What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 204 added, 138 removed, 407 unchanged (46% of the section changed)

4 unchanged sentences

(in thousands, except par values)

APRIL 2, 2023 JANUARY 1, 2023

JULY 2, 2023 JANUARY 1, 2023

Current assets

2 unchanged sentences

Inventories, net 288,181 306,327

Assets held for sale 3,433 —

Prepaid expenses and other current assets 34,078 30,339

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5,000 shares authorized;

none issued or outstanding at April 2, 2023 and January 1, 2023

none issued or outstanding at July 2, 2023 and January 1, 2023

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

58,053 and 58,106 shares issued and outstanding at April 2, 2023 and January 1, 2023, respectively

58,112 and 58,106 shares issued and outstanding at July 2, 2023 and January 1, 2023, respectively

Additional paid-in capital 247,797 244,159

10 unchanged sentences

(in thousands, except per share data)

THREE MONTHS ENDED

APRIL 2, 2023 APRIL 3, 2022

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 2, 2023 JULY 3, 2022 JULY 2, 2023 JULY 3, 2022

Net sales $ 329,582 $ 346,605 $ 625,374 $ 634,607

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Interest expense 8,318 7,190 16,823 14,040

Other expense, net 1,500 170

Income (loss) before income tax expense ( 528 ) 20,400

Other (income) expense, net ( 528 ) 1,394 972 1,564

Income before income tax expense 21,118 25,941 20,590 46,341

Income tax expense 5,321 9,123 5,507 16,230

Net income (loss) $ ( 714 ) $ 13,293

Earnings (loss) per share – basic $ ( 0.01 ) $ 0.22

Earnings (loss) per share – diluted $ ( 0.01 ) $ 0.22

Net income $ 15,797 $ 16,818 $ 15,083 $ 30,111

Earnings per share – basic $ 0.27 $ 0.28 $ 0.26 $ 0.51

Earnings per share – diluted $ 0.27 $ 0.28 $ 0.26 $ 0.51

Common shares outstanding – basic 58,074 59,368 58,077 59,308

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

THREE MONTHS ENDED

APRIL 2, 2023 APRIL 3, 2022

Net income (loss) $ ( 714 ) $ 13,293

THREE MONTHS ENDED SIX MONTHS ENDED

JULY 2, 2023 JULY 3, 2022 JULY 2, 2023 JULY 3, 2022

Net income $ 15,797 $ 16,818 $ 15,083 $ 30,111

Other comprehensive income (loss), after tax:

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Other comprehensive income (loss) 861 ( 32,288 ) 5,811 ( 43,292 )

Comprehensive income $ 4,236 $ 2,289

Comprehensive income (loss) $ 16,658 $ ( 15,470 ) $ 20,894 $ ( 13,181 )

See accompanying notes to consolidated condensed financial statements.

3 unchanged sentences

(in thousands)

THREE MONTHS ENDED

APRIL 2, 2023 APRIL 3, 2022

SIX MONTHS ENDED

JULY 2, 2023 JULY 3, 2022

OPERATING ACTIVITIES:

Net income (loss) $ ( 714 ) $ 13,293

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

Net income $ 15,083 $ 30,111

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

Depreciation and amortization 20,146 20,836

Stock compensation amortization expense 3,004 2,182

Share-based compensation expense 5,125 4,327

Gain on disposal of property, plant and equipment, net ( 2,541 ) —

Deferred income taxes and other ( 618 ) 8,941

8 unchanged sentences

Capital expenditures ( 11,331 ) ( 9,127 )

Proceeds from sale of property, plant and equipment 6,593 —

Cash used in investing activities ( 4,738 ) ( 9,127 )

3 unchanged sentences

Tax withholding payments for share-based compensation ( 1,487 ) ( 398 )

Repurchase of common stock — ( 5,582 )

Dividends paid ( 1,161 ) ( 1,187 )

Finance lease payments ( 1,308 ) ( 1,010 )

Cash (used in) provided by financing activities ( 49,063 ) 21,518

Net cash provided by (used in) operating, investing and financing activities 2,837 ( 19,583 )

Net cash used in operating, investing and financing activities ( 5,877 ) ( 317 )

Effect of exchange rate changes on cash 1,248 ( 5,282 )

CASH AND CASH EQUIVALENTS:

Net increase (decrease) 3,709 ( 21,164 )

Net decrease ( 4,629 ) ( 5,599 )

Balance, beginning of period 97,564 97,252

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The January 1, 2023, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).

The three-month periods ended April 2, 2023 and April 3, 2022 both include 13 weeks.

The six-month periods ended July 2, 2023 and July 3, 2022 both include 26 weeks.

The three-month periods ended July 2, 2023 and July 3, 2022 both include 13 weeks.

Risks and Uncertainties

Global economic challenges, including the impact of the COVID-19 pandemic, the war in Ukraine, inflation and supply chain disruptions could cause economic uncertainty and volatility.

Global economic challenges, including the impact of the war in Ukraine, inflation and supply chain disruptions could cause economic uncertainty and volatility.

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

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We took steps to supplement existing security monitoring, including scanning and protective measures, and notified law enforcement.

The investigation of the Cyber Event was substantially completed early in the third quarter of 2023.

Recently Adopted Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-03, “ Fair Value Measurement (Topic 820):

In July 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-03, “ Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), Compensation — Stock Compensation (Topic 718) .” This ASU amends various paragraphs in the accounting codification pursuant to the issuance of Commission Staff Accounting Bulletin (“SAB”) number 120.

The ASU provides clarifying guidance related to employee and non-employee share-based payment accounting, including guidance related to spring-loaded awards.

ASU 2023-03 is effective upon issuance.

The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2022, the Financial Accounting Standards Board issued ASU 2022-03, “ Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .” This ASU clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value.

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NOTE 2 – REVENUE RECOGNITION

Revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material was approximately 98 % and 99 % of total revenue for the three-month periods ended April 2, 2023 and April 3, 2022, respectively.

The remaining 2 % and 1 % of revenue was generated from the installation of carpet and other flooring-related material for the 2023 and 2022 three-month periods, respectively.

Revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material was approximately 98 % of total revenue for both six-month periods ended July 2, 2023 and July 3, 2022.

The remaining 2 % of revenue was generated from the installation of carpet and other flooring-related material for both 2023 and 2022 six-month periods.

Disaggregation of Revenue

For the three months ended April 2, 2023 and April 3, 2022, revenue from the Company’s customers is broken down by geography as follows:

Three Months Ended

Geography April 2, 2023 April 3, 2022

For the six months ended July 2, 2023 and July 3, 2022, revenue from the Company’s customers is broken down by geography as follows:

Six Months Ended

Geography July 2, 2023 July 3, 2022

Americas 59.2 % 57.2 %

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Inventories are summarized as follows:

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

(in thousands)

4 unchanged sentences

NOTE 4 – EARNINGS PER SHARE

The Company computes basic earnings (loss) per share (“EPS”) by dividing net income (loss) by the weighted average common shares outstanding, including participating securities outstanding, during the period as discussed below.

Diluted EPS reflects the potential dilution beyond shares for basic EPS that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common stock that would have shared in the Company’s earnings (loss).

The Company computes basic earnings per share (“EPS”) by dividing net income by the weighted average common shares outstanding, including participating securities outstanding, during the period as discussed below.

The Company includes all unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding for basic EPS as these awards are considered participating securities.

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands, except per share data)

Net income (loss) $ ( 714 ) $ 13,293

Net income $ 15,797 $ 16,818 $ 15,083 $ 30,111

distributed and undistributed earnings available to participating securities ( 189 ) ( 286 ) ( 207 ) ( 470 )

Distributed and undistributed earnings (loss) available to common shareholders $ ( 723 ) $ 13,103

Distributed and undistributed earnings available to common shareholders $ 15,608 $ 16,532 $ 14,876 $ 29,641

Weighted average shares outstanding 57,381 58,358 57,279 58,380

1 unchanged sentence

Shares for basic EPS 58,074 59,368 58,077 59,308

Dilutive effect of non-participating securities 96 — 103 —

Shares for diluted EPS 58,170 59,368 58,180 59,308

1 unchanged sentence

Diluted EPS $ 0.27 $ 0.28 $ 0.26 $ 0.51

For the three months ended April 2, 2023, 1,728,579 non-participating securities that could potentially dilute basic EPS in the future, consisting of restricted share units and performance shares, were excluded from the computation of diluted EPS as these securities would have been antidilutive for the period.

For the three and six months ended July 2, 2023, 1,476,804 and 1,322,278 non-participating securities, respectively, that could potentially dilute basic EPS in the future, consisting of restricted share units and performance shares, were excluded from the computation of diluted EPS as these securities would have been antidilutive for the respective periods.

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

Outstanding Principal Interest Rate (1)

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

As of both April 2, 2023 and January 1, 2023, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both April 2, 2023 and January 1, 2023, the carrying value of the Company’s borrowings under the Facility approximated its fair value as the Facility bears interest rates that are similar to existing market rates.

As of both July 2, 2023 and January 1, 2023, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both July 2, 2023 and January 1, 2023, 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.

The fair value of borrowings under the Facility is estimated using observable market rates and is considered Level 2 within the fair value hierarchy.

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 Facility.

As of April 2, 2023, the estimated fair value of the Senior Notes was $ 244.1 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 July 2, 2023, the estimated fair value of the Senior Notes was $ 245.0 million, compared with a carrying value recorded in the Company’s consolidated condensed balance sheet of $ 296.2 million ($ 300.0 million excluding $ 3.8 million of 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.

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

As of April 2, 2023 and January 1, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 5.8 million and $ 6.1 million, respectively.

Debt issuance costs related to the issuance of revolving debt, which include underwriting, legal and other direct costs, net of accumulated amortization, were $ 1.7 million and $ 1.8 million as of April 2, 2023 and January 1, 2023, respectively.

As of July 2, 2023 and January 1, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 5.6 million and $ 6.1 million, respectively.

Debt issuance costs related to the issuance of revolving debt, which include underwriting, legal and other direct costs, net of accumulated amortization, were $ 1.6 million and $ 1.8 million as of July 2, 2023 and January 1, 2023, 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 April 2, 2023 and January 1, 2023, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps, before tax, was $ 0.6 million and $ 1.0 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

As of July 2, 2023 and January 1, 2023, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps, before tax, was $ 0.2 million and $ 1.0 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

We expect that approximately $ 0.2 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.

NOTE 7 – SHAREHOLDERS’ EQUITY

The following tables depict the activity in the accounts which make up shareholders’ equity for the three months ended April 2, 2023 and April 3, 2022:

The following tables depict the activity in the accounts which make up shareholders’ equity for the six months ended July 2, 2023 and July 3, 2022:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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— — — ( 580 ) — — —

Compensation expense related to stock awards, net of forfeitures and shares received for tax withholdings ( 132 ) ( 14 ) 1,850 — — — —

Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 132 ) ( 14 ) 1,850 — — — —

Pension liability adjustment — — — — ( 279 ) — —

2 unchanged sentences

Balance, at April 2, 2023 58,053 $ 5,805 $ 246,001 $ 277,345 $ ( 27,827 ) $ ( 133,845 ) $ ( 450 )

Net income — — — 15,797 — — —

Issuances of stock related to restricted share units and performance shares 5 1 ( 1 ) — — — —

Restricted stock issuances 102 10 697 — — — —

Unrecognized compensation expense related to restricted stock awards — — ( 708 ) — — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 581 ) — — —

Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 48 ) ( 5 ) 1,808 — — — —

Pension liability adjustment — — — — ( 800 ) — —

Foreign currency translation adjustment — — — — — 1,361 —

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 300

Balance, at July 2, 2023 58,112 $ 5,811 $ 247,797 $ 292,561 $ ( 28,627 ) $ ( 132,484 ) $ ( 150 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

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Restricted stock issuances 303 30 3,966 — — — —

Unamortized compensation expense related to restricted stock awards — — ( 3,996 ) — — — —

Unrecognized compensation expense related to restricted stock awards — — ( 3,996 ) — — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 592 ) — — —

Compensation expense related to stock awards, net of shares received for tax withholdings ( 30 ) ( 2 ) 1,787 — — — —

Compensation expense related to share-based plans, net of shares received for tax withholdings ( 30 ) ( 2 ) 1,787 — — — —

Pension liability adjustment — — — — 1,539 — —

2 unchanged sentences

Balance, at April 3, 2022 59,328 $ 5,933 $ 254,867 $ 274,135 $ ( 52,349 ) $ ( 113,625 ) $ ( 2,081 )

Net income — — — 16,818 — — —

Restricted stock issuances 198 20 2,533 — — — —

Unrecognized compensation expense related to restricted stock awards — — ( 2,553 ) — — — —

Cash dividends declared, $ 0.01 per common share

— — — ( 595 ) — — —

Compensation expense related to share-based plans, net of forfeitures ( 14 ) ( 1 ) 2,145 — — — —

Share repurchases ( 415 ) ( 42 ) ( 5,540 ) — — — —

Pension liability adjustment — — — — 3,842 — —

Foreign currency translation adjustment — — — — — ( 36,670 ) —

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 540

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

Repurchase of Common Stock

In the second quarter of 2022, the Company adopted a new share repurchase program in which the Company is authorized to repurchase up to $ 100 million of its outstanding shares of common stock.

The program has no specific expiration date.

No shares of common stock were repurchased during the six months ended July 2, 2023.

During the first six months 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.

Restricted Stock Awards

During the three months ended April 2, 2023, no restricted stock awards were granted.

During the six months ended July 2, 2023, the Company granted restricted stock awards for 102,300 shares of common stock.

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.

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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 $ 1.4 million and $ 1.2 million for the three months ended April 2, 2023 and April 3, 2022, respectively.

Compensation expense related to restricted stock grants was $ 2.4 million and $ 2.6 million for the six months ended July 2, 2023 and July 3, 2022, respectively.

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

The following table summarizes restricted stock outstanding as of April 2, 2023, as well as activity during the three months then ended:

The following table summarizes restricted stock outstanding as of July 2, 2023, as well as activity during the six months then ended:

Restricted Shares Weighted Average

Outstanding at January 1, 2023 1,006,400 $ 13.91

Granted 102,300 6.92

Vested ( 405,100 ) 14.43

Forfeited or canceled ( 14,700 ) 13.58

Outstanding at April 2, 2023 729,600 $ 13.45

As of April 2, 2023, the unrecognized total compensation cost related to unvested restricted stock was $ 4.2 million.

Outstanding at July 2, 2023 688,900 $ 12.57

As of July 2, 2023, the unrecognized total compensation cost related to unvested restricted stock was $ 3.8 million.

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

Restricted Share Unit Awards

During the three months ended April 2, 2023, the Company granted awards for 586,500 restricted share units to certain employees pursuant to the Company’s 2020 Omnibus Stock Incentive Plan.

During the six months ended July 2, 2023, the Company granted awards for 593,000 restricted share units to certain employees pursuant to the Company’s 2020 Omnibus Stock Incentive Plan.

Each restricted share unit represents one share of the Company’s common stock to be issued to the award recipient once the vesting criteria have been satisfied.

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The expense is captured in selling, general and administrative expenses in the consolidated condensed statements of operations, and the Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award for awards with a graded vesting schedule.

Compensation expense related to the restricted share units was $ 0.5 million for the three months ended April 2, 2023.

Compensation expense related to the restricted share units was $ 1.0 million for the six months ended July 2, 2023.

The Company reduces its expense for any restricted share units forfeited during the period.

Grants of restricted share units are made primarily to executive-level personnel at the Company and, as a result, no compensation costs have been capitalized.

The following table summarizes restricted share units outstanding as of April 2, 2023, as well as activity during the three months then ended:

The following table summarizes restricted share units outstanding as of July 2, 2023, as well as activity during the six months then ended:

Restricted Share Units Weighted Average

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Granted 593,000 10.36

Vested ( 2,100 ) 10.80

Forfeited or canceled ( 9,100 ) 10.80

Outstanding at April 2, 2023 586,500 $ 10.39

As of April 2, 2023, the unrecognized total compensation cost related to unvested restricted share units was $ 5.6 million.

