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14: R4 Consolidated Statements of Comprehensive Income HTML 53K
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Comprehensive Loss
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(Exact name of
registrant as specified in its charter)
iGeorgia
i58-1451243
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i1280 West Peachtree Street
iAtlanta
iGeorgia
i30309
(Address
of principal executive offices)
(zip code)
Registrant’s telephone number, including area code: (i770) i437-6800
Securities Registered Pursuant to Section 12(b) of the Act:
Title
of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
iCommon Stock, $0.10 Par Value Per Share
iTILE
iNasdaq
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. iYesþ 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). iYesþ 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.
iLarge
accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
i☐
Emerging growth company
i¨
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 i☐ No
þ
Preferred stock, par value $ii1.00/
per share; ii5,000/ shares authorized;
iiiinone///
issued or outstanding at October 2, 2022 and January 2, 2022
i—
i—
Common
stock, par value $ii0.10/ per share; ii120,000/
shares authorized; ii58,370/ and ii59,055/
shares issued and outstanding at October 2, 2022 and January 2, 2022, respectively
i5,837
i5,905
Additional
paid-in capital
i245,007
i253,110
Retained
earnings
i303,837
i261,434
Accumulated
other comprehensive loss – foreign currency translation
(i187,095)
(i100,441)
Accumulated
other comprehensive loss – cash flow hedge
(i1,049)
(i2,722)
Accumulated
other comprehensive loss – pension liability
(i45,114)
(i53,888)
Total
shareholders’ equity
i321,423
i363,398
Total
liabilities and shareholders’ equity
$
i1,240,633
$
i1,330,057
See
accompanying notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – iSUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
i
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”).
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, 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 October 2, 2022. During the third quarter of 2022, the Company permanently closed its operations in Russia, and we are currently in the process of liquidating our legal entity and branch office in the country. While our business activities in Russia and Ukraine were not material, we had approximately $i3.0 million of total assets, including $i2.6 million
of cash, in Russia at October 2, 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 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.
iIn
accordance with applicable accounting standards, the Company tests goodwill for impairment annually in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During fiscal year 2022, the Company has experienced significant cost inflation along with volatility in the Company stock price. Such circumstances, as well as a negative geopolitical climate in Europe, may warrant the need to write down the value of goodwill associated with our EMEA reporting unit if a future test indicates that its fair value is less than its carrying value.
The
fair value of the EMEA reporting unit exceeded its carrying value by approximately i20% at the most recent goodwill test date performed in the fourth quarter of 2021. The goodwill allocated to the EMEA reporting unit as of October 2, 2022 was $i29.4 million.
The amount of any potential future goodwill impairment charge is uncertain as the impairment test involves a significant amount of risk, uncertainty and judgment.
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, and shipping delays. During the first nine months of 2022, new government imposed COVID-19 lockdowns and restrictions
in parts of China adversely impacted sales in that region.
i
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” This ASU clarifies that a contractual restriction on the sale of an equity security is not considered in measuring fair value. The ASU also requires certain disclosures
for equity securities subject to contractual sale restrictions. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard.
Revenue from sales of carpet, modular resilient flooring, rubber flooring, and other flooring-related material was approximately i97% and i98%
of total revenue for the nine-month periods ended October 2, 2022 and October 3, 2021, respectively. The remaining i3% and i2%
of revenue was generated from the installation of carpet and other flooring-related material for the 2022 and 2021 nine-month periods, respectively.
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.
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. iThe following table shows the computation of basic and diluted EPS:
(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 October 2, 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 in compliance with all covenants
under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.
On October 14, 2022, the Facility was amended to, among other changes, extend the maturity date to October 2027. See Note 16 entitled “Subsequent Events” for additional information.
5.50% Senior Notes due 2028
The 5.50% Senior Notes due 2028 (the “Senior Notes”) bear an interest rate at i5.50%
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.
