Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For Quarterly Period Ended April 1, 2018
Commission File Number 001-33994
INTERFACE, INC.
(Exact name of registrant as specified in its charter)
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GEORGIA
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58-1451243
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☑
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☐
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Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Shares outstanding of each of the registrant's classes of common stock at May 5, 2018:
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Class
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Number of Shares
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Common Stock, $.10 par value per share
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59,494,324
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
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APRIL
1
,
201
8
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DECEMBER
3
1, 2017
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(UNAUDITED)
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ASSETS
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Current Assets
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Cash and cash equivalents
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$
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67,857
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$
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87,037
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Accounts receivable, net
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137,890
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142,808
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Inventories, net
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197,415
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177,935
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Prepaid expenses and other current assets
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38,122
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23,087
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Total current assets
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441,284
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430,867
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Property and equipment, net
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214,689
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212,645
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Deferred tax asset
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18,035
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18,003
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Goodwill, net
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70,916
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68,754
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Other assets
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70,529
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70,331
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Total assets
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$
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815,453
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$
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800,600
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities
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Accounts payable
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$
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55,313
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$
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50,672
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Accrued expenses
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99,247
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110,974
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Current portion of long-term debt
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15,000
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15,000
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Total current liabilities
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169,560
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176,646
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Long-term debt
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228,881
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214,928
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Deferred income taxes
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7,326
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6,935
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Other
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71,319
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72,000
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Total liabilities
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477,086
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470,509
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Commitments and contingencies
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Shareholders’ equity
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Preferred stock
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0
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0
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Common stock
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5,950
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5,981
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Additional paid-in capital
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260,115
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271,271
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Retained earnings
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198,649
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187,432
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Accumulated other comprehensive loss – foreign currency translation
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(70,113
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)
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(78,943
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)
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Accumulated other comprehensive income – cash flow hedge
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2,536
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904
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Accumulated other comprehensive loss – pension liability
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(58,770
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)
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(56,554
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)
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Total shareholders’ equity
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338,367
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330,091
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Total liabilities and shareholders’ equity
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$
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815,453
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$
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800,600
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See accompanying notes to consolidated condensed financial statements.
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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THREE
MONTHS
ENDED
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APRIL
1
, 20
18
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APRIL 2, 2017
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NET SALES
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$
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240,563
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$
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221,102
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Cost of Sales
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146,981
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133,300
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GROSS PROFIT ON SALES
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93,582
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87,802
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Selling, General and Administrative Expenses
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70,594
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64,714
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Restructuring and Asset Impairment Charges
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0
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7,299
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OPERATING INCOME
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22,988
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15,789
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Interest Expense
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2,094
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1,617
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Other Expense
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519
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1,394
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INCOME BEFORE INCOME TAX EXPENSE
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20,375
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12,778
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Income Tax Expense
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5,291
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4,231
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Net Income
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$
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15,084
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$
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8,547
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Earnings Per Share – Basic
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$
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0.25
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$
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0.13
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Earnings Per Share – Diluted
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$
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0.25
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$
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0.13
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Common Shares Outstanding – Basic
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59,671
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64,081
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Common Shares Outstanding – Diluted
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59,717
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64,123
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See accompanying notes to consolidated condensed financial statements.
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
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THREE
MONTHS E
NDED
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APRIL
1
, 201
8
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APRIL 2, 2017
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Net Income
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$
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15,084
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$
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8,547
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Other Comprehensive Income, Foreign Currency Translation Adjustment
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8,830
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11,030
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Other Comprehensive Income, Cash Flow Hedge
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1,632
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0
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Other Comprehensive Loss, Pension Liability Adjustment
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(2,216
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)
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(932
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)
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Comprehensive Income
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$
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23,330
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$
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18,645
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See accompanying notes to consolidated condensed financial statements.
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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THREE
MONTHS
ENDED
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APRIL
1
, 201
8
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APRIL
2
, 2017
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OPERATING ACTIVITIES:
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Net income
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$
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15,084
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$
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8,547
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Adjustments to reconcile net income to cash provided by (used in) operating activities:
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Depreciation and amortization
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8,731
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6,969
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Stock compensation amortization expense
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2,858
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1,115
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Deferred income taxes and other
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1,800
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920
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Working capital changes:
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Accounts receivable
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6,338
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11,661
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Inventories
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(17,240
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)
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(18,610
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)
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Prepaid expenses and current assets
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(16,273
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)
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(3,313
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)
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Accounts payable and accrued expenses
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(7,077
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)
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(1,169
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)
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CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
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(5,779
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)
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6,120
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INVESTING ACTIVITIES:
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Capital expenditures
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(7,431
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)
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(7,218
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)
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Other
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264
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(390
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)
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CASH USED IN INVESTING ACTIVITIES
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(7,167
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)
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(7,608
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)
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FINANCING ACTIVITIES:
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Repayments of long-term debt
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(3,750
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)
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(50,511
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)
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Borrowing of long-term debt
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17,210
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0
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Tax withholding payments for share-based compensation
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|
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(987
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)
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(1,447
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)
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Proceeds from issuance of common stock
|
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|
124
|
|
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0
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Dividends paid
|
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(3,868
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)
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|
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(3,806
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)
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Repurchase of common stock
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(14,485
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)
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|
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(31,061
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)
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|
|
|
|
|
|
|
|
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CASH USED IN FINANCING ACTIVITIES:
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|
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(5,756
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)
|
|
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(86,825
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)
|
|
|
|
|
|
|
|
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Net cash used in operating, investing and financing activities
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(18,702
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)
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(88,313
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)
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Effect of exchange rate changes on cash
|
|
|
(478
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)
|
|
|
2,687
|
|
|
|
|
|
|
|
|
|
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CASH AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
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Net change during the period
|
|
|
(19,180
|
)
|
|
|
(85,626
|
)
|
|
Balance at beginning of period
|
|
|
87,037
|
|
|
|
165,672
|
|
|
|
|
|
|
|
|
|
|
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Balance at end of period
|
|
$
|
67,857
|
|
|
$
|
80,046
|
|
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 financial statements and notes thereto contained in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, 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 December 31, 2017 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. Each of the first quarters of 2018 and 2017 were comprised of 13 weeks.
Certain prior period amounts have been reclassified to conform to the current period presentation. There was no change to consolidated assets, liabilities, cash flows or net income as a result of these reclassifications.
NOTE 2 – REVENUE RECOGNITION
Effective January 1, 2018, the Company adopted a new accounting standard with regard to revenue from customers. The Company has elected the modified retrospective approach to adoption of this new standard, as is allowed by the standard. The Company did not have any significant impact from this standard as of the date of the adoption.
Revenue Recognized from
C
ontracts with
C
ustomers
100% of the Company’s revenue is due to contracts with its customers. These contracts typically take the form of invoices for purchase of materials from the Company. The performance obligation is the delivery of these materials to customer control. Nearly 95% of the Company’s current revenue is produced from the sale of carpet, modular resilient flooring and related products (TacTiles installation materials, etc.) and the revenue from sales of these products is recognized upon shipment, or in certain cases upon delivery to the customer. The transaction price for these sales is readily identifiable.
The remaining revenue generated by the Company is for contracts to sell and install carpet and related products at customer locations. For projects underway, the Company recognized installation revenue over time as the customer simultaneously received and consumed the benefit of the services. The installation of the carpet and related products is a separate performance obligation from the sale of carpet. The majority of these projects are completed within 5 days of the start of installation. The transaction price for these sale and installation contracts is readily determinable between flooring material and installation services and is specifically identified in the contract with the customer.
The Company has utilized the portfolio approach to its contracts with customers, as its contracts with customers have similar characteristics and it is reasonable to expect that the effects from applying this approach are not materially different from applying the accounting standard to individual contracts.
The Company does not have any other significant revenue streams outside of these sales of flooring material, and the sale and installation of flooring material, as described above.
Impairment
L
osses
The Company does not recognize any impairment losses related to its revenue contracts due primarily to the short-term and straightforward nature of these contracts.
Disaggregation of Revenue
For the first quarter of 2018, revenue from the Company’s customers is broken down by geography as follows:
|
Geography
|
|
Percentage of Net Sales
|
|
|
Americas
|
|
|
56.2
|
%
|
|
Europe
|
|
|
27.7
|
%
|
|
Asia-Pacific
|
|
|
16.1
|
%
|
Revenue from sales of carpet, modular resilient flooring, and other flooring-related material was approximately 98% of total revenue for the first quarter of 2018. The remaining 2% of revenue was generated from the installation of carpet and other flooring-related material.
Performance
O
bligations
As noted above, the Company primarily generates revenue through the sale of flooring material to end users either upon shipment or upon arrival of the product at its destination. In these instances, there typically is no other obligation to the customers other than the delivery of flooring material with the exception of warranty. The Company does offer a warranty to its customers which guarantees certain on-floor performance characteristics and warrants against manufacturing defects. The warranty is not a service warranty, and there is no ability to separate the warranty obligation from the sale of the carpet or purchase them separately. The Company’s incidence of warranty claims is extremely low, with approximately 0.2% of revenue in claims on an annual basis for the last three fiscal years. Given the nature of the warranty as well as the financial impact, the Company has determined that there is no need to identify this warranty as a separate performance obligation and the Company will continue to account for warranty on an accrual basis.
For the Company’s installation business, the sales of carpet and other flooring materials and installation services are separate deliverables which under the revenue recognition requirements should be characterized as sperate performance obligations. The Company historically has not separated these obligations and has accounted for these installation projects on a completed contract basis. The nature of the installation projects is such that the vast majority – an amount in excess of 90% of these installation projects – are completed in less than 5 days. The Company’s largest installation customers are retail and corporate customers, and these are on a project-by-project basis and are short term installations. The impact of bifurcating the carpet sale from the installation sale is not considered to be material to the total Company. The Company has, however, evaluated these projects at the end of the reporting period and recorded revenue in accordance with the accounting standards for projects which were underway as of the end of the quarter first quarter of 2018.
Costs to
O
btain
C
ontracts
The Company pays sales commissions to many of its sales personnel based upon their selling activity. These are direct costs associated with obtaining the contracts and under the standard. Under the accounting standard, these costs should be expensed as the revenue is earned. As these commissions become payable upon shipment (or in certain cases delivery) of product, the commission is earned as the revenue is recognized. Due to this fact pattern, there is no change to the Company’s accounting for these selling commissions. There are no other material costs the Company incurs as part of obtaining the sales contract.
NOTE 3 – INVENTORIES
Inventories are summarized as follows:
|
|
|
April
1, 2018
|
|
|
December 31
, 201
7
|
|
|
|
|
(In thousands)
|
|
|
Finished Goods
|
|
$
|
134,673
|
|
|
$
|
115,512
|
|
|
Work in Process
|
|
|
11,800
|
|
|
|
13,022
|
|
|
Raw Materials
|
|
|
50,942
|
|
|
|
49,401
|
|
|
Inventories, net
|
|
$
|
197,415
|
|
|
$
|
177,935
|
|
NOTE 4 – 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
|
|
|
|
|
April
1
, 201
8
|
|
|
April 2, 2017
|
|
|
Earnings Per Share
:
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
Distributed Earnings
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
Undistributed Earnings
|
|
|
0.19
|
|
|
|
0.07
|
|
|
Total
|
|
$
|
0.25
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
Distributed Earnings
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
Undistributed Earnings
|
|
|
0.19
|
|
|
|
0.07
|
|
|
Total
|
|
$
|
0.25
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.25
|
|
|
$
|
0.13
|
|
|
Diluted earnings per share
|
|
$
|
0.25
|
|
|
$
|
0.13
|
|
The following table presents net income that was attributable to participating securities.
|
|
|
Three Months Ended
|
|
|
|
|
April
1,
201
8
|
|
|
April 2, 2017
|
|
|
|
|
(In
million
s)
|
|
|
Net Income Attributable to Participating Securities
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
The weighted average shares for basic and diluted EPS were as follows:
|
|
|
Three Months Ended
|
|
|
|
|
April
1
,
201
8
|
|
|
April 2, 2017
|
|
|
|
|
(In
thousands
)
|
|
|
Weighted Average Shares Outstanding
|
|
|
59,069
|
|
|
|
63,635
|
|
|
Participating Securities
|
|
|
602
|
|
|
|
446
|
|
|
Shares for Basic Earnings Per Share
|
|
|
59,671
|
|
|
|
64,081
|
|
|
Dilutive Effect of Stock Options
|
|
|
46
|
|
|
|
42
|
|
|
Shares for Diluted Earnings Per Share
|
|
|
59,717
|
|
|
|
64,123
|
|
For the three months ended April 1, 2018, and April 2, 2017, there were no stock options or participating securities excluded from the computation of diluted EPS.
NOTE 5 – 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. 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 April 1, 2018, the Company had outstanding $166.3 million of term loan borrowing and $77.6 million of revolving loan borrowings under the Facility, and had $5.7 million in letters of credit outstanding under the Facility. As of April 1, 2018, the weighted average interest rate on borrowings outstanding under the Facility was 3.0%.
The Company is 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 quarterly amortization payment amount was $3.75 million for the first quarter of 2018 and will remain this amount for all future quarters until maturity.
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.
Interest Rate Risk Management
In the third quarter of 2017, the Company entered into an interest rate swap transaction to fix the variable interest rate on a portion of its term loan borrowing in order to manage a portion of its exposure to interest rate fluctuations. The Company’s objective and strategy with respect to this interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability to cash flows relating to interest payments on a portion of its outstanding debt. The Company is meeting its objective by hedging the risk of changes in its cash flows (interest payments) attributable to changes in LIBOR, the designated benchmark interest rate being hedged (the “hedged risk”), on an amount of the Company’s debt principal equal to the outstanding swap notional amount.
Cash Flow Interest Rate Swap
The Company’s interest rate swap is designated and qualifies as a cash flow hedge of forecasted interest payments. The Company reports the effective portion of the fair value gain or loss on the swap as a component of other comprehensive income (or other comprehensive loss). Gains or losses (if any) on any ineffective portion of derivative instruments in cash flow hedging relationships are recorded in the period in which they occur as a component of other expense (or other income) in the Consolidated Condensed Statement of Operations. There were no such gains or losses in the first quarter of 2018. The aggregate notional amount of the swap as of April 1, 2018 was $100 million.
As of April 1, 2018, the fair value of the cash flow interest rate swap asset was $2.5 million and was recorded in other assets.
Other Lines of Credit
Subsidiaries of the Company have an aggregate of the equivalent of $9.9 million of other lines of credit available at interest rates ranging from 2.5% to 6.5%. As of April 1, 2018, there were no borrowings outstanding under these lines of credit.
NOTE 6 – 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 quarter of 2018 or 2017.
As of April 1, 2018, there were 72,500 stock options outstanding and exercisable, at an average exercise price of $7.99 per share. There were no stock options granted in 2018 or 2017. There were 10,000 stock options exercised in the first quarter of 2018 and no forfeitures in the first quarter of 2018. There were no exercises or forfeitures of stock options in the first quarter of 2017. The aggregate intrinsic value of the outstanding and exercisable stock options was $1.2 million as of April 1, 2018.
Restricted Stock Awards
During the three months ended April 1, 2018 and April 2, 2017, the Company granted restricted stock awards for 192,000 and 200,000 shares of common stock, respectively. Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a one 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 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 $1.1 million and $0.6 million for the three months ended April 1, 2018, and April 2, 2017, respectively. Accounting standards allow 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 April 1, 2018, as well as activity during the three months then ended:
|
|
|
Restricted
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
|
Outstanding at December 31, 2017
|
|
|
463,000
|
|
|
$
|
17.79
|
|
|
Granted
|
|
|
192,000
|
|
|
|
25.60
|
|
|
Vested
|
|
|
48,000
|
|
|
|
17.29
|
|
|
Forfeited or canceled
|
|
|
5,000
|
|
|
|
17.57
|
|
|
Outstanding at April 1, 2018
|
|
|
602,000
|
|
|
$
|
23.30
|
|
As of April 1, 2018, the unrecognized total compensation cost related to unvested restricted stock was $7.8 million. That cost is expected to be recognized by the end of 2020.
Performance
Share Awards
During the three months ended April 1, 2018 and April 2, 2017, the Company issued awards of performance shares to certain employees. These awards will 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 April 1, 2018, as well as the activity during the three months then ended:
|
|
|
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
|
Outstanding at December 31, 2017
|
|
|
669,500
|
|
|
$
|
17.51
|
|
|
Granted
|
|
|
260,500
|
|
|
|
25.69
|
|
|
Vested
|
|
|
115,500
|
|
|
|
17.79
|
|
|
Forfeited or canceled
|
|
|
9,500
|
|
|
|
17.55
|
|
|
Outstanding at April 1, 2018
|
|
|
805,000
|
|
|
$
|
20.12
|
|
Compensation expense related to the performance shares was $1.8 million and $0.5 million for the three months ended April 1, 2018, and April 2, 2017, respectively. Unrecognized compensation expense related to these performance shares was approximately $9.5 million as of April 1, 2018. That cost is expected to be recognized by the end of 2020.
The tax benefits recognized with regard to restricted stock and performance shares were approximately $0.6 million in the first quarter of 2018.
NOTE 7 – EMPLOYEE BENEFIT PLANS
The following tables provide the components of net periodic benefit cost for the three-month periods ended April 1, 2018 and April 2, 2017, respectively:
|
|
|
Three Months Ended
|
|
|
Defined Benefit Retirement Plan
s
(Europe)
|
|
April
1
, 201
8
|
|
|
April 2, 2017
|
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
187
|
|
|
$
|
384
|
|
|
Interest cost
|
|
|
1,353
|
|
|
|
1,334
|
|
|
Expected return on assets
|
|
|
(1,602
|
)
|
|
|
(1,586
|
)
|
|
Amortization of prior service costs
|
|
|
7
|
|
|
|
0
|
|
|
Recognized net actuarial (gains)/losses
|
|
|
288
|
|
|
|
309
|
|
|
Net periodic benefit cost
|
|
$
|
233
|
|
|
$
|
441
|
|
|
|
|
Three Months Ended
|
|
|
Salary Continuation Plan (SCP)
|
|
April
1
, 201
8
|
|
|
April 2, 2017
|
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Interest cost
|
|
|
270
|
|
|
|
313
|
|
|
Amortization of prior service cost
|
|
|
0
|
|
|
|
0
|
|
|
Amortization of (gain)/loss
|
|
|
116
|
|
|
|
91
|
|
|
Net periodic benefit cost
|
|
$
|
386
|
|
|
$
|
404
|
|
In accordance with applicable accounting standards, the service cost component of net periodic benefit costs is presented within earnings from operations in the consolidated condensed statement of operations, while all other components of net periodic benefit costs are presented within other expenses in the consolidated condensed statement of operations.
NOTE 8– 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.
While the Company operates as one reporting segment for the reasons discussed, included below is selected information on our operating segments.
Summary information by operating segment follows:
|
|
|
AMERICAS
|
|
|
EUROPE
|
|
|
ASIA-
PACIFIC
|
|
|
TOTAL
|
|
|
|
|
(in thousands)
|
|
|
Three Months Ended April 1, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
135,225
|
|
|
$
|
66,556
|
|
|
$
|
38,782
|
|
|
$
|
240,563
|
|
|
Depreciation and amortization
|
|
|
3,611
|
|
|
|
2,254
|
|
|
|
2,208
|
|
|
|
8,073
|
|
|
Total assets
|
|
|
288,239
|
|
|
|
269,813
|
|
|
|
195,551
|
|
|
|
753,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 2, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
131,762
|
|
|
$
|
56,019
|
|
|
$
|
33,321
|
|
|
$
|
221,102
|
|
|
Depreciation and amortization
|
|
|
3,368
|
|
|
|
1,251
|
|
|
|
2,157
|
|
|
|
6,776
|
|
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
|
|
April
1
, 201
8
|
|
|
April
2
, 201
7
|
|
|
|
|
(In thousands)
|
|
|
Total segment depreciation and amortization
|
|
$
|
8,073
|
|
|
$
|
6,776
|
|
|
Corporate depreciation and amortization
|
|
|
658
|
|
|
|
193
|
|
|
Reported depreciation and amortization
|
|
$
|
8,731
|
|
|
$
|
6,969
|
|
|
ASSETS
|
|
April
1
, 201
8
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Total segment assets
|
|
$
|
753,603
|
|
|
|
|
|
|
Corporate assets and eliminations
|
|
|
61,850
|
|
|
|
|
|
|
Reported total assets
|
|
$
|
815,453
|
|
|
|
|
|
NOTE 9 – SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest amounted to $1.9 million and $1.6 million for the quarters ended April 1, 2018 and April 2, 2017, respectively. Income tax payments amounted to $9.8 million and $4.7 million for the three month periods ended April 1, 2018 and April 2, 2017, respectively.
NOTE 10 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2016, the Financial Accounting Standards Board (“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 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 our pending adoption of the new standard on our consolidated financial statements, but the standard will result in the Company recording both assets and liabilities for leases currently classified as operating leases.
In January 2017, the FASB issued a new accounting standard that provides for the elimination of Step 2 from the goodwill impairment test. Under the new guidance, impairment charges are recognized to the extent the carrying amount of a reporting unit exceeds its fair value with certain limitations. The new guidance is effective for any annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company does not anticipate that the adoption of the new guidance will have a material effect on its consolidated financial statements.
In March 2017, the FASB issued a new accounting standard regarding the treatment of net periodic benefit costs. This standard will require segregation of these net benefit costs between operating and non-operating expenses. Currently, the Company reports the net benefit costs associated with its defined benefit plans as a component of operating income. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. When the new standard is implemented, only the service cost component of defined benefit plan costs will be reported within operating income, while all other components of net benefit cost will be presented within the “Other Expense (income)” line item on the consolidated statements of operations. The standard requires retrospective application, and as such upon adoption this standard will result in offsetting changes in operating income and “Other Expense (income)” on the consolidated statements of operations for all periods presented, with no impact on net income. The Company adopted this standard in the first quarter of 2018. As is required, the Company adjusted its previously reported first quarter of 2017 financial statements for this adoption, with a reclassification of expense of approximately $0.5 million from the “Selling, General and Administrative Expenses” line item of the consolidated condensed statement of operations to the “Other Expenses” line items of the consolidated condensed statement of operations. There was no change to consolidated net income or earnings per share from the adoption of this standard.
In February 2018, the FASB issued a new accounting standard to address a narrow-scope financial reporting issue that arose as a consequence of the U.S. Tax Cuts and Jobs Act. Existing guidance requires that deferred tax liabilities and assets be adjusted for a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. That guidance is applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in net income), such as amounts related to benefit plans and hedging activity. As a result, the tax effects of items within accumulated other comprehensive income do not reflect the appropriate tax rate (the difference is referred to as stranded tax effects). The new guidance allows for a reclassification of these amounts to retained earnings, thereby eliminating these stranded tax effects. The new guidance is effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.
NOTE 11 – INCOME
TAXES
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The Company is continuing to evaluate the Tax Act and its requirements, as well as its application to our business and its impact on our effective tax rate.
The Company is applying the guidance to address the accounting for income taxes under accounting standards in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Accounting standards provide a reasonable “measurement period” not to exceed twelve months from the date of enactment to complete the accounting of these provisional estimates. As disclosed in the Company’s Annual report on Form 10-K for the fiscal year ended December 31, 2017, two material provisional estimates that impacted the Company were the U.S. statutory rate reduction and the one-time transition tax. These amounts are considered provisional because they use reasonable estimates of which tax returns have not been filed and because estimated amounts may be impacted by future regulatory and accounting guidance if and when issued.
For the first quarter of 2018, there were no significant changes to the Company’s provisional estimates of the income tax effects reflected in 2017 for the changes in tax law and tax rate from the enactment of the Tax Act. The impact of tax law changes on the Company’s financial statements could differ from its reasonable estimates due to further analysis of the new law, regulatory guidance, technical corrections, legislation, or guidance under U.S. generally accepted accounting principles. If significant changes occur, the Company will provide updated information in connection with future regulatory filings or the Company will adjust these provisional amounts as further information becomes available and as we refine our calculations.
For the first quarter of 2018, the Company’s effective tax rate was favorably impacted by the reduction in the U.S. statutory tax rate due to the enactment of the Tax Act. This favorable impact was partially offset by certain base broadening provisions of the Tax Act. In the first quarter of 2018, our effective tax rate was 26%, as compared to 33% in the first quarter of 2017.
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 three months of 2018, the Company increased its liability for unrecognized tax benefits by $0.2 million. As of April 1, 2018, the Company had accrued approximately $29.0 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of April 1, 2018 reflects a reduction for $3.3 million of these unrecognized tax benefits.
NOTE 12 – ITEMS RECLASSIFIED FROM OTHER COMPREHENSIVE INCOME
During the first quarter of 2018, 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 $0.4 million related to the Company’s defined benefit retirement plan and salary continuation plan. These reclassifications were included in the other expenses line item of the Company’s consolidated condensed statement of operations.
NOTE 13 – REPURCHASE OF COMMON STOCK
In the second quarter of 2017, the Company adopted a new share repurchase program in which the Company is authorized to repurchase up to $100 million of its outstanding shares of common stock. The program has no specific expiration date.
During the first quarter of 2018, the Company repurchased and retired 615,000 shares of common stock at an average price of $23.54 per share pursuant to this share repurchase program.
NOTE 14 – RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
In the fourth quarter of 2016, the Company committed to a new restructuring plan in its continuing efforts to improve efficiencies and decrease costs across its worldwide operations, and more closely align its operating structure with its business strategy. The plan involved (i) a substantial restructuring of the FLOR business model that included closure of its headquarters office and most retail FLOR stores, (ii) a reduction of approximately 70 FLOR employees and a number of employees in the commercial carpet tile business, primarily in the Americas and Europe regions, and (iii) the write-down of certain underutilized and impaired assets that included information technology assets, intellectual property assets, and obsolete manufacturing, office and retail store equipment.
As a result of this plan, the Company incurred a pre-tax restructuring and asset impairment charge in the fourth quarter of 2016 of $19.8 million. In the first quarter of 2017, the Company recorded an additional charge of $7.3 million, primarily related to exit costs associated with the closure of most FLOR retail stores in the first quarter of 2017. The charge in the first quarter of 2017 was comprised of lease exit costs of $3.4 million, asset impairment charges of $3.3 million and severance charges of $0.6 million.
A summary of these restructuring activities is presented below:
|
|
|
Total
Restructuring
Charge
|
|
|
Costs Incurred
in 2016
|
|
|
Costs Incurred
in 2017
|
|
|
Costs Incurred
in 2018
|
|
|
Balance at
April 1, 2018
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Workforce Reduction
|
|
$
|
10,652
|
|
|
$
|
1,451
|
|
|
$
|
6,633
|
|
|
$
|
917
|
|
|
$
|
1,651
|
|
|
Asset Impairment
|
|
|
11,319
|
|
|
|
8,019
|
|
|
|
3,300
|
|
|
|
0
|
|
|
|
0
|
|
|
Lease Exit Costs
|
|
|
5,116
|
|
|
|
27
|
|
|
|
5,089
|
|
|
|
0
|
|
|
|
0
|
|
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, 2017, under Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter ended, or as of, April 1, 2018, and the comparable period of 2017 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 December 31, 2017, 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 April 1, 2018, net sales were $240.6 million compared with net sales of $222.1 million in the first quarter last year. Fluctuations in currency exchange rates had a positive impact of approximately $9.8 million on sales for the 2018 first quarter compared with the prior year period. This impact was primarily a result of the strengthening of the Euro and British Pound against the U.S. dollar.
During the first quarter of 2018, net income was $15.1 million, or $0.25 per diluted share, compared with $8.5 million, or $0.13 per diluted share, in the first quarter last year. Our net income was positively impacted by the reduction in the U.S. statutory tax rate due to the U.S. Tax Cuts and Jobs Act enacted in the fourth quarter of 2017. The first quarter of 2017 includes $7.3 million of restructuring and asset impairment charges as a continuation of the plans announced for the fourth quarter of 2016, primarily relating to our closing of the majority of our FLOR retail stores.
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 periods ended April 1, 2018 and April 2, 2017, respectively:
|
|
|
Three Months Ended
|
|
|
|
|
April
1
, 201
8
|
|
|
April 2, 2017
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
Cost of sales
|
|
|
61.1
|
|
|
|
60.3
|
|
|
Gross profit on sales
|
|
|
38.9
|
|
|
|
39.7
|
|
|
Selling, general and administrative expenses
|
|
|
29.3
|
|
|
|
29.3
|
|
|
Restructuring and Asset Impairment Charge
|
|
|
0.0
|
|
|
|
3.3
|
|
|
Operating income
|
|
|
9.6
|
|
|
|
7.1
|
|
|
Interest/Other expense
|
|
|
1.1
|
|
|
|
1.4
|
|
|
Income before tax expense
|
|
|
8.5
|
|
|
|
5.8
|
|
|
Income tax expense
|
|
|
2.2
|
|
|
|
1.9
|
|
|
Net income
|
|
|
6.3
|
|
|
|
3.9
|
|
Net Sales
Below is information regarding net sales, and analysis of those results, for the three-month periods ended April 1, 2018, and April 2, 2017, respectively.
|
|
|
Three Months Ended
|
|
|
Percentage
|
|
|
|
|
April
1
, 201
8
|
|
|
April
2
, 201
7
|
|
|
Change
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Net Sales
|
|
$
|
240,563
|
|
|
$
|
221,102
|
|
|
|
8.8
|
%
|
For the quarter ended April 1, 2018, net sales increased $19.5 million (8.8%) versus the comparable period in 2017. Currency fluctuations had an approximately $9.8 million (4.4%) positive impact on first quarter 2018 sales compared to the first quarter of 2017. This currency impact was most pronounced in our European operations, due to the strengthening of the Euro and British Pound against the U.S. dollar. On a geographic basis, sales increased across all geographies with Americas increasing 3%, Europe increasing 19% (4% in local currency) and Asia-Pacific increasing 16%. In the Americas, the sales comparison was negatively impacted by a decline in our FLOR residential business, which closed its specialty retail stores in the first quarter of 2017. The increase in the Americas was attributable to sales of our modular resilient flooring product, which is a luxury vinyl tile (“LVT”) product that was launched in the first quarter of 2017. The sales increase in the Americas was most pronounced in the corporate office segment, although healthcare and retail both showed growth as well for the period. In Europe, the sales increase was, as noted, aided by the strengthening of the Euro and British Pound. Growth in local currency of 4% in Europe was primarily due to the introduction of our LVT product offering. On a segment basis, the Europe sales increase was most significant in the corporate office and retail segments. The sales increase in Asia-Pacific was a result of performance in both Australia and Asia, with sales in Asia increasing more than 20%, due to the strength of India and China. Sales increases in the Asia-Pacific region were seen in both core carpet sales as well as our LVT product offerings, with the corporate office segment representing the majority of the sales increase in the region.
Cost and Expenses
The following table presents our overall cost of sales and selling, general and administrative expenses for the three-month periods ended April 1, 2018, and April 2, 2017, respectively:
|
|
|
Three Months Ended
|
|
|
Percentage
|
|
|
Cost and Expenses
|
|
April
1
, 201
8
|
|
|
April 2, 2017
|
|
|
Change
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
146,981
|
|
|
$
|
133,300
|
|
|
|
10.3
|
%
|
|
Selling, general and administrative expenses
|
|
|
70,594
|
|
|
|
64,714
|
|
|
|
9.1
|
%
|
|
Total
|
|
$
|
217,575
|
|
|
$
|
198,014
|
|
|
|
9.9
|
%
|
For the quarter ended April 1, 2018, cost of sales increased $13.7 million (10.3%) compared to the first quarter of 2017. Currency fluctuations had an approximately $6 million (4.5%) negative impact on the comparison. In absolute dollars, the increase in cost of sales was largely attributable to the increase in sales for the first quarter of 2018, as described above. The increase in cost of sales was higher on a percentage basis, however, than the increase in net sales due to higher input costs for our raw materials for the first quarter of 2018 as compared to the first quarter of 2017. These increases were partially offset by production efficiencies. As a percentage of sales, our cost of sales increased to 61.1% for the first quarter of 2018 versus 60.3% for the first quarter of 2017. This increase was due to the increase of raw material pricing as discussed above, as well as a result of the exit of our FLOR specialty retail stores at the end of the first quarter of 2017. Sales in these stores typically generated higher gross margins compared to our commercial carpet business, and therefore the absence of these stores was dilutive to gross profit margin when measured as a percentage of sales.
For the quarter ended April 1, 2018, selling, general and administrative (“SG&A”) expenses increased $5.9 million (9.1%) versus the comparable period in 2017. Fluctuations in currency rates had a $2.2 million (3.4%) negative impact on the comparison. The increase in SG&A expense was due to higher share-based incentive compensation of $1.7 million, as well was higher selling expenses of $1.8 million in our commercial business due to higher sales as well as planned enhancements in our selling system. These increases in selling expenses were offset by lower selling costs of $1.2 million due to the exit of the FLOR specialty retail stores as of the end of the first quarter of 2017. As a percentage of sales, SG&A expenses remained consistent at 29.3% for each of the first quarters of 2018 and 2017.
Interest
Expense
For the three-month period ended April 1, 2018, interest expense increased by $0.5 million to $2.1 million, versus $1.6 million for the three-month period ended April 2, 2017. The reason for the increase was higher average interest rates on our borrowings in the first quarter of 2018 as compared to the first quarter of 2017.
Liquidity and Capital Resources
General
At April 1, 2018, we had $67.9 million in cash. At that date, we had $166.3 million in term loan borrowing, $77.6 million of revolving loan borrowings and $5.7 million in letters of credit outstanding under the Syndicated Credit Facility. As of April 1, 2018, we could have incurred $166.7 million of additional borrowings under the Syndicated Credit Facility. In addition, we could have incurred an additional $9.9 million of borrowings under other credit facilities in place at other non-U.S. subsidiaries.
Analysis of Cash Flows
We exited the quarter ended April 1, 2018 with $67.9 million in cash, a decrease of $19.2 million during the first three months of the year. The most significant factors in the decrease were cash outflows for financing activities, including, (1) $14.5 million used to repurchase and retire 615,000 shares of our outstanding common stock, (2) dividends paid on our common stock of $3.9 million, and (3) $3.8 million of cash used for the required amortization payment under our Syndicated Credit Facility. These financing outflows were partially offset by borrowings of $17.2 million under our Syndicated Credit Facility. We used $7.4 million of cash for capital expenditures during the first three months of 2018. Cash flow from operations in the first three months of 2018 required a use of $5.8 million, with net income of $15.1 million offset by working capital uses of cash of (1) $17.2 million for increases in inventories, (2) increases in prepaid expense and other current assts of $16.3 million, and (3) a decrease in accounts payable and accrued expenses of $7.1 million. These working capital uses of cash were partially offset by an increase in cash due to reductions of accounts receivable of $6.3 million.
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, 2017, under Item 7A of that Form 10-K. The discussion here focuses on the quarter ended April 1, 2018, 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 April 1, 2018, we recognized an $8.8 million increase in our foreign currency translation adjustment account compared to December 31, 2017, primarily because of the strengthening of the Euro and British Pound against the U.S. dollar as of the end of the first quarter of 2018 compared to the end of 2017.
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 December 31, 2017.
As of April 1, 2018, 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 $9.5 million or an increase in the fair value of our financial instruments of $11.6 million, respectively. As the impact of offsetting changes in the fair market value of our net foreign investments is not included in the sensitivity model, these results are not indicative of our actual exposure to foreign currency exchange risk.
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. Based on that 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.
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.
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 first quarter of 2018. 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 December 31, 2017.
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 April 1, 2018:
|
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 1-31, 2018
(2)
|
|
|
1,933
|
|
|
$
|
20.94
|
|
|
|
0
|
|
|
|
39,576,216
|
|
|
February 1-28, 2018
(
2
)
|
|
|
662,853
|
|
|
|
23.54
|
|
|
|
614,595
|
|
|
|
25,109,272
|
|
|
March 1-31, 2018
(
2
)
|
|
|
770
|
|
|
|
24.95
|
|
|
|
0
|
|
|
|
25,109,272
|
|
|
April 1, 2018
|
|
|
0
|
|
|
|
0.00
|
|
|
|
0
|
|
|
|
25,109,272
|
|
|
Total
|
|
|
665,556
|
|
|
$
|
23.54
|
|
|
|
614,595
|
|
|
|
25,109,272
|
|
(1)
The monthly periods identified above correspond to the Company’s fiscal first quarter of 2018, which commenced January 1, 2018 and ended April 1, 2018.
(
2
)
Includes shares acquired by the Company from employees to satisfy income tax withholding obligations in connection with the vesting of previous equity awards.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
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 10, 2018
|
By:
|
/s/
Bruce A. Hausmann
|
|
|
|
Bruce A. Hausmann
|
|
|
|
Vice President
|
|
|
|
(Principal Financial Officer)
|
EXHIBITS INCLUDED HEREWITH
|
EXHIBIT
NUMBER
|
DESCRIPTION OF EXHIBIT
|
|
|
|
|
10.1
|
Form of 2018 Restricted Stock Agreement
|
|
10.2
|
Form of 2018 Performance Share Agreement
|
|
10.3
|
Employment Offer Letter to Bruce A. Hausmann
|
|
10.4
|
Employment Offer Letter to J. Chadwick Scales
|
|
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.
|
-21-
Exhibit 10.1 – Form of 2018 Restricted Stock Agreement for
Employees
INTERFACE, INC.
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (this “Agreement”) is entered into as of the ____ day of ____________, 20__, by and between
Interface, Inc.
(the “Company”) and _______________
(“Grantee”).
W I T N E S S E T H
:
WHEREAS
, the Company has adopted the Interface, Inc. Omnibus Stock Incentive Plan (the “Plan”) which is administered by a committee appointed by the Company's Board of Directors (the “Committee”); and
WHEREAS
, the Committee has granted to Grantee an award of Restricted Shares under the terms of the Plan (the “Award”) to encourage Grantee’s continued loyalty and diligence; and
WHEREAS
,
to comply with the terms of the Plan and to further the interests of the Company and Grantee, the parties hereto have set forth the terms of the Award in writing in this Agreement.
NOW, THEREFORE
, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.
Plan Provisions
.
In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Plan, which are hereby incorporated herein by reference. Any terms used herein with an initial capital letter shall have the same meaning as provided in the Plan, unless otherwise specified herein. In the event of any conflict between the provisions of this Agreement and the Plan, the Plan shall control.
2.
Stock Award
.
Effective on ______________ __, 20__ (the “Grant Date”), and subject to the restrictions and other conditions set forth herein, the Committee granted to Grantee an Award of _____ Shares of common stock, $.10 par value per share, of the Company. Such Shares granted are hereinafter sometimes referred to as the “Restricted Shares.” The Fair Market Value of each Restricted Share awarded on the Grant Date was $______.
3.
Vesting Restrictions
.
(a)
General
.
All or a portion (as applicable) of the Restricted Shares will vest and no longer be subject to forfeiture if one of several criteria is satisfied. As described below, these criteria are based on Grantee’s tenure of employment, the termination of Grantee’s employment after occurrence of a Change in Control (as defined in subsection (c) hereof), and/or certain other events resulting in termination of Grantee’s employment with the Company.
(b)
Tenure of E
m
ployment
.
If Grantee remains continuously employed by the Company or any of its Subsidiaries ____________________, Grantee shall become fully vested in the Restricted Shares.
(c)
Termination After a
Change in Control
. If within 24 months following the occurrence of a Change in Control (as defined below) Grantee’s employment with the Company and its Subsidiaries terminates as a result of (i) involuntary termination at the request of the Company (or the Subsidiary that is Grantee’s employer) for any reason other than Cause (as defined in Section 4 below), or (ii) a voluntary termination by Grantee with Good Reason (as defined below), any Restricted Shares granted hereunder that have not yet vested or been forfeited will become fully vested on the date of Grantee’s termination of employment. For purposes hereof, “
Change in Control
”
shall mean the earliest to occur of:
(i) the acquisition by any “person”, entity, or “group” of “beneficial ownership” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, and rules promulgated thereunder) of more than 30 percent of the outstanding capital stock entitled to vote for the election of directors (“Voting Stock”) of (A) the Company, or (B) any corporation which is the surviving or resulting corporation, or the transferee corporation, in a transaction described in clause (ii)(A) or (ii)(B) immediately below;
(ii) the effective time of (A) a merger, consolidation or other business combination of the Company with one or more corporations as a result of which the holders of the outstanding Voting Stock of the Company immediately prior to such merger or consolidation hold less than 51 percent of the Voting Stock of the surviving or resulting corporation, or (B) a transfer of all or substantially all of the property or assets of the Company other than to an entity of which the Company owns at least 51 percent of the Voting Stock, or (C) a plan of complete liquidation of the Company; and
(iii) the election to the Board of Directors of the Company, without the recommendation or approval of the incumbent Board of Directors of the Company, of the lesser of (A) four directors, or (B) directors constituting a majority of the number of directors of the Company then in office.
“Good Reason” shall mean, following a Change in Control, (i) a material reduction in Grantee’s authorities, duties or responsibilities, (ii) a material reduction in Grantee’s base compensation or bonus opportunity as in effect immediately prior to the Change in Control, (iii) a material reduction in Grantee’s benefits, other than a reduction affecting substantially all similarly situated employees, (iv) a material reduction in any budget over which the Grantee has authority, or (v) a Company-required relocation of more than 30 miles of the Grantee’s principal place of employment. An event described in clause (i), (ii) or (iii) shall constitute Good Reason only if the Grantee notifies the Company within 20 days of the occurrence of the event and the Company fails to take appropriate action to cure such event within 20 days after receiving such notice.
(d)
Disability
,
Death
, or Involuntary Termination
without Cause
.
Upon the date that Grantee’s employment with the Company and its Subsidiaries terminates as a result of (i) Grantee’s Disability (as defined below), (ii) Grantee’s death, or (iii) an involuntary termination at the request of the Company (or the Subsidiary that is Grantee’s employer) for any reason other than Cause (as defined in Section 4 below), all or a portion of the Restricted Shares that have not yet vested or been forfeited will do so on such date, and Grantee thereupon will become vested in such Restricted Shares; provided, however, that in the event of an involuntary termination for any reason other than Cause, in order to vest in such Restricted Shares Grantee must sign a release of claims and acknowledgment in the form required by the Company. The amount of Restricted Shares that shall vest will be equal to the product of (x) the total number of Restricted Shares granted hereunder that have not yet vested, and (y) a fraction, the numerator of which is the number of full and partial 12-month periods that have elapsed since the Grant Date (with any partial 12-month period treated as a whole 12-month period), and the denominator of which is _______. Any Restricted Shares that do not vest as described herein shall be immediately forfeited, and Grantee (or Grantee’s heirs) shall not have any rights in such Restricted Shares. For purposes hereof, the term “Disability” shall mean Grantee’s inability, as a result of physical or mental incapacity, to substantially perform Grantee’s duties for the Company and its Subsidiaries on a full-time basis for a continuous period of six months. The Committee, in its sole discretion, shall make all determinations as to whether or not Grantee has incurred a Disability, and the Committee’s determination shall be final and binding.
4.
Forfeiture Upon Resignation or Termination for Cause
.
If Grantee voluntarily resigns from employment with the Company and all of its Subsidiaries, or if the Company or the Subsidiary that is Grantee’s employer terminates Grantee’s employment for Cause (as defined below), any Restricted Shares that are not then vested under any provision of Section 3 shall be immediately forfeited, and Grantee shall have no rights in such Restricted Shares. For purposes hereof, the term “Cause” shall mean the reason for termination of Grantee’s employment is (A) Grantee’s fraud, dishonesty, gross negligence or willful misconduct, with respect to business affairs of the Company or its Subsidiaries, (B) Grantee’s refusal or repeated failure to follow the established lawful policies of the Company or its Subsidiaries applicable to persons occupying the same or similar positions, or (C) Grantee’s conviction of a felony or other crime involving moral turpitude.
5.
Limitations on Post-Termination Activities
.
During the term of Grantee’s employment by the Company or any of its direct or indirect subsidiaries (collectively, the “Company Group”), and for a period of 12 months thereafter, Grantee will not (i) provide any “Services” within the geographic territory of the business unit with whom Grantee is employed at the time of termination (whether Americas, EMEA or Asia-Pacific, as applicable, or, for corporate employees, all such geographic regions) to any person or entity (other than the Company Group) developing, manufacturing, marketing, selling, distributing (including, without limitation, through catalogs and similar instruments), installing, maintaining or reclaiming any carpet tile (also known as modular carpeting), broadloom carpet (whether 12-foot, six-foot or other competitive widths), luxury vinyl tile, or other engineered textile flooring for contract, commercial, institutional (including, without limitation, government and education), retail, hospitality or residential markets and customers, (ii) solicit, initiate contact with, call upon, initiate communication with or attempt to initiate communication with, directly or indirectly, any customer of the Company Group with whom Grantee had material contact within the most recent two years of Grantee’s employment, or any representative of any such customer, with a view to providing Services to such customers, or (iii) solicit or attempt to solicit, directly or indirectly, for employment with another person or entity a Company Group employee with whom Grantee had material contact during the most recent two years of Grantee’s employment. As used herein, “Services” shall mean the services which are the same as or substantially similar to the services Grantee provides to any Company Group entity within the most recent two years of Grantee’s employment, and that Grantee shall be prohibited from providing (whether as an owner, partner, employee, consultant or in any other capacity) in competition with any Company Group entity, in accordance with the terms of this paragraph, which include but are not limited to conducting the business of developing, manufacturing, marketing, selling, distributing, installing, maintaining or reclaiming any carpet tile, broadloom carpet, luxury vinyl tile, or other engineered textile flooring. During the term of Grantee’s employment by the Company Group, and for a period of 12 months thereafter, Grantee shall, before accepting employment with another employer, provide such prospective employer with a copy of this Section 5 of this Agreement and, upon accepting any employment with another employer, provide the Company with such employer’s name and a description of the services Grantee will provide to such employer. Upon any termination of Grantee’s employment for any reason whatsoever (whether voluntary on the part of Grantee, for just cause, without just cause, or for other reasons), the obligations of Grantee pursuant to this Section 5 shall survive and remain in effect.
The parties acknowledge and agree that (i) the convents contained in this Section 5 are reasonable and necessary for the protection of the business and goodwill of the Company Group, (ii) any breach of the covenants in this Section 5 by Grantee will cause the Company Group substantial and irreparable harm, and (iii) Grantee has received good, valuable and adequate consideration in exchange for the covenants contained in this Section 5. Consequently, if the Grantee breaches any of the terms of this Section 5, the Grantee will forfeit the award described in this Agreement and all rights hereunder. The Company Group shall also be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. Such equitable relief will be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.
The covenants contained in this Section 5 shall be presumed to be enforceable, and any reading causing unenforceability shall yield to a construction permitting enforcement. If any single covenant or clause shall be found unreasonable, unenforceable or both, it shall be modified as appropriate to protect the Company Group’s interests and the revised covenants and clauses shall be enforced in accordance with the tenor of the Agreement. In the event a court should determine not to enforce a covenant as written due to overbreadth, the parties specifically agree that said covenant shall be enforced to the extent reasonable, whether said revisions are in time, territory or scope of prohibited activities. The parties agree that the covenants contained in this Agreement are severable and divisible; that none of such covenants depends on any other covenant for its enforceability; that such covenants constitute enforceable obligations between the parties; that each such covenant will be construed as an agreement independent of any other covenant of this Agreement; and that the existence of any claim or cause of action by one party to this Agreement against the other party to this Agreement, whether predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by any party to this Agreement of any such covenant.
6.
Delivery of S
hares
.
Within a reasonable time after the date hereof, the Company shall cause the Restricted Shares to be registered in the name of Grantee, subject to the risk of forfeiture set forth in Sections 3 and 4 hereof. Grantee may not sell, assign, transfer or pledge any Restricted Shares prior to the date on which the possibility of forfeiture with respect to such Shares has lapsed. During the period that any Restricted Shares remain subject to a risk of forfeiture under Sections 3 and 4 hereof, the Company may retain possession of any certificate representing such Shares as a means of enforcing such restrictions.
7.
Acknowledgment of Grantee
.
Grantee acknowledges that certain restrictions under state, federal or foreign securities laws may apply with respect to the Restricted Shares granted pursuant to the Award. Grantee further acknowledges that, to the extent Grantee is an “affiliate” of the Company (as that term is defined by the Securities Act of 1933), the Restricted Shares granted as a result of the Award are subject to certain trading restrictions under applicable securities laws (including, particularly, Rule 144 under the Securities Act). Grantee hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state, federal and foreign securities laws applicable to the Company and any restrictions on the resale of such Shares which may pertain under such laws. The Company has registered (or intends to register) the securities represented by the Restricted Shares; however, in the event such registration at any time is ineffective or any special rules apply, such securities may be sold or transferred only in accordance with the Plan and pursuant to additional, effective securities laws registrations or in a transaction that is exempt from such registration requirements. If appropriate under the circumstances, the certificate(s) evidencing the Restricted Shares shall bear a restrictive legend indicating that such shares have not been registered under applicable securities laws.
8.
Execution of Agreement
.
Grantee shall execute this Agreement within 30 days after receipt of same, and promptly return an executed copy to the Secretary of the Company.
9.
Withholding
.
Grantee shall pay the Company an amount equal to the sum of all applicable employment taxes that the Company or any Subsidiary is required to withhold at any time in connection with the operation of this Agreement. In the absence of prior arrangements satisfactory to the Company for payment of all such taxes required to be withheld, the Company shall withhold a portion of the Restricted Shares then vested under this Agreement in payment of such taxes, except to the extent such withholding of Shares is prohibited by any covenants governing the Company’s debt as in effect from time to time.
10.
Miscellaneous
.
(a)
Employment Rights
. The granting of the Award and the execution of this Agreement shall not afford Grantee any rights to similar grants in future years or any right to be retained in the employ or service of the Company or any of its Subsidiaries, nor shall it interfere in any way with the right of the Company or any such Subsidiary to terminate Grantee's employment or services at any time, with or without cause, or the right of Grantee to terminate Grantee’s employment or services at any time.
(b)
Shareholder Rights
. While the Restricted Shares remain subject to forfeiture under Sections 3 and 4 hereof, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and to receive any cash dividends.
(c)
Severability
. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a governmental agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall continue in full force and effect, and shall in no way be affected, impaired or invalidated.
(d)
Controlling Law
. This Agreement is being made in the State of Georgia (USA) and shall be construed and enforced in accordance with the laws of that state. Grantee hereby consents to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia, and the U.S. District Court in Atlanta, Georgia, and hereby waives any objection Grantee might otherwise have to jurisdiction and venue in such courts, in the event either court is requested to resolve a dispute between the parties with respect to this Agreement.
(e)
Construction
. This Agreement contains the entire understanding between the parties and supersedes any prior understanding and agreements between them with respect to the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between the parties hereto relating to the subject matter hereof which are not fully expressed herein.
(f)
Binding Effect
. This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns, and Grantee and Grantee’s heirs and personal representatives. Any business entity or person succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets, or otherwise shall be bound by and shall adopt and assume this Agreement, and the Company shall obtain the assumption of this Agreement by such successor.
(g)
Headings
. Section and other headings contained in this Agreement are included for reference purposes only and are in no way intended to define or limit the scope, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF
, the individual party hereto has executed this Agreement, and the corporate party has caused this Agreement to be executed by a duly authorized representative, as of the date first set forth above.
|
|
INTERFACE, INC.
By:
[name]
[title]
GRANTEE
__________________________________________
[name]
|
7
Exhibit 10.2 – Form of 2018 Performance Share Agreement for Employees
INTERFACE, INC.
PERFORMANCE SHARE AGREEMENT
This Performance Share Agreement (this “Agreement”) is entered into as of the ____ day of ________, 20__, by and between
Interface, Inc.
(the “Company”) and _____________ (“Grantee”).
W I T N E S S E T H
:
WHEREAS
, the Company has adopted the Interface, Inc. Omnibus Stock Incentive Plan (the “Plan”) which is administered by a committee appointed by the Company’s Board of Directors (the “Committee”); and
WHEREAS
, the Committee has granted to Grantee an award of Performance Shares under the terms of the Plan (the “Award”) to encourage Grantee’s continued loyalty and diligence; and
WHEREAS
, to comply with the terms of the Plan and to further the interests of the Company and Grantee, the parties hereto have set forth the terms of the Award in writing in this Agreement.
NOW, THEREFORE
, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1)
Plan Provisions
.
In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Plan, which are hereby incorporated herein by reference. Any terms used herein with an initial capital letter shall have the same meaning as provided in the Plan, unless otherwise specified herein. In the event of any conflict between the provisions of this Agreement and the Plan, the Plan shall control.
2)
Performance Share Award
.
(a) Effective on _______ __, 20__ (the “Grant Date”), and subject to the restrictions and other conditions set forth herein, the Committee granted to Grantee an Award of _____ Performance Shares based on a “Target Level” of vesting as described in Section 3. Such Performance Shares granted are hereinafter sometimes referred to as the “Performance Shares.” The Fair Market Value of each Performance Share awarded on the Grant Date was $_____.
(b) If cash dividends are paid with respect to Shares, Grantee shall be credited with a “dividend equivalent” representing the right to receive a cash payment equal to the amount of such dividend with respect of each Performance Share that vests under the Award. If dividends are paid in the form of Shares rather than cash, then the number of Performance Shares shall be increased by the Performance Shares for each Share that would have been received as a dividend had the Performance Shares been outstanding Shares. Dividend equivalents and additional Performance Shares credited under the Section shall vest or be forfeited at the same time as the Performance Shares to which they relate.
3)
Vesting Restrictions
.
(a)
General
.
All or a portion (as applicable) of the Performance Shares will vest and no longer be subject to forfeiture if one of several criteria is satisfied. As described below, these criteria are based on ___________________________________________, the termination of Grantee’s employment after the occurrence of a Change in Control (as defined in subsection (c) hereof), and/or certain other events resulting in termination of Grantee’s employment with the Company.
(b)
Performance
Vesting
.
The Performance Shares shall vest under this Section 3(b), to the extent not otherwise vested or forfeited hereunder, to the extent that the performance vesting criteria specified in this Section 3(b) is achieved. [Performance Vesting Criteria Described Here]
(c)
Performance Vesting
. [Any additional Performance Vesting Criteria Described Here]
(d)
Effect
o
f
a
Change in Control
. In the event of a Change in Control (as defined in Section 4(d)), the Committee shall have the authority to, without the Grantee’s consent, alter or amend the terms of the Award, with respect to any Performance Shares that have not then vested or been forfeited, in any manner that it deems equitable and necessary or advisable to take into account the effect of the Change in Control. Such modifications may include, by way of example and not by way of limitation, (i) providing for payment in the form of cash or other securities in lieu of Shares, (ii) vesting of all or a portion of the Performance Shares based on the attainment of the performance criteria under Section 3(b) or 3(c) determined as of the date of the Change of Control, (iii) accelerating the vesting of the Performance Shares in full or on a pro rata basis, (iv) converting some or all of the Shares to time-based vesting, or (v) making appropriate adjustments to the performance criteria under Sections 3(b) and 3(c). Nothing in this Section 3(d) shall limit the Committee from taking any other action permitted under the Plan with respect to the Performance Shares.
4)
Effect of
Termination
of Employment
(a)
Resignation or Termination for Cause
.
If Grantee voluntarily resigns from employment with the Company and all of its Subsidiaries for any reason other than Disability (as defined in subsection (b) below), or if the Company or the Subsidiary that is Grantee’s employer terminates Grantee’s employment for Cause (as defined below), any Performance Shares that are not then vested shall be immediately forfeited, and Grantee shall have no rights in such Performance Shares. For purposes hereof, the term “Cause” shall mean the reason for termination of Grantee’s employment is (A) Grantee’s fraud, dishonesty, gross negligence or willful misconduct, with respect to the business affairs of the Company or its Subsidiaries, (B) Grantee’s refusal or repeated failure to follow the established lawful policies of the Company or its Subsidiaries applicable to persons occupying the same or similar positions, or (C) Grantee’s conviction of a felony or other crime involving moral turpitude.
(b)
Disability or Death
. If Grantee’s employment with the Company and its Subsidiaries terminates as a result of (i) Grantee’s Disability (as defined below) or (ii) Grantee’s death, Grantee (or Grantee’s heirs) shall vest in a portion of the Performance Shares that have not yet vested or been forfeited. The number of Performance Shares that shall vest will be equal to the product of (x) the nominal number of Performance Shares specified in Section 2(a), reduced by the number of Performance Shares that have vested under the performance criterion (pursuant to Sections 3(b) and 3(c) hereof), and (y) a fraction, the numerator of which is the number of full and partial 12 month periods that have elapsed since the Grant Date (with any partial 12 month period treated as a whole 12-month period), and the denominator of which is ______. Any Performance Shares that do not vest as described herein shall be immediately forfeited, and Grantee (or Grantee’s heirs) shall not have any rights in such Performance Shares. For purposes hereof, the term “Disability” shall mean Grantee’s inability, as a result of physical or mental incapacity, to substantially perform Grantee’s duties for the Company and its Subsidiaries on a full-time basis for a continuous period of six months. The Committee, in its sole discretion, shall make all determinations as to whether or not Grantee has incurred a Disability, and the Committee’s determination shall be final and binding.
(c)
Involuntary Termination
.
If Grantee’s employment with the Company and its Subsidiaries terminates as a result of an involuntary termination at the request of the Company (or the Subsidiary that is Grantee’s employer) for any reason other than Cause (as defined in subsection (a) above) and the provisions of Section 4(d) do not apply, Grantee will retain a portion of the Performance Shares that have not yet vested or been forfeited; provided however, that (i) such retained Performance Shares shall vest only in accordance with Section 3(b) and/or 3(c) and (ii) in order to retain such Performance Shares Grantee must sign a release of claims and acknowledgement in the form required by the Company. Any Performance Shares that are not retained by Grantee shall be immediately forfeited, and Grantee shall not have any rights in such Performance Shares. The number of such Performance Shares that shall be retained will be equal to the product of (x) the nominal number of Performance Shares specified in Section 2(a), reduced by the number of Performance Shares that have vested under the performance criteria (pursuant to Sections 3(b) and 3(c) hereof), and (y) a fraction, the numerator of which is the number of full and partial 12-month periods that have elapsed since the Grant Date (with any partial 12-month period treated as a whole 12-month period), and the denominator of which is _______.
(d)
Termination After a
Change in Control
. If, within 24 months following the occurrence of a Change in Control (as defined below), Grantee’s employment with the Company and its Subsidiaries terminates as a result of (i) involuntary termination at the request of the Company (or the Subsidiary that is Grantee’s employer) for any reason other than Cause (as defined in Section 4(a)), or (ii) a voluntary termination by Grantee with Good Reason (as defined below), a portion of the Performance Shares granted hereunder that have not yet vested or been forfeited will become vested on the date of Grantee’s termination of employment in accordance with this Section 4(d). The number of Performance Shares that shall vest upon such termination of employment shall be equal to the nominal number of Performance Shares set forth in Section 2(a), reduced by the number of Performance Shares previously vested and any Performance Shares that vest pursuant to Section 3(b) after the Grantee’s termination of employment due to the Committee’s subsequent certification of EPS with respect to a fiscal year that ended during the Grantee’s employment. For purposes hereof, “
Change in Control”
shall mean the earliest to occur of:
(i) the acquisition by any “person”, entity, or “group” of “beneficial ownership” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, and rules promulgated thereunder) of more than 30 percent of the outstanding capital stock entitled to vote for the election of directors (“Voting Stock”) of (A) the Company, or (B) any corporation which is the surviving or resulting corporation, or the transferee corporation, in a transaction described in clause (ii)(A) or (ii)(B) immediately below;
(ii) the effective time of (A) a merger, consolidation or other business combination of the Company with one or more corporations as a result of which the holders of the outstanding Voting Stock of the Company immediately prior to such merger or consolidation hold less than 51 percent of the Voting Stock of the surviving or resulting corporation, or (B) a transfer of all or substantially all of the property or assets of the Company other than to an entity of which the Company owns at least 51 percent of the Voting Stock, or (C) a plan of complete liquidation of the Company; and
(iii) the election to the Board of Directors of the Company, without the recommendation or approval of the incumbent Board of Directors of the Company, of the lesser of (A) four directors, or (B) directors constituting a majority of the number of directors of the Company then in office.
“
Good Reason
” shall mean, following a Change in Control, (i) a material reduction in Grantee’s authorities, duties or responsibilities, (ii) a material reduction in Grantee’s base compensation or bonus opportunity as in effect immediately prior to the Change in Control, (iii) a material reduction in Grantee’s benefits, other than a reduction affecting substantially all similarly situated employees, (iv) a material reduction in any budget over which the Grantee has authority, or (v) a Company-required relocation of more than 30 miles of the Grantee’s principal place of employment. An event described in clause (i), (ii) or (iii) shall constitute Good Reason only if the Grantee notifies the Company within 20 days of the occurrence of the event and the Company fails to take appropriate action to cure such event within 20 days after receiving such notice.
5)
Limitations on Post-Termination Activities.
During the term of Grantee’s employment by the Company or any of its direct or indirect subsidiaries (collectively, the “Company Group”), and for a period of 12 months thereafter, Grantee will not (i) provide any “Services” within the geographic territory of the business unit with whom Grantee is employed at the time of termination (whether Americas, EMEA or Asia-Pacific, as applicable, or, for corporate employees, all such geographic regions) to any person or entity (other than the Company Group) developing, manufacturing, marketing, selling, distributing (including, without limitation, through catalogs and similar instruments), installing, maintaining or reclaiming any carpet tile (also known as modular carpeting), broadloom carpet (whether 12-foot, six-foot or other competitive widths), luxury vinyl tile, or other engineered textile flooring for contract, commercial, institutional (including, without limitation, government and education), retail, hospitality or residential markets and customers, (ii) solicit, initiate contact with, call upon, initiate communication with or attempt to initiate communication with, directly or indirectly, any customer of the Company Group with whom Grantee had material contact within the most recent two years of Grantee’s employment, or any representative of any such customer, with a view to providing Services to such customers, or (iii) solicit or attempt to solicit, directly or indirectly, for employment with another person or entity a Company Group employee with whom Grantee had material contact during the most recent two years of Grantee’s employment. As used herein, “Services” shall mean the services which are the same as or substantially similar to the services Grantee provides to any Company Group entity within the most recent two years of Grantee’s employment, and that Grantee shall be prohibited from providing (whether as an owner, partner, employee, consultant or in any other capacity) in competition with any Company Group entity, in accordance with the terms of this paragraph, which include but are not limited to conducting the business of developing, manufacturing, marketing, selling, distributing, installing, maintaining or reclaiming any carpet tile, broadloom carpet, luxury vinyl tile, or other engineered textile flooring. During the term of Grantee’s employment by the Company Group, and for a period of 12 months thereafter, Grantee shall, before accepting employment with another employer, provide such prospective employer with a copy of this Section 5 of this Agreement and, upon accepting any employment with another employer, provide the Company with such employer’s name and a description of the services Grantee will provide to such employer. Upon any termination of Grantee’s employment for any reason whatsoever (whether voluntary on the part of Grantee, for just cause, without just cause, or for other reasons), the obligations of Grantee pursuant to this Section 5 shall survive and remain in effect.
The parties acknowledge and agree that (i) the convents contained in this Section 5 are reasonable and necessary for the protection of the business and goodwill of the Company Group, (ii) any breach of the covenants in this Section 5 by Grantee will cause the Company Group substantial and irreparable harm, and (iii) Grantee has received good, valuable and adequate consideration in exchange for the covenants contained in this Section 5. Consequently, if the Grantee breaches any of the terms of this Section 5, the Grantee will forfeit the award described in this Agreement and all rights hereunder. The Company Group shall also be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. Such equitable relief will be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.
The covenants contained in this Section 5 shall be presumed to be enforceable, and any reading causing unenforceability shall yield to a construction permitting enforcement. If any single covenant or clause shall be found unreasonable, unenforceable or both, it shall be modified as appropriate to protect the Company Group’s interests and the revised covenants and clauses shall be enforced in accordance with the tenor of the Agreement. In the event a court should determine not to enforce a covenant as written due to overbreadth, the parties specifically agree that said covenant shall be enforced to the extent reasonable, whether said revisions are in time, territory or scope of prohibited activities. The parties agree that the covenants contained in this Agreement are severable and divisible; that none of such covenants depends on any other covenant for its enforceability; that such covenants constitute enforceable obligations between the parties; that each such covenant will be construed as an agreement independent of any other covenant of this Agreement; and that the existence of any claim or cause of action by one party to this Agreement against the other party to this Agreement, whether predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by any party to this Agreement of any such covenant.
6)
Delivery of Shares
.
Within a reasonable time after the vesting of any Performance Shares (and in no event later than two and one-half months after the later of (i) the calendar year in which such Performance Shares vest and (ii) the Company’s fiscal year in which such Performance Shares vest), the Company shall deliver a number of Shares equal to the number of vested Performance Shares; provided, however, that the Committee may elect to make payment in cash equal to the Fair Market Value of the Shares, or in a combination of cash and Shares. Grantee may not sell, assign, transfer or pledge any right or interest in the Performance Shares prior to the date on which payment or delivery in respect of such Performance Shares has been made.
7)
Acknowledgment of Grantee
.
Grantee acknowledges that certain restrictions under state, federal or foreign securities laws may apply with respect to the Performance Shares granted pursuant to the Award. Grantee further acknowledges that, to the extent Grantee is an “affiliate” of the Company (as that term is defined by the Securities Act of 1933), the Shares issued under the Award are subject to certain trading restrictions under applicable securities laws (including, particularly, Rule 144 under the Securities Act). Grantee hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state, federal and foreign securities laws applicable to the Company and any restrictions on the resale of the Shares delivered in respect of such Performance Shares which may pertain under such laws. The Company has registered (or intends to register) the Shares represented by the Performance Shares; however, in the event such registration at any time is ineffective or any special rules apply, such securities may be sold or transferred only in accordance with the Plan and pursuant to additional, effective securities laws registrations or in a transaction that is exempt from such registration requirements. If appropriate under the circumstances, the certificate(s) evidencing such Shares shall bear a restrictive legend indicating that such shares have not been registered under applicable securities laws.
8)
Execution of Agreement
.
Grantee shall execute this Agreement within 30 days after receipt of same, and promptly return an executed copy to the Secretary of the Company.
9)
Withholding
.
Grantee shall pay the Company an amount equal to the sum of all applicable employment taxes that the Company or any Subsidiary is required to withhold at any time in connection with the operation of this Agreement. In the absence of prior arrangements satisfactory to the Company for payment of all such taxes required to be withheld, the Company shall withhold a portion of the Shares or cash to be delivered under this Agreement in payment of such taxes, except to the extent such withholding of Shares is prohibited by any covenants governing the Company’s debt as in effect from time to time.
10)
Miscellaneous
.
a)
Employment Rights
. The granting of the Award and the execution of this Agreement shall not afford Grantee any rights to similar grants in future years or any right to be retained in the employ or service of the Company or any of its Subsidiaries, nor shall it interfere in any way with the right of the Company or any such Subsidiary to terminate Grantee’s employment or services at any time, with or without cause, or the right of Grantee to terminate Grantee’s employment or services at any time.
b)
Shareholder Rights
. Prior to the delivery of Shares pursuant to Section 6, Grantee shall not have the rights of a shareholder of the Company, including the right to vote such Shares or to receive any cash dividends.
c)
Severability
. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a governmental agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall continue in full force and effect, and shall in no way be affected, impaired or invalidated.
d)
Controlling Law
. This Agreement is being made in the State of Georgia (USA) and shall be construed and enforced in accordance with the laws of that state. Grantee hereby consents to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia, and the U.S. District Court in Atlanta, Georgia, and hereby waives any objection Grantee might otherwise have to jurisdiction and venue in such courts, in the event either court is requested to resolve a dispute between the parties with respect to this Agreement.
e)
Construction
. This Agreement contains the entire understanding between the parties and supersedes any prior understanding and agreements between them with respect to the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between the parties hereto relating to the subject matter hereof which are not fully expressed herein.
f)
Binding Effect
. This Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns, and Grantee and Grantee’s heirs and personal representatives. Any business entity or person succeeding to all or substantially all of the business of the Company by stock purchase, merger, consolidation, purchase of assets, or otherwise shall be bound by and shall adopt and assume this Agreement, and the Company shall obtain the assumption of this Agreement by such successor.
g)
Headings
. Section and other headings contained in this Agreement are included for reference purposes only and are in no way intended to define or limit the scope, extent or intent of this Agreement or any provision hereof.
IN WITNESS WHEREOF
, the individual party hereto has executed this Agreement, and the corporate party has caused this Agreement to be executed by a duly authorized representative, as of the date first set forth above.
INTERFACE, INC.
By:
[name]
[title]
GRANTEE
____________________________________
[name]
- 8 -
Exhibit 10.3
KATY OWEN
Vice President, CHRO
February 27, 2017
Mr. Bruce Hausmann
69 West Twisted Oak Drive
Simi Valley, CA 93065
Dear Bruce,
On behalf of Interface, Inc. (the “Company”), I am very pleased to offer you a position as the Company’s Vice President and Chief Financial Officer, reporting to Jay Gould, the Company’s President and Chief Operating Officer. Your initial rate of salary compensation in this position will be $17,500 semi-monthly, which annualizes to $420,000.
You will also be eligible to participate in the Company’s bonus plan and receive a bonus of up to 90% of your annual base salary, provided the Company’s performance meets or exceeds specified objectives as set forth each year. The achievement of performance targets can be as high as 150% under the Company’s current bonus formula for senior officers, which can render a bonus amount that is higher than 90% of your base salary. Your 2017 bonus opportunity will be for the full fiscal year and will not be prorated based on your hire date.
You will be eligible to participate in the Company’s long-term incentive plan (LTIP) with a target opportunity of 150% of your annual base salary. In addition to a regular annual grant under the 2017 LTIP, you will be granted a one time sign-on equity award of 32,985 time-vesting shares (restricted stock with a grant value of approximately $600,000). This sign-on equity award will vest ratably over 3 years. Under the 2017 LTIP, the awards have a three year vesting period, with one-third of the shares time-based vesting, and the balance having performance-based vesting criteria. The performance criteria and structural terms of both the annual and sign-on awards will be the same criteria and terms as the grants made to the Company’s senior executives in February of this year. Awards under the long-term incentive plan are subject to review and adjustment by the Compensation Committee of the Company’s Board of Directors.
In addition to the quity awards, you will receive a $100,000 sign on bonus (subject to the applicable tax withholdings). The sign on bonus will be paid to you no later than 60 days from your start date with the Company. Should you choose to voluntary separate from the Company during the first 12 months of your employment, you agree to repay the Company 100% ($100,000) of the sign on bonus. Should you voluntary separate from the Company after the first 12 months, but before the 2
nd
anniversary of your start date, you agree to repay the Company 50% ($55,000) of the sign on bonus.
Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 770.437.6811 678.275.2416 fax
Mr. Bruce Hausmann
February 27, 2017
Page 2
This position is located at the Company’s headquarters in Atlanta, Georgia. Therefore, it is expected that you will relocate to the Atlanta area within the 90 days of employment. The Company will provide relocation assistance in accordance to the terms of the Company’s Executive Relocation Policy (attachment A). In order to mitigate Relocation benefits deemed taxable to the employee will be gross-up for taxes.
In the event your employment is terminated without cause, and whether or not such termination is in connection with a change of control of the Company, you will receive severance in the amount of 12 months of payment of your then-current base salary, and a monthly payment equal to one-twelfth of the average of the bonuses paid to you under the Company’s executive bonus plan for the two prior calendar years. Any shortage of years of participation in the bonus plan will count as a “zero year” such that this severance benefit will presumably increase in value over your first two years of employment. The definition of cause is (i) fraud, dishonesty, gross negligence, or willful misconduct with respect to the business affairs of the Company, (ii) your refusal or repeated failure to follow the established lawful practices of the Company, or (iii) your conviction of a felony or other crime involving moral turpitude.
You will be eligible to participate in the Company’s various health and other employment benefit plans (medical, vision, dental, life, disability, long-term care, 401(k), non-qualified savings plan, etc.), as in effect from time to time and offered to similarly situated Company employees. You will have three weeks paid vacation per year. You will receive a $1,000 per month cash car allowance (or a commensurate Company-leased vehicle of your selection) in accordance with the terms of the Company’s current car program applicable to senior officers. The Company will further provide you with the use of a Company-supplied laptop computer, iPad, and a cellular “Smartphone” (iPhone, Android, or equivalent). All such equipment provided must be returned to the Company upon the cessation of your employment.
All payments referenced herein are subject to reduction by applicable state and federal withholding laws. This position is considered an exempt position for purposes of U.S. wage-hour law. As such, you will not be eligible for overtime pay for any hours actually worked in excess of 40 hours in a given workweek. This offer is also contingent upon the satisfactory completion of a drug screen and final background check, as well as your execution of several Company standard agreements and acknowledgements, including our (i) Code of Business Conduct and Ethics, (ii) Agreement Regarding Use of Electronic Systems, and (iii) Agreement Regarding Confidentiality and Work Product. Furthermore, and as an initial condition of employment, you represent you are not currently subject to any non-competition, non-solicitation, or similar restrictive covenant that would prevent you from fulfilling all of the duties associated with this position.
Mr. Bruce Hausmann
February 27, 2017
Page 3
Employment with the Company is at will, and neither this letter nor any other oral or written representations may be considered a contract of employment for any specific period of time. This letter agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia and the federal laws of the United States of America, without regard to rules relating to the conflict of laws. You consent to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the U.S. District Court in Atlanta, Georgia, and hereby waive any objection you might otherwise have to jurisdiction and venue in such courts in the event either court is requested to resolve a dispute between you and the Company.
Finally, this letter agreement is intended to comply with any applicable requirements of Section 409A of the Internal Revenue Code and shall be construed accordingly. Any payments or distributions to be made to you under this letter agreement of amounts classified as “nonqualified deferred compensation” for purposes of Section 409A, and not exempt from Section 409A, shall in no event be made or commence until six months after your “separation from service” as defined in Section 409A.
We would like for you to begin work on April 3, 2017. If you wish to accept this offer, please sign below and return it to my attention by 5:00 p.m. on March 1
st
. You will be required to complete the applicable background and drug screenings by March 3
rd
. Signatures transmitted by fax (770-319-6270) and/or electronic mail (
katy.owen@interface.com
) will be valid and binding for all purposes.
If you have any questions about this offer, please do not hesitate to contact me. We look forward to you joining our team!
Sincerely,
/s/ Katy Owen
Katy Owen
Vice President and Chief Human Resources Officer
Mr. Bruce Hausmann
February 27, 2017
Page 4
I agree to the terms and conditions of the employment described above. I understand that my employment with Interface, Inc. and its subsidiaries is at will, and neither this letter nor any other oral or written representations may be considered a contract of employment for any specific period of time.
/s/ Bruce Hausmann
Bruce Hausmann
cc: Pebbles Holcombe
Exhibit 10.4
KATY OWEN
Vice President, CHRO
March 16, 2016
Mr. J. Chad Scales
4130 Hillside Place
Atlanta, GA 30342
Dear Chad,
On behalf of Interface, Inc. (the “Company”), I am very pleased to offer you a position as the Company’s Vice President and Chief Innovation Officer, reporting to Jay Gould, the Company’s President and Chief Operating Officer. Your initial rate of salary compensation in this position will be $13,958.34 semi-monthly, which annualizes to $335,000. You will also be eligible to participate in the Company’s bonus plan and receive a bonus of up to 60% of your annual base salary, provided the Company’s performance meets or exceeds specified objectives as set forth each year. The achievement of performance targets can be as high as 150% under the Company’s current bonus formula for senior officers, which can render a bonus amount that is higher than 60% of your base salary.
Upon commencement of employment, the Company will award to you a sign-on equity award of 6,000 restricted stock units which will vest after 1 year. You will also receive an equity award of 17,500 (a combination of restricted stock units and restricted shares) under the 2016 long term incentive plan award. The performance criteria and structural terms of this award will be the same criteria and terms as were included in the grants made to the Company’s senior executives in January of this year. You will thereafter be eligible for periodic equity grants under the Company’s regular executive equity program, which currently provides for annual grants valued at approximately 115% of each senior officer’s base salary, but which remains subject to review and adjustment by the Compensation Committee of the Company’s Board of Directors.
In the event your employment is terminated without cause, and whether or not such termination is in connection with a change of control of the Company, you will receive severance in the amount of 12 months of payment of your then-current base salary, and a monthly payment equal to one-twelfth of the average of the bonuses paid to you under the Company’s executive bonus plan for the two prior calendar years. Any shortage of years of participation in the bonus plan will count as a “zero year” such that this severance benefit will presumably increase in value over your first two years of employment. The definition of cause is (i) fraud, dishonest, gross negligence, or willful misconduct with respect to the business affairs of the Company, (ii) your refusal or repeated failure to follow the established lawful practices of the Company, or (iii) your conviction of a felony or other crime involving moral turpitude.
Interface, Inc. 2859 Paces Ferry Road, Suite 2000 Atlanta, Georgia 30339 770.437.6811 678.275.2416 fax
Mr. J. Chad Scales
March 16, 2016
Page 2
You will be eligible to participate in the Company’s various health and other employment benefit plans (medical, vision, dental, life, disability, long-term care, 401(k), non-qualified savings plan, etc.), as in effect from time to time and offered to similarly situated Company employees. You will have three weeks paid vacation per year. You will receive a $1,000 per month cash car allowance (or a commensurate Company-leased vehicle of your selection) in accordance with the terms of the Company’s current car program applicable to senior officers. The Company will further provide you with the use of a Company-supplied laptop computer, iPad, and a cellular “Smartphone” (iPhone, Android, or equivalent). All such equipment provided must be returned to the Company upon the cessation of your employment.
All payments referenced herein are subject to reduction by applicable state and federal withholding laws. This position is considered an exempt position for purposes of U.S. wage-hour law. As such, you will not be eligible for overtime pay for any hours actually worked in excess of 40 hours in a given workweek. This offer is also contingent upon the satisfactory completion of a drug screen and final background check, as well as your execution of several Company standard agreements and acknowledgements, including our (i) Code of Business Conduct and Ethics, (ii) Agreement Regarding Use of Electronic Systems, and (iii) Agreement Regarding Confidentiality and Work Product. Furthermore, and as an initial condition of employment, you represent you are not currently subject to any non-competition, non-solicitation, or similar restrictive covenant that would prevent you from fulfilling all of the duties associated with this position.
Employment with the Company is at will, and neither this letter nor any other oral or written representations may be considered a contract of employment for any specific period of time. This letter agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia and the federal laws of the United States of America, without regard to rules relating to the conflict of laws. You consent to the exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the U.S. District Court in Atlanta, Georgia, and hereby waive any objection you might otherwise have to jurisdiction and venue in such courts in the event either court is requested to resolve a dispute between you and the Company.
Finally, this letter agreement is intended to comply with any applicable requirements of Section 409A of the Internal Revenue Code and shall be construed accordingly. Any payments or distributions to be made to you under this letter agreement of amounts classified as “nonqualified deferred compensation” for purposes of Section 409A, and not exempt from Section 409A, shall in no event be made or commence until six months after your “separation from service” as defined in Section 409A.
Mr. J. Chad Scales
March 16, 2016
Page 2
We would like for you to begin work on April 11, 2016. If you wish to accept this offer, please sign below and return it to my attention by 5:00 p.m. on March 18
th
. You will be required to complete the applicable background and drug screenings by March 16
th
. Signatures transmitted by fax (770-319-6270) and/or electronic mail (
katy.owen@interface.com
) will be valid and binding for all purposes.
If you have any questions about this offer, please do not hesitate to contact me. We look forward to you joining our team!
Sincerely,
/s/ Katy Owen
Katy Owen
Vice President and Chief Human Resources Officer
I agree to the terms and conditions of the employment described above. I understand that my employment with Interface, Inc. and its subsidiaries is at will, and neither this letter nor any other oral or written representations may be considered a contract of employment for any specific period of time.
/s/ J. Chad Scales
J. Chad Scales
cc: Pebbles Holcombe
Exhibit 31.1
CERTIFICATION
I, Jay D. Gould, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of Interface, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 10, 2018
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/s/
Jay D. Gould
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Jay D. Gould
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Chief Executive Officer
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Exhibit 31.2
CERTIFICATION
I, Bruce A. Hausmann, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of Interface, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 10, 2018
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/s/
Bruce A. Hausmann
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Bruce A. Hausmann
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Chief Financial Officer
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
I, Jay D. Gould, Chief Executive Officer of Interface, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350 as adopted by § 906 of the Sarbanes-Oxley Act of 2002, that:
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(1)
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the Quarterly Report on Form 10-Q of the Company for the quarterly period ended April 1, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 10, 2018
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/s/
Jay D. Gould
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Jay D. Gould
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Chief Executive Officer
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Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
I, Bruce A. Hausmann, Chief Financial Officer of Interface, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350 as adopted by § 906 of the Sarbanes-Oxley Act of 2002, that:
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(1)
|
the Quarterly Report on Form 10-Q of the Company for the quarterly period ended April 1, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 10, 2018
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/s/
Bruce A. Hausmann
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Bruce A. Hausmann
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Chief Financial Officer
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