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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 3, 2022

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-33994
INTERFACE INC
(Exact name of registrant as specified in its charter)
Georgia58-1451243
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1280 West Peachtree StreetAtlantaGeorgia30309
(Address of principal executive offices)(zip code)
Registrant’s telephone number, including area code:           (770) 437-6800          
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.10 Par Value Per ShareTILENasdaq 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 every Interactive Date File required to be submitted 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 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.
Large accelerated filerþAccelerated filer¨Non-accelerated filer¨Smaller reporting companyEmerging 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 þ
Number of shares outstanding of each of the registrant’s classes of common stock, as of May 5, 2022:
ClassNumber of Shares
Common Stock, $0.10 par value per share59,467,426



TABLE OF CONTENTS
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except par values)
APRIL 3, 2022JANUARY 2, 2022
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents$76,088 $97,252 
Accounts receivable, net144,994 171,676 
Inventories, net319,367 265,092 
Prepaid expenses and other current assets43,330 38,320 
Total current assets583,779 572,340 
Property, plant and equipment, net320,778 329,801 
Operating lease right-of-use assets85,323 90,561 
Deferred tax asset23,096 23,994 
Goodwill and intangibles, net212,437 223,204 
Other assets84,372 90,157 
 
Total assets$1,309,785 $1,330,057 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$86,975 $85,924 
Accrued expenses130,047 146,298 
Current portion of operating lease liabilities13,906 14,588 
Current portion of long-term debt14,939 15,002 
Total current liabilities245,867 261,812 
Long-term debt506,803 503,056 
Operating lease liabilities73,454 77,905 
Deferred income taxes35,585 36,723 
Other long-term liabilities81,196 87,163 
 
Total liabilities942,905 966,659 
 
Commitments and contingencies
 
Shareholders’ equity
Preferred stock, par value $1.00 per share; 5,000 shares authorized; none issued or outstanding at April 3, 2022 and January 2, 2022
  
Common stock, par value $0.10 per share; 120,000 shares authorized; 59,328 and 59,055 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively
5,933 5,905 
Additional paid-in capital254,867 253,110 
Retained earnings274,135 261,434 
Accumulated other comprehensive loss – foreign currency translation(113,625)(100,441)
Accumulated other comprehensive loss – cash flow hedge(2,081)(2,722)
Accumulated other comprehensive loss – pension liability(52,349)(53,888)
 
Total shareholders’ equity366,880 363,398 
 
Total liabilities and shareholders’ equity$1,309,785 $1,330,057 
See accompanying notes to consolidated condensed financial statements.
3

INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
THREE MONTHS ENDED
APRIL 3, 2022APRIL 4, 2021
Net sales$288,002 $253,260 
Cost of sales181,203 157,222 
Gross profit on sales106,799 96,038 
 
Selling, general and administrative expenses78,492 79,302 
Restructuring and asset impairment charges887 (130)
Operating income27,420 16,866 
 
Interest expense6,850 7,256 
Other expense, net170 715 
 
Income before income tax expense20,400 8,895 
Income tax expense7,107 1,957 
 
Net income$13,293 $6,938 
 
Earnings per share – basic$0.22 $0.12 
Earnings per share – diluted$0.22 $0.12 
 
Common shares outstanding – basic59,248 58,730 
Common shares outstanding – diluted59,248 58,730 
See accompanying notes to consolidated condensed financial statements.
4

INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
THREE MONTHS ENDED
APRIL 3, 2022APRIL 4, 2021
Net income$13,293 $6,938 
Other comprehensive loss, after tax:
Foreign currency translation adjustment(13,184)(19,597)
Reclassification from accumulated other comprehensive loss - discontinued cash flow hedge641 749 
Pension liability adjustment1,539 89 
Other comprehensive loss(11,004)(18,759)
Comprehensive income (loss)$2,289 $(11,821)
See accompanying notes to consolidated condensed financial statements.
5

INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
THREE MONTHS ENDED
APRIL 3, 2022APRIL 4, 2021
OPERATING ACTIVITIES:
Net income$13,293 $6,938 
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Depreciation and amortization10,670 11,934 
Stock compensation amortization expense2,182 924 
Deferred income taxes and other4,196 230 
Amortization of acquired intangible assets1,342 1,421 
Working capital changes:
Accounts receivable26,135 9,794 
Inventories(56,464)(19,046)
Prepaid expenses and other current assets(5,252)(15,852)
Accounts payable and accrued expenses(13,798)28,512 
 
Cash (used in) provided by operating activities(17,696)24,855 
 
INVESTING ACTIVITIES:
Capital expenditures(4,781)(5,214)
 
Cash used in investing activities(4,781)(5,214)
 
FINANCING ACTIVITIES:
Repayments of long-term debt(44,729)(30,239)
Borrowing of long-term debt48,500 18,000 
Tax withholding payments for share-based compensation(398)(179)
Debt issuance costs (36)
Finance lease payments(479)(527)
 
