−Removed: You should carefully consider the following factors, in addition to the other information included in this Annual Report on Form 10-K and the other documents incorporated herein by reference, before deciding whether to purchase or sell our common stock.
+Added: You should carefully consider the following factors, in addition to the other information included in this Annual Report on Form 10-K and the other documents incorporated herein by reference, before deciding whether to purchase or sell our securities.
Any or all of the following risk factors could have a material adverse effect on our business, financial condition, results of operations and prospects.
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Although the industry has experienced significant consolidation, a large number of manufacturers remain in the industry.
−Removed: In prior years, some of our competitors were adding manufacturing capacity into the industry throughout the globe which increased the amount of supply in the market.
−Removed: Increased capacity at our competitors could result in pricing pressure on our products and less demand for our products, thus adversely affecting both revenues and profitability.
+Added: From time to time, our competitors add or modify manufacturing capacity throughout the globe, which increases the amount or cost structure of supply in the market.
+Added: Increased capacity or manufacturing efficiencies at our competitors could result in pricing pressure on our products and less demand for our products, thus adversely affecting both revenues and profitability.
Some of our competitors, including a number of large diversified domestic and foreign companies who manufacture modular carpet and resilient flooring as one segment of their business, have greater financial resources than we do.
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A future goodwill impairment test may result in a future non-cash adjustment, which could adversely affect our earnings for any such future period.
−Removed: We recorded goodwill and intangible asset impairment charges of $36.2 million in the fourth quarter of 2022 and $121.3 million in the first quarter of 2020.
+Added: In recent years, we recorded goodwill and intangible asset impairment charges of $36.2 million in the fourth quarter of 2022.
The 2022 impairment charge was primarily a result of macroeconomic conditions, such as inflation, rising interest rates and the weakening of the Euro against the U.S.
dollar causing a negative impact to our revenue and operating income in our EMEA goodwill reporting unit.
−Removed: The 2020 impairment charge was primarily a result of the expected duration of the COVID-19 pandemic and its anticipated negative impact to our revenue and operating income.
Future impairment charges could result if these macroeconomic conditions or other negative market events or conditions continue to impact our operations.
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In certain locations where we operate, the demand for labor has exceeded the supply of labor, resulting in higher costs.
−Removed: Despite our focused efforts to attract and retain employees, including by offering higher levels of compensation in certain instances, we experienced attrition rates within our hourly workforce in recent years, particularly in 2021, that exceeded historical levels and we incurred higher operating costs at certain of our facilities in the form of higher levels of overtime pay.
+Added: Despite our focused efforts to attract and retain employees, including by offering higher levels of compensation in certain instances, we experienced attrition rates within our hourly workforce in recent years, that exceeded historical levels and we incurred higher operating costs at certain of our facilities in the form of higher levels of overtime pay.
The market for professional workers was, and remains, similarly challenging.
−Removed: Many of our professional workers continue to work part time or full time from home, initially as part of our COVID-19 protocols and more recently as part of our hybrid working arrangement policies.
As a result, we may experience higher levels of attrition within our professional workforce in the future.
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We also incur significant shipping and transport costs to move our products around the globe, and those costs have increased dramatically due to global supply chain, macroeconomic and geopolitical challenges.
−Removed: While we attempt to match cost increases with corresponding price increases, continued inflation and volatility in the cost of raw materials, transportation and shipping costs could continue to adversely affect our financial results if we are unable to pass through such cost increases to our customers.
+Added: The possibility of government-imposed tariffs in locations where we operate could have an adverse impact on our business.
+Added: While we attempt to match cost increases with corresponding price increases, inflation and volatility in the cost of raw materials, foreign currency fluctuations, tariffs and potential retaliatory tariffs, transportation, shipping costs, and other costs could adversely affect our financial results if we are unable to pass through such cost increases to our customers.
Unanticipated termination or interruption of any of our arrangements with our primary third-party suppliers of synthetic fiber or our primary third-party supplier for luxury vinyl tile (“LVT”) or other key raw materials could have a material adverse effect on us.
−Removed: We depend on a small number of third-party suppliers of synthetic fiber and are largely dependent upon two primary suppliers for our LVT products.
−Removed: The unanticipated termination or interruption of any of our supply arrangements with our current suppliers of synthetic fiber (nylon), our primary suppliers of LVT, or other key raw material suppliers, including failure by any third-party supplier to meet our product specifications, could have a material adverse effect on us because we do not have the capability to manufacture our own fiber for use in our carpet products or our own LVT.
