TILE 10-K & 10-Q changes, risk factors and insider trading
Interface Inc. · Nasdaq · Carpets & Rugs · CIK 715787 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Changes in foreign trade policies and tariffs may adversely impact our business, financial condition, and results of operations.”
Removed heading “The uncertainty surrounding the ongoing implementation and effect of the U.K.’s exit from the European Union, and related negative developments in the European Union, could adversely affect our business, results of operations or financial condition.”
Largest changes
“Any events which deny us use of vital IT systems may seriously disrupt our normal business operations. These disruptions may lead to production or shipping stoppages, which may in turn lead to material revenue loss and reputational harm. …”see in full comparison
“Changes in foreign trade policies and tariffs may adversely impact our business, financial condition, and results of operations.”see in full comparison
“Unfavorable economic conditions may arise during times of U.S. and international economic downturns, or may be attributed to government shutdowns, implementation of new or increased tariffs and ongoing changes in U.S. and foreign government trade policies (including potential modifications to existing trade agreements and retaliatory measures by foreign governments), inflationary or deflationary pressures, natural disasters, severe weather events, calamities, public health crises, political or civil unrest, terrorist acts, and global conflicts. …”see in full comparison
“The uncertainty surrounding the ongoing implementation and effect of the U.K.’s exit from the European Union, and related negative developments in the European Union, could adversely affect our business, results of operations or financial condition.”see in full comparison
“Recent changes in U.S. and international trade policies, including the implementation of tariffs, retaliatory tariffs, and other trade barriers, have created significant uncertainty and volatility in the global markets. The U.S. government has implemented substantial changes to trade policies, including increased tariffs on imports from various countries. These actions have affected and may continue to affect the cost of certain products we import into the U.S. …”see in full comparison
see in full comparisonTo the extent our IT systems store sensitive data, including data related to customers, employees or other parties, security breaches may expose us to fines and other liabilities, and reputational harm if such data is misappropriated. In addition, asAs cybercriminals continue to become more sophisticated and numerous, the costs to defend and insure against cyberattacks can be expected to rise.
Full comparison: every changed paragraph (39)
As prescribed by accounting standards governing goodwill and other intangible assets, weWe undertake an annual review of the goodwill asset balance reflected in our financial statements. Our review is conducted during the fourth quarter of the year, unless there has been a triggering event prescribed by applicable accounting rules that warrants an earlier interim testing for possible goodwill impairment. A future goodwill impairment test may result in a future non-cash adjustment, which could adversely affect our earnings for any such future period.
In recent years, weWe recorded a goodwill and intangible asset impairment chargescharge of $36.2 million in the fourth quarter of 2022. The 2022 impairment charge was primarily a result of macroeconomic conditions, such as inflation, rising interest rates and the weakening of the Euro against the U.S. dollar causing a negative impact to our revenue and operating income in our EMEA goodwill reporting unit. Future impairment charges could result if these macroeconomic conditions or other negative market events or conditions continue to impact our operations.
Changes in foreign trade policies and tariffs may adversely impact our business, financial condition, and results of operations.
Recent changes in U.S. and international trade policies, including the implementation of tariffs, retaliatory tariffs, and other trade barriers, have created significant uncertainty and volatility in the global markets. The U.S. government has implemented substantial changes to trade policies, including increased tariffs on imports from various countries. These actions have affected and may continue to affect the cost of certain products we import into the U.S. They may also increase the risk of overall inflation, slower macro-economic activity, and they may temporarily delay or permanently stall when our customers decide to purchase our products.
We are particularly vulnerable to these trade policy changes as we source our luxury vinyl tile (LVT) products from a third-party manufacturer in South Korea and manufacture all our rubber flooring in Germany. The import of these goods into the U.S. represents our primary exposure to recently implemented and potential future tariffs. Increased tariffs on these imports could significantly increase our cost of goods sold, potentially requiring us to raise prices, which could decrease customer demand for our products, or reduce our profit margins if we are unable to fully pass these increased costs to our customers.
Various countries have announced or implemented retaliatory measures in response to U.S. trade actions, which could further complicate our international operations and supply chain. For example, the carpet tile we sell in Canada typically is manufactured at our plant in the U.S., and therefore may be subject to tariffs implemented by Canada on imports from the U.S. The current situation remains dynamic, and it is unknown if the U.S. and its trade partners will reach agreements to pause or eliminate currently enacted, pending, and threatened tariffs.
These trade policy changes and resulting uncertainty may lead to:
•Increased costs for our imported LVT and rubber flooring products
•Supply chain disruptions or delays in product availability
•Reduced demand for our products
•Increased competitive and consumer demand pressures, particularly if we increase prices to offset higher costs
•Competitive disadvantages if our competitors face different tariff structures
•Currency exchange rate fluctuations that further impact our costs and margins While we are assessing options and taking actions to mitigate potential impacts, our ability to do so may be limited by operational and supply chain constraints, especially in the short term. The ultimate effect of these tariffs will depend on their magnitude, duration, how they affect consumer sentiment and behavior, how they affect the overall global macro environment, as well as which countries are implicated. These factors could have a material adverse effect on our business, financial condition, and results of operations.
Large increases in the cost of our raw materials, shipping costs, duties or tariffs could adversely affect us if we are unable to offset them or pass these cost increases through to our customers.
Petroleum-based products (including yarn) comprise the predominant portion of the cost of raw materials that we use in manufacturing carpet. Synthetic rubber uses petroleum-based products as feedstock as well. We also incur significant shipping and transport costs to move our products around the globe, and those costs havevary increasedbased dramaticallyon market conditions due to global supply chain, macroeconomic and geopolitical challenges. TheNew possibilityor of government-imposedincreased tariffs in locations where we operate could have an adverse impact on our business. While we attempt to matchoffset cost increases with corresponding price increases, inflation and volatility in the cost of raw materials, foreign currency fluctuations, tariffs and potential retaliatory tariffs, transportation, shipping costs, andwe othermay not be successful in offsetting or passing these cost increases through to our customers. Any such new or increased costs could adversely affect our financial results if we are unable to offset or pass through such cost increases to our customers.
We depend on a small number of third-party suppliers of synthetic fiber and are largely dependent upon a primary supplier for our LVT products. The unanticipated termination or interruption of any of our supply arrangements with our current suppliers of synthetic fiber (nylon), our primary supplier of LVT, or other key raw material suppliers, including failure by any third-party supplier to meet our product specifications, could have a material adverse effect on us because we do not have the capability to manufacture our own fiber for use in our carpet products or our own LVT. Our suppliers may not be able to meet our demand for a variety of reasons, including our inability to forecast our future needs accurately or a shortfall in production by the supplier for reasons unrelated to us, such as work stoppages, acts of war, terrorism, civil or political unrest, pandemics, epidemics, or other public health crises, fire, earthquake, energy shortages, flooding or other natural disasters. The primary manufacturing facility of our primary supplier of LVT is located in South Korea. If any of our supply arrangements with our primary suppliers of synthetic fiber, our primary supplier of LVT, or suppliers of other key raw materials are terminated or interrupted, we likely would incur increased manufacturing costs and experience delays in our manufacturing process (thus resulting in decreased sales and profitability) associated with shifting more of our synthetic fiber purchasing to another synthetic fiber supplier or developing new supply chain sources for LVT. A prolonged inability on our part to source synthetic fiber included in our products, LVT, or other key raw materials on a cost-effective basis could adversely impact our ability to deliver products on a timely basis, which could harm our sales and customer relationships.
From time to time, we make improvements and changes to our physical facilities, move operations to other sites, and change our manufacturing processes. Large scaleThese changes or moves could disrupt our normal operations, leading to possible loss of productivity, which may adversely affect our results. We are also making significant investments and modifications to our manufacturing facilities, processes, product compositions, and product construction including but not limited to the production of our CQuest™ carpet tile backings.backings and our nora products. These changes can be disruptive. There is also no guarantee that our CQuest™ backings will perform as expected and will not increase warranty claims or customer complaints. These efforts may also not yield the financial returns and improvements in the business that we hope to achieve from them. While these changes are intended to yield stronger financial results, they could potentially impact our financial results in negative ways due to project delays, business disruption as new facilities and equipment come online, increased customer complaints, or increased warranty claims; all of which could negatively affect our operations, reputation, financial condition and results of operations.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, our manufacturing facilities could be materially damaged by natural disasters, such as floods, storms, tornadoes, hurricanes and earthquakes, whether or not as a result of climate change, or by fire or other unexpected events such as adverse weather conditions, acts of war, terrorism, protests, or other political or civil unrest, energy shortages and disruptions, pandemics or other public health crises or other disruptions to our facilities, supply chain or our customers’ facilities. We have experienced such losses in the past. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition and results of operations. These types of events could also affect our suppliers, installers, and customers, which could have a material adverse impact on our business.
