INTERFACE INC 10-Q

ITEM 1. FINANCIAL STATEMENTS INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except par values) MARCH 31, 2024 DECEMBER 31, 2023 (UNAUDITED) ASSETS Current assets Cash and cash equivalents $ 89,774 $ 110,498 Accounts receivable, net 147,185 163,386 Inventories, net 296,249 279,079 Prepaid expenses and other current assets 32,853 30,895 Total current assets 566,061 583,858 Property, plant and equipment, net 280,333 291,140 Operating lease right-of-use assets 83,766 87,519 Deferred tax asset 21,428 21,721 Goodwill and intangible assets, net 156,951 161,703 Other assets 84,953 84,154 Total assets $ 1,193,492 $ 1,230,095 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 74,503 $ 62,912 Accrued expenses 112,126 130,890 Current portion of operating lease liabilities 12,574 12,347 Current portion of long-term debt 8,523 8,572 Total current liabilities 207,726 214,721 Long-term debt 383,261 408,641 Operating lease liabilities 74,286 78,269 Deferred income taxes 32,098 33,832 Other long-term liabilities 67,573 68,685 Total liabilities 764,944 804,148 Commitments and contingencies (Note 14) Shareholders’ equity Preferred stock, par value $ 1.00 per share; 5,000 shares authorized; none issued or outstanding at March 31, 2024 and December 31, 2023 — — Common stock, par value $ 0.10 per share; 120,000 shares authorized; 58,273 and 58,112 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 5,827 5,811 Additional paid-in capital 252,538 252,909 Retained earnings 334,423 320,833 Accumulated other comprehensive loss – foreign currency translation ( 130,682 ) ( 119,590 ) Accumulated other comprehensive loss – pension liability ( 33,558 ) ( 34,016 ) Total shareholders’ equity 428,548 425,947 Total liabilities and shareholders’ equity $ 1,193,492 $ 1,230,095 See accompanying notes to consolidated condensed financial statements. 3 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) THREE MONTHS ENDED MARCH 31, 2024 APRIL 2, 2023 Net sales $ 289,743 $ 295,792 Cost of sales 179,338 199,919 Gross profit 110,405 95,873 Selling, general and administrative expenses 85,959 86,254 Restructuring, asset impairment and other charges — 142 Operating income 24,446 9,477 Interest expense 6,423 8,505 Other (income) expense, net ( 976 ) 1,500 Income (loss) before income tax expense 18,999 ( 528 ) Income tax expense 4,820 186 Net income (loss) $ 14,179 $ ( 714 ) Earnings (loss) per share – basic $ 0.24 $ ( 0.01 ) Earnings (loss) per share – diluted $ 0.24 $ ( 0.01 ) Common shares outstanding – basic 58,238 58,079 Common shares outstanding – diluted 58,714 58,079 See accompanying notes to consolidated condensed financial statements. 4 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (in thousands) THREE MONTHS ENDED MARCH 31, 2024 APRIL 2, 2023 Net income (loss) $ 14,179 $ ( 714 ) Other comprehensive (loss) income, after tax: Foreign currency translation adjustment ( 11,092 ) 4,930 Reclassification from accumulated other comprehensive loss – discontinued cash flow hedge — 299 Pension liability adjustment 458 ( 279 ) Other comprehensive (loss) income ( 10,634 ) 4,950 Comprehensive income $ 3,545 $ 4,236 See accompanying notes to consolidated condensed financial statements. 5 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) THREE MONTHS ENDED MARCH 31, 2024 APRIL 2, 2023 OPERATING ACTIVITIES: Net income (loss) $ 14,179 $ ( 714 ) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 9,616 9,991 Share-based compensation expense 3,915 3,004 Deferred income taxes and other ( 4,386 ) 599 Amortization of acquired intangible assets 1,297 1,283 Working capital changes: Accounts receivable 13,837 35,791 Inventories ( 20,477 ) ( 5,306 ) Prepaid expenses and other current assets ( 2,193 ) ( 16,148 ) Accounts payable and accrued expenses ( 3,169 ) 1,084 Cash provided by operating activities 12,619 29,584 INVESTING ACTIVITIES: Capital expenditures ( 4,033 ) ( 5,712 ) Proceeds from sale of property, plant and equipment 1,040 — Insurance proceeds from property casualty loss 1,000 — Cash used in investing activities ( 1,993 ) ( 5,712 ) FINANCING ACTIVITIES: Repayments of long-term debt ( 34,783 ) ( 53,225 ) Borrowing of long-term debt 10,000 34,000 Tax withholding payments for share-based compensation ( 4,271 ) ( 1,167 ) Dividends paid ( 6 ) — Finance lease payments ( 716 ) ( 643 ) Cash used in financing activities ( 29,776 ) ( 21,035 ) Net cash (used in) provided by operating, investing and financing activities ( 19,150 ) 2,837 Effect of exchange rate changes on cash ( 1,574 ) 872 CASH AND CASH EQUIVALENTS: Net (decrease) increase ( 20,724 ) 3,709 Balance, beginning of period 110,498 97,564 Balance, end of period $ 89,774 $ 101,273 See accompanying notes to consolidated condensed financial statements. 