ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Our revenues are derived from sales of floorcovering products, primarily modular carpet, resilient flooring, including luxury vinyl tile (“LVT”), rubber flooring products, and installation services and accessories. Our business, as well as the commercial interiors industry in general, is cyclical in nature and is impacted by economic conditions and trends that affect the markets for commercial and institutional business space. The commercial interiors industry, including the market for floorcovering products, is largely driven by reinvestment by corporations and institutions into their existing operations in the form of new fixtures and furnishings for their workplaces. In significant part, the timing and amount of such reinvestments are impacted by the profitability of those entities. As a result, macroeconomic factors such as employment rates, office vacancy rates, work from home policies, capital spending, productivity and efficiency gains that impact profitability in general, also affect our business.
The Company has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”). The AMS operating segment includes the United States, Canada and Latin America geographic areas. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information. The results of operations discussion below also includes segment information.
We focus our marketing and sales efforts on both corporate office and non-corporate office market segments, to reduce somewhat our exposure to economic cycles that affect the corporate office market segment more adversely, as well as to capture additional market share. More than half of our consolidated net sales were in non-corporate office markets in fiscal years 2025, 2024, and 2023, primarily in education, healthcare, public buildings, retail, residential/living, hospitality, transportation, and consumer residential market segments.
Executive Summary
Our One Interface strategy continues to fuel growth as we strengthen global capabilities, improve commercial productivity, and simplify and optimize our operations.During 2025, we had consolidated net sales of $1,386.9 million, up 5.4% compared to $1,315.7 million in 2024, primarily due to higher customer demand — particularly in the healthcare and education market segments. Consolidated operating income for 2025 was $164.0 million compared to consolidated operating income of $134.4 million in 2024, primarily due to higher sales and higher gross profit margin driven by higher average sales prices, favorable product mix, and manufacturing efficiencies, partially offset by higher input costs and tariff costs. Consolidated net income for 2025 was $116.1 million, or $1.96 per diluted share, compared to consolidated net income of $86.9 million, or $1.48 per diluted share, in 2024.
During 2024, we had consolidated net sales of $1,315.7 million, up 4.3% compared to $1,261.5 million in 2023, primarily due to increased customer demand – particularly in the retail and education market segments. Consolidated operating income for 2024 was $134.4 million compared to consolidated operating income of $104.5 million in 2023, primarily due to higher sales volumes and lower raw material costs. Consolidated net income for 2024 was $86.9 million, or $1.48 per diluted share, compared to consolidated net income of $44.5 million, or $0.76 per diluted share, in 2023.
A detailed discussion of our 2025 and 2024 consolidated and segment performance appears below under “Analysis of Results of Operations”.
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. During fiscal year 2024, we recovered $5.6 million in insurance proceeds representing business interruption proceeds and reimbursement of certain costs in connection with the Cyber Event. Of the total insurance proceeds received in fiscal year 2024, $4.8 million of business interruption proceeds were recognized as a benefit in other expense / income, net in the consolidated statements of operations and $0.8 million was recognized as a reduction of selling, general and administrative expenses. The insurance claim for the Cyber Event was closed at the end of fiscal year 2024, and we are not expecting to receive any additional proceeds in connection with the Cyber Event.
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During 2023, we incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which was recognized in selling, general, and administrative expenses in the consolidated statements of operations.
Impact of Macroeconomic Conditions
Disruptions in economic markets due to inflation, the impact of tariffs on the demand for our products, a challenging supply chain environment, slow market conditions in certain parts of the globe, significant financial pressures in the commercial office market globally, and geopolitical factors including wars, civil and political unrest, and other conflicts, all pose challenges which may adversely affect our future performance. Management believes it is reasonably likely that these challenges will continue to affect our future operations and demand for our products to some degree during fiscal year 2026. We plan to continue evaluating our cost structure and global manufacturing footprint to identify and activate opportunities to decrease costs and optimize our global cost structure.
The Company expects higher production volumes and lower per unit fixed costs in 2026, and anticipates these impacts will benefit our gross profit margin in 2026. We also expect that continuing challenges in supply chain markets, tariff costs, and higher raw material costs will adversely impact our performance in 2026. We anticipate that continuing slow market conditions in parts of the globe and significant financial pressures in the commercial office market globally will adversely impact our future performance and demand for our products.
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Analysis of Results of Operations
Consolidated Results
The discussion and analyses below reflects the factors and trends discussed in the preceding sections. Fiscal years 2025, 2024, and 2023 each included 52 weeks.
The following table presents the amounts (in U.S. dollars) by which the exchange rates for translating Euros, British Pounds sterling, Australian dollars, Chinese Renminbi, Canadian dollars, and other currencies into U.S. dollars have affected our consolidated net sales and operating income during the past three years:
(in millions)
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 43% in 2025, 43% in 2024, and 46% in 2023. Because we have substantial international operations, we include the impact of fluctuations in foreign currency exchange rates in our discussion below.
The following table presents, as a percentage of net sales, certain items included in our consolidated statements of operations during the past three years.
Fiscal Year
Selling, general and administrative expenses 26.9 26.5 26.9
Restructuring, asset impairment, other (gains) and charges — — (0.2)
Interest/Other expense, net 1.9 1.6 3.2
Income before income tax expense 9.9 8.6 5.1
Consolidated Net Sales
Below is information regarding our consolidated net sales, and analysis of those results, for each of the last three fiscal years.
Fiscal Year Percentage Change
(in thousands)
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Consolidated net sales for 2025 compared with 2024
For 2025, consolidated net sales increased $71.2 million (5.4%) compared to 2024, comprised of higher sales volume (approximately 3.0%) and higher average sales prices (approximately 2.4%). Fluctuations in currency exchange rates had a positive impact of approximately $14.9 million on consolidated net sales for 2025, primarily due to the strengthening of the Euro against the U.S. dollar. On a market segment basis, the sales increase was most significant in the healthcare, education, public buildings, and transportation market segments. See the segment results discussion below for additional information on market segments.
Consolidated net sales for 2024 compared with 2023
For 2024, consolidated net sales increased $54.2 million (4.3%) compared to 2023, comprised of higher sales volume (approximately 2.7%) and higher average sales prices (approximately 1.6%). Fluctuations in currency exchange rates had a negative impact of $1.8 million on consolidated net sales for 2024, indicating that if currency levels had remained constant year-over-year, our 2024 net sales would have been higher by this amount. On a market segment basis, the sales increase was most significant in the retail, education, residential living, and public buildings market segments partially offset by decreases in the hospitality, corporate office, and consumer residential market segments. See the segment results discussion below for additional information on market segments.
Consolidated Cost and Expenses
The following table presents our consolidated cost of sales and selling, general and administrative (“SG&A”) expenses during the past three years:
Fiscal Year Percentage Change
(in thousands)
Consolidated Cost of Sales
For 2025, consolidated cost of sales increased $16.8 million (2.0%) compared to 2024, primarily due to higher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S. (approximately $7.3 million), and higher raw material costs, partially offset by lower manufacturing costs driven by favorable fixed cost absorption on higher volume and production efficiencies. Currency translation had a negative impact on consolidated cost of sales for 2025 and increased our costs by approximately $9.1 million (1.1%) compared to 2024. As a percentage of net sales, our consolidated cost of sales decreased to 61.3% in 2025 versus 63.3% in 2024. Management believes it is reasonably likely that lower per unit fixed costs due to higher production volumes and plant productivity initiatives will reduce our costs to some degree in 2026. These favorable impacts are expected to be partially offset by continuing tariff costs and higher raw material costs in 2026.
For 2024, our consolidated cost of sales increased $12.3 million (1.5%) compared to 2023, primarily due to higher sales partially offset by lower raw material costs. Currency translation had a positive impact on consolidated cost of sales and partially reduced our costs by approximately $1.4 million (0.2%) compared to 2023. As a percentage of net sales, our consolidated cost of sales decreased to 63.3% in 2024 versus 65.0% in 2023.
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Consolidated Gross Profit
For 2025, consolidated gross profit, as a percentage of net sales, was 38.7% compared to 36.7% for 2024. The increase in gross profit percentage was primarily due to higher average sales prices and favorable product mix (approximately 1%) and lower manufacturing costs (approximately 1%) as discussed above. Management believes it is reasonably likely that gross profit in 2026 will be positively impacted by lower manufacturing costs as result of production efficiencies partially offset by continuing tariff and higher raw material costs.
For 2024, consolidated gross profit, as a percentage of net sales, was 36.7% compared to 35.0% for 2023. The increase in gross profit percentage was primarily due to (i) lower costs (approximately 1%) driven by lower raw material costs and lower fixed costs per unit as a result of higher volume and (ii) higher pricing (approximately 1%).
Consolidated SG&A Expenses
For 2025, consolidated SG&A expenses were $373.4 million versus $348.5 million in 2024. SG&A expenses increased $24.8 million (7.1%) in 2025 compared to 2024, primarily due to (i) higher variable compensation of $8.6 million as a result of higher commissions on increased sales and higher bonus costs driven by improved operating results, (ii) higher employee benefits and labor costs of $8.3 million, (iii) higher severance costs of $4.5 million due to employee separations, and (iv) higher professional fees of $2.6 million. Currency fluctuations had a negative impact on consolidated SG&A expenses and increased our costs by approximately $3.5 million (1.0%) compared to 2024. As a percentage of net sales, SG&A expenses increased to 26.9% in 2025 versus 26.5% in 2024.
