# Interface Inc: Form 10-Q for the period ended Jun 30, 2024

- Company: [Interface Inc](/companies/tile.md) (CIK 715787)
- Form: 10-Q
- Filed: 2024-08-06
- Accepted by EDGAR: Aug 6, 2024, 16:21 ET
- Period: 2024-06-30
- Accession: 0000715787-24-000027
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/715787/000071578724000027/tile-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/715787/000071578724000027/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $346.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $636.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $224.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $403.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $122.6m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $233.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $84.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $170.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $38.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $62.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $6.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $12.6m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $8.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $13.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $22.6m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $36.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.38 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.63 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.39 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 58,692,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 58,703,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $34.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $13.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $1.2m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-06-30 | $94.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $591.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.22bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $214.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $765.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $379.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $8.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $451.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,875 characters.

Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under Part II, Item 7 of that Form 10-K. Our discussions here focus on our results during the quarter and six months ended June 30, 2024, or as of, June 30, 2024, and the comparable periods of 2023, and to the extent applicable, any material changes from the information discussed in that Form 10-K or other important intervening developments or information since that time. These discussions should be read in conjunction with that Form 10-K for more detailed and background information. The six-month periods ended June 30, 2024 and July 2, 2023 both include 26 weeks. The three-month periods ended June 30, 2024 and July 2, 2023 both include 13 weeks.

### Forward-Looking Statements

This report contains statements which may constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with the economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed under the heading “Risk Factors” included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

### Executive Overview

During the quarter ended June 30, 2024, we had consolidated net sales of $346.6 million, up 5.2% compared to $329.6 million in the second quarter last year, primarily due to higher customer demand — particularly in the education and corporate office market segments. Consolidated operating income was $38.2 million for the second quarter of 2024 compared to $28.9 million in the second quarter last year, primarily due to higher sales and higher gross profit margin as a result of increased volume, higher selling prices, and lower raw material costs. Consolidated net income for the quarter ended June 30, 2024, was $22.6 million or $0.38 per diluted share, compared to $15.8 million or $0.27 per diluted share in the second quarter last year.

During the first six months of 2024, we had consolidated net sales of $636.4 million, up 1.8% compared to $625.4 million in the first six months of last year, primarily due to higher customer demand — particularly in the education market segment partially offset by decreases in the retail and healthcare market segments. Consolidated operating income was $62.6 million for the first six months of 2024, compared to $38.4 million in the same period last year, primarily due to higher sales and higher gross profit margin as discussed above. During the first six months of 2023, inflationary pressures on raw materials and lower manufacturing fixed cost absorption adversely impacted our gross profit margin. Consolidated net income for the six months ended June 30, 2024, was $36.7 million or $0.63 per diluted share, compared to $15.1 million or $0.26 per diluted share in the same period last year.

### Cybersecurity Event

As previously disclosed in our current report on Form 8-K filed with the Commission on November 23, 2022, we discovered a cybersecurity attack on November 20, 2022, perpetrated by unauthorized third parties, affecting our IT systems. The investigation of the Cyber Event was completed in fiscal year 2023. We have cyber risk insurance and anticipate that a portion of our costs and expenses related to the Cyber Event will ultimately be recovered by insurance.

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

### Impact of Macroeconomic Trends

Recent disruptions in economic markets due to inflation, high interest rates, the Russia-Ukraine war and the Israel-Hamas war, a fairly stabilized but still challenging supply chain environment, slow market conditions in certain parts of the globe, and significant financial pressures in the commercial office market globally, all pose challenges which may adversely affect our future performance. To mitigate these impacts, we plan to continue evaluating our cost structure and global manufacturing footprint to identify and activate opportunities to decrease costs and optimize our global cost structure.

