INTERFACE INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) FISCAL YEAR 2024 2023 2022 Net sales $ 1,315,658 $ 1,261,498 $ 1,297,919 Cost of sales 832,710 820,429 860,186 Gross profit 482,948 441,069 437,733 Selling, general and administrative expenses 348,542 339,049 324,190 Restructuring, asset impairment, other (gains) and charges — ( 2,502 ) 1,965 Goodwill and intangible asset impairment charge — — 36,180 Operating income 134,406 104,522 75,398 Interest expense 23,205 31,787 29,929 Other (income) expense, net ( 2,353 ) 9,081 3,552 Income before income tax expense 113,554 63,654 41,917 Income tax expense 26,608 19,137 22,357 Net income $ 86,946 $ 44,517 $ 19,560 Earnings per share – basic $ 1.49 $ 0.77 $ 0.33 Earnings per share – diluted $ 1.48 $ 0.76 $ 0.33 Common shares outstanding – basic 58,282 58,092 58,865 Common shares outstanding – diluted 58,871 58,335 58,865 See accompanying notes to consolidated financial statements. 46 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) FISCAL YEAR 2024 2023 2022 Net income $ 86,946 $ 44,517 $ 19,560 Other comprehensive (loss) income, after tax: Foreign currency translation adjustment ( 23,727 ) 19,185 ( 38,334 ) Reclassification from accumulated other comprehensive loss – discontinued cash flow hedge — 749 1,973 Pension liability adjustment ( 5,818 ) ( 6,468 ) 26,340 Other comprehensive (loss) income ( 29,545 ) 13,466 ( 10,021 ) Comprehensive income $ 57,401 $ 57,983 $ 9,539 See accompanying notes to consolidated financial statements. 47 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except par values) END OF FISCAL YEAR 2024 2023 ASSETS Current assets Cash and cash equivalents $ 99,226 $ 110,498 Accounts receivable, net 171,135 163,386 Inventories, net 260,581 279,079 Prepaid expenses and other current assets 33,355 30,895 Total current assets 564,297 583,858 Property, plant and equipment, net 282,374 291,140 Operating lease right-of-use assets 76,815 87,519 Deferred tax asset 24,624 21,721 Goodwill 99,887 105,448 Intangible assets, net 48,273 56,255 Other assets 74,546 84,154 Total assets $ 1,170,816 $ 1,230,095 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 68,943 $ 62,912 Accrued expenses 134,996 130,890 Current portion of operating lease liabilities 12,296 12,347 Current portion of long-term debt 482 8,572 Total current liabilities 216,717 214,721 Long-term debt 302,275 408,641 Operating lease liabilities 68,092 78,269 Deferred income taxes 31,822 33,832 Other long-term liabilities 62,762 68,685 Total liabilities 681,668 804,148 Commitments and contingencies (Note 18) Shareholders’ equity Preferred stock, par value $ 1.00 per share; 5,000 shares authorized; none issued or outstanding at December 29, 2024 and December 31, 2023 — — Common stock, par value $ 0.10 per share; 120,000 shares authorized; 58,304 and 58,112 shares issued and outstanding at December 29, 2024 and December 31, 2023, respectively 5,830 5,811 Additional paid-in capital 261,028 252,909 Retained earnings 405,441 320,833 Accumulated other comprehensive loss – foreign currency translation ( 143,317 ) ( 119,590 ) Accumulated other comprehensive loss – pension liability ( 39,834 ) ( 34,016 ) Total shareholders’ equity 489,148 425,947 Total liabilities and shareholders’ equity $ 1,170,816 $ 1,230,095 See accompanying notes to consolidated financial statements. 48 Table of Contents INTERFACE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) FISCAL YEAR 2024 2023 2022 OPERATING ACTIVITIES: Net income $ 86,946 $ 44,517 $ 19,560 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 39,333 40,774 40,337 Share-based compensation expense 12,907 10,265 8,527 Loss (gain) on disposal of property, plant and equipment, net 264 ( 2,252 ) 4,319 Loss on foreign subsidiary liquidation 2,152 6,221 — Bad debt expense 1,476 53 26 Deferred income taxes ( 3,034 ) ( 10,082 ) 10,310 Other ( 8,480 ) 1,273 3,104 Amortization of acquired intangible assets 5,172 5,172 5,038 Goodwill and intangible asset impairment — — 36,180 Working capital changes: Accounts receivable ( 13,872 ) 21,798 ( 17,489 ) Inventories 10,467 31,040 ( 49,651 ) Prepaid expenses and other current assets ( 3,079 ) ( 302 ) 7,020 Accounts payable and accrued expenses 18,178 ( 6,443 ) ( 24,220 ) Cash provided by operating activities 148,430 142,034 43,061 INVESTING ACTIVITIES: Capital expenditures ( 33,788 ) ( 26,107 ) ( 18,437 ) Proceeds from sale of property, plant and equipment 1,040 6,593 — Insurance proceeds from property casualty loss 2,374 — — Cash used in investing activities ( 30,374 ) ( 19,514 ) ( 18,437 ) FINANCING ACTIVITIES: Revolving loan borrowing 34,243 90,000 206,031 Revolving loan repayments ( 34,243 ) ( 114,381 ) ( 189,281 ) Term loan repayments ( 115,213 ) ( 80,927 ) ( 13,191 ) Repurchase of common stock — — ( 17,171 ) Dividends paid ( 2,338 ) ( 2,323 ) ( 2,355 ) Tax withholding payments for share-based compensation ( 4,770 ) ( 1,514 ) ( 402 ) Debt issuance costs — — ( 1,032 ) Finance lease payments ( 2,913 ) ( 2,419 ) ( 2,089 ) Cash used in financing activities ( 125,234 ) ( 111,564 ) ( 19,490 ) Net cash (used in) provided by operating, investing and financing activities ( 7,178 ) 10,956 5,134 Effect of exchange rate changes on cash ( 4,094 ) 1,978 ( 4,822 ) CASH AND CASH EQUIVALENTS: Net (decrease) increase ( 11,272 ) 12,934 312 Balance, beginning of year 110,498 97,564 97,252 Balance, end of year $ 99,226 $ 110,498 $ 97,564 See accompanying notes to consolidated financial statements. 49 Table of Contents INTERFACE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Interface is a global flooring company specializing in carpet tile and resilient flooring, including luxury vinyl tile (“LVT”), and nora® rubber flooring. The Company manufactures modular carpet focusing on the high quality, design-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. The Company also manufactures and sells resilient rubber flooring. The Company has determined that it has two operating and reportable segments – namely Americas (“AMS”) which includes the United States, Canada and Latin America geographic areas, and Europe, Africa, Asia and Australia (collectively “EAAA”). See Note 20 entitled “Segment Information” for additional information. 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 was completed during 2023. During 2024, we recovered $ 4.8 million in business interruption insurance proceeds, which are recognized as a benefit within other income / expense, net in the consolidated statements of operations. During 2024, we also recovered $ 0.8 million of costs from our cyber risk insurance, which are recorded as a reduction of selling, general, and administrative expenses. The insurance claim for the Cyber Event is now closed. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All of our subsidiaries are wholly-owned, and we are not a party to any joint venture, partnership or other variable interest entity that would potentially qualify for consolidation. All material intercompany accounts and transactions are eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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, 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 impacts of the Russia-Ukraine war, the conflict in the Middle East, and other conflicts around the globe, supply chain disruptions, potential government-imposed tariffs, and slow macro environments in certain geographical regions 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. 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. 50 Table of Contents Revenue Recognition Revenue from contracts with customers is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. Revenue Recognized from Contracts with Customers Contracts with customers typically take the form of invoices for purchase of materials from the Company. Customer payment terms vary by region and are typically less than 60 days. 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 was approximately 97 % of the Company’s total revenue in 2024, approximately 98 % of the Company’s total revenue in 2023, and approximately 97 % of the Company’s total revenue in 2022. 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 2024, approximately 2 % for 2023, and approximately 3 % for 2022 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. The installation of the carpet and related products is a separate performance obligation from the sale of carpet. 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 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. The Company does not record taxes collected from customers and remitted to governmental authorities within revenues. The Company records such taxes collected as a liability on our consolidated balance sheets. Performance Obligations As noted above, the Company primarily generates revenue through the sale of flooring material to end users either upon shipment or upon arrival of the product at its destination. In these instances, there typically is no other obligation to the customers other than the delivery of flooring material, with the exception of warranty. 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 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. Given the nature of the warranty as well as the financial impact, the Company has determined that there is no need to identify this warranty as a separate performance obligation, and the Company accounts for warranty on an accrual basis. 51 Table of Contents For the Company’s installation business, the sales of carpet and other flooring materials and installation services are separate deliverables which under the revenue recognition requirements should be characterized as separate performance obligations. The nature of the installation projects is such that the vast majority – an amount in excess of 85 % of these installation projects – are completed in less than five days. The Company’s largest installation customers are retail, education and corporate customers, and these are on a project-by-project basis and are short-term installations. The Company has evaluated these projects at the end of each reporting period and recorded revenue in accordance with the accounting standards for projects which were underway as of the end of 2024, 2023 and 2022. Costs to Obtain Contracts The Company pays sales commissions to many of its sales personnel based upon their selling activity. These are direct costs associated with obtaining the contracts and are expensed as the revenue is recognized. These commissions become payable upon shipment (or in certain cases delivery) of product. There are no other material costs the Company incurs as part of obtaining the sales contract. Shipping and Handling Shipping and handling fees billed to customers are classified in net sales in the consolidated statements of operations. 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 $ 39.2 million, $ 34.6 million and $ 31.3 million for the years 2024, 2023 and 2022, 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 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 $ 15.1 million, $ 17.0 million, and $ 19.1 million for the years 2024, 2023 and 2022, respectively. Cash, Cash Equivalents and Short-Term Investments 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 December 29, 2024 and December 31, 2023. Supplemental Cash Flow Information Cash payments for interest amounted to approximately $ 22.8 million, $ 28.8 million, and $ 25.1 million for the years 2024, 2023 and 2022, respectively. Income tax payments amounted to approximately $ 37.8 million, $ 25.8 million and $ 31.4 million for the years 2024, 2023 and 2022, respectively. During the years 2024, 2023 and 2022, the Company received income tax refunds of $ 3.3 million, $ 2.5 million and $ 12.4 million, respectively. Allowances for Expected Credit Losses The Company maintains allowances for expected credit losses for estimated losses resulting from the inability of customers to make required payments. Estimating the amount of future expected losses requires the Company to consider historical losses from our customers, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services. By its nature, such an estimate is highly subjective, and it is possible that the amount of accounts receivable that the Company is unable to collect may be different than the amount initially estimated. 52 Table of Contents Inventories Inventories are carried at the lower of cost (standards approximating the first-in, first-out method) or net realizable value. Costs included in inventories are based on invoiced costs and/or production costs, as applicable. Included in production costs are material, direct labor and allocated overhead. The Company writes down inventories for the difference between the carrying value of the inventories and their estimated net realizable value. If actual market conditions are less favorable than those projected by management, additional write-downs may be required. Management estimates its reserves for inventory obsolescence by continuously examining its inventories to determine if there are indicators that carrying values exceed net realizable values. Experience has shown that significant indicators that could require the need for additional inventory write-downs are the age of the inventory, the length of its product life cycles, anticipated demand for the Company’s products, and current economic conditions. 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. Leases 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. The right-of-use asset is measured as the present value of the lease obligation. The discount rate used to calculate the present value of the lease liability is the Company’s incremental borrowing rate, which is based on the estimated rate for a fully collateralized borrowing that fully amortizes over a similar lease term at the commencement date and for the applicable geographical region. 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 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. Property, Plant and Equipment and Long-Lived Assets Property, plant and equipment are carried at cost. Depreciation is computed using the straight-line method over the following estimated useful lives: buildings and improvements – ten to forty 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. Total depreciation expense amounted to approximately $ 34.3 million, $ 35.9 million, and $ 36.3 million for the years 2024, 2023 and 2022, respectively. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset. Repair and maintenance costs are charged to operating expense as incurred. 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 2024, 2023 and 2022, the Company performed the annual goodwill impairment test. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. 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. See Note 12 entitled “Goodwill and Other Intangible Assets” for additional information. 53 Table of Contents 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 2024, 2023, and 2022, 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. Product Warranties The Company typically provides limited warranties with respect to certain attributes of its carpet products (for example, warranties regarding excessive surface wear, edge ravel and static electricity) for periods ranging from ten to twenty years , depending on the particular carpet product and the environment in which it is to be installed. Similar limited warranties are provided on certain attributes of its rubber and LVT products, typically for a period of 5 to 15 years. The Company typically warrants that services performed will be free from defects in workmanship for a period of one year following completion. In the event of a breach of warranty, the remedy typically is limited to repair of the problem or replacement of the affected product. 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 $ 5.3 million and $ 4.3 million as of December 29, 2024 and December 31, 2023, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets. Income Taxes 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. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. 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. 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. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future. This requires us to use estimates and make assumptions regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions. For uncertain tax positions, the Company applies the provisions of relevant authoritative guidance, which requires application of a “more likely than not” threshold to the recognition and derecognition of tax positions. The Company’s ongoing assessments of the more likely than not outcomes of tax authority examinations and related tax positions require significant judgment and can increase or decrease the Company’s effective tax rate as well as impact operating results. For further information, see Note 17 entitled “Income Taxes.” Fair Values of Financial Instruments Fair values of cash and cash equivalents and short-term debt approximate cost due to the short period of time to maturity. Fair values of debt are based on quoted market prices or pricing models using current market rates and classified as level 2 within the fair value hierarchy. See Note 5 entitled “Fair Value of Financial Instruments” for further information. 54 Table of Contents Translation of Foreign Currencies The financial position and results of operations of most of the Company’s foreign subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rate in effect at each year-end. Income and expense items are translated each month at average monthly exchange rates throughout the year. The resulting translation adjustments are recorded in the foreign currency translation adjustment account. 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 $( 23.7 ) million, $ 19.2 million, and $( 38.3 ) million for the years 2024, 2023 and 2022, respectively. Earnings per Share Basic earnings per share is computed based on the average number of common shares outstanding, including participating securities. 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. 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 Net pension expense recorded is based on, among other things, assumptions about the discount rate, estimated return on plan assets and salary increases. While the Company believes these assumptions are reasonable, changes in these and other factors and differences between actual and assumed changes in the present value of liabilities or assets of the Company’s plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year. The actuarial assumptions used in the Company’s salary continuation plan and foreign defined benefit plans reporting are reviewed periodically and compared with external benchmarks to ensure that they appropriately account for our future pension benefit obligation. The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. 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 Certain reclassifications to prior year information have been made in the consolidated statements of cash flows to conform to the current period presentation. The previously reported line item “deferred income taxes and other” was separated into two line items in the current period presentation of the consolidated statements of cash flows to provide additional information. These reclassifications had no effect on cash provided by operating activities as previously reported. Reclassifications were also made to prior year deferred tax assets and deferred tax liabilities and the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits presented in Note 17 entitled “Income Taxes” to conform to the current period presentation. See Note 17 entitled “Income Taxes” for additional information. Fiscal Year The Company’s fiscal year is the 52 or 53 week period ending on the Sunday nearest December 31. All references herein to “2024,” “2023,” and “2022,” mean the fiscal years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively. Fiscal years 2024, 2023 and 2022 were each comprised of 52 weeks. 55 Table of Contents NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS Recently Issued Accounting Pronouncements – Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The Company adopted the provisions of ASU 2023-07 for the year ended December 29, 2024 (see Note 20 entitled “Segment Information”). The adoption did not have a material impact to our consolidated financial statements. Recently Issued Accounting Pronouncements – Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, “Income Statement Reporting - Comprehensive Income - Expense Disaggregation (Topic 220-40)”. This ASU requires public entities to provide additional footnote disclosures to disaggregate the cost and expense line items presented in the income statement into specific categories including (a) purchases of inventory; (b) employee compensation; (c) depreciation: and (d) intangible asset amortization. The ASU also requires qualitative disclosure of other relevant expense categories not separately disclosed, the total amount of selling expenses, and the definition of selling expenses in annual reporting periods. The new guidance in ASU 2024-03 is effective for annual periods beginning after December 15, 2026. In January 2025, the FASB issued ASU 2025-01 to clarify the interim reporting period effective date for ASU 2024-03. The provisions of ASU 2024-03 are effective for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU to its consolidated financial statements. 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. We are currently assessing the updated guidance; however, it is not expected to have a material impact to our consolidated financial statements. 56 Table of Contents NOTE 3 – 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 fiscal years 2024, 2023 and 2022 is a follows: Fiscal Year 2024 2023 2022 Revenue from the sale of flooring material 97 % 98 % 97 % Revenue from installation of flooring material 3 % 2 % 3 % Disaggregation of Revenue For fiscal years 2024, 2023 and 2022, revenue from the Company’s customers is broken down by geography as follows: Fiscal Year Geography 2024 2023 2022 Americas 60.9 % 58.4 % 58.0 % Europe 28.6 % 30.1 % 29.2 % Asia-Pacific 10.5 % 11.5 % 12.8 % 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 20 entitled “Segment Information” for additional information. 57 Table of Contents NOTE 4 – RECEIVABLES The Company has adopted credit policies and standards intended to reduce the inherent risk associated with potential increases in its concentration of credit risk due to increasing trade receivables. Management believes that credit risks are further moderated by the diversity of its end customers and geographic sales areas. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral as deemed necessary. 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 a change in their ability to make payments, additional allowances may be required. As of December 29, 2024, and December 31, 2023, the allowance for expected credit losses amounted to $ 3.8 million and $ 3.0 million, respectively, for all accounts receivable of the Company. 58 Table of Contents NOTE 5 – FAIR VALUE OF FINANCIAL INSTRUMENTS Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure estimated fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under applicable accounting standards are described below: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Inputs to the valuation methodology include: • quoted prices for similar assets in active markets; • quoted prices for identical or similar assets in inactive markets; • inputs other than quoted prices that are observable for the asset; and • inputs that are derived principally or corroborated by observable data by correlation or other. Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following table presents the carrying values and estimated fair values, including the level within the fair value hierarchy, of certain financial instruments: December 29, 2024 December 31, 2023 Carrying Value Fair Value (Level 1) Fair Value (Level 2) Carrying Value Fair Value (Level 1) Fair Value (Level 2) (in thousands) Assets: Company-owned life insurance $ 22,911 $ — $ 22,911 $ 22,788 $ — $ 22,788 Deferred compensation investments 30,521 8,697 21,824 28,417 9,200 19,217 Liabilities (1) : Borrowings under Syndicated Credit Facility (2) $ 5,564 $ — $ 5,564 $ 121,658 $ — $ 121,658 5.50% Senior Notes due 2028 (3) 300,000 — 294,738 300,000 — 281,991 (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 not material as of December 29, 2024, and were $ 1.0 million as of December 31, 2023. (3) Unamortized debt issuance costs associated with the Senior Notes, recorded as a reduction of long-term debt in the consolidated balance sheets, were $ 2.8 million and $ 3.4 million as of December 29, 2024 and December 31, 2023, respectively. Company-Owned Life Insurance The fair value of Company-owned life insurance is measured on a readily determinable cash surrender value on a recurring basis. 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. 59 Table of Contents Deferred Compensation Investments Assets associated with the Company’s nonqualified savings plans are held in a rabbi trust and consist of investments in mutual funds and insurance contracts. The fair value of the mutual funds is derived from quoted prices in active markets. The fair value of the insurance contracts is based on observable inputs related to the performance measurement funds that shadow the deferral investment allocations made by participants in the nonqualified savings plans. 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. Syndicated Credit Facility and Senior Notes The Company’s liabilities for borrowings under the Syndicated Credit Facility (the “Facility”) and 5.50 % Senior Notes due 2028 (the “Senior Notes”) are not recorded at fair value in the consolidated balance sheets. The carrying value of borrowings under the Facility approximates fair value as the Facility bears variable interest rates that are similar to existing market rates. The fair value of the Senior Notes is derived using quoted prices for similar instruments. Other Assets and Liabilities Due to the short maturity of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, their carrying values approximate fair value. See Note 19 entitled “Employee Benefit Plans” for additional information on defined benefit plan assets. 60 Table of Contents NOTE 6 – INVENTORIES Inventories are summarized as follows: End of Fiscal Year 2024 2023 (in thousands) Finished goods $ 192,705 $ 201,821 Work-in-process 18,552 20,892 Raw materials 49,324 56,366 Inventories, net $ 260,581 $ 279,079 Reserves for inventory obsolescence amounted to $ 38.3 million and $ 34.0 million as of December 29, 2024 and December 31, 2023, respectively, and have been netted against amounts presented above. 61 Table of Contents NOTE 7 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following: End of Fiscal Year 2024 2023 (in thousands) Land $ 14,844 $ 15,810 Buildings and improvements 159,741 162,359 Equipment, furniture and fixtures (1) 533,314 533,418 Computer software 66,226 66,792 Construction-in-progress (2) 21,394 21,577 795,519 799,956 Accumulated depreciation and amortization (3) ( 513,145 ) ( 508,816 ) Property, plant and equipment, net $ 282,374 $ 291,140 (1) Includes $ 13.1 million and $ 11.9 million of leased equipment for 2024 and 2023, respectively. (2) Primarily represents manufacturing equipment not yet placed in service as of December 29, 2024 and December 31, 2023. (3) Includes $ 5.0 million and $ 4.7 million of accumulated amortization on leased equipment for 2024 and 2023, respectively. 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. 62 Table of Contents NOTE 8 – ACCRUED EXPENSES Accrued expenses are summarized as follows: End of Fiscal Year 2024 2023 (in thousands) Compensation $ 97,190 $ 87,265 Interest 1,276 1,338 Taxes 13,762 18,300 Accrued purchases 3,888 5,141 Warranty and sales allowances 5,254 4,302 Other 13,626 14,544 Accrued expenses $ 134,996 $ 130,890 63 Table of Contents NOTE 9 – LONG-TERM DEBT Long-term debt consisted of the following: December 29, 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 $ 5,564 5.62 % $ 121,658 6.61 % Total borrowings under Syndicated Credit Facility 5,564 5.62 % 121,658 6.61 % 5.50% Senior Notes due 2028 300,000 5.50 % 300,000 5.50 % Total debt 305,564 421,658 Less: Unamortized debt issuance costs ( 2,807 ) ( 4,445 ) Total debt, net 302,757 417,213 Less: Current portion of long-term debt ( 482 ) ( 8,572 ) Total long-term debt, net $ 302,275 $ 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 as discussed below. There were no revolving loan borrowings outstanding as of December 29, 2024 or December 31, 2023. Syndicated Credit Facility 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 December 29, 2024, 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 December 29, 2024, the Company had available borrowing capacity of $ 299.3 million under the revolving loan facility. Significant Facility Amendments On October 14, 2022, the Company entered into a fifth amendment to its Facility. The fifth amendment provided for, among other changes, the following amendments to the Facility: • the amendment of the maturity date of the Facility to October 2027; and • amendments to replace the LIBOR benchmark interest rates applicable to all loans denominated in U.S. dollars with the SOFR benchmark interest rates. 64 Table of Contents Interest Rates and Fees Base rate loans, as defined in the Facility, represent short-term borrowings with applicable interest rates determined as the greater of the federal funds rate plus a margin, the prime rate, or SOFR plus a margin. 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 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. 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. Covenants The Facility contains standard and customary covenants for agreements of this type, including various reporting, affirmative and negative covenants. Among other things, these covenants limit the Company’s and its subsidiaries’ ability to: • create or incur liens on assets; • make acquisitions of or investments in businesses (in excess of certain specified amounts); • engage in any material line of business substantially different from the Company’s current lines of business; • incur indebtedness or contingent obligations; • sell or dispose of assets (in excess of certain specified amounts); • pay dividends or repurchase the Company’s stock (in excess of certain specified amounts); • repay other indebtedness prior to maturity unless the Company meets certain conditions; and • enter into sale and leaseback transactions. The Facility also requires the Company to remain in compliance with the following financial covenants as of the end of each fiscal quarter, based on the Company’s consolidated results for the year then ended: • Consolidated Secured Net Leverage Ratio: Must be no greater than 3.00 :1.00. • Consolidated Interest Coverage Ratio: Must be no less than 2.25 :1.00. Events of Default If the Company breaches or fails to perform any of the affirmative or negative covenants under the Facility, or if other specified events occur (such as a bankruptcy or similar event or a change of control of Interface, Inc. or certain subsidiaries, or if the Company breaches or fails to perform any covenant or agreement contained in any instrument relating to any of the Company’s other indebtedness exceeding $ 20 million), after giving effect to any applicable notice and right to cure provisions, an event of default will exist. If an event of default exists and is continuing, the lenders’ Administrative Agent may, and upon the written request of a specified percentage of the lender group shall: • declare all commitments of the lenders under the facility terminated; • declare all amounts outstanding or accrued thereunder immediately due and payable; and • exercise other rights and remedies available to them under the agreement and applicable law. 65 Table of Contents Collateral Pursuant to a Second Amended and Restated Security and Pledge Agreement, the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries (subject to exceptions for certain immaterial subsidiaries), including all of the stock of the Company’s domestic subsidiaries and up to 65 % of the stock of certain material foreign subsidiaries. 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 certain material foreign subsidiaries. As of December 29, 2024 and December 31, 2023, the Company had $ 0.7 million and $ 1.6 million, respectively, 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. The amortization payments are due on the last day of the calendar quarter. The Company is in compliance with all covenants under the Facility as of December 29, 2024, and anticipates that it will remain in compliance with the covenants for the foreseeable future. Senior Notes due 2028 As of December 29, 2024, 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 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. Redemption 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: Period Redemption Price 2023 102.750 % 2024 101.375 % 2025 and thereafter 100.000 % 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. 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. 66 Table of Contents Covenants The indenture governing the Senior Notes contains standard and customary covenants for agreements of this type, including various reporting, affirmative and negative covenants. Among other things, these covenants limit the Company’s and its subsidiaries’ ability to: • incur additional indebtedness; • declare or pay dividends, redeem stock or make other distributions to shareholders; • make investments; • create liens on their assets or use their assets as security in other transactions; • enter into mergers, consolidations or sales, transfers, leases or other dispositions of all or substantially all of the Company’s assets; • enter into certain transactions with affiliates; and • sell or transfer certain assets. 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. Events of Default If the Company breaches or fails to perform any of the affirmative or negative covenants under the indenture governing the Senior Notes, or if other specified events occur (such as a bankruptcy or similar event), after giving effect to any applicable notice and right to cure provisions, an event of default will exist. 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. 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. 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 December 29, 2024 and December 31, 2023, the unamortized debt issuance costs recorded as a reduction of long-term debt were $ 2.8 million and $ 4.4 million, respectively. Expenses related to such costs for the years 2024, 2023 and 2022 amounted to $ 1.7 million, $ 1.7 million, and $ 1.2 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 $ 1.1 million and $ 1.4 million, as of December 29, 2024 and December 31, 2023, respectively. These amounts are included in other assets in the Company’s consolidated balance sheets. The Company amortizes these costs over the life of the related debt. Expenses related to such costs amounted to $ 0.4 million for each of the years 2024, 2023 and 2022. Future Maturities The aggregate maturities of borrowings are as follows: Fiscal Year Amount (in thousands) 2025 $ 482 2026 482 2027 4,600 2028 300,000 Total debt $ 305,564 Total long-term debt in the consolidated balance sheets includes a reduction for unamortized debt issuance costs of $ 2.8 million which are excluded from the maturities table above. 67 Table of Contents NOTE 10 – DERIVATIVE INSTRUMENTS Interest Rate Risk Management From time to time, the Company enters into interest rate swap transactions to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations. The Company’s objective and strategy with respect to these interest rate swaps is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability to cash flows relating to interest payments on a portion of its outstanding debt. Cash Flow Interest Rate Swaps 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. 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. 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 at December 29, 2024. 68 Table of Contents NOTE 11 – LEASES General The Company has operating and finance leases for manufacturing equipment, corporate offices, showrooms, vehicles, distribution facilities, design centers, as well as computer and office equipment. The Company’s leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. 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 December 29, 2024, 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 29, 2024 and December 31, 2023: December 29, 2024 December 31, 2023 Balance Sheet Location Operating Leases Finance Leases Operating Leases Finance Leases (in thousands) Operating lease right-of-use assets $ 76,815 $ 87,519 Current portion of operating lease liabilities $ 12,296 $ 12,347 Operating lease liabilities 68,092 78,269 Total operating lease liabilities $ 80,388 $ 90,616 Property, plant and equipment, net $ 8,079 $ 7,236 Accrued expenses $ 2,657 $ 2,587 Other long-term liabilities 5,797 5,035 Total finance lease liabilities $ 8,454 $ 7,622 Lease Costs Fiscal Year 2024 2023 2022 (in thousands) Finance lease cost: Amortization of right-of-use assets $ 3,079 $ 2,808 $ 2,238 Interest on lease liabilities 457 319 164 Operating lease cost 19,495 18,850 18,916 Short-term lease cost 827 1,143 849 Variable lease cost 2,824 2,509 2,692 Total lease cost $ 26,682 $ 25,629 $ 24,859 69 Table of Contents Other Supplemental Information Fiscal Year 2024 2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 431 $ 237 $ 128 Operating cash flows from operating leases 17,246 15,552 18,080 Financing cash flows from finance leases 2,913 2,419 2,089 Right-of-use assets obtained in exchange for new finance lease liabilities 3,993 3,612 3,436 Right-of-use assets obtained in exchange for new operating lease liabilities 4,598 15,561 9,307 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 December 29, 2024 and December 31, 2023: End of Fiscal Year 2024 2023 Weighted-average remaining lease term – finance leases (in years) 3.61 3.70 Weighted-average remaining lease term – operating leases (in years) 7.68 8.29 Weighted-average discount rate – finance leases 6.44 % 5.51 % Weighted-average discount rate – operating leases 6.39 % 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) 2025 $ 16,724 $ 3,096 2026 16,746 2,597 2027 13,863 2,018 2028 11,077 1,151 2029 9,506 504 Thereafter 34,706 146 Total future minimum lease payments (undiscounted) 102,622 9,512 Less: Present value discount ( 22,234 ) ( 1,058 ) Total lease liabilities $ 80,388 $ 8,454 70 Table of Contents NOTE 12 – GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 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 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 2024 and 2023 we performed our annual quantitative goodwill impairment testing. We focused our testing on the Americas reporting unit because 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 2024 and 2023 goodwill testing to facilitate a reconciliation of market capitalization. The annual quantitative goodwill impairment testing performed in 2024 and 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 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 the Americas reporting unit was 10.5 % in 2024 compared to 11.5 % in 2023, which fluctuated based on a lower 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 2024 annual goodwill impairment testing, we determined that the fair value of our Americas reporting unit exceeded its carrying value by 132 % at the 2024 m easurement date, and therefore no impairment was indicated. Improved expectations of financial performance for the Americas reporting unit and a lower discount rate contributed to a higher estimated fair value of our Americas reporting unit for 2024. The consolidated goodwill balance of $ 99.9 million at December 29, 2024 is allocated entirely to our Americas reporting unit. As a result of our 2023 annual goodwill 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, was allocated entirely 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. Macroeconomic factors, including inflation, foreign currency exchange rates, and the expected impact to planned revenue and operating income contributed to the lower estimated fair value of our EMEA reporting unit. Higher discount rates also contributed to the lower fair value of our reporting units. 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, 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. 71 Table of Contents The ending balances and the changes in the carrying amounts of goodwill allocated to each reportable segment for the years ended December 29, 2024 and December 31, 2023 are as follows (1) : AMS EAAA Total (in thousands) 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 Foreign currency translation (2) ( 5,561 ) — ( 5,561 ) Goodwill balance, at December 29, 2024 $ 99,887 $ — $ 99,887 (1) Goodwill balances are presented net of cumulative impairment losses of $ 358.5 million as of December 29, 2024. 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. Other Intangible Assets During the fourth quarter of 2024 and 2023, the Company performed its annual impairment testing of the trademark and trade name intangible assets and determined that no impairment existed at the 2024 or 2023 measurement dates. 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. The Company’s intangible assets other than goodwill consisted of the following as of December 29, 2024 and December 31, 2023: December 29, 2024 December 31, 2023 Gross Carrying Amount Accumulated Impairment Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Impairment Accumulated Amortization Net Carrying Amount (in thousands) Intangible assets subject to amortization (1) : Technology $ 34,429 $ — $ ( 31,522 ) $ 2,907 $ 37,198 $ — $ ( 28,845 ) $ 8,353 Other 723 ( 478 ) ( 34 ) 211 734 ( 478 ) ( 20 ) 236 Total intangible assets subject to amortization 35,152 ( 478 ) ( 31,556 ) 3,118 37,932 ( 478 ) ( 28,865 ) 8,589 Indefinite-lived intangible assets (1) : Trademarks and trade names 56,236 ( 11,081 ) — 45,155 58,747 ( 11,081 ) — 47,666 Total intangible assets $ 91,388 $ ( 11,559 ) $ ( 31,556 ) $ 48,273 $ 96,679 $ ( 11,559 ) $ ( 28,865 ) $ 56,255 (1) Certain intangible asset balances are subject to changes attributable to foreign currency translation. Amortization expense related to intangible assets during the years 2024, 2023 and 2022 was $ 5.2 million, $ 5.2 million and $ 5.0 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 $ 3.0 million for fiscal year 2025. The developed technology intangible asset is amortized over its estimated useful life, which ends in fiscal year 2025. 72 Table of Contents NOTE 13 – PREFERRED STOCK The Company is authorized to designate and issue up to 5,000,000 shares of $ 1.00 par value preferred stock in one or more series and to determine the rights and preferences of each series, to the extent permitted by the Articles of Incorporation, and to fix the terms of such preferred stock without any vote or action by the shareholders. The issuance of any series of preferred stock may have an adverse effect on the rights of holders of common stock and could decrease the amount of earnings and assets available for distribution to holders of common stock. 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 December 29, 2024, and December 31, 2023, there were no shares of preferred stock issued. 73 Table of Contents NOTE 14 – SHAREHOLDERS’ EQUITY The Company is authorized to issue 120 million shares of $ 0.10 par value Common Stock. 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, including participating securities, in each of years 2024, 2023 and 2022. 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 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 2024 or 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. All treasury stock is accounted for using the cost method. The following tables depict the activity in the accounts which make up shareholders’ equity for fiscal years 2024, 2023 and 2022: SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT TOTAL (in thousands) Balance, at December 31, 2023 58,112 $ 5,811 $ 252,909 $ 320,833 $ ( 34,016 ) $ ( 119,590 ) $ 425,947 Net income — — — 86,946 — — 86,946 Issuances of stock related to restricted share units and performance shares 479 48 ( 48 ) — — — — Restricted stock issuances 58 6 941 — — — 947 Unrecognized compensation expense related to restricted stock awards — — ( 946 ) — — — ( 946 ) Cash dividends declared — — — ( 2,338 ) — — ( 2,338 ) Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings ( 345 ) ( 35 ) 8,172 — — — 8,137 Pension liability adjustment — — — — ( 5,818 ) — ( 5,818 ) Foreign currency translation adjustment — — — — — ( 23,727 ) ( 23,727 ) Balance, at December 29, 2024 58,304 $ 5,830 $ 261,028 $ 405,441 $ ( 39,834 ) $ ( 143,317 ) $ 489,148 74 Table of Contents SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT CASH FLOW HEDGE TOTAL (in thousands) Balance, at January 1, 2023 58,106 $ 5,811 $ 244,159 $ 278,639 $ ( 27,548 ) $ ( 138,775 ) $ ( 749 ) $ 361,537 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 Unrecognized compensation expense related to restricted stock awards — — ( 760 ) — — — — ( 760 ) Cash dividends declared — — — ( 2,323 ) — — — ( 2,323 ) 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 ) Foreign currency translation adjustment — — — — — 19,185 — 19,185 Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 749 749 Balance, at December 31, 2023 58,112 $ 5,811 $ 252,909 $ 320,833 $ ( 34,016 ) $ ( 119,590 ) $ — $ 425,947 SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT CASH FLOW HEDGE TOTAL (in thousands) Balance, at January 2, 2022 59,055 $ 5,905 $ 253,110 $ 261,434 $ ( 53,888 ) $ ( 100,441 ) $ ( 2,722 ) $ 363,398 Net income — — — 19,560 — — — 19,560 Restricted stock issuances 501 50 6,499 — — — — 6,549 Unrecognized compensation expense related to restricted stock awards — — ( 6,549 ) — — — — ( 6,549 ) Cash dividends declared — — — ( 2,355 ) — — — ( 2,355 ) Compensation expense related to share-based plans, net of forfeitures ( 66 ) ( 6 ) 8,132 — — — — 8,126 Share repurchases ( 1,384 ) ( 138 ) ( 17,033 ) — — — — ( 17,171 ) Pension liability adjustment — — — — 26,340 — — 26,340 Foreign currency translation adjustment — — — — — ( 38,334 ) — ( 38,334 ) Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge — — — — — — 1,973 1,973 Balance, at January 1, 2023 58,106 $ 5,811 $ 244,159 $ 278,639 $ ( 27,548 ) $ ( 138,775 ) $ ( 749 ) $ 361,537 75 Table of Contents 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 2024, the shareholders of the Company approved the adoption of an amendment and restatement of the Interface, Inc. 2020 Omnibus Stock Incentive Plan (the “Amended and Restated Plan”). The aggregate number of shares of common stock that may be issued or transferred under the Amended and Restated Plan on or after the effective date of the plan is the sum of 3,200,000 shares not previously authorized for issuance under any plan, plus the number of shares remaining available for issuance under the original Interface, Inc. 2020 Omnibus Stock Incentive Plan (the “Original Plan”) but not subject to outstanding awards under the Original Plan immediately prior to the effective date of the Amended and Restated Plan, plus the number of shares remaining available for issuance pursuant to the outstanding awards under the Original Plan immediately prior to the effective date of the Amended and Restated Plan, including any shares that become available due to the forfeiture, termination or cancellation of such awards. No award may be granted after the tenth anniversary of the effective date of the Amended and Restated Plan. 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 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 During fiscal years 2024, 2023 and 2022, the Company granted restricted stock awards totaling 58,400 , 107,100 , and 500,800 shares, respectively, of Common Stock. The weighted average grant date fair value of restricted stock awards granted during 2024, 2023 and 2022 was $ 16.22 , $ 7.10 , and $ 13.08 , respectively. These awards (or a portion thereof) vest with respect to each recipient over a one to three-year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date. Additionally, certain awards (or a portion thereof) could vest earlier in the event of a change in control of the Company or upon involuntary termination without cause. Compensation expense related to awards of restricted stock was $ 2.3 million, $ 4.5 million and $ 5.3 million for 2024, 2023 and 2022, respectively. These grants are made primarily to the board of directors and 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 stock forfeited during the period. 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 December 29, 2024, as well as activity during the year: Restricted Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 691,600 $ 12.55 Granted 58,400 16.22 Vested ( 504,700 ) 12.31 Forfeited or canceled ( 3,000 ) 13.19 Outstanding at December 29, 2024 242,300 $ 13.92 As of December 29, 2024, the unrecognized total compensation cost related to unvested restricted stock was $ 0.4 million. That cost is expected to be recognized over a weighted-average remaining vesting period of 0.3 years. 76 Table of Contents Restricted Share Unit Awards During fiscal year 2024 and 2023, the Company granted awards for 407,300 and 596,200 restricted share units to certain employees pursuant to the Company’s stock incentive plan. There were no restricted share unit awards granted during 2022. The weighted average grant date fair value of the restricted share units granted during 2024 and 2023 was $ 13.38 and $ 10.36 respectively. 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 $ 3.5 million and $ 1.9 million for 2024 and 2023, respectively. There was no compensation expense related to restricted share unit awards during 2022. 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 primarily in SG&A expenses in the consolidated statements of operations. The following table summarizes restricted share units outstanding as of December 29, 2024, as well as activity during the year: Restricted Share Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 583,400 $ 10.35 Granted 407,300 13.38 Vested ( 157,200 ) 10.77 Forfeited or canceled ( 10,200 ) 11.41 Outstanding at December 29, 2024 823,300 $ 11.76 As of December 29, 2024, the unrecognized total compensation cost related to unvested restricted share units was $ 6.0 million. That cost is expected to be recognized over a weighted-average remaining vesting period of 1.8 years. Performance Share Awards In each of the years 2024, 2023 and 2022, the Company issued awards of performance shares to certain employees. These awards vest based on the achievement of certain performance-based goals over a performance period of three years , subject to (among other things) the employee’s continued employment through the last date of the performance period and will be settled in shares of our common stock or in cash at the Company’s election. The number of shares that may be issued in settlement of the performance shares to the award recipients may be greater (up to 200 %) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards. The expense related to these performance shares is captured in SG&A expenses in the consolidated statements of operations. The Company evaluates the probability of achieving the performance-based goals as of the end of each reporting period and adjusts compensation expense based on this assessment. The following table summarizes the performance shares outstanding as of December 29, 2024, as well as the activity during the year: Performance Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 1,115,000 $ 12.36 Granted 402,800 13.24 Vested ( 322,200 ) 13.90 Forfeited or canceled ( 23,900 ) 12.53 Outstanding at December 29, 2024 1,171,700 $ 12.23 77 Table of Contents Compensation expense related to the performance shares for 2024, 2023 and 2022 was $ 7.1 million, $ 3.9 million and $ 3.2 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 $ 7.9 million as of December 29, 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 over a weighted-average remaining vesting period of 1.8 years. The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was $ 1.7 million, $ 0.9 million, and $ 0.8 million in 2024, 2023 and 2022, respectively. 78 Table of Contents NOTE 15 – EARNINGS PER SHARE 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. 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. Unvested share-based awards of restricted stock are paid dividends equally with all other shares of common stock and are considered participating securities. As a result, the Company includes all outstanding restricted stock awards in the calculation of basic and diluted EPS. Any unvested share-based awards considered non-participating securities (restricted share units and performance shares) are included in diluted EPS calculations when the inclusion of these shares would be dilutive. The following table shows the computation of basic and diluted EPS: Fiscal Year 2024 2023 2022 (in thousands, except per share data) Numerator: (1) Net income $ 86,946 $ 44,517 $ 19,560 Denominator: Weighted average shares outstanding 57,937 57,349 57,893 Participating securities 345 743 972 Shares for basic EPS 58,282 58,092 58,865 Dilutive effect of share-based awards (non-participating securities) 589 243 — Shares for diluted EPS 58,871 58,335 58,865 Basic EPS $ 1.49 $ 0.77 $ 0.33 Diluted EPS $ 1.48 $ 0.76 $ 0.33 (1) Including income attributable to participating securities, which was $ 0.5 million, $ 0.6 million, and $ 0.3 million, for fiscal years 2024, 2023 and 2022, respectively. For 2024, there were no securities excluded from the computation of diluted EPS that would have been antidilutive. 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. 79 Table of Contents NOTE 16 – RESTRUCTURING AND OTHER Restructuring, asset impairment, other (gains) and charges by reportable segment are presented as follows: Fiscal Year 2024 2023 2022 (in thousands) AMS $ — $ — $ — EAAA — ( 2,502 ) 1,965 Total restructuring, asset impairment, other (gains) and charges $ — $ ( 2,502 ) $ 1,965 2021 Restructuring Plan On September 8, 2021, the Company committed to a restructuring plan that focused 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. 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 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. This restructuring plan was completed following the sale of the Thailand Facility. 80 Table of Contents NOTE 17 – INCOME TAXES Income before income taxes consisted of the following: Fiscal Year 2024 2023 2022 (in thousands) U.S. operations $ 37,060 $ 3,611 $ 11,758 Foreign operations 76,494 60,043 30,159 Income before income taxes $ 113,554 $ 63,654 $ 41,917 Provisions for federal, foreign and state income taxes in the consolidated statements of operations consisted of the following components: Fiscal Year 2024 2023 2022 (in thousands) Current expense: Federal $ 7,599 $ 5,523 $ 1,624 Foreign 20,982 18,330 20,903 State 2,481 2,167 1,307 Current expense 31,062 26,020 23,834 Deferred (benefit) expense: Federal ( 3,279 ) ( 4,810 ) 346 Foreign ( 841 ) ( 1,212 ) ( 2,053 ) State ( 334 ) ( 861 ) 230 Deferred benefit ( 4,454 ) ( 6,883 ) ( 1,477 ) Total income tax expense $ 26,608 $ 19,137 $ 22,357 81 Table of Contents The Company’s effective tax rate was 23.4 %, 30.1 % and 53.3 % for fiscal years 2024, 2023 and 2022, 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: Fiscal Year 2024 2023 2022 (in thousands) Income taxes at U.S. federal statutory rate $ 23,846 $ 13,367 $ 8,803 Increase (decrease) in taxes resulting from: State income taxes, net of federal tax effect 2,319 ( 432 ) 817 Non-deductible business expenses 940 747 237 Non-deductible employee compensation 1,587 1,681 1,678 Tax effects of Company-owned life insurance ( 576 ) ( 587 ) 612 Tax effects of undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested 443 779 1,123 Foreign and U.S. tax effects attributable to foreign operations 4,532 1,537 3,528 Expiring tax attributes 4,125 3,780 — Valuation allowance effect ( 7,330 ) ( 879 ) 2,898 Research and development tax credits ( 703 ) ( 820 ) ( 917 ) Goodwill impairment — — 6,171 Foreign tax rate change related to UK pension ( 2,493 ) — — Unrecognized tax benefits ( 135 ) ( 79 ) ( 2,463 ) Other 53 43 ( 130 ) Income tax expense $ 26,608 $ 19,137 $ 22,357 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. The Inflation Reduction Act did not have a material impact on the Company’s financial statements for the year ended December 29, 2024. 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. Deferred income taxes for the years ended December 29, 2024 and December 31, 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. 82 Table of Contents The temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows: End of Fiscal Year 2024 2023 (in thousands) Deferred tax assets (1) Lease liability $ 22,329 $ 25,164 Net operating loss and interest carryforwards 7,964 9,587 Federal tax credit carryforwards 4,036 7,876 Deferred compensation 16,521 16,517 Pensions 4,982 6,304 Property and equipment 438 554 Inventory 3,121 6,657 Prepaids, accruals and reserves 9,235 8,147 Capitalized costs 10,327 9,442 Deferred tax asset, gross 78,953 90,248 Valuation allowance ( 10,028 ) ( 17,357 ) Deferred tax asset, net $ 68,925 $ 72,891 Deferred tax liabilities (1) Property and equipment $ 24,899 $ 25,216 Inventory 4,014 3,616 Intangible assets 20,970 24,411 Lease asset 20,887 23,868 Pensions 3,866 6,309 Foreign currency 556 686 Foreign withholding and U.S. state taxes on unremitted earnings 773 725 Other 158 171 Deferred tax liabilities 76,123 85,002 Net deferred tax liabilities $ 7,198 $ 12,111 (1) In prior year, certain deferred tax asset and deferred tax liability balances by jurisdiction were presented as a net position. In the current period presentation, deferred tax assets and deferred tax liabilities are presented gross. Amounts above for 2023 have been recast to conform to the current period presentation. These reclassifications change the previously disclosed gross deferred tax asset and gross deferred tax liability positions. However, the net deferred tax liability position presented in the prior year remains unchanged. 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 December 29, 2024. As of December 29, 2024, the Company has approximately $ 4.0 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 December 29, 2024, the Company has approximately $ 190.1 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2044 and has provided a valuation allowance against $ 127.6 million of such losses, which the Company does not expect to utilize. In addition, as of December 29, 2024, the Company has approximately $ 11.0 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided. During fiscal year 2024, the Company had approximately $ 4.1 million in tax attributes related to foreign tax credit carryovers that expired. The expiring foreign tax credit carryover attributes had a full valuation allowance, as a result, the expiration of these tax attributed did not have an impact on the Company’s effective tax rate for fiscal year 2024. 83 Table of Contents As of December 29, 2024, and December 31, 2023, non-current deferred tax assets were reduced by approximately $ 2.6 million and $ 2.8 million of unrecognized tax benefits, respectively. Historically, the Company has not provided for U.S. income taxes and foreign withholding taxes on the undistributed accumulated earnings of its foreign subsidiaries, with the exception of its Canada and Thailand subsidiaries and a specific portion of the undistributed earnings of foreign subsidiaries outside of Canada and Thailand, because such earnings were deemed to be permanently reinvested. The Company provided for U.S. income taxes and foreign withholding taxes on the undistributed earnings that were not permanently reinvested at December 29, 2024 and December 31, 2023. Although the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) created a dividends received deduction that generally eliminates additional U.S. federal income taxes on dividends from our foreign subsidiaries, the Company continues to assert that all of its undistributed earnings in its non-U.S. subsidiaries, excluding undistributed earnings for which U.S. income taxes and foreign withholding taxes have been provided, are indefinitely reinvested outside of the U.S. The Company expects that domestic cash resources will be sufficient to fund its domestic operations and cash commitments in the future. 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 of earnings from its non-U.S. subsidiaries could still be subject to additional foreign withholding and U.S. state taxes, the determination of which is not practicable. The Company’s federal income tax returns are subject to examination for the years 2021 to the present. The Company files returns in numerous state and local jurisdictions and in general it is subject to examination by the state tax authorities for the years 2019 to the present. The Company files returns in numerous foreign jurisdictions and in general it is subject to examination by the foreign tax authorities for the years 2013 to the present. In 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 Her Majesty’s Revenue & Customs (“HMRC”) adjusting the interest rate applied in the intra-group financing arrangement between the Company’s subsidiary in the U.K. and another in the Netherlands. During 2023, the MAP was concluded, and the Company recognized the related adjustments in its 2023 financial results. The recognition of the adjustments did not have a material impact on the Company’s effective tax rate or its financial position. As of December 29, 2024, and December 31, 2023, the Company had $ 4.8 million and $ 4.9 million, respectively, of unrecognized tax benefits, including accrued interest and penalties. 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 the Company were to prevail on all uncertain tax positions, there would be a favorable impact on the Company’s effective tax rate of approximately $ 4.8 million in future periods. If the unrecognized tax positions are not favorably settled, $ 2.2 million of the total amount of unrecognized tax benefits would require the use of cash in future periods. 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. The Company recognizes accrued interest and income tax penalties related to unrecognized tax benefits as a component of income tax expense. As of December 29, 2024 and December 31, 2023, the Company had accrued interest and penalties of $ 0.4 million for both periods, which are included in the total unrecognized tax benefit noted above. 84 Table of Contents A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows: Fiscal Year 2024 2023 2022 (in thousands) Balance at beginning of year (1) $ 4,532 $ 5,352 $ 7,360 Increases related to tax positions taken during the current year 316 320 342 Increases related to tax positions taken during the prior years — 19 109 Decreases related to tax positions taken during the prior years ( 208 ) ( 30 ) ( 233 ) Decreases related to lapse of applicable statute of limitations ( 289 ) ( 1,142 ) ( 2,225 ) Changes due to foreign currency translation — 13 ( 1 ) Balance at end of year (1) $ 4,351 $ 4,532 $ 5,352 (1) In prior years, interest and penalties were included in the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits. In the current period, interest and penalties are excluded from the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits. Amounts for fiscal years 2023 and 2022 above have been recast to conform to the current period presentation. These reclassifications to the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits do not impact the accrual as recorded in the consolidated balance sheets. 85 Table of Contents NOTE 18 – COMMITMENTS AND CONTINGENCIES From time to time, the Company is a party to legal proceedings, whether arising in the ordinary course of business or otherwise. One of the proceedings the Company is involved in is summarized below. Lawsuit by Former CEO in Connection with Termination On January 19, 2020, the Company’s Board of Directors voted to terminate for cause the employment of Jay D. Gould, then President and Chief Executive Officer, effective immediately, for violations of the Company’s working environment policies. On February 14, 2020, Mr. Gould filed a lawsuit against the Company in the United States District Court of the Northern District of Georgia, Gould v. Interface, Inc. , Case No. 1:20-cv-00695. In his lawsuit, Mr. Gould asserted several claims against the Company in connection with his termination, including that the termination was a wrongful retaliation against Mr. Gould and breached his employment contract with the Company, that public statements made by the Company in connection with his termination defamed Mr. Gould (two counts) and that the Company’s investigation into Mr. Gould’s conduct that preceded the termination was negligently performed. Among other unspecified relief, Mr. 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. Gould’s putative claim of negligent investigation, and Mr. Gould’s defamation claims were dismissed with prejudice by stipulation of the parties. On March 31, 2022, the Court entered an order granting the Company’s motion for summary judgment on all of Mr. Gould’s remaining claims, leaving only the Company’s counterclaim against Mr. Gould for breach of fiduciary duty pending in the District Court. An attempted interlocutory appeal by Mr. Gould of the summary judgment order was remanded by the 11th Circuit Court of Appeals back to the District Court as premature. Mr. Gould filed a motion for reconsideration of the Court’s grant of summary judgment in favor of the Company on Mr. Gould’s breach of contract claim. On July 31, 2023, the Court denied that motion for reconsideration. Also on July 31, 2023, the Company filed a motion to dismiss without prejudice its counterclaim against Mr. Gould for breach of fiduciary duty. On August 2, 2023, the Court granted that motion to dismiss, resulting in a final judgment in the trial court. The Court’s award of summary judgment in favor of the Company on Mr. Gould’s breach of contract claim was appealed by Mr. Gould to the U.S. Court of Appeals for the 11th Circuit. On November 19, 2024, oral arguments for Mr. Gould’s appeal were held in front of the U.S. Court of Appeals for the 11th Circuit. The Court of Appeals has not issued an opinion on Mr. Gould’s appeal, and it remains pending. The Company believes Mr. Gould’s lawsuit and the appeal therefrom is without merit and intends to defend vigorously against it. 86 Table of Contents NOTE 19 – EMPLOYEE BENEFIT PLANS Defined Contribution and Deferred Compensation Plans The Company has a 401(k) retirement investment plan (“401(k) Plan”), which is open to all eligible U.S. employees with at least six months of service. 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. The Company’s matching contributions are funded bi-monthly and totaled approximately $ 3.6 million, $ 3.4 million, and $ 3.3 million for the years 2024, 2023 and 2022, respectively. No discretionary contributions were made in 2024, 2023 or 2022. 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 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. Participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company has established a rabbi trust to hold, invest and reinvest deferrals and contributions under the NSPs. 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 $ 30.3 million and $ 28.2 million at December 29, 2024 and December 31, 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 $ 21.8 million and $ 19.2 million as of December 29, 2024 and December 31, 2023, respectively. The fair value of the mutual fund investments at December 29, 2024 and December 31, 2023 was $ 8.7 million and $ 9.2 million, respectively. Multiemployer Plan On December 31, 2019, a plan amendment was executed to eliminate future service accruals in our defined benefit pension plan in the Netherlands (the “Dutch Plan”), which resulted in a curtailment of the plan. The Dutch Plan remains in existence and continues to pay vested benefits. 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 2024, 2023 and 2022, the Company recorded multi-employer pension expense related to multiemployer contributions of $ 2.9 million, $ 2.7 million and $ 2.4 million, respectively. The Company’s contributions into the IWPF are less than 5 % of total plan contributions. The IWPF is more than 85 % funded at the end of 2023, which is the latest date plan information is available. The IWPF multi-employer plan is not considered to be significant based on the funded status of the plan and our contributions. Foreign Defined Benefit Plans The Company has trusteed defined benefit retirement plans which cover many of its European employees. The benefits under these defined benefit retirement plans are generally based on years of service and the employee’s average monthly compensation. In connection with the nora acquisition in 2018, the Company acquired an additional defined benefit plan, which covers certain employees in Germany (the “nora Plan”). The nora plan has no plan assets. The Company uses a year-end measurement date for the plans, which is the closest practical date to the Company’s fiscal year end. As described above, on December 31, 2019, participants in the Dutch Plan no longer accrue benefits under the plan and they became eligible to contribute to the IWPF beginning fiscal year 2020. Although the Dutch Plan is frozen to new participants, vested benefits will continue to be accounted for in accordance with applicable accounting standards for defined benefit plans. The Dutch Plan is financed by assets held in an insurance contract. The guarantee provision included in the insurance contract, that existed to fund any shortfall between the fair value of plan investments and the benefit obligation, expired on December 31, 2019. The Company is obligated to fund the cost to guarantee vested benefits. As of December 29, 2024, the under-funded status of the Dutch Plan of $ 5.1 million is recorded on the consolidated balance sheet in other long-term liabilities. Pension expense for our three European defined benefit plans was $ 1.8 million, $ 1.3 million, and $ 2.0 million for the years 2024, 2023 and 2022, respectively. Plan assets are primarily invested in insurance contracts and fixed income securities. As of December 29, 2024, for the European plans, the Company had a net liability recorded of $ 19.7 million, an amount equal to their under-funded status, and had recorded in accumulated other comprehensive loss an amount equal to $ 36.3 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. 87 Table of Contents The tables presented below set forth the funded status of the Company’s significant foreign defined benefit plans and required disclosures in accordance with applicable accounting standards: Fiscal Year 2024 2023 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $ 214,428 $ 195,440 Service cost 500 458 Interest cost 7,933 8,169 Benefits and expenses paid ( 10,709 ) ( 10,832 ) Actuarial loss (gain) ( 4,321 ) 12,760 Currency translation adjustment ( 6,943 ) 8,433 Benefit obligation, end of year $ 200,888 $ 214,428 Change in plan assets: Plan assets, beginning of year $ 199,348 $ 187,485 Actual return on assets ( 5,144 ) 11,596 Company contributions 2,626 2,497 Benefits paid ( 10,709 ) ( 10,832 ) Currency translation adjustment ( 4,968 ) 8,602 Plan assets, end of year $ 181,153 $ 199,348 Funded status $ ( 19,735 ) $ ( 15,080 ) Amounts recognized in consolidated balance sheets: Other assets $ 15,465 $ 25,235 Current liabilities ( 1,170 ) ( 1,182 ) Other long-term liabilities, net of current portion ( 34,030 ) ( 39,133 ) Under-funded status at end of fiscal year $ ( 19,735 ) $ ( 15,080 ) Amounts recognized in accumulated other comprehensive loss, after tax: Unrecognized actuarial loss $ 36,323 $ 29,918 Total amount recognized, end of year $ 36,323 $ 29,918 Accumulated benefit obligation $ 200,888 $ 214,428 88 Table of Contents 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 $ 13.5 million for 2024 compared to prior year was primarily due to an increase in the weighted average discount rate used to measure the obligation and the impact of foreign currency translation due to the weakening of the Euro against the U.S. dollar in 2024. As of December 29, 2024, 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 29, 2024. The nora Plan is an unfunded defined benefit plan and the accumulated benefit obligation exceeded plan assets as of December 29, 2024. The following table summarizes this information as of December 29, 2024 and December 31, 2023. End of Fiscal Year 2024 2023 (in thousands) UK Plan Projected benefit obligation $ 106,865 $ 108,424 Accumulated benefit obligation 106,865 108,424 Plan assets 122,330 133,658 Dutch Plan Projected benefit obligation $ 63,938 $ 71,422 Accumulated benefit obligation 63,938 71,422 Plan assets 58,823 65,690 nora Plan Projected benefit obligation $ 30,085 $ 34,582 Accumulated benefit obligation 30,085 34,582 Plan assets — — Fiscal Year 2024 2023 2022 (in thousands) Components of net periodic benefit cost: Service cost $ 500 $ 458 $ 840 Interest cost 7,933 8,169 3,793 Expected return on plan assets ( 7,858 ) ( 7,933 ) ( 3,957 ) Amortization of prior service cost 180 137 117 Amortization of net actuarial losses 1,080 468 1,201 Net periodic benefit cost $ 1,835 $ 1,299 $ 1,994 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 2024, other comprehensive loss was impacted by a total net loss of approximately $ 5.7 million (net of $ 1.7 million of tax), comprised of actuarial loss of approximately $ 6.5 million (net of $ 2.0 million of tax) and amortization of loss of $ 0.8 million (net of $ 0.3 million of tax). 89 Table of Contents Fiscal Year 2024 2023 2022 Weighted average assumptions used to determine net periodic benefit cost: Discount rate 3.9 % 4.1 % 1.4 % Expected return on plan assets 4.6 % 4.6 % 3.0 % Weighted average assumptions used to determine benefit obligations: Discount rate 4.7 % 4.1 % 4.4 % The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. 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. The investment objectives of the foreign defined benefit plans are to maximize the return on the investments to ensure that the assets are sufficient to exceed minimum funding requirements, and to achieve a favorable return against performance expectations based on historical and projected rates of return over the short term. The goal is to optimize the long-term return on plan assets at a moderate level of risk, by balancing higher-returning assets, such as equity securities, with less volatile assets, such as fixed income securities. 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 December 29, 2024 or December 31, 2023. Dutch Plan Assets and Indexation Benefit As is common in Dutch pension plans, the Dutch Plan includes a provision for discretionary benefit increases termed “indexation.” The indexation benefit is meant to adjust pension benefits for cost-of-living increases, similar to U.S. consumer price index-based cost-of-living adjustments for U.S. retirement plans. The indexation benefit is not guaranteed, and is only provided for and paid out if sufficient assets are available due to favorable asset returns. Both the vested benefit amounts as well as amounts related to the discretionary indexation benefits under the Dutch Plan are paid pursuant to an insurance contract with a private insurer (the “Contract”). The Dutch Plan itself is financed by investment assets held within the Contract. Prior to December 31, 2019, the Contract guaranteed payment of vested benefits, regardless of whether Dutch Plan assets held through the Contract were ultimately sufficient to pay vested amounts, and also provided for payment of the indexation amount on a contingent basis if the actual return on Dutch Plan assets were sufficient to pay it. This type of insurance arrangement is common in The Netherlands, although not necessarily common in other jurisdictions. After the Dutch Plan curtailment on December 31, 2019, any shortfall in plan assets to pay vested benefits will be funded by the Company. The assets under the Dutch Plan, including any indexation benefit, are identified as level 3 assets under the fair value hierarchy. 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 2024 and 2023. 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. As explained above, the Contract also will pay the indexation benefit if sufficient assets are available, which the Company believes not to be probable as of the end of 2024 based on recent returns. The indexation benefit for 2024 and 2023 is not significant. 90 Table of Contents The Company’s actual weighted average asset allocations for 2024 and 2023, and the targeted asset allocation for 2025, of the foreign defined benefit plans by asset category, are as follows: Fiscal Year 2025 2024 2023 Asset Category Target Allocation Percentage of Plan Assets at Year End Debt and debt securities 65 % — 70 % 58 % 59 % Short-term investments — % — 2 % 9 % 8 % Other investments 30 % — 35 % 33 % 33 % 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 December 29, 2024 and December 31, 2023. The nora plan is currently unfunded. As required by accounting standards, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 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 December 29, 2024 Dutch Plan UK Plan Total (in thousands) Level 1 $ — $ 16,182 $ 16,182 Level 2 — 90,330 90,330 Level 3 58,823 15,818 74,641 Total $ 58,823 $ 122,330 $ 181,153 Pension Plan Assets by Category as of December 31, 2023 Dutch Plan UK Plan Total (in thousands) Level 1 $ — $ 16,232 $ 16,232 Level 2 — 92,200 92,200 Level 3 65,690 25,226 90,916 Total $ 65,690 $ 133,658 $ 199,348 91 Table of Contents The tables below detail the foreign defined benefit plans’ assets by asset allocation and fair value hierarchy: End of Fiscal Year 2024 Asset Category Level 1 Level 2 Level 3 (in thousands) Debt and debt securities $ — $ 90,330 $ 14,950 Short-term investments (1) 16,182 — — Other investments (2) — — 59,691 $ 16,182 $ 90,330 $ 74,641 End of Fiscal Year 2023 Asset Category Level 1 Level 2 Level 3 (in thousands) Debt and debt securities $ — $ 92,200 $ 24,325 Short-term investments (1) 16,232 — — Other investments (2) — — 66,591 $ 16,232 $ 92,200 $ 90,916 (1) Short-term investments are generally invested in interest-bearing accounts. (2) Other investments are comprised of insurance contracts. Assets identified as level 2 above pertain to corporate bonds and other debt securities. The fair values of these assets are calculated based on quoted market prices for similar assets. With the exception of the Dutch Plan assets as discussed above, the assets identified as level 3 above in 2024 and 2023 relate to insured annuities and direct lending assets held by the UK Plan. The fair value of these assets was calculated using the present value of the future cash flows due under the insurance annuities, and for the direct lending assets the value is based on the asset value from the latest available valuation with adjustments for any drawdowns and distribution payments made between the valuation date and the reporting date. The range of discount rates used in the fair value calculation of level 3 assets held by the Dutch Plan and the UK Plan were 3.50 % to 5.35 % for 2024, and 3.30 % to 4.50 % for 2023. The weighted average discount rates were 3.53 % and 3.32 % for 2024 and 2023, respectively. These amounts are weighted based on the fair value of level 3 plan assets subject to fluctuations in the discount rate. Any changes in these variables will impact the fair value of level 3 assets. The table below indicates the change in value related to these level 3 assets during 2024 and 2023: Fiscal Year 2024 2023 (in thousands) Balance of level 3 assets, beginning of year $ 90,916 $ 89,864 Actual return on plan assets (1) ( 2,463 ) 3,429 Purchases, sales and settlements, net ( 10,138 ) ( 5,734 ) Currency translation adjustment ( 3,674 ) 3,357 Balance of level 3 assets, end of year $ 74,641 $ 90,916 (1) Includes $( 2.1 ) million and $ 2.7 million for 2024 and 2023, respectively, of unrealized (losses) / gains recognized during the period in other comprehensive loss for assets held at year end. 92 Table of Contents During 2025, the Company expects to contribute $ 2.4 million to the foreign defined benefit plans. It is anticipated that future benefit payments for the foreign defined benefit plans will be as follows: Fiscal Year Expected Payments (in thousands) 2025 $ 10,551 2026 10,672 2027 10,775 2028 11,041 2029 11,242 2030-2034 56,744 93 Table of Contents Domestic Defined Benefit Plan The Company maintains a domestic nonqualified salary continuation plan (“SCP”), which is designed to induce selected officers of the Company to remain in the employ of the Company by providing them with retirement, disability and death benefits in addition to those which they may receive under the Company’s other retirement plans and benefit programs. The SCP entitles participants to: (i) retirement benefits upon normal retirement at age 65 (or early retirement as early as age 55 ) after completing at least 15 years of service with the Company (unless otherwise provided in the SCP), payable for the remainder of their lives (or, if elected by a participant, a reduced benefit is payable for the remainder of the participant’s life and any surviving spouse’s life) and in no event less than 10 years under the death benefit feature; (ii) disability benefits payable for the period of any total disability; and (iii) death benefits payable to the designated beneficiary of the participant for a period of up to 10 years. Benefits are determined according to one of three formulas contained in the SCP, and the SCP is administered by the Compensation Committee of the Company’s Board of Directors, which has full discretion in choosing participants and the benefit formula applicable to each. The Company’s obligations under the SCP are currently unfunded (although the Company uses insurance instruments to hedge its exposure thereunder). The Company is required to contribute the present value of its obligations thereunder to an irrevocable grantor trust in the event of a change in control as defined in the SCP. The Company uses a year-end measurement date for the domestic SCP. 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 in the change in benefit obligation in 2024 and 2023 as there are no longer any participants accruing benefits in the plan. Fiscal Year 2024 2023 (in thousands) Change in benefit obligation: Benefit obligation, beginning of year $ 22,659 $ 22,731 Interest cost 1,065 1,134 Benefits paid ( 1,872 ) ( 1,873 ) Actuarial loss (gain) ( 787 ) 667 Benefit obligation, end of year $ 21,065 $ 22,659 The amounts recognized in the consolidated balance sheets are as follows: End of Fiscal Year 2024 2023 (in thousands) Current liabilities $ 1,873 $ 1,873 Non-current liabilities 19,192 20,786 Total benefit obligation $ 21,065 $ 22,659 The components of the amounts in accumulated other comprehensive loss, after tax, are as follows: Fiscal Year 2024 2023 (in thousands) Unrecognized actuarial loss $ 3,428 $ 4,098 The accumulated benefit obligation related to the SCP was $ 21.1 million at December 29, 2024, and $ 22.7 million at December 31, 2023. The SCP is currently unfunded; as such, the benefit obligations disclosed are also the benefit obligations in excess of the plan assets. The Company uses insurance instruments to help limit its exposure under the SCP. 94 Table of Contents Fiscal Year 2024 2023 2022 (in thousands, except for assumptions) Assumptions used to determine net periodic benefit cost: Discount rate 4.90 % 5.20 % 2.65 % Assumptions used to determine benefit obligations: Discount rate 5.45 % 4.90 % 5.20 % Components of net periodic benefit cost: Interest cost $ 1,065 $ 1,134 $ 771 Amortization of actuarial losses 239 195 557 Net periodic benefit cost $ 1,304 $ 1,329 $ 1,328 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 2024 related to the SCP as a result of plan activity was a net gain of approximately $ 0.7 million (net of $ 0.3 million of tax), primarily comprised of a net gain during the period of $ 0.6 million (net of $ 0.2 million of tax) and amortization of loss of $ 0.1 million (net of $ 0.1 million of tax). During 2024, the Company contributed $ 1.9 million in the form of direct benefit payments for its domestic SCP. It is anticipated that future benefit payments for the SCP will be as follows: Fiscal Year Expected Payments (in thousands) 2025 $ 1,873 2026 1,873 2027 1,873 2028 1,873 2029 1,838 2030-2034 8,601 95 Table of Contents NOTE 20 – 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 operating income (“AOI”). The CODM uses AOI to evaluate segment operating results compared to expectations. AOI is also used by the CODM to develop variable compensation targets and make capital spend decisions. AOI includes allocations of corporate selling, general and administrative expenses and global support as discussed below and excludes: nora purchase accounting amortization; Thailand plant closure inventory write-down; Cyber Event impact; goodwill and intangible asset impairment charges; and restructuring, asset impairment, severance, and other, net. Intersegment revenues for 2024, 2023 and 2022 were $ 91.1 million, $ 82.8 million and $ 75.5 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 fiscal year 2024, the Company implemented a cost center realignment initiative to centralize certain global/shared functions. During 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. 96 Table of Contents The following table outlines information by reportable segment including net sales, significant segment expenses, and AOI. The table also includes a reconciliation to income before taxes for fiscal years 2024, 2023, and 2022. Fiscal Year 2024 2023 2022 AMS EAAA TOTAL AMS EAAA TOTAL AMS EAAA TOTAL (in thousands) Net sales $ 800,811 $ 514,847 $ 1,315,658 $ 736,955 $ 524,543 $ 1,261,498 $ 753,740 $ 544,179 $ 1,297,919 Less: significant segment expenses (1) Adjusted cost of sales (2) 494,185 333,353 458,708 356,591 473,761 374,106 Adjusted selling, general, & administrative expenses (3) 200,032 146,691 190,458 139,344 177,609 140,015 Segment AOI 106,594 34,803 141,397 87,789 28,608 116,397 102,370 30,058 132,428 Reconciliation of AOI to income before taxes Restructuring, severance, asset impairment and other, net 2,530 5,631 8,189 Purchasing accounting amortization 5,172 5,172 5,038 Cyber Event impact ( 711 ) 1,072 5,093 Goodwill & intangible asset impairment — — 36,180 Thailand plant inventory write down — — 2,530 Interest expense 23,205 31,787 29,929 Other (income) expense, net ( 2,353 ) 9,081 3,552 Income before taxes $ 113,554 $ 63,654 $ 41,917 (1) Significant segment expense categories and amounts align with segment level information that is regularly provided to the CODM, included in the measure of segment profit, and considered to be significant. Amounts include allocation of corporate overhead and global support costs. Intersegment expenses are excluded. (2) Adjusted cost of sales excludes purchase accounting amortization, the Cyber Event impact, and Thailand plant inventory write down. (3) Adjusted selling, general, and administrative expenses exclude the cyber event impact and restructuring, asset impairment, severance, and other, net. 97 Table of Contents Segment depreciation and amortization for 2024, 2023 and 2022 is presented in the table below: Fiscal Year 2024 2023 2022 (in thousands) Depreciation and amortization AMS $ 17,804 $ 17,989 $ 16,827 EAAA 21,529 22,785 23,510 Total depreciation and amortization $ 39,333 $ 40,774 $ 40,337 A reconciliation of the Company’s total operating segment assets to the corresponding consolidated amounts follows: End of Fiscal Year 2024 2023 (in thousands) Assets AMS $ 644,085 $ 627,782 EAAA 587,639 630,939 Total segment assets 1,231,724 1,258,721 Corporate assets 111,761 108,673 Eliminations ( 172,669 ) ( 137,299 ) Total reported assets $ 1,170,816 $ 1,230,095 The Company has a large and diverse customer base, which includes numerous customers located in foreign countries. No single unaffiliated customer accounted for more than 10 % of total sales in any year during the past three years. Sales to customers in foreign markets in 2024, 2023 and 2022 were approximately 43 %, 46 % and 47 %, respectively, of total net sales. These sales were primarily to customers in Europe, Canada, Asia, Australia and Latin America. Net sales and long-lived assets for the United States and other significant countries (that individually represent 10 % or greater of consolidated totals for each year presented) are as follows: Fiscal Year Net Sales to Unaffiliated Customers (1) 2024 2023 2022 (in thousands) United States $ 744,407 $ 677,342 $ 694,299 Other foreign countries 571,251 584,156 603,620 Total net sales $ 1,315,658 $ 1,261,498 $ 1,297,919 End of Fiscal Year Long-Lived Assets (2) 2024 2023 (in thousands) United States $ 151,130 $ 146,106 Germany 60,391 66,740 Netherlands 36,350 40,455 Other foreign countries 34,503 37,839 Total long-lived assets $ 282,374 $ 291,140 (1) Revenue attributed to geographic areas is based on the location of the customer. (2) Long-lived assets attributed to geographic areas are based on the physical location of the asset. 2024 includes $ 3.1 million and $ 5.0 million of leased equipment, net of accumulated amortization, in the United States and foreign countries, respectively. 2023 includes $ 2.2 million and $ 5.0 million of leased equipment, net of accumulated amortization, in the United States and foreign countries, respectively. 98 Table of Contents NOTE 21 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS Amounts reclassified out of accumulated other comprehensive loss (“AOCL”), before tax, to the consolidated statements of operations for the fiscal years 2024, 2023 and 2022, are reflected in the table below: Fiscal Year Statement of Operations Location 2024 2023 2022 (in thousands) Loss on foreign subsidiary liquidation (1) Other (income) expense, net $ ( 2,152 ) $ ( 6,221 ) $ — Interest rate swap contracts loss (2) Interest expense — ( 982 ) ( 2,809 ) Amortization of benefit plan net actuarial losses and prior service cost (3) Other (income) expense, net ( 1,499 ) ( 800 ) ( 1,875 ) Total loss reclassified from AOCI $ ( 3,651 ) $ ( 8,003 ) $ ( 4,684 ) (1) In 2024, the Company’s foreign subsidiary in Thailand was substantially liquidated and in 2023, the Company’s foreign subsidiaries in Russia and Brazil were substantially liquidated. The cumulative foreign currency translation losses associated with these entities were recognized in the consolidated statements of operations for the respective period. There is no tax impact for the Thailand cumulative foreign currency translation reclassification for 2024 as it is non-deductible. The tax impact for the 2023 cumulative foreign currency translation reclassification was $ 1.1 million. (2) The tax impact of the interest rate swap reclassifications were $ 0.2 million and $ 0.8 million for 2023 and 2022, 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. 99 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Interface, Inc. Atlanta, Georgia Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Interface, Inc. (the “Company”) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the three fiscal years in the period ended December 29, 2024, and the related notes and financial statement 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 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 29, 2024 , 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 29, 2024, 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 26, 2025 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. 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 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. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (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 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 $99.9 million as of December 29, 2024, 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 trade name intangible assets was $45.2 million as of December 29, 2024. 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 assets below their carrying amount. 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. 100 Table of Contents We identified the income approach valuation methodology used in the impairment evaluation of goodwill for the Americas reporting unit and the nora trade name and trademark 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: • 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 trade name and trademark 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. Atlanta, Georgia February 26, 2025 101 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Interface, Inc. Atlanta, Georgia Opinion on Internal Control over Financial Reporting We have audited Interface, Inc.’s (the “Company’s”) internal control over financial reporting as of December 29, 2024, 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 29, 2024, 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 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the three fiscal years in the period ended December 29, 2024, and the related notes and financial statement schedule listed in the accompanying index and our report dated February 26, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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, P.C. Atlanta, Georgia February 26, 2025 102 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.