For 2024, consolidated SG&A expenses were $348.5 million versus $339.0 million in 2023. Currency translation had no material impact on consolidated SG&A expenses for 2024. Consolidated SG&A expenses increased $9.5 million (2.8%) in 2024 compared to 2023, primarily due to higher people costs of $15.7 million driven by increased variable compensation as a result of higher operating income compared to 2023, partially offset by lower severance costs of $5.6 million driven by employee headcount reduction and cost saving initiatives in the prior year period. As a percentage of net sales, SG&A expenses decreased to 26.5% in 2024 versus 26.9% in 2023.
Restructuring Plan
Pursuant to a previous restructuring plan, the Company completed the sale of its Thailand manufacturing facility during 2023 and recognized a gain of $2.7 million.
See Note 15 entitled “Restructuring and Other” of Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Interest Expense
For 2025, interest expense was $19.5 million, versus $23.2 million in 2024, primarily due to lower interest rates and lower outstanding borrowings under the Syndicated Credit Facility for most of 2025. On December 3, 2025, the outstanding borrowings under the $300 million Senior Notes were redeemed and the debt was extinguished. In addition, the Syndicated Credit Facility was amended and restated. In connection with these transactions, we recorded $3.1 million of debt extinguishment costs, which are recognized in interest expense in the consolidated statements of operations. See Note 9 entitled “Long-Term Debt” of Part II, Item 8 of this Annual Report on Form 10-K for additional information. Our average borrowing rate under the Syndicated Credit Facility as of December 28, 2025, was 5.12% compared to 5.62% at December 29, 2024.
For 2024, our interest expense was $23.2 million, versus $31.8 million in 2023, primarily due to lower outstanding term loan borrowings under the Syndicated Credit Facility. Our average borrowing rate under the Syndicated Credit Facility as of December 29, 2024, was 5.62% compared to 6.61% at December 31, 2023.
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Other Expense / Income, net
During 2025, other expense (income), net, was $7.6 million versus $(2.4) million in 2024. The increase of $9.9 million was primarily due to $4.7 million in foreign currency transaction losses from the strengthening of the Euro against the U.S. dollar and higher pension cost of approximately $1.1 million. The increase was also impacted by non-recurring insurance proceeds recognized in 2024, as discussed immediately below.
During 2024, other expense (income), net, was $(2.4) million versus $9.1 million in 2023. The decrease was primarily due to the receipt in 2024 of $4.8 million of business interruption insurance proceeds related to the Cyber Event and $2.4 million of insurance proceeds related to a property casualty loss that occurred in fiscal year 2023. These benefits were partially offset by the recognition of $2.2 million of cumulative translation losses reclassified from accumulated other comprehensive loss due to the substantial liquidation of our foreign subsidiary in Thailand during 2024.
Tax
For fiscal year 2025, the Company recorded income tax expense of $20.8 million on pre-tax income of $136.9 million, resulting in an effective tax rate of 15.2% compared with income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4%, for fiscal year 2024. The decrease in the effective tax rate for fiscal year 2025, compared to fiscal year 2024, was primarily due to the remeasurement and adjustment of deferred taxes, favorable changes related to the utilization of foreign tax credit carryforwards and an increase in the Foreign-Derived Intangible Income deduction. See Note 16 entitled “Income Taxes” of Part II Item 8 of this Annual Report on Form 10-K for additional information.
For fiscal year 2024, the Company recorded income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4% compared with income tax expense of $19.1 million on pre-tax income of $63.7 million, resulting in an effective tax rate of 30.1%, for fiscal year 2023. The decrease in the effective tax rate for fiscal year 2024, compared to fiscal year 2023, was primarily due to the release of the valuation allowance on interest expense carryforwards, favorable tax benefits related to share-based compensation, and a favorable tax benefit related to a change in tax rate related to the UK pension plan. These favorable changes were partially offset by a decrease in favorable tax benefits related to the repatriation of previously taxed foreign earnings and utilization of foreign tax benefits.
Segment Results
As discussed above, the Company has two operating and reportable segments – AMS and EAAA. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
During fiscal year 2024, the Company implemented a cost center realignment initiative as part of the Company’s efforts to centralize certain global/shared functions. During 2024, SG&A expenses for these global support functions were allocated to each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods. Fiscal year 2023 amounts below were not recast as there was no material impact to either reportable segment. There were no changes to the composition of the Company’s operating or reportable segments.
AMS Segment – Net Sales and Adjusted Operating Income (“AOI”)
The following table presents AMS segment net sales and AOI for the last three fiscal years:
Fiscal Year Percentage Change
(in thousands)
(1) Includes allocation of corporate and global support SG&A expenses as discussed above. Excludes Cyber Event impact and restructuring, asset impairment, severance, and other, net. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
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AMS Segment Net Sales for 2025 compared with 2024
During 2025, net sales in AMS increased 5.4% versus 2024, comprised of higher sales volume - particularly increased rubber flooring volume and higher average sales prices. On a market segment basis, the AMS sales increase was most significant in the healthcare (up 21.4%), education (up 8.2%), public buildings (up 10.7%), and corporate office (up 1.5%) market segments, partially offset by decreases in the residential living (down 4.1%) and retail (down 2.5%) market segments.
AMS Segment Net Sales for 2024 compared with 2023
During 2024, net sales in AMS increased 8.7% versus 2023, comprised of higher sales volume and higher average sales prices. On a market segment basis, the AMS sales increase was most significant in the retail (up 81.5%), education (up 13.5%), public buildings (up 27.9%), and residential living (up 23.3%) market segments partially offset by decreases in the corporate office (down 1.7%), hospitality (down 18.0%), and consumer residential (down 10.4%) market segments.
AMS AOI for 2025 compared with 2024
AOI in AMS increased 28.8% during 2025 compared to 2024. Higher gross profit in 2025, driven by higher sales, favorable product mix, and manufacturing efficiencies, partially offset by tariff costs, contributed to the increase in AMS AOI for 2025. As a percentage of net sales, AOI increased to 16.3% in 2025 versus 13.3% in 2024.
AMS AOI for 2024 compared with 2023
AOI in AMS increased 21.4% during 2024 compared to 2023. Higher gross profit in 2024, driven by higher sales, lower raw material costs, and favorable fixed cost absorption contributed to the increase in AMS AOI for 2024. AMS SG&A expenses as a percentage of net sales decreased approximately 0.8% compared to 2023, also contributed to the increase in AOI. As a percentage of net sales, AOI increased to 13.3% in 2024 versus 11.9% in 2023.
EAAA Segment – Net Sales and AOI
The following table presents EAAA segment net sales and AOI for the last three fiscal years:
Fiscal Year Percentage Change
(in thousands)
(1) Includes allocation of corporate and 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 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
EAAA Segment Net Sales for 2025 compared with 2024
During 2025, net sales in EAAA increased 5.5% versus 2024, primarily due to favorable currency fluctuations of approximately $15.9 million (3.1%) from the strengthening of the Euro against the U.S. dollar, higher sales volume, and higher average sales prices. On a market segment basis, the EAAA sales increase was most significant in the transportation (up 35.7%), public buildings (up 24.5%), healthcare (up 18.1%), and education (up 5.8%) market segments.
EAAA Segment Net Sales for 2024 compared with 2023
During 2024, net sales in EAAA decreased 1.8% versus 2023, primarily due to lower sales volume. Currency fluctuations had a negative impact of approximately $0.8 million (0.2%) on EAAA net sales for 2024 compared to 2023 due to the weakening of the Euro, Chinese Renminbi, and Australian dollar against the U.S dollar, partially offset by the strengthening of the British Pound sterling against the U.S. dollar. On a market segment basis, the EAAA sales decrease was most significant in the public buildings (down 21%), hospitality (down 24.1%), and healthcare (down 6.8%) market segments, partially offset by an increase in the residential living (up 9.1%) market segment.
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EAAA AOI for 2025 compared with 2024
AOI in EAAA increased 4.8% during 2025 versus 2024, primarily due to higher gross profit margin driven by favorable manufacturing costs and higher sales volume. Currency fluctuations had a positive impact of approximately $2.8 million (3.8%) on EAAA AOI in 2025 compared to 2024, primarily due to the strengthening of the Euro against the U.S. dollar. As a percentage of net sales, AOI was 6.7% in 2025 versus 6.8% in 2024.
EAAA AOI for 2024 compared with 2023
AOI in EAAA increased 21.7% during 2024 versus 2023. Higher gross profit in 2024, driven by lower raw material costs partially offset by lower sales volume contributed to the increase in EAAA AOI for 2024. Currency fluctuations had no material impact on EAAA AOI in 2024 compared to 2023. As a percentage of net sales, AOI was 6.8% in 2024 versus 5.5% in 2023.
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Financial Condition, Liquidity and Capital Resources
General
In our business, we require cash and other liquid assets primarily to purchase raw materials and to pay other manufacturing costs, in addition to funding normal course SG&A expenses, anticipated capital expenditures, interest expense and potential special projects. We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”).
We anticipate that our liquidity, cash flows from operations, cash and cash equivalents, and other sources of liquidity are sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations. However, the Company’s cash flows from operations can be affected by numerous factors including raw material availability and cost, demand for our products, and other factors described in “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.
Below are estimates of our material cash requirements for future periods. The short-term period represents payments due within the 12 months following December 28, 2025, and the long-term period represents payments due beyond the short-term period.
