What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-10 compared with 2021-05-11 · 157 added, 136 removed, 437 unchanged (40% of the section changed)

4 unchanged sentences

(in thousands, except par values)

APRIL 4, 2021 JANUARY 3, 2021

JULY 4, 2021 JANUARY 3, 2021

Current assets

26 unchanged sentences

5,000 shares authorized;

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

none issued or outstanding at July 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

59,066 and 58,664 shares issued and outstanding at July 4, 2021 and January 3, 2021, respectively

Additional paid-in capital 250,114 247,920

10 unchanged sentences

(in thousands, except per share data)

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 4, 2021 JULY 5, 2020 JULY 4, 2021 JULY 5, 2020

NET SALES $ 294,785 $ 259,504 $ 548,045 $ 547,673

19 unchanged sentences

(in thousands)

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 4, 2021 JULY 5, 2020 JULY 4, 2021 JULY 5, 2020

Net Income (Loss) $ 15,511 $ 4,709 $ 22,449 $ ( 97,458 )

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

Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment 3,455 16,160 ( 16,142 ) 915

Other Comprehensive Income (Loss), Cash Flow Hedge 745 ( 351 ) 1,494 ( 6,491 )

Other Comprehensive Income, Pension Liability Adjustment 89 1,733

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

Other Comprehensive Income (Loss), Pension Liability Adjustment 100 ( 342 ) 189 1,391

Comprehensive Income (Loss) $ 19,811 $ 20,176 $ 7,990 $ ( 101,643 )

See accompanying notes to consolidated condensed financial statements.

3 unchanged sentences

(in thousands)

THREE MONTHS ENDED

APRIL 4, 2021 APRIL 5, 2020

SIX MONTHS ENDED

JULY 4, 2021 JULY 5, 2020

OPERATING ACTIVITIES:

Net income (loss) $ 22,449 $ ( 97,458 )

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

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

Depreciation and amortization 23,670 21,748

8 unchanged sentences

Accounts payable and accrued expenses 40,109 ( 26,045 )

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

CASH PROVIDED BY OPERATING ACTIVITIES 35,118 32,427

INVESTING ACTIVITIES:

7 unchanged sentences

Proceeds from issuance of common stock — 93

Dividends paid ( 1,178 ) ( 4,392 )

Debt issuance costs ( 36 ) —

1 unchanged sentence

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ( 21,319 ) 15,624

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

Net cash provided by operating, investing and financing activities 1,687 12,357

Effect of exchange rate changes on cash ( 2,368 ) ( 1,814 )

16 unchanged sentences

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.

The six-month period ended July 4, 2021 includes 26 weeks, and the six-month period ended July 5, 2020 includes 27 weeks.

The three-month periods ended July 4, 2021 and July 5, 2020 both include 13 weeks.

Risks and Uncertainties

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 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 revenue for the first six months of 2021 when excluding the impacts of foreign currency fluctuations, 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 July 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.

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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 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.

Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 98 % of total revenue for both six-month periods ended July 4, 2021 and July 5, 2020.

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

Disaggregation of Revenue

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

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

Six Months Ended

Geography July 4, 2021 July 5, 2020

Americas 51.8 % 56.5 %

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Inventories are summarized as follows:

April 4, 2021 January 3, 2021

July 4, 2021 January 3, 2021

(in thousands)

11 unchanged sentences

Undistributed earnings represent earnings that were available for distribution but were not distributed.

The following tables show distributed and undistributed earnings:

Three Months Ended

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

Basic Earnings (Loss) Per Share:

Distributed earnings $ 0.01 $ 0.07

Undistributed earnings (loss) 0.11 ( 1.82 )

Total $ 0.12 $ ( 1.75 )

Diluted Earnings (Loss) Per Share:

Distributed earnings $ 0.01 $ 0.07

Undistributed earnings (loss) 0.11 ( 1.82 )

Total $ 0.12 $ ( 1.75 )

Basic earnings (loss) per share $ 0.12 $ ( 1.75 )

Diluted earnings (loss) per share $ 0.12 $ ( 1.75 )

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

Three Months Ended

April 4, 2021 April 5, 2020

(in millions)

Net income attributable to participating securities $ 0.1 $ —

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

Three Months Ended

April 4, 2021 April 5, 2020

(in thousands)

The following table shows the computation of basic and diluted EPS:

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands, except per share data)

Net income (loss) $ 15,511 $ 4,709 $ 22,449 $ ( 97,458 )

distributed and undistributed earnings available to participating securities ( 192 ) ( 38 ) ( 229 ) ( 35 )

Distributed and undistributed earnings (loss) available to common shareholders $ 15,319 $ 4,671 $ 22,220 $ ( 97,493 )

Weighted average shares outstanding 58,310 58,024 58,283 58,006

3 unchanged sentences

Shares for diluted earnings per share 59,041 58,484 58,885 58,466

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

Basic earnings (loss) per share $ 0.26 $ 0.08 $ 0.38 $ ( 1.67 )

Diluted earnings (loss) per share $ 0.26 $ 0.08 $ 0.38 $ ( 1.67 )

For the three and six months ended July 5, 2020, there were 20,000 stock options in each respective period excluded from the computation of diluted EPS because the impact would be anti-dilutive.

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:

April 4, 2021 January 3, 2021

July 4, 2021 January 3, 2021

Outstanding Principal Interest Rate (1)

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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 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.

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

As of both July 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.

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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.

As of July 4, 2021, the estimated fair value of the Senior Notes was $ 315.1 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.

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 July 4, 2021 and January 3, 2021.

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

Borrowing Costs

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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 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.

As of July 4, 2021 and January 3, 2021, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 8.0 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 $ 1.8 million and $ 2.0 million as of July 4, 2021 and January 3, 2021, respectively.

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

7 unchanged sentences

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.

Losses recorded in accumulated other comprehensive loss for these terminated interest rate swaps are reclassified and recorded in the consolidated condensed statements 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.

As of July 4, 2021 and January 3, 2021, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $ 6.5 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 $ 4.0 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

Three Months Ended Six Months Ended

July 5, 2020 July 5, 2020

(in thousands)

5 unchanged sentences

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

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:

As of July 4, 2021, the Company had outstanding foreign currency options with an aggregate notional amount of $ 4.4 million.

The table below sets forth the fair value of derivative instruments not designated as hedging instruments as of July 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

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

(in thousands)

Foreign currency options Other current assets $ 3 $ 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:

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 six months ended July 4, 2021 and July 5, 2020:

Three Months Ended

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

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

(in thousands)

Foreign currency options gain (loss) Other expense $ 134 $ ( 1,629 )

Six Months Ended

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

(in thousands)

Foreign currency options gain Other expense $ 319 $ 79

NOTE 7 – SHAREHOLDERS’ EQUITY

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:

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

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

7 unchanged sentences

— — — ( 589 ) — — —

Forfeitures and compensation expense related to stock awards ( 26 ) ( 2 ) 689 — — — —

Compensation expense related to stock awards, net of forfeitures ( 26 ) ( 2 ) 689 — — — —

Pension liability adjustment — — — — 89 — —

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

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

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

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

Net income — — — 15,511 — — —

Restricted stock issuances 52 6 789 — — — —

Unamortized compensation expense related to restricted stock awards — — ( 794 ) — — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 589 ) — — —

Compensation expense related to stock awards — — 1,548 — — — —

Pension liability adjustment — — — — 100 — —

Foreign currency translation adjustment — — — — — 3,455 —

Reclassification out of accumulated other comprehensive loss - discontinued cash flow hedge — — — — — — 745

Balance, at July 4, 2021 59,066 $ 5,907 $ 250,114 $ 229,833 $ ( 69,099 ) $ ( 76,473 ) $ ( 4,696 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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— — — ( 3,807 ) — — —

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

Compensation expense related to stock awards, net of forfeitures ( 255 ) ( 25 ) ( 4,114 ) — — — —

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

2 unchanged sentences

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

Net income — — — 4,709 — — —

Issuances of stock (other than restricted stock) 12 1 ( 1 ) — — — —

Restricted stock issuances 70 7 2,294 — — — —

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

Cash dividends declared, $ 0.01 per common share

— — — ( 585 ) — — —

Compensation expense related to stock awards, net of forfeitures ( 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 )

Stock Option Awards

1 unchanged sentence

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 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.

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

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

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

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

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

Restricted Stock Awards

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.

During the six months ended July 4, 2021 and July 5, 2020, the Company granted restricted stock awards for 428,400 and 308,100 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 (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.

Compensation expense (benefit) related to restricted stock grants was $ 1.8 million and $( 0.2 ) million for the six months ended July 4, 2021, and July 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 April 4, 2021, as well as activity during the three months then ended:

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

Restricted Shares Weighted Average

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Forfeited or canceled ( 3,100 ) 16.69

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.

Outstanding at July 4, 2021 695,000 $ 20.97

As of July 4, 2021, the unrecognized total compensation cost related to unvested restricted stock was $ 7.2 million.

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

Performance Share Awards

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

During the six months ended July 4, 2021 and July 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 April 4, 2021, as well as the activity during the three months then ended:

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

Performance Shares Weighted Average

2 unchanged sentences

Forfeited or canceled ( 47,500 ) 23.42

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.

Outstanding at July 4, 2021 654,700 $ 15.20

Compensation expense (benefit) related to the performance shares was $ 0.7 million and $( 2.0 ) million for the six months ended July 4, 2021 and July 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 $ 9.5 million as of April 4, 2021.

Unrecognized compensation expense related to these performance shares was approximately $ 9.0 million as of July 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.

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.

The tax benefit recognized with regard to restricted stock and performance shares was approximately $ 0.4 million for the six months ended July 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 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

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

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

July 4, 2021 January 3, 2021

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

8 unchanged sentences

Total finance lease liabilities $ 5,778 $ 4,184

Three Months Ended

April 4, 2021 April 5, 2020

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

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Other Supplemental Information

Three Months Ended

April 4, 2021 April 5, 2020

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 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 April 4, 2021 and January 3, 2021:

April 4, 2021 January 3, 2021

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

July 4, 2021 January 3, 2021

Weighted-average remaining lease term – finance leases (in years) 3.46 3.35

6 unchanged sentences

(in thousands)

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

2021 (excluding the six months ended July 4, 2021)

$ 9,439 $ 1,046

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Policy Elections

The Company made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and will account for the lease payments as a single component.

The Company made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and accounts for the lease payments as a single component.

The Company also made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated condensed balance sheets.

1 unchanged sentence

NOTE 9 – EMPLOYEE BENEFIT PLANS

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

During the three and six months ended July 4, 2021, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.7 million and $ 1.4 million, respectively.

During the three and six months ended July 5, 2020, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.6 million and $ 1.3 million, respectively.

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

Three Months Ended Six Months Ended

Defined Benefit Retirement Plans (Europe)

April 4, 2021 April 5, 2020

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

4 unchanged sentences

Net periodic benefit cost $ 157 $ 178 $ 313 $ 357

Three Months Ended

Salary Continuation Plan April 4, 2021 April 5, 2020

Three Months Ended Six Months Ended

Salary Continuation Plan July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

2 unchanged sentences

Net periodic benefit cost $ 363 $ 374 $ 725 $ 748

Three Months Ended

Three Months Ended Six Months Ended

nora Defined Benefit Plan

April 4, 2021 April 5, 2020

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

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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.

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:

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

The changes in the carrying amounts of goodwill attributable to each reportable segment for the six months ended July 4, 2021 are as follows:

AMS EAAA Total

(in thousands)

1 unchanged sentence

Foreign currency translation ( 5,795 ) ( 2,057 ) ( 7,852 )

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 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.

Balance, at July 4, 2021 $ 116,549 $ 41,376 $ 157,925

Additionally, in fiscal year 2020, 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 was $ 82.4 million at July 4, 2021.

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

NOTE 11 – SEGMENT INFORMATION

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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 for the three and six months ended July 4, 2021 were $ 20.6 million and $ 36.3 million, respectively, and intersegment revenues for the three and six months ended July 5, 2020 were $ 21.1 million and $ 40.6 million, respectively.

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

1 unchanged sentence

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

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

9 unchanged sentences

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

April 4, 2021 January 3, 2021

July 4, 2021 January 3, 2021

(in thousands)

5 unchanged sentences

Total reported assets $ 1,322,214 $ 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

Reconciliations of operating income to income (loss) before income tax expense and segment AOI are presented as follows:

Three Months Ended Six Months Ended

July 4, 2021 July 5, 2020 July 4, 2021 July 5, 2020

(in thousands)

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Income (loss) before income tax expense $ 21,318 $ 7,289 $ 30,213 $ ( 93,344 )

Three Months Ended April 4, 2021

Three Months Ended July 4, 2021 Three Months Ended July 5, 2020

AMS EAAA AMS EAAA

(in thousands)

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AOI $ 21,098 $ 9,960 $ 23,942 $ 3,530

Three Months Ended April 5, 2020

Six Months Ended July 4, 2021 Six Months Ended July 5, 2020

AMS EAAA AMS EAAA

(in thousands)

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NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

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.

Cash payments for interest amounted to $ 11.9 million and $ 11.1 million for the six months ended July 4, 2021 and July 5, 2020, respectively.

Income tax payments, net of refunds, amounted to $ 7.5 million and $ 6.9 million for the six months ended July 4, 2021 and July 5, 2020, respectively.

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

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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 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.

During the six months ended July 4, 2021, the Company recorded a total income tax provision of $ 7.8 million on pre-tax income of $ 30.2 million resulting in an effective tax rate of 25.7 %, as compared to a total income tax provision of $ 4.1 million on a pre-tax loss of $ 93.3 million resulting in an effective tax rate of ( 4.4 )% during the six months ended July 5, 2020.

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

Excluding the impact of the goodwill impairment, the effective tax rate was 17.8 % during the six months ended July 5, 2020.

The increase in the effective tax rate as compared to the period ended July 5, 2020, excluding the non-deductible goodwill impairment, was due to the one-time favorable impacts of amending prior year tax returns during the six months ended July 5, 2020 which was offset by favorable changes related to company-owned life insurance in the current period.

In the first six months of 2021, the Company decreased its liability for unrecognized tax benefits by $ 0.7 million.

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

As of July 4, 2021, the Company had accrued approximately $ 10.1 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of July 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.

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NOTE 14 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

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:

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

Three Months Ended

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

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

(in thousands)

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Total loss reclassified from AOCI, net $ ( 1,762 ) $ ( 1,719 )

Six Months Ended

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

(in thousands)

Interest rate swap contracts loss Interest expense $ ( 2,107 ) $ ( 1,616 )

Amortization of benefit plan prior service cost and net actuarial losses Other expense ( 1,427 ) ( 1,087 )

Total loss reclassified from AOCI, net $ ( 3,534 ) $ ( 2,703 )

NOTE 15 – RESTRUCTURING CHARGES

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Deductions 579

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.

Balance, at July 4, 2021 $ 293

For the six months ended July 4, 2021, the Company recorded a reduction of $ 0.2 million of previously recognized restructuring charges due to changes in expected cash payments.

At July 4, 2021, the restructuring reserve was $ 0.3 million.

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

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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