+Added: We depend on a small number of third-party suppliers of synthetic fiber and are largely dependent upon a primary supplier for our LVT products.
+Added: The unanticipated termination or interruption of any of our supply arrangements with our current suppliers of synthetic fiber (nylon), our primary supplier of LVT, or other key raw material suppliers, including failure by any third-party supplier to meet our product specifications, could have a material adverse effect on us because we do not have the capability to manufacture our own fiber for use in our carpet products or our own LVT.
Our suppliers may not be able to meet our demand for a variety of reasons, including our inability to forecast our future needs accurately or a shortfall in production by the supplier for reasons unrelated to us, such as work stoppages, acts of war, terrorism, pandemics, epidemics, fire, earthquake, energy shortages, flooding or other natural disasters.
−Removed: The primary manufacturing facility of our largest supplier of LVT is located in South Korea.
−Removed: If any of our supply arrangements with our primary suppliers of synthetic fiber, our primary suppliers of LVT, or suppliers of other key raw materials are terminated or interrupted, we likely would incur increased manufacturing costs and experience delays in our manufacturing process (thus resulting in decreased sales and profitability) associated with shifting more of our synthetic fiber purchasing to another synthetic fiber supplier or developing new supply chain sources for LVT.
+Added: The primary manufacturing facility of our primary supplier of LVT is located in South Korea.
+Added: If any of our supply arrangements with our primary suppliers of synthetic fiber, our primary supplier of LVT, or suppliers of other key raw materials are terminated or interrupted, we likely would incur increased manufacturing costs and experience delays in our manufacturing process (thus resulting in decreased sales and profitability) associated with shifting more of our synthetic fiber purchasing to another synthetic fiber supplier or developing new supply chain sources for LVT.
A prolonged inability on our part to source synthetic fiber included in our products, LVT, or other key raw materials on a cost-effective basis could adversely impact our ability to deliver products on a timely basis, which could harm our sales and customer relationships.
−Removed: The market price of our common stock has been volatile and the value of your investment may decline.
−Removed: The market price of our common stock has been volatile in the past and may continue to be volatile going forward.
−Removed: Such volatility may cause precipitous drops in the price of our common stock on the Nasdaq Global Select Market and may cause your investment in our common stock to lose significant value.
−Removed: As a general matter, market price volatility has had a significant effect on the market values of securities issued by many companies for reasons unrelated to their operating performance.
−Removed: We cannot predict the market price for our common stock going forward.
Changes to our facilities, manufacturing processes, product construction, and product composition could disrupt our operations, increase our manufacturing costs, increase customer complaints, increase warranty claims, negatively affect our reputation, and have a material adverse effect on our financial condition and results of operations.
From time to time, we make improvements and changes to our physical facilities, move operations to other sites, and change our manufacturing processes.
−Removed: In the first quarter of 2022, we permanently closed our carpet tile manufacturing facility in Thailand and transferred that production volume to other existing manufacturing operations in China and Australia.
Large scale changes or moves could disrupt our normal operations, leading to possible loss of productivity, which may adversely affect our results.
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While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, our manufacturing facilities could be materially damaged by natural disasters, such as floods, storms, tornadoes, hurricanes and earthquakes, whether or not as a result of climate change, or by fire or other unexpected events such as adverse weather conditions, acts of war, terrorism, protests, energy shortages and disruptions, pandemics or other public health crises or other disruptions to our facilities, supply chain or our customers’ facilities.
+Added: We have experienced such losses in the past.
We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition and results of operations.
These types of events could also affect our suppliers, installers, and customers, which could have a material adverse impact on our business.
+Added: The market price of our common stock has been volatile and the value of your investment may decline.
+Added: The market price of our common stock has been volatile in the past and may continue to be volatile going forward.
+Added: Such volatility may cause precipitous drops in the price of our common stock on the Nasdaq Global Select Market and may cause your investment in our common stock to lose significant value.
+Added: As a general matter, market price volatility has had a significant effect on the market values of securities issued by many companies for reasons unrelated to their operating performance.
+Added: We cannot predict the market price for our common stock going forward.
+Added: Sales of our principal products have been and may continue to be affected by adverse economic cycles, and effects in the new construction market and renovation market.
+Added: Sales of our principal products are related to the renovation and construction of commercial and institutional buildings.
+Added: This activity is cyclical and has been affected by the strength of a country’s or region’s general economy, prevailing interest rates and other factors, including increased office vacancies caused by lingering effects from the COVID-19 pandemic and hybrid work schedules, that lead to cost control measures or reduction in the use of space by businesses and other users of commercial or institutional space.
