INTERFACE INC - Quarter Report: 2024 March (Form 10-Q)

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COMMON STOCK

ADDITIONAL PAID-IN CAPITAL

RETAINED
EARNINGS

PENSION LIABILITY

FOREIGN CURRENCY TRANSLATION ADJUSTMENT

CASH FLOW
HEDGE

TOTAL

(in thousands, except per share data)

Balance, at January 1, 2023

()

Net loss

—

()

—

()

Issuances of stock related to performance shares

()

—

Cash dividends declared, $ per common share

—

()

—

()

Compensation expense related to share-based plans, net of forfeitures and shares received for tax withholdings

()

—

Pension liability adjustment

—

()

—

()

Foreign currency translation adjustment

—

Reclassification out of accumulated other comprehensive loss – discontinued cash flow hedge

—

Balance, at April 2, 2023

()

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million and $ million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any restricted stock forfeited during the period. $ Granted Vested() Forfeited or canceled() Outstanding at March 31, 2024 $

As of March 31, 2024, the unrecognized total compensation cost related to unvested restricted stock was $ million. That cost is expected to be recognized by the first quarter of 2025.

Restricted Share Unit Awards

Compensation expense related to the restricted share units was $ million and $ million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any restricted share units forfeited during the period.

$ Granted Vested() Forfeited or canceled() Outstanding at March 31, 2024 $

As of March 31, 2024, the unrecognized total compensation cost related to unvested restricted share units was $ million. That cost is expected to be recognized by the first quarter of 2027.

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$ Granted Vested() Forfeited or canceled() Outstanding at March 31, 2024 $

Compensation expense related to the performance shares was $ million and $ million for the three months ended March 31, 2024 and April 2, 2023, respectively. The Company has reduced its expense for any performance shares forfeited during the period. Unrecognized compensation expense related to these performance shares was approximately $ million as of March 31, 2024. The amount and timing of future compensation expense will depend on the performance of the Company. The compensation expense related to these outstanding performance shares is expected to be recognized by the first quarter of 2027.

The tax benefit recognized with respect to restricted stock, restricted share units and performance shares was approximately $ million for the three months ended March 31, 2024.

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NOTE 7 –

$ Current portion of operating lease liabilities$ $ Operating lease liabilities Total operating lease liabilities$ $ Property, plant and equipment, net$ $ Accrued expenses$ $ Other long-term liabilities Total finance lease liabilities$ $

As of March 31, 2024, there were no significant leases that had not commenced.

$ Interest on lease liabilities Operating lease cost Short-term lease cost Variable lease cost Total lease cost$ $

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$ Operating cash flows from operating leases Financing cash flows from finance leases Right-of-use assets obtained in exchange for new finance lease liabilities Right-of-use assets obtained in exchange for new operating lease liabilities

Lease Term and Discount Rate

Weighted-average remaining lease term – operating leases (in years)Weighted-average discount rate – finance leases % %Weighted-average discount rate – operating leases % %

Maturity Analysis

$ 2025 2026 2027 2028 Thereafter Total future minimum lease payments (undiscounted) Less: Present value discount()()

Total lease liabilities

$ $

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NOTE 8 –

million and $ million, respectively. $ Expected return on plan assets()()Amortization of prior service cost Amortization of net actuarial losses Net periodic benefit cost$ $


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


	Three Months Ended
nora Defined Benefit Plan	March 31, 2024	April 2, 2023
	(in thousands)
Service cost	$	$
Interest cost
Amortization of net actuarial gains		()
Net periodic benefit cost	$	$

In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within operating income in the consolidated condensed statements of operations, while all other components of net periodic benefit costs are presented within other (income) expense, net, in the consolidated condensed statements of operations.

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NOTE 9 –

Foreign currency translation(2)

()Balance, at March 31, 2024$

(1) The goodwill balance is allocated entirely to the AMS reportable segment.

(2) A portion of the goodwill balance is comprised of goodwill denominated in foreign currency attributable to the nora acquisition.

million and $ million at March 31, 2024 and December 31, 2023, respectively.

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NOTE 10 –

operating segments organized by geographical area – namely (a) Americas (“AMS”) and (b) Europe, Africa, Asia and Australia (collectively “EAAA”). The AMS operating segment includes the United States, Canada and Latin America geographic areas.

Pursuant to the management approach discussed above, the Company’s CODM, our chief executive officer, evaluates performance at the AMS and EAAA operating segment levels and makes operating and resource allocation decisions based on segment adjusted operating income (“AOI”), which includes allocations of corporate selling, general and administrative (“SG&A”) expenses and allocations of global support SG&A as discussed below. AOI excludes: nora purchase accounting amortization; Cyber Event impact; property casualty loss; and restructuring, asset impairment, severance, and other, net. Intersegment revenues for the three months ended March 31, 2024 and April 2, 2023 were $ million and $ million, respectively. Intersegment revenues are eliminated from net sales presented below since these amounts are not included in the information provided to the CODM.

The Company has determined that it has reportable segments – AMS and EAAA, as each operating segment meets the quantitative thresholds defined in the accounting guidance.

During the first quarter of 2024, the Company implemented a cost center realignment initiative to centralize certain global/shared functions. For the quarter ended March 31, 2024, SG&A expenses for these global support functions were allocated to AOI for each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods. Prior year AOI amounts below were not recast as there was no material impact to the measure of segment profit for each reportable segment. There were no changes to the composition of the Company’s operating or reportable segments.

$ EAAA Total net sales$ $ Segment AOIAMS$ $ EAAA Depreciation and amortizationAMS$ $ EAAA Total depreciation and amortization$ $

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$ EAAA Total segment assets Corporate assets Eliminations()()Total reported assets$ $ $ EAAA operating income Consolidated operating income Interest expense

Other (income) expense, net

() Income (loss) before income tax expense$ $()

Three Months Ended March 31, 2024

Three Months Ended April 2, 2023

AMS

EAAA

AMS

EAAA

(in thousands)

Operating income

Purchase accounting amortization

Cyber Event impact

()

Property casualty loss

Restructuring, asset impairment, severance, and other, net

AOI

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NOTE 11 –

Cash paid for income taxes, net of refunds

See Note 7 entitled “Leases” for additional supplemental disclosures related to finance and operating leases.

Non-Cash Financing Activities

million, which were paid during the second quarter of 2024 to shareholders of record as of March 29, 2024. At March 31, 2024, the dividends were recorded within accrued expenses in the consolidated condensed balance sheet.

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NOTE 12 –

million on pre-tax income of $ million resulting in an effective tax rate of %, as compared to a total income tax provision of $ million on pre-tax loss of $ million resulting in a negative effective tax rate of % during the three months ended April 2, 2023. The year-over-year change in the effective tax rate is primarily due to the tax effects of pre-tax income in the current year quarter compared to pre-tax loss in the prior year quarter and favorable changes related to share-based compensation and the limitation on the deduction for business interest expenses under Internal Revenue Code section 163(j). The pre-tax loss for the three months ended April 2, 2023, included significant unusual or infrequent items that are specifically excluded from the AETR. The tax effects related to these specifically excluded items are recognized discretely. The income tax benefits recognized discretely were at a lower effective tax rate compared to the estimated AETR resulting in an overall negative effective tax rate for the three months ended April 2, 2023.

On December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of %. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. For fiscal year 2024, we expect to meet the Transitional Country-by-Country (CbCR) Safe Harbor rules for most if not all jurisdictions and do not expect these provisions to have a material impact on the Company’s financial statements. We will continue to closely monitor ongoing developments and evaluate any potential impact on future periods.

In the first three months of 2024, the Company increased its liability for unrecognized tax benefits by $ million. As of March 31, 2024, the Company had accrued approximately $ million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of March 31, 2024 reflects a reduction for $ million of these unrecognized tax benefits.

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NOTE 13 –

$()Amortization of benefit plan net actuarial losses and prior service cost

Other (income) expense, net

()()Total loss reclassified from AOCI$()$()

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NOTE 14 –

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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 December 31, 2023, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter ended March 31, 2024, or as of, March 31, 2024, and the comparable periods of 2023, and to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time. These discussions should be read in conjunction with that Form 10-K for more detailed and background information. The three-month periods ended March 31, 2024 and April 2, 2023 both include 13 weeks.

Forward-Looking Statements

This report contains statements which may constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with the economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed under the heading “Risk Factors” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. 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.

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Executive Overview

During the quarter ended March 31, 2024, we had consolidated net sales of $289.7 million, down 2.0% compared to $295.8 million in the first quarter last year, primarily due to decreased customer demand — particularly in the corporate office and retail market segments. These decreases were partially offset by higher sales in the education market segment. Consolidated operating income was $24.4 million for the first quarter of 2024, compared to $9.5 million in the first quarter last year, primarily due to higher gross profit margin as a result of lower raw material and freight costs. Consolidated net income for the quarter ended March 31, 2024, was $14.2 million or $0.24 per share, compared to consolidated net loss of $0.7 million or $0.01 per share in the first quarter last year.

Cybersecurity Event

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 in fiscal year 2023. We have cyber risk insurance and anticipate that a portion of our costs and expenses related to the Cyber Event will ultimately be recovered by insurance.

Our IT systems face a myriad of cybersecurity threats, including, without limitation, hacking, computer viruses, denial of service attacks, malware, ransomware, phishing scams, compromised or irretrievable backups, and other cyber attacks. Any of these events which deny us use of vital IT systems may seriously disrupt our normal business operations and lead to production or shipping stoppages, revenue loss, and reputational harm. We also expect to incur ongoing costs for enhanced data security against unauthorized access to, or manipulation of, our systems and data.

Impact of Macroeconomic Trends

Recent disruptions in economic markets due to persistent inflation, high interest rates, the Russia-Ukraine war and the Israel-Hamas war, a fairly stabilized but still challenging supply chain environment, slow market conditions in parts of Asia, and significant financial pressures in the commercial office market globally, all pose challenges which may adversely affect our future performance. To mitigate these impacts, 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.

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Analysis of Results of Operations

Consolidated Results

The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three-month periods ended March 31, 2024 and April 2, 2023:


	Three Months Ended
	March 31, 2024		April 2, 2023
Net sales	100.0	%	100.0	%
Cost of sales	61.9		67.6
Gross profit	38.1		32.4
Selling, general and administrative expenses	29.7		29.2
Restructuring, asset impairment and other charges	—		0.0
Operating income	8.4		3.2
Interest/Other (income) expense, net	1.9		3.4
Income (loss) before income tax expense	6.5		(0.2)
Income tax expense	1.7		0.1
Net income (loss)	4.8	%	(0.3)	%

Consolidated Net Sales

Below is information regarding our consolidated net sales, and analysis of those results, for the three-month periods ended March 31, 2024, and April 2, 2023:


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

For the quarter ended March 31, 2024, consolidated net sales decreased $6.0 million (2.0%) versus the comparable period in 2023, primarily due to lower sales volumes (approximately 4%) partially offset by higher prices (approximately 2%). Currency fluctuations had no material impact on consolidated net sales for the first quarter of 2024 compared to the same period last year. On a market segment basis, the sales decrease was primarily in the corporate office, retail, healthcare and hospitality market segments, partially offset by higher sales in the education and residential living market segments.

Consolidated Cost and Expenses

The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three-month periods ended March 31, 2024, and April 2, 2023:


	Three Months Ended				Percentage Change
	March 31, 2024		April 2, 2023
	(in thousands)
Consolidated cost of sales	$	179,338	$	199,919	(10.3)	%
Consolidated selling, general and administrative expenses	85,959		86,254		(0.3)	%

Consolidated Cost of Sales

For the quarter ended March 31, 2024, consolidated cost of sales decreased $20.6 million (10.3%) compared to the first quarter of 2023, primarily due to lower raw material costs and lower sales. Currency translation had no material impact to consolidated cost of sales compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 61.9% for the first quarter of 2024 versus 67.6% for the first quarter of 2023.

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Consolidated Gross Profit

For the quarter ended March 31, 2024, consolidated gross profit, as a percentage of net sales, was 38.1% compared with 32.4% in the same period last year. The increase in gross profit percentage was primarily due to (i) lower raw material and freight costs (approximately 3%), (ii) favorable product mix and other (approximately 2%), and (iii) higher sales pricing (approximately 1%).

Consolidated Selling, General and Administrative (“SG&A”) Expenses

For the quarter ended March 31, 2024, consolidated SG&A expenses decreased $0.3 million (0.3%) versus the comparable period in 2023. Currency translation had no material impact on consolidated SG&A expenses in the first quarter of 2024 compared to the same period last year. SG&A expenses were lower for the first quarter of 2024 primarily due to (i) $2.0 million of lower severance costs driven by employee headcount reduction and cost saving initiatives in the prior year period, (ii) $1.0 million of lower selling expenses, and (iii) $0.9 million of lower Cyber Event costs due to completion of the investigation in the prior year as well as insurance recoveries in the current period. These decreases were mostly offset by $2.2 million of higher labor and variable compensation costs and $1.4 million of higher software license fees. As a percentage of net sales, SG&A expenses increased to 29.7% for the first quarter of 2024 versus 29.2% for the first quarter of 2023.

Interest Expense

During the quarter ended March 31, 2024, interest expense was $6.4 million, a decrease of $2.1 million from the comparable period in 2023, primarily due to lower outstanding term loan borrowings under the Facility.

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Segment Operating Results

AMS Segment – Net Sales and Adjusted Operating Income (“AOI”)

The following table presents AMS segment net sales and AOI for the three-month periods ended March 31, 2024, and April 2, 2023:


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

(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above. Excludes Cyber Event impact, property casualty loss, and restructuring, asset impairment, severance, and other, net. See Note 10 entitled “Segment Information” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

During the first quarter of 2024, net sales in AMS increased 0.4% versus the comparable period in 2023 primarily due to higher sales prices partially offset by lower volume. On a market segment basis, the AMS sales increase was primarily in the education, residential living, and public buildings market segments, partially offset by decreases in the corporate office, retail and healthcare market segments.

AOI in AMS increased 60.4% during the first quarter of 2024 compared to the prior year period primarily due to higher sales pricing and lower raw material and freight costs compared to the same period last year. During the first quarter of 2023, AOI in AMS was adversely impacted by inflation and higher input costs. As a percentage of net sales, AOI increased to 10.6% during the first quarter of 2024 compared to 6.7% in the same period last year.

EAAA Segment – Net Sales and AOI

The following table presents EAAA segment net sales and AOI for the three-month periods ended March 31, 2024, and April 2, 2023:


	Three Months Ended				Percentage Change
	March 31, 2024		April 2, 2023
	(in thousands)
EAAA segment net sales	$	119,828	$	126,551	(5.3)	%
EAAA segment AOI(1)	7,445		3,929		89.5	%

(1) Includes allocation of corporate SG&A expenses and allocation of global support SG&A expenses as discussed above. Excludes purchase accounting amortization, Cyber Event impact, and restructuring, asset impairment, severance and other, net. See Note 10 entitled “Segment Information” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

During the first quarter of 2024, net sales in EAAA decreased 5.3% versus the comparable period in 2023, primarily due to lower sales volume. Currency fluctuations had no material impact on EAAA sales for the first quarter 2024 compared to the same period last year. On a market segment basis, the EAAA sales decrease was most significant in the education, public buildings, and corporate office market segments.

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AOI in EAAA increased 89.5% during the first quarter of 2024 versus the comparable period in 2023, primarily due to lower raw material costs compared to the same period last year. During the first quarter of 2023, AOI in EAAA was adversely impacted by inflation and higher input costs. Currency fluctuations had no material impact on AOI for the first quarter of 2024 compared to the first quarter last year. As a percentage of net sales, AOI increased to 6.2% during the first quarter of 2024 compared to 3.1% in the same period last year.

Financial Condition, Liquidity and Capital Resources

General

At March 31, 2024, the Company had $89.8 million in cash. At that date, the Company had $96.0 million in term loan borrowings, no revolving loan borrowings, and $1.6 million in letters of credit outstanding under our Facility, and we had $300.0 million of Senior Notes outstanding. As of March 31, 2024, we had additional borrowing capacity of $298.4 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.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its Facility. The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors. Net sales for the non-guarantor subsidiaries were approximately $133 million and $141 million for the three-month periods ended March 31, 2024 and April 2, 2023, respectively. Total indebtedness of the non-guarantor subsidiaries was approximately $128 million and $133 million as of March 31, 2024 and December 31, 2023, respectively.

Balance Sheet

Accounts receivable, net, were $147.2 million at March 31, 2024, compared to $163.4 million at December 31, 2023. The decrease of $16.2 million was primarily due to customer collections and the impact of lower net sales as a result of decreased customer demand in the first quarter of 2024.

Inventories, net, were $296.3 million at March 31, 2024, compared to $279.1 million at December 31, 2023. The increase of $17.2 million was primarily due to finished goods inventory build attributable to expected higher customer demand in the remainder of 2024, partially offset by lower raw material costs.

Analysis of Cash Flows

The following table presents a summary of cash flows for the three-month periods ended March 31, 2024 and April 2, 2023, respectively:


	Three Months Ended
	March 31, 2024		April 2, 2023
	(in thousands)
Net cash provided by (used in):
Operating activities	$	12,619	$	29,584
Investing activities	(1,993)		(5,712)
Financing activities	(29,776)		(21,035)
Effect of exchange rate changes on cash	(1,574)		872
Net change in cash and cash equivalents	(20,724)		3,709
Cash and cash equivalents at beginning of period	110,498		97,564
Cash and cash equivalents at end of period	$	89,774	$	101,273

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Cash provided by operating activities was $12.6 million for the three months ended March 31, 2024, which represents a decrease of $17.0 million from the prior year comparable period. The decrease was primarily due to changes in working capital during the first three months of 2024 compared with the first three months of 2023. Specifically, the prior year comparable period includes a greater source of cash from accounts receivable collections compared with the first three months of 2024, primarily attributable to delays in customer billings from the Cyber Event, in which those delayed billings were collected in the first quarter of 2023. Additionally, the increase in inventories during the first three months of 2024, as described above, resulted in a greater use of cash compared with the same period in the prior year.

Cash used in investing activities was $2.0 million for the three months ended March 31, 2024, which represents a decrease of $3.7 million from the prior year comparable period. The decrease was primarily attributable to cash proceeds received from the sale of manufacturing equipment and insurance proceeds for property casualty losses, both of which partially offset cash used for capital expenditures during the three months ended March 31, 2024.

Cash used in financing activities was $29.8 million for the three months ended March 31, 2024, which represents an increase of $8.7 million from the prior year comparable period. The year-over-year increase was primarily due to lower revolving loan borrowings combined with higher repayments of term loan borrowings during the three months ended March 31, 2024.

Outlook

We anticipate revenue growth in the second quarter of fiscal year 2024 compared with the first quarter of 2024. During the first half of fiscal year 2024, the Company also expects continued year-over-year decreases in the cost per unit of various raw material purchases which will benefit gross profit margins in 2024. We also anticipate that the continued slow macro environment in China, high interest rates, and significant financial pressures in the commercial office market globally will continue to adversely impact our performance and demand for our products.

Cash flows from operations, cash and cash equivalents, and other sources of liquidity are expected to be available and sufficient to meet foreseeable cash requirements. However, the Company’s cash flows from operations can be affected by numerous factors including raw material availability and cost, and demand for our products.

Backlog

As of April 21, 2024, the consolidated backlog of unshipped orders was approximately $224.3 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, backlog was approximately $195.5 million as of February 4, 2024. Disruptions in supply and distribution chains have resulted in delays of construction projects and flooring installations in many regions worldwide, which have also caused, and may continue to cause, fluctuations in our backlog.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The discussion below in this Item 3 is based upon the more detailed discussions of our market risk and related matters included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under Part II, Item 7A of that Form 10-K. The discussion here focuses on the three months ended March 31, 2024, and any material changes from (or other important intervening developments since the time of) the information discussed in that Form 10-K. This discussion should be read in conjunction with that Form 10-K for more detailed and background information.

Sensitivity Analysis

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

Because the debt outstanding under our Facility has variable interest rates based on an underlying prime lending rate, SOFR, or other benchmark rate, we do not believe changes in interest rates would have any significant impact on the fair value of that debt instrument. Changes in the underlying prime lending rate, SOFR, or other benchmark rate would, however, impact the amount of our interest expense. For a discussion of these hypothetical impacts on our interest expense, please see the discussion in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, based on a hypothetical immediate 100 basis point increase in interest rates, with all other variables held constant, the fair value of our fixed rate long-term debt would be impacted by a net decrease of $11.3 million. Conversely, a 100 basis point decrease in interest rates would result in a net increase in the fair value of our fixed rate long-term debt of $11.9 million.

As of March 31, 2024, 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 $9.1 million or an increase in the fair value of our financial instruments of $11.1 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.

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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 President and Chief Executive Officer and our Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”), pursuant to Rule 13a-14(c) under the Act.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures however are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Based on the evaluation, our President and Chief Executive Officer and our Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

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

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to legal proceedings, whether arising in the ordinary course of business or otherwise. See Note 14 of Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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

The following table contains information with respect to purchases made by or on behalf of the Company, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during our first quarter ended March 31, 2024:


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)
January 1 – January 28, 2024(3)	63,293	$	12.05	—	$	82,828,595
January 29 – February 25, 2024	—	—		—	82,858,595
February 26 – March 31, 2024(3)	246,578	14.21		—	82,828,595
Total	309,871	$	13.77	—

(1) The monthly periods identified above correspond to the Company’s fiscal first quarter of 2024, which commenced January 1, 2024 and ended March 31, 2024.

(2) On May 17, 2022, the Company announced a share repurchase program authorizing the repurchase of up to $100 million of common stock. The program has no specific expiration date. There were no shares repurchased pursuant to this program during the Company’s fiscal first quarter of 2024.

(3) Comprised of shares received by the Company from employees to satisfy income tax withholding obligations in connection with the vesting of previous equity awards.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

February 5, 2025

(1) Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934.

Transactions in our securities by directors or officers of Interface or its subsidiaries are required to be made in accordance with our Insider Trading Policy, which incorporates applicable U.S. federal securities laws that prohibit trading Interface common stock and other Company securities while aware of material non-public information about Interface.

Except as set forth above, during the three months ended March 31, 2024, no other director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company or a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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ITEM 6. EXHIBITS

The following exhibits are filed or furnished with this report:


Exhibit Number			Description of Exhibit
19.1			I nsider Trading Policy
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 – The Instance Document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL 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.
104			The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL

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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: May 7, 2024	By:	/s/ Bruce A. Hausmann
		Bruce A. Hausmann Chief Financial Officer (Principal Financial Officer)

INTERFACE INC - Quarter Report: 2024 March (Form 10-Q)

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