As of October 2,
2022, the estimated fair value of the Senior Notes was $i255.2 million, compared with a carrying value recorded in the Company’s consolidated condensed balance sheet of $i300.0 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
The Company has other lines of credit available to certain non-U.S. subsidiaries. The availability under these other lines of credit was the equivalent of $i2.0
million at an interest rate of i6.25% as of October 2, 2022 and $i6.0 million at
interest rates ranging from i3.50% to i6.00% as of January 2, 2022. As of both October 2,
2022 and January 2, 2022, there were iino/ 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 October 2, 2022 and January 2, 2022, the unamortized debt issuance costs recorded as a reduction of long-term debt were $i6.1
million and $i7.1 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 $i1.3
million and $i1.6 million as of October 2, 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.
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 $i250
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 October 2, 2022 and January 2, 2022, the remaining accumulated other comprehensive loss associated with the terminated interest rate swaps was $i1.4 million
and $i3.8 million, respectively, and will be amortized to earnings over the remaining term of the interest rate swaps prior to termination. We expect that approximately $i1.4
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 October 2, 2022 and January 2, 2022, the Company had iino/
outstanding foreign currency options.
The
following tables depict the activity in the accounts which make up shareholders’ equity for the nine months ended October 2, 2022 and October 3, 2021:
In the second quarter of 2022, the Company adopted a new share repurchase program in which the Company is authorized to repurchase up to $i100 million of its outstanding shares of common stock. The program has no specific expiration date. During the nine months ended October 2,
2022, the Company repurchased i1,126,176 shares of common stock at a weighted average price of $i12.83
per share pursuant to this program.
During the nine months ended October 2, 2022 and October 3, 2021, the Company granted restricted stock awards for i500,800
and i428,400 shares of common stock, respectively. Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a one to ithree-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. For certain restricted stock awards with a graded vesting schedule, the Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.
Compensation expense related to restricted stock grants was $i4.0
million and $i2.8 million for the nine months ended October 2, 2022, and October 3, 2021, respectively. The Company has reduced its expense for any restricted stock forfeited during the period.
i
The
following table summarizes restricted stock outstanding as of October 2, 2022, as well as activity during the nine months then ended:
As
of October 2, 2022, the unrecognized total compensation cost related to unvested restricted stock was $i7.3 million. That cost is expected to be recognized by the end of 2025.
PerformanceShare Awards
During
the nine months ended October 2, 2022 and October 3, 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 ithree 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 i200%)
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.
i
The following table summarizes the performance shares outstanding as of October 2,
2022, as well as the activity during the nine months then ended:
Compensation expense related to the performance shares was $i2.7 million and $i1.4
million for the nine months ended October 2, 2022 and October 3, 2021, respectively. The Company has reduced its expense for any performance shares forfeited during the period. Unrecognized compensation expense related to these performance shares was approximately $i8.1
million as of October 2, 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 $i0.6
million for the nine months ended October 2, 2022.
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 i1 to i20
years, some of which may include options to extend the lease term for up to i5 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 October 2, 2022, there were no significant leases that had not commenced.
i
The
table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to the Company’s leases as of October 2, 2022 and January 2, 2022:
Cash paid for amounts included in the measurement of lease liabilities:
Operating
cash flows from finance leases
$
i35
$
i16
$
i88
$
i83
Operating
cash flows from operating leases
i4,406
i6,677
i13,854
i17,353
Financing
cash flows from finance leases
i525
i680
i1,535
i1,796
Right-of-use
assets obtained in exchange for new finance lease liabilities
i182
i67
i2,525
i2,811
Right-of-use
assets (adjusted) obtained in exchange for (remeasured) new operating lease liabilities
(i734)
i6,417
i6,089
i12,062
/
Lease
Term and Discount Rate
i
The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of October 2, 2022 and January 2, 2022:
During the three and nine months ended October 2, 2022, the Company recorded multi-employer pension expense related to multi-employer contributions of $i0.5
million and $i1.8 million, respectively. During the three and nine months ended October 3, 2021, the Company recorded multi-employer pension expense related to multi-employer contributions of $i0.6
million and $i2.0 million, respectively.
i
The following tables provide the components of net periodic
benefit cost for the three and nine months ended October 2, 2022 and October 3, 2021:
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.
The
net carrying value of intangible assets other than goodwill was $i62.0 million and $i76.2 million at October 2,
2022 and January 2, 2022, respectively.
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 itwo
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 and nine months ended
October 2, 2022 were $i19.7 million and $i56.4 million, respectively, and intersegment revenues for the three and nine months ended October 3,
2021 were $i20.1 million and $i56.4 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 itwo reportable segments – AMS and EAAA, as each operating segment meets the quantitative thresholds defined in the accounting guidance.
i
Segment
information for the three and nine months ended October 2, 2022 and October 3, 2021 is presented in the following table:
Cash payments for interest amounted to $i13.7
million and $i13.2 million for the nine months ended October 2, 2022 and October 3, 2021, respectively. Income tax payments, net of refunds, amounted to $i11.5
million and $i15.3 million for the nine months ended October 2, 2022 and October 3, 2021, respectively.
See Note 8 entitled “Leases” for supplemental disclosures related to finance and operating leases.
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 nine months ended October 2,
2022, the Company recorded a total income tax provision of $i22.3 million on pre-tax income of $i66.5
million resulting in an effective tax rate of i33.6%, as compared to a total income tax provision of $i13.0 million on pre-tax income of $i46.4
million resulting in an effective tax rate of i28.0% during the nine months ended October 3, 2021. The increase in the effective tax rate for the period ended October 2, 2022 as compared to the period ended October 3, 2021 was primarily due to a non-recurring favorable change to unrecognized tax benefits in the period ended October 3, 2021, unfavorable changes related to
company-owned life insurance, an increase in non-deductible executive compensation, and unfavorable changes related to foreign currency.
In April of 2021, the Company filed requests with both the Competent Authority in the Netherlands and in the U.K. to initiate a mutual agreement procedure (“MAP”) related to the double taxation arising from adjustments made by Her Majesty’s Revenue & Customs to the Company’s U.K. subsidiaries’ tax returns for years 2012 through 2017. The adjustments result from the interest rate applied in the intra-group financing arrangement between a Company subsidiary in the U.K. and the Netherlands. In June of 2022, the
Company was notified that the Competent Authorities had reached an agreement on the interest rate to be applied for the years 2012 through 2017. The Company recognized the adjustments in the nine-month period ending October 2, 2022, based on the outcome of the MAP. The recognition of the adjustments did not have a material impact on the Company’s effective tax rate or its financial position.
In the first nine months of 2022, the Company decreased its liability for unrecognized tax benefits by $i0.1
million. As of October 2, 2022, the Company had accrued approximately $i8.1 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of October 2, 2022 reflects a reduction for $i2.8
million of these unrecognized tax benefits.
On October 15, 2022, the statute of limitations for the 2018 U.S. federal income tax return and Georgia income tax return closed. As a result of this lapse in the statute of limitations, the Company will recognize $i2.2 million
of unrecognized tax benefits in the fourth quarter of 2022.
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 $i2.6 million of unrecognized tax benefits, including the $i2.2 million
to be recognized in the fourth quarter of 2022, may be recognized within the next 12 months due to a lapse of statute of limitations.
