Annual Statements Open main menu

INTERFACE INC - Quarter Report: 2016 July (Form 10-Q)

tile20160703_10q.htm Table Of Contents

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For Quarterly Period Ended July 3, 2016

 

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.)

 

  

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

(Address of principal executive offices and zip code)

 

(770) 437-6800

(Registrant’s telephone number, including area code)

 

 

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 ☑    No ☐

 

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

 

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

 

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

 

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

Yes ☐     No ☑

 

Shares outstanding of each of the registrant’s classes of common stock at August 4, 2016:

 

Class

Number of Shares

Common Stock, $.10 par value per share

64,807,371

 

 

  

INTERFACE, INC.

 

INDEX

 

 

 

PAGE

PART I.

FINANCIAL INFORMATION

 
 

Item 1.

Financial Statements

3

   

Consolidated Condensed Balance Sheets – July 3, 2016 and January 3, 2016

3

   

Consolidated Condensed Statements of Operations – Three Months and Six Months Ended July 3, 2016 and July 5, 2015

4

   

Consolidated Statements of Comprehensive Income – Three Months and Six Months Ended July 3, 2016 and July 5, 2015

5

   

Consolidated Condensed Statements of Cash Flows – Six Months Ended July 3, 2016 and July 5, 2015

6

   

Notes to Consolidated Condensed Financial Statements

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

17

 

Item 4.

Controls and Procedures

18

     

PART II.

OTHER INFORMATION

 
 

Item 1.

Legal Proceedings

19

 

Item 1A.

Risk Factors

19

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

 

Item 3.

Defaults Upon Senior Securities

19

 

Item 4.

Mine Safety Disclosures

19

 

Item 5.

Other Information

19

 

Item 6.

Exhibits

20

 

 

 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(IN THOUSANDS)

 

   

JULY 3, 2016

   

JANUARY 3, 2016

 
   

(UNAUDITED)

         

ASSETS

               

CURRENT ASSETS:

               

Cash and Cash Equivalents

  $ 88,364     $ 75,696  

Accounts Receivable, net

    128,479       130,322  

Inventories

    168,738       161,174  

Prepaid Expenses and Other Current Assets

    22,402       22,490  

Deferred Income Taxes

    8,509       8,726  

TOTAL CURRENT ASSETS

    416,492       398,408  
                 

PROPERTY AND EQUIPMENT, less accumulated depreciation

    210,818       211,489  

DEFERRED TAX ASSET

    11,073       20,110  

GOODWILL

    64,872       63,890  

OTHER ASSETS

    61,864       62,652  

TOTAL ASSETS

  $ 765,119     $ 756,549  
                 

LIABILITIES AND SHAREHOLDERS’ EQUITY

               

CURRENT LIABILITIES:

               

Accounts Payable

  $ 45,174     $ 52,834  

Current Portion of Long-Term Debt

    13,750       11,250  

Accrued Expenses

    79,501       88,933  

TOTAL CURRENT LIABILITIES

    138,425       153,017  
                 

LONG-TERM DEBT

    210,577       202,281  

DEFERRED INCOME TAXES

    9,030       10,505  

OTHER

    45,947       48,380  

TOTAL LIABILITIES

    403,979       414,183  
                 

Commitments and Contingencies

               
                 

SHAREHOLDERS’ EQUITY:

               

Preferred Stock

    0       0  

Common Stock

    6,481       6,570  

Additional Paid-In Capital

    358,320       370,327  

Retained Earnings

    127,274       100,270  

Accumulated Other Comprehensive Loss – Foreign Currency Translation Adjustment

    (90,443 )     (91,511 )

Accumulated Other Comprehensive Loss – Pension Liability

    (40,492 )     (43,290 )

TOTAL SHAREHOLDERS’ EQUITY

    361,140       342,366  
    $ 765,119     $ 756,549  

 

See accompanying notes to consolidated condensed financial statements.

 

 

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

 

   

THREE MONTHS ENDED

   

SIX MONTHS ENDED

 
                                 
   

JULY 3, 2016

   

JULY 5, 2015

   

JULY 3, 2016

   

JULY 5, 2015

 
                                 

NET SALES

  $ 248,207     $ 263,637     $ 470,761     $ 500,541  

Cost of Sales

    149,081       162,385       285,003       313,857  
                                 

GROSS PROFIT ON SALES

    99,126       101,252       185,758       186,684  

Selling, General and Administrative Expenses

    67,328       68,033       132,933       132,065  

OPERATING INCOME

    31,798       33,219       52,825       54,619  
                                 

Interest Expense

    1,590       1,790       3,109       3,678  

Other Expense (Income)

    (116 )     (446 )     333       826  
                                 

INCOME BEFORE INCOME TAX EXPENSE

    30,324       31,875       49,383       50,115  

Income Tax Expense

    9,667       10,153       15,832       16,071  
                                 

NET INCOME

  $ 20,657     $ 21,722     $ 33,551     $ 34,044  
                                 

Earnings Per Share – Basic

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  
                                 

Earnings Per Share – Diluted

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  
                                 

Common Shares Outstanding – Basic

    65,367       65,995       65,526       66,208  

Common Shares Outstanding – Diluted

    65,405       66,044       65,564       66,253  

 

See accompanying notes to consolidated condensed financial statements.

 

  

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

(IN THOUSANDS)

 

   

THREE MONTHS ENDED

   

SIX MONTHS ENDED

 
                                 
   

JULY 3, 2016

   

JULY 5, 2015

   

JULY 3, 2016

   

JULY 5, 2015

 
                                 

Net Income

  $ 20,657     $ 21,722     $ 33,551     $ 34,044  

Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment

    (8,311 )     5,060       1,068       (20,239 )

Other Comprehensive Income (Loss), Pension Liability Adjustment

    2,190       (2,557 )     2,798       645  

Comprehensive Income

  $ 14,536     $ 24,225     $ 37,417     $ 14,450  

  

See accompanying notes to consolidated condensed financial statements.

 

  

INTERFACE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

(IN THOUSANDS)

 

   

SIX MONTHS ENDED

 
                 
   

JULY 3, 2016

   

JULY 5, 2015

 

OPERATING ACTIVITIES:

               

Net Income

  $ 33,551     $ 34,044  

Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:

               

Depreciation and Amortization

    14,960       15,539  

Stock Compensation Amortization Expense

    2,349       9,100  

Deferred Income Taxes and Other

    4,490       9,287  

Working Capital Changes:

               

Accounts Receivable

    1,668       15,209  

Inventories

    (6,169 )     (27,150 )

Prepaid Expenses and Other Current Assets

    (574 )     (2,328 )

Accounts Payable and Accrued Expenses

    (20,360 )     (2,841 )
                 

CASH PROVIDED BY OPERATING ACTIVITIES:

    29,915       50,860  
                 

INVESTING ACTIVITIES:

               

Capital Expenditures

    (12,752 )     (12,126 )

Other

    1,585       (462 )
                 

CASH USED IN INVESTING ACTIVITIES:

    (11,167 )     (12,588 )
                 

FINANCING ACTIVITIES:

               

Repayments of Long-Term Debt

    (10,000 )     (3,000 )

Borrowing of Long-Term Debt

    20,167       0  

Proceeds from Issuance of Common Stock

    0       359  

Repurchase of Common Stock

    (10,443 )     (10,469 )

Dividends Paid

    (6,547 )     (5,300 )
                 

CASH USED IN FINANCING ACTIVITIES:

    (6,823 )     (18,410 )
                 

Net Cash Provided by (Used in) Operating, Investing and

               

Financing Activities

    11,925       19,862  

Effect of Exchange Rate Changes on Cash

    743       (2,937 )
                 

CASH AND CASH EQUIVALENTS:

               

Net Change During the Period

    12,668       16,925  

Balance at Beginning of Period

    75,696       54,896  
                 

Balance at End of Period

  $ 88,364     $ 71,821  

 

See accompanying notes to consolidated condensed financial statements.

 

 

INTERFACE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

NOTE 1 – CONDENSED FOOTNOTES

 

As contemplated by the Securities and Exchange Commission (the “Commission”) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual financial statements. Reference should be made to the Company’s year-end audited consolidated financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended January 3, 2016, as filed with the Commission.

 

The financial information included in this report has been prepared by the Company, without audit. In the opinion of management, the financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The January 3, 2016, consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The first quarter of 2016 was comprised of 13 weeks, while the first quarter of 2015 was comprised of 14 weeks. Each of the second quarters of 2016 and 2015 was comprised of 13 weeks.

 

Certain prior period amounts have been reclassified to conform to the current period presentation.

 

NOTE 2 – INVENTORIES

 

Inventories are summarized as follows:

 

   

July 3, 2016

   

January 3, 2016

 
   

(In thousands)

 

Finished Goods

  $ 112,304     $ 101,697  

Work in Process

    9,710       9,865  

Raw Materials

    46,724       49,612  
    $ 168,738     $ 161,174  

 

NOTE 3 – EARNINGS PER SHARE

 

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

 

 

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

  

   

Three Months Ended

   

Six Months Ended

 
   

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 

Earnings Per Share:

                               
                                 

Basic Earnings Per Share:

                               

Distributed Earnings

  $ 0.05     $ 0.04     $ 0.10     $ 0.08  

Undistributed Earnings

    0.27       0.29       0.41       0.43  

Total

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  
                                 

Diluted Earnings Per Share:

                               

Distributed Earnings

  $ 0.05     $ 0.04     $ 0.10     $ 0.08  

Undistributed Earnings

    0.27       0.29       0.41       0.43  

Total

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  
                                 

Basic earnings per share

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  

Diluted earnings per share

  $ 0.32     $ 0.33     $ 0.51     $ 0.51  

 

The following tables present net income that was attributable to participating securities:

 

   

Three Months Ended

   

Six Months Ended

 
   

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 
           

(In millions)

         

Net Income

  $ 0.2     $ 0.5     $ 0.3     $ 0.8  

 

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

 

   

Three Months Ended

   

Six Months Ended

 
   

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 
           

(In thousands)

         

Weighted Average Shares Outstanding

    64,779       64,497       64,938       64,710  

Participating Securities

    588       1,498       588       1,498  

Shares for Basic Earnings Per Share

    65,367       65,995       65,526       66,208  

Dilutive Effect of Stock Options

    38       49       38       45  

Shares for Diluted Earnings Per Share

    65,405       66,044       65,564       66,253  

 

For all periods presented, there were no options or participating securities excluded from the computation of diluted EPS.

 

NOTE 4 – LONG-TERM DEBT

 

Syndicated Credit Facility

 

The Company has a syndicated credit facility (the “Facility”) pursuant to which the lenders provide to the Company and certain of its subsidiaries a multicurrency revolving credit facility and provide to the Company a term loan. The facility matures in October of 2019. Interest on base rate loans is charged at varying rates computed by applying a margin depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. Interest on LIBOR-based loans and fees for letters of credit are charged at varying rates computed by applying a margin over the applicable LIBOR rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. In addition, the Company pays a commitment fee per annum (depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter) on the unused portion of the Facility.

 

As of July 3, 2016, the Company had outstanding $192.5 million of term loan borrowing and $31.8 million of revolving loan borrowings outstanding under the Facility, and had $4.0 million in letters of credit outstanding under the Facility. As of July 3, 2016, the weighted average interest rate on borrowings outstanding under the Facility was 2.4%.

 

Beginning in the fourth quarter of 2015, the Company became required to make quarterly amortization payments of the term loan borrowing. The amortization payments are due on the last day of the calendar quarter. The payment amount for each of the first three quarters of 2016 is $2.5 million per quarter. The quarterly amortization payment amount increases to $3.75 million on December 31, 2016.

 

 

The Company is currently in compliance with all covenants under the Facility and anticipates that it will remain in compliance with the covenants for the foreseeable future.

 

Other Lines of Credit

 

Subsidiaries of the Company have an aggregate of the equivalent of $14.7 million of other lines of credit available at interest rates ranging from 2.5% to 6.5%. As of July 3, 2016, there were no borrowings outstanding under these lines of credit. 

 

NOTE 5 – STOCK-BASED COMPENSATION

 

Stock Option Awards

 

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

 

All outstanding stock options vested prior to the end of 2013, and therefore there was no stock option compensation expense in the first six months of 2015 or 2016.

 

As of July 3, 2016, there were 87,500 stock options outstanding and exercisable, at an average exercise price of $8.75 per share. There were no stock options granted in 2016 or 2015. There were no exercises or forfeitures of stock options in the first six months of 2016. The aggregate intrinsic value of the outstanding and exercisable stock options was $0.6 million as of July 3, 2016.

 

Restricted Stock Awards

 

During the six months ended July 3, 2016 and July 5, 2015, the Company granted restricted stock awards for 266,500 and 597,000 shares of common stock, respectively. Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a two to three-year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date. Additionally, certain awards (or a portion thereof) could vest earlier upon the attainment of certain performance criteria, in the event of a change in control of the Company, or upon involuntary termination without cause.

 

Compensation expense related to restricted stock grants was $1.7 million and $9.1 million for the six months ended July 3, 2016 and July 5, 2015, respectively. Accounting standards require that the Company estimate forfeitures for restricted stock and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.

 

The following table summarizes restricted stock outstanding as of July 3, 2016, as well as activity during the six months then ended:

 

   

Restricted

Shares

   

Weighted Average

Grant Date

Fair Value

 

Outstanding at January 3, 2016

    1,470,000     $ 17.92  

Granted

    266,500       17.21  

Vested

    975,000       18.53  

Forfeited or canceled

    174,000       16.71  

Outstanding at July 3, 2016

    587,500     $ 16.95  

 

As of July 3, 2016, the unrecognized total compensation cost related to unvested restricted stock was $6.4 million. That cost is expected to be recognized by the end of 2019.

  

Performance Share Awards

 

In 2016, the Company issued awards of performance shares to certain employees. These awards vest based on the achievement of certain performance-based goals over a performance period of one to three years, subject to the employee’s continued employment through the last date of the performance period, and will be settled in shares of our common stock or in cash at the Company’s election. The number of shares that may be issued in settlement of the performance shares to the award recipients may be greater (up to 200%) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.

 

 

 

The following table summarizes the performance shares outstanding as of July 3, 2016, as well as the activity during the six months then ended:

 

   

Performance

Shares

 

Outstanding at January 3, 2016

    0  

Granted

    435,500  

Vested

    0  

Forfeited or canceled

    0  

Outstanding at July 3, 2016

    435,500  

 

The weighted average grant date fair value of the performance shares awarded in the first six month of 2016 was $17.23 per share. Compensation expense related to the performance shares for the six months ended July 3, 2016 was $0.6 million. Unrecognized compensation expense related to these performance shares was approximately $6.9 million as of July 3, 2016. No performance shares were granted or outstanding during 2015.

 

NOTE 6 – EMPLOYEE BENEFIT PLANS

 

The following tables provide the components of net periodic benefit cost for the three-month and six-month periods ended July 3, 2016 and July 5, 2015, respectively:

 

   

Three Months Ended

   

Six Months Ended

 

Defined Benefit Retirement Plan (Europe)

 

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 
   

(In thousands)

   

(In thousands)

 

Service cost

  $ 263     $ 265     $ 521     $ 534  

Interest cost

    1,728       2,111       3,448       4,204  

Expected return on assets

    (2,007 )     (2,265 )     (4,004 )     (4,512 )

Amortization of prior service costs

    (9 )     9       18       17  

Recognized net actuarial losses

    184       242       368       481  

Net periodic benefit cost

  $ 159     $ 362     $ 351     $ 724  

 

   

Three Months Ended

   

Six Months Ended

 

Salary Continuation Plan (SCP)

 

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 
   

(In thousands)

   

(In thousands)

 

Service cost

  $ 110     $ 148     $ 220     $ 297  

Interest cost

    317       278       634       556  

Amortization of loss

    203       131       405       261  

Net periodic benefit cost

  $ 630     $ 557     $ 1,259     $ 1,114  

 

 

NOTE 7 – SEGMENT INFORMATION

 

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

 

 
-10-

Table Of Contents
 

 

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

 

   

AMERICAS

   

EUROPE

   

ASIA-

PACIFIC

   

TOTAL

 
   

(in thousands)

 

Three Months Ended July 3, 2016:

                               
                                 

Net Sales

  $ 148,761     $ 61,264     $ 38,182     $ 248,207  

Depreciation and amortization

    3,611       1,297       2,169       7,077  

Total assets

    244,313       256,381       187,705       688,399  
                                 

Three Months Ended July 5, 2015:

                               
                                 

Net Sales

  $ 158,243     $ 66,273     $ 39,121     $ 263,637  

Depreciation and amortization

    3,879       1,231       2,297       7,407  
                                 

Six Months Ended July 3, 2016:

                               
                                 

Net Sales

  $ 279,177     $ 119,222     $ 72,362     $ 470,761  

Depreciation and amortization

    7,268       2,571       4,385       14,224  
                                 

Six Months Ended July 5, 2015:

                               
                                 

Net Sales

  $ 297,590     $ 130,780     $ 72,171     $ 500,541  

Depreciation and amortization

    7,820       2,436       4,662       14,918  

 

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

 

   

Three Months Ended

 

DEPRECIATION AND AMORTIZATION

 

July 3, 2016

   

July 5, 2015

 
   

(In thousands)

 

Total segment depreciation and amortization

  $ 7,077     $ 7,407  

Corporate depreciation and amortization

    366       343  
                 

Reported depreciation and amortization

  $ 7,443     $ 7,750  
                 

 

   

Six Months Ended

 

DEPRECIATION AND AMORTIZATION

 

July 3, 2016

   

July 5, 2015

 
   

(In thousands)

 
       

Total segment depreciation and amortization

  $ 14,224     $ 14,918  

Corporate depreciation and amortization

    736       621  
                 

Reported depreciation and amortization

  $ 14,960     $ 15,539  

 

ASSETS

 

July 3, 2016

 
   

(In thousands)

 

Total segment assets

  $ 688,399  

Corporate assets and eliminations

    76,720  
         

Reported total assets

  $ 765,119  

 

 
-11-

Table Of Contents
 

 

NOTE 8 – SUPPLEMENTAL CASH FLOW INFORMATION

 

Cash payments for interest amounted to $2.5 million and $3.3 million for the six months ended July 3, 2016 and July 5, 2015, respectively. Income tax payments amounted to $7.3 million and $3.5 million for the six months ended July 3, 2016 and July 5, 2015, respectively.

 

NOTE 9 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standard regarding recognition of revenue from contracts with customers. In summary, the core principle of this standard is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance for this standard was initially effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in August of 2015, the FASB delayed the effective date of the standard for one full year. While the Company is currently reviewing this new standard, it does not believe that the adoption of this standard will have a material impact on its financial condition or results of operations.

 

In January 2015, the FASB issued an accounting standard which eliminates the concept of extraordinary items from generally accepted accounting principles. The standard does not affect disclosure guidance for events or transactions that are unusual in nature or infrequent in their occurrence. The standard is effective for interim and annual periods in fiscal years beginning after December 15, 2015. The adoption of this standard did not have any impact on our financial condition or results of operations.

    

In February 2015, the FASB issued an accounting standard which changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (“VIE”), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The new accounting standard is effective for annual and interim periods in fiscal years beginning after December 15, 2015. The adoption of this standard did not have any impact on our financial condition or results of operations.

 

In April 2015, the FASB issued an accounting standard to simplify the presentation of debt issuance costs. This accounting standard requires debt issuance costs to be presented on the balance sheet as a direct reduction from the carrying amount of the related debt liability. In August 2015, the FASB issued an accounting standard update that allows the presentation of debt issuance costs related to line-of-credit arrangements as an asset on the balance sheet under the simplified guidance, regardless of whether there are any outstanding borrowings on the related arrangements. The guidance in these accounting standards is to be applied retrospectively and is effective for interim and annual reporting periods beginning after December 15, 2015. The Company’s debt issuance costs relate to its Syndicated Credit Facility and, as a result, these costs have been, and will continue to be, included as an asset on the balance sheet. Thus, the adoption of this standard did not have any impact on our financial statements.

 

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

 

In November 2015, the FASB issued an accounting standard which requires deferred tax assets and liabilities, as well as any related valuation allowance, to be classified as noncurrent on the balance sheet. As a result, each jurisdiction will only have one net noncurrent deferred tax asset or liability. This standard does not change the existing requirement that only permits offsetting within a jurisdiction. The amendments in the standard may be applied either prospectively or retrospectively to all prior periods presented. The new guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. As this standard impacts only presentation, the Company does not expect it to have any significant effect on its ongoing financial reporting.

 

In February 2016, the FASB issued a new accounting standard regarding leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of adoption of the new standard on our consolidated financial statements

 

 
-12-

Table Of Contents
 

 

NOTE 10 – INCOME TAXES

 

Accounting standards require that all tax positions be analyzed using a two-step approach. The first step requires an entity to determine if a tax position is more-likely-than-not to be sustained upon examination. In the second step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-not to be realized upon ultimate settlement. In the first six months of 2016, the Company decreased its liability for unrecognized tax benefits by $0.2 million. As of July 3, 2016, the Company had accrued approximately $28.1 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of July 3, 2016 reflects a reduction for $14.2 million of these unrecognized tax benefits.

 

NOTE 11 – ITEMS RECLASSIFIED FROM OTHER COMPREHENSIVE INCOME

 

During the first six months of 2016, the Company did not reclassify any significant amounts out of accumulated other comprehensive income. The reclassifications that occurred in that period were primarily comprised of $0.8 million related to the Company’s defined retirement benefit plan and salary continuation plan. These reclassifications were included in the selling, general and administrative expenses line item of the Company’s consolidated condensed statement of operations.

 

NOTE 12 – REPURCHASE OF COMMON STOCK

 

In the fourth quarter of 2014, the Company announced a program to repurchase up to 500,000 shares of common stock per fiscal year, commencing with the 2014 fiscal year. In the second quarter of 2016, the Company amended the share purchase program to authorize the repurchase of up to $50 million of common stock. This amended program has no specific expiration date. During the first six months of 2016, the Company repurchased and retired 662,500 shares of common stock at a weighted average purchase price of $15.73 per share.

 

 
-13-

Table Of Contents
 

  

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

 

Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016, under Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter and six months ended, or as of, July 3, 2016, and the comparable periods of 2015 for comparison purposes, and, to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time. These discussions should be read in conjunction with that Form 10-K for more detailed and background information.

 

Forward-Looking Statements

 

This report contains statements which may constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed under the heading “Risk Factors” included in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2016, which discussion is hereby incorporated by reference. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

 

General

 

During the quarter ended July 3, 2016, we had net sales of $248.2 million, compared with net sales of $263.6 million in the second quarter last year. During the first six months of fiscal year 2016, we had net sales of $470.8 million, compared with net sales of $500.5 million in the first six months of last year. Fluctuations in currency exchange rates had small negative impacts on our sales and operating income in the 2016 reported periods, compared with the prior year periods. The following table presents the amounts (in U.S. dollars) by which the exchange rates for converting foreign currencies into U.S. dollars have negatively affected our net sales and operating income for the three months and six months ended July 3, 2016.

 

Impact of Changes in Foreign Currency on:

 

Three Months Ended July 3, 2016

   

Six Months Ended July 3, 2016

 
   

(In millions)

 

Net sales

  $ (0.5 )   $ (4.3 )

Operating income

    0.0       (0.3 )

 

During the second quarter of 2016, we had net income of $20.7 million, or $0.32 per diluted share, compared with net income of $21.7 million, or $0.33 per diluted share, in the second quarter of 2015. During the six months ended July 3, 2016, we had net income of $33.6 million, or $0.51 per diluted share, compared with net income of $34.0 million, or $0.51 per diluted share, in the first six months of 2015.

 

The first six months of 2016 were comprised of 26 weeks, while the first six months of 2015 were comprised of 27 weeks. (The additional week was in the first quarter of 2015.) This is a factor in certain of the comparisons discussed in this Item 2.

 

 
-14-

Table Of Contents
 

 

Results of Operations

 

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 July 3, 2016, and July 5, 2015, respectively:

 

   

Three Months Ended

   

Six Months Ended

 
   

July 3, 2016

   

July 5, 2015

   

July 3, 2016

   

July 5, 2015

 
                                 

Net sales

    100.0 %     100.0 %     100.0 %     100.0 %

Cost of sales

    60.1       61.6       60.5       62.7  

Gross profit on sales

    39.9       38.4       39.5       37.3  

Selling, general and administrative expenses

    27.1       25.8       28.2       26.4  

Operating income

    12.8       12.6       11.2       10.9  

Interest/Other expenses

    0.6       0.5       0.8       0.9  

Income before tax expense

    12.2       12.1       10.5       10.0  

Income tax expense

    3.9       3.9       3.4       3.2  

Net income

    8.3       8.2       7.1       6.8  

 

Net Sales

 

Below we provide information regarding net sales and analyze those results for the three-month and six-month periods ended July 3, 2016, and July 5, 2015, respectively.

 

   

Three Months Ended

   

Percentage

 
   

July 3, 2016

   

July 5, 2015

   

Change

 
   

(In thousands)

         

Net Sales

  $ 248,207     $ 263,637       (5.9 %)

 

   

Six Months Ended

   

Percentage

 
   

July 3, 2016

   

July 5, 2015

   

Change

 
   

(In thousands)

         

Net Sales

  $ 470,761     $ 500,541       (5.9 %)

 

 

For the quarter ended July 3, 2016, net sales decreased $15.4 million (5.9%) versus the comparable period in 2015. Currency fluctuations did not have a significant impact on the comparison, as a strengthening of the Euro versus the U.S. dollar was offset by the weakening of the Australian dollar versus the U.S. dollar. On a geographic basis, we experienced sales declines in the Americas (down 6%), Europe (down 8% as reported in U.S. dollars and 9% in local currency) and Asia-Pacific (down 2%). In the Americas, the decline was largely attributable to our InterfaceServices business, where its largest retail customer delayed many projects until the second half of 2016, alongside deferred purchases by customers in the weakened oil and gas sector. With the exception of the hospitality (up 27%) and healthcare (up 15%) segments, all other market segments in the Americas region experienced declining sales in the second quarter of 2016 compared with the prior year period. In Europe, the decline was largely due to customer uncertainty and hesitation leading up to the June 23, 2016 Brexit referendum vote. The decline in Europe occurred in the corporate office (down 9%) and education (down 46%) market segments, partially offset by increases in all other market segments with the retail segment (up 34%) being the most significant. In Asia-Pacific, the decline was largely a function of softer sales performance in Australia (down 9% as reported in U.S. dollars and 5% in local currency) due primarily to large project shipments in June 2015 that did not reoccur this year. The remainder of the Asia-Pacific region experienced an increase of 5%, with India and China having the most significant growth. Within the Asia-Pacific division, sales in the corporate office market segment were up 6%, but this was more than offset by a 25% decline in non-office segments, with education (down 39%) and hospitality (down 63%) representing the largest areas of decline.

 

For the six months ended July 3, 2016, net sales decreased $29.8 million (5.9%) versus the comparable period in 2015. Currency fluctuations had a negative impact on the comparison of approximately $4.3 million, or just under 1%. On a geographic basis, we experienced a decline of 6% in the Americas and 9% in Europe (in both U.S. dollars and local currency), while our sales in Asia-Pacific were up less than 1% in the first six months of 2016 compared with the same period last year. The decline in the Americas region was, again, largely a result of delayed projects at our InterfaceServices business until the second half of 2016, along with softer sales to oil and gas customers. With the exception of the hospitality (up 13%) and healthcare (up 7%) market segments, all other market segments in the Americas had lower sales compared with the first six months of 2015. In Europe, the uncertainty and hesitation surrounding the Brexit vote as well as other political and economic issues led to lower sales, particularly in the corporate office (down 10%) and education (down 38%) market segments. Small increases in the retail (up 32%) and hospitality (up 23%) market segments slightly mitigated the decline. In Asia-Pacific, an increase of 8% in Asia was nullified by a decline in Australia of 6% as reported in U.S. dollars. In local currency, however, sales in Australia were even in the first six months of 2016 compared with the same period in 2015. On a market segment basis within the Asia-Pacific region, an increase in the corporate office segment of 8% for the first six months of 2016 was offset almost entirely by declines in the retail (down 54%), education (down 27%) and hospitality (down 49%) segments.

 

 
-15-

Table Of Contents
 

 

Cost and Expenses

 

The following table presents, on a consolidated basis for our operations, our overall cost of sales and selling, general and administrative expenses for the three-month and six-month periods ended July 3, 2016, and July 5, 2015, respectively:

 

   

Three Months Ended

   

Percentage

 

Cost and Expenses

 

July 3, 2016

   

July 5, 2015

   

Change

 
   

(In thousands)

         

Cost of sales

  $ 149,081     $ 162,385       (8.2% )

Selling, general and administrative expenses

    67,328       68,033       (1.0% )

Total

  $ 216,409     $ 230,418       (6.1% )

 

   

Six Months Ended

   

Percentage

 

Cost and Expenses

 

July 3, 2016

   

July 5, 2015

   

Change

 
   

(In thousands)

         

Cost of sales

  $ 285,003     $ 313,857       (9.2% )

Selling, general and administrative expenses

    132,933       132,065       0.7 %

Total

  $ 417,936     $ 445,922       (6.3% )

 

 

For the three months ended July 3, 2016, our cost of sales decreased $13.3 million (8.2%) versus the comparable period in 2015. As a percentage of sales, our costs of sales decreased to 60.1% for the second quarter of 2016 versus 61.6% for the second quarter of 2015. This improvement in gross profit margin occurred across all three of our geographic regions, with Asia-Pacific showing the largest percentage increase, followed by Europe and the Americas. The key factors in the gross margin improvement were (1) lower raw materials input costs (for the second quarter of 2016, our per-unit input costs are 3-5% lower on average than the comparable period in 2015 due to lower prices on petroleum-based raw materials), (2) a shift in product mix towards margin accretive products such as our skinny plank designs, and (3) better material usage and improved production efficiencies as we continue to implement and refine our lean manufacturing practices. These factors drove the decrease in cost of sales as percentage of sales, despite a 7% decline in production volume in the second quarter of 2016 compared with the second quarter last year.

 

For the six months ended July 3, 2016, our cost of sales decreased $28.9 million (9.2%) versus the comparable period in 2015. Currency fluctuations had a favorable impact of less than 1% on the comparison; if currency rates had remained the same year over year, our cost of sales would have been approximately $3.0 million higher versus the first six months of 2015. As a percentage of sales, our cost of sales declined to 60.5% for the first six months of 2016, versus 62.7% for the same period last year. The improvement as a percentage of sales took place across all of our geographic regions, with Asia-Pacific having the largest increase followed by Europe and the Americas. Our decrease in cost of sales in absolute dollars was due to the following factors: (1) lower raw materials costs, as our per-unit input costs were down 4-6% during the first six months of 2016 compared with the prior year period, primarily as a result of lower petroleum-based and related feedstock costs; (2) better material usage and improved production efficiencies as we continue to implement and refine lean manufacturing practices; (3) higher average selling prices in the Americas region; and (4) introduction of margin accretive products such as additional skinny plank designs. These factors led to decreased cost of sales as a percentage of sales, notwithstanding a 9% decline in production volume for the first six months of 2016 compared with the prior year period.

 

For the three months ended July 3, 2016, our selling, general and administrative (“SG&A”) expenses decreased $0.7 million (1.0%) versus the comparable period in 2015. The decline in SG&A expenses was primarily due to savings of approximately $3.0 million in administrative costs, primarily as a result of lower performance-based incentive compensation this year. This decrease was somewhat mitigated by (1) $0.9 million of higher selling expenses, primarily associated with new sales staff additions in the Americas division to continue targeting growth markets, and (2) $1.5 million of higher marketing expenses for planned initiatives to promote growth, including global branding, market development and new product introductions. The marketing expenses were higher globally, with the Americas region having the largest increase ($0.8 million) and Europe and Asia-Pacific each responsible for approximately $0.3 million of the increase. Despite the lower SG&A expenses in absolute dollars, the decline in net sales led to an increase in SG&A expenses as a percentage of sales to 27.1% for the three months ended July 3, 2016, compared with 25.8% in the comparable period of 2015. Our SG&A expenses as a percentage of sales are down sequentially, however, as compared to 29.5% in the first quarter of 2016.

 

 
-16-

Table Of Contents
 

 

For the six months ended July 3, 2016, our SG&A expenses increased $0.9 million (0.7%) versus the comparable period in 2015. Fluctuations in currency exchange rates had a slight (less than 1%) negative impact on the comparison. As noted above, our SG&A expenses during the second quarter of 2016 declined as compared to the second quarter of 2015, so the overall increase for the current year six-month period related entirely to the first quarter of 2016. The increase was due to $4.3 million of increased marketing expenses as we continue to roll out global marketing, branding and product introduction platforms. Marketing expenses were up across all regions, with the Americas (up $2.1 million) followed by Europe (up $1.2 million) and Asia-Pacific (up $1.0 million). We also had an increase of $1.4 million in selling expenses, almost entirely within the Americas region, for personnel additions in key markets. These increases were offset by lower administrative costs of $4.8 million, primarily as a result of lower performance-based incentive compensation this year. Due to the overall increase in SG&A expenses, as well as a decline in sales, our SG&A expenses as a percentage of sales increased to 28.2% for the six months ended July 3, 2016, as compared to 26.4% for the six months ended July 5, 2015.

 

Interest Expense

 

For the three month period ended July 3, 2016, our interest expense decreased $0.2 million to $1.6 million, from $1.8 million in the second quarter of 2015. For the six month period ended July 3, 2016, our interest expense decreased $0.6 million to $3.1 million, from $3.7 million in the comparable period last year. The decreases were due to lower daily average outstanding borrowings under our Syndicated Credit Facility during the second quarter and first six months of 2016 as compared to the corresponding periods of 2015.

 

Liquidity and Capital Resources

 

General

 

At July 3, 2016, we had $88.4 million in cash and cash equivalents. At that date, we had $192.5 million in term loan borrowings, $31.8 million of revolving loan borrowings and $4.0 million in letters of credit outstanding under the Syndicated Credit Facility. As of July 3, 2016, we could have incurred $214.2 million of additional borrowings under our Syndicated Credit Facility. In addition, we could have incurred an additional $14.7 million of borrowings under our other lines of credit in place at other non-U.S. subsidiaries.

 

It is also important for you to consider that borrowings under our Syndicated Credit Facility comprise essentially all of our indebtedness, and that these borrowings are based on variable interest rates (as described above) that expose the Company to the risk that short-term interest rates may increase. 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 Note 4 in Part I, Item 1 of this report and the discussion under the heading “Interest Rate Risk” in Item 7A of our Annual Report on Form 10-K for the year ended January 3, 2016.

 

Analysis of Cash Flows

 

Apart from cash provided by operating activities, our primary source of cash during the six months ended July 3, 2016 was $20.2 million of revolving loan borrowings under our Syndicated Credit Facility. Most of the revolving loan borrowings were made by our Australian subsidiary in Australian dollars and then converted into U.S. dollars, to take advantage of a strong Australian dollar and lock in a favorable exchange rate into U.S. dollars, which are used by that business for certain raw material purchases. Our primary uses of cash during the period were (1) $20.4 million for a reduction of accounts payable and accrued expenses, (2) $12.8 million for capital expenditures, (3) $10.4 million for stock repurchases, and (4) $10.0 million for repayments of borrowings under our Syndicated Credit Facility.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our discussion below in this Item 3 is based upon the more detailed discussions of our market risk and related matters included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016 under Item 7A of that Form 10-K. Our discussion here focuses on the period ended July 3, 2016, and any material changes from (or other important intervening developments since the time of) the information discussed in that Form 10-K. This discussion should be read in conjunction with that Form 10-K for more detailed and background information.

 

At July 3, 2016, we recognized a $1.1 million increase in our foreign currency translation adjustment account compared to January 3, 2016, primarily because of the weakening of the U.S. dollar against certain foreign currencies, particularly the Euro and Australian dollar.

 

 
-17-

Table Of Contents
 

 

Sensitivity Analysis. For purposes of specific risk analysis, we use sensitivity analysis to measure the impact that market risk may have on the fair values of our market sensitive instruments. To perform sensitivity analysis, we assess the risk of loss in fair values associated with the impact of hypothetical changes in interest rates and foreign currency exchange rates on market sensitive instruments.

 

Because the debt outstanding under our Syndicated Credit Facility has variable interest rates based on an underlying prime lending rate or LIBOR rate, we do not believe changes in interest rates would have any significant impact on the fair value of that debt instrument. Changes in the underlying prime lending rate or LIBOR rate would, however, impact the amount of our interest expense. For a discussion of these hypothetical impacts on our interest expense, please see the discussion in Item 7A of our Annual Report on Form 10-K for the year ended January 3, 2016.

 

As of July 3, 2016, a 10% decrease or increase in the levels of foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would result in a decrease in the fair value of our financial instruments of $11.7 million or an increase in the fair value of our financial instruments of $14.3 million, respectively. As the impact of offsetting changes in the fair market value of our net foreign investments is not included in the sensitivity model, these results are not indicative of our actual exposure to foreign currency exchange risk.

 

ITEM 4. CONTROLS AND PROCEDURES

 

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

 

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

 

 
-18-

Table Of Contents
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are subject to various legal proceedings in the ordinary course of business, none of which is required to be disclosed under this Item 1.

  

 

ITEM 1A. RISK FACTORS

 

There are no material changes in risk factors in the second quarter of 2016. For a discussion of risk factors, see Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016.

 

  

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

 

The following table contains information with respect to purchases made by or on behalf of the Company, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the quarter ended July 3, 2016:

 

Period(1)

 

Total

Number

of Shares

Purchased

   

Average

Price

Paid

Per Share

   

Total Number

of Shares Purchased

as Part of Publicly

Announced Plans or

Programs(2)

   

Approximate Dollar

Value of Shares that

May Yet Be

Purchased Under the

Plans or Programs(2)

 
                                 

April 4-30, 2016

    0       N/A       0     $ 50,000,000  

May 1-31, 2016(3)

    329,110     $ 16.30       328,833       44,639,862  

June 1-30, 2016

    329,353     $ 15.15       329,353       39,651,157  

July 1-3, 2016

    0       N/A       0       39,651,157  

Total

    658,463     $ 15.72       658,186     $ 39,651,157  

 

(1) The monthly periods identified above correspond to the Company’s fiscal second quarter of 2016, which commenced April 4, 2016 and ended July 3, 2016.

(2) In the fourth quarter of 2014, the Company announced a program to repurchase up to 500,000 shares of common stock per fiscal year, commencing with the 2014 fiscal year. In April 2016, the Company amended the share purchase program to authorize the repurchase of up to $50 million of common stock. This amended program has no specific expiration date.

(3) Includes 277 shares acquired by the Company from employees to satisfy income tax withholding obligations in connection with the vesting of previous grants of restricted stock.

  

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

  

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable

 

  

ITEM 5. OTHER INFORMATION

 

None

 

 
-19-

Table Of Contents
 

 

ITEM 6. EXHIBITS

 

The following exhibits are filed with this report:

 

EXHIBIT 

NUMBER

DESCRIPTION OF EXHIBIT

   

31.1

Section 302 Certification of Chief Executive Officer.

31.2

Section 302 Certification of Chief Financial Officer.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350.

101.INS

XBRL Instance Document  

101.SCH

XBRL Taxonomy Extension Schema Document  

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document  

101.PRE

XBRL Taxonomy Presentation Linkbase Document  

101.DEF

XBRL Taxonomy Definition Linkbase Document

 

 
-20-

Table Of Contents
 

  

SIGNATURE

 

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

 

 

INTERFACE, INC.

     

Date: August 11, 2016

By:

 /s/ Patrick C. Lynch                            

   

Patrick C. Lynch

   

Senior Vice President

   

(Principal Financial Officer)

 

 
-21-

Table Of Contents
 

 

EXHIBITS INCLUDED HEREWITH

 

EXHIBIT

NUMBER

DESCRIPTION OF EXHIBIT

   

31.1

Section 302 Certification of Chief Executive Officer

31.2

Section 302 Certification of Chief Financial Officer

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350

101.INS

XBRL Instance Document  

101.SCH

XBRL Taxonomy Extension Schema Document  

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document  

101.PRE

XBRL Taxonomy Presentation Linkbase Document  

101.DEF

XBRL Taxonomy Definition Linkbase Document  

 

 

-22-