tile-20240331

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 March 31, 2024

¨ 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)


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


1280 West Peachtree Street	Atlanta	Georgia	30309
(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 Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.10 Par Value Per Share	TILE	Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically 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 filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Number of shares outstanding of each of the registrant’s classes of common stock, as of May 2, 2024:


Class			Number of Shares
Common Stock, $0.10 par value per share			58,242,833

TABLE OF CONTENTS


			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)	3

		Consolidated Condensed Balance Sheets – March 31, 2024 and December 31, 2023	3

		Consolidated Condensed Statements of Operations – Three Months Ended March 31, 2024 and April 2, 2023	4

		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2024 and April 2, 2023	5

		Consolidated Condensed Statements of Cash Flows – Three Months Ended March 31, 2024 and April 2, 2023	6

		Notes to Consolidated Condensed Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

	Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	35

	Item 1A.	Risk Factors	35

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

	Item 3.	Defaults Upon Senior Securities	37

	Item 4.	Mine Safety Disclosures	37

	Item 5.	Other Information	37

	Item 6.	Exhibits	38

SIGNATURE			39


	MARCH 31, 2024		DECEMBER 31, 2023
	(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents	$	89,774	$	110,498
Accounts receivable, net	147,185		163,386
Inventories, net	296,249		279,079
Prepaid expenses and other current assets	32,853		30,895
Total current assets	566,061		583,858
Property, plant and equipment, net	280,333		291,140
Operating lease right-of-use assets	83,766		87,519
Deferred tax asset	21,428		21,721
Goodwill and intangible assets, net	156,951		161,703
Other assets	84,953		84,154

Total assets	$	1,193,492	$	1,230,095

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	74,503	$	62,912
Accrued expenses	112,126		130,890
Current portion of operating lease liabilities	12,574		12,347
Current portion of long-term debt	8,523		8,572
Total current liabilities	207,726		214,721
Long-term debt	383,261		408,641
Operating lease liabilities	74,286		78,269
Deferred income taxes	32,098		33,832
Other long-term liabilities	67,573		68,685

Total liabilities	764,944		804,148

Commitments and contingencies (Note 14)

Shareholders’ equity
Preferred stock, par value $1.00 per share; 5,000 shares authorized; none issued or outstanding at March 31, 2024 and December 31, 2023	—		—
Common stock, par value $0.10 per share; 120,000 shares authorized; 58,273 and 58,112 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	5,827		5,811
Additional paid-in capital	252,538		252,909
Retained earnings	334,423		320,833
Accumulated other comprehensive loss – foreign currency translation	(130,682)		(119,590)
Accumulated other comprehensive loss – pension liability	(33,558)		(34,016)

Total shareholders’ equity	428,548		425,947

Total liabilities and shareholders’ equity	$	1,193,492	$	1,230,095


	THREE MONTHS ENDED
	MARCH 31, 2024		APRIL 2, 2023
Net sales	$	289,743	$	295,792
Cost of sales	179,338		199,919
Gross profit	110,405		95,873

Selling, general and administrative expenses	85,959		86,254
Restructuring, asset impairment and other charges	—		142
Operating income	24,446		9,477

Interest expense	6,423		8,505
Other (income) expense, net	(976)		1,500

Income (loss) before income tax expense	18,999		(528)
Income tax expense	4,820		186

Net income (loss)	$	14,179	$	(714)

Earnings (loss) per share – basic	$	0.24	$	(0.01)
Earnings (loss) per share – diluted	$	0.24	$	(0.01)

Common shares outstanding – basic	58,238		58,079
Common shares outstanding – diluted	58,714		58,079


	Three Months Ended
Geography	March 31, 2024		April 2, 2023
Americas	58.6	%	57.2	%
Europe	31.6	%	32.0	%
Asia-Pacific	9.8	%	10.8	%


	March 31, 2024		December 31, 2023
	(in thousands)
Finished goods	$	218,706	$	201,821
Work-in-process	23,107		20,892
Raw materials	54,436		56,366
Inventories, net	$	296,249	$	279,079


	March 31, 2024				December 31, 2023
	Outstanding Principal		Interest Rate(1)		Outstanding Principal		Interest Rate(1)
	(in thousands)				(in thousands)
Syndicated Credit Facility(2):

Term loan borrowings	$	95,988	6.26	%	$	121,658	6.61	%


5.50% Senior Notes due 2028	300,000		5.50	%	300,000		5.50	%

Total debt	395,988				421,658
Less: Unamortized debt issuance costs	(4,204)				(4,445)

Total debt, net	391,784				417,213
Less: Current portion of long-term debt	(8,523)				(8,572)

Total long-term debt, net	$	383,261			$	408,641


	SHARES	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		PENSION LIABILITY		FOREIGN CURRENCY TRANSLATION ADJUSTMENT		TOTAL
	(in thousands, except per share data)
Balance, at December 31, 2023	58,112	$	5,811	$	252,909	$	320,833	$	(34,016)	$	(119,590)	$	425,947
Net income	—	—		—		14,179		—		—		14,179
Issuances of stock related to restricted share units and performance shares	472	47		(47)		—		—		—		—
Cash dividends declared, $0.01 per common share	—	—		—		(589)		—		—		(589)
Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings	(311)	(31)		(324)		—		—		—		(355)
Pension liability adjustment	—	—		—		—		458		—		458
Foreign currency translation adjustment	—	—		—		—		—		(11,092)		(11,092)
Balance, at March 31, 2024	58,273	$	5,827	$	252,538	$	334,423	$	(33,558)	$	(130,682)	$	428,548


	Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2023	691,600	$	12.55
Granted	—	—
Vested	(324,300)	13.94
Forfeited or canceled	(1,200)	13.19
Outstanding at March 31, 2024	366,100	$	11.32


	Restricted Share Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2023	583,400	$	10.35
Granted	402,800	13.24
Vested	(151,600)	10.80
Forfeited or canceled	(4,000)	10.80
Outstanding at March 31, 2024	830,600	$	11.67


	Performance Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2023	1,115,000	$	12.36
Granted	402,800	13.24
Vested	(320,700)	13.91
Forfeited or canceled	(12,800)	12.82
Outstanding at March 31, 2024	1,184,300	$	12.24


	March 31, 2024				December 31, 2023
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(in thousands)
Operating lease right-of-use assets	$	83,766			$	87,519

Current portion of operating lease liabilities	$	12,574			$	12,347
Operating lease liabilities	74,286				78,269
Total operating lease liabilities	$	86,860			$	90,616

Property, plant and equipment, net			$	6,799			$	7,236

Accrued expenses			$	2,482			$	2,587
Other long-term liabilities			4,701				5,035
Total finance lease liabilities			$	7,183			$	7,622


	THREE MONTHS ENDED
	MARCH 31, 2024		APRIL 2, 2023
OPERATING ACTIVITIES:
Net income (loss)	$	14,179	$	(714)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	9,616		9,991
Share-based compensation expense	3,915		3,004
Deferred income taxes and other	(4,386)		599
Amortization of acquired intangible assets	1,297		1,283
Working capital changes:
Accounts receivable	13,837		35,791
Inventories	(20,477)		(5,306)
Prepaid expenses and other current assets	(2,193)		(16,148)
Accounts payable and accrued expenses	(3,169)		1,084

Cash provided by operating activities	12,619		29,584

INVESTING ACTIVITIES:
Capital expenditures	(4,033)		(5,712)
Proceeds from sale of property, plant and equipment	1,040		—
Insurance proceeds from property casualty loss	1,000		—

Cash used in investing activities	(1,993)		(5,712)

FINANCING ACTIVITIES:
Repayments of long-term debt	(34,783)		(53,225)
Borrowing of long-term debt	10,000		34,000
Tax withholding payments for share-based compensation	(4,271)		(1,167)
Dividends paid	(6)		—
Finance lease payments	(716)		(643)

Cash used in financing activities	(29,776)		(21,035)

Net cash (used in) provided by operating, investing and financing activities	(19,150)		2,837
Effect of exchange rate changes on cash	(1,574)		872

CASH AND CASH EQUIVALENTS:
Net (decrease) increase	(20,724)		3,709
Balance, beginning of period	110,498		97,564


	Three Months Ended
	March 31, 2024		April 2, 2023
Revenue from the sale of flooring material	99	%	98	%
Revenue from installation of flooring material	1	%	2	%


	March 31, 2024		December 31, 2023
Weighted-average remaining lease term – finance leases (in years)	3.60		3.70
Weighted-average remaining lease term – operating leases (in years)	8.10		8.29
Weighted-average discount rate – finance leases	5.70	%	5.51	%
Weighted-average discount rate – operating leases	6.27	%	6.25	%


Fiscal Year	Operating Leases		Finance Leases
	(in thousands)
2024 (excluding the three months ended March 31, 2024)	$	12,770	$	2,170
2025	16,197		2,202
2026	16,047		1,651
2027	13,256		1,133
2028	10,804		582
Thereafter	42,883		264
Total future minimum lease payments (undiscounted)	111,957		8,002
Less: Present value discount	(25,097)		(819)
Total lease liabilities	$	86,860	$	7,183


	Three Months Ended
Defined Benefit Retirement Plans (Europe)	March 31, 2024		April 2, 2023
	(in thousands)
Interest cost	$	1,710	$	1,735
Expected return on plan assets	(1,966)		(1,964)
Amortization of prior service cost	45		29
Amortization of net actuarial losses	269		223
Net periodic benefit cost	$	58	$	23


	Three Months Ended
Salary Continuation Plan	March 31, 2024		April 2, 2023
	(in thousands)
Interest cost	$	266	$	283
Amortization of net actuarial losses	60		49
Net periodic benefit cost	$	326	$	332


	Three Months Ended
nora Defined Benefit Plan	March 31, 2024		April 2, 2023
	(in thousands)
Service cost	$	126	$	114
Interest cost	264		272
Amortization of net actuarial gains	—		(109)
Net periodic benefit cost	$	390	$	277


	Goodwill(1)
	(in thousands)
Balance, at December 31, 2023	$	105,448
Foreign currency translation(2)	(2,251)
Balance, at March 31, 2024	$	103,197


	Three Months Ended March 31, 2024				Three Months Ended April 2, 2023
	AMS		EAAA		AMS		EAAA
	(in thousands)
Operating income	$	18,195	$	6,251	$	8,715	$	762
Purchase accounting amortization	—		1,297		—		1,283
Cyber Event impact	(246)		(170)		228		200
Property casualty loss	—		—		1,300		—
Restructuring, asset impairment, severance, and other, net	131		67		1,026		1,684
AOI	$	18,080	$	7,445	$	11,269	$	3,929


		Three Months Ended
	Statement of Operations Location	March 31, 2024		April 2, 2023
		(in thousands)
Interest rate swap contracts loss	Interest expense	$	—	$	(393)
Amortization of benefit plan net actuarial losses and prior service cost	Other (income) expense, net	(374)		(192)
Total loss reclassified from AOCI		$	(374)	$	(585)


	Three Months Ended				Percentage Change
	March 31, 2024		April 2, 2023
	(in thousands)
Consolidated net sales	$	289,743	$	295,792	(2.0)	%


	Three Months Ended				Percentage Change
	March 31, 2024		April 2, 2023
	(in thousands)
AMS segment net sales	$	169,915	$	169,241	0.4	%
AMS segment AOI(1)	18,080		11,269		60.4	%

SEC Form 10-Q filed by Interface Inc.