UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarterly Period Ended ~~October 1, 2017~~

July 5, 2020

Commission File Number 0~~01-33994~~

001-33994

INTERFACE ~~INC.~~

INC

(Exact name of registrant as specified in its charter)

~~GEORGIA~~

Georgia		58-1451243
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer
~~incorporation or organization)~~		Identification No.)

~~2859 PACES FERRY ROAD, SUITE 2000, ATLANTA, GEORGIA 30339~~

1280 West Peachtree Street, Atlanta, Georgia30309

(Address of principal executive offices and zip code)

~~(770)~~

(770) 437-6800

(~~Registrant~~’sRegistrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.10 Par Value Per Share	TILE	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑þ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Date File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer☑

Accelerated filer☐

Non-accelerated filer☐

~~Emerging Growth~~

~~Company~~ ☐

Smaller reporting company

☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Shares outstanding of each of the ~~registrant~~’sregistrant’s classes of common stock at ~~November 3, 2017:~~

August 6, 2020:



Class	Number of Shares
Common Stock, $0.10 par value per share	58,547,753

INTERFACE, INC.

INDEX



	~~Class~~	PAGE
PART I.	~~Number of Shares~~ FINANCIAL INFORMATION
	~~Common Stock, $.10 par value per share~~	~~60,251,423~~

~~Table of Contents~~

~~INTERFACE, INC.~~

~~INDEX~~

			~~PAGE~~
~~PART I.~~	~~FINANCIAL INFORMATION~~
	Item 1.	Financial Statements (Unaudited)	3
		~~Consolidated Condensed Balance Sheets~~ ~~– October 1, 2017 and~~ ~~January~~ ~~1, 2017~~	3
		Consolidated Condensed Balance Sheets – July 5, 2020 and December 29, 2019	3

		Consolidated Condensed Statements of Operations –- Three Months and ~~Nine~~Six Months Ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016~~June 30, 2019	4

		Consolidated Statements of Comprehensive Income –- Three Months and ~~Nine~~Six Months Ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016~~June 30, 2019	5

		Consolidated Condensed Statements of Cash Flows – ~~Nine~~Six Months Ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016~~June 30, 2019	6

		Notes to Consolidated Condensed Financial Statements	7

	Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations	15 30

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18 37

	Item 4.	Controls and Procedures	19 38

PART II.	OTHER INFORMATION
	~~Item 1.~~	~~Legal Proceedings~~	19
	Item ~~1A.~~ 1.	~~Risk Factors~~Legal Proceedings	19 39

	Item 1A.	Risk Factors	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19 40

	Item 3.	Defaults Upon Senior Securities	20 41
	~~Item 4.~~	~~Mine Safety Disclosures~~	20
	Item 5. 4.	~~Other Information~~Mine Safety Disclosures	20 41

	Item 5.	Other Information	41

	Item 6.	Exhibits	20 42

SIGNATURE			43

~~Table of Contents~~

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(IN THOUSANDS)

OCTOBER 1, 2017

JANUARY 1, 2017

(UNAUDITED)

ASSETS

CURRENT ASSETS:

Cash and Cash Equivalents
$ 78,108 $ 165,672
Accounts Receivable, net
133,869 126,004
Inventories
186,126 156,083
Prepaid Expenses and Other Current Assets
24,358 23,123
TOTAL CURRENT ASSETS
422,461 470,882

PROPERTY AND EQUIPMENT, less accumulated depreciation
212,332 204,508
DEFERRED TAX ASSETS
30,805 33,117
GOODWILL
68,029 61,218
OTHER ASSETS
68,772 65,714
TOTAL ASSETS
$ 802,399 $ 835,439

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts Payable
$ 52,313 $ 45,380
Current Portion of Long-Term Debt
15,000 15,000
Accrued Expenses
101,346 98,703
TOTAL CURRENT LIABILITIES
168,659 159,083

LONG-TERM DEBT
219,506 255,347
DEFERRED INCOME TAXES
5,819 4,728
OTHER
76,223 75,552
TOTAL LIABILITIES
470,207 494,710

Commitments and Contingencies

SHAREHOLDERS’ EQUITY:

Preferred Stock
0 0
Common Stock
6,025 6,424
Additional Paid-In Capital
282,424 359,451
Retained Earnings
183,423 140,238
Accumulated Other Comprehensive Income (Loss) – Foreign Currency Translation Adjustment
(79,844 ) (110,522 )
Accumulated Other Comprehensive Income (Loss) – Pension Liability
(59,836 ) (54,862 )
TOTAL SHAREHOLDERS’ EQUITY
332,192 340,729
$ 802,399 $ 835,439



	JULY 5, 2020			DECEMBER 29, 2019
	(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents	$	91,844		$	81,301
Accounts receivable, net	139,410			177,482
Inventories, net	263,721			253,584
Prepaid expenses and other current assets	38,411			35,768
Total current assets	533,386			548,135
Property and equipment, net	338,177			324,585
Operating lease right-of-use assets	100,091			107,044
Deferred tax asset	23,350			19,683
Goodwill and intangibles, net	226,828			346,474
Other assets	79,136			77,128

Total assets	$	1,300,968		$	1,423,049

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	64,894		$	75,687
Accrued expenses	122,505			140,652
Current portion of operating lease liabilities	14,124			15,914
Current portion of long-term debt	31,061			31,022
Total current liabilities	232,584			263,275
Long-term debt	589,130			565,178
Operating lease liabilities	86,716			91,829
Deferred income taxes	32,341			35,550
Other long-term liabilities	102,001			99,015

Total liabilities	1,042,772			1,054,847

Commitments and contingencies

Shareholders’ equity
Preferred stock	—			—
Common stock	5,854			5,842
Additional paid-in capital	246,323			250,306
Retained earnings	184,206			286,056
Accumulated other comprehensive loss – foreign currency translation	(112,224		)	(113,139		)
Accumulated other comprehensive loss – cash flow hedge	(10,654		)	(4,163		)
Accumulated other comprehensive loss – pension liability	(55,309		)	(56,700		)

Total shareholders’ equity	258,196			368,202

Total liabilities and shareholders’ equity	$	1,300,968		$	1,423,049

See accompanying notes to consolidated condensed financial statements.

~~-3-~~

~~Table of Contents~~

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED

NINE MONTHS ENDED

OCTOBER 1,
2017

OCTOBER 2, 2016

OCTOBER 1, 2017

OCTOBER 2, 2016

NET SALES
$ 257,431 $ 248,349 $ 730,233 $ 719,110
Cost of Sales
158,887 155,431 445,990 440,434

GROSS PROFIT ON SALES
98,544 92,918 284,243 278,676
Selling, General and Administrative Expenses
67,633 67,175 197,660 200,108
Restructuring and Asset Impairment Charges
0 0 7,299 0
OPERATING INCOME
30,911 25,743 79,284 78,568

Interest Expense
1,851 1,654 5,150 4,763
Other Expense
651 739 1,816 1,072

INCOME BEFORE INCOME TAX EXPENSE
28,409 23,350 72,318 72,733
Income Tax Expense
8,970 7,446 23,394 23,278

NET INCOME
$ 19,439 $ 15,904 $ 48,924 $ 49,455

Earnings Per Share – Basic
$ 0.32 $ 0.25 $ 0.78 $ 0.76

Earnings Per Share – Diluted
$ 0.32 $ 0.25 $ 0.78 $ 0.76

Common Shares Outstanding – Basic
61,018 64,805 62,630 65,285
Common Shares Outstanding – Diluted
61,060 64,842 62,672 65,322



	THREE MONTHS ENDED					SIX MONTHS ENDED
	JULY 5, 2020			JUNE 30, 2019		JULY 5, 2020			JUNE 30, 2019
NET SALES	$	259,504		$	357,507	$	547,673		$	655,195
Cost of Sales	162,210			216,777		336,068			397,943
GROSS PROFIT ON SALES	97,294			140,730		211,605			257,252

Selling, General and Administrative Expenses	80,058			97,838		167,741			197,973
Restructuring Charges	(157		)	—		(1,275		)	—
Goodwill and Intangible Asset Impairment Charge	—			—		121,258			—
OPERATING INCOME (LOSS)	17,393			42,892		(76,119		)	59,279

Interest Expense	4,965			6,810		10,595			13,603
Other Expense	5,139			304		6,630			1,318

INCOME (LOSS) BEFORE INCOME TAX EXPENSE	7,289			35,778		(93,344		)	44,358
Income Tax Expense	2,580			6,279		4,114			7,800

NET INCOME (LOSS)	$	4,709		$	29,499	$	(97,458	)	$	36,558

Earnings (Loss) Per Share – Basic	$	0.08		$	0.50	$	(1.67	)	$	0.61

Earnings (Loss) Per Share – Diluted	$	0.08		$	0.50	$	(1.67	)	$	0.61

Common Shares Outstanding – Basic	58,484			59,285		58,466			59,459
Common Shares Outstanding – Diluted	58,484			59,291		58,466			59,465

See accompanying notes to consolidated condensed financial statements.

~~-4-~~

~~Table of Contents~~

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(IN THOUSANDS)

THREE MONTHS ENDED

NINE MONTHS ENDED

OCTOBER 1,
2017

OCTOBER 2, 2016

OCTOBER 1, 2017

OCTOBER 2, 2016

Net Income
$ 19,439 $ 15,904 $ 48,924 $ 49,455
Other Comprehensive Income (Loss), Foreign

Currency Translation Adjustment
9,848 2,759 30,678 3,827
Other Comprehensive Income (Loss), Pension Liability Adjustment
(1,994 ) 834 (4,974 ) 3,632
Comprehensive Income
$ 27,293 $ 19,497 $ 74,628 $ 56,914



	THREE MONTHS ENDED						SIX MONTHS ENDED
	JULY 5, 2020			JUNE 30, 2019			JULY 5, 2020			JUNE 30, 2019
Net Income (Loss)	$	4,709		$	29,499		$	(97,458	)	$	36,558
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment	16,160			4,249			915			(954		)
Other Comprehensive Loss, Cash Flow Hedge	(351		)	(4,667		)	(6,491		)	(7,973		)
Other Comprehensive Income (Loss), Pension Liability Adjustment	(342		)	829			1,391			738
Comprehensive Income (Loss)	$	20,176		$	29,910		$	(101,643	)	$	28,369

See accompanying notes to consolidated condensed financial statements.

~~-5-~~

~~Table of Contents~~

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

NINE MONTHS ENDED

OCTOBER 1, 2017

OCTOBER 2, 2016

OPERATING ACTIVITIES:

Net Income
$ 48,924 $ 49,455
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:

Depreciation and Amortization
22,203 22,474
Stock Compensation Amortization Expense
4,479 3,390
Deferred Income Taxes and Other
5,926 5,049
Working Capital Changes:

Accounts Receivable
(1,397 ) 1,449
Inventories
(22,377 ) (454 )
Prepaid Expenses and Other Current Assets
(653 ) (1,008 )
Accounts Payable and Accrued Expenses
10,804 (1,462 )

CASH PROVIDED BY OPERATING ACTIVITIES:
67,909 78,893

INVESTING ACTIVITIES:

Capital Expenditures
(22,809 ) (20,912 )
Other
(421 ) 1,140

CASH USED IN INVESTING ACTIVITIES:
(23,230 ) (19,772 )

FINANCING ACTIVITIES:

Borrowing of Long-Term Debt
20,000 20,329
Repayment of Long-Term Debt
(62,085 ) (17,500 )
Tax Withholding Payments for Share-Based Compensation
(1,477 ) (4,661 )
Repurchase of Common Stock
(81,061 ) (10,443 )
Debt Issuance Cost
(1,418 ) 0
Dividends Paid
(11,571 ) (10,429 )

CASH USED IN FINANCING ACTIVITIES:
(137,612 ) (22,704 )

Net Cash Provided By (Used In) Operating, Investing and

Financing Activities
(92,933 ) 36,417
Effect of Exchange Rate Changes on Cash
5,369 1,616

CASH AND CASH EQUIVALENTS:

Net Change During the Period
(87,564 ) 38,033
Balance at Beginning of Period
165,672 75,696

Balance at End of Period
$ 78,108 $ 113,729



	SIX MONTHS ENDED
	JULY 5, 2020			JUNE 30, 2019
OPERATING ACTIVITIES:
Net income (loss)	$	(97,458	)	$	36,558
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	21,748			22,698
Stock compensation amortization expense (benefit)	(2,216		)	4,832
Deferred income taxes and other	(17,364		)	(11,577		)
Amortization of acquired intangible assets	2,631			3,252
Goodwill and intangible asset impairment	121,258			—
Working capital changes:
Accounts receivable	37,660			(4,637		)
Inventories	(8,792		)	(13,349		)
Prepaid expenses and current assets	1,005			(6,206		)
Accounts payable and accrued expenses	(26,045		)	(11,139		)

CASH PROVIDED BY OPERATING ACTIVITIES	32,427			20,432

INVESTING ACTIVITIES:
Capital expenditures	(35,665		)	(34,926		)
Other	(29		)	33

CASH USED IN INVESTING ACTIVITIES	(35,694		)	(34,893		)

FINANCING ACTIVITIES:
Repayments of long-term debt	(47,779		)	(16,670		)
Borrowing of long-term debt	70,000			70,000
Tax withholding payments for share-based compensation	(1,488		)	(3,264		)
Proceeds from issuance of common stock	93			60
Dividends paid	(4,392		)	(7,763		)
Repurchase of common stock	—			(25,154		)
Finance lease payments	(810		)	—

CASH PROVIDED BY FINANCING ACTIVITIES:	15,624			17,209

Net cash provided by operating, investing and financing activities	12,357			2,748
Effect of exchange rate changes on cash	(1,814		)	519

CASH AND CASH EQUIVALENTS:
Net change during the period	10,543			3,267
Balance at beginning of period	81,301			80,989

Balance at end of period	$	91,844		$	84,256

See accompanying notes to consolidated condensed financial statements.

~~-6-~~

~~Table of Contents~~

INTERFACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 – ~~CONDENSED FOOTNOTES~~

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

As contemplated by the Securities and Exchange Commission (the ~~“Commission”~~“Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the Company’s year-end ~~audited consolidated~~ financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended ~~January 1, 2017,~~December 29, 2019, as filed with the Commission.

The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the financial information included in this report contains all adjustments ~~(all of which are normal and recurring)~~ necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected forfor the full year. The ~~January 1, 2017,~~December 29, 2019, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.

C~~ertain~~

The six month period ended July 5, 2020 includes 27 weeks, and the six month period ended June 30, 2019 includes 26 weeks. The three month periods ended July 5, 2020 and June 30, 2019 both include 13 weeks.

Risks and Uncertainties

The World Health Organization declared the COVID-19 outbreak a pandemic, and many companies have experienced disruptions in their operations. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that, except for the goodwill and intangible asset impairment discussed in Note 10 “Goodwill and Intangible Assets,” the decline in 2020 revenue, and its consequent impacts on production volume, operating income, net income, cash flows, and order rates, there were no other material adverse impacts on the Company’s results of operations and financial position at July 5, 2020. The Company’s primary credit facility has various financial and other covenants including, but not limited to, a covenant to not exceed a maximum net debt to EBITDA ratio, as defined by the credit facility agreement. On July 15, 2020, the Company amended its Syndicated Credit Facility. See Note 16 entitled “Subsequent Events” for additional information. The full extent of the future impact of COVID-19 on the Company’s operations is uncertain. A prolonged COVID-19 pandemic may continue to have a material adverse impact on our operations, financial condition, and supply chains. It may negatively impact our ability to collect outstanding receivables, manage inventory, and service customers. The impact of COVID-19 could result in additional impairment losses related to goodwill, intangible assets, and property, plant and equipment.

As the virus spreads through communities, it could impact the physical health, mental health, and productivity of our workforce as many of them are required to shelter in place and work from home for prolonged periods of time, and it could also impact our ability to reach our customers and collaborate with them as they are required to shelter in place and work from home for prolonged periods of time. The COVID-19 pandemic is having broad and negative implications on the global economy, which affects the size and timing of our customers’ capital budgets, and could result in delays or terminations of new and existing renovation projects, remodeling projects, new construction projects, and other projects where our products are used.

COVID-19 Impact

We continue to monitor our operations and have implemented various programs to mitigate the effects of COVID-19 on our business including reductions in employee headcount, labor costs, marketing expenses, consulting spend, travel costs, various other costs, and capital expenditures, as well as suspending and reducing shifts in our production facilities, temporarily furloughing employees, and implementing other cost reduction or avoidance initiatives. Government grants and payroll protection programs are available globally to provide assistance to companies impacted by the pandemic. The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) enacted in the United States (see Note 13 entitled “Income Taxes” for additional information) and a payroll protection program enacted in the Netherlands (the “NOW Program”), provide benefits related to payroll costs either as reimbursements, lower payroll tax rates or deferral of payroll tax payments. The NOW Program provides eligible companies with reimbursement of labor costs as an incentive to retain employees on the payroll. During the second quarter the Company recognized benefits under several payroll protection programs as reductions to payroll costs.

Reclassifications

In fiscal year 2020, the Company made certain classification and presentation changes related to customer service and other costs. Previously, these costs were presented as a component of cost of sales. Beginning in fiscal year 2020, these costs are presented as a component of selling, general and administrative (“SG&A”) expense. The Company determined that this change better reflects how management views and operates the business. Reclassifications of the comparative prior ~~period~~year 2019 amounts have been ~~reclassified~~made to conform to the current presentation as follows:



	Three Months Ended June 30, 2019
Statement of Operations Line Item	As Reported		Reclassification			As Reclassified
	(In thousands)
Cost of Sales	$	218,917	$	(2,140	)	$	216,777
Selling, General and Administrative Expenses	95,698		2,140			97,838
Total	$	314,615	$	—		$	314,615

	Six Months Ended June 30, 2019
Statement of Operations Line Item	As Reported		Reclassification			As Reclassified
	(In thousands)
Cost of Sales	$	401,207	$	(3,264	)	$	397,943
Selling, General and Administrative Expenses	194,709		3,264			197,973
Total	$	595,916	$	—		$	595,916

Recently Adopted Accounting Pronouncements

On December 30, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 326, Credit Losses. This standard requires a financial asset (including trade receivables) to be presented at the net amount expected to be collected through the use of valuation allowances for credit losses. The income statement will reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The Company adopted the new standard using a modified retrospective approach with no cumulative-effect adjustment to retained earnings to recognize expected credit losses on trade accounts receivable. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

On December 30, 2019, the Company adopted Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other,” that provides for the elimination of Step 2 from the goodwill impairment test. Under the new guidance, impairment charges are recognized to the extent the carrying amount of a reporting unit exceeds its fair value with certain limitations. See Note 10 entitled “Goodwill and Intangible Assets” for additional information.

On December 30, 2019, the Company adopted ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the current requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period ~~presentation. These reclassifications had~~and permits the disclosure of other relevant quantitative information for certain unobservable inputs. The adoption of this standard did not have a material impact to the Company’s consolidated financial statements.

On December 30, 2019, the Company adopted ASU 2018-15, “Internal-Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.” This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement service contract with the guidance to capitalize implementation costs of internal use software. The ASU also requires that the costs for implementation activities during the application development phase be capitalized in a hosting arrangement service contract, and costs during the preliminary and post implementation phase are expensed. The Company adopted this standard, which will be applied on a prospective basis, with no material impact to the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 related to intraperiod tax allocation, the calculation of income taxes in interim periods, and the accounting for outside basis differences of foreign subsidiaries and equity method investments. The amendments also improve consistent application of and simplify GAAP for other areas of ASC Topic 740, including franchise or similar taxes partially based on income, the accounting for a step-up in tax basis goodwill, and interim recognition of an enacted change in tax laws or rates, by clarifying and amending existing guidance. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the impact of adoption of this standard but does not anticipate that the adoption will have a material effect on ~~reporting income, comprehensive income, cash flows, total assets or shareholders equity as previously reported.~~

its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This standard addresses the risks from the discontinuation of the London Interbank Offered Rate (LIBOR) and provides optional expedients and exceptions to contracts, hedging relationships and other transactions that reference LIBOR if certain criteria are met. This new guidance is effective and may be applied beginning March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption of this standard.

NOTE 2 – REVENUE RECOGNITION

Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 98% of total revenue for the six months ended July 5, 2020. The remaining 2% of revenue was generated from the installation of carpet and other flooring-related material.

Disaggregation of Revenue

For the six months ended July 5, 2020, revenue from the Company’s customers is broken down by geography as follows:



Geography		Percentage of Net Sales
Americas		56.5%
Europe		30.4%
Asia-Pacific		13.1%

NOTE 3 – INVENTORIES

Inventories are summarized as follows:

Oct. 1, 2017

Jan. 1, 2017

(In thousands)

Finished Goods
$ 123,708 $ 104,742
Work in Process
13,046 8,711
Raw Materials
49,372 42,630
$ 186,126 $ 156,083



	July 5, 2020		December 29, 2019
	(In thousands)
Finished Goods	$	178,506	$	184,336
Work in Process	16,720		13,152
Raw Materials	68,495		56,096
Inventories, net	$	263,721	$	253,584

NOTE 34 – EARNINGS PER SHARE

The Company computes basic earnings or loss per share (“EPS”) by dividing net income or loss by the weighted average common shares outstanding, including participating securities outstanding, during the period as discussed below. Diluted EPS reflects the potential dilution beyond shares for basic EPS that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common stock that would have shared in the Company’s earnings.

The Company includes all unvested stock awards which contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding in ~~our~~the basic and diluted EPS calculations when the inclusion of these shares would be dilutive. Unvested share-based awards of restricted stock are paid dividends equally with all other shares of common stock. As a result, the Company includes all outstanding restricted stock awards in the calculation of basic and diluted EPS. Distributed earnings include common stock dividends and dividends earned on unvested share-based payment awards. Undistributed earnings represent earnings that were available for distribution but were not distributed. The following tables show distributed and undistributed earnings:

~~-7-~~



	Three Months Ended				Six Months Ended
Earnings (Loss) Per Share	July 5, 2020		June 30, 2019		July 5, 2020			June 30, 2019
Basic Earnings (Loss) Per Share:
Distributed Earnings	$	0.01	$	0.07	$	0.08		$	0.13
Undistributed Earnings (Loss)	0.07		0.43		(1.75		)	0.48
Total	$	0.08	$	0.50	$	(1.67	)	$	0.61

Diluted Earnings (Loss) Per Share:
Distributed Earnings	$	0.01	$	0.07	$	0.08		$	0.13
Undistributed Earnings (Loss)	0.07		0.43		(1.75		)	0.48
Total	$	0.08	$	0.50	$	(1.67	)	$	0.61

Basic Earnings (Loss) Per Share	$	0.08	$	0.50	$	(1.67	)	$	0.61
Diluted Earnings (Loss) Per Share	$	0.08	$	0.50	$	(1.67	)	$	0.61

~~Table of Contents~~

Three Months Ended

Nine Months Ended

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

Earnings Per Share

Basic Earnings Per Share

Distributed Earnings
$ 0.07 $ 0.06 $ 0.19 $ 0.10
Undistributed Earnings
0.25 0.19 0.59 0.66
Total
$ 0.32 $ 0.25 $ 0.78 $ 0.76

Diluted Earnings Per Share

Distributed Earnings
$ 0.07 $ 0.06 $ 0.19 $ 0.10
Undistributed Earnings
0.25 0.19 0.59 0.66
Total
$ 0.32 $ 0.25 $ 0.78 $ 0.76

Basic Earnings Per Share
$ 0.32 $ 0.25 $ 0.78 $ 0.76
Diluted Earnings Per Share
$ 0.32 $ 0.25 $ 0.78 $ 0.76

The following table~~s present~~ presents net income that was attributable to participating securities:

Three Months Ended

Nine Months Ended

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

(In millions)

Net Income Attributable to Participating Securities
$ 0.1 $ 0.1 $ 0.4 $ 0.4



	Three Months Ended				Six Months Ended
	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
	(In millions)
Net Income Attributable to Participating Securities	$	—	$	0.3	$	—	$	0.3

The weighted average shares~~outstanding~~ for basic and diluted EPS were as follows:

Three Months Ended

Nine Months Ended

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

(In thousands)

Weighted Average Shares Outstanding
60,555 64,241 62,167 64,721
Participating Securities
463 564 463 564
Shares for Basic Earnings Per Share
61,018 64,805 62,630 65,285
Dilutive Effect of Stock Options
42 37 42 37
Shares for Diluted Earnings Per Share
61,060 64,842 62,672 65,322



	Three Months Ended		Six Months Ended
	July 5, 2020	June 30, 2019	July 5, 2020	June 30, 2019
	(In thousands)
Weighted Average Shares Outstanding	58,024	58,760	58,006	58,934
Participating Securities	460	525	460	525
Shares for Basic EPS	58,484	59,285	58,466	59,459
Dilutive Effect of Stock Options	—	6	—	6
Shares for Diluted EPS	58,484	59,291	58,466	59,465

For ~~all periods presented,~~ the three and six months ended July 5, 2020, there were no20,000 stock options in each respective period excluded from the computation of diluted EPS because the impact would be anti-dilutive. For the three and six months ended June 30, 2019, there were 0 stock options or participating securities excluded from the computation of diluted EPS.

NOTE 45 – LONG-TERM DEBT

Syndicated Credit Facility

~~The~~

At July 5, 2020, the Company ~~has a syndicated credit facility~~maintained an amended and restated Syndicated Credit Facility (the “Facility”) ~~pursuant to~~ which ~~the lenders provide~~provided to the Company and certain of its subsidiaries a multicurrency revolving ~~credit facility~~loan and ~~provide to the Company a~~U.S. denominated and multicurrency term ~~loan.~~loans. Interest on base rate loans iswas charged at varying rates computed by applying a margin depending on the ~~Company~~’sCompany’s consolidated net leverage ratio as of the most recently completed fiscal quarter. Interest on LIBOR-based loans and fees for letters of credit ~~are~~were charged at varying rates computed by applying a margin over the applicable LIBOR rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. In addition, the Company ~~pays~~paid a commitment fee per annum (depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter) on the unused portion of the Facility.

Debt issuance costs associated with term loans are reflected as a reduction of long-term debt in accordance with applicable accounting standards. As these fees are expensed over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are expensed. As of ~~October1, 2017,~~July 5, 2020 and December 29, 2019, the unamortized debt costs recorded as a reduction of long-term debt were $5.4 million and $6.3 million, respectively.

Other deferred borrowing costs, which include underwriting, legal and other direct costs related to the issuance of revolving debt, net of accumulated amortization, were $1.1 million and $1.3 million as of July 5, 2020 and December 29, 2019, respectively. These amounts are included in other assets in the Company’s consolidated condensed balance sheets. The Company amortizes these costs over the life of the related debt.

As of July 5, 2020, the Company had outstanding ~~$173.8~~$566.8 million of term loan borrowing and ~~$60.8~~$58.8 million of revolving loan borrowings under the Facility, and had ~~$6.0~~$1.6 million in letters of credit outstanding under the Facility. As of ~~October 1, 2017,~~December 29, 2019, the Company had outstanding $581.6 million of term loan borrowing and $20.9 million of revolving loan borrowings under the Facility, and had $2.2 million in letters of credit outstanding under the Facility. As of July 5, 2020 and December 29, 2019, the weighted average interest rate on borrowings outstanding under the Facility was ~~2.6%.~~

~~The~~2.75% and 3.27%, respectively. As of July 5, 2020 and December 29, 2019, the carrying value of the Company’s borrowings under the Facility approximates its fair value as the Facility bears interest rates that are similar to existing market rates.

Under the Facility, the Company is required to make quarterly amortization payments of the term loan ~~borrowing. The amortization payments~~borrowings, which are due on the last day of the calendar quarter. ~~The quarterly amortization payment amount was $3.75 million for the third quarter of 2017 and will remain this amount for all future quarters until maturity.~~

~~-8-~~

~~Table of Contents~~

The Company is currently in compliance with all covenants under the ~~Facility~~Facility. On July 15, 2020, the Company amended its Syndicated Credit Facility. See Note 16 entitled “Subsequent Events” for additional information.

Other Lines of Credit

Subsidiaries of the Company have an aggregate of the equivalent of $9.5 million of other lines of credit available at interest rates ranging from 2.0% to 6.0% as of both July 5, 2020 and ~~anticipates that it will remain in compliance with the covenants for the foreseeable future.~~

December 29, 2019. As of July 5, 2020 and December 29, 2019, there were 0 borrowings outstanding under these lines of credit.

NOTE 6 – DERIVATIVE INSTRUMENTS

Interest Rate Risk Management

In the third quarter of 2017, and the ~~Company amended and restated the syndicated credit facility. The terms and conditions~~first quarter of ~~the amended and restated credit facility (the “Amended Facility”) are substantially similar to the preceding Facility, with the following key changes:~~

●

~~The Amended Facility matures in August of 2022;~~

●

~~The restricted payments covenant in the Amended Facility has been liberalized (and now allows for, among other things, the repurchase of the full amount of the new share repurchase program described below); and~~

●

~~Permits the potential release of the lenders’ liens on certain real property and equipment in connection with an anticipated property tax abatement transaction in Georgia.~~

~~Interest Rate Risk Management~~

~~Shortly after entering into the Amended Facility,~~ 2019, the Company entered into an interest rate swap ~~transaction~~transactions in notional amounts of $100 million and $150 million, respectively, to fix the variable interest rate on a portion of its term loan ~~borrowings~~borrowing in order to manage a portion of its exposure to interest rate fluctuations. The Company’s objective and strategy with respect to ~~this~~these interest rate ~~swap~~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. The Company is meeting its objective by hedging the risk of changes in its cash flows (interest payments) attributable to changes in LIBOR, the designated benchmark interest rate being hedged (the “hedged risk”), on an amount of the Company’s debt principal equal to the outstanding swap notional ~~amount.~~

amounts.

Cash Flow Interest Rate ~~Swap~~

~~The Company’s~~Swaps

Both of the interest rate ~~swap is~~swaps described above are designated and ~~qualifies~~qualify as a cash flow ~~hedge~~hedges of forecasted interest payments. The Company reports the ~~effective portion~~changes in fair value of the ~~fair value gain or loss on the swap~~swaps as a component of other comprehensive income (or other comprehensive loss). Gains or losses (if any) on any ineffective portion of derivative instruments in cash flow hedging relationships are recorded in the period in which they occur as a component of other expense (or other income) in the Consolidated Condensed Statement of Operations. There were no such gains or losses in the third quarter of 2017. The aggregate notional amount of the ~~swap~~interest rate swaps as of ~~October 1, 2017~~July 5, 2020 was ~~$100~~$250 million.

Forward Contracts

Our European operations, from time to time, are party to currency forward contracts designed to hedge the cash flow risk of intercompany sales from the manufacturing facility in Europe to the Americas. The Company’s objective and strategy with respect to these currency forward contracts is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to receipt of payment on intercompany sales. As of ~~October 1, 2017,~~July 5, 2020, there were no active forward currency contracts.

Derivative Transactions Not Designated as Hedging Instruments

Our Asia-Pacific operations, from time to time, purchase foreign currency options to economically hedge inventory purchases denominated in foreign currencies other than their functional currency. The Company’s objective with respect to these foreign currency options is to protect the Company against adverse fluctuations in currency rates by reducing its exposure to variability in cash flows related to payment on inventory purchases. These options are classified as non-designated derivative instruments. Gains and losses on the changes in fair value of these foreign currency options are recognized in earnings each period. As of July 5, 2020, the Company had outstanding foreign currency options with an aggregate notional amount of $17.0 million.

The table below sets forth the fair value of derivative instruments as of July 5, 2020:



	Asset Derivatives as of July 5, 2020			Liability Derivatives as of July 5, 2020
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Derivative instruments designated as hedging instruments:
Interest rate swap contracts	Other current assets	$	—	Accrued expenses	$	14,893
Derivative instruments not designated as hedging instruments:
Foreign currency options	Other current assets	320		Accrued expenses	—
		$	320		$	14,893

The table below sets forth the fair value of derivative instruments as of December 29, 2019:



	Asset Derivatives as of December 29, 2019			Liability Derivatives as of December 29, 2019
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
Derivative instruments designated as hedging instruments:
Interest rate swap contracts	Other current assets	$	—	Accrued expenses	$	5,801
Derivative instruments not designated as hedging instruments:
Foreign currency options	Other current assets	251		Accrued expenses	—
		$	251		$	5,801

There was no significant impact to net income (loss) from the changes in fair value of derivatives designated as cash flow hedges during the three and six months ended July 5, 2020. We expect that approximately $5.2 million related to cash flow hedges will be reclassified from accumulated other comprehensive loss as an increase to interest ~~rate swap liability was $0.2 million~~expense in the next 12 months.

The following table summarizes the impact that changes in the fair value of derivatives designated as cash flow hedges had on accumulated other comprehensive loss, net of tax, during the three and ~~was recorded~~six months ended July 5, 2020 and June 30, 2019:



	Three Months Ended						Six Months Ended
	July 5, 2020			June 30, 2019			July 5, 2020			June 30, 2019
	(In thousands)
Foreign currency contracts gain (loss)	$	—		$	204		$	—		$	(159	)
Interest rate swap contracts loss	(351		)	(4,871		)	(6,491		)	(7,814		)
Loss recognized in accumulated other comprehensive loss	$	(351	)	$	(4,667	)	$	(6,491	)	$	(7,973	)

Gains and losses from derivatives designated as cash flow hedges reclassified from accumulated other comprehensive income (loss) into net income (loss) are discussed in ~~accrued liabilities.~~

Note 14 entitled “Items Reclassified From Accumulated Other ~~Lines~~Comprehensive Loss.”

The following tables summarize gains and losses on derivatives not designated as hedging instruments within the consolidated condensed statements of ~~Credit~~

~~Subsidiaries of~~operations for the ~~Company have an aggregate of~~three and six months ended July 5, 2020 and June 30, 2019:



		Three Months Ended
	Statement of Operations Location	July 5, 2020			June 30, 2019
		(In thousands)
Foreign currency options loss	Other expense	$	(1,629	)	$	(144	)

		Six Months Ended
	Statement of Operations Location	July 5, 2020			June 30, 2019
		(In thousands)
Foreign currency options gain (loss)	Other expense	$	79		$	(549	)

NOTE 7 – SHAREHOLDERS’ EQUITY

The following tables depict the ~~equivalent of $9.8 million of other lines of credit available at interest rates ranging from 2.5% to 6.5%. As of~~ ~~October 1, 2017, there were no borrowings outstanding under these lines of credit.~~

~~NOTE~~ activity in the accounts which make up shareholders’ equity for the three and six months ended July 5, ~~– STOCK-BASED COMPENSATION~~

2020 and June 30, 2019:

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL
RETAINED
EARNINGS
PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT
CASH FLOW
HEDGE
(In thousands)
Balance, at December 29, 2019 58,416
$ 5,842
$ 250,306
$ 286,056
$ (56,700 ) $ (113,139 ) $ (4,163 )
Net loss —
—
—
(102,167 ) —
—
—
Stock issuances under employee plans 220
22
197
—
—
—
—
Other issuances of common stock 107
10
1,720
—
—
—
—
Unamortized stock compensation expense related to restricted stock awards —
—
(1,731 ) —
—
—
—
Cash dividends declared, $0.065 per common share —
—
—
(3,807 ) —
—
—
Forfeitures and compensation expense related to stock awards (255 ) (25 ) (4,114 ) —
—
—
—
Pension liability adjustment —
—
—
—
1,733
—
—
Foreign currency translation adjustment —
—
—
—
—
(15,245 ) —
Cash flow hedge unrealized loss —
—
—
—
—
—
(6,140 )
Balance, at April 5, 2020 58,488
$ 5,849
$ 246,378
$ 180,082
$ (54,967 ) $ (128,384 ) $ (10,303 )
Net income —
—
—
4,709
—
—
—
Stock issuances under employee plans 12
1
(1 ) —
—
—
—
Other issuances of common stock 70
7
2,294
—
—
—
—
Unamortized stock compensation expense related to restricted stock awards —
—
(2,300 ) —
—
—
—
Cash dividends declared, $0.01 per common share —
—
—
(585 ) —
—
—
Forfeitures and compensation expense related to stock awards (26 ) (3 ) (48 ) —
—
—
—
Pension liability adjustment —
—
—
—
(342 ) —
—
Foreign currency translation adjustment —
—
—
—
—
16,160
—
Cash flow hedge unrealized loss —
—
—
—
—
—
(351 )
Balance, at July 5, 2020 58,544
$ 5,854
$ 246,323
$ 184,206
$ (55,309 ) $ (112,224 ) $ (10,654 )

SHARES COMMON STOCK ADDITIONAL PAID-IN CAPITAL
RETAINED
EARNINGS
PENSION LIABILITY FOREIGN CURRENCY TRANSLATION ADJUSTMENT
CASH FLOW
HEDGE
(In thousands)
Balance, at December 30, 2018 59,508
$ 5,951
$ 270,269
$ 222,214
$ (43,610 ) $ (101,487 ) $ 1,326
Net income —
—
—
7,059
—
—
—
Stock issuances under employee plans 509
51
379
—
—
—
—
Other issuances of common stock 224
22
3,900
—
—
—
—
Unamortized stock compensation expense related to restricted stock awards —
—
(3,922 ) —
—
—
—
Cash dividends declared, $0.065 per common share —
—
—
(3,900 ) —
—
—
Forfeitures and compensation expense related to stock awards (225 ) (22 ) 29
—
—
—
—
Pension liability adjustment —
—
—
—
(91 ) —
—
Foreign currency translation adjustment —
—
—
—
—
(5,203 ) —
Cash flow hedge unrealized loss —
—
—
—
—
—
(3,306 )
Balance, at March 31, 2019 60,016
$ 6,002
$ 270,655
$ 225,373
$ (43,701 ) $ (106,690 ) $ (1,980 )
Net income —
—
—
29,499
—
—
—
Stock issuances under employee plans 2
—
6
—
—
—
—
Other issuances of common stock (1 ) —
—
—
—
—
—
Unamortized stock compensation expense related to restricted stock awards —
—
52
—
—
—
—
Cash dividends declared, $0.065 per common share —
—
—
(3,863 ) —
—
—
Forfeitures and compensation expense related to stock awards (28 ) (3 ) 1,506
—
—
—
—
Share repurchases (1,556 ) (156 ) (24,998 ) —
—
—
—
Pension liability adjustment —
—
—
—
829
—
—
Foreign currency translation adjustment —
—
—
—
—
4,249
—
Cash flow hedge unrealized loss —
—
—
—
—
—
(4,667 )
Balance, at June 30, 2019 58,433
$ 5,843
$ 247,221
$ 251,009
$ (42,872 ) $ (102,441 ) $ (6,647 )

Stock OptionAwards

In accordance with accounting standards, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period in which the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award.

~~There were no stock options granted during 2015-2017.~~

All outstanding stock options vested prior to the end of 2013, and therefore there was no0 stock option compensation expense in the first ~~nine~~six months of ~~2016~~2020 or ~~2017.~~

2019.

As of ~~October 1, 2017,~~July 5, 2020, there were ~~82,500~~20,000 stock options outstanding and exercisable, at an average exercise price of ~~$8.53~~$12.43 per share. There were ~~5,000~~0 stock options granted in the first six months of 2020 or 2019. There were 7,500 stock options exercised and 0 stock options forfeited in the first six months of 2020. There were 10,000 stock options exercised in the first ~~nine~~six months of ~~2017. There were no~~2019 and 5,000 stock option forfeitures during ~~the 2017 period.~~those six months. The ~~aggregate intrinsic value of the~~ outstanding and exercisable stock options ~~was $1.1 million~~had no intrinsic value as of ~~October 1, 2017.~~

July 5, 2020.

~~-9-~~

~~Table of Contents~~

Restricted Stock Awards

During the ~~nine~~six months ended ~~October 1, 2017,~~July 5, 2020 and June 30, 2019, the Company granted restricted stock awards for ~~248,000~~308,100 and 224,000 shares of common ~~stock.~~stock, respectively. Awards of restricted stock (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 ~~(or vest earlier) upon the attainment of certain performance criteria,~~earlier in the event of a change in control of the Company, or upon involuntary termination without cause.

Compensation expense (benefit) related to restricted stock grants was $~~2.0~~$(0.2) million and ~~$2.4~~$1.5 million for the ~~nine~~six months ended ~~October 1, 2017~~July 5, 2020, and ~~October 2, 2016,~~June 30, 2019, respectively. ~~Accounting standards require that the Company estimate forfeitures for restricted stock and reduce compensation expense accordingly.~~ The Company has reduced its expense byfor restricted stock forfeited during the ~~assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.~~

period.

The following table summarizes restricted stock outstanding as of ~~October 1, 2017,~~July 5, 2020, as well as activity during the ~~nine~~six months then ended:

Restricted Shares

Weighted Average
Grant Date
Fair Value

Outstanding at January 1, 2017
505,000 $ 17.05
Granted
248,000 17.89
Vested
284,000 16.61
Forfeited or canceled
6,000 16.99
Outstanding at October 1, 2017
463,000 $ 17.77



	Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding at December 29, 2019	468,200		$	28.63
Granted	308,100		13.08
Vested	(162,100	)	19.22
Forfeited or canceled	(153,700	)	19.67
Outstanding at July 5, 2020	460,500		$	24.53

As of ~~October 1, 2017,~~July 5, 2020, the unrecognized total compensation cost related to unvested restricted stock was ~~$5.0~~$4.7 million. That cost is expected to be recognized by the end of ~~2020.~~

2023.

PerformanceShare Awards

~~In 2017~~,

During the six months ended July 5, 2020 and June 30, 2019, 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 one to three years, subject to 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 following table summarizes the performance shares outstanding as of ~~October 1, 2017,~~July 5, 2020, as well as the activity during the ~~nine~~six months then ended:

Performance Shares

Weighted Average Grant
Date Fair Value

Outstanding at January 1, 2017
368,500 $ 17.20
Granted
354,000 17.80
Vested
31,000 17.22
Forfeited or canceled
22,000 17.29
Outstanding at October 1, 2017
669,500 $ 17.51



	Performance Shares		Weighted Average Grant Date Fair Value
Outstanding at December 29, 2019	512,000		$	19.71
Granted	263,700		15.36
Vested	(164,300	)	19.74
Forfeited or canceled	(192,000	)	19.67
Outstanding at July 5, 2020	419,400		$	16.99

Compensation expense (benefit) related to the performance shares was $(2.0) million and $3.3 million for the ~~nine~~six months ended ~~October 1, 2017 was $2.4 million.~~July 5, 2020 and June 30, 2019, respectively. The Company has reduced its expense for performance shares forfeited during the period. Unrecognized compensation expense related to these performance shares was approximately ~~$6.2~~$7.0 million as of ~~October~~July 5, 2020. Depending on the performance of the Company, any compensation expense related to these outstanding performance shares will be recognized by the end of 2023.

Tax expense recognized with regard to restricted stock and performance shares was approximately $0.5 million for the six months ended July 5, 2020.

NOTE 8 – LEASES

General

We have operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. Our leases have terms ranging from 1 ~~2017.~~

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.

We record a right-of-use asset and lease liability for leases extending beyond one year for operating and finance leases once a contract that contains a lease is executed and we have 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 was the Company’s incremental borrowing rate for the applicable geographical region.

As of July 5, 2020, there were no significant right-of-use assets and lease obligations from leases that had not commenced as of the end of the second quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to our leases as of July 5, 2020 and December 29, 2019:

~~-10-~~



	July 5, 2020				December 29, 2019
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(In thousands)
Operating lease right-of-use assets	$	100,091			$	107,044

Current portion of operating lease liabilities	$	14,124			$	15,914
Operating lease liabilities	86,716				91,829
Total operating lease liabilities	$	100,840			$	107,743

Property and equipment			$	4,954			$	5,007

Accrued expenses			$	1,455			$	1,489
Other long-term liabilities			1,485				1,673
Total finance lease liabilities			$	2,940			$	3,162

~~Table~~

Lease Costs



	Three Months Ended				Six Months Ended
	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	335	$	278	$	635	$	424
Interest on lease liabilities	16		11		34		19
Operating lease cost	6,759		5,930		12,981		11,601
Short-term lease cost	166		408		341		1,146
Variable lease cost	924		613		1,570		758
Total lease cost	$	8,200	$	7,240	$	15,561	$	13,948

Other supplemental information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	16	$	11	$	34	$	19
Operating cash flows from operating leases	5,569		5,395		11,450		10,505
Financing cash flows from finance leases	411		271		810		517
Right-of-use assets obtained in exchange for new finance lease liabilities	340		551		553		551
Right-of-use assets obtained in exchange for new operating lease liabilities	3,088		4,069		4,065		6,536

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 ~~Contents~~July 5, 2020 and December 29, 2019:



	July 5, 2020		December 29, 2019
Weighted-average remaining lease term – finance leases (in years)	2.70		2.76
Weighted-average remaining lease term – operating leases (in years)	10.62		10.60
Weighted-average discount rate – finance leases	2.37	%	2.06	%
Weighted-average discount rate – operating leases	5.93	%	5.86	%

Maturity Analysis

A maturity analysis of lease payments under non-cancellable leases is presented as follows:



Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2020 (excluding the six months ended July 5, 2020)	$	10,334		$	816
2021	17,476			1,063
2022	14,369			619
2023	11,850			400
2024	10,120			141
Thereafter	75,880			—
Total future minimum lease payments (undiscounted)	140,029			3,039
Less: Present value discount	(39,189		)	(99		)
Total lease liability	$	100,840		$	2,940

Policy Elections

We made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and will account for the lease payments as a single component. We also 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 condensed balance sheets. These leases primarily represent month-to-month operating leases for vehicles and office equipment where we were reasonably certain that we would not elect an option to extend the lease.

NOTE 69 – EMPLOYEE BENEFIT PLANS

On December 31, 2019, a plan amendment was executed to eliminate future service accruals in the Dutch defined benefit plan, resulting in a curtailment of the plan. This plan remains in existence and will continue to pay vested benefits. Active participants will no longer accrue benefits after December 31, 2019, and instead will participate in an industry-wide multi-employer plan beginning in fiscal year 2020. During the three and six months ended July 5, 2020, the Company recorded multi-employer pension expense related to multi-employer contributions of $0.6 million and $1.3 million, respectively.

The following tables provide the components of net periodic benefit cost for the ~~three-month~~ three and ~~nine-month periods~~six months ended ~~October 1, 2017,~~July 5, 2020 and ~~October 2, 2016, respectively:~~

Three Months Ended

Nine Months Ended

Defined Benefit Retirement Plans (Europe)

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

(In thousands)

(In thousands)

Service cost
$ 423 $ 260 $ 1,204 $ 781
Interest cost
1,426 1,610 4,138 5,058
Expected return on assets
(1,697 ) (1,876 ) (4,920 ) (5,880 )
Amortization of prior service costs
9 9 26 27
Recognized net actuarial losses
318 169 930 537
Net periodic benefit cost
$ 479 $ 172 $ 1,378 $ 523

Three Months Ended

Nine Months Ended

Salary Continuation Plan (SCP)

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

(In thousands)

(In thousands)

Service cost
$ 0 $ 110 $ 0 $ 330
Interest cost
314 317 942 952
Amortization of loss
91 203 273 608
Net periodic benefit cost
$ 405 $ 630 $ 1,215 $ 1,890
June 30, 2019:



	Three Months Ended						Six Months Ended
Defined Benefit Retirement Plans (Europe)	July 5, 2020			June 30, 2019			July 5, 2020			June 30, 2019
	(In thousands)
Service cost	$	—		$	184		$	—		$	369
Interest cost	870			1,266			1,761			2,547
Expected return on assets	(1,038		)	(1,428		)	(2,102		)	(2,873		)
Amortization of prior service cost	26			16			52			32
Amortization of net actuarial losses	320			249			646			502
Net periodic benefit cost	$	178		$	287		$	357		$	577



	Three Months Ended				Six Months Ended
Salary Continuation Plan	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
	(In thousands)
Interest cost	$	235	$	289	$	469	$	577
Amortization of net actuarial losses	139		93		279		187
Net periodic benefit cost	$	374	$	382	$	748	$	764



	Three Months Ended				Six Months Ended
nora Defined Benefit Plan	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
	(In thousands)
Service cost	$	259	$	216	$	517	$	433
Interest cost	110		171		221		345
Amortization of net actuarial losses	110		—		110		—
Net periodic benefit cost	$	479	$	387	$	848	$	778

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

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS

During the first quarter of 2020, we performed a qualitative assessment of goodwill impairment indicators, considering macroeconomic conditions related to the COVID-19 pandemic and its potential impact to sales and operating income. We expect that the duration of the COVID-19 pandemic and its adverse impacts on the global economy, global travel restrictions, COVID-19 related government shutdowns, disruptions to our supply chain, distribution disruption, and disruption to our customers’ plans to spend capital on projects that use our products and services will result in lower revenue and operating income. As a result, we determined that there were indicators of impairment, and the Company proceeded with a quantitative assessment of goodwill for all reporting units at the end of the first quarter.

In performing the first quarter quantitative goodwill 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. Our reporting units are one level below our reporting segment level. In preparing the valuations, past, present and future expectations of performance were considered, including the impact of the COVID-19 pandemic. This methodology was consistent with the approach used to perform the annual quantitative goodwill assessment in prior years. The weighted average cost of capital used in the goodwill impairment testing ranged between 10.0% and 10.5%, which primarily fluctuated based on a country risk premium assigned to the geographical region of the reporting unit. There is inherent uncertainty associated with key assumptions used in our impairment testing including the duration of the economic downturn associated with the COVID-19 pandemic and the recovery period. As a result of the first quarter assessment, we determined that the fair value for two reporting units was less than the carrying value and recognized a goodwill impairment loss of $116.5 million in the first quarter of 2020. The expected decline in revenue due to the impact of COVID-19 contributed to the lower fair value of our Europe and Asia-Pacific reporting units. As such, the goodwill impairment loss was allocated to our Europe and Asia-Pacific reporting units in the amounts of $99.2 million and $17.3 million, respectively. We determined that the goodwill in our Americas reporting unit was not impaired as the fair value exceeded the carrying value by more than 90% at April 5, 2020. There were no indicators of additional goodwill impairment as of July 5, 2020.

The changes in the carrying amounts of goodwill for the six months ended July 5, 2020 are as follows:



BALANCE, AT DECEMBER 30, 2019		ACQUISITIONS		PURCHASE PRICE ACCOUNTING ADJUSTMENTS		IMPAIRMENT			FOREIGN CURRENCY TRANSLATION		BALANCE, AT JULY 5, 2020
(In thousands)
$	257,439	$	—	$	—	$	(116,495	)	$	3,121	$	144,065

Additionally, we determined that the trademarks and trade names intangible assets related to the acquired nora business were also impaired and recognized an impairment loss of $4.8 million in the first quarter of 2020. The carrying value of intangible assets after the impairment was $82.7 million at July 5, 2020. There were no indicators of additional intangible asset impairment as of the end of the second quarter of 2020.

NOTE 7 11 – SEGMENT INFORMATION

Based on applicable accounting standards, the Company has determined that it has ~~three~~3 operating segments – namely, the Americas, Europe and Asia-Pacific geographic regions. Pursuant to accounting standards, the Company has aggregated the three operating segments into one ~~reporting~~reportable segment because they have similar economic characteristics, and the operating segments are similar in all of the following areas: (a) the nature of the products and services; (b) the nature of the production processes; (c) the type or class of customer for their products and services; (d) the methods used to distribute their products or provide their services; and (e) the nature of the regulatory environment.

While the Company operates as ~~one reporting~~1 reportable segment for the reasons discussed, included below is selected information on our operating segments.

AMERICAS

EUROPE

ASIA-PACIFIC

TOTAL

Three Months Ended October 1, 2017:

Net Sales
$ 148,082 $ 66,677 $ 42,672 $ 257,431
Depreciation and amortization
3,386 1,646 2,211 7,243
Total assets
274,946 255,330 186,966 717,242

Three Months Ended October 2, 2016:

Net Sales
$ 147,500 $ 62,682 $ 38,167 $ 248,349
Depreciation and amortization
3,635 1,253 2,213 7,101

Nine Months Ended October 1, 2017:

Net Sales
$ 433,461 $ 180,506 $ 116,266 $ 730,233
Depreciation and amortization
10,064 4,257 6,458 20,779

Nine Months Ended October 2, 2016:

Net Sales
$ 426,677 $ 181,904 $ 110,529 $ 719,110
Depreciation and amortization
10,903 3,824 6,598 21,325

Summary information by operating segment follows:

~~-11-~~



	AMERICAS		EUROPE		ASIA- PACIFIC		TOTAL
	(In thousands)
Three Months Ended July 5, 2020:
Net Sales	$	151,222	$	71,874	$	36,408	$	259,504
Depreciation and amortization	3,009		4,417		1,919		9,345
Total assets	685,080		536,782		172,737		1,394,599

Three Months Ended June 30, 2019:
Net Sales	$	207,250	$	95,665	$	54,592	$	357,507
Depreciation and amortization	3,300		4,651		2,108		10,059

Six Months Ended July 5, 2020:
Net Sales	$	309,313	$	166,564	$	71,796	$	547,673
Depreciation and amortization	6,069		8,858		3,937		18,864

Six Months Ended June 30, 2019:
Net Sales	$	367,876	$	188,715	$	98,604	$	655,195
Depreciation and amortization	6,551		9,331		4,240		20,122

~~Table of Contents~~

A reconciliation of the ~~Company~~’sCompany’s total operating segment depreciation and amortization and assets to the corresponding consolidated amounts follows:

Three Months Ended

DEPRECIATION AND AMORTIZATION

October 1,
2017

October 2,
2016

(In thousands)

Total segment depreciation and amortization
$ 7,243 $ 7,101
Corporate depreciation and amortization
539 413
Reported depreciation and amortization
$ 7,782 $ 7,514

Nine Months Ended

DEPRECIATION AND AMORTIZATION

October 1,
2017

October 2,
2016

(In thousands)

Total segment depreciation and amortization
$ 20,779 $ 21,325
Corporate depreciation and amortization
1,424 1,149
Reported depreciation and amortization
$ 22,203 $ 22,474

ASSETS

October 1,
2017

(In thousands)

Total segment assets
$ 717,242
Corporate assets and eliminations
85,157

Reported total assets
$ 802,399



	Three Months Ended				Six Months Ended
Depreciation and Amortization	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
	(In thousands)
Total segment depreciation and amortization	$	9,345	$	10,059	$	18,864	$	20,122
Corporate depreciation and amortization	1,463		1,295		2,884		2,576
Reported depreciation and amortization	$	10,808	$	11,354	$	21,748	$	22,698



Assets	July 5, 2020
	(In thousands)
Total segment assets	$	1,394,599
Corporate assets	134,082
Eliminations	(227,713		)
Reported total assets	$	1,300,968

NOTE 812 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for ~~interes~~tinterest amounted to ~~$4.6~~$11.1 million and ~~$4.0~~$12.0 million for the ~~nine~~six months ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016,~~June 30, 2019, respectively. Income tax payments, net of refunds, amounted to ~~$14.8~~$6.9 million and ~~$9.9~~$16.4 million for the ~~nine~~six months ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016,~~June 30, 2019, respectively.

See Note 8 entitled “Leases” for supplemental disclosures related to finance and operating leases.

NOTE 913 – ~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

~~In May 2014, the Financial Accounting Standards Board (“~~FASB”) issued an accounting standard regarding recognition of revenue from contracts with customers that will supersede the existing revenue recognition under U.S. GAAP. In summary, the core principle of this standard, along with amendments in 2015 and 2016, is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchangeINCOME TAXES

The Company determines its provision for those goods or services. Additionally, the new standard requires enhanced disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including revenue recognition policies to identify performance obligations, assets recognized from costs incurred to obtain and fulfill a contract, and significant judgments in measurements and recognition. The standard, as amended, will be effectiveincome taxes for ~~annual periods beginning after December 15, 2017, including~~ interim periods ~~within that reporting period. Nearly 95%~~using an estimate of its annual effective tax rate and records any changes affecting the Company’s current revenue is produced from the sale of carpet, hard surface flooring and related products (TacTiles installation system, etc.) and the revenue from sales of these products is recognized upon shipment, or in certain cases upon delivery to the customer. There does not exist any performance or any other obligation after the sale of these products outside of the product warranty, which has not historically been of significance compared to total product sales. There is a small portion of the Company’s revenues (less than 6%) that is for the sale and installation of carpet and related products. Of these projects, the overwhelming majority are completed in less than 5 days and therefore the Company does not expect a significant shiftestimated annual effective tax rate in the timing of revenue recognition for these sales either. While the Company is continuing its review of this new standard and the manner in which it will be implemented, given the nature of the Company’s sales it currently believes that revenue recognition under the new standard will be mostly consistent under both the current and new standards, with performance obligations being satisfied under the majority of contracts with customers upon shipment.

In July 2015, the FASB issued an accounting standard to simplify the accounting for inventory. This standard requires all inventories to be measured at the lower of cost and net realizable value, except for inventory that is accounted for using the LIFO or the retail inventory method, which will be measured under existing accounting standards. The new guidance must be applied on a prospective basis and is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption of this new standard ~~did not have any significant impact on the Company’s consolidated financial statements.~~

In November 2015, the FASB issued an accounting standard which requires deferred tax assets and liabilities, as well as any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will only have one net noncurrent deferred tax asset or liability. This standard does not change the existing requirement that only permits offsetting within a jurisdiction. The amendments in the standard may be applied either prospectively or retrospectively to all prior periods presented. The new guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard in the first quarter of 2017, and recorded a reduction of current assets of $10.0 million and a corresponding increase in long term assets of $5.9 million as well as a reduction of long term liabilities of $4.1 million. The Company applied this standard retrospectively and as a result has adjusted the balance sheet as of the end of 2016 by these amounts as well.

~~-12-~~

~~Table of Contents~~

~~In March 2016, the FASB issued an accounting standard update to simplify several aspects of accounting for share-based payment transactions, including the~~ income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. In addition, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, which is the current U.S. GAAP practice, or account for forfeitures when they occur. This update will be effective for fiscal periods beginning after December 15, 2016, including interim periods within that reporting period. The element of the new standard that will have the most impact on the Company’s financial statements will be income tax consequences. Excess tax benefits and tax deficiencies on stock-based compensation awards will now be included in the tax provision within the consolidated statement of operations as discrete items in the reporting period in which ~~they occur, rather than~~ the ~~previous accounting~~change occurs, including discrete tax items.

During the six months ended July 5, 2020, the Company recorded a total income tax provision of ~~recording them in additional paid-in capital~~$4.1 million on ~~the consolidated balance sheet. The adoption~~a pre-tax loss of ~~this standard resulted~~$93.3 million resulting in an ~~increase in deferred~~effective tax ~~assets~~rate of ~~approximately $5.8 million, with~~(4.4)%. The effective tax rate for this period was primarily impacted by a corresponding increase to equity accounts, as of implementation in the first quarter of 2017. There was an impact of this standard on the consolidated statement of cash flows upon adoption, as under the standard when an employer withholds shares for tax withholding purposes those related tax payments will be treated as financing activities, not as operating activities. Upon adoption in the first quarter of 2017, this resulted in a reclassification of $4.6 million of such tax payments in the first quarter of 2016 from operating activities to financing activities. The Company has elected to continue our current policy of estimating forfeitures of stock-based compensation awards at the time of grant and revising in subsequent periods to reflect actual forfeitures, which is allowable under the new standard.

~~In February 2016, the FASB issued a new accounting standard regarding leases. The new standard establishes a right-of-use (ROU~~) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluatingnon-deductible goodwill impairment. Excluding the impact of ~~our pending adoption~~the goodwill impairment, the effective tax rate was 17.8% for the period compared to 17.6% during the six months ended June 30, 2019. The increase in the effective tax rate, excluding the goodwill impairment, was due to unfavorable changes related to company-owned life insurance and unrecognized tax benefits, which were offset by the favorable impacts of ~~the new standard on our consolidated financial statements.~~

~~In March 2017, the FASB issued~~ a new accounting standard regarding the treatment of net periodic benefit costs. This standard will require segregation of these net benefit costs between operating and non-operating expenses. Currently, the Company reports the net benefit costs associated with its defined benefit plans as a component of operating income. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. When the new standard is implemented, only the service cost component of defined benefit plan costs will be reported within operating income, while all other components of net benefit cost will be presented within the “Other Expense (income)” line item on the Consolidated Statements of Operations. The standard requires retrospective application, and as such upon adoption of this standard will result in offsetting changes in operating income and “Other Expense (income)” on the Consolidated Statements of Operations for all periods of 2018 and 2017, with no impact on net income or earnings per share.

~~NOTE 10 – INCOMETAXES~~

~~Accounting standards require that all~~amending prior year tax positions be analyzed using a two-step approach. The first step requires an entity to determine if a tax position is more-likely-than-not to be sustained upon examination. In the second step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis~~, that is more-likely-than-not to be realized upon ultimate settlement.~~ returns.

In the first ~~nine~~six months of ~~2017,~~2020, the Company ~~increased~~decreased its liability for unrecognized tax benefits by ~~$0.8~~$0.4 million. As of ~~October 1, 2017,~~July 5, 2020, the Company had accrued approximately ~~$28.7~~$25.1 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of ~~October 1, 2017~~July 5, 2020 reflects a reduction for ~~$3.3~~$2.8 million of these unrecognized tax benefits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. Based on information currently available, it is reasonably possible that approximately $14.7 million of unrecognized tax benefits may be recognized within the next 12 months due to a lapse of statute of limitations.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic and provides certain tax relief to businesses. Tax provisions of the CARES Act include, among other things, the deferral of certain payroll taxes, relief for retaining employees, and certain income tax provisions for corporations. During the six months ended July 5, 2020, the Company deferred approximately $1.4 million in payroll taxes under the CARES Act. Other than the deferral of payroll taxes, the CARES Act did not have an impact on the Company’s tax accounts, including its effective tax rate, during the six months ended July 5, 2020. The Company expects it will defer approximately $4.0 million in payroll taxes under the CARES Act during fiscal year 2020 which will result in a corresponding increase in its payroll tax accrual. The CARES Act and other similar foreign government support programs are not expected to have a material impact on the Company’s tax accounts during the year.

NOTE 1114 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE ~~INCOME~~

~~During the first~~ ~~nine months of 2017, the Company did not reclassify any significant amounts~~LOSS

Amounts reclassified out of accumulated other comprehensive ~~income. The reclassifications that occurred in that period were primarily comprised of $1.2 million related~~income (loss) (“AOCI”) to the ~~Company’s defined benefit retirement plan~~consolidated condensed statements of operations during the three and ~~salary continuation plan. These reclassifications were included~~six months ended July 5, 2020 and June 30, 2019 are reflected in the ~~selling, general~~tables below:



		Three Months Ended
	Statement of Operations Location	July 5, 2020			June 30, 2019
		(In thousands)
Interest rate swap contracts gain (loss)	Interest expense	$	(1,124	)	$	156
Amortization of benefit plan prior service cost and net actuarial losses	Other expense	(595		)	(358		)
Total loss reclassified from AOCI, net		$	(1,719	)	$	(202	)

		Six Months Ended
	Statement of Operations Location	July 5, 2020			June 30, 2019
		(In thousands)
Interest rate swap contracts gain (loss)	Interest expense	$	(1,616	)	$	295
Amortization of benefit plan prior service cost and net actuarial losses	Other expense	(1,087		)	(721		)
Total loss reclassified from AOCI, net		$	(2,703	)	$	(426	)

NOTE 15 – RESTRUCTURING CHARGES

For the six months ended July 5, 2020, the Company recorded a reduction of $1.3 million of previously recognized restructuring charges due to changes in expected cash payments. At July 5, 2020, the total restructuring reserve was $6.8 million for both the 2019 and ~~administrative expenses line item~~2018 restructuring plans. Below is a discussion of the ~~Company’s consolidated condensed statement of operations.~~

restructuring plan activities by year.

2019 Restructuring Plan

~~-13-~~

~~Table of Contents~~

~~NOTE 12 – REPURCHASE OF COMMON STOCK~~

In the fourth quarter of 2014, the Company announced a program to repurchase up to 500,000 shares of common stock per fiscal year, commencing with the 2014 fiscal year. In the second quarter of 2016, the Company amended the share purchase program to authorize the repurchase of up to $50 million of common stock, with no specific expiration date. During the first three months of 2017, the Company repurchased and retired 1,601,896 shares of common stock at a weighted average purchase price of $19.36 per share. These repurchases completed the $50 million repurchase plan.

~~In the second quarter of 2017, 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 the second and third quarters of 2017, pursuant to this new program, the Company repurchased and retired an aggregate of 2,575,847 shares of common stock at a weighted average price of $19.38 per share.

~~NOTE 13~~ ~~– RESTRUCTURING AND ASSET IMPAIRMENT CHARGES~~

~~In the fourth quarter of 2016,~~On December 23, 2019, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy. The plan involved a reduction of approximately 105 employees and early termination of 2 office leases. As a result of this plan, the Company recorded a pre-tax restructuring charge in the fourth quarter of 2019 of approximately $9.0 million. The charge was comprised of severance expenses ($8.8 million) and lease exit costs ($0.2 million).

The restructuring plan is expected to result in cash expenditures of approximately $9.0 million for payment of the employee severance and lease exit costs, as described above. The Company expects to complete the restructuring plan in fiscal year 2020 and expects the plan to yield annualized savings of approximately $6.0 million. A portion of the annualized savings is expected to be realized on the income statement in fiscal year 2020, with the remaining portion of the annualized savings expected to be realized in fiscal year 2021.

A reconciliation of the 2019 plan restructuring reserve is presented below:



	BALANCE, AT DECEMBER 30, 2019		DEDUCTIONS 2020			CHARGED TO EXPENSES 2020			BALANCE, AT JULY 5, 2020
	(In thousands)
Workforce Reduction	$	8,634	$	(1,996	)	$	(353	)	$	6,285
Other Exit Costs	139		—			—			139
Total	$	8,773	$	(1,996	)	$	(353	)	$	6,424

2018 Restructuring Plan

On December 29, 2018, the Company committed to a restructuring plan in its continuing efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy. The plan ~~involves~~involved (i) a ~~substantial~~ restructuring of its sales and administrative operations in the ~~FLOR business model that includes closure of its headquarters office and most retail FLOR stores,~~United Kingdom, (ii) a reduction of approximately ~~70 FLOR~~200 employees, ~~and a number of employees in the commercial carpet tile business,~~ primarily in the ~~Americas~~Europe and ~~Europe~~Asia-Pacific geographic regions, and (iii) the write-down of certain underutilized and impaired assets that ~~include~~included information technology ~~assets, intellectual property~~ assets and obsolete manufacturing ~~office~~equipment.

The restructuring plan was substantially completed at the end of the second quarter of 2020. The Company redeployed essentially all of the anticipated savings toward the funding of sales and ~~retail store equipment.~~

strategic growth initiatives, yielding negligible net savings on the Company’s income statement.

A reconciliation of the 2018 plan restructuring reserve is presented below:



	BALANCE, AT DECEMBER 30, 2019		DEDUCTIONS 2020			CHARGED TO EXPENSES 2020			BALANCE, AT JULY 5, 2020
	(In thousands)
Workforce Reduction	$	1,898	$	(1,385	)	$	(223	)	$	290
Other Exit Costs	774		—			(699		)	75
Total	$	2,672	$	(1,385	)	$	(922	)	$	365

NOTE 16 – SUBSEQUENT EVENTS

Cost Reducing Initiatives and Related Charges

As ~~a result~~we continue to monitor the impact of ~~this plan,~~COVID-19 and mitigate its effects to our operations, the Company ~~incurred~~expects to continue to pursue a ~~pre-tax restructuring~~variety of cost reducing initiatives including but not limited to voluntary incentive separation programs, temporary employee furloughs and ~~asset impairment charge~~other time-and-pay reduction programs, applications to participate in various government sponsored “wage support” programs, involuntary separations where necessary to streamline roles and responsibilities, potential facility closures to streamline operations, and various other cost reducing and cost avoidance activities.

Syndicated Credit Facility

On July 15, 2020, the ~~fourth~~Company entered into a second amendment to its Syndicated Credit Facility (the “Facility”). This amendment, among other changes, provides for the following: (1) amends the consolidated net leverage ratio covenant making it less restrictive for a period of seven consecutive fiscal quarters beginning with the third quarter of ~~2016 of $19.8 million.~~ Infiscal year 2020 through the first quarter of ~~2017,~~fiscal year 2022 (the “Relief Period”); (2) amends the pricing grid used to determine interest rate margins on outstanding loans as well as the commitment fee on the unused portion of the Facility to include additional consolidated net leverage ratio levels with increased pricing at higher levels of leverage; (3) amends interest rate provisions to provide for interest rate floors, as applicable, on certain tranches of term loans outstanding; and (4) provides temporary restrictions during the Relief Period on the Company’s ability to make acquisitions, pay dividends, repurchase shares, or enter into new credit facilities without lender consent. The Company ~~recorded an additional charge of $7.3~~incurred approximately $1.5 million ~~primarily related~~in debt issuance costs to exit costs associated with the closure of most FLOR retail stores in the first quarter of 2017. The charge in the first quarter of 2017 was comprised of lease exit costs of $3.4 million, asset impairment charges of $3.3 million and severance charges of $0.6 million.

~~A summary of these restructuring activities is presented below:~~

Total
Restructuring
Charge

Costs Incurred
in 2016

Costs Incurred
in 2017

Balance at
October 1, 2017

(in thousands)

Workforce Reduction
$ 10,652 $ 1,451 $ 6,537 $ 2,664
Asset Impairment
11,319 8,019 3,300 0
Lease Exit Costs
5,116 27 5,027 62

execute this amendment.

~~-14-~~

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended ~~January 1, 2017,~~December 29, 2019, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter ~~and nine months~~ ended, or as of, ~~October 1, 2017,~~July 5, 2020, and the comparable periods of ~~2016~~2019 for comparison purposes, and, to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time. These discussions should be read in conjunction with that Form 10-K for more detailed and background information.

Forward-Looking Statements

This report contains statements which may constitute ~~“forward-looking~~“forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with the ongoing COVID-19 pandemic and the economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed under the heading “Risk Factors” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended ~~January 1, 2017, which discussion is hereby incorporated~~December 29, 2019, as supplemented by ~~reference.~~the additional risk factors included in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2020. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Impact of the COVID-19 Pandemic

The World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services. The COVID-19 pandemic has had material adverse effects on our business, results of operations, and financial condition, and it is anticipated that this will continue for an indefinite period of time. The duration of the pandemic will ultimately determine the extent to which our operations are impacted. We continue to monitor our operations and have implemented various programs to mitigate the effects on our business including reductions in employees, labor costs, marketing expenses, consulting expenses, travel costs, various other costs, and capital expenditures, as well as suspending and reducing shifts in our production facilities, temporarily furloughing employees, and implementing other cost reduction or avoidance initiatives.

During the second quarter of 2020, the COVID-19 pandemic continued to impact our global operations, resulting in lower revenue across all geographic regions. For the three months ended July 5, 2020, consolidated net sales declined 27.4% compared to the same period last year. As discussed above, the Company implemented, and continues to implement, various cost cutting initiatives to mitigate the effects of COVID-19 on our operations. During the three months ended July 5, 2020, the Company recorded $2.9 million of voluntary and involuntary severance costs, which are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Operations. We anticipate future annualized savings of approximately $7 million as a result of these separation initiatives.

As a result of the COVID-19 pandemic, government grants and payroll protection programs are available globally to provide assistance to companies impacted by the pandemic. The CARES Act enacted in the United States (see Note 13 entitled “Income Taxes” of Part I, Item 1 of this 10-Q for additional information) and a payroll protection program enacted in the Netherlands (the “NOW Program”), provide benefits related to payroll costs either as reimbursements, lower payroll tax rates or deferral of payroll tax payments. The NOW Program provides eligible companies with reimbursement of labor costs as an incentive to retain employees on the payroll. During the second quarter of 2020, the Company qualified for benefits under several payroll protection programs and recognized a reduction in payroll costs of approximately $3.8 million during the quarter, which are recorded as a reduction of selling, general and administrative expenses in the Consolidated Condensed Statements of Operations, as the Company believes it is likely that the benefits received will not be repaid.

The COVID-19 pandemic had less of an impact on our global operations for the first six months of 2020 (as compared with the impact on the second quarter of 2020), as the effects of the pandemic did not begin to impact our business substantially until the end of the first quarter. For the first six months of 2020, consolidated net sales declined 16.4% compared to the same period last year primarily due to COVID-19. Due to reduced demand and to enhance employee safety measures, we temporarily suspended production in our U.S. manufacturing facilities from March 18, 2020 to March 23, 2020, and then again from April 6, 2020 to April 13, 2020. We also substantially reduced production in our Craigavon, UK facility beginning on April 20, 2020 through the end of the second quarter, and our Thailand, China, and Australia plants are operating in reduced shifts in light of reduced demand. During the first quarter of 2020, our Asia-Pacific region was primarily impacted by COVID-19 due to government shutdowns in China and the temporary closure of our China plant in late January 2020 to February 9, 2020. In addition, almost all of our salesforce and administrative employees globally continue to work remotely in accordance with local government orders and “shelter in place” directives.

General

During the quarter ended ~~October 1, 2017, we had~~July 5, 2020, net sales ~~of $257.4~~were $259.5 million compared with net sales of ~~$248.3~~$357.5 million in the ~~third~~second quarter last year. During the first ~~nine~~six months ~~of fiscal year 2017, we had~~ended July 5, 2020, net sales ~~of $730.2~~were $547.7 million, compared with net sales of ~~$719.1~~$655.2 million in the first ~~nine~~six months of last year. ~~Fluctuations in currency exchange rates had positive impacts on our sales~~The second quarter and ~~operating income in~~first half of 2020 were negatively impacted by the ~~third quarter 2017 versus~~effects of the ~~prior year period; for the nine-month period ended October 1, 2017, fluctuations~~COVID-19 pandemic as discussed above. Fluctuations in currency exchange rates had a negative impact on our sales but a positive impact on operating income compared with the prior year period. The following table presents the amounts (in U.S. dollars) by which the exchange rates for converting foreign currencies into U.S. dollars have affected our net sales and operating incomeof approximately $2.8 million for the ~~three months~~second quarter of 2020 and ~~nine months ended October 1, 2017. The impacts~~a negative impact of ~~changes in foreign currency presented in~~approximately $7.5 million for the ~~tables are calculated based on applying the prior year period’s average foreign currency exchange rates~~six month period of 2020 compared to the ~~current year period.~~

Impact of Changes in
Foreign Currency on:

Three Months Ended
October 1, 2017

Nine Months Ended
October 1, 2017

(In millions)

Net sales
$ 4.0 $ (1.0 )
Operating income
0.6 0.2

three and six month periods of 2019, mostly driven by the weakening of the Euro, British Pound sterling and the Australian dollar against the U.S. dollar.

Goodwill, Intangible Asset and Fixed Asset Impairment

During the ~~third~~first quarter of ~~201~~7,2020, we ~~had net income~~recognized a charge of ~~$19.4~~$121.3 million for the impairment of goodwill and certain intangible assets. See Note 10 entitled “Goodwill and Intangible Assets” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information. No additional goodwill or $0.32 per diluted share, compared with net income of $15.9 million, or $0.25 per diluted share, in the third quarter of 2016. During the nine months ended October 1, 2017, we had net income of $48.9 million, or $0.78 per share, compared with net income of $49.5 million, or $0.76 per share, in the first nine months of 2016. The first nine months of 2017 include $7.3 million of restructuring andintangible asset impairment charges ~~(all of which~~ were recorded during the second quarter. During the second quarter of 2020, we recognized fixed asset impairment charges of $3.1 million related to certain FLOR design center closures and other projects that were abandoned or indefinitely delayed. These charges are included in selling, general and administrative expenses in the ~~first quarter) as a continuation~~Consolidated Condensed Statements of ~~the plans announced in the fourth quarter of 2016, primarily related to closing our FLOR specialty retail stores.~~

Operations.

~~-15-~~

~~Table of Contents~~

Results of Operations

The following table presents, as a percentage of net sales, certain items included in our ~~Consolidated~~ ~~Condensed Statements~~consolidated condensed statements of ~~Operations~~operations for the ~~three-month~~three and ~~nine-month~~six month periods ended ~~October 1, 2017~~July 5, 2020 and ~~October 2, 2016, respectively:~~

Three Months Ended

Nine Months Ended

Oct. 1, 2017

Oct. 2, 2016

Oct. 1, 2017

Oct. 2, 2016

Net sales
100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales
61.7 62.6 61.1 61.2
Gross profit on sales
38.3 37.4 38.9 38.8
Selling, general and administrative expenses
26.3 27.0 27.1 27.8
Restructuring and Asset Impairment Charges
0.0 0.0 1.0 0.0
Operating income
12.0 10.4 10.9 10.9
Interest/Other expenses
1.0 1.0 0.9 0.8
Income before tax expense
11.0 9.4 9.9 10.1
Income tax expense
3.5 3.0 3.2 3.2
Net income
7.6 6.4 6.7 6.9

June 30, 2019:

Three Months Ended Six Months Ended
July 5, 2020 June 30, 2019 July 5, 2020 June 30, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 62.5
60.6
61.4
60.7
Gross profit on sales 37.5
39.4
38.6
39.3
Selling, general and administrative expenses 30.9
27.4
30.6
30.2
Restructuring charges (0.1 ) —
(0.2 ) —
Goodwill and intangible asset impairment charge —
—
22.1
—
Operating income (loss) 6.7
12.0
(13.9 ) 9.1
Interest/Other expenses 3.9
2.0
3.1
2.3
Income (loss) before tax expense 2.8
10.0
(17.0 ) 6.8
Income tax expense 1.0
1.8
0.8
1.2
Net income (loss) 1.8 % 8.2 % (17.8 )% 5.6 %

Net Sales

Below ~~we provide~~is information regarding our net sales, and ~~analyze~~analysis of those results,, for the ~~three-month~~three and ~~nine-month~~six month periods ended ~~October 1, 2017,~~July 5, 2020, and ~~October 2, 2016, respectively.~~

Three Months Ended

Percentage

Oct. 1, 2017

Oct. 2, 2016

Change

(In thousands)

Net Sales
$ 257,431 $ 248,349 3.7 %

Nine Months Ended

Percentage

Oct. 1, 2017

Oct. 2, 2016

Change

(In thousands)

Net Sales
$ 730,233 $ 719,110 1.5 %

June 30, 2019:



	Three Months Ended				Percentage Change
	July 5, 2020		June 30, 2019		Percentage Change
	(In thousands)
Net Sales:
Americas	$	151,222	$	207,250	(27.0	)%
Europe	71,874		95,665		(24.9	)%
Asia-Pacific	36,408		54,592		(33.3	)%
Total Net Sales	$	259,504	$	357,507	(27.4	)%



	Six Months Ended				Percentage Change
	July 5, 2020		June 30, 2019		Percentage Change
	(In thousands)
Net Sales:
Americas	$	309,313	$	367,876	(15.9	)%
Europe	166,564		188,715		(11.7	)%
Asia-Pacific	71,796		98,604		(27.2	)%
Total Net Sales	$	547,673	$	655,195	(16.4	)%

For the quarter ended ~~October 1, 2017,~~July 5, 2020, net sales ~~increased $9.1~~decreased $98.0 million ~~(3.7%~~(27.4%) versus the comparable period in ~~2016.~~2019. The sales decline was primarily due to the impact of the COVID-19 pandemic as discussed above. Currency fluctuations had an approximately ~~$4.0~~$2.8 million ~~(2.0%~~(0.8%) ~~positive~~negative impact on ~~the 2017 third~~second quarter 2020 sales compared to the ~~third~~second quarter of ~~2016.~~2019. This ~~positive~~currency impact was mostly due to the ~~result~~weakening of ~~a strengthening~~the Euro, British Pound sterling, Chinese Renminbi, and Australian dollar ~~as compared to~~against the ~~prior year period.~~U.S. dollar. On a geographic basis, ~~sales increased in all regions, with Americas commercial sales (defined as Americas sales less the FLOR residential sales) up 2%,~~net sales in the Americas decreased 27.0%, Europe ~~up 6%~~decreased 24.9% and Asia-Pacific decreased 33.3%. The sales decreases across all geographic regions were, as ~~translated into U.S. dollars (2%~~discussed above, due to the impacts of COVID-19, resulting in ~~local currency),~~lower sales globally. The sales decrease in the Americas was most significant in the corporate, retail, leisure and transportation market segments, partially offset by increases in the hospitality and residential/living market segments. On a market segment basis, the sales decrease in ~~Asia-Pacific up 12%. Third quarter~~Europe was most significant in the corporate, retail, hospitality and residential/living market segments, partially offset by increases in the healthcare and leisure market segments. The sales ~~were~~decrease in Europe was also negatively impacted by the ~~exit~~weakening of the ~~FLOR specialty~~Euro. On a market segment basis, the sales decrease in Asia-Pacific was most significant in the corporate, retail, ~~stores at the end of the first quarter of 2017, although this was~~healthcare, public buildings and hospitality market segments partially offset by gains in FLOR’s other sales channels. Global sales increased most significantly in the corporate office, education, government and healthcare segments. These increases were partially offset by declines in the retail segment and in the residential segment, which is largely a result of the exit of the FLOR specialty retail stores. In the Americas, the increase in sales was primarily due to sales of luxury vinyl tile (“LVT”), which is a hard surface modular flooring product line launched in the first quarter of 2017. In Europe, sales increased 2% in local currency, with increases in the ~~United Kingdom, Germany and Southern and Central Europe. As noted above, due to~~residential/living market segment. The sales decrease in Asia-Pacific was also impacted by the ~~strengthening~~weakening of the ~~Euro, our sales in Europe improved by 6% as translated into U.S. dollars. Sales in Asia-Pacific saw increases across the region with the exception of China.~~

Australian dollar.

For the ~~nine~~six months ended ~~October 1, 2017,~~July 5, 2020, net sales ~~increased~~ ~~$11.1~~decreased $107.5 million ~~(1.5%~~(16.4%) versus the comparable period in ~~2016.~~2019. The sales decline was primarily due to the impact of the COVID-19 pandemic, as discussed above, more pronounced in the second quarter as the effects of the pandemic did not begin to impact our business substantially until the end of the first quarter. Currency fluctuations had an approximately ~~$1.0~~$7.5 million ~~(less than 1%~~(1.1%) negative impact on net sales for the first ~~nine~~six months of ~~2017 as~~2020 compared to the ~~same period in 2016.~~first six months of 2019. This currency impact was mostly due to the weakening of the Euro, British Pound sterling, Chinese Renminbi, and Australian dollar against the U.S. dollar. On a geographic basis, net sales ~~were up 2%~~for the first six months of 2020 in the Americas ~~commercial business~~decreased 15.9%, Europe decreased 11.7% and ~~up 5%~~Asia-Pacific decreased 27.2%. The sales decreases across all geographic regions were, as discussed above, due to the impacts of COVID-19, resulting in ~~Asia-Pacific. In Europe,~~lower sales ~~were down approximately 1% both~~globally. The sales decrease in ~~local currency~~the Americas was seen in the corporate, retail, and ~~as translated into U.S. dollars. We experienced sales~~leisure market segments, partially offset by increases in ~~our~~the hospitality and residential/living market segments. On a market segment basis, the sales decrease in Europe was most significant in the corporate, ~~office, education~~retail, public buildings, residential/living and ~~government segments. These increases were~~hospitality market segments, partially offset by ~~declines~~increases in the ~~healthcare~~leisure and ~~hospitality~~transportation market segments. ~~Sales were~~The sales decrease in Europe was also ~~negatively~~ impacted by the ~~exit of FLOR specialty retail stores at the end~~weakening of the ~~first quarter of 2017. As noted above, we launched LVT~~Euro. The sales decrease in the ~~first quarter~~Asia-Pacific region was impacted by COVID-19 shutdowns and the weakening of ~~2017. Sales of these products are progressing according to plan~~the Chinese Renminbi and ~~have been primarily~~Australian dollar. On a market segment basis, the sales decrease in Asia-Pacific was most significant in the ~~Americas, although they were launched in Europe~~corporate, retail, healthcare, public buildings and ~~Asia-Pacific~~transportation market segments partially offset by increases in the ~~second quarter of this year and sales activity in those regions is progressing in line with expectations as well.~~

residential/living market segment.

~~-16-~~

~~Table of Contents~~

Cost and Expenses

The following ~~table~~stables present ~~on a consolidated basis for our operations,~~ our overall cost of sales and selling, general and administrative expenses for the ~~three-month~~three and ~~nine-month~~six month periods ended ~~October 1, 2017~~July 5, 2020, and ~~October 2, 2016, respectively:~~

Three Months Ended

Percentage

Cost and Expenses

Oct. 1, 2017

Oct. 2, 2016

Change

(In thousands)

Cost of sales
$ 158,887 $ 155,431 2.2 %
Selling, general and administrative expenses
67,633 67,175 0.7 %
Total
$ 226,520 $ 222,606 1.8 %

Nine Months Ended

Percentage

Cost and Expenses

Oct. 1, 2017

Oct. 2, 2016

Change

(In thousands)

Cost of sales
$ 445,990 $ 440,434 1.3 %
Selling, general and administrative expenses
197,660 200,108 (1.2% )
Total
$ 643,650 $ 640,542 0.5 %

June 30, 2019:



	Three Months Ended				Percentage Change
	July 5, 2020		June 30, 2019		Percentage Change
	(In thousands)
Cost of sales	$	162,210	$	216,777	(25.2	)%
Selling, general and administrative expenses	80,058		97,838		(18.2	)%



	Six Months Ended				Percentage Change
	July 5, 2020		June 30, 2019		Percentage Change
	(In thousands)
Cost of sales	$	336,068	$	397,943	(15.5	)%
Selling, general and administrative expenses	167,741		197,973		(15.3	)%

For the quarter ended ~~October 1, 2017, costs~~July 5, 2020, cost of sales ~~increased $3.5~~decreased $54.6 million ~~(2.2%~~(25.2%) as compared to the ~~third~~second quarter of ~~2016. Fluctuations in currency exchange rates~~2019, primarily due to lower net sales. Cost of sales also includes the amortization of acquired intangible assets of $1.3 million for each of the second quarters of 2020 and 2019, respectively. Currency translation had ~~a small (1%~~an approximately $2.0 million (0.9%) positive impact on the year-over-year comparison. The increase in costs of sales was a function of higher sales for the 2017 third quarter, as sales increased 3.7% versus the prior year period. The percentage increase in costs of sales was lower than the increase in sales due to improved manufacturing performance during the quarter, a result of our productivity and process improvement gains as well as savings from our restructuring activities undertaken in the fourth quarter of 2016. In addition, in the third quarter of 2016, there were costs related to our move to a centralized warehouse facility in the U.S. that did not repeat in 2017. As a percentage of sales, costs of sales decreased to 61.7% for the third quarter of 2017 as compared to 62.6% for the third quarter of 2016 due to the factors noted above. This improvement came despite slightly lower production volumes in the third quarter of 2017 versus the same period in 2016 as well as higher raw material input prices.

~~For the nine months ended October 1, 2017~~, cost of sales increased $5.5 million (1.3%) versus the comparable period in 2016. Fluctuations in currency exchange rates did not have a significant impact on the comparison. This increase in costs of sales was largely because of increased sales for the period, as sales increased 1.5% versus the prior year period. As a percentage ofnet sales, our cost of sales ~~decreased slightly~~increased to ~~61.1%~~62.5% for the ~~nine~~second quarter of 2020 versus 60.6% for the second quarter of 2019.

For the six months ended October 1, 2017, from 61.2% for the comparable period in 2016. This decrease is a result of the Company’s productivity initiatives delivering benefits slightly in advance of higher raw material input prices and despite lesser absorption of fixed costs associated with lower production volumes. We expect continued raw material price inflation, as well as less absorption of fixed costs associated with lower production levels, for the balance of 2017 and, as a result,July 5, 2020, cost of sales asdecreased $61.9 million (15.5%) compared to the first six months of 2019, primarily due to lower net sales. Cost of sales also includes the amortization of acquired intangible assets of $2.6 million and $3.2 million for the first six months of 2020 and 2019, respectively. Currency translation had an approximately $5.3 million (1.3%) positive impact on the year-over-year comparison. As a percentage of net sales, ~~is expected~~our cost of sales increased to ~~increase~~61.4% for the ~~remainder~~first six months of ~~2017.~~

2020 versus 60.7% for the first six months of 2019.

For the ~~three months~~quarter ended ~~October~~ ~~1, 2017,~~July 5, 2020, selling, general and administrative (“SG&A”) expenses ~~increased $0.5~~decreased $17.8 million (0.7%) versus the comparable period last year. Fluctuations in current exchange rates did not have a significant impact on the comparison. This increase in SG&A expenses is a result of additional incentive based compensation due to higher projected attainment of performance goals in the third quarter of 2017 as compared to the prior year period. This increase in incentive-based compensation was offset almost entirely by (1) lower selling expenses due to the exit of the FLOR specialty retail stores, (2) lower functional expenses as we continue our transition to more centralized services, and (3) savings as a result of our restructuring plans implemented in the fourth quarter of 2016. These savings were realized despite higher expenses associated with our LVT product launches in 2017. As a result of the savings discussed above, as a percentage of sales, our SG&A expenses declined to 26.3% for the three months ended October 1, 2017 versus 27.0% for the comparable period in 2016.

~~For the nine-month ended October 1, 2017, SG&A expenses decreased $2.5 million (1.2%~~(18.2%) versus the comparable period in ~~2016. This decline was~~2019. Currency translation had a ~~function~~$0.5 million (0.5%) positive impact on the year-over-year comparison. SG&A expenses were lower for the second quarter of ~~decreases~~2020 primarily due to (1) lower selling expenses of $16.1 million due to lower net sales, (2) $3.8 million of payroll protection credits, and (3) lower overall payroll costs due to lower performance-based incentive compensation as well as the impact of voluntary and involuntary employee separations and furloughs, which were partially offset by $2.9 million of severance expenses recorded during the quarter. As a percentage of sales, SG&A expenses increased to 30.9% for the second quarter of 2020 versus 27.4% for the second quarter of 2019.

For the six months ended July 5, 2020, SG&A expenses decreased $30.2 million (15.3%) versus the comparable period in 2019. Currency translation had a $1.4 million (0.7%) positive impact on the year-over-year comparison. SG&A expenses were lower for the first six months of ~~2017 offset by~~2020 primarily due to (1) lower selling expenses of $23.7 million due to lower net sales, (2) lower stock compensation expense of $7.0 million, (3) $3.8 million of payroll protection credits, and (4) lower overall payroll costs as discussed above. As a ~~slight increae in~~percentage of sales, SG&A expenses increased to 30.6% for the first six months of 2020 versus 30.2% for the first six months of 2019.

Other Expense

Other expenses increased $4.8 million and $5.3 million during the three and six months ended ~~October 1, 2017. Fluctuations in currency exchanges rates did not have~~July 5, 2020, respectively, compared to 2019 primarily due to a ~~significant impact on the comparison. The decline for the nine-month period was~~$4.2 million write-down of damaged raw material inventory as a result of (1) lower functional expenses, as we move towards more centralized services and realize associated savings, (2) lower selling expenses in the second and third quarters of 2017 associated with exiting the FLOR specialty retail stores, and (3) savings associated with our previously announced restructuring plans. These savings were offset by higher incentive compensation due to higher attainment of performance goals in 2017 versus 2016, as well as costs associated with the rollout of our LVT product offerings. Due to these decreases, as well as higher sales for the first nine months of 2017, our SG&A expenses declined to 27.1% of sales as compared to 27.8% of sales for the first nine months of 2016.

a fire at a storage facility.

InterestExpense

~~-17-~~

~~Table of Contents~~

~~Interest Expense~~

For the ~~three-month period~~quarter ended ~~October 1, 2017, our~~July 5, 2020, interest expense ~~increased $0.2 million to $1.9~~decreased $1.8 million, from ~~$1.7 million in the third quarter of 2016. For the nine-month period ended October 1, 2017, our interest expense increased $0.4 million to $5.2 million, from $4.8~~$6.8 million in the comparable period last ~~year. The increases were~~year to $5.0 million, primarily due to ~~higher weighted average borrowing rates for~~lower interest rates. For the ~~2017 periods versus those of~~six months ended July 5, 2020, interest expense decreased $3.0 million, from $13.6 million in the ~~2016 periods as well as higher average daily outstanding borrowing amounts under our Syndicated Credit Facility during the 2017 periods.~~

comparable period last year to $10.6 million, primarily due to lower interest rates.

Liquidity and Capital Resources

General

At ~~October 1, 2017,~~July 5, 2020, we had ~~$78.1~~$91.8 million in ~~cash and cash equivalents.~~cash. At that date, we had ~~outstanding $173.8~~$566.8 million ofin term loan ~~borrowings, $60.8~~borrowing, $58.8 million of revolving loan borrowings, and ~~$6.0~~$1.6 million in letters of credit ~~under our Syndicated Credit Facility.~~

~~As of~~ ~~October 1, 2017, we could have incurred $183.2 million of additional borrowings~~outstanding under our Syndicated Credit Facility. ~~In addition,~~As of July 5, 2020, we ~~could have incurred an~~had additional ~~$9.8~~borrowing capacity of $239.6 million under the Syndicated Credit Facility and $9.5 million of ~~borrowings~~borrowing capacity under ~~our~~ other ~~lines of~~ credit facilities in place at other non-U.S. subsidiaries.

~~Analysis~~ We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months.

Amendment of ~~Cash Flows~~

~~We exi~~ted the quarter ended October 1, 2017 with $78.1 million in cash, a decrease of $87.6 million during the first nine months of the year. The decrease in cash was primarily a result of cash outflows for financing activities, with the most significant factors being (1) $81.1 million of cash used to repurchase and retire 4.2 million shares of our outstanding common stock, (2) $62.1 million of cash used to repay borrowings under the Syndicated Credit Facility (including required amortization payments of $11.3 million), and (3) $11.6 million for the payments of dividends. These financing cash outflows were partially offset by $20.0 million of borrowings underDue to COVID-19 Impact

On July 15, 2020, we entered into a second amendment to our Syndicated Credit Facility. ~~We also used~~See Note 16 entitled “Subsequent Events” within Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Analysis of Cash Flows

The following table presents a summary of cash ~~of $22.8~~flows for the six-month periods ended July 5, 2020 and June 30, 2019, respectively:



	Six Months Ended
	July 5, 2020			June 30, 2019
	(In thousands)
Net cash provided by (used in):
Operating activities	$	32,427		$	20,432
Investing activities	(35,694		)	(34,893		)
Financing activities	15,624			17,209
Effect of exchange rate changes on cash	(1,814		)	519
Net change in cash and cash equivalents	10,543			3,267
Cash and cash equivalents at beginning of period	81,301			80,989
Cash and cash equivalents at end of period	$	91,844		$	84,256

Cash provided by operating activities was $32.4 million for the six months ended July 5, 2020, which represents an increase of $12.0 million from the prior year comparable period. The increase was primarily due to working capital ~~expenditures~~changes, specifically an increase in ~~the first nine months of 2017. These uses were partially~~account receivable collections offset by ~~$67.9~~the change to accounts payable and accrued expenses.

Cash used in investing activities was $35.7 million for the six months ended July 5, 2020 which represents an increase of ~~cash generated~~$0.8 million from ~~operating activities during~~ the ~~nine-month~~prior year comparable period. The ~~factors driving the cash from operations were (1) $48.9 million of net income for the period, and (2) $10.8 million of cash generated~~increase was primarily due to an increase in ~~accounts payable and accruals. These inflows were partially offset~~capital expenditures from the prior year comparable period.

Cash provided by ~~operating cash outflows~~financing activities was $15.6 million for the six months ended July 5, 2020 which represents a decrease of ~~$22.4~~$1.6 million from the prior year comparable period. The decrease was primarily due to ~~an increase~~higher repayments of revolving loan borrowings.

Purchase Obligations

We have outstanding purchase obligations of $9.7 million related to expanding our manufacturing capabilities, which we expect to fund during the remainder of 2020.

Forward-Looking Statement on Impact of COVID-19

While we are aggressively managing our response to the COVID-19 pandemic, its impacts on our full year fiscal 2020 results and beyond are uncertain. We believe the most significant elements of uncertainty are (1) the intensity and duration of the impact on construction, renovation, and remodeling; (2) corporate, government, and consumer spending levels and sentiment; and (3) the ability of our sales channels, supply chain, manufacturing, and distribution partners to continue operating through disruptions. Any or all of these factors could negatively impact our financial position, results of operations, cash flows, and outlook. As the impact of the COVID-19 pandemic continues to affect companies with global operations, we anticipate that our business and results in ~~inventory.~~

the third quarter of 2020 will continue to be adversely affected, and the timeline and pace of recovery is uncertain. While we are unable to predict with certainty, we anticipate continued year-over-year declines in revenue and operating income in the third and fourth quarters of fiscal year 2020, and perhaps during quarterly periods thereafter.

The Company has implemented several cost reduction and avoidance initiatives to align with anticipated customer demand, including a voluntary employee separation program, temporary employee furloughs and other time-and-pay reduction programs, involuntary employee separations where necessary to streamline roles and responsibilities, and various other cost reducing initiatives. The Company has also suspended merit-based salary increases, as well as its 401(k) and Non-Qualified Savings Plan (NSP) matching contributions, and will benefit from lower than originally anticipated performance-based compensation and variable compensation for 2020. In addition, the Company has reduced its capital spending plans.

Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet foreseeable cash requirements. However, the Company’s cash flows from operations can be affected by numerous factors including the uncertainty of COVID-19 and its impact on global operations, raw material availability and cost, demand for our products, and other factors described in “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Backlog

As of July 26, 2020, the consolidated backlog of orders was approximately $193.1 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 29, 2019, backlog was approximately $177.8 million as of February 9, 2020. Disruptions in supply and distribution chains, global travel restrictions and government shelter in place orders due to the impact of COVID-19 have resulted in delays of construction projects and flooring installations in many regions worldwide.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Our~~

The discussion below in this Item 3 is based upon the more detailed discussions of our market risk and related matters included in our Annual Report on Form 10-K for the fiscal year ended ~~January 1, 2017~~December 29, 2019, under Part II, Item 7A of that Form 10-K. ~~Our~~The discussion here focuses on the ~~period~~six months ended ~~October 1, 2017,~~July 5, 2020, and any material changes from (or other important intervening developments since the time of) the information discussed in that Form 10-K. This discussion should be read in conjunction with that Form 10-K for more detailed and background information.

At October 1, 2017, we recognized a $30.7 million increase in our foreign currency translation adjustment account compared to January 1, 2017, primarily because of the weakening of the U.S. dollar against certain foreign currencies, particularly the Euro and the Australian dollar.

Sensitivity ~~Analysis.~~Analysis

For purposes of specific risk analysis, we use sensitivity analysis to measure the impact that market risk may have on the fair values of our market sensitive instruments.

To perform sensitivity analysis, we assess the risk of loss in fair values associated with the impact of hypothetical changes in interest rates and foreign currency exchange rates on market sensitive instruments.

Because the debt outstanding under our Syndicated Credit Facility has variable interest rates based on an underlying prime lending rate or LIBOR rate, we do not believe changes in interest rates would have any significant impact on the fair value of that debt instrument. Changes in the underlying prime lending rate or LIBOR rate would, however, impact the amount of our interest expense. For a discussion of these hypothetical impacts on our interest expense, please see the discussion in Part II, Item 7A of our Annual Report on Form 10-K for the year ended ~~January 1, 2017.~~

December 29, 2019.

~~-18-~~

~~Table of Contents~~

As of ~~October 1, 2017,~~July 5, 2020, a 10% decrease or increase in the levels of foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would result in a decrease in the fair value of our financial instruments of ~~$9.6~~$11.8 million or an increase in the fair value of our financial instruments of ~~$11.7~~$14.4 million, respectively. As the impact of offsetting changes in the fair market value of our net foreign investments is not included in the sensitivity model, these results are not indicative of our actual exposure to foreign currency exchange risk.

As of July 5, 2020, a 100 basis point decrease in interest rates would result in an increase in the recorded liability of our interest rate swaps of approximately $5.2 million while a 100 basis point increase in interest rates would result in a decrease in the recorded liability of our interest rate swaps of approximately $6.3 million.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”), pursuant to Rule 13a-14(c) under the Act.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures however are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Based on ~~that~~the evaluation, our President and Chief Executive Officer and our Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly ~~Report.~~

Report to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are ~~subject~~a party to ~~various~~ legal proceedings, whether arising in the ordinary course of business ~~none~~or otherwise. The disclosure set forth in Note 17 to the consolidated financial statements included in Item 8 of ~~which~~the December 29, 2019 Annual Report on Form 10-K is ~~required to be disclosed under this Item 1.~~

incorporated by reference herein.

ITEM 1A. RISK FACTORS

~~There~~ ~~are no material changes~~

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in ~~the third quarter of 2017. For a discussion of risk factors, see~~ Part I, Item 1A, “Risk Factors,” inof our ~~Annual Report~~annual report on Form 10-K for the ~~fiscal~~ year ended ~~January 1, 2017.~~

December 29, 2019, as supplemented by Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains information with respect to purchases made by or on behalf of the Company, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during ~~the~~our second quarter ended ~~October 1, 2017:~~

Period⁽¹⁾

Total
Number
of Shares
Purchased

Average
Price
Paid
Per Share

Total Number
of Shares Purchased
as Part of Publicly
Announced Plans or
Programs⁽²⁾

Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs⁽²⁾

July 3-31, 2017⁽³⁾
21,638 $ 19.67 20,010 $ 75,037,949
August 1-31, 2017
1,311,102 $ 19.04 1,311,102 50,077,293
September 1-30, 2017
0 N/A 0 50,077,293
October 1, 2017
0 N/A 0 50,077,293
Total
1,332,740 $ 19.75 1,331,112 50,077,293

July 5, 2020:



Period⁽¹⁾	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 6 - May 3, 2020^{(2) (3)}	19,867	$	10.50	—	$	—
May 4 - May 31, 2020⁽²⁾	428	9.02		—	—
June 1 - July 5, 2020⁽²⁾	292	8.50		—	—
Total	20,587	$	10.44	—	$	—

⁽¹⁾The monthly periods identified above correspond to the Company’s fiscal ~~third~~second quarter of ~~2017,~~2020, which commenced ~~July 3, 2017~~April 6, 2020 and ended ~~October 1, 2017.~~

July 5, 2020.

⁽²⁾ ~~In April 2017, the Company announced a new share purchase program authorizing the repurchase of up to $100 million of common stock. This amended program has no specific expiration date.~~

⁽³⁾ Includes ~~1,628~~ shares acquired by the Company from employees ~~at a price of $19.65 per share~~ to satisfy income tax withholding obligations in connection with the vesting of previous ~~grants~~equity awards.

⁽³⁾ Includes 6,741 shares withheld that vested during the first quarter of ~~equity awards.~~

2020 at the average share price in effect at that time.

~~-19-~~

~~Table of Contents~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not ~~applicable~~

applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits are filed with this report:

~~EXHIBIT~~ ~~NUMBER~~		~~DESCRIPTION OF EXHIBIT~~
~~10.1~~
EXHIBIT NUMBER
10.1	~~Amended and Restated Syndicated Facility Agreement, dated as of August 8, 2017, among~~ Seventh Amendment to the Interface Inc, Nonqualified Savings Plan II.
10.2	Interface, Inc.~~, certain subsidiaries of the Company as borrowers, certain subsidiaries of the Company as guarantors, Bank of America, N.A. as Administrative Agent, and the other lenders party thereto~~ 2020 Omnibus Stock Incentive Plan (included as Exhibit 99.1 to the ~~Company’s current report~~Company’s Current Report on Form 8-K filed on ~~August 9, 2017,~~May 28, 2020, previously filed with the Commission and incorporated herein by reference).
~~10.2~~ 10.3	Second Amendment to Second Amended and Restated ~~Security and Pledge~~Syndicated Facility Agreement dated ~~as of August 8, 2017, among Interface, Inc., certain subsidiaries of the Company as obligors, and Bank of America, N.A. as Administrative Agent~~July 15, 2020 (included as Exhibit ~~99.2~~10.1 to the ~~Company’s current report~~Company’s Current Report on Form 8-K filed on ~~August 9, 2017,~~July 16, 2020, previously filed with the Commission and incorporated herein by reference).
31.1	Section 302 Certification of Chief Executive Officer.
31.2	Section 302 Certification of Chief Financial Officer.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.
101.INS	XBRL Instance Document. – The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema ~~Document~~. Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase ~~Document~~. Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase ~~Document~~. Document.
101.PRE	XBRL Taxonomy Presentation Linkbase ~~Document~~. Document.
101.DEF	XBRL Taxonomy Definition Linkbase Document.
104	The cover page from this Quarterly Report on Form 10-Q for the quarter ended July 5, 2020, formatted in Inline XBRL

~~-20-~~

~~Table of Contents~~SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	INTERFACE, INC.

Date: ~~November 9, 2017~~ August 11, 2020	By:	/s/ Bruce A. Hausmann
		Bruce A. Hausmann
		~~Vice President~~
		Chief Financial Officer (Principal Financial Officer)

~~-21-~~

~~Table of Contents~~-43-

~~EXHIBITS INCLUDED HEREWTIH~~

~~EXHIBIT~~ ~~NUMBER~~	~~DESCRIPTION OF EXHIBIT~~

~~31.1~~	~~Section 302 Certification of Chief Executive Officer~~.
~~31.2~~	~~Section 302 Certification of Chief Financial Officer~~.
~~32.1~~	~~Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350~~.
~~32.2~~	~~Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350~~.
~~101.INS~~	~~XBRL Instance Document~~.
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~.
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~.
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~.
~~101.PRE~~	~~XBRL Taxonomy Presentation Linkbase Document~~.
~~101.DEF~~	~~XBRL Taxonomy Definition Linkbase Document~~.

	OCTOBER 1, 2017			JANUARY 1, 2017
	(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents	$	78,108		$	165,672
Accounts Receivable, net		133,869			126,004
Inventories		186,126			156,083
Prepaid Expenses and Other Current Assets		24,358			23,123
TOTAL CURRENT ASSETS		422,461			470,882

PROPERTY AND EQUIPMENT, less accumulated depreciation		212,332			204,508
DEFERRED TAX ASSETS		30,805			33,117
GOODWILL		68,029			61,218
OTHER ASSETS		68,772			65,714
TOTAL ASSETS	$	802,399		$	835,439

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts Payable	$	52,313		$	45,380
Current Portion of Long-Term Debt		15,000			15,000
Accrued Expenses		101,346			98,703
TOTAL CURRENT LIABILITIES		168,659			159,083

LONG-TERM DEBT		219,506			255,347
DEFERRED INCOME TAXES		5,819			4,728
OTHER		76,223			75,552
TOTAL LIABILITIES		470,207			494,710

Commitments and Contingencies

SHAREHOLDERS’ EQUITY:
Preferred Stock		0			0
Common Stock		6,025			6,424
Additional Paid-In Capital		282,424			359,451
Retained Earnings		183,423			140,238
Accumulated Other Comprehensive Income (Loss) – Foreign Currency Translation Adjustment		(79,844	)		(110,522	)
Accumulated Other Comprehensive Income (Loss) – Pension Liability		(59,836	)		(54,862	)
TOTAL SHAREHOLDERS’ EQUITY		332,192			340,729
	$	802,399		$	835,439

	THREE MONTHS ENDED				NINE MONTHS ENDED

	OCTOBER 1, 2017		OCTOBER 2, 2016		OCTOBER 1, 2017		OCTOBER 2, 2016

NET SALES	$	257,431	$	248,349	$	730,233	$	719,110
Cost of Sales		158,887		155,431		445,990		440,434

GROSS PROFIT ON SALES		98,544		92,918		284,243		278,676
Selling, General and Administrative Expenses		67,633		67,175		197,660		200,108
Restructuring and Asset Impairment Charges		0		0		7,299		0
OPERATING INCOME		30,911		25,743		79,284		78,568

Interest Expense		1,851		1,654		5,150		4,763
Other Expense		651		739		1,816		1,072

INCOME BEFORE INCOME TAX EXPENSE		28,409		23,350		72,318		72,733
Income Tax Expense		8,970		7,446		23,394		23,278

NET INCOME	$	19,439	$	15,904	$	48,924	$	49,455

Earnings Per Share – Basic	$	0.32	$	0.25	$	0.78	$	0.76

Earnings Per Share – Diluted	$	0.32	$	0.25	$	0.78	$	0.76

Common Shares Outstanding – Basic		61,018		64,805		62,630		65,285
Common Shares Outstanding – Diluted		61,060		64,842		62,672		65,322

	THREE MONTHS ENDED					NINE MONTHS ENDED

	OCTOBER 1, 2017			OCTOBER 2, 2016		OCTOBER 1, 2017			OCTOBER 2, 2016

Net Income	$	19,439		$	15,904	$	48,924		$	49,455
Other Comprehensive Income (Loss), Foreign
Currency Translation Adjustment		9,848			2,759		30,678			3,827
Other Comprehensive Income (Loss), Pension Liability Adjustment		(1,994	)		834		(4,974	)		3,632
Comprehensive Income	$	27,293		$	19,497	$	74,628		$	56,914

	NINE MONTHS ENDED
	OCTOBER 1, 2017			OCTOBER 2, 2016
OPERATING ACTIVITIES:
Net Income	$	48,924		$	49,455
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:
Depreciation and Amortization		22,203			22,474
Stock Compensation Amortization Expense		4,479			3,390
Deferred Income Taxes and Other		5,926			5,049
Working Capital Changes:
Accounts Receivable		(1,397	)		1,449
Inventories		(22,377	)		(454	)
Prepaid Expenses and Other Current Assets		(653	)		(1,008	)
Accounts Payable and Accrued Expenses		10,804			(1,462	)

CASH PROVIDED BY OPERATING ACTIVITIES:		67,909			78,893

INVESTING ACTIVITIES:
Capital Expenditures		(22,809	)		(20,912	)
Other		(421	)		1,140

CASH USED IN INVESTING ACTIVITIES:		(23,230	)		(19,772	)

FINANCING ACTIVITIES:
Borrowing of Long-Term Debt		20,000			20,329
Repayment of Long-Term Debt		(62,085	)		(17,500	)
Tax Withholding Payments for Share-Based Compensation		(1,477	)		(4,661	)
Repurchase of Common Stock		(81,061	)		(10,443	)
Debt Issuance Cost		(1,418	)		0
Dividends Paid		(11,571	)		(10,429	)

CASH USED IN FINANCING ACTIVITIES:		(137,612	)		(22,704	)

Net Cash Provided By (Used In) Operating, Investing and
Financing Activities		(92,933	)		36,417
Effect of Exchange Rate Changes on Cash		5,369			1,616

CASH AND CASH EQUIVALENTS:
Net Change During the Period		(87,564	)		38,033
Balance at Beginning of Period		165,672			75,696

Balance at End of Period	$	78,108		$	113,729

	Oct. 1, 2017		Jan. 1, 2017
	(In thousands)
Finished Goods	$	123,708	$	104,742
Work in Process		13,046		8,711
Raw Materials		49,372		42,630
	$	186,126	$	156,083

	Three Months Ended				Nine Months Ended
	Oct. 1, 2017		Oct. 2, 2016		Oct. 1, 2017		Oct. 2, 2016
Earnings Per Share

Basic Earnings Per Share
Distributed Earnings	$	0.07	$	0.06	$	0.19	$	0.10
Undistributed Earnings		0.25		0.19		0.59		0.66
Total	$	0.32	$	0.25	$	0.78	$	0.76

Diluted Earnings Per Share
Distributed Earnings	$	0.07	$	0.06	$	0.19	$	0.10
Undistributed Earnings		0.25		0.19		0.59		0.66
Total	$	0.32	$	0.25	$	0.78	$	0.76

Basic Earnings Per Share	$	0.32	$	0.25	$	0.78	$	0.76
Diluted Earnings Per Share	$	0.32	$	0.25	$	0.78	$	0.76

	Three Months Ended				Nine Months Ended
	Oct. 1, 2017		Oct. 2, 2016		Oct. 1, 2017		Oct. 2, 2016
			(In millions)
Net Income Attributable to Participating Securities	$	0.1	$	0.1	$	0.4	$	0.4

	Three Months Ended				Nine Months Ended
	Oct. 1, 2017		Oct. 2, 2016		Oct. 1, 2017		Oct. 2, 2016
			(In thousands)
Weighted Average Shares Outstanding		60,555		64,241		62,167		64,721
Participating Securities		463		564		463		564
Shares for Basic Earnings Per Share		61,018		64,805		62,630		65,285
Dilutive Effect of Stock Options		42		37		42		37
Shares for Diluted Earnings Per Share		61,060		64,842		62,672		65,322



	SHARES		COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			PENSION LIABILITY			FOREIGN CURRENCY TRANSLATION ADJUSTMENT			CASH FLOW HEDGE
	(In thousands)
Balance, at December 29, 2019	58,416		$	5,842		$	250,306		$	286,056		$	(56,700	)	$	(113,139	)	$	(4,163	)
Net loss	—		—			—			(102,167		)	—			—			—
Stock issuances under employee plans	220		22			197			—			—			—			—
Other issuances of common stock	107		10			1,720			—			—			—			—
Unamortized stock compensation expense related to restricted stock awards	—		—			(1,731		)	—			—			—			—
Cash dividends declared, $0.065 per common share	—		—			—			(3,807		)	—			—			—
Forfeitures and compensation expense related to stock awards	(255	)	(25		)	(4,114		)	—			—			—			—
Pension liability adjustment	—		—			—			—			1,733			—			—
Foreign currency translation adjustment	—		—			—			—			—			(15,245		)	—
Cash flow hedge unrealized loss	—		—			—			—			—			—			(6,140		)
Balance, at April 5, 2020	58,488		$	5,849		$	246,378		$	180,082		$	(54,967	)	$	(128,384	)	$	(10,303	)
Net income	—		—			—			4,709			—			—			—
Stock issuances under employee plans	12		1			(1		)	—			—			—			—
Other issuances of common stock	70		7			2,294			—			—			—			—
Unamortized stock compensation expense related to restricted stock awards	—		—			(2,300		)	—			—			—			—
Cash dividends declared, $0.01 per common share	—		—			—			(585		)	—			—			—
Forfeitures and compensation expense related to stock awards	(26	)	(3		)	(48		)	—			—			—			—
Pension liability adjustment	—		—			—			—			(342		)	—			—
Foreign currency translation adjustment	—		—			—			—			—			16,160			—
Cash flow hedge unrealized loss	—		—			—			—			—			—			(351		)
Balance, at July 5, 2020	58,544		$	5,854		$	246,323		$	184,206		$	(55,309	)	$	(112,224	)	$	(10,654	)

	Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017		505,000	$	17.05
Granted		248,000		17.89
Vested		284,000		16.61
Forfeited or canceled		6,000		16.99
Outstanding at October 1, 2017		463,000	$	17.77

	Performance Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2017		368,500	$	17.20
Granted		354,000		17.80
Vested		31,000		17.22
Forfeited or canceled		22,000		17.29
Outstanding at October 1, 2017		669,500	$	17.51

	Three Months Ended						Nine Months Ended
Defined Benefit Retirement Plans (Europe)	Oct. 1, 2017			Oct. 2, 2016			Oct. 1, 2017			Oct. 2, 2016
	(In thousands)						(In thousands)
Service cost	$	423		$	260		$	1,204		$	781
Interest cost		1,426			1,610			4,138			5,058
Expected return on assets		(1,697	)		(1,876	)		(4,920	)		(5,880	)
Amortization of prior service costs		9			9			26			27
Recognized net actuarial losses		318			169			930			537
Net periodic benefit cost	$	479		$	172		$	1,378		$	523

	Three Months Ended				Nine Months Ended
Salary Continuation Plan (SCP)	Oct. 1, 2017		Oct. 2, 2016		Oct. 1, 2017		Oct. 2, 2016
	(In thousands)				(In thousands)
Service cost	$	0	$	110	$	0	$	330
Interest cost		314		317		942		952
Amortization of loss		91		203		273		608
Net periodic benefit cost	$	405	$	630	$	1,215	$	1,890

	AMERICAS		EUROPE		ASIA-PACIFIC		TOTAL

Three Months Ended October 1, 2017:

Net Sales	$	148,082	$	66,677	$	42,672	$	257,431
Depreciation and amortization		3,386		1,646		2,211		7,243
Total assets		274,946		255,330		186,966		717,242

Three Months Ended October 2, 2016:

Net Sales	$	147,500	$	62,682	$	38,167	$	248,349
Depreciation and amortization		3,635		1,253		2,213		7,101

Nine Months Ended October 1, 2017:

Net Sales	$	433,461	$	180,506	$	116,266	$	730,233
Depreciation and amortization		10,064		4,257		6,458		20,779

Nine Months Ended October 2, 2016:

Net Sales	$	426,677	$	181,904	$	110,529	$	719,110
Depreciation and amortization		10,903		3,824		6,598		21,325

	Nine Months Ended
DEPRECIATION AND AMORTIZATION	October 1, 2017		October 2, 2016
	(In thousands)
Total segment depreciation and amortization	$	20,779	$	21,325
Corporate depreciation and amortization		1,424		1,149
Reported depreciation and amortization	$	22,203	$	22,474

	Total Restructuring Charge		Costs Incurred in 2016		Costs Incurred in 2017		Balance at October 1, 2017
			(in thousands)
Workforce Reduction	$	10,652	$	1,451	$	6,537	$	2,664
Asset Impairment		11,319		8,019		3,300		0
Lease Exit Costs		5,116		27		5,027		62

Impact of Changes in Foreign Currency on:	Three Months Ended October 1, 2017		Nine Months Ended October 1, 2017
	(In millions)
Net sales	$	4.0	$	(1.0	)
Operating income		0.6		0.2

	Three Months Ended				Percentage
	Oct. 1, 2017		Oct. 2, 2016		Change
	(In thousands)
Net Sales	$	257,431	$	248,349		3.7	%

	Three Months Ended				Percentage
Cost and Expenses	Oct. 1, 2017		Oct. 2, 2016		Change
	(In thousands)
Cost of sales	$	158,887	$	155,431		2.2	%
Selling, general and administrative expenses		67,633		67,175		0.7	%
Total	$	226,520	$	222,606		1.8	%

Period⁽¹⁾	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs⁽²⁾

July 3-31, 2017⁽³⁾		21,638	$	19.67		20,010	$	75,037,949
August 1-31, 2017		1,311,102	$	19.04		1,311,102		50,077,293
September 1-30, 2017		0		N/A		0		50,077,293
October 1, 2017		0		N/A		0		50,077,293
Total		1,332,740	$	19.75		1,331,112		50,077,293