Cash provided by (used in) financing activities2,894 (12,981)
 
Net cash (used in) provided by operating, investing and financing activities(19,583)6,660 
Effect of exchange rate changes on cash(1,581)(2,790)
 
CASH AND CASH EQUIVALENTS:
Net (decrease) increase(21,164)3,870 
Balance, beginning of period97,252 103,053 
 
Balance, end of period$76,088 $106,923 
See accompanying notes to consolidated condensed financial statements.
6

INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
References in this Quarterly Report on Form 10-Q to “Interface,” “the Company,” “we,” “our,” “ours” and “us” refer to Interface, Inc. and its subsidiaries or any of them, unless the context requires otherwise.
As contemplated by the Securities and Exchange Commission (the “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the Company’s year-end financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended January 2, 2022, as filed with the Commission.
The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the financial information included in this report contains all adjustments necessary for a fair presentation of the results for the interim periods. All such adjustments are of a normal recurring nature unless otherwise disclosed. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The January 2, 2022, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“GAAP”).
The three-month periods ended April 3, 2022 and April 4, 2021 both include 13 weeks.
Risks and Uncertainties
Global economic challenges, including the impact of the COVID-19 pandemic, the war in Ukraine, rising inflation and supply chain disruptions could cause economic uncertainty and volatility. The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein. The Company determined that except for the continued impacts to our global supply chain, production volume, raw material shortages, raw material cost increases, higher freight costs, shipping delays and labor shortages, gross profit margins, 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 April 3, 2022. The Company’s primary credit facility has various financial and other covenants including, but not limited to, a covenant to not exceed a maximum secured net debt to EBITDA ratio, as defined by the credit facility agreement. The Company is currently in compliance with all covenants under the credit facility agreement and anticipates that it will remain in compliance with the covenants for the foreseeable future.
COVID-19 Impact
We continue to monitor our operations and have implemented various programs to mitigate the effects of COVID-19 on our business. Our global supply chain and manufacturing operations continue to experience increased impacts of COVID-19 including raw material shortages, raw material cost increases, higher freight costs, shipping delays, and labor shortages. During the first quarter of 2022, new government imposed COVID-19 lockdowns in parts of China adversely impacted sales in that region.

7

NOTE 2 – REVENUE RECOGNITION
Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately 99% of total revenue for both three-month periods ended April 3, 2022 and April 4, 2021. The remaining 1% of revenue was generated from the installation of carpet and other flooring-related material for both three-month periods.
Disaggregation of Revenue
For the three months ended April 3, 2022 and April 4, 2021, revenue from the Company’s customers is broken down by geography as follows:
Three Months Ended
GeographyApril 3, 2022April 4, 2021
Americas54.4%50.1%
Europe32.6%35.1%
Asia-Pacific13.0%14.8%
Revenue from the Company’s customers in the Americas corresponds to the AMS operating segment, and the EAAA operating segment includes revenue from the Europe and Asia-Pacific geographies. See Note 11 entitled “Segment Information” for additional information.
8

NOTE 3 – INVENTORIES
Inventories are summarized as follows:
April 3, 2022January 2, 2022
(in thousands)
Finished goods$227,257 $182,896 
Work-in-process18,505 15,185 
Raw materials73,605 67,011 
Inventories, net$319,367 $265,092 

9

NOTE 4 – EARNINGS PER SHARE
The Company computes basic earnings per share (“EPS”) by dividing net income by the weighted average common shares outstanding, including participating securities outstanding, during the period as discussed below. Diluted EPS reflects the potential dilution beyond shares for basic EPS that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common stock that would have shared in the Company’s earnings.
The Company includes all unvested stock awards which contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, in the number of shares outstanding in 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 table shows the computation of basic and diluted EPS:
Three Months Ended
April 3, 2022April 4, 2021
(in thousands, except per share data)
Numerator:
Net income$13,293 $6,938 
Less: distributed and undistributed earnings available to participating securities(190)(89)
Distributed and undistributed earnings available to common shareholders$13,103 $6,849 
 
Denominator:
Weighted average shares outstanding58,403 57,979 
Participating securities845 751 
Shares for basic EPS59,248 58,730 
Dilutive effect of stock options  
Shares for diluted EPS59,248 58,730 
 
Basic EPS$0.22 $0.12 
Diluted EPS$0.22 $0.12 

10

NOTE 5 – LONG-TERM DEBT
Long-term debt consisted of the following:
April 3, 2022January 2, 2022
Outstanding Principal
Interest Rate(1)
Outstanding Principal
Interest Rate(1)
(in thousands)(in thousands)
Syndicated Credit Facility:
Revolving loan borrowings$15,000 1.89 %$7,500 4.00 %
Term loan borrowings213,498 1.88 %217,631 1.84 %
Total borrowings under Syndicated Credit Facility228,498 1.88 %225,131 1.91 %
5.50% Senior Notes due 2028300,000 5.50 %300,000 5.50 %
 
Total debt528,498 525,131 
Less: Unamortized debt issuance costs(6,756)(7,073)
 
Total debt, net521,742 518,058 
Less: Current portion of long-term debt(14,939)(15,002)
 
Total long-term debt, net$506,803 $503,056 
(1) Represents the stated rate of interest, without the effect of debt issuance costs.
Syndicated Credit Facility
The Company’s Syndicated Credit Facility (the “Facility”) provides to the Company U.S. denominated and multicurrency term loans and provides to the Company and certain of its subsidiaries a multicurrency revolving credit facility. Interest on base rate loans is charged at varying rates computed by applying a margin depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. Interest on Eurocurrency-based loans and fees for letters of credit are charged at varying rates computed by applying a margin over the applicable Eurocurrency rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. In addition, the Company pays a commitment fee per annum (depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter) on the unused portion of the Facility.
As of both April 3, 2022 and January 2, 2022, the Company had $1.6 million in letters of credit outstanding under the Facility.
As of both April 3, 2022 and January 2, 2022, the carrying value of the Company’s borrowings under the Facility approximated its fair value as the Facility bears interest rates that are similar to existing market rates.
Under the Facility, the Company is required to make quarterly amortization payments of the term loan borrowings, which are due on the last day of the calendar quarter.
The Company is currently in compliance with all covenants under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.
5.50% Senior Notes due 2028
The 5.50% Senior Notes due 2028 (the “Senior Notes”) bear an interest rate at 5.50% per annum and mature on December 1, 2028. Interest is paid semi-annually on June 1 and December 1 of each year. The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its existing Facility.

11

As of April 3, 2022, the estimated fair value of the Senior Notes was $289.5 million, compared with a carrying value recorded in the Company’s consolidated condensed balance sheet of $300.0 million, excluding unamortized debt issuance costs. The fair value of the Senior Notes is derived using quoted prices for similar instruments and is considered Level 2 within the fair value hierarchy.
Other Lines of Credit
Subsidiaries of the Company had an aggregate of the equivalent of $4.0 million of other lines of credit available at interest rates ranging from 3.5% to 4.5% as of April 3, 2022, and $6.0 million of other lines of credit available at interest rates ranging from 3.5% to 6.0% as of January 2, 2022. As of April 3, 2022 and January 2, 2022, there were no borrowings outstanding under these lines of credit.
Borrowing Costs
Debt issuance costs associated with the Company’s Senior Notes and term loans under the Facility are reflected as a reduction of long-term debt in accordance with applicable accounting standards. As these fees are expensed over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are expensed. As of April 3, 2022 and January 2, 2022, the unamortized debt issuance costs recorded as a reduction of long-term debt were $6.8 million and $7.1 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 $1.5 million and $1.6 million as of April 3, 2022 and January 2, 2022, respectively. These amounts are included in other assets in the Company’s consolidated condensed balance sheets. The Company amortizes these costs over the life of the related debt.
12

NOTE 6 – DERIVATIVE INSTRUMENTS
Interest Rate Risk Management
From time to time, the Company enters into interest rate swap transactions to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations. The Company’s objective and strategy with respect to these interest rate swaps is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability to cash flows relating to interest payments on a portion of its outstanding debt.
Cash Flow Interest Rate Swaps
In the fourth quarter of 2020, the Company terminated its designated interest rate swap transactions with a total notional value of $250 million. Hedge accounting was also discontinued at that time. Losses recorded in accumulated other comprehensive loss for these terminated interest rate swaps are reclassified and recorded in the consolidated condensed statements of operations to the extent it is probable that a portion of the original forecasted transactions related to the portion of the hedged debt repaid will not occur by the end of the originally specified time period. See Note 14 entitled “Items Reclassified From Accumulated Other Comprehensive Loss” for additional information.
As of April 3, 2022 and January 2, 2022, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $2.9 million and $3.8 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination. We expect that approximately $2.3 million, before tax, related to the terminated interest rate swaps will be reclassified from accumulated other comprehensive loss as an increase to interest expense in the next 12 months.
Derivative Transactions Not Designated as Hedging Instruments
Our EAAA segment, from time to time, purchases 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 April 3, 2022 and January 2, 2022, the Company had no outstanding foreign currency options.
The following table summarizes gains on derivatives not designated as hedging instruments within the consolidated condensed statements of operations for the three months ended April 4, 2021:
Three Months Ended
Statement of Operations LocationApril 4, 2021
(in thousands)
Foreign currency options gainOther expense, net$185 

