2. Mohawk Industries is the second-largest carpet mill in the United States, and the leading producer of area rugs
and mats. Headquartered in Calhoun, Georgia, Mohawk designs, manufactures and markets woven and tufted
broadloom carpet, carpet tile, home textiles, bath mats, and area and accent rugs.The Company also markets hard
surface flooring including laminate, wood and ceramic tile. Mohawk supplies products for all significant
markets, distribution channels and price points through a family of popular and prestigious brands that include
Aladdin, Alexander Smith, American Rug Craftsmen, American Weavers, Bigelow, CustomWeave, Durkan,
Galaxy, Harbinger, Helios, Horizon, Image, Karastan, Mohawk, Newmark Rug, World and WundaWeve.
Mohawk Industries’ shares are traded on the New York Stock Exchange under the symbol MHK.
1999
1997 1998
(In thousands, except per share amounts)
Net sales $2,429,085 2,744,620 3,083,264
Gross profit $ 559,864 681,287 776,859
Operating income before
financial highlights No one knows for sure what tomor row will br ing. At the threshold of our
nonrecurring items $ 176,341 249,096 294,797
Net earnings before
third centur y in business, we do know it will be full of
nonrecurring items $ 84,464 130,494 157,239
opportunity
Earnings per share before
nonrecurring items $ 1.40 2.13 2.61
$3,083
$2,745
$2,429
Net Sales $2,000
(In millions) 1997 1998 1999
$157
$130
$84
Net Earnings $80
Before nonrecurring items (In millions) 1997 1998 1999
$2.61
$2.13
$1.40
Earnings Per Share $1.35
Before nonrecurring items 1997 1998 1999
3. dear stockholders
During 1999,Mohawk continued to outpace the industry in top-line
and bottom-line growth.We achieved these excellent results by offering
the widest array of products and price points in our industry. We serve
our customers in innovative ways,continuously improve our infrastruc-
ture and adhere to time-tested strategies for delivering stockholder
value.If Mohawk’s past is any indication,our future will be full of
new opportunities.
Strength in Numbers A 12% increase in net sales to $3.1 billion in
1999 contributed to the highest diluted earnings per share in Mohawk’s
history — $2.61 per share, or $157.2 million in net earnings.This repre-
sents a 23% increase over 1998’s diluted earnings per share of $2.13
before nonrecurring items, or $130.5 million in net earnings. Gross
profit as a percentage of net sales improved from 1998’s 24.8% to 25.2%
in 1999. Operating income before nonrecurring items as a percentage
of net sales improved from 9.1% in 1998 to 9.6% in 1999. Our return
on equity before nonrecurring items increased from 23.6% in 1998 to
24.1% in 1999.
We accomplished our continued strong revenue growth through
a combination of internal growth and acquisitions, and far exceeded the
industry’s 3% increase. As a result, Mohawk again gained market share.
This impressive performance failed to boost the Company’s share
price, as the stock market appears to favor some industry sectors over
others. Given our share price attractiveness, the Board of Directors
authorized the repurchase of up to 10 million shares of Mohawk com-
mon stock.This share repurchase program demonstrates our belief in
the Company’s future and our expectations for continued growth and
earnings. We anticipate an increase in share price when investors return
to the value sector of the market.
Although many investors failed to recognize our financial accom-
plishments in 1999, the financial press did. In February 2000, Fortune
named Mohawk as one of “America’s Most Admired Companies.” In
January 2000, Forbes placed us on its “Platinum 400” list of exceptional
big corporations. In 1999, The Atlanta Journal ranked Mohawk the fifth-
best Georgia corporation.
Strategies that Work Our basic strategies for growth remain unchanged:
(1) to grow internally through strong marketing, merchandising and edu-
cational support coupled with product line expansion and (2) to grow
externally through acquisitions that leverage our powerful infrastructure.