Payments Due by Period
Short-Term Long-Term Total
(in thousands)
Historically, we use more cash in the first half of the fiscal year, as we pay insurance premiums, taxes and incentive compensation and build up inventory in preparation for the holiday/vacation season of our international operations. As outlined in the table above, we have approximately $70.0 million in material contractual cash obligations due within the next year, which includes, among other things, scheduled debt repayments under the Facility, pension contributions, interest payments on our debt, and payments on our lease obligations. Our long-term debt obligations include the contractually scheduled principal repayment of our term loan and revolving loan borrowings under the Facility, which matures in 2030. Operating and finance lease obligations consist of undiscounted lease payments due over the lease term. Expected interest payments are those associated with borrowings under the Facility consistent with our contractually scheduled principal repayments. Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures. Our pension obligations include contributions and expected benefit payments to be paid by the Company related to certain defined benefit pension plans and exclude the expected benefit payments for two of our funded foreign defined benefit plans as these obligations will be paid by the plans.
Based on current interest rates and debt levels, we expect our aggregate interest expense for 2026 to be approximately $10 million. We estimate aggregate capital expenditures in 2026 to be approximately $55 million, although we are not committed to this amount.
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Liquidity
As of December 28, 2025, we had $71.3 million in cash, which was mostly located outside of the U.S. We consider cash located outside of the U.S. as indefinitely reinvested in the respective jurisdictions (except as identified below). We believe that our strategic plans and business needs, particularly for working capital needs and capital expenditure requirements in Europe, Asia, and Australia, support our assertion that a portion of our cash in foreign locations will be reinvested and remittance will be postponed indefinitely. Of the cash held in foreign jurisdictions, approximately $13.3 million relates to earnings which we have determined are not permanently reinvested, and as such we have provided for foreign withholding and U.S. state income taxes on these amounts in accordance with applicable accounting standards.
As of December 28, 2025, we had $181.8 million of borrowings outstanding under our Facility, of which $175.6 million were term loan borrowings and $6.2 million were revolving loan borrowings. Additionally, $0.6 million in letters of credit were outstanding under the Facility at the end of fiscal year 2025. As of December 28, 2025, we had additional borrowing capacity of $243.2 million under the Facility. As of December 28, 2025, the weighted average interest rate on borrowings outstanding under the Facility was 5.12%.
It is important for you to consider that we have a significant amount of indebtedness. Our Facility matures on December 3, 2030. We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms, or at all. If we are unable to refinance our debt or obtain new financing, we would have to consider other options, such as selling assets to meet our debt service obligations and other liquidity needs, or using cash, if available, that would have been used for other business purposes.
We have borrowings based on variable interest rates (as described below) that expose the Company to the risk that interest rates may increase. For information regarding the current variable interest rates of these borrowings, and the potential impact on our interest expense from hypothetical increases in interest rates, please see the discussion in Item 7A of this Report.
We are not a party to any material off-balance sheet arrangements.
Balance Sheet
Accounts receivable, net, were $174.5 million at December 28, 2025, compared to $171.1 million at December 29, 2024. The increase of $3.3 million was primarily due to the impact of higher net sales as a result of increased customer demand in 2025.
Inventories, net, were $275.0 million at December 28, 2025, compared to $260.6 million at December 29, 2024. The increase of $14.4 million was primarily due to finished goods inventory build as higher customer demand is expected to continue into 2026. Currency fluctuations also impacted the increase in inventories due to the strengthening of the Euro against the U.S. dollar.
Analysis of Cash Flows
The following table presents a summary of cash flows for fiscal years 2025, 2024 and 2023:
Fiscal Year
(in thousands)
Net cash provided by (used in):
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We ended 2025 with $71.3 million in cash, a decrease of $27.9 million during the year. The decrease was primarily due to the following:
•Cash provided by operating activities was $167.9 million for 2025, which represents an increase of $19.5 million compared to 2024. The increase in operating cash flows was primarily due to higher sales during 2025 and the impact of foreign currency from the strengthening of the Euro against the U.S. dollar resulting in a source of cash from higher receivables.
•Cash used in investing activities was $46.2 million for 2025, which represents an increase of $15.8 million compared to 2024. The increase was primarily due to an increase in capital expenditures attributable to a greater capital investment in manufacturing automation and robotics solutions in 2025.
•Cash used in financing activities was $159.3 million for 2025, which represents an increase of $34.1 million compared to 2024. The increase was primarily attributable to the repayment of the $300 million Senior Notes in 2025, partially offset by $170 million of proceeds from new term loan borrowings under the amended and restated Syndicated Credit Facility on December 3, 2025. In 2025, we repurchased $18.1 million of our outstanding common stock. See section below entitled “Share Repurchases” for additional information.
We ended 2024 with $99.2 million in cash, a decrease of $11.3 million during the year. The decrease was primarily due to the following:
•Cash provided by operating activities was $148.4 million for 2024, which represents an increase of $6.4 million compared to 2023. The increase in operating cash flows was primarily due to higher sales during 2024 resulting in a source of cash from lower inventory balances partially offset by a use of cash as a result of higher accounts receivable. The 2023 comparable period includes a source of cash for accounts receivable as delayed customer billings related to the 2022 Cyber Event were collected in 2023.
•Cash used in investing activities was $30.4 million for 2024, which represents an increase of $10.9 million compared to 2023. The increase was primarily attributable to an increase in capital expenditures due to increased capital investment partially offset by $2.4 million of insurance proceeds related to a 2023 property casualty loss. The 2023 comparable period includes proceeds of approximately $6.6 million from the sale of the Company’s Thailand real estate.
•Cash used in financing activities was $125.2 million for 2024, which represents an increase of $13.7 million compared to 2023. The increase was primarily attributable to higher prepayments of term loan borrowings during 2024 compared to 2023.
We ended 2023 with $110.5 million in cash, an increase of $12.9 million during the year. The increase was primarily due to the following:
•Cash provided by operating activities was $142.0 million for 2023, which represents an increase of $99.0 million compared to 2022. The increase in operating cash flows was primarily due to a greater source of cash from working capital in 2023. Specifically, customer collections in 2023 contributed to a decrease in accounts receivable, primarily attributable to delays in customer billings from the Cyber Event, in which due dates for those delayed billings were pushed from the fourth quarter of 2022 to the first quarter of 2023. The 2022 comparable period also included a greater use of cash for working capital attributable to an increase in inventories compared with 2023.
•Cash used in investing activities was $19.5 million for 2023, which represents an increase of $1.1 million compared to 2022. The increase was primarily attributable to an increase in capital expenditures due to increased capital investment, partially offset by the proceeds of approximately $6.6 million from the sale of the Company’s Thailand real estate in 2023.
•Cash used in financing activities was $111.6 million for 2023, which represents an increase of $92.1 million compared to 2022. The year-over-year difference was primarily due to lower revolving loan borrowings combined with higher repayments of term loan borrowings in 2023 as a result of cash generated from operating activities as described above.
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•Fiscal year 2022 also included repurchases of the Company’s common stock that did not occur in 2023, which partially offset the increased use of cash for financing activities in 2023 compared with 2022.
Share Repurchases
In May 2022, 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 fiscal year 2025, the Company repurchased 750,166 shares of common stock at a weighted average price of $24.23 per share pursuant to this program. No shares of common stock were repurchased during 2024 and 2023 pursuant to this program. As of December 28, 2025, approximately $64.7 million remained authorized pursuant to this program for future share repurchases. The program does not require the Company to repurchase a specific number or amount of shares, or to do so within any specific time periods. With the remaining availability under this program, the Company may repurchase shares of common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations. The Company’s repurchases may be made through a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.
Syndicated Credit Facility
In the normal course of business, in addition to using our available cash, we fund our operations by borrowing under our Facility. On December 3, 2025, the Company entered into the third amended and restated Facility agreement. In connection with this amendment the Company revised certain material terms which include, but are not limited to, the addition of a $170 million term loan, extending the maturity date to December 2030, and reducing our revolving loan facility to $250 million. For additional information, please see Note 9 entitled “Long-Term Debt” in Item 8 of this Annual Report on Form 10-K.
The Company was in compliance with all covenants under the Facility as of December 28, 2025, and anticipates that it will remain in compliance with the covenants for the foreseeable future.
Senior Notes
On December 3, 2025, the Company redeemed all of its $300 million outstanding principal amount of 5.50% Senior Notes. The Senior Notes were redeemed at a redemption price of 100% of their principal amount, plus accrued and unpaid interest. The redemption was funded using proceeds from the amended term loan facility and available cash on hand. As a result of the debt extinguishment, the Company recognized a loss of $2.1 million resulting from the write-off of unamortized debt issuance costs on the Senior Notes.
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Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires that we make estimates and assumptions about future events that affect the reported amounts of assets and liabilities in the consolidated financial statements. Our significant accounting policies are described in Note 1 entitled ”Summary of Significant Accounting Policies” of the consolidated financial statements.
For the year ended December 28, 2025, the assumptions related to goodwill and impairment of long lived assets were no longer considered critical accounting estimates.
The following discussion addresses our critical accounting estimates as of December 28, 2025, that require significant management judgment, or use of significant assumptions, or complex estimates.
Deferred Income Tax Assets and Liabilities. The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards. The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws and incorporate management’s assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes may result in materially different carrying values of income tax assets and liabilities and results of operations.
We evaluate the recoverability of these deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. We use our historical experience and our short-term and long-term business forecasts to provide insight. Further, our global business portfolio gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future deductions. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. As of December 28, 2025, and December 29, 2024, we had state net operating loss carryforwards of $153.7 million and $190.1 million, respectively. Certain of these state net operating loss carryforwards are reserved with a valuation allowance because, based on the available evidence, we believe it is more likely than not that we would not be able to utilize those deferred tax assets in the future. The remaining year-end 2025 amounts are expected to be fully recoverable within the applicable statutory expiration periods. If the actual amounts of taxable income differ from our estimates, the amount of our valuation allowance could be materially impacted.
Trademark and Trade Name Intangible Assets. Trademark and trade name intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually in the fourth quarter, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the intangible assets below their carrying amount. For the annual test performed, the Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which requires significant management estimates of forecasted revenue and the use of an estimated intangible asset required rate of return, which was 11% for the 2025 test.
As a result of the 2025 intangible assets impairment testing, we determined that the estimated fair value exceeded the carrying value and there was no indication of impairment of the trademark and trade name intangible assets.
There is inherent risk and uncertainty associated with key assumptions and estimates used in our impairment testing, including the impact of macroeconomic conditions. If we determine that the carrying value of the trademark and trade name intangible assets exceeds the estimated fair value, then we will recognize an impairment charge for the excess of the carrying value over the estimated fair value. To the extent actual revenues decrease by 10% from our estimates, there would be a corresponding 10% decrease in the fair value of the trademark and trade name intangible assets. A hypothetical 1% increase in the intangible asset rate of return would result in an 11% decrease in fair value of the trademark and trade name intangible assets. Neither of these hypothetical changes to key assumptions would cause fair value to be less than carrying value.
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Inventories. We determine the value of inventories using the lower of cost or net realizable value. We write down inventories for the difference between the carrying value of the inventories and their net realizable value. If actual market conditions are less favorable than those projected by management, additional write-downs may be required.
Management’s judgment in estimating our reserves for inventory obsolescence is based on continuous examination of our inventories to determine if there are indicators that carrying values exceed net realizable values. Experience has shown that significant indicators that could require the need for additional inventory write-downs are the age of the inventory, the length of its product life cycles, anticipated demand for our products and current economic conditions.
While we believe that adequate write-downs for inventory obsolescence have been made in the consolidated financial statements, consumer tastes and preferences may continue to change, and we could experience additional inventory write-downs in the future. Our inventory reserve on December 28, 2025 and December 29, 2024, was $35.5 million and $38.3 million, respectively. To the extent that actual obsolescence of our inventory differs from our estimate by 10%, our 2025 net income would be higher or lower by approximately $3.0 million, on an after-tax basis.
Allowances for Expected Credit Losses. We maintain allowances for expected credit losses resulting from the inability of customers to make required payments. Estimating the amount of future expected losses requires us to consider historical losses from our customers, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services. By its nature, such an estimate is highly subjective, and it is possible that the amount of accounts receivable that we are unable to collect may be different than the amount initially estimated. Our allowance for expected credit losses on December 28, 2025 and December 29, 2024, was $5.2 million and $3.8 million, respectively. To the extent the actual collectability of our accounts receivable differs from our estimates by 10%, our 2025 net income would be higher or lower by approximately $0.4 million, on an after-tax basis, depending on whether the actual collectability was better or worse, respectively, than the estimated allowance.
Product Warranties. We typically provide limited warranties with respect to certain attributes of our carpet products (for example, warranties regarding excessive surface wear, edge ravel and static electricity) for periods ranging from ten to twenty years, depending on the particular carpet product and the environment in which the product is to be installed. Similar limited warranties are provided on certain attributes of our rubber and LVT products, typically for a period of 5 to 15 years. We typically warrant that any services performed will be free from defects in workmanship for a period of one year following completion. In the event of a breach of warranty, the remedy typically is limited to repair of the problem or replacement of the affected product. We record a provision related to warranty costs based on historical experience and future expectations, and periodically adjust these provisions to reflect changes in actual experience. Our warranty and sales allowance reserve on December 28, 2025 and December 29, 2024, was $3.9 million and $5.3 million, respectively. Actual warranty expense incurred could vary significantly from amounts that we estimate. To the extent the actual warranty expense differs from our estimates by 10%, our 2025 net income would be higher or lower by approximately $0.3 million, on an after-tax basis, depending on whether the actual expense is lower or higher, respectively, than the estimated provision.
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Pension Benefits. Net pension expense recorded is based on, among other things, assumptions about the discount rate, estimated return on plan assets and salary increases. While management believes these assumptions are reasonable, changes in these and other factors and differences between actual and assumed changes in the present value of liabilities or assets of our plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year. The actuarial assumptions used in our foreign defined benefit plans reporting are reviewed periodically and compared with external benchmarks to ensure that they appropriately account for our future pension benefit obligation. The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets, and include input from actuaries, investment service firms and investment managers. The table below represents the changes to the projected benefit obligation as a result of changes in discount rate assumptions:
Foreign Defined Benefit Plans Increase (Decrease) inProjected Benefit Obligation
(in millions)
1% increase in actuarial assumption for discount rate $ (21.1)
1% decrease in actuarial assumption for discount rate 25.6
For the year ended December 28, 2025, the discount rate used in the salary continuation plan is no longer considered a critical accounting estimate as a 1% increase or decrease in the discount rate would not have a material impact to the projected benefit obligation of the plan.
Recent Accounting Pronouncements
Please see Note 2 entitled “Recent Accounting Pronouncements” in Item 8 of this Report for discussion of these items.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
As a result of the scope of our global operations, we are exposed to an element of market risk from changes in interest rates and foreign currency exchange rates. Our results of operations and financial condition could be impacted by this risk. We manage our exposure to market risk through our regular operating and financial activities and, to the extent we deem appropriate, through the use of derivative financial instruments.
Interest Rate Market Risk Exposure
Changes in interest rates affect the interest paid on our variable rate debt. To mitigate the impact of fluctuations in interest rates, our management monitors interest rates and subject to approval by our Board of Directors, may from time to time enter into derivative transactions, such as interest rate swaps, in order to manage exposure to interest rate fluctuations. There were no active interest rate derivative instruments as of December 28, 2025.
Foreign Currency Exchange Market Risk Exposure
A significant portion of our operations consists of manufacturing and sales activities in foreign jurisdictions. We manufacture our products in the United States, Northern Ireland, the Netherlands, Germany, China, and Australia, and we sell our products in more than 100 countries. As a result, our financial results have been, and could be, significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we distribute our products. Our operating results are exposed to changes in exchange rates between the U.S. dollar and many other currencies, including the Euro, British Pound sterling, Canadian dollar, Australian dollar and Chinese Renminbi. When the U.S. dollar strengthens against a foreign currency, the value of anticipated sales in those currencies decreases, and vice versa. Additionally, to the extent our foreign operations with functional currencies other than the U.S. dollar transact business in countries other than the United States, exchange rate changes between two foreign currencies could ultimately impact us. Finally, because we report in U.S. dollars on a consolidated basis, foreign currency exchange fluctuations could have a translation impact on our financial position. To mitigate the impact of fluctuations in foreign currency exchange rates, we may enter into derivative transactions from time to time, such as forward contracts and foreign currency options. There were no active foreign currency derivative instruments as of December 28, 2025.
During 2025, we recognized $50.6 million in other comprehensive income related to foreign currency translation adjustments primarily due to the strengthening of the Euro against the U.S dollar.
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. The market value of instruments affected by interest rate and foreign currency exchange rate risk is computed based on the present value of future cash flows as impacted by the changes in the rates attributable to the market risk being measured. The discount rates used for the present value computations were selected based on market interest and foreign currency exchange rates in effect at December 28, 2025. The values that result from these computations are then compared with the market values of the financial instruments. The differences are the hypothetical gains or losses associated with each type of risk.
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Interest Rate Risk
As discussed above, our Facility is comprised of a combination of term loan and revolving loan borrowings. The following table summarizes our market risks associated with our variable rate debt obligations under the Facility as of December 28, 2025. For debt obligations, the table presents principal cash flows by year of maturity.
(in thousands)
Long-term Debt:
Our weighted average interest rate for our outstanding borrowings under the Facility as of December 28, 2025 and December 29, 2024 was 5.12% and 5.62%, respectively.
An increase in our effective interest rate of 1% on our variable rate debt would increase annual interest expense by approximately $2.2 million. We will continue to review our exposure to interest rate fluctuations and evaluate whether we should manage such exposures through any future interest rate swap transactions. The carrying value of the Company’s borrowings under our Facility approximates fair value as the Facility bears variable interest rates that are similar to existing market rates.
Foreign Currency Exchange Rate Risk
As of December 28, 2025, 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 respective decrease or increase in the fair value of our financial instruments of $11.4 million. As the impact of offsetting changes in the fair market value of our net foreign investments is not included in the sensitivity model, these results are not indicative of our actual exposure to foreign currency exchange risk.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
FISCAL YEAR
Restructuring, asset impairment, other (gains) and charges — — (2,502)
Earnings per share – basic $ 1.99 $ 1.49 $ 0.77
Earnings per share – diluted $ 1.96 $ 1.48 $ 0.76
See accompanying notes to consolidated financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME
(in thousands)
FISCAL YEAR
Other comprehensive income (loss), after tax:
See accompanying notes to consolidated financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
END OF FISCAL YEAR
ASSETS
Current assets
Prepaid expenses and other current assets 34,048 33,355
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of operating lease liabilities 15,748 12,296
Current portion of long-term debt 8,778 482
Commitments and contingencies (Note 17)
Shareholders’ equity
Accumulated other comprehensive loss – pension liability (39,314) (39,834)
See accompanying notes to consolidated financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
FISCAL YEAR
OPERATING ACTIVITIES:
Adjustments to reconcile net income to cash provided by operating activities:
Loss (gain) on disposal of property, plant and equipment, net — 264 (2,252)
Loss on foreign subsidiary liquidation — 2,152 6,221
Loss on debt extinguishment 2,440 — —
Working capital changes:
Prepaid expenses and other current assets 590 (3,079) (302)
INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment — 1,040 6,593
Insurance proceeds from property casualty loss — 2,374 —
FINANCING ACTIVITIES:
Term loan borrowings 170,000 — —
Senior notes repayment (300,000) — —
Repurchase of common stock (18,175) — —
Tax withholding payments for share-based compensation (8,372) (4,770) (1,514)
Payments for debt extinguishment costs (620) — —
Debt issuance costs (1,303) — —
CASH AND CASH EQUIVALENTS:
See accompanying notes to consolidated financial statements.
