Exhibit 99.1
Independent Auditors' Report
The Administrator
Mohawk Carpet Corporation
Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Mohawk Carpet Corporation Retirement Savings Plan (Plan) as of
December 31, 2001 and 2000 and the related statement of changes in net assets
available for plan benefits for the year ended December 31, 2001. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2001 and 2000 and the changes in net assets available for plan
benefits for the year ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
/s/ KPMG LLP
Atlanta, Georgia
May 3, 2002
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
------------------ ------------------
Assets:
Investments (notes 3 and 4):
Mutual funds, at fair value $ 112,824,624 104,065,096
Mohawk Industries, Inc. common stock, at fair value 38,045,527 21,766,298
Money market funds, at cost 82,104,332 69,147,930
Loans to participants, at cost 12,135,000 10,343,989
------------------ ------------------
Total investments 245,109,483 205,323,313
Contributions receivable from employer 71,455 314,866
Contributions receivable from participants 167,314 904,948
------------------ ------------------
Net assets available for plan benefits $ 245,348,252 206,543,127
================== ==================
See accompanying notes to financial statements.
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2001
Additions:
Investment income:
Interest and dividends $ 6,505,032
Net appreciation (depreciation) in fair value of investments:
Mutual funds (7,333,948)
Mohawk Industries, Inc. common stock 19,504,377
-------------------
Net investment income 18,675,461
Contributions from employer 9,043,105
Contributions from participants 21,168,711
Transfers from other plan (note 7) 5,553,885
-------------------
Total additions 54,441,162
-------------------
Deductions:
Participants' benefits 15,564,312
Administrative expenses 71,725
-------------------
Total deductions 15,636,037
-------------------
Increase in net assets available for plan benefits 38,805,125
Net assets available for plan benefits at beginning of year 206,543,127
-------------------
Net assets available for plan benefits at end of year $ 245,348,252
===================
See accompanying notes to financial statements.
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Plan in preparing its financial statements.
(a) Basis of Presentation
The records of the Plan are maintained on the cash basis of
accounting. The accompanying financial statements of the Mohawk Carpet
Corporation Retirement Savings Plan (the Plan) have been prepared on
the accrual basis of accounting and present the net assets available
for plan benefits and changes in those net assets.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from
those estimates.
(b) Investments
Investments in mutual funds and common stock are stated at fair value
based on quoted market prices or as determined by Scudder Kemper
Investments (Trustee). Investments in money market funds and loans to
participants are stated at cost which approximates fair value.
Securities transactions are accounted for on a trade date basis.
Realized and unrealized investment gains and losses are included in
net appreciation in fair value of investments in the accompanying
statement of changes in net assets available for plan benefits.
(c) Fair Value of Financial Instruments
Investments in securities are stated at fair value. In addition,
management of the Plan believes that the carrying amount of
receivables is a reasonable approximation of the fair value due to the
short-term nature of these instruments.
(2) Description of the Plan
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
(a) General
The Plan is a defined contribution plan and covers all employees of
Mohawk Carpet Corporation (the Company), a wholly owned subsidiary of
Mohawk Industries, Inc. The Plan provides for retirement savings to
qualified active participants through both participant and employer
contributions and is subject to certain provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Employees are eligible
to participate in the Plan at the beginning of a calendar month after
the completion of 90 days of service.
(Continued)
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
The Plan is administered by an Administrative Committee appointed by
the Company. The Administrative Committee is responsible for the
control, management, and administration of the Plan and the assets
held in trust at Scudder Kemper Investments as of December 31, 2001
and 2000 and for the year ended December 31, 2001.
(b) Contributions
Contributions to the Plan are made by both participants and the
Company. Participants may contribute a maximum of 16% of their gross
compensation, subject to certain limitations. Participants may
allocate their contributions in multiples of 1% to various investment
funds of the Plan. The employer makes a 50% matching contribution up
to the first 4% of each participant's gross compensation contributed
to the Plan. The Company amended the Plan effective January 1, 2000 to
match an additional $0.25 for every $1.00 of employee contributions in
excess of 4% up to a maximum of 6%. The terms of the Plan also provide
for discretionary employer profit sharing contributions to the Mohawk
Stock Fund for plan participants employed on the last day of the plan
year or terminated during the plan year on account of death,
disability, or retirement.
(c) Participant Accounts
Each participant's account is credited with their contribution for the
period as well as the employer's matching contribution and an
allocation of any employer profit sharing contribution. Investment
income, realized gains/losses, and the change in unrealized
appreciation or depreciation on plan investments are credited to
participants' accounts monthly based on the proportion of each
participant's account balance to the total account balance within each
investment fund at the beginning of the month.
Participant accounts may be invested in one or more of the investment
funds available under the Plan at the direction of the participant.
The Plan provides for monthly valuation of accounts. Current
investment funds available within the Plan include the following:
Investment fund Fund objective
----------------------- ----------------------------------------------------------------------
Scudder Stable Value To provide fixed rate of return for a fixed period of time. Money in
Fund: this fund is invested in investment contracts, money market
securities, and managed bond portfolios.
PIMCO Total Return To provide the opportunity for higher earnings than the stable value
Fund: fund. Money in this fund is invested primarily in intermediate term,
high-quality, fixed income securities.
Scudder Balanced Fund: To provide capital growth and current income while minimizing the
risk of principal loss associated with common stocks by investing in
a changing mix of seasoned stocks and investment grade bonds.
Kemper-Dreman High- To provide long-term capital growth through investing in large
Return Equity Fund: capitalization stocks in undervalued sectors of the stock market.
(Continued)
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Investment fund Fund objective
----------------------- ----------------------------------------------------------------------
Scudder S&P 500 Index To track the performance of the Standard and Poor's 500 Composite
Fund: Stock Price Index, which emphasizes stocks of large U.S.
companies.
Baron Asset Fund: To provide long-term capital growth through investing in the stocks
of small, and medium-sized companies with undervalued assets.
Scudder International To provide long-term capital growth through a flexible policy of
Fund: investing in stocks and debt obligations of companies and
governments outside the U.S.
Mohawk Stock Fund: To provide capital appreciation through the ownership of Mohawk
Industries shares.
Scudder 21st Century To provide long-term growth of capital through investing primarily
Growth Fund in emerging growth companies poised to become leaders in 21st
Century.
Transamerica Premier To provide long-term growth through investing in a diversified
Equity Fund portfolio of equity securities of domestic growth companies of any
size.
AIM Value Fund To provide long-term growth of capital through investing in stocks
of companies that are undervalued relative to the stock market as a
whole.
(d) Distributions to Participants
Upon termination of employment, the participant's account shall be
distributed in a lump-sum cash payment as soon as administratively
practicable, unless the participant elects otherwise. A participant
may elect to receive his distribution in approximate equal
installments over a period designated by the participant, not to
exceed the lesser of 15 years or the life expectancy of the last
survivor of the participant and his beneficiary.
Under the terms of the Plan, participants may make hardship
withdrawals from their accounts upon furnishing proof of hardship as
specified in the Plan agreement. Participants may also borrow the
lesser of $50,000 or 50% of the value of their accounts subject to
limitations provided by the Plan. Loans must be paid back to the Plan
generally within four years of the loan date.
Amounts due to participants who have withdrawn from the Plan but have
not been paid at December 31, 2001 and 2000 totaled $-0- and $170,697,
respectively.
(Continued)
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(e) Vesting
Participants are immediately vested in their contributions and the
Company's matching and discretionary contributions and the income
earned on such contributions. Effective January 1, 2001, participants
whose entry date is on or after January 1, 2001 are vested in the
Company's matching and discretionary contributions in accordance with
the following schedule:
Years of vesting service Percent vested
------------------------------------------------ --------------------
Less than one year 0%
One year or more 100%
Amounts forfeited by participants who terminate from the Plan prior to
being 100% vested are applied to reduce subsequent Company
contributions to the Plan. Forfeitures totaled $3,700 in 2001.
