company

A Message From
Jeffrey Lorberbaum,
Chairman and CEO

During the past year, Mohawk has continued to grow and grow well – both profitably and responsibly. We delivered record annual sales of $8.1 billion, and our adjusted operating income exceeded $1 billion. In the process, we further expanded our global reach through several acquisitions and strengthened our existing legacy businesses.

Certainly, one of the most significant highlights of 2015 was surpassing our goal to reduce waste-to-landfill intensity by 25 percent by 2020 — a feat accomplished five years ahead of the target we set in 2010. This accomplishment speaks not only to the increasing efficiency of our business, but also to the high level of engagement and commitment among our employees who drive responsible resource use on a daily basis. Other notable achievements in 2015 included:

  • Integrating the European and North American operations of IVC, the world’s foremost producer of Luxury Vinyl Tile (LVT) and sheet vinyl.
  • Acquiring the ceramic leader in Bulgaria and Romania.
  • Commencing operation of our newly constructed ceramic tile plant in Tennessee.
  • Modernizing our ceramic facilities in Italy to enhance productivity and efficiency.
  • Achieving the highest ranking for a manufacturing company in Training magazine’s annual Top 125 list, our eleventh consecutive year of making this list.

Our success in 2015 builds on a trajectory of growth that we began two decades ago. During this period, Mohawk has grown exponentially through 34 acquisitions and continuous reinvestment in the business. Since 2013, that investment reached almost $5 billion, with almost $3.5 billion in nine acquisitions and approximately $1.5 billion in capital expenditures to create innovative products, enhance efficiencies and expand capacities. Today, Mohawk is the world’s largest flooring company, with a comprehensive product portfolio, manufacturing operations in 15 countries and sales in 140 countries. This leadership position and our track record of “Growth Done Well” reflects a set of internal strategies that we adhere to consistently.

Business Reinvestment

Continual cycles of reinvestment are required to sustain a business long term. Capital investments in state-of-the-art manufacturing equipment, for example, can help us conserve natural resources for our planet, create a safer working environment for our employees and enhance product quality for our customers — all of which contribute to higher levels of profitability that drive more reinvestment.

In 2015, we invested about $500 million, which included the construction of a large porcelain plant in Tennessee that will increase our capacity to produce higher-value product. We also expanded our fiber manufacturing assets to differentiate our recycled polyester carpet and support continued growth; built an LVT plant in Europe to expand our participation in the fastest-growing flooring category and significantly upgraded the core manufacturing assets in our Italian ceramic and European panel businesses.

Localization

Though flooring is a common denominator across all of our businesses, there are very different dynamics within each unit, ranging from geographic markets to product categories to distribution channels. These differences are driven by factors such as regulatory requirements, employment practices and supply chains, to name a few, that also are unique to each business.

As we grow around the world, our decentralized management approach places operational responsibility with the team closest to the ground in order to drive optimal transparency, accountability and performance. That’s why the identification of a strong management team is the single most important consideration when we expand in a given market, and, in the majority of markets, we maintain or install local management. We don’t need to pay a premium for equipment. We invest in organization, people and relationships.

Best Practices

One of our greatest strengths as an organization is managing our businesses on a decentralized basis while also capitalizing on the scale and shared expertise of the enterprise. This requires maintaining the flexibility to optimize performance in local markets as well as constantly identifying opportunities where success can be transferred from one business unit to another. Our zero waste program is a good example. What started as a pilot initiative in our rug and mat business was then leveraged throughout our entire business. By the end of 2015, the program had been successfully implemented at 44 sites.

Another way we share best practices on an ongoing basis is through the leadership of designated experts in the Company in areas such as innovation, production or logistics. Using a variety of communication forums, from intranet sites to annual gatherings, these experts bring together functional areas from across the Company to ask, “What’s working well in your business?” and then to listen and learn from each other.

Innovation

Technology transfer is another form of best practice sharing within Mohawk. Within the past few years, for example, we’ve responded to the market’s shift toward polyester fibers through our proprietary Continuum™ technology, which yields a softer, higher-performance polyester fiber made from recycled PET bottles. Recently, we’ve leveraged that technology to reinvigorate the area rug category with the introduction of polyester collections. The result is a higher-quality, more durable product that allows us to further source and incorporate recyclable material.

As we’ve executed these strategies, we’ve seen time and again that growing well by growing responsibly creates opportunities for our business and all of our stakeholders. We’ve found, more often than not, that it’s possible to have a profitable and sustainable business:

  • More environmentally sound manufacturing practices lead us to higher levels of efficiency and profitability.
  • Investment in R&D to innovate more sustainable products results in differentiated products that command a higher premium in the marketplace.
  • Being a strong, fair employer positions us to attract, retain and develop the best and the brightest talent.
  • Helping to build strong communities means we have good places to both live and do business.

Simply put, growth done well makes good business sense to Mohawk, and we look forward to doing more of it in the years ahead.

Sincerely,

Jeffrey Lorberbaum
Chairman and Chief Executive Officer