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INTERFACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Interface is a global flooring company specializing in carpet tile and resilient flooring, including luxury vinyl tile (“LVT”), and nora® rubber flooring. The Company manufactures modular carpet focusing on the high quality, design-oriented sector of the market, sources resilient flooring including LVT from third parties and focuses on the same sector of the market, and provides specialized carpet replacement, installation and maintenance services. The Company also manufactures and sells resilient rubber flooring.
The Company’s fiscal year is the 52 or 53 week period ending on the Sunday nearest December 31. All references herein to “2025,” “2024,” and “2023,” mean the fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively. Fiscal years 2025, 2024 and 2023 were each comprised of 52 weeks.
The Company has determined that it has two operating and reportable segments – namely Americas (“AMS”) which includes the United States, Canada and Latin America geographic areas, and Europe, Africa, Asia and Australia (collectively “EAAA”). See Note 19 entitled “Segment Information” for additional information.
Cybersecurity Event
On November 20, 2022, we discovered a cybersecurity attack, perpetrated by unauthorized third parties, affecting our IT systems (the “Cyber Event”). The investigation of the Cyber Event was completed during 2023. During 2024, we recovered $4.8 million in business interruption insurance proceeds, which are recognized as a benefit within other expense / income, net in the consolidated statements of operations. During 2024, we also recovered $0.8 million from our cyber risk insurance, which are recorded as a reduction of selling, general, and administrative expenses. The insurance claim for the Cyber Event is now closed.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All of our subsidiaries are wholly-owned, and we are not a party to any joint venture, partnership or other variable interest entity that would potentially qualify for consolidation. All material intercompany accounts and transactions are eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Examples include provisions for returns, expected credit losses, product claims reserves, inventory obsolescence and the length of product life cycles, accruals associated with restructuring activities, income tax exposures and valuation allowances, and the remaining carrying value of goodwill, intangible assets and property, plant and equipment. Actual results could vary from these estimates.
Risks and Uncertainties
Global economic challenges, including government-imposed tariffs and retaliatory tariffs, inflation, supply chain disruptions, geopolitical factors including wars and other conflicts, and slow market conditions in certain parts of the globe could cause economic uncertainty and volatility. The Company considered these impacts and subsequent general uncertainties and volatility in the global economy on the assumptions and estimates used herein, including the goodwill and intangible asset assessments discussed in Note 11 entitled “Goodwill and Other Intangible Assets.” These uncertainties could result in a future material adverse effect to the Company’s financial statements if actual results differ from these estimates.
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Revenue Recognition
Revenue from contracts with customers is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the guidance provides that an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.
Revenue Recognized from Contracts with Customers
Contracts with customers typically take the form of invoices for purchase of materials from the Company. Customer payment terms vary by region and are typically less than 60 days. The performance obligation is the delivery of these materials to the customer’s control. Revenue from the sale of modular carpet, resilient flooring, rubber flooring, and related products is the primary source of the Company’s total revenue. 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 is generated from the installation of carpet and other flooring-related material. See Note 3 entitled “Revenue Recognition” for additional information related to revenue disaggregation.
For installation projects underway, the Company recognized installation revenue over time based on a project cost input method 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 five 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 typically is specifically identified in the contract with the customer.
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.
The Company does not record taxes collected from customers and remitted to governmental authorities within revenues. The Company records such taxes collected as a liability on our consolidated balance sheets.
Performance Obligations
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 offers 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 flooring or purchase it separately. This assurance-type warranty does not represent a separate performance obligation and the Company accounts for warranty claims on an accrual basis.
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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 separate performance obligations. The nature of the installation projects is such that the vast majority – an amount in excess of 85% of these installation projects – are completed in less than five days. On a project-by-project basis, the Company’s largest installation customers are retail, education and corporate customers. The Company has evaluated these projects at the end of each reporting period and recorded revenue in accordance with the accounting standards for projects which were underway as of the end of 2025, 2024 and 2023.
Costs to Obtain Contracts
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 are expensed as the revenue is recognized. These commissions become payable upon shipment (or in certain cases delivery) of product. There are no other material costs the Company incurs as part of obtaining the sales contract.
Shipping and Handling
Shipping and handling fees billed to customers are classified in net sales in the consolidated statements of operations. Shipping and handling costs incurred are classified in cost of sales in the consolidated statements of operations.
Advertising and Promotion
The Company’s advertising and promotional activities primarily consist of product samples, printed materials, digital marketing, trade shows, and customer events. Advertising and promotional costs are expensed when the advertising / promotional activity first takes place. Advertising and promotional expenses were $37.8 million, $39.2 million and $34.6 million for the years 2025, 2024 and 2023, respectively, and were recorded in selling, general and administrative (“SG&A”) expenses in the consolidated statements of operations.
Research and Development
Research and development costs are expensed as incurred and are included in SG&A expenses and cost of sales in the consolidated statements of operations. Research and development expense includes costs associated with the development of new products as well as the improvement and enhancement of existing products. Research and development expense was $16.1 million, $15.1 million, and $17.0 million for the years 2025, 2024 and 2023, respectively.
Cash, Cash Equivalents and Short-Term Investments
Highly liquid investments with original maturities of three months or less are classified as cash and cash equivalents. Investments with maturities greater than three months and less than one year are classified as short-term investments. Significant concentrations of credit risk may arise from the Company’s cash maintained at various banks, as from time to time cash balances may exceed the FDIC limits. The Company did not hold any significant amounts of cash equivalents and short-term investments at December 28, 2025 and December 29, 2024.
Supplemental Cash Flow Information
Cash payments for interest amounted to approximately $18.0 million, $22.8 million, and $28.8 million for the years 2025, 2024 and 2023, respectively. See Note 16 entitled “Income Taxes” for income taxes paid information for fiscal years 2025, 2024 and 2023.
Allowances for Expected Credit Losses
The Company maintains allowances for expected credit losses for estimated losses resulting from the inability of customers to make required payments. Estimating the amount of future expected losses requires the Company to consider historical losses from our customers, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services. By its nature, such an estimate is subjective, and it is possible that the amount of accounts receivable that the Company is unable to collect may be different than the amount initially estimated.
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Inventories
Inventories are carried at the lower of cost (standards approximating the first-in, first-out method) or net realizable value. Costs included in inventories are based on invoiced costs and/or production costs, as applicable. Included in production costs are material, direct labor and allocated overhead. The Company writes down inventories for the difference between the carrying value of the inventories and their estimated net realizable value. If actual market conditions are less favorable than those projected by management, additional write-downs may be required.
Management estimates its reserves for inventory obsolescence by continuously examining its inventories to determine if there are indicators that carrying values exceed net realizable values. Experience has shown that significant indicators that could require the need for additional inventory write-downs are the age of the inventory, the length of its product life cycles, anticipated demand for the Company’s products, and current economic conditions. While management believes that adequate write-downs for inventory obsolescence have been made in the consolidated financial statements, consumer tastes and preferences may continue to change, and the Company could experience additional inventory write-downs in the future.
Leases
The Company records a right-of-use asset and lease liability for operating and finance leases once a contract that contains a lease is executed and the Company has the right to control the use of the leased asset. The right-of-use asset is measured as the present value of the lease obligation. The discount rate used to calculate the present value of the lease liability is the Company’s incremental borrowing rate, which is based on the estimated rate for a fully collateralized borrowing that fully amortizes over a similar lease term at the commencement date and for the applicable geographical region.
The Company made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated balance sheets. These leases primarily represent month-to-month operating leases for equipment where we were reasonably certain that we would not elect an option to extend the lease. The Company also made an accounting policy election not to separate lease and non-lease components for all asset classes and accounts for the lease payments as a single component.
Property, Plant and Equipment and Long-Lived Assets
Property, plant and equipment are carried at cost. Depreciation is computed using the straight-line method over the following estimated useful lives: buildings and improvements – ten to forty years; equipment, furniture and fixtures – three to twelve years; and computer software – three to six years. Certain manufacturing equipment in our Weinheim manufacturing facility have estimated useful lives up to twenty-five years. Leasehold improvements are depreciated over the shorter of the asset life or lease term, generally between three to twelve years. Interest costs for the construction/development of certain long-term assets are capitalized and amortized over the related assets’ estimated useful lives. Total depreciation expense amounted to approximately $34.4 million, $34.3 million, and $35.9 million for the years 2025, 2024 and 2023, respectively.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying value of the asset. Repair and maintenance costs are charged to operating expense as incurred.
Goodwill and Other Intangible Assets
In accordance with applicable accounting standards, the Company tests goodwill for impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the fourth quarters of 2025, 2024 and 2023, the Company performed the annual goodwill impairment test. The Company tests goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. In performing the impairment testing, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed.
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In preparing the valuations, past, present and future expectations of performance were considered. See Note 11 entitled “Goodwill and Other Intangible Assets” for additional information.
Trademark and trade name intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the intangible assets below its carrying amount. For the annual tests performed in 2025, 2024 and 2023, the Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which requires management to estimate forecasted revenues and a discount rate. The estimated fair value of the trademark and trade name intangible assets was compared to the carrying value to determine whether any impairment existed. See Note 11 entitled “Goodwill and Other Intangible Assets” for additional information.