+Added: In addition, the effects of cyclicality and other factors affecting the corporate office segment have traditionally tended to be more pronounced than the effects on other market segments.
+Added: Historically, we have generated more sales in the corporate office market segment than in any other market segment.
+Added: The effects of cyclicality and other factors on the new construction segment of the market have also tended in the past to be more pronounced than the effects on the renovation segment.
+Added: These effects may recur and could be more pronounced if global economic conditions do not improve or are weakened by negative cycles or other factors.
Disruptions to or failures of information technology systems we use could adversely affect our business.
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The IT systems we use may be disrupted or fail for a number of reasons, including:
−Removed: • natural disasters, like fires;
+Added: • natural disasters, such as fires;
• power loss;
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Additionally, we incurred Cyber Event costs of approximately $5 million in fiscal year 2022 primarily due to idle plant costs, direct labor costs during the period our manufacturing facilities were idle and third-party remediation costs.
−Removed: We have insurance and anticipate that a portion of our financial losses related to the Cyber Event will ultimately be recovered by insurance.
+Added: We have cyber insurance and during 2024, we recovered $5.6 million of our financial losses related to the Cyber Event.
Following the Cyber Event, we implemented measures to enhance our cybersecurity protections against, and reduce the potential of, any future cybersecurity attack.
−Removed: We expect to incur ongoing costs to enhance cybersecurity and plan to take further steps to prevent unauthorized access to, or manipulation of, our systems and data.
+Added: We expect to incur ongoing costs to enhance cybersecurity with the goal of preventing unauthorized access to, or manipulation of, our systems and data.
However, there is no guarantee that these enhancements and steps will be adequate to mitigate future losses due to IT system disruptions, and we may incur significant expense in correcting and recovering from future disruptions.
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If we are unable to meet these targets or commitments on our projected timelines or at all, or if they are perceived negatively, including the perception that they are not sufficiently robust or, conversely, are too costly, our reputation as well as our relationships with investors, customers and other stakeholders could be harmed, which could in turn adversely impact our business, results of operations and the trading price of our common stock.
−Removed: Sales of our principal products have been and may continue to be affected by adverse economic cycles, and effects in the new construction market and renovation market.
−Removed: Sales of our principal products are related to the renovation and construction of commercial and institutional buildings.
−Removed: This activity is cyclical and has been affected by the strength of a country’s or region’s general economy, prevailing interest rates and other factors that lead to cost control measures or reduction in the use of space by businesses and other users of commercial or institutional space.
−Removed: In addition, the effects of cyclicality and other factors affecting the corporate office segment have traditionally tended to be more pronounced than the effects on other market segments.
−Removed: Historically, we have generated more sales in the corporate office segment than in any other segment.
−Removed: The effects of cyclicality and other factors on the new construction segment of the market have also tended in the past to be more pronounced than the effects on the renovation segment.
−Removed: These effects may recur and could be more pronounced if global economic conditions do not improve or are weakened by negative cycles or other factors.
Health crisis events, such as epidemics or pandemics, have adversely impacted, and may continue to impact, the economy and disrupt our operations and supply chains, which may have an adverse effect on our results of operations.
Health crisis events, including epidemics or pandemics, such as COVID-19, have impacted areas where we operate and sell our products and could have additional impacts on economic growth, supply chains, and foreign currency exchange rates.
−Removed: Recently, prolonged government imposed COVID-19 restrictions in China and the slow post-COVID recovery in the country adversely impacted our sales in China during fiscal years 2022 and 2023.
A public health emergency in the future could have a material adverse effect on our ability to operate, our results of operations, financial condition, and demand for our products.
International Risk Factors
−Removed: Our substantial international operations are subject to various political, economic and other uncertainties that could adversely affect our business results, including foreign currency fluctuations, restrictive taxation, custom duties, border closings or other adverse government regulations.
+Added: Our substantial international operations are subject to various political, economic and other uncertainties that could adversely affect our business results, including foreign currency fluctuations, restrictive taxation, custom duties, tariffs, border closings or other adverse government regulations.
We have substantial international operations and intend to continue to pursue and commit resources to growth opportunities beyond the United States.
Outside of the United States, we maintain manufacturing facilities in the Netherlands, the United Kingdom, China, Australia and Germany, in addition to product showrooms or design studios in England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Singapore, Hong Kong, China and elsewhere.
−Removed: In 2023, approximately 46% of our net sales and a significant portion of our production were outside the United States, primarily in Europe and Asia-Pacific.
+Added: In 2024 and 2023 approximately 43% and 46% of our net sales, respectively, and a significant portion of our production were outside the United States, primarily in Europe and Asia-Pacific.
