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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 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM COMMISSION FILE NUMBER
TO 01-19826

MOHAWK INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 52-1604305
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

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. [_]

The aggregate market value of the Common Stock of the Registrant held by non-
affiliates of the Registrant (37,645,351 shares) on March 8, 1999 was
$1,185,828,557. 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 8, 1999: 60,578,367
shares of Common Stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 1999 Annual Meeting of
Stockholders--Part III
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PART I

ITEM 1. BUSINESS

GENERAL

Mohawk Industries, Inc. ("Mohawk" or the "Company," a term which includes the
Company and its subsidiaries, including its primary operating subsidiaries,
Mohawk Carpet Corporation ("Mohawk Carpet"), Aladdin Manufacturing Corporation
("Aladdin Manufacturing", formerly known as Mohawk Manufacturing Corporation),
World Carpets, Inc. ("World"), American Weavers, LLC ("American Weavers") and
Newmark & James, Inc. ("Newmark")) 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
1998 net sales of approximately $2.6 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," "Alexander Smith," "American Rug Craftsmen," "American
Weavers," "Bigelow," "Durkan," "Galaxy," "Harbinger," "Helios," "Horizon,"
"Image," "Karastan," "Mohawk Commercial," "Newmark Rug," and "World," 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 Aladdin Manufacturing
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. ("Horizon") in October 1992 for cash of
approximately $63.9 million and 4,009,500 shares of Common Stock valued at
approximately $22.5 million. Mohawk purchased American Rug Craftsmen, Inc.
("American Rug") 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. ("Galaxy") 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 and 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 in exchange for
approximately 4,900,000 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 $193 million, including the assumption of $30
million of tax exempt bonds, and on March 1, 1999, the Company acquired all of
the outstanding capital stock of Durkan Patterned Carpets, Inc. ("Durkan") for
3,150,000 shares valued at $116.5 million based on the closing stock price the
day the letter of intent was executed.

On October 23, 1997, the Board of Directors of the Company declared a 3-for-2
stock split that was paid as a 50% stock dividend on December 4, 1997, to
holders of record on November 4, 1997. All share information presented herein
gives effect to this stock split and the World merger.

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 1.7 billion square yards in 1997.
This volume represents a market in excess of approximately $10.3 billion at the
"mill level," which management believes, based on standard industry mark-ups,
translates into approximately $16.4 billion to $18.5 billion at the retail
level. Based upon data obtained from recent industry publications, the
worldwide carpet and rug sales volume of American manufacturers in 1998 was
approximately 1.8 billion square yards and $10.7 billion. The overall level of
sales in the carpet industry is influenced by a number of factors, including
consumer confidence in spending for durable goods, interest rates, turnover in
housing, the condition of the residential and commercial construction industries
and the overall strength of the economy.

Broadloom carpet (defined as carpet over six feet by nine feet in size)
represented 80% of the volume shipped by the industry in 1997. Tufted broadloom
carpet (a category that refers to the manner of construction in addition to
size) represented 96% of the broadloom industry volume shipped in 1997. 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 1997. An
estimated 55% of industry shipments is made in response to replacement demand,
which usually involves exact yardage (or "cut order") shipments that typically
provide higher profit margins than sales of carpet sold in full rolls. Because
the replacement business generally involves higher quality carpet cut to order
by the manufacturer, rather than the dealer, this business tends to be more
profitable for manufacturers than the new construction business.

PRODUCTS AND MARKETS

The Company designs, manufactures and markets hundreds of styles of carpet,
rugs and mats in a broad range of colors, textures and patterns. Mohawk
positions its products in all price ranges and emphasizes quality, style,
performance and service. The Company is widely recognized through its premier
brand names, "Mohawk," "Aladdin," "Alexander Smith," "American Rug Craftsmen,"
"American Weavers," "Bigelow," "Bigelow Commercial," "Durkan," "Galaxy,"
"Harbinger," "Helios," "Horizon," "Image," "Karastan," "Karastan Contract,"
"Mohawk Commercial," "Newmark Rug," and "World," 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 900 residential products to more than 25,000 customers which
include independent retailers, department stores, mass merchandisers, buying
groups, and building and tenant improvement contractors.

The Company has positioned its premier residential brand names across all
price ranges. "Mohawk," "Alexander Smith," "Bigelow," "Galaxy," "Horizon,"
"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
in the low-to-medium retail price range.

Based on an industry survey, the Company is considered a leader within the
industry of U.S. carpet manufacturers providing marketing support. Through
dealer programs like Karastan Gallery, Mohawk Brand Excellence, New

Visions, Hamilton, Ciboney, Mohawk Carpet Color Center and Floor Scapes, 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 computer systems, accounting 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. For
example, in the corporate office group, decisions are usually made by architects
or specifiers, whose responsibility is to manage the project budget and
coordinate interior design. In the institutional group, by comparison, decisions
are often made by purchasing agents employed by the end user who have
longstanding relationships with carpet manufacturers. The commercial market is
generally a more complex market in which to sell than the residential market.

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

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

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

Woven commercial products accounted for a significant portion of the Company's
net sales of commercial product in 1998, including the Mohawk Commercial brand's
exclusive woven interlock products, which are manufactured by a unique weaving
process that increases performance, wear and durability. The Company's ability
to make woven carpet under the Mohawk Commercial, Karastan Contract and Bigelow
Commercial brand names in large volume for commercial applications
differentiates it from other manufacturers, most of which produce tufted carpet
almost exclusively. Woven carpet and specifically the Company's woven interlock
products sell at higher prices than tufted carpet and generally produce higher
profit margins. Management believes that the Company is the largest producer of
woven carpet in the United States and that the Company has several carpet
weaving machines and processes that no other manufacturer has, thereby allowing
the Company to create carpet to meet specifications that its competitors cannot
duplicate.

The machine-made rug market is currently the fastest growing segment of the U.
S. carpet and rug industry with an annual growth rate estimated to be
approximately 12% in 1998. Much of this growth has occurred at the low-to-
medium retail price ranges. The distribution channels for the rug market
primarily include department stores, mass merchants, floorcovering stores,
catalog stores, home centers and furniture stores.

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

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

The Company also sells to the bath mat and washable bath rug segments of the
rug market through its Newmark Rug and Aladdin brand names. The Aladdin products
are tufted nylon products which are distributed through department stores and
mass merchants. The 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," "Bigelow," "Bigelow Commercial," "Durkan,"
"Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan," "Karastan
Contract," "Mohawk," "Mohawk Commercial," "Newmark Rug," and "World," 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 $115.1 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; olefin 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, Monsanto Company, BASF Corporation and AlliedSignal,
Inc. Most of the fibers the Company uses in carpet production are treated with
stain-resistant chemicals. The Company has not experienced significant shortages
of raw materials in recent years. 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. 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 1997 had worldwide sales in excess of $10.0 billion, and
the top twenty manufacturers in 1990 had sales in excess of $6 billion. Mohawk,
with 1998 net sales of approximately $2.6 billion, is the second largest
producer of carpet and rugs (in terms of sales volume).

Certain of the Company's competitors have greater financial and other
resources than the Company. In particular, the industry has one large
competitor, Shaw Industries, Inc. ("Shaw"), who in 1998 held the largest share
of the domestic wholesale market based on sales. Shaw's size could permit
significant raw material purchasing power and certain other manufacturing cost
advantages compared with the rest of the industry.

The principal methods of competition within the industry are price, style,
quality and service. In 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)," "American Rug
Craftsmen," "Bigelow (R)," "Ciboney (R)," "Commercial Horizons (R)," "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," and "World."

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 1998, no single customer accounted for more than 5.0% 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, 1998, the Company employed approximately 18,200 persons.
Approximately 280 Mohawk employees are members of the Union of Needletrades,
Industrial and Textile Employees, AFL-CIO, CLC with which the Company is party
to a collective bargaining agreement. Other than with respect to these
employees, the Company is not a party to any collective bargaining agreements.
Additionally, the Company has not experienced any strikes or work stoppages. The
Company believes that its relations with its employees are good.

ENVIRONMENTAL MATTERS

The Company's operations must meet federal, state and local regulations
governing the discharge of materials into the environment. All of the plants
operated by the Company were built or have been upgraded to meet current

environmental standards. The Company believes it is in material compliance with
all applicable regulations. The Company estimates that any expenses incurred in
maintaining compliance with these regulations will not materially affect
earnings.

CYCLICAL NATURE OF INDUSTRY; CURRENT ECONOMIC CONDITIONS

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

ITEM 2. PROPERTIES

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

APPROX.
ENCLOSED
AREA IN
SQUARE
LOCATION PRIMARY PRODUCTS OR PURPOSES FOOTAGE
-------- ---------------------------- ---------

Dalton, GA........... Carpet and rug manufacturing and warehousing.. 1,832,600
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.......... 635,000
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(1)........ 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............................ 336,716
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
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
Belton, SC (1)....... Yarn manufacturing............................ 106,000
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
Chatsworth, GA....... Yarnset plant................................. 121,200
Chatsworth, GA....... Commercial warehouse.......................... 128,000
Eton, GA............. Storage warehouse............................. 121,300
Greenville, NC....... Wool processing............................... 103,000

___________
(1) Operations have been discontinued and these facilities are held for sale.

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

APPROX.
ENCLOSED
AREA IN LEASE
SQUARE TERM
LOCATION PRIMARY PRODUCTS OR PURPOSES FOOTAGE THROUGH (1)
-------- ---------------------------- ---------- -----------

Calhoun, GA......... Carpet manufacturing and administrative offices (2) 62,000 Jul. 2000
Calhoun, GA......... Mat manufacturing and warehouse (2)................ 164,400 June 2004
Philadelphia, PA.... Warehouse.......................................... 53,100 Dec. 2000
Calhoun, GA......... Rug manufacturing, warehouse and offices........... 233,455 Apr. 2003
Haiwassee, GA....... Rug manufacturing.................................. 63,500 June 2003
La Mirada, CA....... Distribution warehouse............................. 220,000 Aug. 2001
Grand Prairie, TX... Distribution warehouse............................. 208,000 June 2004
Glen Burnie, MD..... Distribution warehouse............................. 187,000 June 2004
Pompton Plains, NJ.. Distribution warehouse............................. 164,000 June 2004
Miami, FL........... Distribution warehouse............................. 120,600 May 2001
Columbus, OH........ Distribution warehouse............................. 112,500 Aug. 2004
Romeoville, IL...... Distribution warehouse............................. 108,000 Nov. 1999
Hayward, CA......... Distribution warehouse............................. 102,500 Aug. 2001
Dalton, GA.......... Distribution warehouse............................. 80,000 Aug. 2002
Kent, WA............ Distribution warehouse............................. 67,250 Jan. 2003
San Diego, CA....... Distribution warehouse............................. 63,000 Sep. 2006
Rome, GA............ Warehouse.......................................... 140,000 Jan. 2000
Kensington, GA...... Warehouse.......................................... 136,000 May 1999
Lyerly, GA.......... Warehouse.......................................... 74,250 Nov. 2002
Calhoun, GA......... Warehouse.......................................... 68,700 Aug. 2000
Calhoun, GA......... Warehouse.......................................... 60,000 Oct. 2001

- ------------
(1) Include renewal options exercisable by the Company.
(2) Includes a number of separately leased adjoining or adjacent buildings with
varying lease terms. The expiration date shown in the table is the earliest
expiration date of the respective group of leases.

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

ITEM 3. LEGAL PROCEEDINGS

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

In 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 determined that the plaintiffs met their burden of
establishing the requirements for class certification and granted the
plaintiffs' motion to certify the class. 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 carpet in the State of California and
seek damages for alleged violations of California antitrust and unfair
competition laws. The complaints filed do not specify any amount of damages but
do request for any unlawful conduct to be enjoined and treble damages plus
reimbursement for fees and costs. 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 a competitor and one of its
subsidiaries. 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 and denied the allegations in the
complaint and set forth its defenses. 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 purchases 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, 1998.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET FOR THE COMMON STOCK

On December 16, 1997, the Common Stock began trading on the New York Stock
Exchange ("NYSE") under the symbol "MHK." From the time of the Company's
initial public offering in April 1992 until December 15, 1997, the Common Stock
was listed on the Nasdaq National Market ("NNM") under the symbol "MOHK." The
table below sets forth the high and low bid or sales prices per share of the
Common Stock as reported on either the NNM or the NYSE Composite Tape, as
applicable, for each fiscal period indicated.

MOHAWK
COMMON STOCK
------------------
HIGH LOW
---------- -------

1997
----
First Quarter..................... $18.67 13.92
Second Quarter.................... 17.33 12.92
Third Quarter..................... 18.29 14.58
Fourth Quarter.................... 22.00 17.75

1998
----
First Quarter..................... $33.50 20.50
Second Quarter.................... 35.50 28.44
Third Quarter..................... 34.94 22.63
Fourth Quarter.................... 42.44 22.69

1999
----
First Quarter (through March 8, 1999) $42.00 29.50

As of March 8, 1999, there were 443 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 in various of the Company's loan agreements.

On November 12, 1998, the Company issued 4,899,992 shares of Common Stock to
the former shareholders of World in exchange for all of their shares of World.
This issuance of securities was made in reliance on the exemption from
registration provided under Section 4(2) of the Securities Act of 1933 as a
transaction by an issuer not involving a public offering. All of the securities
were acquired by the recipients for investment and with no view toward the
public resale or distribution of the securities without registration. There was
not any public solicitation and the issues stock certificates bear restrictive
legends.

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 February 25, 1994, the Company exchanged 20,343,336 shares of Common
Stock for all of the outstanding shares of Aladdin common stock in a transaction
recorded using the pooling- of-interests basis of accounting. All financial data
were restated to include the accounts and results of operations of Aladdin. On
January 13, 1995, the Company acquired all of the outstanding capital stock of
Galaxy. The operating results of Galaxy are included in the 1995 consolidated
statement of earnings from the date of its acquisition. On July 23, 1997, the
Company acquired certain assets of Diamond Rug & Carpet Mills, Inc. and other
assets owned by Diamond's principal shareholders. The acquisitions of Galaxy and
Diamond were recorded using the purchase method of accounting. On November 12,
1998, the Company acquired all of the outstanding capital stock of World in
exchange for 4,899,992 shares of the Company's common stock in a transaction
recorded using the pooling-of-interests basis of accounting. All financial data
are restated to include the accounts and results of operations of World. 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,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------- ----------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF EARNINGS DATA:
Net sales............................................... $ 2,639,200 2,327,341 2,153,016 1,965,374 1,712,112
Cost of sales (a)....................................... 1,998,903 1,808,137 1,675,221 1,545,796 1,341,703
------------ ------------- ----------- ------------- ------------
Gross profit.......................................... 640,297 519,204 477,795 419,578 370,409
Selling, general and administrative expenses............ 406,170 354,528 340,770 325,276 265,044
Restructuring costs (b)................................. - - 700 8,439 -
Carrying value reduction of property, plant
and equipment and other assets (c).................... 2,900 5,500 3,060 23,711 -
Compensation expense for stock option exercises (d)..... - 2,600 - 4,000 -
------------ ------------- ----------- ------------- ------------
Operating income...................................... 231,227 156,576 133,265 58,152 105,365
------------ ------------- ----------- ------------- ------------
Interest expense........................................ 29,290 34,551 37,522 39,981 31,210
Acquisition costs - Aladdin/World Mergers (e)........... 17,700 - - - 10,201
Other expense, net...................................... 1,849 447 4,080 1,206 689
------------ ------------- ----------- ------------- ------------
48,839 34,998 41,602 41,187 42,100
------------ ------------- ----------- ------------- ------------
Earnings before income taxes.......................... 182,388 121,578 91,663 16,965 63,265
Income taxes (f)........................................ 74,776 48,154 38,285 6,951 26,599
------------ ------------- ----------- ------------- ------------
Net earnings.......................................... $ 107,612 73,424 53,378 10,014 36,666
============ ============= =========== ============= ============

Basic earnings per share (g)............................ $ 1.88 1.29 0.95 0.19 0.68
============ ============= =========== ============= ============
Weighted-average common shares outstanding (g).......... 57,243 56,812 56,160 54,085 53,568
============ ============= =========== ============= ============
Diluted earnings per share (g).......................... $ 1.86 1.28 0.94 0.18 0.67
============ ============= =========== ============= ============
Weighted-average common and dilutive potential
common shares outstanding (g)......................... 57,984 57,303 56,749 55,335 54,961
============ ============= =========== ============= ============

BALANCE SHEET DATA:
Working capital......................................... $ 419,217 382,108 387,067 301,790 351,346
Total assets............................................ 1,331,406 1,176,557 1,177,510 1,061,826 996,999
Short-term note payable................................. - - 21,200 50,000 -
Long-term debt (including current portion).............. 355,968 377,738 458,741 405,100 448,442
Stockholders' equity.................................... 586,709 477,133 399,047 336,447 321,984

_____________
(a) Certain of the Company's facilities suffered damage during the March 1993
blizzard, and the Company finalized settlement of the insurance claim
during the first quarter of 1994. The Company recorded a reduction of $6.0
million in cost of sales in 1994 for reimbursements of business
interruption costs

(b) During 1995 and 1996, the Company recorded pre-tax restructuring costs of
$8.4 million and $0.7 million, respec-tively, related to certain mill
closings whose operations have been consolidated into other Mohawk
facilities.

(c) During 1995, the Company adopted FAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," as of January 1, 1995. A charge of $23.7 million was recorded for the
reduction of the carrying value of property, plant and equipment at
certain mills. During 1996, the Company recorded a charge of $3.1 million
arising from the write-down of property, plant and equipment to be
disposed of related to the closing of a manufacturing facility in 1996 and
a revision in the estimate of fair value of certain property, plant and
equipment based on current market conditions related to mill closings in
1995. 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.

(d) Charges of $4.0 million and $2.6 million were recorded in 1995 and 1997,
respectively, for income tax reimburse-ments to be made to certain
executives related to the exercise of stock options granted in 1988 and
1989 in connec-tion with the Company's 1988 leveraged buyout.

(e) The Company recorded one-time charges of $10.2 million and $17.7 million
in 1994 and 1998, respectively, for transaction expenses related to the
Aladdin and World Mergers, respectively.

(f) During 1994, the Company reduced income tax expense by $2.0 million to
reflect a reduction in its effective tax rate and certain other changes in
the Company's federal and state income tax status.

(g) The 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.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

During the three-year period ended December 31, 1998, the Company continued to
experience significant growth both internally and through acquisitions. On July
23, 1997, the Company acquired certain assets of Diamond and other assets owned
by Diamond's principal shareholders for $36.0 million, including acquisition
costs, 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 Diamond
business combination was accounted for using the purchase method of accounting.

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 4,900,000 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 $193 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 3,150,000 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 will be accounted for
using the purchase method of accounting and the Durkan acquisition will be
accounted for using the pooling-of-interests 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 and table runners.

Through the Company's restructuring efforts over the past three years, new
information technology systems have been installed throughout all of the
organization, all of which are Year 2000 compliant. In addition, the Company
has concluded identification of all other significant information technology
systems that are not Year 2000 compliant. The Company is reviewing its
equipment and software with the respective vendors from whom it purchased the
equipment and software to address any noncompliance issues. However, the
Company believes that certain Year 2000 issues exist with respect to its
business systems. The Company has formed a committee of employees familiar with
its information technology systems to assess and prioritize the need to act, on
the basis of each system's importance, to ensure that its business systems will
be made Year 2000 compliant. The Company has also begun a review of all process
control systems, both proprietary and non-proprietary. This review revealed
that certain Year 2000 issues exist. The Company does not believe these issues
are material and will obtain the necessary technical resources to assist in
making these systems Year 2000 compliant. Although the Company can provide no
assurances, it estimates that it will cost no more than approximately $1,000,000
of incremental costs to make its business systems Year 2000 compliant and that
these upgrades will be completed in the second quarter of 1999.

The Company has also begun to review its top suppliers and customers to
determine their progress in becoming Year 2000 compliant. This will allow the
Company to determine whether a Year 2000 problem will impede the ability of its
suppliers and customers to provide goods and services as the Year 2000 is
approached and reached. An initial review indicated that all of its major
suppliers and customers appear to be in the process of resolving any of their
Year 2000 compliance issues and that they do not foresee any material problems.
The Company will follow-up with all of its suppliers and customers to insure
that all potential problems, including those of our individual plant locations
and local suppliers, are managed correctly.

If the Company cannot successfully and timely resolve its Year 2000 issues,
its business, results of operations and financial condition could be materially
adversely affected. The Company has not developed a contingency plan in the
event of a Year 2000 problem, however, based upon the results of its internal
review, the Company does not believe a contingency plan is necessary. The
Company will, however, continue to evaluate the need for a contingency plan.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 AS COMPARED WITH YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------

Net sales for the year ended December 31, 1998 were $2,639.2 million,
reflecting an increase of $311.9 million, or approximately 13%, over the
$2,327.3 million reported in the year ended December 31, 1997. All major
product categories achieved sales increases in 1998 as compared to 1997. These
sales increases were impacted by continued favorable industry conditions and a
gain in the Company's market share which the Company believes primarily resulted
from continued emphasis on supporting its dealers and strong customer acceptance
of new product introductions.

Quarterly net sales and the percentage changes in net sales by quarter for
1998 versus 1997 were as follows (dollars in thousands):

1998 1997 CHANGE
---------- --------- -------

First Quarter............... $ 561,664 514,993 9.1 %
Second Quarter.............. 662,569 581,539 13.9
Third Quarter............... 691,954 600,843 15.2
Fourth Quarter.............. 723,013 629,966 14.8
---------- --------- ----
Total Year................ $2,639,200 2,327,341 13.4 %
========== ========= ====

Gross profit for 1998 was $ 640.3 million (24.3% of net sales) and represented
an increase over the gross profit of $519.2 million (22.3% of net sales) for
1997. Gross profit dollars for the current year were impacted favorably by
better absorption of fixed costs through higher production volume and continued
improvements in manufacturing efficiencies from restructuring efforts.

Selling, general and administrative expenses for 1998 were $406.2 million
(15.4% of net sales) compared to $354.5 million (15.2% of net sales) for 1997.
Selling, general and administrative expenses as a percentage of net sales
increased primarily due to higher sample expenses due to the introduction of new
products in 1998.

During the fourth quarter of 1998, the Company recorded a charge of $2.9
million for the write-down of fixed assets to be disposed of in connection with
the World acquisition. Also, a $17.7 million charge was recorded for non-
recurring costs associated with the World acquisition.

During the fourth quarter of 1997, the Company revised its estimate of the
fair value of certain property, plant and equipment held for sale. The revision
resulted in a $5.5 million write-down to the carrying value of those assets.
The revision was based upon current appraisals and other market information. In
addition, a $2.6 million charge was recorded for additional income tax
reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.

Interest expense for the current year was $29.3 million compared to $34.6
million in 1997. The primary factor contributing to the decrease was a
significant reduction in debt levels.

In the current year, income tax expense was $74.8 million, or 41.0% of
earnings before income taxes. In 1997, income tax expense was $48.2 million,
representing 39.6% of earnings before income taxes. The primary reason for the
increase in the 1998 effective income tax rate is that certain costs included in
the non recurring pre-tax charge of $17.7 million related to the World
acquisition are not deductible for income tax purposes.

YEAR ENDED DECEMBER 31, 1997 AS COMPARED WITH YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------

Net sales for the year ended December 31, 1997 were $2,327.3 million,
reflecting an increase of $174.3 million, or approximately 8%, over the $2,153.0
million reported in the year ended December 31, 1996. All major product
categories achieved sales increases in 1997 as compared to 1996. These sales
increases were attributable to an improvement in the Company's market share
which the Company believes primarily resulted from competitive changes in the
retail segment of the industry, strong customer acceptance of new product
introductions, expansion of residential warehousing operations, and further
refinement of the sales organization to achieve better regional customer focus.

Quarterly net sales and the percentage changes in net sales by quarter for
1997 versus 1996 were as follows (dollars in thousands):

1997 1996 CHANGE
----------- --------- -------

First Quarter..................... $ 514,993 466,201 10.5%
Second Quarter.................... 581,539 555,671 4.7
Third Quarter..................... 600,843 557,724 7.7
Fourth Quarter.................... 629,966 573,420 9.9
---------- --------- ----
Total Year...................... $2,327,341 2,153,016 8.1%
========== ========= ====

Gross profit for 1997 was $519.2 million (22.3% of net sales) and represented
an increase over the gross profit of $477.8 million (22.2% of net sales) for
1996. Gross profit dollars for 1997 were impacted favorably by manufacturing
improvements from restructuring and consolidating the residential operations,
higher production levels resulting in better absorption of fixed costs and a
reduction in certain raw material prices.

Selling, general and administrative expenses for 1997 were $354.5 million
(15.2% of net sales) compared to $340.8 million (15.8% of net sales) for 1996.
Selling, general and administrative expenses as a percentage of net sales
decreased primarily due to lower administrative, bad debt and sample expenses.

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

Interest expense for 1997 was $34.6 million compared to $37.5 million in 1996.
The primary factor contributing to the decrease was a significant reduction in
debt levels.

In 1997, income tax expense was $48.2 million, or 39.6% of earnings before
income taxes. In 1996, income tax expense was $38.3 million, representing 41.8%
of earnings before income taxes.

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 $286.9 million at the
beginning of 1998 to $321.1 million at December 31, 1998. The $34.2 million
increase is attributable to strong sales growth. Inventories increased from
$367.1 million at the beginning of 1998 to $412.2 million at December 31, 1998,
due primarily to acquisitions and the need for a higher level of inventory to
meet the increased sales volume.

Capital expenditures totaled $78.5 million during 1998, and the Company spent
an additional $36.6 million related to the Newmark and American Weavers
acquisitions. The capital expenditures made during 1998 were incurred
primarily to modernize and expand manufacturing facilities and equipment. The
Company's capital projects are primarily focused on increasing capacity,
improving productivity and reducing costs. Capital expenditures for Mohawk,
including the $21.2 million of equipment used for the extrusion of polypropylene
yarn that was acquired in a noncash transaction in 1996 and $72.8 million for
acquisitions, have totaled $265.8 million over the past three years. Capital
spending during 1999 is expected to range from $95 million to $105 million, the
majority of which will be used to purchase equipment

to increase production capacity and productivity. This amount excludes the $193
million that was paid in January 1999 to purchase Image.

On January 28, 1999, the Company amended and restated its revolving credit
agreement to increase total availability to $450 million, comprised of the
Tranche A commitment of $250 million due on January 28, 2004 and the Tranche B
commitment of $200 million due on January 27, 2000.

IMPACT OF INFLATION

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

SEASONALITY

The carpet business is seasonal, with the Company's second, third and fourth
quarters typically producing higher net sales and operating income. By
comparison, results for the first quarter tend to be the weakest. This
seasonality is primarily attributable to consumer residential spending patterns
and higher installation levels during the spring and summer months.

FORWARD-LOOKING INFORMATION

Certain of the matters discussed in the preceding pages, particularly
regarding anticipating 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's management 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.

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.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Reports............................................................... 17
Consolidated Balance Sheets as of December 31, 1998 and 1997................................ 19
Consolidated Statements of Earnings for the Years ended December 31, 1998, 1997 and 1996.... 20
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1998, 1997 and 1996....................................................... 21
Consolidated Statements of Cash Flows for the Years ended December 31, 1998, 1997 and 1996.. 22
Notes to Consolidated Financial Statements.................................................. 23

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 did not audit the consolidated financial statements of World
Carpets, Inc. and Subsidiary, a wholly owned subsidiary, as of June 28, 1998 and
for each of the years in the two-year period ended June 28, 1998 (not presented
herein), which financial statements have been combined with those of Mohawk
Industries, Inc. and subsidiaries as of December 31, 1997 and for each of the
years in the two-year period ended December 31, 1997, respectively. The
consolidated financial statements of World Carpets, Inc. and Subsidiary reflect
total assets constituting 18 percent as of December 31, 1997 and total net sales
constituting 19 percent for each of the years in the two-year period ended
December 31, 1997, of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for World Carpets, Inc.
and Subsidiary, is based solely on the report of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

KPMG LLP

Atlanta, Georgia
February 5, 1999, except for the
seventh paragraph
of note 2 as to which the date is
March 9, 1999

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

To the Board of Directors
and Shareholders of
World Carpets, Inc.

In our opinion, the consolidated balance sheets and the related consolidated
statements of operations, of changes in shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of World
Carpets, Inc. and its subsidiary (the "Company") at June 28, 1998, and the
results of their operations and their cash flows for the years ended June 28,
1998 and June 29, 1997 (not presented separately herein), in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above. We have not
audited the consolidated financial statements of the Company for any period
subsequent to June 28, 1998.

PricewaterhouseCoopers LLP
Atlanta, Georgia

September 21, 1998

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS 1998 1997
--------------- --------------

Current assets:
Cash............................................................................ $ - 145
Receivables..................................................................... 321,126 286,871
Inventories..................................................................... 412,194 367,076
Prepaid expenses................................................................ 21,283 15,547
Deferred income taxes........................................................... 52,304 39,082
--------------- --------------
Total current assets............................................. 806,907 708,721
Property, plant and equipment, net..................................................... 422,922 391,101
Other assets........................................................................... 101,577 76,735
--------------- --------------
$ 1,331,406 1,176,557
=============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................... $ 34,176 41,529
Accounts payable and accrued expenses........................................... 353,514 285,084
--------------- --------------
Total current liabilities........................................ 387,690 326,613
Deferred income taxes.................................................................. 29,835 30,311
Long-term debt, less current portion................................................... 321,792 336,209
Other long-term liabilities............................................................ 5,380 6,291
--------------- --------------
Total liabilities................................................ 744,697 699,424
--------------- --------------

Stockholders' equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued......... - -
Common stock, $.01 par value; 150,000 shares authorized; 57,383 and 57,067
shares issued in 1998 and 1997, respectively.................................. 574 571
Additional paid-in capital...................................................... 168,797 164,140
Retained earnings............................................................... 417,338 312,422
--------------- --------------
Total stockholders' equity...................................... 586,709 477,133
Commitments and contingencies (Notes 10 and 13)........................................
--------------- --------------
$ 1,331,406 1,176,557
=============== ==============

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(IN THOUSANDS, EXCEPT PER SHARE DATA)

1998 1997 1996
---------- --------- ---------

Net sales............................................. $2,639,200 2,327,341 2,153,016
Cost of sales ........................................ 1,998,903 1,808,137 1,675,221
---------- --------- ---------
Gross profit..................................... 640,297 519,204 477,795
Selling, general and administrative expenses.......... 406,170 354,528 340,770
Restructuring costs................................... - - 700
Carrying value reduction of property, plant
and equipment and other assets....................... 2,900 5,500 3,060
Compensation expense for stock option exercises....... - 2,600 -
---------- --------- ---------
Operating income................................. 231,227 156,576 133,265
---------- --------- ---------
Other expense:
Interest expense.................................... 29,290 34,551 37,522
Acquisition costs - World Merger.................... 17,700 - -
Other expense, net.................................. 1,849 447 4,080
---------- --------- ---------
48,839 34,998 41,602
---------- --------- ---------
Earnings before income taxes..................... 182,388 121,578 91,663
Income taxes.......................................... 74,776 48,154 38,285
---------- --------- ---------
Net earnings..................................... $ 107,612 73,424 53,378
========== ========= =========

Basic earnings per share.............................. $ 1.88 1.29 0.95
========== ========= =========

Weighted-average common shares outstanding............ 57,243 56,812 56,160
========== ========= =========

Diluted earnings per share............................ $ 1.86 1.28 0.94
========== ========= =========
Weighted-average common and dilutive potential
common shares outstanding............................ 57,984 57,303 56,749
========== ========= =========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(IN THOUSANDS)

ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK STOCKHOLDER'S
----------------------
SHARES AMOUNT CAPITAL EARNINGS STOCK OPTIONS EQUITY
--------- --------- --------- ---------- -------- ---------- ------------

Balances at December 31, 1995......... 51,591 $ 516 122,575 155,822 (115) (317) 278,481
Pooling of World...................... 4,900 49 28,071 29,846 - - 57,966
Stock options exercised............... 116 1 1,207 - 115 - 1,323
Dividends paid........................ - - - (24) - - (24)
Tax benefit from exercise of stock
options.......................... - - 7,606 - - - 7,606
Amortization of deferred
compensation..................... - - - - - 317 317
Net earnings.......................... - - - 53,378 - - 53,378
---------- ---------- --------- --------- -------- -------- ---------
Balances at December 31, 1996......... 56,607 566 159,459 239,022 - - 399,047
Stock options exercised............... 460 5 3,631 - - - 3,636
Dividends paid........................ - - - (24) - - (24)
Tax benefit from exercise of stock
options.......................... - - 1,050 - - - 1,050
Net earnings.......................... - - - 73,424 - - 73,424
---------- ---------- --------- --------- -------- -------- ---------
Balances at December 31, 1997......... 57,067 571 164,140 312,422 - - 477,133
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.......................... - - - 107,612 - - 107,612
---------- ---------- --------- --------- -------- -------- ---------
Balances at December 31, 1998......... 57,383 $ 574 168,797 417,338 - - 586,709
========== =========== ========= ========= ======== ======== =========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(IN THOUSANDS)

1998 1997 1996
----------- ---------- ---------

Cash flows from operating activities:
Net earnings............................................................. $ 107,612 73,424 53,378
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 67,897 68,377 62,281
Deferred income taxes............................................... (13,744) (3,440) 4,348
Provision for doubtful accounts..................................... 13,173 8,434 13,213
(Gain) loss on sale of property, plant and equipment................ 2,121 (396) 1,302
Carrying value reduction of property, plant and equipment and other
assets............................................................. 2,900 5,500 3,060
Compensation expense for stock option exercises..................... - 2,600 -
Changes in assets and liabilities, net of effects of acquisitions:
Receivables...................................................... (38,743) (29,254) (69,560)
Inventories...................................................... (30,251) 25,725 (12,662)
Accounts payable and accrued expenses............................ 60,159 26,607 3,359
Other assets and prepaid expenses................................ (8,530) 1,941 (7,291)
Other liabilities................................................ (1,672) (2,571) 4,868
------------ ---------- ----------
Net cash provided by operating activities...................... 160,922 176,947 56,296
------------ ---------- ----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment and other assets.... - 2,092 3,284
Additions to property, plant and equipment.............................. (78,488) (42,953) (49,985)
Acquisitions............................................................ (36,574) (34,141) (2,122)
Other................................................................... - 895 159
Net cash used in investing activities.......................... (115,062) (74,107) (48,664)
------------ ---------- ----------
Cash flows from financing activities:
Net change in revolving line of credit................................... 85,347 (83,131) (27,179)
Payment of note payable.................................................. - (21,200) -
Payments on term loans................................................... (35,958) (20,337) (13,754)
Redemption of acquisition indebtedness................................... (102,201) - -
Proceeds from new loan................................................... - 10,661 24,681
Proceeds from Industrial Revenue Bonds and other, net of payments........ 11,329 11,593 -
Change in outstanding checks in excess of cash........................... (6,486) (5,841) (391)
Dividends paid........................................................... (24) (24) (24)
Common stock transactions................................................ 1,988 4,686 9,246
------------ ---------- ----------
Net cash used in financing activities......................... (46,005) (103,593) (7,421)
------------ ---------- ----------
Net change in cash............................................ (145) (753) 211
Cash, beginning of year....................................................... 145 898 687
------------ ---------- ----------
Cash, end of year............................................................. $ - 145 898
============ ========== ==========

See accompanying notes to consolidated financial statements.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996

(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 approximately
4,900 shares of the Company's common stock ("Merger"). On November 12, 1998, the
Securities and Exchange Commission declared effective a shelf registration
statement to register for resale approximately 4,900 shares of Company common
stock issued in connection with the Merger. The historical consolidated
financial statements have been restated to give retroactive effect to the
Merger. The 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 a broadloom carpet and rug manufacturer and sells
carpet and rugs throughout the United States for principally 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. The Company provides
allowances for expected cash discounts, returns, claims and doubtful accounts
based upon historical bad debt and claims experience and periodic evaluations of
the aging of the accounts receivable.

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

(d) Property, Plant and Equipment

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

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

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(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.

The Company's weighted-average common and dilutive potential common
shares outstanding have been adjusted for the 3-for-2 stock split approved by
the Board of Directors on October 23, 1997 and paid on December 4, 1997 to
holders of record on November 4, 1997 and the World merger. 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, 1998 and 1997 was $363,121
and $388,848, compared to a carrying amount of $355,968 and $377,738,
respectively.

(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 $2,437 in 1998, $2,518 in 1997 and
$2,047 in 1996.

(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 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.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(l) Reclassifications

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

(2) ACQUISITIONS

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 $36,000, including acquisition costs, which
consisted of $19,600 in cash, at closing, $7,000 in cash over the six-month
period following closing and a $9,350 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. 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 approximately 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 the fourth quarter of 1998 related to the Merger
with World, of which $17,700 of the charge is recorded as non-operating expense
and $2,900 of the charge is recorded as a write-down of World computer equipment
that will be disposed of.

The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated financial
statements are presented below:

NINE MONTHS
ENDED YEARS ENDED DECEMBER 31,
------------------------
SEPT. 26, 1998 1997 1996
--------------- ---------- ---------
(UNAUDITED)

Net sales:
Mohawk............... $ 1,582,493 1,901,352 1,779,389
World................ 333,694 425,989 373,627
--------- --------- ---------
Combined......... $ 1,916,187 2,327,341 2,153,016
========= ========= =========

Net earnings:
Mohawk............... $ 77,829 68,030 49,050
World................ 4,984 5,394 4,328
--------- --------- ---------
Combined......... $ 82,813 73,424 53,378
========= ========= =========

Prior to the combination, World's fiscal year ended on the Sunday closest
to June 30. In recording the pooling-of-interests combination, World's financial
statements for the year ended December 31, 1998 were combined with Mohawk's
consolidated financial statements for the same period. World's financial
statements for the years ended June 28, 1998 and June 29, 1997 were combined
with Mohawk's financial statements for the years ended December 31, 1997 and
1996, respectively. An adjustment has been made to stockholders' equity in the
year ended December 31, 1998 to eliminate the effect of including World's
results of operations for the six months ended June 28, 1998 in the Company's
consolidated financial statements for the years ended December 31, 1998 and
1997. There were no significant intercompany transactions between Mohawk and
World prior to the combination.

On January 29, 1999, the Company acquired certain assets of Image
Industries, Inc. for approximately $193,000, including acquisition costs and the
assumption of $30,000 of tax exempt debt. The acquisition will be accounted for
using the purchase method of accounting.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

On March 9, 1999, the Company acquired all of the outstanding capital stock
of Durkan Patterned Carpets, Inc. ("Durkan") and certain notes payable to Durkan
shareholders for 3,150 shares of the Company's common stock.

The acquisition of Durkan will be accounted for under the pooling-of-interests
basis of accounting and, accordingly, the Company's historical consolidated
financial statements will be restated to include the accounts and results of
operations of Durkan.

(3) RECEIVABLES

Receivables are as follows:

1998 1997
----------- -------------

Customers, trade.......................................................... $ 375,448 337,520
Other..................................................................... 2,919 956
----------- -------------
378,367 338,476
Less allowance for discounts, returns, claims and doubtful accounts....... 57,241 51,605
Net receivables............................................ ----------- -------------
$ 321,126 286,871
=========== =============

(4) INVENTORIES

The components of inventories are as follows:

1998 1997
----------- -------------

Finished goods.................................................... $ 215,365 185,162
Work in process................................................... 57,829 53,892
Raw materials..................................................... 139,000 128,022
----------- -------------
Total inventories......................................... $ 412,194 367,076
=========== =============

(5) PROPERTY, PLANT AND EQUIPMENT

Following is a summary of property, plant and equipment:

1998 1997
----------- -------------

Land...................................................................... $ 13,449 12,746
Buildings and improvements................................................ 160,917 153,486
Machinery and equipment................................................... 571,175 527,218
Furniture and fixtures.................................................... 32,306 18,590
Leasehold improvements.................................................... 4,143 3,256
Construction in progress.................................................. 43,237 20,666
----------- -------------
825,227 735,962
Less accumulated depreciation and amortization............................ 402,305 344,861
----------- -------------
Net property, plant and equipment................................. $ 422,922 391,101
=========== =============

Property, plant and equipment includes capitalized interest of $1,661, $799
and $1,180 in 1998, 1997 and 1996, respectively.

During 1998, the Company recorded a charge of $2,900 related to a write-
down of computer equipment acquired in the World acquisition that will be
disposed of.

During 1997, the Company recorded a charge of $5,500 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 1996, the Company recorded a charge of $3,060 arising from (a) the
write-down of property, plant and equipment to be disposed of related to the
closing of a manufacturing facility in 1996 and (b) a revision in the estimate
of fair value of certain property, plant and equipment based on current market
conditions related to mill closings in 1995.

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(6) OTHER ASSETS

The components of other assets are summarized below:

1998 1997
-------------- -------------

Goodwill, net of accumulated amortization of $10,363 and $8,266,
respectively..................................................... $ 85,972 59,823
Other assets....................................................... 15,605 16,912
-------------- -------------
Total other assets........................................ $ 101,577 76,735
============== =============

(7) LONG-TERM DEBT

On April 15, 1997, the Company amended and restated its credit agreement to
provide 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%. Additionally, the termination date of the credit
agreement was extended to May 15, 2002. At December 31, 1998, the Company had
credit availability of $250,000 under its revolving credit line of which
$121,078 was unused. The credit agreement contains customary financial and other
covenants and restricts cumulative dividend payments to $10,000 as adjusted
based on the Company's performance and dividend payments. The Company must pay
an annual facility fee ranging from .0015 to .0025 of the total credit
commitment, depending upon the Company's performance measured against specific
coverage ratios, under the revolving credit line.

The capital stock of each of the Company's subsidiaries has been pledged as
collateral under the credit agreement, the term loans and the senior notes.

On February 7, 1997, World amended the terms of its revolving and term loan
facility. Under the amended terms, World could borrow up to $102,000, based on
eligible accounts receivable and inventory balances. Interest on the revolving
credit facility is payable monthly at a rate equal to the prime rate minus 0.25%
or LIBOR plus 2% (8.25% at June 28, 1998. Interest on the term loans is payable
monthly at a rate equal to the prime rate plus 0.25% or LIBOR plus 2.5% (8.5% at
June 28, 1998). The line of credit expires February 7, 2002. The term loans are
payable in sixty equal monthly principal instalments of approximately $321, plus
interest at the rate stated above. The loans are secured by substantially all
accounts receivable, inventory and property, plant and equipment of World. Under
the terms of the revolving line of credit agreement, World incurs a fee equal to
3/8% per year on the unused balance of the revolving line of credit. The fee is
paid monthly.

On January 28, 1999, the Company amended and restated its credit agreement
to increase the total availability to $450,000, comprised of the Tranche A
commitment of $250,000 due on January 28, 2004 and the Tranche B commitment of
$200,000 due on January 27, 2000.

Long-term debt consists of the following:

1998 1997
--------------- -------------

Revolving line of credit, due May 15, 2002..................................... $128,922 48,800
World revolving line of credit, due February 7, 2002........................... - 58,872
World term loans............................................................... - 21,857
8.46% senior notes, payable in annual principal installments beginning in
1998, due September 16, 2004, interest payable quarterly.................... 85,714 100,000
7.14%-7.23% senior notes, payable in annual principal installments
beginning in 1997, due September 1, 2005, interest payable semiannually..... 66,111 75,556
8.48% term loans, payable in annual principal installments, due October 26,
2002, interest payable quarterly............................................ 22,857 28,571
9.5% senior notes, payable in annual principal installments, due April 1,
1998, interest payable semiannually......................................... - 3,750
7.58% senior notes, payable in annual principal installments beginning in
1997, due July 30, 2003, interest payable semiannually...................... 7,143 8,571

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

6% term note, payable in annual principal and interest
installments beginning in 1998, due July 23, 2004.............................. 8,014 9,350
Industrial Revenue Bonds and other................................................ 37,207 22,411
----------- ----------
Total long-term debt........................................................... 355,968 377,738
Less current portion.............................................................. 34,176 41,529
----------- ----------
Long-term debt, excluding current portion $ 321,792 336,209
=========== ==========

The aggregate maturities of long-term debt as of December 31, 1998 are as
follows:

1999....................................................... $ 34,176
2000....................................................... 33,786
2001....................................................... 33,361
2002....................................................... 162,237
2003....................................................... 27,389
Thereafter................................................. 65,019
---------------
$ 355,968
===============

(8) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses are as follows:

1998 1997
------------ ----------

Outstanding checks in excess of cash.................................... $ 26,894 33,655
Accounts payable, trade................................................. 153,217 138,699
Accrued expenses........................................................ 122,532 70,986
Accrued compensation.................................................... 50,871 41,744
------------ ----------
Total accounts payable and accrued expenses......................... $ 353,514 285,084
============ ==========

(9) STOCK OPTIONS AND STOCK COMPENSATION

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 1998,
options to purchase 165 and 9 shares, respectively, were granted under these
plans. Options granted under each of these plans expire ten years from the date
of grant and become exercisable at such dates and at prices as determined by the
Compensation Committee of the Company's Board of Directors.

During 1996, the Company adopted the 1997 Non-Employee Director Stock
Compensation Plan. The plan provides for awards of common stock of the Company
for non-employee directors to receive in lieu of cash for their annual
retainers. During 1998, a total of 3 shares were awarded to the non-employee
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 1998, a total of 21 shares were
awarded to employees under this plan.

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

1998 1997 1996
--------- -------- ---------

Options outstanding at beginning of year............... 1,568 2,142 3,839
Options granted........................................ 174 65 621
Options exercised...................................... (316) (460) (2,069)
Options canceled....................................... (39) (179) (249)
--------- -------- ---------
Options outstanding at end of year..................... 1,387 1,568 2,142
========= ======== =========
Options exercisable at end of year..................... 686 742 655
========= ======== =========

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Option prices per share:
Options granted during the year...................... $ 17.23 - 32.31 5.67 - 19.38 9.94 - 11.33
=============== ============= =============
Options exercised during the year.................... $ 5.67 - 19.38 .02 - 19.17 .01 - 14.50
=============== ============= =============
Options canceled during the year..................... $ 5.67 - 31.94 5.67 - 19.17 5.67 - 19.17
=============== ============= =============
Options outstanding at end of year................... $ 5.61 - 32.31 5.61 - 19.38 .03 - 19.17
=============== ============= =============

A charge of $2,600 was recorded in the fourth quarter of 1997 for income
tax reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allowed the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon the exercise of these options. Such income tax benefit resulted
in a direct increase in stockholders' equity of $7,606 in 1996 primarily from
the exercise of these options.

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

(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. Employee and employer
contributions to the Plan were $12,345 and $4,213 in 1998, $9,334 and $3,075 in
1997 and $6,499 and $2,132 in 1996, respectively.

A portion of the employees who were not eligible to participate in the Plan
participated in a defined contribution profit sharing plan through June 1997.
After June 1997, the employee balances in the profit sharing plan were rolled
over into the 401(k) retirement savings plan. Contributions were discretionary
and the Company expensed $991 and $2,130 for the years ended December 31, 1997
and 1996, respectively.

World maintains the World Carpet Savings Retirement Plan (the "Plan"), a
defined contribution 401(k) plan covering substantially all employees. Employees
are eligible to participate upon completion of one year of service. Under the
terms of the Plan, World may match employee contributions up to a maximum of 2%
of the employee's salary and employees vest in the contributions based on years
of credited service. For the years ended December 31, 1998, 1997 and 1996, the
Company contributed approximately $703, $698 and $629 to the Plan, respectively.

(11) RESTRUCTURING COSTS

During the fourth quarter of 1996, the Company decided to close a spinning
mill in Belton, South Carolina, the operations of which were consolidated into
other Mohawk facilities. For the year ended December 31, 1996, the Company
recorded restructuring costs of $700 related to employee termination benefits,
environmental clean-up and other costs associated with the mill closing. The
after-tax effect of the restructuring costs for the year was $415. Additionally,
in 1996 the Company made payments of $1,125 and reclassed $5,266 to other
liability or reserve accounts in connection with mill closings in 1996 and prior
years.

(12) INCOME TAXES

Income tax expense attributable to earnings before income taxes for the
years ended December 31, 1998, 1997 and 1996 consists of the following:

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

CURRENT DEFERRED TOTAL
------------- ------------ -------------

1998:
U.S. federal...................................... $ 72,218 (11,767) 60,451
State and local................................... 17,099 (2,774) 14,325
------------- ------------ -------------
$ 89,317 (14,541) 74,776
============= ============ =============
1997:
U.S. federal...................................... $ 42,994 (2,800) 40,194
State and local................................... 8,600 (640) 7,960
------------- ------------ -------------
$ 51,594 (3,440) 48,154
============= ============ =============
1996:
U.S. federal...................................... $ 31,363 955 32,318
State and local................................... 2,574 3,393 5,967
------------- ------------ -------------
$ 33,937 4,348 38,285
============= ============ =============

Income tax expense attributable to earnings before income taxes differs
from the amounts computed by applying the U.S. federal income tax rate of 35%
for Mohawk and 34% for World to earnings before income taxes as follows:

1998 1997 1996
-------------- ------------- -------------

Computed "expected" tax expense........................ $ 63,836 42,461 31,993
State and local income taxes, net of federal
income tax benefit................................... 9,311 4,810 2,377
Amortization of goodwill............................... 746 472 519
Other, net............................................. 883 411 3,396
-------------- ------------- -------------
$ 74,776 48,154 38,285
============== ============= =============

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented below:

1998 1997
------------- -------------

Deferred tax assets:
Accounts receivable.............................................. $ 16,845 19,387
Inventories...................................................... 6,946 969
Accrued expenses................................................. 28,583 18,451
Purchased net operating loss carryforwards....................... - 6,025
Other............................................................ 1,990 1,385
------------- -------------
Gross deferred tax assets................................ 54,364 46,217
------------- -------------
Deferred tax liabilities:
Plant and equipment.............................................. (31,895) (32,946)
Other............................................................ - (4,500)
------------- -------------
Gross deferred tax liabilities............................... (31,895) (37,446)
------------- -------------
Net deferred tax asset....................................... $ 22,469 8,771
============= =============

Based upon the level of historical and projected taxable income over
periods 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, 1998.

(13) COMMITMENTS AND CONTINGENCIES

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

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) at December 31, 1998
are:

OHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

YEARS ENDING
DECEMBER 31,
------------

1999.......................................... $ 18,207
2000.......................................... 15,813
2001.......................................... 11,932
2002.......................................... 8,140
2003.......................................... 6,595
Thereafter.................................... 4,960
-----------
Total minimum lease payments.................. $ 65,647
===========

Rental expense under operating leases was $26,882, $20,475 and $17,677 in
1998, 1997 and 1996, 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 determined that the plaintiffs met their burden of
establishing the requirements for class certification and granted the
plaintiffs' motion to certify the class. 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 carpet in the State of California and
seek damages for alleged violations of California antitrust and unfair
competition laws. The complaints filed do not specify any amount of damages but
do request for any unlawful conduct to be enjoined and treble damages plus
reimbursement for fees and costs. 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 a competitor and one of its
subsidiaries. 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 and denied the allegations in the
complaint and set forth its defenses. 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 purchases 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.

(14) CONSOLIDATED STATEMENTS OF CASH FLOWS INFORMATION

Supplemental disclosures of cash flow information are as follows:

1998 1997 1996
------------- ------------- -------------

Net cash paid during the year for:
Interest.................................. $ 29,156 35,926 37,949
============= ============= =============
Income taxes.............................. $ 72,174 52,368 23,721
============= ============= =============

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)

The supplemental quarterly financial data are as follows:

QUARTERS ENDED
---------------------------------------------------------------
MARCH 28, JUNE 27, SEPT. 26, DEC. 31,
1998 1998 1998 1998
------------- -------------- ------------- -------------

Net sales...................................... $ 561,664 662,569 691,954 723,013
Gross profit................................... 124,839 165,963 167,293 182,202
Net earnings................................... 14,595 33,495 34,723 24,799
Basic earnings per share....................... 0.26 0.59 0.61 0.43
Diluted earnings per share..................... 0.25 0.58 0.60 0.43

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

QUARTERS ENDED
----------------------------------------------------
MARCH 29, JUNE 28, SEPT. 27, DEC . 31,
1997 1997 1997 1997
--------- ---------- ----------- -------------

Net sales.................................. $ 514,993 581,539 600,843 629,966
Gross profit............................... 109,881 129,852 136,231 143,240
Net earnings............................... 8,731 18,899 22,184 23,610
Basic earnings per share................... 0.15 0.33 0.39 0.41
Diluted earnings per share................. 0.15 0.33 0.39 0.41

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 1999 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 1999 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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) 1. CONSOLIDATED FINANCIAL STATEMENTS

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

2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

Schedule I-Condensed Financial Information of Registrant............46
Schedule II-Consolidated Valuation and Qualifying Accounts..........49

Schedules not listed above have been omitted because they are not applicable
or the required information is included in the consolidated financial statements
or notes thereto.

3. EXHIBITS

The exhibit number for the exhibit as originally filed is included in
parentheses at the end of the description.

MOHAWK
EXHIBIT
NUMBER DESCRIPTION
------ -----------

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

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

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

*2.4 Agreement and Plan of Merger dated as of December 3, 1993 and amended
as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin
and certain Shareholders of Aladdin. (Incorporated herein by
reference to Exhibit 2(i)(a) in Mohawk's Registration Statement on
Form S-4, Registration No. 33-74220.)

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

*2.6 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 Appendix A of the Mohawk Registration Statement on Form S-3,
Registration No. 333-66061, as filed October 22, 1998).

*2.7 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).

3.1 Restated Certificate of Incorporation of Mohawk, as amended.

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

*4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)

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

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

*10.2 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.)

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

*10.4 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.)

*10.5 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.)

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

*10.7 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.)

10.8 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a
distribution warehouse in Glen Burnie, Maryland.

10.9 Lease dated April 1, 1996 between Love Lock, LLC and Mohawk concerning
a distribution warehouse in San Diego, California.

10.10 Lease dated September 23, 1996 between West End Road Associates and
Mohawk concerning a distribution warehouse in Pompton Plains, New
Jersey.

10.11 Lease dated September 1, 1996 between Catellus Development Corp. and
Mohawk concerning a distribution warehouse in LaMirada, California.

10.12 Lease dated November 27, 1996 between CP-Regency Business Park LTD and
Aladdin concerning a distribution warehouse in Grand Prairie, Texas.

10.13 Lease dated December 31, 1985 between General Bag & Burlap Company and
Mohawk concerning a distribution warehouse in Philadelphia,
Pennsylvania.

10.14 Lease dated May 23, 1996 between Echota Properties, LLC and American
Weavers concerning a manufacturing and warehousing facility in
Calhoun, Georgia.

10.15 Lease dated May 23, 1996 between Echota Properties, LLC and American
Weavers concerning an addition to a manufacturing and warehousing
facility in Calhoun, Georgia.

10.16 Lease dated May 23, 1996 between Echota Properties, LLC and American
Weavers concerning an addition to a manufacturing and warehousing
facility in Calhoun, Georgia.

10.17 Lease dated May 1, 1998 between Echota Properties, LLC and American
Weavers concerning an addition to a manufacturing and warehousing
facility in Calhoun, Georgia.

10.18 Lease dated February 1, 1998 between Hugh C. Hoodenpyle and American
Weavers concerning a manufacturing and warehousing facility in
Haiwassee, Georgia.

10.19 Lease dated October 1, 1998 between Hugh C. Hoodenpyle and American
Weavers concerning an addition to a manufacturing and warehousing
facility in Haiwassee, Georgia.

10.20 Lease dated September 14, 1993 between WBP Properties and Newmark
concerning a distribution warehouse in Dalton, Georgia.

10.21 Lease dated November 21, 1987 between First American Bank of New York
and Image, as amended on December 3, 1997 by an agreement between
Charles Milford Morgan, Jr. d/b/a Morgan Trust Properties and Image,
and as further amended on July 17, 1998 by an agreement between
Milford Morgan Trust Properties and Image with respect to that
certain warehouse located on Highway 114 in Lyerly, Georgia.

10.22 Lease dated November 19, 1997 between James S. Owens Residual Trust,
Diana O. Layson, Trustee, and Image with respect to that certain
warehouse located at 713 South River Street in Calhoun, Georgia.

10.23 Lease dated December 12, 1997 between Kay D. Owens Estate, Diana O.
Layson, Executrix, and Image with respect to that certain warehouse
located at 713 South River Street in Calhoun, Georgia.

10.24 Lease dated December 14, 1992, between First Union National Bank of
Georgia, as Trustee under item 8 u/w of James E. Minge; First Union
National Bank of Georgia, as Trustee u/a W. G. Minge, dated
September 15, 1987; First Union National Bank of Georgia and Jerry
L. Minge, co-executors u/w/o C. A. Minge and Image, as amended by
that certain lease modification and extension agreement dated July
24, 1995 with respect to that certain warehouse located at 15 Old
Airport Road in Rome, Georgia.

10.25 Lease dated June 1, 1998 between Intemark USA, Inc. and Image
concerning a warehouse in Kensington, Georgia.

10.26 Lease dated November 10, 1997 between Mohawk and Hayward Industrial
Park Associates concerning a warehouse in Hayward, California.

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

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

*10.29 Letter dated as of September 16, 1994 of the Second Modification to
the Consolidated, Amended and Restated Note Agreement dated
September 3, 1993 among Mohawk, Mohawk Carpet Corporation and The
Prudential Insurance Company of America. (Incorporated herein by
reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form 10-Q
for the quarter ended October 1, 1994.)

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

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

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

*10.33 Letter dated as of October 17, 1997 of the Sixth Modification to the
Consolidated, Amended And Restated Note Agreement dated September 3,
1993 among Mohawk, Aladdin Manufacturing Corporation (f/n/a Mohawk
Manufacturing Corporation and prior to that k/a Mohawk Carpet
Corporation) and The Prudential Insurance Company of America.
(Incorporated herein by reference to Exhibit 10.1 in Mohawk's
Registration Statement on Form S-3, Registration No. 333-45683.)

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

*10.35 Third Amended and Restated Credit Agreement dated as of April 15,
1997 among Mohawk, Aladdin Manufacturing Corporation, Wachovia Bank
of Georgia, N.A. and First Union National Bank of Georgia.
(Incorporated herein by reference to Exhibit 10 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended March 29, 1997.)

*10.36 Fourth Amended and Restated Credit Agreement dated as of January 28,
1999 among Mohawk, Aladdin Manufacturing Corporation, Wachovia Bank
of Georgia, N.A. and First Union National Bank of Georgia.
(Incorporated herein by reference to Exhibit 99.1 of Mohawk's
Current Report on Form 8-K dated February 2, 1999.)

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

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

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

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

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

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

*10.43 Note Purchase Agreement dated as of August 15, 1993 for 9.5% Senior
Notes due April 1, 1998 among Mohawk Carpet, Mohawk, Horizon,
American Rug Craftsmen, Burton Carpets & Rugs, Inc. and The
Harbinger Company, Inc., and Alexander Hamilton Life Insurance
Company of America, Connecticut Mutual Life Insurance Company, The
Franklin Life Insurance Company and Principal Mutual Life

Insurance Company. (Incorporated herein by reference to Exhibit 10.5
of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)

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

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

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

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

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

*10.49 Seventh Amendment Agreements dated as of October 17, 1997 of the Note
Purchase Agreement dated as of August 15, 1993 for 9.5% Senior Notes
due April 1, 1998 among the Company, Aladdin Manufacturing
Corporation (f/k/a Mohawk Manufacturing Corporation and prior to
that k/a Mohawk Carpet Corporation), Mohawk Marketing, Inc., Mohawk
Mills, Inc., Mohawk Carpet Corporation (f/n/a Mohawk Limited),
Alexander Hamilton Life Insurance Company of America, Massachusetts
Mutual Life Insurance Company, The Franklin Life Insurance Company
and Principal Mutual Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.4 in Mohawk's Registration Statement on Form
S-3, Registration No. 333-45683.)

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

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

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

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

*10.54 Fifth Amendment Agreement dated as of September 29, 1995 of the Note
Purchase Agreement dated as of August 15, 1993 for $85 million of Senior
Notes due September 1, 2005 among Mohawk Manufacturing Corporation (f/k/a
Mohawk Carpet Corporation), Mohawk, Aladdin Mills, Inc., Mohawk
Marketing, Inc., Galaxy Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk
Carpet Corporation, John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, John Hancock Life Insurance
Company of America, Principal Mutual Life Insurance Company, UNUM Life
Insurance Company of America and American General Life Insurance Company.
(Incorporated herein by reference to Exhibit 10.8 of Mohawk's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.)

*10.55 Sixth Amendment Agreement dated as of March 12, 1996 of the Note
PurchaseAgreement dated as of August 15, 1993 for $85 million Senior
Notes due September 1, 2005 among the Company, Mohawk Manufacturing
Corporation (f/k/a Mohawk Carpet Corporation), Aladdin, Mohawk Marketing,
Inc.,Galaxy Carpet Mills, Inc., Mohawk Mills, Inc., Mohawk Carpet
Corporation, John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, John Hancock Life Insurance Company of
America, Principal Mutual Life Insurance Company, Principal National Life
Insurance Company, UNUM Life Insurance Company and The Franklin Life
Insurance Company.

(Incorporated herein by reference to Exhibit 10.44 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.)

*10.56 Seventh Amendment Agreement dated as of October 17, 1997 for $85 million
Senior Notes due September 1, 2005 among the Company, Aladdin
Manufacturing Corporation (f/k/a Mohawk Manufacturing Corporation and
prior to that k/a Mohawk Carpet Corporation), Mohawk Marketing, Inc.,
Mohawk Mills, Inc., Mohawk Carpet Corporation (f/n/a Mohawk Limited),
John Hancock Mutual Life Insurance Company, John Hancock Variable Life
Insurance Company, John Hancock Life Insurance Company of America,
Principal Mutual Life Insurance Company, The Prudential Insurance Company
of America and The Franklin Life Insurance Company. (Incorporated herein
by reference to Exhibit 10.3 in Mohawk's Registration Statement on
Form S-3, Registration No. 333-45683.)

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

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

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

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

*10.61 Letter dated as of October 17, 1997 of the Fourth Modification to the
Note Purchase Agreement dated as of September 16, 1994 for $100 million
of Senior Notes due September 16, 2004 among Mohawk, Aladdin
Manufacturing Corporation (f/k/a Mohawk Manufacturing Corporation and
prior to that k/a Mohawk Carpet Corporation), The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company, John Hancock
Mutual Life Insurance Company of America, 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 in Mohawk's Registration Statement on Form S-3, Registration
No. 333-45683.)

*10.62 Second Amended and Restated Intercreditor Agreement among the Collateral
Agent, First UnionNational Bank of Georgia, Wachovia Bank of Georgia,
N.A., The Prudential Insurance Company of America, John Hancock Mutual
Life Insurance Company, John Hancock Variable Life Insurance Company,
John Hancock Life Insurance Company of America, Principal Mutual Life
InsuranceCompany, Principal National Life Insurance Company, UNUM Life
Insurance Company, The Franklin Life Insurance Company, Alexander
Hamilton Life Insurance Company of America and Connecticut Mutual Life
Insurance Company, and the related Amended and Restated Security
Agreements dated as of September 16, 1994 between the Collateral Agent
for the benefit of the parties to that Intercreditor Agreement and the
Company and Mohawk Carpet Corporation. (Incorporated herein by reference
to Exhibit 10.5 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended October 1, 1994.)

*10.63 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.)

*10.64 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.)

*10.65 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.)

*10.66 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.)

*10.67 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.)

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

*10.68 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.)

*10.69 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.)

10.70 World Carpets, Inc. Savings and Retirement Plan dated January 1, 1989.

*10.71 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.)

*10.72 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.)

*10.73 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.)

*10.74 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.)

*10.75 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.)

*10.76 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.)

*10.77 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.)

*10.78 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.)

*10.79 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.)

*10.80 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.)

*10.81 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.)

*10.82 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.)

*10.83 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.)

*10.84 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.)

*10.85 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.)

*10.86 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.)

*10.87 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.)

11 Statement re: Computation of Per Share Earnings.

21 Subsidiaries of the Registrant.

23.1 Independent Auditors' Consent - KPMG LLP.

23.2 Consent of Independent Accountants - PricewaterhouseCoopers LLP.

27.1 1998 Financial Data Schedule.

27.2 1997 Financial Data Schedule (restated).

27.3 1996 Financial Data Schedule (restated).

________
* Indicates exhibit incorporated by reference.

(B) REPORTS ON FORM 8-K.

1. Current Report on Form 8-K dated February 5, 1998.
2. Current Report on Form 8-K dated October 15, 1998.
3. Current Report on Form 8-K dated November 12, 1998.
4. Current Report on Form 8-K dated November 12, 1998.
5. Current Report on Form 8-K dated November 20, 1998.
6. Current Report on Form 8-K dated December 23, 1998.
7. Current Report on Form 8-K dated January 29, 1999.
8. Current Report on Form 8-K dated February 2, 1999.
9. Current Report on Form 8-K dated February 4, 1999.
10. Current Report on Form 8-K dated February 19, 1999.

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 2, 1999
By: /s/ David L. Kolb
---------------------------------------------
David L. Kolb,
Chairman of the Board and Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

Dated: March 2, 1999 /s/ David L. Kolb
-------------------------------------------------
David L. Kolb,
Chairman of the Board and Chief Executive Officer
(principal executive officer)

Dated: March 2, 1999 /s/ John D. Swift
-------------------------------------------------
John D. Swift,
Chief Financial Officer, Vice President-Finance
and Assistant Secretary
(principal financial and accounting officer)

Dated: March 2, 1999 /s/ Leo Benatar
-------------------------------------------------
Leo Benatar,
Director

Dated: March 2, 1999 /s/ Bruce C. Bruckmann
-------------------------------------------------
Bruce C. Bruckmann,
Director

Dated: March 2, 1999 /s/ Alan S. Lorberbaum
-------------------------------------------------
Alan S. Lorberbaum,
Director

Dated: March 2, 1999 /s/ Jeffrey S. Lorberbaum
-------------------------------------------------
Jeffrey S. Lorberbaum,
Director

Dated: March 2, 1999 /s/ Larry W. McCurdy
-------------------------------------------------
Larry W. McCurdy,
Director

Dated: March 2, 1999 /s/ Robert N. Pokelwaldt
-------------------------------------------------
Robert N. Pokelwaldt,
Director

SCHEDULE I

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
MOHAWK INDUSTRIES, INC.

BALANCE SHEETS

DECEMBER 31, 1998 AND 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS 1998 1997
-----------------------------

Current assets - intercompany receivable................................................. $ 40,729 38,765
Investment in subsidiaries............................................................... 545,980 438,368
----------- --------
$ 586,709 477,133
=========== ========

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 60 shares authorized; no shares issued.................. $ - -
Common stock, $.01 par value; 150,000 shares authorized; 57,383 and 57,067
shares issued in 1998 and 1997, respectively.......................................... 574 571
Additional paid-in capital............................................................... 168,797 164,140
Retained earnings........................................................................ 417,338 312,422
----------- --------
$ 586,709 477,133
=========== ========

SCHEDULE I
(CONTINUED)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
MOHAWK INDUSTRIES, INC.

STATEMENTS OF EARNINGS

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(IN THOUSANDS)

1998 1997 1996
----------- ---------- -----------

Equity in earnings of subsidiaries........................................... $ 107,612 73,424 53,378
----------- ---------- -----------
Net earnings......................................................... $ 107,612 73,424 53,378
=========== ========== ===========

SCHEDULE I
(CONTINUED)

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
MOHAWK INDUSTRIES, INC.

STATEMENTS OF EARNINGS

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(IN THOUSANDS)

1998 1997 1996
-------------- ------------ ------------

Cash flows from operating activities:
Net earnings.................................................... $ 107,612 73,424 53,378
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in earnings of subsidiaries........................ (107,612) (73,424) (53,378)
Increase in intercompany receivable....................... (1,964) (4,662) (9,222)
------------ ----------- --------
Net cash used in operating activities..................... (1,964) (4,662) (9,222)
------------ ---------- --------
Cash flows from financing activities:
Stock options exercised......................................... 4,417 3,636 1,323
Tax benefit from exercise of stock options...................... 243 1,050 7,606
Other........................................................... (2,696) (24) 293
------------ ---------- --------
Net cash provided by financing activities................. 1,964 4,662 9,222
------------ ---------- --------
Net change in cash.................................. - - -
Cash, beginning of year................................................ - - -
------------ ---------- --------
Cash, end of year...................................................... $ - - -
============ ========== ========

SCHEDULE II

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

(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, 1996:
Allowance for doubtful accounts - trade.. $ 17,956 13,213 15,466 15,703
Provision for cash discounts............. 5,879 48,577 47,407 7,049
Provision for claims and allowances...... 13,585 109,399 105,736 17,248
--------------- ------------- ------------------- -------------
Total............................... $ 37,420 171,189 168,609 40,000
=============== ============= =================== =============

Year ended December 31, 1997:
Allowance for doubtful accounts - trade.. $ 15,703 8,434 7,069 17,068
Provision for cash discounts............. 7,049 51,023 48,111 9,961
Provision for claims and allowances...... 17,248 119,232 111,904 24,576
--------------- ------------- ------------------- -------------
Total............................... $ 40,000 178,689 167,084 51,605
=============== ============= =================== =============

Year ended December 31, 1998:
Allowance for doubtful accounts - trade.. $ 17,068 13,173 7,362 22,879
Provision for cash discounts............. 9,961 72,275 70,074 12,162
Provision for claims and allowances...... 24,576 187,287 189,663 22,200
--------------- ------------- ------------------- -------------
Total............................... $ 51,605 272,735 267,099 57,241
=============== ============= =================== =============

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

EXHIBIT INDEX