(f) Administrative Expenses
Certain administrative expenses of the Plan are paid by the Company.
These costs include legal, accounting, and certain administrative
fees.
(3) Transactions with Parties-in-Interest
At December 31, 2001 and 2000, the Plan held investments in trust funds and
money market accounts sponsored by the trustee with current values of
$175,845,632 and $160,915,675, respectively. The Plan also held investments
in 693,249 and 795,119 shares of Mohawk Industries, Inc. common stock at
December 31, 2001 and 2000, respectively.
(4) Investments
The following investments represent 5% or more of the Plan assets at
December 31, 2001 and 2000:
2001 2000
-------------------- --------------------
Mutual funds:
Scudder Balanced Fund $ 15,710,066 15,250,186
Scudder S&P 500 Index Fund 12,441,812 12,537,715
Kemper-Dreman High-Return Equity Fund 59,078,307 57,646,310
Mohawk Industries, Inc. common stock 38,045,527 21,766,298
Money market fund - Scudder Stable Value Fund 82,104,332 69,147,930
All of the Plan's investments are held by a party-in-interest to the Plan.
(Continued)
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MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) Income Tax Status
The Internal Revenue Service made a favorable ruling on the application for
determination of qualification submitted by the Company in September 1995.
The Plan has been amended since receiving the determination letter and the
Plan has filed an application for an updated determination letter. The
administrative committee of the Plan is not aware of any course of action
or series of events that might adversely affect the Plan's qualification
under Section 401(a) of the Internal Revenue Code, and under which the Plan
would be subject to tax under present income tax law.
(6) Plan Termination
While it is the Company's intention to continue the Plan indefinitely, the
Company has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of ERISA and
the Plan agreement. In the event of Plan termination, participants will
become 100% vested in their accounts.
(7) Plan Merger
During 2001, the assets of Durkan Patterned Carpet 401(k) Profit Sharing
Plan were merged with the Plan. Plan assets at December 31, 2001 include
assets of $5,553,885 transferred from Durkan Patterned Carpet 401(k) Profit
Sharing Plan.
(8) Subsequent Events
Effective January 1, 2002, account balances attributable to employees of
Karastan Bigelow Group (KBY) and Lauren Park Mill (LPM) were transferred
into Mohawk Carpet Corporation Retirement Savings Plan II. Also, account
balances attributable to all salaried, sales employees, and nonexempt
employees were transferred into Mohawk Carpet Corporation Retirement
Savings Plan II.
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Schedule 1
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Schedule H, Line 4i - Schedule of Assets (Held at Year End) - December 31, 2001
December 31, 2001
Current
Identity of the issue Description of investments value
- ------------------------------------------------ ------------------------------------------------- -------------------
Mutual funds:
PIMCO Total Return Fund 611,045 mutual fund units $ 6,391,526
*Scudder Balanced Fund 898,745 mutual fund units 15,710,066
*Scudder S&P 500 Index Fund 380,367 mutual fund units 12,441,812
*Scudder International Fund 102,548 mutual fund units 3,759,412
*Kemper-Dreman High-Return Equity Fund 1,600,604 mutual fund units 59,078,307
Baron Asset Fund 77,635 mutual fund units 3,451,632
AIM Value Fund 157,678 mutual fund units 1,713,956
Transamerica Premier Equity Fund 439,872 mutual fund units 7,526,210
*Scudder 21st Century Growth Fund 159,057 mutual fund units 2,751,703
*Mohawk Industries, Inc. - common stock 693,249 shares of common stock 38,045,527
*Money Market Fund - Scudder Stable
Value Fund 82,104,332 Money Market Fund 82,104,332
Loans to participants (1) 12,135,000
-------------------
Total $ 245,109,483
===================
*Scudder Kemper Investments, Trustee, and Mohawk Industries, Inc. are parties-
in-interest to the Plan.
(1) Loans are consummated at a fixed rate (then current prime rate plus 1%) for
terms up to four years. Interest rates range from 7% to 10% on loans
outstanding.
See accompanying independent auditors' report.
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