13

NOTE 7 – SHAREHOLDERS’ EQUITY
The following tables depict the activity in the accounts which make up shareholders’ equity for the three months ended April 3, 2022 and April 4, 2021:
SHARESCOMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED
EARNINGS
PENSION LIABILITYFOREIGN CURRENCY TRANSLATION ADJUSTMENTCASH FLOW
HEDGE
(in thousands)
Balance, at January 2, 202259,055 $5,905 $253,110 $261,434 $(53,888)$(100,441)$(2,722)
Net income— — — 13,293 — — — 
Restricted stock issuances303 30 3,966 — — — — 
Unamortized compensation expense related to restricted stock awards— — (3,996)— — — — 
Cash dividends declared, $0.01 per common share
— — — (592)— — — 
Compensation expense related to stock awards, net of shares received for tax withholdings(30)(2)1,787 — — — — 
Pension liability adjustment— — — — 1,539 — — 
Foreign currency translation adjustment— — — — — (13,184)— 
Reclassification out of accumulated other comprehensive loss - discontinued cash flow hedge— — — — — — 641 
Balance, at April 3, 202259,328 $5,933 $254,867 $274,135 $(52,349)$(113,625)$(2,081)
SHARESCOMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED
EARNINGS
PENSION LIABILITYFOREIGN CURRENCY TRANSLATION ADJUSTMENTCASH FLOW
HEDGE
(in thousands)
Balance, at January 3, 202158,664 $5,865 $247,920 $208,562 $(69,288)$(60,331)$(6,190)
Net income— — — 6,938 — — — 
Restricted stock issuances376 38 5,277 — — — — 
Unamortized compensation expense related to restricted stock awards— — (5,315)— — — — 
Cash dividends declared, $0.01 per common share
— — — (589)— — — 
Compensation expense related to stock awards, net of forfeitures and shares received for tax withholdings(26)(2)689 — — — — 
Pension liability adjustment— — — — 89 — — 
Foreign currency translation adjustment— — — — — (19,597)— 
Reclassification out of accumulated other comprehensive loss - discontinued cash flow hedge— — — — — — 749 
Balance, at April 4, 202159,014 $5,901 $248,571 $214,911 $(69,199)$(79,928)$(5,441)

14

Restricted Stock Awards
During the three months ended April 3, 2022 and April 4, 2021, the Company granted restricted stock awards for 302,600 and 375,600 shares of common 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 earlier in the event of a change in control of the Company, or upon involuntary termination without cause.
Compensation expense related to restricted stock grants was $1.2 million and $0.7 million for the three months ended April 3, 2022, and April 4, 2021, respectively. The Company has reduced its expense for any restricted stock forfeited during the period.
The following table summarizes restricted stock outstanding as of April 3, 2022, as well as activity during the three months then ended:
Restricted SharesWeighted Average
Grant Date
Fair Value
Outstanding at January 2, 2022683,800 $21.06 
Granted302,600 13.21 
Vested(87,900)17.54 
Forfeited or canceled  
Outstanding at April 3, 2022898,500 $18.76 
As of April 3, 2022, the unrecognized total compensation cost related to unvested restricted stock was $7.9 million. That cost is expected to be recognized by the end of 2025.
Performance Share Awards
During the three months ended April 3, 2022 and April 4, 2021, 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 (among other things) the employee’s continued employment through the last date of the performance period, and will be settled in shares of our common stock or in cash at the Company’s election. The number of shares that may be issued in settlement of the performance shares to the award recipients may be greater (up to 200%) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards. The Company evaluates the probability of achieving the performance-based goals as of the end of each reporting period and adjusts compensation expense based on this assessment.
The following table summarizes the performance shares outstanding as of April 3, 2022, as well as the activity during the three months then ended:
Performance SharesWeighted Average
Grant Date
Fair Value
Outstanding at January 2, 2022718,100 $14.98 
Granted227,800 13.19 
Vested  
Forfeited or canceled(115,100)17.54 
Outstanding at April 3, 2022830,800 $14.13 
Compensation expense related to the performance shares was $1.0 million and $0.2 million for the three months ended April 3, 2022 and April 4, 2021, respectively. The Company has reduced its expense for performance shares forfeited during the period. Unrecognized compensation expense related to these performance shares was approximately $8.6 million as of April 3, 2022. Depending on the performance of the Company, any compensation expense related to these outstanding performance shares will be recognized by the end of 2025.
The tax benefit recognized with regard to restricted stock and performance shares was approximately $0.3 million for the three months ended April 3, 2022.
15

NOTE 8 – LEASES
General
The Company has operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. The Company’s leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. Our lease accounting may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.
The Company records 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 April 3, 2022, there were no significant leases that had not commenced.
The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to the Company’s leases as of April 3, 2022 and January 2, 2022:
April 3, 2022January 2, 2022
Balance Sheet LocationOperating LeasesFinance LeasesOperating LeasesFinance Leases
(in thousands)
Operating lease right-of-use assets$85,323 $90,561 
 
Current portion of operating lease liabilities$13,906 $14,588 
Operating lease liabilities73,454 77,905 
Total operating lease liabilities$87,360 $92,493 
 
Property, plant and equipment, net$4,475 $6,547 
 
Accrued expenses$1,806 $1,837 
Other long-term liabilities3,055 3,201 
Total finance lease liabilities$4,861 $5,038 
Lease Costs
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
Finance lease cost:
Amortization of right-of-use assets$517 $279 
Interest on lease liabilities29 32 
Operating lease cost4,918 5,886 
Short-term lease cost227 463 
Variable lease cost616 806 
Total lease cost$6,307 $7,466 

16

Other Supplemental Information
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$21 $32 
Operating cash flows from operating leases4,635 5,200 
Financing cash flows from finance leases479 527 
Right-of-use assets obtained in exchange for new finance lease liabilities382 1,273 
Right-of-use assets obtained in exchange for new operating lease liabilities20 2,378 
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 April 3, 2022 and January 2, 2022:
 April 3, 2022January 2, 2022
Weighted-average remaining lease term – finance leases (in years)3.373.20
Weighted-average remaining lease term – operating leases (in years)9.899.97
Weighted-average discount rate – finance leases2.90 %2.82 %
Weighted-average discount rate – operating leases5.89 %5.87 %
Maturity Analysis
A maturity analysis of lease payments under non-cancellable leases is presented as follows:
Fiscal YearOperating LeasesFinance Leases
(in thousands)
2022 (excluding the three months ended April 3, 2022)
$13,077 $1,433 
202313,540 1,582 
202411,980 1,208 
202510,162 487 
202610,387 165 
Thereafter59,149 260 
Total future minimum lease payments (undiscounted)118,295 5,135 
Less: Present value discount(30,935)(274)
Total lease liability$87,360 $4,861 

17

NOTE 9 – EMPLOYEE BENEFIT PLANS
During both three-month periods ended April 3, 2022 and April 4, 2021, the Company recorded multi-employer pension expense related to multi-employer contributions of $0.7 million.
The following tables provide the components of net periodic benefit cost for the three months ended April 3, 2022 and April 4, 2021:
Three Months Ended
Defined Benefit Retirement Plans (Europe)
April 3, 2022April 4, 2021
(in thousands)
Interest cost$916 $572 
Expected return on plan assets(1,059)(849)
Amortization of prior service cost32 29 
Amortization of net actuarial losses275 404 
Net periodic benefit cost$164 $156 
Three Months Ended
Salary Continuation PlanApril 3, 2022April 4, 2021
(in thousands)
Interest cost$193 $176 
Amortization of net actuarial losses139 186 
Net periodic benefit cost$332 $362 
Three Months Ended
nora Defined Benefit Plan
April 3, 2022April 4, 2021
(in thousands)
Service cost$225 $277 
Interest cost110 103 
Amortization of net actuarial losses50 92 
Net periodic benefit cost$385 $472 
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, net, in the consolidated condensed statements of operations.
18

NOTE 10 – GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill attributable to each reportable segment for the three months ended April 3, 2022 are as follows:
AMSEAAATotal
(in thousands)
Balance, at January 2, 2022$108,505 $38,520 $147,025 
Foreign currency translation(5,325)(1,890)(7,215)
Balance, at April 3, 2022$103,180 $36,630 $139,810 
The net carrying value of intangible assets was $72.6 million and $76.2 million at April 3, 2022 and January 2, 2022, respectively.
19

NOTE 11 – SEGMENT INFORMATION
The Company determines that an operating segment exists if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has operating results that are regularly reviewed by the chief operating decision maker (“CODM”) and (iii) has discrete financial information. Additionally, accounting standards require the utilization of a “management approach” to report the financial results of operating segments, which is based on information used by the CODM to assess performance and make operating and resource allocation decisions. The Company determined that it has two operating segments organized by geographical area – namely (a) Americas (“AMS”) and (b) Europe, Africa, Asia and Australia (collectively “EAAA”). The AMS operating segment includes the United States, Canada and Latin America geographic areas.
Pursuant to the management approach discussed above, the Company’s CODM, our chief executive officer, evaluates performance at the AMS and EAAA operating segment levels and makes operating and resource allocation decisions based on segment adjusted operating income (“AOI”), which includes allocations of corporate selling, general and administrative expenses. AOI excludes nora purchase accounting amortization, Thailand plant closure inventory write-down, and restructuring charges, asset impairment, severance and other charges. Intersegment revenues for the three months ended April 3, 2022 and April 4, 2021 were $17.3 million and $15.7 million, respectively. Intersegment revenues are eliminated from net sales presented below since these amounts are not included in the information provided to the CODM.
The Company has determined that it has two reportable segments – AMS and EAAA, as each operating segment meets the quantitative thresholds defined in the accounting guidance.
Segment information for the three months ended April 3, 2022 and April 4, 2021 is presented in the following table:
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
Net sales
AMS$156,509 $126,967 
EAAA131,493 126,293 
Total net sales$288,002 $253,260 
 
Segment AOI
AMS$21,138 $11,913 
EAAA 9,504 8,011 
 
Depreciation and amortization
AMS$4,058 $4,723 
EAAA6,612 7,211 
Total depreciation and amortization$10,670 $11,934 
20

A reconciliation of the Company’s total operating segment assets to the corresponding consolidated amounts follows:
April 3, 2022January 2, 2022
(in thousands)
Assets
AMS$546,993 $652,423 
EAAA687,535 691,844 
Total segment assets1,234,528 1,344,267 
Corporate assets132,386 146,204 
Eliminations(57,129)(160,414)
Total reported assets$1,309,785 $1,330,057 
Reconciliations of operating income to income before income tax expense and segment AOI are presented as follows:
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
AMS operating income$21,250 $11,647 
EAAA operating income6,170 5,219 
Consolidated operating income27,420 16,866 
Interest expense6,850 7,256 
Other expense, net170 715 
Income before income tax expense$20,400 $8,895 
Three Months Ended April 3, 2022Three Months Ended April 4, 2021
AMSEAAAAMSEAAA
(in thousands)
Operating income$21,250 $6,170 $11,647 $5,219 
Purchase accounting amortization 1,342  1,421 
Thailand plant closure inventory write-down 1,115   
Restructuring, asset impairment, severance and other charges(112)877 266 1,371 
AOI$21,138 $9,504 $11,913 $8,011 

21

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest amounted to $1.3 million and $1.6 million for the three months ended April 3, 2022 and April 4, 2021, respectively. Income tax payments, net of refunds, amounted to $2.8 million and $3.2 million for the three months ended April 3, 2022 and April 4, 2021, respectively.
Non-Cash Financing Activities
On March 15, 2022, the Company declared cash dividends on its common stock of $0.6 million, which were paid during the second quarter of 2022 to shareholders of record as of April 1, 2022. At April 3, 2022, the dividends were recorded within accrued expenses in the consolidated condensed balance sheet.
See Note 8 entitled “Leases” for supplemental disclosures related to finance and operating leases.
22

NOTE 13 – INCOME TAXES
The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete tax items.
During the three months ended April 3, 2022, the Company recorded a total income tax provision of $7.1 million on pre-tax income of $20.4 million resulting in an effective tax rate of 34.8%, as compared to a total income tax provision of $2.0 million on pre-tax income of $8.9 million resulting in an effective tax rate of 22.0% during the three months ended April 4, 2021. The increase in the effective tax rate for the period ended April 3, 2022 as compared to the period ended April 4, 2021 was primarily due to a non-recurring favorable change to unrecognized tax benefits in the period ended April 4, 2021, unfavorable changes related to company-owned life insurance, an increase in non-deductible executive compensation, and non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand in the first quarter of 2022.
In the first three months of 2022, the Company increased its liability for unrecognized tax benefits by $0.3 million. As of April 3, 2022, the Company had accrued approximately $8.5 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of April 3, 2022 reflects a reduction for $2.8 million of these unrecognized tax benefits.
Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. Based on information currently available, it is reasonably possible that approximately $2.6 million of unrecognized tax benefits may be recognized within the next 12 months due to a lapse of statute of limitations.
23

NOTE 14 – ITEMS RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE LOSS
Amounts reclassified out of accumulated other comprehensive loss (“AOCI”), before tax, to the consolidated condensed statements of operations during the three months ended April 3, 2022 and April 4, 2021 are reflected in the table below:
Three Months Ended
Statement of Operations LocationApril 3, 2022April 4, 2021
(in thousands)
Interest rate swap contracts lossInterest expense$(893)$(1,061)
Amortization of benefit plan net actuarial losses and prior service costOther expense, net(496)(711)
Total loss reclassified from AOCI$(1,389)$(1,772)


24

NOTE 15 – RESTRUCTURING AND OTHER CHARGES
Restructuring and asset impairment charges by reportable segment are presented as follows:
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
AMS$ $ 
EAAA887 (130)
Total restructuring and asset impairment charges$887 $(130)
A summary of the restructuring reserve balance, recorded within accrued expenses in the consolidated condensed balance sheets, for the 2021 and 2019 restructuring plans is presented below:
Workforce ReductionAsset Impairment
2021 Plan2019 Plan2021 PlanTotal
(in thousands)
Balance, at January 2, 2022$2,257 $97 $— $2,354 
Charged to expenses1  886 887 
Deductions(957)(97)— (1,054)
Charged to other accounts— — (886)(886)
Balance, at April 3, 2022$1,301 $ $— $1,301 
Below is a discussion of the restructuring plan activities under the 2021 and 2019 restructuring plans.
2021 Restructuring Plan
On September 8, 2021, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations. The plan involves a reduction of approximately 188 employees and the closure of the Company’s manufacturing facility in Thailand at the end of the first quarter of 2022.
Expected charges and cumulative charges incurred to date under the 2021 restructuring plan are as follows:
Workforce Reduction
Retention Bonuses(2)
Asset ImpairmentTotal
(in thousands)
Estimated expected charges(1)
$2,258 $500 $2,536 $5,000 $6,000 
Cumulative charges incurred to date(1)
2,258  2,536 4,794 
(1) Charges are attributable to the EAAA reportable segment.
(2) The retention bonuses will be recognized through the end of fiscal year 2022 as earned over the requisite service periods.
In addition, during the three months ended April 3, 2022, in conjunction with the closure of its Thailand Facility, the Company recorded a write-down of inventory of $1.1 million within cost of sales in the consolidated condensed statements of operations.
The restructuring plan is expected to result in cash expenditures of approximately $3 million to $4 million for payment of the employee severance, employee retention bonuses and other costs of the shutdown of the Thailand manufacturing facility, as described above. The Company expects to complete the restructuring plan in fiscal year 2022 and expects the plan to yield annualized savings of approximately $1.7 million. A portion of the annualized savings is expected to be realized on the consolidated condensed statement of operations in fiscal year 2022, with the remaining portion of the annualized savings expected to be realized in fiscal year 2023.
2019 Restructuring Plan
The 2019 restructuring plan has been completed as of April 3, 2022.
25

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 2, 2022, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter ended April 3, 2022, or as of, April 3, 2022, and the comparable periods of 2021, 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. The three-month periods ended April 3, 2022 and April 4, 2021 both include 13 weeks.
Forward-Looking Statements
This report contains statements which may constitute “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 2, 2022, as supplemented in Part II, Item 1A of this report. 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.
26

Executive Overview
During the quarter ended April 3, 2022, we had consolidated net sales of $288.0 million, up 13.7% compared to $253.3 million in the first quarter last year, primarily due to the continued rebound in economic activity in certain countries following the impacts of COVID-19. Higher sales were primarily in the corporate office, education and healthcare market segments. Consolidated operating income was $27.4 million for the first quarter of 2022 compared to $16.9 million in the first quarter last year primarily due to higher sales in the current year period. Consolidated net income for the quarter ended April 3, 2022 was $13.3 million or $0.22 per share compared to $6.9 million or $0.12 per share in the first quarter last year.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to impact 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. The duration of the pandemic will ultimately determine the extent to which our operations are impacted.
During the first quarter of 2022, the COVID-19 pandemic continued to impact our global supply chain and manufacturing operations, which resulted in raw material shortages, raw material cost increases, higher freight costs, higher labor costs and shipping delays. These global supply chain and manufacturing challenges increased our costs and adversely affected our gross profit margin–particularly in our EAAA segment. New government imposed COVID-19 lockdowns in parts of China during the first quarter of 2022 adversely impacted sales in China by approximately 14% compared with the first quarter last year.


27

Analysis of Results of Operations
Consolidated Results
The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three-month periods ended April 3, 2022 and April 4, 2021:
Three Months Ended
April 3, 2022April 4, 2021
Net sales100.0 %100.0 %
Cost of sales62.9 62.1 
Gross profit on sales37.1 37.9 
Selling, general and administrative expenses27.3 31.3 
Restructuring and asset impairment charges0.3 (0.1)
Operating income9.5 6.7 
Interest/Other expense, net2.4 3.1 
Income before income tax expense7.1 3.6 
Income tax expense2.5 0.8 
Net income4.6 %2.8 %
Consolidated Net Sales
Below is information regarding our consolidated net sales, and analysis of those results, for the three-month periods ended April 3, 2022, and April 4, 2021:
Three Months EndedPercentage
Change
April 3, 2022April 4, 2021
(in thousands)
Consolidated net sales$288,002 $253,260 13.7 %
For the quarter ended April 3, 2022, consolidated net sales increased $34.7 million (13.7%) versus the comparable period in 2021, primarily due to higher sales volume and prices. Currency fluctuations had a negative impact on consolidated net sales of approximately $7.9 million (3.1%) for the first quarter of 2022, due primarily to the weakening of the Euro, Australian dollar and British Pound sterling against the U.S. dollar. On a market segment basis, the sales increase was primarily in the corporate office, education and healthcare market segments as a result of higher corporate reinvestment and government spending on school renovation projects.
Consolidated Cost and Expenses
The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three-month periods ended April 3, 2022, and April 4, 2021:
Three Months EndedPercentage
Change
April 3, 2022April 4, 2021
(in thousands)
Cost of sales$181,203 $157,222 15.3 %
Selling, general and administrative expenses78,492 79,302 (1.0)%
For the quarter ended April 3, 2022, consolidated cost of sales increased $24.0 million (15.3%) compared to the first quarter of 2021, primarily due to higher sales and continuing inflationary pressures on raw materials, freight and labor costs. Currency translation had a positive impact on consolidated cost of sales in the first quarter of 2022 and partially reduced our costs by approximately $5.2 million (3.3%) compared to the same period last year. As a percentage of net sales, our cost of sales increased to 62.9% for the first quarter of 2022 versus 62.1% for the first quarter of 2021.
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For the quarter ended April 3, 2022, consolidated selling, general and administrative (“SG&A”) expenses decreased $0.8 million (1.0%) versus the comparable period in 2021. Currency translation had a positive impact on consolidated SG&A expenses in the first quarter of 2022 and partially reduced our costs by approximately $1.9 million (2.7%) compared to the same period last year. SG&A expenses were also lower for the first quarter of 2022 due to lower severance costs and lower labor costs of approximately $2.6 million driven by employee headcount reduction initiatives in response to the impacts of COVID-19. These lower costs were partially offset by higher selling expenses of approximately $1.8 million during the first quarter of 2022 due to higher sales. As a percentage of sales, SG&A expenses decreased to 27.3% for the first quarter of 2022 versus 31.3% for the first quarter of 2021. 
Restructuring Activities
On September 8, 2021, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, involving the closure of the Company’s manufacturing facility in Thailand at the end of the first quarter of 2022. In the first quarter of 2022, we recognized restructuring charges of approximately $0.9 million under this plan primarily related to the impairment of property, plant and equipment at the Thailand facility.
In addition, in conjunction with the closure of its Thailand Facility, the Company recorded a write-down of inventory of $1.1 million in the first quarter of 2022 within cost of sales in the consolidated condensed statements of operations.
See Note 15 entitled “Restructuring and Other Charges” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
Interest Expense
During the quarter ended April 3, 2022, interest expense was $6.9 million, a decrease of $0.4 million from the comparable period in 2021, primarily due to lower outstanding term loan borrowings under the Facility.

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Segment Operating Results
AMS Segment - Net Sales and Adjusted Operating Income (“AOI”)
The following table presents AMS segment net sales and AOI for the three-month periods ended April 3, 2022, and April 4, 2021:
Three Months EndedPercentage Change
April 3, 2022April 4, 2021
(in thousands)
AMS segment net sales$156,509 $126,967 23.3 %
AMS segment AOI(1)
21,138 11,913 77.4 %
(1) Includes allocation of corporate SG&A expenses. Excludes non-recurring items related to restructuring, asset impairment, severance and other costs. See Note 11 entitled “Segment Information” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
During the first quarter of 2022, net sales in AMS increased 23.3% versus the comparable period in 2021 primarily due to higher sales volume and prices in the corporate office, education and healthcare market segments.
AOI in AMS increased 77.4% during the first quarter of 2022 compared to the prior year period primarily due to higher sales. The increase in AOI was also due to higher pricing and favorable fixed cost absorption, partially offset by higher raw material costs, higher freight costs, and higher labor costs as a result of continuing inflationary pressures.
EAAA Segment - Net Sales and AOI
The following table presents EAAA segment net sales and AOI for the three-month periods ended April 3, 2022, and April 4, 2021:
Three Months EndedPercentage Change
April 3, 2022April 4, 2021
(in thousands)
EAAA segment net sales$131,493 $126,293 4.1 %
EAAA segment AOI(1)
9,504 8,011 18.6 %
(1) Includes allocation of corporate SG&A expenses. Excludes non-recurring items related to purchase accounting amortization, Thailand plant closure inventory write-down, and restructuring, asset impairment, severance and other costs. See Note 11 entitled “Segment Information” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
During the first quarter of 2022, net sales in EAAA increased 4.1% versus the comparable period in 2021. Currency fluctuations had a negative impact on EAAA sales of approximately $7.9 million (6.3%) for the first quarter 2022 compared to the same period last year due to the weakening of the Euro, British Pound sterling, and Australian dollar against the U.S. dollar. During the first quarter of 2022, EAAA sales were adversely impacted by new government imposed COVID-19 lockdowns in parts of China. On a market segment basis, the EAAA sales increase was most significant in the corporate office and healthcare market segments, partially offset by decreases in the public buildings market segment.
AOI in EAAA increased 18.6% during the first quarter of 2022 versus the comparable period in 2021 primarily due to the impact of higher sales. Currency fluctuations had a negative impact on AOI of approximately $1.0 million (6.8%) for the first quarter of 2022 compared to the first quarter last year. EAAA SG&A expenses as a percentage of net sales in the first quarter of 2022 decreased approximately 3% compared to the first quarter of 2021, which contributed to the increase in AOI for the first quarter of 2022. AOI in the first quarter of 2022 was adversely impacted by higher raw material costs, higher freight costs, and higher labor costs as a result of continuing inflationary pressures.

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Liquidity and Capital Resources
General
At April 3, 2022, the Company had $76.1 million in cash. At that date, the Company had $213.5 million in term loan borrowings, $15.0 million in revolving loan borrowings, and $1.6 million in letters of credit outstanding under our Facility, and we had $300.0 million of Senior Notes outstanding. As of April 3, 2022, we had additional borrowing capacity of $283.4 million under the Facility and $4.0 million of borrowing capacity under other credit facilities in place at other non-U.S. subsidiaries. We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months.
The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its existing Facility. The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors. Net sales for the non-guarantor subsidiaries were approximately $144 million and $136 million for the three-month periods ended April 3, 2022 and April 4, 2021, respectively. Total indebtedness of the non-guarantor subsidiaries was approximately $43 million and $45 million as of April 3, 2022 and January 2, 2022, respectively.
Analysis of Cash Flows
The following table presents a summary of cash flows for the three-month periods ended April 3, 2022 and April 4, 2021, respectively: