What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-03-01 · 426 added, 466 removed, 1118 unchanged (44% of the section changed)

9 unchanged sentences

Selling, general and administrative expenses 339,049 324,190 324,315

Restructuring, asset impairment and other charges 1,965 3,621 ( 4,626 )

Restructuring, asset impairment, other (gains) and charges

( 2,502 ) 1,965 3,621

Goodwill and intangible asset impairment charge — 36,180 —

Operating income (loss) 75,398 104,797 ( 39,287 )

Operating income

104,522 75,398 104,797

Interest expense 31,787 29,929 29,681

Other expense, net 9,081 3,552 2,483

Income (loss) before income tax expense 41,917 72,633 ( 79,420 )

Income tax expense (benefit) 22,357 17,399 ( 7,491 )

Net income (loss) $ 19,560 $ 55,234 $ ( 71,929 )

Earnings (loss) per share – basic $ 0.33 $ 0.94 $ ( 1.23 )

Earnings (loss) per share – diluted $ 0.33 $ 0.94 $ ( 1.23 )

Income before income tax expense

63,654 41,917 72,633

Income tax expense

19,137 22,357 17,399

$ 44,517 $ 19,560 $ 55,234

Earnings per share – basic

$ 0.77 $ 0.33 $ 0.94

Earnings per share – diluted

$ 0.76 $ 0.33 $ 0.94

Common shares outstanding – basic 58,092 58,865 58,971

1 unchanged sentence

See accompanying notes to consolidated financial statements.

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INTERFACE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

2023 2022 2021

Net income (loss) $ 19,560 $ 55,234 $ ( 71,929 )

$ 44,517 $ 19,560 $ 55,234

Other comprehensive income (loss), after tax:

Foreign currency translation adjustment 19,185 ( 38,334 ) ( 40,110 )

Cash flow hedge gain (loss) 1,973 3,468 ( 2,027 )

Reclassification from accumulated other comprehensive loss – discontinued cash flow hedge

749 1,973 3,468

Pension liability adjustment ( 6,468 ) 26,340 15,400

Other comprehensive income (loss) 13,466 ( 10,021 ) ( 21,242 )

Comprehensive income (loss) $ 9,539 $ 33,992 $ ( 33,736 )

Comprehensive income

$ 57,983 $ 9,539 $ 33,992

See accompanying notes to consolidated financial statements.

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INTERFACE, INC.

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Deferred tax asset 21,721 17,767

Goodwill and intangibles, net 162,195 223,204

105,448 102,417

Intangible assets, net

56,255 59,778

Other assets 84,154 89,884

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Total liabilities 804,148 904,966

Commitments and contingencies

Commitments and contingencies (Note 18)

Shareholders’ equity

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5,000 shares authorized;

none issued or outstanding at January 1, 2023 and January 2, 2022

none issued or outstanding at December 31, 2023 and January 1, 2023

Common stock, par value $ 0.10 per share;

120,000 shares authorized;

58,106 and 59,055 shares issued and outstanding at January 1, 2023 and January 2, 2022, respectively

58,112 and 58,106 shares issued and outstanding at December 31, 2023 and January 1, 2023, respectively

Additional paid-in capital 252,909 244,159

6 unchanged sentences

See accompanying notes to consolidated financial statements.

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INTERFACE, INC.

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OPERATING ACTIVITIES:

Net income (loss) $ 19,560 $ 55,234 $ ( 71,929 )

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

$ 44,517 $ 19,560 $ 55,234

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

Depreciation and amortization 40,774 40,337 46,345

Stock compensation amortization expense (benefit) 8,527 5,467 ( 502 )

Loss on disposal of fixed assets 4,319 4,427 4,996

Share-based compensation expense

10,265 8,527 5,467

(Gain) loss on disposal of property, plant and equipment, net

( 2,252 ) 4,319 4,427

Loss on foreign subsidiary liquidation 6,221 — —

Bad debt expense 53 26 ( 263 )

10 unchanged sentences

Capital expenditures ( 26,107 ) ( 18,437 ) ( 28,071 )

Other — — 1,260

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

Cash used in investing activities ( 19,514 ) ( 18,437 ) ( 28,071 )

3 unchanged sentences

Term loan repayments ( 80,927 ) ( 13,191 ) ( 60,485 )

Proceeds from issuance of Senior Notes due 2028 — — 300,000

Repurchase of common stock — ( 17,171 ) —

2 unchanged sentences

Debt issuance costs — ( 1,032 ) ( 36 )

Payments for debt extinguishment costs — — ( 660 )

Proceeds from issuance of common stock — — 93

Finance lease payments ( 2,419 ) ( 2,089 ) ( 2,282 )

7 unchanged sentences

See accompanying notes to consolidated financial statements.

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INTERFACE, INC.

3 unchanged sentences

Nature of Operations

Interface is a global flooring company specializing in carbon neutral carpet tile and resilient flooring, including luxury vinyl tile (“LVT”), vinyl sheet, rigid core and nora® rubber flooring.

Interface is a global flooring company specializing in carbon neutral carpet tile and resilient flooring, including luxury vinyl tile (“LVT”), and nora® rubber flooring.

The Company manufactures modular carpet focusing on the high quality, designer-oriented sector of the market, sources resilient flooring including LVT from third parties and focuses on the same sector of the market, and provides specialized carpet replacement, installation and maintenance services.

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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 completed during 2023.

Principles of Consolidation

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requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Examples include provisions for returns, bad debts, product claims reserves, rebates, inventory obsolescence and the length of product life cycles, accruals associated with restructuring activities, income tax exposures and valuation allowances, environmental liabilities, and the carrying value of goodwill, intangible assets and property, plant and equipment.

Examples include provisions for returns, bad debts, product claims reserves, inventory obsolescence and the length of product life cycles, accruals associated with restructuring activities, income tax exposures and valuation allowances, and the carrying value of goodwill, intangible assets and property, plant and equipment.

Actual results could vary from these estimates.

Risks and Uncertainties

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

In connection with the Cyber Event discussed above, security breaches may expose us to fines and other liabilities to the extent sensitive data stored in our IT systems, including data related to customers, suppliers or employees, are misappropriated.

Any potential fine or other liability is not probable nor estimable at this time.

Accordingly, pursuant to applicable accounting standards, no accrual has been recorded for any contingent liability arising out of the 2022 Cyber Event.

The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein, including the goodwill and intangible asset impairments discussed in Note 12 entitled “Goodwill and Intangible Assets.” These uncertainties could result in a future material adverse effect to the Company’s financial statements if actual results differ from these estimates.

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COVID-19 Impact

On March 1, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to impact areas where we operate and sell our products and services.

The COVID-19 pandemic has had material adverse effects on our business, results of operations, and financial condition.

The duration of the pandemic will ultimately determine the extent to which our operations are impacted.

During fiscal year 2022, the COVID-19 pandemic had less of an impact on our overall financial results as sales increased 8.1 % compared to 2021.

However, continuing government imposed COVID-19 lockdowns and restrictions in parts of China adversely impacted sales in China by approximately 13 % in 2022 compared with the prior year.

Ongoing global supply chain challenges and inflationary pressures resulted in higher raw material costs, higher freight costs and shipping delays during 2022, which increased our operating costs and adversely impacted our gross profit margin.

During fiscal year 2020, in connection with the COVID-19 pandemic, government grants and payroll protection programs were available globally to provide assistance to companies impacted by the pandemic.

The Coronavirus Aid, Relief and Economic Security Act (“ CARES Act”) enacted in the United States (see Note 17 entitled “ Income Taxes ” for additional information) and a payroll protection program enacted in the Netherlands (the “NOW Program”) provided benefits related to payroll costs either as reimbursements, lower payroll tax rates or deferral of payroll tax payments.

The NOW Program provided eligible companies with reimbursement of labor costs as an incentive to retain employees on the payroll.

During fiscal year 2020, the Company received reimbursements under the NOW Program and recognized a reduction in payroll costs of approximately $ 7.3 million, which were recorded as a $ 6.1 million reduction of selling, general and administrative expenses and a $ 1.2 million reduction of cost of sales in the consolidated statements of operations.

We applied a grant analogy method to recognize the reimbursements under the NOW Program as the Company believes it is probable that the benefits received will not be repaid.

The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein, including the goodwill and intangible asset assessments and impairments discussed in Note 12 entitled “Goodwill and Other Intangible Assets.” These uncertainties could result in a future material adverse effect to the Company’s financial statements if actual results differ from these estimates.

Revenue Recognition

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The performance obligation is the delivery of these materials to the customer’s control.

Revenue from the sale of modular carpet, resilient flooring, rubber flooring, and related products (TacTiles installation materials, etc.) was approximately 97 % of the Company’s total revenue in 2022 and approximately 98 % of the Company’s total revenue in both 2021 and 2020.

Revenue from the sale of modular carpet, resilient flooring, rubber flooring, and related products (TacTiles installation materials, etc.) was approximately 98 % of the Company’s total revenue in 2023, approximately 97 % of the Company’s total revenue in 2022, and approximately 98 % of the Company’s total revenue in 2021.

The revenue from sales of these products is recognized upon shipment, or in certain cases, upon delivery to the customer.

The transaction price for these sales is readily identifiable.

The remaining revenue of approximately 3 % for 2022 and approximately 2 % for both 2021 and 2020 was generated from the installation of carpet and other flooring-related material.

The remaining revenue of approximately 2 % for 2023, approximately 3 % for 2022, and approximately 2 % for 2021 was generated from the installation of carpet and other flooring-related material.

For installation projects underway, the Company recognized installation revenue over time based on a project cost input method as the customer simultaneously received and consumed the benefit of the services.

1 unchanged sentence

The majority of these projects are completed within five days of the start of installation.

The transaction price for these sale and installation contracts is readily determinable between flooring material and installation services and is specifically identified in the contract with the customer.

The transaction price for these sale and installation contracts is readily determinable between flooring material and installation services and typically is specifically identified in the contract with the customer.

The Company has utilized the portfolio approach to its contracts with customers, as its contracts with customers have similar characteristics, and it is reasonable to expect that the effects from applying this approach are not materially different from applying the accounting standard to individual contracts.

The Company does not have any other significant revenue streams outside of these sales of flooring material, and the sale and installation of flooring material, as described above.

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The Company does not record taxes collected from customers and remitted to governmental authorities within revenues.

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The Company does offer a warranty to its customers which guarantees certain on-floor performance characteristics and warrants against manufacturing defects.

The warranty is not a service warranty, and there is no ability to separate the warranty obligation from the sale of the flooring or purchase them separately.

The warranty is not a service warranty, and there is no ability to separate the warranty obligation from the sale of the flooring or purchase it separately.

The Company’s incidence of warranty claims is extremely low, with less than 0.5 % of revenue in claims on an annual basis for the last three fiscal years.

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Shipping and handling costs incurred are classified in cost of sales in the consolidated statements of operations.

Advertising and Promotion

The Company’s advertising and promotional activities primarily consist of product samples, printed materials, digital marketing, trade shows, and customer events.

Advertising and promotional costs are expensed when the advertising / promotional activity first takes place.

Advertising and promotional expenses were $ 34.6 million, $ 31.3 million and $ 28.4 million for the years 2023, 2022 and 2021, respectively, and were recorded in selling, general and administrative (“SG&A”) expenses in the consolidated statements of operations.

Research and Development

Research and development costs are expensed as incurred and are included in selling, general and administrative (“SG&A”) expenses and cost of sales in the consolidated statements of operations.

Research and development expense includes costs associated with the improvement and enhancement of existing products.

Research and development costs are expensed as incurred and are included in SG&A expenses and cost of sales in the consolidated statements of operations.

Research and development expense includes costs associated with the development of new products as well as the improvement and enhancement of existing products.

Research and development expense was $ 17.0 million, $ 19.1 million, and $ 19.3 million for the years 2023, 2022 and 2021, respectively.

Cash, Cash Equivalents and Short-Term Investments

Highly liquid investments with insignificant interest rate risk and with original maturities of three months or less are classified as cash and cash equivalents.

Highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents.

Investments with maturities greater than three months and less than one year are classified as short-term investments.

Significant concentrations of credit risk may arise from the Company’s cash maintained at various banks, as from time to time cash balances may exceed the FDIC limits.

The Company did no t hold any significant amounts of cash equivalents and short-term investments at January 1, 2023 and January 2, 2022.

The Company did no t hold any significant amounts of cash equivalents and short-term investments at December 31, 2023 and January 1, 2023.

Supplemental Cash Flow Information

Cash payments for interest amounted to approximately $ 28.8 million, $ 25.1 million, and $ 22.9 million for the years 2023, 2022 and 2021, respectively.

Fiscal year 2020 includes cash payments of $ 12.5 million to terminate the Company’s interest rate swap liabilities.

Income tax payments amounted to approximately $ 25.8 million, $ 31.4 million and $ 23.1 million for the years 2023, 2022 and 2021, respectively.

During the years 2023, 2022 and 2021, the Company received income tax refunds of $ 2.5 million, $ 12.4 million and $ 5.4 million, respectively.

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Allowances for Expected Credit Losses

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While management believes that adequate write-downs for inventory obsolescence have been made in the consolidated financial statements, consumer tastes and preferences may continue to change, and the Company could experience additional inventory write-downs in the future.

The Company has agreements to receive cash consideration from certain of its vendors, including rebates and cooperative marketing reimbursements.

The amounts received from its vendors are generally presumed to be a reduction of the prices the Company pays for their products and, therefore, such amounts are reflected as either a reduction of cost of sales in the accompanying consolidated statements of operations, or, if the inventory is still on hand at the reporting date, it is reflected as a reduction of “Inventories, net” on the accompanying consolidated balance sheets.

Vendor rebates are typically dependent upon reaching minimum purchase thresholds.

The Company evaluates the likelihood of reaching purchase thresholds using past experience and current year forecasts.

When rebates can be reasonably estimated and receipt becomes probable, the Company records a portion of the rebate as the Company makes progress towards the purchase threshold.

When the Company receives direct reimbursements for costs incurred in marketing the vendor’s product or service, the amount received is recorded as an offset to SG&A expenses in the accompanying consolidated statements of operations.

The Company records a right-of-use asset and lease liability for operating and finance leases once a contract that contains a lease is executed and the Company has the right to control the use of the leased asset.

2 unchanged sentences

The Company made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated balance sheets.

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

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

The Company also made an accounting policy election not to separate lease and non-lease components for all asset classes and accounts for the lease payments as a single component.

3 unchanged sentences

buildings and improvements – ten to forty years ;

and furniture and equipment – three to twelve years .

equipment, furniture and fixtures – three to twelve years ;

and computer software – three to six years .

Certain manufacturing equipment in our Weinheim manufacturing facility have estimated useful lives up to twenty-five years .

Leasehold improvements are depreciated over the shorter of the asset life or lease term, generally between three to twelve years .

Interest costs for the construction/development of certain long-term assets are capitalized and amortized over the related assets’ estimated useful lives.

The Company capitalized net interest costs on qualifying expenditures of approximately $ 0.1 million, $ 0.5 million, and $ 1.9 million for the fiscal years 2022, 2021 and 2020, respectively.

Total depreciation expense amounted to approximately $ 35.9 million, $ 36.3 million, and $ 41.9 million for the years 2023, 2022 and 2021, respectively.

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Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

1 unchanged sentence

Repair and maintenance costs are charged to operating expense as incurred.

Goodwill and Intangible Assets

Goodwill and Other Intangible Assets

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

During the fourth quarters of 2023, 2022 and 2021, the Company performed the annual goodwill impairment test.

In addition, during the first quarter of 2020—primarily due to anticipated impacts of the COVID-19 pandemic—the Company determined that there were indicators of impairment, and the Company proceeded with a goodwill impairment test as of the end of the first quarter.

The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment.

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In preparing the valuations, past, present and future expectations of performance were considered.

See Note 12 entitled “Goodwill and Intangible Assets” for additional information.

Trademark and tradename intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount.

In the fourth quarter of 2022, we determined that the trademark and trade name intangible assets were impaired.

During the first quarter of 2020—primarily due to anticipated impacts of the COVID-19 pandemic—the Company determined that there were indicators of impairment, and the Company proceeded with an impairment test as of the end of the first quarter.

The Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which were compared to the carrying value of intangible assets to determine whether any impairment existed.

See Note 12 entitled “Goodwill and Intangible Assets” for additional information.

See Note 12 entitled “Goodwill and Other Intangible Assets” for additional information.

Trademark and trade name intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount.

For the annual tests performed in 2023, 2022, and 2021, the Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which were compared to the carrying value of intangible assets to determine whether any impairment existed.

See Note 12 entitled “Goodwill and Other Intangible Assets” for additional information.

The Company’s other intangible assets primarily consist of developed technology that is amortized on a straight-line basis over the estimated useful life of 7 years.

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The Company records a provision related to warranty costs based on historical experience and future expectations and periodically adjusts these provisions to reflect changes in actual experience.

Warranty and sales allowance reserves amounted to $ 2.1 million and $ 2.7 million as of January 1, 2023 and January 2, 2022, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets.

Warranty and sales allowance reserves amounted to $ 4.3 million and $ 2.1 million as of December 31, 2023 and January 1, 2023, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets.

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.

1 unchanged sentence

The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date.

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The Company has elected to account for tax effects of the global intangible low-taxed income (“GILTI”) in the period when incurred, and therefore has not provided any deferred tax impacts for these provisions in its consolidated financial statements.

The Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will expire before realization of the benefit or that future deductibility is not probable.

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The resulting translation adjustments are recorded in the foreign currency translation adjustment account.

In the event of a divestiture or liquidation of a foreign subsidiary, the related foreign currency translation results are reclassified from equity to income.

In the event of a divestiture or substantial liquidation of a foreign subsidiary, the related foreign currency translation results are reclassified from equity to income.

Foreign exchange translation gains (losses) were $ 19.2 million, $( 38.3 ) million, and $( 40.1 ) million for the years 2023, 2022 and 2021, respectively.

1 unchanged sentence

Basic earnings per share is computed based on the average number of common shares outstanding, including participating securities.

Diluted earnings per share reflects the increase in average common shares outstanding that would result from the assumed exercise of outstanding stock options, calculated using the treasury stock method.

Diluted earnings per share reflects the potential increase in average common shares outstanding that would result from share-based awards or the assumed exercise of outstanding stock options, calculated using the treasury stock method.

See Note 15 entitled “Earnings Per Share” for additional information.

Stock-Based Compensation

The Company has stock-based employee compensation plans, which are described more fully in Note 14 entitled “Shareholders' Equity.”

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model.

However, there were no stock options granted in 2022, 2021 or 2020.

The Company recognizes expense related to its restricted stock and performance share grants based on the grant date fair value of the shares awarded, as determined by its market price at date of grant.

Derivative Financial Instruments

Derivatives are recognized on the balance sheet at fair value.

For derivatives that meet the criteria as designated cash flow hedges, the changes in the fair value of the derivative are recognized in other comprehensive income (or other comprehensive loss) until the hedged item is recognized in earnings.

Changes in the fair value of derivatives not designated as hedging instruments are recognized in earnings each period.

Derivative liabilities are recorded in accrued expenses and derivative assets are recorded in other current assets in the consolidated balance sheets.

Cash flows from all derivative instruments, including those not designated as hedging instruments, are classified in the same category as the cash flows from the items being hedged.

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Share-Based Compensation

The Company has share-based employee compensation plans, which are described more fully in Note 14 entitled “Shareholders' Equity.”

The Company recognizes expense related to its restricted stock, restricted share unit and performance share grants based on the grant date fair value of the shares awarded, as determined by its market price at date of grant.

Pension Benefits

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Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets, and include input from actuaries, investment service firms and investment managers.

Reclassifications

Prior period amounts for goodwill and intangible assets, net, in the consolidated balance sheets have been reclassified to conform with the current period presentation.

Additionally, prior period amounts for the major classes of assets representing property, plant and equipment, as disclosed in Note 7 entitled “Property, Plant and Equipment,” have been reclassified to conform with the current presentation.

These reclassifications had no effect on total assets as previously reported.

The Company’s fiscal year is the 52 or 53 week period ending on the Sunday nearest December 31.

All references herein to “2022,” “2021,” and “2020,” mean the fiscal years ended January 1, 2023, January 2, 2022, and January 3, 2021, respectively.

Fiscal years 2022 and 2021 are both comprised of 52 weeks, and 2020 is comprised of 53 weeks.

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All references herein to “2023,” “2022,” and “2021,” mean the fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

Fiscal years 2023, 2022 and 2021 were each comprised of 52 weeks.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements - Not Yet Adopted

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

Recently Issued Accounting Pronouncements – Adopted

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.

ASU 2023-03 was effective upon issuance.

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

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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The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

Early adoption was permitted.

The Company adopted this standard on April 2, 2023.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures.

” This ASU requires public entities on an annual basis to disclose a rate reconciliation with explicit categories, as outlined in the ASU, and requires additional disclosures for reconciling items that meet certain quantitative thresholds.

Other disclosures include disaggregation of income taxes paid, pre-tax income, and income tax expense.

The new guidance is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

This ASU is not expected to have a material impact to the Company’s consolidated financial statements.

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The Company is currently evaluating the impact of this ASU to its income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

” This ASU requires additional disclosures in annual and interim periods for significant segment expenses included in the measure of segment profit provided to the chief operating decision maker (“CODM”).

Disclosure of other segment items by reportable segment as well as a description of its composition is also required.

The new guidance is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU to its segment disclosures.

NOTE 3 – REVENUE RECOGNITION

Revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material was approximately 97 % of total revenue for 2022 and approximately 98 % of total revenue for both 2021 and 2020.

The remaining revenue was generated from the installation of carpet and other flooring-related material, which was approximately 3 % of total revenue for 2022 and approximately 2 % of total revenue for both 2021 and 2020.

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 fiscal years 2023, 2022 and 2021 is a follows:

2023 2022 2021

Revenue from the sale of flooring material

98 % 97 % 98 %

Revenue from installation of flooring material

Disaggregation of Revenue

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See Note 20 entitled “Segment Information” for additional information.

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NOTE 4 – RECEIVABLES

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The Company maintains allowances for expected credit losses resulting from the inability of customers to make required payments.

If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

As of January 1, 2023 and January 2, 2022, the allowance for expected credit losses amounted to $ 4.0 million and $ 5.0 million, respectively, for all accounts receivable of the Company.

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If the financial condition of its customers were to deteriorate, resulting in a change in their ability to make payments, additional allowances may be required.

As of December 31, 2023, and January 1, 2023, the allowance for expected credit losses amounted to $ 3.0 million and $ 4.0 million, respectively, for all accounts receivable of the Company.

NOTE 5 – FAIR VALUE OF FINANCIAL INSTRUMENTS

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The following table presents the carrying values and estimated fair values, including the level within the fair value hierarchy, of certain financial instruments:

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Carrying Value Fair Value (Level 1) Fair Value (Level 2) Carrying Value Fair Value (Level 1) Fair Value (Level 2)

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Deferred compensation investments 28,417 9,200 19,217 27,610 11,003 16,607

Liabilities (1) :

Borrowings under Syndicated Credit Facility (2)

2 unchanged sentences

300,000 — 281,991 300,000 — 248,652

(1) Carrying values exclude unamortized debt issuance costs and include amounts presented as current liabilities on the consolidated balance sheets.

(1) Carrying values are presented gross, excluding the impact of unamortized debt issuance costs and including amounts presented as current liabilities on the consolidated balance sheets.

(2) Unamortized debt issuance costs associated with term loan borrowings under the Syndicated Credit Facility, recorded as a reduction of long-term debt in the consolidated balance sheets, were $ 1.0 million and $ 1.9 million as of December 31, 2023 and January 1, 2023, respectively.

(3) Unamortized debt issuance costs associated with the Senior Notes, recorded as a reduction of long-term debt in the consolidated balance sheets, were $ 3.4 million and $ 4.2 million as of December 31, 2023 and January 1, 2023, respectively.

Company-Owned Life Insurance

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Company-owned life insurance is recorded at fair value within other assets in the consolidated balance sheets.

Changes in the fair value of Company-owned life insurance are recognized in SG&A expenses in the consolidated statements of operations.

Deferred Compensation Investments

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These investments are recorded at fair value within other assets in the consolidated balance sheets.

Changes in the fair value of the investments associated with the nonqualified savings plans are recognized in SG&A expenses in the consolidated statements of operations.

See Note 19 entitled “Employee Benefit Plans” for additional information on the Company’s nonqualified savings plans.

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Syndicated Credit Facility and Senior Notes

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See Note 19 entitled “Employee Benefit Plans” for additional information on defined benefit plan assets.

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NOTE 6 – INVENTORIES

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Inventories, net $ 279,079 $ 306,327

Reserves for inventory obsolescence amounted to $ 28.5 million and $ 27.1 million as of January 1, 2023 and January 2, 2022, respectively, and have been netted against amounts presented above.

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Reserves for inventory obsolescence amounted to $ 34.0 million and $ 28.5 million as of December 31, 2023 and January 1, 2023, respectively, and have been netted against amounts presented above.