In 1999, we complemented our internal growth with two outstanding
acquisitions — the assets of Image Industries, Inc. and Durkan Patterned
“We have uniquely positioned Mohawk Industries to recognize Carpets, Inc. Image is a leading postconsumer bottle recycler and manu-
and seize opportunities as they arise. Mohawk has the financial facturer of polyester residential carpet. Image’s state-of-the-art recycling
strength, the infrastructure, the knowledge and the leadership to
turn potential into profit.”
David L. Kolb, Chairman and Chief Executive Officer,
with one of our new Martha Stewart throws.
4. and production technologies enhance Mohawk’s low-cost producer
position in staple yarn products and give us a market leadership position
in the polyester product category.
Durkan is a leading supplier of custom commercial carpet to the
hospitality market. Acquiring Durkan strengthens our commercial prod-
uct offerings and adds the latest design and printing technology to
Mohawk’s manufacturing strengths.
These acquisitions exemplify our market strategy — to enter seg-
ments or niches with growth and synergy potential that complements
or expands our product line.Two recently added hard surface products,
Mohawk Laminate flooring and Mohawk Ceramic tile, fit this strategy.
Their significant growth has led us to offer new styles and SKUs. We are
also excited about our newly introduced Mohawk Hardwood flooring
products. Both carpet padding and Mohawk Commercial carpet tiles capacity, and we bought new dyeing equipment to further consolidate
posted substantial gains. our residential manufacturing operations and improve costs.
Last year, we focused on getting the maximum value from our An expanded warehouse system accommodates the higher volume
brands. We strengthened Karastan’s position at the high end of the market, produced by our acquisitions and our growth in the hard surfaces busi-
and then heavily promoted the Mohawk brand to the mass market. Our ness. As we added space, trucks and people, we improved the automation
goal is to make Mohawk the overall brand of choice among our dealers of our distribution system to give us more accurate information faster.
and consumers. In 1999, we began to tap the power of the Internet to assist our cus-
We also realigned the Company into five product categories tomers, and we will expand this effort in 2000. Mohawk tested programs
dedicated to marketing and retail channels: rug and textile, residential, on our proprietary business-to-business (B2B) website to provide cus-
specified commercial, hospitality and Karastan.This enables us to focus tomers with key information about shipping, delivery, claims and credit.
Jeffrey S. Lorberbaum,
more effectively on the needs of each of our customers. This resource also provides immediate information and feedback to our
President and Chief sales and marketing staffs.
Structural Integrity At Mohawk, continually improving our infrastructure
enhances our low-cost position and strengthens relationships with our Operating Officer, Tomorrow’s Forecast In our business, there are many variables we cannot
customers.The design and implementation of our leading-edge, real-time with one of our Karastan control. Industry dynamics, however, appear to favor continued growth.
information system unified our operations. Our processes for integrating Consolidation has increased the professionalism of our industry’s top
tea-washed rugs.
acquisitions have allowed us to take immediate advantage of synergies companies, leading to improved stockholder value and a positive outlook.
and cost savings. Demographics remain favorable as baby boomers mature and
During 1999, we significantly expanded our fiber extrusion capa- prosper.The strong U.S. economy creates a large amount of discretion-
bilities to support new and existing product categories. New facilities and ary income, offering tremendous potential for our industry. Retailers
equipment increase the Company’s filament and staple yarn processing are moving from a focus on price to selling features and benefits.This
translates into increased demand for higher-quality products and better
margins at all levels.
Mohawk has established the foundation for a successful future. We
provide a high level of service to a large, strong customer base. We own
well-integrated, state-of-the-art manufacturing facilities and a distribution
system second to none. Our acquisitions have contributed to the strength
and depth of our management team and employees. Our new marketing
initiatives support a continually broadening product line. With all these
advantages in place, we remain confident that we possess the people,
the manufacturing capabilities, the marketing strategies, the distribu-
tion network and the brand awareness to take advantage of the many
opportunities that lie ahead.
David L. Kolb, Jeffrey S. Lorberbaum,
Chairman and Chief Executive Officer President and Chief Operating Officer
5. Mohawk’s commitment to
cable television commercials build
As we begin the 21st century,
its retailers includes not only mar-
on that name recognition with
Mohawk Industries is positioned
keting and sales programs, but also
consumers. Our advertising cam-
to make a grand entrance into what
education and training. Last year,
paign emphasizes style, beauty
we believe will be an era of creative
thousands of dealer representatives
and fashion.
marketing for the floor covering
from across the country partici-
Working in concert with our
and home textiles industry.
pated in Mohawk University, the
advertising is a three-tiered mer-
Mohawk’s marketing plan cen-
industry’s most in-depth program
chandising program: Mohawk
ters on the value associated with
designed to improve sales tech-
Floorscapes, a total store concept;
our brands. To provide increased
niques and consumer satisfaction.
Mohawk Color Center, which
value to our dealers and help
Our technological investments
provides a boutique for a store-
them attract more customers, we
now extend to e-commerce. We
within-a-store presentation; and
have significantly expanded the
have tested and introduced a B2B
Mohawk Family of Brands, which
advertising, marketing and mer-
proprietary Internet site.The site
offers product packages tailored to
chandising of the Mohawk and
will provide our dealers with easy
the particular needs of each retailer.
Karastan brands. We will promote
access to customer service, shipping
In 1999, we launched the
the popular Mohawk brand
and delivery status, and claims and
Mohawk Floorscapes concept in
name to all market segments and
credit data as well as marketing and
limited test markets. Today, inde-
all product categories, including
sales information. Internally, the site
pendent retailers have installed
residential and commercial carpet,
will give our sales force immediate
the concept in approximately 100
rugs, home textiles and hard sur-
feedback and will improve the
stores, and we plan to continue
face flooring. The time-honored
level of service.
this rollout on a national basis.
Karastan name will be promoted
With this comprehensive
Mohawk Color Center, the indus-
in conjunction with high-end
approach to marketing, we’re
try’s longest-running and most
residential and commercial carpet
poised to make a truly grand
successful merchandising program,
and rugs.
entrance in the new millennium.
features nearly 2,000 participating
Surveys show that Mohawk and
dealers. More than 20,000 dealers
Karastan are the most recognized
buy products under the Mohawk
brands in floor covering. Our
Family of Brands.
increased print advertising and
In 1999, we strengthened the Karastan brand at the high
end of the market, and promoted the Mohawk brand to
the mass market.These are now the most recognized
brands in floor covering.
a grand entrance
6. Neocon ’99, the nation’s most
us to introduce a variety of prod-
Mohawk is uniquely positioned
distinguished commercial flooring
ucts in all residential brands. And
to take advantage of market
exposition. A new woven prod-
we have introduced American
possibilities. Our recent acquisi-
uct, Whipstitch, and a new carpet
Weavers’ home textile designs into
tions create exciting new synergies
tile product,Tangents, received
our printed rug and mat business.
in manufacturing and design.
Silver Best of Neocon awards.
In fact, our recently realigned
Mohawk has always recognized
Mohawk’s commercial designs
Rug & Textiles division has shared
the value in sharing technology
won Solutia’s 1999 Doc Award
manufacturing technologies and
and ideas among its divisions.
for best-of-show, and our Lago
strategies in sales and marketing
This results in product innova-
Collection of patterned loop
to further enhance an already
tions that have increased sales
carpets received the 1999 Design
successful business.
and improved efficiencies.
Journal Award for Design Excel-
With an eye toward both envi-
The Durkan, Image and
lence.The Heirloom Collection
ronmental responsibility and cost
American Weavers acquisitions,
from Mohawk Residential earned
reduction, we reclaim waste in
for instance, have produced ripple
the Company its second consec-
innovative and productive ways. We
effects throughout many areas
utive Dealer’s Choice Award
recycle material from our residen-
of our business. Durkan diversi-
at Surfaces ’99.
tial carpet business into nonwoven
fied our position in commercial
Winning awards is gratifying,
padding, creating a value-added
carpeting through its hospitality
but winning consumer loyalty is
product from manufacturing
line, but Durkan’s state-of-the-art
more rewarding. Mohawk’s com-
waste by-product.
Spectronics printing equipment
mitment to bolstering our business
Mohawk’s ability to transform
and cutting-edge design also have
through shared technology, shared
possibilities into reality continues
been used to create bath mats,
design, shared manufacturing and
to earn awards from a number
printed rugs and residential
shared information has solidified
of influential organizations. Our
broadloom products.
our reputation for innovation
commercial carpet brands cap-
Similarly, Image’s polyester
and efficiency.
tured two prestigious awards at
extrusion capabilities have allowed
Our acquisitions historically produce immediate synergies and are
quickly accretive to earnings.Then we leverage the strengths of
these purchases throughout our organization to create
additional stockholder value.
endless possibilities
7. importantly, by providing us with
Karastan brand and introduces
Mohawk’s manufacturing and
business opportunities that result
the classic look of woven Oriental
marketing strengths offer a distinct
in greater product placements and
rugs to the bath market. In 1999,
advantage to retailers and con-
increased sales.
we added an accent pillow collec-
sumers alike. We offer superior
Wal-Mart selected Mohawk
tion to complement our profitable
service, product innovations and
to be a worldwide vendor because
mass-market home textile line.To
the ability to respond quickly and
it recognized our customer com-
leverage our commercial product
flexibly to retailer challenges. We
mitment and the strength of our
lines and enhance our presence in
combine the strength of an indus-
manufacturing and distribution
the corporate office market, we’ve
try titan with the attention to
capabilities. We will now serve
added a new manufacturing line
detail of a specialty manufacturer.
Wal-Mart stores in the U.S.,
and launched a carpet tile product
In addition to our own prod-
Canada, Germany, the United
under the Mohawk name.
uct advances, we have extended
Kingdom, Singapore and China.
We seek to offer our customers
Mohawk’s market presence by
Mohawk was the only floor cover-
every possible advantage through
entering into licensing agreements
ing manufacturer to receive Home
product innovations. Last year,
with major brands in American
Depot’s Partner of the Year award
we launched the SmartBack
fashion. Our home textiles busi-
in 1999. We were also honored
Protective Backing System, a
ness, for example, proudly supplies
with a Partner in Progress award
technologically advanced carpet
Martha Stewart products to
from Sears, Roebuck & Co.—
backing engineered to reduce
K-Mart. Most recently, Karastan
overall weight and improve carpet
and Ralph Lauren signed an exclu- the first time in a decade a floor
performance.This exclusive back-
sive licensing agreement to create covering manufacturer has been
ing resists water damage, makes
a new series of area rug and broad- so honored.
the carpet more flexible and is
loom designs for the Ralph Lauren Target recently presented
easier to install.
Home Collection label. In addition, our Rug & Textiles division with
How do our customers respond
Karastan and the Rug & Textiles its 1999 Vendor of Excellence
to the advantages we offer? They
division have collaborated on an Award, citing our innovative lead-
clear advantages confirm our successful program
exciting new venture to create a ership, superior execution and
of continuous innovation by hon-
unique line of washable bath rugs. commitment to enhancing the
oring us with awards and, more
This collection features the retailer’s performance.
Starting with the two most recognized brands in floor
covering, we expand our consumer presence by aligning
with other household names. Agreements with Ralph
Lauren and Martha Stewart take advantage of our
superior infrastructure.
8. As well as adding new products and manufacturing
capabilities, our external growth strengthens our
management team, our knowledge base and our
ability to adapt to changing customer needs.
made it easier to work with
company trucks. At each step in
Mohawk has acquired 12 compa-
Mohawk, and our customers
the process, the combination of
nies in the past eight years. Along
have responded enthusiastically. In
employee expertise and cutting-
with adding substantial products
today’s technology-driven world,
edge technology yields increased
and sales, these acquisitions have
needs change constantly. We strive
productivity and reduced waste.
introduced significant new ideas
to anticipate those needs and con-
Knowledge is not just power;
and technologies to our Company.
stantly challenge ourselves to stay
knowledge is profit.
Mohawk has retained key managers
on the cutting edge.
At Mohawk, we continuously
from each acquisition, adding their
At Mohawk, information leads
refine our information systems to
expertise to our knowledge base
to innovation. By shifting manu-
provide superlative customer ser-
to help propel our Company for-
facturing tasks to more efficient
vice. Now we are able to quickly
ward. Currently, Mohawk’s Top 25
locations and revamping sales
realign our manufacturing and
management team includes repre-
assignments, we ensure that our
distribution systems to bring our
sentatives from most of these
products are manufactured in
products to customers faster. Real-
organizations.This diversity pro-
the most effective place and sold
time tracking of production, orders
duces multiple perspectives and
in the most appropriate manner.
and shipping allows our customers
dynamic insights, and has allowed
We provide faster, more coordi-
to stay better informed and enables
us to create a multifaceted organi-
nated responses to customer
us to better control inventory at
zation whose synergies extend
requirements and empower cus-
our network of regional and satel-
from manufacturing to marketing.
tomers to follow the flow of
lite warehouses. In many cases, our
Today, we are an almost com-
their orders, from placement to
Residential division can deliver
pletely vertically integrated organi-
delivery. Mohawk’s integrated
a broadloom order within 24
zation. Advanced technologies
information systems and our
hours. Our Commercial division’s
allow us to produce more than half
employees’ experience are addi-
advanced technology allows us to
of our own fiber, convert it into
knowledge is power
tional reasons we feel confi-
track orders and project demand.
yarn, dye it, tuft or weave it, store
dent as we move into our third
Shared knowledge improves
it, and ship it anywhere in the
century of doing business.
business relationships. We have
country using our large fleet of
9. Opportunity and risk go hand In 1999, the fruits of this strat- rugs. Our new accent pillow line
in hand. We feel an absolute egy were clearly evident. Growth is designed to complement these
obligation to our stockholders to in home textiles, carpet tiles, carpet products.To further expand our
rug and textile offerings, we import
minimize risk while maximizing padding and hard surface flooring
rugs from around the world.
opportunity. Historically, we have added value for our customers and
Hard surface flooring represents
explored new markets with a delib- made Mohawk a more desirable
the fastest-growing segment of the
erate, measured approach before business partner. Our customers
floor covering industry. We recog-
committing to large investments. appreciate the diversity of products
nized that we had an opportunity
This strategy has proven successful we offer and have enthusiastically
to add value to our Company by
time after time. supported this expansion of our
further diversifying our product
Residential and commercial product line.
line in this market. We also discov-
carpet remain the core business of As one example, our entry into
ered that our retailers wanted to
Mohawk Industries. Broadloom the home textile market began
associate the respected Mohawk
is the primary source of our sales with limited exposure.The Ameri-
brand with hard surface flooring.
and our profits. Our goal is to can Weavers product line offered a
Our initial success with ceramic
increase market share within new market segment to Mohawk,
tile in the Florida region proved
that core business, while aug- and we have capitalized on it by
that hard surfaces could add to
menting this effort with strate- manufacturing these items in
our profitability. Expansion of the
gic opportunities. concert with our mass-market
think big start small ceramic tile program into other
regions, coupled with an initial dis-
Customers appreciate our penetration into niche markets. tribution of laminate flooring, is
Expanding our product offerings gives them more opportunities establishing Mohawk as a supplier
of choice for hard surface flooring.
to single-source their needs.The industry’s most diverse product
We have previously stated that
line offers smaller customers the choices to differentiate themselves.
hardwood flooring is an area of
interest to Mohawk. We believe
this sector offers significant sales
and profit opportunities. We
have recently introduced a line
of wood products.
The “think big, start small”
strategy has already placed us
among the market leaders in area
rugs, bath mats, throws, padding
and ceramic tile.
10. golden opportunity
Mohawk’s long history of growth
and success is built upon our ability
to seize opportunities.Today, we are
the world’s second-largest carpet
manufacturer and the largest pro-
ducer of rugs. With $3.1 billion in
sales last year, we hold an approxi-
mately 26% market share in an over
$11 billion carpet and rug industry.
The industry continues to grow,
and Mohawk continues to outpace
industry growth. We are financially
and organizationally prepared to Our strategies position Mohawk to capture tomorrow’s
seize opportunities as they arise. opportunities: opportunities for strategic acquisitions at
Our brands represent a huge
reasonable valuations. And for internal growth through
strength because of their established
marketing, product line extension and maintenance
name recognition.Through our
of our low-cost position.
print and television advertising, we
will bolster the Company’s estab-
lished reputation for excellence information. We also offer the shared among our five divisions
and further associate our brands industry’s most in-depth training supports the entire Company.
with fashion, style and design. system, Mohawk University, which Meeting business opportunities in
Similarly, the breadth and depth helps retailers produce greater sales one group often pays dividends in
of our product line offers many and profits. We grow as our cus- others. We have assembled a diverse
opportunities. We have the ability tomers grow, so their success is vital group of people and technologies,
to expand product placements with to our future. We are developing and the synergies the two assets
existing customers and to attract new tools like Floorscapes and afford us are truly exciting.
new customers as they appear on expanding time-tested tools like The proven success of our busi-
the retail horizon. Color Center. ness strategies shows that we can
Our industry leadership in The basic structure of our Com- create many golden opportunities.
information technology creates pany provides additional opportu- As we expand and excel in design,
opportunities to do business at a nities. Our whole truly is stronger marketing, merchandising, manu-
lower cost and with greater ease. than the sum of its parts.The tech- facturing and distribution, we
We constantly seek new avenues nology, expertise, information, believe that the opportunities
to provide our customers with manufacturing and marketing are almost limitless.
11. Our broad management expertise and continual infrastructure
improvements enable us to quickly see and adapt to changes
in the marketplace. We welcome change, as it provides us with
more opportunities to demonstrate our superior capabilities.
regional and satellite warehouses,
along with our extensive trucking
fleet, promote high levels of cus-
tomer service. Our organization is a
blend of talented people, enhanced
by our acquisitions, with hundreds
of years of combined knowledge
and skill. And our financial position
looking ahead is powerful, supporting our growth
and acquisitions.
The challenge for Mohawk is to
leverage these tremendous strengths
and talents to grow our Company
At Mohawk Industries, we have
successfully and profitably. We
built an organization that handles
believe that no one in our industry
change quickly and efficiently.
is in a better strategic position than
Our Company seizes opportuni-
Mohawk Industries, and we look
ties that offer growth, synergies and
forward with great anticipation
stockholder value. We approach
to the opportunities ahead.
these opportunities in a measured
manner to minimize risk while
maximizing reward.
We have a very strong customer
base; top consumer brands; and
exciting merchandising, marketing
and training. We offer a wide array
of products. We have creative,
innovative product development
departments to keep new products
flowing. We feature state-of-the-art
facilities and leading-edge informa-
tion systems. Our network of
12. Board of Directors
David Kolb Jeffrey Lorberbaum Leo Benatar Bruce Bruckmann
Larry McCurdy Robert Pokelwaldt Jack Sharpe
B RU C E C . B RU C K M A N N * RO B E RT N . P O K E LWA L D T * †
DAV I D L . K O L B
Managing Director Former Chairman and
Chairman and
Bruckmann, Rosser, Chief Executive Officer
Chief Executive Officer
Sherrill & Co., Inc. York International Corporation
Mohawk Industries, Inc.
(a venture capital firm) (a manufacturer of air conditioning
and cooling systems)
J E F F R E Y S . L O R B E R B AU M
President and L A R RY W. M C C U R DY *
Chief Operating Officer President S. H . “ JAC K ” S H A R P E
Mohawk Industries, Inc. Dana Corporation’s Executive Vice President
Automotive Aftermarket Group Mohawk Residential Business
L E O B E N ATA R† (a worldwide manufacturer
Associated Consultant, of motor vehicle parts)
A.T. Kearney, and former
Chairman, Engraph, Inc.,
a subsidiary of Sonoco Products
Company (an international
manufacturer of industrial and * Audit Committee
consumer packaging products) Compensation Committee
†