Product Warranties
The Company typically provides limited warranties with respect to certain attributes of its carpet products (for example, warranties regarding excessive surface wear, edge ravel and static electricity) for periods ranging from ten to twenty years, depending on the particular carpet product and the environment in which it is to be installed. Similar limited warranties are provided on certain attributes of its rubber and LVT products, typically for a period of 5 to 15 years. The Company typically warrants that services performed will be free from defects in workmanship for a period of one year following completion. In the event of a breach of warranty, the remedy typically is limited to repair of the problem or replacement of the affected product.
The Company records a provision related to warranty costs based on historical experience and future expectations and periodically adjusts these provisions to reflect changes in actual experience. Warranty and sales allowance reserves amounted to $3.9 million and $5.3 million as of December 28, 2025 and December 29, 2024, respectively, and are included in accrued expenses in the accompanying consolidated balance sheets.
Income Taxes
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date.
The Company has elected to account for tax effects of the global intangible low-taxed income (“GILTI”) in the period when incurred, and therefore has not provided any deferred tax impacts for these provisions in its consolidated financial statements.
The Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will expire before realization of the benefit or that future deductibility is not probable. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future. This requires us to use estimates and make assumptions regarding significant future events such as the taxability of entities operating in the various taxing jurisdictions.
For uncertain tax positions, the Company applies the provisions of relevant authoritative guidance, which requires application of a “more likely than not” threshold to the recognition and derecognition of tax positions. The Company’s ongoing assessments of the more likely than not outcomes of tax authority examinations and related tax positions require significant judgment and can increase or decrease the Company’s effective tax rate as well as impact operating results. For further information, see Note 16 entitled “Income Taxes.”
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Fair Values of Financial Instruments
Fair values of cash and cash equivalents and short-term debt approximate cost due to the short period of time to maturity. Fair values of debt are based on quoted market prices or pricing models using current market rates and classified as level 2 within the fair value hierarchy. See Note 5 entitled “Fair Value of Financial Instruments” for further information.
Translation of Foreign Currencies
The financial position and results of operations of the Company’s foreign subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars at the exchange rate in effect at each year-end. Income and expense items are translated each month at average monthly exchange rates throughout the year. The resulting translation adjustments are recorded in the foreign currency translation adjustment account. In the event of a divestiture or substantial liquidation of a foreign subsidiary, the related foreign currency translation results are reclassified from equity to income. Foreign exchange translation gains (losses) were $50.6 million, $(23.7) million, and $19.2 million for the years 2025, 2024 and 2023, respectively.
Earnings per Share
Basic earnings per share is computed based on the average number of common shares outstanding, including participating securities. Diluted earnings per share reflects the potential increase in average common shares outstanding that would result from share-based awards or the assumed exercise of outstanding stock options, calculated using the treasury stock method. See Note 14 entitled “Earnings Per Share” for additional information.
Share-Based Compensation
The Company has share-based employee compensation plans, which are described more fully in Note 13 entitled “Shareholders' Equity.”
The Company recognizes expense related to its restricted stock, restricted share unit and performance share grants based on the grant date fair value of the shares awarded, as determined by its market price at date of grant.
Pension Benefits
Net pension expense recorded is based on, among other things, assumptions about the discount rate, estimated return on plan assets and salary increases. While the Company believes these assumptions are reasonable, changes in these and other factors and differences between actual and assumed changes in the present value of liabilities or assets of the Company’s plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year. The actuarial assumptions used in the Company’s salary continuation plan and foreign defined benefit plans reporting are reviewed periodically and compared with external benchmarks to ensure that they appropriately account for our future pension benefit obligation. The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets, and include input from actuaries, investment service firms and investment managers.
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NOTE 2 –RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements – Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU requires public entities on an annual basis to disclose a rate reconciliation with explicit categories, as outlined in the ASU, and requires additional disclosures for reconciling items that meet certain quantitative thresholds. Other disclosures include disaggregation of income taxes paid, pre-tax income, and income tax expense. The new guidance is effective for fiscal years beginning after December 15, 2024. The Company adopted this ASU prospectively for the period ended December 28, 2025. See Note 16 entitled “Income Taxes” for additional information. The adoption of this ASU impacted our income tax disclosures but did not have a material impact to our consolidated financial statements.
Recently Issued Accounting Pronouncements – Not Yet Adopted
In September 2025, the FASB issued ASU 2025-06 - “Intangibles - Goodwill and Other Internal Use Software (Topic 350-40)”. This ASU amends the accounting for internal-use software costs by removing reference to prescriptive and sequential software development stages used to evaluate capitalizable costs. The ASU requires entities to consider whether significant uncertainties associated with development activities have been resolved prior to capitalization of software costs and aligns disclosure requirements with ASC 360, “Property, Plant, and Equipment”. The new guidance in ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods, and may be applied prospectively, retrospectively, or using a modified retrospective approach. Early adoption is permitted. The Company is currently evaluating the impact of this ASU to its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement Reporting - Comprehensive Income - Expense Disaggregation (Topic 220-40)”. This ASU requires public entities to provide additional footnote disclosures to disaggregate the cost and expense line items presented in the income statement into specific categories including (a) purchases of inventory; (b) employee compensation; (c) depreciation; and (d) intangible asset amortization. The ASU also requires qualitative disclosure of other relevant expense categories not separately disclosed, the total amount of selling expenses, and the definition of selling expenses in annual reporting periods. The new guidance in ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU to its consolidated financial statements.
All other ASU’s issued but not adopted yet were assessed and determined to be not applicable or are not expected to have a material impact to our consolidated financial statement or disclosures.
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NOTE3– REVENUE RECOGNITION
The Company generates revenue from sales of modular carpet, resilient flooring, rubber flooring, and other flooring-related material, and from the installation of carpet and other flooring-related material. A summary of these revenue streams, as a percentage of net sales, for fiscal years 2025, 2024 and 2023 is as follows:
Fiscal Year
Revenue from the sale of flooring material 98% 97% 98%
Revenue from installation of flooring material 2% 3% 2%
Disaggregation of Revenue
For fiscal years 2025, 2024 and 2023, revenue from the Company’s customers is broken down by geography as follows:
Fiscal Year
Revenue from the Company’s customers in the Americas corresponds to the AMS reportable segment, and the EAAA reportable segment includes revenue from the Europe and Asia-Pacific geographies. See Note 19 entitled “Segment Information” for additional information.
For fiscal years 2025, 2024, and 2023, revenue by material market segment as a percentage of consolidated totals is as follows:
Fiscal Year
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NOTE4–RECEIVABLES
The Company has adopted credit policies and standards intended to reduce the inherent risk associated with potential increases in its concentration of credit risk due to increasing trade receivables. Management believes that credit risks are further moderated by the diversity of its end customers and geographic sales areas. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral as deemed necessary. The Company maintains allowances for expected credit losses resulting from the inability of customers to make required payments. If the financial condition of its customers were to deteriorate, resulting in a change in their ability to make payments, additional allowances may be required. As of December 28, 2025, and December 29, 2024, the allowance for expected credit losses amounted to $5.2 million and $3.8 million, respectively, for all accounts receivable of the Company.
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NOTE5–FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure estimated fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under applicable accounting standards are described below:
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 Inputs to the valuation methodology include:
•quoted prices for similar assets in active markets;
•quoted prices for identical or similar assets in inactive markets;
•inputs other than quoted prices that are observable for the asset; and
•inputs that are derived principally or corroborated by observable data by correlation or other.
Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following table presents the carrying values and estimated fair values, including the level within the fair value hierarchy, of certain financial instruments:
(in thousands)
Assets:
Liabilities(1):
(1) Carrying values are presented gross, excluding the impact of unamortized debt issuance costs and including amounts presented as current liabilities on the consolidated balance sheets.
(2) Unamortized debt issuance costs associated with term loan borrowings under the Syndicated Credit Facility were $0.2 million as of December 28, 2025, and recorded as a reduction of long-term debt in the consolidated balance sheets. Unamortized debt issuance costs associated with the Syndicated Credit Facility as of December 29, 2024, were not material.
(3) The Senior Notes were repaid on December 3, 2025, and the outstanding debt was extinguished. As of December 29, 2024, unamortized debt issuance costs associated with the Senior Notes were $2.8 million and were recorded as a reduction of long-term debt in the consolidated balance sheets.
Company-Owned Life Insurance
The fair value of Company-owned life insurance is measured on a readily determinable cash surrender value on a recurring basis. Company-owned life insurance is recorded at fair value within other assets in the consolidated balance sheets. Changes in the fair value of Company-owned life insurance are recognized in SG&A expenses in the consolidated statements of operations.
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Deferred Compensation Investments
Assets associated with the Company’s nonqualified savings plans are held in a rabbi trust and consist of investments in mutual funds and insurance contracts. The fair value of the mutual funds is derived from quoted prices in active markets. The fair value of the insurance contracts is based on observable inputs related to the performance measurement funds that shadow the deferral investment allocations made by participants in the nonqualified savings plans. These investments are recorded at fair value within other assets in the consolidated balance sheets. Changes in the fair value of the investments associated with the nonqualified savings plans are recognized in SG&A expenses in the consolidated statements of operations. See Note 18 entitled “Employee Benefit Plans” for additional information on the Company’s nonqualified savings plans.
Syndicated Credit Facility and Senior Notes
The Company’s liabilities for borrowings under the Facility are not recorded at fair value in the consolidated balance sheets. The carrying value of borrowings under the Facility approximates fair value as the Facility bears variable interest rates that are similar to existing market rates. In the prior year, the Senior Notes obligation was not recorded at fair value in the consolidated balance sheets. The fair value of the Senior Notes was derived in prior year using quoted prices for similar instruments. See Note 9, entitled “Long-Term Debt” for additional information.
Other Assets and Liabilities
Due to the short maturity of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, their carrying values approximate fair value. See Note 18 entitled “Employee Benefit Plans” for additional information on defined benefit plan assets.
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NOTE6–INVENTORIES
Inventories are summarized as follows:
End of Fiscal Year
(in thousands)
Reserves for inventory obsolescence amounted to $35.5 million and $38.3 million as of December 28, 2025 and December 29, 2024, respectively, and have been netted against amounts presented above.
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NOTE7–PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
End of Fiscal Year
(in thousands)
(1) Includes impact of finance lease assets. See Note 10 entitled “Leases” for additional information.
(2) Primarily represents manufacturing equipment not yet placed in service.
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NOTE8–ACCRUED EXPENSES
Accrued expenses are summarized as follows:
End of Fiscal Year
(in thousands)
Warranty and sales allowances 3,885 5,254
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NOTE9–LONG-TERMDEBT
Long-term debt consisted of the following:
Outstanding Principal Interest Rate(1) Outstanding Principal Interest Rate(1)
(in thousands) (in thousands)
Syndicated Credit Facility
Revolving loan borrowings $ 6,158 6.07 % $ — — %
Less: Unamortized debt issuance costs (200) (2,807)
Less: Current portion of long-term debt (8,778) (482)
(1) Represents the weighted average rate of interest for borrowings under the Syndicated Credit Facility and the stated rate of interest for the 5.50% Senior Notes without the effect of debt issuance costs.
(2) The Senior Notes were redeemed December 3, 2025. See below for additional information.
Syndicated Credit Facility
The Company’s Syndicated Facility Agreement (“Facility”) provides to the Company U.S. denominated and multicurrency term loans and provides to the Company and certain of its subsidiaries a multicurrency revolving credit facility. Each of the Company’s material domestic subsidiaries guarantee the obligations of the Company under its Facility. At December 28, 2025, the Company had available borrowing capacity of $243.2 million under the revolving loan facility.
Significant Credit Facility Amendment
On December 3, 2025, the Company entered into the third amended and restated Facility agreement. The amendment provided for, among other changes, the following:
•adding a new term loan facility in an aggregate principal amount of $170 million (“Term Loan”), which was fully drawn on December 3, 2025;
•extending the maturity date of the Facility to December 3, 2030;
•reducing the revolving credit facility from $300 million to $250 million;
•reducing the maximum unused facility commitment fee to 0.30%; and
•amending the interest rates applicable to Base Rate loans and Secured Overnight Financing Rate ("SOFR") loans as discussed in more detail below in “Interest Rates and Fees”.
See the section below entitled “Debt Issuance and Extinguishment costs” for the accounting treatment of fees and charges incurred in connection with this amendment.
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InterestRatesandFees
Base rate loans, as defined in the amended Facility, represent short-term borrowings with applicable interest rates determined as the greater of the federal funds rate plus a margin, the prime rate, or SOFR plus a margin. Interest on base rate loans is charged at varying rates computed by applying a margin ranging from 0.125% to 1.00%, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter. Interest on SOFR-based and alternative currency loans are charged at varying rates computed by applying a margin ranging from 1.125% to 2.00% over the applicable SOFR rate or alternative currency 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 ranging from 0.20% to 0.30% 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.
Fees for commercial letters of credit are computed as 1.00% per annum of the daily amount available to be drawn under such letters of credit. Fees for standby letters of credit are charged at varying rates computed by applying a margin ranging from 1.125% to 2.00% per annum of the amount available to be drawn under such standby letters of credit, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.
Covenants
The Facility contains standard and customary covenants for agreements of this type, including various reporting, affirmative and negative covenants. Among other things, these covenants limit the Company’s and its subsidiaries’ ability to:
•create or incur liens on assets;
•make acquisitions of or investments in businesses (in excess of certain specified amounts);
•engage in any material line of business substantially different from the Company’s current lines of business;
•incur indebtedness or contingent obligations;
•sell or dispose of assets (in excess of certain specified amounts);
•pay dividends or repurchase the Company’s stock (in excess of certain specified amounts);
•repay other indebtedness prior to maturity unless the Company meets certain conditions; and
•enter into sale and leaseback transactions.
The Facility also requires the Company to remain in compliance with the following financial covenants as of the end of each fiscal quarter, based on the Company’s consolidated results for the four fiscal quarters most recently ended:
•Consolidated Secured Net Leverage Ratio: Must be no greater than 3.00:1.00.
•Consolidated Interest Coverage Ratio: Must be no less than 2.25:1.00.
Under the amended Facility, the Company is required to make quarterly amortization payments of the term loan borrowings, which will commence the first quarter of 2026. The amortization payments are due on the last day of the calendar quarter.
Events of Default
If the Company breaches or fails to perform any of the affirmative or negative covenants under the Facility, or if other specified events occur (such as a bankruptcy or similar event or a change of control of Interface, Inc. or certain subsidiaries, or if the Company breaches or fails to perform any covenant or agreement contained in any instrument relating to any of the Company’s other indebtedness exceeding $20 million), after giving effect to any applicable notice and right to cure provisions, an event of default will exist. If an event of default exists and is continuing, the lenders’ Administrative Agent may, and upon the written request of a specified percentage of the lender group shall:
•declare all commitments of the lenders under the facility terminated;
•declare all amounts outstanding or accrued thereunder immediately due and payable; and
•exercise other rights and remedies available to them under the agreement and applicable law.
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Collateral
Pursuant to a Third Amended and Restated Security and Pledge Agreement, the Facility is secured by substantially all of the assets of the Company and its domestic subsidiaries (subject to exceptions for certain immaterial subsidiaries), including all of the stock of the Company’s domestic subsidiaries and up to 65% of the stock of certain material foreign subsidiaries. If an event of default occurs under the Facility, the lenders’ Administrative Agent may, upon the request of a specified percentage of lenders, exercise remedies with respect to the collateral, including, in some instances, taking possession of or selling personal property assets, collecting accounts receivable, or exercising proxies to take control of the pledged stock of domestic and certain material foreign subsidiaries.
As of December 28, 2025 and December 29, 2024, the Company had $0.6 million and $0.7 million, respectively, in letters of credit outstanding under the Facility.
The Company is in compliance with all covenants under the Facility as of December 28, 2025, and anticipates that it will remain in compliance with the covenants for the foreseeable future.
Redemption of Senior Notes
On December 3, 2025, the Company redeemed all of its $300 million outstanding 5.50% Senior Notes. The Senior Notes were redeemed using the proceeds from term loan borrowings under the amended Facility and cash on hand. The redemption price was 100% of the principal amount, plus accrued and unpaid interest. See below for amounts recognized upon extinguishment.
Debt Issuance and Extinguishment Costs
In connection with the December 3, 2025 Facility amendment and Senior Notes redemption, below is a summary of the fees and expenses incurred:
Financial Statement Location Revolving Loans Term Loans Senior Notes (1) Total
(in thousands)
Capitalization of debt issuance costs - term loans Long-term debt — 203 — 203
Loss on debt extinguishment(2) Interest expense 293 — 2,147 2,440
Other debt extinguishment costs Interest expense — 620 — 620
(1) Represents write-off of unamortized debt issuance costs.
(2) Revolving loan amounts pertain to the partial write-off of unamortized debt issuance costs due to lender changes in the Facility.
Debt issuance costs related to the revolving debt include underwriting fees, legal, and other direct costs associated with the issuance of debt. These unamortized amounts are included in other assets in the Company’s consolidated balance sheets. The Company amortizes these costs over the life of the related debt.
Debt issuance costs associated with term loans under the Facility and the prior Senior Notes are reflected as a reduction of long-term debt in the Company’s consolidated balance sheets. These fees are amortized straight-line, which approximates the effective interest method, and over the life of the outstanding borrowing, the debt balance will increase by the same amount as the fees that are amortized.
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Future Maturities
The aggregate maturities of borrowings outstanding at December 28, 2025 were as follows:
Fiscal Year Amount
(in thousands)
Total long-term debt in the consolidated balance sheets includes a reduction for unamortized debt issuance costs, which are excluded from the maturities table above.
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NOTE10–LEASES
General
The Company has operating and finance leases for manufacturing equipment, corporate offices, showrooms, vehicles, distribution facilities, design centers, as well as computer and office equipment. The Company’s leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. Our lease accounting may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.
As of December 28, 2025, there were no significant leases that had not commenced.
The table below represents a summary of the balances recorded in the consolidated balance sheets related to the Company’s leases as of December 28, 2025 and December 29, 2024:
(in thousands)
Operating lease right-of-use assets $ 78,191 $ 76,815
Current portion of operating lease liabilities $ 15,748 $ 12,296
Total operating lease liabilities $ 82,953 $ 80,388
Property, plant and equipment, net $ 9,574 $ 8,079
Total finance lease liabilities $ 9,972 $ 8,454
Lease Costs
Fiscal Year
(in thousands)
Finance lease cost:
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Other Supplemental Information
Fiscal Year
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases $ 534 $ 431 $ 237
Lease Term and Discount Rate
The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of December 28, 2025 and December 29, 2024:
End of Fiscal Year
Weighted-average remaining lease term – finance leases (in years) 4.07 3.61
Weighted-average remaining lease term – operating leases (in years) 7.05 7.68
Weighted-average discount rate – finance leases 6.52 % 6.44 %
Weighted-average discount rate – operating leases 6.33 % 6.39 %
Maturity Analysis
A maturity analysis of lease payments under non-cancellable leases is presented as follows:
Fiscal Year Operating Leases Finance Leases
(in thousands)
Total future minimum lease payments (undiscounted) 103,634 11,364
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NOTE11– GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The Company has two operating and reportable segments – namely AMS and EAAA. See Note 19 entitled “Segment Information” for additional information. The Company tests goodwill for impairment at least annually at the reporting unit level. The Company’s reporting units consist of (1) the Americas, (2) Europe, Middle East and Africa (“EMEA”), and (3) Asia-Pacific. The Americas reporting unit is the same as the AMS reportable segment, and the EMEA and Asia-Pacific reporting units are one level below the EAAA reportable segment.
During the fourth quarter of 2025, 2024, and 2023 we performed our annual quantitative goodwill impairment testing. We focused our testing on the Americas reporting unit because it is the only reporting unit with an allocated goodwill balance. The allocated goodwill balances for our EMEA and Asia-Pacific reporting units were written off in prior years as a result of goodwill impairment charges. The Company performed limited procedures for our EMEA and Asia-Pacific reporting units during the 2025, 2024, and 2023 goodwill testing to facilitate a reconciliation of market capitalization.
The annual quantitative goodwill impairment testing performed in 2025, 2024, and 2023 for our Americas reporting unit used a consistent methodology. The Company prepared valuations for the Americas reporting unit on both a market comparable methodology and an income methodology, utilizing a combination of the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of the reporting unit. In preparing the valuation, past, present and future expectations of performance were considered, including our expectations for the short-term and long-term impacts of macroeconomic conditions and our expected financial performance, including planned revenue and operating income for the Americas reporting unit. The present value model requires management to estimate future cash flows, the timing of these cash flows, and a discount rate based on a weighted average cost of capital.
For 2025, 2024, and 2023 the fair value of the Americas reporting unit was substantially in excess of the carrying value and is not at risk of failing the quantitative impairment test.
The ending balances and the changes in the carrying amounts of goodwill allocated to each reportable segment for the years ended December 28, 2025 and December 29, 2024, are as follows(1):
AMS EAAA Total
(in thousands)
Foreign currency translation(2) (5,561) — (5,561)
(1) Goodwill balances are presented net of cumulative impairment losses of $358.5 million as of December 28, 2025. The cumulative impairment losses include impairment charges recognized prior to 2020 related to discontinued operations that were allocated to the current reportable segments on a proportionate basis.
(2) A portion of the goodwill balance allocated to the AMS reportable segment is comprised of goodwill denominated in foreign currency attributable to the nora acquisition.
Other Intangible Assets
During the fourth quarter of 2025, 2024, and 2023, the Company performed its annual impairment testing of the trademark and trade name intangible assets. The Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which requires management to estimate forecasted revenues and a discount rate. The intangible asset required rate of return used in the 2025, 2024, and 2023 annual impairment testing were 11.0%, 11.5%, 12.5%, respectively. We determined that the estimated fair value of the trademark and trade name intangible assets exceeded the carrying value and that no impairment existed at the 2025,2024, or 2023 measurement dates.
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The Company’s intangible assets other than goodwill consisted of the following as of December 28, 2025 and December 29, 2024:
(in thousands)
Intangible assets subject to amortization(1):
Indefinite-lived intangible assets(1):
(1) Certain intangible asset balances are subject to changes attributable to foreign currency translation.
Amortization expense related to intangible assets during the years 2025, 2024 and 2023 was $3.1 million, $5.2 million and $5.2 million, respectively, and is recorded in cost of sales in the consolidated statements of operations. The developed technology intangible asset was amortized over its estimated useful life of 7 years and was fully amortized during fiscal year 2025.
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NOTE12–PREFERRED STOCK
The Company is authorized to designate and issue up to 5,000,000 shares of $1.00 par value preferred stock in one or more series and to determine the rights and preferences of each series, to the extent permitted by the Articles of Incorporation, and to fix the terms of such preferred stock without any vote or action by the shareholders. The issuance of any series of preferred stock may have an adverse effect on the rights of holders of common stock and could decrease the amount of earnings and assets available for distribution to holders of common stock. In addition, any issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of the Company. As of December 28, 2025, and December 29, 2024, there were no shares of preferred stock issued.
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NOTE 13–SHAREHOLDERS’ EQUITY
The Company is authorized to issue 120 million shares of $0.10 par value Common Stock. The Company’s Common Stock is traded on the Nasdaq Global Select Market under the symbol TILE.
The Company paid cash dividends during 2025 totaling $0.06 per share and $0.04 per share for 2024 and 2023, including participating securities. The future declaration and payment of dividends is at the discretion of the Company’s Board, and depends upon, among other things, the Company’s investment policy and opportunities, results of operations, financial condition, cash requirements, future prospects, and other factors that may be considered relevant at the time of the Board’s determination. Such other factors include limitations contained in the agreement for its Syndicated Credit Facility, which specify conditions as to when any dividend payments may be made. As such, the Company may discontinue its dividend payments in the future if its Board determines that a cessation of dividend payments is appropriate in light of the factors indicated above.
In May 2022, 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 fiscal year 2025, the Company repurchased 750,166 shares of common stock at a weighted average price of $24.23 per share pursuant to this program. No shares of common stock were repurchased pursuant to this program during 2024 or 2023. All treasury stock is accounted for using the cost method.
The following tables depict the activity in the accounts which make up shareholders’ equity for fiscal years 2025, 2024 and 2023:
(in thousands)
Cash dividends declared — — — (3,559) — — (3,559)
Pension liability adjustment — — — — 520 — 520
Foreign currency translation adjustment — — — — — 50,626 50,626
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(in thousands)
Cash dividends declared — — — (2,338) — — (2,338)
Pension liability adjustment — — — — (5,818) — (5,818)
Foreign currency translation adjustment — — — — — (23,727) (23,727)
(in thousands)
Cash dividends declared — — — (2,323) — — — (2,323)
Pension liability adjustment — — — — (6,468) — — (6,468)
Foreign currency translation adjustment — — — — — 19,185 — 19,185
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Stock Incentive Plan
The Company has a stock incentive plan under which a committee of independent directors is authorized to grant directors and key employees, including officers, restricted stock, incentive stock options, nonqualified stock options, stock appreciation rights, restricted share units and performance shares.
In May 2024, the shareholders of the Company approved the adoption of an amendment and restatement of the Interface, Inc. 2020 Omnibus Stock Incentive Plan (the “Amended and Restated Plan”). The aggregate number of shares of common stock that may be issued or transferred under the Amended and Restated Plan on or after the effective date of the plan is the sum of 3,200,000 shares not previously authorized for issuance under any plan, plus the number of shares remaining available for issuance under the original Interface, Inc. 2020 Omnibus Stock Incentive Plan (the “Original Plan”) but not subject to outstanding awards under the Original Plan immediately prior to the effective date of the Amended and Restated Plan, plus the number of shares remaining available for issuance pursuant to the outstanding awards under the Original Plan immediately prior to the effective date of the Amended and Restated Plan, including any shares that become available due to the forfeiture, termination or cancellation of such awards. No award may be granted after the tenth anniversary of the effective date of the Amended and Restated Plan.
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair market value of the award. That expense will be recognized over the period that the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award. For certain restricted stock and restricted share unit awards with a graded vesting schedule, the Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.
Restricted Stock Awards
During fiscal year 2025, there were no new grants of restricted stock awards. Outstanding restricted stock at December 29, 2024, of 242,300 shares with a weighted average grant date fair value of $13.92 were fully vested as of December 28, 2025. During fiscal years 2024 and 2023, the Company granted restricted stock awards totaling 58,400 and 107,100 shares, respectively, of Common Stock. The weighted average grant date fair value of restricted stock awards granted during 2024 and 2023 was $16.22 and $7.10, respectively. These awards (or a portion thereof) vested with respect to each recipient over a one to three-year period from the date of grant, provided the individual remained 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 awards of restricted stock was $0.4 million, $2.3 million and $4.5 million for 2025, 2024 and 2023, respectively. These grants are made primarily to the board of directors and executive-level personnel at the Company, and as a result, no compensation costs have been capitalized. The Company has reduced its expense for any restricted stock forfeited during the period. The expense related to awards of restricted stock is captured in SG&A expenses in the consolidated statements of operations. As of December 28, 2025, there was no remaining unrecognized compensation expense for restricted stock awards.
Restricted Share Unit Awards
During fiscal year 2025, 2024, and 2023, the Company granted awards for 337,300, 407,300, and 596,200 restricted share units to certain employees and directors pursuant to the Company’s stock incentive plan. The weighted average grant date fair value of the restricted share units granted during 2025, 2024, and 2023, was $22.00, $13.38, and $10.36, respectively. Each restricted share unit represents one share of the Company’s common stock to be issued to the award recipient once the vesting criteria have been satisfied. Awards of restricted share units have a graded vesting schedule 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 each vesting date. Additionally, certain awards (or a portion thereof) could vest earlier in the event of a change in control of the Company, upon involuntary termination without cause, or upon retirement, provided certain eligibility criteria are met.
Compensation expense related to the restricted share units was $6.0 million, $3.5 million, and $1.9 millionfor 2025, 2024, and 2023, respectively. These grants are made primarily to executive-level personnel at the Company and, as a result, no compensation costs have been capitalized.
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The Company has reduced its expense for any restricted share units forfeited during the period. The expense related to awards of restricted share units is captured primarily in SG&A expenses in the consolidated statements of operations.
The following table summarizes restricted share units outstanding as of December 28, 2025, as well as activity during the year: