What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-08 · 182 added, 141 removed, 470 unchanged (41% of the section changed)

4 unchanged sentences

(in thousands, except par values)

JULY 2, 2023 JANUARY 1, 2023

OCTOBER 1, 2023 JANUARY 1, 2023

Current assets

26 unchanged sentences

5,000 shares authorized;

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

none issued or outstanding at October 1, 2023 and January 1, 2023

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

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

58,107 and 58,106 shares issued and outstanding at October 1, 2023 and January 1, 2023, respectively

Additional paid-in capital 249,979 244,159

10 unchanged sentences

(in thousands, except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED

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

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 1, 2023 OCTOBER 2, 2022 OCTOBER 1, 2023 OCTOBER 2, 2022

Net sales $ 311,006 $ 327,757 $ 936,380 $ 962,364

2 unchanged sentences

Selling, general and administrative expenses 79,273 80,848 251,049 240,711

Restructuring, asset impairment and other charges ( 2,644 ) 810 ( 2,502 ) 1,697

Restructuring, asset impairment, other (gains) and charges

— ( 105 ) ( 2,502 ) 1,592

Operating income 30,985 28,042 69,370 89,987

Interest expense 8,163 7,747 24,986 21,787

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

Other expense, net

6,702 124 7,674 1,688

Income before income tax expense 16,120 20,171 36,710 66,512

10 unchanged sentences

(in thousands)

THREE MONTHS ENDED SIX MONTHS ENDED

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

THREE MONTHS ENDED NINE MONTHS ENDED

OCTOBER 1, 2023 OCTOBER 2, 2022 OCTOBER 1, 2023 OCTOBER 2, 2022

Net income $ 9,879 $ 14,065 $ 24,962 $ 44,176

Other comprehensive income (loss), after tax:

Other comprehensive loss, after tax:

Foreign currency translation adjustment ( 9,176 ) ( 36,800 ) ( 2,885 ) ( 86,654 )

1 unchanged sentence

Pension liability adjustment 202 3,393 ( 877 ) 8,774

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

Other comprehensive loss

( 8,824 ) ( 32,915 ) ( 3,013 ) ( 76,207 )

Comprehensive income (loss) $ 1,055 $ ( 18,850 ) $ 21,949 $ ( 32,031 )

4 unchanged sentences

(in thousands)

SIX MONTHS ENDED

JULY 2, 2023 JULY 3, 2022

NINE MONTHS ENDED

OCTOBER 1, 2023 OCTOBER 2, 2022

OPERATING ACTIVITIES:

Net income $ 24,962 $ 44,176

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

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

Depreciation and amortization 30,591 30,661

1 unchanged sentence

Gain on disposal of property, plant and equipment, net ( 2,531 ) —

Loss on foreign subsidiary liquidation

Deferred income taxes and other ( 671 ) 13,616

5 unchanged sentences

Accounts payable and accrued expenses ( 4,264 ) ( 6,040 )

Cash provided by (used in) operating activities 47,924 ( 12,708 )

Cash provided by operating activities

114,217 14,883

INVESTING ACTIVITIES:

9 unchanged sentences

Finance lease payments ( 1,853 ) ( 1,535 )

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

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

Cash used in financing activities

( 80,847 ) ( 10,456 )

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

22,725 ( 8,887 )

Effect of exchange rate changes on cash ( 656 ) ( 8,916 )

CASH AND CASH EQUIVALENTS:

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

Net increase (decrease)

22,069 ( 17,803 )

Balance, beginning of period 97,564 97,252

15 unchanged sentences

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 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.

The nine-month periods ended October 1, 2023 and October 2, 2022, both include 39 weeks.

The three-month periods ended October 1, 2023 and October 2, 2022, both include 13 weeks.

Risks and Uncertainties

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

Global economic challenges, including the impacts of the Russia-Ukraine and Israel-Hamas wars, 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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Cybersecurity Event

On November 20, 2022, we discovered a cybersecurity attack, perpetrated by unauthorized third parties, affecting our IT systems.

Promptly, out of an abundance of caution, we shut down certain systems including shipping, inventory management and production systems and engaged forensic experts to evaluate the extent of the Cyber Event and its impact to our operations.

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

On November 20, 2022, we discovered a cybersecurity attack, perpetrated by unauthorized third parties, affecting our IT systems (the “Cyber Event”).

In response to this Cyber Event, we notified law enforcement and took steps to supplement existing security monitoring, including scanning and protective measures.

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

Recently Adopted Accounting Pronouncements

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.

In July 2023, the Financial Accounting Standards Board (“FASB”) 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.

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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):

In June 2022, the FASB 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 % 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.

The Company generates revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material and from the installation of carpet and other flooring-related material.

A summary of these revenue streams, as a percentage of net sales, for the three and nine months ended October 1, 2023 and October 2, 2022 is as follows:

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Revenue from the sale of flooring material

98 % 96 % 98 % 97 %

Revenue from installation of flooring material

2 % 4 % 2 % 3 %

Disaggregation of Revenue

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

For the three and nine months ended October 1, 2023 and October 2, 2022, revenue from the Company’s customers is broken down by geography as follows:

Three Months Ended Nine Months Ended

Geography October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

Americas 57.3 % 59.4 % 58.6 % 57.9 %

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Inventories are summarized as follows:

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

(in thousands)

13 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands, except per share data)

9 unchanged sentences

Diluted EPS $ 0.17 $ 0.24 $ 0.43 $ 0.75

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.

For both the three and nine months ended October 1, 2023, 855,785 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 respective periods.

NOTE 5 – LONG-TERM DEBT

Long-term debt consisted of the following:

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

Outstanding Principal Interest Rate (1)

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Total long-term debt, net $ 435,899 $ 510,003

(1) Represents the stated rate of interest, without the effect of debt issuance costs.

(1) Represents the weighted average rate of interest for borrowings under the Syndicated Credit Facility and the stated rate of interest for the 5.50 % Senior Notes due 2028, without the effect of debt issuance costs.

Syndicated Credit Facility

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

As of both July 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.

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

As of both October 1, 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.

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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 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).

As of October 1, 2023, the estimated fair value of the Senior Notes was $ 258.8 million, compared with a carrying value recorded in the Company’s consolidated condensed balance sheet of $ 296.3 million ($ 300.0 million excluding $ 3.7 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 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.

As of October 1, 2023 and January 1, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 4.9 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 $ 1.5 million and $ 1.8 million as of October 1, 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 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.

As of October 1, 2023, all amounts related to the terminated interest rate swaps have been recognized in the consolidated condensed statements of operations, and there was no remaining balance in accumulated other comprehensive loss associated with the terminated interest rate swaps.

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

NOTE 7 – SHAREHOLDERS’ EQUITY

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:

The following tables depict the activity in the accounts which make up shareholders’ equity for the nine months ended October 1, 2023 and October 2, 2022:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT CASH FLOW

(in thousands)

(in thousands, except per share data)

Balance, at January 1, 2023 58,106 $ 5,811 $ 244,159 $ 278,639 $ ( 27,548 ) $ ( 138,775 ) $ ( 749 )

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

Net income — — — 9,879 — — —

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 ( 5 ) — 2,182 — — — —

Pension liability adjustment — — — — 202 — —

Foreign currency translation adjustment — — — — — ( 9,176 ) —

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 150

Balance, at October 1, 2023 58,107 $ 5,811 $ 249,979 $ 301,859 $ ( 28,425 ) $ ( 141,660 ) $ —

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED

EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT CASH FLOW

(in thousands)

(in thousands, except per share data)

Balance, at January 2, 2022 59,055 $ 5,905 $ 253,110 $ 261,434 $ ( 53,888 ) $ ( 100,441 ) $ ( 2,722 )

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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 share-based plans, 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 )

Repurchase of Common Stock

1 unchanged sentence

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.

No shares of common stock were repurchased during the nine months ended October 1, 2023.

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 2, 2023, the Company granted restricted stock awards for 102,300 shares of common stock.

During the nine months ended October 1, 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.

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 $ 2.4 million and $ 2.6 million for the six months ended July 2, 2023 and July 3, 2022, respectively.

Compensation expense related to restricted stock grants was $ 3.4 million and $ 4.0 million for the nine months ended October 1, 2023 and October 2, 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 July 2, 2023, as well as activity during the six months then ended:

The following table summarizes restricted stock outstanding as of October 1, 2023, as well as activity during the nine months then ended:

Restricted Shares Weighted Average

3 unchanged sentences

Forfeited or canceled ( 16,800 ) 13.60

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.

Outstanding at October 1, 2023 686,800 $ 12.56

As of October 1, 2023, the unrecognized total compensation cost related to unvested restricted stock was $ 2.8 million.

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

Restricted Share Unit Awards

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.

During the nine months ended October 1, 2023, the Company granted awards for 596,200 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.

Awards of restricted share units have a graded vesting schedule over a three-year period from the date of grant, with one-third of the restricted share units vesting on each of the first, second and third anniversaries of the date of grant, provided the individual remains in the employment or service of the Company until such anniversaries.

Awards of restricted share units have a graded vesting schedule over a two to three-year period from the date of grant, provided the individual remains in the employment or service of the Company as of each vesting date.

Additionally, certain awards (or a portion thereof) could vest earlier in the event of a change in control of the Company, upon involuntary termination without cause, or upon retirement provided certain eligibility criteria are met.

The Company recognizes expense related to restricted share unit grants based on the grant date fair value of the units awarded, as determined by the market price of the Company’s common stock at date of grant.

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 $ 1.0 million for the six months ended July 2, 2023.

The expense is captured in selling, general and administrative expenses in the consolidated condensed statements of operations, which is consistent with the classification of expense for other share-based awards.

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 $ 1.5 million for the nine months ended October 1, 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 July 2, 2023, as well as activity during the six months then ended:

The following table summarizes restricted share units outstanding as of October 1, 2023, as well as activity during the nine months then ended:

Restricted Share Units Weighted Average

3 unchanged sentences

Forfeited or canceled ( 10,700 ) 10.80

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.

Outstanding at October 1, 2023 583,400 $ 10.35

As of October 1, 2023, the unrecognized total compensation cost related to unvested restricted share units was $ 4.6 million.

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

Performance Share Awards

During the six months ended July 2, 2023, the Company issued awards of performance shares to certain employees.

During the nine months ended October 1, 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.

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

The following table summarizes the performance shares outstanding as of October 1, 2023, as well as the activity during the nine months then ended:

Performance Shares Weighted Average

3 unchanged sentences

Forfeited or canceled ( 193,800 ) 14.79

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.

Outstanding at October 1, 2023 1,115,000 $ 12.36

Compensation expense related to the performance shares was $ 2.4 million and $ 2.7 million for the nine months ended October 1, 2023 and October 2, 2022, 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 $ 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 $ 0.5 million for the six months ended July 2, 2023.

Unrecognized compensation expense related to these performance shares was approximately $ 7.3 million as of October 1, 2023.

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

The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was approximately $ 0.7 million for the nine months ended October 1, 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 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

As of October 1, 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 October 1, 2023 and January 1, 2023:

October 1, 2023 January 1, 2023

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

8 unchanged sentences

Total finance lease liabilities $ 6,790 $ 6,239

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

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Other Supplemental Information

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

4 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities 1,414 182 2,450 2,525

Right-of-use assets obtained in exchange for new operating lease liabilities 2,842 6,803 3,963 6,823

Right-of-use assets obtained (adjusted) in exchange for new (remeasured) operating lease liabilities

236 ( 734 ) 4,199 6,089

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 2, 2023 and January 1, 2023:

July 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 October 1, 2023 and January 1, 2023:

October 1, 2023 January 1, 2023

Weighted-average remaining lease term – finance leases (in years) 3.76 3.82

6 unchanged sentences

(in thousands)

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

2023 (excluding the nine months ended October 1, 2023)

$ 2,733 $ 569

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NOTE 9 – EMPLOYEE BENEFIT PLANS

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

During the three and nine months ended October 1, 2023, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.7 million and $ 2.0 million, respectively.

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.

The following tables provide the components of net periodic benefit cost for the three and nine months ended October 1, 2023 and October 2, 2022:

Three Months Ended Nine Months Ended

Defined Benefit Retirement Plans (Europe)

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

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

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Net periodic benefit cost $ 20 $ 144 $ 64 $ 461

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Salary Continuation Plan October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

2 unchanged sentences

Net periodic benefit cost $ 333 $ 332 $ 997 $ 997

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

nora Defined Benefit Plan

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

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

3 unchanged sentences

Net periodic benefit cost $ 281 $ 342 $ 837 $ 1,091

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.

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.

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS

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

The ending balance and the change in the carrying amount of goodwill for the nine months ended October 1, 2023, are as follows:

(in thousands)

1 unchanged sentence

Foreign currency translation (2)

Balance, at July 2, 2023 $ 104,298

Balance, at October 1, 2023 $ 101,224

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

1 unchanged sentence

(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 $ 58.3 million and $ 59.8 million at July 2, 2023 and January 1, 2023, respectively.

The net carrying value of intangible assets other than goodwill was $ 55.3 million and $ 59.8 million at October 1, 2023 and January 1, 2023, respectively.

NOTE 11 – SEGMENT INFORMATION

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Pursuant to the management approach discussed above, the Company’s CODM, our chief executive officer, evaluates performance at the AMS and EAAA operating segment levels and makes operating and resource allocation decisions based on segment adjusted operating income (“AOI”), which includes allocations of corporate selling, general and administrative expenses.

AOI excludes nora purchase accounting amortization;

Thailand plant closure inventory write-down;

Cyber Event impact;

property casualty loss;

and restructuring, asset impairment, severance and other charges.

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.

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

Intersegment revenues for the three and nine months ended October 1, 2023, were $ 25.0 million and $ 72.3 million, respectively, and intersegment revenues for the three and nine months ended October 2, 2022, were $ 19.7 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 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

Segment information for the three and nine months ended October 1, 2023 and October 2, 2022, is presented in the following table:

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

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

July 2, 2023 January 1, 2023

October 1, 2023 January 1, 2023

(in thousands)

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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

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

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Interest expense 8,163 7,747 24,986 21,787

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

Other expense, net

6,702 124 7,674 1,688

Income before income tax expense $ 16,120 $ 20,171 $ 36,710 $ 66,512

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

Three Months Ended October 1, 2023 Three Months Ended October 2, 2022

AMS EAAA AMS EAAA

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Cyber Event impact 62 42 — —

Property casualty loss (1)

Restructuring, asset impairment, severance, and other, net

( 274 ) 250 20 1,505

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

AOI $ 23,318 $ 9,049 $ 24,975 $ 6,273

(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

Nine Months Ended October 1, 2023 Nine Months Ended October 2, 2022

AMS EAAA AMS EAAA

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Cyber Event impact 554 415 — —

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

Restructuring, asset impairment, severance, and other, net

1,070 131 ( 116 ) 4,192

AOI $ 58,621 $ 16,805 $ 74,502 $ 25,908

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

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.

Cash payments for interest amounted to $ 17.6 million and $ 13.7 million for the nine months ended October 1, 2023 and October 2, 2022, respectively.

Income tax payments, net of refunds, amounted to $ 17.6 million and $ 11.5 million for the nine months ended October 1, 2023 and October 2, 2022, respectively.

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

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

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.

During the nine months ended October 1, 2023, the Company recorded a total income tax provision of $ 11.7 million on pre-tax income of $ 36.7 million resulting in an effective tax rate of 32.0 %, as compared to 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 % during the nine months ended October 2, 2022.

The decrease in the effective tax rate for the period ended October 1, 2023, as compared to the period ended October 2, 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 nine months 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 October 2, 2022, non-deductible charges related to the substantial liquidation of subsidiaries in Brazil and Russia in the period ended October 1, 2023, and an increase in the valuation allowance on interest carryforwards.

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

As of October 1, 2023, the Company had accrued approximately $ 5.4 million for unrecognized tax benefits.

In accordance with applicable accounting standards, the Company’s deferred tax asset as of October 1, 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.

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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 2, 2023 and July 3, 2022 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 1, 2023 and October 2, 2022, are reflected in the tables below:

Three Months Ended

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

Statement of Operations Location October 1, 2023 October 2, 2022

(in thousands)

Loss on foreign subsidiary liquidation (1)

Other expense, net

$ ( 6,221 ) $ —

Interest rate swap contracts loss Interest expense ( 196 ) ( 645 )

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

Amortization of benefit plan net actuarial losses and prior service cost Other expense, net

( 198 ) ( 450 )

Total loss reclassified from AOCI $ ( 6,615 ) $ ( 1,095 )

Six Months Ended

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

Nine Months Ended

Statement of Operations Location October 1, 2023 October 2, 2022

(in thousands)

Loss on foreign subsidiary liquidation (1)

Other expense, net

$ ( 6,221 ) $ —

Interest rate swap contracts loss Interest expense ( 982 ) ( 2,416 )

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

Amortization of benefit plan net actuarial losses and prior service cost Other expense, net

( 585 ) ( 1,420 )

Total loss reclassified from AOCI $ ( 7,788 ) $ ( 3,836 )

NOTE 15 – RESTRUCTURING AND OTHER CHARGES

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

(1) The Company’s foreign subsidiaries in Russia and Brazil were substantially liquidated during the three months ended October 1, 2023, and the cumulative foreign currency translation losses associated with these entities were recognized in the consolidated condensed statements of operations.

The tax impact of the cumulative foreign currency translation reclassification is approximately $ 1.1 million.

NOTE 15 – RESTRUCTURING AND OTHER

Restructuring, asset impairment, other (gains) and charges were as follows:

Three Months Ended Nine Months Ended

October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022

(in thousands)

Restructuring, asset impairment and other charges (1)

Restructuring, asset impairment, other (gains) and charges (1)

$ — $ ( 105 ) $ ( 2,502 ) $ 1,592

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

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

2021 Restructuring Plan

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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.

Balance, at October 1, 2023 $ — $ — $ — $ —

The Company recognized a gain of $ 2.7 million on the sale of the Thailand facility during the second quarter of 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.

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 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.

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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.

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.

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

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, which is recorded in restructuring, asset impairment, other (gains) and 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.

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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.

See 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 .

In the lawsuit by the former CEO, Mr.

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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.

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

The court’s award of summary judgment in favor of the Company on Mr.

Gould’s breach of contract claim has been appealed by Mr.

Gould to the U.S.

Court of Appeals for the 11th Circuit.

The Company believes Mr.

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

Gould’s lawsuit and the 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.

Putative class member proofs of claims were due by September 13, 2023, and in a hearing on October 19, 2023, the Court approved the final settlement of the action.

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