NOTE 14 – iITEMS RECLASSIFIED
FROM ACCUMULATED OTHER COMPREHENSIVE LOSS
i
Amounts reclassified out of accumulated other comprehensive loss (“AOCI”), before tax, to the consolidated condensed statements of operations during the three and nine months ended October 2, 2022 and October 3, 2021 are reflected in the tables below:
Total
restructuring, asset impairment and other charges
$
(i105)
$
i3,813
$
i1,592
$
i3,621
/i
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:
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 i188
employees and the closure of the Company’s manufacturing facility in Thailand at the end of the first quarter of 2022.
i
Expected charges and cumulative charges incurred to date under the 2021 restructuring plan are as follows:
Workforce
Reduction
Retention Bonuses(2)
Asset Impairment and Other Related Charges
Total
(in thousands)
Estimated expected charges(1)
$
i2,300
$
i500
$
i3,700
$
i6,500
Cumulative
charges incurred to date(1)
i2,258
i348
i2,893
i5,499
(1)
Charges are attributable to the EAAA reportable segment.
(2) The retention bonuses will be recognized through the first quarter of 2023 as earned over the requisite service periods.
/
In addition, during the nine months ended October 2, 2022, in conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $i2.5 million
within cost of sales in the consolidated condensed statements of operations.
The restructuring plan is expected to result in cash expenditures of approximately $i3 million to $i4 million
for payment of employee severance, employee retention bonuses and other costs to shut down the Thailand manufacturing facility, as described above. The Company expects to complete the restructuring plan in the first quarter of 2023 and expects the plan to yield annualized savings of approximately $i1.7 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.
On October 14, 2022, the Company entered into a fifth amendment to its existing credit facility. This amendment, among other changes, provides for the following: (1) extends the maturity date of the credit facility to October 2027 and (2) replaces the LIBOR benchmark interest rates applicable to all loans denominated in U.S. dollars with the SOFR benchmark interest rates.
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 and nine months ended October 2, 2022, or as of, October 2, 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 nine-month periods ended October 2, 2022 and October 3, 2021 both include 39 weeks. The three-month periods ended October 2, 2022 and October 3, 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 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 the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2022. 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.
During the quarter ended October 2, 2022, we had consolidated net sales of $327.8 million, up 4.8% compared to $312.7 million in the third quarter last year, primarily due to the continued rebound in economic activity in certain countries following the impacts of COVID-19, partially offset by the negative impact of currency fluctuations. Higher sales were primarily in the corporate
office, retail, public buildings and hospitality market segments. Consolidated operating income was $28.0 million for the third quarter of 2022 compared to $24.8 million in the third quarter last year, primarily due to higher sales but partially offset by the continuing impact of cost inflation in the current year period. Consolidated net income for the quarter ended October 2, 2022 was $14.1 million or $0.24 per share, compared to $11.0 million or $0.19 per share in the third quarter last year.
During the first nine months of 2022, we had consolidated net sales of $962.4 million, up 11.8% compared to $860.8 million in the first nine months of last year. Higher sales were primarily in the corporate office, retail and education market segments. Consolidated operating income was $90.0 million for the first nine months of 2022 compared to $70.9 million in the same period last year,
due to the continued rebound in commercial markets and higher sales. Consolidated net income for the nine months ended October 2, 2022 was $44.2 million or $0.75 per share, compared to $33.4 million or $0.57 per share in the same period 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.
Continuing government imposed COVID-19 lockdowns and restrictions in parts of China adversely impacted sales in
China by approximately 12% for the first nine months of 2022 compared with the same period last year. Ongoing global supply chain challenges and inflationary pressures resulted in higher raw material costs, higher freight costs and shipping delays during the third quarter and first nine months of 2022, which increased our operating costs and adversely impacted our gross profit margin.
The
following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three-month and nine-month periods ended October 2, 2022 and October 3, 2021:
Below is information regarding our consolidated net sales, and analysis of those results, for the three-month and nine-month periods ended October 2, 2022, and October 3, 2021:
For
the quarter ended October 2, 2022, consolidated net sales increased $15.1 million (4.8%) versus the comparable period in 2021, primarily due to higher prices and volume. Currency fluctuations had a negative impact on consolidated net sales of approximately $19.0 million (6.1%) for the third quarter of 2022, due primarily to the weakening of the Euro, British Pound sterling, Australian dollar and Chinese Renminbi against the U.S. dollar. On a market segment basis, the sales increase was primarily in the corporate office, retail, public buildings and hospitality market segments partially offset by decreases in the healthcare market segment.
For the nine months ended October 2, 2022, consolidated net sales increased $101.6 million (11.8%) versus the comparable period in 2021, primarily due to higher volume and prices. Currency fluctuations
had a negative impact on consolidated net sales of approximately $42.4 million (4.9%) for the first nine months of 2022, due to the weakening of the Euro, Australian dollar, British Pound sterling and Chinese Renminbi against the U.S. dollar. On a market segment basis, the sales increase was primarily in the corporate office, retail, education and residential / living market segments partially offset by decreases in the transportation market segment.
The following table presents our consolidated cost of sales and selling,
general and administrative expenses for the three-month and nine-month periods ended October 2, 2022, and October 3, 2021:
Consolidated
selling, general and administrative expenses
80,848
77,735
4.0
%
240,711
236,867
1.6
%
Consolidated Cost of Sales
For the quarter ended October 2, 2022, consolidated cost of sales increased
$12.6 million (6.1%) compared to the third quarter of 2021, primarily due to higher sales and continuing inflationary pressures on raw materials and freight costs. Currency translation had a positive impact on consolidated costs of sales in the third quarter of 2022 and partially reduced our costs by approximately $13.2 million (6.4%) compared to the same period last year. As a percentage of net sales, our cost of sales increased to 66.8% for the third quarter of 2022 versus 66.0% for the third quarter of 2021.
For the nine months ended October 2, 2022, consolidated cost of sales increased $80.7 million (14.7%) versus the comparable period in 2021, primarily due to higher sales and the continuing impact of inflation as discussed above. Currency translation had a positive impact on consolidated cost of sales for the first nine months of 2022 and partially reduced our costs by
approximately $28.8 million (5.2%) compared to the same period last year. As a percentage of net sales, our cost of sales increased to 65.5% for the first nine months of 2022 versus 63.8% for the first nine months of 2021.
Consolidated Gross Profit
For the quarter ended October 2, 2022, consolidated gross profit, as a percentage of net sales, was 33.2% compared with 34.0% in the same period last year. The decrease was primarily due to inflationary pressures on raw materials and freight costs as discussed above.
For the nine months ended October 2, 2022, consolidated gross profit, as a percentage of net sales, was 34.5% compared with 36.2% in the same period last year. The decrease was primarily due to the continuing impact of inflation as
discussed above.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
For the quarter ended October 2, 2022, consolidated SG&A expenses increased $3.1 million (4.0%) versus the comparable period in 2021. Currency translation had a positive impact on consolidated SG&A expenses in the third quarter of 2022 of approximately $3.9 million (4.9%) compared to the same period last year. SG&A expenses for the third quarter of 2022 included higher selling expenses of approximately $2.8 million compared to the same period last year due to higher sales, higher asset impairment charges of approximately $1.2 million due to exit activities in Thailand and Russia, and higher professional fees of approximately $1.9 million as the prior year included insurance reimbursements. These increases were partially offset
by lower labor costs of approximately $3.4 million due to headcount reduction initiatives in the prior year in response to the impacts of COVID-19. As a percentage of net sales, SG&A expenses decreased to 24.7% for the third quarter of 2022 versus 24.9% for the third quarter of 2021.
For the nine months ended October 2, 2022, consolidated SG&A expenses increased $3.8 million (1.6%) versus the comparable period in 2021. Currency translation had a positive impact on consolidated SG&A expenses for the first nine months of 2022 of approximately $9.1 million (3.9%) compared to the same period last year. SG&A expenses included $10.4 million of higher selling expenses in the first nine months of 2022 compared to the same period last year due to higher sales, which were partially offset by lower labor costs of approximately $6.2 million due to the employee headcount
reduction initiatives discussed above. As a percentage of net sales, SG&A expenses decreased to 25.0% for the first nine months of 2022 versus 27.5% for the first nine months of 2021.
On September 8, 2021, the Company committed to a restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, including the closure of the
Company’s manufacturing facility in Thailand at the end of the first quarter of 2022. During the first nine months of 2022, we recognized restructuring charges of approximately $1.6 million under this plan primarily related to the impairment of property, plant and equipment at the Thailand facility.
In conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $2.5 million in the first nine months 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.
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 and nine-month periods ended October 2, 2022, and October 3, 2021:
(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 third quarter of 2022, net sales in AMS increased 10.0% versus the comparable period in 2021, primarily due to higher prices and volume. The sales increase was primarily in the retail, public buildings and corporate office market segments partially offset by decreases in the healthcare and consumer residential market segments.
During the first nine months of 2022, net sales in AMS increased 21.1% versus the comparable period in 2021, primarily due to higher sales volume and prices. The sales increase was primarily in the corporate office, education, retail, public buildings and residential / living market segments.
AOI in AMS increased 15.7% during the third quarter of 2022 compared to
the prior year period, primarily due to higher sales. AMS SG&A expenses as a percentage of net sales in the third quarter of 2022 decreased approximately 0.5% compared to the third quarter of 2021, which contributed to the increase in AOI for the current quarter.
AOI in AMS increased 36.4% during the first nine months of 2022 compared to the prior year period, primarily due to higher sales. AMS SG&A expenses as a percentage of net sales decreased approximately 1.4% for the first nine months of 2022 compared to last year, which contributed to the increase in AOI for the current year period.
(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 third quarter of 2022, net sales in EAAA decreased 1.9% versus the comparable period in 2021. Higher selling prices and volume were offset by the impact of negative currency fluctuations of approximately $18.5 million (13.6%) for the third quarter of 2022 compared to the same period last year due to the weakening of the Euro, British Pound sterling, Australian dollar and Chinese Renminbi against the U.S. dollar. Continuing government-imposed COVID-19 lockdowns and restrictions in parts of China during the third quarter of 2022 adversely impacted EAAA sales for the current quarter. Higher EAAA sales in the corporate office and hospitality market segments were offset by decreases in the healthcare,
public buildings and transportation market segments.
During the first nine months of 2022, net sales in EAAA increased 1.1% versus the comparable period in 2021. Higher sales volume and prices were mostly offset by the impact of negative currency fluctuations of approximately $41.4 million (10.3%) for the first nine months of 2022 compared to the same period last year due to the weakening of the Euro, Australian dollar, British Pound sterling and Chinese Renminbi against the U.S. dollar. Government-imposed COVID-19 lockdowns and restrictions in parts of China adversely impacted EAAA sales for the first nine months of 2022. The EAAA sales increase was primarily in the corporate office and hospitality market segments partially offset by decreases in the public buildings, transportation and education market segments.
AOI in EAAA decreased 26.9% during the third quarter of 2022 versus
the comparable period in 2021 primarily due to lower sales and the continuing impact of inflationary pressures on raw materials, freight and labor costs. Currency fluctuations had a negative impact on AOI of approximately $2.1 million (15.2%) for the third quarter of 2022 compared to the third quarter of 2021.
AOI in EAAA decreased 2.4% during the first nine months of 2022 versus the comparable period in 2021 primarily due to higher cost inflation as discussed above and the negative impact of currency fluctuations of approximately $5.1 million (11.6%). EAAA SG&A expenses as a percentage of net sales in the first nine months of 2022 decreased approximately 2.7% compared to last year, which partially offset the negative impacts on AOI discussed above.
Financial Condition, Liquidity and Capital Resources
General
At October 2, 2022, the Company had $79.4 million in cash. At that date, the Company had $201.6 million in term loan borrowings, $26.0 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 October 2, 2022, we had additional borrowing capacity of $272.4 million under the Facility and $2.0 million of borrowing capacity under another line of credit in place at a non-U.S. subsidiary.
We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations.
On October 14, 2022, the Facility was amended to, among other changes, extend the maturity date to October 2027. See Note 16 entitled “Subsequent Events” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
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 $147 million and $443 million for the three-month and nine-month periods ended October 2, 2022, respectively, and net sales for the non-guarantor subsidiaries were approximately $148 million and $432 million for the three-month and nine-month periods ended October 3,
2021, respectively. Total indebtedness of the non-guarantor subsidiaries was approximately $45 million as of both October 2, 2022 and January 2, 2022.
Balance Sheet
Inventories, net, were $319.1 million at October 2, 2022 compared to $265.1 million at January 2, 2022. The increase of $54.0 million was primarily due to higher raw material costs and freight costs due to continuing inflationary pressures and inventory build driven by higher customer demand and global supply chain disruption.
Analysis of Cash Flows
The
following table presents a summary of cash flows for the nine-month periods ended October 2, 2022 and October 3, 2021, respectively:
Cash
provided by operating activities was $14.9 million for the nine months ended October 2, 2022, which represents a decrease of $49.2 million from the prior year period. The difference was primarily due to a greater use of cash for working capital during the first nine months of 2022. Specifically, higher inventories as a result of increased customer demand, higher raw material costs and input costs contributed to the greater use of cash for working capital compared to last year. Accrued bonus payments during the first quarter of 2022 also contributed to the increased use of cash for the first nine months of 2022.
Cash used in investing activities was $13.3 million for the nine months ended October 2, 2022, which represents a decrease of $4.1 million from the prior year period. The decrease from the comparable period was primarily
due to a decrease in capital expenditures due to reduced capital investment.
Cash used in financing activities was $10.5 million for the nine months ended October 2, 2022, which represents a decrease of $42.6 million from the prior year period. The year-over-year difference was primarily due to higher revolving loan borrowings in 2022 as a source of cash to fund operating activities as described above, partially offset by a use of cash for repurchases of the Company’s common stock pursuant
to a new share repurchase program adopted in the second quarter of 2022.
Share Repurchases
In the second quarter of 2022, the Company adopted a new share repurchase program in which the Company is authorized to repurchase up to $100 million of its outstanding shares of common stock. The program has no specific expiration date. During the nine months ended October 2, 2022, the Company repurchased 1,126,176 shares of common stock at a weighted average price of $12.83 per share pursuant to this program.
Purchase Obligations
In
March of 2022, we entered into a purchase obligations commitment to procure fiberglass raw materials through the end of 2026 for approximately $22.5 million. We expect that approximately $4.5 million will be purchased within the next 12 months.
Critical Accounting Policies and Estimates
Goodwill
In accordance with applicable accounting standards, the Company tests goodwill for impairment annually in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During fiscal year 2022, the
Company has experienced significant cost inflation, volatility in the Company stock price and a negative geopolitical climate in Europe. The Company considered these factors and determined they did not indicate that the fair value of the EMEA reporting unit was less than its carrying value as of October 2, 2022. If the uncertainty caused by these events continues, they may warrant the need to write down the value of goodwill associated with our EMEA reporting unit if a future test indicates that its fair value is less than its carrying value.
The fair value of the EMEA reporting unit exceeded its carrying value by approximately 20% at the most recent goodwill test date performed in the fourth quarter of
2021. The goodwill allocated to the EMEA reporting unit as of October 2, 2022 was $29.4 million. The amount of any potential future goodwill impairment charge is uncertain as the impairment test involves a significant amount of risk, uncertainty and judgment.
While we are aggressively managing our response to the COVID-19 pandemic, its impacts on our full fiscal year 2022 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; (3) the ability of our sales channels, supply chain, manufacturing, and distribution partners to continue operating through disruptions; and (4) the severity of global supply chain disruptions and their effects on inflation, labor shortages, raw material shortages, and other factors that disrupt our supply chain and manufacturing facilities. 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, specifically as it relates to the global supply chain, we anticipate that, at a minimum, our business and results in the final quarter of 2022 will continue to be affected, and the timeline and pace
of recovery is uncertain.
We anticipate a sequential revenue increase in the fourth quarter of fiscal year 2022 compared with the third quarter of 2022. We are also anticipating continued impacts to our global supply chain and manufacturing operations. These impacts are expected to include significant cost increases in our raw materials globally and continued labor shortages and cost increases. The impacts may also potentially include raw material shortages, higher freight costs, shipping delays, and other disruptions. These impacts to our supply chain and manufacturing will increase our costs and adversely affect our gross margins, they may inhibit our ability to manufacture and ship product timely, and at times they may inhibit our ability to meet customer demands and expectations.
We also plan to continue evaluating our cost structure and global manufacturing footprint to identify
and activate opportunities to decrease costs and optimize our global cost structure.
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, and demand for our products.
Backlog
As of October 23, 2022, the consolidated backlog of unshipped orders was approximately $236.2 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended January
2, 2022, backlog was approximately $215.6 million as of February 6, 2022. Disruptions in global supply and distribution chains and government imposed lockdowns 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
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 2, 2022, under Part II, Item 7A of that Form 10-K. The discussion here focuses on the nine months ended October 2, 2022, 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.
Sensitivity 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 Facility has variable interest rates based on an underlying prime lending rate or other benchmark 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 other benchmark 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 2, 2022.
As of October 2, 2022, based on a hypothetical immediate 100 basis point increase in interest rates,
with all other variables held constant, the fair value of our fixed rate long-term debt would be impacted by a net decrease of $12.4 million. Conversely, a 100 basis point decrease in interest rates would result in a net increase in the fair value of our fixed rate long-term debt of $13.2 million.
As of October 2, 2022, 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 $8.7 million or an increase in the fair value of our financial instruments of $10.6 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 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 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 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.
From time to time, we are a party to legal proceedings, whether arising in the ordinary course of business or otherwise. The disclosure under the headings “Lawsuit by Former CEO in Connection with Termination” and “Putative Class Action Lawsuit” set forth in Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended January 2, 2022 is incorporated
by reference herein.
On March 31, 2022, the Court entered an order granting the Company’s motion for summary judgment on all of Mr. Gould’s remaining claims. The portion of the order granting the Company summary judgment on Mr. Gould’s claims for breach of contract and attorney’s fees has been appealed by Mr. Gould to the U.S. Court of Appeals for the 11th Circuit. The Company believes the lawsuit and the appeal therefrom are without merit and intends to defend vigorously against them.
In
the putative class action lawsuit, the Court has appointed a lead plaintiff, which filed an Amended Complaint that, among other things, added the Company’s former chief financial officer as a defendant. As in the original complaint, the allegations in the Amended Complaint relate to the subject matter of the concluded SEC investigation described in Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended January 2, 2022. The Company filed a motion to dismiss the Amended Complaint, and that motion was denied by the Court on June 6, 2022. The Company
filed its Answer to the Amended Complaint on July 21, 2022. Discovery in the case is proceeding. The Company believes the putative class action is without merit and that the Company has good defenses to it. The Company intends to defend itself vigorously against the action.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Part I, Item 1A, “Risk Factors,” of our Annual
Report on Form 10-K for the year ended January 2, 2022, as supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended July 3, 2022.
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 our third quarter ended October 2, 2022:
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)
(1)
The monthly periods identified above correspond to the Company’s fiscal third quarter of 2022, which commenced July 4, 2022 and ended October 2, 2022.
(2) On May 17, 2022, the Company announced a new share repurchase program authorizing the repurchase of up to $100 million of common stock. The program has no specific expiration date.
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.
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.
