What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 144 added, 111 removed, 462 unchanged (36% of the section changed)

4 unchanged sentences

(in thousands, except par values)

JULY 3, 2022 JANUARY 2, 2022

OCTOBER 2, 2022 JANUARY 2, 2022

Current assets

26 unchanged sentences

5,000 shares authorized;

none issued or outstanding at July 3, 2022 and January 2, 2022

none issued or outstanding at October 2, 2022 and January 2, 2022

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

59,097 and 59,055 shares issued and outstanding at July 3, 2022 and January 2, 2022, respectively

58,370 and 59,055 shares issued and outstanding at October 2, 2022 and January 2, 2022, respectively

Additional paid-in capital 245,007 253,110

10 unchanged sentences

(in thousands, except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 3, 2022 JULY 4, 2021 JULY 3, 2022 JULY 4, 2021

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 2, 2022 OCTOBER 3, 2021 OCTOBER 2, 2022 OCTOBER 3, 2021

Net sales $ 327,757 $ 312,707 $ 962,364 $ 860,752

2 unchanged sentences

Selling, general and administrative expenses 80,848 77,735 240,711 236,867

Restructuring and asset impairment charges 810 ( 62 ) 1,697 ( 192 )

Restructuring, asset impairment and other charges ( 105 ) 3,813 1,592 3,621

Operating income 28,042 24,777 89,987 70,867

13 unchanged sentences

(in thousands)

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 3, 2022 JULY 4, 2021 JULY 3, 2022 JULY 4, 2021

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 2, 2022 OCTOBER 3, 2021 OCTOBER 2, 2022 OCTOBER 3, 2021

Net income $ 14,065 $ 10,959 $ 44,176 $ 33,408

Other comprehensive income (loss), after tax:

Other comprehensive loss, after tax:

Foreign currency translation adjustment ( 36,800 ) ( 14,553 ) ( 86,654 ) ( 30,695 )

1 unchanged sentence

Pension liability adjustment 3,393 2,377 8,774 2,566

Other comprehensive income (loss) ( 32,288 ) 4,300 ( 43,292 ) ( 14,459 )

Other comprehensive loss ( 32,915 ) ( 10,853 ) ( 76,207 ) ( 25,312 )

Comprehensive income (loss) $ ( 18,850 ) $ 106 $ ( 32,031 ) $ 8,096

4 unchanged sentences

(in thousands)

SIX MONTHS ENDED

JULY 3, 2022 JULY 4, 2021

NINE MONTHS ENDED

OCTOBER 2, 2022 OCTOBER 3, 2021

OPERATING ACTIVITIES:

Net income $ 44,176 $ 33,408

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

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 30,661 35,087

7 unchanged sentences

Accounts payable and accrued expenses ( 6,040 ) 44,891

Cash (used in) provided by operating activities ( 12,708 ) 35,118

Cash provided by operating activities 14,883 64,056

INVESTING ACTIVITIES:

9 unchanged sentences

Finance lease payments ( 1,535 ) ( 1,796 )

Cash provided by (used in) financing activities 21,518 ( 21,319 )

Net cash (used in) provided by operating, investing and financing activities ( 317 ) 1,687

Cash used in financing activities ( 10,456 ) ( 53,079 )

Net cash used in operating, investing and financing activities ( 8,887 ) ( 6,429 )

Effect of exchange rate changes on cash ( 8,916 ) ( 3,815 )

18 unchanged sentences

The January 2, 2022, 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 periods ended July 3, 2022 and July 4, 2021 both include 26 weeks.

The three-month periods ended July 3, 2022 and July 4, 2021 both include 13 weeks.

The nine-month periods ended October 2, 2022 and October 3, 2021 both include 39 weeks.

The three-month periods ended October 2, 2022 and October 3, 2021 both include 13 weeks.

Risks and Uncertainties

1 unchanged sentence

The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein.

The Company determined that except for the continued impacts to our global supply chain, 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 July 3, 2022.

While our business activities in Russia and Ukraine are not material, we had approximately $ 2.2 million of total assets, including $ 1.7 million of cash, in Russia at July 3, 2022.

The Company determined that except for the continued impacts to our global supply chain, production volume, raw material shortages, raw material cost increases, higher freight costs, shipping delays, 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 2, 2022.

During the third quarter of 2022, the Company permanently closed its operations in Russia, and we are currently in the process of liquidating our legal entity and branch office in the country.

While our business activities in Russia and Ukraine were not material, we had approximately $ 3.0 million of total assets, including $ 2.6 million of cash, in Russia at October 2, 2022.

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 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.

In accordance with applicable accounting standards, the Company tests goodwill for impairment annually in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During fiscal year 2022, the Company has experienced significant cost inflation along with volatility in the Company stock price.

Such circumstances, as well as a negative geopolitical climate in Europe, may warrant the need to write down the value of goodwill associated with our EMEA reporting unit if a future test indicates that its fair value is less than its carrying value.

The fair value of the EMEA reporting unit exceeded its carrying value by approximately 20 % at the most recent goodwill test date performed in the fourth quarter of 2021.

The goodwill allocated to the EMEA reporting unit as of October 2, 2022 was $ 29.4 million.

The amount of any potential future goodwill impairment charge is uncertain as the impairment test involves a significant amount of risk, uncertainty and judgment.

COVID-19 Impact

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.

During the first six months of 2022, new government imposed COVID-19 lockdowns in parts of China adversely impacted sales in that region.

During the first nine months of 2022, new government imposed COVID-19 lockdowns and restrictions in parts of China adversely impacted sales in that region.

Recently Issued Accounting Pronouncements Not Yet Adopted

6 unchanged sentences

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 3, 2022 and July 4, 2021.

The remaining 2 % of revenue was generated from the installation of carpet and other flooring-related material for both 2022 and 2021 six-month periods.

Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 97 % and 98 % of total revenue for the nine-month periods ended October 2, 2022 and October 3, 2021, respectively.

The remaining 3 % and 2 % of revenue was generated from the installation of carpet and other flooring-related material for the 2022 and 2021 nine-month periods, respectively.

Disaggregation of Revenue

For the six months ended July 3, 2022 and July 4, 2021, revenue from the Company’s customers is broken down by geography as follows:

Six Months Ended

Geography July 3, 2022 July 4, 2021

For the nine months ended October 2, 2022 and October 3, 2021, revenue from the Company’s customers is broken down by geography as follows:

Nine Months Ended

Geography October 2, 2022 October 3, 2021

Americas 57.9 % 53.5 %

5 unchanged sentences

Inventories are summarized as follows:

July 3, 2022 January 2, 2022

October 2, 2022 January 2, 2022

(in thousands)

12 unchanged sentences

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

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands, except per share data)

10 unchanged sentences

Long-term debt consisted of the following:

July 3, 2022 January 2, 2022

October 2, 2022 January 2, 2022

Outstanding Principal Interest Rate (1)

18 unchanged sentences

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 3, 2022 and January 2, 2022, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both July 3, 2022 and January 2, 2022, 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 2, 2022 and January 2, 2022, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both October 2, 2022 and January 2, 2022, 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 in compliance with all covenants under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.

On October 14, 2022, the Facility was amended to, among other changes, extend the maturity date to October 2027.

See Note 16 entitled “Subsequent Events” for additional information.

5.50% Senior Notes due 2028

2 unchanged sentences

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 3, 2022, the estimated fair value of the Senior Notes was $ 262.2 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 2, 2022, the estimated fair value of the Senior Notes was $ 255.2 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 $ 4.0 million of other lines of credit available at interest rates ranging from 3.5 % to 4.5 % as of July 3, 2022, and $ 6.0 million of other lines of credit available at interest rates ranging from 3.5 % to 6.0 % as of January 2, 2022.

As of both July 3, 2022 and January 2, 2022, there were no borrowings outstanding under these lines of credit.

The Company has other lines of credit available to certain non-U.S.

subsidiaries.

The availability under these other lines of credit was the equivalent of $ 2.0 million at an interest rate of 6.25 % as of October 2, 2022 and $ 6.0 million at interest rates ranging from 3.50 % to 6.00 % as of January 2, 2022.

As of both October 2, 2022 and January 2, 2022, there were no borrowings outstanding under these lines of credit.

Borrowing Costs

1 unchanged sentence

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 3, 2022 and January 2, 2022, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 6.4 million and $ 7.1 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 $ 1.4 million and $ 1.6 million as of July 3, 2022 and January 2, 2022, respectively.

As of October 2, 2022 and January 2, 2022, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 6.1 million and $ 7.1 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 $ 1.3 million and $ 1.6 million as of October 2, 2022 and January 2, 2022, respectively.

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

9 unchanged sentences

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

As of July 3, 2022 and January 2, 2022, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $ 2.0 million and $ 3.8 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

As of October 2, 2022 and January 2, 2022, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $ 1.4 million and $ 3.8 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

We expect that approximately $ 1.4 million, before tax, 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.

4 unchanged sentences

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

As of July 3, 2022 and January 2, 2022, the Company had no outstanding foreign currency options.

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

Statement of Operations Location Three Months Ended July 4, 2021 Six Months Ended July 4, 2021

(in thousands)

Foreign currency options gain Other expense, net $ 134 $ 319

As of October 2, 2022 and January 2, 2022, the Company had no outstanding foreign currency options.

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 3, 2022 and July 4, 2021:

The following tables depict the activity in the accounts which make up shareholders’ equity for the nine months ended October 2, 2022 and October 3, 2021:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

23 unchanged sentences

Balance, at July 3, 2022 59,097 $ 5,910 $ 251,452 $ 290,358 $ ( 48,507 ) $ ( 150,295 ) $ ( 1,541 )

Net income — — — 14,065 — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 586 ) — — —

Compensation expense related to stock awards, net of forfeitures ( 16 ) ( 2 ) 2,353 — — — —

Share repurchases ( 711 ) ( 71 ) ( 8,798 ) — — — —

Pension liability adjustment — — — — 3,393 — —

Foreign currency translation adjustment — — — — — ( 36,800 ) —

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 492

Balance, at October 2, 2022 58,370 $ 5,837 $ 245,007 $ 303,837 $ ( 45,114 ) $ ( 187,095 ) $ ( 1,049 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

22 unchanged sentences

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 )

Repurchase of Common Stock

1 unchanged sentence

The program has no specific expiration date.

During the second quarter of 2022, the Company repurchased 415,223 shares of common stock at a weighted average price of $ 13.44 per share pursuant to this program.

During the nine months ended October 2, 2022, the Company repurchased 1,126,176 shares of common stock at a weighted average price of $ 12.83 per share pursuant to this program.

Restricted Stock Awards

During the six months ended July 3, 2022 and July 4, 2021, the Company granted restricted stock awards for 500,800 and 428,400 shares of common stock, respectively.

During the nine months ended October 2, 2022 and October 3, 2021, the Company granted restricted stock awards for 500,800 and 428,400 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.

1 unchanged sentence

For certain restricted stock awards with a graded vesting schedule, the Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

Compensation expense related to restricted stock grants was $ 2.6 million and $ 1.8 million for the six months ended July 3, 2022, and July 4, 2021, respectively.

Compensation expense related to restricted stock grants was $ 4.0 million and $ 2.8 million for the nine months ended October 2, 2022, and October 3, 2021, respectively.

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

The following table summarizes restricted stock outstanding as of July 3, 2022, as well as activity during the six months then ended:

The following table summarizes restricted stock outstanding as of October 2, 2022, as well as activity during the nine months then ended:

Restricted Shares Weighted Average

3 unchanged sentences

Forfeited or canceled ( 30,400 ) 14.05

Outstanding at July 3, 2022 1,029,500 $ 17.89

As of July 3, 2022, the unrecognized total compensation cost related to unvested restricted stock was $ 8.8 million.

Outstanding at October 2, 2022 1,012,300 $ 13.91

As of October 2, 2022, the unrecognized total compensation cost related to unvested restricted stock was $ 7.3 million.

That cost is expected to be recognized by the end of 2025.

Performance Share Awards

During the six months ended July 3, 2022 and July 4, 2021, the Company issued awards of performance shares to certain employees.

During the nine months ended October 2, 2022 and October 3, 2021, 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 (among other things) the employee’s continued employment through the last date of the performance period and will be settled in shares of our common stock or in cash at the Company’s election.

1 unchanged sentence

The Company evaluates the probability of achieving the performance-based goals as of the end of each reporting period and adjusts compensation expense based on this assessment.

The following table summarizes the performance shares outstanding as of July 3, 2022, as well as the activity during the six months then ended:

The following table summarizes the performance shares outstanding as of October 2, 2022, as well as the activity during the nine months then ended:

Performance Shares Weighted Average

1 unchanged sentence

Granted 366,900 13.02

Vested ( 200 ) 15.36

Forfeited or canceled ( 154,400 ) 16.73

Outstanding at July 3, 2022 952,200 $ 13.92

Compensation expense related to the performance shares was $ 1.7 million and $ 0.7 million for the six months ended July 3, 2022 and July 4, 2021, respectively.

Outstanding at October 2, 2022 930,400 $ 13.91

Compensation expense related to the performance shares was $ 2.7 million and $ 1.4 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.

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

Unrecognized compensation expense related to these performance shares was approximately $ 9.4 million as of July 3, 2022.

Unrecognized compensation expense related to these performance shares was approximately $ 8.1 million as of October 2, 2022.

Depending on the performance of the Company, any compensation expense related to these outstanding performance shares will be recognized by the end of 2025.

The tax benefit recognized with regard to restricted stock and performance shares was approximately $ 0.4 million for the six months ended July 3, 2022.

The tax benefit recognized with regard to restricted stock and performance shares was approximately $ 0.6 million for the nine months ended October 2, 2022.

NOTE 8 – LEASES

5 unchanged sentences

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 3, 2022, 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 July 3, 2022 and January 2, 2022:

July 3, 2022 January 2, 2022

As of October 2, 2022, 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 2, 2022 and January 2, 2022:

October 2, 2022 January 2, 2022

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

8 unchanged sentences

Total finance lease liabilities $ 5,526 $ 5,038

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

7 unchanged sentences

Other Supplemental Information

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

4 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities 182 67 2,525 2,811

Right-of-use assets obtained in exchange for new operating lease liabilities 6,803 3,267 6,823 5,645

Right-of-use assets (adjusted) obtained in exchange for (remeasured) new operating lease liabilities ( 734 ) 6,417 6,089 12,062

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 3, 2022 and January 2, 2022:

July 3, 2022 January 2, 2022

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of October 2, 2022 and January 2, 2022:

October 2, 2022 January 2, 2022

Weighted-average remaining lease term – finance leases (in years) 3.77 3.20

6 unchanged sentences

(in thousands)

2022 (excluding the six months ended July 3, 2022)

2022 (excluding the nine months ended October 2, 2022)

$ 4,071 $ 532

8 unchanged sentences

NOTE 9 – EMPLOYEE BENEFIT PLANS

During the three and six months ended July 3, 2022, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.6 million and $ 1.3 million, respectively.

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.

The following tables provide the components of net periodic benefit cost for the three and six months ended July 3, 2022 and July 4, 2021:

Three Months Ended Six Months Ended

During the three and nine months ended October 2, 2022, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.5 million and $ 1.8 million, respectively.

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.

The following tables provide the components of net periodic benefit cost for the three and nine months ended October 2, 2022 and October 3, 2021:

Three Months Ended Nine Months Ended

Defined Benefit Retirement Plans (Europe)

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

4 unchanged sentences

Net periodic benefit cost $ 144 $ 153 $ 461 $ 466

Three Months Ended Six Months Ended

Salary Continuation Plan July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three Months Ended Nine Months Ended

Salary Continuation Plan October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

2 unchanged sentences

Net periodic benefit cost $ 332 $ 362 $ 997 $ 1,087

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

nora Defined Benefit Plan

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

5 unchanged sentences

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amounts of goodwill allocated to each reportable segment for the six months ended July 3, 2022 are as follows:

The changes in the carrying amounts of goodwill allocated to each reportable segment for the nine months ended October 2, 2022 are as follows:

AMS EAAA Total

2 unchanged sentences

Foreign currency translation ( 25,733 ) ( 9,136 ) ( 34,869 )

Balance, at July 3, 2022 $ 93,020 $ 33,022 $ 126,042

The net carrying value of intangible assets other than goodwill was $ 67.2 million and $ 76.2 million at July 3, 2022 and January 2, 2022, respectively.

Balance, at October 2, 2022 $ 82,772 $ 29,384 $ 112,156

The net carrying value of intangible assets other than goodwill was $ 62.0 million and $ 76.2 million at October 2, 2022 and January 2, 2022, respectively.

NOTE 11 – SEGMENT INFORMATION

5 unchanged sentences

AOI excludes nora purchase accounting amortization, Thailand plant closure inventory write-down, and restructuring charges, asset impairment, severance and other charges.

Intersegment revenues for the three and six months ended July 3, 2022 were $ 19.4 million and $ 36.7 million, respectively, and intersegment revenues for the three and six months ended July 4, 2021 were $ 20.6 million and $ 36.3 million, respectively.

Intersegment revenues for the three and nine months ended October 2, 2022 were $ 19.7 million and $ 56.4 million, respectively, and intersegment revenues for the three and nine months ended October 3, 2021 were $ 20.1 million and $ 56.4 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 for the three and six months ended July 3, 2022 and July 4, 2021 is presented in the following table:

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Segment information for the three and nine months ended October 2, 2022 and October 3, 2021 is presented in the following table:

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

9 unchanged sentences

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

July 3, 2022 January 2, 2022

October 2, 2022 January 2, 2022

(in thousands)

6 unchanged sentences

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

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

5 unchanged sentences

Income before income tax expense $ 20,171 $ 16,163 $ 66,512 $ 46,376

Three Months Ended July 3, 2022 Three Months Ended July 4, 2021

Three Months Ended October 2, 2022 Three Months Ended October 3, 2021

AMS EAAA AMS EAAA

5 unchanged sentences

AOI $ 24,975 $ 6,273 $ 21,595 $ 8,586

Six Months Ended July 3, 2022 Six Months Ended July 4, 2021

Nine Months Ended October 2, 2022 Nine Months Ended October 3, 2021

AMS EAAA AMS EAAA

6 unchanged sentences

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest amounted to $ 11.2 million and $ 11.9 million for the six months ended July 3, 2022 and July 4, 2021, respectively.

Income tax payments, net of refunds, amounted to $ 6.8 million and $ 7.5 million for the six months ended July 3, 2022 and July 4, 2021, respectively.

Cash payments for interest amounted to $ 13.7 million and $ 13.2 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.

Income tax payments, net of refunds, amounted to $ 11.5 million and $ 15.3 million for the nine months ended October 2, 2022 and October 3, 2021, 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 3, 2022, the Company recorded a total income tax provision of $ 16.2 million on pre-tax income of $ 46.3 million resulting in an effective tax rate of 35.0 %, as compared to 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 % during the six months ended July 4, 2021.

The increase in the effective tax rate for the period ended July 3, 2022 as compared to the period ended July 4, 2021 was primarily due to a non-recurring favorable change to unrecognized tax benefits in the period ended July 4, 2021, unfavorable changes related to company-owned life insurance, an increase in non-deductible executive compensation, and non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand in the first half of 2022.

During the nine months ended October 2, 2022, the Company recorded a total income tax provision of $ 22.3 million on pre-tax income of $ 66.5 million resulting in an effective tax rate of 33.6 %, as compared to 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 % during the nine months ended October 3, 2021.

The increase in the effective tax rate for the period ended October 2, 2022 as compared to the period ended October 3, 2021 was primarily due to a non-recurring favorable change to unrecognized tax benefits in the period ended October 3, 2021, unfavorable changes related to company-owned life insurance, an increase in non-deductible executive compensation, and unfavorable changes related to foreign currency.

In April of 2021, the Company filed requests with both the Competent Authority in the Netherlands and in the U.K.

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In June of 2022, the Company was notified that the Competent Authorities had reached an agreement on the interest rate to be applied for the years 2012 through 2017.

The Company recognized the adjustments in the period ending July 3, 2022, based on the outcome of the MAP.

The Company recognized the adjustments in the nine-month period ending October 2, 2022, based on the outcome of the MAP.

The recognition of the adjustments did not have a material impact on the Company’s effective tax rate or its financial position.

In the first six months of 2022, the Company decreased its liability for unrecognized tax benefits by $ 0.1 million.

As of July 3, 2022, the Company had accrued approximately $ 8.1 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of July 3, 2022 reflects a reduction for $ 2.8 million of these unrecognized tax benefits.

In the first nine months of 2022, the Company decreased its liability for unrecognized tax benefits by $ 0.1 million.

As of October 2, 2022, the Company had accrued approximately $ 8.1 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of October 2, 2022 reflects a reduction for $ 2.8 million of these unrecognized tax benefits.

On October 15, 2022, the statute of limitations for the 2018 U.S.

federal income tax return and Georgia income tax return closed.

As a result of this lapse in the statute of limitations, the Company will recognize $ 2.2 million of unrecognized tax benefits in the fourth quarter of 2022.

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 $ 2.6 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 $ 2.6 million of unrecognized tax benefits, including the $ 2.2 million to be recognized in the fourth quarter of 2022, 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 3, 2022 and July 4, 2021 are reflected in the tables 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 2, 2022 and October 3, 2021 are reflected in the tables below:

Three Months Ended

Statement of Operations Location July 3, 2022 July 4, 2021

Statement of Operations Location October 2, 2022 October 3, 2021

(in thousands)

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Total loss reclassified from AOCI $ ( 1,095 ) $ ( 2,550 )

Six Months Ended

Statement of Operations Location July 3, 2022 July 4, 2021

Nine Months Ended

Statement of Operations Location October 2, 2022 October 3, 2021

(in thousands)

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NOTE 15 – RESTRUCTURING AND OTHER CHARGES

Restructuring and asset impairment charges by reportable segment are presented as follows:

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

Restructuring, asset impairment and other charges by reportable segment are presented as follows:

Three Months Ended Nine Months Ended

October 2, 2022 October 3, 2021 October 2, 2022 October 3, 2021

(in thousands)

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EAAA ( 105 ) 3,814 1,592 3,622

Total restructuring and asset impairment charges $ 810 $ ( 62 ) $ 1,697 $ ( 192 )

Total restructuring, asset impairment and other charges $ ( 105 ) $ 3,813 $ 1,592 $ 3,621

A summary of the restructuring reserve balance, recorded within accrued expenses in the consolidated condensed balance sheets, for the 2021 and 2019 restructuring plans is presented below:

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Charged to other accounts — — — ( 1,243 ) ( 1,243 )

Balance, at July 3, 2022 $ 1,151 $ — $ 165 $ — $ 1,316

Balance, at October 2, 2022 $ 889 $ — $ 277 $ — $ 1,166

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

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(1) Charges are attributable to the EAAA reportable segment.

(2) The retention bonuses will be recognized through the end of fiscal year 2022 as earned over the requisite service periods.

In addition, during the six months ended July 3, 2022, in conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $ 2.1 million within cost of sales in the consolidated condensed statements of operations.

The restructuring plan is expected to result in 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.

(2) The retention bonuses will be recognized through the first quarter of 2023 as earned over the requisite service periods.

In addition, during the nine months ended October 2, 2022, in conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $ 2.5 million within cost of sales in the consolidated condensed statements of operations.

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

The Company expects to complete the restructuring plan in the first quarter of 2023 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 consolidated condensed statement of operations in fiscal year 2022, with the remaining portion of the annualized savings expected to be realized in fiscal year 2023.

1 unchanged sentence

The 2019 restructuring plan has been completed as of April 3, 2022.

NOTE 16 – SUBSEQUENT EVENTS

On October 14, 2022, the Company entered into a fifth amendment to its existing credit facility.

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

(1) extends the maturity date of the credit facility to October 2027 and (2) replaces the LIBOR benchmark interest rates applicable to all loans denominated in U.S.

dollars with the SOFR benchmark interest rates.

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