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

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Buildings and improvements 162,359 169,370

Equipment and furniture (1)

Equipment, furniture and fixtures (1)

533,418 511,916

Computer software

66,792 66,826

Construction-in-progress (2)

21,577 24,066

799,956 788,485

Accumulated depreciation and amortization (3)

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(1) Includes $ 11.9 million and $ 9.9 million of leased equipment for 2023 and 2022, respectively.

(2) Construction-in-progress costs are presented as a separate asset category.

Amounts for 2022, that were previously allocated to each asset class, have been reclassified to conform to the current presentation.

(3) Includes $ 4.7 million and $ 4.1 million of accumulated amortization on leased equipment for 2023 and 2022, respectively.

As of January 1, 2023 and January 2, 2022, construction-in-progress was approximately $ 24.1 million and $ 44.6 million, respectively.

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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 16 entitled “Restructuring and Other” for additional information.

During the second quarter of 2023, the Company completed the sale of the Thailand 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 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 8 – ACCRUED EXPENSES

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Accrued expenses $ 130,890 $ 120,138

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NOTE 9 – LONG-TERM DEBT

Long-term debt consisted of the following:

January 1, 2023 January 2, 2022

December 31, 2023 January 1, 2023

Outstanding Principal Interest Rate (1)

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Total long-term debt, net $ 408,641 $ 510,003

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

(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

The Company’s Syndicated Credit Facility (the “Facility”) provides to the Company U.S.

The Company’s Facility provides to the Company U.S.

denominated and multicurrency term loans and provides to the Company and certain of its subsidiaries a multicurrency revolving credit facility.

At January 1, 2023, the Facility provided to the Company and certain of its subsidiaries a multicurrency revolving loan facility up to $ 300.0 million, as well as other U.S.

At December 31, 2023, the Facility provided to the Company and certain of its subsidiaries a multicurrency revolving loan facility up to $ 300.0 million, as well as other U.S.

denominated and multicurrency term loans.

At January 1, 2023, the Company had available borrowing capacity of $ 274.1 million under the revolving loan facility.

At December 31, 2023, the Company had available borrowing capacity of $ 298.4 million under the revolving loan facility.

Significant Facility Amendments

On July 15, 2020, the Company entered into a second amendment to its Facility.

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

(1) amended the consolidated net leverage ratio covenant making it less restrictive for a period of seven consecutive fiscal quarters beginning with the third quarter of fiscal year 2020 through the first quarter of fiscal year 2022 (the “Relief Period”);

(2) amended the pricing grid used to determine interest rate margins on outstanding loans as well as the commitment fee on the unused portion of the Facility to include additional consolidated net leverage ratio levels with increased pricing at higher levels of leverage;

(3) amended interest rate provisions to provide for an interest rate floor of either 0.00 % or 0.75 %, as applicable, on certain tranches of term loans outstanding;

and (4) provided temporary restrictions during the Relief Period on the Company’s ability to make acquisitions, pay dividends, repurchase shares, or enter into new credit facilities without lender consent.

The Company incurred approximately $ 1.5 million in debt issuance costs to execute this amendment.

Of this amount, approximately $ 1.0 million of debt issuance costs associated with term loan borrowings was recorded as a reduction of long-term debt, and approximately $ 0.5 million of debt issuance costs associated with revolving loan borrowings was recorded in other assets in the consolidated balance sheet.

These costs will be amortized over the life of the outstanding debt.

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On November 17, 2020, the Company entered into a third amendment to its Facility.

The third amendment provided for, among other changes, the following amendments to the Facility:

• the amendment of the maturity date of the Facility to November 2025;

• the amendment of the 0.75 % interest rate floor in respect of certain loans under the Facility with an interest rate floor of 0.00 %;

• amendments to the financial covenants to replace the consolidated net leverage ratio covenant with a consolidated secured net leverage ratio covenant that is not to exceed 3.00 to 1.00;

• amendments to remove the Relief Period restrictions previously imposed pursuant to the second amendment;

• amendments to provide for the case where any interest rate benchmark in the future ceases to be available.

In connection with the third amendment, the Company recognized a loss on extinguishment of debt of $ 3.6 million within interest expense in the consolidated statement of operations and recorded approximately $ 0.9 million of debt issuance costs.

Of this amount, approximately $ 0.1 million of debt issuance costs associated with term loan borrowings was recorded as a reduction of long-term debt, and approximately $ 0.8 million of debt issuance costs associated with revolving loan borrowings was recorded in other assets in the consolidated balance sheet.

On December 9, 2021, the Company entered into a fourth amendment to its Facility.

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In connection with the fifth amendment, the Company recognized a loss on extinguishment of debt of $ 0.1 million within interest expense in the consolidated statement of operations and recorded approximately $ 1.0 million of debt issuance costs.

Of this amount, approximately $ 0.4 million of debt issuance costs associated with term loan borrowings was recorded as a reduction of long-term debt, and approximately $ 0.7 million of debt issuance costs associated with revolving loan borrowings was recorded in other assets in the consolidated balance sheet.

Interest Rates and Fees

Interest on base rate loans is charged at varying rates computed by applying a margin ranging from 0.25 % to 2.00 %, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

Interest on Eurocurrency-based loans (or SOFR-based and alternative currency loans following the fifth amendment to the Facility) and fees for letters of credit are charged at varying rates computed by applying a margin ranging from 1.25 % to 3.00 % over the applicable Eurocurrency rate (or SOFR rate or alternative currency rate following the fifth amendment to the Facility), depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

Interest on SOFR-based and alternative currency loans are charged at varying rates computed by applying a margin ranging from 1.25 % to 3.00 % over the applicable SOFR rate or alternative currency rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

In addition, the Company pays a commitment fee ranging from 0.20 % to 0.40 % 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.

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Fees for commercial letters of credit are computed as 1.00 % per annum of the amount available to be drawn under such letters of credit.

Fees for standby letters of credit are charged at varying rates computed by applying a margin ranging from 1.25 % to 3.00 % per annum of the amount available to be drawn under such standby letters of credit, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.

The Facility contains standard and customary covenants for agreements of this type, including various reporting, affirmative and negative covenants.

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If an event of default occurs under the Facility, the lenders’ Administrative Agent may, upon the request of a specified percentage of lenders, exercise remedies with respect to the collateral, including, in some instances, foreclosing mortgages on real estate assets, taking possession of or selling personal property assets, collecting accounts receivable, or exercising proxies to take control of the pledged stock of domestic and first-tier material foreign subsidiaries.

As of both January 1, 2023 and January 2, 2022, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

As of both December 31, 2023 and January 1, 2023, the Company had $ 1.6 million in letters of credit outstanding under the Facility.

Under the Facility, the Company is required to make quarterly amortization payments of the term loan borrowings.

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The Company is in compliance with all covenants under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.

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Senior Notes due 2028

On November 17, 2020, the Company issued $ 300.0 million aggregate principal amount of 5.50% Senior Notes due December 2028 (the “Senior Notes”).

As of December 31, 2023, the Company had $ 300.0 million of Senior Notes outstanding.

The Senior Notes bear an interest rate at 5.50 % per annum and mature on December 1, 2028.

Interest is paid semi-annually on June 1 and December 1 of each year.

The Company used the net proceeds to repay approximately $ 269.7 million of outstanding term loan borrowings and approximately $ 21.0 million of outstanding revolving loan borrowings under its existing Facility.

In connection with the issuance of the Senior Notes, the Company recorded approximately $ 5.7 million of debt issuance costs.

These costs were recorded as a reduction of long-term debt in the consolidated balance sheet and will be amortized over the life of the outstanding debt.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its existing Facility.

On or after December 1, 2023, the Company may redeem the Senior Notes, in whole or in part, at any time at the redemption prices listed below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date, if redeemed during the 12-month period commencing on December 1 of the years set forth below:

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2025 and thereafter 100.000 %

In addition, the Company may redeem up to 35 % of the aggregate principal amount of the Senior Notes before December 1, 2023 with the proceeds of certain equity offerings at a redemption price of 105.50 %, plus accrued and unpaid interest, if any, to (but excluding) the redemption date.

The Company may also redeem all or a part of the Senior Notes before December 1, 2023 at a price equal to 100 % of the principal amount plus accrued and unpaid interest, if any, to (but excluding) the redemption date, plus a make-whole premium.

In addition, the Company had the option to redeem up to 35 % of the aggregate principal amount of the Senior Notes before December 1, 2023 with the proceeds of certain equity offerings at a redemption price of 105.50 %, plus accrued and unpaid interest, if any, to (but excluding) the redemption date.

The Company also had the option to redeem all or a part of the Senior Notes before December 1, 2023, at a price equal to 100 % of the principal amount plus accrued and unpaid interest, if any, to (but excluding) the redemption date, plus a make-whole premium.

The Company did not elect to redeem the Senior Notes, in whole or in part, before December 1, 2023.

If the Company experiences a change of control, the Company will be required to offer to purchase the Senior Notes at 101 % of their principal amount, plus accrued and unpaid interest to (but excluding) the date of repurchase.

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If an event of default exists and is continuing, the terms of the indenture permit the trustee or the holders of at least 25 % in principal amount of outstanding Senior Notes to declare the principal, premium, if any, and accrued but unpaid interest on all the Senior Notes to be due and payable.

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Other Lines of Credit

Other than its Facility, there were no other lines of credit available to the Company as of January 1, 2023.

Debt Issuance Costs

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These fees are amortized straight-line, which approximates the effective interest method, and over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are amortized.

As of January 1, 2023 and January 2, 2022, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 6.1 million and $ 7.1 million, respectively.

As of December 31, 2023 and January 1, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 4.4 million and $ 6.1 million, respectively.

Expenses related to such costs for the years 2023, 2022 and 2021 amounted to $ 1.7 million, $ 1.2 million, and $ 1.6 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 $ 1.8 million and $ 1.6 million, as of January 1, 2023 and January 2, 2022, respectively.

Debt issuance costs related to the issuance of revolving debt, which include underwriting, legal and other direct costs, net of accumulated amortization, were $ 1.4 million and $ 1.8 million, as of December 31, 2023 and January 1, 2023, respectively.

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

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(in thousands)

2023 $ 10,211

Thereafter 300,000

Total debt $ 421,658

Total long-term debt in the consolidated balance sheets includes a reduction for unamortized debt issuance costs of $ 4.4 million which are excluded from the maturities table above.

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NOTE 10 – DERIVATIVE INSTRUMENTS

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Cash Flow Interest Rate Swaps

The Company reports the changes in fair value of derivatives designated as hedging instruments as a component of other comprehensive income (or other comprehensive loss).

In the fourth quarter of 2020, the Company terminated its designated interest rate swap transactions with a total notional value of $ 250 million.

Hedge accounting was also discontinued at that time.

The termination resulted in a loss of $ 3.9 million recorded in interest expense in the consolidated statements of operations in 2020 as it was probable that a portion of the original forecasted transactions related to the portion of the hedged debt that was repaid will not occur by the end of the originally specified time period.

As of January 1, 2023 and January 2, 2022, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps, before tax, was $ 1.0 million and $ 3.8 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination.

We expect that approximately $ 1.0 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.

Forward Contracts

The Company, from time to time, is party to currency forward contracts designed to hedge the cash flow risk of intercompany sales from the manufacturing facility in Europe to the Americas.

The Company’s objective and strategy with respect to these currency forward contracts is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to receipt of payment on intercompany sales.

As of January 1, 2023 and January 2, 2022, there were no active forward currency contracts.

Derivative Transactions Not Designated as Hedging Instruments

Our EAAA segment, from time to time, purchases foreign currency options to economically hedge inventory purchases denominated in foreign currencies other than their functional currency.

The Company’s objective with respect to these foreign currency options is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to payment on inventory purchases.

These options are classified as non-designated derivative instruments.

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

As of January 1, 2023 and January 2, 2022, the Company had no outstanding foreign currency options.

The following table summarizes the impact that changes in the fair value of derivatives designated as cash flow hedges and included in the assessment of hedge effectiveness had on other comprehensive income (loss), net of tax:

(in thousands)

Interest rate swap contracts loss $ ( 2,027 )

Gains and losses from derivatives designated as cash flow hedges reclassified from accumulated other comprehensive loss into net income (loss) are discussed in Note 21 entitled “Items Reclassified From Accumulated Other Comprehensive Loss.”

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Losses recorded in accumulated other comprehensive loss for these terminated interest rate swaps are reclassified and recorded in the consolidated statements of operations to the extent it is probable that a portion of the original forecasted transactions related to the portion of the hedged debt repaid will not occur by the end of the originally specified time period.

See Note 21 entitled “Items Reclassified From Accumulated Other Comprehensive Loss” for additional information.

As of December 31, 2023, all amounts related to the terminated interest rate swaps have been recognized in the consolidated 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 11 – LEASES

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Our lease accounting may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.

As of January 1, 2023, there were no significant leases that had not commenced.

The table below represents a summary of the balances recorded in the consolidated balance sheets related to the Company’s leases as of January 1, 2023 and January 2, 2022:

January 1, 2023 January 2, 2022

As of December 31, 2023, there were no significant leases that had not commenced.

The table below represents a summary of the balances recorded in the consolidated balance sheets related to the Company’s leases as of December 31, 2023 and January 1, 2023:

December 31, 2023 January 1, 2023

Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases

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Total lease cost $ 25,629 $ 24,859 $ 28,182

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Other Supplemental Information

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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 January 1, 2023 and January 2, 2022:

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of December 31, 2023 and January 1, 2023:

End of Fiscal Year

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Present value discount ( 26,894 ) ( 874 )

Total lease liability $ 84,162 $ 6,239

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NOTE 12 – GOODWILL AND INTANGIBLE ASSETS

In 2021, the Company determined that it has two operating and reportable segments – namely AMS and EAAA.

Total lease liabilities

$ 90,616 $ 7,622

NOTE 12 – GOODWILL AND OTHER INTANGIBLE ASSETS

The Company has two operating and reportable segments – namely AMS and EAAA.

See Note 20 entitled “Segment Information” for additional information.

The Company tests goodwill for impairment at least annually at the reporting unit level.

The Company’s reporting units remain unchanged following the realignment of its operating segments and consist of (1) the Americas, (2) Europe, Middle East and Africa (“EMEA”), and (3) Asia-Pacific.

The Company’s reporting units consist of (1) the Americas, (2) Europe, Middle East and Africa (“EMEA”), and (3) Asia-Pacific.

The Americas reporting unit is the same as the AMS reportable segment, and the EMEA and Asia-Pacific reporting units are one level below the EAAA reportable segment.

During the fourth quarter of 2022, we performed our annual goodwill impairment testing.

T he Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, utilizing a combination of the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of our reporting units.

We test goodwill at the reporting unit level, which is an operating segment or one level below an operating segment.

In preparing the valuations, past, present and future expectations of performance were considered, including our expectations for the short-term and long-term impacts of macroeconomic conditions, including inflation, foreign currency exchange rates and our expected financial performance, including planned revenue and operating income of each reporting unit.

During the fourth quarter of 2023, we performed our annual quantitative goodwill impairment testing.

We focused our testing on the Americas reporting unit since it is the only reporting unit with an allocated goodwill balance.

The allocated goodwill balances for our EMEA and Asia-Pacific reporting units were written off in prior years as a result of goodwill impairment charges.

The Company performed limited procedures for our EMEA and Asia-Pacific reporting units during the 2023 goodwill testing to facilitate a reconciliation of market capitalization.

The annual quantitative goodwill impairment testing performed in 2023 for our Americas reporting unit was consistent with our prior year methodology.

T he Company prepared valuations for the Americas reporting unit on both a market comparable methodology and an income methodology, utilizing a combination of the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of the reporting unit.

In preparing the valuation, past, present and future expectations of performance were considered, including our expectations for the short-term and long-term impacts of macroeconomic conditions, including inflation, and our expected financial performance, including planned revenue and operating income for the Americas reporting unit.

The present value model requires management to estimate future cash flows, the timing of these cash flows, and a discount rate based on a weighted average cost of capital.

The discount rate used for each reporting unit ranged from 13.5 % to 14.0 %, which primarily fluctuated based on a country risk premium assigned to the geographical region of the reporting unit.

The discount rate used for the Americas reporting unit was 11.5 % in 2023 compared to 13.5 % in 2022, which fluctuated based on a risk premium assigned to estimates of expected future performance.

There is inherent uncertainty associated with key assumptions and estimates used in our impairment testing, including the impact of macroeconomic conditions.

As a result of our 2022 annual goodwill testing, we determined that the carrying value of our EMEA reporting unit exceeded its fair value and that the associated goodwill was impaired at the measurement date.

As a result of our 2023 annual goodwill impairment testing, we determined that the fair value of our Americas reporting unit exceeded its carrying value by 71 % at the 2023 m easurement date, and therefore no impairment was indicated.

The goodwill balance of $ 105.4 million at December 31, 2023 is allocated to our Americas reporting unit.

During the fourth quarter of 2022, the Company performed the annual goodwill impairment test, consistent with prior years.

The Company performed this test at the reporting unit level, which is an operating segment or one level below the operating segment level.

In performing the impairment testing for each reporting unit, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed.

In preparing the valuations, past, present and future expectations of performance were considered, including the ongoing impact of the COVID-19 pandemic in 2022.

As a result of our 2022 testing, we determined that the carrying value of our EMEA reporting unit exceeded its fair value and that the associated goodwill was impaired at the measurement date.

We recorded a goodwill impairment charge of $ 29.4 million in 2022 to write off all the goodwill allocated to our EMEA reporting unit, as the excess of carrying value over fair value exceeded the recorded amount of goodwill for the EMEA reporting unit.

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We determined that the fair value of our Americas reporting unit exceeded its carrying value by 71 % at the 2022 m easurement date, and therefore no impairment was indicated.

The remaining goodwill balance of $ 102.4 million at January 1, 2023 is allocated to our Americas reporting unit.

The goodwill balance allocated to our Asia-Pacific reporting unit was previously written off in connection with the 2020 goodwill impairment, as discussed below.

During the fourth quarters of 2021 and 2020, the Company performed the annual goodwill impairment test, consistent with the methodology discussed above.

The Company performed this test at the reporting unit level, which is an operating segment or one level below the operating segment level.

In performing the impairment testing, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed.

In preparing the valuations, past, present and future expectations of performance were considered, including the ongoing impact of the COVID-19 pandemic in 2021 and 2020.

Each of the Company’s reporting units maintained fair values in excess of their respective carrying values as of the measurement dates, and therefore no impairment was indicated as a result of the annual impairment testing in the fourth quarters of 2021 and 2020.

During the first quarter of 2020, we performed a qualitative assessment of goodwill impairment indicators, considering macroeconomic conditions related to the COVID-19 pandemic and its potential impact to net sales and operating income.

We expected that the duration of the COVID-19 pandemic and its adverse impacts on the global economy, global travel restrictions, COVID-19 related government shutdowns, disruptions to our supply chain, distribution disruption, and disruption to our customers’ plans to spend capital on projects that use our products and services would result in lower revenue and operating income.

As a result, we determined that there were indicators of impairment, and the Company proceeded with a quantitative assessment of goodwill for all reporting units at the end of the first quarter.

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In performing the quantitative goodwill impairment testing in the first quarter of 2020, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed.

Our reporting units were one level below our operating segment level.

In preparing the valuations, past, present and future expectations of performance were considered, including the impact of the COVID-19 pandemic.

This methodology was consistent with the approach used to perform the annual quantitative goodwill assessment in prior years.

The weighted average cost of capital used in the goodwill impairment testing ranged between 10.0 % and 10.5 %, which primarily fluctuated based on a country risk premium assigned to the geographical region of the reporting unit.

There is inherent uncertainty associated with key assumptions used in our impairment testing including the duration of the economic downturn associated with the COVID-19 pandemic and the recovery period.

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

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

As such, the goodwill impairment loss was allocated to our EMEA and Asia-Pacific reporting units in the amounts of $ 99.2 million and $ 17.3 million, respectively.

We determined that the goodwill in our Americas reporting unit was not impaired as the fair value exceeded the carrying value by more than 90 % at April 5, 2020.

The ending balances and the changes in the carrying amounts of goodwill allocated to each reportable segment for the years ended January 1, 2023 and January 2, 2022 are as follows:

The remaining goodwill balance of $ 102.4 million at January 1, 2023, was allocated to our Americas reporting unit.

The goodwill balance allocated to our Asia-Pacific reporting unit was previously written off in connection with the 2020 goodwill impairment.

During the fourth quarter of 2021, we performed the annual goodwill impairment test consistent with prior years and the methodology described above, and all reporting units that had a goodwill balance were noted to have a fair value that exceeded their carrying value.

The ending balances and the changes in the carrying amounts of goodwill allocated to each reportable segment for the years ended December 31, 2023 and January 1, 2023 are as follows (1) :

AMS EAAA Total

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Goodwill balance, at January 2, 2022

Foreign currency translation (1)

$ 108,505 $ 38,520 $ 147,025

Goodwill balance, at January 2, 2022 108,505 38,520 147,025

Impairment — ( 29,384 ) ( 29,384 )

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Goodwill balance, at January 1, 2023

102,417 — 102,417

Foreign currency translation (2)

3,031 — 3,031

Goodwill balance, at December 31, 2023

$ 105,448 $ — $ 105,448

(1) Goodwill balances are presented net of cumulative impairment losses of $ 358.5 million as of both December 31, 2023 and January 1, 2023, and $ 329.1 million as of January 2, 2022.

The cumulative impairment losses include impairment charges recognized prior to 2020 related to discontinued operations that were allocated to the current reportable segments on a proportionate basis.

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

Intangible Assets

Other Intangible Assets

During the fourth quarter of 2023, the Company performed its annual impairment testing of the trademark and trade name intangible assets and determined that no impairment existed at the 2023 measurement date.

In the fourth quarter of 2022, we determined that the trademark and trade name intangible assets related to the acquired nora business were impaired and recognized an impairment loss of $ 6.3 million .

The impairment loss consisted of charges of $ 3.6 million and $ 2.7 million attributable to the AMS and EAAA reportable segments, respectively.

In the first quarter of 2020, we determined that the trademark and trade name intangible assets related to the acquired nora business were also impaired and recognized an impairment loss of $ 4.8 million.

The impairment loss consisted of charges of $ 2.7 million and $ 2.1 million attributable to the AMS and EAAA reportable segments, respectively.

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The Company’s intangible assets other than goodwill consisted of the following as of January 1, 2023 and January 2, 2022 (1) :

January 1, 2023 January 2, 2022

The Company’s intangible assets other than goodwill consisted of the following as of December 31, 2023 and January 1, 2023:

December 31, 2023 January 1, 2023

Gross Carrying Amount Accumulated Impairment Accumulated Amortization Net Carrying Amount Gross Carrying Amount

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(1) Certain intangible asset balances are subject to changes attributable to foreign currency translation.

(2) Net of a $ 3.3 million write off for fully amortized backlog intangible assets.

Amortization expense related to intangible assets during the years 2023, 2022 and 2021 was $ 5.2 million, $ 5.0 million and $ 5.6 million, respectively, and is recorded in cost of sales in the consolidated statements of operations.

Amortization expense related to intangible assets is expected to be approximately $ 5 million per year for fiscal years 2023 and 2024 and approximately $ 3 million for fiscal year 2025.

The developed technology intangible asset will be amortized over its estimated useful life, which ends in fiscal year 2025.

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Amortization expense related to intangible assets is expected to be approximately $ 5 million for fiscal year 2024 and approximately $ 3 million for fiscal year 2025.

The developed technology intangible asset is amortized over its estimated useful life, which ends in fiscal year 2025.

NOTE 13 – PREFERRED STOCK

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In addition, any issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company.

As of January 1, 2023 and January 2, 2022, there were no shares of preferred stock issued.

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As of December 31, 2023, and January 1, 2023, there were no shares of preferred stock issued.

NOTE 14 – SHAREHOLDERS’ EQUITY

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The Company’s Common Stock is traded on the Nasdaq Global Select Market under the symbol TILE.

The Company paid cash dividends totaling $ 0.04 per share in both 2022 and 2021, and $ 0.095 per share in 2020, to each share of Common Stock, including participating securities.

The Company paid cash dividends totaling $ 0.04 per share, including participating securities in each of years 2023, 2022 and 2021.

The future declaration and payment of dividends is at the discretion of the Company’s Board, and depends upon, among other things, the Company’s investment policy and opportunities, results of operations, financial condition, cash requirements, future prospects, and other factors that may be considered relevant at the time of the Board’s determination.

Such other factors include limitations contained in the agreement for its Syndicated Credit Facility and the indenture governing its 5.50% Senior Notes due 2028, which specify conditions as to when any dividend payments may be made.

As such, the Company may discontinue its dividend payments in the future if its Board determines that a cessation of dividend payments is proper in light of the factors indicated above.

As such, the Company may discontinue its dividend payments in the future if its Board determines that a cessation of dividend payments is appropriate in light of the factors indicated above.

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 pursuant to this program during 2023.

During 2022, the Company repurchased and retired an aggregate of 1,383,682 shares, at a weighted average price of $ 12.41 per share, pursuant to this program.

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Net income — — — 44,517 — — — 44,517

Issuances of stock related to restricted share units and performance shares

85 8 ( 8 ) — — — — —

Restricted stock issuances 107 11 749 — — — — 760

Unamortized compensation expense related to restricted stock awards — — ( 6,549 ) — — — —

Unrecognized compensation expense related to restricted stock awards

— — ( 760 ) — — — — ( 760 )

Cash dividends declared — — — ( 2,323 ) — — — ( 2,323 )

Compensation expense related to stock awards, net of forfeitures and shares received for tax withholdings ( 66 ) ( 6 ) 8,132 — — — —

Share repurchases ( 1,384 ) ( 138 ) ( 17,033 ) — — — —

Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings

( 186 ) ( 19 ) 8,769 — — — — 8,750

Pension liability adjustment — — — — ( 6,468 ) — — ( 6,468 )

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Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 749 749

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

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Balance, at December 31, 2023 58,112 $ 5,811 $ 252,909 $ 320,833 $ ( 34,016 ) $ ( 119,590 ) $ — $ 425,947

SHARES COMMON STOCK ADDITIONAL

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Restricted stock issuances 501 50 6,499 — — — — 6,549

Unamortized compensation expense related to restricted stock awards — — ( 6,109 ) — — — —

Unrecognized compensation expense related to restricted stock awards

— — ( 6,549 ) — — — — ( 6,549 )

Cash dividends declared — — — ( 2,355 ) — — — ( 2,355 )

Compensation expense related to stock awards, net of forfeitures ( 38 ) ( 3 ) 5,233 — — — —

Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 66 ) ( 6 ) 8,132 — — — — 8,126

Share repurchases ( 1,384 ) ( 138 ) ( 17,033 ) — — — — ( 17,171 )

Pension liability adjustment — — — — 26,340 — — 26,340

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LIABILITY FOREIGN

ADJUSTMENT CASH FLOW HEDGE

ADJUSTMENT CASH FLOW

(in thousands)

Balance, at December 29, 2019 58,416 $ 5,842 $ 250,306 $ 286,056 $ ( 56,700 ) $ ( 113,139 ) $ ( 4,163 )

Net loss — — — ( 71,929 ) — — —

Issuances of stock (other than restricted stock) 239 24 195 — — — —

Balance, at January 3, 2021 58,664 $ 5,865 $ 247,920 $ 208,562 $ ( 69,288 ) $ ( 60,331 ) $ ( 6,190 ) $ 326,538

— — — 55,234 — — — 55,234

Restricted stock issuances 429 43 6,066 — — — — 6,109

Unamortized compensation expense related to restricted stock awards — — ( 4,030 ) — — — —

Unrecognized compensation expense related to restricted stock awards

— — ( 6,109 ) — — — — ( 6,109 )

Cash dividends declared — — — ( 2,362 ) — — — ( 2,362 )

Compensation expense related to stock awards, net of forfeitures ( 295 ) ( 31 ) ( 2,550 ) — — — —

Compensation expense related to share-based plans, net of forfeitures

( 38 ) ( 3 ) 5,233 — — — — 5,230

Pension liability adjustment — — — — 15,400 — — 15,400

Foreign currency translation adjustment — — — — — ( 40,110 ) — ( 40,110 )

Cash flow hedge unrealized loss — — — — — — ( 2,027 )

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 3,468 3,468

Balance, at January 2, 2022 59,055 $ 5,905 $ 253,110 $ 261,434 $ ( 53,888 ) $ ( 100,441 ) $ ( 2,722 ) $ 363,398

Stock Incentive Plans

The Company has stock incentive plans under which a committee of independent directors is authorized to grant directors and key employees, including officers, restricted stock, incentive stock options, nonqualified stock options, stock appreciation rights, deferred shares, performance shares and performance units.

In May 2015, the shareholders approved an amendment and restatement of the then-existing Omnibus Stock Incentive Plan.

This amendment and restatement extended the term of the Omnibus Plan and set the number of shares authorized for issuance or transfer on or after the effective date of the amendment and restatement at 5,161,020 shares, except that each share issued under the 2015 plan pursuant to an award other than a stock option reduced the number of such authorized shares by 1.33 shares.

In May 2020, the shareholders approved the adoption of a new 2020 Omnibus Stock Incentive Plan (“2020 Omnibus Plan”).

The aggregate number of shares of common stock that may be issued or transferred under the 2020 Omnibus Plan on or after the effective date of the plan is 3,700,000 (and the 1.33 multiplier discussed in the paragraph immediately above was eliminated).

Stock Incentive Plan

The Company has a stock incentive plan under which a committee of independent directors is authorized to grant directors and key employees, including officers, restricted stock, incentive stock options, nonqualified stock options, stock appreciation rights, restricted share units and performance shares.

In May 2020, the shareholders approved the adoption of the 2020 Omnibus Stock Incentive Plan (“2020 Omnibus Plan”).

The aggregate number of shares of common stock that may be issued or transferred under the 2020 Omnibus Plan on or after the effective date of the plan is 3,700,000 .

No award may be granted after the tenth anniversary of the effective date of the 2020 Omnibus Plan.

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Accounting standards require that the Company measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair market value of the award.

That expense will be recognized over the period that the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award.

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.

Stock Options

Stock options are exercisable for shares of Common Stock at a price not less than 100 % of the fair market value on the date of grant.

The options become exercisable either immediately upon the grant date or ratably over a time period ranging from one to five years from the date of the grant.

The Company’s options expire at the end of time periods ranging from three to ten years from the date of the grant.

There was no stock option compensation expense during 2022, 2021 or 2020.

There were no stock options outstanding or exercisable as of January 1, 2023 or January 2, 2022.

For certain restricted stock and restricted share unit 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.

Restricted Stock Awards

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The expense related to awards of restricted stock is captured in SG&A expenses in the consolidated statements of operations.

The following table summarizes restricted stock outstanding as of January 1, 2023, as well as activity during the year:

Restricted Shares Weighted Average

The following table summarizes restricted stock outstanding as of December 31, 2023, as well as activity during the year:

Restricted Shares Weighted Average Grant Date Fair Value

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

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Forfeited or canceled ( 16,800 ) 13.60

Outstanding at December 31, 2023 691,600 $ 12.55

As of December 31, 2023, the unrecognized total compensation cost related to unvested restricted stock was $ 1.8 million.

That cost is expected to be recognized over a weighted-average remaining vesting period of 0.7 years.

Restricted Share Unit Awards

During fiscal year 2023, the Company granted awards for 596,200 restricted share units to certain employees pursuant to the Company’s 2020 Omnibus Plan.

There were no restricted share unit awards granted during 2022 or 2021.

The weighted average grant date fair value of the restricted share units granted during 2023 was $ 10.36 .

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 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.

Compensation expense related to the restricted share units was $ 1.9 million for 2023.

There was no compensation expense related to restricted share unit awards during 2022 or 2021.

These grants are made primarily to executive-level personnel at the Company and, as a result, no compensation costs have been capitalized.

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

The expense related to awards of restricted share units is captured in SG&A expenses in the consolidated statements of operations.

The following table summarizes restricted share units outstanding as of December 31, 2023, as well as activity during the year:

Restricted Share Units

Weighted Average Grant Date Fair Value

Outstanding at January 1, 2023 — $ —

As of January 1, 2023, the unrecognized total compensation cost related to unvested restricted stock was $ 5.8 million.

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

596,200 10.36

( 2,100 ) 10.80

Forfeited or canceled

( 10,700 ) 10.80

Outstanding at December 31, 2023 583,400 $ 10.35

As of December 31, 2023, the unrecognized total compensation cost related to unvested restricted share units was $ 4.1 million.

That cost is expected to be recognized over a weighted-average remaining vesting period of 2.1 years.

Performance Share Awards

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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.

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The following table summarizes the performance shares outstanding as of January 1, 2023, as well as the activity during the year:

Performance Shares Weighted

Average Grant

Date Fair Value

The following table summarizes the performance shares outstanding as of December 31, 2023, as well as the activity during the year:

Performance Shares Weighted Average Grant Date Fair Value

Outstanding at January 1, 2023 923,600 $ 13.91

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Forfeited or canceled ( 193,800 ) 14.79

Outstanding at January 1, 2023 923,600 $ 13.91

Compensation expense (benefit) related to the performance shares for 2022, 2021 and 2020 was $ 3.2 million, $ 1.7 million and $( 1.8 ) million, respectively.

Outstanding at December 31, 2023 1,115,000 $ 12.36

Compensation expense related to the performance shares for 2023, 2022 and 2021 was $ 3.9 million, $ 3.2 million and $ 1.7 million, 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 $ 7.6 million as of January 1, 2023.

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

The tax benefit recognized with respect to restricted stock and performance shares was $ 0.8 million, $ 0.7 million, and $ 0.6 million in 2022, 2021 and 2020, respectively.

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Unrecognized compensation expense related to these performance shares was approximately $ 5.9 million as of December 31, 2023.

The amount and timing of future compensation expense will depend on the performance of the Company.

The compensation expense related to these outstanding performance shares is expected to be recognized over a weighted-average remaining vesting period of 1.7 years.

The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was $ 0.9 million, $ 0.8 million, and $ 0.7 million in 2023, 2022 and 2021, respectively.

NOTE 15 – EARNINGS PER SHARE

The Company calculates basic and diluted earnings per common share using the two-class method.

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) by the weighted average common shares outstanding, including participating securities outstanding, during the period as depicted below.

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.

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.

Income attributable to non-controlling interest is included in the computation of basic and diluted earnings per share, where applicable.

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 common shares outstanding in the basic and diluted EPS calculations when the inclusion of these shares would be dilutive.

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.

Any unvested stock awards considered non-participating securities are included in diluted EPS calculations when the inclusion of these shares would be dilutive.

Unvested share-based awards of restricted stock are paid dividends equally with all other shares of common stock.

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(in thousands, except per share data)

Net income (loss) $ 19,560 $ 55,234 $ ( 71,929 )

$ 44,517 $ 19,560 $ 55,234

distributed and undistributed earnings available to participating securities ( 569 ) ( 323 ) ( 602 )

Distributed and undistributed earnings (loss) available to common shareholders $ 19,237 $ 54,632 $ ( 71,971 )

Distributed and undistributed earnings available to common shareholders

$ 43,948 $ 19,237 $ 54,632

Weighted average shares outstanding 57,349 57,893 58,328

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Shares for basic EPS 58,092 58,865 58,971

Dilutive effect of non-participating securities

Shares for diluted EPS 58,335 58,865 58,971

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Diluted EPS $ 0.76 $ 0.33 $ 0.94

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NOTE 16 – RESTRUCTURING AND OTHER CHARGES

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

For 2023, 657,391 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 period.

NOTE 16 – RESTRUCTURING AND OTHER

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

2023 2022 2021

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EAAA ( 2,502 ) 1,965 3,622

Total restructuring, asset impairment and other charges $ 1,965 $ 3,621 $ ( 4,626 )

A summary of the restructuring reserve balance, recorded within accrued expenses in the consolidated balance sheets, for the 2021, 2019 and 2018 restructuring plans is presented below:

Workforce Reduction Retention Bonuses Other Exit Costs Asset Impairment and Other Related Charges

2021 Plan 2019 Plan 2018 Plan 2021 Plan 2019 Plan 2018 Plan 2021 Plan Total

Total restructuring, asset impairment, other (gains) and charges

$ ( 2,502 ) $ 1,965 $ 3,621

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

Workforce Reduction Retention Bonuses Asset Impairment and Other Related Charges

2021 Plan 2019 Plan 2021 Plan 2021 Plan Total

(in thousands)

Balance, at December 29, 2019 $ — $ 8,634 $ 1,898 $ — $ 139 $ 774 $ — $ 11,445

Balance, at January 3, 2021 $ — $ 1,064 $ — $ — $ 1,064

Charged to expenses 2,257 ( 286 ) — 1,650 3,621

Deductions — ( 681 ) — — ( 681 )

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

Balance, at January 2, 2022 2,257 97 — — 2,354

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

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

Below is a discussion of the restructuring plan activities under the 2021, 2019 and 2018 restructuring plans.

Balance, at December 31, 2023 $ — $ — $ — $ — $ —

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

2021 Restructuring Plan

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

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

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

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

Expected charges and cumulative charges incurred to date under the 2021 restructuring plan are as follows:

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

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

In addition, during 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 statements of operations.

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

The Company expects to complete the restructuring plan in the first quarter of 2023 and expects the plan to yield annualized savings of approximately $ 1.7 million.

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

The Company recognized a gain of $ 2.7 million on the sale of the Thailand facility during 2023.

See Note 7 entitled “Property, Plant and Equipment” for additional information.

During 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 statements of operations.

The Company completed the 2021 restructuring plan in the second quarter of 2023, following the sale of the Thailand facility, as described in Note 7 entitled “Property, Plant and Equipment,” and expected the plan to yield annualized savings of approximately $ 1.7 million.

A portion of the annualized savings was realized in the consolidated statements of operations in 2022, with the remaining portion of the annualized savings realized in 2023.

2019 Restructuring Plan

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

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

The plan involved a reduction of approximately 105 employees and early termination of two office leases.

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A portion of the annualized savings was realized in the consolidated statements of operations in 2020, with the remaining portion of the annualized savings realized in 2021.

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2018 Restructuring Plan

On December 29, 2018, the Company committed to a restructuring plan in its continuing efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy.

The plan involved (i) a restructuring of its sales and administrative operations in the United Kingdom, (ii) a reduction of approximately 200 employees, primarily in the Europe and Asia-Pacific geographic regions, and (iii) the write-down of certain underutilized and impaired assets that included information technology assets and obsolete manufacturing equipment.

As a result of this plan, the Company recorded a pre-tax restructuring and asset impairment charge in the fourth quarter of 2018 of approximately $ 20.5 million (comprised of $ 7.7 million attributable to the AMS reportable segment and $ 12.8 million attributable to the EAAA reportable segment).

The charge was comprised of severance expenses (approximately $ 10.8 million), impairment of assets (approximately $ 8.6 million) and other items (approximately $ 1.1 million).

The charge was expected to result in future cash expenditures of $ 12.0 million, primarily for severance payments (approximately $ 10.8 million).

In the third quarter of 2019, the Company recorded $ 0.7 million of restructuring charges related to additional lease exit costs in connection with the restructuring plan announced on December 29, 2018.

In the fourth quarter of 2019, the Company adjusted its previously recorded severance expenses in connection with the 2018 restructuring plan and recognized a reduction in restructuring costs of $ 1.7 million in 2019.

In 2020, the Company further adjusted its previously recorded severance expenses and other exit costs and recognized a reduction in restructuring costs of $ 0.9 million.

The restructuring plan was completed as of January 3, 2021.

Cumulative charges under the 2018 restructuring plan, net of reductions of previously recognized charges, were $ 6.4 million within the AMS reportable segment and $ 12.1 million within the EAAA reportable segment.

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NOTE 17 – INCOME TAXES

Income (loss) before income taxes consisted of the following:

Income before income taxes consisted of the following:

2023 2022 2021

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Foreign operations 60,043 30,159 68,173

Income (loss) before income taxes $ 41,917 $ 72,633 $ ( 79,420 )

Income before income taxes

$ 63,654 $ 41,917 $ 72,633

Provisions for federal, foreign and state income taxes in the consolidated statements of operations consisted of the following components:

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(in thousands)

Current expense (benefit):

Current expense:

Federal $ 5,523 $ 1,624 $ 1,987

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State 2,167 1,307 1,418

Current expense (benefit) 23,834 24,777 ( 7,625 )

Deferred expense (benefit):

Current expense

26,020 23,834 24,777

Deferred (benefit) expense:

Federal ( 4,810 ) 346 ( 2,841 )

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State ( 861 ) 230 ( 691 )

Deferred expense (benefit) ( 1,477 ) ( 7,378 ) 134

Total income tax expense (benefit) $ 22,357 $ 17,399 $ ( 7,491 )

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Deferred benefit

( 6,883 ) ( 1,477 ) ( 7,378 )

Total income tax expense

$ 19,137 $ 22,357 $ 17,399

The Company’s effective tax rate was 30.1 %, 53.3 % and 24.0 % for fiscal years 2023, 2022 and 2021, respectively.

The following summary reconciles income taxes at the U.S.

federal statutory rate of 21 % applicable for all periods presented to the Company’s actual income tax expense (benefit):

federal statutory rate of 21 % applicable for all periods presented to the Company’s actual income tax expense:

2023 2022 2021

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tax effects attributable to foreign operations 1,537 3,528 1,748

Expiring tax attributes

Valuation allowance effect ( 879 ) 2,898 1,349

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Other 43 ( 130 ) 592

Income tax expense (benefit) $ 22,357 $ 17,399 $ ( 7,491 )

Income tax expense

$ 19,137 $ 22,357 $ 17,399

On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was signed into law, with tax provisions primarily focused on implementing a 15 % minimum tax on global adjusted financial statement income (“AFSI”) for corporations with average AFSI exceeding $ 1 billion over a three-year period, a 1 % excise tax on share repurchases and various climate and clean energy tax incentives.

While we continue to evaluate the impacts of the Inflation Reduction Act, it is not expected to have a material impact on the Company’s financial statements.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic and provides certain tax relief to businesses.

Tax provisions of the CARES Act include, among other things, the deferral of certain payroll taxes, relief for retaining employees, and certain income tax provisions for corporations.

For the year ended January 3, 2021, the Company deferred $ 4.1 million in payroll taxes under the CARES Act which was paid as of January 2, 2022.

In addition, for the year ended January 3, 2021, the Company benefited from the relaxed 163(j) limitation and the technical correction related to depreciation of leasehold improvements, both of which did not have a material impact on the Company’s effective tax rate for that year.

Some of the provisions of the CARES Act, including the deferral of certain payroll taxes and the relaxed 163(j) limitation, are not applicable for tax years after 2020, and as a result the Company did not benefit from these provisions for the years ended January 1, 2023 and January 2, 2022.

Deferred income taxes for the years ended January 1, 2023 and January 2, 2022, reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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The Inflation Reduction Act did not have a material impact on the Company’s financial statements for the year ended December 31, 2023.

On December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15 %.

The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax.

Many non-U.S.

tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years.

We are still closely monitoring developments and evaluating the potential impact on future periods.

Deferred income taxes for the years ended December 31, 2023 and January 1, 2023, reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

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Capitalized costs 9,442 7,467

Pensions — 6,431

Deferred tax asset, gross 79,774 77,034

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Net deferred tax liabilities $ 12,111 $ 20,895

Management believes, based on the Company’s history of taxable income and expectations for the future, that it is more likely than not that future taxable income will be sufficient to fully utilize the federal deferred tax assets at January 1, 2023.

Beginning in 2018, the Company has elected to account for tax effects of the global intangible low-taxed income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Internal Revenue Code Section 163(j) interest limitation (“Interest Limitation”) and base-erosion and anti-abuse tax (“BEAT”) provisions included in the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) in the period when incurred, and therefore has not provided any deferred tax impacts for these provisions in its consolidated financial statements.

As of January 1, 2023, the Company has approximately $ 10.9 million of foreign tax credit carryforwards with expiration dates through 2032.

As of December 31, 2023, the Company has approximately $ 7.9 million of foreign tax credit carryforwards with expiration dates through 2033.

A full valuation allowance has been provided as the Company does not expect to utilize these foreign tax credits before the expiration dates.

As of January 1, 2023, the Company has approximately $ 162.8 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2042 and has provided a valuation allowance against $ 100.3 million of such losses, which the Company does not expect to utilize.

In addition, as of January 1, 2023, the Company has approximately $ 21.2 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided.

As of January 1, 2023, and January 2, 2022, non-current deferred tax assets were reduced by approximately $ 2.8 million of unrecognized tax benefits.

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As of December 31, 2023, the Company has approximately $ 192.1 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2043 and has provided a valuation allowance against $ 129.6 million of such losses, which the Company does not expect to utilize.

In addition, as of December 31, 2023, the Company has approximately $ 15.6 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided.

During fiscal year 2023, the Company had approximately $ 3.8 million in tax attributes with a full valuation allowance related to foreign tax credit carryforwards and foreign net operating loss carryforwards that expired.

As a result, the expiration of these tax attributes did not have an impact on the Company’s effective tax rate for fiscal year 2023.

As of December 31, 2023, and January 1, 2023, non-current deferred tax assets were reduced by approximately $ 2.8 million of unrecognized tax benefits.

Historically, the Company has not provided for U.S.

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The Company provided for U.S.

income taxes and foreign withholding taxes on these earnings at January 1, 2023 and January 2, 2022.

income taxes and foreign withholding taxes on these earnings at December 31, 2023 and January 1, 2023.

Although the Tax Act created a dividends received deduction that generally eliminates additional U.S.

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In the event the Company determines not to continue to assert that all or part of its undistributed earnings in its non-U.S.

subsidiaries are permanently reinvested, an actual repatriation from its non-U.S.

subsidiaries are permanently reinvested, an actual repatriation of earnings from its non-U.S.

subsidiaries could still be subject to additional foreign withholding and U.S.

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The adjustments result from the interest rate applied in the intra-group financing arrangement between a Company subsidiary in the U.K.

and the Netherlands.

and another in the Netherlands.

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

to initiate a mutual agreement procedure (“MAP”) related to the double taxation arising from the HMRC adjustments.

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

The Company recognized the adjustments in 2022, based on the outcome of the MAP.

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

As of January 1, 2023, and January 2, 2022, the Company had $ 5.7 million and $ 8.2 million, respectively, of unrecognized tax benefits.

For the years ended January 1, 2023 and January 2, 2022, the Company recognized as income tax benefits $ 2.5 million and $ 2.7 million, respectively, of previously unrecognized tax benefits.

It is reasonably possible that approximately $ 0.9 million of unrecognized tax benefits may be recognized within the next 12 months.

If any of the $ 5.7 million of unrecognized tax benefits as of January 1, 2023 are recognized, there would be a favorable impact on the Company’s effective tax rate of approximately $ 5.0 million in future periods.

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

The Company recognized the adjustments from the 2012-2017 MAP in 2022.

In March of 2023, the Company filed requests with both the Competent Authority in the Netherlands and in the U.K.

to initiate a MAP for tax years 2018 through 2020 related to the double taxation arising from the application of the HMRC interest rate adjustments that were the subject of the 2012-2017 MAP.

In September 2023, the Competent Authorities reached an agreement on the interest rate to be applied for the years 2018 through 2020.

The Company recognized the adjustments from the 2018-2020 MAP in 2023.

The recognition of the adjustments in both 2022 and 2023 did not have a material impact on the Company’s effective tax rate or its financial position.

As of December 31, 2023, and January 1, 2023, the Company had $ 4.9 million and $ 5.7 million, respectively, of unrecognized tax benefits.

For the years ended December 31, 2023 and January 1, 2023, the Company recognized as income tax benefits $ 0.1 million and $ 2.5 million, respectively, of previously unrecognized tax benefits.

While it is reasonably possible that some of the unrecognized tax benefits will be recognized within the next 12 months, the Company does not expect the recognition of such amounts will have a material impact on the Company’s financial results.

If any of the $ 4.9 million of unrecognized tax benefits as of December 31, 2023 are recognized, there would be a favorable impact on the Company’s effective tax rate of approximately $ 4.9 million in future periods.

If the unrecognized tax benefits are not favorably settled, $ 2.1 million of the total amount of unrecognized tax benefits would require the use of cash in future periods.

The Company recognizes accrued interest and income tax penalties related to unrecognized tax benefits as a component of income tax expense.

As of January 1, 2023, the Company had accrued interest and penalties of $ 0.4 million, which is included in the total unrecognized tax benefit noted above.

Accrued interest and penalties were $ 0.4 million as of December 31, 2023 and were included in the total unrecognized tax benefit noted above.

The timing of the ultimate resolution of the Company’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside the Company’s control.

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A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:

9 unchanged sentences

Balance at end of year $ 4,948 $ 5,743 $ 8,220

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NOTE 18 – COMMITMENTS AND CONTINGENCIES

14 unchanged sentences

Among other unspecified relief, Mr.

Gould seeks in excess of $ 10 million in damages for the breach of contract claim and $ 100 million for each of the other claims, as well as attorneys’ fees.

Gould sought in excess of $ 10 million in damages for the breach of contract claim and $ 100 million for each of the other claims, as well as attorneys’ fees.

The Court granted judgment on the pleadings in favor of the Company on Mr.

6 unchanged sentences

Gould of the summary judgment order was remanded by the 11th Circuit Court of Appeals back to the District Court as premature.

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.

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, and that appeal remains pending.

The Company believes Mr.

Gould’s lawsuit 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.

Putative Class Action Lawsuit

As previously reported, the Securities & Exchange Commission (the “SEC”) conducted an investigation into the Company’s historical quarterly earnings per share calculations and rounding practices during the period 2014-2017.

In the third quarter of 2020, the Company successfully reached a settlement with the SEC in this matter.

The Company consented to the entry of an order by the SEC which states, among other things, that the Company was negligent in making certain accounting entries in 2015 and 2016.

As part of the settlement, the Company did not admit or deny any wrongdoing.

The Company paid a $ 5.0 million fine to resolve the matter, and was ordered to cease-and-desist from violating certain federal securities laws.

On November 12, 2020, the Company, the Company’s former president and chief executive officer, and its current chief financial officer and chairman were named as defendants in a lawsuit filed in the United States District Court for the Eastern District of New York, Swanson v.

On November 12, 2020, the Company and certain former and current officers were named as defendants in a lawsuit filed in the United States District Court for the Eastern District of New York, Swanson v.

Interface, Inc.

(case :120-cv-05518).

The lawsuit is a federal securities law putative class action that alleges that the defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies.

The specific allegations relate to the subject matter of the concluded SEC investigation described above.

The complaint does not quantify the damages sought.

The Court has appointed a lead plaintiff, which filed an Amended Complaint that, among other things, added the Company’s former chief financial officer as a defendant.

As in the original complaint, the allegations in the Amended Complaint relate to the subject matter of the concluded SEC investigation described above.

The Company filed a motion to dismiss the Amended Complaint, and that motion was denied by the Court on June 6, 2022.

The Company filed its Answer to the Amended Complaint on July 21, 2022.

Discovery in the case is proceeding.

The Company believes the putative class action is without merit and that the Company has good defenses to it.

The Company intends to defend itself vigorously against the action.

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The lawsuit was a federal securities law putative class action that alleged that the defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies.

The specific allegations related to the subject matter of a previously disclosed and concluded SEC investigation.

The complaint did not quantify the damages sought.

In 2023, the parties settled the lawsuit for $ 7.5 million, and the Company’s insurers funded the settlement amount.

NOTE 19 – EMPLOYEE BENEFIT PLANS

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employees with at least six months of service.

The 401(k) Plan calls for Company matching contributions on a sliding scale based on the level of the employee’s contribution.

The 401(k) Plan provides Company matching contributions on a sliding scale based on the level of the employee’s contribution.

The Company may, at its discretion, make additional contributions to the 401(k) Plan based on the attainment of certain performance targets by its subsidiaries.

2 unchanged sentences

Under the Company’s nonqualified savings plans (“NSPs”), the Company provides eligible employees the opportunity to enter into agreements for the deferral of a specified percentage of their compensation, as defined in the NSPs.

The NSPs call for Company matching contributions on a sliding scale based on the level of the employee’s contribution.

The NSPs provide Company matching contributions on a sliding scale based on the level of the employee’s contribution.

The obligations of the Company under such agreements to pay the deferred compensation in the future in accordance with the terms of the NSPs are unsecured general obligations of the Company.

2 unchanged sentences

If a change in control of the Company occurs, as defined in the NSPs, the Company will contribute an amount to the rabbi trust sufficient to pay the obligation owed to each participant.

The deferred compensation liability in connection with the NSPs totaled $ 27.5 million and $ 34.2 million at January 1, 2023 and January 2, 2022, respectively.

The Company invests the deferrals in insurance instruments with readily determinable cash surrender values and in exchange traded mutual funds beginning in fiscal 2021.

The value of the insurance instruments was $ 16.6 million and $ 20.0 million as of January 1, 2023 and January 2, 2022, respectively.

The fair value of the mutual fund investments at January 1, 2023 and January 2, 2022 was $ 11.0 million and $ 15.6 million, respectively.

In 2020, the Company temporarily suspended its 401(k) and NSP matching contributions described above.

These employer matching contributions were resumed in 2021.

The deferred compensation liability in connection with the NSPs totaled $ 28.2 million and $ 27.5 million at December 31, 2023 and January 1, 2023, respectively.

The Company invests the deferrals in insurance instruments with readily determinable cash surrender values and in exchange traded mutual funds.

The value of the insurance instruments was $ 19.2 million and $ 16.6 million as of December 31, 2023 and January 1, 2023, respectively.

The fair value of the mutual fund investments at December 31, 2023 and January 1, 2023 was $ 9.2 million and $ 11.0 million, respectively.

Multiemployer Plan

2 unchanged sentences

Active participants no longer accrue benefits after December 31, 2019, and instead participate in the Industry-Wide Pension Fund (the “IWPF”) multi-employer plan beginning in fiscal year 2020.

During 2022, 2021 and 2020, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 2.4 million, $ 2.6 million and $ 2.5 million, respectively.

During 2023, 2022 and 2021, the Company recorded multi-employer pension expense related to multiemployer contributions of $ 2.7 million, $ 2.4 million and $ 2.6 million, respectively.

The Company’s contributions into the IWPF are less than 5 % of total plan contributions.

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The Company will fund the cost to guarantee vested benefits and this amount is recorded as an obligation on the Company’s consolidated balance sheets.

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As discussed above, the Company still has an obligation to pay vested benefits in the frozen Dutch Plan.

As of January 1, 2023, the under-funded status of the Dutch Plan of $ 5.5 million is recorded on the consolidated balance sheet in other long-term liabilities.

As of December 31, 2023, the under-funded status of the Dutch Plan of $ 5.7 million is recorded on the consolidated balance sheet in other long-term liabilities.

Pension expense for our three European defined benefit plans was $ 1.3 million, $ 2.0 million, and $ 2.5 million for the years 2023, 2022 and 2021, respectively.

Plan assets are primarily invested in insurance contracts and fixed income securities.

As of January 1, 2023, for the European plans, the Company had a net liability recorded of $ 8.0 million, an amount equal to their under-funded status, and had recorded in accumulated other comprehensive loss an amount equal to $ 23.7 million (net of taxes of approximately $ 4.3 million) related to the future amounts to be recorded in net periodic benefit costs.

As of December 31, 2023, for the European plans, the Company had a net liability recorded of $ 15.1 million, an amount equal to their under-funded status, and had recorded in accumulated other comprehensive loss an amount equal to $ 29.9 million (net of taxes of approximately $ 8.1 million) related to the future amounts to be recorded in net periodic benefit costs.

In the next fiscal year, approximately $ 1.3 million will be reclassified from accumulated other comprehensive loss into net periodic benefit cost.

6 unchanged sentences

Benefits and expenses paid ( 10,832 ) ( 9,890 )

Actuarial gain ( 96,556 ) ( 19,723 )

Actuarial loss (gain)

12,760 ( 96,556 )

Currency translation adjustment 8,433 ( 27,155 )

9 unchanged sentences

Amounts recognized in consolidated balance sheets:

Other assets $ 26,586 $ 10,975

$ 25,235 $ 26,586

Current liabilities

( 1,182 ) ( 1,032 )

Other long-term liabilities, net of current portion

( 39,133 ) ( 33,509 )

Under-funded status at end of fiscal year $ ( 15,080 ) $ ( 7,955 )

1 unchanged sentence

Unrecognized actuarial loss $ 29,918 $ 23,737

Unamortized prior service credits — —

Total amount recognized $ 23,737 $ 45,209

Total amount recognized, end of year

$ 29,918 $ 23,737

Accumulated benefit obligation $ 214,428 $ 195,440

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The above disclosure represents the aggregation of information related to the Company’s three defined benefit plans which cover many of its European employees.

The decrease in the projected benefit obligation of $ 129.0 million for 2022 compared to prior year was primarily due to the increase in the discount rates used to measure the obligation and the impact of foreign currency translation due to the weakening of the Euro and British Pound sterling against the U.S.

The increase in the projected benefit obligation of $ 19.0 million for 2023 compared to prior year was primarily due to a decrease in the weighted average discount rate used to measure the obligation and the impact of foreign currency translation due to the strengthening of the Euro and British Pound sterling against the U.S.

dollar in 2023.

As of January 1, 2023, one of these plans, which primarily covers certain employees in the United Kingdom (the “UK Plan”), had assets in excess of the accumulated benefit obligation.

The accumulated benefit obligation of the Dutch Plan exceeded plan assets as of January 1, 2023.

The nora Plan is an unfunded defined benefit plan and the accumulated benefit obligation exceeded plan assets as of January 1, 2023.

The following table summarizes this information as of January 1, 2023 and January 2, 2022.

As of December 31, 2023, one of these plans, which primarily covers certain employees in the United Kingdom (the “UK Plan”), had assets in excess of the accumulated benefit obligation.

The accumulated benefit obligation of the Dutch Plan exceeded plan assets as of December 31, 2023.

The nora Plan is an unfunded defined benefit plan and the accumulated benefit obligation exceeded plan assets as of December 31, 2023.

The following table summarizes this information as of December 31, 2023 and January 1, 2023.

End of Fiscal Year

18 unchanged sentences

Net periodic benefit cost $ 1,299 $ 1,994 $ 2,544

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

During 2022, other comprehensive loss was impacted by a net gain of approximately $ 17.1 million (net of $ 10.0 million of tax), comprised of actuarial gain of approximately $ 16.4 million (net of $ 9.5 million of tax) and amortization of loss of $ 0.7 million (net of $ 0.5 million of tax).

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

During 2023, other comprehensive loss was impacted by a total net loss of approximately $ 6.3 million (net of $ 2.1 million of tax), comprised of actuarial loss of approximately $ 6.6 million (net of $ 2.3 million of tax) and amortization of loss of $ 0.3 million (net of $ 0.2 million of tax).

2023 2022 2021

9 unchanged sentences

The assets are managed by professional investment firms and performance is evaluated periodically against specific benchmarks.

The plans’ net assets did not include the Company’s own stock at January 1, 2023 or January 2, 2022.

The plans’ net assets did not include the Company’s own stock at December 31, 2023 or January 1, 2023.

Dutch Plan Assets and Indexation Benefit

10 unchanged sentences

Under the express terms of the Contract, contract value is the greater of (i) the value of the discounted vested benefits of the Dutch Plan and (ii) the fair value of the underlying investment assets held by the insurance company under the Contract.

As between those two values, the former was the greater for 2022 and 2021 and this represents the plan assets as shown above for the Dutch Plan.

As between those two values, the former was the greater for 2023 and 2022.

Because the Company will fund the cost to guarantee vested benefits, the Company has recorded a provision, which reduces the Dutch Plan assets, that consists of the net present value of the expected future guarantee payments due to the insurance company pursuant to the Company’s guarantee.

1 unchanged sentence

The indexation benefit for 2023 and 2022 is not significant.

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The Company’s actual weighted average asset allocations for 2023 and 2022, and the targeted asset allocation for 2024, of the foreign defined benefit plans by asset category, are as follows:

6 unchanged sentences

100 % 100 % 100 %

The following table sets forth by level within the fair value hierarchy the foreign defined benefit plans’ assets at fair value, as of January 1, 2023 and January 2, 2022.

The following table sets forth by level within the fair value hierarchy the foreign defined benefit plans’ assets at fair value, as of December 31, 2023 and January 1, 2023.

The nora plan is currently unfunded.

1 unchanged sentence

As noted above, the Dutch Plan assets as represented by the insurance contract are classified as a level 3 asset and included in the “Other” asset category.

Pension Plan Assets by Category as of January 1, 2023

Pension Plan Assets by Category as of December 31, 2023

Dutch Plan UK Plan Total

19 unchanged sentences

$ 16,232 $ 92,200 $ 90,916

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End of Fiscal Year 2022

21 unchanged sentences

Purchases, sales and settlements, net ( 5,734 ) 389

Assets transferred to (from) level 3 ( 710 ) 732

Translation adjustment ( 8,973 ) ( 7,480 )

Assets transferred from level 3

Currency translation adjustment

3,357 ( 8,973 )

Balance of level 3 assets, end of year $ 90,916 $ 89,864

(1) Includes $ 22.2 million and $ 6.6 million for 2022 and 2021, respectively, of unrealized losses recognized during the period in other comprehensive income (loss) for assets held at year end.

During 2023, the Company expects to contribute $ 2.5 million to the plans.

(1) Includes $ 2.7 million and $( 22.2 ) million for 2023 and 2022, respectively, of unrealized gains / (losses) recognized during the period in other comprehensive income (loss) for assets held at year end.

During 2024, the Company expects to contribute $ 2.7 million to the foreign defined benefit plans.

It is anticipated that future benefit payments for the foreign defined benefit plans will be as follows:

3 unchanged sentences

2029-2033 59,800

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Domestic Defined Benefit Plan

9 unchanged sentences

The tables presented below set forth the required disclosures in accordance with applicable accounting standards, and amounts recognized in the consolidated financial statements related to the domestic SCP.

There is no service cost component of the change in benefit obligation in 2022 and 2021 as there are no longer any participants accruing benefits in the plan.

There is no service cost component in the change in benefit obligation in 2023 and 2022 as there are no longer any participants accruing benefits in the plan.

(in thousands)

3 unchanged sentences

Benefits paid ( 1,873 ) ( 1,873 )

Actuarial gain ( 6,220 ) ( 2,522 )

Actuarial loss (gain)

667 ( 6,220 )

Benefit obligation, end of year $ 22,659 $ 22,731

8 unchanged sentences

Unrecognized actuarial loss $ 4,098 $ 3,811

The accumulated benefit obligation related to the SCP was $ 22.7 million and $ 30.1 million as of January 1, 2023 and January 2, 2022, respectively.

The accumulated benefit obligation related to the SCP was $ 22.7 million as of both December 31, 2023 and January 1, 2023.

The SCP is currently unfunded;

1 unchanged sentence

The Company uses insurance instruments to help limit its exposure under the SCP.

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2023 2022 2021

8 unchanged sentences

Net periodic benefit cost $ 1,329 $ 1,328 $ 1,449

The changes in other comprehensive loss during 2022 related to the SCP as a result of plan activity was a net gain of approximately $ 4.9 million (net of $ 1.9 million of tax), primarily comprised of a net gain during the period of $ 4.5 million (net of $ 1.7 million of tax) and amortization of loss of $ 0.4 million (net of $ 0.2 million of tax).

In accordance with applicable accounting standards, all components of net periodic benefit cost associated with the SCP are presented within other expense, net, in the consolidated statements of operations.

The change in other comprehensive loss during 2023 related to the SCP as a result of plan activity was a net loss of approximately $ 0.4 million (net of $ 0.1 million of tax), primarily comprised of a net loss during the period of $ 0.5 million (net of $ 0.2 million of tax) and amortization of loss of $ 0.1 million (net of $ 0.1 million of tax).

During 2023, the Company contributed $ 1.9 million in the form of direct benefit payments for its domestic SCP.

3 unchanged sentences

2029-2033 8,670

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NOTE 20 – SEGMENT INFORMATION

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Additionally, accounting standards require the utilization of a “management approach” to report the financial results of operating segments, which is based on information used by the CODM to assess performance and make operating and resource allocation decisions.

In 2021, the Company determined that it has two operating segments organized by geographical area – namely (a) Americas (“AMS”) and (b) Europe, Africa, Asia and Australia (collectively “EAAA”).

The Company determined that it has two operating segments organized by geographical area – namely (a) Americas (“AMS”) and (b) Europe, Africa, Asia and Australia (collectively “EAAA”).

The AMS operating segment includes the United States, Canada and Latin America geographic areas.

4 unchanged sentences

goodwill and intangible asset impairment charges;

changes in equity award forfeiture accounting;

restructuring, asset impairment, severance and other charges;

and an SEC settlement fine.

and restructuring, asset impairment, severance, and other, net.

Intersegment revenues for 2023, 2022 and 2021 were $ 82.8 million, $ 75.5 million and $ 78.1 million, respectively.

1 unchanged sentence

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 2022, 2021 and 2020 is presented in the tables below – segment information for fiscal year 2020 has been recast to reflect the new reportable segment structure:

Segment information for 2023, 2022 and 2021 is presented in the table below:

2023 2022 2021

9 unchanged sentences

Total depreciation and amortization $ 40,774 $ 40,337 $ 46,345

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

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Total operating lease right-of-use assets $ 87,519 $ 81,644

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

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

2023 2022 2021

2 unchanged sentences

EAAA operating income (loss) 19,487 ( 16,836 ) 23,352

Consolidated operating income (loss) 75,398 104,797 ( 39,287 )

Consolidated operating income

104,522 75,398 104,797

Interest expense 31,787 29,929 29,681

Other expense, net 9,081 3,552 2,483

Income (loss) before income tax expense $ 41,917 $ 72,633 $ ( 79,420 )

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Income before income tax expense

$ 63,654 $ 41,917 $ 72,633

2023 2022 2021

AMS EAAA AMS EAAA AMS EAAA

5 unchanged sentences

Goodwill and intangible asset impairment — — 3,838 32,342 — —

Impact of change in equity award forfeiture accounting — — — — 757 650

Restructuring, asset impairment, severance and other charges 2,420 5,769 3,569 8,280 9,722 6,943

SEC fine — — — — 2,689 2,311

Restructuring, asset impairment, severance, and other, net

2,138 3,493 2,420 5,769 3,569 8,280

AOI $ 87,789 $ 28,608 $ 102,370 $ 30,058 $ 85,014 $ 37,268

16 unchanged sentences

Netherlands 40,455 42,422

Australia 29,924 33,536

Other foreign countries (3)

37,839 45,162

Total long-lived assets $ 291,140 $ 297,976

(1) Revenue attributed to geographic areas is based on the location of the customer.

(2) Net sales in Germany were $ 115.4 million in 2020, which exceeded 10 % of consolidated net sales for that year.

Net sales in Germany did not exceed 10 % of consolidated net sales for all other periods presented.

(2) Long-lived assets attributed to geographic areas are based on the physical location of the asset.

1 unchanged sentence

2022 includes $ 1.3 million and $ 4.5 million of leased equipment, net of accumulated amortization, in the United States and foreign countries, respectively.

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(3) Long-lived assets in Australia did not exceed 10 % of consolidated long-lived assets for 2023.

Long-lived assets in Australia were $ 29.9 million in 2022, which exceeded 10 % of consolidated long-lived assets as of the end of that fiscal year.

NOTE 21 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS

2 unchanged sentences

(in thousands)

Loss on foreign subsidiary liquidation (1)

Other expense, net

$ ( 6,221 ) $ — $ —

Interest rate swap contracts loss (2)

3 unchanged sentences

Total loss reclassified from AOCI $ ( 8,003 ) $ ( 4,684 ) $ ( 7,686 )

(1) Other comprehensive income (loss) includes tax of $ 0.8 million, $ 1.4 million and $( 2.5 ) million for 2022, 2021 and 2020, respectively, related to cash flow hedges.

(2) See Note 19 entitled “Employee Benefit Plans” for the tax effects in other comprehensive income (loss) related to the Company’s defined benefit plans.

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

The tax impact of the cumulative foreign currency translation reclassification for 2023 is approximately $ 1.1 million.

(2) The tax impact of the interest rate swap reclassifications were $ 0.2 million, $ 0.8 million and $ 1.4 million for 2023, 2022 and 2021, respectively, related to the discontinued cash flow hedges.

See Note 10 entitled “Derivative Instruments” for additional information.

(3) See Note 19 entitled “Employee Benefit Plans” for the tax impact of reclassifications related to the Company’s defined benefit plans.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Interface, Inc.

(the “Company”) as of January 1, 2023, and January 2, 2022, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the three years in the period ended January 1, 2023, and the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company on January 1, 2023, and January 2, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2023 expressed an unqualified opinion thereon.

(the “Company”) as of December 31, 2023, and January 1, 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the three fiscal years in the period ended December 31, 2023, and the related notes and financial statements schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and January 1, 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

8 unchanged sentences

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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Goodwill Impairment Assessment

As described in Notes 1 and 12 to the consolidated financial statements, the Company’s consolidated goodwill balance was $102 million as of January 1, 2023.

Goodwill is tested for impairment annually as of the measurement date or more frequently if events or changes in circumstances indicate the asset might be impaired.

During the fourth quarter of fiscal 2022, the Company performed the annual impairment test for all reporting units, which resulted in the Company recording a goodwill impairment charge for the Europe, Middle East and Africa (“EMEA”) reporting unit in the amount of $29.4 million.

The goodwill impairment test consists of a comparison of the fair value of a reporting unit with its carrying value, including the goodwill allocated to the reporting unit.

If the carrying value of a reporting unit exceeds its fair value, the Company will recognize an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit.

The Company estimates the fair value of its reporting units using a weighting of fair values derived from an income approach and a market approach.

We identified the estimate of the fair value of the EMEA reporting unit used in the goodwill impairment assessment as of the annual measurement date, as a critical audit matter.

The principal considerations for our determination are:

(i) this reporting unit had relatively low excess fair value over carrying value;

therefore, the fair value estimates were particularly sensitive to changes in significant assumptions such as projected revenue, gross margin, earnings, and the discount rate included in the income approach, (ii) the greater than usual volatility and uncertainty underlying the market data used in the market approach includes assumptions utilized by management for which changes to these assumptions can have a significant impact on the fair value of the reporting unit, and (iii) auditing management’s valuation methods and assumptions utilized in estimating the fair value of the EMEA reporting unit involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address this matter, including the involvement of individuals with specialized skill or knowledge.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Other Intangible Assets Impairment Assessment

As described in Notes 1 and 12 of the consolidated financial statements, the Company’s consolidated goodwill balance was $105.4 million as of December 31, 2023, all allocated to the Americas reporting unit.

Goodwill is tested for impairment annually and between annual tests if events or changes in circumstances indicate the asset might be impaired.

If the carrying value of the Americas reporting unit exceeds its estimated fair value, the Company will recognize an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit.

The Company estimates the fair value of the Americas reporting unit using a combination of fair values derived from an income methodology and a market comparable methodology.

The Company’s consolidated trademark and tradename intangible assets were $47.7 million as of December 31, 2023.

We identified the income approach valuation methodology used in the impairment evaluation of goodwill for the Americas reporting unit and the nora tradename intangibles as a critical audit matter due to the inherent subjectivity involved in management’s determination of (i) forecasts of revenues and (ii) the discount rate.

The audit procedures to evaluate the reasonableness of these assumptions involved a high degree of auditor judgment and an increased extent of effort, including the involvement of individuals with specialized skill or knowledge.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of controls related to management’s forecasting process, including controls over management’s review of the data and significant assumptions utilized to determine fair value of the EMEA reporting unit, including projected revenue, gross margin, earnings, and the discount rate, all referred to as significant assumptions, included in the income approach.

• Evaluating the reasonableness of the significant assumptions described above used in management’s income approach analysis by comparing them to prior period forecasts, historical operating performance, the Company’s projected budget, peer company historical operating performance, publicly available industry analyst projections, and internal and external communications made by the Company.

• Testing the reconciliation of the estimated fair value of the Company’s reporting units to the indicated market capitalization of the Company as a whole.

• Utilizing personnel with specialized knowledge and skill of valuation techniques to assist in:

(i) evaluating the methodologies used by management to determine the fair value of the EMEA reporting unit including the weighting of the income and market approaches (ii) testing the mathematical accuracy of the Company’s calculations, (iii) evaluating the reasonableness of significant assumptions used in the income approach including the discount rate, (iv) assessing the reasonableness of certain market data used in the market approach, and (v) evaluating the reasonableness of the market capitalization reconciliation.

• Evaluating management’s ability to accurately forecast future revenues by performing a retrospective review comparing management’s prior period forecasts to actual results for the same period.

• Inquiring of management to understand the process for developing the forecasts of future revenues and evaluating the consistency of the revenue forecasts used with evidence obtained in other areas of the audit.

• Testing management’s process used to evaluate goodwill and the nora tradename intangibles for impairment, including evaluating the reasonableness of the forecasts of future revenues by comparing forecasts of future revenues to (1) historical results and the recent trend of revenue growth rates, (2) forecasted information included in industry reports for the Company and its peer companies, (3) publicly available industry analyst projections, and (4) external communications made by the Company.

• Utilizing our valuation specialists to assist in evaluating the reasonableness of the Company’s discount rate by (i) testing the source information underlying the determination of the discount rate, (ii) testing the mathematical accuracy of the calculations;

and (iii) developing a range of independent estimates and comparing those to the discount rate selected by management.

/s/ BDO USA, P.C.

We are uncertain as to the year we began serving consecutively as the auditor of the Company's financial statements;

however, we are aware that we have been the Company's auditor consecutively since at least 1981.

/s/ BDO USA, LLP

Atlanta, Georgia

March 1, 2023

Ta b le of Contents

February 28, 2024

Report of Independent Registered Public Accounting Firm

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Opinion on Internal Control over Financial Reporting

We have audited Interface, Inc.

(the “Company’s”) internal control over financial reporting as of January 1, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of January 1, 2023 and January 2, 2022, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the three years in the period ended January 1, 2023, and the related notes and schedules and our report dated March 1, 2023 expressed an unqualified opinion thereon.

We have audited Interface, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023, and January 1, 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the three fiscal years in the period ended December 31, 2023, and the related notes and financial statements schedule and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

15 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

Atlanta, Georgia

March 1, 2023

Ta b le of Contents

February 28, 2024

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data