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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

 	 	 	
[Mark One]	 	 	
þ	 	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	For the fiscal year ended December 31, 2010	
OR	
o	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	For the transition period from          to          	
 
Commission File Number 01-13697
 
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.)	
 	 	 	
160 S. Industrial Blvd., Calhoun, Georgia
(Address of principal executive offices)	 	30701
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ      No  o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act  Yes  o      No  þ
 
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  þ      No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ      No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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 this Form 10-K.   o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act).  Yes  o      No  þ
 
The aggregate market value of the Common Stock of the Registrant held by non-affiliates (excludes beneficial owners of more than 10% of the Common Stock) of the Registrant (47,891,122 shares) on July 2, 2010 (the last business day of the Registrant’s most recently completed fiscal second quarter) was $2,116,308,681. The aggregate market value was computed by reference to the closing price of the Common Stock on such date.
 
Number of shares of Common Stock outstanding as of February 21, 2011: 68,645,180 shares of Common Stock, $.01 par value.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the definitive Proxy Statement for the 2011 Annual Meeting of Stockholders-Part III.

 
 
Table of Contents

 	 	 	 	Page
	
 	 	 	 	No.	
 	 	 	 	 	 	 	 	 	
PART I	
 	Item 1.	 	 	Business	 	 	3	 	
 	Item 1A.	 	 	Risk Factors	 	 	9	 	
 	Item 1B.	 	 	Unresolved Staff Comments	 	 	16	 	
 	Item 2.	 	 	Properties	 	 	17	 	
 	Item 3.	 	 	Legal Proceedings	 	 	17	 	
 	Item 4.	 	 	(Removed and Reserved)	 	 	18	 	
 	
PART II	
 	Item 5.	 	 	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	 	 	18	 	
 	Item 6.	 	 	Selected Financial Data	 	 	19	 	
 	Item 7.	 	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	20	 	
 	Item 7A.	 	 	Quantitative and Qualitative Disclosures About Market Risk	 	 	33	 	
 	Item 8.	 	 	Consolidated Financial Statements and Supplementary Data	 	 	34	 	
 	Item 9.	 	 	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	 	 	66	 	
 	Item 9A.	 	 	Controls and Procedures	 	 	66	 	
 	Item 9B.	 	 	Other Information	 	 	66	 	
 	
PART III	
 	Item 10.	 	 	Directors, Executive Officers and Corporate Governance	 	 	67	 	
 	Item 11.	 	 	Executive Compensation	 	 	67	 	
 	Item 12.	 	 	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	 	 	67	 	
 	Item 13.	 	 	Certain Relationships and Related Transactions, and Director Independence	 	 	67	 	
 	Item 14.	 	 	Principal Accounting Fees and Services	 	 	67	 	
 	
PART IV	
 	Item 15.	 	 	Exhibits and Financial Statement Schedules	 	 	68	 	
 EX-10.19	
 EX-21	
 EX-23.1	
 EX-31.1	
 EX-31.2	
 EX-32.1	
 EX-32.2	
 EX-101 INSTANCE DOCUMENT	
 EX-101 SCHEMA DOCUMENT	
 EX-101 CALCULATION LINKBASE DOCUMENT	
 EX-101 LABELS LINKBASE DOCUMENT	
 EX-101 PRESENTATION LINKBASE DOCUMENT	
 EX-101 DEFINITION LINKBASE DOCUMENT	

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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, LLC, Dal-Tile Corporation and Unilin BVBA, is a leading producer of floor covering products for residential and commercial applications in the United States (“U.S.”) and residential applications in Europe. The Company is the second largest carpet and rug manufacturer and one of the largest manufacturers, marketers and distributors of ceramic tile, natural stone and hardwood flooring in the U.S., as well as a leading producer of laminate flooring in the U.S. and Europe. The Company had annual net sales in 2010 of $5.3 billion. Approximately 84% of this amount was generated by sales in North America and approximately 16% was generated by sales outside North America. The Company has three reporting segments: the Mohawk segment, the Dal-Tile segment and the Unilin segment. Selected financial information for the Mohawk, Dal-Tile and Unilin segments, geographic net sales and the location of long-lived assets is set forth in note 15 to the consolidated financial statements.
 
The Mohawk segment designs, manufactures, sources, distributes and markets its floor covering product lines, which include carpets, ceramic tile, laminate, rugs, carpet pad, hardwood and resilient, in a broad range of colors, textures and patterns for residential and commercial applications in both new construction and remodeling. The Mohawk segment markets and distributes its carpets and rugs under its soft surface floor covering brands and ceramic tile, laminate, hardwood and resilient under its hard surface floor covering brands. The Mohawk segment positions its products in all price ranges and emphasizes quality, style, performance and service. The Mohawk segment is widely recognized through its premier brand names, which include “Mohawk ® ,” “Aladdin ® ,” “Mohawk ColorCenters ® ,” “Mohawk Floorscapes ® ,” “Portico ® ,” “Mohawk Home ® ,” “Bigelow ® ,” “Durkan ® ,” “Horizon ® ,” “Karastan ® ,” “Lees ® ” and “Merit ® ”. The Mohawk segment markets and distributes soft and hard surface products through over 24,000 customers, which include independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. Some products are also marketed through private labeling programs. The Mohawk segment’s soft surface operations are vertically integrated from the extrusion of resin to the manufacturing and distribution of finished carpets and rugs.
 
The Dal-Tile segment designs, manufactures, sources, distributes and markets a broad line of ceramic tile, porcelain tile, natural stone and other products used in the residential and commercial markets for both new construction and remodeling. Most of the Dal-Tile segment’s ceramic tile products are marketed under the “Dal-Tile ® ” and “American Olean ® ” brand names and sold through Company-owned sales service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. The Dal-Tile segment operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile.
 
The Unilin segment designs, manufactures, sources, licenses, distributes and markets laminate and hardwood flooring used primarily in the residential market for both new construction and remodeling in Europe and the U.S. Unilin is one of the leaders in laminate flooring technology, having commercialized direct pressure laminate, or DPL, a technology used in a majority of laminates today, and has developed the patented UNICLIC ®  glueless installation system and a variety of other new technologies, such as beveled edges, multiple length planks and new surface and finish features. Unilin sells its flooring products under the Quick-Step ® , Columbia Flooring ® , Century Flooring ® , and Universal Flooring ®  brands through retailers, independent distributors and home centers. Unilin is one of the largest vertically-integrated laminate flooring manufacturers in the U.S. producing both laminate flooring and related high density fiberboard. Unilin also produces roofing systems, insulation panels and other wood products.
 
Industry
 
The U.S. floor covering industry has declined from $18.8 billion in sales in 1999 to $17.1 billion in 2009. In 2009, the primary categories of the U.S. floor covering industry, based on sales dollars, were carpet and rug
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(55%), resilient and rubber (12%), ceramic tile (11%), hardwood (11%), stone (6%) and laminate (5%). Each of these categories are influenced by the average selling price per square foot, the residential builder and homeowner remodeling markets, housing starts and housing resales, average house size and home ownership. In addition, the level of sales in the floor covering industry, both in the U.S. and Europe, is influenced by consumer confidence, spending for durable goods, interest rates and availability of credit, turnover in housing, the condition of the residential and commercial construction industries and the overall strength of the economy. The U.S. floor covering industry experienced declining demand beginning in the fourth quarter of 2006 that worsened during the latter parts of 2008, and continued to decline in 2009. In the first half of 2010 demand showed signs of recovering, but first half gains were lost in the second half of the year. Overall industry conditions in the U.S. are expected to improve during 2011, although the timing and size of a sustained recovery within the market remains uncertain.
 
Domestic carpet and rug sales volume of U.S. manufacturers was approximately 1.2 billion square yards, or $9.3 billion, in 2009. The carpet and rugs category has two primary markets, residential and commercial. In 2009, the residential market made up approximately 69% of industry amounts shipped and the commercial market comprised approximately 31%. Of the total residential market, 73% of the dollar values of shipments are made in response to residential replacement demand.
 
The U.S. ceramic tile industry shipped 1.8 billion square feet, or $1.9 billion, in 2009. The ceramic tile industry’s two primary markets, residential applications and commercial applications, represent 58% and 42% of the 2009 industry total, respectively. Of the total residential market, 55% of the dollar values of shipments are made in response to residential replacement demand.
 
In 2009, the U.S. laminate industry shipped 0.9 billion square feet, or $0.9 billion. The laminate industry’s two primary markets, residential applications and commercial applications, represent 88% and 12% of the 2009 industry total, respectively. Sales of U.S. laminate flooring are primarily distributed through the residential replacement market. In 2009, the European laminate industry produced approximately 5.0 billion square feet which accounted for approximately 15% of the European floor covering market.
 
In 2009, the U.S. stone flooring industry shipped 0.3 billion square feet, representing a market of approximately $1.1 billion. The stone flooring industry’s two primary markets, residential applications and commercial applications, represent 53% and 47% of the 2009 industry total, respectively. Sales of U.S. stone flooring are primarily distributed to the residential market for both new construction and residential replacement.
 
In 2009, the U.S. hardwood industry shipped 0.8 billion square feet, representing a market of approximately $1.8 billion. The hardwood industry’s two primary markets, residential applications and commercial applications, represent 80% and 20% of the 2009 industry total, respectively. Sales of U.S. hardwood are primarily distributed to the residential market for both new construction and residential replacement.
 
In 2009, the U.S. resilient and rubber industry shipped 3.3 billion square feet, representing a market of approximately $2.1 billion. The resilient and rubber industry’s two primary markets, residential applications and commercial applications, represent 46% and 54% of the 2009 industry total, respectively. Sales of U.S. resilient are distributed to the residential market for both new construction and residential replacement.
 
Sales and Distribution
 
Mohawk Segment
 
Through its Mohawk segment, the Company designs, manufactures, distributes and markets thousands of styles of carpet and rugs in a broad range of colors, textures and patterns. In addition, the Mohawk segment markets and distributes ceramic tile, laminate, hardwood, resilient floor covering, carpet pad and flooring accessories. The Mohawk segment positions product lines in all price ranges and emphasizes quality, style, performance and service. The Mohawk segment markets and distributes its soft and hard surface product lines to over 24,000 customers, which include independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. Some products are also marketed
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through private labeling programs. Sales to residential customers represent a significant portion of the total industry and the majority of the Company’s carpet and rug sales.
 
The Company has positioned its premier residential carpet and rug brand names across all price ranges. Mohawk, Horizon, “WundaWeve ® ,” and Karastan are positioned to sell primarily in the medium-to-high retail price channels in the residential broadloom and rug markets. These lines have substantial brand name recognition among carpet dealers and retailers, with the Karastan and Mohawk brands having among the highest consumer recognition in the industry. Karastan is a leader in the high-end market. The Aladdin and Mohawk Home brand names compete primarily in the value retail price channel. The Portico and “Properties ® ” brand names compete primarily in the builder and multi-family markets, respectively. The Company markets its hard surface product lines, which include Mohawk Ceramic, Mohawk Hardwood, Mohawk Laminate and Congoleum across all price ranges.
 
The Company offers marketing and advertising support through dealer programs like Mohawk Floorscapes, Mohawk ColorCenter, and Karastan. These programs offer varying degrees of support to dealers in the form of sales and management training, in-store merchandising systems, exclusive promotions and assistance in certain administrative functions, such as consumer credit, advertising and website technology.
 
The commercial customer base is divided into several channels: corporate office space, education institutions, healthcare facilities, retail space, public space and institutional and government facilities. Different purchase decision makers and decision-making processes exist for each channel. The Company produces and markets its commercial broadloom and modular carpet tile under The Mohawk Group brand which includes these brand collections: Bigelow, Lees, and “Karastan Contract ® .” It markets its hospitality carpet under the Durkan brand which includes the Merit collection of hospitality carpet.
 
The Company’s sales forces are generally organized by product type and sales channels in order to best serve each type of customer. Product delivery to dealers is done predominantly on Mohawk trucks operating from strategically positioned warehouses/cross-docks that receive inbound product directly from the source of manufacture.
 
Dal-Tile Segment
 
The Dal-Tile segment designs, manufactures, distributes and markets a broad line of ceramic tile, porcelain tile and natural stone products. Products are distributed through separate distribution channels consisting of retailers, contractors, commercial users, independent distributors and home centers. The business is organized to address the specific customer needs of each distribution channel, and dedicated sales forces support the various channels.
 
The Company serves as a “one-stop” source that provides customers with one of the ceramic tile industry’s broadest product lines — a complete selection of glazed floor tile, glazed wall tile, glazed and unglazed ceramic mosaic tile, porcelain tile, quarry tile and stone products, as well as installation products. In addition to products manufactured by the Company’s ceramic tile business, the Company also sources products from other manufacturers to enhance its product offering.
 
The Company has two of the leading brand names in the U.S. ceramic tile industry— Dal-Tile and American Olean. The Dal-Tile and American Olean brand names date back over 50 years and are well recognized in the industry. Both of these brands are supported by a fully integrated marketing program, displays, merchandising boards, literature/catalogs and internet websites.
 
A network of Company-owned sales service centers distributes primarily the Dal-Tile brand product with a fully integrated marketing program, emphasizing a focus on quality and fashion serving customers in the U.S., Canada and Puerto Rico. The sales service centers provide distribution points for customer pick-up, local delivery and showrooms to assist customers. In addition, the Dal-Tile brand is distributed through independent distributors in Mexico. The American Olean brand is primarily distributed through independent distributors and Company-owned sales service centers that service a variety of residential and commercial customers. The Company is focused on sales growth opportunities through innovative products and programs in both the residential and commercial channels.
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The Company uses regional distribution centers to help deliver high-quality customer service by focusing on shorter lead times, increased order fill rates and improved on-time deliveries to customers.
 
Unilin Segment
 
The Unilin segment designs, manufactures, sources, licenses, distributes and markets laminate and hardwood flooring. It also designs and manufactures roofing systems, insulation panels and other wood products in Europe. Products are distributed through separate distribution channels consisting of retailers, independent distributors and home centers. Unilin U.S. operations also manufacture Mohawk branded laminate and hardwood flooring, which sells through the Mohawk channel. The majority of Unilin’s laminate sales, both in the U.S. and Europe, are for residential replacement. The business is organized to address the specific customer needs of each distribution channel.
 
The Unilin segment markets and sells laminate and hardwood flooring products under the Quick-Step, Columbia Flooring, Century Flooring, and Universal Flooring brands. In addition, Unilin also sells laminate and hardwood flooring products under private label. The Company believes Quick-Step is one of the leading brand names in the U.S. and European flooring industry.
 
In the U.S., Europe and Asia the Company uses regional distribution centers and direct shipping from manufacturing facilities to help deliver high-quality customer service and also enhance the Company’s ability to plan and schedule production and manage inventory requirements.
 
Advertising and Promotion
 
The Company promotes its brands through advertising in television, print, social and internet media as well as in the form of cooperative advertising, point-of-sale displays, advertising and sponsorship of a cycling team, and marketing literature provided to assist in marketing various flooring styles. The Company also continues to rely on the substantial brand name recognition of its product lines. The cost of producing display samples, a significant promotional expense, is partially offset by sales of samples to customers.
 
Manufacturing and Operations
 
Mohawk Segment
 
The Company’s carpet and rug manufacturing operations are vertically integrated and include the extrusion of resin and post-consumer plastics into polypropylene, polyester, nylon and triexta fiber, yarn processing, backing manufacturing, tufting, weaving, dyeing, coating and finishing. Over the past three years, the Mohawk Segment has invested in capital expenditures, principally in state-of-the-art equipment, to increase manufacturing efficiency, improve overall cost competitiveness and develop new capabilities.
 
Dal-Tile Segment
 
The Company’s tile manufacturing operations are vertically integrated from the production of raw material for body and glaze preparation to the manufacturing and distribution of ceramic and porcelain tile. The Company believes that its manufacturing organization offers competitive advantages due to its ability to manufacture a differentiated product line consisting of one of the industry’s broadest product offerings of colors, textures and finishes, as well as the industry’s largest offering of trim and angle pieces and its ability to utilize the industry’s newest technology. In addition, Dal-Tile also imports or sources a portion of its product to supplement its product offerings. Over the past three years, the Dal-Tile segment has invested in capital expenditures, principally in state-of-the-art equipment, to increase manufacturing capacity, improve efficiency and develop new capabilities.
 
Unilin Segment
 
The Company’s laminate flooring manufacturing operations are vertically integrated, both in the U.S. and in Europe, and include high-density fiberboard (“HDF”) production, paper impregnation, short-cycle pressing, cutting and milling. The European operations also include resin production. Unilin has state-of-the-art
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equipment that results in competitive manufacturing in terms of cost and flexibility. Most of the equipment for the production of laminate flooring in Belgium and North Carolina is relatively new. In addition, Unilin has significant manufacturing capability for both engineered and prefinished solid wood flooring for the U.S. and European markets. Over the past three years, the Unilin segment has invested in capital expenditures, principally in new plants and state-of-the-art equipment, to increase manufacturing capacity, improve efficiency and develop new capabilities.
 
The manufacturing facilities for other activities in the Unilin business (roofing systems, insulation panels and other wood products) are all configured for cost-efficient manufacturing and production flexibility and are competitive in the European market.
 
Raw Materials and Suppliers
 
Mohawk Segment
 
The principal raw materials used in the production of carpet and rugs are nylon, polypropylene, triexta, polyester, wool, synthetic backing materials, latex and various dyes and chemicals, many of which are petroleum based. Major raw materials used in the Company’s manufacturing process are available from independent sources, and the Company obtains most of its externally purchased fibers and resins principally from four major suppliers. Although temporary disruptions of supply of carpet raw materials were experienced in 2005 as a result of hurricane Katrina, the carpet and rug business has not experienced significant shortages of raw materials in recent years.
 
Dal-Tile Segment
 
The principal raw materials used in the production of ceramic tile are clay, talc, nepheline syenite and glazes. The Company has entered into a long-term supply agreement for most of its talc requirements. In addition, the Company has long-term clay mining rights in Kentucky and Mississippi that satisfy nearly all of its clay requirements for producing unglazed quarry tile. The Company purchases a number of different grades of clay for the manufacture of its non-quarry tile. The Company believes that there is an adequate supply of all grades of clay and that all are readily available from a number of independent sources. The Company has two suppliers for its nepheline syenite requirements. If these suppliers were unable to satisfy the requirements, the Company believes that alternative supply arrangements would be available. Glazes are used on a significant percentage of manufactured tiles. Glazes consist of frit (ground glass), zircon, stains and other materials, with frit being the largest ingredient. The Company manufactures approximately 74% of its frit requirements.
 
Unilin Segment
 
The principal raw materials used in producing boards, laminate and hardwood flooring are wood, paper, resins, coatings and stains. Wood supply is a very fragmented market in Europe. The Company has long-standing relationships with numerous suppliers. These suppliers provide a wide variety of wood species, varying from fresh round wood to several kinds of by-products of sawmills and used wood recycled specifically for chipboard production, giving the Company a cost-effective and secure supply of raw material. In the U.S., the Company has a long-term contract with a contiguously located lumber company that supplies most of its total needs for HDF board production. The supply of various species of hardwoods and hardwood veneers used in the production of solid wood and engineered flooring is both localized and global.
 
Major manufacturers supply the papers required in the laminate flooring business in both Europe and the U.S. The Company processes most of the paper impregnation internally in its laminate flooring facilities in Europe and the U.S. In Europe, the resins for paper impregnation are manufactured by the Company, which permits greater control over the laminate flooring manufacturing process, enabling the Company to produce higher-quality products. The Company buys the balance of its resin requirements from a number of companies. The Company believes there are ample sources of supply located within a reasonable distance of Unilin’s facilities.
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Competition
 
The principal methods of competition within the floor covering industry generally are service, style, quality, price, product innovation and technology. In each of the markets, price competition and market coverage are particularly important because there is limited differentiation among competing product lines. The Company’s investments in manufacturing equipment, computer systems and distribution network, as well as the Company’s marketing strategy, contribute to its ability to compete primarily on the basis of performance, quality, style and service, rather than just price.
 
Mohawk Segment
 
The carpet and rug industry is highly competitive. Based on industry publications, the top 5 North American carpet and rug manufacturers (including their North American and foreign divisions) in 2009 had carpet and rug sales in excess of $7 billion of the over $9 billion market. The Company believes it is the second largest producer of carpets and rugs (in terms of sales dollars) in the world based on its 2009 sales.
 
Dal-Tile Segment
 
The ceramic tile industry is significantly more fragmented than the carpet industry. The Company estimates that over 100 tile manufacturers, more than half of which are based outside the U.S., compete for sales of ceramic tile to customers located in the U.S. Although the U.S. ceramic tile industry is highly fragmented at both the manufacturing and distribution levels, the Company believes it is one of the largest manufacturers, distributors and marketers of ceramic tile in the U.S. and the world. The Company believes it is substantially larger than the next largest competitor and that it is the only significant manufacturer with its own North American distribution system.
 
Unilin Segment
 
The Company faces competition in the laminate and hardwood flooring channel from a large number of domestic and foreign manufacturers. The Company estimates that there are over 100 wood flooring manufacturers located in various countries. The Company believes it is one of the largest manufacturers, distributors and marketers of laminate flooring in the world, with a focus on high-end products. The Company believes it is one of the largest manufacturers and distributors of hardwood flooring in the U.S. In addition, the Company believes it has a competitive advantage in the laminate flooring channel as a result of Unilin’s industry leading design and patented technologies, which allows the Company to distinguish its laminate and hardwood flooring products in the areas of finish, quality, installation and assembly.
 
Patents and Trademarks
 
Intellectual property is important to the Company’s business, and the Company relies on a combination of patent, copyright, trademark and trade secret laws to protect its interests.
 
The Company uses several trademarks that it considers important in the marketing of its products, including Aladdin, American Olean, Bigelow, Columbia Flooring, Century Flooring, Dal-Tile, “Duracolor ® ,” Durkan, “Elka ® ,” “Everset fibers ® ,” Horizon, Karastan, Lees, Mohawk, “Mohawk Greenworks ® ,” Mohawk Home, Portico, “PureBond ® ,” Quick-Step, “SmartStrand ® ,” “Ultra Performance System ® ,” “UNILIN ® ,” UNICLIC, Universal Flooring and “Wear-Dated ® ”. These trademarks represent unique innovations that highlight competitive advantages and provide differentiation from competing brands in the market.
 
Unilin owns a number of important patent families in Europe and the U.S. The most important of these patent families is the UNICLIC family, as well as the snap, pretension, clearance and beveled edge patent families, which protects Unilin’s interlocking laminate flooring panel technology. The patents in the UNICLIC family are not expected to expire until 2017.
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Sales Terms and Major Customers
 
The Company’s sales terms are substantially the same as those generally available throughout the industry. The Company generally permits its customers to return products purchased from it within specified time periods from the date of sale, if the customer is not satisfied with the quality of the product.
 
During 2010, no single customer accounted for more than 5% of total net sales, and the top ten customers accounted for less than 20% of the Company’s net sales. The Company believes the loss of one major customer would not have a material adverse effect on its business.
 
Employees
 
As of December 31, 2010, the Company employed approximately 26,900 persons consisting of approximately 20,500 in the U.S., approximately 3,500 in Mexico, approximately 2,100 in Europe, approximately 700 in Malaysia and approximately 100 in Canada. The majority of the Company’s European and Mexican manufacturing employees are members of unions. Most of the Company’s U.S. employees are not a party to any collective bargaining agreement. Additionally, the Company has not experienced any strikes or work stoppages in the U.S., Mexico or Malaysia for over 20 years. The Company believes that its relations with its employees are good.
 
Available Information
 
The Company’s Internet address is http://www.mohawkind.com. The Company makes the following reports filed by it available, free of charge, on its website under the heading “Investor Information”

 	• 	annual reports on Form 10-K;	
 	 	 	
 	• 	quarterly reports on Form 10-Q;	
 	 	 	
 	• 	current reports on Form 8-K; and	
 	 	 	
 	• 	amendments to the foregoing reports.	
 
The foregoing reports are made available on the Company’s website as soon as practicable after they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

Item 1A.  	Risk Factors	
 
Certain Factors affecting the Company’s Performance
 
In addition to the other information provided in this Form 10-K, the following risk factors should be considered when evaluating an investment in shares of the Company’s Common Stock.
 
If any of the events described in these risks were to occur, it could have a material adverse effect on the Company’s business, financial condition and results of operations.
 
The floor covering industry is sensitive to changes in general economic conditions, such as consumer confidence and income, corporate and government spending, interest rate levels, availability of credit and demand for housing. The downturn in the U.S. and global economies beginning in 2006, along with the residential and commercial markets in such economies, negatively impacted the floor covering industry and the Company’s business. While overall economic conditions and the housing and flooring industries have begun to show signs of recovering, this improvement may be temporary and economic conditions may deteriorate in the foreseeable future. Further, significant or prolonged declines in such economies or in spending for replacement floor covering products or new construction activity could have a material adverse effect on the Company’s business.
 
The floor covering industry in which the Company participates is highly dependent on general economic conditions, such as consumer confidence and income, corporate and government spending, interest rate levels, availability of credit and demand for housing. The Company derives a majority of its sales from the
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replacement segment of the market. Therefore, economic changes that result in a significant or prolonged decline in spending for remodeling and replacement activities could have a material adverse effect on the Company’s business and results of operations.
 
The floor covering industry is highly dependent on residential and commercial construction activity, including new construction, which is cyclical in nature and currently in a downturn. The downturn in the U.S. and global economies, along with the housing markets in such economies, negatively impacted the floor covering industry and the Company’s business. Although the impact of a decline in new construction activity is typically accompanied by an increase in remodeling and replacement activity, these activities have also lagged during the downturn. While overall economic conditions and the housing and flooring industries have begun to show signs of recovering, this improvement may be temporary and economic conditions may deteriorate in the foreseeable future. A significant or prolonged decline in residential or commercial construction activity could have a material adverse effect on the Company’s business and results of operations.
 
In periods of rising costs, the Company may be unable to pass raw materials, energy and fuel-related cost increases on to its customers, which could have a material adverse effect on the Company’s profitability.
 
The prices of raw materials and fuel-related costs could vary significantly with market conditions. Although the Company generally attempts to pass on increases in raw material, energy and fuel-related costs to its customers, the Company’s ability to do so is dependent upon the rate and magnitude of any increase, competitive pressures and market conditions for the Company’s products. There have been in the past, and may be in the future, periods of time during which increases in these costs cannot be recovered. During such periods of time, the Company’s profitability may be materially adversely affected.
 
Uncertainty in the credit market or downturns in the global economy and the Company’s business could affect the Company’s overall availability and cost of credit.
 
Uncertainty in the credit markets could affect the overall availability and cost of credit. Despite recent improvement in overall economic conditions, the impact of the economic downturn on the Company’s ability to obtain financing, including any financing necessary to refinance its existing senior unsecured notes, in the future, and the cost and terms of it, remains uncertain. These and other economic factors could have a material adverse effect on demand for the Company’s products and on its financial condition and operating results. Further, these generally negative economic and business conditions may factor into the Company’s periodic credit ratings assessment by either or both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services. A rating agency’s evaluation is based on a number of factors, which include scale and diversification, brand strength, profitability, leverage, liquidity and interest coverage. During 2009, the Company’s senior unsecured notes were downgraded by the rating agencies, which increased the Company’s interest expense by approximately $0.2 million per quarter per $100 million of outstanding notes and could adversely affect the cost of and ability to obtain additional credit in the future. Additional downgrades in the Company’s credit ratings could further increase the cost of its existing credit and adversely affect the cost of and ability to obtain additional credit in the future, and the Company can provide no assurances that additional downgrades will not occur.
 
The Company has a significant level of indebtedness that must be repaid or refinanced. In addition, if the Company were unable to meet certain covenants contained in the ABL Facility, it may be required to repay borrowings under the ABL Facility prior to their maturity and may lose access to the ABL Facility for additional borrowings that may be necessary to fund its operations.
 
The Company’s outstanding 7.20% senior notes in the aggregate amount of $400.0 million are due April 15, 2012. The Company’s $600.0 million four-year, senior, secured revolving credit facility (the “ABL Facility”) is scheduled to mature on September 2, 2013, but the maturity date will accelerate, including the acceleration of any unamortized deferred financing costs, to January 15, 2012, if the Company’s outstanding 7.20% senior notes due April 15, 2012 have not been repaid, refinanced, defeased or adequately reserved for by the Company, as reasonably determined by the Administrative Agent, prior to January 15, 2012. The Company believes it will be able to make adequate reserves for such senior notes with cash and cash
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equivalents, unutilized borrowing availability under the ABL Facility and other financing sources, including public debt markets or new bank facilities. As of December 31, 2010, the amount utilized under the ABL Facility was $387.1 million resulting in a total of $169.6 million available under the ABL Facility. The amount utilized included the reserved amount of $280.0 million related to the repayment of the Company’s outstanding 5.75% senior notes due January 15, 2011, $53.5 million of standby letters of credit guaranteeing the Company’s industrial revenue bonds and $53.5 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. Immediately following the repayment of the 5.75% senior notes due January 15, 2011 at maturity, a total of $289.6 million was available under the ABL Facility. While the Company currently believes it has access to other uncommitted financing sources, including public debt markets, to satisfy the January 15, 2012 requirements under the ABL Facility and the subsequent repayment of the 7.20% senior notes due April 15, 2012, there can be no assurances that the Company will be able to complete any necessary financing transactions prior to the relevant date under the ABL Facility or the April 15, 2012 maturity date.
 
If the Company’s cash flow is worse than expected or the borrowing base on its ABL Facility declines, the Company may need to refinance all or a portion of its indebtedness in the public debt markets and may not be able to do so on terms acceptable to it, or at all. If the Company is unable to access debt markets at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption, or other factors, it could materially adversely affect the Company’s ability to repay its indebtedness and otherwise have a substantial adverse effect on the Company’s financial condition and results of operations.
 
Additionally, the Company’s credit facilities require it to meet certain affirmative and negative covenants that impose restrictions on its financial and business operations, including limitations relating to debt, investments, asset dispositions and changes in the nature of its business. The Company is also required to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that the unutilized amount available under the ABL Facility is less than 15% of the amount available under the ABL Facility. Failure to comply with these covenants could materially and adversely affect the Company’s ability to finance its operations or capital needs and to engage in other activities that may be in the Company’s best interest.
 
The Company faces intense competition in the flooring industry, which could decrease demand for the Company’s products or force it to lower prices, which could have a material adverse effect on the Company’s profitability.
 
The floor covering industry is highly competitive. The Company faces competition from a number of manufacturers and independent distributors. Some of the Company’s competitors are larger and have greater resources and access to capital than the Company does. Maintaining the Company’s competitive position may require substantial investments in the Company’s product development efforts, manufacturing facilities, distribution network and sales and marketing activities. Competitive pressures may also result in decreased demand for the Company’s products or force the Company to lower prices. Any of these factors or others may impact demand which could have a material adverse effect on the Company’s business.
 
The Company may be unable to obtain raw materials on a timely basis, which could have a material adverse effect on the Company’s business.
 
The principal raw materials used in the Company’s manufacturing operations include nylon, polypropylene, triexta and polyester resins and fibers, which are used primarily in the Company’s carpet and rugs business; clay, talc, nepheline syenite and glazes, including frit (ground glass), zircon and stains, which are used exclusively in the Company’s ceramic tile business; wood, paper, and resins which are used primarily in the Company’s laminate flooring business. For certain of such raw materials, the Company is dependent on one or a small number of suppliers. An adverse change in the Company’s relationship with such a supplier, the financial condition of such a supplier or such supplier’s ability to manufacture or deliver such raw materials to the Company could lead to an interruption of supply or require the Company to purchase more expensive alternatives. An extended interruption in the supply of these or other raw materials used in the Company’s business or in the supply of suitable substitute materials would disrupt the Company’s operations, which could have a material adverse effect on the Company’s business.
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Fluctuations in currency exchange rates may impact the Company’s financial condition and results of operations and may affect the comparability of results between the Company’s financial periods.
 
The results of the Company’s foreign subsidiaries reported in the local currency are translated into U.S. dollars for balance sheet accounts using exchange rates in effect as of the balance sheet date and for the statement of operations accounts using, principally, the Company’s average rates during the period. The exchange rates between some of these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. The Company may not be able to manage effectively the Company’s currency translation risks and volatility in currency exchange rates may have a material adverse effect on the Company’s consolidated financial statements and affect comparability of the Company’s results between financial periods.
 
The Company may experience certain risks associated with acquisitions, joint ventures and strategic investments.
 
The Company has typically grown its business through acquisitions. Growth through acquisitions involves risks, many of which may continue to affect the Company after the acquisition. The Company cannot give assurance that an acquired company will achieve the levels of revenue, profitability and production that the Company expects. The combination of an acquired company’s business with the Company’s existing businesses involves risks. The Company cannot be assured that reported earnings will meet expectations because of goodwill and intangible asset impairment, increased interest costs and issuance of additional securities or incurrence of debt. The Company may also face challenges in consolidating functions, integrating the Company’s organizations, procedures, operations and product lines in a timely and efficient manner and retaining key personnel. These challenges may result in:

 	• 	maintaining executive offices in different locations;	
 	 	 	
 	• 	manufacturing and selling different types of products through different distribution channels;	
 	 	 	
 	• 	conducting business from various locations;	
 	 	 	
 	• 	maintaining different operating systems and software on different computer hardware; and	
 	 	 	
 	• 	providing different employment and compensation arrangements for employees.	
 
The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on the Company’s revenues, level of expenses and operating results.
 
Failure to successfully manage and integrate an acquisition with the Company’s existing operations could lead to the potential loss of customers of the acquired business, the potential loss of employees who may be vital to the new operations, the potential loss of business opportunities or other adverse consequences that could affect the Company’s financial condition and results of operations. Even if integration occurs successfully, failure of the acquisition to achieve levels of anticipated sales growth, profitability or productivity or otherwise perform as expected, may adversely impact the Company’s financial condition and results of operations.
 
In addition, we have made certain investments, including through joint ventures, in which we have a minority equity interest and lack management and operational control. The controlling joint venture partner in a joint venture investment may have business interests, strategies or goals that are inconsistent with ours, and business decisions or other actions or omissions of the controlling joint venture partner or the joint venture company may result in harm to our reputation or adversely affect the value of our investment in the joint venture.
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A failure to identify suitable acquisition candidates or partners for strategic investments and to complete acquisitions could have a material adverse effect on the Company’s business.
 
As part of the Company’s business strategy, the Company intends to continue to pursue a wide array of potential strategic transactions, including acquisitions of complementary businesses, as well as strategic investments and joint ventures. Although the Company regularly evaluates such opportunities, the Company may not be able successfully to identify suitable acquisition candidates or investment opportunities, to obtain sufficient financing on acceptable terms to fund such strategic transactions, to complete acquisitions and integrate acquired businesses with the Company’s existing businesses, or to manage profitably acquired businesses or strategic investments.
 
The Company has been, and in the future may be, subject to costs, liabilities and other obligations under existing or new laws and regulations, which could be significant.
 
The Company and its customers and suppliers are subject to various federal, state and local laws, regulations and licensing requirements. The Company faces risks and uncertainties related to compliance with and enforcement of increasingly numerous and complex federal, state and local laws and regulations. In addition, new laws and regulations may be enacted in the U.S. or abroad that may require the Company to incur additional personnel-related, environmental, or other costs on an ongoing basis, such as recently enacted healthcare legislation in the United States.
 
Further, the Company’s operations are subject to various environmental, health and safety laws and regulations, including those governing air emissions, wastewater discharges, and the use, storage, treatment, recycling and disposal of materials and finished product. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional requirements and to changing interpretations of agencies or courts. The Company could incur material expenditures to comply with new or existing regulations, including fines and penalties and increased costs of its operations. For example, enactment of climate control legislation or other regulatory initiatives by the U.S. Congress or various states, or the adoption of regulations by the EPA and analogous state or foreign governmental agencies that restrict emissions of greenhouse gases in areas in which the Company conducts business could have an adverse effect on its operations and demand for its products. The Company’s manufacturing processes use a significant amount of energy, especially natural gas. Increased regulation of energy use to address the possible emission of greenhouse gases and climate change could materially increase the Company’s manufacturing costs.
 
The nature of the Company’s business and operations, including the potential discovery of presently unknown environmental conditions, exposes it to the risk of claims under environmental, health and safety laws and regulations. The Company could incur material costs or liabilities in connection with such claims.
 
The Company’s business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.
 
Many of the Company’s business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters, such as floods, tornados, hurricanes and earthquakes, or by fire or other unexpected events. The Company could incur uninsured losses and liabilities arising from such events, including damage to its reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on its business, financial condition and results of operations.
 
The Company may be exposed to litigation, claims and other legal proceedings in the ordinary course of business relating to its products, which could affect its results of operations and financial condition.
 
In the ordinary course of business, the Company is subject to a variety of product-related claims, lawsuits and legal proceedings, including those relating to product liability, product warranty, product recall, personal injury, and other matters that are inherently subject to many uncertainties regarding the possibility of a loss to the Company. Such matters could have a material adverse effect on its business, results of operations and financial condition if the Company is unable to successfully defend against or resolve these matters or if its
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insurance coverage is insufficient to satisfy any judgments against the Company or settlements relating to these matters. Although the Company has product liability insurance, the policies may not provide coverage for certain claims against the Company or may not be sufficient to cover all possible liabilities. Further, the Company may not be able to maintain insurance at commercially acceptable premium levels. Moreover, adverse publicity arising from claims made against the Company, even if the claims were not successful, could adversely affect the Company’s reputation or the reputation and sales of its products.
 
The Company manufactures, sources and sells many products internationally and is exposed to risks associated with doing business globally.
 
The Company’s manufacturing facilities in Mexico and Europe represent a significant portion of the Company’s capacity for ceramic tile and laminate flooring, respectively, and the Company’s European operations represent a significant source of the Company’s revenues and profits. The business, regulatory and political environments in these countries differ from those in the U.S. In addition, the Company increasingly sells products, operates plants and invests in companies in other parts of the world. The Company’s international sales, operations and investments are subject to risks and uncertainties, including:

 	• 	changes in foreign country regulatory requirements;	
 	 	 	
 	• 	differing business practices associated with foreign operations;	
 	 	 	
 	• 	various import/export restrictions and the availability of required import/export licenses;	
 	 	 	
 	• 	imposition of foreign tariffs and other trade barriers;	
 	 	 	
 	• 	political, legal and economic instability;	
 	 	 	
 	• 	foreign currency exchange rate fluctuations;	
 	 	 	
 	• 	changes in foreign country tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations in tax laws;	
 	 	 	
 	• 	inflation;	
 	 	 	
 	• 	differing labor laws and changes in those laws;	
 	 	 	
 	• 	work stoppages and disruptions in the shipping of imported and exported products;	
 	 	 	
 	• 	government price controls;	
 	 	 	
 	• 	extended payment terms and the inability to collect accounts receivable; and	
 	 	 	
 	• 	tax inefficiencies and currency exchange controls that may adversely impact its ability to repatriate cash from non-U.S. subsidiaries.	
 
The Company cannot assure investors that it will succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where the Company does business and therefore that the foregoing factors will not have a material adverse effect on the Company’s operations or upon its financial condition and results of operations.
 
If the Company is unable to protect its intellectual property rights, particularly with respect to the Company’s patented laminate flooring technology and its registered trademarks, the Company’s business and prospects could be harmed.
 
The future success and competitive position of certain of the Company’s businesses, particularly the Company’s laminate flooring business, depend in part upon the Company’s ability to obtain and maintain proprietary technology used in the Company’s principal product families. The Company relies, in part, on the patent, trade secret and trademark laws of the U.S. and countries in Europe, as well as confidentiality agreements with some of the Company’s employees, to protect that technology.
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The Company has obtained a number of patents relating to the Company’s products and associated methods and has filed applications for additional patents, including the UNICLIC  ®  family of patents, which protects Unilin’s interlocking laminate flooring panel technology. The Company cannot assure investors that any patents owned by or issued to it will provide the Company with competitive advantages, that third parties will not challenge these patents, or that the Company’s pending patent applications will be approved. In addition, patent filings by third parties, whether made before or after the date of the Company’s filings, could render the Company’s intellectual property less valuable.
 
Furthermore, despite the Company’s efforts, the Company may be unable to prevent competitors and/or third parties from using the Company’s technology without the Company’s authorization, independently developing technology that is similar to that of the Company or designing around the Company’s patents. The use of the Company’s technology or similar technology by others could reduce or eliminate any competitive advantage the Company has developed, cause the Company to lose sales or otherwise harm the Company’s business. In addition, if the Company does not obtain sufficient protection for the Company’s intellectual property, the Company’s competitiveness in the markets it serves could be significantly impaired, which would limit the Company’s growth and future revenue.
 
The Company has obtained and applied for numerous U.S. and Foreign Service marks and trademark registrations and will continue to evaluate the registration of additional service marks and trademarks, as appropriate. The Company cannot guarantee that any of the Company’s pending or future applications will be approved by the applicable governmental authorities. Moreover, even if such applications are approved, third parties may seek to oppose or otherwise challenge the registrations. A failure to obtain trademark registrations in the U.S. and in other countries could limit the Company’s ability to protect the Company’s trademarks and impede the Company’s marketing efforts in those jurisdictions.
 
The Company generally requires third parties with access to the Company’s trade secrets to agree to keep such information confidential. While such measures are intended to protect the Company’s trade secrets, there can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that the Company’s confidential and proprietary information and technology will not be independently developed by or become otherwise known to third parties. In any of these circumstances, the Company’s competitiveness could be significantly impaired, which would limit the Company’s growth and future revenue.
 
Companies may claim that the Company infringed their intellectual property or proprietary rights, which could cause it to incur significant expenses or prevent it from selling the Company’s products.
 
In the past, companies have claimed that certain technologies incorporated in the Company’s products infringe their patent rights. There can be no assurance that the Company will not receive notices in the future from parties asserting that the Company’s products infringe, or may infringe, those parties’ intellectual property rights. The Company cannot be certain that the Company’s products do not and will not infringe issued patents or other intellectual property rights of others. Historically, patent applications in the U.S. and some foreign countries have not been publicly disclosed until the patent is issued (or, in some recent cases, until 18 months following submission), and the Company may not be aware of currently filed patent applications that relate to the Company’s products or processes. If patents are later issued on these applications, the Company may be liable for infringement.
 
Furthermore, the Company may initiate claims or litigation against parties for infringement of the Company’s proprietary rights or to establish the invalidity, noninfringement, or unenforceability of the proprietary rights of others. Likewise, the Company may have similar claims brought against it by competitors. Litigation, either as plaintiff or defendant, could result in significant expense to the Company and divert the efforts of the Company’s technical and management personnel from operations, whether or not such litigation is resolved in the Company’s favor. In the event of an adverse ruling in any such litigation, the Company might be required to pay substantial damages (including punitive damages and attorney’s fees), discontinue the use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses to infringing technology. There can be no assurance that licenses to disputed technology or
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intellectual property rights would be available on reasonable commercial terms, if at all. In the event of a successful claim against the Company along with failure to develop or license a substitute technology, the Company’s business, financial condition and results of operations would be materially and adversely affected.
 
The Company is subject to changing regulation of corporate governance and public disclosure that have increased both costs and the risk of noncompliance.
 
The Company’s stock is publicly traded. As a result, the Company is subject to the rules and regulations of federal and state agencies and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the Securities and Exchange Commission and New York Stock Exchange, frequently issue new requirements and regulations. The Company’s efforts to comply with the regulations and interpretations have resulted in, and are likely to continue to result in, increased general and administrative costs and diversion of management’s time and attention from revenue generating activities to compliance activities.
 
Declines in the Company’s business conditions may result in an impairment of the Company’s tangible and intangible assets which could result in a material non-cash charge.
 
A decrease in the Company’s market capitalization, including a short-term decline in stock price, or a negative long-term performance outlook, could result in an impairment of its tangible and intangible assets which results when the carrying value of the Company’s assets exceed their fair value. In 2008, the Company’s goodwill and other intangible assets suffered an impairment and additional impairment charges could occur in future periods.
 
The long-term performance of the Company’s business relies on its ability to attract, develop and retain talented management.
 
To be successful, the Company must attract, develop and retain highly qualified and talented personnel in management, sales, marketing, product design and innovation and operations, and as it considers entering new international markets, skilled personnel familiar with those markets. The Company competes with multinational firms for these employees and invests significant resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect the Company’s competitive position and its operating results.
 
Forward-Looking Information
 
Certain of the statements in this Form 10-K, particularly those anticipating future performance, business prospects, growth and operating strategies, proposed acquisitions, and similar matters, and those that include the words “believes,” “anticipates,” “forecast,” “estimates” or similar expressions constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, 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. There can be no assurance that the forward-looking statements will be accurate because they are based on many assumptions, which involve risks and uncertainties. The following important factors could cause future results to differ: changes in economic or industry conditions; competition; raw material prices; energy costs and supply; timing and level of capital expenditures; timing and implementation of price increases for the Company’s products; impairment charges; integration of acquisitions; introduction of new products; rationalization of operations; claims; litigation; and other risks identified in Mohawk’s SEC reports and public announcements.

Item 1B.  	Unresolved Staff Comments	
 
None.
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Item 2.  	Properties	
 
The Company owns a 0.1 million square foot headquarters office in Calhoun, Georgia on an eight-acre site. The Company also owns a 2.1 million square foot manufacturing facility located in Dalton, Georgia, used by the Mohawk segment, a 1.7 million square foot manufacturing facility located in Monterey, Mexico and a 1.0 million square foot manufacturing facility located in Muskogee, Oklahoma, used by the Dal-Tile segment, and a 1.1 million square foot manufacturing facility located in Wielsbeke, Belgium and a 0.5 million square foot manufacturing facility located in Thomasville, North Carolina used by the Unilin segment.
 
The following table summarizes the Company’s facilities both owned and leased for each segment in square feet (in millions):

 	 	Mohawk Segment	 	 	Dal-Tile Segment	 	 	Unilin Segment	 	
Primary Purpose	 	Owned	 	 	Leased	 	 	Owned	 	 	Leased	 	 	Owned	 	 	Leased	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Manufacturing	 	 	15.7	 	 	 	—	 	 	 	4.6	 	 	 	—	 	 	 	9.2	 	 	 	—	 	
Selling and Distribution	 	 	3.4	 	 	 	5.2	 	 	 	0.4	 	 	 	8.1	 	 	 	0.1	 	 	 	0.2	 	
Other	 	 	1.1	 	 	 	0.1	 	 	 	0.3	 	 	 	—	 	 	 	0.1	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	20.2	 	 	 	5.3	 	 	 	5.3	 	 	 	8.1	 	 	 	9.4	 	 	 	0.2	 	

The Company’s properties are in good condition and adequate for its requirements. The Company believes its principal plants are generally adequate to meet its production plans pursuant to the Company’s long-term sales goals. In the ordinary course of 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 litigation from time to time in the regular course of its business. Currently there are no material legal proceedings pending or known by the Company to be contemplated to which the Company is a party or to which any of its property is subject.
 
The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses and that the ultimate outcome of these actions will not have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations in a given quarter or year.
 
Environmental Matters
 
The Company is subject to various federal, state, local and foreign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment, recycling and disposal of solid and hazardous materials and finished product, and the cleanup of contamination associated therewith. Because of the nature of the Company’s business, the Company has incurred, and will continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in various proceedings relating to environmental matters and is currently engaged in environmental investigation, remediation and post-closure care programs at certain sites. The Company has provided accruals for such activities that it has determined to be both probable and reasonably estimable. The Company does not expect that the ultimate liability with respect to such activities will have a material adverse effect on its operations, but may have an effect on the results of operations for a given quarter or annual period.

Item 4.  	(Removed and Reserved)	

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PART II

Item 5.  	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	
 
Market for the Common Stock
 
The Company’s common stock, $0.01 par value per share (the “Common Stock”) is quoted on the New York Stock Exchange (“NYSE”) under the symbol “MHK.” The table below shows the high and low sales prices per share of the Common Stock as reported on the NYSE Composite Tape, for each fiscal period indicated.

 	 	Mohawk
	
 	 	Common Stock	
 	 	High	 	Low	
 	 	 	 	 	 	 	 	 	
2009	 	 	 	 	 	 	 	 	
First quarter	 	$	46.05	 	 	 	16.97	 	
Second quarter	 	 	51.88	 	 	 	28.74	 	
Third quarter	 	 	53.71	 	 	 	31.40	 	
Fourth quarter	 	 	50.49	 	 	 	39.84	 	
2010	 	 	 	 	 	 	 	 	
First quarter	 	$	55.52	 	 	 	41.33	 	
Second quarter	 	 	66.93	 	 	 	43.58	 	
Third quarter	 	 	54.94	 	 	 	42.61	 	
Fourth quarter	 	 	61.28	 	 	 	51.55	 	
 
As of February 21, 2011, there were approximately 324 holders of record of Common Stock. The Company 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 presently, 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.

 	 	 	 	 	 	 	 	 	 	 	Maximum Number
	 	
 	 	 	 	 	 	 	 	 	 	 	(or Approximate
	 	
 	 	 	 	 	 	 	 	Total Number of
	 	 	Dollar Value) of
	 	
 	 	 	 	 	 	 	 	Shares (or units)
	 	 	Shares (or Units)
	 	
 	 	Total Number
	 	 	Average
	 	 	Purchased as Part
	 	 	That May Yet Be
	 	
 	 	of Shares (or
	 	 	Price Paid
	 	 	of Publicly
	 	 	Purchased Under
	 	
 	 	units)
	 	 	per Share (or
	 	 	Announced Plans
	 	 	the Plans or
	 	
Period	 	Purchased(1)	 	 	unit)	 	 	or Programs	 	 	Programs(2)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
October 3, 2010 — November 6, 2010	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,488,071	 	
November 7, 2010 — December 4, 2010	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,488,071	 	
December 5, 2010 — December 31, 2010	 	 	5,362	 	 	$	56.94	 	 	 	—	 	 	 	3,482,709	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	5,362	 	 	$	56.94	 	 	 	—	 	 	 	3,482,709	 	

 
 	 	 	
(1)	 	Shares surrendered to the Company to pay the exercise price in connection with the exercise of stock options under the Company’s 2007 Incentive Plan.	
 	 	 	
(2)	 	On September 29, 1999, the Company announced that its Board of Directors authorized the repurchase of up to 5 million shares of the Company’s common stock. On December 16, 1999 and May 18, 2000, the Company announced that its Board of Directors authorized the repurchase, for each announcement, of up to 5 million additional shares of the Company’s common stock, respectively, under the existing repurchase plan.	

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Item 6.  	Selected Financial Data	
 
The following table sets forth the selected financial data of the Company for the periods indicated which information is derived from the consolidated financial statements of the Company. The consolidated financial statements include the results of all acquisitions from the date of acquisition. 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.

 	 	As of or for the Years Ended December 31,	 	
 	 	2010	 	 	2009	 	 	2008	 	 	2007	 	 	2006	 	
 	 	(In thousands, except per share data)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Statement of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales(a)	 	$	5,319,072	 	 	 	5,344,024	 	 	 	6,826,348	 	 	 	7,586,018	 	 	 	7,905,842	 	
Cost of sales(a)	 	 	3,916,472	 	 	 	4,111,794	 	 	 	5,088,584	 	 	 	5,471,234	 	 	 	5,674,531	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	1,402,600	 	 	 	1,232,230	 	 	 	1,737,764	 	 	 	2,114,784	 	 	 	2,231,311	 	
Selling, general and administrative	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
expenses	 	 	1,088,431	 	 	 	1,188,500	 	 	 	1,318,501	 	 	 	1,364,678	 	 	 	1,392,251	 	
Impairment of goodwill and other intangibles(b)	 	 	—	 	 	 	—	 	 	 	1,543,397	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)	 	 	314,169	 	 	 	43,730	 	 	 	(1,124,134	)	 	 	750,106	 	 	 	839,060	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	133,151	 	 	 	127,031	 	 	 	127,050	 	 	 	154,469	 	 	 	173,697	 	
Other (income) expense, net	 	 	(3,900	)	 	 	(5,588	)	 	 	21,288	 	 	 	(6,925	)	 	 	(252	)	
U.S. customs refund(c)	 	 	(7,730	)	 	 	—	 	 	 	—	 	 	 	(9,154	)	 	 	(19,436	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	121,521	 	 	 	121,443	 	 	 	148,338	 	 	 	138,390	 	 	 	154,009	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes	 	 	192,648	 	 	 	(77,713	)	 	 	(1,272,472	)	 	 	611,716	 	 	 	685,051	 	
Income taxes (benefit) expense(d)	 	 	2,713	 	 	 	(76,694	)	 	 	180,062	 	 	 	(102,697	)	 	 	220,478	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	 	189,935	 	 	 	(1,019	)	 	 	(1,452,534	)	 	 	714,413	 	 	 	464,573	 	
Less: Net earnings attributable to the noncontrolling interest	 	 	4,464	 	 	 	4,480	 	 	 	5,694	 	 	 	7,599	 	 	 	8,740	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) attributable to Mohawk Industries, Inc	 	$	185,471	 	 	 	(5,499	)	 	 	(1,458,228	)	 	 	706,814	 	 	 	455,833	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per share	 	$	2.66	 	 	 	(0.08	)	 	 	(21.32	)	 	 	10.37	 	 	 	6.74	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share	 	$	2.65	 	 	 	(0.08	)	 	 	(21.32	)	 	 	10.32	 	 	 	6.70	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance sheet data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Working capital (includes short-term debt)	 	$	1,199,699	 	 	 	1,474,978	 	 	 	1,369,333	 	 	 	1,238,220	 	 	 	783,148	 	
Total assets (b and d)	 	 	6,098,926	 	 	 	6,391,446	 	 	 	6,446,175	 	 	 	8,680,050	 	 	 	8,212,209	 	
Long-term debt (including current portion)	 	 	1,653,582	 	 	 	1,854,479	 	 	 	1,954,786	 	 	 	2,281,834	 	 	 	2,783,681	 	
Total stockholders’ equity	 	 	3,271,556	 	 	 	3,200,823	 	 	 	3,153,803	 	 	 	4,707,357	 	 	 	3,715,263	 	

 	 	 	
(a)	 	During 2009, the Company recognized an increased number of warranty claims related to the performance of commercial carpet tiles that used a newer carpet backing technology. As a result, the Company recorded a $121,224 carpet sales allowance and a $12,268 inventory write-off.	
 	 	 	
(b)	 	In 2008, the Company recorded an impairment of goodwill and other intangibles which included $276,807 for the Mohawk segment, $531,930 for the Dal-Tile segment and $734,660 for the Unilin segment.	
 	 	 	
(c)	 	In 2010, 2007 and 2006, the Company received refunds from the U.S. government in reference to settlement of customs disputes dating back to 1982.	
 	 	 	
(d)	 	In 2007, the Company implemented a change in residency of one of its foreign subsidiaries. This tax restructuring resulted in a step up in the subsidiary’s taxable basis, which resulted in the recognition of a deferred tax asset of approximately $245,000 and a related income tax benefit of approximately $272,000. In 2008, the Company recorded a valuation allowance of approximately $253,000 against the deferred tax asset described above.	

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Item 7.  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
 
Overview
 
The Company is a leading producer of floor covering products for residential and commercial applications in the U.S. and residential applications in Europe with net sales in 2010 of $5.3 billion. The Company is the second largest carpet and rug manufacturer and one of the largest manufacturers, marketers and distributors of ceramic tile, natural stone and hardwood flooring in the U.S., as well as a leading producer of laminate flooring in the U.S. and Europe. In 2009, the primary categories of the U.S. floor covering industry were carpet and rug (55%), resilient and rubber (12%), ceramic tile (11%), hardwood (11%), stone (6%) and laminate (5%).
 
The U.S. floor covering industry experienced declining demand beginning in the fourth quarter of 2006 that worsened during the latter parts of 2008, and continued to decline in 2009. In the first half of 2010 demand showed signs of recovering, but first half gains were lost in the second half of the year. Overall industry conditions in the U.S. are expected to improve during 2011, although the timing and size of a sustained recovery within the market remains uncertain.
 
The Company has three reporting segments: the Mohawk segment, the Dal-Tile segment and the Unilin segment. The Mohawk segment designs, manufactures, sources, distributes and markets its floor covering product lines, which include carpets, ceramic tile, laminate, rugs, carpet pad, hardwood and resilient, primarily in North America through its network of regional distribution centers and satellite warehouses using company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, which include independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. The Dal-Tile segment designs, manufactures, sources, distributes and markets a broad line of ceramic tile, porcelain tile, natural stone and other products, primarily in North America through its network of regional distribution centers and Company-operated sales service centers using company-operated trucks, common carriers or rail transportation. The segment’s product lines are sold through Company-owned sales service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. The Unilin segment designs, manufactures, sources, licenses, distributes and markets laminate, hardwood flooring, roofing systems, insulation panels and other wood products, primarily in North America and Europe through various selling channels, which include retailers, independent distributors and home centers.
 
The Company reported net earnings attributable to the Company of $185.5 million or diluted earnings per share (“EPS”) of $2.65 for 2010, compared to net loss attributable to the Company of $5.5 million or loss per share of $0.08 for 2009. The change in EPS is primarily the result of lower restructuring charges, tax benefits related to the settlement of certain tax contingencies in 2010 and the impact of geographic dispersion of profits and losses on income taxes. During 2009, the Company recognized an increased number of warranty claims related to the performance of commercial carpet tiles that used a newer carpet backing technology. The Company discontinued sales of carpet tiles using this backing technology in 2009. Therefore, 2009 EPS included the pre-tax $121.2 million carpet sales allowance and a $12.3 million inventory write-off related to the warranty claims, as well as the unfavorable impact of higher raw material costs flowing through cost of sales of approximately $62 million. The amounts recorded for the carpet sales allowance reflected the Company’s best estimate, but the actual amount of total claims and related costs could vary from such estimate. The Company now manufactures these types of commercial carpet tiles with a different backing technology that has been used for many years by the Company.
 
For the year ended December 31, 2010, the Company generated $319.7 million of operating cash flow which it used to repay debt and fund working capital. As of December 31, 2010, the Company had cash and cash equivalents of $354.2 million. Subsequent to the balance sheet date, the Company repaid the 5.75% senior notes due January 15, 2011 at maturity, including accrued interest, using approximately $170 million of available cash and borrowings of approximately $138 million under its $600.0 million four-year, senior, secured revolving credit facility (the “ABL Facility”).
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On February 25, 2011, subsequent to the balance sheet date, the Company announced a plan to exit a manufacturing facility in the Mohawk segment. The Company is finalizing its estimates and expects to record a restructuring charge in the first quarter of 2011.
 
Results of Operations
 
Following are the results of operations for the last three years:

 	 	For the Years Ended December 31,	 	
 	 	2010	 	 	2009	 	 	2008	 	
 	 	(In millions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Statement of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	5,319.1	 	 	 	100.0	%	 	$	5,344.0	 	 	 	100.0	%	 	$	6,826.3	 	 	 	100.0	%	
Cost of sales	 	 	3,916.5	 	 	 	73.6	%	 	 	4,111.8	 	 	 	76.9	%	 	 	5,088.5	 	 	 	74.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	1,402.6	 	 	 	26.4	%	 	 	1,232.2	 	 	 	23.1	%	 	 	1,737.8	 	 	 	25.5	%	
Selling, general and administrative expenses	 	 	1,088.4	 	 	 	20.5	%	 	 	1,188.5	 	 	 	22.2	%	 	 	1,318.5	 	 	 	19.3	%	
Impairment of goodwill and other intangibles	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,543.4	 	 	 	22.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)	 	 	314.2	 	 	 	5.9	%	 	 	43.7	 	 	 	0.8	%	 	 	(1,124.1	)	 	 	(16.5	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	133.2	 	 	 	2.5	%	 	 	127.0	 	 	 	2.4	%	 	 	127.1	 	 	 	1.9	%	
Other (income) expense, net	 	 	(3.9	)	 	 	(0.1	)%	 	 	(5.6	)	 	 	(0.1	)%	 	 	21.3	 	 	 	0.3	%	
U.S. customs refund	 	 	(7.7	)	 	 	(0.1	)%	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	121.6	 	 	 	2.3	%	 	 	121.4	 	 	 	2.3	%	 	 	148.4	 	 	 	2.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes	 	 	192.6	 	 	 	3.6	%	 	 	(77.7	)	 	 	(1.5	)%	 	 	(1,272.5	)	 	 	(18.6	)%	
Income taxes expense (benefit)	 	 	2.7	 	 	 	0.1	%	 	 	(76.7	)	 	 	(1.4	)%	 	 	180.0	 	 	 	2.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	 	189.9	 	 	 	3.6	%	 	 	(1.0	)	 	 	(0.0	)%	 	 	(1,452.5	)	 	 	(21.3	)%	
Less: Net earnings attributable to the noncontrolling interest	 	 	4.4	 	 	 	0.1	%	 	 	4.5	 	 	 	0.1	%	 	 	5.7	 	 	 	0.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) attributable to Mohawk Industries, Inc	 	$	185.5	 	 	 	3.5	%	 	$	(5.5	)	 	 	(0.1	)%	 	$	(1,458.2	)	 	 	(21.4	)%	

Year Ended December 31, 2010, as Compared with Year Ended December 31, 2009
 
Net sales
 
Net sales for 2010 were $5,319.1 million, reflecting a decrease of $25.0 million, or 0.5%, from the $5,344.0 million reported for 2009. Included in net sales for 2009 is a carpet sales allowance of $121.2 million. For 2010, net sales decreased primarily due to lower sales volume of approximately $81 million, primarily related to continued weakness in the residential, commercial and new construction markets, unfavorable foreign exchange impact of approximately $37 million and the net effect of price and product mix of approximately $28 million, driven by customers trading down to lower priced products and distribution channel mix.
 
Mohawk Segment — Net sales decreased $11.9 million, or 0.4%, to $2,844.9 million in 2010 compared to $2,856.7 million in 2009. Included in net sales for 2009 is a carpet sales allowance of $121.2 million. For 2010, net sales decreased primarily due to lower sales volume of approximately $183 million, primarily related to continued weakness in the soft surface product category, partially offset by approximately $50 million due to the net effect of price and product mix as a result of price increases to offset higher raw material costs.
 
Dal-Tile Segment — Net sales decreased $59.3 million, or 4.2%, to $1,367.4 million in 2010 compared to $1,426.8 million in 2009. The decrease in net sales was primarily driven by the net effect of price and product mix of approximately $51 million, primarily driven by customer mix, and lower sales volume of approximately $17 million, primarily related to continued weakness in the commercial, residential and new construction markets, partially offset by the impact of favorable foreign exchange rates of approximately $9 million.
 
Unilin Segment — Net sales increased $60.0 million, or 5.3%, to $1,188.3 million in 2010 compared to $1,128.3 million in 2009. The increase in net sales was primarily driven by higher sales volume of
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approximately $132 million as a result of growth in developing markets, partially offset by the impact of unfavorable foreign exchange rates of approximately $46 million and the net effect of price and product mix of approximately $27 million, as customers traded down to lower priced products.
 
Quarterly net sales and the percentage changes in net sales by quarter for 2010 versus 2009 were as follows (dollars in millions):

 	 	2010	 	 	2009	 	 	Change	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
First quarter	 	$	1,347.2	 	 	 	1,208.3	 	 	 	11.5	%	 	 	 	 	
Second quarter	 	 	1,400.1	 	 	 	1,406.0	 	 	 	(0.4	)	 	 	 	 	
Third quarter	 	 	1,309.6	 	 	 	1,382.6	 	 	 	(5.3	)	 	 	 	 	
Fourth quarter	 	 	1,262.2	 	 	 	1,347.1	 	 	 	(6.3	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total year	 	$	5,319.1	 	 	 	5,344.0	 	 	 	(0.5	)%	 	 	 	 	

Gross profit
 
Gross profit for 2010 was $1,402.6 million (26.4% of net sales) and represented an increase of $170.4 million, or 13.8%, compared to gross profit of $1,232.2 million (23.1% of net sales) for 2009. Gross profit for 2009 includes a carpet sales allowance of $121.2 million and inventory write-off of $12.4 million. For 2010, gross profit was favorably impacted by approximately $50 million as a result of various restructuring actions and cost savings initiatives implemented by the Company, including facility consolidations, workforce reductions and productivity improvements, lower restructuring charges of approximately $32 million and the net effect of price and product mix of approximately $27 million. These increases were partially offset by higher manufacturing costs, primarily raw materials, of approximately $58 million, lower sales volume of approximately $13 million and the impact of unfavorable foreign exchange rates of approximately $11 million.
 
Selling, general and administrative expenses
 
Selling, general and administrative expenses for 2010 were $1,088.4 million (20.5% of net sales), reflecting a decrease of $100.1 million, or 8.4%, compared to $1,188.5 million (22.2% of net sales) for 2009. The decrease in selling, general and administrative expenses is primarily driven by various restructuring actions and cost savings initiatives implemented by the Company, including distribution facility consolidations, workforce reductions and productivity improvements, to align such expenses with the Company’s sales volumes.
 
Operating income
 
Operating income for 2010 was $314.2 million (5.9% of net sales) reflecting a $270.4 million increase compared to an operating income of $43.7 million (0.8% of net sales) in 2009. Operating income for 2009 includes a carpet sales allowance and inventory write-off of $133.5 million. For 2010, operating income was favorably impacted by approximately $128 million as a result of lower selling, general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the Company, lower restructuring charges of approximately $49 million and the net effect of price and product mix of approximately $27 million, partially offset by higher manufacturing costs, primarily raw materials, of approximately $58 million and lower sales volume of approximately $13 million.
 
Mohawk Segment — Operating income was $122.9 million (4.3% of segment net sales) in 2010 reflecting an increase of $248.9 million compared to operating loss of $126.0 million in 2009. Operating loss for 2009 includes a carpet sales allowance and inventory write-off of $133.5 million. For 2010, operating income was favorably impacted by approximately $101 million as a result of lower selling, general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the Company, the net effect of price and product mix of approximately $66 million and lower restructuring charges of approximately $19 million, partially offset by higher manufacturing costs, primarily raw materials, of approximately $25 million and lower sales volume of approximately $45 million.
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Dal-Tile Segment — Operating income was $97.3 million (7.1% of segment net sales) in 2010 reflecting an increase of $13.2 million, or 15.7%, compared to operating income of $84.2 million (5.9% of segment net sales) for 2009. The increase was primarily driven by the favorable impact of approximately $20 million as a result of lower selling, general and administrative expenses and various restructuring actions and cost savings initiatives implemented by the Company, lower restructuring charges of approximately $16 million and lower manufacturing expenses of approximately $4 million, partially offset by the net effect of price and product mix of approximately $28 million.
 
Unilin Segment — Operating income was $114.3 million (9.6% of segment net sales) in 2010 reflecting an increase of $8.3 million, or 7.9%, compared to operating income of $106.0 million (9.4% of segment net sales) for 2009. The increase was primarily driven by higher sales volume of approximately $42 million, lower restructuring charges of approximately $14 million and lower selling, general and administrative expenses of approximately $5 million, offset by higher manufacturing costs, primarily raw materials, of approximately $36 million, the net effect of price and product mix of approximately $10 million and unfavorable foreign exchange rates of approximately $6 million.
 
Interest expense
 
Interest expense for 2010 was $133.2 million compared to $127.0 million in 2009. The increase in interest expense resulted from the $7.5 million premium and fees related to the extinguishment of approximately $200 million aggregate principal amount of the Company’s 5.75% senior notes due January 15, 2011, higher costs on the Company’s revolving credit facility and higher interest rates on the Company’s notes, partially offset by the impact of lower debt levels.
 
U.S. customs refund
 
The Company has received partial refunds from the U.S. government in reference to settling customs disputes dating back to 1986. Accordingly, the Company realized a gain of $7.7 million in other expense (income) for 2010. The Company is pursuing additional recoveries for years subsequent to 1986 but there can be no assurances such recoveries will occur. Additional future recoveries, if any, will be recorded as realized.
 
Income tax expense (benefit)
 
For 2010, the Company recorded an income tax expense of $2.7 million on earnings before income taxes of $192.6 million compared to a benefit of $76.7 million on loss before income taxes of $77.7 million for 2009. The 2010 effective tax rate of 1.4% is primarily due to a tax benefit of approximately $30 million related to the settlement of certain income tax contingencies in Europe, the favorable geographic dispersion of profits and losses resulting in a tax benefit of approximately $21 million and a decrease in valuation allowance of approximately $17 million related to European deferred tax assets. The 2009 effective tax rate of 98.7% was the result of the geographic dispersion of profits and losses resulting in a tax benefit of approximately $13 million, a permanent tax benefit in Europe on notional interest of approximately $56 million, offset by an increase to the Company’s valuation allowance and tax contingencies of approximately $19 million.
 
Year Ended December 31, 2009, as Compared with Year Ended December 31, 2008
 
Net sales
 
Net sales for 2009 were $5,344.0 million, reflecting a decrease of $1,482.3 million, or 21.7%, from the $6,826.3 million reported for 2008. The decrease was primarily driven by a decline in sales volumes of approximately $1,047 million due to the continued weakness in the U.S. residential remodeling and new construction markets, commercial real estate market and European demand, a decline of approximately $298 million due to unfavorable price and product mix as customers trade down to lower priced products, a decrease of approximately $81 million due to a net increase in warranty requirements described in the overview and a decline of approximately $56 million due to unfavorable foreign exchange rates and other.
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Mohawk Segment — Net sales decreased $771.4 million, or 21.3%, to $2,856.7 million in 2009 compared to $3,628.2 million in 2008. The decrease was primarily driven by a decline in sales volumes of approximately $531 million due to the continued weakness in the U.S. residential remodeling and new construction markets and the declining commercial real estate market, a decline of approximately $151 million due to unfavorable price and product mix as customers trade down to lower priced products and a decrease of approximately $81 million due to a net increase in warranty requirements described above in the overview.
 
Dal-Tile Segment — Net sales decreased $388.6 million, or 21.4%, to $1,426.8 million in 2009 compared to $1,815.4 million in 2008. The decrease was primarily driven by a decline in sales volumes of approximately $301 million due to the continued weakness in the U.S. residential remodeling and new construction markets and the declining commercial real estate market, a decline of approximately $73 million due to unfavorable price and product mix as customers trade down to lower priced products and a decline of approximately $15 million due to unfavorable foreign exchange rates.
 
Unilin Segment — Net sales decreased $336.9 million, or 23.0%, to $1,128.3 million in 2009 compared to $1,465.2 million in 2008. The decrease was driven by a decline in sales volumes of approximately $215 million due to the continued weakness in the U.S. residential remodeling and new construction markets and slowing European demand, a decline of approximately $74 million due to the net effect of price and product mix as customers trade down to lower priced products and a decline of approximately $48 million due to unfavorable foreign exchange rates.
 
Quarterly net sales and the percentage changes in net sales by quarter for 2009 versus 2008 were as follows (dollars in millions):

 	 	2009	 	 	2008	 	 	Change	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
First quarter	 	$	1,208.3	 	 	 	1,738.1	 	 	 	(30.5	) %	
Second quarter	 	 	1,406.0	 	 	 	1,840.0	 	 	 	(23.6	)	
Third quarter	 	 	1,382.6	 	 	 	1,763.0	 	 	 	(21.6	)	
Fourth quarter	 	 	1,347.1	 	 	 	1,485.2	 	 	 	(9.3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total year	 	$	5,344.0	 	 	 	6,826.3	 	 	 	(21.7	)%	

Gross profit
 
Gross profit for 2009 was $1,232.2 million (23.1% of net sales) and represented a decrease of $505.5 million compared to gross profit of $1,737.8 million (25.5% of net sales) for 2008. Gross profit in 2009 was unfavorably impacted by approximately $315 million resulting from lower sales volume, a decline of approximately $185 million due to the net effect of price and product mix, a decline of approximately $89 million due to a net increase in warranty requirements described above in the overview, restructuring charges of approximately $28 million and the impact of unfavorable foreign exchange rates of approximately $9 million, partially offset by lower manufacturing costs of approximately $120 million. The decrease in gross profit percentage is primarily attributable to unfavorable price and product mix, increased warranty requirements and restructuring costs, partially offset by lower raw material and manufacturing costs
 
Selling, general and administrative expenses
 
Selling, general and administrative expenses for 2009 were $1,188.5 million (22.2% of net sales), reflecting a decrease of $130.0 million, or 9.9%, compared to $1,318.5 million (19.3% of net sales) for the prior year. The decrease in selling, general and administrative expenses is primarily driven by lower sales and various cost savings initiatives implemented by the Company, including distribution facility consolidations, workforce reductions and productivity improvements, to align such expenses with the Company’s sales volumes, partially offset by approximately $8 million of unfavorable foreign exchange rates and approximately $4 million for restructuring charges. The increase in selling general and administrative expenses as a percentage of net sales is primarily a result of a higher mix of fixed costs on lower net sales, and restructuring costs.
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Operating income (loss)
 
Operating income for 2009 was $43.7 million (0.8% of net sales) reflecting an increase of $1,167.9 million compared to an operating loss of $1,124.1 million in 2008. The change was primarily driven by the recognition of an impairment of goodwill and other intangibles of $1,543.4 million in 2008. In addition, operating income in 2009 was impacted by a decline of approximately $315 million due to lower sales volumes, a decline of approximately $185 million due to unfavorable price and product mix, a decrease of approximately $89 million due to a net increase in warranty requirements described above in the overview and restructuring charges of approximately $32 million, partially offset by lower manufacturing and selling, general and administrative costs of approximately $244 million.
 
Mohawk Segment — Operating loss was $126.0 million in 2009 reflecting a decrease of $90.2 million compared to operating loss of $216.2 million in 2008. The increase was primarily driven by the recognition of an impairment of goodwill and other intangibles of $276.8 million in 2008. In addition, operating income in 2009 was impacted by a decline of approximately $133 million due to lower sales volumes, a decrease of approximately $89 million due to a net increase in warranty requirements and a decline of approximately $74 million due to unfavorable price and product mix and restructuring charges of approximately $7 million, partially offset by lower manufacturing and selling, general and administrative costs of approximately $116 million.
 
Dal-Tile Segment — Operating income was $84.2 million (5.9% of segment net sales) in 2009 reflecting an increase of $407.5 million compared to operating loss of $323.4 million for 2008. The change was primarily driven by the recognition of an impairment of goodwill and other intangibles of $531.9 million in 2008. In addition, operating income in 2009 was impacted by a decline of approximately $108 million due to lower sales volumes, a decline of approximately $35 million due to unfavorable price and product mix and restructuring charges of approximately $12 million, partially offset by lower manufacturing and selling, general and administrative costs of approximately $23 million.
 
Unilin Segment — Operating income was $106.0 million (9.4% of segment net sales) in 2009 reflecting an increase of $670.9 million compared to operating loss of $564.9 million for 2008. The increase was primarily driven by the recognition of an impairment of goodwill and other intangibles of $734.7 million in 2008. In addition, operating income in 2009 was impacted by a decline of approximately $76 million due to the net effect of price and product mix, a decline in sales volumes of approximately $74 million, restructuring charges of approximately $13 million and the impact of unfavorable foreign exchange rates of approximately $8 million, partially offset by lower raw material, manufacturing and selling, general and administrative costs of approximately $107 million.
 
Interest expense
 
Interest expense for 2009 was $127.0 million compared to $127.1 million in 2008. Interest expense in 2009 was directly impacted by higher interest rates on the Company’s notes and revolving credit facilities due to three credit rating downgrades in 2009, partially offset by lower average debt levels in the current year compared to 2008.
 
Income tax (benefit) expense
 
For 2009, the Company recorded an income tax benefit of $76.7 million on loss before taxes of $77.7 million as compared to income tax expense of $180.1 million on loss before taxes of $1,272.5 million for 2008. The change is principally due to the non-deductible 2008 goodwill impairment charge, the recognition of a valuation allowance against a deferred asset of approximately $253 million, and the geographic distribution of income (loss).
 
In the fourth quarter of 2007, the Company moved the intellectual property and treasury operations of an indirectly owned European entity to a new office in another jurisdiction in Europe. The Company also indirectly owned a holding company in the new jurisdiction that provided certain treasury functions to Unilin, and the move allowed for the consolidation of the historical intellectual property and treasury operations to be
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combined with those of the holding company’s treasury operations in a single jurisdiction in order to integrate and streamline the operations, to facilitate international acquisitions and to improve tax and cost efficiencies. This restructuring resulted in a step up in the subsidiary’s taxable basis of its intellectual property. The step up relates primarily to intangible assets which will be amortized over 10 years for tax purposes. During the fourth quarter of 2007, the Company evaluated the evidence for recognition of the deferred tax asset created through the restructuring and determined that, based on the available evidence at the time, the deferred tax asset would more likely than not be realized. The deferred tax asset recognized as of December 31, 2007 was approximately $245 million and the related income tax benefit recognized in the consolidated financial statements was approximately $272 million.
 
During the third quarter of 2008, the Company reassessed the need for a valuation allowance against its deferred tax assets. Cash flows had decreased from that projected as of December 31, 2007, primarily due to the slowing worldwide economy and declining sales volume. The Company determined that, given the current and expected economic conditions and the corresponding reductions in cash flows, its ability to realize the benefit of the deferred tax asset related to the transaction described above as well as tax losses generated in the same jurisdiction was not more likely than not. Accordingly the Company recorded a valuation allowance against the deferred tax asset in the amount of $253 million during the quarter ended September 27, 2008.
 
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 primarily through a combination of internally generated funds, bank credit lines and credit terms from suppliers.
 
Cash flows provided by operations for 2010 were $319.7 million compared to cash flows provided by operations of $672.2 million in 2009. The decrease in operating cash flows for 2010 as compared to 2009 is primarily attributable to higher working capital requirements as the Company’s inventory levels stabilize to meet current market conditions and the impact of higher raw material costs, partially offset by higher earnings.
 
Cash flows provided by operations for 2009 were $672.2 million compared to cash flows provided by operations of $576.1 million in 2008. The increase in operating cash flows for 2009 as compared to 2008 is primarily attributable to lower working capital requirements due to lower sales demand.
 
Net cash used in investing activities for 2010 was $231.5 million compared to $114.8 million in 2009. The increase is due to the investment of $79.9 million in a Chinese tile manufacturer and higher capital spending during 2010 as compared to 2009. Capital expenditures, including $94.1 million for acquisitions, have totaled $577.0 million over the past three years. Capital spending during 2011, excluding acquisitions, is expected to range from $270 million to $300 million, and is intended to be used primarily to purchase equipment and to streamline manufacturing capacity.
 
Net cash used in investing activities for 2009 was $114.8 million compared to $226.1 million in 2008. The decrease is due to lower capital spending as a result of lower sales and tighter management of expenditures during 2009 as compared to 2008.
 
Net cash used in financing activities for 2010 was $255.2 million compared to net cash used by financing activities of $125.8 million in 2009. The change in cash used in financing activities as compared to 2009 is primarily attributable to the higher debt repayments in 2010, principally the repayment of $200.0 million aggregate principal amount of the Company’s outstanding 5.75% senior notes due January 15, 2011, and the establishment of a $27.9 million restricted cash account to repay the remaining outstanding 5.75% senior notes due January 15, 2011, compared to 2009.
 
Net cash used in financing activities for 2009 was $125.8 million compared to net cash used by financing activities of $348.9 million in 2008. The change in cash used in financing activities as compared to 2008 is primarily attributable to lower debt levels as the Company manages its working capital requirements to align with its current sales.
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On September 2, 2009, the Company entered the ABL Facility in connection with the replacement of the Company’s then-existing senior, unsecured, revolving credit facility (the “Senior Unsecured Facility”). At the time of its termination, the Senior Unsecured Facility consisted of a $650.0 million revolving credit facility, which was to mature on October 28, 2010. The ABL Facility provides for a maximum of $600.0 million of revolving credit, subject to borrowing base availability, including limited amounts of credit in the form of letters of credit and swingline loans. The borrowing base is equal to specified percentages of eligible accounts receivable and inventories of the borrowers under the ABL Facility, which are subject to seasonal variations, less reserves established in good faith by the Administrative Agent under the ABL Facility. All obligations under the ABL Facility, and the guarantees of those obligations, are secured by a security interest in certain accounts receivable, inventories, certain deposit and securities accounts, tax refunds and other personal property (excluding intellectual property) directly relating to, or arising from, and proceeds of any of the foregoing. On June 1, 2010, the Company amended the ABL Facility to, among other things, reduce the applicable interest rate margins on loans and reduce the commitment fees.
 
At the Company’s election, revolving loans under the ABL Facility bear interest at annual rates equal to either (a) LIBOR for 1, 2, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 2.75% and 3.25%, or (b) the higher of the prime rate, the Federal Funds rate plus 0.5%, or a one-month LIBOR rate, plus an applicable margin ranging between 1.25% and 1.75%. The Company also pays a commitment fee to the lenders under the ABL Facility on the average amount by which the aggregate commitments of the lenders’ exceed utilization of the ABL Facility equal to 0.65% per annum during any quarter that this excess is 50% or more and 0.50% per annum during any quarter that this excess is less than 50%.
 
The ABL Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on debt, liens, investments, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company’s business. Many of these limitations are subject to numerous exceptions. The Company is also required to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that the unutilized amount available under the ABL Facility is less than 15% of the lenders’ aggregated commitments.
 
The ABL Facility is scheduled to mature on September 2, 2013 but the maturity date will accelerate, including the acceleration of any unamortized deferred financing costs, to January 15, 2012, if the Company’s outstanding 7.20% senior notes due April 15, 2012 have not been repaid, refinanced, defeased or adequately reserved for by the Company, as reasonably determined by the Administrative Agent, prior to January 15, 2012. The Company believes it will be able to make adequate reserves for such senior notes with cash and cash equivalents, unutilized borrowings under the ABL and other uncommitted financing sources, including new public debt offerings or bank facilities, although there can be no assurances that the Company will be able to complete any necessary financing transactions prior to the relevant date under the ABL Facility or the April 15, 2012 maturity date.
 
As of December 31, 2010, the amount utilized under the ABL Facility was $387.1 million resulting in a total of $169.6 million available under the ABL Facility. The amount utilized included the reserved amount of $280.0 million related to the repayment of the Company’s outstanding 5.75% senior notes due January 15, 2011, discussed below, $53.5 million of standby letters of credit guaranteeing the Company’s industrial revenue bonds and $53.5 million of standby letters of credit related to various insurance contracts and foreign vendor commitments. Immediately following the repayment of the 5.75% senior notes due January 15, 2011 at maturity, a total of $289.6 million was available under the ABL Facility.
 
On January 17, 2006, the Company issued $900.0 million aggregate principal amount of 6.125% notes due 2016. Interest payable on these notes is subject to adjustment if either Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Ratings Services (“Standard & Poor’s”), or both, downgrades the rating assigned to the notes. Each rating agency downgrade results in a 0.25% increase in the interest rate, subject to a maximum increase of 1% per rating agency. If later the rating of these notes improves, then the interest rates would be reduced accordingly. Each 0.25% increase in the interest rate of these notes would increase the
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Company’s interest expense by approximately $0.1 million per quarter per $100 million of outstanding notes. Currently, the interest rates have been increased by an aggregate amount of 0.75% as a result of downgrades by Moody’s and Standard & Poor’s during 2009. Additional downgrades in the Company’s credit ratings could further increase the cost of its existing credit and adversely affect the cost of and ability to obtain additional credit in the future.
 
On April 12, 2010, the Company purchased for cash approximately $200 million aggregate principal amount of its outstanding 5.75% senior notes due January 15, 2011 at a price equal to 103.5% of the principal amount, which resulted in a premium to tendering noteholders of approximately $7 million. The debt extinguishment resulted in a decrease in interest expense of approximately $10 million over the remaining term of the notes. In connection with the extinguishment, the Company paid approximately $0.5 million in fees and accelerated the remaining deferred financing costs incurred in the original issuance of the notes that were purchased by the Company. The premium and fees associated with the cash tender are included in interest expense on the 2010 consolidated statement of operations. On October 14, 2010, the Company deposited $27.9 million of cash in a restricted account under the control of the Administrative Agent and reserved $280.0 million on the ABL Facility to repay the remaining amount outstanding of the 5.75% senior notes due January 15, 2011, which actions were determined by the Administrative Agent to adequately reserve (for purposes of the ABL Facility) for the repayment of such notes. Subsequent to the balance sheet date, the Company repaid the 5.75% senior notes due January 15, 2011 at maturity, using approximately $170 million of available cash and borrowings of approximately $138 million under the ABL Facility.
 
In 2002, the Company issued $400.0 million aggregate principal amount of its senior 7.20% notes due April 15, 2012.
 
As of December 31, 2010, the Company had invested cash of $334.8 million in money market AAA rated cash investments of which $149.6 million was in North America and $185.2 million was in Europe. The Company believes that its cash and cash equivalents on hand, cash generated from operations, availability under its ABL Facility and other financing sources, including new public debt offerings or bank facilities, will be sufficient to adequately reserve for, repay, defease or refinance its 7.20% senior notes due April 15, 2012, on or before January 15, 2012 as required by the ABL Facility, and meet its capital expenditure and working capital requirements over the next twelve months.
 
The Company may from time to time seek to retire its outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amount involved may be material.
 
The Company’s Board of Directors has authorized the repurchase of up to 15 million shares of the Company’s outstanding common stock. Since the inception of the program in 1999, a total of approximately 11.5 million shares have been repurchased at an aggregate cost of approximately $334.7 million. All of these repurchases have been financed through the Company’s operations and banking arrangements. No shares were repurchased during 2010, 2009 and 2008.
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Contractual obligations
 
The following is a summary of the Company’s future minimum payments under contractual obligations as of December 31, 2010 (in millions):

 	 	Total	 	 	2011	 	 	2012	 	 	2013	 	 	2014	 	 	2015	 	 	Thereafter	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Recorded Contractual Obligations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt, including current maturities and capital leases	 	$	1,653.6	 	 	 	350.6	 	 	 	401.5	 	 	 	0.4	 	 	 	0.4	 	 	 	0.3	 	 	 	900.4	 	
Unrecorded Contractual Obligations:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest payments on long-term debt and capital leases(1)	 	 	350.3	 	 	 	91.7	 	 	 	70.3	 	 	 	61.9	 	 	 	61.9	 	 	 	61.9	 	 	 	2.6	 	
Operating leases	 	 	356.8	 	 	 	91.7	 	 	 	75.6	 	 	 	59.5	 	 	 	49.7	 	 	 	38.5	 	 	 	41.8	 	
Purchase commitments(2)	 	 	579.8	 	 	 	212.6	 	 	 	125.0	 	 	 	121.1	 	 	 	121.1	 	 	 	—	 	 	 	—	 	
Expected pension contributions(3)	 	 	1.9	 	 	 	1.9	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Uncertain tax positions(4)	 	 	3.2	 	 	 	3.2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Guarantees	 	 	0.8	 	 	 	0.8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	1,292.8	 	 	 	401.9	 	 	 	270.9	 	 	 	242.5	 	 	 	232.7	 	 	 	100.4	 	 	 	44.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,946.4	 	 	 	752.5	 	 	 	672.4	 	 	 	242.9	 	 	 	233.1	 	 	 	100.7	 	 	 	944.8	 	

 
 	 	 	
(1)	 	For fixed rate debt, the Company calculated interest based on the applicable rates and payment dates. For variable rate debt, the Company estimated average outstanding balances for the respective periods and applied interest rates in effect as of December 31, 2010 to these balances.	
 	 	 	
(2)	 	Includes commitments for natural gas, electricity and raw material purchases.	
 	 	 	
(3)	 	Includes the estimated pension contributions for 2011 only, as the Company is unable to estimate the pension contributions beyond 2011. The Company’s projected benefit obligation as of December 31, 2010 was $27.0 million. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.	
 	 	 	
(4)	 	Excludes $62.3 million of non-current accrued income tax liabilities and related interest and penalties for uncertain tax positions. These liabilities have not been presented in the table above due to uncertainty as to amounts and timing regarding future payments.	
 
Critical Accounting Policies
 
In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles, the Company must make decisions which impact the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Such decisions include the selection of appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, the Company applies judgment based on its understanding and analysis of the relevant circumstances and historical experience. Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.
 
The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included elsewhere in this report. Some of those significant accounting policies require the Company to make subjective or complex judgments or estimates. Critical accounting policies are defined as those that are both most important to the portrayal of a company’s financial condition and results and require management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
 
The Company believes the following accounting policies require it to use judgments and estimates in preparing its consolidated financial statements and represent critical accounting policies.
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 	• 	Accounts receivable and revenue recognition.  Revenues are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable, and collectability can be reasonably assured. The Company provides allowances for expected cash discounts, sales allowances, returns, claims and doubtful accounts based upon historical bad debt and claims experience and periodic evaluation of specific customer accounts and the aging of accounts receivable. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. A 10% change in the Company’s allowance for discounts, returns, claims and doubtful accounts would have affected net earnings by approximately $3 million for the year ended December 31, 2010.	
 	 	 	
 	• 	Inventories are stated at the lower of cost or market (net realizable value).  Cost has been determined using the first-in first-out method (“FIFO”). Costs included in inventory include raw materials, direct and indirect labor and employee benefits, depreciation, general manufacturing overhead and various other costs of manufacturing. Market, with respect to all inventories, is replacement cost or net realizable value. Inventories on hand are compared against anticipated future usage, which is a function of historical usage, anticipated future selling price, expected sales below cost, excessive quantities and an evaluation for obsolescence. Actual results could differ from assumptions used to value obsolete inventory, excessive inventory or inventory expected to be sold below cost and additional reserves may be required. A 10% change in the Company’s reserve for excess or obsolete inventory would have affected net earnings by approximately $4 million for the year ended December 31, 2010.	
 	 	 	
 	• 	Goodwill and other intangibles.  Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management judgments and assumptions using the discounted cash flows and comparable company market valuation approaches. The Company has identified Mohawk, Dal-Tile, Unilin Flooring, Unilin Chipboard and Melamine, and Unilin Roofing as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples. When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as continued declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted. Generally, a decline in estimated after tax cash flows of more than 20% or a more than 15% increase in WACC or a decline in market capitalization could result in an additional indication of impairment.	
 
The impairment test for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. These judgments and assumptions are subject to the variability discussed above.
 
The impairment evaluation for indefinite lived intangible assets, which for the Company are its trademarks, is conducted during the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The determination of fair value used in the impairment evaluation is based on discounted estimates of future sales projections attributable to
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ownership of the trademarks. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the trademarks. Estimated cash flows are sensitive to changes in the economy among other things.
 
The Company reviews its long-lived asset groups, which include intangible assets subject to amortization, which for the Company are its patents and customer relationships, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.
 
The Company conducted its annual assessment of goodwill and indefinite lived intangibles in the fourth quarter and no impairment was indicated. The Company did record impairment of goodwill and other intangibles of $1,543.4 million in 2008.

 	• 	Income taxes.  The Company’s effective tax rate is based on its income, statutory tax rates and tax planning opportunities available in the jurisdictions in which it operates. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining the Company’s tax expense and in evaluating the Company’s tax positions. Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in a future period. The Company evaluates the recoverability of these future tax benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other projections of financial results over an extended period of time. In the event that the Company is not able to realize all or a portion of its deferred tax assets in the future, a valuation allowance is provided. The Company would recognize such amounts through a charge to income in the period in which that determination is made or when tax law changes are enacted. The Company had valuation allowances of $325.1 million in 2010, $365.9 million in 2009 and $343.6 million in 2008. For further information regarding the Company’s valuation allowances, see Note 12 to the consolidated financial statements.	
 
In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the Company’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information, as required by the provisions of the Financial Accounting Standards Board (“FASB”) FASB Accounting Standards Codification Topic 740 (“ASC 740-10”), a replacement of FASB Interpretation No. 48,  “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” . For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the consolidated financial statements. As of December 31, 2010, the Company has $49.9 million accrued for uncertain tax positions. For further information regarding the Company’s uncertain tax positions, see Note 12 to the consolidated financial statements.
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 	• 	Environmental and legal accruals.  Environmental and legal accruals are estimates based on judgments made by the Company relating to ongoing environmental and legal proceedings, as disclosed in the Company’s consolidated financial statements. In determining whether a liability is probable and reasonably estimable, the Company consults with its internal experts. The Company believes that the amounts recorded in the accompanying financial statements are based on the best estimates and judgments available to it.	
 
Recent Accounting Pronouncements
 
In June 2009, the FASB issued ASC 860, formerly SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” . ASC 860 seeks to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. Specifically, ASC 860 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. ASC 860 is effective for annual and quarterly reporting periods that begin after November 15, 2009. The Company’s adoption of ASC 860 on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2009, FASB issued ASC 810, formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” . ASC 810 amends FASB Interpretation No. 46(R),  “Variable Interest Entities”,  for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under ASC 810, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. ASC 810 also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. ASC 810 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. ASC 810 is effective for annual and quarterly reporting periods that begin after November 15, 2009. The Company’s adoption of ASC 810 on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.
 
Impact of Inflation
 
Inflation affects the Company’s manufacturing costs, distribution costs and operating expenses. The carpet, tile and laminate industry experienced inflation in the prices of raw materials and fuel-related costs beginning in 2006, and the prices increased dramatically during the latter part of 2008, peaking in the second half of 2008. The Company expects raw material prices, many of which are petroleum based, to continue to fluctuate based upon worldwide supply and demand of commodities utilized in the Company’s production processes. In the past, the Company has generally been able to pass along these price increases to its customers and has been able to enhance productivity and develop new product innovations to help offset increases in costs resulting from inflation in its operations.
 
Seasonality
 
The Company is a calendar year-end company. With respect to its Mohawk and Dal-Tile segments, its results of operations for the first quarter tend to be the weakest. The second, third and fourth quarters typically produce higher net sales and operating income in these segments. These results are primarily due to consumer residential spending patterns for floor covering, which historically have decreased during the first two months of each year following the holiday season. The Unilin segment second and fourth quarters typically produce
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higher net sales and earnings followed by a moderate first quarter and a weaker third quarter. The third quarter is traditionally the weakest due to the European holiday in late summer.

Item 7A.  	Quantitative and Qualitative Disclosures about Market Risk	
 
Financial exposures are monitored as an integral part of the Company’s risk management program, which seeks to reduce the potentially adverse effect that the volatility of exchange rates and natural gas markets may have on its operating results. From time to time the Company enters into derivative contracts to manage these risks. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes. The Company did not have any derivative contracts outstanding as of December 31, 2010 and 2009.
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Item 8.  	Consolidated Financial Statements and Supplementary Data	
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm	 	 	35	 	
Consolidated Balance Sheets as of December 31, 2010 and 2009	 	 	37	 	
Consolidated Statements of Operations for the Years ended December 31, 2010, 2009 and 2008	 	 	38	 	
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the Years ended December 31, 2010, 2009 and 2008	 	 	39	 	
Consolidated Statements of Cash Flows for the Years ended December 31, 2010, 2009 and 2008	 	 	40	 	
Notes to Consolidated Financial Statements	 	 	41	 	

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Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Stockholders
Mohawk Industries, Inc.:
 
We have audited the accompanying consolidated balance sheets of Mohawk Industries, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mohawk Industries, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Mohawk Industries, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
 
/s/  KPMG LLP
 
Atlanta, Georgia
March 1, 2011
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Report of Independent Registered Public Accounting Firm
 
The Board of Directors and Stockholders
Mohawk Industries, Inc.:
 
We have audited Mohawk Industries, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Mohawk Industries, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, as set forth in Item 9A. of Mohawk Industries, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
In our opinion, Mohawk Industries, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Mohawk Industries, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated March 1, 2011 expressed an unqualified opinion on those consolidated financial statements.
 
/s/  KPMG LLP
 
Atlanta, Georgia
March 1, 2011
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 2010 and 2009

 	 	2010	 	 	2009	 	
 	 	(In thousands, except per share data)	 	
 	 	 	 	 	 	 	 	 	
ASSETS	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	354,217	 	 	 	531,458	 	
Restricted cash	 	 	27,954	 	 	 	—	 	
Receivables, net	 	 	614,473	 	 	 	673,931	 	
Inventories	 	 	1,007,503	 	 	 	892,981	 	
Prepaid expenses	 	 	91,731	 	 	 	108,947	 	
Deferred income taxes	 	 	133,304	 	 	 	130,990	 	
Other current assets	 	 	19,431	 	 	 	20,693	 	
 	 	 	 	 	 	 	 	 	
Total current assets	 	 	2,248,613	 	 	 	2,359,000	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	1,687,124	 	 	 	1,791,412	 	
Goodwill	 	 	1,369,394	 	 	 	1,411,128	 	
Tradenames	 	 	456,890	 	 	 	477,607	 	
Other intangible assets, net	 	 	220,237	 	 	 	307,735	 	
Deferred income taxes and other non-current assets	 	 	116,668	 	 	 	44,564	 	
 	 	 	 	 	 	 	 	 	
 	 	$	6,098,926	 	 	 	6,391,446	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY	
Current liabilities:	 	 	 	 	 	 	 	 	
Current portion of long-term debt	 	$	350,588	 	 	 	52,907	 	
Accounts payable and accrued expenses	 	 	698,326	 	 	 	831,115	 	
 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	1,048,914	 	 	 	884,022	 	
Deferred income taxes	 	 	346,503	 	 	 	370,903	 	
Long-term debt, less current portion	 	 	1,302,994	 	 	 	1,801,572	 	
Other long-term liabilities	 	 	93,518	 	 	 	100,667	 	
 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	2,791,929	 	 	 	3,157,164	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies (Notes 7 and 13)	 	 	 	 	 	 	 	 	
Redeemable noncontrolling interest	 	 	35,441	 	 	 	33,459	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	 	 	—	 	 	 	—	 	
Common stock, $.01 par value; 150,000 shares authorized; 79,666 and 79,518 shares issued in 2010 and 2009, respectively	 	 	797	 	 	 	795	 	
Additional paid-in capital	 	 	1,235,445	 	 	 	1,227,856	 	
Retained earnings	 	 	2,180,843	 	 	 	1,998,616	 	
Accumulated other comprehensive income, net	 	 	178,097	 	 	 	296,917	 	
 	 	 	 	 	 	 	 	 	
 	 	 	3,595,182	 	 	 	3,524,184	 	
Less treasury stock at cost; 11,037 and 11,034 shares in 2010 and 2009, respectively	 	 	323,626	 	 	 	323,361	 	
 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	3,271,556	 	 	 	3,200,823	 	
 	 	 	 	 	 	 	 	 	
 	 	$	6,098,926	 	 	 	6,391,446	 	

See accompanying notes to consolidated financial statements.
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years Ended December 31, 2010, 2009 and 2008

 	 	2010	 	 	2009	 	 	2008	 	
 	 	(In thousands, except per share data)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	5,319,072	 	 	 	5,344,024	 	 	 	6,826,348	 	
Cost of sales	 	 	3,916,472	 	 	 	4,111,794	 	 	 	5,088,584	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	1,402,600	 	 	 	1,232,230	 	 	 	1,737,764	 	
Selling, general and administrative expenses	 	 	1,088,431	 	 	 	1,188,500	 	 	 	1,318,501	 	
Impairment of goodwill and other intangibles	 	 	—	 	 	 	—	 	 	 	1,543,397	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)	 	 	314,169	 	 	 	43,730	 	 	 	(1,124,134	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other expense (income):	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	133,151	 	 	 	127,031	 	 	 	127,050	 	
Other expense	 	 	8,144	 	 	 	16,935	 	 	 	31,139	 	
Other income	 	 	(12,044	)	 	 	(22,523	)	 	 	(9,851	)	
U.S. customs refund	 	 	(7,730	)	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	121,521	 	 	 	121,443	 	 	 	148,338	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes	 	 	192,648	 	 	 	(77,713	)	 	 	(1,272,472	)	
Income tax expense (benefit)	 	 	2,713	 	 	 	(76,694	)	 	 	180,062	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	 	189,935	 	 	 	(1,019	)	 	 	(1,452,534	)	
Less: Net earnings attributable to noncontrolling interest	 	 	4,464	 	 	 	4,480	 	 	 	5,694	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) attributable to Mohawk Industries, Inc. 	 	$	185,471	 	 	 	(5,499	)	 	 	(1,458,228	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per share attributable to Mohawk Industries, Inc. 	 	$	2.66	 	 	 	(0.08	)	 	 	(21.32	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share attributable to Mohawk Industries, Inc. 	 	$	2.65	 	 	 	(0.08	)	 	 	(21.32	)	

See accompanying notes to consolidated financial statements.
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss)
Years Ended December 31, 2010, 2009 and 2008

 	 	 	 	 	Stockholders’ equity	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Accumulated
	 	 	 	 	 	 	 	 	 	 	
 	 	Redeemable
	 	 	 	 	 	 	 	 	Additional
	 	 	 	 	 	other
	 	 	 	 	 	 	 	 	Total
	 	
 	 	noncontrolling
	 	 	Common stock	 	 	paid-in
	 	 	Retained
	 	 	comprehensive
	 	 	Treasury stock	 	 	stockholders’
	 	
 	 	interest	 	 	Shares	 	 	Amount	 	 	capital	 	 	earnings	 	 	income (loss)	 	 	Shares	 	 	Amount	 	 	equity	 	
 	 	(In thousands)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at December 31, 2007	 	$	31,488	 	 	 	79,404	 	 	$	794	 	 	$	1,203,957	 	 	$	3,462,343	 	 	$	363,981	 	 	 	(11,046	)	 	$	(323,718	)	 	$	4,707,357	 	
Shares issued under employee and director stock plans	 	 	—	 	 	 	57	 	 	 	1	 	 	 	1,621	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	173	 	 	 	1,795	 	
Stock-based compensation expense	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11,991	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11,991	 	
Tax benefit from stock-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	334	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	334	 	
Distribution to noncontrolling interest	 	 	(6,052	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Comprehensive loss:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency translation adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(101,935	)	 	 	—	 	 	 	—	 	 	 	(101,935	)	
Unrealized loss on hedge instruments net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7,127	)	 	 	—	 	 	 	—	 	 	 	(7,127	)	
Pension prior service cost and actuarial gain or loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(384	)	 	 	—	 	 	 	—	 	 	 	(384	)	
Net earnings (loss)	 	 	5,694	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,458,228	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,458,228	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,567,674	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at December 31, 2008	 	 	31,130	 	 	 	79,461	 	 	 	795	 	 	 	1,217,903	 	 	 	2,004,115	 	 	 	254,535	 	 	 	(11,040	)	 	 	(323,545	)	 	 	3,153,803	 	
Shares issued under employee and director stock plans	 	 	—	 	 	 	57	 	 	 	—	 	 	 	642	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	184	 	 	 	826	 	
Stock-based compensation expense	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9,653	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9,653	 	
Tax deficit from stock-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(342	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(342	)	
Distribution to noncontrolling interest, net of adjustments	 	 	(2,151	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency translation adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	36,089	 	 	 	—	 	 	 	—	 	 	 	36,089	 	
Unrealized gain on hedge instruments net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7,207	 	 	 	—	 	 	 	—	 	 	 	7,207	 	
Pension prior service cost and actuarial gain or loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(914	)	 	 	—	 	 	 	—	 	 	 	(914	)	
Net earnings (loss)	 	 	4,480	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5,499	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(5,499	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	36,883	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at December 31, 2009	 	 	33,459	 	 	 	79,518	 	 	 	795	 	 	 	1,227,856	 	 	 	1,998,616	 	 	 	296,917	 	 	 	(11,034	)	 	 	(323,361	)	 	 	3,200,823	 	
Shares issued under employee and director stock plans	 	 	—	 	 	 	148	 	 	 	2	 	 	 	1,685	 	 	 	—	 	 	 	—	 	 	 	(3	)	 	 	(265	)	 	 	1,422	 	
Stock-based compensation expense	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,888	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,888	 	
Tax deficit from stock-based compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(984	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(984	)	
Distribution to noncontrolling interest, net of adjustments	 	 	(5,726	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency translation adjustment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(119,200	)	 	 	—	 	 	 	—	 	 	 	(119,200	)	
Pension prior service cost and actuarial gain or loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	380	 	 	 	—	 	 	 	—	 	 	 	380	 	
Net earnings	 	 	4,464	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	185,471	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	185,471	 	
Accretion of redeemable noncontrolling interest	 	 	3,244	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3,244	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3,244	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	63,407	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances at December 31, 2010	 	$	35,441	 	 	 	79,666	 	 	$	797	 	 	$	1,235,445	 	 	$	2,180,843	 	 	$	178,097	 	 	 	(11,037	)	 	$	(323,626	)	 	$	3,271,556	 	

See accompanying notes to consolidated financial statements.
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
Years Ended December 31, 2010, 2009 and 2008

 	 	2010	 	 	2009	 	 	2008	 	
 	 	(In thousands)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss)	 	$	189,935	 	 	 	(1,019	)	 	 	(1,452,534	)	
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Impairment of goodwill and other intangibles	 	 	—	 	 	 	—	 	 	 	1,543,397	 	
Restructuring	 	 	12,341	 	 	 	57,412	 	 	 	29,617	 	
Depreciation and amortization	 	 	296,773	 	 	 	303,004	 	 	 	295,054	 	
Deferred income taxes	 	 	(21,279	)	 	 	(20,579	)	 	 	69,842	 	
Loss on extinguishment of debt	 	 	7,514	 	 	 	—	 	 	 	—	 	
Loss (gain) on disposal of property, plant and equipment	 	 	(4,975	)	 	 	1,481	 	 	 	2,272	 	
Excess tax deficit (benefit) from stock-based compensation	 	 	—	 	 	 	342	 	 	 	(334	)	
Stock-based compensation expense	 	 	6,888	 	 	 	9,653	 	 	 	11,991	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables, net	 	 	(12,273	)	 	 	102,799	 	 	 	118,199	 	
Income tax receivable	 	 	68,740	 	 	 	(72,515	)	 	 	—	 	
Inventories	 	 	(118,903	)	 	 	276,169	 	 	 	102,706	 	
Accounts payable and accrued expenses	 	 	(86,947	)	 	 	11,510	 	 	 	(127,905	)	
Other assets and prepaid expenses	 	 	(11,791	)	 	 	17,320	 	 	 	(23,774	)	
Other liabilities	 	 	(6,311	)	 	 	(13,372	)	 	 	7,555	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	 	319,712	 	 	 	672,205	 	 	 	576,086	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Additions to property, plant and equipment	 	 	(156,180	)	 	 	(108,925	)	 	 	(217,824	)	
Proceeds from insurance claim	 	 	4,615	 	 	 	—	 	 	 	—	 	
Acquisitions, net of cash acquired	 	 	(79,917	)	 	 	(5,924	)	 	 	(8,276	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	(231,482	)	 	 	(114,849	)	 	 	(226,100	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Payments on revolving line of credit	 	 	—	 	 	 	(412,666	)	 	 	(1,448,742	)	
Proceeds from revolving line of credit	 	 	—	 	 	 	349,571	 	 	 	1,270,449	 	
Repayment of senior notes	 	 	(199,992	)	 	 	—	 	 	 	—	 	
Net change in asset securitization borrowings	 	 	—	 	 	 	(47,000	)	 	 	(143,000	)	
Borrowings (payments) on term loan and other debt	 	 	(812	)	 	 	6,537	 	 	 	(11,819	)	
Debt issuance costs	 	 	—	 	 	 	(23,714	)	 	 	—	 	
Debt extinguishment costs	 	 	(7,514	)	 	 	—	 	 	 	—	 	
Distribution to noncontrolling interest	 	 	(3,472	)	 	 	(4,402	)	 	 	(6,052	)	
Change in restricted cash	 	 	(27,954	)	 	 	—	 	 	 	—	 	
Excess tax (deficit) benefit from stock-based compensation	 	 	—	 	 	 	(342	)	 	 	334	 	
Change in outstanding checks in excess of cash	 	 	(17,900	)	 	 	5,288	 	 	 	(12,007	)	
Proceeds from stock transactions	 	 	2,445	 	 	 	884	 	 	 	1,915	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in financing activities	 	 	(255,199	)	 	 	(125,844	)	 	 	(348,922	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	(10,272	)	 	 	6,427	 	 	 	2,851	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	 	 	(177,241	)	 	 	437,939	 	 	 	3,915	 	
Cash and cash equivalents, beginning of year	 	 	531,458	 	 	 	93,519	 	 	 	89,604	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents, end of year	 	$	354,217	 	 	 	531,458	 	 	 	93,519	 	

See accompanying notes to consolidated financial statements.
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MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
 
Notes to Consolidated Financial Statements
Years Ended December 31, 2010, 2009 and 2008
(In thousands, except per share data)

(1)  	Summary of Significant Accounting Policies	

(a)  	Basis of Presentation	
 
The consolidated financial statements include the accounts of Mohawk Industries, Inc. and its subsidiaries (the “Company” or “Mohawk”). All significant intercompany balances and transactions have been eliminated in consolidation.
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of 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)  	Reclassifications and adjustments	
 
During the fourth quarter of 2010, the Company identified an immaterial error in its annual and interim consolidated financial statements included in its Form 10-K for 2009 and its Form 10-Qs for the quarters ended July 3 and October 2, 2010. The error related to the balance sheet misclassification of a redeemable noncontrolling interest, the accretion of a redemption feature in the noncontrolling interest (which decreases retained earnings), and the related earnings per share impact. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 480-10-S99-3 (“ASC 480”), formerly FASB Emerging Issues Task Force (“EITF”) Topic D-98,  “Classification and Measurement of Redeemable Securities,”  the Company reduced both basic and diluted earnings per share attributable to common stockholders by $0.04 for the quarter ended July 3, 2010 as a result of an adjustment to the fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company (see Note 16). In addition, the Company reclassified $33,459 of its noncontrolling interest from within equity to mezzanine on its consolidated balance sheet as of December 31, 2009. The Company believes the correction of this error to be both quantitatively and qualitatively immaterial to its quarterly results for 2010 or to any of its previously issued consolidated financial statements. The correction had no impact on total assets, total liabilities, net earnings or cash flows as previously presented.

(c)  	Cash and Cash Equivalents and Restricted Cash	
 
The Company considers investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2010, the Company had invested cash of $334,830 in money market AAA rated cash investments of which $149,649 was in North America and $185,181 was in Europe. In addition, the Company had restricted cash of $27,954 under the control of an administrative agent and reserved $280,000 under its $600,000 four-year, senior, secured revolving credit facility (the “ABL Facility”) to repay the remaining amount outstanding of the 5.75% senior notes due January 15, 2011.

(d)  	Accounts Receivable and Revenue Recognition	
 
The Company is principally a carpet, rugs, ceramic tile, laminate and hardwood flooring manufacturer and sells carpet, rugs, ceramic tile, natural stone, hardwood, resilient and laminate flooring products in the U.S. principally for residential and commercial use. In addition, the Company manufactures laminate and sells carpet, rugs, hardwood and laminate flooring products in Europe principally for residential and commercial use. The Company grants credit to customers, most of whom are retail-flooring dealers and commercial end users, under credit terms that the Company believes are customary in the industry.
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Revenues, which are recorded net of taxes collected from customers, are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable, and collectability can be reasonably assured. The Company provides allowances for expected cash discounts, returns, claims, sales allowances and doubtful accounts based upon historical bad debt and claims experience and periodic evaluations of specific customer accounts and the aging of accounts receivable. Licensing revenues received from third parties for patents are recognized based on contractual agreements.

(e)  	Inventories	
 
The Company accounts for all inventories on the first-in, first-out (“FIFO”) method. Inventories are stated at the lower of cost or market (net realizable value). Cost has been determined using the FIFO method. Costs included in inventory include raw materials, direct and indirect labor and employee benefits, depreciation, general manufacturing overhead and various other costs of manufacturing. Market, with respect to all inventories, is replacement cost or net realizable value. Inventories on hand are compared against anticipated future usage, which is a function of historical usage, anticipated future selling price, expected sales below cost, excessive quantities and an evaluation for obsolescence. Actual results could differ from assumptions used to value obsolete inventory, excessive inventory or inventory expected to be sold below cost and additional reserves may be required.

(f)  	Property, Plant and Equipment	
 
Property, plant and equipment are stated at cost, including capitalized interest. Depreciation is calculated on a straight-line basis over the estimated remaining useful lives, which are 25-35 years for buildings and improvements, 5-15 years for machinery and equipment, the shorter of the estimated useful life or lease term for leasehold improvements and 3-7 years for furniture and fixtures.

(g)  	Goodwill and Other Intangible Assets	
 
In accordance with the provisions of ASC 350 formerly Statement of Financial Accounting Standards (“SFAS”) No. 142,  “Goodwill and Other Intangible Assets,”  the Company tests goodwill and other intangible assets with indefinite lives for impairment on an annual basis in the fourth quarter (or on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value). The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. The goodwill impairment tests are based on determining the fair value of the specified reporting units based on management’s judgments and assumptions using the discounted cash flows and comparable company market valuation approaches. The Company has identified Mohawk, Dal-Tile, Unilin Flooring, Unilin Chipboard and Melamine, and Unilin Roofing as its reporting units for the purposes of allocating goodwill and intangibles as well as assessing impairments. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, weighted average cost of capital (“WACC”), and comparable company market multiples.
 
When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Should a significant or prolonged deterioration in economic conditions occur, such as continued declines in spending for new construction, remodeling and replacement activities; the inability to pass increases in the costs of raw materials and fuel on to customers; or a decline in comparable company market multiples, then key judgments and assumptions could be impacted.
 
The impairment evaluation for indefinite lived intangible assets, which for the Company are its trademarks, is conducted during the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that an asset might be impaired. The determination of fair value used in the impairment
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evaluation is based on discounted estimates of future sales projections attributable to ownership of the trademarks. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that are used in current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the trademarks. Estimated cash flows are sensitive to changes in the economy among other things. The impairment test for indefinite lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of indefinite lived intangible assets are determined using a discounted cash flows valuation. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, royalty rates, WACC and the amount of expected future cash flows. These judgments and assumptions are subject to the variability discussed above.
 
Intangible assets that do not have indefinite lives are amortized based on average lives, which range from 7-16 years.

(h)  	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 and operating loss and tax credit carry-forwards. 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.
 
The Company records interest and penalties related to unrecognized tax benefits in income taxes.

(i)  	Financial Instruments	
 
The Company’s financial instruments consist primarily of receivables, accounts payable, accrued expenses and long-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates its fair value because of the short-term maturity of such instruments. The carrying amount of the Company’s floating rate debt approximates its fair value based upon level two fair value hierarchy. 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.

(j)  	Advertising Costs and Vendor Consideration	
 
Advertising and promotion expenses are charged to earnings during the period in which they are incurred. Advertising and promotion expenses included in selling, general, and administrative expenses were $38,553 in 2010, $43,752 in 2009 and $53,643 in 2008.
 
Vendor consideration, generally cash, is classified as a reduction of net sales, unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. The Company makes various payments to customers, including slotting fees, advertising allowances, buy-downs and co-op advertising. All of these payments reduce gross sales with the exception of co-op advertising. Co-op advertising is classified as a selling, general and administrative expense in accordance with ASC 605-50, formerly FASB, Emerging Issues Task Force 01-09,  “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).”  Co-op advertising expenses, a component of advertising and promotion expenses, were $4,660 in 2010, $3,809 in 2009 and $7,359 in 2008.
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(k)  	Product Warranties	
 
The Company warrants certain qualitative attributes of its flooring products. The Company has recorded a provision for estimated warranty and related costs, based on historical experience and periodically adjusts these provisions to reflect actual experience.

(l)  	Impairment of Long-Lived Assets	
 
The Company reviews its long-lived asset groups, which include intangible assets subject to amortization, which for the Company are its patents and customer relationships, for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of long-lived assets to future undiscounted net cash flows expected to be generated by these asset groups. If such asset groups are considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal and are no longer depreciated.

(m)  	Foreign Currency Translation	
 
The Company’s subsidiaries that operate outside the United States use their local currency as the functional currency, with the exception of operations carried out in Canada and Mexico, in which case the functional currency is the U.S. dollar. Other than Canada and Mexico, the functional currency is translated into U.S. dollars for balance sheet accounts using the month end rates in effect as of the balance sheet date and average exchange rate for revenue and expense accounts for each respective period. The translation adjustments are deferred as a separate component of stockholders’ equity, within other comprehensive income (loss). Gains or losses resulting from transactions denominated in foreign currencies are included in other income or expense, within the consolidated statements of operations. The assets and liabilities of the Company’s Canada and Mexico operations are re-measured using a month end rate, except for non-monetary assets and liabilities, which are re-measured using the historical exchange rate. Income and expense accounts are re-measured using an average monthly rate for the period, except for expenses related to those balance sheet accounts that are re-measured using historical exchange rates. The resulting re-measurement adjustment is reported in the consolidated statements of operations when incurred.

(n)  	Earnings per Share (“EPS”)	
 
Basic net earnings per share (“EPS”) is calculated using net earnings available to common stockholders divided by the weighted-average number of shares of common stock outstanding during the year. Diluted EPS is similar to basic EPS except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
 
Dilutive common stock options are included in the diluted EPS calculation using the treasury stock method. Common stock options and unvested restricted shares (units) that were not included in the diluted EPS computation because the price was greater than the average market price of the common shares for the periods presented were 1,203, 1,413 and 1,099 for 2010, 2009 and 2008, respectively. For 2009 and 2008, all outstanding common stock options to purchase common shares and unvested restricted shares (units) were excluded from the calculation of diluted loss per share because their effect on net loss per common share was anti-dilutive.
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Computations of basic and diluted earnings (loss) per share are presented in the following table:

 	 	Years Ended December 31,	 	
 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) attributable to Mohawk Industries, Inc. 	 	$	185,471	 	 	 	(5,499	)	 	 	(1,458,228	)	
Accretion of redeemable noncontrolling interest(1)	 	 	(3,244	)	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings (loss) available to common stockholders	 	$	182,227	 	 	 	(5,499	)	 	 	(1,458,228	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding-basic and diluted:	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding — basic	 	 	68,578	 	 	 	68,452	 	 	 	68,401	 	
Add weighted-average dilutive potential common shares — options and RSU’s to purchase common shares, net	 	 	206	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average common shares outstanding-diluted	 	 	68,784	 	 	 	68,452	 	 	 	68,401	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per share attributable to Mohawk Industries, Inc. 	 	$	2.66	 	 	 	(0.08	)	 	 	(21.32	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per share attributable to Mohawk Industries, Inc. 	 	$	2.65	 	 	 	(0.08	)	 	 	(21.32	)	

 
 	 	 	
(1)	 	Amount represents the adjustment to fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company.	

(o)  	Stock-Based Compensation	
 
The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with ASC 718-10, formerly SFAS No 123R, “ Stock Compensation ”. Compensation expense is generally recognized on a straight-line basis over the award’s estimated lives for fixed awards with ratable vesting provisions.

(p)  	Comprehensive Income	
 
Comprehensive income includes foreign currency translation of assets and liabilities of foreign subsidiaries, effects of exchange rate changes on intercompany balances of a long-term nature and transactions and derivative financial instruments designated as cash flow hedges. The Company does not provide income taxes on currency translation adjustments, as earnings from foreign subsidiaries are considered to be indefinitely reinvested.
 
Amounts recorded in accumulated other comprehensive income on the Consolidated Statements of Equity and Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and 2008 are as follows:

 	 	Foreign
	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Translation
	 	 	Hedge
	 	 	 	 	 	Tax Expense
	 	 	 	 	
 	 	Adjustment	 	 	Instruments	 	 	Pensions	 	 	(Benefit)	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2008	 	$	260,093	 	 	 	(11,150	)	 	 	1,649	 	 	 	3,943	 	 	 	254,535	 	
2009 activity	 	 	36,089	 	 	 	11,150	 	 	 	(914	)	 	 	(3,943	)	 	 	42,382	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2009	 	 	296,182	 	 	 	—	 	 	 	735	 	 	 	—	 	 	 	296,917	 	
2010 activity	 	 	(119,200	)	 	 	—	 	 	 	380	 	 	 	—	 	 	 	(118,820	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2010	 	$	176,982	 	 	 	—	 	 	 	1,115	 	 	 	—	 	 	 	178,097	 	

 	 	
(q)  	Recent Accounting Pronouncements	
 
In June 2009, the FASB issued ASC 860, formerly SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” . ASC 860 seeks to improve the relevance,
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representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. Specifically, ASC 860 eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor’s interest in transferred financial assets. ASC 860 is effective for annual and quarterly reporting periods that begin after November 15, 2009. The Company’s adoption of ASC 860 on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.
 
In June 2009, FASB issued ASC 810, formerly SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” . ASC 810 amends FASB Interpretation No. 46(R),  “Variable Interest Entities”,  for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. Under ASC 810, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. ASC 810 also requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has power to direct the activities of the VIE that most significantly impact the entity’s economic performance. ASC 810 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE, requires enhanced disclosures and eliminates the scope exclusion for qualifying special-purpose entities. ASC 810 is effective for annual and quarterly reporting periods that begin after November 15, 2009. The Company’s adoption of ASC 810 on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.

(r)  	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.

(2)  	Acquisitions	
 
The Company acquired a 34% equity investment in a leading manufacturer and distributor of ceramic tile in China in the Dal-Tile segment for $79,917 in 2010, a business in the Unilin segment for $5,604 in 2009 and certain stone center assets in the Dal-Tile segment for $8,276 in 2008.

(3)  	Receivables	
 
Receivables are as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Customers, trade	 	$	621,539	 	 	 	633,571	 	
Income tax receivable	 	 	11,027	 	 	 	72,515	 	
Other	 	 	27,662	 	 	 	30,654	 	
 	 	 	 	 	 	 	 	 	
 	 	 	660,228	 	 	 	736,740	 	
Less allowance for discounts, returns, claims and doubtful accounts	 	 	45,755	 	 	 	62,809	 	
 	 	 	 	 	 	 	 	 	
Receivables, net	 	$	614,473	 	 	 	673,931	 	

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The following table reflects the activity of allowances for discounts, returns, claims and doubtful accounts for the years ended December 31:

 	 	 	 	 	Additions
	 	 	 	 	 	 	 	
 	 	Balance at
	 	 	Charged to
	 	 	 	 	 	Balance
	 	
 	 	Beginning
	 	 	Costs and
	 	 	 	 	 	at End
	 	
 	 	of Year	 	 	Expenses	 	 	Deductions(1)	 	 	of Year	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2008	 	$	56,310	 	 	 	274,337	 	 	 	268,269	 	 	 	62,378	 	
2009	 	 	62,378	 	 	 	205,145	 	 	 	204,714	 	 	 	62,809	 	
2010	 	 	62,809	 	 	 	170,274	 	 	 	187,328	 	 	 	45,755	 	

 	 	 	
(1)	 	Represents charge-offs, net of recoveries.	

(4)  	Inventories	
 
The components of inventories are as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Finished goods	 	$	624,082	 	 	 	559,340	 	
Work in process	 	 	97,257	 	 	 	84,414	 	
Raw materials	 	 	286,164	 	 	 	249,227	 	
 	 	 	 	 	 	 	 	 	
Total inventories	 	$	1,007,503	 	 	 	892,981	 	

 	 	
(5)  	Goodwill and Other Intangible Assets	
 
The Company conducted its annual assessment in the fourth quarter of 2010 and determined the fair values of its reporting units exceeded their carrying values. As a result, no impairment was indicated. During 2008, the Company recorded a $1,543,397 impairment charge to reduce the carrying amount of the Company’s goodwill and intangible assets to their estimated fair value based upon the results of two interim impairment tests. The total impairment included $276,807 in the Mohawk segment, $531,930 in the Dal-Tile segment and $734,660 in the Unilin segment.
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The following table summarizes the components of intangible assets:
 
Goodwill:

 	 	Mohawk	 	 	Dal-Tile	 	 	Unilin	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balances as of December 31, 2008	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill	 	$	199,132	 	 	 	1,186,913	 	 	 	1,340,814	 	 	 	2,726,859	 	
Accumulated impairments losses	 	 	(199,132	)	 	 	(531,930	)	 	 	(596,363	)	 	 	(1,327,425	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	—	 	 	 	654,983	 	 	 	744,451	 	 	 	1,399,434	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill recognized during the year	 	 	—	 	 	 	—	 	 	 	1,288	 	 	 	1,288	 	
Currency translation during the year	 	 	—	 	 	 	—	 	 	 	10,406	 	 	 	10,406	 	
Balances as of December 31, 2009	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill	 	 	199,132	 	 	 	1,186,913	 	 	 	1,352,508	 	 	 	2,738,553	 	
Accumulated impairments losses	 	 	(199,132	)	 	 	(531,930	)	 	 	(596,363	)	 	 	(1,327,425	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	—	 	 	 	654,983	 	 	 	756,145	 	 	 	1,411,128	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill recognized during the year	 	 	—	 	 	 	—	 	 	 	141	 	 	 	141	 	
Currency translation during the year	 	 	—	 	 	 	—	 	 	 	(41,875	)	 	 	(41,875	)	
Balances as of December 31, 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill	 	 	199,132	 	 	 	1,186,913	 	 	 	1,310,774	 	 	 	2,696,819	 	
Accumulated impairments losses	 	 	(199,132	)	 	 	(531,930	)	 	 	(596,363	)	 	 	(1,327,425	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	—	 	 	 	654,983	 	 	 	714,411	 	 	 	1,369,394	 	

During 2010 and 2009, the Company recorded additional goodwill of $141 and $1,288, respectively, in the Unilin segment related to a business acquisition.
 
Intangible assets:

 	 	Tradenames	 	
 	 	 	 	 	
Indefinite life assets not subject to amortization:	 	 	 	 	
Balance as of December 31, 2008	 	$	472,399	 	
Currency translation during the year	 	 	5,208	 	
 	 	 	 	 	
Balance as of December 31, 2009	 	 	477,607	 	
Currency translation during the year	 	 	(20,717	)	
 	 	 	 	 	
Balance as of December 31, 2010	 	$	456,890	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Customer
	 	 	 	 	 	 	 	 	 	 	
 	 	Relationships	 	 	Patents	 	 	Other	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intangible Assets Subject to Amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2008	 	$	204,064	 	 	 	171,387	 	 	 	—	 	 	 	375,451	 	
Intangible assets recognized during the year	 	 	972	 	 	 	—	 	 	 	1,496	 	 	 	2,468	 	
Amortization during year	 	 	(47,175	)	 	 	(26,812	)	 	 	(68	)	 	 	(74,055	)	
Currency translation during the year	 	 	1,441	 	 	 	2,433	 	 	 	(3	)	 	 	3,871	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2009	 	 	159,302	 	 	 	147,008	 	 	 	1,425	 	 	 	307,735	 	
Amortization during year	 	 	(45,679	)	 	 	(23,714	)	 	 	(120	)	 	 	(69,513	)	
Currency translation during the year	 	 	(7,191	)	 	 	(10,774	)	 	 	(20	)	 	 	(17,985	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2010	 	$	106,432	 	 	 	112,520	 	 	 	1,285	 	 	 	220,237	 	

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 	 	Years Ended December 31,	 	
 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization expense	 	$	69,513	 	 	 	74,055	 	 	 	78,567	 	

Estimated amortization expense for the years ending December 31, are as follows:

2011	 	$	67,411	 	
2012	 	 	58,061	 	
2013	 	 	21,869	 	
2014	 	 	19,974	 	
2015	 	 	17,676	 	

(6)  	Property, Plant and Equipment	
 
Following is a summary of property, plant and equipment:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Land	 	$	186,406	 	 	 	195,171	 	
Buildings and improvements	 	 	703,939	 	 	 	722,533	 	
Machinery and equipment	 	 	2,361,605	 	 	 	2,348,689	 	
Furniture and fixtures	 	 	82,287	 	 	 	80,722	 	
Leasehold improvements	 	 	54,156	 	 	 	54,995	 	
Construction in progress	 	 	129,999	 	 	 	67,415	 	
 	 	 	 	 	 	 	 	 	
 	 	 	3,518,392	 	 	 	3,469,525	 	
Less accumulated depreciation and amortization	 	 	1,831,268	 	 	 	1,678,113	 	
 	 	 	 	 	 	 	 	 	
Net property, plant and equipment	 	$	1,687,124	 	 	 	1,791,412	 	

Property, plant and equipment included capitalized interest of $4,240, $4,469 and $6,419 in 2010, 2009 and 2008, respectively. Depreciation expense was $218,649, $223,453 and $212,281 for 2010, 2009 and 2008, respectively. Included in the property, plant and equipment are capital leases with a cost of $8,113 and $37,846 and accumulated depreciation of $5,420 and $8,348 as of December 31, 2010 and 2009, respectively.

(7)  	Long-Term Debt	
 
On September 2, 2009, the Company entered into the ABL Facility in connection with the replacement of the Company’s then-existing senior, unsecured, revolving credit facility (the “Senior Unsecured Facility”). At the time of its termination, the Senior Unsecured Facility consisted of a $650,000 revolving credit facility, which was to mature on October 28, 2010. The ABL Facility provides for a maximum of $600,000 of revolving credit, subject to borrowing base availability, including limited amounts of credit in the form of letters of credit and swingline loans. The borrowing base is equal to specified percentages of eligible accounts receivable and inventories of the borrowers under the ABL Facility, which are subject to seasonal variations, less reserves established in good faith by the Administrative Agent under the ABL Facility. All obligations under the ABL Facility, and the guarantees of those obligations, are secured by a security interest in certain accounts receivable, inventories, certain deposit and securities accounts, tax refunds and other personal property (excluding intellectual property) directly relating to, or arising from, and proceeds of any of the foregoing. On June 1, 2010, the Company amended the ABL Facility to, among other things, reduce the applicable interest rate margins on loans and reduce the commitment fees.
 
At the Company’s election, revolving loans under the ABL Facility bear interest at annual rates equal to either (a) LIBOR for 1, 2, 3 or 6 month periods, as selected by the Company, plus an applicable margin ranging between 2.75% and 3.25%, or (b) the higher of the prime rate, the Federal Funds rate plus 0.5%, or a one-month LIBOR rate, plus an applicable margin ranging between 1.25% and 1.75%. The Company also pays a commitment fee to the lenders under the ABL Facility on the average amount by which the aggregate
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commitments of the lenders’ exceed utilization of the ABL Facility equal to 0.65% per annum during any quarter that this excess is 50% or more and 0.50% per annum during any quarter that this excess is less than 50%.
 
The ABL Facility includes certain affirmative and negative covenants that impose restrictions on the Company’s financial and business operations, including limitations on debt, liens, investments, fundamental changes, asset dispositions, dividends and other similar restricted payments, transactions with affiliates, payments and modifications of certain existing debt, future negative pledges, and changes in the nature of the Company’s business. The Company is also required to maintain a fixed charge coverage ratio of 1.1 to 1.0 during any period that the unutilized amount available under the ABL Facility is less than 15% of the lenders’ aggregated commitments.
 
The ABL Facility is scheduled to mature on September 2, 2013 but the maturity date will accelerate, including the acceleration of any unamortized deferred financing costs, to January 15, 2012, if the Company’s outstanding 7.20% senior notes due April 15, 2012 have not been repaid, refinanced, defeased or adequately reserved for by the Company, as reasonably determined by the Administrative Agent, prior to January 15, 2012. The Company believes it will be able to make adequate reserves for such senior notes with cash and cash equivalents, unutilized borrowings under the ABL and other uncommitted financing sources, including new public debt offerings or bank facilities, although there can be no assurances that the Company will be able to complete any necessary financing transactions prior to the relevant date under the ABL Facility or the April 15, 2012 maturity date.
 
As of December 31, 2010, the amount utilized under the ABL Facility was $387,091 resulting in a total of $169,614 available under the ABL Facility. The amount utilized included the reserved amount of $280,000 related to the repayment of the Company’s outstanding 5.75% senior notes due January 15, 2011, discussed below, $53,542 of standby letters of credit guaranteeing the Company’s industrial revenue bonds and $53,549 of standby letters of credit related to various insurance contracts and foreign vendor commitments. Immediately following the repayment of the 5.75% senior notes due January 15, 2011 at maturity, discussed below, a total of $289,610 was available under the ABL Facility.
 
On January 17, 2006, the Company issued $900,000 million aggregate principal amount of 6.125% notes due 2016. Interest payable on these notes is subject to adjustment if either Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Ratings Services (“Standard & Poor’s”), or both, downgrades the rating assigned to the notes. Each rating agency downgrade results in a 0.25% increase in the interest rate, subject to a maximum increase of 1% per rating agency. If later the rating of these notes improves, then the interest rates would be reduced accordingly. Each 0.25% increase in the interest rate of these notes would increase the Company’s interest expense by approximately $63 per quarter per $100,000 of outstanding notes. Currently, the interest rates have been increased by an aggregate amount of 0.75% as a result of downgrades by Moody’s and Standard & Poor’s during 2009. Additional downgrades in the Company’s credit ratings could further increase the cost of its existing credit and adversely affect the cost of and ability to obtain additional credit in the future.
 
On April 12, 2010, the Company purchased for cash approximately $200,000 aggregate principal amount of its outstanding 5.75% senior notes due January 15, 2011 at a price equal to 103.5% of the principal amount, which resulted in a premium to tendering noteholders of approximately $7,000. The premium and fees of $514 associated with the cash tender are included in interest expense on the 2010 consolidated statement of operations. On October 14, 2010, the Company deposited $27,942 of cash in a restricted account under the control of the Administrative Agent and reserved $280,000 on the ABL Facility to repay the remaining amount outstanding of the 5.75% senior notes due January 15, 2011, which actions were determined by the Administrative Agent to adequately reserve (for purposes of the ABL Facility) for the repayment of such notes. Subsequent to the balance sheet date, the Company repaid the 5.75% senior notes due January 15, 2011 at maturity, including accrued interest, using approximately $170,000 of available cash and borrowings of approximately $138,000 million under the ABL Facility.
 
In 2002, the Company issued $400,000 aggregate principal amount of its senior 7.20% notes due April 15, 2012.
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The fair value and carrying value of the Company’s debt instruments are detailed as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	Carrying
	 	 	 	 	 	Carrying
	 	
 	 	Fair Value	 	 	Value	 	 	Fair Value	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
5.75% notes, payable January 15, 2011 interest payable semiannually	 	$	296,459	 	 	 	298,248	 	 	 	508,703	 	 	 	498,240	 	
7.20% senior notes, payable April 15, 2012 interest payable semiannually	 	 	422,400	 	 	 	400,000	 	 	 	418,400	 	 	 	400,000	 	
6.125% notes, payable January 15, 2016 interest payable semiannually	 	 	963,000	 	 	 	900,000	 	 	 	891,900	 	 	 	900,000	 	
Industrial revenue bonds, capital leases and other	 	 	55,334	 	 	 	55,334	 	 	 	56,239	 	 	 	56,239	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total long-term debt	 	 	1,737,193	 	 	 	1,653,582	 	 	 	1,875,242	 	 	 	1,854,479	 	
Less current portion	 	 	348,799	 	 	 	350,588	 	 	 	52,907	 	 	 	52,907	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt, less current portion	 	$	1,388,394	 	 	 	1,302,994	 	 	 	1,822,335	 	 	 	1,801,572	 	

The fair values of the Company’s debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values.
 
The aggregate maturities of long-term debt as of December 31, 2010 are as follows:

2011	 	$	350,588	 	
2012	 	 	401,469	 	
2013	 	 	433	 	
2014	 	 	365	 	
2015	 	 	258	 	
Thereafter	 	 	900,469	 	
 	 	 	 	 	
 	 	$	1,653,582	 	

 	 	
(8)  	Accounts Payable, Accrued Expenses and Deferred Tax Liability	
 
Accounts payable and accrued expenses are as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Outstanding checks in excess of cash	 	$	—	 	 	 	17,900	 	
Accounts payable, trade	 	 	353,387	 	 	 	335,401	 	
Accrued expenses	 	 	147,595	 	 	 	169,730	 	
Product warranties	 	 	37,265	 	 	 	66,545	 	
Accrued interest	 	 	45,696	 	 	 	52,743	 	
Income taxes payable	 	 	9,301	 	 	 	85,699	 	
Deferred tax liability	 	 	5,089	 	 	 	2,836	 	
Accrued compensation and benefits	 	 	99,993	 	 	 	100,261	 	
 	 	 	 	 	 	 	 	 	
Total accounts payable and accrued expenses	 	$	698,326	 	 	 	831,115	 	

 	 	
(9)  	Product Warranties	
 
The Company warrants certain qualitative attributes of its products for up to 50 years. The Company records a provision for estimated warranty and related costs in accrued expenses, based on historical experience and periodically adjusts these provisions to reflect actual experience.
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Product warranties are as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at beginning of year	 	$	66,545	 	 	 	56,460	 	 	 	46,187	 	
Warranty claims paid during the year	 	 	(77,017	)	 	 	(167,053	)	 	 	(81,586	)	
Pre-existing warranty accrual adjustment	 	 	 	 	 	 	 	 	 	 	 	 	
during the year(1)	 	 	2,261	 	 	 	125,124	 	 	 	—	 	
Warranty expense during the year(1)	 	 	45,476	 	 	 	52,014	 	 	 	91,859	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at end of year	 	$	37,265	 	 	 	66,545	 	 	 	56,460	 	

 
 	 	 	
(1)	 	The increase in warranty expense in 2009 and 2008 relates primarily to certain commercial carpet tiles that were discontinued in early 2009.	

(10)  	Stock Options, Stock Compensation and Treasury Stock	
 
The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the award’s estimated lives for fixed awards with ratable vesting provisions.
 
Under the Company’s 2007 Incentive Plan (“2007 Plan”), which was approved by the Company’s stockholders on May 16, 2007, the Company reserved up to a maximum of 3,200 shares of common stock for issuance upon the grant or exercise of stock options, restricted stock, restricted stock units (“RSU’s”) and other types of awards, to directors and key employees through 2017. Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years with a 10-year contractual term. Restricted stock and RSU’s are granted with a price equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years.
 
Additional information relating to the Company’s stock option plans follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options outstanding at beginning of year	 	 	1,481	 	 	 	1,506	 	 	 	1,455	 	
Options granted	 	 	40	 	 	 	76	 	 	 	146	 	
Options exercised	 	 	(74	)	 	 	(35	)	 	 	(46	)	
Options forfeited and expired	 	 	(76	)	 	 	(66	)	 	 	(49	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options outstanding at end of year	 	 	1,371	 	 	 	1,481	 	 	 	1,506	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options exercisable at end of year	 	 	1,160	 	 	 	1,165	 	 	 	1,035	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Option prices per share:	 	 	 	 	 	 	 	 	 	 	 	 	
Options granted during the year	 	$	46.80	 	 	 	28.37	 	 	 	74.47	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options exercised during the year	 	$	16.66-57.88	 	 	 	16.66-48.50	 	 	 	19.63-73.45	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options forfeited and expired during the year	 	$	22.63-93.65	 	 	 	19.94-93.65	 	 	 	16.66-93.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options outstanding at end of year	 	$	28.37-93.65	 	 	 	16.66-93.65	 	 	 	16.66-93.65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Options exercisable at end of year	 	$	28.37-93.65	 	 	 	16.66-93.65	 	 	 	16.66-93.65	 	

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 2010, 2009 and 2008, a total of 4, 3 and 2 shares, respectively, were awarded to the non-employee directors under the plan.
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In addition, the Company maintains an employee incentive program that awards restricted stock on the attainment of certain service criteria. The outstanding awards related to these programs and related compensation expense was not significant for any of the years ended December 31, 2010, 2009 and 2008.
 
The Company’s Board of Directors has authorized the repurchase of up to 15,000 shares of the Company’s outstanding common stock. During 2010, the Company repurchased approximately 6 shares at an average price of $56.94 in connection with the exercise of stock options under the Company’s 2007 Incentive Plan. For the year ended December 31, 2009 and 2008, no shares of the Company’s common stock were purchased. Since the inception of the program, a total of approximately 11,518 shares have been repurchased at an aggregate cost of approximately $335,110. All of these repurchases have been financed through the Company’s operations and banking arrangements.
 
The fair value of option awards is estimated on the date of grant using the Black-Scholes-Merton valuation model that uses the assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s common stock and other factors. The Company uses historical data to estimate option exercise and forfeiture rates within the valuation model. Optionees that exhibit similar option exercise behavior are segregated into separate groups within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on U.S. Treasury yields in effect at the time of the grant for the expected term of the award.

 	 	2010	 	2009	 	2008	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividend yield	 	 	—	 	 	 	—	 	 	 	—	 	
Risk-free interest rate	 	 	2.3	%	 	 	1.7	%	 	 	2.9	%	
Volatility	 	 	45.2	%	 	 	35.3	%	 	 	24.0	%	
Expected life (years)	 	 	5	 	 	 	5	 	 	 	5	 	
 
A summary of the Company’s options under the 2007 Plan as of December 31, 2010, and changes during the year then ended is presented as follows:

 	 	 	 	 	 	 	 	Weighted
	 	 	 	 	
 	 	 	 	 	 	 	 	Average
	 	 	 	 	
 	 	 	 	 	Weighted
	 	 	Remaining
	 	 	Aggregate
	 	
 	 	 	 	 	Average Exercise
	 	 	Contractual
	 	 	Intrinsic
	 	
 	 	Shares	 	 	Price	 	 	Term (Years)	 	 	Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Options outstanding December 31, 2009	 	 	1,481	 	 	$	70.11	 	 	 	 	 	 	 	 	 	
Granted	 	 	40	 	 	 	46.80	 	 	 	 	 	 	 	 	 	
Exercised	 	 	(74	)	 	 	33.16	 	 	 	 	 	 	 	 	 	
Forfeited and expired	 	 	(76	)	 	 	69.35	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Options outstanding, December 31, 2010	 	 	1,371	 	 	 	71.48	 	 	 	4.0	 	 	$	3,765	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and expected to vest as of December 31, 2010	 	 	1,360	 	 	$	71.60	 	 	 	4.0	 	 	$	3,664	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exercisable as of December 31, 2010	 	 	1,160	 	 	$	73.72	 	 	 	3.4	 	 	$	1,839	 	

The weighted-average grant-date fair value of an option granted during 2010, 2009 and 2008 was $19.10, $9.17 and $20.26, respectively. The total intrinsic value of options exercised during the years ended December 31, 2010, 2009, and 2008 was $1,714, $809 and $1,169, respectively. Total compensation expense recognized for the years ended December 31, 2010, 2009 and 2008 was $2,436 ($1,543, net of tax), $4,552 ($2,884, net of tax) and $6,646 ($4,210, net of tax), respectively, which was allocated to selling, general and administrative expenses. The remaining unamortized expense for non-vested compensation expense as of December 31, 2010 was $1,919 with a weighted average remaining life of 1.7 years.
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The following table summarizes information about the Company’s stock options outstanding as of December 31, 2010:

 	 	Outstanding	 	 	Exercisable	 	
 	 	Number of
	 	 	 	 	 	Average
	 	 	Number of
	 	 	Average
	 	
Exercise Price Range	 	Shares	 	 	Average Life	 	 	Price	 	 	Shares	 	 	Price	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Under $49.09	 	 	234	 	 	 	4.7	 	 	$	41.01	 	 	 	140	 	 	$	44.23	 	
$53.01-$69.46	 	 	241	 	 	 	1.5	 	 	 	62.40	 	 	 	241	 	 	 	62.40	 	
$69.95-$74.47	 	 	312	 	 	 	4.8	 	 	 	73.87	 	 	 	227	 	 	 	73.65	 	
$74.93-$84.85	 	 	242	 	 	 	4.5	 	 	 	82.38	 	 	 	221	 	 	 	82.48	 	
$86.51-$88.00	 	 	45	 	 	 	4.9	 	 	 	87.63	 	 	 	45	 	 	 	87.63	 	
$88.33-$93.65	 	 	297	 	 	 	4.1	 	 	 	89.00	 	 	 	286	 	 	 	88.83	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	1,371	 	 	 	4.0	 	 	$	71.48	 	 	 	1,160	 	 	$	73,72	 	

A summary of the Company’s RSUs under the 2007 Plan as of December 31, 2010, and changes during the year then ended is presented as follows:

 	 	 	 	 	 	 	 	Weighted
	 	 	 	 	
 	 	 	 	 	 	 	 	Average
	 	 	 	 	
 	 	 	 	 	 	 	 	Remaining
	 	 	 	 	
 	 	 	 	 	Weighted
	 	 	Contractual
	 	 	Aggregate
	 	
 	 	Shares	 	 	Average Price	 	 	Term (Years)	 	 	Intrinsic Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted Stock Units outstanding, December 31, 2009	 	 	359	 	 	$	60.69	 	 	 	 	 	 	 	 	 	
Granted	 	 	149	 	 	 	50.87	 	 	 	 	 	 	 	 	 	
Released	 	 	(95	)	 	 	77.62	 	 	 	 	 	 	 	 	 	
Forfeited	 	 	(9	)	 	 	46.00	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted Stock Units outstanding, December 31, 2010	 	 	404	 	 	 	47.42	 	 	 	3.4	 	 	$	22,906	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and expected to vest as of December 31, 2010	 	 	343	 	 	$	47.42	 	 	 	2.8	 	 	$	19,474	 	

The Company recognized stock-based compensation costs related to the issuance of RSU’s of $4,262 ($2,700, net of taxes), $5,009 ($3,173, net of taxes) and $4,977 ($3,153, net of taxes) for the years ended December 31, 2010, 2009 and 2008, respectively, which has been allocated to selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSU’s granted to employees, net of estimated forfeitures, was $8,766 as of December 31, 2010, and will be recognized as expense over a weighted-average period of approximately 4.0 years.
 
Additional information relating to the Company’s RSUs under the 2007 Plan is as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted Stock Units outstanding, January 1	 	 	359	 	 	 	187	 	 	 	137	 	
Granted	 	 	149	 	 	 	204	 	 	 	72	 	
Released	 	 	(95	)	 	 	(22	)	 	 	(15	)	
Forfeited	 	 	(9	)	 	 	(10	)	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Restricted Stock Units outstanding, December 31	 	 	404	 	 	 	359	 	 	 	187	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and expected to vest as of December 31	 	 	343	 	 	 	317	 	 	 	175	 	

 	 	
(11)  	Employee Benefit Plans	
 
The Company has a 401(k) retirement savings plan (the “Mohawk Plan”) open to substantially all of its employees within the Mohawk segment, Dal-Tile segment and certain U.S. employees of the Unilin segment,
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who have completed 90 days of eligible service. For the Mohawk segment, the Company contributes $0.50 for every $1.00 of employee contributions up to a maximum of 4% of the employee’s salary and an additional $0.25 for every $1.00 of employee contributions in excess of 4% of the employee’s salary up to a maximum of 6%. For the Dal-Tile and Unilin segments, the Company contributes $.50 for every $1.00 of employee contributions up to a maximum of 6% of the employee’s salary. Employee and employer contributions to the Mohawk Plan were $33,071 and $13,062 in 2010, $34,838 and $13,822 in 2009 and $40,393 and $16,024 in 2008, respectively. The Company also made a discretionary contribution to the Mohawk Plan of approximately $1,908 and $4,211 in 2009 and 2008, respectively. The Company discontinued the discretionary match on January 1, 2010.
 
The Company also has various pension plans covering employees in Belgium, France, and The Netherlands (the “Non-U.S. Plans”) that it acquired with the acquisition of Unilin. Benefits under the Non-U.S. Plans depend on compensation and years of service. The Non-U.S. Plans are funded in accordance with local regulations. The Company uses December 31 as the measurement date for its Non-U.S. Plans.
 
Components of the net periodic benefit cost of the Non-U.S. Plans are as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost of benefits earned	 	$	1,506	 	 	 	1,315	 	 	 	1,881	 	
Interest cost on projected benefit obligation	 	 	1,219	 	 	 	1,352	 	 	 	1,245	 	
Expected return on plan assets	 	 	(1,025	)	 	 	(1,069	)	 	 	(993	)	
Amortization of actuarial gain	 	 	4	 	 	 	(322	)	 	 	(29	)	
Effect of curtailments and settlements	 	 	—	 	 	 	(200	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net pension expense	 	$	1,704	 	 	 	1,076	 	 	 	2,104	 	

Assumptions used to determine net periodic pension expense for the Non-U.S. Plans:

 	 	2010	 	2009	
 	 	 	 	 	
Discount rate	 	5.00%	 	6.00%-6.60%	
Expected rate of return on plan assets	 	4.00%-5.00%	 	4.50%-6.60%	
Rate of compensation increase	 	0.00%-3.00%	 	0.00%-4.00%	
Underlying inflation rate	 	2.00%	 	2.25%	

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The obligations, plan assets and funding status of the Non-U.S. Plans were as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Change in benefit obligation:	 	 	 	 	 	 	 	 	
Projected benefit obligation at end of prior year	 	$	25,468	 	 	 	20,090	 	
Cumulative foreign exchange effect	 	 	(1,850	)	 	 	458	 	
Service cost	 	 	1,506	 	 	 	1,315	 	
Interest cost	 	 	1,219	 	 	 	1,352	 	
Plan participants contributions	 	 	720	 	 	 	763	 	
Actuarial loss	 	 	863	 	 	 	2,588	 	
Benefits paid	 	 	(949	)	 	 	(687	)	
Effect of curtailment and settlement	 	 	—	 	 	 	(411	)	
 	 	 	 	 	 	 	 	 	
Projected benefit obligation at end of year	 	$	26,977	 	 	 	25,468	 	
 	 	 	 	 	 	 	 	 	
Change in plan assets:	 	 	 	 	 	 	 	 	
Fair value of plan assets at end of prior year	 	$	21,841	 	 	 	16,371	 	
Cumulative foreign exchange effect	 	 	(1,599	)	 	 	306	 	
Actual return on plan assets	 	 	2,324	 	 	 	3,234	 	
Employer contributions	 	 	1,771	 	 	 	2,059	 	
Benefits paid	 	 	(949	)	 	 	(687	)	
Plan participant contributions	 	 	720	 	 	 	763	 	
Effect of settlement	 	 	-	 	 	 	(205	)	
 	 	 	 	 	 	 	 	 	
Fair value of plan assets at end of year	 	$	24,108	 	 	 	21,841	 	
 	 	 	 	 	 	 	 	 	
Funded status of the plans:	 	 	 	 	 	 	 	 	
Ending funded status	 	$	(2,869	)	 	 	(3,627	)	
 	 	 	 	 	 	 	 	 	
Net amount recognized in consolidated balance sheets:	 	 	 	 	 	 	 	 	
Accrued expenses (current liability)	 	$	—	 	 	 	—	 	
Accrued benefit liability (non-current liability)	 	 	(2,869	)	 	 	(3,628	)	
Accumulated other comprehensive income	 	 	(1,115	)	 	 	(735	)	
 	 	 	 	 	 	 	 	 	
Net amount recognized	 	$	(3,984	)	 	 	(4,363	)	

The Company’s net amount recognized in other comprehensive income related to actuarial gains (losses) was $380, $(914) and $(384) for the years ended December 31, 2010, 2009 and 2008, respectively.
 
Assumptions used to determine the projected benefit obligation for the Non-U.S. Plans were as follows:

 	 	2010	 	2009	
 	 	 	 	 	
Discount rate	 	4.75%	 	5.00%	
Rate of compensation increase	 	0.00%-3.00%	 	0.00%-6.00%	
Underlying inflation rate	 	2.00%	 	2.00%	
 
The discount rate assumptions used to account for pension obligations reflect the rates at which the Company believes these obligations will be effectively settled. In developing the discount rate, the Company
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evaluated input from its actuaries, including estimated timing of obligation payments and yield on investments. The rate of compensation increase for the Non-U.S. Plans is based upon the Company’s annual reviews.

 	 	Non-U.S. Plans	
 	 	2010	 	2009	
 	 	 	 	 	 	 	 	 	
Plans with accumulated benefit obligations in excess of plan assets:	 	 	 	 	 	 	 	 	
Projected benefit obligation	 	$	17,236	 	 	 	10,251	 	
Accumulated benefit obligation	 	 	16,122	 	 	 	8,585	 	
Fair value of plan assets	 	 	15,356	 	 	 	7,907	 	
Plans with plan assets in excess of accumulated benefit obligations:	 	 	 	 	 	 	 	 	
Projected benefit obligation	 	$	9,741	 	 	 	15,217	 	
Accumulated benefit obligation	 	 	8,132	 	 	 	13,242	 	
Fair value of plan assets	 	 	8,752	 	 	 	13,934	 	
 
Estimated future benefit payments for the Non-U.S. Plans are $891 in 2011, $834 in 2012, $974 in 2013, $1,029 in 2014, $1,454 in 2015 and $8,304 in total for 2016-2020.
 
The Company expects to make cash contributions of $1,944 to the Non-U.S. Plans in 2011.
 
The fair value of the Non-U.S. Plans investments were estimated using market observable data. Within the hierarchy of fair value measurements, these investments represent Level 2 fair values. The fair value and percentage of each asset category of the total investments held by the plans as of December 31, 2010 and 2009 were as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Non-U.S. Plans:	 	 	 	 	 	 	 	 	
Insurance contracts	 	$	24,108	 	 	 	21,841	 	

The Company’s investment policy:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Non-U.S. Plans:	 	 	 	 	 	 	 	 	
Insurance contracts	 	 	100.0	%	 	 	100.0	%	

The Company’s approach to developing its expected long-term rate of return on pension plan assets combines an analysis of historical investment performance by asset class, the Company’s investment guidelines and current and expected economic fundamentals.

(12)  	Income Taxes	
 
Following is a summary of earnings (loss) from continuing operations before income taxes for United States and foreign operations:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
United States	 	$	39,332	 	 	 	(205,737	)	 	 	(847,624	)	
Foreign	 	 	153,316	 	 	 	128,024	 	 	 	(424,848	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings (loss) before income taxes	 	$	192,648	 	 	 	(77,713	)	 	 	(1,272,472	)	

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Income tax expense (benefit) for the years ended December 31, 2010, 2009 and 2008 consists of the following:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current income taxes:	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. federal	 	$	14,052	 	 	 	(78,051	)	 	 	61,186	 	
State and local	 	 	1,514	 	 	 	1,139	 	 	 	8,248	 	
Foreign	 	 	8,427	 	 	 	20,797	 	 	 	41,232	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current	 	 	23,993	 	 	 	(56,115	)	 	 	110,666	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred income taxes:	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. federal	 	 	(8,578	)	 	 	18,082	 	 	 	(91,813	)	
State and local	 	 	18,562	 	 	 	(6,931	)	 	 	(7,511	)	
Foreign	 	 	(31,264	)	 	 	(31,730	)	 	 	168,720	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total deferred	 	 	(21,280	)	 	 	(20,579	)	 	 	69,396	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	2,713	 	 	 	(76,694	)	 	 	180,062	 	

Income tax expense (benefit) attributable to earnings (loss) before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings (loss) before income taxes as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income taxes at statutory rate	 	$	67,427	 	 	 	(27,200	)	 	 	(445,365	)	
State and local income taxes, net of federal income tax benefit	 	 	2,358	 	 	 	(3,874	)	 	 	(4,113	)	
Foreign income taxes	 	 	(21,389	)	 	 	(12,840	)	 	 	(380	)	
Change in valuation allowance	 	 	(17,139	)	 	 	12,214	 	 	 	276,801	 	
Goodwill impairment	 	 	—	 	 	 	—	 	 	 	406,577	 	
Notional interest	 	 	—	 	 	 	(55,956	)	 	 	(63,694	)	
Tax contingencies and audit settlements	 	 	(3,447	)	 	 	9,634	 	 	 	4,990	 	
Acquisition related tax contingencies	 	 	(30,162	)	 	 	—	 	 	 	—	 	
Change in statutory tax rate	 	 	(49	)	 	 	101	 	 	 	(254	)	
Other, net	 	 	5,114	 	 	 	1,227	 	 	 	5,500	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	2,713	 	 	 	(76,694	)	 	 	180,062	 	

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2010 and 2009 are presented below:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Deferred tax assets:	 	 	 	 	 	 	 	 	
Accounts receivable	 	$	12,808	 	 	 	22,843	 	
Inventories	 	 	46,981	 	 	 	46,536	 	
Accrued expenses and other	 	 	89,549	 	 	 	102,665	 	
Deductible state tax and interest benefit	 	 	15,441	 	 	 	24,801	 	
Intangibles	 	 	164,945	 	 	 	199,660	 	
Federal, foreign and state net operating losses and credits	 	 	201,337	 	 	 	214,955	 	
 	 	 	 	 	 	 	 	 	
Gross deferred tax assets	 	 	531,061	 	 	 	611,460	 	
Valuation allowance	 	 	(325,127	)	 	 	(365,944	)	
 	 	 	 	 	 	 	 	 	
Net deferred tax assets	 	 	205,934	 	 	 	245,516	 	
 	 	 	 	 	 	 	 	 	
Deferred tax liabilities:	 	 	 	 	 	 	 	 	
Inventories	 	 	(4,358	)	 	 	(5,089	)	
Plant and equipment	 	 	(269,340	)	 	 	(279,668	)	
Intangibles	 	 	(144,120	)	 	 	(160,429	)	
LIFO change in accounting method	 	 	—	 	 	 	(12,850	)	
Other liabilities	 	 	(5,338	)	 	 	(30,144	)	
 	 	 	 	 	 	 	 	 	
Gross deferred tax liabilities	 	 	(423,156	)	 	 	(488,180	)	
 	 	 	 	 	 	 	 	 	
Net deferred tax liability(1)	 	$	(217,222	)	 	 	(242,664	)	

 
 	 	 	
(1)	 	This amount includes $1,066 and $85 of non-current deferred tax assets which are in deferred income taxes and other non-current assets and $5,089 and $2,836 current deferred tax liabilities which are included in accounts payable and accrued expenses in the consolidated balance sheets as of December 31, 2010 and 2009, respectively.	
 
Management believes it is more likely than not the Company will realize the benefits of these deductible differences, with the exception of certain carryforward deferred tax assets discussed below, based upon the expected reversal of deferred tax liabilities and the level of historic and forecasted taxable income over periods in which the deferred tax assets are deductible.
 
In accordance with ASC 350, the Company is required to test goodwill and indefinite-lived assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In 2008, the Company recorded a non-cash pretax impairment charge of $1,543,397 to reduce the carrying value of goodwill and other intangibles. The tax impact was to book an expense of $406,577 related to the portion of the impaired assets that are non-deductible for tax purposes.
 
The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing its forecasted taxable income using both historic and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. The valuation allowance as of December 31, 2010 and 2009 is $325,127 and $365,944, respectively. The December 31, 2010 valuation allowance relates to net operating losses and tax credits of $162,275 and intangibles of $162,852. The December 31, 2009 valuation allowance relates to net operating losses and tax credits of $168,773 and intangibles of $197,171. For 2010, the total change in the valuation allowance was a decrease of $40,817, which includes $22,046 primarily related to foreign currency translation, $17,139 related to European deferred tax assets and a non-P&L charge of $1,632 primarily related to current year state tax credits which have a full valuation allowance, and foreign net operating losses.
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As of December 31, 2010, the Company has a federal net operating loss carryforward of $17,174. The Company also has state net operating loss carryforwards and state tax credits with potential tax benefits of $49,244, net of federal income tax benefit; these carryforwards expire over various periods based on taxing jurisdiction. A valuation allowance totaling $39,178 has been recorded against these deferred tax assets as of December 31, 2010. In addition, as of December 31, 2010, the Company has net operating loss carryforwards in various foreign jurisdictions of $134,918. A valuation allowance totaling $123,097 has been recorded against these deferred tax assets as of December 31, 2010.
 
In the fourth quarter of 2007, the Company moved the intellectual property and treasury operations of an indirectly owned European entity to a new office in another jurisdiction in Europe. The Company also indirectly owned a holding company in the new jurisdiction that provided certain treasury functions to Unilin, and the move allowed for the consolidation of the historical intellectual property and treasury operations to be combined with those of the holding company’s treasury operations in a single jurisdiction in order to integrate and streamline the operations, to facilitate international acquisitions and to improve tax and cost efficiencies. This restructuring resulted in a step up in the subsidiary’s taxable basis of its intellectual property. The step up relates primarily to intangible assets which will be amortized over 10 years for tax purposes. During the fourth quarter of 2007, the Company evaluated the evidence for recognition of the deferred tax asset created through the restructuring and determined that, based on the available evidence, the deferred tax asset would more likely than not be realized. The deferred tax asset recognized as of December 31, 2007 was approximately $245,000 and the related income tax benefit recognized in the consolidated financial statements was approximately $272,000.
 
During the third quarter of 2008, the Company reassessed the need for a valuation allowance against its deferred tax assets. Actual cash flows have been less than those projected as of December 31, 2007, primarily due to the slowing worldwide economy and declining sales volume. The Company determined that, given the current and expected economic conditions and the corresponding reductions in cash flows, its ability to realize the benefit of the deferred tax asset related to the European step up transaction described above, as well as tax losses generated in the same jurisdiction was not more likely than not. Accordingly, the Company recorded a valuation allowance against the deferred tax asset in the amount of $252,751 during the quarter ended September 27, 2008.
 
The Company does not provide for U.S. federal and state income taxes on the cumulative undistributed earnings of its foreign subsidiaries because such earnings are deemed to be permanently reinvested. As of December 31, 2010 and 2009, the Company had not provided federal income taxes on earnings of approximately $748,000 and $723,000, respectively, from its foreign subsidiaries. Should these earnings be distributed in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes in various foreign jurisdictions. These taxes may be partially offset by U.S. foreign tax credits. Determination of the amount of the unrecognized deferred U.S. tax liability is not practical because of the complexities associated with this hypothetical calculation.
 
Tax Uncertainties
 
In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing jurisdictions. Accordingly, the Company accrues liabilities when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10, formerly FASB Interpretation No. 48  “Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No.  109”. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s consolidated financial position but could possibly be material to the Company’s consolidated results of operations or cash flow in any given quarter or annual period.
 
As of December 31, 2010, the Company’s gross amount of unrecognized tax benefits is $49,943, excluding interest and penalties. If the Company were to prevail on all uncertain tax positions, $37,379 of the
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unrecognized tax benefits would affect the Company’s effective tax rate, exclusive of any benefits related to interest and penalties.
 
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 	 	2010	 	 	2009	 	
 	 	 	 	 	 	 	 	 	
Balance as of January 1	 	$	105,779	 	 	 	91,887	 	
Additions based on tax positions related to the current year	 	 	4,028	 	 	 	8,678	 	
Additions for tax positions of prior years	 	 	13,726	 	 	 	10,630	 	
Reductions for tax positions of prior years	 	 	(9,273	)	 	 	—	 	
Reductions resulting from the lapse of the statute of limitations	 	 	(1,517	)	 	 	(60	)	
Settlements with taxing authorities	 	 	(61,063	)	 	 	(5,562	)	
Effects of foreign currency translation	 	 	(1,737	)	 	 	206	 	
 	 	 	 	 	 	 	 	 	
Balance as of December 31	 	$	49,943	 	 	 	105,779	 	

The Company will continue to recognize interest and penalties related to unrecognized tax benefits as a component of its income tax provision. As of December 31, 2010 and 2009, the Company has $15,550 and $47,870, respectively, accrued for the payment of interest and penalties, excluding the federal tax benefit of interest deductions where applicable. During the years ending December 31, 2010, 2009 and 2008, the Company accrued/(reversed) interest and penalties through the consolidated statements of operations of $(9,852), $8,228 and $3,657, respectively.
 
The Company’s 2007-2009 federal income tax returns are currently under examination by the Internal Revenue Service. The Company expects this examination to end December 31, 2012. The Company believes that its unrecognized tax benefits could decrease by $10,405 within the next twelve months. In addition, the Company has effectively settled all federal income tax matters related to years prior to 2007, with the exception of one open issue related to the 2004-2006 tax years.

(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 non-cancelable capital and operating leases (with initial or remaining lease terms in excess of one year) as of December 31:

 	 	 	 	 	 	 	 	Total Future
	 	
 	 	Capital	 	 	Operating	 	 	Payments	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
2011	 	$	1,383	 	 	 	91,696	 	 	 	93,079	 	
2012	 	 	770	 	 	 	75,631	 	 	 	76,401	 	
2013	 	 	497	 	 	 	59,492	 	 	 	59,989	 	
2014	 	 	418	 	 	 	49,706	 	 	 	50,124	 	
2015	 	 	296	 	 	 	38,518	 	 	 	38,814	 	
Thereafter	 	 	538	 	 	 	41,773	 	 	 	42,311	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total payments	 	 	3,902	 	 	 	356,816	 	 	 	360,718	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Less amount representing interest	 	 	395	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Present value of capitalized lease payments	 	$	3,507	 	 	 	 	 	 	 	 	 	

Rental expense under operating leases was $105,976, $130,227 and $139,103 in 2010, 2009 and 2008, respectively.
 
The Company had approximately $53,549 and $58,603 as of December 31, 2010 and 2009, respectively, in standby letters of credit for various insurance contracts and commitments to foreign vendors that expire within two years. In addition, as of December 31, 2010 and 2009, the Company guaranteed approximately $824 and $721 for building leases, respectively, related to its operating facilities in France.
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The Company is involved in 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 by the Company to be contemplated to which the Company is a party or to which any of its property is subject.
 
In Shirley Williams et al. v. Mohawk Industries, Inc., four plaintiffs filed a putative class action lawsuit in January 2004 in the United States District Court for the Northern District of Georgia (Rome Division), alleging that they are former and current employees of the Company and that the actions and conduct of the Company, including the employment of persons who are not authorized to work in the United States, have damaged them and the other members of the putative class by suppressing the wages of the Company’s hourly employees in Georgia. The plaintiffs sought a variety of relief, including (a) treble damages; (b) return of any allegedly unlawful profits; and (c) attorney’s fees and costs of litigation. In April 2010, the plaintiffs, the Company and the Company’s insurance carrier agreed to settle the litigation. In July 2010, the District Court approved the settlement. The Company accrued for its portion of the settlement in a prior year. The claims process was completed in the third quarter of 2010.
 
The Company believes that adequate provisions for resolution of all contingencies, claims and pending litigation have been made for probable losses and that the ultimate outcome of these actions will not have a material adverse effect on its financial condition but could have a material adverse effect on its results of operations in a given quarter or year.
 
On July 1, 2010, Monterrey, Mexico experienced flooding as a result of Hurricane Alex which temporarily interrupted operations at the Company’s Dal-Tile ceramic tile production facility. The plant was fully operational in the latter part of the third quarter of 2010. Prior to the close of the third quarter of 2010, the Company and its insurance carrier agreed to a final settlement of its claim, which included property damage and business interruption for approximately $25,000. The amount included approximately $20,000 to cover costs to repair and/or replace property and equipment and approximately $5,000 to recover lost margin from lost sales. The settlement with the insurance carrier is recorded in cost of sales in the Company’s 2010 consolidated statement of operations. As a result of the insurance settlement, the flooding did not have a material impact on the Company’s results of operations or financial position.
 
The Company has received partial refunds from the United States government in reference to settling custom disputes dating back to 1986. Accordingly, the Company realized a gain of $7,730 in other expense (income) in the Company’s 2010 consolidated statement of operations. The Company is pursuing additional recoveries for prior years but there can be no assurances such recoveries will occur. Additional future recoveries, if any, will be recorded as realized.
 
The Company is subject to various federal, state, local and foreign environmental health and safety laws and regulations, including those governing air emissions, wastewater discharges, the use, storage, treatment recycling and disposal of solid and hazardous materials and finished product, and the cleanup of contamination associated therewith. Because of the nature of the Company’s business, the Company has incurred, and will continue to incur, costs relating to compliance with such laws and regulations. The Company is involved in various proceedings relating to environmental matters and is currently engaged in environmental investigation, remediation and post-closure care programs at certain sites. The Company has provided accruals for such activities that it has determined to be both probable and reasonably estimable. The Company does not expect that the ultimate liability with respect to such activities will have a material adverse effect on its operations, but may have an effect on a given quarter or annual period.
 
In the normal course of business, the Company has entered into various collective bargaining agreements with its workforce in Europe, Mexico and Malaysia, either locally or within its industry sector. Historically, the Company has maintained favorable relationships with its workforce and expects to do so in the future.
 
The Company recorded pre-tax business restructuring charges of $13,156 in 2010, of which $12,392 was recorded as cost of sales and $764 was recorded as selling, general and administrative expenses. The Company recorded pre-tax business restructuring charges of $61,725 in 2009, of which $43,436 was recorded as cost of sales and $18,289 was recorded as selling, general and administrative expenses. The charges primarily relate
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to the Company’s actions taken to lower its cost structure and improve the efficiency of its manufacturing and distribution operations as it adjusts to current economic conditions.
 
The activity for 2009 and 2010 is as follows:

 	 	 	 	 	Inventory
	 	 	 	 	 	 	 	 	Other
	 	 	 	 	
 	 	Asset
	 	 	Write-
	 	 	Lease
	 	 	 	 	 	Restructuring
	 	 	 	 	
 	 	Write-Downs(1)	 	 	Downs	 	 	Impairments	 	 	Severance	 	 	Costs	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2008	 	$	—	 	 	 	—	 	 	 	12,711	 	 	 	2,070	 	 	 	—	 	 	 	14,781	 	
Provisions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk segment	 	 	13,604	 	 	 	2,300	 	 	 	5,365	 	 	 	7,075	 	 	 	347	 	 	 	28,691	 	
Dal-Tile segment	 	 	5,717	 	 	 	1,653	 	 	 	9,160	 	 	 	1,191	 	 	 	—	 	 	 	17,721	 	
Unilin segment	 	 	4,310	 	 	 	3,096	 	 	 	—	 	 	 	4,773	 	 	 	3,134	 	 	 	15,313	 	
Cash payments	 	 	—	 	 	 	—	 	 	 	(6,163	)	 	 	(7,285	)	 	 	(65	)	 	 	(13,513	)	
Noncash items	 	 	(23,631	)	 	 	(7,049	)	 	 	—	 	 	 	—	 	 	 	(415	)	 	 	(31,095	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2009	 	 	—	 	 	 	—	 	 	 	21,073	 	 	 	7,824	 	 	 	3,001	 	 	 	31,898	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Provisions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk segment	 	 	3,989	 	 	 	—	 	 	 	(403	)	 	 	305	 	 	 	6,452	 	 	 	10,343	 	
Dal-Tile segment	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,223	 	 	 	—	 	 	 	1,223	 	
Unilin segment	 	 	815	 	 	 	—	 	 	 	—	 	 	 	775	 	 	 	—	 	 	 	1,590	 	
Cash payments	 	 	—	 	 	 	—	 	 	 	(9,687	)	 	 	(8,019	)	 	 	(9,033	)	 	 	(26,739	)	
Noncash items	 	 	(4,804	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4,804	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of December 31, 2010	 	$	—	 	 	 	—	 	 	 	10,983	 	 	 	2,108	 	 	 	420	 	 	 	13,511	 	

 
 	 	 	
(1)	 	Includes $815 and $4,313 in 2010 and 2009, respectively which were charged to depreciation.	
 
On February 25, 2011, subsequent to the balance sheet date, the Company announced a plan to exit a manufacturing facility in the Mohawk segment. The Company is finalizing its estimates and expects to record a restructuring charge in the first quarter of 2011.

(14)  	Consolidated Statements of Cash Flows Information	
 
Supplemental disclosures of cash flow information are as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash paid (received) during the year for:	 	 	 	 	 	 	 	 	 	 	 	 	
Interest	 	$	139,358	 	 	 	127,623	 	 	 	129,465	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income taxes	 	$	(5,862	)	 	 	(3,841	)	 	 	107,638	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental schedule of non-cash investing and financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value of assets acquired in acquisition	 	$	—	 	 	 	17,911	 	 	 	9,745	 	
Liabilities assumed in acquisition	 	 	—	 	 	 	(11,987	)	 	 	(1,469	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	—	 	 	 	5,924	 	 	 	8,276	 	

 	 	
(15)  	Segment Reporting	
 
The Company has three reporting segments:  the Mohawk segment, the Dal-Tile segment and the Unilin segment. The Mohawk segment designs, manufactures, sources, distributes and markets its floor covering product lines, which include carpets, ceramic tile, laminate, rugs, carpet pad, hardwood and resilient, primarily in North America through its network of regional distribution centers and satellite warehouses using company-operated trucks, common carrier or rail transportation. The segment’s product lines are sold through various selling channels, which include independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers and commercial end users. The Dal-Tile segment designs, manufactures, sources, distributes and markets a broad line of ceramic tile, porcelain tile, natural stone and other
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products, primarily in North America through its network of regional distribution centers and Company-operated sales service centers using company-operated trucks, common carriers or rail transportation. The segment’s product lines are sold through Company-owned sales service centers, independent distributors, home center retailers, tile and flooring retailers and contractors. The Unilin segment designs, manufactures, sources, licenses, distributes and markets laminate, hardwood flooring, roofing systems, insulation panels and other wood products, primarily in North America and Europe through various selling channels, which include retailers, independent distributors and home centers.
 
Amounts disclosed for each segment are prior to any elimination or consolidation entries. Corporate general and administrative expenses attributable to each segment are estimated and allocated accordingly. Segment performance is evaluated based on operating income. No single customer accounted for more than 5% of net sales for the years ended December 31, 2010, 2009 and 2008.
 
Segment information is as follows:

 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk	 	$	2,844,876	 	 	 	2,856,741	 	 	 	3,628,183	 	
Dal-Tile	 	 	1,367,442	 	 	 	1,426,757	 	 	 	1,815,373	 	
Unilin	 	 	1,188,274	 	 	 	1,128,315	 	 	 	1,465,208	 	
Intersegment sales	 	 	(81,520	)	 	 	(67,789	)	 	 	(82,416	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	5,319,072	 	 	 	5,344,024	 	 	 	6,826,348	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)(1):	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk	 	$	122,904	 	 	 	(125,965	)	 	 	(216,152	)	
Dal-Tile	 	 	97,334	 	 	 	84,154	 	 	 	(323,370	)	
Unilin	 	 	114,298	 	 	 	105,953	 	 	 	(564,911	)	
Corporate and eliminations	 	 	(20,367	)	 	 	(20,412	)	 	 	(19,701	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	314,169	 	 	 	43,730	 	 	 	(1,124,134	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk	 	$	91,930	 	 	 	94,134	 	 	 	92,130	 	
Dal-Tile	 	 	45,578	 	 	 	47,934	 	 	 	46,093	 	
Unilin	 	 	145,941	 	 	 	151,450	 	 	 	149,543	 	
Corporate	 	 	13,324	 	 	 	9,486	 	 	 	7,288	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	296,773	 	 	 	303,004	 	 	 	295,054	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures (excluding acquisitions):	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk	 	$	84,013	 	 	 	35,149	 	 	 	78,239	 	
Dal-Tile	 	 	37,344	 	 	 	17,683	 	 	 	41,616	 	
Unilin	 	 	29,439	 	 	 	45,966	 	 	 	90,500	 	
Corporate	 	 	5,384	 	 	 	10,127	 	 	 	7,469	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	156,180	 	 	 	108,925	 	 	 	217,824	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	
Mohawk	 	$	1,637,319	 	 	 	1,582,652	 	 	 	1,876,696	 	
Dal-Tile	 	 	1,644,448	 	 	 	1,546,393	 	 	 	1,693,765	 	
Unilin	 	 	2,475,049	 	 	 	2,598,182	 	 	 	2,663,599	 	
Corporate and intersegment eliminations	 	 	342,110	 	 	 	664,219	 	 	 	212,115	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	6,098,926	 	 	 	6,391,446	 	 	 	6,446,175	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Geographic net sales:	 	 	 	 	 	 	 	 	 	 	 	 	
North America	 	$	4,447,965	 	 	 	4,516,784	 	 	 	5,776,701	 	
Rest of world	 	 	871,107	 	 	 	827,240	 	 	 	1,049,647	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	5,319,072	 	 	 	5,344,024	 	 	 	6,826,348	 	

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 	 	2010	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-lived assets(2):	 	 	 	 	 	 	 	 	 	 	 	 	
North America	 	$	1,971,611	 	 	 	2,000,522	 	 	 	2,120,067	 	
Rest of world	 	 	1,084,906	 	 	 	1,202,018	 	 	 	1,205,109	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	3,056,517	 	 	 	3,202,540	 	 	 	3,325,176	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales by product categories(3):	 	 	 	 	 	 	 	 	 	 	 	 	
Soft surface	 	$	2,645,952	 	 	 	2,650,452	 	 	 	3,337,073	 	
Tile	 	 	1,428,571	 	 	 	1,491,846	 	 	 	1,919,070	 	
Wood	 	 	1,244,549	 	 	 	1,201,726	 	 	 	1,570,205	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	5,319,072	 	 	 	5,344,024	 	 	 	6,826,348	 	

 
 	 	 	
(1)	 	Operating income (loss) includes the impact of the impairment of goodwill and other intangibles recognized in 2008 of $276,807 for the Mohawk segment, $531,930 for the Dal-Tile segment and $734,660 for the Unilin segment.	
 	 	 	
(2)	 	Long-lived assets are composed of net property, plant and equipment and goodwill.	
 	 	 	
(3)	 	The Soft surface product category includes carpets, rugs, carpet pad and resilient. The Tile product category includes ceramic tile, porcelain tile and natural stone. The Wood product category includes laminate, hardwood, roofing panels and wood-based panels.	

(16)  	Quarterly Financial Data (Unaudited)	
 
The supplemental quarterly financial data are as follows:

 	 	Quarters Ended	 	
 	 	April 3,
	 	 	July 3,
	 	 	October 2,
	 	 	December 31,
	 	
 	 	2010	 	 	2010(1)	 	 	2010(1)	 	 	2010(1)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	1,347,236	 	 	 	1,400,086	 	 	 	1,309,552	 	 	 	1,262,198	 	
Gross profit	 	 	341,246	 	 	 	374,756	 	 	 	344,932	 	 	 	341,666	 	
Net earnings	 	 	20,538	 	 	 	68,081	 	 	 	51,094	 	 	 	45,758	 	
Basic earnings per share	 	 	0.30	 	 	 	0.95	 	 	 	0.74	 	 	 	0.67	 	
Diluted earnings per share	 	 	0.30	 	 	 	0.95	 	 	 	0.74	 	 	 	0.66	 	

 	 	Quarters Ended	 	
 	 	March 28,
	 	 	June 27,
	 	 	September 26,
	 	 	December 31,
	 	
 	 	2009	 	 	2009	 	 	2009	 	 	2009	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	1,208,339	 	 	 	1,406,012	 	 	 	1,382,565	 	 	 	1,347,108	 	
Gross profit	 	 	153,689	 	 	 	367,388	 	 	 	369,459	 	 	 	341,694	 	
Net (loss) earnings	 	 	(105,887	)	 	 	46,261	 	 	 	34,348	 	 	 	19,779	 	
Basic (loss) earnings per share	 	 	(1.55	)	 	 	0.68	 	 	 	0.50	 	 	 	0.29	 	
Diluted (loss) earnings per share	 	 	(1.55	)	 	 	0.67	 	 	 	0.50	 	 	 	0.29	 	

 	 	 	
(1)	 	Basic and diluted earnings per share for the quarters ended July 3, 2010, October 2, 2010 and December 31, 2010, includes a correction to reduce the numerator by $3,057, $58 and $129, respectively, for an increase in the fair value of a redeemable noncontrolling interest in a consolidated subsidiary of the Company. The Company reduced basic and diluted earnings per share in the quarter ended July 3, 2010 by $0.04 from the previously reported amount of $0.99 to correct an immaterial error related to the change in the aforementioned fair value. There was no change to the previously reported basic and diluted earnings per share for the quarter ended October 2, 2010.	
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Item 9.  	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	
 
None.

Item 9A.  	Controls and Procedures	
 
Evaluation of Disclosure Controls and Procedures
 
Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), which have been designed to provide reasonable assurance that such controls and procedures will meet their objectives, as of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective at a reasonable assurance level for the period covered by this report.
 
Management’s Report on Internal Control over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s management assessed the effectiveness of its internal control over financial reporting as of December 31, 2010. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The Company’s management has concluded that, as of December 31, 2010, its internal control over financial reporting is effective based on these criteria. The Company’s independent registered public accounting firm, KPMG LLP, has issued an attestation report on the Company’s internal control over financial reporting, which is included herein.
 
Changes in Internal Control Over Financial Reporting
 
There were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
Limitations on the Effectiveness of Controls
 
The Company’s management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Item 9B.  	Other Information	
 
None.
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PART III

Item 10.  	Directors and Executive Officers and Corporate Governance	
 
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2011 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,” “— Meetings and Committees of the Board of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee” and “Corporate Governance.” The Company has adopted the Mohawk Industries, Inc. Standards of Conduct and Ethics, which applies to all of its directors, officers and employees. The standards of conduct and ethics are publicly available on the Company’s website at  http://www.mohawkind.com  and will be made available in print to any stockholder who requests them without charge. If the Company makes any substantive amendments to the standards of conduct and ethics, or grants any waiver, including any implicit waiver, from a provision of the standards required by regulations of the Commission to apply to the Company’s chief executive officer, chief financial officer or chief accounting officer, the Company will disclose the nature of the amendment or waiver on its website. The Company may elect to also disclose the amendment or waiver in a report on Form 8-K filed with the SEC. The Company has adopted the Mohawk Industries, Inc. Board of Directors Corporate Governance Guidelines, which are publicly available on the Company’s website and will be made available to any stockholder who requests it.

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 2011 Annual Meeting of Stockholders under the following headings: “Compensation, Discussion and Analysis,” “Executive Compensation and Other Information — Summary Compensation Table,” “— Grants of Plan Based Awards,” “— Outstanding Equity Awards at Fiscal Year End,” “— Option Exercises and Stock Vested,” “— Nonqualified Deferred Compensation,” “— Certain Relationships and Related Transactions,” “— Compensation Committee Interlocks and Insider Participation,” “— Compensation Committee Report” and “Director Compensation.”

Item 12.  	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	
 
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders under the following headings: “Executive Compensation and Other Information — Equity Compensation Plan Information,” and “— Principal Stockholders of the Company.”

Item 13.  	Certain Relationships and Related Transactions, and Director Independence	
 
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders under the following heading: “Election of Directors — Meetings and Committees of the Board of Directors,” and “Executive Compensation and Other Information — Certain Relationships and Related Transactions.”

Item 14.  	Principal Accounting Fees and Services	
 
The information required by this item is incorporated by reference to information contained in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders under the following heading: “Audit Committee — Principal Accountant Fees and Services” and “Meetings and Committees of the Board.”
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PART IV

Item 15.  	Exhibits and Financial Statement Schedules	

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

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

Mohawk
	 	 	
Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	*2	.1	 	Agreement and Plan of Merger dated as of December 3, 1993 and amended as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin and certain Shareholders of Aladdin. (Incorporated herein by reference to Exhibit 2.1(a) in Mohawk’s Registration Statement on Form S-4, Registration No. 333-74220.)	
 	*3	.1	 	Restated Certificate of Incorporation of Mohawk, as amended. (Incorporated herein by reference to Exhibit 3.1 in Mohawk’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998.)	
 	*3	.2	 	Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk’s Report on Form 8-K dated December 4, 2007.)	
 	*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 (File No. 001-13697) for the fiscal year ended December 31, 1998.)	
 	*4	.2	 	See Articles 2, 6, and 9 of the Restated Bylaws of Mohawk. (Incorporated herein by reference to Exhibit 3.2 in Mohawk’s Current Report on Form 8-K dated December 4, 2007.)	
 	*4	.3	 	Indenture, dated as of April 2, 2002 between Mohawk Industries, Inc. and Wachovia Bank, National Association, as Trustee (Incorporated herein by reference to Exhibit 4.1 in Mohawk’s Registration Statement on Form S-4, Registration No. 333-86734, as filed April 22, 2002.)	
 	*4	.4	 	Indenture dated as of January 9, 2006, between Mohawk Industries, Inc. and SunTrust Bank, as trustee. (Incorporated herein by reference to Exhibit 4.4 in Mohawk’s Registration Statement on Form S-3, Registration Statement No. 333-130910.)	
 	*4	.5	 	First Supplemental Indenture, dated as of January 17, 2006, by and between Mohawk Industries, Inc., and SunTrust Bank, as trustee. (Incorporated by reference to Exhibit 4.1 in Mohawk’s Current Report on form 8-K dated January 17, 2006.)	
 	*10	.1	 	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	.2	 	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	.3	 	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 (File No. 001-13697) for the fiscal year ended December 31, 1993.)	

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Mohawk
	 	 	
Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	*10	.4	 	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 (File No. 001-13697) for the quarter ended July 2, 1994.)	
 	*10	.5	 	Loan and Security Agreement dated as of September 2, 2009 by and among Mohawk Industries, Inc. and certain of its Subsidiaries, as Borrowers, certain of its Subsidiaries, as Guarantors, the Lenders from time to time party thereto, Wachovia Bank, National Association, as Administrative Agent, and the other parties thereto (Incorporated herein by reference to Exhibit 10.1 of Mohawk’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2010.)	
 	*10	.6	 	First Amendment to Loan and Security Agreement dated as of June 1, 2010 by and among Mohawk Industries, Inc. and certain of its Subsidiaries, as Borrowers, certain of its Subsidiaries, as Guarantors, the Lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent, and the other parties thereto. (Incorporated herein by reference to Exhibit 10.1 of Mohawk’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2010.)	
Exhibits Related to Executive Compensation Plans, Contracts and other Arrangements:	
 	*10	.7	 	Service Agreement dated February 24, 2009, by and between Unilin Industries BVBA and BVBA “F. De Cock Management”. (Incorporated by reference to the Company’s Current Report on Form 8-K dated February 24, 2009).	
 	*10	.8	 	Service Agreement dated February 9, 2009, by and between Unilin Industries BVBA and Comm. V. “Bernard Thiers”. (Incorporated herein by reference to Exhibit 10.7 in Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 2009.)	
 	*10	.9	 	Second Amended and Restated Employment Agreement, dated as of November 4, 2009, by and between the Company and W. Christopher Wellborn (Incorporated by reference to the Company’s Current Report on Form 8-K dated November 4, 2009).	
 	*10	.10	 	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	.11	 	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	.12	 	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 (File No. 001-13697) for the quarter ended July 3, 1993.)	
 	*10	.13	 	Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.35 of Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1999.)	
 	*10	.14	 	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	.15	 	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 (File No. 001-13697) for the quarter ended July 3, 1993.)	
 	*10	.16	 	Second Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference to Exhibit 10.38 of Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1999.)	
 	*10	.17	 	Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.39 of Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1992.)	
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Mohawk
	 	 	
Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	*10	.18	 	First Amendment dated February 17, 2000 to the Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.40 of Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1999.)	
 	10	.19	 	The Mohawk Industries, Inc. Senior Management Deferred Compensation Plan.	
 	*10	.20	 	Mohawk Industries, Inc. 1997 Non-Employee Director Stock Compensation Plan (Amended and Restated as of January 1, 2009) (Incorporated herein by reference to Exhibit 10.32 in Mohawk’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.).	
 	*10	.21	 	1997 Long-Term Incentive Plan. (Incorporated herein by reference to Exhibit 10.80 of Mohawk’s Annual Report on Form 10-K (File No. 001-13697) for the fiscal year ended December 31, 1996.)	
 	*10	.22	 	2002 Long-Term Incentive Plan. (Incorporated herein by reference to Appendix A in the 2002 Mohawk Industries, Inc. Proxy Statement dated March 29, 2002.)	
 	*10	.23	 	Mohawk Industries, Inc. 2007 Incentive Plan (Incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-13697) filed with the Securities and Exchange Commission on April 9, 2007)	
 	21	 	 	Subsidiaries of the Registrant.	
 	23	.1	 	Consent of Independent Registered Public Accounting Firm (KPMG LLP).	
 	31	.1	 	Certification Pursuant to Rule 13a-14(a).	
 	31	.2	 	Certification Pursuant to Rule 13a-14(a).	
 	32	.1	 	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	32	.2	 	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	101	.INS	 	XBRL Instance Document	
 	101	.SCH	 	XBRL Taxonomy Extension Schema Document	
 	101	.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	
 	101	.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	
 	101	.LAB	 	XBRL Taxonomy Extension Label Linkbase Document	
 	101	.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	

 	 	 	
*	 	Indicates exhibit incorporated by reference.	
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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 1, 2011	 	By: 
/s/  JEFFREY S. LORBERBAUM	
 	 	 	
 	 	Jeffrey S. Lorberbaum,
Chairman 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 1, 2011	 	/s/  JEFFREY S. LORBERBAUM	
 	 	 	
 	 	Jeffrey S. Lorberbaum,
Chairman and Chief Executive Officer
(principal executive officer)	

 	 	 	
Dated: March 1, 2011	 	/s/  FRANK H. BOYKIN	
 	 	 	
 	 	Frank H. Boykin,
Chief Financial Officer and Vice President-Finance
(principal financial officer)	

 	 	 	
Dated: March 1, 2011	 	/s/  JAMES F. BRUNK	
 	 	 	
 	 	James F. Brunk,
Vice President and Corporate Controller
(principal accounting officer)	

 	 	 	
Dated: March 1, 2011	 	/s/  PHYLLIS O. BONANNO	
 	 	 	
 	 	Phyllis O. Bonanno,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  BRUCE C. BRUCKMANN	
 	 	 	
 	 	Bruce C. Bruckmann,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  FRANS DE COCK	
 	 	 	
 	 	Frans De Cock,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  JOHN F. FIEDLER	
 	 	 	
 	 	John F. Fiedler,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  DAVID L. KOLB	
 	 	 	
 	 	David L. Kolb,
Director	

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Dated: March 1, 2011	 	/s/  ROBERT N. POKELWALDT	
 	 	 	
 	 	Robert N. Pokelwaldt,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  JOSEPH A. ONORATO	
 	 	 	
 	 	Joseph A. Onorato,
Director	

 	 	 	
Dated: March 1, 2011	 	/s/  W. CHRISTOPHER WELLBORN	
 	 	 	
 	 	W. Christopher Wellborn,
Director	

72

Exhibit 10.19
THE MOHAWK INDUSTRIES, INC.
SENIOR MANAGEMENT DEFERRED COMPENSATION PLAN
ARTICLE I
ESTABLISHMENT OF PLAN
     1.1 Establishment of the Plan. Mohawk Industries, Inc. established, effective as of June 1, 1994, a deferred compensation plan known as The Mohawk Industries, Inc. Executive Deferred Compensation Plan (the “Prior Executive Plan”). Effective as of January 1, 2008, the Prior Executive Plan was amended and restated to comply with Code Section 409A and for certain other purposes for post-2004 deferrals and earnings or losses thereon (the “Executive Plan”). Amounts deferred under the Prior Executive Plan before January 1, 2005, plus any earnings or losses thereon, are governed by the terms of the Prior Executive Plan. Amounts deferred under the Executive Plan on or after January 1, 2005, plus any earnings or losses thereon, are governed by the terms of the Executive Plan.
     Mohawk Industries, Inc. also established, effective as of June 1, 1994, a deferred compensation plan known as The Mohawk Industries, Inc. Management Deferred Compensation Plan (the “Prior Management Plan”). Effective as of January 1, 2008, the Prior Management Plan was amended and restated to comply with Code Section 409A and for certain other purposes for post-2004 deferrals and earnings or losses thereon (the “Management Plan”). Amounts deferred under the Prior Management Plan before January 1, 2005, plus any earnings or losses thereon, are governed by the terms of the Prior Management Plan. Amounts deferred under the Management Plan on or after January 1, 2005, plus any earnings or losses thereon, are governed by the terms of the Management Plan.
     Effective December 1, 2010, the Management Plan is hereby merged with and into the Executive Plan, and the resulting merged plan is hereby amended as restated as The Mohawk Industries, Inc. Senior Management Deferred Compensation Plan (the “Plan”). Amounts deferred under the Plan on and after December 1, 2010, plus any earnings or losses thereon, are governed by the terms of this Plan. The purpose of the Plan is to enhance the retention of employees occupying selected positions and to enable those employees to defer receipt of compensation until a later date, as described herein.
     1.2 Plan Intended to be a “Top Hat” Plan. The Plan is intended to be a non-qualified, unfunded plan of deferred compensation for a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, and shall be so interpreted.
     1.3 Plan Intended to Comply with Code Section 409A. The Plan (including, but not limited to, the amendment and restatement creating the merged Plan) is intended to comply with, and shall be construed so as to provide for deferrals and benefits that are consistent with the requirements of, Code Section 409A. The Plan Administrator may authorize changes to time and

 
form of payment elections but only to the extent consistent with the transition rules and during the transition relief period provided under Code Section 409A.
ARTICLE II
DEFINITIONS
     Certain terms of this Plan have defined meanings that are set forth in this Article and that shall govern unless the context in which they are used clearly indicates that some other meaning is intended.
     2.1 Account shall mean the bookkeeping account established and maintained under this Plan for each Participant or their Beneficiaries to which shall be credited each Participant’s Salary Deferral Amounts, Bonus Deferral Amounts, and earnings allocable thereto pursuant to Section 4.2. No money shall actually be allocated to any individual Participant’s Account; all such Accounts shall be of a memorandum nature, maintained by the Committee for accounting purposes, and shall not represent any specific or identifiable assets of the Company; provided, however, that once the Company transfers to the Participant’s sub-trust under the Benefit Security Trust established in connection with this Plan amounts that are to be credited to the Participant’s account under this Plan, then to that extent the earnings allocable to a Participant under this Plan shall be determined with reference to the assets held in a Participant’s sub-trust under such Benefit Security Trust.
     2.2 Beneficiary shall mean the person or persons designated by a Participant during his lifetime, in a written instrument, signed and filed with the Committee, to receive any payments due under this Plan after his death. Such designation may be revoked at any time and the Participant may designate more than one Beneficiary and the proportions to be distributed to each Beneficiary and a contingent Beneficiary or Beneficiaries to receive distributions after the death of a primary Beneficiary. If no designated Beneficiary is living at the time of any payment, distribution shall be made to the executor, administrator or other personal representative of the Participant, to be distributed as part of the Participant’s estate. Additional rules regarding Beneficiary designations may be determined by the Committee from time to time.
     2.3 Benefit Security Trust shall mean the rabbi trust document executed by the Company and Fidelity Management Trust Company in connection with the Plan.
     2.4 Board shall mean the Board of Directors of the Company.
     2.5 Bonus shall mean, for a Participant who is eligible to participate in the Company’s Executive Incentive Plan, the Participant’s annual bonus (if any) under the Company’s Executive Incentive Plan. For all other Participants, “Bonus” shall mean the Participant’s short-term cash incentive compensation paid under any incentive plan or bonus arrangement of the Company relating to services performed during the Plan Year, if any. The Committee may, in its discretion,
- 2 -

 
limit the types of short-term incentive compensation that will qualify as Bonus compensation under the Plan for any given Plan Year.
     2.6 Bonus Deferral Amount shall mean the percentage of the Participant’s Bonus that the Participant elects to defer to this Plan pursuant to Section 4.1. Such percentage shall be indicated on the Election Form.
     2.7 Code shall mean the Internal Revenue Code of 1986, as amended.
     2.8 Code Section 409A shall mean Code Section 409A and the Treasury regulations or other authoritative guidance issued thereunder.
     2.9 Committee shall mean the Compensation Committee of the Board. The Committee may delegate pursuant to a written authorization any or all if its responsibilities set forth in the Plan to one or more individuals, committees or service providers. In any case, where the Plan refers to the Committee, such reference is deemed to be a reference to any delegate of the Committee appointed for such purpose.
     2.10 Company shall mean Mohawk Industries, Inc. or any successor thereto.
     2.11 Effective Date of this amendment and restatement shall mean December 1, 2010.
     2.12 Election Form shall mean a paper or electronic form adopted by the Committee for purposes of allowing Participants to indicate deferral elections.
     2.13 Participant shall mean an Employee of the Company or a corporation that is controlled by the Company who is designated as a Participant pursuant to Section 3.1 and who elects to participate in this Plan by deferring a portion of his compensation to this Plan.
     2.14 Plan shall mean the Mohawk Industries, Inc. Senior Management Deferred Compensation Plan as set forth in this document together with any subsequent amendments hereto.
     2.15 Plan Year shall mean the annual period from January 1 through the following December 31.
     2.16 Salary shall mean the Participant’s eligible base compensation and commissions, if any.
     2.17 Salary Deferral Amount shall mean the percentage of the Participant’s Salary that the Participant elects to defer to this Plan pursuant to Section 4.1. Such percentage shall be indicated on the Election Form.
     2.18 Separation from Service shall mean separation from service within the meaning of Section 409A.
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     2.19 Specified Employee shall mean a specified employee within the meaning of Code Section 409A.
     2.20 Valuation Date shall mean each business day of the Plan Year during which Plan assets are traded on a national exchange or such other day as selected by the Committee.
ARTICLE III
PARTICIPATION
     3.1 Participation.
          (a) An employee of the Company who participates in the Company’s Executive Incentive Plan or who otherwise is designated as a Participant hereunder by the chief executive officer of the Company or his designee shall be eligible to make Salary and Bonus Deferrals under this Plan.
          (b) Any employee who is eligible to participate in this Plan must, in order to become a Participant, complete and deliver to the Committee an Election Form approved by the Committee that identifies the compensation which the employee wishes to defer hereunder. Such Election Form must be delivered prior to the first day of the Plan Year with respect to which the services giving rise to the Salary or Bonus will be performed.
          (c) Once delivered, an Election Form may be changed or revoked by a new Election Form delivered to the Committee only up until the day an Election Form must be delivered pursuant to subparagraph (b) above; and after such date the Election Form shall be irrevocable for the Plan Year to which it relates. An Election Form, once submitted, shall be deemed to remain in effect for subsequent Plan Years until a new Election Form is delivered to the Committee on a timely basis as described in this Section 3.1.
          (d) Notwithstanding paragraph (b) above, for the first Plan Year in which the employee is eligible to participate, such Election Form must be delivered to the Committee no later than thirty (30) days following the date the employee becomes eligible to participate.
          (e) Under all circumstances, any deferral election shall apply only to compensation payable for services to be performed after the date it is delivered to the Committee.
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ARTICLE IV
PLAN BENEFITS
     4.1 Salary and Bonus Deferrals.
          (a) Salary and Bonus Deferral Amounts. A Participant may elect to defer from 1% to 25% of his Salary to the Plan. Prior to January 1, 2011, a Participant may make a separate deferral election under the Plan to defer (i) from 1% to 25% with respect to a Participant’s Bonus from the Company’s Executive Incentive Plan or (ii) from 1% to 100% with respect to any other Bonus. Notwithstanding the foregoing, effective January 1, 2011, a Participant may make a separate deferral election under the Plan to defer from 1% to 100% with respect to any Bonus. All elections must be made in accordance with the terms of the Plan and the Election Forms.
          (b) Method for Crediting Accounts. The Participant’s Salary Deferral Amount and Bonus Deferral Amount shall be withheld from the Participant’s compensation and credited to the Participant’s Account hereunder as soon as practicable after such salary or bonus would (but for the operation of this Plan) have been paid to the Participant, but no later than thirty (30) days after such salary or bonus would have been paid to the Participant.
     4.2 Earnings on Accounts. The earnings on a Participant’s Account under this Plan shall consist of the earnings (meaning earnings, appreciation and depreciation, whether realized or unrealized) on the Participant’s sub-trust under the Benefit Security Trust. At any time when there exists under the Benefit Security Trust two or more investment funds to serve as investment vehicles in connection with such Trust, then in such event the Participants under this Plan may request that the Company and the Trustee allocate the Participant’s sub-trust under the Benefit Security Trust among such investment vehicles in accordance with the Participant’s preferences, but the final decision concerning the allocation of the Participant’s sub-trust shall be made in the sole discretion of the Company and the Trustee (under terms set forth in the Benefit Security Trust document).
     4.3 Form of Payment. A Participant’s Account shall be paid to the Participant (or to his or her Beneficiary in the event of his death) under one of the following options, as elected by the Participant on his or her Election Form:
          (a) A single lump sum no more than ninety (90) days following the Participant’s Separation from Service (with the exact date to be determined by the Committee); provided, however, that this shall be the only option if the value of the Participant’s Account as of the Valuation Date which coincides with or next follows the Participant’s Separation from Service does not exceed $10,000.
          (b) Annual installments elected by the Participant (not to exceed ten (10)), commencing no more than ninety (90) days following the Participant’s Separation from Service (with the exact date to be determined by the Committee) and continuing thereafter on each applicable anniversary of the initial distribution date. In the event payment is made in installments,
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the Participant’s Account shall continue to be adjusted for earnings as provided in Section 4.2, and the amount of the payment to be made in a given year shall be equal to (i) times (ii), where (i) equals the value of the Participant’s Account as of the most recent Valuation Date, and (ii) equals a fraction, the numerator of which is one, and the denominator of which is the number of installments to be paid under the Participant’s election (including the current installment).
          (c) Notwithstanding the above, any Participant who is a Specified Employee as of his or her Separation from Service, payment under this Section 4.3 shall be delayed as follows:
 	(i)	 	if the Account is payable in a lump sum, such payment will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s Separation from Service;	
 	 	 	 	
 	(ii)	 	if the Account is payable in installments, the amount of such installments that would otherwise be payable during the six-month period immediately following the Participant’s Separation from Service will be accumulated and payment of such accumulated amount will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s Separation from Service, whereupon the accumulated amount will be paid to the Participant and the normal payment schedule for any remaining installment payments will resume.	
          (d) A Participant may modify any or all of the form of payment elections with respect to an Account, consistent with the permissible forms of payment available under the Plan, provided such modification election is submitted at least twelve months prior to the date on which payment is scheduled to commence under the form of payment election in effect prior to the modification. Except with respect to modifications that relate to the payment on account of death, the date payments may commence under the modified form of payment election must be no earlier than five (5) years after the date payment otherwise would have commenced under the form of payment election most recently in effect. Under no circumstances may a modification result in an acceleration of payments in violation of Code Section 409A.
     4.4. Scheduled Payment Dates. Until December 31, 2007, in connection with an election to defer, a Participant may, on a one-time basis, elect that a specified dollar amount of the Participant’s Account be distributed to the Participant prior to his Separation from Service, at a date specified in such election (the “Scheduled Payment Date Election”); provided that such payment date shall be no earlier than three (3) years from the date of such election. If a Scheduled Payment Date Election is made, then there shall be created a sub-account within such Participant’s Account (such sub-account to be referred to hereafter as the Participant’s “Scheduled Payment Sub-Account”), and the Salary and Bonus to be deferred under the Plan after the date of such election shall be added to the Scheduled Payment Sub-Account until the dollar amount in such Sub-Account equals the dollar amount specified in the Participant’s Scheduled Payment Date Election;
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provided, however, that the funding of the Scheduled Payment Sub-Account shall in all events cease two (2) years prior to the date the Scheduled Payment is to be made. Payment of the amount specified in the Scheduled Payment Date Election shall be made solely from the Scheduled Payment Sub-Account; and after such payment is made, any amount remaining in such Sub-Account shall be added to the Participant’s regular Account hereunder.
     4.5 Acceleration of Payment in the Event of Unforeseeable Financial Emergency. Upon written request by a Participant, the Committee may distribute to the Participant prior to his Separation from Service such amount of the Participant’s Account balance that the Committee determines is necessary to provide for an unforeseeable financial emergency suffered by the Participant. For this purpose, unforeseeable financial emergency shall mean a severe financial hardship to the Participant resulting from: (a) an illness or accident of the Participant, the Participant’s spouse, beneficiary, or dependent; (b) loss of the Participant’s property due to casualty; or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. For example, the need to pay for medical expenses may constitute an unforeseeable emergency. The purchase of a home and the payment of college tuition are not unforeseeable emergencies. In all cases, any distribution on account of “unforeseeable financial emergency” shall comply with the requirements of Code Section 409A.
     4.6 Payment to Minors and Incapacitated Persons. In the event that any amount is payable to a minor or to any person who, in the judgment of the Committee, is incapable of making proper disposition thereof, such payment shall be made for the benefit of such minor or such person in any of the following ways as the Committee, in its sole discretion, shall determine:
          (a) By payment to the legal representative of such minor or such person;
          (b) By payment directly to such minor or such person;
          (c) By payment in discharge of bills incurred by or for the benefit of such minor or such person. The Committee shall make such payments without the necessary intervention of any guardian or like fiduciary, and without any obligation to require bond or to see to the further application of such payment. Any payment so made shall be in complete discharge of the Plan’s obligation to the Participant and his or her Beneficiaries.
     4.7 Application for Benefits. The Committee may require a Participant or Beneficiary to complete and file certain forms as a condition precedent to receiving the payment of benefits. The Committee may rely upon all such information given to it, including the Participant’s current mailing address. It is the responsibility of all persons interested in receiving a distribution pursuant to the Plan to keep the Committee informed of their current mailing addresses.
     4.8 Acceleration of or Delay in Payments. This Section shall take precedence over any other provision of the Plan to the contrary. No provision of this Plan shall be followed if following the provision would result in the acceleration of the time or schedule of any payment from the Plan as would require immediate income tax to Participants based on the law in effect at the time the
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distribution is to be made, including Code Section 409A. In addition, a payment may be delayed after a designated payment date under the circumstances described in Code Section 409A, including payments subject to Code Section 162(m), or payments that would violate federal securities or other applicable law. In such case, payment will be made at the earliest date on which the Committee reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.
     4.9 Investment Requests.
          (a) Election of Investment Funds. Each Participant may direct, following such procedures as may be specified by the Committee, to have his Account allocated or reallocated as appropriate in increments of 1% among the various investment funds that are made available under the Plan from time to time; provided that the total of such increments shall at all times equal 100%; and further provided that the final decision concerning the investment of the Account shall be made by the Committee in its sole discretion. An investment request shall become effective as soon as administratively feasible following delivery of the request to the Committee.
          (b) Initial Investment Request. A Participant’s initial investment request shall allocate his entire Account, together with all subsequent contributions to his Account, among the investment funds for so long as the request remains in effect.
          (c) Subsequent Investment Requests. A Participant’s investment request shall remain in effect until changed by a new request. A Participant may make a new investment request at any time by submitting a new request to the Committee. A new request may change future allocations to the Participant’s Accounts, may reallocate any amounts previously credited to the Participant’s Account among the investment funds, or may leave the allocation of such prior amounts unchanged. A new investment request shall allocate the Participant’s Account among the investment funds in the same manner as set forth in Section 4.9(a). Subject to the provisions of Section 4.9(a), a new investment request shall become effective as soon as administratively feasible following submission of the request to the Committee.
          (d) Failure to Make Investment Request. If a Participant does not make an investment request pursuant to this Section 4.9, his Account shall be invested as determined by the Committee in its sole discretion and shall remain so invested until such time as the Participant files an investment request pursuant to the provisions of this Section 4.9.
          (e) Method of Making Investment Requests. All investment requests shall be made pursuant to rules and procedures established by the Committee from time to time (provided such rules and procedures are applied in a consistent and nondiscriminatory basis), shall be made using such forms or other methods (such as an automated communication method, other telephonic or electronic communication, or the Internet) as may be approved by the Committee from time to time, and shall be subject to such required lead time as may be approved by the Committee from time to time.
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ARTICLE V
FUNDING OF PLAN
     5.1 No Trust Fund Other than Benefit Security Trust. Except to the extent the Company transfers assets to the Benefit Security Trust created in connection with this Plan, the benefits provided by this Plan shall be paid from the general assets of the Company. To the extent that any Participant acquires the right to receive payments from the Company under the Plan, such right shall be no greater than that of an unsecured general creditor of the Company. Participants and their Beneficiaries shall not have any preference or security interest in the assets of the Company other than as a general unsecured creditor.
ARTICLE VI
ADMINISTRATION OF THE PLAN
     6.1 The Plan shall be administered by the Committee. Except as otherwise provided in this Plan, the Committee shall have complete control of the administration of the Plan with all powers necessary to enable it to properly carry out the provisions of the Plan. The Committee shall have the exclusive right to interpret the Plan and to decide all matters arising thereunder, including the right to resolve possible ambiguities, inconsistencies, or omissions. All determinations of the Committee with respect to any matter hereunder shall be conclusive and binding on all persons. Without limiting the generality of the foregoing, the Committee shall have the following powers and duties:
          (a) To require any person to furnish such reasonable information as may be requested for the purpose of the proper administration of the Plan as a condition to receiving any benefits under the Plan;
          (b) To make and enforce such rules and regulations and prescribe the use of such forms as it shall deem necessary for the efficient administration of the Plan;
          (c) To determine the amount of benefits that shall be payable to any person in accordance with the provisions of the Plan, and to provide a full and fair review to any Participant whose claim for benefits has been denied in whole or in part;
          (d) To employ at the expense of the Company other persons (who may or may not be employed by the Company) to assist the Committee in carrying out its duties under the terms of the Plan;
          (e) To keep records of all acts and determinations, and to keep all such records, books of account, data and other documents as may be necessary for the proper administration of the Plan;
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          (f) To prepare and distribute to all Participants, and Beneficiaries information concerning the Plan and their rights under the Plan;
          (g) To exercise any powers reserved to the Company under any Benefit Security Trust executed in connection with this Plan, including but not limited to the power to provide investment guidelines to the trustee under such Benefit Security Trust; and
          (h) To do all things necessary to operate and administer the Plan in accordance with its provisions.
ARTICLE VII
AMENDMENT AND TERMINATION
     7.1 Right to Amend and Terminate. The Board or its delegate reserves the right to modify, alter, amend, or terminate the Plan, at any time and from time to time, without notice, to any extent deemed advisable, in accordance with the rules under Code Section 409A. If permitted by Code Section 409A, the termination and liquidation of the Plan will involve both the amendment of the Plan to cease deferrals under the Plan and provide for payment of all benefits accrued under the Plan, and the accelerated payment of benefits accrued under the Plan.
ARTICLE VIII
CLAIMS PROCEDURE
     8.1 Claims Procedure. Any Participant or Beneficiary may file a claim for benefits under the Plan by submitting a written request to the Committee describing the nature of the claim and requesting a determination of the validity of the claim. If such claim is denied, the Company shall provide written notice to the Participant or Beneficiary whose claim for benefits under the Plan was denied and shall provide a claims appeal procedure, all in accordance with Section 503 of ERISA and D.O.L. Reg. Section 2560.503-1 and such procedures are incorporated in this Plan by reference.
ARTICLE IX
MISCELLANEOUS
     9.1 Headings. The headings and sub-headings in this Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.
     9.2 Assignment by Participant. No right or interest of the Participant under the Plan shall be assignable or transferable by the Participant except by will or the laws of descent and distribution, and, to the extent permitted by law, any rights or interests of the Participant under the
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Plan shall not be subject to any lien, directly, by operation of law or otherwise, including, but not limited to, execution, levy, garnishment, attachment, pledge, or bankruptcy.
     9.3 [Reserved].
     9.4 Effect of Plan on Employee. The benefits under this Plan are intended to constitute deferred compensation to the Participants. Unless specifically included in compensation by the terms of another benefit plan and to the extent permitted by law, any amounts paid to a Participant under the Plan shall not be taken into account in determining (i) the amount of the Participant’s benefits under any pension or profit sharing plan in which the Participant participates as an employee of the Company; or (ii) the amount of the Participant’s coverage under any group life insurance plan in which the Participant participates as an employee of the Company.
     9.5 Continued Employment. Nothing contained in the Plan shall be deemed to give any Employee the right to be retained as an employee of the Company.
     9.6 Severability. If any portion of the Plan is declared by a court of competent jurisdiction to be void or unenforceable, such portion shall be deemed severed from the Plan and the balance of the Plan shall remain in effect.
     9.7 Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Georgia, to the extent not preempted by the Employee Retirement Income Security Act of 1974.
     9.8 Withholding. Whenever the Company proposes or is required to make any payment under the Plan, the Company shall make such payment net of an amount sufficient to satisfy any Federal, state, or local withholding tax liability.
     IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed and its seal to be hereunto affixed on the date indicated below, but effective as of December 1, 2010.
 	 	 	 	 	
 	 	MOHAWK INDUSTRIES, INC.	
 	 	 	 	 	
 	 	By:	 	 	

 	 	Title:	 	 	

 	 	Date: December ___, 2010	
ATTEST:

 
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EXHIBIT 21
 
SUBSIDIARIES OF THE REGISTRANT
 	 	 	
Aladdin Manufacturing Corporation	 	Delaware	
Horizon Europe, Inc. 	 	Georgia	
Lees Mohawk (UK) Limited	 	UK	
Mohawk Canada Corporation	 	Nova Scotia	
Mohawk Carpet, LLC	 	Delaware	
Mohawk Carpet Distribution, Inc. 	 	Delaware	
Mohawk Carpet Transportation of Georgia, LLC	 	Delaware	
Mohawk Commercial, Inc. 	 	Delaware	
Mohawk ESV, Inc. 	 	Delaware	
Mohawk Factoring, Inc. 	 	Delaware	
Mohawk International (China) Ltd. 	 	Mauritius	
Mohawk International (India) Ltd. 	 	Mauritius	
Mohawk Resources, LLC	 	Delaware	
Mohawk Servicing, LLC	 	Delaware	
Wayn-Tex LLC	 	Delaware	
World International, Inc. 	 	Barbados	
Dal-Tile International, Inc. 	 	Delaware	
Dal-Elit, LLC	 	Texas	
Dal Italia LLC	 	Delaware	
Dal-Tile Corporation	 	Pennsylvania	
Dal-Tile Group, Inc	 	Delaware	
Dal-Tile I, LLC	 	Delaware	
Dal-Tile Operaciones Mexico, S. de R.L. de C.V. 	 	Mexico	
Dal-Tile Industrias S. de R.L. de C.V	 	Mexico	
Dal-Tile Recubrimientos, S. de R.L. de C.V. 	 	Mexico	
Dal-Tile Mexico S. de R.L. de C.V. 	 	Mexico	
Dal-Tile of Canada Inc	 	Ontario	
Dal-Tile Puerto Rico, Inc	 	Puerto Rico	
Dal-Tile Shared Services, Inc. 	 	Delaware	
Dal-Tile Services, Inc. 	 	Delaware	
Dal-Tile Distribution, Inc. 	 	Delaware	
DTM/CM Holdings LLC	 	Delaware	
Recumbrimentos Interceramic, S.A. de C.V	 	Mexico	
Cevotrans BV	 	Netherlands	
Mohawk Global Investments S.àr.l	 	Luxembourg	
Mohawk International (Europe) S.àr.l	 	Luxembourg	
Mohawk International Holdings (DE) Corporation	 	Delaware	
Mohawk International Holdings S.àr.l	 	Luxembourg	
Opstalan BV	 	Netherlands	
Sharikat Malaysia Wood Industries Sdn Bhd	 	Malaysia	
Timber Technique Finance Ltd	 	Ireland	
Unilin Beheer BV	 	Netherlands	
Unilin Flooring NC, LLC	 	N. Carolina	
Unilin GmbH	 	Germany	
Unilin Holding SAS	 	France	
Unilin Industries BVBA	 	Belgium	
Unilin/Multiprè BV	 	Netherlands	
Unilin BVBA	 	Belgium	
Unilin SAS	 	France	
Unilin Systems SAS	 	France	
Unilin Systems SUD SAS	 	France	
Unilin UK Ltd	 	UK	
DB Wholesale Carpets & Flooring	 	India	
F.I.L.S Investments	 	Ireland	
Mohawk International (Hong Kong) Ltd	 	Hong Kong	
Mohawk Trading (Shanghai) Co., Ltd	 	China	
Mohawk Unilin International BV	 	Netherlands	
Unilin Russia	 	Russia	
Mohawk Finance S.àr.l. 	 	Luxembourg	
Unilin Distribution, Ltd. 	 	UK	
Mohawk Foreign Holdings, S.àr.l. 	 	Luxembourg	
DT Mexico Holding, LLC	 	Delaware	

EXHIBIT 23.1
 
Consent of Independent Registered Public Accounting Firm
 
The Board of Directors
Mohawk Industries, Inc.:
 
We consent to the incorporation by reference in the registration statements (No. 333-157788) on Form S-3 and (No. 033-52070, No. 033-53544, No. 033-67282, No. 033-87998, No. 333-23577, No. 333-74806, No. 333-91908 and No. 333-143370) on Form S-8, of Mohawk Industries, Inc. of our reports dated March 1, 2011, with respect to the consolidated balance sheets of Mohawk Industries, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2010, and the effectiveness of internal control over financial reporting as of December 31, 2010, which reports appear in the annual report on Form 10-K of Mohawk Industries, Inc.
 
/s/  KPMG LLP
 
Atlanta, Georgia
March 1, 2011

EXHIBIT 31.1
 
CERTIFICATIONS
 
I, Jeffrey S. Lorberbaum, certify that:
 
1. I have reviewed this annual report on Form 10-K of Mohawk Industries, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: March 1, 2011
 
/s/  JEFFREY S. LORBERBAUM
Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer

EXHIBIT 31.2
 
CERTIFICATIONS
 
I, Frank H. Boykin, certify that:
 
1. I have reviewed this annual report on Form 10-K of Mohawk Industries, Inc.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: March 1, 2011
 
/s/  FRANK H. BOYKIN
Frank H. Boykin
Chief Financial Officer

Exhibit 32.1
 
Statement of Chief Executive Officer of
MOHAWK INDUSTRIES, INC.
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002
 
In connection with the annual report of Mohawk Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey S. Lorberbaum, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
 
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  JEFFREY S. LORBERBAUM
Jeffrey S. Lorberbaum
Chairman and Chief Executive Officer
 
March 1, 2011

Exhibit 32.2
 
Statement of Chief Financial Officer of
MOHAWK INDUSTRIES, INC.
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002
 
In connection with the annual report of Mohawk Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank H. Boykin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
 
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/  FRANK H. BOYKIN
Frank H. Boykin
Chief Financial Officer
 
March 1, 2011