EX-99.1 3 dex991.txt MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Exhibit 99.1 The Administrator Mohawk Carpet Corporation Retirement Savings Plan: We have audited the accompanying statements of net assets available for plan benefits of the Mohawk Carpet Corporation Retirement Savings Plan ("Plan") as of December 31, 2000 and 1999, and the related statement of changes in net assets available for plan benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 2000 and 1999, and the changes in net assets available for plan benefits for the year ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes as of December 31, 2000 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG LLP Atlanta, Georgia May 22, 2001 6 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Statements of Net Assets Available for Plan Benefits December 31, 2000 and 1999
2000 1999 -------------------- -------------------- Assets: Investments (notes 3 and 4): Mutual funds, at fair value $ 104,065,096 77,751,684 Mohawk Industries, Inc. common stock, at fair value 21,766,298 18,619,828 Money market funds, at cost 69,147,930 61,154,948 Loans to participants, at cost 10,343,989 8,387,633 -------------------- -------------------- Total investments 205,323,313 165,914,093 Contributions receivable from employer 314,866 472,185 Contributions receivable from participants 904,948 1,393,040 Receivable from American Rug Craftsman 401(k) Savings Plan (note 7) - 3,301,969 Receivable from American Weaver Retirement Plan (note 7) - 964,642 -------------------- -------------------- Net assets available for plan benefits $ 206,543,127 172,045,929 ==================== ====================
See accompanying notes to financial statements. 7 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits Year ended December 31, 2000
Additions: Investment income: Interest and dividends $ 9,687,688 Net appreciation in fair value of investments: Mutual funds 7,458,967 Mohawk Industries, Inc. common stock 1,712,726 -------------------- Net investment income 18,859,381 Contributions from employer 10,629,497 Contributions from participants 18,950,559 Transfers from other plans (note 7) 1,388,357 -------------------- Total additions 49,827,794 -------------------- Deductions: Participants' benefits 15,259,786 Administrative expenses 70,810 -------------------- Total deductions 15,330,596 -------------------- Increase in net assets available for plan benefits 34,497,198 Net assets available for plan benefits at beginning of year 172,045,929 -------------------- Net assets available for plan benefits at end of year $ 206,543,127 ====================
See accompanying notes to financial statements. 8 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 (1) Summary of Significant Accounting Policies The following is a summary of significant accounting policies followed by the Plan in preparing its financial statements. (a) Basis of Presentation The records of the Plan are maintained on the cash basis of accounting. The accompanying financial statements of the Mohawk Carpet Corporation Retirement Savings Plan (the "Plan") have been prepared on the accrual basis of accounting and present the net assets available for plan benefits and changes in those net assets. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. (b) Investments Investments in mutual funds and common stock are stated at fair value based on quoted market prices or as determined by Scudder Kemper Investments (Trustee). Investments in money market funds and loans to participants are stated at cost which approximate fair value. Securities transactions are accounted for on a trade date basis. Realized and unrealized investment gains and losses are included in net appreciation in fair value of investments in the statement of changes in net assets available for plan benefits. (c) Fair Value of Financial Instruments Investments in securities are stated at fair value. In addition, management of the Plan believes that the carrying amount of receivables is a reasonable approximation of the fair value due to the short-term nature of these instruments. (2) Description of the Plan The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. (a) General The Plan is a defined contribution plan and covers all employees of Mohawk Carpet Corporation (the "Company"), a wholly owned subsidiary of Mohawk Industries, Inc. The Plan provides for retirement savings to qualified active participants through both participant and employer contributions and is subject to certain provisions of the Employee Retirement 9 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 Income Security Act of 1974 (ERISA). Employees are eligible to participate in the Plan at the beginning of a calendar month after completing one year of service. The Plan is administered by an Administrative Committee appointed by the Company. The Administrative Committee is responsible for the control, management, and administration of the Plan and the assets held in trust at Scudder Kemper Investments as of December 31 2000 and 1999, and for the year ended December 31, 2000. (b) Contributions Contributions to the Plan are made by both participants and the Company. Participants may contribute a maximum of 16% of their gross compensation, subject to certain limitations. Participants may allocate their contributions in multiples of 1% to various investment funds of the Plan. The employer makes a 50% matching contribution up to the first 4% of each participant's gross compensation contributed to the Plan. The Company amended the Plan effective January 1, 2000 to match an additional $0.25 for every $1.00 of employee contributions in excess of 4% up to a maximum of 6%. The terms of the Plan also provide for discretionary employer profit sharing contributions to the Mohawk Stock Fund for plan participants employed on the last day of the plan year or terminated during the plan year on account of death, disability, or retirement. (c) Participant Accounts Each participant's account is credited with their contribution for the period as well as the employer's matching contribution. Investment income, realized gains/losses, employer profit sharing contributions, and the change in unrealized appreciation or depreciation on plan investments are credited to participants' accounts monthly based on the proportion of each participant's account balance to the total account balance within each investment fund at the beginning of the month. Participant accounts may be invested in one or more of the investment funds available under the Plan at the direction of the participant. The Plan provides for monthly valuation of accounts. Current investment funds available within the Plan include the following: 10 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 Investment Fund Fund Objective --------------- -------------- Scudder Stable Value Fund: To provide fixed rate of return for a fixed period of time. Money in this fund is invested in investment contracts, money market securities and treasury bills. PIMCO Total Return Fund: To provide the opportunity for higher earnings