What changed in this filing

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Item 1. Financial Statements

2021-05-11 compared with 2020-11-09 · 250 added, 360 removed, 323 unchanged (65% of the section changed)

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CONSOLIDATED CONDENSED BALANCE SHEETS

(IN THOUSANDS)

OCTOBER 4, 2020 DECEMBER 29, 2019

(in thousands, except par values)

APRIL 4, 2021 JANUARY 3, 2021

Current Assets

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Total current assets 517,427 495,394

Property and equipment, net 346,592 324,585

Property, plant and equipment, net 348,632 359,036

Operating lease right-of-use assets 94,609 98,013

17 unchanged sentences

Shareholders’ equity

Preferred stock — —

Common stock 5,867 5,842

Preferred stock, par value $ 1.00 per share;

5,000 shares authorized;

none issued or outstanding at April 4, 2021 and January 3, 2021

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

59,014 and 58,664 shares issued and outstanding at April 4, 2021 and January 3, 2021, respectively

Additional paid-in capital 248,571 247,920

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 4, 2020 SEPTEMBER 29, 2019 OCTOBER 4, 2020 SEPTEMBER 29, 2019

(in thousands, except per share data)

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

NET SALES $ 253,260 $ 288,169

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 4, 2020 SEPTEMBER 29, 2019 OCTOBER 4, 2020 SEPTEMBER 29, 2019

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

Net Income (Loss) $ 6,938 $ ( 102,167 )

Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment 23,402 ( 18,585 ) 24,317 ( 19,539 )

Other Comprehensive Loss, Foreign Currency Translation Adjustment ( 19,597 ) ( 15,245 )

Other Comprehensive Income (Loss), Cash Flow Hedge 749 ( 6,140 )

Other Comprehensive Income (Loss), Pension Liability Adjustment ( 1,471 ) 1,076 ( 80 ) 1,814

Comprehensive Income (Loss) $ 28,708 $ 7,760 $ ( 72,935 ) $ 36,129

Other Comprehensive Income, Pension Liability Adjustment 89 1,733

Comprehensive Loss $ ( 11,821 ) $ ( 121,819 )

See accompanying notes to consolidated condensed financial statements.

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(in thousands)

NINE MONTHS ENDED

OCTOBER 4, 2020 SEPTEMBER 29, 2019

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

OPERATING ACTIVITIES:

Net income (loss) $ 6,938 $ ( 102,167 )

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation and amortization 11,934 10,940

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Inventories ( 19,046 ) ( 22,514 )

Prepaid expenses and current assets 8,819 ( 4,481 )

Prepaid expenses and other current assets ( 15,852 ) ( 7,464 )

Accounts payable and accrued expenses 28,512 ( 27,056 )

CASH PROVIDED BY OPERATING ACTIVITIES 97,268 89,904

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 24,855 ( 15,717 )

INVESTING ACTIVITIES:

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Debt issuance costs ( 36 ) —

Dividends paid ( 4,978 ) ( 11,561 )

Repurchase of common stock — ( 25,154 )

Finance lease payments ( 527 ) ( 399 )

CASH USED IN FINANCING ACTIVITIES ( 30,183 ) ( 30,157 )

Net cash provided by operating, investing and financing activities 20,018 5,951

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 12,981 ) 32,475

Net cash provided by (used in) operating, investing and financing activities 6,660 ( 5,536 )

Effect of exchange rate changes on cash ( 2,790 ) ( 3,114 )

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As contemplated by the Securities and Exchange Commission (the “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements.

Reference should be made to the Company’s year-end financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended December 29, 2019, as filed with the Commission.

Reference should be made to the Company’s year-end financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended January 3, 2021, as filed with the Commission.

The financial information included in this report has been prepared by the Company, without audit.

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Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year.

The December 29, 2019, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).

The nine month period ended October 4, 2020 includes 40 weeks, and the nine month period ended September 29, 2019 includes 39 weeks.

The three month periods ended October 4, 2020 and September 29, 2019 both include 13 weeks.

The January 3, 2021, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).

The three month period ended April 4, 2021 includes 13 weeks, and the three month period ended April 5, 2020 includes 14 weeks.

Risks and Uncertainties

The World Health Organization declared the COVID-19 outbreak a pandemic, and many companies have experienced disruptions in their operations.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that, except for the goodwill and intangible asset impairment discussed in Note 10 “Goodwill and Intangible Assets,” the decline in 2020 revenue, and its consequent impacts on production volume, operating income, net income, cash flows, and order rates, there were no other material adverse impacts on the Company’s results of operations and financial position at October 4, 2020.

The Company’s primary credit facility has various financial and other covenants including, but not limited to, a covenant to not exceed a maximum net debt to EBITDA ratio, as defined by the credit facility agreement.

On July 15, 2020, the Company amended its Syndicated Credit Facility;

see Note 5 entitled “Long-Term Debt” for additional information.

The World Health Organization declared the COVID-19 outbreak a pandemic in March 2020, and many companies have experienced disruptions in their operations.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that, except for the goodwill and intangible asset impairment recorded in the first quarter of 2020 and discussed in Note 10 “Goodwill and Intangible Assets,” the decline in 2021 revenue, and its consequent impacts on production volume, operating income, net income, cash flows, and order rates, there were no other material adverse impacts on the Company’s results of operations and financial position at April 4, 2021.

The Company’s primary credit facility has various financial and other covenants including, but not limited to, a covenant to not exceed a maximum secured net debt to EBITDA ratio, as defined by the credit facility agreement.

The Company is currently in compliance with all covenants under the credit facility agreement and anticipates that it will remain in compliance with the covenants for the foreseeable future.

The full extent of the future impact of COVID-19 on the Company’s operations is uncertain.

A prolonged COVID-19 pandemic may continue to have a material adverse impact on our operations, financial condition, and supply chains.

It may negatively impact our ability to collect outstanding receivables, manage inventory, and service customers.

It may negatively impact our ability to collect outstanding receivables, manage inventory, produce our products and service customers.

The impact of COVID-19 could result in additional impairment losses related to goodwill, intangible assets, and property, plant and equipment.

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We continue to monitor our operations and have implemented various programs to mitigate the effects of COVID-19 on our business including reductions in employee headcount, labor costs, marketing expenses, consulting spend, travel costs, various other costs, and capital expenditures, as well as suspending and reducing shifts in our production facilities, temporarily furloughing employees, and implementing other cost reduction or avoidance initiatives.

Government grants and payroll protection programs are available globally to provide assistance to companies impacted by the pandemic.

The Coronavirus Aid, Relief and Economic Security Act (“ CARES Act”) enacted in the United States (see Note 13 entitled “Income Taxes” for additional information) and a payroll protection program enacted in the Netherlands (the “NOW Program”) provide benefits related to payroll costs either as reimbursements, lower payroll tax rates or deferral of payroll tax payments.

The NOW Program provides eligible companies with reimbursement of labor costs as an incentive to retain employees on the payroll.

During fiscal year 2020 year to date, the Company recognized benefits under several payroll protection programs as reductions to payroll costs.

Reclassifications

In fiscal year 2020, the Company made certain classification and presentation changes related to customer service and other costs.

Previously, these costs were presented as a component of cost of sales.

Beginning in fiscal year 2020, these costs are presented as a component of selling, general and administrative (“SG&A”) expense.

The Company determined that this change better reflects how management views and operates the business.

Reclassifications of the comparative prior year 2019 amounts have been made to conform to the current presentation as follows:

Three Months Ended September 29, 2019

Statement of Operations Line Item As Reported Reclassification As Reclassified

(In thousands)

Cost of Sales $ 212,590 $ ( 1,982 ) $ 210,608

Selling, General and Administrative Expenses 91,414 1,982 93,396

Total $ 304,004 $ — $ 304,004

Nine Months Ended September 29, 2019

Statement of Operations Line Item As Reported Reclassification As Reclassified

(In thousands)

Cost of Sales $ 613,797 $ ( 5,246 ) $ 608,551

Selling, General and Administrative Expenses 286,123 5,246 291,369

Total $ 899,920 $ — $ 899,920

In the first quarter of fiscal 2021, the Company determined that it has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).

The AMS operating segment is unchanged from prior year and continues to include the United States, Canada and Latin America geographic areas.

Segment disclosures for 2020 have been restated to conform to the current reportable segment structure.

See Note 11 entitled “Segment Information” for additional information.

Recently Adopted Accounting Pronouncements

On December 30, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 326, Credit Losses.

This standard requires a financial asset (including trade receivables) to be presented at the net amount expected to be collected through the use of valuation allowances for credit losses.

The income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

The Company adopted the new standard using a modified retrospective approach with no cumulative-effect adjustment to retained earnings to recognize expected credit losses on trade accounts receivable.

The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

On December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other,” that provides for the elimination of Step 2 from the goodwill impairment test.

Under the new guidance, impairment charges are recognized to the extent the carrying amount of a reporting unit exceeds its fair value with certain limitations.

See Note 10 entitled “Goodwill and Intangible Assets” for additional information.

On December 30, 2019, the Company adopted ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements.

The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs.

On January 4, 2021, the Company adopted Accounting Standards Update (“ASU”) 2019-12, “ Simplifying the Accounting for Income Taxes .” The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 related to intraperiod tax allocation, the calculation of income taxes in interim periods, and the accounting for outside basis differences of foreign subsidiaries and equity method investments.

The amendments also improve consistent application of and simplify GAAP for other areas of ASC Topic 740, including franchise or similar taxes partially based on income, the accounting for a step-up in tax basis goodwill, and interim recognition of an enacted change in tax laws or rates, by clarifying and amending existing guidance.

The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

On December 30, 2019, the Company adopted ASU 2018-15, “Internal-Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.” This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement service contract with the guidance to capitalize implementation costs of internal use software.

The ASU also requires that the costs for implementation activities during the application development phase be capitalized in a hosting arrangement service contract, and costs during the preliminary and post implementation phase are expensed.

The Company adopted this standard, which will be applied on a prospective basis, with no material impact to the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 related to intraperiod tax allocation, the calculation of income taxes in interim periods, and the accounting for outside basis differences of foreign subsidiaries and equity method investments.

This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company is currently evaluating the impact of adoption of this standard but does not anticipate that the adoption will have a material effect on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “ Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .” This standard addresses the risks from the discontinuation of the London Interbank Offered Rate (LIBOR) and provides optional expedients and exceptions to contracts, hedging relationships and other transactions that reference LIBOR if certain criteria are met.

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NOTE 2 – REVENUE RECOGNITION

Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 98 % of total revenue for both nine month periods ended October 4, 2020 and September 29, 2019.

The remaining 2 % of revenue was generated from the installation of carpet and other flooring-related material for both the 2020 and 2019 nine month periods.

Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 99 % and 98 % of total revenue for the three month periods ended April 4, 2021 and April 5, 2020, respectively.

The remaining 1 % and 2 % of revenue was generated from the installation of carpet and other flooring-related material for the 2021 and 2020 three month periods, respectively.

Disaggregation of Revenue

For the nine months ended October 4, 2020 and September 29, 2019, revenue from the Company’s customers is broken down by geography as follows:

Nine Months Ended

Geography October 4, 2020 September 29, 2019

For the three months ended April 4, 2021 and April 5, 2020, revenue from the Company’s customers is broken down by geography as follows:

Three Months Ended

Geography April 4, 2021 April 5, 2020

Americas 50.1 % 54.9 %

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Asia-Pacific 14.8 % 12.3 %

Revenue from the Company’s customers in the Americas corresponds to the AMS operating segment, and the EAAA operating segment includes revenue from the Europe and Asia-Pacific geographies.

See Note 11 entitled “Segment Information” for additional information.

NOTE 3 – INVENTORIES

Inventories are summarized as follows:

October 4, 2020 December 29, 2019

April 4, 2021 January 3, 2021

(in thousands)

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The following tables show distributed and undistributed earnings:

Three Months Ended Nine Months Ended

Earnings (Loss) Per Share October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

Earnings (Loss) Per Share April 4, 2021 April 5, 2020

Basic Earnings (Loss) Per Share:

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The following table presents net income that was attributable to participating securities:

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

April 4, 2021 April 5, 2020

(in millions)

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The weighted average shares for basic and diluted EPS were as follows:

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

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Participating securities 751 390

Shares for Basic EPS 58,592 58,433 58,507 59,117

Shares for basic earnings per share 58,730 58,450

Dilutive effect of stock options — 2

Shares for Diluted EPS 58,592 58,434 58,507 59,122

Shares for diluted earnings per share 58,730 58,452

For all periods presented, there were no stock options or participating securities excluded from the computation of diluted EPS.

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:

April 4, 2021 January 3, 2021

Outstanding Principal Interest Rate (1)

(in thousands) (in thousands)

Syndicated Credit Facility:

On July 15, 2020, the Company entered into a second amendment to its Syndicated Credit Facility (the “Facility”).

This amendment, among other changes, provides for the following:

(1) amends the consolidated net leverage ratio covenant making it less restrictive for a period of seven consecutive fiscal quarters beginning with the third quarter of fiscal year 2020 through the first quarter of fiscal year 2022 (the “Relief Period”);

(2) amends the pricing grid used to determine interest rate margins on outstanding loans as well as the commitment fee on the unused portion of the Facility to include additional consolidated net leverage ratio levels with increased pricing at higher levels of leverage;

(3) amends interest rate provisions to provide for an interest rate floor of either 0.00 % or 0.75 %, as applicable, on certain tranches of term loans outstanding;

and (4) provides temporary restrictions during the Relief Period on the Company’s ability to make acquisitions, pay dividends, repurchase shares, or enter into new credit facilities without lender consent.

The Company incurred approximately $ 1.5 million in debt issuance costs to execute this amendment.

The Facility provides the Company and certain of its subsidiaries a multicurrency revolving loan and U.S.

Revolving loan borrowings $ — 4.00 % $ 3,000 4.00 %

Term loan borrowings 270,901 1.84 % 282,215 1.87 %

Total borrowings under Syndicated Credit Facility 270,901 1.84 % 285,215 1.89 %

5.50% Senior Notes due 2028 300,000 5.50 % 300,000 5.50 %

Total debt 570,901 585,215

Unamortized debt issuance costs ( 8,330 ) ( 8,645 )

Total debt, net 562,571 576,570

Current portion of long-term debt ( 15,176 ) ( 15,319 )

Total long-term debt, net $ 547,395 $ 561,251

(1) Represents the stated rate of interest, without the effect of debt issuance costs or interest rate swaps.