Sales of our principal products have been and may continue to be affected by adverse economic conditions and cycles, and effects in the new construction market and renovation market.
Unfavorable economic conditions may arise during times of U.S. and international economic downturns, or may be attributed to government shutdowns, implementation of new or increased tariffs and ongoing changes in U.S. and foreign government trade policies (including potential modifications to existing trade agreements and retaliatory measures by foreign governments), inflationary or deflationary pressures, natural disasters, severe weather events, calamities, public health crises, political or civil unrest, terrorist acts, and global conflicts. These macroeconomic conditions have at times, and could in the future, adversely affect the demand for our product offerings.
•software “bugs”, hardware defects or human error or malfeasance; and
•hacking, computer viruses,viruses or malicious codes, denial of service attacks, malware, ransomware, unauthorized access attempts, social engineering schemes, credential theft, phishing scams, compromised or irretrievable backupsbackups, exploitation of vulnerabilities in third-party software and systems or other cyber-attacks.
Any events which deny us use of vital IT systems may seriously disrupt our normal business operations. These disruptions may lead to production or shipping stoppages, which may in turn lead to material revenue loss and reputational harm. These cyber threats are diverse and constantly evolving, especially given the advances in, and the rise of the use of, artificial intelligence, thereby increasing the difficulty of preventing, detecting, and successfully defending against them and may be more difficult to detect and mitigate, including as threat actors use artificial intelligence and other advanced tools to enhance attacks and impersonation tactics. Cybersecurity breaches could, among other things, disrupt our operations or result in the unauthorized disclosure, theft and misuse of company, customer, employee and supplier sensitive and confidential information, all of which could adversely affect our financial condition and results of operations. Cybersecurity breaches could also result in legal claims or proceedings, financial liability to other parties, governmental investigations, regulatory enforcement actions and penalties, and damage to our brand and reputation. Although we maintain insurance coverage relating to cybersecurity incidents, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance and such insurance may be subject to exclusions, sub-limits and retentions and may become more expensive or less available on acceptable terms.
Any of these events which deny us use of vital IT systems may seriously disrupt our normal business operations. These disruptions may lead to production or shipping stoppages, which may in turn lead to material revenue loss and reputational harm.
Despite security designs and internal controls, the IT systems we use have in the past experienced, and we or systems owned and or operated by third parties on which we rely may in the future become subject to, attempts by unauthorized third parties to access and exfiltrate confidential information, manipulate data or disrupt our operations. In November 2022, we discovered a cybersecurity attack, perpetrated by unauthorized third parties, affecting our IT systems (the “Cyber Event”). In response, we promptly shut down certain systems, including shipping, inventory management and production systems, and engaged forensic experts to evaluate the extent of the Cyber Event and its disruption to our operations. The investigation of the Cyber Event by our forensic experts was completed during fiscal year 2023.
However, there is no guarantee that these enhancements and steps will be adequate to mitigate future losses due to IT system disruptions,disruptions or that we will be able to prevent, detect or respond to future incidents in a timely and effective manner, and we may incur significant expense in correcting and recovering from future disruptions.
To the extent our IT systems store sensitive data, including data related to customers, employees or other parties, security breaches may expose us to fines and other liabilities, and reputational harm if such data is misappropriated. In addition, asAs cybercriminals continue to become more sophisticated and numerous, the costs to defend and insure against cyberattacks can be expected to rise.
HealthPublic health crisis events, such as epidemics or pandemics, have in the past adversely impacted, and may continuein tothe future impact, the economy and disrupt our operations and supply chains, which may have an adverse effect on our results of operations.
HealthPublic health crisis events, including epidemics or pandemics, such as COVID-19,the COVID-19 pandemic, have impacted areas where we operate and sell our products and any future public health crises could have additional impacts on economic growth, supply chains, and foreign currency exchange rates. A public health emergency in the future could have a material adverse effect on our ability to operate, our results of operations, financial condition, and demand for our products.
Our substantial international operations are subject to various political, economic and other uncertainties that could adversely affect our business results, including foreign currency fluctuations, restrictive taxation, custom duties, tariffs, border closings or other adverse government regulations.
We have substantial international operations and intend to continue to pursue and commit resources to growth opportunities beyond the United States. Outside of the United States, we maintain manufacturing facilities in the Netherlands, the United Kingdom, China, Australia and Germany, in addition to product showrooms or design studios in England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Singapore, Hong Kong, China and elsewhere. In 20242025, 2024, and 2023 approximately 43%43%, 43%, and 46% of our net sales, respectively, and a significant portion of our production were outside the United States, primarily in Europe and Asia-Pacific.
Changes in the value of foreign currencies relative to the U.S. dollar have adversely affected our results of operations and financial position and could continue to do so. In recent periods, as the value of the U.S. dollar has strengthenedweakened in comparison to certain foreign currencies — particularly in our EAAA segment and the impact of the Euro on our European operations — our reported revenues have been negatively impacted. As approximately 43% of our revenue is denominated in foreign currencies, these exchange rate fluctuations have had, and could continue to have, a significant adverse impact on our financial results.
The uncertainty surrounding the ongoing implementation and effect of the U.K.’s exit from the European Union, and related negative developments in the European Union, could adversely affect our business, results of operations or financial condition.
In 2016, voters in the U.K. approved an exit from the European Union via a referendum (commonly referred to as “Brexit”). The U.K. ceased to be a member of the European Union on January 31, 2020. In December 2020, the U.K. and the European Union agreed on a trade and cooperation agreement. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the U.K. and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms before withdrawal. The uncertainty leading up to and following Brexit has had, and the ongoing implementation of Brexit may continue to have, a negative impact on our business and demand for our products in Europe, and particularly in the U.K. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in political institutions and regulatory agencies. Brexit could also have the effect of disrupting the free movement of goods, services, and people between the U.K., the European Union and elsewhere. In addition, Brexit has had a detrimental effect, and could have further detrimental effects, on the value of either or both of the Euro and the British Pound sterling, which could negatively impact our business (principally from the translation of sales and earnings in those foreign currencies into our reporting currency of U.S. dollars). Such a development could have other unpredictable adverse effects, including a material adverse effect on demand for office space and our flooring products in the U.K. and in Europe if the U.K. exit leads to economic difficulties in Europe.
•limiting our ability to attract certain investors to purchase our common stock due to the amount of debt we have outstanding; and
•limiting our ability to refinance our existing indebtedness as it matures.matures; and
In addition, borrowings under our Syndicated Credit Facility have variable interest rates, and therefore our interest expense will increase if the underlying market rates (upon which the variable interest rates are based) increase. The interest rate on certain borrowings under the Syndicated Credit Facility will also increase if our consolidated net leverage ratio increases in a given period. For information regarding the current variable interest rates of these borrowings and the potential impact on our interest expense from hypothetical increases in short term interest rates, please see the discussion in Item 7A of this Report.
Our ability to generate cash in order to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive, legislative, regulatory and other factors beyond our control. In addition, our ability to borrow funds in the future to make payments on our debt will depend on the satisfaction of the covenants in our Syndicated Credit Facility and our other financing agreements, including the indenture governing the Senior Notes, and other agreements we may enter into in the future. Specifically, we will need to maintain certain financial ratios under our Syndicated Credit Facility. Our business may not continue to generate sufficient cash flow from operations in the future and future borrowings may not be available to us under our existing revolving credit facility or from other sources in an amount sufficient to service our indebtedness, including the Senior Notes, to make necessary capital expenditures or to fund our other liquidity needs. If we are unable to generate cash from our operations or through borrowings, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to make payments on our indebtedness or refinance our indebtedness will depend on the capital markets and our financial condition at such time, as well as the terms of our financing agreements, including the Syndicated Credit Facility, and the indenture governing the Senior Notes.Facility. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. In addition, borrowings under our Syndicated Credit Facility have variable interest rates, and therefore our interest expense will increase if the underlying market rates (upon which the variable interest rates are based) increase.
Subject to the restrictions in our Syndicated Credit Facility and in the indenture governing our Senior Notes,Facility, we and our subsidiaries may be able to incur additional indebtedness in the future. Although our Syndicated Credit Facility and the indenture governing the Senior Notes containcontains restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, including the ability, on a non-committed basis, for us to increase revolving commitments and/or term loans under our Syndicated Credit Facility, and debt incurred in compliance with these restrictions could be substantial. If new debt is added to our and our subsidiaries’ existing debt levels, the related risks we now face would increase.
Management's Discussion & Analysis (MD&A)
New heading “Consolidated net sales for 2025 compared with 2024”
New heading “AMS Segment Net Sales for 2025 compared with 2024”
New heading “EAAA Segment Net Sales for 2025 compared with 2024”
Removed heading “Consolidated net sales for 2023 compared with 2022”
Removed heading “Goodwill, Intangible Asset and Fixed Asset Impairment”
Removed heading “AMS AOI for 2023 compared with 2022”
Removed heading “EAAA AOI for 2023 compared with 2022”
Removed heading “Interest Rates and Fees”
Removed heading “Events of Default”
Largest changes
“If we breach or fail to perform any of the affirmative or negative covenants under the Facility, or if other specified events occur (such as a bankruptcy or similar event or a change of control of Interface, Inc. or certain subsidiaries, or if we breach or fail to perform any covenant or agreement contained in any instrument relating to any of our other indebtedness exceeding $20 million), after giving effect to any applicable notice and right to cure provisions, an event of default will exist. …”see in full comparison
“Goodwill, Intangible Asset and Fixed Asset Impairment”see in full comparison
Disruptions in economic markets due to inflation,see in full comparisonhightheinterestimpactrates,of tariffs on theRussia-Ukrainedemandwarforandourthe conflict in the Middle East,products, astillchallenging supply chain environment, slow market conditions in certain parts of the globe,the impact of potential tariffs on the demand for our products, fluctuating freight costs, andsignificant financial pressures in the commercial office market globally, and geopolitical factors including wars, civil and political unrest, and other conflicts, all pose challenges which may adversely affect our future performance. Management believes it is reasonably likely that these challenges will continue to affect our future operations and demand for our products to some degree during fiscal year2025.2026. We 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.
(1) Includes allocation of corporatesee in full comparisonSG&A expensesandallocation ofglobal support SG&A expenses as discussed above. Excludesgoodwill and intangible asset impairment charges,purchase accounting amortization, Cyber Event impact,Thailand plant closure inventory write-down,and restructuring, asset impairment, severance, and other, net. See Note2019 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
“The annual quantitative goodwill testing performed in 2024 and 2023 for our Americas reporting unit was consistent with our prior year methodology. The Company prepared valuations for the Americas reporting unit on both a market comparable methodology and an income methodology, utilizing a combination of the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of the reporting unit. …”see in full comparison
Full comparison: every changed paragraph (131)
Our revenues are derived from sales of floorcovering products, primarily modular carpet, resilient flooring, including luxury vinyl tile (“LVT”), rubber flooring products, and installation services and accessories. Our business, as well as the commercial interiors industry in general, is cyclical in nature and is impacted by economic conditions and trends that affect the markets for commercial and institutional business space. The commercial interiors industry, including the market for floorcovering products, is largely driven by reinvestment by corporations and institutions into their existing businessesoperations in the form of new fixtures and furnishings for their workplaces. In significant part, the timing and amount of such reinvestments are impacted by the profitability of those corporations.entities. As a result, macroeconomic factors such as employment rates, office vacancy rates, work from home policies, capital spending, productivity and efficiency gains that impact corporate profitability in general, also affect our business.
Our One Interface strategy continues to fuel growth as we strengthen global capabilities, improve commercial productivity, and simplify and optimize our operations. During 2025, we had consolidated net sales of $1,386.9 million, up 5.4% compared to $1,315.7 million in 2024, primarily due to higher customer demand — particularly in the healthcare and education market segments. Consolidated operating income for 2025 was $164.0 million compared to consolidated operating income of $134.4 million in 2024, primarily due to higher sales and higher gross profit margin driven by higher average sales prices, favorable product mix, and manufacturing efficiencies, partially offset by higher input costs and tariff costs. Consolidated net income for 2025 was $116.1 million, or $1.96 per diluted share, compared to consolidated net income of $86.9 million, or $1.48 per diluted share, in 2024.
During 2023, we had consolidated net sales of $1,261.5 million, down 2.8% compared to $1,297.9 million in 2022, primarily due to decreased customer demand – particularly in the retail market segment. Consolidated operating income for 2023 was $104.5 million compared to consolidated operating income of $75.4 million in 2022, primarily due to a non-recurring goodwill and intangible asset impairment charge of $36.2 million recognized in 2022. Consolidated net income for 2023 was $44.5 million, or $0.76 per diluted share, compared to consolidated net income of $19.6 million, or $0.33 per diluted share, in 2022.
As previously disclosed in our current report on Form 8-K filed with the Commission on November 23, 2022, we discovered a cybersecurity attack on November 20, 2022, perpetrated by unauthorized third parties, affecting our IT systems. The investigation of the Cyber Event was completed inDuring fiscal year 2023.2024, We have cyber risk insurance andwe recovered $5.6 million in insurance proceeds during fiscal year 2024, representing business interruption proceeds and reimbursement of certain costs in connection with the Cyber Event. Of the total insurance proceeds received in fiscal year 2024, $4.8 million of business interruption proceeds were recognized as a benefit in other incomeexpense / expense,income, net in the consolidated statements of operations and $0.8 million was recognized as a reduction of selling, general and administrative expenses. The insurance claim for the Cyber Event has beenwas closed asat the end of Decemberfiscal 29,year 2024, and we are not expecting to receive any additional proceeds.proceeds in connection with the Cyber Event.
During 2023, we incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which was recognized in selling, general, and administrative expenses in the consolidated statements of operations.
During 2023, the Company incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which were recorded in selling, general and administrative expenses in the consolidated statements of operations. In 2022, we estimated that the Cyber Event adversely affected our fiscal year 2022 revenues by approximately $8 million in lost sales. We incurred approximately $5 million of costs related to the Cyber Event in 2022 for idle plant costs, direct labor costs during the period our manufacturing facilities were idle and third-party remediation costs. Approximately $4.8 million of the Cyber Event costs in 2022 were included in cost of sales in the consolidated statements of operations and approximately $0.3 million were included in selling, general and administrative expenses.
Disruptions in economic markets due to inflation, highthe interestimpact rates,of tariffs on the Russia-Ukrainedemand warfor andour the conflict in the Middle East,products, a still challenging supply chain environment, slow market conditions in certain parts of the globe, the impact of potential tariffs on the demand for our products, fluctuating freight costs, and significant financial pressures in the commercial office market globally, and geopolitical factors including wars, civil and political unrest, and other conflicts, all pose challenges which may adversely affect our future performance. Management believes it is reasonably likely that these challenges will continue to affect our future operations and demand for our products to some degree during fiscal year 2025.2026. We 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.
The Company expects higher production volumes and lower per unit fixed costs in 2025,2026, and anticipates these impacts will benefit our gross profit margin in 2025.2026. We also expect that continuing challenges in supply chain marketsmarkets, tariff costs, and higher raw material costs will resultadversely impact our performance in higher freight costs to some degree in 2025 - particularly in the first half of 2025.2026. We anticipate that continuing slow market conditions in parts of the globe and significant financial pressures in the commercial office market globally will adversely impact our future performance and demand for our products.
The following discussion and analyses reflectbelow reflects the factors and trends discussed in the preceding sections. Fiscal years 2025, 2024, and 2023 each included 52 weeks.
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 43% in 2024, 46% in 2023, and 47% in 2022. Because we have substantial international operations, we are impacted, from time to time, by international developments that affect foreign currency transactions. In 2024, the weakening of the Euro, Canadian dollar, and Chinese Renminbi against the U.S. dollar had a negative impact on our net sales, partially offset by the strengthening of the British Pound sterling against the U.S. dollar. Currency fluctuations had no material impact to operating income in 2024. In 2023, the strengthening of the Euro against the U.S. dollar had a positive impact on our net sales, partially offset by the weakening of the Australian dollar, Chinese Renminbi, and Canadian dollar. Currency fluctuations had no material impact to operating income in 2023. In 2022, the weakening of the Euro, Australian dollar, British Pound sterling and Chinese Renminbi against the U.S. dollar had a negative impact on our net sales and operating income.
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 43% in 2025, 43% in 2024, and 46% in 2023. Because we have substantial international operations, we include the impact of fluctuations in foreign currency exchange rates in our discussion below.
The following table presents, as a percentage of net sales, certain items included in our consolidated statements of operations during the past three years:years.
Below we provideis information regarding our consolidated net salessales, and analyzeanalysis of those resultsresults, for each of the last three fiscal years. Fiscal years 2024, 2023, and 2022 each included 52 weeks.
Consolidated net sales for 2025 compared with 2024
For 2025, consolidated net sales increased $71.2 million (5.4%) compared to 2024, comprised of higher sales volume (approximately 3.0%) and higher average sales prices (approximately 2.4%). Fluctuations in currency exchange rates had a positive impact of approximately $14.9 million on consolidated net sales for 2025, primarily due to the strengthening of the Euro against the U.S. dollar. On a market segment basis, the sales increase was most significant in the healthcare, education, public buildings, and transportation market segments. See the segment results discussion below for additional information on market segments.
For 2024, our consolidated net sales increased $54.2 million (4.3%) compared to 2023, comprised of higher sales volumesvolume (approximately 2.7%) and higher average sales prices (approximately 1.6%). Fluctuations in currency exchange rates had a negative impact of $1.8 million on our year-over-year consolidated net sales comparisonfor of approximately $1.8 million,2024, indicating that if currency levels had remained constant year-over-year, our 2024 net sales would have been higher by this amount. On a market segment basis, the sales increase was most significant in the retail, education, residential living, and public buildings market segments partially offset by decreases in the hospitality, corporate office, and consumer residential market segments. See the segment results discussion below for additional information on market segments.
Consolidated net sales for 2023 compared with 2022
For 2023, our consolidated net sales decreased $36.4 million (2.8%) compared to 2022, comprised of lower sales volumes (approximately 7.9%) partially offset by higher prices (approximately 5.1%). Fluctuations in currency exchange rates had a positive impact on our year-over-year consolidated net sales comparison of approximately $1.4 million, meaning that if currency levels had remained constant year-over-year, our 2023 net sales would have been lower by this amount. On a market segment basis, the sales decrease was most significant in the retail and healthcare market segments partially offset by increases in education and residential living market segments. See the segment results discussion below for additional information on market segments.
For 2024, our2025, consolidated cost of sales increased $12.3$16.8 million (1.5%2.0%) compared to 2023,2024, primarily due to higher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S. (approximately $7.3 million), and higher raw material costs, partially offset by lower rawmanufacturing materialcosts costs.driven by favorable fixed cost absorption on higher volume and production efficiencies. Currency translation had a positivenegative impact on consolidated cost of sales for 2025 and partially reducedincreased our costs by approximately $1.4$9.1 million (0.2%1.1%) compared to 2023.2024. As a percentage of net sales, our consolidated cost of sales decreased to 61.3% in 2025 versus 63.3% in 2024 versus 65.0% in 2023.2024. Management believes it is reasonably likely that lower per unit fixed costs due to higher production volumes and plant productivity initiatives will reduce our costs to some degree in 2025, particularly in the first half of 2025.2026. These favorable impacts are expected to be partially offset by continuing tariff costs and higher freightraw material costs in 2025.2026.
For 2023,2024, our consolidated cost of sales decreasedincreased $39.8$12.3 million (4.6%1.5%) compared to 2022,2023, primarily due to lowerhigher sales andpartially offset by lower freightraw costsmaterial (approximately $19 million) due to stabilizing supply chain conditions.costs. Currency translation had noa materialpositive impact on consolidated cost of sales and partially reduced our costs by approximately $1.4 million (0.2%) compared to 2022.2023. As a percentage of net sales, our consolidated cost of sales decreased to 63.3% in 2024 versus 65.0% in 2023 versus 66.3% in 2022.2023.
For 2024,2025, consolidated gross profit, as a percentage of net sales, was 36.7%38.7% compared to 35.0%36.7% for 2023.2024. The increase in gross profit percentage was primarily due to higher average sales prices and favorable product mix (iapproximately 1%) and lower manufacturing costs (approximately 1%) driven by lower raw material costs and lower fixed costs per unit as adiscussed result of higher volume and (ii) higher pricing (approximately 1%).above. Management believes it is reasonably likely that gross profit in 20252026 will be positively impacted by lower manufacturing costs as discussedresult above.of production efficiencies partially offset by continuing tariff and higher raw material costs.
For 2023,2024, consolidated gross profit, as a percentage of net sales, was 35.0%36.7% compared to 33.7%35.0% for 2022.2023. The increase in gross profit percentage was primarily due to (i) higher pricing (approximately 4%), partially offset by (ii) the unfavorable impact of inflation on raw materiallower costs (approximately 1%), driven by lower raw material costs and lower fixed costs per unit as a result of higher volume and (iiiii) unfavorablehigher manufacturing fixed cost absorption and product mixpricing (approximately 2%1%).
For 2025, consolidated SG&A expenses were $373.4 million versus $348.5 million in 2024. SG&A expenses increased $24.8 million (7.1%) in 2025 compared to 2024, primarily due to (i) higher variable compensation of $8.6 million as a result of higher commissions on increased sales and higher bonus costs driven by improved operating results, (ii) higher employee benefits and labor costs of $8.3 million, (iii) higher severance costs of $4.5 million due to employee separations, and (iv) higher professional fees of $2.6 million. Currency fluctuations had a negative impact on consolidated SG&A expenses and increased our costs by approximately $3.5 million (1.0%) compared to 2024. As a percentage of net sales, SG&A expenses increased to 26.9% in 2025 versus 26.5% in 2024.
For 2024, our consolidated SG&A expenses were $348.5 million versus $339.0 million in 2023. Currency translation had no material impact on consolidated SG&A expenses for 2024. Consolidated SG&A expenses increased $9.5 million (2.8%) in 2024 compared to 2023, primarily due to higher people costs of $15.7 million driven by increased variable compensation as a result of higher operating income compared to 2023, partially offset by lower severance costs of $5.6 million driven by employee headcount reduction and cost saving initiatives in the prior year period. As a percentage of net sales, SG&A expenses decreased to 26.5% in 2024 versus 26.9% in 2023.
For 2023, our consolidated SG&A expenses were $339.0 million versus $324.2 million in 2022. Currency translation had a $1.5 million (0.5%) negative impact on the year-over-year comparison. Consolidated SG&A expenses increased $14.9 million (4.6%) in 2023 compared to 2022, primarily due to (i) $6.5 million of higher selling expenses due to sales and marketing initiatives, (ii) $6.3 million of higher severance costs driven by employee headcount reductions and initiatives to reduce future costs, (iii) $4.4 million of higher professional fees, and (iv) $1.9 million of higher variable compensation costs. These increases were partially offset by lower plant closure costs of approximately $4.1 million related to the closure of our Thailand and Russia operations in 2022. As a percentage of net sales, SG&A expenses increased to 26.9% in 2023 versus 25.0% in 2022.
Pursuant to a previous restructuring plan, the Company completed the sale of its Thailand manufacturing facility during 2023 and recognized a gain of $2.7 million.
On September 8, 2021, the Company committed to a restructuring plan that continued to focus on efforts to improve efficiencies and decrease costs across its worldwide operations, involving the closure of the Company’s manufacturing facility in Thailand. During the second quarter of 2023, the Company completed the sale of the Thailand real estate and recognized a gain of $2.7 million. This restructuring plan was completed following the sale of the Thailand facility.
During 2022, in conjunction with the closure of its Thailand facility, the Company recorded a write-down of inventory of $2.5 million within cost of sales in the consolidated statements of operations.
See Note 1615 entitled “Restructuring and Other” and Note 7 entitled “Property, Plant and Equipment” of Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Goodwill, Intangible Asset and Fixed Asset Impairment
During 2024 and 2023 there was no impairment of our goodwill or indefinite-lived intangible assets. During 2022, we recognized a charge of $36.2 million for the impairment of goodwill and certain intangible assets. See Note 12 entitled “Goodwill and Other Intangible Assets” of Part II, Item 8 of this Annual Report for additional information.
For 2025, interest expense was $19.5 million, versus $23.2 million in 2024, primarily due to lower interest rates and lower outstanding borrowings under the Syndicated Credit Facility for most of 2025. On December 3, 2025, the outstanding borrowings under the $300 million Senior Notes were redeemed and the debt was extinguished. In addition, the Syndicated Credit Facility was amended and restated. In connection with these transactions, we recorded $3.1 million of debt extinguishment costs, which are recognized in interest expense in the consolidated statements of operations. See Note 9 entitled “Long-Term Debt” of Part II, Item 8 of this Annual Report on Form 10-K for additional information. Our average borrowing rate under the Syndicated Credit Facility as of December 28, 2025, was 5.12% compared to 5.62% at December 29, 2024.
For 2023, our interest expense was $31.8 million, versus $29.9 million in 2022, primarily due to higher interest rates on outstanding term loan borrowings under the Syndicated Credit Facility, partially offset by lower outstanding term loan borrowings under the Facility. Our average borrowing rate under the Syndicated Credit Facility as of December 31, 2023, was 6.61% compared to 5.78% at January 1, 2023.
Other IncomeExpense Expense,/ Income, net
During 2025, other expense (income), net, was $7.6 million versus $(2.4) million in 2024. The increase of $9.9 million was primarily due to $4.7 million in foreign currency transaction losses from the strengthening of the Euro against the U.S. dollar and higher pension cost of approximately $1.1 million. The increase was also impacted by non-recurring insurance proceeds recognized in 2024, as discussed immediately below.
During 2024, other expense (income) expense,, net, was $(2.4) million versus $9.1 million in 2023. The decrease was primarily due to the receipt in 2024 of $4.8 million of business interruption insurance proceeds related to the Cyber Event and $2.4 million of insurance proceeds related to a property casualty loss that occurred in fiscal year 2023. These benefits were partially offset by the recognition of $2.2 million of cumulative translation losses reclassified from accumulated other comprehensive loss due to the substantial liquidation of our foreign subsidiary in Thailand during 2024.
During 2023, $6.2 million of cumulative translation losses were recognized in other (income) expense, net as a result of the substantial liquidation of our foreign subsidiaries in Brazil and Russia.
For fiscal year 2025, the Company recorded income tax expense of $20.8 million on pre-tax income of $136.9 million, resulting in an effective tax rate of 15.2% compared with income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4%, for fiscal year 2024. The decrease in the effective tax rate for fiscal year 2025, compared to fiscal year 2024, was primarily due to the remeasurement and adjustment of deferred taxes, favorable changes related to the utilization of foreign tax credit carryforwards and an increase in the Foreign-Derived Intangible Income deduction. See Note 16 entitled “Income Taxes” of Part II Item 8 of this Annual Report on Form 10-K for additional information.
For fiscal year 2023, the Company recorded income tax expense of $19.1 million on pre-tax income of $63.7 million, resulting in an effective tax rate of 30.1%. This compares with income tax expense of $22.4 million on pre-tax income of $41.9 million, resulting in an effective tax rate of 53.3%, for fiscal year 2022. The effective tax rate for fiscal year 2022 was significantly impacted by a non-deductible goodwill impairment charge. Excluding the impact of the non-deductible goodwill impairment charge, the effective tax rate was 31.4% for fiscal year 2022. The decrease in the effective tax rate for fiscal year 2023, as compared to fiscal year 2022, excluding the goodwill impairment, was primarily due to favorable changes related to the cash surrender value of Company-owned life insurance, utilization of foreign tax credits, favorable U.S. tax effects from the repatriation of previously taxed foreign earnings, and non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand in fiscal year 2022. This decrease was partially offset by a favorable change to unrecognized tax benefits in fiscal year 2022.
During fiscal year 2024, the Company implemented a cost center realignment initiative as part of the Company’s efforts to centralize certain global/shared functions. During 2024, SG&A expenses for these global support functions were allocated to adjusted operating income (“AOI”) for each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods. PriorFiscal year AOI2023 amounts below were not recast as there was no material impact to the measure of segment profit for eacheither reportable segment. There were no changes to the composition of the Company’s operating or reportable segments.
(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above. Excludes Cyber Event impact, intangible asset impairment charge,impact and restructuring, asset impairment, severance, and other, net. See Note 2019 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
AMS Segment Net Sales for 2025 compared with 2024
During 2025, net sales in AMS increased 5.4% versus 2024, comprised of higher sales volume - particularly increased rubber flooring volume and higher average sales prices. On a market segment basis, the AMS sales increase was most significant in the healthcare (up 21.4%), education (up 8.2%), public buildings (up 10.7%), and corporate office (up 1.5%) market segments, partially offset by decreases in the residential living (down 4.1%) and retail (down 2.5%) market segments.
AMS Segment Net SalesAOI for 20232025 compared with 20222024
AOI in AMS increased 28.8% during 2025 compared to 2024. Higher gross profit in 2025, driven by higher sales, favorable product mix, and manufacturing efficiencies, partially offset by tariff costs, contributed to the increase in AMS AOI for 2025. As a percentage of net sales, AOI increased to 16.3% in 2025 versus 13.3% in 2024.
During 2023, net sales in AMS decreased 2.2% versus 2022, comprised of lower sales volume partially offset by higher average sales prices. On a market segment basis, the AMS sales decrease was most significant in the retail (down 50.6%) market segment partially offset by increases in the education (up 7.9%), corporate office (up 4.1%) and residential living (up 15.4%) market segments.
AOI in AMS increased 21.4% during 2024 compared to 2023. Higher adjusted gross profit in 2024, driven by higher sales, lower raw material costs, and favorable fixed cost absorption contributed to the increase in AMS AOI for the current year.2024. AMS SG&A expenses as a percentage of net sales decreased approximately 0.8% compared to 2023, also contributed to the increase in AOI. As a percentage of net sales, AOI increased to 13.3% in 2024 versus 11.9% in 2023.
AMS AOI for 2023 compared with 2022
AOI in AMS decreased 14.2% during 2023 compared to 2022. Lower adjusted gross profit in 2023 driven by unfavorable manufacturing fixed cost absorption and lower sales, partially offset by lower freight costs contributed to the decrease in AMS AOI. AMS SG&A expenses as a percentage of net sales increased approximately 1.1% compared to 2022, primarily due to higher selling expenses also contributed to the decrease in AOI for 2023. As a percentage of net sales, AOI decreased to 11.9% in 2023 versus 13.6% in 2022.
(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above. Excludes goodwill and intangible asset impairment charges, purchase accounting amortization, Cyber Event impact, Thailand plant closure inventory write-down, and restructuring, asset impairment, severance, and other, net. See Note 2019 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
EAAA Segment Net Sales for 2025 compared with 2024
During 2025, net sales in EAAA increased 5.5% versus 2024, primarily due to favorable currency fluctuations of approximately $15.9 million (3.1%) from the strengthening of the Euro against the U.S. dollar, higher sales volume, and higher average sales prices. On a market segment basis, the EAAA sales increase was most significant in the transportation (up 35.7%), public buildings (up 24.5%), healthcare (up 18.1%), and education (up 5.8%) market segments.
EAAA Segment Net SalesAOI for 20232025 compared with 20222024
AOI in EAAA increased 4.8% during 2025 versus 2024, primarily due to higher gross profit margin driven by favorable manufacturing costs and higher sales volume. Currency fluctuations had a positive impact of approximately $2.8 million (3.8%) on EAAA AOI in 2025 compared to 2024, primarily due to the strengthening of the Euro against the U.S. dollar. As a percentage of net sales, AOI was 6.7% in 2025 versus 6.8% in 2024.
During 2023, net sales in EAAA decreased 3.6% versus 2022, comprised of lower sales volume partially offset by higher selling prices. Slower economic recovery and decreased customer demand in Asia resulted in approximately 25% lower net sales in Asia during 2023 compared to 2022. Currency fluctuations had a positive impact of approximately $3.5 million (0.6%) on EAAA net sales for 2023 compared to 2022 due to the strengthening of the Euro, partially offset by the weakening of the Australian dollar and Chinese Renminbi against the U.S. dollar. On a market segment basis, the EAAA sales decrease was most significant in the corporate office (down 3.5%), healthcare (down 23.5%), retail (down 22.8%), and education (down 3.9%) market segments, partially offset by an increase in the hospitality (up 11.5%) market segment.
AOI in EAAA increased 21.7% during 2024 versus 2023. Higher adjusted gross profit in 2024, driven by lower raw material costs partially offset by lower sales volume contributed to the increase in EAAA AOI for the current year.2024. Currency fluctuations had no material impact on EAAA AOI in 2024 compared to 2023. As a percentage of net sales, AOI was 6.8% in 2024 versus 5.5% in 2023.
EAAA AOI for 2023 compared with 2022
AOI in EAAA decreased 4.8% during 2023 versus 2022. Lower adjusted gross profit in 2023, driven by lower sales, inflationary pressures on raw material costs, and unfavorable manufacturing fixed cost absorption on lower production volumes contributed to the decrease in EAAA AOI. Currency fluctuations had no material impact on EAAA AOI in 2023 compared to 2022. As a percentage of net sales, AOI was 5.5% in both 2023 and 2022.
In our business, we require cash and other liquid assets primarily to purchase raw materials and to pay other manufacturing costs, in addition to funding normal course SG&A expenses, anticipated capital expenditures, interest expense and potential special projects. We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”) discussed below..
Historically, we use more cash in the first half of the fiscal year, as we pay insurance premiums, taxes and incentive compensation and build up inventory in preparation for the holiday/vacation season of our international operations. As outlined in the table above, we have approximately $68.8$70.0 million in material contractual cash obligations due within the next year, which includes, among other things, scheduled debt repayments under the Facility, pension contributions, interest payments on our debt, and payments on our lease commitments.obligations. Our long-term debt obligations include the contractually scheduled principal repayment of our term loan and revolving loan borrowings under the Facility, which matures in 2027, and $300 million on our Senior Notes due in 2028.2030. Operating and finance lease obligations consist of undiscounted lease payments due over the termlease of the lease.term. Expected interest payments are those associated with borrowings under the Facility and Senior Notes consistent with our contractually scheduled principal repayments. Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures. Our pension obligations include contributions and expected benefit payments to be paid by the Company related to certain defined benefit pension plans and exclude the expected benefit payments for two of our funded foreign defined benefit plans as these obligations will be paid by the plans.
What changed in the latest 10-Q
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 fiscal year ended December 28, 2025.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
In 2025, the U.S. government enacted a series of higher trade tariffs on goods imported into the U.S. As a result, the Company incurred higher tariff costs on rubber and luxury vinyl tile products imported into the U.S. in fiscal year 2025 and in the firstsee in full comparisonquartersix months of 2026. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid.TheDuring the three months ended July 5, 2026, the Companybelievesrecognizedcertainapproximately $15.6 million in refunds for tariffs previously paidmayunderbetherefundable.IEEPA. These refunds were recognized as a reduction to cost of sales in the consolidated condensed statements of operations. The Companyhasalso recorded approximately $0.5 million of interest income associated with these tariff refunds, presented as a reduction to interest expense, net in the consolidated condensed statements of operations. In the consolidated condensed balance sheets, the Company recorded $7.6 million as an accounts receivable as a portion of these tariff-related amounts recognized was notyetcollectedrecognizedduringanytherecoverysecond quarter oftariffs2026 but was realizable pursuant to the gain contingency guidance as of July 5, 2026, with the remainder of the tariff-related amounts recorded as an increase initscash.consolidatedAnyfinancialoutstandingstatements.requests for IEEPA tariff refunds are not material.
“During the first six months of 2026, we had consolidated net sales of $726.7 million, up 8.0% compared to $672.9 million in the first six months of last year, primarily due to higher customer demand partially driven by an extra week in the first six months of 2026. Consolidated operating income was $107.2 million for the first six months of 2026, compared to $75.3 million in the same period last year, primarily due to higher sales and higher gross profit margin, driven by lower manufacturing costs and tariff refunds as discussed above. …”see in full comparison
For the quarter endedsee in full comparisonAprilJuly 5, 2026, consolidated cost of salesincreaseddecreased$17.9$9.9 million (9.6%4.4%) compared to thefirstsecond quarter of 2025, primarily due tohigher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S., partially offset bylowerEAAAmanufacturing costs driven by favorable fixed cost absorption on highervolume.volume, manufacturing efficiencies, and the impact of $15.6 million in IEEPA tariff refunds recognized in the current quarter, which were recorded as a reduction to cost of sales. These favorable impacts were partially offset by other tariff costs of $3.5 million recognized during the second quarter of 2026. Currencyfluctuationstranslation had a negative impact on consolidated cost of salesforin thefirstsecond quarter of 2026 and partially increased our costs by approximately$8.6$3.8 million (4.6%1.7%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to61.7%55.0% for thefirstsecond quarter of 2026 versus62.7%60.6% for thefirstsecond quarter of 2025.
“For the six months ended July 5, 2026, consolidated cost of sales increased $7.9 million (1.9%) versus the comparable period in 2025, primarily due to higher sales partially offset by the impact of tariff refunds and lower manufacturing costs as discussed above. Currency translation had a negative impact on consolidated cost of sales for the first six months of 2026 and partially increased our costs by approximately $12.4 million (3.0%) compared to the same period last year. …”see in full comparison
For the quarter endedsee in full comparisonAprilJuly 5, 2026,consolidatedgross profit, as a percentage of net sales, was38.3%45.0% compared with37.3%39.4% in the same period last year. The increase inconsolidatedgross profit percentage was primarily due tohigher average sales prices (approximately 1%), favorable product mix (approximately 1%), partially offset by higher manufacturinglower costs (approximately1%5%) driven byincreasedtarifftariffrefunds recognized in the current quarter and lower manufacturing coststhatdueoffsettolowerfavorableEAAAfixed cost absorption and manufacturingcosts.efficiencies compared to the same period last year.
Accounts receivable, net, weresee in full comparison$163.3$210.0 million atAprilJuly 5, 2026, compared to $174.5 million at December 28, 2025. Thedecreaseincrease of$11.2$35.5 million was primarily due to the impact of higher net sales as a result of increased customercollectionsdemand in thefirstsecond quarter of 2026. The Company also recorded a $7.6 million accounts receivable related to IEEPA tariff refunds.
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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 December 28, 2025, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter and six months ended AprilJuly 5, 2026, or as of,of AprilJuly 5, 2026, and the comparable periods of 2025, 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-monthsix-month period ended AprilJuly 5, 2026 includes 1427 weeks,weeks and the three-monthsix-month period ended MarchJune 30,29, 2025 includes 26 weeks. The three-month periods ended July 5, 2026 and June 29, 2025 both include 13 weeks.
During the quarter ended AprilJuly 5, 2026, we had consolidated net sales of $331.0$395.7 million, up 11.3%5.4% compared to $297.4$375.5 million in the firstsecond quarter last year, primarily due to higher salescustomer volumedemand— partially driven by an extra week in 2026. The sales increase was primarilyparticularly in the corporate officeoffice, healthcare, and education market segment.segments — and higher average sales prices. Fluctuations in currency exchange rates positively impacted net sales during the firstsecond quarter of 2026, as discussed below. Consolidated operating income was $32.3$74.9 million for the firstsecond quarter of 2026,2026 compared to $23.2$52.0 million in the firstsecond quarter last year, primarily due to higher sales and higher gross profit margin asdriven a result of higher average sales prices and product mix,by lower manufacturing costs inon EAAA,higher partiallyvolume, offsetproduction byefficiencies, increasedproduct mix, and IEEPA tariff costs.refunds recognized during the current quarter as discussed below. Consolidated net income for the quarter ended AprilJuly 5, 2026, was $23.6$51.4 million or $0.40$0.88 per diluted share, compared to consolidated net income of $13.0$32.6 million or $0.22$0.55 per diluted share,share in the firstsecond quarter last year.
During the first six months of 2026, we had consolidated net sales of $726.7 million, up 8.0% compared to $672.9 million in the first six months of last year, primarily due to higher customer demand partially driven by an extra week in the first six months of 2026. Consolidated operating income was $107.2 million for the first six months of 2026, compared to $75.3 million in the same period last year, primarily due to higher sales and higher gross profit margin, driven by lower manufacturing costs and tariff refunds as discussed above. Consolidated net income for the six months ended July 5, 2026, was $75.0 million or $1.28 per diluted share, compared to $45.6 million or $0.77 per diluted share in the same period last year.
Ongoing disruptions in economic markets and global energy markets, inflation, the war between Russia and Ukraine, conflicts in the Middle East, evolving trade policiespolicies, andimpacts thefrom impactgovernment-imposed of tariffs on the demand for our products,tariffs, a challenging supply chain environment, slow market conditions in certain parts of the globe,globe and macro driven changes to customer demand for our products, significant financial pressures in the commercial office market globally, and other geopolitical factors, all pose challenges which may adversely affect our future performance. We 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.
In 2025, the U.S. government enacted a series of higher trade tariffs on goods imported into the U.S. As a result, the Company incurred higher tariff costs on rubber and luxury vinyl tile products imported into the U.S. in fiscal year 2025 and in the first quartersix months of 2026. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were invalid. TheDuring the three months ended July 5, 2026, the Company believesrecognized certainapproximately $15.6 million in refunds for tariffs previously paid mayunder bethe refundable.IEEPA. These refunds were recognized as a reduction to cost of sales in the consolidated condensed statements of operations. The Company hasalso recorded approximately $0.5 million of interest income associated with these tariff refunds, presented as a reduction to interest expense, net in the consolidated condensed statements of operations. In the consolidated condensed balance sheets, the Company recorded $7.6 million as an accounts receivable as a portion of these tariff-related amounts recognized was not yetcollected recognizedduring anythe recoverysecond quarter of tariffs2026 but was realizable pursuant to the gain contingency guidance as of July 5, 2026, with the remainder of the tariff-related amounts recorded as an increase in itscash. consolidatedAny financialoutstanding statements.requests for IEEPA tariff refunds are not material.
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 six-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025:
Below is information regarding our consolidated net sales, and analysis of those results, for the three-month and six-month periods ended AprilJuly 5, 2026, and MarchJune 30,29, 2025:
For the quarter ended AprilJuly 5, 2026, consolidated net sales increased $33.6$20.2 million (11.3%5.4%) versus the comparable period in 2025, primarily due to higher sales volume (approximately 6%3%), higher average sales prices (approximately 1%), and the impact of currency fluctuations, which had a positive impact on net sales of approximately $13.4 million (5%). Thesefavorable currency fluctuations were(approximately primarily$5.8 duemillion toor 1%) from the strengthening of theforeign Eurocurrencies against the U.S. dollar. On a market segment basis, the sales increase was primarily in the corporate office, public buildings, healthcare, and retaileducation market segments.
For the six months ended July 5, 2026, consolidated net sales increased $53.8 million (8.0%) versus the comparable period in 2025, primarily due to higher sales volume (approximately 4%) partially driven by an extra week in the first six months of 2026, favorable currency fluctuations (approximately $19.2 million or 3%) from the strengthening of the Euro against the U.S. dollar, and higher average sales prices (approximately 1%). On a market segment basis, the sales increase was primarily in the corporate office, healthcare, and education market segments.
The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three-month and six-month periods ended AprilJuly 5, 2026, and MarchJune 30,29, 2025:
For the quarter ended AprilJuly 5, 2026, consolidated cost of sales increaseddecreased $17.9$9.9 million (9.6%4.4%) compared to the firstsecond quarter of 2025, primarily due to higher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S., partially offset by lower EAAA manufacturing costs driven by favorable fixed cost absorption on higher volume.volume, manufacturing efficiencies, and the impact of $15.6 million in IEEPA tariff refunds recognized in the current quarter, which were recorded as a reduction to cost of sales. These favorable impacts were partially offset by other tariff costs of $3.5 million recognized during the second quarter of 2026. Currency fluctuationstranslation had a negative impact on consolidated cost of sales forin the firstsecond quarter of 2026 and partially increased our costs by approximately $8.6$3.8 million (4.6%1.7%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 61.7%55.0% for the firstsecond quarter of 2026 versus 62.7%60.6% for the firstsecond quarter of 2025.
For the six months ended July 5, 2026, consolidated cost of sales increased $7.9 million (1.9%) versus the comparable period in 2025, primarily due to higher sales partially offset by the impact of tariff refunds and lower manufacturing costs as discussed above. Currency translation had a negative impact on consolidated cost of sales for the first six months of 2026 and partially increased our costs by approximately $12.4 million (3.0%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 58.1% for the first six months of 2026 versus 61.5% for the first six months of 2025.
For the quarter ended AprilJuly 5, 2026, consolidated gross profit, as a percentage of net sales, was 38.3%45.0% compared with 37.3%39.4% in the same period last year. The increase in consolidated gross profit percentage was primarily due to higher average sales prices (approximately 1%), favorable product mix (approximately 1%), partially offset by higher manufacturinglower costs (approximately 1%5%) driven by increasedtariff tariffrefunds recognized in the current quarter and lower manufacturing costs thatdue offsetto lowerfavorable EAAAfixed cost absorption and manufacturing costs.efficiencies compared to the same period last year.
For the six months ended July 5, 2026, gross profit, as a percentage of net sales, was 41.9% compared with 38.5% in the same period last year. The increase in gross profit percentage was primarily due to lower costs driven by the factors discussed above.
For the quarter ended AprilJuly 5, 2026, consolidated SG&A expenses increased $6.7$7.2 million (7.6%7.5%) versus the comparable period in 2025. Currency fluctuations had a negative impact on consolidated SG&A expenses of approximately $3.0$1.1 million (3.4%1.2%) in the firstsecond quarter of 2026 compared to the same period last year. SG&A expenses were higher for the firstsecond quarter of 2026 primarily due to (i)higher highersales commissions and variable compensation of $3.1$7.6 million; (ii)on improved operating results and higher labor costs of $2.5$1.6 million;million. andThese (iii)increases higherwere advertisingpartially offset by lower severance costs of $1.1$2.9 million due to aemployee newreduction productinitiatives launch.recognized in the comparable prior year period. As a percentage of net sales, SG&A expenses decreasedincreased to 28.5%26.1% for the firstsecond quarter of 2026 versus 29.5%25.5% for the firstsecond quarter of 2025.
For the six months ended July 5, 2026, consolidated SG&A expenses increased $13.9 million (7.6%) versus the comparable period in 2025. Currency translation had a negative impact on consolidated SG&A expenses of approximately $4.1 million (2.3%) in the first six months of 2026 compared to the same period last year.
SG&A expenses were higher for the first six months of 2026 primarily due to (i) higher variable compensation of $10.7 million; (ii) higher labor costs of $4.1 million; (iii) higher advertising costs of $1.3 million due to a new product launch; and (iv) higher professional fees of $1.3 million. These increases were partially offset by lower severance costs of $3.0 million due to employee reduction initiatives recognized in the comparable prior year period. As a percentage of net sales, SG&A expenses decreased to 27.1% for the first six months of 2026 versus 27.3% for the first six months of 2025.
During the quarter ended AprilJuly 5, 2026, interest expense was $2.7$2.4 million, a decrease of $1.8$2.1 million from the comparable period in 2025, primarily due to lower outstanding borrowings as theour formerly outstanding senior notes were redeemed in December 2025. Lower interest rates on borrowings under the Facility also contributed to the decrease in interest expense. For the six months ended July 5, 2026, interest expense was $5.0 million, a decrease of $3.8 million from the comparable period in 2025, primarily due to lower outstanding borrowings as discussed above.
The effective tax rate for the three and six months ended AprilJuly 5, 20262026, was 27.4% and March24.8%, 30,respectively, 2025,compared wasto 18.3%26.3% and 24.0%,25.6% respectively.for the same periods in 2025. The decreaseincrease in the effective tax rate for the three months ended AprilJuly 5, 2026, as compared to the same period lastin year2025, was primarily due to an increase in non-deductible employee compensation. The decrease in the effective tax rate for the six months ended July 5, 2026, as compared to the same period in 2025, was primarily due to higher excess tax benefits related to share-based compensation.
See Note 12 entitled “Income Taxes” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
The following table presents AMS segment net sales and AOI for the three-month and six-month periods ended AprilJuly 5, 2026, and MarchJune 30,29, 2025:
During the firstsecond quarter of 2026, net sales in AMS increased 8.7%3.4% versus the comparable period in 20252025, primarily due to higher sales volume and higher average blended sales prices.prices on favorable price / mix. On a market segment basis, the AMS sales increase was primarily in the healthcare, corporate office, healthcare, public buildings, and retail market segments.
During the first six months of 2026, net sales in AMS increased 5.7% versus the comparable period in 2025, primarily due to higher sales volume and favorable price / mix as discussed above. On a market segment basis, the AMS sales increase was primarily in the corporate office, healthcare, and retail market segments.
AOI in AMS increased 20.3%24.9% during the firstsecond quarter of 2026 compared to the prior year periodperiod, primarily due to higher sales.sales Higherand gross profit margin mostly driven by higher average sales prices and product mix, partially offset by increased tariff costs,refunds alsorecognized contributed toin the increasecurrent in AMS AOI.quarter. As a percentage of net sales, AOI increased to 12.2%24.6% during the firstsecond quarter of 2026 compared to 11.0%20.4% in the same period last year.
AOI in AMS increased 23.5% during the first six months of 2026 compared to the prior year period, primarily due to higher sales, higher gross profit margin as discussed above, and product mix. As a percentage of net sales, AOI increased to 19.1% during the first six months of 2026 compared to 16.4% in the same period last year.
The following table presents EAAA segment net sales and AOI for the three-month and six-month periods ended AprilJuly 5, 2026, and MarchJune 30,29, 2025:
During the firstsecond quarter of 2026, net sales in EAAA increased 15.2%8.8% versus the comparable period in 2025, primarily due to higher sales volume.volume Currencyand favorable currency fluctuations had a positive impact on EAAA net sales of approximately $12.8$5.8 million (10.9%4.3%) from the strengthening of theforeign Euro and Australian dollarcurrencies against the U.S. dollar. On a market segment basis, the EAAA sales increase was most significantprimarily in the corporate office and education market segment.segments.
During the first six months of 2026, net sales in EAAA increased 11.8% versus the comparable period in 2025, primarily due to favorable currency fluctuations of approximately $18.6 million (7.3%) and higher sales volume. On a market segment basis, the EAAA sales increase was primarily in the corporate office and education market segments.
AOI in EAAA increased 57.9%97.7% during the firstsecond quarter of 2026 versus the comparable period in 2025, primarily due to higher sales and higher gross profit margin asdriven a result ofby lower manufacturing costs drivenand byproduct favorablemix. fixedCurrency costfluctuations absorptionhad no material impact on higherEAAA productionAOI volume.for the second quarter of 2026 compared to the same period last year. As a percentage of net sales, AOI increased to 6.5%9.4% during the firstsecond quarter of 2026 compared to 4.8%5.2% in the same period last year.
AOI in EAAA increased 80.1% during the first six months of 2026 versus the comparable period in 2025, primarily due to higher sales and gross profit margin as discussed above. Currency fluctuations had a positive impact on AOI of approximately $2.8 million (8.5%) for the first six months of 2026 compared to the same period in 2025. As a percentage of net sales, AOI increased to 8.0% during the first six months of 2026 compared to 5.0% in the same period last year.
At AprilJuly 5, 2026, the Company had $61.2$81.5 million in cash. At that date, the Company had $173.6$171.1 million in term loan borrowings, $23.1$33.1 million in revolving loan borrowings, and $0.6 million in letters of credit outstanding under our Facility. As of AprilJuly 5, 2026, we had additional borrowing capacity of $226.3$216.3 million under the Facility. 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.
Accounts receivable, net, were $163.3$210.0 million at AprilJuly 5, 2026, compared to $174.5 million at December 28, 2025. The decreaseincrease of $11.2$35.5 million was primarily due to the impact of higher net sales as a result of increased customer collectionsdemand in the firstsecond quarter of 2026. The Company also recorded a $7.6 million accounts receivable related to IEEPA tariff refunds.
Inventories, net, were $294.2$291.6 million at AprilJuly 5, 2026, compared to $275.0 million at December 28, 2025. The increase of $19.2$16.6 million was primarily due to higher work in process and finished goods inventory builddriven attributableby toincreased expectedproduction volumes and higher customer demand in the remainder of 2026.demand.
The following table presents a summary of cash flows for the three-monthsix-month periods ended AprilJuly 5, 2026 and MarchJune 30,29, 2025, respectively:
Cash provided by operating activities was $13.5$51.9 million for the threesix months ended AprilJuly 5, 2026, which represents an increase of $1.8$10.0 million from the prior year comparable period. The increase wasperiod, primarily dueattributable to higher net income for the threesix months ended AprilJuly 5, 2026, partially offset by a higher use of cash related to inventory build and accounts receivable as discussed above.
Cash used in investing activities was $10.3$22.5 million for the threesix months ended AprilJuly 5, 2026, which represents an increase of $2.9$7.7 million from the prior year comparable period, primarily attributable to a greater capital investment in manufacturing automation and robotics solutions during the threefirst six months ended April 5,of 2026.
Cash used in financing activities was $12.4$17.8 million for the threesix months ended AprilJuly 5, 2026, which represents an increase of $3.7$4.1 million from the prior year comparable period. The year-over-year increase was primarily due to higher outstanding borrowings under the credit facility resulting in higher repayments and theincreased repurchaserepurchases of common stock, partially offset by higher proceeds from line of credit borrowings under the credit facility during the threefirst six months endedof April2026 5,compared 2026.to the prior year.
In May 2022, the Company adopted a 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 threesix months ended AprilJuly 5, 2026, the Company repurchased 460,882771,125 shares of common stock at a weighted average price of $26.04$26.90 per share pursuant to this program.
We anticipate revenue growth in the secondthird quarter of fiscal 2026 compared to the firstprior quarteryear ofcomparable 2026.period. We anticipate that our secondthird quarter and the remainder of fiscal 2026 will be impacted by higher raw material costs, higher energy costs, and higher costs to procure our luxury vinyl tile products amid increased global macro-economic uncertainty. We are activating initiatives to offset these impacts through incremental pricing and productivity.
As of AprilJuly 27,20, 2026, the consolidated backlog of unshipped orders was approximately $256.6$269.1 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, backlog was approximately $222.8 million as of February 2, 2026. Historically, backlog is subject to significant fluctuations due to the timing of orders for individual large projects. Disruptions in supply and distribution chains or delays in construction projects and flooring installations worldwide,worldwide have caused, and may continue to cause, fluctuations in our backlog.
TILE insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 13 filings (7 insiders, 11 trade dates, 180,666 shares, about $6.0M; 6 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -180,666 (purchases minus sales); net value about -$6.0M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-24 | Hurd Laurel |
Open-market sale |
7,000 | $34.99 | $244.9K |
| 2026-09-21 | Hendrix Daniel T |
Open-market sale |
4,000 | $34.05 | $136.2K |
| 2026-09-08 | Foshee David B |
Open-market sale |
28,451 | $35.99 | $1.0M |
| 2026-09-02 | Hendrix Daniel T |
Open-market sale |
8,000 | $37.13 | $297.0K |
| 2026-09-02 | Hendrix Daniel T |
Open-market sale |
8,000 | $37.13 | $297.0K |
| 2026-08-27 | Blackorby William Thomas |
Open-market sale | 2,826 | $37.86 | $107.0K |
| 2026-08-26 | Hausmann Bruce Andrew |
Open-market sale | 170 | $39.13 | $6.7K |
| 2026-08-24 | Hurd Laurel |
Open-market sale |
7,000 | $39.09 | $273.6K |
| 2026-08-19 | Blackorby William Thomas |
Open-market sale | 2,826 | $39.21 | $110.8K |
| 2026-08-13 | Keough Joseph |
Gift | 8,442 | — | — |
| 2026-08-11 | Pridgen Robert |
Open-market sale | 8,000 | $38.30 | $306.4K |
| 2026-08-11 | Poppens James |
Open-market sale | 10,000 | $38.43 | $384.3K |
| 2026-05-27 | Hausmann Bruce Andrew |
Open-market sale | 50,000 | $29.66 | $1.5M |
| 2026-05-19 | Kennedy Christopher G |
Grant/award | 6,067 | — | — |
| 2026-05-19 | O'brien Robert T |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Marcus Catherine |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Kohler K David |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Kilbane Catherine M |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Keough Joseph |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Burke John Patrick |
Grant/award | 4,461 | — | — |
| 2026-05-19 | Gibson Dwight Audley Konrad |
Grant/award | 4,461 | — | — |
| 2026-05-18 | Foshee David B |
Open-market sale | 44,393 | $29.00 | $1.3M |
Well-known investors holding TILE (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 862,819 | $30.9M | 0.02% | Reduced 12% |
| Renaissance Technologies | 2026-06-30 | 242,741 | $8.7M | 0.01% | Reduced 47% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 308,387 | $7.7M | — | Sold out |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 161,033 | $5.8M | 0.0% | Added 8% |
| Two Sigma Investments | 2026-06-30 | 133,591 | $4.8M | 0.0% | Reduced 61% |
| First Eagle Investment Management | 2026-06-30 | 125,143 | $4.5M | 0.01% | No change |
| Millennium Management (Israel Englander) | 2026-06-30 | 79,114 | $2.8M | 0.0% | Reduced 79% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 20,729 | $742.9K | 0.0% | Reduced 91% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 20,085 | $719.8K | 0.0% | Reduced 16% |