than the stable value fund. Money in this fund is invested primarily in intermediate term, high- quality, fixed income securities. Scudder Balanced Fund: To provide capital growth and current income while minimizing the risk of principal loss associated with common stocks by investing in a changing mix of seasoned stocks and investment grade bonds. Kemper-Dreman High- To provide long-term capital Return Equity Fund: growth through investing in large capitalization stocks in undervalued sectors of the stock market. Scudder S&P 500 Index Fund: To track the performance of the Standard and Poor's 500 Composite Stock Price Index, which emphasizes stocks of large U.S. companies. Baron Asset Fund: To provide long-term capital growth through investing in the stocks of small- and medium- sized companies with undervalued assets. Scudder International Fund: To provide long-term capital growth through a flexible policy of investing in stocks and debt obligations of companies and governments outside the U.S. Mohawk Stock Fund: To provide capital appreciation through the ownership of Mohawk Industries shares. Scudder 21/st/ Century To provide long-term growth of Growth Fund: capital through investing primarily in emerging growth companies poised to become leaders in the 21/st/ Century. Transamerica Premier To provide long-term growth Equity Fund: through investing in a diversified portfolio of equity securities of domestic growth companies of any size. AIM Value Fund: To provide long-term growth of capital through investing in stocks of companies that are undervalued relative to the stock market as a whole. 11 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 (d) Distributions to Participants Upon termination of employment, the participant's account shall be distributed in a lump-sum cash payment as soon as administratively practicable, unless the participant elects otherwise. A participant may elect to receive his distribution in approximate equal installments over a period designated by the participant, not to exceed the lesser of 15 years or the life expectancy of the last survivor of the participant and his beneficiary. Under the terms of the Plan, participants may make hardship withdrawals from their accounts upon furnishing proof of hardship as specified in the Plan agreement. Participants may also borrow the lesser of $50,000 or 50% of the value of their accounts subject to limitations provided by the Plan. Loans must be paid back to the Plan generally within four years of the loan date. Amounts due to participants who have withdrawn from the Plan but have not been paid at December 31, 2000 and 1999 totaled $170,697 and $7,498, respectively. (e) Vesting Participants are immediately vested in their contributions and the Company's matching and discretionary contributions and the income earned on such contributions. Effective January 1, 2001, participants whose entry date is on or after January 1, 2001 will be vested in the Company's matching and discretionary contributions in accordance with the following schedule: Years of vesting service Percent vested ------------------------ -------------- Less than one year 0% One year or more 100% (f) Administrative Expenses Certain administrative expenses of the Plan are paid by the Company. These costs include legal, accounting, and certain administrative fees. (3) Transactions with Parties-In-Interest At December 31, 2000 and 1999, the Plan held investments in trust funds and money market accounts sponsored by the trustee with current values of $160,915,675 and $136,030,055, respectively. The Plan also held investments in 795,119 and 747,855 shares of Mohawk Industries, Inc. common stock at December 31, 2000 and 1999, respectively. 12 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Notes to Financial Statements December 31, 2000 and 1999 (4) Investments The following investments represent 5% or more of the Plan assets at December 31, 2000 and 1999:
2000 1999 ----------------- ---------------- Mutual funds: Scudder Balanced Fund 15,250,186 13,388,084 Scudder S&P 500 Index Fund 12,537,715 10,297,656 Kemper-Dreman High-Return Equity Fund 57,646,310 47,720,992 Mohawk Industries, Inc. common stock 21,766,298 18,619,828 Money market fund - Scudder Stable Value Fund 69,147,930 61,154,948
All of the Plan's investments are held by a party-in-interest to the Plan. (5) Income Tax Status The Internal Revenue Service made a favorable ruling on the application for determination of qualification submitted by the Company in September 1995. The Plan has been amended since receiving the determination letter and the Plan has filed an application for an updated determination letter. The administrative committee of the Plan is not aware of any course of action or series of events that might adversely affect the Plan's qualification under Section 401(a) of the Internal Revenue Code, and under which the Plan would be subject to tax under present income tax law. (6) Plan Termination While it is the Company's intention to continue the Plan indefinitely, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA and the Plan agreement. (7) Plan Mergers In 1999, the plan sponsor elected to merge the American Rug Craftsmen 401(k) Savings Plan and the American Weaver Retirement Plan with the Plan. The assets from these plans represent the receivables of $3,301,969 and $964,642, respectively, and were received by the Plan in January 2000. During 2000, the assets of Multitex Employee Retirement Savings Plan were merged with the plan. Plan assets include assets of $1,388,357 transferred from Multitex Employee Retirement Savings Plan. 13 MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN Schedule of Assets Held for Investment Purposes December 31, 2000
Identity of the issue Description of investments Current value ---------------------------------------------------- ------------------------------------------- ----------------- Mutual funds: PIMCO Total Return Fund 275,890 mutual fund units $ 2,866,499 Scudder Balanced Fund* 792,217 mutual fund units 15,250,186 Scudder S&P 500 Index Fund 336,854 mutual fund units 12,537,715 Scudder International Fund* 86,174 mutual fund units 4,335,407 Kemper-Dreman High-Return Equity* 1,560,539 mutual fund units 57,646,310 Baron Asset Fund 47,533 mutual fund units 2,585,321 AIM Value Fund 115,848 mutual fund units 1,449,253 Transamerica Premier Equity Fund 259,811 mutual fund units 5,396,278 Scudder 21st Century Fund* 90,700 mutual fund units 1,998,127 Mohawk Industries, Inc.* - common stock 795,119 shares of common stock 21,766,298 Money Market Fund - Scudder Stable Value Fund* 69,147,930 Money Market Fund 69,147,930 Loans to participants (1) 10,343,989 ----------------- Total $ 205,323,313 =================
* Scudder Kemper Investments, Trustee, and Mohawk Industries, Inc. are parties-in-interest to the Plan. (1) Loans are consummated at a fixed rate (then current prime rate plus 1%) for terms up to four years or 20 years for residence. Interest rates range from 7% to 10% on loans outstanding. See accompanying independent auditors' report 14