<PAGE>
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, 1999 and 1998, and the related statement of changes in net assets
available for plan benefits for the year ended December 31, 1999. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits 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, 1999 and 1998, and the changes in net assets available for plan
benefits for the year ended December 31, 1999 in conformity with generally
accepted accounting principles.
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, 1999 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 12, 2000
6
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Assets:
Investments (notes 3 and 4):
Mutual funds, at fair value $ 77,751,684 34,799,216
Guaranteed investment contracts, at contract value - 36,585,191
Mohawk Industries, Inc. common stock, at fair value 18,619,828 17,111,270
Money market funds, at cost 61,154,948 194,825
Loans to participants, at cost 8,387,633 2,686,268
------------------- -------------------
Total investments 165,914,093 91,376,770
Accrued investment income - 300,701
Contributions receivable from employer 472,185 253,002
Contributions receivable from participants 1,393,040 779,265
Receivable from American Rug Craftsman
401(k) Savings Plan (note 7) 3,301,969 -
Receivable from American Weaver
Retirement Plan (note 7) 964,642 -
------------------- -------------------
Total assets 172,045,929 92,709,738
Liabilities - accounts payable - 407,255
------------------- -------------------
Net assets available for plan benefits $ 172,045,929 92,302,483
=================== ===================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1999
<TABLE>
<S> <C>
Additions:
Investment income:
Interest and dividends $ 7,942,620
Net depreciation in fair value of investments:
Mutual funds (291,040)
Mohawk Industries, Inc. common stock (850,912)
---------------
Net investment income 6,800,668
Contributions from employer 5,210,668
Contributions from participants 16,266,393
Transfers from other plans (note 7) 65,031,097
---------------
Total additions 93,308,826
---------------
Deductions:
Participants' benefits 13,510,275
Administrative expenses 55,105
---------------
Total deductions 13,565,380
---------------
Increase in net assets available for plan benefits 79,743,446
Net assets available for plan benefits at beginning of year 92,302,483
---------------
Net assets available for plan benefits at end of year $ 172,045,929
===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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
generally accepted accounting principles 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.
Investments in guaranteed investment contracts are payable on
demand and are recorded at contract value, which approximates fair
value. The contractual interest rates and crediting interest rates
ranged from 6.0% to 7.5% at December 31, 1998. Guaranteed
investment contracts are renegotiated at current rates available
from insurance companies annually on April 1. There were no
investments in guaranteed investment contracts for the year ended
December 31, 1999.
Realized and unrealized investment gains and losses are included
in net appreciation (depreciation) in fair value of investments in
the statement of changes in net assets available for plan
benefits.
(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
9
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
and employer contributions and is subject to certain provisions of
the Employee Retirement 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 for the period
from March 1, 1999 to December 31, 1999 and SunTrust Bank for the
period from January 1, 1999 to March 1, 1999 and the year ended
December 31, 1998, respectively.
(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 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.
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%.
(c) Participant Accounts
Each participant's account is credited with their contribution for
the period as well as the employer's matching contribution and an
allocation of any employer profit sharing 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
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
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 growth through
Return Equity Fund: 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.
11
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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, 1999 and 1998 totaled
$7,498 and $657,537, 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.
(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, 1999 and 1998, the Plan held investments in trust funds
and money market accounts sponsored by the trustee with current values of
$136,030,055 and $29,701,669, respectively. The Plan also held
investments in 747,855 and 406,801 shares of Mohawk Industries, Inc.
common stock at December 31, 1999 and 1998, respectively.
12
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(4) Investments
In September 1999, the American Institute of Certified Public Accountants
issued Statement of Position 99-3, Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure
Matters ("SOP 99-3"). SOP 99-3 simplifies the disclosure for certain
investments and is effective for plan years ending after December 15,
1999. The Plan adopted SOP 99-3 during the Plan year ending December 31,
1999. Accordingly, information previously required to be disclosed about
participant-directed fund investment programs is not presented in the
Plan's 1999 financial statements. The Plan's 1998 financial statements
have been reclassified to conform with the current year's presentation.
The following investments represent 5% or more of the Plan assets at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Mutual funds:
STI Capital Growth Fund $ -- 29,506,844
Scudder Balanced Fund 13,388,084 --
Scudder S&P 500 Index Fund 10,297,656 --
Kemper-Dreman High-Return Equity Fund 47,720,992 --
Guaranteed investment contracts:
CNA Insurance Guaranteed Investment Contracts -- 6,247,618
New York Life Guaranteed Investment Contract -- 6,710,388
John Hancock Life Guaranteed Investment Contract -- 5,352,065
Life of Virginia Guaranteed Investment Contract -- 10,747,605
Mohawk Industries, Inc. common stock 18,619,828 17,111,270
Money market fund - Scudder Stable Value Fund 61,154,948 194,825
Loans to participants 8,387,633 2,686,268
</TABLE>
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.
13
<PAGE>
MOHAWK CARPET CORPORATION RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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
During 1999, the assets of the following plans were merged with the Plan:
Aladdin Retirement Savings Plan, Galaxy Carpet Mills, Inc. Deferred
Income Retirement Plan, World Carpets, Inc. Savings and Retirement Plan,
Multitex Employee Retirement Savings Plan, and William Barnett & Son,
Inc. Employees Profit Sharing and 401(k) Savings Plan.
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.
14
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Schedule 1
MOHAWK INDUSTRIES 401(K)
Schedule of Assets Held for Investment Purposes
December 31, 1999
<TABLE>
<CAPTION>
Current
Identity of the issue Description of investments value
------------------------------------------------- ---------------------------------------- ----------------
<S> <C> <C>
Mutual funds:
PIMCO Total Return Fund 173,009 mutual fund units $ 1,712,786
Scudder Balanced Fund* 633,006 mutual fund units 13,388,084
Scudder S&P 500 Index Fund 251,101 mutual fund units 10,297,656
Scudder International Fund* 49,030 mutual fund units 3,468,375
Kemper-Dreman High-Return Equity* 1,779,306 mutual fund units 47,720,992
Baron Asset Fund 19,802 mutual fund units 1,163,791
Mohawk Industries, Inc.* - common stock 747,855 shares of common stock 18,619,828
Money Market Fund - Scudder Stable Value Fund* Money Market Fund 61,154,948
Loans to participants (1) 8,387,633
----------------
Total $ 165,914,093
================
</TABLE>
* 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
15