International operations carry certain risks and associated costs, such as:
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The risks outlined above, and others specific to certain jurisdictions that we may not be aware of, could adversely and materially affect our business and results.
−Removed: The conflict between Russia and Ukraine and the Israel-Hamas war could adversely affect our business, results of operations and financial position.
−Removed: Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks arising from the conflict between Russia and Ukraine and the Israel-Hamas war, may adversely affect our business, results of operations and financial position.
+Added: The conflicts between Russia and Ukraine and in the Middle East could adversely affect our business, results of operations and financial position.
+Added: Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks arising from the conflicts between Russia and Ukraine and the Middle East, may adversely affect our business, results of operations and financial position.
Historically, Russia was a key supplier of natural gas, oil, and other raw materials to European countries.
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Any disruption in the supply of natural gas, oil, or other raw materials from Russia to Europe could adversely affect our ability to operate our business, our results of operations and our financial position, or adversely affect the ability of our key suppliers to meet our raw material requirements.
−Removed: In particular, the currently reduced Russian exports of natural gas to Europe may materially impede our European manufacturing operations and may result in higher energy costs to operate our facilities.
+Added: In particular, reduced Russian exports of natural gas and oil to Europe may materially impede our European manufacturing operations and may result in higher energy costs to operate our facilities.
Our customers’ businesses, results of operations and financial positions also could be adversely impacted by the conflict in Ukraine, which could reduce their spending on our products.
While we permanently closed our operations in Russia in the third quarter of 2022, the effects of the conflict between Russia and Ukraine on us as well as the global economy cannot be predicted.
−Removed: The conflict between Russia and Ukraine and the Israel-Hamas war are ongoing and the duration of the conflict and war are uncertain.
+Added: The conflicts between Russia and Ukraine and in the Middle East are ongoing and the duration of the conflict and war are uncertain.
We cannot predict the outcome of the conflict and war or the impact on the broader region, as the conflict and war and related government actions are evolving and are beyond our control.
−Removed: To the extent the conflict between Russia and Ukraine and the Israel-Hamas war adversely affects our business, the conflict and war may also have the effect of heightening other risks disclosed in our Annual Report, any of which could materially and adversely affect our business, results of operations and financial condition.
−Removed: Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and corporate and consumer spending;
+Added: To the extent the conflicts between Russia and Ukraine and in the Middle East adversely affects our business, the conflict and war may also have the effect of heightening other risks disclosed in our Annual Report, any of which could materially and adversely affect our business, results of operations and financial condition.
+Added: Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation and reduced corporate and consumer spending;
disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion;
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and constraints, volatility, or disruption in the capital markets.
−Removed: Other potential consequences of the ongoing conflict and war include or may include government sanctions, embargoes, unstable energy markets, regional instability, geopolitical shifts, potential retaliatory action by the governments involved in the conflict and war against companies or other countries, and increased tensions between the involved governments and the United States or other countries in which we operate.
+Added: Other potential consequences of the ongoing conflict and war include or may include government sanctions, embargoes, unstable energy markets, tariff wars, regional instability, geopolitical shifts, potential retaliatory action by the governments involved in the conflict and war against companies or other countries, and increased tensions between the involved governments and the United States or other countries in which we operate.
Fluctuations in foreign currency exchange rates have had, and could continue to have, an adverse impact on our financial condition and results of operations.
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• limiting our ability to refinance our existing indebtedness as it matures.
+Added: • limiting our ability to pay dividends or repurchase our shares.
In addition, borrowings under our Syndicated Credit Facility have variable interest rates, and therefore our interest expense will increase if the underlying market rates (upon which the variable interest rates are based) increase.
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We face risks associated with litigation and claims.
−Removed: We have been, and may in the future become, party to lawsuits including, without limitation, actions and proceedings in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or claims relating to intellectual property matters.
+Added: We have been, and may in the future become, party to lawsuits including, without limitation, actions and proceedings in the ordinary course of business, such as claims brought by our customers in connection with commercial disputes, employment claims made by our current or former employees, or claims relating to intellectual property matters or regulatory investigations and enforcement.
Litigation might result in substantial costs and may divert management’s attention and resources, which may adversely affect our business, results of operations and financial condition.
−Removed: An unfavorable judgment against us in any legal proceeding or claim could require us to pay monetary damages.
+Added: An unfavorable judgment against us in any legal proceeding or claim could require us to pay monetary damages and, depending on the nature of the claim and proceeding, may harm our reputation.
Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us.
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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.