### Analysis of Results of Operations

### Consolidated Results

The following table presents, as a percentage of net sales, certain items included in our consolidated condensed statements of operations for the three-month and six-month periods ended June 30, 2024 and July 2, 2023:

|  | Three Months Ended June 30, 2024 | July 2, 2023 | Six Months Ended June 30, 2024 | July 2, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net sales | 100.0% | 100.0% | 100.0% | 100.0% |
| Cost of sales | 64.6 | 66.1 | 63.4 | 66.8 |
| Gross profit | 35.4 | 33.9 | 36.6 | 33.2 |
| Selling, general and administrative expenses | 24.4 | 25.9 | 26.8 | 27.5 |
| Restructuring, asset impairment, and other gains, net | — | (0.8) | — | (0.4) |
| Operating income | 11.0 | 8.8 | 9.8 | 6.1 |
| Interest/Other expense (income), net | 2.0 | 2.4 | 2.0 | 2.8 |
| Income before income tax expense | 9.0 | 6.4 | 7.8 | 3.3 |
| Income tax expense | 2.5 | 1.6 | 2.1 | 0.9 |
| Net income | 6.5% | 4.8% | 5.7% | 2.4% |

### Consolidated Net Sales

Below is information regarding our consolidated net sales, and analysis of those results, for the three-month and six-month periods ended June 30, 2024, and July 2, 2023:

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2024 | July 2, 2023 | Percentage Change June 30, 2024 | Six Months Ended July 2, 2023 |  | Percentage Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Consolidated net sales | $346,635 | $329,582 | 5.2% | $636,378 | $625,374 | 1.8% |

For the quarter ended June 30, 2024, consolidated net sales increased $17.1 million (5.2%) versus the comparable period in 2023, primarily due to higher sales volume (approximately 4%) and higher prices (approximately 1%). Currency fluctuations had a negative impact on consolidated net sales of approximately $2.0 million (0.6%) for the second quarter of 2024, due primarily to the weakening of the Euro, Chinese Renminbi, and Australian dollar against the U.S. dollar. On a market segment basis, the sales increase was primarily in the education, corporate office, public buildings, and residential living market segments partially offset by decreases in the healthcare, retail, and hospitality market segments.

For the six months ended June 30, 2024, consolidated net sales increased $11.0 million (1.8%) versus the comparable period in 2023, primarily due to higher sales pricing (approximately 2%). Currency fluctuations had a negative impact on consolidated net sales of approximately $2.1 million (0.3%) for the first six months of 2024, due to the weakening of the Chinese Renminbi and Australian dollar against the U.S. dollar. On a market segment basis, the sales increase was primarily in the education, residential living, and public buildings market segments partially offset by decreases in the retail, healthcare, hospitality, and consumer residential market segments.

### Consolidated Cost and Expenses

The following table presents our consolidated cost of sales and selling, general and administrative expenses for the three-month and six-month periods ended June 30, 2024, and July 2, 2023:

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2024 | July 2, 2023 | Percentage Change June 30, 2024 | Six Months Ended July 2, 2023 |  | Percentage Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Consolidated cost of sales | $224,022 | $217,796 | 2.9% | $403,360 | $417,715 | (3.4)% |
| Consolidated selling, general and administrative expenses | 84,462 | 85,522 | (1.2)% | 170,421 | 171,776 | (0.8)% |

#### Consolidated Cost of Sales

For the quarter ended June 30, 2024, consolidated cost of sales increased $6.2 million (2.9%) compared to the second quarter of 2023, primarily due to higher sales partially offset by lower raw material costs. Currency translation had a positive impact on consolidated cost of sales in the second quarter of 2024 and partially reduced our costs by approximately $1.4 million (0.6%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 64.6% for the second quarter of 2024 versus 66.1% for the second quarter of 2023.

For the six months ended June 30, 2024, consolidated cost of sales decreased $14.4 million (3.4%) versus the comparable period in 2023, primarily due to lower raw material costs. Currency translation had a positive impact on consolidated cost of sales for the first six months of 2024 and partially reduced our costs by approximately $1.5 million (0.4%) compared to the same period last year. As a percentage of net sales, our cost of sales decreased to 63.4% for the first six months of 2024 versus 66.8% for the first six months of 2023.

#### Consolidated Gross Profit

For the quarter ended June 30, 2024, gross profit, as a percentage of net sales, was 35.4% compared with 33.9% in the same period last year. The increase in gross profit percentage was primarily due to (i) lower raw material costs (approximately 1%), (ii) higher sales pricing (approximately 1%), partially offset by (iii) unfavorable fixed cost absorption (approximately 1%).

For the six months ended June 30, 2024, gross profit, as a percentage of net sales, was 36.6% compared with 33.2% in the same period last year. The increase in gross profit percentage was primarily due to (i) lower raw material costs (approximately 2%) and (ii) higher sales pricing (approximately 1%).

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

For the quarter ended June 30, 2024, consolidated SG&A expenses decreased $1.1 million (1.2%) versus the comparable period in 2023. Currency fluctuations had no material impact on consolidated SG&A expenses in the second quarter of 2024 compared to the same period last year. SG&A expenses were lower for the second quarter of 2024 primarily due to (i) lower professional fees of $2.2 million primarily due to lower legal fees and non-recurring consulting expenses compared to the prior year period and (ii) lower severance costs of $0.5 million driven by employee headcount reduction initiatives in the prior year. These decreases were partially offset by $1.7 million of higher labor and variable compensation costs. As a percentage of net sales, SG&A expenses decreased to 24.4% for the second quarter of 2024 versus 25.9% for the second quarter of 2023.

For the six months ended June 30, 2024, consolidated SG&A expenses decreased $1.4 million (0.8%) versus the comparable period in 2023. Currency translation had no material impact on consolidated SG&A expenses in the first six months of 2024 compared to the same period last year. SG&A expenses were lower for the first six months of 2024 primarily due to (i) lower severance costs of $2.5 million driven by employee headcount reduction and cost saving initiatives in the prior year period, (ii) lower professional fees of $2.3 million as discussed above, (iii) lower Cyber Event costs of $1.3 million due to completion of the investigation in the prior year, and (iv) lower marketing expenses of $1.1 million due to global restructuring initiatives. These decreases were partially offset by (i) higher labor and variable compensation costs of $3.9 million and (ii) higher software license fees of $1.8 million. As a percentage of net sales, SG&A expenses decreased to 26.8% for the first six months of 2024 versus 27.5% for the first six months of 2023.

### Assets Disposed

During the second quarter of 2023, the Company completed the sale of its Thailand manufacturing facility and recognized a gain of $2.7 million.

See Note 14 entitled “Assets Disposed” of Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

### Interest Expense

During the quarter ended June 30, 2024, interest expense was $6.2 million, a decrease of $2.1 million from the comparable period in 2023, primarily due to lower outstanding term loan borrowings under the Facility. For the six months ended June 30, 2024, interest expense was $12.6 million, a decrease of $4.2 million from the comparable period in 2023, primarily due to lower outstanding term loan borrowings as discussed above.

### Segment Operating Results

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

*AMS Segment – Net Sales and AOI*

The following table presents AMS segment net sales and AOI for the three-month and six-month periods ended June 30, 2024, and July 2, 2023:

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2024 | July 2, 2023 | Percentage Change June 30, 2024 | Six Months Ended July 2, 2023 |  | Percentage Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| AMS segment net sales | $215,012 | $201,281 | 6.8% | $384,927 | $370,522 | 3.9% |
| AMS segment AOI(1) | 26,947 | 24,034 | 12.1% | 45,027 | 35,303 | 27.5% |

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

During the second quarter of 2024, net sales in AMS increased 6.8% versus the comparable period in 2023, primarily due to higher sales volume and pricing. On a market segment basis, the AMS sales increase was primarily in the education, public buildings, and residential living market segments partially offset by decreases in the healthcare market segment.

During the first six months of 2024, net sales in AMS increased 3.9% versus the comparable period in 2023, primarily due to higher sales pricing and volume. On a market segment basis, the AMS sales increase was primarily in education, public buildings, and residential living market segments partially offset by decreases in the corporate office, retail and healthcare market segments.

AOI in AMS increased 12.1% during the second quarter of 2024 compared to the prior year period, primarily due to higher sales and lower raw material costs compared to the same period last year. As a percentage of net sales, AOI increased to 12.5% during the second quarter of 2024 compared to 11.9% in the same period last year.

AOI in AMS increased 27.5% during the first six months of 2024 compared to the prior year period, primarily due to lower raw material costs and higher sales. During the first six months of 2023, AOI in AMS was adversely impacted by inflation and higher input costs. As a percentage of net sales, AOI increased to 11.7% during the first six months of 2024 compared to 9.5% in the same period last year.

*EAAA Segment – Net Sales and AOI*

The following table presents EAAA segment net sales and AOI for the three-month and six-month periods ended June 30, 2024, and July 2, 2023:

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2024 | July 2, 2023 | Percentage Change June 30, 2024 | Six Months Ended July 2, 2023 |  | Percentage Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| EAAA segment net sales | $131,623 | $128,301 | 2.6% | $251,451 | $254,852 | (1.3)% |
| EAAA segment AOI(1) | 12,658 | 3,827 | 230.8% | 20,103 | 7,756 | 159.2% |

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

During the second quarter of 2024, net sales in EAAA increased 2.6% versus the comparable period in 2023, primarily due to higher sales volume. Currency fluctuations had a negative impact on EAAA sales of approximately $1.8 million (1.4%) for the second quarter of 2024 compared to the same period last year due to the weakening of the Euro, Chinese Renminbi and Australian dollar against the U.S. dollar. On a market segment basis, the EAAA sales increase was primarily in the corporate office and education market segments partially offset by decreases in the public buildings and hospitality market segments.

During the first six months of 2024, net sales in EAAA decreased 1.3% versus the comparable period in 2023, primarily due to lower sales volume. Currency fluctuations had a negative impact on EAAA sales of approximately $1.9 million (0.7%) for the first six months of 2024 compared to the same period last year due to the weakening of the Australian dollar and Chinese Renminbi against the U.S. dollar. On a market segment basis, the EAAA sales decrease was primarily in the public buildings, healthcare, and hospitality market segments partially offset by increases in the corporate office market segment.

AOI in EAAA increased 230.8% during the second quarter of 2024 versus the comparable period in 2023, primarily due to the impact of lower raw material costs and higher sales. During the second quarter of 2023, AOI in EAAA was adversely impacted by inflation and higher input costs. Currency fluctuations had no material impact on EAAA AOI for the second quarter of 2024 compared to the same period last year. As a percentage of net sales, AOI increased to 9.6% during the second quarter of 2024 compared to 3.0% in the same period last year.

AOI in EAAA increased 159.2% during the first six months of 2024 versus the comparable period in 2023, primarily due to the impact of lower raw material costs in the current year and the unfavorable impact of inflation in the prior year. Currency fluctuations had no material impact on AOI for the first six months of 2024 compared to the same period in 2023. As a percentage of net sales, AOI increased to 8.0% during the first six months of 2024 compared to 3.0% in the same period last year.

### Financial Condition, Liquidity and Capital Resources

### General

At June 30, 2024, the Company had $94.2 million in cash. At that date, the Company had $83.9 million in term loan borrowings, $7.3 million in revolving loan borrowings, and $1.6 million in letters of credit outstanding under our Facility, and we had $300.0 million of Senior Notes outstanding. As of June 30, 2024, we had additional borrowing capacity of $291.0 million under the Facility. We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by each of the Company’s material domestic subsidiaries, all of which also guarantee the obligations of the Company under its Facility. The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors. Net sales for the non-guarantor subsidiaries were approximately $145 million and $278 million for the three-month and six-month periods ended June 30, 2024, respectively, and net sales for the non-guarantor subsidiaries were approximately $142 million and $283 million for the three-month and six-month periods ended July 2, 2023, respectively. Total indebtedness of the non-guarantor subsidiaries was approximately $128 million and $133 million as of June 30, 2024 and December 31, 2023, respectively.

### Balance Sheet

Accounts receivable, net, were $179.6 million at June 30, 2024, compared to $163.4 million at December 31, 2023. The increase of $16.2 million was primarily due to the impact of higher net sales as a result of increased customer demand in the second quarter of 2024.

Inventories, net, were $281.1 million at June 30, 2024, compared to $279.1 million at December 31, 2023. The increase of $2.0 million was primarily due to finished goods inventory build attributable to higher expected customer demand in the remainder of 2024, partially offset by lower raw material costs.

### Analysis of Cash Flows

The following table presents a summary of cash flows for the six-month periods ended June 30, 2024 and July 2, 2023, respectively:

*(in thousands)*

| Net cash provided by (used in): | Six Months Ended June 30, 2024 | July 2, 2023 |
| --- | ---: | ---: |
| Operating activities | $34,158 | $47,924 |
| Investing activities | (11,567) | (4,738) |
| Financing activities | (36,960) | (49,063) |
| Effect of exchange rate changes on cash | (1,942) | 1,248 |
| Net change in cash and cash equivalents | (16,311) | (4,629) |
| Cash and cash equivalents at beginning of period | 110,498 | 97,564 |
| Cash and cash equivalents at end of period | $94,187 | $92,935 |

Cash provided by operating activities was $34.2 million for the six months ended June 30, 2024, which represents a decrease of $13.8 million from the prior year comparable period. Higher sales during the first six months of 2024 contributed to higher accounts receivable balances resulting in a use of cash for the current period. The prior year comparable period includes a source of cash from accounts receivable collections compared with the first six months of 2024, primarily attributable to delays in customer billings from the Cyber Event, in which those delayed billings were collected in the first quarter of 2023. Additionally, the increase in inventories during the first six months of 2024, as described above, resulted in a greater use of cash compared with the same period in the prior year.

Cash used in investing activities was $11.6 million for the six months ended June 30, 2024, which represents an increase of $6.8 million from the prior year comparable period. The increase was attributable to higher capital expenditures partially offset by cash proceeds received during the first six months of 2024 from the sale of manufacturing equipment and insurance proceeds for property casualty losses. The first six months of 2023 include cash proceeds of approximately $6.6 million from the sale of the Company’s Thailand manufacturing facility.

Cash used in financing activities was $37.0 million for the six months ended June 30, 2024, which represents a decrease of $12.1 million from the prior year comparable period. The decrease was primarily attributable to lower debt repayments on borrowings under the Facility during the first six months of 2024 compared to the prior year period.

### Outlook

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

### Backlog

As of July 21, 2024, the consolidated backlog of unshipped orders was approximately $244.2 million. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, backlog was approximately $195.5 million as of February 4, 2024. Disruptions in supply and distribution chains have resulted in delays of construction projects and flooring installations in many regions worldwide, which have also caused, and may continue to cause, fluctuations in our backlog.

## Market risk

As filed, 2,545 characters.

The discussion below in this Item 3 is based upon the more detailed discussions of our market risk and related matters included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, under Part II, Item 7A of that Form 10-K. The discussion here focuses on the six months ended June 30, 2024, and any material changes from (or other important intervening developments since the time of) the information discussed in that Form 10-K. This discussion should be read in conjunction with that Form 10-K for more detailed and background information.

### Sensitivity Analysis

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

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

As of June 30, 2024, based on a hypothetical immediate 100 basis point increase in interest rates, with all other variables held constant, the fair value of our fixed rate long-term debt would be impacted by a net decrease of $10.6 million. Conversely, a 100 basis point decrease in interest rates would result in a net increase in the fair value of our fixed rate long-term debt of $11.1 million.

As of June 30, 2024, a 10% decrease or increase in the levels of foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would result in a decrease in the fair value of our financial instruments of $10.4 million or an increase in the fair value of our financial instruments of $12.7 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.

## Controls and procedures

As filed, 1,521 characters.

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

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

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

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

## Risk factors

As filed, 234 characters.

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

Filed Aug 6, 2024.
Source: SEC EDGAR, the filing index for accession 0000715787-24-000027. Last ingested by Listed: Nov 3, 2026, 18:47 ET. No prices; not investment advice.