Syndicated Credit Facility

The Syndicated Credit Facility (the “Facility”) provides the Company and certain of its subsidiaries a multicurrency revolving loan and U.S.

denominated and multicurrency term loans.

Interest on base rate loans is charged at varying rates computed by applying a margin depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

Interest on LIBOR-based loans and fees for letters of credit is charged at varying rates computed by applying a margin over the applicable LIBOR rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

Interest on Eurocurrency-based loans and fees for letters of credit are charged at varying rates computed by applying a margin over the applicable Eurocurrency rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

In addition, the Company pays a commitment fee per annum (depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter) on the unused portion of the Facility.

As of October 4, 2020, the Company had outstanding $ 562.3 million of term loan borrowing and $ 23.7 million of revolving loan borrowings under the Facility, and had $ 1.6 million in letters of credit outstanding under the Facility.

As of December 29, 2019, the Company had outstanding $ 581.6 million of term loan borrowing and $ 20.9 million of revolving loan borrowings under the Facility, and had $ 2.2 million in letters of credit outstanding under the Facility.

As of October 4, 2020 and December 29, 2019, the weighted average interest rate on borrowings outstanding under the Facility was 3.15 % and 3.27 %, respectively.

As of October 4, 2020 and December 29, 2019, the carrying value of the Company’s borrowings under the Facility approximates its fair value as the Facility bears interest rates that are similar to existing market rates.

As of both April 4, 2021 and January 3, 2021, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both April 4, 2021 and January 3, 2021, the carrying value of the Company’s borrowings under the Facility approximated its fair value as the Facility bears interest rates that are similar to existing market rates.

Under the Facility, the Company is required to make quarterly amortization payments of the term loan borrowings, which are due on the last day of the calendar quarter.

The Company is currently in compliance with all covenants under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.

Debt issuance costs associated with term loans are reflected as a reduction of long-term debt in accordance with applicable accounting standards.

5.50% Senior Notes due 2028

The 5.50% Senior Notes due 2028 (the “Senior Notes”) bear an interest rate at 5.50 % per annum and mature on December 1, 2028.

Interest is paid semi-annually on June 1 and December 1 of each year, beginning on June 1, 2021.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its existing Facility.

As of April 4, 2021, the estimated fair value of the Senior Notes was $ 310.7 million, compared with a carrying value recorded in the Company’s consolidated condensed balance sheet of $ 300.0 million, excluding unamortized debt issuance costs.

The fair value of the Senior Notes is derived using quoted prices for similar instruments and is considered Level 2 within the fair value hierarchy.

Other Lines of Credit

Subsidiaries of the Company had an aggregate of the equivalent of $ 6.0 million of other lines of credit available at interest rates ranging from 3.5 % to 6.0 % as of both April 4, 2021 and January 3, 2021.

As of April 4, 2021 and January 3, 2021, there were no borrowings outstanding under these lines of credit.

Borrowing Costs

Debt issuance costs associated with the Company’s Senior Notes and term loans under the Facility are reflected as a reduction of long-term debt in accordance with applicable accounting standards.

As these fees are expensed over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are expensed.

As of October 4, 2020 and December 29, 2019, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 5.9 million and $ 6.3 million, respectively.

Other deferred borrowing costs, which include underwriting, legal and other direct costs related to the issuance of revolving debt, net of accumulated amortization, were $ 1.5 million and $ 1.3 million as of October 4, 2020 and December 29, 2019, respectively.

As of April 4, 2021 and January 3, 2021, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 8.3 million and $ 8.6 million, respectively.

Other deferred borrowing costs, which include underwriting, legal and other direct costs related to the issuance of revolving debt, net of accumulated amortization, were $ 1.9 million and $ 2.0 million as of April 4, 2021 and January 3, 2021, respectively.

These amounts are included in other assets in the Company’s consolidated condensed balance sheets.

The Company amortizes these costs over the life of the related debt.

Other Lines of Credit

Subsidiaries of the Company had an aggregate of the equivalent of $ 9.6 million and $ 9.5 million of other lines of credit available as of October 4, 2020 and December 29, 2019, respectively, at interest rates ranging from 2.0 % to 6.0 % as of both October 4, 2020 and December 29, 2019.

As of October 4, 2020 and December 29, 2019, there were no borrowings outstanding under these lines of credit.

NOTE 6 – DERIVATIVE INSTRUMENTS

Interest Rate Risk Management

In the third quarter of 2017 and the first quarter of 2019, the Company entered into interest rate swap transactions in notional amounts of $ 100 million and $ 150 million, respectively, to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations.

From time to time, the Company enters into interest rate swap transactions to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations.

The Company’s objective and strategy with respect to these interest rate swaps is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability to cash flows relating to interest payments on a portion of its outstanding debt.

The Company is meeting its objective by hedging the risk of changes in its cash flows (interest payments) attributable to changes in LIBOR, the designated benchmark interest rate being hedged (the “hedged risk”), on an amount of the Company’s debt principal equal to the outstanding swap notional amounts.

Cash Flow Interest Rate Swaps

Both of the interest rate swaps described above are designated and qualify as cash flow hedges of forecasted interest payments.

The Company reports the changes in fair value of the swaps as a component of other comprehensive income (or other comprehensive loss).

The aggregate notional amount of the interest rate swaps as of October 4, 2020 was $ 250 million.

Forward Contracts

Our European operations, from time to time, are party to currency forward contracts designed to hedge the cash flow risk of intercompany sales from the manufacturing facility in Europe to the Americas.

The Company’s objective and strategy with respect to these currency forward contracts is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to receipt of payment on intercompany sales.

As of October 4, 2020, there were no active forward currency contracts.

In the fourth quarter of 2020 the Company terminated its designated interest rate swap transactions with a total notional value of $ 250 million.

Hedge accounting was also discontinued at that time.

Losses recorded in accumulated other comprehensive income for these terminated interest rate swaps are reclassified and recorded in the consolidated condensed statement of operations to the extent it is probable that a portion of the original forecasted transactions related to the portion of the hedged debt repaid will not occur by the end of the originally specified time period.

See Note 14 entitled “Items Reclassified From Accumulated Other Comprehensive Loss” for additional information.

As of April 4, 2021 and January 3, 2021, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $ 7.6 million and $ 8.7 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

We expect that approximately $ 4.1 million related to the terminated interest rate swaps will be reclassified from accumulated other comprehensive loss as an increase to interest expense in the next 12 months.

The following table summarizes the impact that changes in the fair value of derivatives designated as cash flow hedges had on accumulated other comprehensive loss, net of tax, during the three months ended April 5, 2020:

Three Months Ended

April 5, 2020

(in thousands)

Interest rate swap contracts loss $ ( 6,140 )

Derivative Transactions Not Designated as Hedging Instruments

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Gains and losses on the changes in fair value of these foreign currency options are recognized in earnings each period.

As of October 4, 2020, the Company had outstanding foreign currency options with an aggregate notional amount of $ 16.9 million.

The table below sets forth the fair value of derivative instruments as of October 4, 2020:

Asset Derivatives as of October 4, 2020 Liability Derivatives as of October 4, 2020

Balance Sheet

Location Fair Value Balance Sheet

Location Fair Value

(In thousands)

Derivative instruments designated as hedging instruments:

Interest rate swap contracts Other current assets $ — Accrued expenses $ 13,685

Derivative instruments not designated as hedging instruments:

Foreign currency options Other current assets 232 Accrued expenses —

$ 232 $ 13,685

The table below sets forth the fair value of derivative instruments as of December 29, 2019:

Asset Derivatives as of December 29, 2019 Liability Derivatives as of December 29, 2019

Balance Sheet

Location Fair Value Balance Sheet

Location Fair Value

(In thousands)

Derivative instruments designated as hedging instruments:

Interest rate swap contracts Other current assets $ — Accrued expenses $ 5,801

Derivative instruments not designated as hedging instruments:

Foreign currency options Other current assets 251 Accrued expenses —

$ 251 $ 5,801

We expect that approximately $ 5.2 million related to cash flow hedges will be reclassified from accumulated other comprehensive loss as an increase to interest expense in the next 12 months.

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

As of April 4, 2021, the Company had outstanding foreign currency options with an aggregate notional amount of $ 8.8 million.

The table below sets forth the fair value of derivative instruments not designated as hedging instruments as of April 4, 2021 and January 3, 2021:

Asset Derivatives

Balance Sheet Location Fair Value as of April 4, 2021 Fair Value as of January 3, 2021

(in thousands)

Foreign currency contracts gain $ — $ 627 $ — $ 468

Interest rate swap contracts gain (loss) 864 ( 1,568 ) ( 5,627 ) ( 9,382 )

Gain (loss) recognized in accumulated other comprehensive loss $ 864 $ ( 941 ) $ ( 5,627 ) $ ( 8,914 )

Gains and losses from derivatives designated as cash flow hedges reclassified from accumulated other comprehensive income (loss) into net income (loss) are discussed in Note 14 entitled “Items Reclassified From Accumulated Other Comprehensive Loss.”

The following tables summarize gains and losses on derivatives not designated as hedging instruments within the consolidated condensed statements of operations for the three and nine months ended October 4, 2020 and September 29, 2019:

Foreign currency options Other current assets $ 21 $ 37

The following table summarizes gains and losses on derivatives not designated as hedging instruments within the consolidated condensed statements of operations for the three months ended April 4, 2021 and April 5, 2020:

Three Months Ended

Statement of Operations Location October 4, 2020 September 29, 2019

(In thousands)

Foreign currency options gain (loss) Other expense $ 11 $ 325

Nine Months Ended

Statement of Operations Location October 4, 2020 September 29, 2019

Statement of Operations Location April 4, 2021 April 5, 2020

(in thousands)

Foreign currency options gain (loss) Other expense $ 90 $ ( 224 )

Foreign currency options gain Other expense $ 185 $ 1,700

NOTE 7 – SHAREHOLDERS’ EQUITY

The following tables depict the activity in the accounts which make up shareholders’ equity for the three and nine months ended October 4, 2020 and September 29, 2019:

The following tables depict the activity in the accounts which make up shareholders’ equity for the three months ended April 4, 2021 and April 5, 2020:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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(in thousands)

Balance, at December 29, 2019 58,416 $ 5,842 $ 250,306 $ 286,056 $ ( 56,700 ) $ ( 113,139 ) $ ( 4,163 )

Net loss — — — ( 102,167 ) — — —

Stock issuances under employee plans 220 22 197 — — — —

Other issuances of common stock 107 10 1,720 — — — —

Unamortized stock compensation expense related to restricted stock awards — — ( 1,731 ) — — — —

Cash dividends declared, $ 0.065 per common share

— — — ( 3,807 ) — — —

Forfeitures and compensation expense related to stock awards ( 255 ) ( 25 ) ( 4,114 ) — — — —

Pension liability adjustment — — — — 1,733 — —

Foreign currency translation adjustment — — — — — ( 15,245 ) —

Cash flow hedge unrealized loss — — — — — — ( 6,140 )

Balance, at April 5, 2020 58,488 $ 5,849 $ 246,378 $ 180,082 $ ( 54,967 ) $ ( 128,384 ) $ ( 10,303 )

Net income — — — 4,709 — — —

Stock issuances under employee plans 12 1 ( 1 ) — — — —

Other issuances of common stock 70 7 2,294 — — — —

Unamortized stock compensation expense related to restricted stock awards — — ( 2,300 ) — — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 585 ) — — —

Forfeitures and compensation expense related to stock awards ( 26 ) ( 3 ) ( 48 ) — — — —

Pension liability adjustment — — — — ( 342 ) — —

Foreign currency translation adjustment — — — — — 16,160 —

Cash flow hedge unrealized loss — — — — — — ( 351 )

Balance, at July 5, 2020 58,544 $ 5,854 $ 246,323 $ 184,206 $ ( 55,309 ) $ ( 112,224 ) $ ( 10,654 )

Balance, at January 3, 2021 58,664 $ 5,865 $ 247,920 $ 208,562 $ ( 69,288 ) $ ( 60,331 ) $ ( 6,190 )

Net income — — — 6,938 — — —

Stock issuances under employee plans 7 1 ( 1 ) — — — —

Other issuances of common stock 127 13 ( 15 ) — — — —

Unamortized stock compensation expense related to restricted stock awards — — 2 — — — —

Restricted stock issuances 376 38 5,277 — — — —

Unamortized compensation expense related to restricted stock awards — — ( 5,315 ) — — — —

Cash dividends declared, $ 0.01 per common share

3 unchanged sentences

Foreign currency translation adjustment — — — — — ( 19,597 ) —

Cash flow hedge unrealized loss — — — — — — 864

Balance, at October 4, 2020 58,670 $ 5,867 $ 247,012 $ 189,533 $ ( 56,780 ) $ ( 88,822 ) $ ( 9,790 )

Reclassification out of accumulated other comprehensive income - discontinued cash flow hedge — — — — — — 749

Balance, at April 4, 2021 59,014 $ 5,901 $ 248,571 $ 214,911 $ ( 69,199 ) $ ( 79,928 ) $ ( 5,441 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

2 unchanged sentences

Balance, at December 29, 2019 58,416 $ 5,842 $ 250,306 $ 286,056 $ ( 56,700 ) $ ( 113,139 ) $ ( 4,163 )

Net income — — — 7,059 — — —

Stock issuances under employee plans 509 51 379 — — — —

Other issuances of common stock 224 22 3,900 — — — —

Unamortized stock compensation expense related to restricted stock awards — — ( 3,922 ) — — — —

Cash dividends declared, $ 0.065 per common share

— — — ( 3,900 ) — — —

Forfeitures and compensation expense related to stock awards ( 225 ) ( 22 ) 29 — — — —

Pension liability adjustment — — — — ( 91 ) — —

Foreign currency translation adjustment — — — — — ( 5,203 ) —

Cash flow hedge unrealized loss — — — — — — ( 3,306 )

Balance, at March 31, 2019 60,016 $ 6,002 $ 270,655 $ 225,373 $ ( 43,701 ) $ ( 106,690 ) $ ( 1,980 )

Net income — — — 29,499 — — —

Stock issuances under employee plans 2 — 6 — — — —

Other issuances of common stock ( 1 ) — — — — — —

Unamortized stock compensation expense related to restricted stock awards — — 52 — — — —

Cash dividends declared, $ 0.065 per common share

— — — ( 3,863 ) — — —

Forfeitures and compensation expense related to stock awards ( 28 ) ( 3 ) 1,506 — — — —

Share repurchases ( 1,556 ) ( 156 ) ( 24,998 ) — — — —

Pension liability adjustment — — — — 829 — —

Foreign currency translation adjustment — — — — — 4,249 —

Cash flow hedge unrealized loss — — — — — — ( 4,667 )

Balance, at June 30, 2019 58,433 $ 5,843 $ 247,221 $ 251,009 $ ( 42,872 ) $ ( 102,441 ) $ ( 6,647 )

Net income — — — 26,210 — — —

Net loss — — — ( 102,167 ) — — —

Issuances of stock (other than restricted stock) 220 22 197 — — — —

Restricted stock issuances 107 10 1,720 — — — —

Unamortized compensation expense related to restricted stock awards — — ( 1,731 ) — — — —

Cash dividends declared, $ 0.065 per common share

4 unchanged sentences

Cash flow hedge unrealized loss — — — — — — ( 6,140 )

Balance, at September 29, 2019 58,433 $ 5,843 $ 248,524 $ 273,421 $ ( 41,796 ) $ ( 121,026 ) $ ( 7,588 )

Balance, at April 5, 2020 58,488 $ 5,849 $ 246,378 $ 180,082 $ ( 54,967 ) $ ( 128,384 ) $ ( 10,303 )

Stock Option Awards

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That cost will be recognized over the period in which the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award.

All outstanding stock options vested prior to the end of 2013, and therefore there was no stock option compensation expense in the first nine months of 2020 or 2019.

As of October 4, 2020, there were no stock options outstanding and exercisable.

There were no stock options granted in the first nine months of 2020 or 2019.

There were 7,500 stock options exercised and 20,000 stock options expired in the first nine months of 2020.

There were 10,000 stock options exercised in the first nine months of 2019 and 5,000 stock option forfeitures during those nine months.

All outstanding stock options vested prior to the end of 2013, and therefore there was no stock option compensation expense in the first three months of 2021 or 2020.

As of April 4, 2021, there were no stock options outstanding and exercisable.

There were no stock options granted in the first three months of 2021 or 2020.

There were no stock options exercised and no stock options forfeited in the first three months of 2021.

There were 7,500 stock options exercised in the first three months of 2020 and no stock option forfeitures during those three months.

Restricted Stock Awards

During the nine months ended October 4, 2020 and September 29, 2019, the Company granted restricted stock awards for 308,100 and 224,000 shares of common stock, respectively.

During the three months ended April 4, 2021 and April 5, 2020, the Company granted restricted stock awards for 375,600 and 199,600 shares of common stock, respectively.

Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a one to three -year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date.

Additionally, certain awards (or a portion thereof) could vest earlier in the event of a change in control of the Company, or upon involuntary termination without cause.

Compensation expense related to restricted stock grants was $ 0.6 million and $ 2.5 million for the nine months ended October 4, 2020, and September 29, 2019, respectively.

Compensation expense (benefit) related to restricted stock grants was $ 0.7 million and $( 0.7 ) million for the three months ended April 4, 2021, and April 5, 2020, respectively.

The Company has reduced its expense for restricted stock forfeited during the period.

The following table summarizes restricted stock outstanding as of October 4, 2020, as well as activity during the nine months then ended:

The following table summarizes restricted stock outstanding as of April 4, 2021, as well as activity during the three months then ended:

Restricted Shares Weighted Average

Outstanding at December 29, 2019 468,200 $ 28.63

Outstanding at January 3, 2021 436,900 $ 24.73

Granted 375,600 14.15

1 unchanged sentence

Forfeited or canceled ( 3,100 ) 16.69

Outstanding at October 4, 2020 451,500 $ 24.62

As of October 4, 2020, the unrecognized total compensation cost related to unvested restricted stock was $ 3.8 million.

Outstanding at April 4, 2021 750,800 $ 19.52

As of April 4, 2021, the unrecognized total compensation cost related to unvested restricted stock was $ 7.5 million.

That cost is expected to be recognized by the end of 2024.

Performance Share Awards

During the nine months ended October 4, 2020 and September 29, 2019, the Company issued awards of performance shares to certain employees.

During the three months ended April 4, 2021 and April 5, 2020, the Company issued awards of performance shares to certain employees.

These awards vest based on the achievement of certain performance-based goals over a performance period of one to three years , subject to the employee’s continued employment, and will be settled in shares of our common stock or in cash at the Company’s election.

The number of shares that may be issued in settlement of the performance shares to the award recipients may be greater (up to 200 %) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.

The following table summarizes the performance shares outstanding as of October 4, 2020, as well as the activity during the nine months then ended:

The following table summarizes the performance shares outstanding as of April 4, 2021, as well as the activity during the three months then ended:

Performance Shares Weighted Average

Outstanding at December 29, 2019 512,000 $ 19.71

Outstanding at January 3, 2021 405,300 $ 16.94

Granted 296,900 14.15

Vested ( 164,300 ) 19.74

Forfeited or canceled ( 47,500 ) 23.42

Outstanding at October 4, 2020 410,700 $ 16.96

Compensation expense (benefit) related to the performance shares was $( 2.0 ) million and $ 4.0 million for the nine months ended October 4, 2020 and September 29, 2019, respectively.

Outstanding at April 4, 2021 654,700 $ 15.20

Compensation expense (benefit) related to the performance shares was $ 0.2 million and $( 2.2 ) million for the three months ended April 4, 2021 and April 5, 2020, respectively.

The Company has reduced its expense for performance shares forfeited during the period.

Unrecognized compensation expense related to these performance shares was approximately $ 6.9 million as of October 4, 2020.

Unrecognized compensation expense related to these performance shares was approximately $ 9.5 million as of April 4, 2021.

Depending on the performance of the Company, any compensation expense related to these outstanding performance shares will be recognized by the end of 2024.

Tax expense recognized with regard to restricted stock and performance shares was approximately $ 0.3 million for the nine months ended October 4, 2020.

The tax benefit recognized with regard to restricted stock and performance shares was approximately $ 0.2 million for the three months ended April 4, 2021.

NOTE 8 – LEASES

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The discount rate used to calculate the present value of the lease liability was the Company’s incremental borrowing rate for the applicable geographical region.

As of October 4, 2020, there were no significant leases that had not commenced as of the end of the third quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to our leases as of October 4, 2020 and December 29, 2019:

October 4, 2020 December 29, 2019

As of April 4, 2021, there were no significant leases that had not commenced as of the end of the first quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to our leases as of April 4, 2021 and January 3, 2021:

April 4, 2021 January 3, 2021

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

4 unchanged sentences

Total operating lease liabilities $ 96,462 $ 100,023

Property and equipment $ 5,786 $ 5,007

Property, plant and equipment, net $ 6,835 $ 6,138

Accrued expenses $ 1,733 $ 1,496

1 unchanged sentence

Total finance lease liabilities $ 4,881 $ 4,184

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

7 unchanged sentences

Other Supplemental Information

Three Months Ended Nine Months Ended

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

6 unchanged sentences

Lease Term and Discount Rate

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of October 4, 2020 and December 29, 2019:

October 4, 2020 December 29, 2019

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of April 4, 2021 and January 3, 2021:

April 4, 2021 January 3, 2021

Weighted-average remaining lease term – finance leases (in years) 3.19 3.35

6 unchanged sentences

(in thousands)

2020 (excluding the nine months ended October 4, 2020)

2021 (excluding the three months ended April 4, 2021)

$ 14,250 $ 1,437

12 unchanged sentences

NOTE 9 – EMPLOYEE BENEFIT PLANS

On December 31, 2019, a plan amendment was executed to eliminate future service accruals in the Dutch defined benefit plan, resulting in a curtailment of the plan.

This plan remains in existence and will continue to pay vested benefits.

Active participants will no longer accrue benefits after December 31, 2019, and instead will participate in an industry-wide multi-employer plan beginning in fiscal year 2020.

During the three and nine months ended October 4, 2020, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.6 million and $ 1.9 million, respectively.

The following tables provide the components of net periodic benefit cost for the three and nine months ended October 4, 2020 and September 29, 2019:

Three Months Ended Nine Months Ended

The Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.7 million during both three month periods ended April 4, 2021 and April 5, 2020.

The following tables provide the components of net periodic benefit cost for the three months ended April 4, 2021 and April 5, 2020:

Three Months Ended

Defined Benefit Retirement Plans (Europe)

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

April 4, 2021 April 5, 2020

(in thousands)

Service cost $ — $ 181 $ — $ 550

Interest cost $ 572 $ 891

3 unchanged sentences

Net periodic benefit cost $ 156 $ 179

Three Months Ended Nine Months Ended

Salary Continuation Plan October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

Three Months Ended

Salary Continuation Plan April 4, 2021 April 5, 2020

(in thousands)

2 unchanged sentences

Net periodic benefit cost $ 362 $ 374

Three Months Ended Nine Months Ended

Three Months Ended

nora Defined Benefit Plan

October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

April 4, 2021 April 5, 2020

(in thousands)

3 unchanged sentences

Net periodic benefit cost $ 472 $ 369

In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within Operating Income in the consolidated condensed statements of operations, while all other components of net periodic benefit costs are presented within other expense in the consolidated condensed statements of operations.

In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within operating income (loss) in the consolidated condensed statements of operations, while all other components of net periodic benefit costs are presented within other expense in the consolidated condensed statements of operations.

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS

During the first quarter of 2020, we performed a qualitative assessment of goodwill impairment indicators, considering macroeconomic conditions related to the COVID-19 pandemic and its potential impact to sales and operating income.

We expect that the duration of the COVID-19 pandemic and its adverse impacts on the global economy, global travel restrictions, COVID-19 related government shutdowns, disruptions to our supply chain, distribution disruption, and disruption to our customers’ plans to spend capital on projects that use our products and services will result in lower revenue and operating income.

As a result, we determined that there were indicators of impairment, and the Company proceeded with a quantitative assessment of goodwill for all reporting units at the end of the first quarter.

In performing the first quarter quantitative goodwill impairment testing, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed.

Our reporting units are one level below our reporting segment level.

In preparing the valuations, past, present and future expectations of performance were considered, including the impact of the COVID-19 pandemic.

This methodology was consistent with the approach used to perform the annual quantitative goodwill assessment in prior years.

The weighted average cost of capital used in the goodwill impairment testing ranged between 10.0 % and 10.5 %, which primarily fluctuated based on a country risk premium assigned to the geographical region of the reporting unit.

There is inherent uncertainty associated with key assumptions used in our impairment testing including the duration of the economic downturn associated with the COVID-19 pandemic and the recovery period.

In the first quarter of 2021, the Company determined that it has two operating and reportable segments – namely AMS and EAAA.

See Note 11 entitled “Segment Information” for additional information.

The Company tests goodwill for impairment at least annually at the reporting unit level.

The Company’s reporting units remain unchanged following the realignment of its segments and consist of Americas, Europe, and Asia-Pacific.

The Americas reporting unit is the same as the AMS reportable segment, and the Europe and Asia-Pacific reporting units are one level below the EAAA reportable segment.

During the first quarter of 2020, as a result of changes in macroeconomic conditions related to the COVID-19 pandemic, the Company recognized a charge of $ 121.3 million for the impairment of goodwill and certain intangible assets.

As a result of the first quarter assessment, we determined that the fair value for two reporting units was less than the carrying value and recognized a goodwill impairment loss of $ 116.5 million in the first quarter of 2020.

1 unchanged sentence

As such, the goodwill impairment loss was allocated to our Europe and Asia-Pacific reporting units in the amounts of $ 99.2 million and $ 17.3 million, respectively.

We determined that the goodwill in our Americas reporting unit was not impaired as the fair value exceeded the carrying value by more than 90 % at April 5, 2020.

There were no indicators of additional goodwill impairment as of October 4, 2020.

The changes in the carrying amounts of goodwill for the nine months ended October 4, 2020 are as follows:

2019 ACQUISITIONS PURCHASE

ADJUSTMENTS IMPAIRMENT FOREIGN

TRANSLATION BALANCE, AT

OCTOBER 4, 2020

There were no indicators of additional goodwill impairment as of April 4, 2021.

The changes in the carrying amounts of goodwill for the three months ended April 4, 2021 are as follows:

(in thousands)

$ 257,439 $ — $ — $ ( 116,495 ) $ 13,686 $ 154,630

Balance, at January 3, 2021 $ 165,777

Foreign currency translation ( 9,815 )

Balance, at April 4, 2021 $ 155,962

Additionally, we determined that the trademarks and trade names intangible assets related to the acquired nora business were also impaired and recognized an impairment loss of $ 4.8 million in the first quarter of 2020.

The carrying value of intangible assets after the impairment was $ 85.5 million at October 4, 2020.

There were no indicators of additional intangible asset impairment as of the end of the third quarter of 2020.

The carrying value of intangible assets was $ 83.2 million at April 4, 2021.

There were no indicators of additional intangible asset impairment as of the end of the first quarter of 2021.

NOTE 11 – SEGMENT INFORMATION

Based on applicable accounting standards, the Company has determined that it has three operating segments – namely, the Americas, Europe and Asia-Pacific geographic regions.

Pursuant to accounting standards, the Company has aggregated the three operating segments into one reportable segment because they have similar economic characteristics, and the operating segments are similar in all of the following areas:

(a) the nature of the products and services;

(b) the nature of the production processes;

(d) the methods used to distribute their products or provide their services;

and (e) the nature of the regulatory environment.

While the Company operates as one reportable segment for the reasons discussed, included below is selected information on our operating segments.

Summary information by operating segment follows:

AMERICAS EUROPE ASIA-

PACIFIC TOTAL

The Company determines that an operating segment exists if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has operating results that are regularly reviewed by the chief operating decision maker (“CODM”) and (iii) has discrete financial information.

Additionally, accounting standards require the utilization of a “management approach” to report the financial results of operating segments, which is based on information used by the CODM to assess performance and make operating and resource allocation decisions.

In the first quarter of 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas and determined that it has two operating segments organized by geographical area – namely (a) Americas (“AMS”) and (b) Europe, Africa, Asia and Australia (collectively “EAAA”).

The AMS operating segment is unchanged from prior year and continues to include the United States, Canada and Latin America geographic areas.

Pursuant to the management approach discussed above, the Company’s CODM, our chief executive officer, evaluates performance at the AMS and EAAA operating segment levels and makes operating and resource allocation decisions based on segment adjusted operating income or loss (“AOI”), which includes allocations of corporate selling, general and administrative expenses.

AOI excludes nora purchase accounting amortization, goodwill and intangible asset impairment charges, changes in equity award forfeiture accounting, restructuring charges, asset impairment, severance and other charges.

Intersegment revenues for the three months ended April 4, 2021 and April 5, 2020 were $ 15.7 million and $ 19.5 million, respectively.

Intersegment revenues are eliminated from net sales presented below since these amounts are not included in the information provided to the CODM.

The Company has determined that it has two reportable segments – AMS and EAAA as each operating segment meets the quantitative thresholds defined in the accounting guidance.

Segment information below for fiscal year 2020 has been restated to reflect our new reportable segment structure.

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

Three Months Ended October 4, 2020:

Net Sales $ 142,858 $ 92,905 $ 42,879 $ 278,642

Depreciation and amortization 3,554 4,590 1,911 10,055

Total assets 749,577 491,155 186,166 1,426,898

Three Months Ended September 29, 2019:

Net Sales $ 195,900 $ 106,115 $ 46,337 $ 348,352

Depreciation and amortization 3,238 4,255 2,035 9,528

Nine Months Ended October 4, 2020:

Net Sales $ 452,171 $ 259,469 $ 114,675 $ 826,315

Depreciation and amortization 9,623 13,448 5,848 28,919

Nine Months Ended September 29, 2019:

Net Sales $ 563,776 $ 294,830 $ 144,941 $ 1,003,547

AMS $ 126,967 $ 158,091

EAAA 126,293 130,078

Total net sales $ 253,260 $ 288,169

AMS $ 11,913 $ 23,552

EAAA 8,011 5,798

Depreciation and Amortization

A reconciliation of the Company’s total operating segment depreciation and amortization and assets to the corresponding consolidated amounts follows:

Three Months Ended Nine Months Ended

Depreciation and Amortization October 4, 2020 September 29, 2019 October 4, 2020 September 29, 2019

(In thousands)

Total segment depreciation and amortization $ 10,055 $ 9,528 $ 28,919 $ 29,650

Corporate depreciation and amortization 1,677 1,352 4,561 3,928

Reported depreciation and amortization $ 11,732 $ 10,880 $ 33,480 $ 33,578

Assets October 4, 2020

AMS $ 4,723 $ 3,907

EAAA 7,211 7,033

Total depreciation and amortization $ 11,934 $ 10,940

A reconciliation of the Company’s total operating segment assets to the corresponding consolidated amounts follows:

April 4, 2021 January 3, 2021

(in thousands)

AMS $ 795,007 $ 800,068

EAAA 679,240 682,295

Total segment assets $ 1,474,247 $ 1,482,363

1 unchanged sentence

Eliminations ( 308,120 ) ( 287,425 )

Reported total assets $ 1,305,775

Total reported assets $ 1,295,326 $ 1,306,011

A reconciliation of operating income to income (loss) before income tax expense and segment AOI is presented as follows:

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

AMS operating income $ 11,647 $ 20,100

EAAA operating income (loss) 5,219 ( 113,612 )

Consolidated operating income (loss) $ 16,866 $ ( 93,512 )

Interest expense 7,256 5,630

Other expense 715 1,491

Income (loss) before income tax expense $ 8,895 $ ( 100,633 )

Three Months Ended April 4, 2021

(in thousands)

Operating income $ 11,647 $ 5,219

Purchase accounting amortization — 1,421

Restructuring, asset impairment, severance and other charges 266 1,371

AOI $ 11,913 $ 8,011

Three Months Ended April 5, 2020

(in thousands)

Operating income (loss) $ 20,100 $ ( 113,612 )

Purchase accounting amortization — 1,315

Goodwill and intangible asset impairment 2,695 118,563

Impact of change in equity award forfeiture accounting 757 650

Restructuring, asset impairment, severance and other charges — ( 1,118 )

AOI $ 23,552 $ 5,798

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest amounted to $ 16.0 million and $ 18.1 million for the nine months ended October 4, 2020 and September 29, 2019, respectively.

Income tax payments, net of refunds, amounted to $ 8.2 million and $ 26.5 million for the nine months ended October 4, 2020 and September 29, 2019, respectively.

Cash payments for interest amounted to $ 1.6 million and $ 6.6 million for the three months ended April 4, 2021 and April 5, 2020, respectively.

Income tax payments, net of refunds, amounted to $ 3.2 million and $ 9.3 million for the three months ended April 4, 2021 and April 5, 2020, respectively.

Non-Cash Investing and Financing Activities

On March 16, 2021, the Company declared cash dividends on its common stock of $ 0.6 million, which were paid during the second quarter of 2021 to shareholders of record as of April 2, 2021.

At April 4, 2021, the dividends were recorded within Accrued Expenses in the consolidated condensed balance sheet.

See Note 8 entitled “Leases” for supplemental disclosures related to finance and operating leases.

1 unchanged sentence

The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete tax items.

During the nine months ended October 4, 2020, the Company recorded a total income tax provision of $ 5.7 million on a pre-tax loss of $ 85.8 million resulting in an effective tax rate of ( 6.7 )%.

The effective tax rate for this period was primarily impacted by a non-deductible goodwill impairment.

Excluding the impact of the goodwill impairment, the effective tax rate was 18.7 % for the period compared to 22.0 % during the nine months ended September 29, 2019.

The decrease in the effective tax rate, excluding the goodwill impairment, was due to favorable impacts of amending prior year tax returns and the retroactive election of the GILTI High-tax Exclusion in the 2019 tax return, which were offset by the unfavorable changes related to unrecognized tax benefits and the non-deductible penalty to settle the SEC matter, referenced in the disclosure set forth in Note 17 to the consolidated financial statements included in Item 8 of the December 29, 2019 Annual Report on Form 10-K.

In the first nine months of 2020, the Company increased its liability for unrecognized tax benefits by $ 0.1 million.

As of October 4, 2020, the Company had accrued approximately $ 25.6 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of October 4, 2020 reflects a reduction for $ 2.8 million of these unrecognized tax benefits.

In October 2020, the statute of limitations for the 2016 U.S.

federal income tax return closed.

As a result of this lapse in the statute of limitations, the Company will recognize $ 14.4 million of unrecognized tax benefits in the fourth quarter of 2020.

On March 27, 2020, the CARES Act was signed into law in response to the COVID-19 pandemic and provides certain tax relief to businesses.

Tax provisions of the CARES Act include, among other things, the deferral of certain payroll taxes, relief for retaining employees, and certain income tax provisions for corporations.

During the nine months ended October 4, 2020, the Company deferred approximately $ 2.9 million in payroll taxes under the CARES Act.

Other than the deferral of payroll taxes, the CARES Act did not have an impact on the Company’s tax accounts, including its effective tax rate, during the nine months ended October 4, 2020.

The Company expects it will defer approximately $ 4.0 million in payroll taxes under the CARES Act during fiscal year 2020 which will result in a corresponding increase in its payroll tax accrual.

The CARES Act and other similar foreign government support programs are not expected to have a material impact on the Company’s tax accounts during the year.

During the three months ended April 4, 2021, the Company recorded a total income tax provision of $ 2.0 million on pre-tax income of $ 8.9 million resulting in an effective tax rate of 22.0 %, as compared to a total income tax provision of $ 1.5 million on a pre-tax loss of $ 100.6 million resulting in an effective tax rate of ( 1.5 )% during the three months ended April 5, 2020.

The effective tax rate for the period ended April 5, 2020 was primarily impacted by a non-deductible goodwill impairment.

Excluding the impact of the goodwill impairment, the effective tax rate was 7.4 % during the three months ended April 5, 2020.

The increase in the effective tax rate as compared to the period ended April 5, 2020, excluding the non-deductible goodwill impairment, was due to the one-time favorable impacts of amending prior year tax returns during the three months ended April 5, 2020.

In the first three months of 2021, the Company decreased its liability for unrecognized tax benefits by $ 0.8 million.

The decrease was primarily due to settlements with taxing authorities and lapse of applicable statute of limitations.

As of April 4, 2021, the Company had accrued approximately $ 10.0 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of April 4, 2021 reflects a reduction for $ 3.0 million of these unrecognized tax benefits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations.

Based on information currently available, it is reasonably possible that approximately $ 1.8 million of unrecognized tax benefits may be recognized within the next 12 months due to a lapse of statute of limitations.

NOTE 14 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

Amounts reclassified out of accumulated other comprehensive income (loss) (“AOCI”) to the consolidated condensed statements of operations during the three and nine months ended October 4, 2020 and September 29, 2019 are reflected in the tables below:

Amounts reclassified out of accumulated other comprehensive income (loss) (“AOCI”), before tax, to the consolidated condensed statements of operations during the three months ended April 4, 2021 and April 5, 2020 are reflected in the table below:

Three Months Ended

Statement of Operations Location October 4, 2020 September 29, 2019

(In thousands)

Foreign currency contracts loss Cost of sales $ — $ ( 450 )

Interest rate swap contracts gain (loss) Interest expense ( 1,328 ) 55

Amortization of benefit plan prior service cost and net actuarial losses Other expense ( 560 ) ( 350 )

Total loss reclassified from AOCI, net $ ( 1,888 ) $ ( 745 )

Nine Months Ended

Statement of Operations Location October 4, 2020 September 29, 2019

Statement of Operations Location April 4, 2021 April 5, 2020

(in thousands)

Foreign currency contracts loss Cost of sales $ — $ ( 450 )

Interest rate swap contracts gain (loss) Interest expense ( 2,944 ) 350

Interest rate swap contracts loss Interest expense $ ( 1,061 ) $ ( 492 )

Amortization of benefit plan prior service cost and net actuarial losses Other expense ( 711 ) ( 492 )

1 unchanged sentence

NOTE 15 – RESTRUCTURING CHARGES

For the nine months ended October 4, 2020, the Company recorded a reduction of $ 3.2 million of previously recognized restructuring charges due to changes in expected cash payments.

At October 4, 2020, the aggregate restructuring reserve was $ 3.9 million for both the 2019 and 2018 restructuring plans.

Below is a discussion of the restructuring plan activities by year.

A summary of restructuring activities for the 2019 restructuring plan is presented below:

Workforce Reduction

(in thousands)

Balance, at January 3, 2021 $ 1,064

Charged to expenses ( 130 )

Deductions 474

Balance, at April 4, 2021 $ 460

For the three months ended April 4, 2021, the Company recorded a reduction of $ 0.1 million of previously recognized restructuring charges due to changes in expected cash payments.

At April 4, 2021, the restructuring reserve was $ 0.5 million.

Below is a discussion of the restructuring plan activities under the 2019 restructuring plan.

2019 Restructuring Plan

3 unchanged sentences

The charge was comprised of severance expenses ($ 8.8 million) and lease exit costs ($ 0.2 million).

The restructuring plan is expected to result in cash expenditures of approximately $ 9.0 million for payment of the employee severance and lease exit costs, as described above.

The restructuring plan was expected to result in cash expenditures of approximately $ 9.0 million for payment of the employee severance and lease exit costs, as described above.

The Company expects to complete the restructuring plan in fiscal year 2021 and expects the plan to yield annualized savings of approximately $ 6.0 million.

A portion of the annualized savings is expected to be realized on the income statement in fiscal year 2020, with the remaining portion of the annualized savings expected to be realized in fiscal year 2021.

A reconciliation of the 2019 plan restructuring reserve is presented below:

2019 DEDUCTIONS 2020 CHARGED TO EXPENSES 2020 BALANCE, AT

OCTOBER 4, 2020

(In thousands)

Workforce Reduction $ 8,634 $ ( 2,648 ) $ ( 2,234 ) $ 3,752

Other Exit Costs 139 ( 139 ) — —

Total $ 8,773 $ ( 2,787 ) $ ( 2,234 ) $ 3,752

2018 Restructuring Plan

On December 29, 2018, the Company committed to a restructuring plan in its continuing efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy.

The plan involved (i) a restructuring of its sales and administrative operations in the United Kingdom, (ii) a reduction of approximately 200 employees, primarily in the Europe and Asia-Pacific geographic regions, and (iii) the write-down of certain underutilized and impaired assets that included information technology assets and obsolete manufacturing equipment.

The restructuring plan was substantially completed at the end of the second quarter of 2020.

The Company redeployed essentially all of the anticipated savings toward the funding of sales and strategic growth initiatives, yielding negligible net savings on the Company’s income statement.

A reconciliation of the 2018 plan restructuring reserve is presented below:

2019 DEDUCTIONS 2020 CHARGED TO EXPENSES 2020 BALANCE, AT

OCTOBER 4, 2020

(In thousands)

Workforce Reduction $ 1,898 $ ( 1,576 ) $ ( 223 ) $ 99

Other Exit Costs 774 ( 75 ) ( 699 ) —

Total $ 2,672 $ ( 1,651 ) $ ( 922 ) $ 99

NOTE 16 – SUBSEQUENT EVENTS

Cost Reducing Initiatives and Related Charges

As we continue to monitor the impact of COVID-19 and mitigate its effects to our operations, the Company expects to continue to pursue a variety of cost reducing initiatives including but not limited to voluntary incentive separation programs, temporary employee furloughs and other time-and-pay reduction programs, applications to participate in various government sponsored “wage support” programs, involuntary separations where necessary to streamline roles and responsibilities, potential facility closures to streamline operations, and various other cost reducing and cost avoidance activities.

Unrecognized Tax Benefits

In October 2020, the statute of limitations for the 2016 U.S.

federal income tax return closed.

As a result of this lapse in the statute of limitations, the Company will recognize $ 14.4 million of unrecognized tax benefits in the fourth quarter of 2020.

A portion of the annualized savings was realized on the income statement in fiscal year 2020, with the remaining portion of the annualized savings expected to be realized in fiscal year 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements