Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures . As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, pursuant to Rule 13a-14(c) under the Act. Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting . The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of January 1, 2023 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework (2013).” Based on that assessment, management concluded that, as of January 1, 2023, our internal control over financial reporting was effective based on those criteria.
Our independent auditors have issued an audit report on the effectiveness of our internal control over financial reporting. This report immediately precedes Item 9 of this Report.
ITEM 9B. OTHER INFORMATION
None
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information contained under the captions “Nomination and Election of Directors,” “Delinquent Section 16(a) Reports” and “Meetings and Committees of the Board” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of our 2022 fiscal year, is incorporated herein by reference. Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information relating to our executive officers is included in Item 1 of this Report.
We have adopted the “Interface Code of Conduct” (the “Code”) which applies to all of our employees, officers and directors, including the Chief Executive Officer and Chief Financial Officer. The Code may be viewed on our website at www.interface.com . Changes to the Code will be posted on our website. Any waiver of the Code for executive officers or directors may be made only by our Board of Directors and will be disclosed to the extent required by law or Nasdaq rules on our website or in a filing on Form 8-K.
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ITEM 11. EXECUTIVE COMPENSATION
The information contained under the captions “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” and “Potential Payments upon Termination or Change in Control” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of our 2022 fiscal year, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information contained under the captions “Principal Shareholders and Management Stock Ownership” and “Equity Compensation Plan Information” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of our 2022 fiscal year, is incorporated herein by reference.
For purposes of determining the aggregate market value of our voting and non-voting stock held by non-affiliates, shares held by our directors and executive officers have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be “affiliates” as that term is defined under federal securities laws.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information contained under the captions “Certain Relationships and Related Transactions” and “Director Independence” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of our 2022 fiscal year, is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information contained under the captions “Audit and Non-Audit Fees” and “Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors” in our definitive Proxy Statement for our 2023 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of our 2022 fiscal year, is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1. Financial Statements
The following consolidated financial statements and notes thereto of Interface, Inc. and subsidiaries and related Reports of Independent Registered Public Accounting Firm are contained in Item 8 of this Report:
Consolidated Statements of Operations and Comprehensive Income (Loss) — fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021.
Consolidated Balance Sheets — January 1, 2023 and January 2, 2022.
Consolidated Statements of Cash Flows — fiscal years ended January 1, 2023, January 2, 2022, and January 3, 2021.
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm ( BDO USA, LLP , Atlanta, Georgia , PCAOB ID: 243 )
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
2. Financial Statement Schedule
The following consolidated financial statement schedule of Interface, Inc. and subsidiaries is included as part of this Report (see the pages immediately preceding the signatures in this Report).
Schedule II — Valuation and Qualifying Accounts and Reserves
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3. Exhibits
The following exhibits are filed or furnished with this Report:
Exhibit
Number
Description of Exhibit
3.1 Restated Articles of Incorporation and accompanying Clarification Certificate (included as Exhibit 3.1 to the Company’s quarterly report on Form 10-Q filed on May 10, 2012, previously filed with the Commission and incorporated herein by reference).
3.2 Bylaws, as amended and restated February 22, 2017 (included as Exhibit 3.1 to the Company’s current report on Form 8-K filed on February 27, 2017, previously filed with the Commission and incorporated herein by reference).
4.1 Description of the Company’s Securities (included as Exhibit 4.1 to the Company’s annual report on Form 10-K for the year ended December 29, 2019, previously filed with the Commission and incorporated herein by reference).
4.2 Indenture governing the Company’s 5.50% Senior Notes Due 2028, dated as of November 17, 2020 (included as Exhibit 4.1 to the Company’s current report on Form 8-K filed on November 18, 2020, previously filed with the Commission and incorporated herein by reference).
4.3 Form of 5.50% Senior Note Due 2028 (included as Exhibit 4.2 to the Company’s current report on Form 8-K filed on November 18, 2020, previously filed with the Commission and incorporated herein by reference, and included in Exhibit 4.2 to this Report).
10.1 Salary Continuation Plan, dated May 7, 1982 (included as Exhibit 10.20 to the Company’s registration statement on Form S-1, File No. 2-82188, previously filed with the Commission and incorporated herein by reference).*
10.2 Form of Salary Continuation Agreement, dated as of January 1, 2008 (as used for Daniel T. Hendrix) (included as Exhibit 99.5 to the Company’s current report on Form 8-K filed on January 7, 2008, previously filed with the Commission and incorporated herein by reference).*
10.3 Interface, Inc. Omnibus Stock Incentive Plan (as amended and restated effective February 18, 2015) (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on May 20, 2015, previously filed with the Commission and incorporated herein by reference) ; Form of Restricted Stock Agreement, as used for executive officers (included as Exhibit 10.5 to the Company’s annual report on Form 10-K for the year ended December 30, 2007, previously filed with the Commission and incorporated herein by reference) ; Form of Performance Share Agreement (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on January 20, 2016, previously filed with the Commission and incorporated herein by reference) ; Form of Restricted Stock Agreement, as used for executive officers (included as Exhibit 10.1 to the Company’s quarterly report on Form 10-Q filed on May 11, 2017, previously filed with the Commission and incorporated herein by reference) ; Form of Performance Share Agreement for executive officers (included as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q filed on May 11, 2017, previously filed with the Commission and incorporated herein by reference) ; Form of Restricted Stock Agreement, as used for directors (included as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q filed on May 11, 2017, previously filed with the Commission and incorporated herein by reference) ; Form of 2018 Restricted Stock Agreement for executive officers (included as Exhibit 10.1 to the Company’s quarterly report on Form 10-Q filed on May 11, 2018, previously filed with the Commission and incorporated herein by reference) ; and Form of 2018 Performance Share Agreement for executive officers (included as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q filed on May 11, 2018, previously filed with the Commission and incorporated herein by reference).*
10.4 Interface, Inc. Executive Bonus Plan, as amended October 28, 2015 (included as Exhibit 99.2 to the Company’s current report on Form 8-K filed on October 28, 2015, previously filed with the Commission and incorporated herein by reference).*
10.5 Interface, Inc. Nonqualified Savings Plan (as amended and restated effective January 1, 2002) (included as Exhibit 10.4 to the Company’s annual report on Form 10-K for the year ended December 30, 2001, previously filed with the Commission and incorporated herein by reference) ; First Amendment thereto, dated as of December 20, 2002 (included as Exhibit 10.2 to the Company’s quarterly report on Form 10-Q for the quarter ended June 29, 2003, previously filed with the Commission and incorporated herein by reference) ; Second Amendment thereto, dated as of December 30, 2002 (included as Exhibit 10.3 to the Company’s quarterly report on Form 10-Q for the quarter ended June 29, 2003, previously filed with the Commission and incorporated herein by reference) ; Third Amendment thereto, dated as of May 8, 2003 (included as Exhibit 10.6 to the Company’s annual report on Form 10-K for the year ended December 28, 2003 (the “2003 10-K”), previously filed with the Commission and incorporated herein by reference) ; and Fourth Amendment thereto, dated as of December 31, 2003 (included as Exhibit 10.7 to the 2003 10-K, previously filed with the Commission and incorporated herein by reference).*
10.6 Form of Indemnity Agreement of Director (as used for directors of the Company) (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on November 30, 2005, previously filed with the Commission and incorporated herein by reference).*
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10.7 Form of Indemnity Agreement of Officer (as used for certain officers of the Company, including Daniel T. Hendrix, Laurel M. Hurd, David B. Foshee, Bruce A. Hausmann, James Poppens and Nigel Stansfield) (included as Exhibit 99.2 to the Company’s current report on Form 8-K filed on November 30, 2005, previously filed with the Commission and incorporated herein by reference).*
10.8 Interface, Inc. Long-Term Care Insurance Plan and related Summary Plan Description (included as Exhibit 99.2 to the Company’s current report on Form 8-K filed on December 20, 2005, previously filed with the Commission and incorporated herein by reference).*
10.9 Interface, Inc. Nonqualified Savings Plan II, as amended and restated effective January 1, 2009 (included as Exhibit 10.18 to the Company’s annual report on Form 10-K for the year ended December 30, 2012 (the “2012 10-K”), previously filed with the Commission and incorporated herein by reference ); First Amendment thereto, dated February 26, 2009 (included as Exhibit 10.19 to the 2012 10-K, previously filed with the Commission and incorporated herein by reference) ; Second Amendment thereto, dated December 9, 2009 (included as Exhibit 10.20 to the 2012 10-K, previously filed with the Commission and incorporated herein by reference) ; Third Amendment thereto, dated April 15, 2010 (included as Exhibit 10.21 to the 2012 10-K, previously filed with the Commission and incorporated herein by reference) ; Fourth Amendment thereto, dated August 9, 2012 (included as Exhibit 10.22 to the 2012 10-K, previously filed with the Commission and incorporated herein by reference) ; Sixth Amendment thereto, dated March 30, 2020 (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on March 31, 2020, previously filed with the Commission and incorporated herein by reference) ; Seventh Amendment thereto (included as Exhibit 10.1 to the Company’s quarterly report on Form 10-Q filed on August 11, 2020, previously filed with the Commission and incorporated herein by reference) ; Eighth Amendment thereto, dated November 19, 2020 (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on November 24, 2020, previously filed with the Commission and incorporated herein by reference) ; and Ninth Amendment thereto, dated as of December 31, 2020 (included as Exhibit 10.9 to the Company's annual report on Form 10-K for the year ended January 2, 2022, previously filed with the Commission and incorporated herein by reference).*
10.10 Second Amended and Restated Security and Pledge Agreement, dated as of August 7, 2018, among Interface, Inc., certain subsidiaries of the Company as obligors, and Bank of America, N.A. as Administrative Agent (included as Exhibit 10.14 to the Company’s annual report on Form 10-K for the year ended December 29, 2019, previously filed with the Commission and incorporated herein by reference).
10.11 Employment Offer Letter to Bruce A. Hausmann (included as Exhibit 10.3 to the Company’s quarterly report on Form 10-Q filed on May 11, 2018, previously filed with the Commission and incorporated herein by reference).*
10.12 First Restatement Agreement, dated as of July 20, 2018, among Interface, Inc., certain subsidiaries of the Company as borrowers, certain subsidiaries of the Company as guarantors, Bank of America, N.A. as Administrative Agent, and the other lenders party thereto (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on July 26, 2018, previously filed with the Commission and incorporated herein by reference).
10.13 First Amendment to Second Amended and Restated Syndicated Facility Agreement, dated as of December 18, 2019 (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on December 23, 2019, previously filed with the Commission and incorporated herein by reference).
10.14 Second Amendment to Second Amended and Restated Syndicated Facility Agreement dated as of July 15, 2020 (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on July 16, 2020, previously filed with the Commission and incorporated herein by reference).
10.15 Third Amendment to Second Amended and Restated Syndicated Facility Agreement, dated as of November 17, 2020 (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on November 18, 2020, previously filed with the Commission and incorporated herein by reference).
10.16 Fourth Amendment to Second Amended and Restated Syndicated Facility Agreement dated as of December 9, 2021 (included as Exhibit 99.2 to the Company’s current report on Form 8-K/A filed on December 21, 2021, previously filed with the Commission and incorporated herein by reference).
10.17 Interface, Inc. 2020 Omnibus Stock Incentive Plan (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on May 28, 2020, previously filed with the Commission and incorporated herein by reference).*
10.18 Contract of Employment of Nigel Stansfield dated August 15, 2022 (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on August 19, 2022, previously filed with the Commission and incorporated herein by reference).*
10.19 Form of Severance Protection and Change in Control Agreement (as used for David B. Foshee, Bruce A. Hausmann, and James Poppens) (included as Exhibit 99.1 to the Company’s current report on Form 8-K/A filed on December 21, 2021, previously filed with the Commission and incorporated herein by reference).*
10.20 Employment Offer Letter for Laurel M. Hurd dated March 3, 2022 (included as Exhibit 99.1 to the Company’s current report on Form 8-K filed on March 7, 2022, previously filed with the Commission and incorporated herein by reference).*
10.21 Severance Protection and Change in Control Agreement of Laurel M. Hurd dated April 18, 2022 (included as Exhibit 99.1 to the Company’s current report on Form 8-K/A filed on April 21, 2022, previously filed with the Commission and incorporated herein by reference).*
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10.22 Severance Protection and Change in Control Agreement of Nigel Stansfield dated August 15, 2022 (included as Exhibit 99.2 to the Company’s current report on Form 8-K filed on August 19, 2022, previously filed with the Commission and incorporated herein by reference).*
10.23 Fifth Amendment to Second Amended and Restated Syndicated Facility Agreement, dated as of October 14, 2022 (included as Exhibit 10.1 to the Company’s current report on Form 8-K filed on October 17, 2022, previously filed with the Commission and incorporated herein by reference).
21 Subsidiaries of the Company.
23 Consent of BDO USA, LLP.
24 Power of Attorney (see signature page of this Report).
31.1 Certification of Chief Executive Officer with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
31.2 Certification of Chief Financial Officer with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
32.1 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Executive Officer with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
32.2 Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Financial Officer with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
101.INS XBRL Instance Document – The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Presentation Linkbase Document.
101.DEF XBRL Taxonomy Definition Linkbase Document.
104 The cover page from this Annual Report on Form 10-K for the year ended January 1, 2023, formatted in Inline XBRL.
* Management contract or compensatory plan or agreement required to be filed pursuant to Item 15(b) of this Report.
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ITEM 16. FORM 10-K SUMMARY
None.
INTERFACE, INC. AND SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
COLUMN A
BALANCE, AT
BEGINNING
OF YEAR COLUMN B
CHARGED TO
COSTS AND
EXPENSES (A) COLUMN C
CHARGED TO
OTHER
ACCOUNTS COLUMN D
DEDUCTIONS
(DESCRIBE) (B) COLUMN E
BALANCE, AT
END OF YEAR
(in thousands)
Allowance for Expected Credit Losses
Year ended:
January 1, 2023 $ 4,960 $ ( 357 ) $ — $ 651 $ 3,952
January 2, 2022 6,643 ( 705 ) — 978 4,960
January 3, 2021 3,793 3,777 — 927 6,643
(A) Includes changes in foreign currency exchange rates.
(B) Write off of bad debt and recovery of previously provided for amounts.
COLUMN A
BALANCE, AT
BEGINNING
OF YEAR COLUMN B
CHARGED TO
COSTS AND
EXPENSES (A) COLUMN C
CHARGED
TO OTHER
ACCOUNTS COLUMN D
DEDUCTIONS
(DESCRIBE) (B) COLUMN E
BALANCE, AT
END OF YEAR
(in thousands)
Warranty and Sales Allowances Reserves
Year ended:
January 1, 2023 $ 2,702 $ ( 41 ) $ — $ 570 $ 2,091
January 2, 2022 3,248 366 — 912 2,702
January 3, 2021 3,853 1,062 — 1,667 3,248
(A) Includes changes in foreign currency exchange rates.
(B) Represents credits and costs applied against reserve and adjustments to reflect actual exposure.
(All other Schedules for which provision is made in the applicable accounting requirements of the Securities and Exchange Commission are omitted because they are either not applicable or the required information is shown in the Company’s consolidated financial statements or the notes thereto.)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 1, 2023 INTERFACE, INC.
By: /s/ LAUREL M. HURD
Laurel M. Hurd
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Laurel M. Hurd as attorney-in-fact, with power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature Capacity Date
/s/ LAUREL M. HURD President, Chief Executive Officer and Director March 1, 2023
Laurel M. Hurd (Principal Executive Officer)
/s/ BRUCE A. HAUSMANN Vice President and Chief Financial Officer March 1, 2023
Bruce A. Hausmann (Principal Financial Officer)
/s/ ROBERT PRIDGEN Vice President and Chief Accounting Officer March 1, 2023
Robert Pridgen (Principal Accounting Officer)
/s/ DANIEL T. HENDRIX Chairman of the Board and Director March 1, 2023
Daniel T. Hendrix
/s/ JOHN P. BURKE Director March 1, 2023
John P. Burke
/s/ DWIGHT GIBSON Director March 1, 2023
Dwight Gibson
/s/ CHRISTOPHER G. KENNEDY Director March 1, 2023
Christopher G. Kennedy
/s/ JOSEPH KEOUGH Director March 1, 2023
Joseph Keough
/s/ CATHERINE M. KILBANE Director March 1, 2023
Catherine M. Kilbane
/s/ K. DAVID KOHLER Director March 1, 2023
K. David Kohler
/s/ ROBERT T. O’BRIEN Director March 1, 2023
Robert T. O’Brien
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