Outstanding at July 2, 2023 581,800 $ 10.36

As of July 2, 2023, the unrecognized total compensation cost related to unvested restricted share units was $ 5.1 million.

That cost is expected to be recognized by the end of 2026.

Performance Share Awards

During the three months ended April 2, 2023 and April 3, 2022, the Company issued awards of performance shares to certain employees.

During the six months ended July 2, 2023, 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.

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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 April 2, 2023, as well as the activity during the three months then ended:

The following table summarizes the performance shares outstanding as of July 2, 2023, as well as the activity during the six months then ended:

Performance Shares Weighted Average

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Forfeited or canceled ( 190,100 ) 14.84

Outstanding at April 2, 2023 1,142,000 $ 12.36

Compensation expense related to the performance shares was $ 1.1 million and $ 1.0 million for the three months ended April 2, 2023 and April 3, 2022, respectively.

Outstanding at July 2, 2023 1,118,700 $ 12.36

Compensation expense related to the performance shares was $ 1.7 million for both six-month periods ended July 2, 2023 and July 3, 2022.

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

Unrecognized compensation expense related to these performance shares was approximately $ 9.0 million as of April 2, 2023.

Unrecognized compensation expense related to these performance shares was approximately $ 8.1 million as of July 2, 2023.

Depending on the performance of the Company, any compensation expense related to these outstanding performance shares will be recognized by the end of 2026.

The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was approximately $ 0.3 million for the three months ended April 2, 2023.

The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was approximately $ 0.5 million for the six months ended July 2, 2023.

NOTE 8 – LEASES

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

As of April 2, 2023, 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 April 2, 2023 and January 1, 2023:

April 2, 2023 January 1, 2023

As of July 2, 2023, 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 2, 2023 and January 1, 2023:

July 2, 2023 January 1, 2023

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

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Total finance lease liabilities $ 6,112 $ 6,239

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

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Other Supplemental Information

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(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 April 2, 2023 and January 1, 2023:

April 2, 2023 January 1, 2023

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of July 2, 2023 and January 1, 2023:

July 2, 2023 January 1, 2023

Weighted-average remaining lease term – finance leases (in years) 3.66 3.82

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(in thousands)

2023 (excluding the three months ended April 2, 2023)

2023 (excluding the six months ended July 2, 2023)

$ 6,892 $ 1,178

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NOTE 9 – EMPLOYEE BENEFIT PLANS

During the three-month periods ended April 2, 2023 and April 3, 2022, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.6 million and $ 0.7 million, respectively.

The following tables provide the components of net periodic benefit cost for the three months ended April 2, 2023 and April 3, 2022:

Three Months Ended

During the three and six months ended July 2, 2023, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.7 million and $ 1.3 million, respectively.

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.

The following tables provide the components of net periodic benefit cost for the three and six months ended July 2, 2023 and July 3, 2022:

Three Months Ended Six Months Ended

Defined Benefit Retirement Plans (Europe)

April 2, 2023 April 3, 2022

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

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Net periodic benefit cost $ 21 $ 153 $ 44 $ 317

Three Months Ended

Salary Continuation Plan April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

Salary Continuation Plan July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

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Net periodic benefit cost $ 332 $ 333 $ 664 $ 665

Three Months Ended

Three Months Ended Six Months Ended

nora Defined Benefit Plan

April 2, 2023 April 3, 2022

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

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Net periodic benefit cost $ 279 $ 364 $ 556 $ 749

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

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

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS

The ending balance and the change in the carrying amounts of good will fo r the three months ended April 2, 2023 are as follows:

The ending balance and the change in the carrying amounts of goodwill for the six months ended July 2, 2023 are as follows:

(in thousands)

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Foreign currency translation (2)

Balance, at April 2, 2023 $ 103,674

Balance, at July 2, 2023 $ 104,298

(1) The goodwill balance is allocated entirely to the AMS reportable segment.

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(2) A portion of the goodwill balance is comprised of goodwill denominated in foreign currency attributable to the nora acquisition.

The net carrying value of intangible assets other than goodwill was $ 59.2 million and $ 59.8 million at April 2, 2023 and January 1, 2023, respectively.

The net carrying value of intangible assets other than goodwill was $ 58.3 million and $ 59.8 million at July 2, 2023 and January 1, 2023, respectively.

NOTE 11 – SEGMENT INFORMATION

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and restructuring, asset impairment, severance and other charges.

Intersegment revenues for the three months ended April 2, 2023 and April 3, 2022 were $ 22.6 million and $ 17.3 million, respectively.

Intersegment revenues for the three and six months ended July 2, 2023, were $ 24.7 million and $ 47.3 million, respectively, and intersegment revenues for the three and six months ended July 3, 2022, were $ 19.4 million and $ 36.7 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 months ended April 2, 2023 and April 3, 2022 is presented in the following table:

Three Months Ended

April 2, 2023 April 3, 2022

Segment information for the three and six months ended July 2, 2023 and July 3, 2022 is presented in the following table:

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

9 unchanged sentences

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

April 2, 2023 January 1, 2023

July 2, 2023 January 1, 2023

(in thousands)

5 unchanged sentences

Total reported assets $ 1,219,954 $ 1,266,503

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

Three Months Ended

April 2, 2023 April 3, 2022

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

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

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Interest expense 8,318 7,190 16,823 14,040

Other expense, net 1,500 170

Income (loss) before income tax expense $ ( 528 ) $ 20,400

Three Months Ended April 2, 2023 Three Months Ended April 3, 2022

Other (income) expense, net ( 528 ) 1,394 972 1,564

Income before income tax expense $ 21,118 $ 25,941 $ 20,590 $ 46,341

Three Months Ended July 2, 2023 Three Months Ended July 3, 2022

AMS EAAA AMS EAAA

5 unchanged sentences

Property casualty loss (1)

( 1,300 ) — — —

Restructuring, asset impairment, severance and other charges 318 ( 1,803 ) ( 24 ) 1,810

AOI $ 24,034 $ 3,827 $ 28,389 $ 10,131

(1) Represents insurance recovery of loss recognized in the first quarter of 2023.

Six Months Ended July 2, 2023 Six Months Ended July 3, 2022

AMS EAAA AMS EAAA

(in thousands)

Operating income $ 33,467 $ 4,918 $ 49,663 $ 12,282

Purchase accounting amortization — 2,584 — 2,613

Thailand plant closure inventory write-down — — — 2,053

Cyber Event impact 492 373 — —

Restructuring, asset impairment, severance and other charges 1,344 ( 119 ) ( 136 ) 2,687

AOI $ 35,303 $ 7,756 $ 49,527 $ 19,635

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest amounted to $ 3.7 million and $ 1.3 million for the three months ended April 2, 2023 and April 3, 2022, respectively.

Income tax payments, net of refunds, amounted to $ 5.1 million and $ 2.8 million for the three months ended April 2, 2023 and April 3, 2022, respectively.

Cash payments for interest amounted to $ 14.7 million and $ 11.2 million for the six months ended July 2, 2023 and July 3, 2022, respectively.

Income tax payments, net of refunds, amounted to $ 10.1 million and $ 6.8 million for the six months ended July 2, 2023 and July 3, 2022, respectively.

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

Non-Cash Financing Activities

On March 14, 2023, the Company declared cash dividends on its common stock of $ 0.6 million, which were paid during the second quarter of 2023 to shareholders of record as of March 31, 2023.

At April 2, 2023, the dividends were recorded within accrued expenses in the consolidated condensed balance sheet.

NOTE 13 – INCOME TAXES

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

During the three months ended April 2, 2023, the Company recorded a total income tax provision of $ 0.2 million on pre-tax loss of $ 0.5 million resulting in a negative effective tax rate of 35.2 %, as compared to a total income tax provision of $ 7.1 million on pre-tax income of $ 20.4 million resulting in an effective tax rate of 34.8 % during the three months ended April 3, 2022.

The pre-tax loss for the three months ended April 2, 2023 included significant unusual or infrequent items that are specifically excluded from the AETR.

The tax effects related to these specifically excluded items are recognized discretely.

The income tax benefits recognized discretely were at a lower effective tax rate compared to the estimated AETR resulting in an overall negative effective tax rate for the three months ended April 2, 2023.

The year-over-year change in the effective tax rate is primarily due to the tax effects of relatively low pre-tax loss in the current year quarter compared to pre-tax income in the prior year quarter and favorable changes related to the cash surrender value of Company-owned life insurance policies.

In the first three months of 2023, the Company increased its liability for unrecognized tax benefits by $ 0.3 million.

As of April 2, 2023, the Company had accrued approximately $ 6.0 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of April 2, 2023 reflects a reduction for $ 2.8 million of these unrecognized tax benefits.

During the six months ended July 2, 2023, the Company recorded a total income tax provision of $ 5.5 million on pre-tax income of $ 20.6 million resulting in an effective tax rate of 26.7 %, as compared to 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 % during the six months ended July 3, 2022.

The decrease in the effective tax rate for the period ended July 2, 2023, as compared to the period ended July 3, 2022, was primarily due to favorable changes related to the cash surrender value of Company-owned life insurance, non-recurring non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand incurred in the first half of 2022 and favorable changes related to foreign exchange movements.

This decrease was partially offset by a non-recurring favorable change to unrecognized tax benefits in the period ended July 3, 2022, and an increase in the valuation allowance on interest carryforwards.

In the first six months of 2023, the Company increased its liability for unrecognized tax benefits by $ 0.5 million.

As of July 2, 2023, the Company had accrued approximately $ 6.2 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of July 2, 2023, reflects a reduction for $ 2.8 million of these unrecognized tax benefits.

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

1 unchanged sentence

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 months ended April 2, 2023 and April 3, 2022 are reflected in the table below:

Amounts reclassified out of accumulated other comprehensive loss (“AOCI”), before tax, to the consolidated condensed statements of operations during the three and six months ended July 2, 2023 and July 3, 2022 are reflected in the tables below:

Three Months Ended

Statement of Operations Location April 2, 2023 April 3, 2022

Statement of Operations Location July 2, 2023 July 3, 2022

(in thousands)

Interest rate swap contracts loss Interest expense $ ( 393 ) $ ( 878 )

Amortization of benefit plan net actuarial losses and prior service cost Other expense, net ( 192 ) ( 496 )

Amortization of benefit plan net actuarial losses and prior service cost Other (income) expense, net ( 195 ) ( 474 )

Total loss reclassified from AOCI $ ( 588 ) $ ( 1,352 )

Six Months Ended

Statement of Operations Location July 2, 2023 July 3, 2022

(in thousands)

Interest rate swap contracts loss Interest expense $ ( 786 ) $ ( 1,771 )

Amortization of benefit plan net actuarial losses and prior service cost Other (income) expense, net ( 387 ) ( 970 )

Total loss reclassified from AOCI $ ( 1,173 ) $ ( 2,741 )

NOTE 15 – RESTRUCTURING AND OTHER CHARGES

Restructuring, asset impairment and other charges are as follows:

Three Months Ended

April 2, 2023 April 3, 2022

Restructuring, asset impairment and other charges were as follows:

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(in thousands)

Restructuring, asset impairment and other charges (1)

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

$ ( 2,644 ) $ 810 $ ( 2,502 ) $ 1,697

(1) Restructuring, asset impairment and other charges are attributable to the EAAA reportable segment.

2021 Restructuring Plan

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

Workforce Reduction Retention Bonuses Asset Impairment and Other Related Charges Total

(in thousands)

Balance, at January 1, 2023 $ 277 $ 179 $ — $ 456

Charged to expenses 23 ( 19 ) 138 142

Deductions ( 300 ) ( 160 ) — ( 460 )

Charged to other accounts — — ( 138 ) ( 138 )

Balance, at April 2, 2023 $ — $ — $ — $ —

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

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

8 unchanged sentences

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

In addition, during the three months ended April 3, 2022, in conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $ 1.1 million within cost of sales in the consolidated condensed statements of operations.

The restructuring plan was 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 second quarter of 2023 following the sale of the Thailand manufacturing facility, as described in Note 16 entitled “Assets Held For Sale,” and expects the plan to yield annualized savings of approximately $ 1.7 million.

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

Workforce Reduction Retention Bonuses Asset Impairment and Other Related Charges Total

(in thousands)

Balance, at January 1, 2023 $ 277 $ 179 $ — $ 456

Charged to expenses 23 ( 19 ) 174 178

Deductions ( 300 ) ( 160 ) — ( 460 )

Charged to other accounts — — ( 174 ) ( 174 )

Balance, at July 2, 2023 $ — $ — $ — $ —

The Company recognized a gain of $ 2.7 million on the sale of the Thailand facility during the three months ended July 2, 2023.

See Note 16 entitled “Assets Disposed” for additional information.

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 Company completed the 2021 restructuring plan in the second quarter of 2023, following the sale of the Thailand manufacturing facility, as described in Note 16 entitled “Assets Disposed,” and expects the plan to yield annualized savings of approximately $ 1.7 million.

A portion of the annualized savings was realized on the consolidated condensed statements of operations in fiscal year 2022, with the remaining portion of the annualized savings expected to be realized in fiscal year 2023.

NOTE 16 – ASSETS HELD FOR SALE

NOTE 16 – ASSETS DISPOSED

On September 8, 2021, the Company announced a restructuring plan that involved the closure of its manufacturing facility in Thailand and committed to a plan to sell the Thailand facility in connection with this restructuring plan.

See Note 15 entitled “Restructuring and Other Charges” for additional information.

On March 7, 2023, the Company entered into a binding agreement to sell the Thailand manufacturing facility for approximately $ 6.7 million.

The transaction is expected to close in the second quarter of 2023.

The Company determined that the Thailand manufacturing facility met the assets held for sale criteria during the first quarter of 2023.

Accordingly, we have reported the carrying value of the manufacturing facility as assets held for sale in the consolidated condensed balance sheet as of April 2, 2023.

We discontinued recording depreciation expense on the manufacturing facility once the assets held for sale criteria were met.

We determined that the Thailand facility sale did not meet the criteria for classification as discontinued operations.

During the second quarter of 2023, the Company completed the sale of the Thailand manufacturing facility for a selling price of $ 6.6 million and recognized a gain of $ 2.7 million.

The gain is recorded in restructuring, asset impairment and other charges in the consolidated condensed statements of operations and is attributable to the EAAA reportable segment.

The Company determined that the Thailand facility sale did not meet the criteria for classification as discontinued operations.

NOTE 17 – COMMITMENTS AND CONTINGENCIES

From time to time, we are a party to legal proceedings, whether arising in the ordinary course of business or otherwise.

The disclosure under the headings “Lawsuit by Former CEO in Connection with Termination” and “Putative Class Action Lawsuit” set forth in Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended January 1, 2023 is incorporated by reference herein.

In the lawsuit by the former CEO, Mr.

Gould filed a motion for reconsideration of the Court’s grant of summary judgment in favor of the Company on Mr.

Gould’s breach of contract claim.

On July 31, 2023, the Court denied that motion for reconsideration.

Also on July 31, 2023, the Company filed a motion to dismiss without prejudice its counterclaim against Mr.

Gould for breach of fiduciary duty.

On August 2, 2023, the Court granted that motion to dismiss, resulting in a final judgment in the trial court, subject to possible appeal by Mr.

The Company believes Mr.

Gould’s lawsuit and any appeal therefrom is without merit and intends to defend vigorously against it.

In the putative class action, the Court preliminarily approved a settlement of the lawsuit for $ 7.5 million, and the Company’s insurers funded the settlement amount into escrow.

As a result, in the second quarter of 2023, the Company reversed the $ 7.5 million asset and liability that were previously recorded in the first quarter of 2023.

Putative class member proofs of claims are due by September 13, 2023, and the Court will hold a hearing on final approval of the settlement on September 18, 2023.

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