September 13, 2011

Mohawk Industries, Inc. 

 

 - 49 - 

known for developing the UNICLIC glueless system, beveled edges, and new designs/textures for laminate 

and hardwood flooring. After having steadily increased distribution within Eastern Europe and Russia, the 

Company added a manufacturing facility in Russia that will be operational in 3Q 2011.  In addition, Mohawk 

has expanded Unilin’s Western European business into the hardwood category with products manufactured 

from Malaysia and through the acquisition of a large hard surface wholesaler in the U.K. and Ireland.  Finally, 

Unilin recently expanded its product lines to include roofing systems, insulation panels and other wood 

products. Non-flooring products now account for one-third of overall segment sales.    

2010 Sales ($MM) 

2010 EBITDA ($MM) 

 

 

Source: Company reports 

History of the Company 

The Company was founded in 1878 by four Shuttleworth brothers who shipped 14 second-hand Wilton 

looms from Great Britain to Amsterdam, New York (which at the time was a major textile center) to launch their 

carpet mill. The Company was incorporated in 1902 under the name Shuttleworth Brothers Company. Three 

generations of Shuttleworths ran the Company’s first century, and in 1920, the company began the first of what 

would become many mergers and acquisitions when it combined with carpet makers McCleary, William and 

Crouse to become a market leader in the then fragmented industry. After the merger, the combined company 

was renamed Mohawk Carpet Mills. In 1956, Mohawk merged with Alexander Smith Inc., which was the largest 

carpet manufacturer in the world at that time, to form Mohasco Industries. Aspiring to build a home furnishing 

empire, Mohasco acquired nine furniture manufacturers over the next 15 years. By 1972, Mohasco was the 

number two player in the overall home furnishing market, behind Bassett Furniture, and its carpet business 

only accounted about a quarter of total sales. Mohasco’s carpet business incurred operating losses throughout 

the late 1970s and 1980s as the industry was burdened with overcapacity and fierce competition. David Kolb 

was hired as President of Mohasco’s carpet division in 1980 and was charged with improving profitability. Over 

the next five years, he upgraded manufacturing facilities, emphasized high margin carpet products and sold 

directly to floor covering retailers. Kolb led a management buyout of the division in 1988, but MHK reemerged 

as a public company in 1992.  

In 1994, Mohawk merged with highly profitable and privately held Aladdin Mills. Because Aladdin was 

more profitable than Mohawk, the privately held company's owners, the Lorberbaum family, ended up with a 

controlling 39 percent stake in Mohawk. After the merger, Aladdin contributed 40 percent of MHK’s sales and 

50 percent of net income. In 1995, Jeffrey Lorberbaum, son of Aladdin founder Alan Lorberbaum, was 

appointed President and Chief Operating Officer. He continued the Company’s acquisition strategy to 

consolidate the industry with the purchase of Galaxy Carpet Mills in 1995, Diamond Rug and Carpet Mills in 

1997, and Newmark & James, America Weavers, and World Carpets in 1998. In 1999, Mohawk acquired 

Image carpet and Durkan Patterned Carpets, Crown Crafts’ woven division. In 2001, MHK paid $1.7 billion for 

Dal-Tile. The acquisition was the Company’s 14

th

 since 1992 and added close to $1 billion to MHK’s already 

Mohawk

53%

Dal-Tile

25%

Unilin

22%

Mohawk

35%

Dal-Tile

23%

Unilin

42%

$2,845 

$1,367 

$1,188 

$260 

$215 

$143 

Total: $5,319 before elimination of Intersegment Sales 

Total: $611 before Corporate Eliminations 

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Mohawk Industries, Inc. 

 

 - 50 - 

substantial $3.3 billion in 2002 sales. In 2005, the Company acquired Unilin for almost $2.6 billion. Over the 

last 15 or so years, MHK added $4.5 billion in sales through acquisitions.  

Overview of the Flooring Industry 

U.S. Flooring Sales 1994-2010 ($MM) 

2010 U.S Flooring Industry - $17.1 Billion 

 

Carpets & 

Rugs

55%

Vinyl

12%

Ceram ic

12%

Hardw ood

9%

Stone

6%

Lam inate

5%

Rubber

1%

 

Source: Floor Covering Weekly, July 18/25, 2011

 

In 2010, U.S. floor covering sales approximated $17.1 billion consisting of carpet and area rugs (54.7% 

of total sales), vinyl, linoleum and cork (12.1%), ceramic (11.6%), hardwood (9.4%), stone (6.2%), laminates 

(5.1%) and rubber (0.9%). Over a ten year period from 1995 to 2005, the Industry grew at a compound annual 

growth rate of 5.7%. Between 2006 and 2010, the U.S. flooring sales declined 33.2%. Sales in 2010 increased 

3.3% due to inventory restocking, depleted inventories at distribution channels, and higher housing sales 

driven by the homebuyer tax credit. The increase was encouraging given that new home construction was 

under 500,000 units in 2010, for the second consecutive year, and the homes built were about six percent 

smaller on average. Catalina Research forecasts flooring sales to increase 2.1% in 2011. Overall industry 

sales are typically driven by residential replacement and remodeling, which accounts for about 56% of total 

sales while residential new construction and commercial make up 8% and 36%, respectively. 

Carpet and rug sales approximated $9.4 billion in 2010, up 1.1% from 2009’s level, while square 

footage approximated 10.7 million square feet, up 0.8%. Residential replacement and new construction 

accounted for 65% and 3%, respectively, of total carpet sales. For commercial construction, replacement sales 

accounted for 21% of total category sales, while new construction makes up 4%. Carpet and area rugs have 

been losing market share to ceramic tiles, hardwood floor and laminate flooring. Over the last five years, total 

carpet and area rug sales have declined 36.5% from $14.7 billion in 2006, while overall square footage 

declined 37.2% from 17.0 billion square feet. During this same period, carpet and area rugs share of the overall 

flooring market declined from 63.8% to 59.9% (as measured in square footage).  

In the hardwood flooring category, sales increased 8.5% from $1.5 billion in 2009 to $1.6 billion in 2010 

due to higher pricing (from manufacturers passing through higher lumber prices) and pent up demand from 

home remodelers. Square foot sales were up 3.2% in 2010 to 829.0 million from 803.4 million in 2009. About 

77% of 2010’s $1.6 billion hardwood sales are consumed in residential housing (58.3% is replacement and 

18.5% new construction). Hardwood flooring share (as measured in square feet) of the overall flooring market 

increased from 4.1% in 2006 to 4.6% in 2010. Hardwood is now increasingly desired by consumers and should 

benefit from a healthier consumer spending environment as they remodel their existing homes or purchase a 

new house. In our view, hardwood flooring should correlate with home sales going forward.  

14.2

14.6

15.2

15.8

17.4

18.8

19.9 20.2

20.5

21.9

24.1

25.4 25.7

23.2

21.2

17.1

16.6

$10

$12

$14

$16

$18

$20

$22

$24

$26

$28

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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