What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 150 added, 251 removed, 220 unchanged (65% of the section changed)

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Our business, as well as the commercial interiors industry in general, is cyclical in nature and is impacted by economic conditions and trends that affect the markets for commercial and institutional business space.

The commercial interiors industry, including the market for floorcovering products, is largely driven by reinvestment by corporations into their existing businesses in the form of new fixtures and furnishings for their workplaces.

In significant part, the timing and amount of such reinvestments are impacted by the profitability of those corporations.

As a result, macroeconomic factors such as employment rates, office vacancy rates, work from home policies, capital spending, productivity and efficiency gains that impact corporate profitability in general, also affect our business.

The commercial interiors industry, including the market for floorcovering products, is largely driven by reinvestment by corporations and institutions into their existing operations in the form of new fixtures and furnishings for their workplaces.

In significant part, the timing and amount of such reinvestments are impacted by the profitability of those entities.

As a result, macroeconomic factors such as employment rates, office vacancy rates, work from home policies, capital spending, productivity and efficiency gains that impact profitability in general, also affect our business.

The Company has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).

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Executive Summary

Our One Interface strategy continues to fuel growth as we strengthen global capabilities, improve commercial productivity, and simplify and optimize our operations.

During 2025, we had consolidated net sales of $1,386.9 million, up 5.4% compared to $1,315.7 million in 2024, primarily due to higher customer demand — particularly in the healthcare and education market segments.

Consolidated operating income for 2025 was $164.0 million compared to consolidated operating income of $134.4 million in 2024, primarily due to higher sales and higher gross profit margin driven by higher average sales prices, favorable product mix, and manufacturing efficiencies, partially offset by higher input costs and tariff costs.

Consolidated net income for 2025 was $116.1 million, or $1.96 per diluted share, compared to consolidated net income of $86.9 million, or $1.48 per diluted share, in 2024.

During 2024, we had consolidated net sales of $1,315.7 million, up 4.3% compared to $1,261.5 million in 2023, primarily due to increased customer demand – particularly in the retail and education market segments.

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Consolidated net income for 2024 was $86.9 million, or $1.48 per diluted share, compared to consolidated net income of $44.5 million, or $0.76 per diluted share, in 2023.

During 2023, we had consolidated net sales of $1,261.5 million, down 2.8% compared to $1,297.9 million in 2022, primarily due to decreased customer demand – particularly in the retail market segment.

Consolidated operating income for 2023 was $104.5 million compared to consolidated operating income of $75.4 million in 2022, primarily due to a non-recurring goodwill and intangible asset impairment charge of $36.2 million recognized in 2022.

Consolidated net income for 2023 was $44.5 million, or $0.76 per diluted share, compared to consolidated net income of $19.6 million, or $0.33 per diluted share, in 2022.

A detailed discussion of our 2025 and 2024 consolidated and segment performance appears below under “Analysis of Results of Operations”.

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As previously disclosed in our current report on Form 8-K filed with the Commission on November 23, 2022, we discovered a cybersecurity attack on November 20, 2022, perpetrated by unauthorized third parties, affecting our IT systems.

The investigation of the Cyber Event was completed in fiscal year 2023.

We have cyber risk insurance and recovered $5.6 million in insurance proceeds during fiscal year 2024, representing business interruption proceeds and reimbursement of certain costs in connection with the Cyber Event.

Of the total insurance proceeds received in fiscal 2024, $4.8 million of business interruption proceeds were recognized as a benefit in other income / expense, net in the consolidated statements of operations and $0.8 million was recognized as a reduction of selling, general and administrative expenses.

The insurance claim for the Cyber Event has been closed as of December 29, 2024, and we are not expecting additional proceeds.

During 2023, the Company incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which were recorded in selling, general and administrative expenses in the consolidated statements of operations.

In 2022, we estimated that the Cyber Event adversely affected our fiscal year 2022 revenues by approximately $8 million in lost sales.

We incurred approximately $5 million of costs related to the Cyber Event in 2022 for idle plant costs, direct labor costs during the period our manufacturing facilities were idle and third-party remediation costs.

Approximately $4.8 million of the Cyber Event costs in 2022 were included in cost of sales in the consolidated statements of operations and approximately $0.3 million were included in selling, general and administrative expenses.

During fiscal year 2024, we recovered $5.6 million in insurance proceeds representing business interruption proceeds and reimbursement of certain costs in connection with the Cyber Event.

Of the total insurance proceeds received in fiscal year 2024, $4.8 million of business interruption proceeds were recognized as a benefit in other expense / income, net in the consolidated statements of operations and $0.8 million was recognized as a reduction of selling, general and administrative expenses.

The insurance claim for the Cyber Event was closed at the end of fiscal year 2024, and we are not expecting to receive any additional proceeds in connection with the Cyber Event.

During 2023, we incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which was recognized in selling, general, and administrative expenses in the consolidated statements of operations.

Impact of Macroeconomic Conditions

Disruptions in economic markets due to inflation, high interest rates, the Russia-Ukraine war and the conflict in the Middle East, a still challenging supply chain environment, slow market conditions in certain parts of the globe, the impact of potential tariffs on the demand for our products, fluctuating freight costs, and significant financial pressures in the commercial office market globally, all pose challenges which may adversely affect our future performance .

Disruptions in economic markets due to inflation, the impact of tariffs on the demand for our products, a challenging supply chain environment, slow market conditions in certain parts of the globe, significant financial pressures in the commercial office market globally, and geopolitical factors including wars, civil and political unrest, and other conflicts, all pose challenges which may adversely affect our future performance .

Management believes it is reasonably likely that these challenges will continue to affect our future operations and demand for our products to some degree during fiscal year 2026.

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The Company expects higher production volumes and lower per unit fixed costs in 2026, and anticipates these impacts will benefit our gross profit margin in 2026.

We also expect that continuing challenges in supply chain markets will result in higher freight costs to some degree in 2025 - particularly in the first half of 2025.

We also expect that continuing challenges in supply chain markets, tariff costs, and higher raw material costs will adversely impact our performance in 2026.

We anticipate that continuing slow market conditions in parts of the globe and significant financial pressures in the commercial office market globally will adversely impact our future performance and demand for our products.

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Consolidated Results

The following discussion and analyses reflect the factors and trends discussed in the preceding sections.

Consolidated net sales denominated in currencies other than the U.S.

dollar were approximately 43% in 2024, 46% in 2023, and 47% in 2022.

Because we have substantial international operations, we are impacted, from time to time, by international developments that affect foreign currency transactions.

In 2024, the weakening of the Euro, Canadian dollar, and Chinese Renminbi against the U.S.

dollar had a negative impact on our net sales, partially offset by the strengthening of the British Pound sterling against the U.S.

Currency fluctuations had no material impact to operating income in 2024.

In 2023, the strengthening of the Euro against the U.S.

dollar had a positive impact on our net sales, partially offset by the weakening of the Australian dollar, Chinese Renminbi, and Canadian dollar.

Currency fluctuations had no material impact to operating income in 2023.

In 2022, the weakening of the Euro, Australian dollar, British Pound sterling and Chinese Renminbi against the U.S.

dollar had a negative impact on our net sales and operating income.

The discussion and analyses below reflects the factors and trends discussed in the preceding sections.

Fiscal years 2025, 2024, and 2023 each included 52 weeks.

The following table presents the amounts (in U.S.

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dollars have affected our consolidated net sales and operating income during the past three years:

2024 2023 2022

(in millions)

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Impact of changes in foreign currency on consolidated operating income 2.4 (0.1) (0.6)

(0.1) (0.6) (8.3)

Consolidated net sales denominated in currencies other than the U.S.

dollar were approximately 43% in 2025, 43% in 2024, and 46% in 2023.

Because we have substantial international operations, we include the impact of fluctuations in foreign currency exchange rates in our discussion below.

The following table presents, as a percentage of net sales, certain items included in our consolidated statements of operations during the past three years.

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Restructuring, asset impairment, other (gains) and charges — — (0.2)

Goodwill and intangible asset impairment charge — — 2.8

Operating income 11.8 10.2 8.3

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Income tax expense 1.5 2.0 1.5

6.6 % 3.6 % 1.4 %

Net income 8.4 % 6.6 % 3.6 %

Consolidated Net Sales

Below we provide information regarding our consolidated net sales and analyze those results for each of the last three fiscal years.

Fiscal years 2024, 2023, and 2022 each included 52 weeks.

Below is information regarding our consolidated net sales, and analysis of those results, for each of the last three fiscal years.

Fiscal Year Percentage Change

2024 2023 2022 2024 compared with 2023

2023 compared with 2022

2025 2024 2023 2025 compared with 2024 2024 compared with 2023

(in thousands)

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Consolidated net sales for 2025 compared with 2024

For 2024, our consolidated net sales increased $54.2 million (4.3%) compared to 2023, comprised of higher sales volumes (approximately 2.7%) and higher average sales prices (approximately 1.6%).

Fluctuations in currency exchange rates had a negative impact on our year-over-year consolidated net sales comparison of approximately $1.8 million, indicating that if currency levels had remained constant year-over-year, our 2024 net sales would have been higher by this amount.

On a market segment basis, the sales increase was most significant in the retail, education, residential living, and public buildings market segments partially offset by decreases in the hospitality, corporate office, and consumer residential market segments.

For 2025, consolidated net sales increased $71.2 million (5.4%) compared to 2024, comprised of higher sales volume (approximately 3.0%) and higher average sales prices (approximately 2.4%).

Fluctuations in currency exchange rates had a positive impact of approximately $14.9 million on consolidated net sales for 2025, primarily due to the strengthening of the Euro against the U.S.

On a market segment basis, the sales increase was most significant in the healthcare, education, public buildings, and transportation market segments.

See the segment results discussion below for additional information on market segments.

Consolidated net sales for 2024 compared with 2023

For 2023, our consolidated net sales decreased $36.4 million (2.8%) compared to 2022, comprised of lower sales volumes (approximately 7.9%) partially offset by higher prices (approximately 5.1%).

Fluctuations in currency exchange rates had a positive impact on our year-over-year consolidated net sales comparison of approximately $1.4 million, meaning that if currency levels had remained constant year-over-year, our 2023 net sales would have been lower by this amount.

On a market segment basis, the sales decrease was most significant in the retail and healthcare market segments partially offset by increases in education and residential living market segments.

For 2024, consolidated net sales increased $54.2 million (4.3%) compared to 2023, comprised of higher sales volume (approximately 2.7%) and higher average sales prices (approximately 1.6%).

Fluctuations in currency exchange rates had a negative impact of $1.8 million on consolidated net sales for 2024, indicating that if currency levels had remained constant year-over-year, our 2024 net sales would have been higher by this amount.

See the segment results discussion below for additional information on market segments.

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Fiscal Year Percentage Change

2024 2023 2022 2024 compared with 2023

2023 compared with 2022

2025 2024 2023 2025 compared with 2024 2024 compared with 2023

(in thousands)

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Consolidated Cost of Sales

For 2025, consolidated cost of sales increased $16.8 million (2.0%) compared to 2024, primarily due to higher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S.

(approximately $7.3 million), and higher raw material costs, partially offset by lower manufacturing costs driven by favorable fixed cost absorption on higher volume and production efficiencies.

Currency translation had a negative impact on consolidated cost of sales for 2025 and increased our costs by approximately $9.1 million (1.1%) compared to 2024.

As a percentage of net sales, our consolidated cost of sales decreased to 61.3% in 2025 versus 63.3% in 2024.

Management believes it is reasonably likely that lower per unit fixed costs due to higher production volumes and plant productivity initiatives will reduce our costs to some degree in 2026.

These favorable impacts are expected to be partially offset by continuing tariff costs and higher raw material costs in 2026.

For 2024, our consolidated cost of sales increased $12.3 million (1.5%) compared to 2023, primarily due to higher sales partially offset by lower raw material costs.

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As a percentage of net sales, our consolidated cost of sales decreased to 63.3% in 2024 versus 65.0% in 2023.

Management believes it is reasonably likely that lower per unit fixed costs due to higher production volumes and plant productivity initiatives will reduce our costs to some degree in 2025, particularly in the first half of 2025.

These favorable impacts are expected to be partially offset by higher freight costs in 2025.

For 2023, our consolidated cost of sales decreased $39.8 million (4.6%) compared to 2022, primarily due to lower sales and lower freight costs (approximately $19 million) due to stabilizing supply chain conditions.

Currency translation had no material impact on consolidated cost of sales compared to 2022.

As a percentage of net sales, our consolidated cost of sales decreased to 65.0% in 2023 versus 66.3% in 2022.

Consolidated Gross Profit

For 2025, consolidated gross profit, as a percentage of net sales, was 38.7% compared to 36.7% for 2024.

The increase in gross profit percentage was primarily due to (i) lower costs (approximately 1%) driven by lower raw material costs and lower fixed costs per unit as a result of higher volume and (ii) higher pricing (approximately 1%).

Management believes it is reasonably likely that gross profit in 2025 will be positively impacted by lower costs as discussed above.

The increase in gross profit percentage was primarily due to higher average sales prices and favorable product mix (approximately 1%) and lower manufacturing costs (approximately 1%) as discussed above.

Management believes it is reasonably likely that gross profit in 2026 will be positively impacted by lower manufacturing costs as result of production efficiencies partially offset by continuing tariff and higher raw material costs.

For 2024, consolidated gross profit, as a percentage of net sales, was 36.7% compared to 35.0% for 2023.

The increase in gross profit percentage was primarily due to (i) higher pricing (approximately 4%), partially offset by (ii) the unfavorable impact of inflation on raw material costs (approximately 1%), and (iii) unfavorable manufacturing fixed cost absorption and product mix (approximately 2%).

Consolidated SG&A Expenses

For 2024, our consolidated SG&A expenses were $348.5 million versus $339.0 million in 2023.

For 2025, consolidated SG&A expenses were $373.4 million versus $348.5 million in 2024.

SG&A expenses increased $24.8 million (7.1%) in 2025 compared to 2024, primarily due to (i) higher variable compensation of $8.6 million as a result of higher commissions on increased sales and higher bonus costs driven by improved operating results, (ii) higher employee benefits and labor costs of $8.3 million, (iii) higher severance costs of $4.5 million due to employee separations, and (iv) higher professional fees of $2.6 million.

Currency fluctuations had a negative impact on consolidated SG&A expenses and increased our costs by approximately $3.5 million (1.0%) compared to 2024.

As a percentage of net sales, SG&A expenses increased to 26.9% in 2025 versus 26.5% in 2024.

For 2024, consolidated SG&A expenses were $348.5 million versus $339.0 million in 2023.

Currency translation had no material impact on consolidated SG&A expenses for 2024.

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As a percentage of net sales, SG&A expenses decreased to 26.5% in 2024 versus 26.9% in 2023.

For 2023, our consolidated SG&A expenses were $339.0 million versus $324.2 million in 2022.

Currency translation had a $1.5 million (0.5%) negative impact on the year-over-year comparison.

Consolidated SG&A expenses increased $14.9 million (4.6%) in 2023 compared to 2022, primarily due to (i) $6.5 million of higher selling expenses due to sales and marketing initiatives, (ii) $6.3 million of higher severance costs driven by employee headcount reductions and initiatives to reduce future costs, (iii) $4.4 million of higher professional fees, and (iv) $1.9 million of higher variable compensation costs.

These increases were partially offset by lower plant closure costs of approximately $4.1 million related to the closure of our Thailand and Russia operations in 2022.

As a percentage of net sales, SG&A expenses increased to 26.9% in 2023 versus 25.0% in 2022.

Restructuring Plan

On September 8, 2021, the Company committed to a restructuring plan that continued to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, involving the closure of the Company’s manufacturing facility in Thailand.

During the second quarter of 2023, the Company completed the sale of the Thailand real estate and recognized a gain of $2.7 million.

This restructuring plan was completed following the sale of the Thailand facility.

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.

See Note 16 entitled “Restructuring and Other” and Note 7 entitled “Property, Plant and Equipment” of Part II, Item 8 of this Annual Report for additional information.

Goodwill, Intangible Asset and Fixed Asset Impairment

During 2024 and 2023 there was no impairment of our goodwill or indefinite-lived intangible assets.

During 2022, we recognized a charge of $36.2 million for the impairment of goodwill and certain intangible assets.

See Note 12 entitled “ Goodwill and Other Intangible Assets ” of Part II, Item 8 of this Annual Report for additional information.

Pursuant to a previous restructuring plan, the Company completed the sale of its Thailand manufacturing facility during 2023 and recognized a gain of $2.7 million.

See Note 15 entitled “Restructuring and Other” of Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Interest Expense

For 2025, interest expense was $19.5 million, versus $23.2 million in 2024, primarily due to lower interest rates and lower outstanding borrowings under the Syndicated Credit Facility for most of 2025.

On December 3, 2025, the outstanding borrowings under the $300 million Senior Notes were redeemed and the debt was extinguished.

In addition, the Syndicated Credit Facility was amended and restated.

In connection with these transactions, we recorded $3.1 million of debt extinguishment costs, which are recognized in interest expense in the consolidated statements of operations.

See Note 9 entitled “Long-Term Debt” of Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Our average borrowing rate under the Syndicated Credit Facility as of December 28, 2025, was 5.12% compared to 5.62% at December 29, 2024.

For 2024, our interest expense was $23.2 million, versus $31.8 million in 2023, primarily due to lower outstanding term loan borrowings under the Syndicated Credit Facility.

Our average borrowing rate under the Syndicated Credit Facility as of December 29, 2024, was 5.62% compared to 6.61% at December 31, 2023.

For 2023, our interest expense was $31.8 million, versus $29.9 million in 2022, primarily due to higher interest rates on outstanding term loan borrowings under the Syndicated Credit Facility, partially offset by lower outstanding term loan borrowings under the Facility.

Our average borrowing rate under the Syndicated Credit Facility as of December 31, 2023, was 6.61% compared to 5.78% at January 1, 2023.

Other Income Expense, net

During 2024, other (income) expense, net, was $(2.4) million versus $9.1 million in 2023.

Other Expense / Income, net

During 2025, other expense (income), net, was $7.6 million versus $(2.4) million in 2024.

The increase of $9.9 million was primarily due to $4.7 million in foreign currency transaction losses from the strengthening of the Euro against the U.S.

dollar and higher pension cost of approximately $1.1 million.

The increase was also impacted by non-recurring insurance proceeds recognized in 2024, as discussed immediately below.

During 2024, other expense (income), net, was $(2.4) million versus $9.1 million in 2023.

The decrease was primarily due to the receipt in 2024 of $4.8 million of business interruption insurance proceeds related to the Cyber Event and $2.4 million of insurance proceeds related to a property casualty loss that occurred in fiscal year 2023.

These benefits were partially offset by the recognition of $2.2 million of cumulative translation losses reclassified from accumulated other comprehensive loss due to the substantial liquidation of our foreign subsidiary in Thailand during 2024.

During 2023, $6.2 million of cumulative translation losses were recognized in other (income) expense, net as a result of the substantial liquidation of our foreign subsidiaries in Brazil and Russia.

For fiscal year 2025, the Company recorded income tax expense of $20.8 million on pre-tax income of $136.9 million, resulting in an effective tax rate of 15.2% compared with income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4%, for fiscal year 2024.

The decrease in the effective tax rate for fiscal year 2025, compared to fiscal year 2024, was primarily due to the remeasurement and adjustment of deferred taxes, favorable changes related to the utilization of foreign tax credit carryforwards and an increase in the Foreign-Derived Intangible Income deduction.

See Note 16 entitled “Income Taxes” of Part II Item 8 of this Annual Report on Form 10-K for additional information .

For fiscal year 2024, the Company recorded income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4% compared with income tax expense of $19.1 million on pre-tax income of $63.7 million, resulting in an effective tax rate of 30.1%, for fiscal year 2023.

The decrease in the effective tax rate for fiscal year 2024, compared to fiscal year 2023, was primarily due to the release of the valuation allowance on interest expense carryforwards, favorable tax benefits related to share-based compensation, and a favorable tax benefit related to a change in tax rate related to the UK pension plan.

These favorable changes were partially offset by a decrease in favorable tax benefits related to the repatriation of previously taxed foreign earnings and utilization of foreign tax benefits.

For fiscal year 2023, the Company recorded income tax expense of $19.1 million on pre-tax income of $63.7 million, resulting in an effective tax rate of 30.1%.

This compares with income tax expense of $22.4 million on pre-tax income of $41.9 million, resulting in an effective tax rate of 53.3%, for fiscal year 2022.

The effective tax rate for fiscal year 2022 was significantly impacted by a non-deductible goodwill impairment charge.

Excluding the impact of the non-deductible goodwill impairment charge, the effective tax rate was 31.4% for fiscal year 2022.

The decrease in the effective tax rate for fiscal year 2023, as compared to fiscal year 2022, excluding the goodwill impairment, was primarily due to favorable changes related to the cash surrender value of Company-owned life insurance, utilization of foreign tax credits, favorable U.S.

tax effects from the repatriation of previously taxed foreign earnings, and non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand in fiscal year 2022.

This decrease was partially offset by a favorable change to unrecognized tax benefits in fiscal year 2022.

Segment Results

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During fiscal year 2024, the Company implemented a cost center realignment initiative as part of the Company’s efforts to centralize certain global/shared functions.

During 2024, SG&A expenses for these global support functions were allocated to adjusted operating income (“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.

During 2024, SG&A expenses for these global support functions were allocated to each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods.

Fiscal year 2023 amounts below were not recast as there was no material impact to either reportable segment.

There were no changes to the composition of the Company’s operating or reportable segments.

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Fiscal Year Percentage Change

2024 2023 2022 2024 compared with 2023

2023 compared with 2022

2025 2024 2023 2025 compared with 2024 2024 compared with 2023

(in thousands)

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137,299 106,594 87,789 28.8 % 21.4 %

(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above.

Excludes Cyber Event impact, intangible asset impairment charge, and restructuring, asset impairment, severance, and other, net.

(1) Includes allocation of corporate and global support SG&A expenses as discussed above.

Excludes Cyber Event impact and restructuring, asset impairment, severance, and other, net.

See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.

AMS Segment Net Sales for 2025 compared with 2024

During 2025, net sales in AMS increased 5.4% versus 2024, comprised of higher sales volume - particularly increased rubber flooring volume and higher average sales prices.

On a market segment basis, the AMS sales increase was most significant in the healthcare (up 21.4%), education (up 8.2%), public buildings (up 10.7%), and corporate office (up 1.5%) market segments, partially offset by decreases in the residential living (down 4.1%) and retail (down 2.5%) market segments.

AMS Segment Net Sales for 2024 compared with 2023

During 2024, net sales in AMS increased 8.7% versus 2023, comprised of higher sales volume and higher average sales prices.

On a market segment basis, the AMS sales increase was most significant in the retail (up 81.5%), education (up 13.5%), public buildings (up 27.9%), and residential living (up 23.3%) market segments partially offset by decreases in the corporate office (down 1.7%), hospitality (down 18.0%), and consumer residential (down 10.4%) market segments.

AMS Segment Net Sales for 2023 compared with 2022

During 2023, net sales in AMS decreased 2.2% versus 2022, comprised of lower sales volume partially offset by higher average sales prices.

On a market segment basis, the AMS sales decrease was most significant in the retail (down 50.6%) market segment partially offset by increases in the education (up 7.9%), corporate office (up 4.1%) and residential living (up 15.4%) market segments.

AMS AOI for 2025 compared with 2024

AOI in AMS increased 28.8% during 2025 compared to 2024.

Higher adjusted gross profit in 2024, driven by higher sales, lower raw material costs, and favorable fixed cost absorption contributed to the increase in AMS AOI for the current year.

AMS SG&A expenses as a percentage of net sales decreased approximately 0.8% compared to 2023, also contributed to the increase in AOI.

Higher gross profit in 2025, driven by higher sales, favorable product mix, and manufacturing efficiencies, partially offset by tariff costs, contributed to the increase in AMS AOI for 2025.

As a percentage of net sales, AOI increased to 16.3% in 2025 versus 13.3% in 2024.

AMS AOI for 2024 compared with 2023

AOI in AMS decreased 14.2% during 2023 compared to 2022.

Lower adjusted gross profit in 2023 driven by unfavorable manufacturing fixed cost absorption and lower sales, partially offset by lower freight costs contributed to the decrease in AMS AOI.

AMS SG&A expenses as a percentage of net sales increased approximately 1.1% compared to 2022, primarily due to higher selling expenses also contributed to the decrease in AOI for 2023.

As a percentage of net sales, AOI decreased to 11.9% in 2023 versus 13.6% in 2022.

AOI in AMS increased 21.4% during 2024 compared to 2023.

Higher gross profit in 2024, driven by higher sales, lower raw material costs, and favorable fixed cost absorption contributed to the increase in AMS AOI for 2024.

AMS SG&A expenses as a percentage of net sales decreased approximately 0.8% compared to 2023, also contributed to the increase in AOI.

As a percentage of net sales, AOI increased to 13.3% in 2024 versus 11.9% in 2023 .

EAAA Segment – Net Sales and AOI

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Fiscal Year Percentage Change

2024 2023 2022 2024 compared with 2023

2023 compared with 2022

2025 2024 2023 2025 compared with 2024 2024 compared with 2023

(in thousands)

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36,456 34,803 28,608 4.8 % 21.7 %

(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above.

Excludes goodwill and intangible asset impairment charges, purchase accounting amortization, Cyber Event impact, Thailand plant closure inventory write-down, and restructuring, asset impairment, severance, and other, net.

(1) Includes allocation of corporate and global support SG&A expenses as discussed above.

Excludes purchase accounting amortization, Cyber Event impact, and restructuring, asset impairment, severance, and other, net.

See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.

EAAA Segment Net Sales for 2025 compared with 2024

During 2025, net sales in EAAA increased 5.5% versus 2024, primarily due to favorable currency fluctuations of approximately $15.9 million (3.1%) from the strengthening of the Euro against the U.S.

dollar, higher sales volume, and higher average sales prices.

On a market segment basis, the EAAA sales increase was most significant in the transportation (up 35.7%), public buildings (up 24.5%), healthcare (up 18.1%), and education (up 5.8%) market segments.

EAAA Segment Net Sales for 2024 compared with 2023

During 2024, net sales in EAAA decreased 1.8% versus 2023, primarily due to lower sales volume.

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On a market segment basis, the EAAA sales decrease was most significant in the public buildings (down 21%), hospitality (down 24.1%), and healthcare (down 6.8%) market segments, partially offset by an increase in the residential living (up 9.1%) market segment.

EAAA Segment Net Sales for 2023 compared with 2022

During 2023, net sales in EAAA decreased 3.6% versus 2022, comprised of lower sales volume partially offset by higher selling prices.

Slower economic recovery and decreased customer demand in Asia resulted in approximately 25% lower net sales in Asia during 2023 compared to 2022.

Currency fluctuations had a positive impact of approximately $3.5 million (0.6%) on EAAA net sales for 2023 compared to 2022 due to the strengthening of the Euro, partially offset by the weakening of the Australian dollar and Chinese Renminbi against the U.S.

On a market segment basis, the EAAA sales decrease was most significant in the corporate office (down 3.5%), healthcare (down 23.5%), retail (down 22.8%), and education (down 3.9%) market segments, partially offset by an increase in the hospitality (up 11.5%) market segment.

EAAA AOI for 2025 compared with 2024

AOI in EAAA increased 21.7% during 2024 versus 2023.

Higher adjusted gross profit in 2024, driven by lower raw material costs partially offset by lower sales volume contributed to the increase in EAAA AOI for the current year.

Currency fluctuations had no material impact on EAAA AOI in 2024 compared to 2023.

AOI in EAAA increased 4.8% during 2025 versus 2024, primarily due to higher gross profit margin driven by favorable manufacturing costs and higher sales volume.

Currency fluctuations had a positive impact of approximately $2.8 million (3.8%) on EAAA AOI in 2025 compared to 2024, primarily due to the strengthening of the Euro against the U.S.

As a percentage of net sales, AOI was 6.7% in 2025 versus 6.8% in 2024.

EAAA AOI for 2024 compared with 2023

AOI in EAAA decreased 4.8% during 2023 versus 2022.

Lower adjusted gross profit in 2023, driven by lower sales, inflationary pressures on raw material costs, and unfavorable manufacturing fixed cost absorption on lower production volumes contributed to the decrease in EAAA AOI.

AOI in EAAA increased 21.7% during 2024 versus 2023.

Higher gross profit in 2024, driven by lower raw material costs partially offset by lower sales volume contributed to the increase in EAAA AOI for 2024.

Currency fluctuations had no material impact on EAAA AOI in 2024 compared to 2023.

As a percentage of net sales, AOI was 5.5% in both 2023 and 2022.

As a percentage of net sales, AOI was 6.8% in 2024 versus 5.5% in 2023.

Financial Condition, Liquidity and Capital Resources

In our business, we require cash and other liquid assets primarily to purchase raw materials and to pay other manufacturing costs, in addition to funding normal course SG&A expenses, anticipated capital expenditures, interest expense and potential special projects.

We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”) discussed below.

We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”).

We anticipate that our liquidity, cash flows from operations, cash and cash equivalents, and other sources of liquidity are sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations.

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Historically, we use more cash in the first half of the fiscal year, as we pay insurance premiums, taxes and incentive compensation and build up inventory in preparation for the holiday/vacation season of our international operations.

As outlined in the table above, we have approximately $68.8 million in material contractual cash obligations due within the next year, which includes, among other things, scheduled debt repayments under the Facility, pension contributions, interest payments on our debt, and lease commitments.

Our long-term debt obligations include the contractually scheduled principal repayment of our term loan and revolving loan borrowings under the Facility, which matures in 2027, and $300 million on our Senior Notes due in 2028.

Operating and finance lease obligations consist of undiscounted lease payments due over the term of the lease.

Expected interest payments are those associated with borrowings under the Facility and Senior Notes consistent with our contractually scheduled principal repayments.

As outlined in the table above, we have approximately $70.0 million in material contractual cash obligations due within the next year, which includes, among other things, scheduled debt repayments under the Facility, pension contributions, interest payments on our debt, and payments on our lease obligations.

Our long-term debt obligations include the contractually scheduled principal repayment of our term loan and revolving loan borrowings under the Facility, which matures in 2030.

Operating and finance lease obligations consist of undiscounted lease payments due over the lease term.

Expected interest payments are those associated with borrowings under the Facility consistent with our contractually scheduled principal repayments.

Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures.

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We estimate aggregate capital expenditures in 2026 to be approximately $55 million, although we are not committed to this amount.

At December 29, 2024, we had $99.2 million in cash.

Approximately $3.1 million of this cash was located in the U.S., and the remaining $96.1 million was located outside of the U.S.

The cash located outside of the U.S.

is indefinitely reinvested in the respective jurisdictions (except as identified below).

As of December 28, 2025, we had $71.3 million in cash, which was mostly located outside of the U.S.

We consider cash located outside of the U.S.

as indefinitely reinvested in the respective jurisdictions (except as identified below).

We believe that our strategic plans and business needs, particularly for working capital needs and capital expenditure requirements in Europe, Asia, and Australia, support our assertion that a portion of our cash in foreign locations will be reinvested and remittance will be postponed indefinitely.

Of the $96.1 million of cash in foreign jurisdictions, approximately $8.8 million represents earnings which we have determined are not permanently reinvested, and as such we have provided for foreign withholding and U.S.

Of the cash held in foreign jurisdictions, approximately $13.3 million relates to earnings which we have determined are not permanently reinvested, and as such we have provided for foreign withholding and U.S.

state income taxes on these amounts in accordance with applicable accounting standards.

As of December 29, 2024, we had $5.6 million of borrowings outstanding under our Facility, all of which were term loan borrowings.

There were no revolving loan borrowings outstanding as of December 29, 2024.

As of December 28, 2025, we had $181.8 million of borrowings outstanding under our Facility, of which $175.6 million were term loan borrowings and $6.2 million were revolving loan borrowings.

Additionally, $0.6 million in letters of credit were outstanding under the Facility at the end of fiscal year 2025.

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As of December 28, 2025, the weighted average interest rate on borrowings outstanding under the Facility was 5.12%.

As of December 29, 2024, there were no other lines of credit available to the Company.

In addition, as of December 29, 2024, we had $300.0 million of 5.50% Senior Notes due 2028 (the “Senior Notes”) outstanding, which are discussed further below.

It is important for you to consider that we have a significant amount of indebtedness.

Our Facility matures in October of 2027, and the Senior Notes, as discussed below, mature in December 2028.

Our Facility matures on December 3, 2030.

We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms, or at all.

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We have borrowings based on variable interest rates (as described below) that expose the Company to the risk that interest rates may increase.

For information regarding the current variable interest rates of these borrowings, the potential impact on our interest expense from hypothetical increases in short term interest rates, and the former interest rate swap transaction, please see the discussion in Item 7A of this Report.

For information regarding the current variable interest rates of these borrowings, and the potential impact on our interest expense from hypothetical increases in interest rates, please see the discussion in Item 7A of this Report.

We are not a party to any material off-balance sheet arrangements.

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Inventories, net, were $275.0 million at December 28, 2025, compared to $260.6 million at December 29, 2024.

The decrease of $18.5 million was primarily due to higher sales, stronger working capital management, and lower raw material costs during the current year.

The increase of $14.4 million was primarily due to finished goods inventory build as higher customer demand is expected to continue into 2026.

Currency fluctuations also impacted the increase in inventories due to the strengthening of the Euro against the U.S.

Analysis of Cash Flows

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• Cash provided by operating activities was $167.9 million for 2025, which represents an increase of $19.5 million compared to 2024.

The increase in operating cash flows was primarily due to higher sales during 2025 and the impact of foreign currency from the strengthening of the Euro against the U.S.

dollar resulting in a source of cash from higher receivables.

• Cash used in investing activities was $46.2 million for 2025, which represents an increase of $15.8 million compared to 2024.

The increase was primarily due to an increase in capital expenditures attributable to a greater capital investment in manufacturing automation and robotics solutions in 2025.

• Cash used in financing activities was $159.3 million for 2025, which represents an increase of $34.1 million compared to 2024.

The increase was primarily attributable to the repayment of the $300 million Senior Notes in 2025, partially offset by $170 million of proceeds from new term loan borrowings under the amended and restated Syndicated Credit Facility on December 3, 2025.

In 2025, we repurchased $18.1 million of our outstanding common stock.

See section below entitled “Share Repurchases” for additional information.

We ended 2024 with $99.2 million in cash, a decrease of $11.3 million during the year.

The decrease was primarily due to the following:

• Cash provided by operating activities was $148.4 million for 2024, which represents an increase of $6.4 million compared to 2023.

The increase in operating cash flows was primarily due to higher sales during 2024 resulting in a source of cash from lower inventory balances partially offset by a use of cash as a result of higher accounts receivable.

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• Cash used in financing activities was $125.2 million for 2024, which represents an increase of $13.7 million compared to 2023.

The increase was primarily attributable to higher prepayments of term loan borrowings during 2024 compared to the 2023 comparable period.

The increase was primarily attributable to higher prepayments of term loan borrowings during 2024 compared to 2023.

We ended 2023 with $110.5 million in cash, an increase of $12.9 million during the year.

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• Fiscal year 2022 also included repurchases of the Company’s common stock that did not occur in 2023, which partially offset the increased use of cash for financing activities in 2023 compared with 2022.

We ended 2022 with $97.6 million in cash, an increase of $0.3 million during the year.

The increase was primarily due to the following:

• Cash provided by operating activities was $43.1 million for 2022, which represents a decrease of $43.6 million compared to 2021.

The decrease was primarily due to a greater use of cash for working capital during 2022.

Specifically, higher inventories as a result of higher raw material costs and input costs contributed to the greater use of cash for working capital in 2022.

Higher variable compensation payouts in the first quarter of 2022 (related to 2021 performance) also contributed to the increased use of cash for 2022.

Cash provided by operating activities in 2022 also was negatively impacted by delays in billings due to the Cyber Event, which pushed the due dates for those delayed billings from the fourth quarter of 2022 to the first quarter of 2023.

• Cash used in investing activities was $18.4 million for 2022, which represents a decrease of $9.6 million compared to 2021.

The decrease was primarily due to reduced capital expenditures.

• Cash used in financing activities was $19.5 million for 2022, which represents a decrease of $41.4 million compared to 2021.

The year-over-year difference was primarily due to higher revolving loan borrowings in 2022 as a source of cash to fund operating activities as described above, offset by a use of cash for repurchases of the Company’s common stock pursuant to a new share repurchase program adopted in the second quarter of 2022.

Fiscal year 2021 also included higher repayments of approximately $60 million of term loan borrowings which contributed to a greater use of cash in that period.

Share Repurchases

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.

In May 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.

During fiscal year 2025, the Company repurchased 750,166 shares of common stock at a weighted average price of $24.23 per share pursuant to this program.

No shares of common stock were repurchased during 2024 and 2023 pursuant to this program.

As of December 29, 2024, approximately $82.8 million remains authorized pursuant to this program for future share repurchases.

As of December 28, 2025, approximately $64.7 million remained authorized pursuant to this program for future share repurchases.

The program does not require the Company to repurchase a specific number or amount of shares, or to do so within any specific time periods.

With the remaining availability under this program, the Company may repurchase shares of common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations.

The Company’s repurchases may be made through a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

Syndicated Credit Facility

In the normal course of business, in addition to using our available cash, we fund our operations by borrowing under our Facility.

At December 29, 2024, the Facility provided the Company and certain of its subsidiaries with a multicurrency revolving loan facility up to $300 million, as well as other U.S.

denominated and multicurrency term loans.

On October 14, 2022, in connection with the fifth amendment to the Facility, the maturity date was extended to October 2027.

Material terms under the Facility are discussed below.

For additional information please see Note 9 entitled “Long-Term Debt” in Item 8 of this Report.

Interest Rates and Fees

Under the Facility, 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 defined in the Facility agreement) 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.

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 our 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 our stock (in excess of certain specified amounts);

• repay other indebtedness prior to maturity unless we meet certain conditions;

• enter into sale and leaseback transactions.

The Facility also requires us to remain in compliance with the following financial covenants as of the end of each fiscal quarter, based on our 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 we breach or fail 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 we breach or fail to perform any covenant or agreement contained in any instrument relating to any of our 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;

• exercise other rights and remedies available to them under the agreement and applicable law.

Pursuant to a Second Amended and Restated Security and Pledge Agreement, the Facility is secured by substantially all of the assets of Interface, Inc.

and our domestic subsidiaries (subject to exceptions for certain immaterial subsidiaries), including all of the stock of our 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.

Under the Facility, we are required to make quarterly amortization payments of the term loan borrowings.

The amortization payments are due on the last day of the calendar quarter.

We are in compliance with all covenants under the Facility and anticipate that we will remain in compliance with the covenants for the foreseeable future.

As of December 29, 2024, the Company had $300 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.

Debt issuance costs associated with the Senior Notes are recorded as a reduction of long-term debt in the consolidated balance sheets and are amortized over the life of the outstanding debt.

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

The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors.

Net sales for the non-guarantor subsidiaries were approximately $573 million for fiscal year 2024, $584 million for fiscal year 2023, and $597 million for fiscal year 2022.

Total indebtedness of the non-guarantor subsidiaries was approximately $102 million and $133 million as of December 29, 2024, and December 31, 2023, respectively.

The Senior Notes can be redeemed on or after December 1, 2023, at specified redemption prices.

See Note 9 entitled “Long-Term Debt” in Item 8 of this Report for additional information.

On December 3, 2025, the Company entered into the third amended and restated Facility agreement.

In connection with this amendment the Company revised certain material terms which include, but are not limited to, the addition of a $170 million term loan, extending the maturity date to December 2030, and reducing our revolving loan facility to $250 million.

For additional information, please see Note 9 entitled “Long-Term Debt” in Item 8 of this Annual Report on Form 10-K.

The Company was in compliance with all covenants under the Facility as of December 28, 2025, and anticipates that it will remain in compliance with the covenants for the foreseeable future.

On December 3, 2025, the Company redeemed all of its $300 million outstanding principal amount of 5.50% Senior Notes.

The Senior Notes were redeemed at a redemption price of 100% of their principal amount, plus accrued and unpaid interest.

The redemption was funded using proceeds from the amended term loan facility and available cash on hand.

As a result of the debt extinguishment, the Company recognized a loss of $2.1 million resulting from the write-off of unamortized debt issuance costs on the Senior Notes.

Critical Accounting Policies and Estimates

The policies and estimates discussed below are considered by management to be critical to an understanding of our consolidated financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimations about the effects of matters that are inherently uncertain.

Specific risks for these critical accounting policies are described in the following paragraphs.

For all of these policies, management cautions that future events may not develop as forecasted, and the best estimates routinely require adjustment.

Impairment of Long-Lived Assets.

Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment is indicated.

A loss is then recognized for the difference, if any, between the fair value of the asset (as estimated by management using its best judgment) and the carrying value of the asset.

Management’s judgment in estimating the undiscounted cash flows based on market conditions and trends, and other industry specific metrics used in determining the fair value is subject to uncertainty.

If actual market value is less favorable than that estimated by management, additional write-downs may be required.

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires that we make estimates and assumptions about future events that affect the reported amounts of assets and liabilities in the consolidated financial statements.

Our significant accounting policies are described in Note 1 entitled ”Summary of Significant Accounting Policies” of the consolidated financial statements.

For the year ended December 28, 2025, the assumptions related to goodwill and impairment of long lived assets were no longer considered critical accounting estimates.

The following discussion addresses our critical accounting estimates as of December 28, 2025, that require significant management judgment, or use of significant assumptions, or complex estimates.

Deferred Income Tax Assets and Liabilities.

The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies in accordance with applicable accounting standards and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards.

The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards.

The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws and incorporate management’s assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions.

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If the actual amounts of taxable income differ from our estimates, the amount of our valuation allowance could be materially impacted.

We review the carrying values of our goodwill annually at the beginning of the fourth quarter of each fiscal year, or more often if events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value as set forth in Accounting Standards Codification 350 “ Intangibles — Goodwill and Other ”, as amended by Accounting Standards Update (“ASU”) 2017-04 .

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

We utilize the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of our reporting units.

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 assumptions we use to estimate future cash flows and the development of any forecasts to be used in the fair value determination are subject to inherent risk and judgment.

If we determine that the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.

If we determine that the carrying value of the reporting unit exceeds its estimated fair value, we measure the goodwill impairment charge based on the excess of the reporting unit’s carrying value over its fair value consistent with ASU 2017-04, “ Simplifying the Test for Goodwill Impairment”.

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 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 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.

The 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, we performed our annual goodwill quantitative testing for each reporting unit.

We considered factors such as, but not limited to, our expectations for the short-term and long-term impacts of macroeconomic factors, including ongoing inflation, foreign currency exchange rates, and our expected financial performance, including planned revenue and operating income of each reporting unit.

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

For fiscal year 2022, we determined that the carrying value of our EMEA reporting unit exceeded its fair value and that the associated goodwill was impaired.

We recorded a goodwill impairment charge of $29.4 million to write off all the goodwill allocated to our EMEA reporting unit.

As of the 2022 measurement date, the fair value of our Americas reporting unit exceeded its carrying value by 71%, and the Americas reporting unit was not impaired.

The Americas reporting unit had a goodwill balance of $102.4 million at the end of fiscal 2022.

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

We have not made any material changes to our goodwill impairment loss assessment methodology during the past three fiscal years.

Currently, we do not believe there is a reasonable likelihood that there will be a material change in future assumptions or estimates we use to calculate impairment losses.

However, we cannot predict or control market factors, including the impact of macroeconomic conditions and the impact of certain risks inherent to our operations, as described in Item 1A “Risk Factors” of this Annual Report.

If actual results are not consistent with our assumptions and estimates, we may be exposed to additional goodwill impairment losses that could be material.

See Note 12 entitled “ Goodwill and Other Intangible Assets ” of Part II, Item 8 of this Annual Report for additional information.

Trademark and Trade Name Intangible Assets.

Trademark and trade name intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually in the fourth quarter, 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.

For the annual test performed, the Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which requires significant management estimates of forecasted revenue and the use of an estimated intangible asset required rate of return, which was 11% for the 2025 test.

As a result of the 2025 intangible assets impairment testing, we determined that the estimated fair value exceeded the carrying value and there was no indication of impairment of the trademark and trade name intangible assets.

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

If we determine that the carrying value of the trademark and trade name intangible assets exceeds the estimated fair value, then we will recognize an impairment charge for the excess of the carrying value over the estimated fair value.

To the extent actual revenues decrease by 10% from our estimates, there would be a corresponding 10% decrease in the fair value of the trademark and trade name intangible assets.

A hypothetical 1% increase in the intangible asset rate of return would result in an 11% decrease in fair value of the trademark and trade name intangible assets.

Neither of these hypothetical changes to key assumptions would cause fair value to be less than carrying value.

We determine the value of inventories using the lower of cost or net realizable value.

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To the extent that actual obsolescence of our inventory differs from our estimate by 10%, our 2025 net income would be higher or lower by approximately $3.0 million, on an after-tax basis.

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 management 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 our plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year.

The actuarial assumptions used in our salary continuation plan and our 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.

The table below represents the changes to the projected benefit obligation as a result of changes in discount rate assumptions:

Foreign Defined Benefit Plans Increase (Decrease) in

Projected Benefit Obligation

(in millions)

1% increase in actuarial assumption for discount rate $ (19.7)

1% decrease in actuarial assumption for discount rate 25.3

Domestic Salary Continuation Plan Increase (Decrease) in

Projected Benefit Obligation

(in millions)

1% increase in actuarial assumption for discount rate $ (1.6)

1% decrease in actuarial assumption for discount rate 1.9

Allowances for Expected Credit Losses.

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To the extent the actual warranty expense differs from our estimates by 10%, our 2025 net income would be higher or lower by approximately $0.3 million, on an after-tax basis, depending on whether the actual expense is lower or higher, respectively, than the estimated provision.

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.

The actuarial assumptions used in our 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.

The table below represents the changes to the projected benefit obligation as a result of changes in discount rate assumptions:

Foreign Defined Benefit Plans Increase (Decrease) in

Projected Benefit Obligation

(in millions)

1% increase in actuarial assumption for discount rate $ (21.1)

1% decrease in actuarial assumption for discount rate 25.6

For the year ended December 28, 2025, the discount rate used in the salary continuation plan is no longer considered a critical accounting estimate as a 1% increase or decrease in the discount rate would not have a material impact to the projected benefit obligation of the plan.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis