What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-10 · 157 added, 133 removed, 461 unchanged (39% of the section changed)

4 unchanged sentences

(in thousands, except par values)

JULY 4, 2021 JANUARY 3, 2021

OCTOBER 3, 2021 JANUARY 3, 2021

Current assets

26 unchanged sentences

5,000 shares authorized;

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

none issued or outstanding at October 3, 2021 and January 3, 2021

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

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

59,055 and 58,664 shares issued and outstanding at October 3, 2021 and January 3, 2021, respectively

Additional paid-in capital 251,794 247,920

10 unchanged sentences

(in thousands, except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED

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

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 3, 2021 OCTOBER 4, 2020 OCTOBER 3, 2021 OCTOBER 4, 2020

NET SALES $ 312,707 $ 278,642 $ 860,752 $ 826,315

2 unchanged sentences

Selling, General and Administrative Expenses 77,735 88,161 236,867 255,902

Restructuring Charges ( 62 ) ( 157 ) ( 192 ) ( 1,275 )

Restructuring and Asset Impairment Charges 3,813 ( 1,881 ) 3,621 ( 3,156 )

Goodwill and Intangible Asset Impairment Charge — — — 121,258

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(in thousands)

THREE MONTHS ENDED SIX MONTHS ENDED

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

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 3, 2021 OCTOBER 4, 2020 OCTOBER 3, 2021 OCTOBER 4, 2020

Net Income (Loss) $ 10,959 $ 5,913 $ 33,408 $ ( 91,545 )

8 unchanged sentences

(in thousands)

SIX MONTHS ENDED

JULY 4, 2021 JULY 5, 2020

NINE MONTHS ENDED

OCTOBER 3, 2021 OCTOBER 4, 2020

OPERATING ACTIVITIES:

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Finance lease payments ( 1,796 ) ( 1,252 )

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

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

CASH USED IN FINANCING ACTIVITIES ( 53,079 ) ( 30,183 )

Net cash (used in) provided by operating, investing and financing activities ( 6,429 ) 20,018

Effect of exchange rate changes on cash ( 3,815 ) 2,400

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 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.

The nine-month period ended October 3, 2021 includes 39 weeks, and the nine-month period ended October 4, 2020 includes 40 weeks.

The three-month periods ended October 3, 2021 and October 4, 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 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 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 continued impacts to our global supply chain, and its consequent impacts on production volume, raw material shortages, raw material cost increases, higher freight costs, shipping delays and labor shortages, gross profit margins, 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 3, 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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COVID-19 Impact

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.

We continue to monitor our operations and have implemented various programs to mitigate the effects of COVID-19 on our business.

Our global supply chain and manufacturing operations continue to experience increased impacts of COVID-19 including raw material shortages, raw material cost increases, higher freight costs, shipping delays, and labor shortages – particularly in the United States.

Reclassifications

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This new guidance is effective and may be applied beginning March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of adoption of this standard.

While the Company is currently evaluating the impact of adoption of this standard, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

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 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.

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 3, 2021 and October 4, 2020.

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

Disaggregation of Revenue

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

For the nine months ended October 3, 2021 and October 4, 2020, revenue from the Company’s customers is broken down by geography as follows:

Nine Months Ended

Geography October 3, 2021 October 4, 2020

Americas 53.5 % 54.7 %

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Inventories are summarized as follows:

July 4, 2021 January 3, 2021

October 3, 2021 January 3, 2021

(in thousands)

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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

Three Months Ended Nine Months Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands, except per share data)

4 unchanged sentences

Participating securities 686 452 630 452

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

Shares for basic EPS 59,057 58,592 58,942 58,507

Dilutive effect of stock options — — — —

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

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.

Shares for diluted EPS 59,057 58,592 58,942 58,507

Basic EPS $ 0.19 $ 0.10 $ 0.57 $ ( 1.56 )

Diluted EPS $ 0.19 $ 0.10 $ 0.57 $ ( 1.56 )

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:

July 4, 2021 January 3, 2021

October 3, 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 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.

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

As of both October 3, 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 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.

As of October 3, 2021, the estimated fair value of the Senior Notes was $ 316.5 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 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.

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 October 3, 2021 and January 3, 2021.

As of October 3, 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 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.

As of October 3, 2021 and January 3, 2021, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 7.7 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 $ 1.7 million and $ 2.0 million as of October 3, 2021 and January 3, 2021, respectively.

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

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

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.

As of October 3, 2021 and January 3, 2021, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $ 4.7 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 $ 3.3 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 and six months ended July 5, 2020:

Three Months Ended Six Months Ended

July 5, 2020 July 5, 2020

Three Months Ended Nine Months Ended

October 4, 2020 October 4, 2020

(in thousands)

Interest rate swap contracts loss $ ( 351 ) $ ( 6,491 )

Interest rate swap contracts gain (loss) $ 864 $ ( 5,627 )

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 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:

As of October 3, 2021, the Company had no outstanding foreign currency options.

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

Asset Derivatives

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

Balance Sheet Location Fair Value as of October 3, 2021 Fair Value as of January 3, 2021

(in thousands)

Foreign currency options Other current assets $ — $ 37

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 July 4, 2021 July 5, 2020

Statement of Operations Location October 3, 2021 October 4, 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

Foreign currency options gain Other expense $ 101 $ 11

Nine Months Ended

Statement of Operations Location October 3, 2021 October 4, 2020

(in thousands)

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NOTE 7 – SHAREHOLDERS’ EQUITY

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:

The following tables depict the activity in the accounts which make up shareholders’ equity for the three and nine months ended October 3, 2021 and October 4, 2020:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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

Net income — — — 10,959 — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 593 ) — — —

Compensation expense related to stock awards, net of forfeitures ( 11 ) ( 2 ) 1,680 — — — —

Pension liability adjustment — — — — 2,377 — —

Foreign currency translation adjustment — — — — — ( 14,553 ) —

Reclassification out of accumulated other comprehensive loss - discontinued cash flow hedge — — — — — — 1,323

Balance, at October 3, 2021 59,055 $ 5,905 $ 251,794 $ 240,199 $ ( 66,722 ) $ ( 91,026 ) $ ( 3,373 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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

Stock Option Awards

In accordance with accounting standards, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award.

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 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.

Net income — — — 5,913 — — —

Issuances of stock (other than restricted stock) 7 1 ( 1 ) — — — —

Restricted stock issuances 127 13 ( 15 ) — — — —

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

Cash dividends declared, $ 0.01 per common share

— — — ( 586 ) — — —

Compensation expense related to stock awards, net of forfeitures ( 8 ) ( 1 ) 703 — — — —

Pension liability adjustment — — — — ( 1,471 ) — —

Foreign currency translation adjustment — — — — — 23,402 —

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 )

Restricted Stock Awards

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.

During the nine months ended October 3, 2021 and October 4, 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 $ 1.8 million and $( 0.2 ) million for the six months ended July 4, 2021, and July 5, 2020, respectively.

Compensation expense related to restricted stock grants was $ 2.8 million and $ 0.6 million for the nine months ended October 3, 2021, and October 4, 2020, respectively.

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

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

The following table summarizes restricted stock outstanding as of October 3, 2021, as well as activity during the nine months then ended:

Restricted Shares Weighted Average

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Forfeited or canceled ( 14,300 ) 15.48

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.

Outstanding at October 3, 2021 683,800 $ 21.06

As of October 3, 2021, the unrecognized total compensation cost related to unvested restricted stock was $ 6.1 million.

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

Performance Share Awards

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

During the nine months ended October 3, 2021 and October 4, 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 July 4, 2021, as well as the activity during the six months then ended:

The following table summarizes the performance shares outstanding as of October 3, 2021, as well as the activity during the nine months then ended:

Performance Shares Weighted Average

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Forfeited or canceled ( 63,000 ) 21.43

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.

Outstanding at October 3, 2021 718,100 $ 14.98

Compensation expense (benefit) related to the performance shares was $ 1.4 million and $( 2.0 ) million for the nine months ended October 3, 2021 and October 4, 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 $ 9.0 million as of July 4, 2021.

Unrecognized compensation expense related to these performance shares was approximately $ 9.0 million as of October 3, 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 $ 0.4 million for the six months ended July 4, 2021.

The tax benefit recognized with regard to restricted stock and performance shares was approximately $ 0.8 million for the nine months ended October 3, 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 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

As of October 3, 2021, there were no significant leases that had not commenced.

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

October 3, 2021 January 3, 2021

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

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Total finance lease liabilities $ 5,304 $ 4,184

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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Other Supplemental Information

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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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 July 4, 2021 and January 3, 2021:

July 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 October 3, 2021 and January 3, 2021:

October 3, 2021 January 3, 2021

Weighted-average remaining lease term – finance leases (in years) 3.28 3.35

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(in thousands)

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

2021 (excluding the nine months ended October 3, 2021)

$ 4,842 $ 696

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Total lease liability $ 95,781 $ 5,304

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 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.

These leases primarily represent month-to-month operating leases for vehicles and office equipment where we were reasonably certain that we would not elect an option to extend the lease.

NOTE 9 – EMPLOYEE BENEFIT PLANS

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

During the three and nine months ended October 3, 2021, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.6 million and $ 2.0 million, respectively.

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 3, 2021 and October 4, 2020:

Three Months Ended Nine Months Ended

Defined Benefit Retirement Plans (Europe)

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

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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Net periodic benefit cost $ 153 $ 187 $ 466 $ 544

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Salary Continuation Plan October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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Net periodic benefit cost $ 362 $ 374 $ 1,087 $ 1,122

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

nora Defined Benefit Plan

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

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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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 Company’s reporting units remain unchanged following the realignment of its operating segments and consist of the 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 2020 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.

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

The expected decline in revenue due to the impact of COVID-19 contributed to the lower fair value of our Europe and Asia-Pacific reporting units.

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 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:

There were no indicators of additional goodwill impairment as of October 3, 2021.

The changes in the carrying amounts of goodwill attributable to each reportable segment for the nine months ended October 3, 2021 are as follows:

AMS EAAA Total

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Foreign currency translation ( 10,272 ) ( 3,647 ) ( 13,919 )

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.

Balance, at October 3, 2021 $ 112,072 $ 39,786 $ 151,858

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 $ 79.0 million at October 3, 2021.

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

NOTE 11 – SEGMENT INFORMATION

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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 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 for the three and nine months ended October 3, 2021 were $ 20.1 million and $ 56.4 million, respectively, and intersegment revenues for the three and nine months ended October 4, 2020 were $ 15.6 million and $ 56.2 million, respectively.

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

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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

July 4, 2021 January 3, 2021

October 3, 2021 January 3, 2021

(in thousands)

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Total reported assets $ 1,289,242 $ 1,306,011

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

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

Three Months Ended Nine Months Ended

October 3, 2021 October 4, 2020 October 3, 2021 October 4, 2020

(in thousands)

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Income (loss) before income tax expense $ 16,163 $ 7,535 $ 46,376 $ ( 85,809 )

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

Three Months Ended October 3, 2021 Three Months Ended October 4, 2020

AMS EAAA AMS EAAA

3 unchanged sentences

Restructuring, asset impairment, severance and other charges ( 89 ) 4,086 2,733 3,086

SEC fine — — 2,689 2,311

AOI $ 21,595 $ 8,586 $ 20,279 $ 7,821

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

Nine Months Ended October 3, 2021 Nine Months Ended October 4, 2020

AMS EAAA AMS EAAA

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Restructuring, asset impairment, severance and other charges 174 5,853 9,486 3,978

SEC fine — — 2,689 2,311

AOI $ 54,606 $ 26,557 $ 67,771 $ 17,151

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

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.

Cash payments for interest amounted to $ 13.2 million and $ 16.0 million for the nine months ended October 3, 2021 and October 4, 2020, respectively.

Income tax payments, net of refunds, amounted to $ 15.3 million and $ 8.2 million for the nine months ended October 3, 2021 and October 4, 2020, respectively.

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 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.

During the nine months ended October 3, 2021, the Company recorded a total income tax provision of $ 13.0 million on pre-tax income of $ 46.4 million resulting in an effective tax rate of 28.0 %, as compared to 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 )% during the nine months ended October 4, 2020.

The effective tax rate for the period ended October 4, 2020 was primarily impacted by a non-deductible goodwill impairment.

Excluding the impact of the goodwill impairment, the effective tax rate was 18.7 % during the nine months ended October 4, 2020.

The increase in the effective tax rate as compared to the period ended October 4, 2020, excluding the non-deductible goodwill impairment, was due to the one-time favorable impacts of amending prior year tax returns during the nine months ended October 4, 2020.

In the first nine months of 2021, the Company decreased its liability for unrecognized tax benefits by $ 0.6 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.

As of October 3, 2021, the Company had accrued approximately $ 10.2 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of October 3, 2021 reflects a reduction for $ 3.0 million of these unrecognized tax benefits.

In October 2021, the statute of limitations for the 2017 U.S.

federal income tax return closed.

As a result of this lapse in the statute of limitations, the Company will recognize $ 1.2 million of unrecognized tax benefits in the fourth quarter of 2021.

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 $ 1.7 million of unrecognized tax benefits may be recognized within the next 12 months due to a lapse of statute of limitations.

Based on information currently available, it is reasonably possible that approximately $ 1.7 million of unrecognized tax benefits, including the $ 1.2 million to be recognized in the fourth quarter of 2021, 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 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:

Amounts reclassified out of accumulated other comprehensive loss (“AOCI”), before tax, to the consolidated condensed statements of operations during the three and nine months ended October 3, 2021 and October 4, 2020 are reflected in the table below:

Three Months Ended

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

Statement of Operations Location October 3, 2021 October 4, 2020

(in thousands)

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Total loss reclassified from AOCI, net $ ( 2,550 ) $ ( 1,888 )

Six Months Ended

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

Nine Months Ended

Statement of Operations Location October 3, 2021 October 4, 2020

(in thousands)

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Total loss reclassified from AOCI, net $ ( 6,084 ) $ ( 4,591 )

NOTE 15 – RESTRUCTURING CHARGES

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

Workforce Reduction

NOTE 15 – RESTRUCTURING AND OTHER CHARGES

A summary of restructuring activities for the 2021 and 2019 restructuring plans are presented below:

Workforce Reduction Asset Impairment

2021 Plan 2019 Plan 2021 Plan Total

(in thousands)

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Deductions — ( 645 ) — ( 645 )

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.

Charged to other accounts — — ( 1,650 ) ( 1,650 )

Balance, at October 3, 2021 $ 2,229 $ 161 $ — $ 2,390

For the nine months ended October 3, 2021, the Company recorded restructuring and asset impairment charges of $ 3.6 million.

At October 3, 2021, the restructuring reserve was $ 2.4 million.

Below is a discussion of the restructuring plan activities under the 2021 and 2019 restructuring plans.

2021 Restructuring Plan

On September 8, 2021, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations.

The plan involves a reduction of approximately 188 employees and the closure of the Company’s manufacturing facility in Thailand at the end of the first quarter of 2022.

As a result of this plan, the Company expects to incur pre-tax restructuring charges between the third quarter of 2021 and the fourth quarter of 2022 of approximately $ 4 million to $ 5 million.

The expected charges are comprised of severance expenses ($ 2.2 million), retention bonuses ($ 0.5 million), and asset impairment and other charges ($ 2.0 million).

The retention costs of approximately $ 0.5 million will be recognized through the end of fiscal year 2022 as earned over the requisite service periods.

Restructuring charges of $ 3.9 million comprised of severance and asset impairment charges were recognized during the third quarter of 2021.

The restructuring plan is expected to result in future cash expenditures of approximately $ 3 million to $ 4 million for payment of the employee severance, employee retention bonuses and other costs of the shutdown of the Thailand manufacturing facility, as described above.

The Company expects to complete the restructuring plan in fiscal year 2022 and expects the plan to yield annualized savings of approximately $ 1.7 million.

A portion of the annualized savings is expected to be realized on the income statement in fiscal year 2022, with the remaining portion of the annualized savings expected to be realized in fiscal year 2023.

2019 Restructuring Plan

On December 23, 2019, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy.

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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