# Growth

By Design

Mohawk Industries, Inc. 2012 Annual Report 160 South Industrial Boulevard

Calhoun, Georgia 30701

www.mohawkind.com

© All rights reserved Mohawk Industries, Inc. 2013 Mohawk Industries, Inc. is one of the world’s leading flooring companies with operations in

North America, Europe, Asia and Australia. Our products and brands span every major flooring

category across a wide range of price points and distribution channels. We are headquartered

in Calhoun, Georgia, and our shares trade on the New York Stock Exchange under the ticker

symbol “MHK.” 

# Growth By DesignMohawkIndustries,Inc.2012AnnualReport

38395_Cover.indd 1 3/21/13 4:20 PMFrom Left to Right: Joseph A. Onorato, W. Christopher Wellborn, Phyllis O. Bonanno, Frans De Cock, Richard C. III, Jeffrey S. Lorberbaum,

Karen A. Smith Bogart, Bruce C. Bruckmann, John F. Fiedler, David L. Kolb

Joseph A. Onorato (1)(2)

Former Chief Financial Officer of Echlin, Inc.

(a manufacturer of automotive parts)

W. ChristopherWellborn

President and Chief Operating Officer

Phyllis O. Bonanno (3)

Former President and Chief Executive Officer

of International Trade Solutions, Inc.

(an international trade consulting firm)

Frans De Cock

Former President of Unilin Richard C. III (1)

Chairman of Triumph Group, Inc.

(a public, international aviation

services company)

Jeffrey S. Lorberbaum

Chairman and Chief Executive Officer

Karen A. Smith Bogart (2)

President of Pacific Tributes, Inc.

(a start-up firm providing web-based

printing services) Bruce C. Bruckmann (1)(3)

Managing Director of Bruckmann, Rosser,

Sherrill & Co., Inc. (a venture capital firm)

John F. Fiedler (2)

Former Chairman and Chief Executive Officer

of Borg-Warner Automotive Inc.

(a manufacturer of automotive parts)

David L. Kolb (3)

Former Chairman and Chief Executive Officer

of Mohawk Industries, Inc.

Please see the Company’s 2013 Proxy Statement for a listing of our Executive Officers.

The Proxy Statement is available via the Internet at www.mohawkind.com under Investor Information. (1) Audit Committee

(2) Compensation Committee

(3) Nominating and Corporate Governance Committee



# Board of Directors

David L. Kolb At the February 2013 Board meeting, Mr. Kolb announced that he would be retiring from Mohawk’s Board of Directors at the

end of his current term, May 8, 2013. Mr. Kolb served as President of Mohawk Carpet Corporation until it was acquired by the Company in

December 1988, and then served as Chief Executive Officer and Chairman of the Board of Directors until 2001 and 2004, respectively.

Mr. Kolb’s guidance and vision was instrumental in transforming the Company from a North American carpet manufacturer to a worldwide

flooring manufacturer and distributor. Dave’s strong leadership, business acumen and focus on innovative products and processes were

invaluable as the Company grew by more than twenty-fold during his tenure. The Company is grateful to have had the benefit of Dave’s

vision and dedication over the past 25 years.

Phyllis O. Bonanno Ms. Bonanno also announced at the February 2013 Board meeting that she would be retiring from Mohawk’s Board

at the end of her current term, May 8, 2013. Ms. Bonanno served the Company as a director since February 2004. With her broad

experience in international trade and consumer products, Phyllis provided exceptional advice and guidance to the Company as it expanded

its geographic footprint from North America operations to a worldwide presence. Mohawk expresses its

appreciation for her serviceand dedication

during her tenure on the Board. 

# Mohawk Industries:

A Leading Global Flooring Manufacturer

As one of the foremost flooring manufacturers, we are proud to create products that

enhance the aesthetics and functionality of spaces around the world. Our vertically

integrated operations, leading brands and broad product portfolios provide us with

numerous competitive advantages in the global marketplace.



# Dal-Tile

Dal-Tile is the largest

manufacturer of ceramic

tile and distributor of

natural stone in the

North American market

and supplies a vast

array of commercial

and residential products

under the Daltile ®



## , American Olean ® 

## and

Marazzi ® 

## * brands.

Daltile ®



## American Olean ®



## Marazzi ® 

# Unilin

Unilin’s Quick-Step ® 

## and

Columbia ® 

## brands are among

the world’s most recognized

names in laminate and

hardwood flooring. In 2013,

we welcome the Pergo ®



## brand into our laminate

collections. Unilin products

also include chipboard,

MDF, HDF and insulation

panels and boards.

Quick-Step ®



## Pergo ®



## Columbia ®



## Century ®



## didit TM 

## Furniture 

# Mohawk

The Mohawk ® 

## brand is

one of the premier carpet

and hard surface brands

in North America. Under

our Mohawk Home ® 

## brand,

we are also the largest

supplier of rugs and mats

in the market.

Karastan ®



## Mohawk ®



## Aladdin ®



## Horizon ® 

## Bigelow ®



## Lees ®



## Durkan ®



## Mohawk Home ®

*Subject to completion of Marazzi acquisition.

38395_Cover.indd 2 3/22/13 10:47 AM

### During 2012, Mohawk gathered momentum on all fronts

by introducing new products, expanding its geographical

footprint, announcing strategic acquisitions and posting

solid financial results. Much of this progress reflects our

purposeful execution of strategies during the prolonged

industry downturn

–strategies that enabled our businesses

to compete more effectively and our Company to capitalize

on opportunities as the marketplace regains its strength.

In the United States, low mortgage rates, increasing home

prices and a limited supply of existing homes are driving

growth in new home construction. Increased home prices

also help to strengthen consumer confidence, which, in turn,

stimulates residential remodeling projects. Additionally,

the U.S. commercial market continues to grow with the

expansion of new projects across all sectors.

These strengthening economic conditions offer significant

opportunities for Mohawk to capture both residential and

commercial new construction and remodeling business.

We are not relying, however, on strengthening market

conditions alone. Each of our businesses has translated

an ongoing emphasis on product innovation into unique

products that redefine end-user expectations and offer compelling incentives for contractors, designers and

consumers to trade up to value-added options with

highly desirable features.

With our disciplined approach to cost management,

the Company is able to invest in product research and

development and enhanced merchandising and marketing

programs to drive sales. We continue to realize cost and

productivity gains through asset consolidations, new

equipment purchases and continuous process improvements.

In addition, we have made significant improvements in

safety programs across the enterprise that have received

world-class recognition from a major insurer.

As a result of these internal initiatives and an improving

market, Mohawk grew earnings per share before unusual

items 29 percent over 2011 to $3.78* in 2012. Operating

margins before unusual items increased 80 basis points,*

or 15 percent, during the 12-month period, with all

segments increasing earnings as a result of improved

product mix, productivity gains and price increases.

As a result, cash flow from operations increased from

$301 million to $588 million. The Company’s liquidity

and operating leverage remain strong. 

# To Our

Shareholders

1

2012 Annual Report *See pages 50 and 51 for Non-GAAP Reconciliation.

38395_Narr.indd 1 3/21/13 3:29 PM

## Innovation & Market Expansion

Drive Segment Profitability

The Mohawk segment posted operating profit before unusual

items of $169 million* in 2012, its best performance since

2007. In 2012, we introduced SmartStrand ® 

### Silk TM



### , a nextgeneration product line that introduces a revolutionary

new level of softness in carpet. In commercial markets,

we offered products with our high-performance Duracolor ®



### fiber that provides improved style in key commercial price

points. The Mohawk segment continues to benefit from

investments in additional fiber extrusion capacity, as well

as enhanced sales tools and techniques.

Innovation is driving performance in our Dal-Tile segment

also, where our Reveal Imaging ® 

### technology is used across

an increasing number of product lines, replicating a wide

variety of looks. Dal-Tile is aligning its product portfolio with

the market’s growing use of larger format tiles. During the

year, the segment balanced new product launches with a

reduction in total SKUs to improve manufacturing efficiencies

and inventory control.

Dal-Tile’s sales continue to outpace the growth of the

ceramic market in Mexico as it broadens its participation

across all price points and product categories. Our new

Salamanca plant’s location near raw materials, as well as

the important Mexico City market, provides cost and

distribution advantages. With the additional capacity of our

Mexican plants, we can also export more value-oriented

tile product to the U.S. market. Improved U.S. market

conditions, new products, expanded distribution through

all channels and sales growth in Mexico enabled Dal-Tile to record operating profit before unusual items of $127 million*

in 2012, a 22 percent increase over 2011.

As always, innovation is a priority for Unilin. In 2012, Unilin

expanded product offerings featuring its proprietary

GenuEdgeTM technology, which provides laminate flooring

with a realistic hardwood look. Unilin also added its patented

Uniclic ® 

### locking system and surface embossing technology

to luxury vinyl tile (LVT). Easy to install and maintain, LVT

mimics the look of either tile or wood surfaces. Among

existing product lines, the Quick-Step ® 

### brand offers patented

Uniclic installation technology, the longest and widest planks

in the industry and fashionable distressed surfaces. In

addition, new Scotchgard ®** 

### and ArmorMax TM 

### finishes

on our hardwood products offer an unprecedented level

of wear resistance and easy maintenance.

Beyond continued growth in its core U.S. and European

flooring business, Unilin has numerous expansion projects

under way around the world. In Russia, our laminate plant

successfully ramped up production levels during the year

and has further potential to increase productivity. We

also continue to be pleased with the performance of our

Australian laminate and hardwood distribution business,

which we acquired in 2011. In Brazil, we have established

a presence through a laminate joint venture with a fully

integrated forest products supplier. The need for more

energy-efficient building continues to drive demand in

Unilin’s insulation board business. The construction of a new

plant in France will help us meet this demand and better

service customers in southern Europe, while our existing

Belgian plant continues to supply those in the north. 

## EPS

excluding unusual items 

## * O pe rat i ng IncOME

excluding unusual items 

## *

in millions



### 2

Mohawk Industries, Inc. * See pages 50 and 51 for Non-GAAP Reconciliation.

** SCOTCHGARD ® is a registered trademark of 3M Company. 

### 2009 2010 2011 2012 $3.50

$2.00 $3.00

$2.50 $4.00



### $2.24 $2.52 $2.92 $3.78

2009 2010 2011 2012 $400

$250 $350

$300 $450



### $301 $327 $345 $398

38395_Narr.indd 2 3/22/13 10:59 AM

## G lobal Expansion Through A cquisition †



### The improvements in our infrastructure and our strong

balance sheet afforded us the opportunity in 2012 to

transition from a focus on capital conservation to aggressive

business expansion. We were able to identify three acquisitions

that are excellent fits with our existing businesses.

In late December 2012, we announced our intent to acquire

the Marazzi Group, one of the world’s largest tile companies.

Upon closing this $1.5 billion acquisition, financed through

a combination of cash and equity, Mohawk will become

the global leader in ceramic tile, the world’s most widely

utilized flooring product. With businesses in the U.S., Russia

and Europe, Marazzi will provide us with the resources to

strengthen our existing Dal-Tile operations in the United

States and to expand our presence in tile markets around

the world. Marazzi’s Russian operation has an integrated

supply chain, from manufacturing to distribution to retail,

with about half of its products sold directly to end-users.

Marazzi allows us to enter the European market with leading

positions in Italy, France and Spain while their building

market is at a low level but with significant upside potential.

In January 2013, we completed the purchase of Pergo

for approximately $150 million in cash. Pergo is one of the

leading manufacturers and a highly regarded brand in the

laminate flooring industry. Pergo’s products and distribution

channels in the U.S. and Europe complement our Quick-Step ®



### brand and create a number of product, operational and

administrative synergies. Pergo also provides opportunities

to enhance Unilin’s patent portfolio. At the beginning of 2013, we also announced our intent

to purchase Spano Group, a Belgian board manufacturer.

Spano’s line of chip and melamine boards, used in furniture

and building products, will strengthen our niche position

in that business and provide complementary offerings to

our Unilin products. Spano’s facilities are located near our

Unilin operations, allowing us to optimize manufacturing

assets, raw materials and production efficiencies.

These acquisitions, combined with our ongoing reinvestment

in our existing businesses, will position Mohawk for growth

over the next three to five years and affirm our confidence

in the long-term potential of the global flooring market. By

continuing to invest in product innovation and other growth

initiatives, exercising cost discipline and maintaining a strong

balance sheet, we will ensure that Mohawk is well positioned

to grow and reward its shareholders

–all of which is very

much Growth by Design.

Thank you for your support.

Jeff Lorberbaum

Chairman and Chief Executive Officer 

## N ET DEBT TO CA PIT A LIZ A TIO N

excluding unusual items 

## * N ET DEBT TO EBITD A

excluding unusual items 

## *

3

2012 Annual Report * See pages 50 and 51 for Non-GAAP Reconciliation.

† Completion of Marazzi and Spano acquisitions subject to

customary closing conditions. 

### 2009 2010 2011 2012 25%

16% 22%

19% 28% 

### 26.2% 25.8% 25.5%

17.7%

2009 2010 2011 2012 2.00

0.05 1.50

1.00 2.50 

### 2.2

2.0 2.0

1.3

38395_Narr.indd 3 3/21/13 3:29 PM

# During the past decade, Mohawk transformed its business from

that of a North American carpet manufacturer into one of the world’s

largest flooring companies with leadership positions in multiple

product categories, including carpet, rugs, tile, laminate and

hardwood. Today, we continue to expand into new, faster-growing

geographies through greenfield development, acquisition or joint

ventures, depending on the opportunity and characteristics of the

local market.

Europe

With the acquisitions of the

Pergo laminate and Marazzi

ceramic tile businesses,

combined with our existing

Quick-Step ® 

### brand, we

will have leading brands

in laminate, hardwood

and ceramic tile flooring

in Europe. 

## United States

We enjoy market leadership

positions in carpet, tile,

laminate, hardwood, rugs and

mats in the nearly $18 billion

U.S. flooring market. Our

vertically integrated operations

distribute products through all

channels in both the residential

and commercial sectors. 

## Mexico

The ceramic tile market in

Mexico on a volume basis is

similar in size to the U.S. market

and is among the fastestgrowing in the world. With

production from our recently

opened Salamanca plant,

Dal-Tile is able to participate

across a wider range of price

points and through a wider

variety of channels. 

# G rowth By Design 

# Expanding

Our Footprint

4

Mohawk Industries, Inc.

38395_Narr.indd 4 3/21/13 3:29 PM

## Australia and

Malaysia

We are the only national

laminate and hardwood

distributor in Australia. Our

hardwood facility in Malaysia

enables us to source product

for the market directly. 

## Emerging

Markets

Joint ventures with a vertically

integrated forest products

company in Brazil, a laminate

distribution company in India

and a vertically integrated tile

company in China, have allowed

us to establish a presence

in these three important

emerging markets. 

## Russia

The plant we opened in 2011

is supporting the distribution

of Quick-Step ® 

### brand flooring

in this growing laminate

market, while the addition

of Marazzi will give us the

leading brands in ceramic

tile in Russia.

5

2012 Annual Report

38395_Narr.indd 5 3/21/13 3:29 PM

# G rowth By Design



# A cquiring

N ew Businesses

Acquisitions have played a major role in Mohawk’s

expansion into new product categories and new

geographic markets. With the pending acquisition of

Marazzi Group and recently completed acquisition

of Pergo, Mohawk will become the worldwide leader

in ceramic tile and one of the world’s largest

manufacturers of laminate flooring. Our pending

acquisition of Spano will strengthen Unilin's niche

board business.

C eramic Tile

Ceramic tile is the most popular flooring in the world.

Manufacturers supply more than 110 billion square feet of

ceramic tile every year to the market, which continues to

grow at an annual rate of 5 to 6 percent. Marazzi is a global

leader in ceramic tile with widespread brand recognition

and a history of innovation and design sophistication. The

Company’s products, which include glazed ceramic and

porcelain, color-body porcelain, as well as new innovations

such as crystallized porcelain and single-fired thin tile,

are sold in more than 100 countries.

Today, Marazzi operates in three primary markets. In Russia,

where the tile market is more fragmented, Marazzi commands

a leading market position through a unique strategyof

manufacturing and distributing products. Across Russia

and in neighboring countries, Marazzi owns 70 retail stores

and is the sole brand sold in 225 franchised retail locations.

This model provides Marazzi with unique opportunities to

create greater brand recognition and consumer loyalty.



## 2002

Dal-Tile

Acquisition 

## 2005

Unilin

Acquisition 

## 2003

Lees

Acquisition 

## 2007

Columbia Wood

Acquisition 

## 2010

Sanfi JV

Investment

(China) 

## 2011

Australian

Distribution

Acquisition 

## 2013

Pergo

Marazzi*

Spano Group*

Acquisitions 

## 1992-2000

Focus on

Soft Surface 

# G rowth Through The Years

6

Mohawk Industries, Inc. *Completion subject to

customary closing conditions.

38395_Narr.indd 6 3/21/13 3:29 PM

### In the U.S., Marazzi is the second-largest tile supplier behind Dal-Tile and sells products through independent

distributors, home centers and a limited number of service centers. Marazzi is focused on the residential

market, which complements Dal-Tile’s stronger commercial presence. Between the two companies, we expect

to optimize manufacturing assets by dedicating plants to specific products and improving efficiencies, as

well as leveraging best practices and product innovation capabilities.

Marazzi enjoys one of the top market positions in Italy, Spain and France. With the ongoing challenge in

the European market, our strategy will be focused on improving the cost structure, increasing distribution

and enhancing sales effectiveness as we position the business for the eventual market recovery.



## Laminate Leadership

The addition of the highly regarded Pergo ® 

### brand will strengthen our leadership in the laminate category,

where we have been a major player since acquiring Unilin and its Quick-Step ® 

### brand in 2005. Each brand

brings unique strengths to the mid-to-high end of the market in the U.S. and Europe. In the U.S., Pergo

distribution is concentrated in the home center channel, which complements Quick-Step’s penetration in

specialty retail. Geography is the primary differentiator between the two brands in Europe, where Pergo

leads in the Nordic region and Quick-Step leads in Western Europe and the United Kingdom. With Pergo’s

integration into our existing business, we expect to realize synergies in the areas of manufacturing, product

innovation and patent technologies.



## Boards

The Spano acquisition will also provide benefits to our Unilin segment. With its broad chip and melamine

board offerings and its Belgian base of operations near Unilin, Spano will bring greater efficiencies to our

production and expand our product offerings. 

# Marazzi, Pergo and Spano each possess many of the same

compelling attributes that we found in Dal-Tile and Unilin,

including leadership in desirable markets, experienced management

teams, innovative product design and technologies, efficient

manufacturing and excellent customer service.

7

2012 Annual Report

38395_Narr.indd 7 3/21/13 3:29 PM

# We remain committed to growing our core businesses. From enhanced performance attributes to simplified

installation techniques, new product development across all of our businesses is a top priority and one in

which we are making significant investment. Our focus on innovation leads to products and technologies

that differentiate our brands in the marketplace and that appeal to a broad range of consumers and end-users. Wear-Dated ® Embrace TM

Durable, stain-resistant, ultra-soft premium carpet



# G rowth By Design 

# Innovating N ew ProductsCARPET

SmartStrand ® Silk TM

Unsurpassed softness and lifetime stain protectionTILE

Persico

Porcelain tile with the authentic look of

stone Next TM

Sophisticated commercial tile for large-scale projectsWOODANDLAMINATE

Quick-Step ® Reclaimé TM

Laminate that delivers the look of reclaimed hardwood



### 8

Mohawk Industries, Inc.

38395_Narr.indd 8 3/21/13 3:29 PM

### 9

2012 Annual Report 

# Form 10-K

38395_10K.indd 1 3/21/13 3:36 PM

## United States

Securities and Exchange Commission

Washington, D.C. 20549



# FORM 10-K

 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2012.

or



###  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 30701

(Address of principal executive offices, including Zip Code)

(706) 629-7721

(Registrant’s telephone number, including area code)

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 

###  No 

### 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Securities Act. Yes 

###  No 

### 

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 

###  No 

### 

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 

###  No 

### 

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. 

### 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the

Securities Exchange Act.

Large accelerated filer 

###  Accelerated filer 

### 

Non-accelerated filer 

###  Smaller reporting company 

### 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes 

###  No 

### 

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 (48,771,300 shares) on June 29, 2012 (the last business day of the Registrant’s most recently completed

fiscal second quarter) was $3,405,699,879. 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 20, 2013: 69,326,449 shares of Common Stock, $.01 par value.



### DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2013 Annual Meeting of Stockholders—Part III.

38395_10K.indd 2 3/21/13 3:36 PM

### 1

2012 Annual Report 

# Table of Contents

Part I Page

I tem 1. Business 2

I tem 1A. Risk Factors 6

I tem 1B. Unresolved Staff Comments 10

I tem 2. Properties 10

I tem 3. Legal Proceedings 11

I tem 4. Mine Safety Disclosures 11



# Part II

I tem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of

Equity Securities 11

I tem 6. Selected Financial Data 12

I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12

I tem 7A. Quantitative and Qualitative Disclosures About Market Risk 21

I tem 8. Consolidated Financial Statements and Supplementary Data 21

I tem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 45

I tem 9A. Controls and Procedures 45

I tem 9B. Other Information 45



# Part III

I tem 10. Directors, Executive Officers and Corporate Governance 46

I tem 11. Executive Compensation 46

I tem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 46

I tem 13. Certain Relationships and Related Transactions, and Director Independence 46

I tem 14. Principal Accounting Fees and Services 46



# Part IV

I tem 15. Exhibits, Financial Statement Schedules 47

38395_10K.indd 1 3/21/13 3:36 PM

### 2

Mohawk Industries, Inc. 

# PART I

I tem 1. B usiness



### General

Mohawk Industries, Inc. (“Mohawk” or the “Company”) 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 United States, as well as a leading producer of laminate flooring

in the U.S. and Europe. The Company has recently expanded its

international presence through investments in Australia, Brazil,

China, France, Mexico and Russia. The Company had annual net

sales in 2012 of $5.8 billion. Approximately 83% of this amount was

generated by sales in North America and approximately 17% 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 16 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 remodeling and new construction.

The Mohawk segment markets and distributes its carpets, rugs,

ceramic tile, laminate, hardwood and resilient under various brands,

including the following premium brand names: Mohawk ®

, Aladdin ®

, Mohawk ColorCenters ®

, Mohawk Floorscapes ®

, Portico ®

, Mohawk

Home ®

, Bigelow ®

, Durkan ®

, Horizon ®

, Karastan ®

, Lees ®

, Merit ® and

SmartStrand ®

. 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 and natural

stone products used in the residential and commercial markets for

both remodeling and new construction. In addition, Dal-Tile sources,

markets and distributes other tile related products. Most of the

Dal-Tile segment’s ceramic tile products are marketed under the

Dal-Tile ® and American Olean ® brand names and sold through

independent distributors, home center retailers, individual floor

covering retailers, ceramic specialists, commercial dealers and

commercial end users. 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 remodeling and new

construction in Europe and the U.S. Unilin is one of the leaders in

laminate flooring technology, having commercialized direct pressure

laminate (“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 from which the company generates licensing revenue. Unilin sells

its flooring products under the Quick-Step ®

, Columbia Flooring ®

, Century Flooring ® and Mohawk ® 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.

In Europe, Unilin also produces roofing systems, insulation panels

and other wood products. In 2012, Unilin began marketing luxury

vinyl tiles in Europe. This product features UNICLIC ® technology for

easy installation.



### Recent Developments

In January 2013, Unilin purchased Pergo, a leading manu facturer

of

premium laminate flooring in the U.S. and Europe. Pergo com

plements our specialty distribution network in the United States,

leverages our geographic position in Europe, expands our geographic

reach to the Nordic countries and India and enhances our

patent portfolio.

On December 20, 2012, the Company entered into a definitive

share purchase agreement (the “Share Purchase Agreement”) to

acquire Fintiles S.p.A. and its subsidiaries (collectively, the “Marazzi

Group”), a global producer of tile products for residential and

commercial applications in Russia, the United States and Europe,

pursuant to which the Company will acquire all of the outstanding

shares of the Marazzi Group and retire all outstanding debt of the

Marazzi Group for an estimated transaction value of approximately

€ 1,170 million, or $1,504.4 million, subject to certain adjustments

set forth in the share purchase agreement and plus transaction

expenses. The Company expects to complete the transaction during

the first half of

2013 pending customary governmental approvals

and the satisfaction of other closing conditions.

On January 28, 2013, the Company entered into an agreement

to purchase Spano Invest NV, a Belgian panel board manufacturer,

for € 125 million or $168 million in cash. The Company expects to

complete the transaction during the second half of

2013 pending

customary governmental approvals and the satisfaction of other

closing conditions.



### Industry

In 2011, the primary categories of the U.S. floor covering industry,

based on sales dollars, were carpet and rug (53%), resilient and

rubber (14%), ceramic tile (12%), hardwood (10%), stone (6%)

and laminate (5%). Each of these categories is 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.

Domestic carpet and rug sales volume of U.S. manufacturers was

approximately 1.1 billion square yards, or $9.5 billion, in 2011. The

carpet and rugs category has two primary markets, residential and

commercial. In 2011, the residential market made up approximately

68% of industry amounts shipped and the commercial market

comprised approximately 32%. Sales of U.S. carpet and rug are

distributed to the residential market for both new construction and

residential replacement.

The U.S. ceramic tile industry shipped 2.1 billion square feet,

or $2.2 billion, in 2011. The ceramic tile industry’s two primary

markets, residential applications and commercial applications,

38395_10K.indd 2 3/21/13 3:36 PM

### 3

2012 Annual Report represent 56% and 44% of the 2011 industry total, respectively.

Of

the total residential market, 73% of the dollar values of shipments

were made in response to residential replacement demand.

In 2011, 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 2011 industry total, respectively. Sales of U.S.

laminate flooring are primarily distributed through the residential

replacement market. In 2011, the European laminate industry

produced approximately 4.9 billion square feet which accounted

for approximately 14% of the European floor covering market.

In 2011, the U.S. hardwood industry shipped 0.9 billion square

feet, representing a market of approximately $1.8 billion. The

hardwood industry’s two primary markets, residential applications

and commercial applications, represent 77% and 23% of the 2011

industry total, respectively. Sales of U.S. hardwood are primarily

distributed to the residential market for both new construction and

residential replacement.

In 2011, 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 2011 industry total, respectively. Sales of U.S. stone flooring

are primarily distributed to the residential market for both new

construction and residential replacement.

In 2011, the U.S. resilient and rubber industry shipped 3.2 billion

square feet, representing a market of approximately $2.4 billion.

The resilient and rubber industry’s two primary markets, residential

applications and commercial applications, represent 43% and 57%

of

the 2011 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,

sources, 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 acces

sories. The Mohawk segment positions product lines in all price

ranges and emphasizes quality, style, performance and service.

The Mohawk segment markets and distributes its 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 through private labeling programs. Sales to residential

customers represent a significant portion of the total industry and

the majority of the segment’s carpet and rug sales.

The Company has positioned its premier residential carpet and

rug brand names across all price ranges. The Mohawk, Horizon,

WundaWeve ®

, SmartStrand and Karastan brands 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 brands 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, Mohawk LVT and Congoleum, across

all price ranges. The Company offers marketing and advertising support through

residential 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 Company produces and markets its commercial broadloom

and modular carpet tile under the Mohawk Group which includes

the following brands: Bigelow, Lees, and Karastan Contract. It markets

its hospitality carpet under the Durkan brand which includes the

Merit collection of hospitality carpet. The commercial customer base

is divided into several channels: corporate office space, education

institutions, healthcare facilities, retail space and institutional and

government facilities. Different purchase decision makers and

decision-making processes exist for each channel.

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, sources, distributes

and markets a broad line of ceramic tile, porcelain tile and natural

stone products. Products are distributed through separate distribution channels consisting of independent distributors, home center

retailers, individual floor covering retailers, ceramic specialists and

commercial dealers and directly to commercial end users. 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. The Company is

focused on sales growth opportunities through innovative products

and programs in both the residential and commercial channels.

A network of Company-owned 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 service centers

provide distribution points for customer pick-up, local delivery and

showrooms for product selection and design assistance. 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 service centers that

service both residential and commercial customers.

In addition to Company-owned service centers, the Company

uses regional distribution centers which include the utilization of the

Company’s truck fleet to help deliver high-quality customer service

with shorter lead times, increased order fill rates and improved

on-time deliveries to customers.

38395_10K.indd 3 3/21/13 3:36 PM

### 4

Mohawk Industries, Inc. Unilin Segment

The Unilin segment designs, manufactures, 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 and also directly through home centers and mass

merchandisers. 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, Mohawk and Pergo ® brands. Unilin also sells private label

laminate and hardwood flooring products. The Company believes

Quick-Step and Pergo are leading brand names in the U.S. and

European flooring industry. In addition, Unilin markets and sells

insulation panels in Europe. The segment also licenses its UNICLIC

and Pergo intellectual property to floor manufacturers throughout

the world.

In the U.S., Europe and Asia, the Company uses regional

distribution centers and direct shipping from manufacturing facilities

to provide high-quality customer service and enhance the

Company’s ability to plan and manage inventory requirements.



### Advertising and Promotion

The Company promotes its brands through advertising in television,

print, social and internet media, as well as cooperative advertising,

point-of-sale displays, sponsorship of a European cycling team and

marketing literature. The Company also continues to rely on the

substantial brand name recognition of its product lines. The cost of

point-of-sale displays and product 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 triexta fiber, polyester, nylon and polypropylene, and

yarn processing, backing manufacturing, tufting, weaving, dyeing,

coating and finishing. The Mohawk segment continues to invest

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

in the U.S. and Mexico. 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

and its ability to utilize the industry’s newest technology, as well as

the industry’s largest offering of trim and angle pieces. In addition,

Dal-Tile also imports or sources a portion of its product to supplement

its product offerings. The Dal-Tile segment continues to invest in

capital expenditures, principally in state-of-the-art equipment, to

increase manufacturing capacity, improve efficiency and develop

new capabilities. The segment is expanding its international presence through investments in China and Mexico and through the pending

acquisition of the Marazzi Group in Europe and Russia.

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 equipment

that results in competitive manufacturing in terms of cost and

flexibility. In addition, Unilin has significant manufacturing capability

for both engineered and prefinished solid wood flooring for the U.S.

and European markets. The Unilin segment continues to invest in

capital expenditures, principally in new plants and state-of-the-art

equipment, to increase manufacturing capacity, improve efficiency

and develop new capabilities. The segment is expanding its inter

national presence through investments in Australia, Brazil, France

and Russia, and with the recent acquisition of Pergo, the Nordic

countries and India. 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, triexta, polyester, polypropylene, synthetic backing

materials, latex and various dyes and chemicals, all 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 six major suppliers. If these suppliers were unable

to satisfy the requirements, the Company believes that alternative

supply arrangements would be available. Although the market for

carpet raw materials is sensitive to temporary disruptions, the carpet

and rug business has not experienced a significant shortage 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 quarry tile. The Company purchases a

number of different grades of clay for the manufacture of its nonquarry 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

75% 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

38395_10K.indd 4 3/21/13 3:36 PM

### 5

2012 Annual Report 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.



### 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 five North American carpet and rug manu

facturers (including their North American and foreign divisions) in

2011 had carpet and rug sales in excess of $7.1 billion of the over

$9.9 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 2011 net 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 world. The Company believes it is substantially

larger than the next largest competitor in the United States 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

licensors of laminate flooring in the world, with a focus on high-end

products. The Company believes it is one of the largest manufac

turers 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,

patented technologies and brands, which allows the Company to

distinguish its laminate and hardwood flooring products in the areas

of

finish, quality, installation and assembly and provides a source of

additional revenue for the Company from licensing royalties.



### 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, Century Flooring, Columbia Flooring, Dal-Tile, Duracolor ®

, didit, Durkan, Elka ®

, Everset fibers ®

, Horizon, Karastan, Lees, Merit,

Mohawk, Mohawk ColorCenter, Mohawk Floorscapes, Mohawk

GreenWorks ®

, Mohawk Home, Pergo, Portico, PureBond ®

, Quick-Step, SmartStrand, Ultra Performance System ®

, UNICLIC,

UNILIN ®

, Utherm ® and Wear-Dated ®

. These trademarks represent

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. some of which the Company licenses to manufacturers

and distributors throughout the world. The most important of these

patent families is the UNICLIC family, which include the snap,

pretension, clearance and the beveled edge patent and are not

expected to expire until 2017, protecting Unilin’s interlocking

laminate flooring technology. The recent acquisition of Pergo potentially enhances the intellectual property revenue stream with new

“clicking” technology that could be licensed until 2021. Also, the

marketability of the Company’s furniture technology utilizing the

“click” methodology continues to develop. The licensing and related

furniture products are in the early stages of introduction into the

European market. The Company believes these and other ongoing

innovations will partially offset the impact of the future expiration of

the UNICLIC family patents. The licensing revenue from patents

included in the Unilin results was approximately € 80 million in

2012. The licensing revenue from patents generated in the Unilin

operations is partially offset by various expenses such as amortization,

developing new technologies, filing new patents, supporting

existing patents, defending patent lawsuits, collection and auditing

of

receivables, bad debt and other administrative activities. The

Company continues to build upon these patents, trademarks and

its proven innovation in pursuing growth opportunities.



### 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 2012, no single customer accounted for more than 5%

of

total net sales, and the top 10 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, 2012, the Company employed approximately

25,100 persons consisting of approximately 18,200 in the U.S.,

approximately 3,600 in Mexico, approximately 2,200 in Europe,

approximately 800 in Malaysia, approximately 200 in Canada and

approximately 100 in Russia. The majority of the Company’s

38395_10K.indd 5 3/21/13 3:36 PM

### 6

Mohawk Industries, Inc. 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 recent 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”).

I tem 1A. R is k F actors



### 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, avail

ability of

credit and demand for housing. The downturn in

the U.S.

and global economies, along with the residential and commercial

markets in

such economies, negatively impacted the floor covering

industry and the Company’s business. Although these difficult

economic conditions have improved, there may be additional

downturns that could cause the industry to

deteriorate further.

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

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 construction

activity, including new construction, which is cyclical in nature and

recently experienced a downturn. The downturn in the U.S. and

global economies, along with the residential and commercial 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 lagged during

the downturn. Although the difficult economic conditions have improved, there may be additional downturns that could cause

the industry to 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 business.

The prices of raw materials and fuel-related costs 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 business may be materially adversely affected.

The Company faces intense competition in

the flooring industry

that 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 business.

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.

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, market conditions could impact the Company’s ability to

obtain financing in the future, including any financing necessary to

refinance existing indebtedness, 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 Moody’s Investors

Service, Inc. (“Moody’s”), Standard & Poor’s Financial Services, LLC

(“S&P”) and Fitch, Inc. 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. Any

future downgrades in the Company’s credit ratings could increase

the cost of its existing credit and could adversely affect the cost of

and ability to obtain additional credit in the future. A downgrade of

the Company’s credit rating by Moody’s or S&P would increase

interest expense on the Company’s senior unsecured $900.0 million

notes by 25 basis points per downgrade. The Company can provide

no assurances that downgrades will not occur.

38395_10K.indd 6 3/21/13 3:36 PM

### 7

2012 Annual Report If

the Company were unable to

meet certain covenants contained

in

its existing credit facilities, it may be required to

repay

borrowings under the credit facilities prior to

their maturity and

may lose access to

the credit facilities for additional borrowings

that may be necessary to

fund its operations, which could have

a

material adverse effect on the Company’s business.

On July 8, 2011, the Company entered into a $900.0 million

five-year, senior, secured revolving credit facility (the “Senior Credit

Facility”). On January 20, 2012, the Company entered into an

amendment to the Senior Credit Facility that provides for an

incremental term loan facility in the aggregate principal amount of

$150.0 million. As of December 31, 2012, the amount utilized

under the Senior Credit Facility including the term loan was

$251.2 million resultingin a total of $793.1 million available underthe

Senior Credit Facility. The amount utilized included $153.9 million

of

borrowings, $46.8 million of standby letters of credit guaranteeing

the Company’s industrial revenue bonds and $50.5 million of

standby letters of credit related to various insurance contracts and

foreign vendor commitments. In addition, on December 19, 2012,

the Company entered into a three-year on-balance sheet U.S. trade

accounts receivable securitization agreement (the “Securitization

Facility”) that allows the Company to borrow up to $300 million based

on available accounts receivable and is secured by the Company’s

U.S. trade accounts receivable. At December 31, 2012, the amount

utilized under the Securitization Facility was $280.0 million.

During the term of the credit facilities, if the Company’s cash flow

is worse than expected or the U.S. trade accounts receivables are

lower than expected, the Company may need to refinance all or a

portion of its indebtedness through a public and/or private debt

offering or a new bank facility 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 material adverse effect

on the Company’s financial condition and results of operations.

Additionally, the credit facilities include certain affirmative and

negative covenants that impose restrictions on the Company’s

financial and business operations, including limitations on liens,

indebtedness, 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 Consolidated Interest

Coverage Ratio of at least 3.0 to 1.0 and a Consolidated Net Leverage

Ratio of no more than 3.75 to 1.0 for the Senior Credit Facility, each

as of the last day of any fiscal quarter and as defined in the Senior

Credit Facility. A failure to comply with the obligations contained in

our current or future credit facilities or indentures relating to our

outstanding public debt could result in an event of default or an

acceleration of debt under other instruments that may contain

cross-acceleration or cross-default provisions. We cannot be certain

that we would have, or be able to obtain, sufficient funds to make

these accelerated payments.

The Company may be unable to

obtain raw materials or

sourced

product 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; and wood, paper, and resins which

are used primarily in the Company’s laminate flooring business.

In addition, the Company sources finished goods as well. For certain

of

such raw materials and sourced products, 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 or sourced products

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 or sourced

products used in the Company’s business or in the supply of suitable

substitute materials or products would disrupt the Company’s

operations, which could have a material adverse effect on the

Company’s business.

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, other asset

impairments, 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 arrange

ments 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.

38395_10K.indd 7 3/21/13 3:36 PM

### 8

Mohawk Industries, Inc.

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 have a

material adverse effect on the Company’s business, 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 have a material adverse effect on the Company’s

business, 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.

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 to successfully 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 manufactures, sources and sells many products

internationally and is

exposed to

risks associated with doing

business globally.

The Company’s international activities are significant to its

manufacturing capacity, revenues and profits, and the Company is

further expanding internationally. The Company increasingly sells

products, operates plants and invests in companies in other parts

of

the world. Currently, the Company has significant operations in

Europe, Malaysia and Australia for its Unilin division (including

Belgium, Netherlands, France, Sweden and Russia) and Mexico for

its ceramic tile business, which will expand to Western Europe and

Russia following the acquisition of the Marazzi Group. In addition, the

Company has invested in joint ventures in Brazil and China related

to laminate flooring and ceramic tile, respectively. The business,

regulatory and political environments in these countries differ from

those in the U.S. 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;

• 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;

• tax inefficiencies and currency exchange controls that may

adversely impact its ability to repatriate cash from non-U.S.

subsidiaries; and

• compliance with laws governing international relations,

including those that prohibit improper payments to

government officials.

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.

Negative tax consequences could materially and adversely affect

the Company’s business, financial condition, cash flows or

results

of

operations.

We are subject to the tax laws of the many jurisdictions in which we

operate. The tax laws are complex, and the manner in which they

apply to our facts is sometimes open to interpretation. In calculating

the provision for income taxes, we must make judgments about the

application of these inherently complex tax laws. Our domestic and

international tax liabilities are largely dependent upon the distribution of profit before tax among these many jurisdictions. However, it

also includes estimates of additional tax which may be incurred for

tax exposures and reflects various estimates and assumptions,

including assessments of future earnings of the Company that could

impact the valuation of our deferred tax assets. Our future results of

operations and tax liability could be adversely affected by changes

in the effective tax rate as a result of a change in the mix of earnings

in countries with differing statutory tax rates, changes in the overall

profitability of the Company, changes in tax legislation and rates,

changes in generally accepted accounting principles, changes in

the valuation of deferred tax assets and liabilities, changes in the

amount of earnings permanently reinvested offshore, the results of

audits and examinations of previously filed tax returns, and ongoing

assessments of our tax exposures.

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 have a

material adverse effect on

the Company’s business.

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

38395_10K.indd 8 3/21/13 3:36 PM

### 9

2012 Annual Report 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 Environmental Protection Agency

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 have a material

adverse effect on the Company’s business.

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 have a

material adverse effect on the

Company’s business.

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 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 are not

successful, could adversely affect the Company’s reputation or

the reputation and sales of its products.

The Company’s inability to

protect its intellectual property

rights or

collect license revenues, particularly with respect to

the Company’s patented laminate flooring technology and its

registered trademarks, could have a

material adverse effect on

the Company’s business.

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,

maintain and license 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.

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 and Pergo

family of patents, which protects its interlocking laminate flooring

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 through

license agreements, 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 could have a material effect

on the Company’s business.

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 and could

have a material effect on the Company’s business.

The Company generates license revenue from certain patents in

the UNICLIC and Pergo families that are not expected to expire until

2017 and 2021, respectively. The Company continues to develop

new sources of revenue to offset the expiration in its UNICLIC and

Pergo family of patents. The failure to develop alternative revenues

could have a material adverse effect on the Company’s business.

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 con

fidential 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.

38395_10K.indd 9 3/21/13 3:36 PM

### 10

Mohawk Industries, Inc. 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 authorizing the

use of infringing technology. There can be no assurance that licenses

for disputed technology or 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 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

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 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.

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 the 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 significant or prolonged decrease in the Company’s market

capitalization, including a decline in stock price, or a negative longterm 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.



### Forward-Looking Information

Certain of the statements in this Form 10-K, particularly those

anticipating future performance, business prospects, growth and

operating strategies, and similar matters, and those that include the

words “could,” “should,” “believes,” “anticipates,” “expects” and

“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; inflation in raw material prices and other input costs;

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; interna

tional operations; introduction of new products; rationalization of

operations; tax, product and other claims; litigation; and other risks

identified in Mohawk’s SEC reports and public announcements.

I tem 1B. U nreso lv ed S taff C omments

None.

I tem 2. P roperties

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 Dal-Tile Unilin

Segment Segment Segment

Primary Purpose Owned Leased Owned Leased Owned Leased

Manufacturing 17.7

— 4.6 0.1 8.7 0.4

Selling and Distribution 3.7 4.8 0.4 7.4 0.1 0.3

Other 0.9 0.1 0.2 0.3 0.1

—

Total 22.3 4.9 5.2 7.8 8.9 0.7

38395_10K.indd 10 3/21/13 3:36 PM

### 11

2012 Annual Report 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.

I tem 3. Lega l P roceedings

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.

Beginning in August 2010, a series of civil lawsuits were initiated

in several U.S. federal courts alleging that certain manufacturers

of

polyurethane foam products and competitors of the Company’s

carpet underlay division had engaged in price fixing in violation of

U.S. antitrust laws. Mohawk has been named as a defendant in a

number of the individual cases (the first filed on August 26, 2010),

as well as in two consolidated amended class action complaints,

the first filed on February 28, 2011, on behalf of

a class of all direct

purchasers of polyurethane foam products, and the second filed

on March 21, 2011, on behalf of

a class of indirect purchasers.

All pending cases in which the Company has been named as a

defendant have been filed in or transferred to the U.S. District Court

for the Northern District of Ohio for consolidated pre-trial proceedings

under the name In re: Polyurethane Foam Antitrust Litigation,

Case No. 1:10-MDL-02196.

In these actions, the plaintiffs, on behalf of

themselves and/or

a class of purchasers, seek three times the amount of unspecified

damages allegedly suffered as a result of alleged overcharges in the

price of polyurethane foam products from at least 1999 to the

present. Each plaintiff also seeks attorney fees, pre-judgment and

post-judgment interest, court costs, and injunctive relief against

future violations. In December 2011, the Company was named as a

defendant in a Canadian Class action, Hi !

Neighbor Floor Covering

Co. Limited v. Hickory Springs Manufacturing Company, et.al., filed

in

the Superior Court of

Justice of

Ontario, Canada and Options

Consommateures v. Vitafoam, Inc. et.al.

, filed in the Superior Court

of

Justice of Quebec, Montreal, Canada, both of which allege similar

claims against the Company as raised in the U.S. actions and seek

unspecified damages and punitive damages. The Company denies

all of the allegations in these actions and will vigorously defend itself.

The Company believes that adequate provisions for resolution of

all contingencies, claims and pending litigation have been made for

probable losses that are reasonably estimable. These contingencies

are subject to significant uncertainties and we are unable to

estimate the amount or range of loss, if any, in excess of amounts

accrued. The Company does not believe that the ultimate outcome

of

these actions will have a material adverse effect on its financial

condition but could have a material adverse effect on its results

of

operations, cash flows or liquidity 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 financial

condition but could have a material adverse effect on its results of

operations, cash flows or liquidity in a given quarter or year.

I tem 4. M ine S afety D isc l osures

Not applicable.



# PART II

I tem 5. M ar k et R egistrant ’ s C ommon Eq uity

, R e l ated S toc kh o l der M atters I ssuer

P urc h ases Eq uity S ecurities



### 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

2011

First Quarter $63.12 54.42

Second Quarter 68.86 57.43

Third Quarter 61.47 39.93

Fourth Quarter 61.30 40.19

2012

First Quarter 68.16 57.62

Second Quarter 75.44 60.21

Third Quarter 82.76 64.22

Fourth Quarter 93.95 77.67

As of February 20, 2013, there were approximately 297 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.

The Company did not repurchase any of its common stock during

the fourth quarter of 2012.

38395_10K.indd 11 3/21/13 3:36 PM

### 12

Mohawk Industries, Inc. I tem 6. S e l ected F inancia l D ata

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 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,

(In thousands, except per share data) 2012 2011 2010 2009 2008

Statement of operations data:

Net sales (a) $5,787,980 5,642,258 5,319,072 5,344,024 6,826,348

Cost of sales (a) 4,297,922 4,225,379 3,916,472 4,111,794 5,088,584

Gross profit 1,490,058 1,416,879 1,402,600 1,232,230 1,737,764

Selling, general and administrative expenses 1,110,550 1,101,337 1,088,431 1,188,500 1,318,501

Impairment of goodwill and other intangibles (b)

— — — — 1,543,397

Operating income (loss) 379,508 315,542 314,169 43,730 (1,124,134)

Interest expense 74,713 101,617 133,151 127,031 127,050

Other expense (income), net (c) 303 14,051 (11,630) (5,588) 21,288

Earnings (loss) before income taxes 304,492 199,874 192,648 (77,713) (1,272,472)

Income tax expense (benefit) (d) 53,599 21,649 2,713 (76,694) 180,062

Net earnings (loss) 250,893 178,225 189,935 (1,019) (1,452,534)

Less: Net earnings attributable to the noncontrolling interest 635 4,303 4,464 4,480 5,694

Net earnings (loss) attributable to Mohawk Industries, Inc. $ 250,258 173,922 185,471 (5,499) (1,458,228)

Basic earnings (loss) per share $ 3.63 2.53 2.66 (0.08) (21.32)

Diluted earnings (loss) per share $ 3.61 2.52 2.65 (0.08) (21.32)

Balance sheet data:

Working capital (includes short-term debt) $1,721,397 1,296,818 1,199,699 1,474,978 1,369,333

Total assets (b and d) 6,303,684 6,206,228 6,098,926 6,391,446 6,446,175

Long-term debt (including current portion) 1,382,942 1,586,439 1,653,582 1,854,479 1,954,786

Total stockholders’ equity 3,719,617 3,415,785 3,271,556 3,200,823 3,153,803

(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, the Company received $7,730 in refunds from the U.S. government in reference to settlement of customs disputes dating back to 1986.

(d) In 2008, the Company recorded a valuation allowance of approximately $253,000 against the deferred tax asset recorded in 2007 as a result of a change in residency the

Company implemented in one of its foreign subsidiaries.

I tem 7. M anagement ’ s D iscussion A na l ysis

F inancia l C ondition R esu l ts O perations



### Overview

In 2011, the primary categories of the U.S. floor covering industry,

based on sales dollars, were carpet and rug (53%), resilient and

rubber (14%), ceramic tile (12%), hardwood (10%), stone (6%)

and laminate (5%). Each of these categories is 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 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 distri

bution 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 Companyoperated service centers using company-operated trucks, common

carriers or rail transportation. The segment’s product lines are sold

through Company-owned 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.

38395_10K.indd 12 3/21/13 3:36 PM

### 13

2012 Annual Report Net earnings attributable to the Company were $250.3 million, or

diluted EPS of $3.61 for 2012 compared to net earnings attributable

to the Company of $173.9 million, or diluted EPS of $2.52 for 2011.

The increase in EPS was primarily attributable to the favorable net

impact of price and product mix, improved manufacturing efficiencies, higher sales volume, lower interest expense and the change in

the net impact of unrealized foreign exchange gains/losses, partially

offset by higher input costs, increases in costs to support new product introductions and geographic expansion and higher tax expense

primarily attributable to the geographic dispersion of earnings.

For the year ended December 31, 2012, the Company generated

$587.6 million of cash from operating activities which it partially used

for capital expenditures, repayment of borrowings, the purchase of

the non-controlling interest within the Dal-Tile segment and a joint

venture investment. As of December 31, 2012, the Company had

cash and cash equivalents of $477.7 million, of which $42.6 million

was in the United States and $435.1 million was in foreign countries. 

### Recent Developments

On December 20, 2012, the Company entered into a definitive

share purchase agreement to acquire Fintiles S.p.A. and its

subsidiaries (collectively, the “Marazzi Group”), for an estimated

transaction value of approximately € 1,170 million, or $1,504.4 million.

The Company expects to complete the transaction during the first

half of

2013 pending customary governmental approvals and the

satisfaction of other closing conditions.

On January 10, 2013, the Company announced that it completed

the acquisition of Pergo, a leading manufacturer of premium laminate

flooring. The Company remitted approximately $150 million in cash

for the acquisition using both European and U.S. cash available.

On January 28, 2013, the Company entered into an agreement to

purchase Spano Invest NV, a Belgian panel board manufacturer, for

€ 125 million ($168 million) in cash. This transaction is expected to

close in the second half of

2013 pending customary governmental

approvals and the satisfaction of other closing conditions.

The results of operations do not include the effect of the foregoing

acquisitions, as the Pergo acquisition closed after December 31,

2012, and the Marazzi and Spano acquisitions remain pending.



### Results of Operations

Following are the results of operations for the last three years:

For the Years Ended December 31,

(In millions) 2012 2011 2010

Statement of operations data:

Net sales $5,788.0 100.0% 5,642.3 100.0% 5,319.1 100.0%

Cost of sales (1) 4,297.9 74.3% 4,225.4 74.9% 3,916.5 73.6%

Gross profit 1,490.1 25.7% 1,416.9 25.1% 1,402.6 26.4%

Selling, general and administrative expenses (2) 1,110.6 19.2% 1,101.3 19.5% 1,088.4 20.5%

Operating income 379.5 6.6% 315.6 5.6% 314.2 5.9%

Interest expense (3) 74.7 1.3% 101.6 1.8% 133.2 2.5%

Other expense (income) (4) 0.3 0.0% 14.1 0.2% (11.6) (0.2)%

Earnings before income taxes 304.5 5.3% 199.9 3.5% 192.6 3.6%

Income tax expense 53.6 0.9% 21.7 0.4% 2.7 0.1%

Net earnings 250.9 4.3% 178.2 3.2% 189.9 3.6%

Less: Net earnings attributable to the noncontrolling interest 0.6 0.0% 4.3 0.1% 4.4 0.1%

Net earnings attributable to Mohawk Industries, Inc. $ 250.3 4.3% 173.9 3.1% 185.5 3.5%

(1) Cost of sales includes:

Restructuring charges $ 14.8 0.3% 17.5 0.3% 12.4 0.2%

(2) Selling, general and administrative expenses include:

Restructuring charges 3.7 0.1% 5.7 0.1% 0.8

—

Lease charges

— — 6.0 0.1%

— —

(3) Interest expense includes:

Debt extinguishment costs

— — 1.1

— 7.5 0.1%

(4) Other expense (income) includes:

Unrealized foreign currency losses

— — 9.1 0.2%

— —

U.S. customs refund

— — — — (7.7) (0.1)%

Acquisitions purchase accounting

— — — — 1.7

—

38395_10K.indd 13 3/21/13 3:36 PM

### 14

Mohawk Industries, Inc. 

### Year Ended December 31, 2012, as Compared

with Year Ended December 31, 2011

Net sales

Net sales for 2012 were $5,788.0 million, reflecting an increase

of

$145.7 million, or 2.6%, from the $5,642.3 million reported for

2011. The increase was primarily driven by the favorable net impact

of

price and product mix of approximately $146 million and higher

volume of approximately $92 million, partially offset by the net

impact of unfavorable foreign exchange rates of approximately

$92 million.

Mohawk Segment— Net sales decreased $15.6 million, or

0.5%, to $2,912.1 million for 2012, compared to $2,927.7 million

for 2011. The decrease was primarily driven by lower volume of

approximately $142 million, which was partially offset by the

favorable net impact of price and product mix of approximately

$126 million. The volume decreases were primarily attributable to

the timing of carpet product transitions in the home center channel

and lower demand for rug products in the retail channel.

Dal-Tile Segment— Net sales increased $162.1 million, or 11.1%,

to $1,616.4 million for 2012, compared to $1,454.3 million for

2011. The increase was primarily driven by volume increases of

approximately $157 million and the favorable net impact of price

and product mix of approximately $11 million, partially offset by the

net impact of unfavorable foreign exchange rates of approximately

$6 million. The volume increases were primarily attributable to

improvement in the U.S. commercial and residential channels and

growth in the Mexican market.

Unilin Segment— Net sales increased $5.5 million, or 0.4%,

to $1,350.3 million for 2012, compared to $1,344.8 million for

2011. The increase was primarily driven by volume increases of

approximately $84 million and the favorable net impact of price

and product mix of approximately $8 million, partially offset by the

impact of unfavorable foreign exchange rates of approximately

$86 million. The volume increases were primarily attributable to

flooring products primarily in Russia, Australia and North America,

as well as increases in wood panel and insulation products.

Quarterly net sales and the percentage changes in net sales by

quarter for 2012 versus 2011 were as follows (dollars in millions):

2012 2011 Change

First quarter $1,409.0 1,343.6 4.9%

Second quarter 1,469.8 1,477.9 (0.5)%

Third quarter 1,473.5 1,442.5 2.1%

Fourth quarter 1,435.7 1,378.3 4.2%

Total year $5,788.0 5,642.3 2.6%



### Gross profit

Gross profit for 2012 was $1,490.1 million (25.7% of net sales), an

increase of $73.2 million or 5.2%, compared to gross profit of

$1,416.9 million (25.1% of net sales) for 2011. The increase in

gross profit dollars was primarily attributable to the favorable net

impact of price and product mix of approximately $62 million,

operations productivity of approximately $52 million and higher

sales volume of approximately $22 million, partially offset by higher

input costs of approximately $42 million and the impact of

unfavorable foreign exchange rates of approximately $19 million. 

### Selling, general and administrative expenses

Selling, general and administrative expenses for 2012 were

$1,110.6 million (19.2% of net sales), compared to $1,101.3 million

(19.5% of net sales) for 2011. Selling, general and administrative

expenses decreased as a percentage of net sales compared to the

prior year primarily due to increased sales volume. The increase in

selling, general and administrative expenses in dollars was primarily

driven by increases in costs to support new product introductions

and geographic expansion of approximately $31 million, partially

offset by favorable foreign exchange rates of approximately

$15 million and lower amortization costs of approximately $9 million.



### Operating income

Operating income for 2012 was $379.5 million (6.6% of net sales)

reflecting an increase of $64.0 million, or 20.3%, compared to

operating income of $315.5 million (5.6% of net sales) for 2011.

The increase in operating income was primarily driven by the

favorable net impact of price and product mix of approximately

$62 million, operations productivity of approximately $52 million

and sales volume increases of approximately $22 million, partially

offset by higher input costs of approximately $42 million and

increases in selling costs to support new product introductions,

geographic expansion and higher sales volume of approximately

$31 million.

Mohawk Segment— Operating income was $158.2 million

(5.4% of segment net sales) for 2012 reflecting an increase of

$48.3 million compared to operating income of $109.9 million

(3.8% of segment net sales) for 2011. The increase in operating

income was primarily driven by the favorable net impact of price

and product mix of approximately $67 million, higher operations

productivity of approximately $18 million and lower restructuring

costs of approximately $15 million, partially offset by lower sales

volume of approximately $36 million and higher input costs of

approximately $18 million.

Dal-Tile Segment— Operating income was $121.0 million (7.5% of

segment net sales) for 2012 reflecting an increase of $19.7 million

compared to operating income of $101.3 million (7.0% of segment

net sales) for 2011. The increase in operating income was primarily

driven by sales volume increases of approximately $42 million

and favorable foreign exchange rates of approximately $6 million,

partially offset by increases in selling costs to support new product

introductions and higher sales volume of approximately $16 million,

manufacturing start-up and restructuring costs of approximately

$9 million and higher input costs of approximately $7 million.

Unilin Segment— Operating income was $126.4 million (9.4% of

segment net sales) for 2012 reflecting a decrease of $0.7 million

compared to operating income of $127.1 million (9.5% of segment

net sales) for 2011. The decrease in operating income was primarily

driven by higher input costs of approximately $18 million, increases

in costs to support new product introductions and geographic

expansion of approximately $11 million and unfavorable foreign

exchange rates of approximately $10 million, partially offset by

operations productivity of approximately $25 million and sales

volume increases of approximately $15 million.

38395_10K.indd 14 3/21/13 3:36 PM

### 15

2012 Annual Report 

### Interest expense

Interest expense was $74.7 million for 2012, reflecting a decrease

of

$26.9 million compared to interest expense of $101.6 million for

2011. The decrease in interest expense in 2012 was due to lower

outstanding debt and lower interest rates on that outstanding debt.

The lower interest rates were primarily attributable to the shift

from higher interest rate senior notes to the Senior Credit Facility

and the rating agency upgrades discussed in “Liquidity and

Capital Resources”.



### Other expense

Other expense was $0.3 million for 2012, reflecting a change of

$13.7 million compared to other expense of $14.1 million for 2011.

The change was primarily attributable to net foreign currency losses

of

approximately $16 million. The unrealized foreign currency losses

in the prior year were primarily a result of volatility in the Mexican

Peso and Canadian Dollar that occurred late in the third quarter of

2011. Prior to the second quarter of 2012, operations carried out in

Mexico used the U.S. dollar as the functional currency. Effective

April 1, 2012, the Company changed the functional currency of its

Mexico operations to the Mexican peso. See Note 1(l) of the Notes

to the Consolidated Financial Statements.



### Income tax expense

For 2012, the Company recorded income tax expense of

$53.6 million on earnings before income taxes of $304.5 million

for an effective tax rate of 17.6%, as compared to an income tax

expense of $21.7 million on earnings before income taxes of

$199.9 million, resulting in an effective tax rate of 10.8% for 2011.

The difference in the effective tax rate for the comparative period is

primarily due to the geographical dispersion of earnings and losses,

a favorable IRS audit settlement in 2011, and the expiration of

statutes of limitations for both Federal and State tax purposes.



### Year Ended December 31, 2011, as Compared

with Year Ended December 31, 2010

Net sales

Net sales for 2011 were $5,642.3 million, reflecting an increase

of

$323.2 million, or 6.1%, from the $5,319.1 million reported for

2010. The increase was primarily due to higher sales volume of

approximately $143 million, favorable price and product mix of

approximately $127 million and the impact of favorable foreign

exchange rates of approximately $53 million.

Mohawk Segment— Net sales increased $82.8 million, or 2.9%,

to $2,927.7 million in 2011, compared to $2,844.9 million in 2010.

The increase was primarily driven by favorable price and product

mix of approximately $64 million, and higher sales volume of

approximately $19 million.

Dal-Tile Segment— Net sales increased $86.9 million, or 6.4%,

to $1,454.3 million in 2011, compared to $1,367.4 million in

2010. The increase was primarily driven by higher sales volume

of approximately $75 million, favorable price and product mix

of

approximately $9 million and the impact of favorable foreign

exchange rates of approximately $3 million. Unilin Segment— Net sales increased $156.5 million, or 13.2%, to

$1,344.8 million in 2011, compared to $1,188.3 million in 2010.

The increase was primarily due to favorable price and product mix

of

approximately $55 million, the impact of favorable foreign

exchange rates of approximately $51 million and higher sales volume of approximately $51 million.

Quarterly net sales and the percentage changes in net sales by

quarter for 2011 versus 2010 were as follows (dollars in millions):

2011 2010 Change

First quarter $1,343.6 1,347.2 (0.3)%

Second quarter 1,477.9 1,400.1 5.6%

Third quarter 1,442.5 1,309.6 10.1%

Fourth quarter 1,378.3 1,262.2 9.2%

Total year $5,642.3 5,319.1 6.1%



### Gross profit

Gross profit for 2011 was $1,416.9 million (25.1% of net sales)

compared to gross profit of $1,402.6 million (26.4% of net sales) for

2010. Gross profit dollars were impacted by favorable price and

product mix of

approximately $124 million, lower manufacturing costs

of

approximately $69 million, higher sales volume of approximately

$27 million and favorable foreign exchange rates of approximately

$16 million, substantially offset by higher inflationary costs of

approximately $206 million, primarily related to raw materials, and

approximately $7 million of higher restructuring charges. The lower

manufacturing costs are primarily a result of cost savings initiatives

implemented and various restructuring activities taken by the

Company, including facility consolidations, workforce reductions

and productivity improvements resulting from capital investments.

In addition, the gross profit for 2010 included insurance settlement

proceeds of approximately $9 million related to a flood in the

Company’s Mexican manufacturing facility.



### Selling, general and administrative expenses

Selling, general and administrative expenses for 2011 were

$1,101.3 million (19.5% of net sales) compared to $1,088.4 million

(20.5% of net sales) for 2010. As a percentage of sales, selling,

general and administrative expenses for 2011 decreased 1.0%

compared to the prior year as a result of the Company’s ability to

leverage its various cost savings initiatives. The dollar increase in

selling, general and administrative expenses is primarily a result of

unfavorable foreign exchange rates of approximately $9 million, a lease

charge (discussed below) of approximately $6 million and higher

restructuring charges of approximately $5 million, partially offset by

the various cost savings initiatives implemented by the Company

including facility consolidations and productivity improvements.

During the fourth quarter of 2011, the Company corrected an

immaterial error in its consolidated financial statements. The error

related to accounting for operating leases. The correction of

$6.0 million resulted in an additional charge (“lease charge”) to

selling, general and administrative expense in the Company’s 2011

consolidated statement of operations. The Company believes the

correction of this error to be both quantitatively and qualitatively

immaterial to its quarterly results for 2011 or to any of its previously

issued consolidated financial statements. The correction had no

impact on the Company’s cash flows as previously presented.

38395_10K.indd 15 3/21/13 3:36 PM

### 16

Mohawk Industries, Inc. 

### Operating income

Operating income for 2011 was $315.6 million (5.6% of net sales),

reflecting a $1.4 million increase, compared to an operating income

of

$314.2 million (5.9% of net sales) for 2010. The increase in operating income was primarily a result of favorable price and product

mix of approximately $124 million, lower manufacturing and selling,

general and administrative expenses of approximately $77 million,

higher sales volume of $27 million and the impact of favorable foreign

exchange rates of approximately $7 million, substantially offset by

higher inflationary costs of approximately $206 million, primarily

related to raw materials, higher restructuring charges of approximately

$11 million and a lease charge (discussed in selling, general and

administrative expenses) of approximately $6 million. The lower

manufacturing costs and selling, general and administrative expenses

are primarily a result of cost saving initiatives implemented and

various restructuring actions taken by the Company, including facility

consolidations, workforce reductions and productivity improvements

resulting from capital investments. In addition, the operating

income for 2010 included insurance settlement proceeds of

approximately $9 million related to a flood in the Company’s

Mexican manufacturing facility.

Mohawk Segment— Operating income was $109.9 million (3.8% of

segment net sales) for 2011, reflecting a decrease of $13.0 million,

compared to operating income of $122.9 million (4.3% of segment

net sales) for 2010. Operating income was negatively impacted by

higher inflationary costs of approximately $138 million, primarily

related to raw materials, higher restructuring charges of approximately

$14 million and a lease charge (discussed in selling, general and

administrative expenses) of approximately $3 million, substantially

offset by lower manufacturing costs and selling, general and

administrative expenses of approximately $76 million and favorable

price and product mix of approximately $64 million. The lower

manufacturing costs and selling, general and administrative expenses

were primarily a result of cost savings initiatives imple mented and

various restructuring actions taken by the Company, including

facility consolidations, workforce reductions and productivity

improvements resulting from capital investments.

Dal-Tile Segment— Operating income was $101.3 million (7.0% of

segment net sales) for 2011, reflecting an increase of $4.0 million,

compared to operating income of $97.3 million (7.1% of segment

net sales) for 2010. Operating income was favorably impacted by

higher sales volume of approximately $18 million, lower manufacturing costs and selling, general and administrative expenses of

approximately $10 million and favorable price and product mix of

approximately $6 million, partially offset by higher inflationary costs

of

approximately $18 million, primarily related to raw materials and

a lease charge (discussed in selling, general and administrative

expenses) of approximately $3 million. The lower manufacturing

costs and selling, general and administrative expenses are primarily

a result of cost savings initiatives implemented and various

restructuring actions taken by the Company, including workforce

reductions and productivity improvements resulting from capital

investments. In addition, the operating income for 2010 included

insurance settlement proceeds of approximately $9 million related

to a flood in the Company’s Mexican manufacturing facility. Unilin Segment— Operating income was $127.1 million (9.5% of

segment net sales) for 2011 reflecting an increase of $12.8 million

compared to operating income of $114.3 million (9.6% of segment

net sales) for 2010. The increase was primarily driven by favorable

price and product mix of approximately $54 million, lower

manufacturing costs of approximately $10 million, favorable foreign

exchange rates of approximately $7 million, higher sales volume of

approximately $7 million and lower restructuring costs ofapproximately $2 million, substantially offset by higher inflationary costs of

approximately $50 million, primarily related to raw materials, and

higher selling, general and administrative costs of approximately

$17 million. The lower manufacturing costs are primarily a result of

cost savings initiatives implemented and various restructuring

actions taken by the Company, including facility consolidations and

productivity improvements resulting from capital investments.



### Interest expense

Interest expense was $101.6 million for 2011, reflecting a decrease

of

$31.5 million compared to interest expense of $133.2 million for

2010. The decrease in interest expense resulted from lower interest

costs on the Company’s outstanding debt and lower debt levels. In

addition, the 2010 interest expense includes a $7.5 million premium

paid to extinguish approximately $200 million aggregate principal

amount of senior notes.



### Other expense (income)

Other expense for 2011 was $14.1 million as compared to other

income in the prior year of $11.6 million. The unfavorable impact of

$25.7 million was primarily a result of unfavorable changes in net

foreign currency gains/losses of approximately $13 million, and losses

associated with the minority interest of approximately $5 million. In

addition, other income for 2010 included an approximately$8 million

benefit from customs refunds partially offset by acquisitions

purchase accounting adjustments of $1.7 million. The unrealized

foreign currency losses are attributable to certain of the Company’s

consolidated foreign subsidiaries that measure financial conditions

and results using the U.S. dollar rather than the local currency. The

unrealized foreign currency losses were primarily a result of volatility

in the Mexican Peso and the Canadian Dollar that occurred late

in the third quarter of 2011. The customs refunds from the U.S.

government resulted from settling customs disputes dating back to

1986. 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

For 2011, the Company recorded an income tax expense of

$21.6 million on earnings before income taxes of $199.9 million

for an effective tax rate of 10.8%, as compared to an income tax

expense of $2.7 million on earnings before income taxes of

$192.6 million for an effective tax rate of 1.4% for 2010. The

difference in the effective tax rate for the comparative period is

primarily due to the benefit from the settlement of certain tax

contingencies of $7.2 million and $30.0 million, respectively, in 2011

and 2010. In addition, both years were effected by the geographical

dispersion of earnings and losses for the current period.

38395_10K.indd 16 3/21/13 3:36 PM

### 17

2012 Annual Report 

### 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 operating activities for 2012 were

$587.6 million compared to $301.0 million provided by operating

activities for 2011. The increase in cash provided by operating

activities for 2012 as compared to 2011 is primarily attributable to

higher earnings, and improvements in working capital. As discussed

in note 13 to the consolidated financial statements, on December 28,

2012, the Company received the refund of the deposit related to

the tax assessment by the Belgium taxing authority of € 23.8 million.

On January 30, 2013, the Company received a refund of the interest

deposit of € 2.9 million and interest income of € 1.6 million earned

on the deposit.

Net cash used in investing activities for 2012 was $215.3 million

compared to $299.7 million for 2011. The decrease in investing

activities primarily relates to lower capital expenditures and lower

acquisition expenditures in 2012. Capital spending during 2013,

excluding pending acquisition expenditures, is expected to range

from approximately $275 million to $295 million and is intended to

be used primarily to purchase equipment, add geographic capacity

and to streamline manufacturing capabilities.

Net cash used in financing activities for 2012 was $216.8 million

compared to $33.1 million for 2011. The change in cash used in

financing activities as compared to 2011 is primarily attributable to

the purchase of the non-controlling interest within the Dal-Tile

segment for approximately $35.0 million, repayment of borrowings

and funding of working capital.

On July 8, 2011, the Company entered into a five-year, senior,

secured revolving credit facility (the “Senior Credit Facility”). The

Senior Credit Facility provides for a maximum of $900.0 million of

revolving credit, including limited amounts of credit in the form of

letters of credit and swingline loans. The Company paid financing

costs of $8.3 million in connection with its Senior Credit Facility.

These costs were deferred and, along with unamortized costs of

$12.3 million related to the Company’s prior senior, secured

revolving credit facility, are being amortized over the term of the

Senior Credit Facility.

On January 20, 2012, the Company entered into an amendment

to the Senior Credit Facility that provides for an incremental term

loan facility in the aggregate principal amount of $150.0 million. The

Company paid financing costs of $1.0 million in connection with the

amendment to its Senior Credit Facility. These costs were deferred

and are being amortized over the remaining term of the Senior

Credit Facility. The incremental term loan facility provides for eight

scheduled quarterly principal payments of $1.875 million, with the

first such payment due on June 30, 2012, followed by four scheduled

quarterly principal payments of $3.750 million, with remaining

quarterly principal payments of $5.625 million prior to maturity.

The Senior Credit Facility is scheduled to mature on July 8, 2016.

The Company can terminate and prepay the Senior Credit Facility at

any time without payment of any termination or prepayment penalty

(other than customary breakage costs in respect of loans bearing

interest at a rate based on LIBOR).

At the Company’s election, revolving loans under the Senior Credit

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 1.25% and 2.0%, or (b) the

higher of the Bank of America, N.A. prime rate, the Federal Funds rate plus 0.5%, and a monthly LIBOR rate plus 1.0%, plus an

applicable margin ranging between 0.25% and 1.0%. The Company

also pays a commitment fee to the lenders under the Senior Credit

Facility on the average amount by which the aggregate commitments

of

the lenders’ exceed utilization of the Senior Credit Facility ranging

from 0.25% to 0.4% per annum. The applicable margin and the

commitment fee are determined based on the Company’s

Consolidated Net Leverage Ratio (with applicable margins and the

commitment fee increasing as the ratio increases).

All obligations of the Company and the other borrowers under

the Senior Credit Facility are required to be guaranteed by all of the

Company’s material domestic subsidiaries and all obligations of

borrowers that are foreign subsidiaries are guaranteed by those

foreign subsidiaries of the Company which the Company designates

as guarantors.

Due to the rating agency upgrade announced on March 14, 2012

by Standard & Poor’s Financial Services, LLC (“S&P”), the security

interests in domestic accounts receivable and inventories, certain

shares of capital stock (or equivalent ownership interests) of the

domestic borrowers’ and domestic guarantors’ subsidiaries, and

proceeds of any of the foregoing securing obligations under the

Senior Credit Facility were released. The Company will be required

to reinstate such security interests if there is a ratings downgrade

such that: (a) both (i) the Moody’s Investor’s Service, Inc. (“Moody’s”)

rating is Ba2 and (ii) the S&P rating is BB, (b) (i) the Moody’s rating

is Ba3 or lower and (ii) the S&P rating is below BBB- (with a stable

outlook or better) or (c) (i) the Moody’s rating is below Baa3 (with a

stable outlook or better) and (ii) the S&P rating is BB- or lower.

The Senior Credit Facility includes certain affirmative and

negative covenants that impose restrictions on the Company’s

financial and business operations, including limitations on liens,

indebtedness, 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 Consolidated Interest

Coverage Ratio of at least 3.00 to 1.0 and a Consolidated Net

Leverage Ratio of no more than 3.75 to 1.0, each as of the last day

of

any fiscal quarter, as defined in the Senior Credit Facility. The

Senior Credit Facility also contains customary representations and

warranties and events of default, subject to customary grace periods.

As of December 31, 2012, the amount utilized under the Senior

Credit Facility including the term loan was $251.2 million, resulting

in a total of $793.1 million available under the Senior Credit Facility.

The amount utilized included $153.9 million of borrowings,

$46.8 million of standby letters of credit guaranteeing the Company’s

industrial revenue bonds and $50.5 million of standby letters of

credit related to various insurance contracts and foreign

vendor commitments.

On December 19, 2012, the Company entered into a three-year

on-balance sheet trade accounts receivable securitization agreement (the “Securitization Facility”). The Securitization Facility allows

the Company to borrow up to $300 million based on available

accounts receivable and is secured by the Company’s U.S. trade

accounts receivable. Borrowings under the Securitization Facility

bear interest at commercial paper interest rates, in the case oflenders that are commercial paper conduits, or LIBOR, in the case of

lenders that are not commercial paper conduits, in each case, plus

an applicable margin of 0.75% per annum. The Company also pays

a commitment fee at a per annum rate of 0.30% on the unused

38395_10K.indd 17 3/21/13 3:36 PM

### 18

Mohawk Industries, Inc. amount of each lender’s commitment. At December 31, 2012, the

amount utilized under the Securitization Facility was $280.0 million.

On January 31, 2013, the Company issued $600 million aggregate

principal amount of 3.850% Senior Notes due 2023. In the event

that the Company does not complete its acquisition of the Marazzi

Group on or prior to January 25, 2014 or if, prior to that date,

the Share Purchase Agreement with respect to the acquisition is

terminated, the Company will be required to redeem all of the notes

on the special mandatory redemption date at a redemption price

equal to 101% of the aggregate principal amount of the notes, plus

accrued and unpaid interest thereon to, but not including, the

special mandatory redemption date.

On January 17, 2006, the Company issued $900.0 million

aggregate principal amount of 6.125% notes due January 15, 2016.

Interest payable on these notes is subject to adjustment if either

Moody’s or S&P, or both, upgrades or 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 $0.1 million per

quarter per $100.0 million of outstanding notes. In 2009, interest

rates increased by an aggregate amount of 75 basis points as a

result of downgrades by Moody’s and S&P. In the first quarter of

2012, interest rates decreased by 50 basis points as a result of the

upgrades from S&P and Moody’s. Any future downgrades in the

Company’s credit ratings could increase the cost of its existing credit

and adversely affect the cost of and ability to obtain additional

credit in the future. In 2002, the Company issued $400.0 million aggregate principal

amount of its senior 7.20% notes due April 15, 2012. During 2011,

the Company repurchased $63.7 million of its senior 7.20% notes,

at an average price equal to 102.72% of the principal amount. On

April 16, 2012, the Company repaid the $336.3 million principal

amount of outstanding senior 7.20% notes, together with accrued

interest of $12.1 million, at maturity using available borrowings

under its Senior Credit Facility.

As of December 31, 2012, the Company had invested cash

of

$417.5 million, of which $415.9 million was invested in A-1/P-1

rated money market cash investments in Europe. While the

Company’s plans are to permanently reinvest the cash held in

Europe, the estimated cost of repatriation for the cash invested in

Europe would be approximately $145.6 million. The Company

believes that its cash and cash equivalents on hand, cash generated

from operations and availability under its credit facilities will be

sufficient to meet its capital expenditure, working capital and debt

servicing requirements over the next twelve months.

The Company may continue, from time to time, 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 ofapproximately 11.5 million shares have been repurchased at an aggregate

cost of approximately $335.1 million. All of these repurchases have

been financed through the Company’s operations and banking

arrangements. No shares were repurchased during 2012 or 2011.



### Contractual Obligations

The following is a summary of the Company’s future minimum payments under contractual obligations as of December 31, 2012 (in millions):

Total 2013 2014 2015 2016 2017 Thereafter

Recorded Contractual Obligations:

Long-term debt, including current

maturities and capital leases $1,382.9 55.2 13.7 300.9 1,012.9 0.2

—

Unrecorded Contractual Obligations:

Interest payments on long-term debt

and capital leases (1) 234.5 67.1 66.9 66.6 33.8 0.1

— Operating leases 304.5 87.7 75.5 59.3 33.7 21.2 27.1

Purchase commitments (2) 145.4 80.3 37.9 26.0 1.2

— — Expected pension contributions (3) 1.9 1.9

— — — — —

Uncertain tax positions (4) 1.2 1.2

— — — — —

Guarantees 11.9 8.6 3.3

— — — —

699.4 246.8 183.6 151.9 68.7 21.3 27.1

Total $2,082.3 302.0 197.3 452.8 1,081.6 21.5 27.1

(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, 2012 to these balances.

(2) Includes commitments for natural gas, electricity and raw material purchases.

(3) Includes the estimated pension contributions for 2013 only, as the Company is unable to estimate the pension contributions beyond 2013. The Company’s projected benefit

obligation and plan assets as of December 31, 2012 were $37.6 million and $32.6 million, respectively. The projected benefit obligation liability has not been presented in the table

above due to uncertainty as to amounts and timing regarding future payments.

(4) Excludes $33.7 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.

38395_10K.indd 18 3/21/13 3:36 PM

### 19

2012 Annual Report 

### 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.

• 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 $2 million for the year

ended December 31, 2012.

• 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, 2012. • 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

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 25% or a more than

15% increase in WACC or a significant or prolonged 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 Companyare 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 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 operating plans.

38395_10K.indd 19 3/21/13 3:36 PM

### 20

Mohawk Industries, Inc. 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 bya 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 for 2012.

• 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 $321.6 million in

2012, $334.2 million in 2011 and $325.1 million in 2010. For

further information regarding the Company’s valuation allowances, see Note 13 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 pro visions of the Financial Accounting Standards Board (“FASB”) FASB Accounting

Standards Codification Topic (“ASC”) 740-10. 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, 2012,

the Company has $53.8 million accrued for uncertain tax

positions. For further information regarding the Company’s

uncertain tax positions, see Note 13 to the consolidated

financial statements.

• 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

Accounting Standards Update (“ASU”) No. 2011-05,

“Comprehensive Income (Topic 220)

— Presentation of

Comprehensive

Income” (“ASU 2011-05”) requires comprehensive income to be

presented as a single continuous financial statement or in two

separate but consecutive statements. The option of present ing other

comprehensive income in the statement of stockholders’ equity was

eliminated. The Company adopted ASU 2011-05 in the first quarter

of

2012 and chose to present comprehensive income as two

s eparate but consecutive statements.



### Impact of Inflation

Inflation affects the Company’s manufacturing costs, distribution

costs and operating expenses. The Company expects raw material

prices, many of which are petroleum based, to fluctuate based upon

worldwide supply and demand of commodities utilized in the

Company’s production processes. Although the Company 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 fully recovered. In the past, the

Company has often 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’s second and fourth quarters typically

produce 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.

38395_10K.indd 20 3/21/13 3:36 PM

### 21

2012 Annual Report I tem 7A. Quantitati v e l itati v e D isc l osures

M ar k et R is k

The Company’s market risk is impacted by changes in foreign

currency exchange rates, interest rates and certain commodity

prices. Financial exposures to these risks 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

these 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, 2012 and 2011. As of December 31,

2012, approximately 65% of the Company’s debt portfolio was

comprised of fixed-rate debt and 35% was floating-rate debt.

A 1.0 percentage point change in the interest rate of the floatingrate debt would not have a material impact on the Company’s

results of operations. I tem 8. C onso l idated F inancia l S tatements

S upp l ementary D ata



### Index to Consolidated Financial Statements

Reports of Independent Registered

Public Accounting Firm 22

Consolidated Balance Sheets

as of December 31, 2012 and 2011 24

Consolidated Statements of Operations

for the Years Ended December 31, 2012,

2011 and 2010 25

Consolidated Statements of Comprehensive Income

for the Years Ended December 31, 2012,

2011 and 2010 26

Consolidated Statements of Stockholders’ Equity

for the Years Ended December 31, 2012,

2011 and 2010 27

Consolidated Statements of Cash Flows

for the Years Ended December 31, 2012,

2011 and 2010 28

Notes to Consolidated Financial Statements 29

38395_10K.indd 21 3/21/13 3:36 PM

### 22

Mohawk Industries, Inc. 

### 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, 2012

and 2011, and the related consolidated statements of operations,

comprehensive income, stockholders’ equity, and cash flows for

each of the years in the three-year period ended December 31,

2012. 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, 2012

and 2011, and the results of their operations and their cash flows for

each of the years in the three-year period ended December 31, 2012,

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, 2012, 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 February 27, 2013 expressed an unqualified

opinion on the effectiveness of the Company’s internal control over

financial reporting.

/s/

KPMG LLP

Atlanta, Georgia

February 27, 2013

38395_10K.indd 22 3/21/13 3:36 PM

### 23

2012 Annual Report 

### Report of Independent Registered Public Accounting Firm on Internal Control

over Financial Reporting

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, 2012, 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,

2012. 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, 2012, 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, 2012 and 2011, and the related

consolidated statements of operations, comprehensive income,

stockholders’ equity, and cash flows for each of the years in the

three-year period ended December 31, 2012, and our report dated

February 27, 2013 expressed an unqualified opinion on those

consolidated financial statements.

/s/

KPMG LLP

Atlanta, Georgia

February 27, 2013

38395_10K.indd 23 3/21/13 3:36 PM

### 24

Mohawk Industries, Inc. 

### Mohawk Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31,

(In thousands, except per share data) 2012 2011

ASSETS

Current assets:

Cash and cash equivalents $ 477,672 311,945

Receivables, net 679,473 686,165

Inventories 1,133,736 1,113,630

Prepaid expenses 138,117 112,779

Deferred income taxes 111,585 150,910

Other current assets 9,463 22,735

Total current assets 2,550,046 2,398,164

Property, plant and equipment, net 1,692,852 1,712,154

Goodwill 1,385,771 1,375,175

Tradenames 455,503 450,432

Other intangible assets, net 98,296 154,668

Deferred income taxes and other non-current assets 121,216 115,635

$6,303,684 6,206,228

L IABI L ITIES AND STOC KH O L DERS’ E Q UITY

Current liabilities:

Current portion of long-term debt $ 55,213 386,255

Accounts payable and accrued expenses 773,436 715,091

Total current liabilities 828,649 1,101,346

Deferred income taxes 329,810 355,653

Long-term debt, less current portion 1,327,729 1,200,184

Other long-term liabilities 97,879 99,537

Total liabilities 2,584,067 2,756,720

Commitments and contingencies (Notes 7 and 14)

Redeemable noncontrolling interest

— 33,723

Stockholders’ equity:

Preferred stock, $.01 par value; 60 shares authorized; no shares issued

— —

Common stock, $.01 par value; 150,000 shares authorized;

80,185 and 79,815 shares issued in 2012 and 2011, respectively 802 798

Additional paid-in capital 1,277,521 1,248,131

Retained earnings 2,605,023 2,354,765

Accumulated other comprehensive income, net 159,733 135,639

4,043,079 3,739,333

Less treasury stock at cost; 11,032 and 11,034 shares in 2012 and 2011, respectively 323,462 323,548

Total stockholders’ equity 3,719,617 3,415,785

$6,303,684 6,206,228

See accompanying notes to

consolidated financial statements.

38395_10K.indd 24 3/21/13 3:36 PM

### 25

2012 Annual Report 

### Mohawk Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

Years Ended December 31,

(In thousands, except per share data) 2012 2011 2010

Net sales $5,787,980 5,642,258 5,319,072

Cost of sales 4,297,922 4,225,379 3,916,472

Gross profit 1,490,058 1,416,879 1,402,600

Selling, general and administrative expenses 1,110,550 1,101,337 1,088,431

Operating income 379,508 315,542 314,169

Interest expense 74,713 101,617 133,151

Other expense (income) 303 14,051 (11,630)

Earnings before income taxes 304,492 199,874 192,648

Income tax expense 53,599 21,649 2,713

Net earnings 250,893 178,225 189,935

Less: Net earnings attributable to noncontrolling interest 635 4,303 4,464

Net earnings attributable to Mohawk Industries, Inc. $ 250,258 173,922 185,471

Basic earnings per share attributable to Mohawk Industries, Inc. $ 3.63 2.53 2.66

Diluted earnings per share attributable to Mohawk Industries, Inc. $ 3.61 2.52 2.65

See accompanying notes to

consolidated financial statements.

38395_10K.indd 25 3/21/13 3:36 PM

### 26

Mohawk Industries, Inc. 

### Mohawk Industries, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31,

(In thousands) 2012 2011 2010

Net earnings $250,893 178,225 189,935

Other comprehensive income (loss):

Foreign currency translation adjustments 25,685 (42,006) (119,200)

Pension prior service cost and actuarial (loss) gain (1,591) (452) 380

Other comprehensive income (loss) 24,094 (42,458) (118,820)

Comprehensive income 274,987 135,767 71,115

Less: comprehensive income attributable to the non-controlling interest 635 4,303 4,464

Comprehensive income attributable to Mohawk Industries, Inc. $274,352 131,464 66,651

See accompanying notes to

consolidated financial statements.

38395_10K.indd 26 3/21/13 3:36 PM

### 27

2012 Annual Report 

### Mohawk Industries, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2012, 2011 and 2010

Total Stockholders’ Equity

Accumulated

Redeemable Additional Other Total

Noncontrolling Common Stock Paid-in Retained Comprehensive Treasury Stock Stockholders'

(In thousands) Interest Shares Amount Capital Earnings Income Shares Amount Equity

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)

— — — — — — — —

Noncontrolling earnings 4,464

— — — — — — — —

Accretion of redeemable

noncontrolling interest 3,244

— — — (3,244)

— — — (3,244)

Currency translation adjustment

— — — — — (119,200)

— — (119,200)

Pension prior service cost

and actuarial gain or loss

— — — — — 380

— — 380

Net income

— — — — 185,471

— — — 185,471

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

Shares issued under employee

and director stock plans

— 149 1 2,543

— — 3 78 2,622

Stock-based compensation expense

— — — 10,159

— — — — 10,159

Tax deficit from stock-based compensation

— — — (16)

— — — — (16)

Distribution to noncontrolling interest,

net of adjustments (4,764)

— — — — — — — —

Retained distribution noncontrolling interest (1,257)

— — — — — — —

Noncontrolling earnings 4,303

— — — — — — — —

Currency translation adjustment

— — — — — (42,006)

— — (42,006)

Pension prior service cost

and actuarial gain or loss

— — — — — (452)

— — (452)

Net income

— — — — 173,922

— — — 173,922

Balances at December 31, 2011 33,723 79,815 798 1,248,131 2,354,765 135,639 (11,034) (323,548) 3,415,785

Shares issued under employee

and director stock plans

— 370 4 13,467

— — 2 86 13,557

Stock-based compensation expense

— — — 14,082

— — — — 14,082

Tax benefit from stock-based compensation

— — — 1,133

— — — — 1,133

Distribution to noncontrolling interest,

net of adjustments (423)

— — — — — — — —

Noncontrolling earnings 635

— — — — — — — —

Purchase of noncontrolling interest (35,000)

— — — — — — — —

Tax effect of purchase

of

noncontrolling interest 1,065

— — 708

— — — — 708

Currency translation adjustment

— — — — — 25,685

— — 25,685

Pension prior service cost

and actuarial gain or loss

— — — — — (1,591)

— — (1,591)

Net income

— — — — 250,258

— — — 250,258

Balances at December 31, 2012 $

— 80,185 $802 $1,277,521 $2,605,023 $159,733 (11,032) $(323,462) $3,719,617

See accompanying notes to

consolidated financial statements.

38395_10K.indd 27 3/21/13 3:36 PM

### 28

Mohawk Industries, Inc. 

### Mohawk Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31,

(In thousands) 2012 2011 2010

Cash flows from operating activities:

Net earnings $ 250,893 178,225 189,935

Adjustments to reconcile net earnings to net cash provided by operating activities:

Restructuring 18,564 23,209 12,341

Depreciation and amortization 280,293 297,734 296,773

Deferred income taxes 9,037 (4,616) (21,279)

Loss on extinguishment of debt

— 1,116 7,514

Loss (gain) on disposal of property, plant and equipment 4,782 (1,273) (4,975)

Stock-based compensation expense 14,082 10,159 6,888

Other

— (1,257)

— Changes in operating assets and liabilities, net of effects of acquisitions:

Receivables, net 10,888 (85,391) (12,273)

Income tax receivable

— 1,631 68,740

Inventories (17,079) (100,205) (118,903)

Accounts payable and accrued expenses 39,181 (11,124) (86,947)

Other assets and prepaid expenses (9,864) (12,434) (11,791)

Other liabilities (13,187) 5,219 (6,311)

Net cash provided by operating activities 587,590 300,993 319,712

Cash flows from investing activities:

Additions to property, plant and equipment (208,294) (275,573) (156,180)

Proceeds from insurance claim

— — 4,615

Acquisitions, net of cash acquired

— (24,097)

—

Investment in joint venture (7,007)

— (79,917)

Net cash used in investing activities (215,301) (299,670) (231,482)

Cash flows from financing activities:

Payments on revolving line of credit (1,711,425) (1,431,349)

—

Proceeds from revolving line of credit 1,567,300 1,729,349

— Repayment of senior notes (336,270) (368,478) (199,992)

Proceeds from asset securitization borrowings 280,000

— — Borrowings (payments) on term loan and other debt (3,259) 2,806 (812)

Debt issuance costs (1,797) (8,285)

—

Debt extinguishment costs

— (1,734) (7,514)

Purchase of non-controlling interest (35,000)

— —

Distribution to non-controlling interest (423) (4,764) (3,472)

Change in restricted cash

— 27,954 (27,954)

Change in outstanding checks in excess of cash 7,890 17,590 (17,900)

Proceeds from stock transactions 16,153 3,787 2,445

Net cash used in financing activities (216,831) (33,124) (255,199)

Effect of exchange rate changes on cash and cash equivalents 10,269 (10,471) (10,272)

Net change in cash and cash equivalents 165,727 (42,272) (177,241)

Cash and cash equivalents, beginning of year 311,945 354,217 531,458

Cash and cash equivalents, end of year $ 477,672 311,945 354,217

See accompanying notes to

consolidated financial statements.

38395_10K.indd 28 3/21/13 3:36 PM

### 29

2012 Annual Report 

### Mohawk Industries, Inc. and Subsidiaries



# N otes C onsolidated

F inancial S tatements

Years Ended December 31, 2012, 2011 and 2010

(In thousands, except per share data)



# NOTE 1

S ummary S ignificant

A ccounting P olicies

(a) Basis of Presentation

Mohawk Industries, Inc. (“Mohawk” or the “Company”), a term

which includes the Company and its subsidiaries, 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 consolidated financial statements include the accounts of the

Company and its subsidiaries. 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) Cash and Cash Equivalents

The Company considers investments with an original maturity of

three months or less when purchased to be cash equivalents. As of

December 31, 2012, the Company had invested cash of $417,541

of

which $415,877 was invested in A-1/P-1 rated money market

cash investments in Europe and $1,664 was in North America and

Mexico. As of December 31, 2011, the Company had invested cash

of

$266,488 of which $259,991 was invested in A-1/P-1 rated

money market cash investments in Europe and $6,497 was in

North America and Mexico.



### (c) 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, home centers

and commercial end users, under credit terms that the Company

believes are customary in the industry.

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.



### (d) 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 ofmanufacturing. 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.



### (e) 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.



### (f) Goodwill and Other Intangible Assets

In accordance with the provisions of the Financial Accounting

Standards Board (“FASB”) Accounting Standards Codification

Topic (“ASC”) 350, “Intangibles—Goodwill and Other,” 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

38395_10K.indd 29 3/21/13 3:36 PM

### 30

Mohawk Industries, Inc. 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.

During 2012, the Company adopted Accounting Standard Update

No. 2011-08, “Testing Goodwill for Impairment,” and early adopted

Accounting Standard Update No. 2012-02, “Testing Indefinite-Lived

Intangible Assets for Impairment.” As a result, beginning in 2012,

the first step of the impairment tests for our indefinite lived intangible

assets is a thorough assessment of qualitative factors to determine

the existence of events or circumstances that would indicate that it

is not more likely than not that the fair value of these assets is less

than their carrying amounts. If the qualitative test indicates it is not

more likely than not that the fair value of these assets is less than

their carrying amounts, a quantitative assessment is not required.

If a quantitative test is necessary, the second step of our impairment

test involves comparing the estimated fair value of a reporting unit

to its carrying amount. The determination of fair value used in the

impairment 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. If the

carrying value of the intangible asset exceeds its fair value, an

impairment loss is recognized in an amount equal to that excess.

Intangible assets that do not have indefinite lives are amortized

based on average lives, which range from 7-16 years.



### (g) 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 enactmentdate. Changes in recognition ormeasurement

are reflected in the period in which the change in judgment occurs.

The Company records interest and penalties related to unrecognized

tax benefits in income tax expense.



### (h) 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 their 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.



### (i) 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 $29,175 in 2012, $35,847 in 2011 and $38,553 in 2010.

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. Co-op

advertising expenses, a component of advertising and promotion

expenses, were $6,424 in 2012, $3,520 in 2011 and $4,660

in 2010.



### (j) 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.



### (k) 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.



### (l) Foreign Currency Translation

Prior to the second quarter of 2012, operations carried out in Mexico

used the U.S. dollar as the functional currency. Effective April 1,

2012, the Company changed the functional currency of its Mexico

operations to the Mexican peso. The Company believes that the

completion of a second plant in Mexico and growth in sales to the

local Mexican market indicated a significant change in the economic

facts and circumstances that justified the change in the functional

currency. The effects of the change in functional currency were not

significant to the Company’s consolidated financial statements.

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 in which case the

functional currency is the U.S. dollar. Other than Canada, 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 accumulated other comprehensive income. Gains or losses resulting from

38395_10K.indd 30 3/21/13 3:36 PM

### 31

2012 Annual Report 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 Canadian

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.



### (m) 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 891, 1,180 and 1,203 for 2012, 2011 and

2010, respectively.

Computations of basic and diluted earnings per share are

presented in the following table:

2012 2011 2010

Net earnings attributable

to Mohawk Industries, Inc. $250,258 173,922 185,471

Accretion of redeemable

noncontrolling interest (1)

— — (3,244)

Net earnings available

to common stockholders $250,258 173,922 182,227

Weighted-average common

shares outstanding—basic

and diluted:

Weighted-average common

shares outstanding—basic 68,988 68,736 68,578

Add weighted-average dilutive

potential common shares—

options and RSU’s to

purchase common

shares, net 318 228 206

Weighted-average common

shares outstanding—diluted 69,306 68,964 68,784

Basic earnings per share

attributable to Mohawk

Industries, Inc. $ 3.63 2.53 2.66

Diluted earnings per share

attributable to Mohawk

Industries, Inc. $ 3.61 2.52 2.65

(1) Amount represents the adjustment to fair value of a redeemable noncontrolling

interest in a consolidated subsidiary of the Company. 

### (n) 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, “Stock Compensation”. Compensation

expense is generally recognized on a straight-line basis over the

awards’ estimated lives for fixed awards with ratable vesting provisions.



### (o) 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

pensions. 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 stockholders’ equity for the years

ended December 31, 2012, 2011 and 2010 are as follows:

Foreign

translation

adjustment Pensions Total

December 31, 2009 $ 296,182 735 296,917

2010 activity (119,200) 380 (118,820)

December 31, 2010 176,982 1,115 178,097

2011 activity (42,006) (452) (42,458)

December 31, 2011 134,976 663 135,639

2012 activity 25,685 (1,591) 24,094

December 31, 2012 $ 160,661 (928) 159,733



### (p) Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive

Income (Topic 220)—Presentation of

Comprehensive Income”

(“ASU 2011-05”) requires comprehensive income to be presented

in a single continuous financial statement or in two separate but

con secutive statements. The option of presenting other comprehensive income in the statement of stockholders’ equity was eliminated.

The Company adopted ASU 2011-05 in the first quarter of 2012

and chose to present comprehensive income in two separate but

consecutive statements.



### (q) 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.



# NOTE 2

A c q uisitions

The Company invested in a Brazilian joint venture in the Unilin

segment for $7,007 in 2012. The Company acquired an Australian

distribution business in the Unilin segment for $24,097 in 2011.

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. In June 2012, the Company

increased its equity method ownership in the China joint venture to

49% through a restructuring transaction in which the majority equity

owner acquired certain assets of the joint venture. Also in 2012, the

Company purchased the non-controlling interest within the Dal-Tile

segment for $35,000.

38395_10K.indd 31 3/21/13 3:36 PM

### 32

Mohawk Industries, Inc.

On January 10, 2013, the Company completed its purchase

of

Pergo, a leading manufacturer of laminate flooring in the United

States and the Nordic countries. The total value of the acquisition

was approximately $150 million in cash.

On December 20, 2012, the Company entered into a definitive

share purchase agreement to acquire Fintiles S.p.A and its sub

sidiaries (collectively, the “Marazzi Group”), a global manufacturer,

distributor and marketer of ceramic tile. At the closing of the

transaction, the Company will pay a purchase price based on an

enterprise value of € 1.17 billion. The Company expects to complete the

transaction in the firsthalf of

2013 pendingcustomary governmental

approvals and the satisfaction of other closing conditions.

On January 28, 2013 the Company entered into an agreement to

purchase Spano Invest NV, a Belgian panel board manufacturer, for

€ 125 million. The Company expects to complete the transaction in

the second half of

2013 pending customary governmental approvals

and the satisfaction of other closing conditions.



# NOTE 3

R eceivables

December 31, December 31,

2012 2011

Customers, trade $691,553 696,856

Income tax receivable

— 1,703

Other 25,793 31,311

717,346 729,870

Less allowance for discounts,

returns, claims and doubtful

accounts 37,873 43,705

Receivables, net $679,473 686,165 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 at end

of

year expenses Deductions (1) of year

2010 $62,809 170,274 187,328 45,755

2011 45,755 161,073 163,123 43,705

2012 43,705 180,616 186,448 37,873

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



# NOTE 4

I nventories

The components of inventories are as follows:

December 31, December 31,

2012 2011

Finished goods $ 695,606 670,877

Work in process 103,685 113,311

Raw materials 334,445 329,442

Total inventories $1,133,736 1,113,630



# NOTE 5

G oodwill O ther I ntangible A ssets

The Company conducted its annual impairment assessment in the fourth quarter of 2012 and determined the fair values of its reporting units

and trademarks exceeded their carrying values. As a result, no impairment was indicated.

The following table summarizes the components of intangible assets:

Goodwill:

Mohawk Dal-Tile Unilin Total

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

Goodwill recognized during the year

— — 19,066 19,066

Currency translation during the year

— — (13,285) (13,285)

Balances as of December 31, 2011

Goodwill 199,132 1,186,913 1,316,555 2,702,600

Accumulated impairments losses (199,132) (531,930) (596,363) (1,327,425)

— 654,983 720,192 1,375,175

Currency translation during the year

— — 10,596 10,596

Balances as of December 31, 2012

Goodwill 199,132 1,186,913 1,327,151 2,713,196

Accumulated impairments losses (199,132) (531,930) (596,363) (1,327,425)

$

— 654,983 730,788 1,385,771

During 2011, the Company recorded additional goodwill of $19,066 in the Unilin segment related to business acquisitions.

38395_10K.indd 32 3/21/13 3:36 PM

### 33

2012 Annual Report Intangible assets:

Tradenames

Indefinite life assets not subject to amortization:

Balance as of December 31, 2010 $456,890

Currency translation during the year (6,458)

Balance as of December 31, 2011 450,432

Currency translation during the year 5,071

Balance as of December 31, 2012 $455,503

Customer

relationships Patents Other Total

Intangible assets subject to amortization:

Balance as of December 31, 2010 $106,432 112,520 1,285 220,237

Intangible assets recognized during the year 5,181

— — 5,181

Amortization during the year (47,460) (22,782) (122) (70,364)

Currency translation during the year 805 (1,194) 3 (386)

Balance as of December 31, 2011 64,958 88,544 1,166 154,668

Amortization during the year (38,595) (18,747) (121) (57,463)

Currency translation during the year (153) 1,234 10 1,091

Balance as of December 31, 2012 $ 26,210 71,031 1,055 98,296

Years Ended December 31,

2012 2011 2010

Amortization expense $57,463 70,364 69,513

Estimated amortization expense for the years ending

December 31 are as follows:

2013 $22,715

2014 20,716

2015 18,421

2016 15,837

2017 14,207



# NOTE 6

P roperty

, P lant Eq uipment

Following is a summary of property, plant and equipment:

December 31, December 31,

2012 2011

Land $ 178,110 180,584

Buildings and improvements 730,668 682,395

Machinery and equipment 2,550,779 2,470,485

Furniture and fixtures 98,519 90,963

Leasehold improvements 54,880 54,501

Construction in progress 145,368 160,929

3,758,324 3,639,857

Less accumulated depreciation

and amortization 2,065,472 1,927,703

Net property, plant

and equipment $1,692,852 1,712,154 Additions to property, plant and equipment included capitalized

interest of $4,577, $6,197 and $4,240 in 2012, 2011 and 2010,

respectively. Depreciation expense was $217,393, $220,580 and

$218,649 for 2012, 2011 and 2010, respectively. Included in the

property, plant and equipment are capital leases with a cost of

$7,219 and $7,803 and accumulated depreciation of $5,581 and

$5,881 as of December 31, 2012 and 2011, respectively.



# NOTE 7

L ong -T erm D ebt

On July 8, 2011, the Company entered into a 5-year, senior, secured

revolving credit facility (the “Senior Credit Facility”). The Senior Credit

Facility provides for a maximum of $900,000 of revolving credit,

including limited amounts of credit in the form of letters of credit

and swingline loans. The Company paid financing costs of $8,285

in connection with its Senior Credit Facility. These costs were

deferred and, along with unamortized costs of $12,277 related to

the Company’s prior senior, secured revolving credit facility, are

being amortized over the term of the Senior Credit Facility.

On January 20, 2012, the Company entered into an amendment

to the Senior Credit Facility that provides for an incremental term

loan facility in the aggregate principal amount of $150,000. The

Company paid financing costs of $1,018 in connection with the

amendment to its Senior Credit Facility. These costs were deferred

and are being amortized over the remaining term of the Senior

Credit Facility. The incremental term loan facility provides for eight

scheduled quarterly principal payments of $1,875, with the first

such payment due on June 30, 2012, followed by four scheduled

quarterly principal payments of $3,750, with remaining quarterly

principal payments of $5,625 prior to maturity.

The Senior Credit Facility is scheduled to mature on July 8, 2016.

The Company can terminate and prepay the Senior Credit Facility at

any time without payment of any termination or prepayment penalty

(other than customary breakage costs in respect of loans bearing

interest at a rate based on LIBOR).

38395_10K.indd 33 3/21/13 3:36 PM

### 34

Mohawk Industries, Inc.

At the Company’s election, revolving loans under the Senior Credit

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 1.25% and 2.0%, or (b) the

higher of the Bank of America, N.A. prime rate, the Federal Funds

rate plus 0.5%, and a monthly LIBOR rate plus 1.0%, plus an

applicable margin ranging between 0.25% and 1.0%. The Company

also pays a commitment fee to the lenders under the Senior Credit

Facility on the average amount by which the aggregate commitments

of

the lenders’ exceed utilization of the Senior Credit Facility ranging

from 0.25% to 0.4% per annum. The applicable margin and the

commitment fee are determined based on the Company’s

Consolidated Net Leverage Ratio (with applicable margins and the

commitment fee increasing as the ratio increases).

All obligations of the Company and the other borrowers under

the Senior Credit Facility are required to be guaranteed by all of the

Company’s material domestic subsidiaries and all obligations of

borrowers that are foreign subsidiaries are guaranteed by those

foreign subsidiaries of the Company which the Company designates

as guarantors.

Due to the rating agency upgrade announced on March 14, 2012

by Standard & Poor’s Financial Services, LLC (“S&P”), the security

interests in domestic accounts receivable and inventories, certain

shares of capital stock (or equivalent ownership interests) of the

domestic borrowers’ and domestic guarantors’ subsidiaries, and

proceeds of any of the foregoing securing obligations under the

Senior Credit Facility were released. The Company will be required

to reinstate such security interests if there is a ratings downgrade

such that: (a) both (i) the Moody’s Investor’s Service, Inc. (“Moody’s”)

rating is Ba2 and (ii) the S&P rating is BB, (b) (i) the Moody’s rating

is Ba3 or lower and (ii) the S&P rating is below BBB- (with a stable

outlook or better) or (c) (i) the Moody’s rating is below Baa3 (with a

stable outlook or better) and (ii) the S&P rating is BB- or lower.

The Senior Credit Facility includes certain affirmative and

negative covenants that impose restrictions on the Company’s

financial and business operations, including limitations on liens,

indebtedness, 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 Consolidated

Interest Coverage Ratio of at least 3.00 to 1.0 and a Consolidated

Net Leverage Ratio of no more than 3.75 to 1.0, each as of the last

day of any fiscal quarter, as defined in the Senior Credit Facility. The

Senior Credit Facility also contains customary representations and

warranties and events of default, subject to customary grace periods.

As of December 31, 2012, the amount utilized under the Senior

Credit Facility including the term loan was $251,238, resulting in a

total of $793,137 available under the Senior Credit Facility. The

amount utilized included $153,875 of borrowings, $46,823 of

standby letters of credit guaranteeing the Company’s industrial

revenue bonds and $50,540 of standby letters of credit related to

various insurance contracts and foreign vendor commitments. On December 19, 2012, the Company entered into a three-year

on-balance sheet trade accounts receivable securitization agreement

(the “Securitization Facility”). The Securitization Facility allows the

Company to borrow up to $300,000 based on available accounts

receivable and is secured by the Company’s U.S. trade accounts

receivable. Borrowings under the Securitization Facility bear interest

at commercial paper interest rates, in the case of lenders that

are commercial paper conduits, or LIBOR, in the case of lenders

that are not commercial paper conduits, in each case, plus an

applicable margin of 0.75% per annum. The Company also pays

a commitment fee at a per annum rate of 0.30% on the unused

amount of each lender’s commitment. At December 31, 2012, the

amount utilized under the Securitization Facility was $280,000.

On January 31, 2013, the Company issued $600,000 aggregate

principal amount of 3.850% Senior Notes due 2023. In the event

that the Company does not complete its acquisition of the Marazzi

Group on or prior to January 25, 2014 or if, prior to that date, the

Share Purchase Agreement with respect to the acquisition is

terminated, the Company will be required to redeem all of the notes

on the special mandatory redemption date at a redemption price

equal to 101% of the aggregate principal amount of the notes, plus

accrued and unpaid interest thereon to, but not including, the

special mandatory redemption date.

On January 17, 2006, the Company issued $900,000 aggregate

principal amount of 6.125% notes due January 15, 2016. Interest

payable on these notes is subject to adjustment if either Moody’s or

S&P, or both, upgrades or 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 $0.1 million per quarter per $100.0 million

of

outstanding notes. In 2009, interest rates increased by an

aggregate amount of 75 basis points as a result of downgrades by

Moody’s and S&P. In the first quarter of 2012, interest rates

decreased by 50 basis points as a result of the upgrades from S&P

and Moody’s. Any future downgrades in the Company’s credit ratings

could increase the cost of its existing credit and adversely affect the

cost of and ability to obtain additional credit in the future.

In 2002, the Company issued $400,000 aggregate principal

amount of its senior 7.20% notes due April 15, 2012. During 2011,

the Company repurchased $63,730 of its senior 7.20% notes,

at an average price equal to 102.72% of the principal amount. On

April 16, 2012, the Company repaid the $336,270 principal

amount of outstanding senior 7.20% notes, together with accrued

interest of $12,106, at maturity using available borrowings under

its Senior Credit Facility.

38395_10K.indd 34 3/21/13 3:36 PM

### 35

2012 Annual Report The fair value and carrying value of the Company’s debt instruments are detailed as follows:

December 31, 2012 December 31, 2011

Fair value Carrying value Fair value Carrying value

7.20% senior notes, payable April 15, 2012

interest payable semiannually $

— — 336,606 336,270

6.125% notes, payable January 15, 2016

interest payable semiannually 1,011,600 900,000 963,900 900,000

Five-year senior secured credit facility, due July 8, 2016 153,875 153,875 298,000 298,000

Securitization facility 280,000 280,000

— —

Industrial revenue bonds, capital leases and other 49,067 49,067 52,169 52,169

Total long-term debt 1,494,542 1,382,942 1,650,675 1,586,439

Less current portion 55,213 55,213 386,591 386,255

Long-term debt, less current portion $1,439,329 1,327,729 1,264,084 1,200,184

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,

2012 are as follows:

2013 $ 55,213

2014 13,653

2015 300,944

2016 1,012,864

2017 229

Thereafter 39

$1,382,942



# NOTE 8

A ccounts P ayable

, A ccrued Ex penses

D eferred T a x L iability

Accounts payable and accrued expenses are as follows:

December 31, December 31,

2012 2011

Outstanding checks in excess

of

cash $ 25,480 17,590

Accounts payable, trade 387,871 372,616

Accrued expenses 180,039 154,560

Product warranties 32,930 30,144

Accrued interest 26,843 34,235

Deferred tax liability 6,309 8,760

Income taxes payable 2,074

—

Accrued compensation

and benefits 111,890 97,186

Total accounts payable

and accrued expenses $773,436 715,091 

# NOTE 9

P roduct W arranties

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.

Product warranties are as follows:

2012 2011 2010

Balance at beginning of year $ 30,144 37,265 66,545

Warranty claims paid

during the year (55,314) (57,163) (77,017)

Pre-existing warranty accrual

adjustment during the year

— 4,473 2,261

Warranty expense during the year 58,100 45,569 45,476

Balance at end of year $ 32,930 30,144 37,265



# NOTE 10

S tock -B ased C ompensation

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 options’ or other awards’ estimated lives for fixed awards with

ratable vesting provisions.

Under the Company’s 2007 Incentive Plan (“2007 Plan”), the

Company’s principal stock compensation plan prior to May 9, 2012,

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 (“RSUs”) 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

generallyvest between three and five years with a 10-year contractual

term. Restricted stock and RSUs 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. On May 9,

2012, the Company’s stockholders approved the 2012 Long-Term

Incentive Plan (“2012 Plan”), which allows the Company to reserve

up to a maximum of 3,200 shares of common stock for issuance

upon the grant or exercise of awards under the 2012 Plan. No

additional awards may be granted under the 2007 Plan after May 9,

2012. As of December 31, 2012, there have been no awards

granted under the 2012 Plan.

38395_10K.indd 35 3/21/13 3:36 PM

### 36

Mohawk Industries, Inc.

Additional information relating to the Company’s stock option

plans follows:

2012 2011 2010

Options outstanding

at beginning of year 1,305 1,371 1,481

Options granted 83 76 40

Options exercised (277) (82) (74)

Options forfeited

and expired (116) (60) (76)

Options outstanding

at end of year 995 1,305 1,371

Options exercisable

at end of year 814 1,106 1,160

Option prices per share:

Options granted

during the year 66.14 57.34 46.80

Options exercised

during the year 28.37-88.33 28.37-63.14 16.66-57.88

Options forfeited

and expired during

the year 46.80-93.65 28.37-93.65 22.63-93.65

Options outstanding

at end of year 28.37-93.65 28.37-93.65 28.37-93.65

Options exercisable

at end of year 28.37-93.65 28.37-93.65 28.37-93.65 During 2012, 2011 and 2010, a total of 2, 3 and 4 shares,

respectively, were awarded to the non-employee directors in lieu of

cash for their annual retainers.

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, 2012, 2011 or 2010.

The Company’s Board of Directors has authorized the repurchase

of

up to 15,000 shares of the Company’s outstanding common stock.

For the years ended December 31, 2012 and 2011, no shares of

the Company’s common stock were purchased. For the year ended

December 31, 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. 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.

2012 2011 2010

Dividend yield

— — —

Risk-free interest rate 1.0% 2.0% 2.3%

Volatility 47.1% 48.1% 45.2%

Expected life (years) 5 5 5

A summary of the Company’s options under the 2002 and 2007 Plan as of December 31, 2012, and changes during the year then ended is

presented as follows:

Weighted

Weighted average

average remaining Aggregate

exercise contractual intrinsic

Shares price term (years) value

Options outstanding, December 31, 2011 1,305 $72.08

Granted 83 66.14

Exercised (277) 60.76

Forfeited and expired (116) 70.93

Options outstanding, December 31, 2012 995 $74.87 3.9 $15,643

Vested and expected to vest as of December 31, 2012 989 $74.95 3.9 $15,453

Exercisable as of December 31, 2012 814 $77.78 3.0 $10,437

The weighted-average grant-date fair value of an option granted during 2012, 2011 and 2010 was $28.71, $25.39 and $19.10, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011, and 2009 was $4,226, $1,148 and $1,714,

respectively. Total compensation expense recognized for the years ended December 31, 2012, 2011 and 2010 was $2,176 ($1,378, net of tax),

$1,885 ($1,194, net of tax) and $2,436 ($1,543, 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, 2012 was $2,096 with a weighted average

remaining life of 1.4 years.

38395_10K.indd 36 3/21/13 3:36 PM

### 37

2012 Annual Report The following table summarizes information about the Company’s stock options outstanding as of December 31, 2012:

Outstanding Exercisable

Number Average Average Number Average

Exercise price range of shares life price of shares price

Under $57.34 171 6.4 $47.90 98 $44.34

$57.88-$73.45 197 4.4 69.97 115 72.75

$73.54-$81.40 162 4.7 74.91 136 74.99

$81.90-$86.51 167 2.8 83.16 167 83.16

$87.87-$88.00 35 2.8 87.96 35 87.96

$88.33-$93.65 263 2.3 89.08 263 89.08

Total 995 3.9 $74.87 814 $77.78

A summary of the Company’s RSUs under the 2007 Plan as of December 31, 2012, and changes during the year then ended is presented

as follows:

Weighted

average

Weighted remaining Aggregate

average contractual intrinsic

Shares price term (years) value

Restricted Stock Units outstanding, December 31, 2011 495 $50.76

Granted 260 65.98

Released (140) 43.55

Forfeited (10) 59.07

Restricted Stock Units outstanding, December 31, 2012 605 $57.87 2.3 $54,774

Expected to vest as of December 31, 2012 551 2.1 $49,872

The Company recognized stock-based compensation costs

related to the issuance of RSU’s of $11,887 ($7,530, net of taxes),

$8,186 ($5,186, net of taxes) and $4,262 ($2,700, net of taxes) for

the years ended December 31, 2012, 2011 and 2010, 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

$15,437 as of December 31, 2012, and will be recognized as

expense over a weighted-average period of approximately 2.9 years.

Additional information relating to the Company’s RSUs under the

2007 Plan is as follows:

2012 2011 2010

Restricted Stock Units

outstanding, January 1 495 404 359

Granted 260 196 149

Released (140) (91) (95)

Forfeited (10) (14) (9)

Restricted Stock Units

outstanding, December 31 605 495 404

Expected to vest

as of December 31 551 438 343 

# NOTE 11

E mployee B enefit P lans

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 U.S. based employees of the Unilin

segment, who have completed 90 days of eligible service. The

Company contributes $.50 for every $1.00 of employee contributions

up to a maximum of 6% of the employee’s salary based upon each

individual participants election. Employee and employer contributions

to the Mohawk Plan were $35,986 and $15,046 in 2012,

$34,595 and $14,541 in 2011 and $33,071 and $13,062 in

2010, respectively.

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:

2012 2011 2010

Service cost of benefits earned $ 1,870 1,708 1,506

Interest cost on projected

benefit obligation 1,367 1,400 1,219

Expected return on plan assets (1,192) (1,232) (1,025)

Amortization of actuarial gain (10) (26) 4

Net pension expense $ 2,035 1,850 1,704

38395_10K.indd 37 3/21/13 3:36 PM

### 38

Mohawk Industries, Inc.

Assumptions used to determine net periodic pension expense for

the Non-U.S. Plans:

2012 2011

Discount rate 4.50% 4.75%

Expected rate of return

on plan assets 2.50%-3.50% 4.00%-5.00%

Rate of compensation

increase 2.00%-4.00% 0.00%-3.00%

Underlying inflation rate 2.00% 2.00%

The obligations, plan assets and funding status of the Non-U.S.

Plans were as follows:

2012 2011

Change in benefit obligation:

Projected benefit obligation

at end of prior year $29,231 26,977

Cumulative foreign

exchange effect 669 (876)

Service cost 1,870 1,708

Interest cost 1,367 1,400

Plan participants contributions 827 763

Actuarial loss 5,179 455

Benefits paid (1,552) (1,196)

Effect of curtailment

and settlement (40)

—

Projected benefit obligation

at end of year $37,551 29,231

Change in plan assets:

Fair value of plan assets

at end of prior year $26,109 24,108

Cumulative foreign

exchange effect 515 (594)

Actual return on plan assets 4,771 1,203

Employer contributions 1,888 1,825

Benefits paid (1,552) (1,196)

Plan participant contributions 827 763

Fair value of plan assets

at end of year $32,558 26,109

Funded status of the plans:

Ending funded status $ (4,993) (3,122)

Net amount recognized in

consolidated balance sheets:

Accrued benefit liability

(non-current liability) $ (4,993) (3,122)

Accumulated other

comprehensive income 928 (663)

Net amount recognized $ (4,065) (3,785)

The Company’s net amount recognized in other comprehensive

income related to actuarial gains (losses) was $(1,591), $(452)

and $380 for the years ended December 31, 2012, 2011 and

2010, respectively. Assumptions used to determine the projected benefit obligation

for the Non-U.S. Plans were as follows:

2012 2011

Discount rate 3.25% 4.50%

Rate of compensation

increase 2.00%-4.00% 0.00%-3.00%

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 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

December 31, December 31,

2012 2011

Plans with accumulated

benefit obligations in excess

of

plan assets:

Projected benefit obligation $15,067 16,492

Accumulated benefit obligation 12,396 15,496

Fair value of plan assets 11,702 14,703

Plans with plan assets in

excess of accumulated benefit

obligations:

Projected benefit obligation $22,484 12,739

Accumulated benefit obligation 20,640 10,687

Fair value of plan assets 20,856 11,406

Estimated future benefit payments for the Non-U.S. Plans are

as follows:

2013 976

2014 984

2015 1,071

2016 1,102

2017 1,606

Thereafter 10,241

The Company expects to make cash contributions of $1,930 to

the Non-U.S. Plans in 2013.

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, 2012 and 2011

were as follows:

2012 2011

Non-U.S. Plans:

Insurance contracts (100%) $32,558 26,109

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 invest ment

guidelines and current and expected economic fundamentals.

38395_10K.indd 38 3/21/13 3:36 PM

### 39

2012 Annual Report 

# NOTE 12

O ther Ex pense (I ncome )

Following is a summary of other expense (income):

2012 2011 2010

Foreign currency losses (gains) $(5,599) 10,423 (2,270)

U.S. customs refund

— — (7,730)

All other, net 5,902 3,628 (1,630)

Total other expense (income) $ 303 14,051 (11,630)



# NOTE 13

I ncome T a x es

Following is a summary of earnings from continuing operations

before income taxes for United States and foreign operations:

2012 2011 2010

United States $164,122 78,224 39,332

Foreign 140,370 121,650 153,316

Earnings before income taxes $304,492 199,874 192,648

Income tax expense (benefit) for the years ended December 31,

2012, 2011 and 2010 consists of the following:

2012 2011 2010

Current income taxes:

U.S. federal $ 26,204 13,957 14,052

State and local 4,583 5,118 1,514

Foreign 13,775 7,190 8,426

Total current 44,562 26,265 23,992

Deferred income taxes:

U.S. federal 31,106 8,994 (8,578)

State and local 4,704 (3,488) 18,562

Foreign (26,773) (10,122) (31,263)

Total deferred 9,037 (4,616) (21,279)

Total $ 53,599 21,649 2,713

Income tax expense (benefit) attributable to earnings before

income taxes differs from the amounts computed by applying the

U.S. statutory federal income tax rate to earnings before income

taxes as follows:

2012 2011 2010

Income taxes at statutory rate $106,572 69,956 67,427

State and local income taxes,

net of federal income

tax benefit 6,004 2,821 2,358

Foreign income taxes (66,538) (45,112) (21,389)

Change in valuation allowance 5,703 (2,052) (17,139)

Tax contingencies and

audit settlements (3,598) (5,911) (3,447)

Acquisition related tax

contingencies

— — (30,162)

Change in statutory tax rate

— — (49)

Other, net 5,456 1,947 5,114

$ 53,599 21,649 2,713 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, 2012 and 2011 are presented below:

2012 2011

Deferred tax assets:

Accounts receivable $ 12,289 10,031

Inventories 38,801 39,227

Accrued expenses and other 97,808 90,171

Deductible state tax and

interest benefit 13,119 17,224

Intangibles 113,282 136,891

Federal, foreign and state

net operating losses and credits 247,786 273,509

Gross deferred tax assets 523,085 567,053

Valuation allowance (321,585) (334,215)

Net deferred tax assets 201,500 232,838

Deferred tax liabilities:

Inventories (8,106) (5,270)

Plant and equipment (277,324) (294,960)

Intangibles (128,433) (137,888)

Other liabilities (7,854) (6,401)

Gross deferred tax liabilities (421,717) (444,519)

Net deferred tax liability (1) $(220,217) (211,681)

(1) This amount includes $4,317 and $1,822 of non-current deferred tax assets which

are in deferred income taxes and other non-current assets and $6,309 and $8,760

current deferred tax liabilities which are included in accounts payable and accrued

expenses in the consolidated balance sheets as of December 31, 2012 and

2011, respectively.

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,

2012, 2011 and 2010 is $321,585, $334,215 and $325,127,

respectively. The valuation allowance as of December 31, 2012

relates to the net deferred tax assets of one of the Company’s foreign

subsidiaries as well as certain state net operating losses and tax

credits. The total change in the 2012 valuation allowance was a

decrease of $12,630 which includes $5,863 related to foreign

currency translation. The total change in the 2011 valuation

allowance was an increase of $9,088, which includes $7,040

related to foreign currency translation. The total change in the 2010

valuation allowance was a decrease of $40,817, which includes

$22,046 related to foreign currency translation.

Management believes it is more likely than not that the Company

will realize the benefits of its deferred tax assets, net of valuation

allowances, 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.

38395_10K.indd 39 3/21/13 3:36 PM

### 40

Mohawk Industries, Inc.

As of December 31, 2012, the Company has state net operating

loss carry forwards and state tax credits with potential tax benefits

of $49,081, net of federal income tax benefit; these carry forwards

expire over various periods based on taxing jurisdiction. A valuation

allowance totaling $39,461 has been recorded against these state

deferred tax assets as of December 31, 2012. In addition, as of

December 31, 2012, the Company has net operating loss carry forwards

in various foreign jurisdictions with potential tax benefits of $198,705.

A valuation allowance totaling $170,394 has been recorded against

these deferred taxassets as of December 31, 2012.

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, 2012, the Company had not

provided federal income taxes on earnings of approximately

$786,000 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. Changes in

recognition or measurement are reflected in the period in which the

change in judgment occurs. The Company records interest related

to unrecognized tax benefits in interest and penalties in income tax

expense (benefit). 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.

In January 2012, the Company received a € 23,789 assessment

from the Belgian taxauthority related to its year ended December 31,

2008, asserting that the Company had understated its Belgian

taxable income for that year. The Company filed a formal protest in

the first quarter of 2012 refuting the Belgian tax authority’s position

and in order to eliminate the accrual of additional interest on the

assessed amount, the Company remitted payment of the tax

assessment, plus applicable interest of € 2,912 (collectively, the

“Deposit”). In July 2012, the Company received notification of the

Belgian tax authority’s intention to extend the statute of limitations

back to and including the tax year 2005. On September 10, 2012,

the Company received notice from the Belgian tax authority setting

aside the 2008 assessment and refunding the Deposit to the

Company. On October 23, 2012, the Company received notification

from the Belgian tax authority of its intent to increase the Company’s

tax base for the 2008 tax year under a revised theory. On December 28,

2012, the Company received the refund of the Deposit of € 23,789.

On January 30, 2013, the Company received a refund of the

interest Deposit of € 2,912 and interest income of € 1,583 earned

on the Deposit. On December 28, 2012, the Belgian taxing authority issued

assessments under a revised theory related to the years ended

December 31, 2005 and December 31, 2009, in the amounts of

€ 46,135 and € 35,567, respectively, excluding potential interest and

penalties. The Company intends to file a formal protest during the

first quarter of 2013 relating to the new assessments. The Company

disagrees with the views of the Belgian tax authority on this matter

and will continue to vigorously defend itself. Although there can be

no assurances, the Company believes 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, liquidity or cash flows in a given quarter or year.

As of December 31, 2012, the Company’s gross amount of

unrecognized tax benefits is $53,835, excluding interest and

penalties. If the Company were to prevail on all uncertain tax

positions, $36,902 of the 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:

2012 2011

Balance as of January 1 $46,087 49,943

Additions based on tax positions

related to the current year 3,142 306

Additions for tax positions of prior years 17,006 7,907

Reductions for tax positions of prior years (3,571) (926)

Reductions resulting from the lapse

of

the statute of limitations (1,764) (1,391)

Settlements with taxing authorities (7,065) (9,752)

Balance as of December 31 $53,835 46,087

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, 2012 and 2011, the Company

has $5,874 and $7,998, 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,

2012, 2011 and 2010, the Company reversed interest and penalties

through the consolidated statements of operations of $1,585, $3,755

and $9,852, respectively.

The Company believes that its unrecognized tax benefits could

decrease by $7,499 within the next twelve months. The Company

has effectively settled all Federal income tax matters related to years

prior to 2009. Various other state and foreign income tax returns are

open to examination for various years. The Internal Revenue Service

(“IRS”) recently concluded its examination of the Company’s

2007-2009 federal income tax returns. The results of the federal

income tax examination were submitted to the Congressional Joint

Committee on Taxation for review. Subsequent to the quarter ended

December 31, 2012, the Company received notice that the

Congressional Joint Committee on Taxation had completed its

review and took no exception to the conclusions reached by the IRS.

38395_10K.indd 40 3/21/13 3:36 PM

### 41

2012 Annual Report 

# NOTE 14

C o mmi t m ent s a n d C ont i n g enc i e s

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

2013 $ 795 87,741 88,536

2014 587 75,509 76,096

2015 354 59,252 59,606

2016 266 33,665 33,931

2017 255 21,160 21,415

Thereafter 16 27,068 27,084

Total payments 2,273 304,395 306,668

Less amount representing

interest 228

Present value of capitalized

lease payments $2,045

Rental expense under operating leases was $97,587, $103,416

and $105,976 in 2012, 2011 and 2010, respectively.

The Company had approximately $50,540 as of December 31,

2012 and 2011 in standby letters of credit for various insurance

contracts and commitments to foreign vendors that expire within

two years.

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.

Beginning in August 2010, a series of civil lawsuits were initiated

in several U.S. federal courts alleging that certain manufacturers of

polyurethane foam products and competitors of the Company’s

carpet underlay division had engaged in price fixing in violation of

U.S. antitrust laws. Mohawk has been named as a defendant in a

number of the individual cases (the first filed on August 26, 2010),

as well as in two consolidated amended class action complaints,

the first filed on February 28, 2011, on behalf of

a class of all direct

purchasers of polyurethane foam products, and the second filed

on March 21, 2011, on behalf of

a class of indirect purchasers.

All pending cases in which the Company has been named as a

defendant have been filed in or transferred to the U.S. District Court

for the Northern District of Ohio for consolidated pre-trial proceedings

under the name In re: Polyurethane Foam Antitrust Litigation,

Case No. 1:10-MDL-02196.

In these actions, the plaintiffs, on behalf of

themselves and/or a

class of purchasers, seek three times the amount of unspecified

damages allegedly suffered as a result of alleged overcharges in the

price of polyurethane foam products from at least 1999 to the

present. Each plaintiff also seeks attorney fees, pre-judgment and

post-judgment interest, court costs, and injunctive relief against

future violations. In December 2011, the Company was named as a

defendant in a Canadian Class action, Hi !

Neighbor Floor Covering

Co. Limited v. Hickory Springs Manufacturing Company, et.al., filed

in

the Superior Court of

Justice of

Ontario, Canada and Options

Consommateures v. Vitafoam, Inc., et.al.

, filed in the Superior Court

of

Justice of Quebec, Montreal, Canada, both of which allege similar

claims against the Company as raised in the U.S. actions and seek unspecified damages and punitive damages. The Company denies

all of the allegations in these actions and will vigorously defend itself.

The Company believes that adequate provisions for resolution of

all contingencies, claims and pending litigation have been made for

probable losses that are reasonably estimable. These contingencies

are subject to significant uncertainties and we are unable to estimate

the amount or range of loss, if any, in excess of amounts accrued.

The Company does not believe that the ultimate outcome of these

actions will have a material adverse effect on its financial condition

but could have a material adverse effect on its results of operations,

cash flows or liquidity 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 financial

condition but could have a material adverse effect on its results of

operations, cash flows or liquidity in a given quarter or year.

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. The Company believes that its relations with its employees

are good.

38395_10K.indd 41 3/22/13 2:35 PM

### 42

Mohawk Industries, Inc.

The Company recorded pre-tax business restructuring charges of $18,564 in 2012, of which $14,816 was recorded as cost of sales and

$3,748 was recorded as selling, general and administrative expenses. The Company recorded pre-tax business restructuring charges of

$23,209 in 2011, of which $17,546 was recorded as cost of sales and $5,663 was recorded as selling, general and administrative expenses.

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 charges primarily relate 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 2011 and 2012 is as follows:

Other

Lease Asset restructuring

impairments write-downs Severance costs Total

Balance as of December 31, 2010 $10,983

— 2,108 420 13,511

Provisions

Mohawk segment 3,680 10,643 5,120 3,766 23,209

Cash payments (3,707)

— (4,850) (2,406) (10,963)

Noncash items

— (10,643)

— (269) (10,912)

Balance as of December 31, 2011 10,956

— 2,378 1,511 14,845

Provisions:

Mohawk segment

— 6,687 4,069 (252) 10,504

Dal-Tile segment 373 3,727 2,009

— 6,109

Unilin segment

— 138 1,775 38 1,951

Cash payments (3,872)

— (7,333) (1,297) (12,502)

Noncash items

— (10,552)

— — (10,552)

Balance as of December 31, 2012 $ 7,457

— 2,898

— 10,355

Subsequent to December 31, 2012, in conjunction with the Pergo acquisition, the Company announced its intention to move certain

production activities from Sweden to Belgium. The Company is in the beginning stages of union negotiations.



# NOTE 15

C onsolidated S tatements

C ash F lows I nformation

Supplemental disclosures of cash flow information are as follows:

2012 2011 2010

Net cash paid (received) during

the years for:

Interest $80,985 119,463 139,358

Income taxes $43,650 34,479 (5,862)

Supplemental schedule of

non-cash investing and

financing activities:

Fair value of assets acquired

in acquisition $

— 37,486

—

Liabilities assumed

in acquisition

— (13,389)

—

$

— 24,097

— 

# NOTE 16

S egment R eporting

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 service centers using companyoperated trucks, common carriers or rail transportation. The segment’s product lines are sold through Company-owned 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.

38395_10K.indd 42 3/21/13 3:36 PM

### 43

2012 Annual Report 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, 2012, 2011 or 2010.

Segment information is as follows:

2012 2011 2010

Net sales:

Mohawk $2,912,055 2,927,674 2,844,876

Dal-Tile 1,616,383 1,454,316 1,367,442

Unilin 1,350,349 1,344,764 1,188,274

Intersegment sales (90,807) (84,496) (81,520)

$5,787,980 5,642,258 5,319,072

Operating income (loss):

Mohawk $ 158,196 109,874 122,904

Dal-Tile 120,951 101,298 97,334

Unilin 126,409 127,147 114,298

Corporate and intersegment eliminations (26,048) (22,777) (20,367)

$ 379,508 315,542 314,169

Depreciation and amortization:

Mohawk $ 95,648 90,463 91,930

Dal-Tile 41,176 42,723 45,578

Unilin 132,183 151,884 145,941

Corporate 11,286 12,664 13,324

$ 280,293 297,734 296,773

Capital expenditures (excluding acquisitions):

Mohawk $ 97,972 125,630 84,013

Dal-Tile 49,426 66,419 37,344

Unilin 56,605 78,615 29,439

Corporate 4,291 4,909 5,384

$ 208,294 275,573 156,180

Assets:

Mohawk $1,721,214 1,769,065 1,637,319

Dal-Tile 1,731,258 1,732,818 1,644,448

Unilin 2,672,389 2,533,070 2,475,049

Corporate and intersegment eliminations 178,823 171,275 342,110

$6,303,684 6,206,228 6,098,926

Geographic net sales:

North America $4,798,804 4,619,771 4,447,965

Rest of world 989,176 1,022,487 871,107

$5,787,980 5,642,258 5,319,072

Long-lived assets (1) :

North America $1,968,561 1,996,517 1,971,612

Rest of world 1,110,062 1,090,812 1,084,906

$3,078,623 3,087,329 3,056,518

Net sales by product categories (2) :

Soft surface $2,696,462 2,722,113 2,645,952

Tile 1,676,971 1,513,210 1,428,571

Wood 1,414,547 1,406,935 1,244,549

$5,787,980 5,642,258 5,319,072

(1) Long-lived assets are composed of property, plant and equipment, net, and goodwill.

(2) 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, wood-based panels and licensing.

38395_10K.indd 43 3/21/13 3:36 PM

### 44

Mohawk Industries, Inc. 

# NOTE 17

Quarterly F inancial D ata (U naudited )

The supplemental quarterly financial data are as follows:

Quarters Ended

March 31, June 30, September 29, December 31,

2012 2012 2012 2012

Net sales $1,409,035 1,469,793 1,473,493 1,435,659

Gross profit 359,426 388,464 372,837 369,331

Net earnings 40,377 73,188 70,304 66,389

Basic earnings per share 0.59 1.06 1.02 0.96

Diluted earnings per share 0.58 1.06 1.01 0.96

Quarters Ended

April 2, July 2, October 1, December 31,

2011 2011 2011 2011 (1)

Net sales $1,343,595 1,477,854 1,442,512 1,378,297

Gross profit 341,592 382,247 357,623 335,417

Net earnings 23,442 60,903 46,646 42,931

Basic earnings per share 0.34 0.89 0.68 0.62

Diluted earnings per share 0.34 0.88 0.68 0.62

(1) During the fourth quarter of 2011, the Company corrected an immaterial error in its consolidated financial statements. The error related to accounting for operating leases.

The correction of $6,035 resulted in an additional charge to selling, general and administrative expense in the Company’s 2011 fourth quarter consolidated statement of operations.

The Company believes the correction of this error to be both quantitatively and qualitatively immaterial to its quarterly results for 2011 or to any of its previously issued consolidated

financial statements. The correction had no impact on the Company’s cash flows as previously presented.

38395_10K.indd 44 3/21/13 3:36 PM

### 45

2012 Annual Report I tem 9. Ch anges D isagreements

h A ccountants A ccounting

F inancia l D isc l osure

None.

I tem 9A. C ontro l s P rocedures



### 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, 2012. 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, 2012, 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.

I tem 9B. O t h er I nformation

None.

38395_10K.indd 45 3/21/13 3:36 PM

### 46

Mohawk Industries, Inc. 

# PART III

I tem 10. D irectors

, Ex ecuti v e O fficers

C orporate G o v ernance

The information required by this item is incorporated by reference

to information contained in the Company’s Proxy Statement for the

2013 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.

I tem 11. Ex ecuti v e C ompensation

The information required by this item is incorporated by reference

to information contained in the Company’s Proxy Statement for the

2013 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.” I tem 12. S ecurity O wners h ip C ertain B eneficia l

O wners M anagement R e l ated

S toc kh o l der M atters

The information required by this item is incorporated by reference to

information contained in the Company’s Proxy Statement for the

2013 Annual Meeting of Stockholders under the following headings:

“Executive Compensation and Other Information—Equity

Compensation Plan Information,” and “—Principal Stockholders of

the Company.”

I tem 13. C ertain R e l ations h ips R e l ated

T ransactions

, and D irector I ndependence

The information required by this item is incorporated by reference

to information contained in the Company’s Proxy Statement for the

2013 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.”

I tem 14. P rincipa l A ccounting F ees S er v ices

The information required by this item is incorporated by reference

to information contained in the Company’s Proxy Statement for the

2013 Annual Meeting of Stockholders under the following heading:

“Audit Committee—Principal Accountant Fees and Services” and

“Election of Directors—Meetings and Committees of the Board

of

Directors.”

38395_10K.indd 46 3/21/13 3:36 PM

### 47

2012 Annual Report 

# PART IV

Item 15. Exhibits, 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 the Company’s Registration Statement

on Form S-4, Registration No. 333-74220.)

*2.2 Share Purchase Agreement, dated as of December 20,

2012, by and among LuxELIT S.a r.l., Finceramica S.p.A,

Mohawk Industries, Inc. and Mohawk International

Holdings (DE) Corporation (Incorporated herein by

reference to Exhibit 10.2 of the Company’s Current

Report on Form 8-K dated December 21, 2012.)

*3.1 Restated Certificate of Incorporation of Mohawk, as

amended. (Incorporated herein by reference to

Exhibit 3.1 in the Company’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 the Company’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 the Company’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 the Company’s Current Report on Form 8-K dated

December 4, 2007.)

*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 the

Company’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 the Company’s Current Report on Form 8-K

dated January 17, 2006.)

*4.6 Indenture, dated as of January 31, 2013, by and

between Mohawk Industries, Inc. and U.S. Bank National

Association, as Trustee (Incorporated herein by reference

to Exhibit 4.1 of the Company’s Current Report on

Form 8-K dated January 31, 2013.)

*4.7 First Supplemental Indenture, dated as of January 31,

2013, by and between Mohawk Industries, Inc. and U.S.

Bank National Association, as Trustee (Incorporated

herein by reference to Exhibit 4.2 of the Company’s

Current Report on Form 8-K dated January 31, 2013.)

*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 the Company’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 the Company’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 the Company’s

Annual Report on Form 10-K (File No. 001-13697) for

the fiscal year ended December 31, 1993.)

*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 the Company’s Quarterly Report on

Form 10-Q (File No. 001-13697) for the quarter ended

July 2, 1994.)

*10.5 Credit Agreement by and among the Company and

certain of its subsidiaries, as Borrowers, certain of its

subsidiaries, as Guarantors, Bank of America, N.A. as

administrative Agent, Swing Line Leader, and a L/C Issuer,

the other lenders party thereto, and the other parties

thereto. (Incorporated by reference to the Company’s

Current Report on Form 8-K dated July 12, 2011.)

*10.6 Amendment No. 1 to Credit Agreement dated as of

January 20, 2012, by and among the Company and

certain of its subsidiaries, as Borrowers, certain of its

subsidiaries, as Guarantors, Bank of America, N.A. as

administrative Agent, Swing Line Leader, and a L/C Issuer,

the other lenders party thereto, and the other parties

thereto. (Incorporated by reference to the Company’s

Current Report on Form 8-K dated January 20, 2012.)

38395_10K.indd 47 3/21/13 3:36 PM

### 48

Mohawk Industries, Inc. *10.7 Amendment No. 2 to Credit Agreement dated as of

November 16, 2012 by and among the Company and

certain of its subsidiaries, as Borrowers, certain of its

subsidiaries, as Guarantors, Bank of America, N.A., as

Administrative Agent, Swing Line Lender, and a L/C

Issuer, the other lenders party thereto, and the other

parties thereto (Incorporated herein by reference to

Exhibit 10.1 of the Company’s Current Report on

Form 8-K dated November 21, 2012.)

*10.8 Amendment No. 3 to the Credit Agreement, dated

January 28, 2013, by and among Mohawk Industries,

Inc. and certain of its subsidiaries, as Borrowers, Bank

of

America, N.A., as Administrative Agent, Swing Line

Lender and a L/C Issuer, the other lenders party thereto

and the other parties thereto (Incorporated herein by

reference to Exhibit 10.2 of the Company’s Current

Report on Form 8-K dated January 30, 2013.)

*10.9 Credit and Security Agreement, dated as of December 19,

2012, by and among Mohawk Factoring, LLC, as

borrower, Mohawk Servicing, LLC, as servicer, the lenders

from time to time party thereto, the liquidity banks from

time to time party thereto, the co-agents from time to

time party thereto and SunTrust Bank, as administrative

agent (Incorporated herein by reference to Exhibit 10.2

of

the Company’s Current Report on Form 8-K dated

December 21, 2012.)

10.10 First Amendment to Credit and Security Agreement,

dated as of January 22, 2013, by and among Mohawk

Factoring, LLC, as borrower, Mohawk Servicing, LLC,

as servicer, the lenders from time to time party thereto,

the liquidity banks from time to time party thereto, the

co-agents from time to time party thereto and SunTrust

Bank, as administrative agent.

*10.11 Receivables Purchase and Sale Agreement, dated

December 19, 2012, by and among Mohawk Carpet

Distribution, Inc., and Dal-Tile Distribution, Inc., as

originators, and Mohawk Factoring, LLC, as buyer

(Incorporated herein by reference to Exhibit 10.3

of

the Company’s Current Report on Form 8-K dated

December 21, 2012.)

Exhibits Related to Executive Compensation Plans, Contracts and

other Arrangements:

*10.12 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.)

*10.13 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 the Company’s Annual Report on Form 10-K

(File No. 001-13697) for the fiscal year ended

December 31, 2009.)

*10.14 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.) 10.15 Amendment No. 1 to Second Amended and

Restated Employment Agreement, dated as of

December 20, 2012, by and between the Company

and W. Christopher Wellborn.

*10.16 Mohawk Carpet Corporation Supplemental Executive

Retirement Plan, as amended. (Incorporated herein by

reference to Exhibit 10.2 of the Company’s Registration

Statement on Form S-1, Registration No. 33-45418.)

*10.17 Mohawk Industries, Inc. 1992 Stock Option Plan.

(Incorporated herein by reference to Exhibit 10.8

of

the Company’s Registration Statement on Form S-1,

Registration No. 33-45418.)

*10.18 Amendment dated July 22, 1993 to the Mohawk

Industries, Inc. 1992 Stock Option Plan. (Incorporated

herein by reference to Exhibit 10.2 in the Company’s

quarterly report on Form 10-Q (File No. 001-13697)

for the quarter ended July 3, 1993.)

*10.19 Second Amendment dated February 17, 2000 to the

Mohawk Industries, Inc. 1992 Stock Option Plan.

(Incorporated herein by reference to Exhibit 10.35

of

the Company’s Annual Report on Form 10-K

(File No. 001-13697) for the fiscal year ended

December 31, 1999.)

*10.20 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock

Option Plan. (Incorporated herein by reference to

Exhibit 10.15 of the Company’s Registration Statement

on Form S-1, Registration Number 33-53932.)

*10.21 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

the Company’s quarterly report on Form 10-Q

(File No. 001-13697) for the quarter ended July 3, 1993.)

*10.22 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 the Company’s Annual Report on

Form 10-K (File No. 001-13697) for the fiscal year

ended December 31, 1999.)

*10.23 Mohawk Industries, Inc. 1993 Stock Option Plan.

(Incorporated herein by reference to Exhibit 10.39

of

the Company’s Annual Report on Form 10-K

(File No. 001-13697) for the fiscal year ended

December 31, 1992.)

*10.24 First Amendment dated February 17, 2000 to the

Mohawk Industries, Inc. 1993 Stock Option Plan.

(Incorporated herein by reference to Exhibit 10.40

of

the Company’s Annual Report on Form 10-K

(File No. 001-13697) for the fiscal year ended

December 31, 1999.)

*10.25 The Mohawk Industries, Inc. Senior Management

Deferred Compensation Plan (Incorporated herein by

reference to Exhibit 10.21 of the Company’s Annual

Report on Form 10-K (File No. 001-13697) for the

fiscal year ended December 31, 2010.)

38395_10K.indd 48 3/21/13 3:37 PM

### 49

2012 Annual Report *10.26 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 the Company’s Annual Report on

Form 10-K for the fiscal year ended December 31, 2008.)

*10.27 Mohawk Industries, Inc. 2012 Non-Employee Director

Stock Compensation Plan (Incorporated herein by

reference to Exhibit 10.2 of the Company’s Quarterly

Report on Form 10-Q dated August 3, 2012.)

*10.28 2002 Long-Term Incentive Plan. (Incorporated herein by

reference to Appendix A in the 2002 Mohawk Industries,

Inc. Proxy Statement dated March 29, 2002.)

*10.29 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.)

*10.30 Mohawk Industries, Inc. 2012 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 3, 2012.)

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. 

### 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.

February 27, 2013 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.

February 27, 2013 /s/ JEFFREY S. LORBERBAUM

Jeffrey S. Lorberbaum,

Chairman and Chief Executive Officer

(principal executive officer)

February 27, 2013 /s/ FRANK H. BOYKIN

Frank H. Boykin,

Chief Financial Officer

and Vice President-Finance

(principal financial officer)

February 27, 2013 /s/ JAMES F. BRUNK

James F. Brunk,

Vice President and Corporate Controller

(principal accounting officer)

February 27, 2013 /s/ PHYLLIS O. BONANNO

Phyllis O. Bonanno,

Director

February 27, 2013 /s/ BRUCE C. BRUCKMANN

Bruce C. Bruckmann,

Director

February 27, 2013 /s/ FRANS DE COCK

Frans De Cock,

Director

February 27, 2013 /s/ JOHN F. FIEDLER

John F. Fiedler,

Director

February 27, 2013 /s/ RICHARD C. ILL

Richard C. Ill,

Director

February 27, 2013 /s/ DAVID L. KOLB

David L. Kolb,

Director

February 27, 2013 /s/ JOSEPH A. ONORATO

Joseph A. Onorato,

Director

February 27, 2013 /s/ KAREN A. SMITH BOGART

Karen A. Smith Bogart,

Director

February 27, 2013 /s/ W. CHRISTOPHER WELLBORN

W. Christopher Wellborn,

Director

38395_10K.indd 49 3/21/13 3:37 PM

### 50

Mohawk Industries, Inc. 

### Reconciliation of Non-GAAP Measures

Reconciliation of Operating Income to Adjusted Operating Income and Adjusted EBITDA

(Amounts in thousands)

As of and for the Years Ended December 31,

2012 2011 2010 2009

Operating income $ 379,508 315,542 314,169 43,730

Add: Business restructurings 18,564 23,209 13,156 61,725

Operating lease correction (e)

— 6,035

— —

Commercial carpet tile reserve

— — — 133,492

Higher cost inventory flow through (f)

— — — 61,794

Adjusted operating income (a) $ 398,072 344,786 327,325 300,741

Less: Net earnings attributable to noncontrolling interest (635) (4,303) (4,464) (4,480)

Add: Depreciation and amortization 280,293 297,734 296,773 303,004

Other income (expense), net (303) (14,051) 3,900 5,588

Unrealized foreign currency losses (g)

— 9,085

— —

U.S. customs refund

— — 7,730

—

Adjusted EBITDA (b) $ 677,427 633,251 631,264 604,853

Net Debt

Long-term debt (including current portion) $1,382,942 1,586,439 1,653,582 1,854,479

Less: Cash and cash equivalents (including restricted cash) (477,672) (311,945) (382,171) (531,458)

Net Debt (c) $ 905,270 1,274,494 1,271,411 1,323,021

Capital

Long-term debt (including current portion) $1,382,942 1,586,439 1,653,582 1,854,479

Total stockholders' equity 3,719,617 3,415,785 3,271,556 3,200,823

Capitalization $5,102,559 5,002,224 4,925,138 5,055,302

Net Debt to Adjusted EBITDA (d) 1.3 2.0 2.0 2.2

Net Debt to Capitalization (c) 17.7% 25.5% 25.8% 26.2%

(a) The non-GAAP measure "Adjusted Operating Income" is used to compare operating results. Management uses the information to review results excluding items that are not

necessarily indicative of on-going results.

(b) The non-GAAP measure "Adjusted EBITDA" is used to more clearly evaluate our cash generation from operations.

(c) The non-GAAP measure "Net Debt" and "Net Debt to Capitalization" is used to more clearly evaluate our capital structure and leverage.

(d) The non-GAAP measure "Net Debt to Adjusted EBITDA" is used to more clearly show the number of times our operating cash flow covers leverage.

(e) Correction of an immaterial error related to accounting for operating leases.

(f) Unusually high raw material costs incurred in the latter part of 2008, flowing through cost of sales in the first quarter of 2009.

(g) Unrealized foreign currency losses in Q3 2011 for certain of the Company's consolidated foreign subsidiaries that measure financial position and results using the U.S. dollar rather

than the local currency.

The Company believes it is useful for itself and investors to review, as applicable, both GAAP and the above non-GAAP measures in order to assess the performance of the Company’s

business for planning and forecasting in subsequent periods.

38395_10K.indd 50 3/21/13 3:37 PM

### 51

2012 Annual Report 

### Reconciliation of Non-GAAP Measures (continued)

Reconciliation ofNet Earnings Attributable to Mohawk Industries, Inc. to Adjusted Net Earnings Attributable to Mohawk Industries, Inc.

and Adjusted Diluted Earnings Per Share Attributable to Mohawk Industries, Inc.

(Amounts in thousands, except per share data)

Years Ended December 31,

2012 2011 2010 2009

Net earnings attributable to Mohawk Industries, Inc. $250,258 173,922 185,471 (5,499)

Unusual items:

Unrealized foreign currency losses (g)

— 9,085

— — Operating lease correction (e)

— 6,035

— —

Business restructurings 18,564 23,209 13,156 61,725

Commercial carpet tile reserve

— — — 133,492

Higher cost inventory flow through (f)

— — — 61,794

Debt extinguishment costs

— 1,116 7,514

— Acquisitions purchase accounting

— — 1,713

—

U.S. customs refund

— — (7,730)

—

Discrete tax items, net

— — (24,407)

—

Income taxes (7,003) (11,749) (2,592) (98,195)

Adjusted net earnings attributable to Mohawk Industries, Inc. $261,819 201,618 173,125 153,317

Adjusted diluted earnings per share attributable to Mohawk Industries, Inc. $ 3.78 2.92 2.52 2.24

Weighted-average common shares outstanding

–diluted 69,306 68,964 68,784 68,452

Reconciliation of Segment Operating Income to Adjusted Segment Operating Income

(Amounts in thousands)

Years Ended December 31,

Mohawk 2012 2011

Operating income $158,196 109,874

Adjustment to segment operating income:

Operating lease correction (e)

— 2,761

Business restructurings 10,504 23,209

Adjusted segment operating income $168,700 135,844

Years Ended December 31,

Unilin 2012 2011

Operating income $126,409 127,147

Adjustment to segment operating income:

Business restructurings 1,951

—

Adjusted segment operating income $128,360 127,147

Years Ended December 31,

Dal-Tile 2012 2011

Operating income $120,951 101,298

Adjustment to segment operating income:

Operating lease correction (e)

— 3,274

Business restructurings 6,109

—

Adjusted segment operating income $127,060 104,572

38395_10K.indd 51 3/21/13 3:37 PM

### 52

Mohawk Industries, Inc. 

### Corporate Headquarters

P.O. Box 12069

160 South Industrial Boulevard

Calhoun, Georgia 30703

(706) 624-2246



### Independent Registered Public

Accounting Firm

KPMG LLP

Atlanta, Georgia



### Corporate Counsel

Alston & Bird LLP

Atlanta, Georgia



### Transfer Agent and Registrar

American Stock Transfer

and Trust Company

Corporate Trust Client Services

16633 N. Dallas Parkway, Suite 600

Addison, Texas 75001

(972) 588-1889



### Publications

The Company’s Annual Report, Proxy Statement,

Form 8-K, 10-K and 10-Q reports are available

without charge and can be ordered via our

stockholder communications service at

(800) 625-7721 or via the Internet at

www.mohawkind.com under Investor Information.

Written requests should be sent to Deby Forbus

at the Company’s headquarters address above.



### Product Inquiries

For more information about Mohawk’s products,

visit our websites:

www.mohawkflooring.com

www.daltile.com

www.pergo.com

www.unilin.com 

### Investor/Analyst Contact

For additional information about Mohawk,

please contact Frank H. Boykin at

(706) 624-2695 or at the Company’s

headquarters address above.



### Annual Meeting of Stockholders

The Annual Meeting of Stockholders of

Mohawk Industries, Inc. will be held at the

time and location specified in our Notice of

Annual Meeting of Stockholders for 2013.



### Common Stock Price Range

Mohawk’s common stock is traded on the

New York Stock Exchange under the symbol

MHK. The table below sets forth the high

and low sales prices per share of the common

stock as reported by the exchange, for each

period indicated.



### Mohawk Common Stock

2012 High Low

First Quarter $68.16 $57.62

Second Quarter 75.44 60.21

Third Quarter 82.76 64.22

Fourth Quarter 93.95 77.67

2011 High Low

First Quarter $63.12 $54.42

Second Quarter 68.86 57.43

Third Quarter 61.47 39.93

Fourth Quarter 61.30 40.19 

### Sustainability

Mohawk is recognized as a leader in sustainability

and environmental stewardship, with a determined

focus on responsible use of raw materials, recycling,

waste management and water and energy conservation throughout its business and operations.



### Equal Opportunity

Mohawk is an Equal Opportunity/Affirmative

Action employer committed to attracting a

diverse pool of applicants and sustaining an

inclusive workforce.



### NYSE Affirmation Certifications

As a listed Company with the New York Stock

Exchange (“NYSE”), Mohawk is subject to certain

Corporate Governance standards as required by

the NYSE and/or the Securities and Exchange

Commission (“SEC”). Among other requirements,

Mohawk’s CEO, as required by Section 303A.12(a)

of

the NYSE Listing Company Manual, must certify

to the NYSE each year whether or

not he is aware of

any violations by the Company of

NYSE Corporate

Governance listing standards as of the date of the

certification. On May 9, 2012, Mohawk’s CEO

Jeffrey S. Lorberbaum submitted such a certification to the NYSE which stated that he was not

aware of any violation by Mohawk of the NYSE

Corporate Governance listing standards.

The Company has filed the certifications of its

Chief Executive Officer and Chief Financial

Officer required by Section 302 of SarbanesOxley Act of 2002 as an exhibit to the

Company’s Form 10-K for the year ended

December 31, 2012. 

# Shareholder Information

Stock Performance Graph

The following is a line graph comparing the yearly percentage change in the Company’s cumulative total

stockholder returns to those of the Standard & Poor’s 500 Index and a group of peer issuers beginning on

December 31, 2007 and ending on December 31, 2012.

The peer group includes the following companies: Armstrong World Industries, Inc.; Dixie Group, Inc.;

Interface, Inc.; Leggett & Platt, Inc.; MASCO Corporation; and Stanley Black & Decker, Inc. Total return

values were calculated based on cumulative total return, assuming the value of the investment in the

Company’s Common Stock and in each index on December 31, 2007 was $100 and that all dividends

were reinvested. The Company is not included in the peer group because management believes that,

by

excluding the Company, investors will have a more accurate view of

the Company’s performance relative

to peer companies.



### • Mohawk Industries, Inc. 

### • S&P 500 Index

– Total Returns 

### • Peer Group Design by Corporate Reports Inc., Atlanta, GA

www.corporatereport.com $ 40 $ 62 $ 84 $128

$106 $150

2007 2008 2009 2010 2011 2012 $100 $141.00

$108.57 $121.60

38395_10K.indd 52 3/21/13 3:37 PMFrom Left to Right: Joseph A. Onorato, W. Christopher Wellborn, Phyllis O. Bonanno, Frans De Cock, Richard C. III, Jeffrey S. Lorberbaum,

Karen A. Smith Bogart, Bruce C. Bruckmann, John F. Fiedler, David L. Kolb

Joseph A. Onorato (1)(2)

Former Chief Financial Officer of Echlin, Inc.

(a manufacturer of automotive parts)

W. ChristopherWellborn

President and Chief Operating Officer

Phyllis O. Bonanno (3)

Former President and Chief Executive Officer

of International Trade Solutions, Inc.

(an international trade consulting firm)

Frans De Cock

Former President of Unilin Richard C. III (1)

Chairman of Triumph Group, Inc.

(a public, international aviation

services company)

Jeffrey S. Lorberbaum

Chairman and Chief Executive Officer

Karen A. Smith Bogart (2)

President of Pacific Tributes, Inc.

(a start-up firm providing web-based

printing services) Bruce C. Bruckmann (1)(3)

Managing Director of Bruckmann, Rosser,

Sherrill & Co., Inc. (a venture capital firm)

John F. Fiedler (2)

Former Chairman and Chief Executive Officer

of Borg-Warner Automotive Inc.

(a manufacturer of automotive parts)

David L. Kolb (3)

Former Chairman and Chief Executive Officer

of Mohawk Industries, Inc.

Please see the Company’s 2013 Proxy Statement for a listing of our Executive Officers.

The Proxy Statement is available via the Internet at www.mohawkind.com under Investor Information. (1) Audit Committee

(2) Compensation Committee

(3) Nominating and Corporate Governance Committee



# Board of Directors

David L. Kolb At the February 2013 Board meeting, Mr. Kolb announced that he would be retiring from Mohawk’s Board of Directors at the

end of his current term, May 8, 2013. Mr. Kolb served as President of Mohawk Carpet Corporation until it was acquired by the Company in

December 1988, and then served as Chief Executive Officer and Chairman of the Board of Directors until 2001 and 2004, respectively.

Mr. Kolb’s guidance and vision was instrumental in transforming the Company from a North American carpet manufacturer to a worldwide

flooring manufacturer and distributor. Dave’s strong leadership, business acumen and focus on innovative products and processes were

invaluable as the Company grew by more than twenty-fold during his tenure. The Company is grateful to have had the benefit of Dave’s

vision and dedication over the past 25 years.

Phyllis O. Bonanno Ms. Bonanno also announced at the February 2013 Board meeting that she would be retiring from Mohawk’s Board

at the end of her current term, May 8, 2013. Ms. Bonanno served the Company as a director since February 2004. With her broad

experience in international trade and consumer products, Phyllis provided exceptional advice and guidance to the Company as it expanded

its geographic footprint from North America operations to a worldwide presence. Mohawk expresses its

appreciation for her serviceand dedication

during her tenure on the Board. 

# Mohawk Industries:

A Leading Global Flooring Manufacturer

As one of the foremost flooring manufacturers, we are proud to create products that

enhance the aesthetics and functionality of spaces around the world. Our vertically

integrated operations, leading brands and broad product portfolios provide us with

numerous competitive advantages in the global marketplace.



# Dal-Tile

Dal-Tile is the largest

manufacturer of ceramic

tile and distributor of

natural stone in the

North American market

and supplies a vast

array of commercial

and residential products

under the Daltile ®



## , American Olean ® 

## and

Marazzi ® 

## * brands.

Daltile ®



## American Olean ®



## Marazzi ® 

# Unilin

Unilin’s Quick-Step ® 

## and

Columbia ® 

## brands are among

the world’s most recognized

names in laminate and

hardwood flooring. In 2013,

we welcome the Pergo ®



## brand into our laminate

collections. Unilin products

also include chipboard,

MDF, HDF and insulation

panels and boards.

Quick-Step ®



## Pergo ®



## Columbia ®



## Century ®



## didit TM 

## Furniture 

# Mohawk

The Mohawk ® 

## brand is

one of the premier carpet

and hard surface brands

in North America. Under

our Mohawk Home ® 

## brand,

we are also the largest

supplier of rugs and mats

in the market.

Karastan ®



## Mohawk ®



## Aladdin ®



## Horizon ® 

## Bigelow ®



## Lees ®



## Durkan ®



## Mohawk Home ®

*Subject to completion of Marazzi acquisition.

38395_Cover.indd 2 3/22/13 10:47 AM

# Growth

By Design

Mohawk Industries, Inc. 2012 Annual Report 160 South Industrial Boulevard

Calhoun, Georgia 30701

www.mohawkind.com

© All rights reserved Mohawk Industries, Inc. 2013 Mohawk Industries, Inc. is one of the world’s leading flooring companies with operations in

North America, Europe, Asia and Australia. Our products and brands span every major flooring

category across a wide range of price points and distribution channels. We are headquartered

in Calhoun, Georgia, and our shares trade on the New York Stock Exchange under the ticker

symbol “MHK.” 

# Growth By DesignMohawkIndustries,Inc.2012AnnualReport

38395_Cover.indd 1 3/21/13 4:20 PM