6 Table of Contents INTERFACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation References in this Quarterly Report on Form 10-Q to “Interface,” “the Company,” “we,” “our,” “ours” and “us” refer to Interface, Inc. and its subsidiaries or any of them, unless the context requires otherwise. As contemplated by the Securities and Exchange Commission (the “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the Company’s year-end financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Commission. The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the financial information included in this report contains all adjustments necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature unless otherwise disclosed. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The December 31, 2023, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”). The three-month periods ended March 31, 2024 and April 2, 2023 both include 13 weeks. Risks and Uncertainties Global economic challenges, including the impacts of the Russia-Ukraine and Israel-Hamas wars, inflation, supply chain disruptions, and the slow macro environment in China could cause economic uncertainty and volatility. In connection with the Cyber Event discussed below, 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. The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein. These uncertainties could result in a future material adverse effect to the amounts reported within the Company’s consolidated condensed financial statements if actual results differ from these estimates. Cybersecurity Event 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 by our forensic experts was completed during fiscal year 2023. Recently Issued Accounting Pronouncements – Not Yet Adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. 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. 7 Table of Contents NOTE 2 – REVENUE RECOGNITION The Company generates revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material, and from the installation of carpet and other flooring-related material. A summary of these revenue streams, as a percentage of net sales, for the three months ended March 31, 2024 and April 2, 2023 is as follows: Three Months Ended March 31, 2024 April 2, 2023 Revenue from the sale of flooring material 99 % 98 % Revenue from installation of flooring material 1 % 2 % Disaggregation of Revenue For the three months ended March 31, 2024 and April 2, 2023, revenue from the Company’s customers is broken down by geography as follows: Three Months Ended Geography March 31, 2024 April 2, 2023 Americas 58.6 % 57.2 % Europe 31.6 % 32.0 % Asia-Pacific 9.8 % 10.8 % Revenue from the Company’s customers in the Americas corresponds to the AMS reportable segment, and the EAAA reportable segment includes revenue from the Europe and Asia-Pacific geographies. See Note 10 entitled “Segment Information” for additional information. 8 Table of Contents NOTE 3 – INVENTORIES Inventories are summarized as follows: March 31, 2024 December 31, 2023 (in thousands) Finished goods $ 218,706 $ 201,821 Work-in-process 23,107 20,892 Raw materials 54,436 56,366 Inventories, net $ 296,249 $ 279,079 9 Table of Contents NOTE 4 – EARNINGS PER SHARE The Company computes basic earnings (loss) per share (“EPS”) by dividing net income (loss) by the weighted average common shares outstanding, including participating securities outstanding, during the period as discussed below. Diluted EPS reflects the potential dilution beyond shares for basic EPS that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common stock that would have shared in the Company’s earnings (loss). The Company 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. As a result, the Company includes all outstanding restricted stock awards in the calculation of basic and diluted EPS. Distributed earnings include common stock dividends and dividends earned on unvested share-based payment awards. Undistributed earnings represent earnings that were available for distribution but were not distributed. The following table shows the computation of basic and diluted EPS: Three Months Ended March 31, 2024 April 2, 2023 (in thousands, except per share data) Numerator: Net income (loss) $ 14,179 $ ( 714 ) Less: distributed and undistributed earnings available to participating securities ( 150 ) ( 9 ) Distributed and undistributed earnings (loss) available to common shareholders $ 14,029 $ ( 723 ) Denominator: Weighted average shares outstanding 57,623 57,177 Participating securities 615 902 Shares for basic EPS 58,238 58,079 Dilutive effect of non-participating securities 476 — Shares for diluted EPS 58,714 58,079 Basic EPS $ 0.24 $ ( 0.01 ) Diluted EPS $ 0.24 $ ( 0.01 ) For the three months ended March 31, 2024 and April 2, 2023, 1,049,405 and 1,728,579 non-participating securities that could potentially dilute basic EPS in the future, respectively, consisting of restricted share units and performance shares, were excluded from the computation of diluted EPS as these securities would have been antidilutive for the respective periods. 10 Table of Contents NOTE 5 – LONG-TERM DEBT Long-term debt consisted of the following: March 31, 2024 December 31, 2023 Outstanding Principal Interest Rate (1) Outstanding Principal Interest Rate (1) (in thousands) (in thousands) Syndicated Credit Facility (2) : Term loan borrowings $ 95,988 6.26 % $ 121,658 6.61 % 5.50% Senior Notes due 2028 300,000 5.50 % 300,000 5.50 % Total debt 395,988 421,658 Less: Unamortized debt issuance costs ( 4,204 ) ( 4,445 ) Total debt, net 391,784 417,213 Less: Current portion of long-term debt ( 8,523 ) ( 8,572 ) Total long-term debt, net $ 383,261 $ 408,641 (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. (2) The Syndicated Credit Facility also includes a multicurrency revolving loan facility up to $ 300.0 million. There were no revolving loan borrowings outstanding as of March 31, 2024 or December 31, 2023. Syndicated Credit Facility The Company’s Syndicated Credit Facility (the “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. Interest on base rate loans is charged at varying rates computed by applying a margin 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 is charged at varying rates computed by applying a margin 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 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. Fees for commercial letters of credit are computed as a percentage 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 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. As of both March 31, 2024 and December 31, 2023, the Company had $ 1.6 million in letters of credit outstanding under the Facility. As of both March 31, 2024 and December 31, 2023, the carrying value of the Company’s borrowings under the Facility approximated its fair value as the Facility bears interest rates that are similar to existing market rates. The fair value of borrowings under the Facility is estimated using observable market rates and is considered Level 2 within the fair value hierarchy. Under the Facility, the Company is required to make quarterly amortization payments of the term loan borrowings, which are due on the last day of the calendar quarter. 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. 11 Table of Contents Senior Notes due 2028 The 5.50 % Senior Notes due 2028 (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 Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its Facility. As of March 31, 2024, the estimated fair value of the Senior Notes was $ 287.0 million, compared with a net carrying value recorded in the Company’s consolidated condensed balance sheet of $ 296.7 million ($ 300.0 million gross, excluding the impact of $ 3.3 million of unamortized debt issuance costs). The fair value of the Senior Notes is derived using quoted prices for similar instruments and is considered Level 2 within the fair value hierarchy. The Company is in compliance with all covenants under the indenture governing the Senior Notes and anticipates that it will remain in compliance with the covenants for the foreseeable future. Debt Issuance Costs Debt issuance costs associated with the Company’s Senior Notes and term loans under the Facility are reflected as a reduction of long-term debt in accordance with applicable accounting standards. As these fees are expensed over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are expensed. As of March 31, 2024 and December 31, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 4.2 million and $ 4.4 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 $ 1.3 million and $ 1.4 million as of March 31, 2024 and December 31, 2023, respectively. These amounts are included in other assets in the Company’s consolidated condensed balance sheets. The Company amortizes these costs over the life of the related debt. 12 Table of Contents NOTE 6 – SHAREHOLDERS’ EQUITY The following tables depict the activity in the accounts which make up shareholders’ equity for the three months ended March 31, 2024 and April 2, 2023: SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT TOTAL (in thousands, except per share data) Balance, at December 31, 2023 58,112 $ 5,811 $ 252,909 $ 320,833 $ ( 34,016 ) $ ( 119,590 ) $ 425,947 Net income — — — 14,179 — — 14,179 Issuances of stock related to restricted share units and performance shares 472 47 ( 47 ) — — — — Cash dividends declared, $ 0.01 per common share — — — ( 589 ) — — ( 589 ) Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 311 ) ( 31 ) ( 324 ) — — — ( 355 ) Pension liability adjustment — — — — 458 — 458 Foreign currency translation adjustment — — — — — ( 11,092 ) ( 11,092 ) Balance, at March 31, 2024 58,273 $ 5,827 $ 252,538 $ 334,423 $ ( 33,558 ) $ ( 130,682 ) $ 428,548 SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT CASH FLOW HEDGE TOTAL (in thousands, except per share data) Balance, at January 1, 2023 58,106 $ 5,811 $ 244,159 $ 278,639 $ ( 27,548 ) $ ( 138,775 ) $ ( 749 ) $ 361,537 Net loss — — — ( 714 ) — — — ( 714 ) Issuances of stock related to performance shares 79 8 ( 8 ) — — — — — Cash dividends declared, $ 0.01 per common share — — — ( 580 ) — — — ( 580 ) Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 132 ) ( 14 ) 1,850 — — — — 1,836 Pension liability adjustment — — — — ( 279 ) — — ( 279 ) Foreign currency translation adjustment — — — — — 4,930 — 4,930 Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 299 299 Balance, at April 2, 2023 58,053 $ 5,805 $ 246,001 $ 277,345 $ ( 27,827 ) $ ( 133,845 ) $ ( 450 ) $ 367,029 13 Table of Contents The Company has share-based employee compensation plans, which are described more fully in Note 14 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 . Restricted Stock Awards Compensation expense related to restricted stock grants was $ 0.9 million and $ 1.4 million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any restricted stock forfeited during the period. The following table summarizes restricted stock outstanding as of March 31, 2024, as well as activity during the three months then ended: Restricted Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 691,600 $ 12.55 Granted — — Vested ( 324,300 ) 13.94 Forfeited or canceled ( 1,200 ) 13.19 Outstanding at March 31, 2024 366,100 $ 11.32 As of March 31, 2024, the unrecognized total compensation cost related to unvested restricted stock was $ 0.9 million. That cost is expected to be recognized by the first quarter of 2025. Restricted Share Unit Awards Compensation expense related to the restricted share units was $ 0.9 million and $ 0.5 million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any restricted share units forfeited during the period. The following table summarizes restricted share units outstanding as of March 31, 2024, as well as activity during the three months then ended: Restricted Share Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 583,400 $ 10.35 Granted 402,800 13.24 Vested ( 151,600 ) 10.80 Forfeited or canceled ( 4,000 ) 10.80 Outstanding at March 31, 2024 830,600 $ 11.67 As of March 31, 2024, the unrecognized total compensation cost related to unvested restricted share units was $ 8.5 million. That cost is expected to be recognized by the first quarter of 2027. 14 Table of Contents Performance Share Awards The following table summarizes the performance shares outstanding as of March 31, 2024, as well as the activity during the three months then ended: Performance Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 1,115,000 $ 12.36 Granted 402,800 13.24 Vested ( 320,700 ) 13.91 Forfeited or canceled ( 12,800 ) 12.82 Outstanding at March 31, 2024 1,184,300 $ 12.24 Compensation expense related to the performance shares was $ 2.1 million and $ 1.1 million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any performance shares forfeited during the period. Unrecognized compensation expense related to these performance shares was approximately $ 9.0 million as of March 31, 2024. 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 by the first quarter of 2027. The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was approximately $ 0.5 million for the three months ended March 31, 2024. 15 Table of Contents NOTE 7 – LEASES The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to the Company’s leases as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases (in thousands) Operating lease right-of-use assets $ 83,766 $ 87,519 Current portion of operating lease liabilities $ 12,574 $ 12,347 Operating lease liabilities 74,286 78,269 Total operating lease liabilities $ 86,860 $ 90,616 Property, plant and equipment, net $ 6,799 $ 7,236 Accrued expenses $ 2,482 $ 2,587 Other long-term liabilities 4,701 5,035 Total finance lease liabilities $ 7,183 $ 7,622 As of March 31, 2024, there were no significant leases that had not commenced. Lease Costs Three Months Ended March 31, 2024 April 2, 2023 (in thousands) Finance lease cost: Amortization of right-of-use assets $ 776 $ 655 Interest on lease liabilities 99 60 Operating lease cost 4,989 4,703 Short-term lease cost 197 356 Variable lease cost 690 733 Total lease cost $ 6,751 $ 6,507 16 Table of Contents Other Supplemental Information Three Months Ended March 31, 2024 April 2, 2023 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 96 $ 52 Operating cash flows from operating leases 4,097 4,201 Financing cash flows from finance leases 716 643 Right-of-use assets obtained in exchange for new finance lease liabilities 390 557 Right-of-use assets obtained in exchange for new operating lease liabilities 265 1,121 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 March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Weighted-average remaining lease term – finance leases (in years) 3.60 3.70 Weighted-average remaining lease term – operating leases (in years) 8.10 8.29 Weighted-average discount rate – finance leases 5.70 % 5.51 % Weighted-average discount rate – operating leases 6.27 % 6.25 % Maturity Analysis A maturity analysis of lease payments under non-cancellable leases is presented as follows: Fiscal Year Operating Leases Finance Leases (in thousands) 2024 (excluding the three months ended March 31, 2024) $ 12,770 $ 2,170 2025 16,197 2,202 2026 16,047 1,651 2027 13,256 1,133 2028 10,804 582 Thereafter 42,883 264 Total future minimum lease payments (undiscounted) 111,957 8,002 Less: Present value discount ( 25,097 ) ( 819 ) Total lease liabilities $ 86,860 $ 7,183 17 Table of Contents NOTE 8 – EMPLOYEE BENEFIT PLANS During the three-month periods ended March 31, 2024 and April 2, 2023, the Company recorded multi-employer pension expense related to multi-employer contributions of $ 0.7 million and $ 0.6 million, respectively. The following tables provide the components of net periodic benefit cost for the three months ended March 31, 2024 and April 2, 2023: Three Months Ended Defined Benefit Retirement Plans (Europe) March 31, 2024 April 2, 2023 (in thousands) Interest cost $ 1,710 $ 1,735 Expected return on plan assets ( 1,966 ) ( 1,964 ) Amortization of prior service cost 45 29 Amortization of net actuarial losses 269 223 Net periodic benefit cost $ 58 $ 23 Three Months Ended Salary Continuation Plan March 31, 2024 April 2, 2023 (in thousands) Interest cost $ 266 $ 283 Amortization of net actuarial losses 60 49 Net periodic benefit cost $ 326 $ 332 Three Months Ended nora Defined Benefit Plan March 31, 2024 April 2, 2023 (in thousands) Service cost $ 126 $ 114 Interest cost 264 272 Amortization of net actuarial gains — ( 109 ) Net periodic benefit cost $ 390 $ 277 In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within operating income in the consolidated condensed statements of operations, while all other components of net periodic benefit costs are presented within other (income) expense, net, in the consolidated condensed statements of operations. 18 Table of Contents NOTE 9 – GOODWILL AND OTHER INTANGIBLE ASSETS The ending balance and the change in the carrying amount of good will fo r the three months ended March 31, 2024 is as follows: Goodwill (1) (in thousands) Balance, at December 31, 2023 $ 105,448 Foreign currency translation (2) ( 2,251 ) Balance, at March 31, 2024 $ 103,197 (1) The goodwill balance is allocated entirely to the AMS reportable segment. (2) A portion of the goodwill balance is comprised of goodwill denominated in foreign currency attributable to the nora acquisition. The net carrying value of intangible assets other than goodwill was $ 53.8 million and $ 56.3 million at March 31, 2024 and December 31, 2023, respectively. 19 Table of Contents NOTE 10 – SEGMENT INFORMATION The Company determines that an operating segment exists if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has operating results that are regularly reviewed by the chief operating decision maker (“CODM”) and (iii) has discrete financial information. 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. 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. Pursuant to the management approach discussed above, the Company’s CODM, our chief executive officer, evaluates performance at the AMS and EAAA operating segment levels and makes operating and resource allocation decisions based on segment adjusted operating income (“AOI”), which includes allocations of corporate selling, general and administrative (“SG&A”) expenses and allocations of global support SG&A as discussed below. AOI excludes: nora purchase accounting amortization; Cyber Event impact; property casualty loss; and restructuring, asset impairment, severance, and other, net. Intersegment revenues for the three months ended March 31, 2024 and April 2, 2023 were $ 16.8 million and $ 22.6 million, respectively. Intersegment revenues are eliminated from net sales presented below since these amounts are not included in the information provided to the CODM. The Company has determined that it has two reportable segments – AMS and EAAA, as each operating segment meets the quantitative thresholds defined in the accounting guidance. During the first quarter of 2024, the Company implemented a cost center realignment initiative to centralize certain global/shared functions. For the quarter ended March 31, 2024, SG&A expenses for these global support functions were allocated to AOI for each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods. Prior year AOI amounts below were not recast as there was no material impact to the measure of segment profit for each reportable segment. There were no changes to the composition of the Company’s operating or reportable segments. Segment information for the three months ended March 31, 2024 and April 2, 2023 is presented in the following table: Three Months Ended March 31, 2024 April 2, 2023 (in thousands) Net sales AMS $ 169,915 $ 169,241 EAAA 119,828 126,551 Total net sales $ 289,743 $ 295,792 Segment AOI AMS $ 18,080 $ 11,269 EAAA 7,445 3,929 Depreciation and amortization AMS $ 4,353 $ 4,393 EAAA 5,263 5,598 Total depreciation and amortization $ 9,616 $ 9,991 20 Table of Contents A reconciliation of the Company’s total operating segment assets to the corresponding consolidated amounts follows: March 31, 2024 December 31, 2023 (in thousands) Assets AMS $ 546,971 $ 627,782 EAAA 603,853 630,939 Total segment assets 1,150,824 1,258,721 Corporate assets 110,168 108,673 Eliminations ( 67,500 ) ( 137,299 ) Total reported assets $ 1,193,492 $ 1,230,095 Reconciliations of operating income to income (loss) before income tax expense and segment AOI are presented as follows: Three Months Ended March 31, 2024 April 2, 2023 (in thousands) AMS operating income $ 18,195 $ 8,715 EAAA operating income 6,251 762 Consolidated operating income 24,446 9,477 Interest expense 6,423 8,505 Other (income) expense, net ( 976 ) 1,500 Income (loss) before income tax expense $ 18,999 $ ( 528 ) Three Months Ended March 31, 2024 Three Months Ended April 2, 2023 AMS EAAA AMS EAAA (in thousands) Operating income $ 18,195 $ 6,251 $ 8,715 $ 762 Purchase accounting amortization — 1,297 — 1,283 Cyber Event impact ( 246 ) ( 170 ) 228 200 Property casualty loss — — 1,300 — Restructuring, asset impairment, severance, and other, net 131 67 1,026 1,684 AOI $ 18,080 $ 7,445 $ 11,269 $ 3,929 21 Table of Contents NOTE 11 – SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow information for the three months ended March 31, 2024 and April 2, 2023 is presented in the following table: Three Months Ended March 31, 2024 April 2, 2023 (in thousands) Cash paid for interest $ 2,099 $ 3,667 Cash paid for income taxes, net of refunds 7,161 5,148 See Note 7 entitled “Leases” for additional supplemental disclosures related to finance and operating leases. Non-Cash Financing Activities On March 12, 2024, the Company declared cash dividends on its common stock of $ 0.6 million, which were paid during the second quarter of 2024 to shareholders of record as of March 29, 2024. At March 31, 2024, the dividends were recorded within accrued expenses in the consolidated condensed balance sheet. 22 Table of Contents NOTE 12 – INCOME TAXES The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate (“AETR”) and records any changes affecting the estimated AETR in the interim period in which the change occurs, including discrete tax items. During the three months ended March 31, 2024, the Company recorded a total income tax provision of $ 4.8 million on pre-tax income of $ 19.0 million resulting in an effective tax rate of 25.4 %, as compared to a total income tax provision of $ 0.2 million on pre-tax loss of $ 0.5 million resulting in a negative effective tax rate of 35.2 % during the three months ended April 2, 2023. The year-over-year change in the effective tax rate is primarily due to the tax effects of pre-tax income in the current year quarter compared to pre-tax loss in the prior year quarter and favorable changes related to share-based compensation and the limitation on the deduction for business interest expenses under Internal Revenue Code section 163(j). The pre-tax loss for the three months ended April 2, 2023, included significant unusual or infrequent items that are specifically excluded from the AETR. The tax effects related to these specifically excluded items are recognized discretely. The income tax benefits recognized discretely were at a lower effective tax rate compared to the estimated AETR resulting in an overall negative effective tax rate for the three months ended April 2, 2023. 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. For fiscal year 2024, we expect to meet the Transitional Country-by-Country (CbCR) Safe Harbor rules for most if not all jurisdictions and do not expect these provisions to have a material impact on the Company’s financial statements. We will continue to closely monitor ongoing developments and evaluate any potential impact on future periods. In the first three months of 2024, the Company increased its liability for unrecognized tax benefits by $ 0.3 million. As of March 31, 2024, the Company had accrued approximately $ 5.2 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of March 31, 2024 reflects a reduction for $ 2.8 million of these unrecognized tax benefits. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. 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. 23 Table of Contents NOTE 13 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS Amounts reclassified out of accumulated other comprehensive loss (“AOCI”), before tax, to the consolidated condensed statements of operations during the three months ended March 31, 2024 and April 2, 2023 are reflected in the table below: Three Months Ended Statement of Operations Location March 31, 2024 April 2, 2023 (in thousands) Interest rate swap contracts loss Interest expense $ — $ ( 393 ) Amortization of benefit plan net actuarial losses and prior service cost Other (income) expense, net ( 374 ) ( 192 ) Total loss reclassified from AOCI $ ( 374 ) $ ( 585 ) 24 Table of Contents NOTE 14 – COMMITMENTS AND CONTINGENCIES From time to time, we are a party to legal proceedings, whether arising in the ordinary course of business or otherwise. See disclosure under the heading “Lawsuit by Former CEO in Connection with Termination” set forth in Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 . 25 Table of Contents