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What changed in INTERFACE INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INTERFACE INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+335 added−298 removedSource: 10-K (2023-03-01) vs 10-K (2022-03-02)

Top changes in INTERFACE INC's 2023 10-K

335 paragraphs added · 298 removed · 235 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur targets are to reduce our absolute Scope 1 and 2 greenhouse gas emissions 50% by 2030 from a 2019 base year, and to reduce our absolute Scope 3 greenhouse gas emissions from purchased goods and services 50% and from business travel and employee commuting 30% by 2030 from a 2019 base year. 8 Tab le of Contents A highlight in our pursuit of sustainability was our creation with the Zoological Society of London of a program called Net-Works® in which we worked with communities in the Philippines to collect discarded fishing nets that are damaging a large coral reef, and divert them to our yarn supplier where they are recycled into new carpet fiber.
Biggest changeWe also set a goal to become a carbon negative enterprise by 2040. 8 Ta b le of Contents A highlight in our pursuit of sustainability was our creation with the Zoological Society of London of a program called Net-Works® in which we worked with communities in the Philippines to collect discarded fishing nets that are damaging a large coral reef, and divert them to our yarn supplier where they are recycled into new carpet fiber.
We began this initiative as part of a market diversification strategy to reduce our exposure to the economic cyclicality of the corporate office segment, and it has become a principal strategy generally for growing our business and enhancing profitability. Develop a Substantial Resilient Flooring Business .
We began this initiative as part of a market diversification strategy to reduce our exposure to the economic cyclicality of the corporate office market segment, and it has become a principal strategy generally for growing our business and enhancing profitability. Develop a Substantial Resilient Flooring Business .
Building upon the success of our products in the high growth LVT market, we plan to expand our LVT product offerings while also seeking to introduce new products in the resilient flooring category, such as rigid core LVT that was launched in early 2022.
Building upon the success of our products in the high growth LVT market, we plan to expand our LVT product offerings while also seeking to introduce new products in the resilient flooring category, such as our rigid core resilient flooring that was launched in early 2022.
Recent step changes in design are noraplan Iona introducing a rubber on rubber print, noraplan valua introducing natural woodlike colors and embossing, and noraplan unita that incorporates real granite parts in a rubber floor. The combination of performance and design makes nora the recognized market leader in rubber flooring.
Recent changes in design are noraplan Iona introducing a rubber on rubber print, noraplan valua introducing natural woodlike colors and embossing, and noraplan unita that incorporates real granite parts in a rubber floor. The combination of performance and design makes nora the recognized market leader in rubber flooring.
We also own many trademarks in the United States and abroad. In addition to the United States, the primary jurisdictions in which we have registered our trademarks are the European Union, Canada, Australia, New Zealand, Japan, and various countries in Central America, South America and Asia.
We also own many trademarks in the United States and abroad. In addition to the United States, the primary jurisdictions in which we have registered our trademarks are the European Union, United Kingdom, Canada, Australia, New Zealand, Japan, and various countries in Central America, South America and Asia.
The materials in the CQuest backings, when measured on a stand-alone basis, are net carbon negative — meaning that their global warming potential emissions are net negative. The new CQuest backings are: • CQuest™GB - The next evolution of our GlasBacRE backing.
The materials in the CQuest backings, when measured on a stand-alone basis, are net carbon negative — meaning that their global warming potential emissions are net negative. The CQuest backings are: • CQuest™GB - The next evolution of our GlasBacRE backing.
We have developed innovative ways to work with recycled content and bio-based materials, which has led us to make carpet tiles that store carbon, preventing its release into the atmosphere. For our nora rubber flooring products, the innovation focus is on performance and design. A recent innovation is the fast growing self-adhesive nTx solution for nora tiles and sheet goods.
We have developed innovative ways to work with recycled content and bio-based materials, which has led us to make carpet tiles that store carbon, preventing its release into the atmosphere. For our nora rubber flooring products, the innovation focus is on performance and design. A key innovation is the fast growing self-adhesive nTx solution for nora tiles and sheet goods.
As more customers in our target markets share our view that sustainability is an important factor, it will become a determining factor in purchasing and design decisions. In 2021, we set a goal to reduce our CO2 emissions across our Company and supply chain by 2030 with a target validated by the Science Based Targets Initiative.
As more customers in our target markets share our view that sustainability is an important factor, we expect sustainability will become a determining factor in purchasing and design decisions. In 2021, we set a goal to reduce our CO2 emissions across our Company and supply chain by 2030 with a target validated by the Science Based Targets Initiative.
Our acquisition of nora, with its rubber flooring products, is also a key component of our strategy in this area. Sustain Leadership in Product Design and Development. Our CQuest backings, Embodied Beauty collection, and our plank, Skinny Plank , and i2 products and TacTiles installation system have confirmed our position as an innovation leader in modular carpet.
Our nora business, with its rubber flooring products, is also a key component of our strategy in this area. Sustain Leadership in Product Design and Development. Our CQuest backings, Embodied Beauty collection, and our plank, Skinny Plank , and i2 products and TacTiles installation system have confirmed our position as an innovation leader in modular carpet.
Our Internet address is http://www.interface.com . The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including the Company) file electronically with the SEC. The SEC’s website is http://www.sec.gov . Interface, Inc. was incorporated in 1973 as a Georgia corporation.
Our Internet address is http://www.interface.com . The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including the Company) file electronically with the SEC. The SEC’s website is http://www.sec.gov . Interface, Inc. was incorporated in Georgia in 1973.
Reportable Segments In the first quarter of 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas, and determined that it has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).
Reportable Segments In 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas, and determined that it has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).
We also have technology that more cleanly separates the face fiber and backing of reclaimed and waste carpet, thus making it easier to recycle some of its components and providing a purer supply of inputs for our CQuestGB carpet backing.
We also have technology that separates the face fiber and backing of reclaimed and waste carpet, thus making it easier to recycle some of its components and providing a purer supply of inputs for our CQuestGB carpet backing.
We also continue to provide “turnkey” project management services for a number of global accounts and other large customers through our InterfaceSERVICES™ business. 5 Tab le of Contents Manufacturing and Raw Materials We manufacture carpet tile at two locations in the United States and at facilities in the Netherlands, the United Kingdom, China and Australia.
We also continue to provide “turnkey” project management services for a number of global accounts and other large customers through our InterfaceSERVICES™ business. 5 Ta b le of Contents Manufacturing and Raw Materials We manufacture carpet tile at two locations in the United States and at facilities in the Netherlands, the United Kingdom, China and Australia.
In addition, we have created modular carpet products specifically designed for each of the education, hospitality and retail market segments. 4 Tab le of Contents The award-winning design firm David Oakey Designs has had a pivotal role in developing many of our innovative product designs.
In addition, we have created modular carpet products specifically designed for each of the education, hospitality and retail market segments. 4 Ta b le of Contents The award-winning design firm David Oakey Designs has had a pivotal role in developing many of our innovative product designs.
We may open offices in other locations around the world as necessary to capitalize on emerging marketing opportunities. 6 Tab le of Contents Business Strategy and Principal Initiatives Our business strategy is to continue to use our leading position in modular carpet, product design and global made-to-order capabilities as a platform from which to position our modular carpet, LVT products and rubber flooring products across several industry segments.
We may open offices in other locations around the world as necessary to capitalize on emerging marketing opportunities. 6 Ta b le of Contents Business Strategy and Principal Initiatives Our business strategy is to continue to use our leading position in modular carpet, product design and global made-to-order capabilities as a platform from which to position our modular carpet, LVT products, other resilient products and rubber flooring products across several industry segments.
In order to implement our global marketing efforts, we have product showrooms or design studios in the United States, Mexico, England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Russia, Singapore, Hong Kong, Thailand, China and elsewhere.
In order to implement our global marketing efforts, we have product showrooms or design studios in the United States, England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Singapore, Hong Kong, China and elsewhere.
We believe the quality, service, design, better and longer average product performance, flexibility (design options, selective rotation or replacement, use in combination with our resilient products), environmental footprint and convenience of our modular carpet are our principal competitive advantages. 7 Tab le of Contents We believe we have competitive advantages in several other areas as well.
We believe the quality, service, design, better and longer average product performance, flexibility (such as design options, selective rotation or replacement, and use in combination with our resilient products), environmental footprint and convenience of our modular carpet are our principal competitive advantages. 7 Ta b le of Contents We believe we have competitive advantages in several other areas as well.
We will continue initiatives to sustain, augment and capitalize upon that strength to continue to increase our market share in targeted market segments. Our Climate Take Back initiative, which was advanced in 2020 with the launch of our first ever cradle-to-gate carbon negative carpet tile, and our Mission Zero initiative promote our commitment to the pursuit of sustainability.
We will continue initiatives to sustain, augment and capitalize upon that strength to continue to increase our market share in targeted market segments. Our Climate Take Back initiative, which was advanced in 2020 with the launch of our first ever cradle-to-gate carbon negative carpet tile, promotes our commitment to the pursuit of sustainability.
To mitigate the effects of COVID-19 on our business, we capitalized on our ongoing market diversification strategy to increase our presence and market penetration for modular carpet and resilient flooring sales in non-corporate office market segments. 3 Tab le of Contents Below is a summary of our sales mix between corporate office and non-corporate office market segments for the last three fiscal years by reportable segment: 2021 2020 2019 Corporate Office Non-Corporate Office Corporate Office Non-Corporate Office Corporate Office Non-Corporate Office AMS 39 % 61 % 37 % 63 % 47 % 53 % EAAA 57 % 43 % 60 % 40 % 63 % 37 % Products and Services Modular Carpet Our AMS and EAAA reportable segments sell the same products within their respective geographical regions.
To mitigate the effects of COVID-19 on our business, we capitalized on our ongoing market diversification strategy to increase our presence and market penetration for modular carpet and resilient flooring sales in non-corporate office market segments. 3 Ta b le of Contents Below is a summary of our sales mix between corporate office and non-corporate office market segments for the last three fiscal years by reportable segment: 2022 2021 2020 Corporate Office Non-Corporate Office Corporate Office Non-Corporate Office Corporate Office Non-Corporate Office AMS 38% 62% 39% 61% 37% 63% EAAA 61% 39% 57% 43% 60% 40% Products and Services Modular Carpet Our AMS and EAAA reportable segments sell the same products within their respective geographical regions.
On August 7, 2018, the Company acquired nora Holding GmbH (“nora”), a worldwide leader in the rubber flooring category under the established nora brands norament ® and noraplan ®.
In 2018, the Company acquired nora Holding GmbH (“nora”), a worldwide leader in the rubber flooring category under the established nora brands norament ® and noraplan ®.
Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed below in Item 1A, “Risk Factors.”
Important factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include risks and uncertainties associated with economic conditions in the commercial interiors industry as well as the risks and uncertainties discussed below in Item 1A, “Risk Factors.” 11 Ta b le of Contents
During fiscal years 2021 and 2020, t he COVID-19 pandemic impacted areas where we operate and sell our products and services. Government restrictions and shutdowns around the world resulted in lower corporate reinvestment and impacted sales in the corporate office market segment.
During fiscal years 2022, 2021 and 2020, t he COVID-19 pandemic impacted areas where we operate and sell our products and services. Government restrictions and shutdowns around the world impacted sales in the corporate office market segment and resulted in lower corporate reinvestment compared to the few years immediately preceding the pandemic.
He was promoted to Assistant Secretary in April 2002, Senior Counsel in April 2006, Assistant Vice President in April 2007, Vice President in July 2012, Associate General Counsel in May 2014, and Secretary and General Counsel in January 2017. Mr. Hausmann joined us in April 2017 as Vice President and Chief Financial Officer.
He was promoted to Assistant Secretary in April 2002, Senior Counsel in April 2006, Assistant Vice President in April 2007, Vice President in July 2012, Associate General Counsel in May 2014, and Secretary and General Counsel in January 2017. 10 Ta b le of Contents Mr. Hausmann joined us in April 2017 as Vice President and Chief Financial Officer.
Stansfield served as Manufacturing Systems Manager, part of a global project team that designed and implemented manufacturing software systems at seven of our manufacturing plants. In 1999, he returned to Firth Carpets as Operations Director.
For two years following that acquisition, Mr. Stansfield served as Manufacturing Systems Manager, part of a global project team that designed and implemented manufacturing software systems at seven of our manufacturing plants. In 1999, he returned to Firth Carpets as Operations Director.
Our management believes that its relations with the Works Councils, the unions and our employees are good. Information About Our Executive Officers Our executive officers, their ages as of January 2, 2022, and their principal positions with us are set forth below. Executive officers serve at the pleasure of the Board of Directors. Name Age Principal Position(s) Daniel T.
Our management believes that its relations with the Works Councils, the unions and our employees are good. Information About Our Executive Officers Our executive officers, their ages as of January 1, 2023, and their principal positions with us are set forth below. Executive officers serve at the pleasure of the Board of Directors. Name Age Principal Position(s) Laurel M.
We also utilized the services of 251 temporary personnel as of January 2, 2022. Some of our employees in Australia, the United Kingdom and China are represented by unions.
We also utilized the services of 176 temporary personnel as of January 1, 2023. Some of our employees in Australia, the United Kingdom and China are represented by unions.
Prior year amounts have been restated to reflect the current reportable segment structure: 2021 2020 2019 AMS 54 % 54 % 56 % EAAA 46 % 46 % 44 % Market Segmentation 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.
Percentages for fiscal year 2020 have been recast to reflect the current reportable segment structure: 2022 2021 2020 AMS 58% 54% 54% EAAA 42% 46% 46% Market Segmentation 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.
These core values are: • Design a better way; • Be genuine and generous; • Inspire others; • Connect the whole; and • Embrace tomorrow, today. 9 Tab le of Contents At January 2, 2022, we employed a total of 3,646 employees worldwide. Of such total, 1,463 were clerical, staff, sales, supervisory and management personnel and 2,183 were manufacturing personnel.
These core values are: • Design a better way; • Be genuine and generous; • Inspire others; • Connect the whole; and • Embrace tomorrow, today. At January 1, 2023, we employed a total of 3,671 employees worldwide. Of such total, 1,452 were clerical, staff, sales, supervisory and management personnel and 2,219 were manufacturing personnel.
We also use technology which allows us to provide digital, simulated samples of our products, which helps reduce raw material and energy consumption associated with our samples. We primarily use our internal marketing and sales force teams to market our flooring products.
In addition, through our websites, we have made it easy to view and request samples of our products. We also use technology which allows us to provide digital, simulated samples of our products, which helps reduce raw material and energy consumption associated with our samples. We primarily use our internal marketing and sales force teams to market our flooring products.
Disruptions in supply and distribution chains, global travel restrictions and government shelter in place orders due to the impact of COVID-19 have resulted in delays of construction projects and flooring installations in many regions worldwide, which also have caused fluctuations in our backlog.
Historically, backlog is subject to significant fluctuations due to the timing of orders for individual large projects and currency fluctuations. Disruptions in supply and distribution chains, global travel restrictions and government orders due to the impact of COVID-19 have resulted in delays of construction projects and flooring installations in many regions worldwide, which also have caused fluctuations in our backlog.
We also have manufactured carpet tile at a location in Thailand for many years, but in 2021 we announced that we are closing the Thailand plant (anticipated closure at the end of the first quarter of 2022). We manufacture rubber flooring in Germany.
We also manufactured carpet tile at a location in Thailand for many years, but in 2021 we announced the closure of the Thailand plant, in which manufacturing was permanently halted at the end of the first quarter of 2022. We manufacture rubber flooring in Germany.
Rubber Flooring With the acquisition of nora in 2018, we began offering rubber flooring products under the established noraplan and norament brands which enhances the Company’s fast-growing resilient flooring portfolio. Rubber flooring is ideal for applications that require hygienic, safe flooring with strong chemical resistance. Rubber flooring is extremely durable compared to other flooring alternatives.
Our rigid core resilient flooring products are designed for hard-working spaces and commercial markets. Rubber Flooring With the acquisition of nora in 2018, we began offering rubber flooring products under the established noraplan and norament brands which enhances the Company’s fast-growing resilient flooring portfolio. Rubber flooring is ideal for applications that require hygienic, safe flooring with strong chemical resistance.
The duration of trademarks registered in other jurisdictions varies. Human Capital Interface is a purpose-driven company with a passionate team that shares a unique set of values. We strive to do the right thing and to be generous to people and the planet. We are committed to an equitable and inclusive culture and achieve this by living our values.
The duration of trademarks registered in other jurisdictions varies. 9 Ta b le of Contents Human Capital Interface is a purpose-driven company with a passionate team that shares a unique set of values. We strive to do the right thing and to be generous to people and the planet.
Our core values represent who we are, how we see the world, how we treat each other and our external customers and stakeholders, and how we approach our work every day.
We are committed to an equitable and inclusive culture and achieve this by living our values. Our core values represent who we are, how we see the world, how we treat each other and our external customers and stakeholders, and how we approach our work every day.
The AMS operating segment is unchanged from prior year and continues to include the United States, Canada and Latin America geographic areas. See Note 20 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information .
The AMS operating segment continues to include the United States, Canada and Latin America geographic areas. See Note 20 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information . Below is a summary of total net sales percentages by reportable segment for the last three fiscal years.
An important part of our marketing and sales efforts involves the preparation of custom-made samples of requested carpet designs, in conjunction with the development of innovative product designs and styles to meet the customer’s particular needs.
An important part of our marketing and sales efforts involves the preparation of custom-made samples of requested carpet designs, in conjunction with the development of innovative product designs and styles to meet the customer’s particular needs. In most cases, we can produce samples to customer specifications in less than five days, which significantly enhances our marketing and sales efforts.
Although the industry has experienced significant consolidation, a large number of manufacturers remain in the industry. A number of domestic and foreign competitors manufacture modular carpet as one segment of their business, and some of these competitors have financial resources greater than ours.
A number of domestic and foreign competitors manufacture modular carpet as one segment of their business, and some of these competitors have financial resources greater than ours.
In addition, some of our LVT products include a backing system that provides acoustic insulation without the need for additional underlayment, which can reduce the impact of sound in the space where the flooring is used.
In addition, some of our LVT products include a backing system that provides acoustic insulation without the need for additional underlayment, which can reduce the impact of sound in the space where the flooring is used. In 2022, we introduced our rigid core Even Path ™ collection of LVT with high-quality wood and stone designs.
Innovations in both design and manufacturing allow us to create high-quality, high-performance carpet products at a lower price point. In 2020, we introduced the next generation of our carpet tile backings called CQuest™ backings. Guided by materials science and inspired by nature’s carbon-storing abilities, we added new bio-based materials and more recycled content to our backings.
In 2020, we introduced the next generation of our carpet tile backings called CQuest™ backings. Guided by materials science and inspired by nature’s carbon-storing abilities, we added new bio-based materials and more recycled content to our backings.
Net-Works is a big step in redesigning our supply chain from a linear take-make-waste process toward a closed loop system, and it advances our ultimate goal of becoming a restorative enterprise.
Net-Works is a big step in redesigning our supply chain from a linear take-make-waste process toward a closed loop system, and it advances our ultimate goal of becoming a restorative enterprise. In 2022, we became the first and only flooring manufacturer to achieve third-party Carbon Neutral Enterprise certification.
Other Products and Services We sell a proprietary antimicrobial chemical compound under the registered trademark Intersept that we incorporate in some of our modular carpet products. We also sell our TacTiles carpet tile installation system, along with a variety of traditional adhesives and products for carpet installation and maintenance that are manufactured by a third party.
We also sell our TacTiles carpet tile installation system, along with a variety of traditional adhesives and products for carpet installation and maintenance that are manufactured by a third party.
However, in more recent years up through 2019, as our sales efforts and results in the education and other non-corporate office market segments increased, our second and third quarter sales sometimes were the highest. In 2020, our first quarter sales were the highest quarter, as the COVID-19 pandemic escalated and more severely impacted the remainder of the year.
However, in more recent years, as our sales efforts and results in the education and other non-corporate office market segments increased, our second and third quarter sales sometimes were the highest. In 2022, our second quarter sales were the highest quarter.
In December 2016, he became President of our business serving Europe, the Middle East and Africa, and in January 2019 he assumed responsibility for the Asia-Pacific region as well.
In December 2016, he became President of our business serving Europe, the Middle East and Africa, and in January 2019 he assumed responsibility for the Asia-Pacific region as well. Effective February 1, 2023, Mr. Stansfield was named Chief Innovation and Sustainability Officer, and his former role as President of Europe, Africa, Australia and Asia was eliminated.
Poppens held leadership roles at Newell Rubbermaid, Kellogg Company, REI, and Coca-Cola. 10 Tab le of Contents Mr. Stansfield was the Operations Manager for Firth Carpets (our former European broadloom operations) at the time it was acquired by us in 1997. For two years following that acquisition, Mr.
Poppens held leadership roles at Newell Rubbermaid, Kellogg Company, REI, and Coca-Cola. Effective February 1, 2023, Mr. Poppens was named Chief Commercial Officer, and his former role as President of Americas was eliminated. Mr. Stansfield was the Operations Manager for Firth Carpets (our former European broadloom operations) at the time it was acquired by us in 1997.
The environmental management systems of our floorcovering manufacturing facilities in LaGrange, Georgia, West Point, Georgia, Northern Ireland, the Netherlands, Thailand (anticipated closure at the end of the first quarter of 2022), China, Germany and Australia are certified under ISO Standard No. 14001.
The environmental management systems of our floorcovering manufacturing facilities in LaGrange, Georgia, West Point, Georgia, Northern Ireland, the Netherlands, China, Germany and Australia are certified under ISO Standard No. 14001. Backlog Our backlog of unshipped orders was approximately $197.4 million at February 5, 2023, compared with approximately $215.6 million at February 6, 2022.
Hendrix 67 President and Chief Executive Officer David B. Foshee 51 Vice President, General Counsel and Secretary Bruce A. Hausmann 52 Vice President and Chief Financial Officer James Poppens 57 Vice President (President - Americas) Nigel Stansfield 54 Vice President (President - Europe, Africa, Australia, and Asia) Mr.
Hurd 53 President and Chief Executive Officer David B. Foshee 52 Vice President, General Counsel and Secretary Bruce A. Hausmann 53 Vice President and Chief Financial Officer James Poppens 58 Vice President (President - Americas) (1) Nigel Stansfield 55 Vice President (President - Europe, Africa, Australia and Asia) (1) (1) See below for changes effective February 2023 Ms.
The environmental management systems of our floorcovering manufacturing facilities in LaGrange, Georgia, West Point, Georgia, Northern Ireland, the Netherlands, Thailand (anticipated closure at the end of the first quarter of 2022), China and Australia are certified under International Standards Organization (ISO) Standard No. 14001.
The environmental management systems of our floorcovering manufacturing facilities in LaGrange, Georgia, West Point, Georgia, Northern Ireland, the Netherlands, China and Australia are certified under International Standards Organization (ISO) Standard No. 14001. Nora’s manufacturing facility, which is located in Weinheim, Germany, is ISO14001 certified as well and sells the majority of its products with the Blauer Engel label.
Our GlasBac® technology employs a fiberglass-reinforced polymeric composite backing that provides dimensional stability and reduces the need for adhesives or fasteners. We also make carpet tiles with a backing containing post-industrial and/or post-consumer recycled materials, which we now market under the CQuest™GB name (formerly known as GlasBacRE ).
We also make carpet tiles with a backing containing post-industrial and/or post-consumer recycled materials, which we now market under the CQuest™GB name (formerly known as GlasBacRE ). In addition, we make carpet tile with yarn containing varying degrees of recycled post-consumer nylon, depending on the style and color.
In 2021, our fourth quarter sales were the highest quarter as certain countries rebounded from the economic impacts of the COVID-19 pandemic over the course of the year. Competition We compete, on a global basis, in the sale of our modular carpet products with other carpet manufacturers and manufacturers of vinyl and other types of floorcoverings, including broadloom carpet.
In 2021, our fourth quarter sales were the highest quarter as certain countries rebounded from the economic impacts of the COVID-19 pandemic over the course of the year. In 2020, our first quarter sales were the highest quarter, as the COVID-19 pandemic escalated and more severely impacted the remainder of the year.
Sales and Marketing We distribute our products through two primary channels: (1) direct sales to end users; and (2) indirect sales through independent contractors, installers and distributors.
Blauer Engel is the leading German institute that recognizes products that have environmentally friendly aspects. Sales and Marketing We distribute our products through two primary channels: (1) direct sales to end users; and (2) indirect sales through independent contractors, installers and distributors. We use an exclusive third-party distributor to sell our products in the Latin American region.
In addition, we make carpet tile with yarn containing varying degrees of post-consumer nylon, depending on the style and color. In 2021, we introduced our Open Air™ collection of more affordable carpet tiles — an expansive platform of hard-working carpet tile styles designed with open spaces in mind.
In 2021, we introduced our Open Air™ collection of more affordable carpet tiles — an expansive platform of hard-working carpet tile styles designed with open spaces in mind. Innovations in both design and manufacturing allow us to create high-quality, high-performance carpet products at a lower price point.
We manufacture carpet tiles cut in precise, dimensionally stable squares (usually 50 cm x 50 cm) or rectangles (such as planks and Skinny Planks ) to produce a floorcovering that combines the appearance and texture of traditional soft floorcovering with the advantages of a modular carpet system.
We manufacture carpet tiles cut in precise, dimensionally stable squares (usually 50 cm x 50 cm) or rectangles (such as planks and Skinny Planks ™ ). Our GlasBac® technology employs a fiberglass-reinforced polymeric composite backing that provides dimensional stability and reduces the need for adhesives or fasteners.
Hendrix retired from the positions of President and Chief Executive Officer in March 2017 (while remaining Chairman of the Board), and subsequently was re-elected as President and Chief Executive Officer in January 2020. Mr. Foshee , who previously practiced with an Atlanta-based international law firm, joined us in October 1999 as Associate Counsel.
Hurd was Vice President, Global Development for Newell Brands, leading both Marketing and Research & Development for the Graco, Aprica, and Teutonia brands globally. Mr. Foshee , who previously practiced with an Atlanta-based international law firm, joined us in October 1999 as Associate Counsel.
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Below is a summary of total net sales percentages by reportable segment for the last three fiscal years.
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Rubber flooring is extremely durable compared to other flooring alternatives. Other Products and Services We sell a proprietary antimicrobial chemical compound under the registered trademark Intersept that we incorporate in some of our modular carpet products.
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Nora’s manufacturing facility, which is located in Weinheim, Germany, is ISO14001 certified as well and sells the majority of its products with the Blauer Engel label. Blauer Engel is the leading German institute that recognizes products that have environmentally friendly aspects.
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Competition We compete, on a global basis, in the sale of our modular carpet products with other carpet manufacturers and manufacturers of vinyl and other types of floorcoverings, including broadloom carpet. Although the industry has experienced significant consolidation, a large number of manufacturers remain in the industry.
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In most cases, we can produce samples to customer specifications in less than five days, which significantly enhances our marketing and sales efforts and has increased our volume of higher margin made-to-order or custom sales. In addition, through our websites, we have made it easy to view and request samples of our products.
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Our targets are to reduce our absolute Scope 1 and 2 greenhouse gas emissions 50% by 2030 from a 2019 base year, and to reduce our absolute Scope 3 greenhouse gas emissions from purchased goods and services 50% and from business travel and employee commuting 30% by 2030 from a 2019 base year.
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Backlog Our backlog of unshipped orders was approximately $215.6 million at February 6, 2022, compared with approximately $177.7 million at February 7, 2021. Historically, backlog is subject to significant fluctuations due to the timing of orders for individual large projects and currency fluctuations.
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Our claim of Carbon Neutral Enterprise status has been third-party certified to meet the PAS 2060 standard, the leading international carbon neutrality standard created by the British Standards Institution (BSI). We neutralized our carbon impact across our entire business, including all operations and its full value chain.
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Hendrix joined us in 1983 after having worked previously for a national accounting firm. He was promoted to Treasurer in 1984, Chief Financial Officer in 1985, Vice President-Finance in 1986, Senior Vice President in October 1995, Executive Vice President in October 2000, and President and Chief Executive Officer in July 2001.
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The Carbon Neutral Enterprise certification builds on our history as a purpose-driven flooring company. Achieving Carbon Neutral Enterprise status is a continuation of our innovation and efforts that started with the Carbon Neutral Floors program — it brings us one step closer to becoming a carbon negative enterprise by 2040.
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He was elected to the Board in October 1996 and has served on the Executive Committee of the Board since July 2001. In October 2011, Mr. Hendrix was elected as Chairman of the Board of Directors. Mr.
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Hurd joined us in April 2022 after having worked previously for global consumer goods company Newell Brands, Inc. Ms. Hurd served as Segment President, Learning and Development at Newell Brands Inc. starting in February 2019, leading its Baby and Writing businesses. Previously, Ms. Hurd was the Division Chief Executive Officer for Newell Brands’ Writing division starting in February 2018.
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From 2016 to February 2018, she served as Chief Executive Officer of Newell Brands’ Baby division. From May 2014 until 2016, Ms. Hurd was President of the Baby and Parenting division at Newell Brands, where she oversaw the Calphalon, Goody, and Rubbermaid consumer brands. From 2012 to 2014, Ms.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe COVID-19 pandemic and similar issues in the future could have a material adverse effect on: our ability to operate; our ability to keep employees safe from the pandemic; our results of operations, financial condition, liquidity and capital investments; our near term and long term ability to stay in compliance with debt covenants under our Syndicated Credit Facility and Senior Notes; our ability to refinance our existing indebtedness; and our ability to gain financing in the capital markets. 11 Tab le of Contents Public health organizations have recommended, and many governments have implemented, measures from time to time during the pandemic to slow and limit the transmission of the virus, including certain business shutdowns and shelter in place and social distancing requirements.
Biggest changeThese initiatives could, for example, increase the cost of obtaining raw materials for production of our products, increase the cost of energy for our manufacturing processes, and negatively impact our supply chain and capital expenditures. 15 Ta b le of Contents Risk Factors Related to COVID-19 The COVID-19 pandemic has had and could continue to have (and other public health emergencies could have in the future) a material adverse effect on our ability to operate, our ability to keep employees safe from the pandemic, our results of operations, financial condition, liquidity, capital investments, our near term and long term ability to stay in compliance with debt covenants under our Syndicated Credit Facility and Senior Notes, our ability to refinance our existing indebtedness, and our ability to obtain financing in capital markets.
We may face challenges competing on price, making investments in our business, or competing on product design. The floorcovering industry is highly competitive. Globally, we compete for sales of floorcovering products with other carpet manufacturers and manufacturers of other types of floorcovering. Although the industry has experienced significant consolidation, a large number of manufacturers remain in the industry.
We may face challenges competing on price, making investments in our business, or competing on product design or sustainability. The floorcovering industry is highly competitive. Globally, we compete for sales of floorcovering products with other carpet manufacturers and manufacturers of other types of floorcovering. Although the industry has experienced significant consolidation, a large number of manufacturers remain in the industry.
Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as: the potential shut down of certain locations; decreased employee availability; employee reluctance to receive COVID-19 vaccinations, whether recommended or potentially required; increased overtime and temporary labor costs; potential border closures; and disruptions to the businesses of our selling channel partners, and others.
Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as: the potential shut down of certain locations; decreased employee availability; employee reluctance to receive vaccinations, whether recommended or potentially required; increased overtime and temporary labor costs; potential border closures; and disruptions to the businesses of our selling channel partners, and others.
Although our existing credit facility and the indenture governing the Senior Notes contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, including the ability, on a non-committed basis, for us to increase revolving commitments and/or term loans under our existing credit facility, and debt incurred in compliance with these restrictions could be substantial.
Although our Syndicated Credit Facility and the indenture governing the Senior Notes contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, including the ability, on a non-committed basis, for us to increase revolving commitments and/or term loans under our Syndicated Credit Facility, and debt incurred in compliance with these restrictions could be substantial.
This level of debt could have significant consequences on our future operations, including: • making it more difficult for us to meet our payment and other obligations under our outstanding debt; • resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in all of our debt becoming immediately due and payable; • reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions or strategic investments and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • subjecting us to the risk of increasing interest expense on variable rate indebtedness, including borrowings under our existing credit facility; • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; 14 Tab le of Contents • placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged; • limiting our ability to attract certain investors to purchase our common stock due to the amount of debt we have outstanding; and • limiting our ability to refinance our existing indebtedness as it matures.
This level of debt could have significant consequences on our future operations, including: • making it more difficult for us to meet our payment and other obligations under our outstanding debt; • resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements, which event of default could result in all of our debt becoming immediately due and payable; • reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions or strategic investments and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • subjecting us to the risk of increasing interest expense on variable rate indebtedness, including borrowings under our Syndicated Credit Facility; • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; • placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged; • limiting our ability to attract certain investors to purchase our common stock due to the amount of debt we have outstanding; and • limiting our ability to refinance our existing indebtedness as it matures.
In addition, our ability to borrow funds in the future to make payments on our debt will depend on the satisfaction of the covenants in our existing credit facility and our other financing agreements, including the indenture governing the Senior Notes, and other agreements we may enter into in the future.
In addition, our ability to borrow funds in the future to make payments on our debt will depend on the satisfaction of the covenants in our Syndicated Credit Facility and our other financing agreements, including the indenture governing the Senior Notes, and other agreements we may enter into in the future.
Our ability to make payments on our indebtedness or refinance our indebtedness will depend on the capital markets and our financial condition at such time, as well as the terms of our financing agreements, including the existing credit facility, and the indenture governing the Senior Notes.
Our ability to make payments on our indebtedness or refinance our indebtedness will depend on the capital markets and our financial condition at such time, as well as the terms of our financing agreements, including the Syndicated Credit Facility, and the indenture governing the Senior Notes.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, our manufacturing facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes and earthquakes, whether or not as a result of climate change, or by fire or other unexpected events such as adverse weather conditions, acts of war, terrorism, pandemics or other public health crises (such as the COVID-19 pandemic described above), or other disruptions to our facilities, supply chain or our customers’ facilities.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, our manufacturing facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes and earthquakes, whether or not as a result of climate change, or by fire or other unexpected events such as adverse weather conditions, acts of war, terrorism, energy shortages and disruptions, pandemics or other public health crises (such as the COVID-19 pandemic described below), or other disruptions to our facilities, supply chain or our customers’ facilities.
We may also experience continued manufacturing personnel shortages, which may adversely affect our ability to manufacture our products.
We may also experience manufacturing personnel shortages, which may adversely affect our ability to manufacture our products.
The loss of key personnel with a great deal of knowledge, training and experience in the flooring industry — particularly in the areas of sales, marketing, operations, product design and management — could have an adverse impact on our business.
The loss of key personnel with a great deal of knowledge, training and experience — particularly in the areas of sales, marketing, operations, product design and management — could have an adverse impact on our business.
Our IT systems may be disrupted or fail for a number of reasons, including: • natural disasters, like fires; • power loss; • software “bugs”, hardware defects or human error; and • hacking, computer viruses, denial of service attacks, malware, ransomware, phishing scams, or other cyber attacks.
Our IT systems may be disrupted or fail for a number of reasons, including: • natural disasters, like fires; • power loss; • software “bugs”, hardware defects or human error; and • hacking, computer viruses, denial of service attacks, malware, ransomware, phishing scams, compromised or irretrievable backups or other cyber attacks.
Subject to the restrictions in our existing credit facility and in the indenture governing our Senior Notes, we and our subsidiaries may be able to incur additional indebtedness in the future.
Subject to the restrictions in our Syndicated Credit Facility and in the indenture governing our Senior Notes, we and our subsidiaries may be able to incur additional indebtedness in the future.
In addition, an unfavorable judgment in which the counterparty is awarded equitable relief, such as an injunction, could harm our business, results of operations and financial condition. Please refer to Item 3, “Legal Proceedings,” within this Report for additional information related to litigation and claims. 18 Tab le of Contents
In addition, an unfavorable judgment in which the counterparty is awarded equitable relief, such as an injunction, could harm our business, results of operations and financial condition. Please refer to Item 3, “Legal Proceedings,” within this Report for additional information related to litigation and claims.
Despite our focused efforts to attract and retain employees, including by offering higher levels of compensation in certain instances, we experienced attrition rates within our hourly workforce in fiscal 2021 that exceeded historical levels and we incurred higher operating costs at certain of our facilities in the form of higher levels of overtime pay.
Despite our focused efforts to attract and retain employees, including by offering higher levels of compensation in certain instances, we experienced attrition rates within our hourly workforce in recent years, particularly in 2021, that exceeded historical levels and we incurred higher operating costs at certain of our facilities in the form of higher levels of overtime pay.
We have exposure to LIBOR-based financial instruments, namely our existing credit facility which has variable (or floating) interest rates based on LIBOR. This facility allows for the use of an alternative benchmark rate if LIBOR is no longer available.
We had exposure to LIBOR-based financial instruments, namely our Syndicated Credit Facility which has variable (or floating) interest rates based on LIBOR. This facility allows for the use of an alternative benchmark rate if LIBOR is no longer available.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our debt. Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our operations to pay our indebtedness.
Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our debt. 19 Ta b le of Contents Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our operations to pay our indebtedness.
These types of events could also affect our suppliers, installers, and customers, which could have a material adverse impact on our business. Disruptions to or failures of our information technology systems could adversely affect our business. We rely heavily on information technology systems—both software and computer hardware—to operate our business.
These types of events could also affect our suppliers, installers, and customers, which could have a material adverse impact on our business. 14 Ta b le of Contents Disruptions to or failures of our information technology systems could adversely affect our business. We rely heavily on information technology systems—both software and computer hardware—to operate our business.
In addition, we often compete on design preferences. Our customers’ design preferences may evolve or change before we adapt quickly enough to those changes or before we recognize those changes have happened in the marketplace. If this occurs, it could negatively affect our sales as our customers choose other product offerings.
In addition, we often compete on design preferences. Our customers’ design preferences may evolve or change before we adapt quickly enough to those changes or before we recognize those changes have happened in the marketplace. If this occurs, it could negatively affect our sales as our customers choose other product offerings that more closely align with their design preferences.
Specifically, we will need to maintain certain financial ratios under our existing credit facility.
Specifically, we will need to maintain certain financial ratios under our Syndicated Credit Facility.
To the extent our IT systems store sensitive data, including about our employees or other individuals, security breaches may expose us to other serious liabilities and reputational harm if such data is misappropriated. In addition, as cybercriminals continue to become more sophisticated and numerous, the costs to defend and insure against cyberattacks can be expected to rise.
To the extent our IT systems store sensitive data, including data related to customers, employees or other parties, security breaches may expose us to fines and other liabilities, and reputational harm if such data is misappropriated. In addition, as cybercriminals continue to become more sophisticated and numerous, the costs to defend and insure against cyberattacks can be expected to rise.
In 2021, approximately half of our net sales and a significant portion of our production were outside the United States, primarily in Europe and Asia-Pacific.
In 2022, approximately 47% of our net sales and a significant portion of our production were outside the United States, primarily in Europe and Asia-Pacific.
As the COVID-19 pandemic continues, the future of the office, and what the office of the future might look like, is being highly debated by senior executives, commercial real estate firms, architects, designers and other global experts which could adversely affect the amount of money that customers spend on our products.
The COVID-19 pandemic has impacted the corporate office market and what the office of the future might look like and continues to be highly debated by senior executives, commercial real estate firms, architects, designers and other global experts, which could adversely affect the amount of money that customers spend on our products.
We continue to implement a multi-year transformation of our sales organization, including the standardized processes and systems that our sales force uses to go to market, interact with customers, work with architects and the design community and, in general, operate day-to-day.
We continue to implement changes within our sales organization, including to the standardized processes and systems that our sales force uses to go to market, interact with customers, work with architects and the design community and, in general, operate day-to-day.
Risk Factors Related to COVID-19 The COVID-19 pandemic could have a material adverse effect on our ability to operate, our ability to keep employees safe from the pandemic, our results of operations, financial condition, liquidity, capital investments, our near term and long term ability to stay in compliance with debt covenants under our Syndicated Credit Facility and Senior Notes, our ability to refinance our existing indebtedness, and our ability to obtain financing in capital markets.
The COVID-19 pandemic or a similar public health emergency in the future could have a material adverse effect on: our ability to operate; our ability to keep employees safe from public health risks; our results of operations, financial condition, liquidity and capital investments; our near term and long term ability to stay in compliance with debt covenants under our Syndicated Credit Facility and Senior Notes; our ability to refinance our existing indebtedness; and our ability to gain financing in the capital markets.
Outside of the United States, we maintain manufacturing facilities in the Netherlands, the United Kingdom, China, Thailand (anticipated closure at the end of the first quarter of 2022), Australia and Germany, in addition to product showrooms or design studios in Mexico, England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Russia, Singapore, Hong Kong, Thailand, China and elsewhere.
Outside of the United States, we maintain manufacturing facilities in the Netherlands, the United Kingdom, China, Australia and Germany, in addition to product showrooms or design studios in England, France, Germany, Spain, the Netherlands, India, Australia, United Arab Emirates, Singapore, Hong Kong, China and elsewhere.
In addition, borrowings under our credit facility have variable interest rates, and therefore our interest expense will increase if the underlying market rates (upon which the variable interest rates are based) increase. Furthermore, on July 27, 2017, the U.K.
In addition, borrowings under our Syndicated Credit Facility have variable interest rates, and therefore our interest expense will increase if the underlying market rates (upon which the variable interest rates are based) increase.
Sales of our principal products have been and may continue to be affected by the COVID-19 pandemic, adverse economic cycles, and effects in the new construction market and renovation market. Sales of our principal products are related to the renovation and construction of commercial and institutional buildings.
A public health emergency that occurs in the future could involve similar uncertainties. Sales of our principal products have been and may continue to be affected by the COVID-19 pandemic, adverse economic cycles, and effects in the new construction market and renovation market. Sales of our principal products are related to the renovation and construction of commercial and institutional buildings.
We may lose the services of key personnel for a variety of reasons, including if our compensation programs become uncompetitive in the relevant markets for our employees and service providers, or if the Company undergoes significant disruptive change (including not only economic downturns, but potentially other changes management believes are positive in the long term).
We may lose the services of key personnel for a variety of reasons, including if our compensation programs become uncompetitive in the relevant markets for our employees and service providers, or if the Company undergoes significant disruptive change, including economic downturns.
The market for professional workers was, and remains, similarly challenging. Many of our professional workers continue to work from home as part of our COVID-19 protocols and, although in most instances we expect to offer flexible working arrangements in the future, we may experience higher levels of attrition within our professional workforce.
The market for professional workers was, and remains, similarly challenging. Many of our professional workers continue to work from home, initially as part of our COVID-19 protocols and more recently as part of our flexible working arrangement policies. As a result, we may experience higher levels of attrition within our professional workforce in the future.
The COVID-19 pandemic continues to impact areas where we operate and sell our products and services.
The COVID-19 pandemic has impacted areas where we operate and sell our products and services.
We also continue to improve and change the technology tools that the sales force is required to use as part of their day-to-day jobs, and monitor managerial positions that are designed to actively manage and coach the sales force.
We also continue to improve and change the technology tools that the sales force is required to use as part of their day-to-day jobs and monitor managerial positions that are designed to actively manage and coach the sales force. All of these changes are disruptive, which may create challenges for our sales force to adapt, particularly for long tenured employees.
While these changes are intended to yield stronger financial results, they could potentially impact our financial results in negative ways due to project delays, business disruption as new facilities and equipment come online, increase customer complaints, or increase warranty claims; all of which could negatively affect our operations, reputation, financial condition and results of operations. 17 Tab le of Contents Our business operations could suffer significant losses from natural disasters, acts of war, terrorism, catastrophes, fire, adverse weather conditions, pandemics, endemics or other unexpected events.
While these changes are intended to yield stronger financial results, they could potentially impact our financial results in negative ways due to project delays, business disruption as new facilities and equipment come online, increase customer complaints, or increase warranty claims; all of which could negatively affect our operations, reputation, financial condition and results of operations.
The scope and volume of our global operations make it impossible to eliminate completely all foreign currency translation risks as an influence on our financial results. 13 Tab le of Contents In addition, due to our global operations, we are subject to many laws governing international relations and international operations, including laws that prohibit improper payments to government officials and commercial customers and that restrict where we can do business, what information or products we can import and export to and from certain countries and what information we can provide to a non-U.S. government.
In addition, due to our global operations, we are subject to many laws governing international relations and international operations, including laws that prohibit improper payments to government officials and commercial customers and that restrict where we can do business, what information or products we can import and export to and from certain countries and what information we can provide to a non-U.S. government.
We are also making significant investments and modifications to our manufacturing facilities, processes, product compositions, and product construction including but not limited to the production of our new CQuest™ carpet tile backings. These changes can be disruptive.
Large scale changes or moves could disrupt our normal operations, leading to possible loss of productivity, which may adversely affect our results. We are also making significant investments and modifications to our manufacturing facilities, processes, product compositions, and product construction including but not limited to the production of our CQuest™ carpet tile backings. These changes can be disruptive.
For example, the COVID-19 pandemic may have cyclical and structural impacts on this activity resulting from job losses for office workers, reductions in the use of coworking spaces, and increases in the number of people working from home.
For example, the COVID-19 pandemic has had and may continue to have cyclical and structural impacts on the renovation of commercial and institutional buildings due to reductions in the use of work spaces, increases in office worker job losses and increases in the number of people working from home.
Our success depends significantly upon the efforts, abilities and continued service of our senior management executives, our principal design consultant and other key personnel (including experienced sales and manufacturing personnel), and our loss of any of them could affect us adversely.
Future impairment charges could result if these macroeconomic conditions or other negative market events or conditions continue to impact our operations. 12 Ta b le of Contents Our success depends significantly upon the efforts, abilities and continued service of our senior management executives, our principal design consultant and other key personnel (including experienced sales and manufacturing personnel), and our loss of any of them could affect us adversely.
There is no guarantee that our backup systems or disaster recovery procedures will be adequate to mitigate losses due to IT system disruptions in a timely fashion, and we may incur significant expense in correcting IT system emergencies.
However, there is no guarantee that these enhancements and steps will be adequate to mitigate future losses due to IT system disruptions, and we may incur significant expense in correcting and recovering from future disruptions.
Moreover, some of our competitors are adding manufacturing capacity into the industry throughout the globe which could increase the amount of supply in the market.
Moreover, some of our competitors are adding manufacturing capacity into the industry throughout the globe which could increase the amount of supply in the market. Increased capacity at our competitors could result in pricing pressure on our products and less demand for our products, thus adversely affecting both revenues and profitability.
In December 2021, we amended our existing credit facility to replace LIBOR with a successor rate for loans denominated in euros or British Pound sterling. At this time, we cannot predict the overall effect of the modification or discontinuation of LIBOR on our U.S. dollar denominated loans under the existing credit facility or the establishment of alternative benchmark rates.
In December 2021 we amended our Syndicated Credit Facility to replace LIBOR with a successor rate for loans denominated in euros or British Pound sterling. In October 2022, we amended our credit facility to replace LIBOR interest rates with the SOFR rate for U.S. denominated loans.
Such a development could have other unpredictable adverse effects, including a material adverse effect on demand for office space and our flooring products in the U.K. and in Europe if the U.K. exit leads to economic difficulties in Europe.
Such a development could have other unpredictable adverse effects, including a material adverse effect on demand for office space and our flooring products in the U.K. and in Europe if the U.K. exit leads to economic difficulties in Europe. 18 Ta b le of Contents Risk Factors Related to our Indebtedness We have a substantial amount of debt, which could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under our debt.
If new debt is added to our and our subsidiaries’ existing debt levels, the related risks we now face would increase. 15 Tab le of Contents Risk Factors Related to our Business and Operations We compete with a large number of manufacturers in the highly competitive floorcovering products market, and some of these competitors have greater financial resources than we do.
Any or all of the following risk factors could have a material adverse effect on our business, financial condition, results of operations and prospects. Risk Factors Related to our Business and Operations We compete with a large number of manufacturers in the highly competitive floorcovering products market, and some of these competitors have greater financial resources than we do.
As prescribed by accounting standards governing goodwill and other intangible assets, we undertake an annual review of the goodwill asset balance reflected in our financial statements. Our review is conducted during the fourth quarter of the year, unless there has been a triggering event prescribed by applicable accounting rules that warrants an earlier interim testing for possible goodwill impairment.
Our review is conducted during the fourth quarter of the year, unless there has been a triggering event prescribed by applicable accounting rules that warrants an earlier interim testing for possible goodwill impairment. A future goodwill impairment test may result in a future non-cash adjustment, which could adversely affect our earnings for any such future period.
While we attempt to match cost increases with corresponding price increases, continued inflation and volatility in the cost of raw materials, transportation and shipping costs could adversely affect our financial results if we are unable to pass through such cost increases to our customers.
While we attempt to match cost increases with corresponding price increases, continued inflation and volatility in the cost of raw materials, transportation and shipping costs could continue to adversely affect our financial results if we are unable to pass through such cost increases to our customers. 13 Ta b le of Contents Unanticipated termination or interruption of any of our arrangements with our primary third-party suppliers of synthetic fiber or our primary third-party supplier for luxury vinyl tile (“LVT”) or other key raw materials could have a material adverse effect on us.
As of January 2, 2022, we had approximately $525.1 million of outstanding debt, and we had $290.9 million of undrawn borrowing capacity under our existing credit facility.
We have a substantial amount of debt and debt service requirements. As of January 1, 2023, we had approximately $526.3 million of outstanding debt, and we had $274.1 million of undrawn borrowing capacity under our Syndicated Credit Facility.
There are no guarantees that these efforts will increase sales or improve profitability of the business, or that they will not instead adversely disrupt the business, decrease sales, and decrease overall profitability. 16 Tab le of Contents Large increases in the cost of our raw materials, shipping costs, duties or tariffs could adversely affect us if we are unable to pass these cost increases through to our customers.
There are no guarantees that these efforts will increase sales or improve profitability of the business, or that they will not instead adversely disrupt the business, decrease sales, and decrease overall profitability.
Petroleum-based products (including yarn) comprise the predominant portion of the cost of raw materials that we use in manufacturing carpet. Synthetic rubber uses petroleum-based products as feedstock as well. We also incur significant shipping and transport costs to move our products around the globe, and those costs have increased dramatically due to recent global supply chain challenges.
We also incur significant shipping and transport costs to move our products around the globe, and those costs have increased dramatically due to global supply chain, macroeconomic and geopolitical challenges.
These effects may recur and could be more pronounced if global economic conditions do not improve or are weakened by negative cycles or other factors, including as a result of the continuing COVID-19 pandemic. 12 Tab le of Contents Our earnings could be adversely affected by non-cash adjustments to goodwill, when a test of goodwill assets indicates a material impairment of those assets.
These effects may recur and could be more pronounced if global economic conditions do not improve or are weakened by negative cycles or other factors, including as a result of the continuing COVID-19 pandemic. 16 Ta b le of Contents International Risk Factors Our substantial international operations are subject to various political, economic and other uncertainties that could adversely affect our business results, including foreign currency fluctuations, restrictive taxation, custom duties, border closings or other adverse government regulations.
We recorded a goodwill and intangible asset impairment loss of $121.3 million in the first quarter of 2020 primarily as a result of the expected duration of the COVID-19 pandemic and its anticipated negative impact to our revenue and operating income. Future impairment charges could result if these expectations change or the COVID-19 pandemic continues for an extended period.
The 2020 impairment charge was primarily a result of the expected duration of the COVID-19 pandemic and its anticipated negative impact to our revenue and operating income.
From time to time, we make improvements and changes to our physical facilities, move operations to other sites, and change our manufacturing processes. We are also in the process of closing our carpet tile manufacturing facility in Thailand. Large scale changes or moves could disrupt our normal operations, leading to possible loss of productivity, which may adversely affect our results.
From time to time, we make improvements and changes to our physical facilities, move operations to other sites, and change our manufacturing processes. In the first quarter of 2022, we permanently closed our carpet tile manufacturing facility in Thailand and transferred that production volume to other existing manufacturing operations in China and Australia.
Legal Risk Factors We face risks associated with litigation and claims.
If new debt is added to our and our subsidiaries’ existing debt levels, the related risks we now face would increase. Legal Risk Factors We face risks associated with litigation and claims.
International Risk Factors Our substantial international operations are subject to various political, economic and other uncertainties that could adversely affect our business results, including foreign currency fluctuations, restrictive taxation, custom duties, border closings or other adverse government regulations. We have substantial international operations and intend to continue to pursue and commit resources to growth opportunities beyond the United States.
We have substantial international operations and intend to continue to pursue and commit resources to growth opportunities beyond the United States.
SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. A transition away from the widespread use of LIBOR to SOFR or another benchmark rate may occur over the course of the next few years.
SOFR is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. On September 29, 2022, the FCA announced its decision to stop publishing the 1-month and 6-month LIBOR rates by the end of March 2023.
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Any or all of the following risk factors could have a material adverse effect on our business, financial condition, results of operations and prospects.
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Moreover, as our competitors improve the sustainability attributes of their products and operations, or if our competitors market the sustainability attributes of their products or operations more effectively than we do, it could negatively affect the degree to which we differentiate from our competitors on those attributes which could negatively affect our ability to compete and gain those sales as customers choose product offerings from our competitors instead of our product offerings.
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A future goodwill impairment test may result in a future non-cash adjustment, which could adversely affect our earnings for any such future period.
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Our earnings could be adversely affected by non-cash adjustments to goodwill, when a test of goodwill assets indicates a material impairment of those assets. As prescribed by accounting standards governing goodwill and other intangible assets, we undertake an annual review of the goodwill asset balance reflected in our financial statements.
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There can be no assurance that we will not experience these risks in the future. Risks include, for example, the uncertainty surrounding the ongoing implementation and effect of the United Kingdom’s exit from the European Union described below, including changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union.
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We recorded goodwill and intangible asset impairment charges of $36.2 million in the fourth quarter of 2022 and $121.3 million in the first quarter of 2020.
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We conduct business in Russia and Ukraine, which subjects us to risks inherent with current geopolitical tensions between the two countries. We also make a substantial portion of our net sales in currencies other than U.S. dollars (approximately half of 2021 net sales), which subjects us to the risks inherent in currency translations.
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The 2022 impairment charge was primarily a result of macroeconomic conditions, such as inflation, rising interest rates and the weakening of the Euro against the U.S. dollar causing a negative impact to our revenue and operating income in our EMEA goodwill reporting unit.
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Risk Factors Related to our Indebtedness We have a substantial amount of debt, which could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under our debt. We have a substantial amount of debt and debt service requirements.
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Large increases in the cost of our raw materials, shipping costs, duties or tariffs could adversely affect us if we are unable to pass these cost increases through to our customers. Petroleum-based products (including yarn) comprise the predominant portion of the cost of raw materials that we use in manufacturing carpet. Synthetic rubber uses petroleum-based products as feedstock as well.
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Increased capacity at our competitors could result in pricing pressure on our products (including products, like LVT, which may currently carry attractive margins) and less demand for our products, thus adversely affecting both revenues and profitability.
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Our business operations could suffer significant losses from natural disasters, acts of war, terrorism, catastrophes, fire, adverse weather conditions, pandemics, endemics, unstable geopolitical situations or other unexpected events.
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All of these changes are disruptive, which may create challenges for our sales force to adapt, particularly for long tenured employees, which comprise a large portion of our sales force.
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Despite our security design and internal controls, our IT systems have in the past experienced, and may in the future become subject to, attempts by unauthorized third parties to access and exfiltrate confidential information, manipulate data or disrupt our operations. In November 2022, we discovered a cybersecurity attack, perpetrated by unauthorized third parties, affecting our IT systems (the “Cyber Event”).
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Unanticipated termination or interruption of any of our arrangements with our primary third-party suppliers of synthetic fiber or our primary third-party supplier for luxury vinyl tile (“LVT”) or other key raw materials could have a material adverse effect on us.
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In response, we promptly shut down certain systems, including shipping, inventory management and production systems and engaged forensic experts to evaluate the extent of the Cyber Event and its disruption to our operations.
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While the investigation of the Cyber Event by our forensic experts is still ongoing and our operations have fully resumed, we estimate fiscal year 2022 revenues were adversely affected by approximately $8 million due to lost sales.
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In fiscal 2022, in connection with the Cyber Event, we incurred approximately $5 million of idle plant costs, direct labor costs during the period our manufacturing facilities were idle and third-party remediation costs. We have insurance and anticipate that a portion of our financial losses related to the Cyber Event will ultimately be recovered by insurance.
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Following the Cyber Event, we implemented measures to enhance our cybersecurity protections against, and reduce the potential of, any future cybersecurity attack. We expect to incur ongoing costs to enhance cybersecurity and plan to take further steps to prevent unauthorized access to, or manipulation of, our systems and data.
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The impact of potential changes to environmental laws and regulations and industry standards regarding climate change could lead to unforeseen disruptions to our business operations. Addressing the effects of climate change has taken on increased importance throughout the world.
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The continued efforts to combat climate change could include more restrictive federal, state, and foreign environmental laws and regulations, heightened industry standards, or other mitigation measures that may have a material adverse effect on our global operations.
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Public health organizations have recommended, and many governments have implemented, measures from time to time during the COVID-19 pandemic to slow and limit the transmission of the virus, including certain business shutdowns and shelter in place and social distancing requirements.
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There can be no assurance that we will not experience these risks in the future.
Added
The conflict between Russia and Ukraine could adversely affect our business, results of operations and financial position. Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks arising from the conflict between Russia and Ukraine, may adversely affect our business, results of operations and financial position.
Added
While we permanently closed our operations in Russia in the third quarter of 2022, the broader consequences of this conflict and the extent of its effects on us as well as the global economy cannot be predicted.
Added
These consequences include or may include government sanctions, embargoes, unstable energy markets, regional instability, geopolitical shifts, potential retaliatory action by the Russian government against companies or other countries, and increased tensions between Russia and the United States or other countries in which we operate. 17 Ta b le of Contents Historically, Russia was a key supplier of natural gas, oil, and other raw materials to European countries.
Added
We have substantial manufacturing operations in Europe (including Germany, the Netherlands, and the United Kingdom), and we have key suppliers in Europe, which rely upon natural gas, oil, and other raw materials to operate. Our sole rubber flooring plant is in Germany, and our primary European carpet tile plant is in the Netherlands.
Added
Any disruption in the supply of natural gas, oil, or other raw materials from Russia to Europe could adversely affect our ability to operate our business, our results of operations and our financial position, or adversely affect the ability of our key suppliers to meet our raw material requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our manufacturing and distribution facilities and our marketing offices are sufficient for our present operations. We will continue, however, to consider the desirability of establishing additional facilities and offices in other locations around the world as part of our business strategy to meet global market demands.
Biggest changeWe will continue, however, to consider the desirability of establishing additional facilities and offices in other locations around the world as part of our business strategy to meet global market demands. Substantially all of our owned properties in the United States are subject to mortgages, which secure borrowings under our Syndicated Credit Facility. 21 Ta b le of Contents
Ft.) AMS LaGrange, Georgia 669,145 LaGrange, Georgia (1) 717,205 Union City, Georgia (1) 370,000 West Point, Georgia 250,000 Salem, New Hampshire (1) 109,129 EAAA Bangkok, Thailand (2) 275,946 Craigavon, N. Ireland (1) 72,200 Minto, Australia 240,000 Scherpenzeel, Netherlands 1,250,960 Weinheim, Germany (1) 831,113 Taicang, China (1) 142,500 (1) Leased.
Ft.) AMS LaGrange, Georgia 669,145 LaGrange, Georgia (1) 352,205 Union City, Georgia (1) 370,000 West Point, Georgia 250,000 Salem, New Hampshire (1) 126,766 EAAA Craigavon, N. Ireland (1) 72,200 Minto, Australia 240,000 Scherpenzeel, Netherlands 1,250,960 Weinheim, Germany (1) 831,113 Taicang, China (1) 142,500 (1) Leased.
(2) We are currently in the process of closing this carpet tile manufacturing facility in Thailand. We maintain sales or marketing offices in over 50 locations in more than 25 countries and a number of other distribution facilities in several countries. Most of our sales and marketing locations and many of our distribution facilities are leased.
We maintain sales or marketing offices in over 45 locations in more than 20 countries and a number of other distribution facilities in several countries. Most of our sales and marketing locations and many of our distribution facilities are leased. We believe that our manufacturing and distribution facilities and our marketing offices are sufficient for our present operations.
Removed
Substantially all of our owned properties in the United States are subject to mortgages, which secure borrowings under our Syndicated Credit Facility. 20 Tab le of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+4 added−2 removed3 unchanged
Biggest change(5) The following companies are included in the New Self-Determined Peer Group depicted above: Acuity Brands, Inc.; Albany International Corp.; Apogee Enterprises, Inc.; Armstrong Flooring, Inc.; Armstrong World Industries, Inc.; Caesarstone Ltd.; Gentherm Incorporated; H. B. Fuller Company; Harsco Corporation; Herman Miller, Inc.; HNI Corporation; Kimball International, Inc.; Masonite International Corporation; Materion Corporation; P. H.
Biggest changeGlatfelter Company); Steelcase Inc.; Unifi, Inc.; and Welbilt, Inc. Welbilt, Inc. is included as a peer for periods prior to its acquisition in 2022. (5) The following companies are included in the New Self-Determined Peer Group depicted above: Acuity Brands, Inc.; Albany International Corp.; Apogee Enterprises, Inc.; Armstrong World Industries, Inc.; Caesarstone Ltd.; Gentherm Incorporated; H. B.
Stock Performance The following graph and table compare, for the period comprised of the Company’s five preceding fiscal years ended January 2, 2022, the Company’s total returns to shareholders (assuming all dividends were reinvested) with that of (i) all companies listed on the Nasdaq Composite Index, (ii) our previous self-determined peer group, and (iii) our new self-determined peer group, assuming an initial investment of $100 in each on January 1, 2017 (the last day of the fiscal year 2016).
Stock Performance The following graph and table compare, for the period comprised of the Company’s five preceding fiscal years ended January 1, 2023, the Company’s total returns to shareholders (assuming all dividends were reinvested) with that of (i) all companies listed on the Nasdaq Composite Index, (ii) our previous self-determined peer group, and (iii) our new self-determined peer group, assuming an initial investment of $100 in each on December 31, 2017 (the last day of the fiscal year 2017).
(2) The index level was set to $100 as of January 1, 2017 (the last day of fiscal year 2016). (3) The Company’s fiscal year ends on the Sunday nearest December 31.
(2) The index level was set to $100 as of December 31, 2017 (the last day of fiscal year 2017). (3) The Company’s fiscal year ends on the Sunday nearest December 31.
(4) The following companies are included in the Previous Self-Determined Peer Group depicted above: Acuity Brands, Inc.; Albany International Corp.; Apogee Enterprises, Inc.; Armstrong Flooring, Inc.; Armstrong World Industries, Inc.; Caesarstone Ltd.; FLIR Systems, Inc.; Gentherm Incorporated; H. B. Fuller Company; Harsco Corporation; Herman Miller, Inc.; HNI Corporation; Kimball International, Inc.; Knoll, Inc.; Masonite International Corporation; Materion Corporation; P. H.
(4) The following companies are included in the Previous Self-Determined Peer Group depicted above: Acuity Brands, Inc.; Albany International Corp.; Apogee Enterprises, Inc.; Armstrong Flooring, Inc.; Armstrong World Industries, Inc.; Caesarstone Ltd.; Gentherm Incorporated; H. B. Fuller Company; Harsco Corporation; MillerKnoll, Inc. (formerly Herman Miller, Inc.); HNI Corporation; Kimball International, Inc.; Masonite International Corporation; Materion Corporation; Glatfelter Corporation (formerly P.H.
We estimate that there are in excess of 9,000 beneficial holders of our Common Stock.
We estimate that there are in excess of 11,000 beneficial holders of our Common Stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is traded on the Nasdaq Global Select Market under the symbol TILE. As of February 18, 2022, we had 643 holders of record of our Common Stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is traded on the Nasdaq Global Select Market under the symbol TILE. As of February 17, 2023, we had 620 holders of record of our Common Stock.
The Company chose a peer group that it believes provides a robust sample size with minimal revenue dispersion, with companies in similar industries or lines of business or subject to similar economic and business cycles, including companies with a significant international presence that are also focused on sustainability. 22 Tab le of Contents January 1, 2017 December 31, 2017 December 30, 2018 December 29, 2019 January 3, 2021 January 2, 2022 Interface, Inc. $100 $137 $79 $93 $60 $91 NASDAQ Composite Index $100 $130 $125 $173 $249 $304 Previous Self-Determined Peer Group (20 Stocks) $100 $102 $82 $107 $96 $110 New Self-Determined Peer Group (18 Stocks) $100 $99 $77 $101 $93 $129 Notes to Performance Graph (1) If the annual interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
The Company chose a peer group that it believes provides a robust sample size with minimal revenue dispersion, with companies in similar industries or lines of business or subject to similar economic and business cycles, including companies with a significant international presence that are also focused on sustainability. 23 Ta b le of Contents December 31, 2017 December 30, 2018 December 29, 2019 January 3, 2021 January 2, 2022 January 1, 2023 Interface, Inc. $100 $58 $68 $44 $66 $41 NASDAQ Composite Index $100 $97 $133 $192 $235 $159 Previous Self-Determined Peer Group (18 Stocks) $100 $78 $102 $94 $130 $89 New Self-Determined Peer Group (16 Stocks) $100 $81 $107 $99 $135 $100 Notes to Performance Graph (1) If the annual interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
Glatfelter Company; Steelcase Inc.; Unifi, Inc.; and Welbilt, Inc. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K.
Fuller Company; Harsco Corporation; MillerKnoll, Inc. (formerly Herman Miller, Inc.); HNI Corporation; Kimball International, Inc.; Masonite International Corporation; Materion Corporation; Glatfelter Corporation (formerly P.H. Glatfelter Company); Steelcase Inc.; and Unifi, Inc. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K.
In 2021, the Company updated its self-determined peer group to exclude FLIR Systems, Inc. and Knoll, Inc. as both of these companies were acquired in 2021 and no longer trade publicly. In determining its peer group companies, the Company considered various factors, including the potential peer’s industry, business model, size and complexity.
In determining its peer group companies, the Company considered various factors, including the potential peer’s industry, business model, size and complexity.
Removed
Glatfelter Company; Steelcase Inc.; Unifi, Inc.; and Welbilt, Inc. FLIR Systems, Inc. and Knoll, Inc. are included as peers for periods prior to their acquisitions in 2021.
Added
In 2022, the Company updated its self-determined peer group to exclude Armstrong Flooring, Inc. and Welbilt, Inc. Armstrong Flooring, Inc. was delisted and most of its assets were acquired in 2022, and Welbilt, Inc. was acquired in 2022 and no longer trades publicly.
Removed
Issuer Purchases of Equity Securities There were no purchases made by or on behalf of the Company, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during our fourth quarter ended January 2, 2022. 23 Tab le of Contents
Added
Issuer Purchases of Equity Securities The following table contains information with respect to purchases made by or on behalf of the Company, or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during our fourth quarter ended January 1, 2023: Period (1) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 3, 2022 – October 30, 2022 (3) 163,539 $ 10.40 163,204 $ 83,853,300 October 31, 2022 – December 4, 2022 94,302 10.87 94,302 82,828,595 December 5, 2022 – January 1, 2023 — — — 82,828,595 Total 257,841 $ 10.57 257,506 (1) The monthly periods identified above correspond to the Company’s fiscal fourth quarter of 2022, which commenced October 3, 2022 and ended January 1, 2023.
Added
(2) On May 17, 2022, the Company announced a new share repurchase program authorizing the repurchase of up to $100 million of common stock. The program has no specific expiration date.
Added
(3) Includes 335 shares received by the Company from employees to satisfy income tax withholding obligations in connection with the vesting of equity awards. 24 Ta b le of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

105 edited+61 added−46 removed51 unchanged
Biggest changeAmong other things, these covenants limit our 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 our stock (in excess of certain specified amounts); • repay other indebtedness prior to maturity unless we meet certain conditions; and • enter into sale and leaseback transactions. 35 Tab le of Contents The Facility also requires us to remain in compliance with the following financial covenants as of the end of each fiscal quarter, based on our consolidated results for the year then 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.
Biggest changeAmong other things, these covenants limit our 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 our stock (in excess of certain specified amounts); • repay other indebtedness prior to maturity unless we meet certain conditions; and • enter into sale and leaseback transactions.
As a percentage of net sales, our consolidated costs of sales increased to 64.0% in 2021 versus 62.8% in 2020, primarily due to inflationary pressures on raw materials, freight and labor costs driving an approximately 3.4% increase in cost of sales as a percentage of net sales compared to the prior year.
As a percentage of net sales, our consolidated cost of sales increased to 64.0% in 2021 versus 62.8% in 2020, primarily due to inflationary pressures on raw materials, freight and labor costs driving an approximately 3.4% increase in cost of sales as a percentage of net sales compared to the prior year.
Tax For the year ended January 2, 2022, the Company recorded income tax expense of $17.4 million on pre-tax income of $72.6 million resulting in an effective tax rate of 24.0%, as compared to an income tax benefit of $7.5 million on pre-tax loss of $79.4 million resulting in an effective tax rate of 9.4% for the year ended January 3, 2021.
For the year ended January 2, 2022, the Company recorded income tax expense of $17.4 million on pre-tax income of $72.6 million resulting in an effective tax rate of 24.0%, as compared to an income tax benefit of $7.5 million on pre-tax loss of $79.4 million resulting in an effective tax rate of 9.4% for the year ended January 3, 2021.
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 and long-term business forecasts to provide insight.
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.
We believe the most significant elements of uncertainty are (1) the intensity and duration of the impact on construction, renovation, and remodeling; (2) corporate, government, and consumer spending levels and sentiment; (3) the ability of our sales channels, supply chain, manufacturing, and distribution partners to continue operating through disruptions; and (4) the severity of global supply chain disruptions and their effects on inflation, labor shortages, raw material shortages, and other factors that disrupt our supply chain and manufacturing facilities.
We believe the most significant elements of uncertainty are (1) the intensity and duration of the impact on construction, renovation, and remodeling; (2) corporate, government, and consumer spending levels and sentiment; (3) the ability of our sales channels, supply chain, manufacturing, and distribution partners to continue operating through disruptions; and (4) the severity of global supply chain disruptions and their effects on inflation, labor costs, raw material shortages, and other factors that disrupt our supply chain and manufacturing facilities.
During 2020, the Company recorded $12.9 million of voluntary and involuntary severance costs, which were included in selling, general and administrative expenses in the consolidated statements of operations. In fiscal year 2020, government grants and payroll protection programs were available in various countries globally to provide assistance to companies impacted by the pandemic.
During 2020, the Company recorded $12.9 million of voluntary and involuntary severance costs, which were included in selling, general and administrative expenses in the consolidated statements of operations. Also in fiscal year 2020, government grants and payroll protection programs were available in various countries globally to provide assistance to companies impacted by the pandemic.
Fluctuations in currency exchange rates had a positive impact on our year-over-year consolidated sales comparison of approximately $23.9 million, meaning that if currency levels had remained constant year over year our 2021 sales would have been lower by this amount.
Fluctuations in currency exchange rates had a positive impact on our year-over-year consolidated net sales comparison of approximately $23.9 million, meaning that if currency levels had remained constant year over year, our 2021 sales would have been lower by this amount.
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 2021 amounts are expected to be fully recoverable within the applicable statutory expiration periods.
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 2022 amounts are expected to be fully recoverable within the applicable statutory expiration periods.
As the impact of the COVID-19 pandemic continues to affect companies with global operations, specifically as it relates to the global supply chain, we anticipate that, at a minimum, our business and results in the first half of 2022 will continue to be affected, and the timeline and pace of recovery is uncertain.
As the impact of the COVID-19 pandemic continues to affect companies with global operations, specifically as it relates to the global supply chain, we anticipate that, at a minimum, our business and results in the first half of 2023 will continue to be affected, and the timeline and pace of recovery is uncertain.
Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment is indicated.
Long-lived assets are reviewed for impairment at the asset group level whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment is indicated.
However, the Company’s cash flows from operations can be affected by numerous factors including the uncertainty of COVID-19 and its impact on global operations, 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. 37 Tab le of Contents Critical Accounting Policies and Estimates The policies and estimates discussed below are considered by management to be critical to an understanding of our consolidated financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimations about the effects of matters that are inherently uncertain.
However, the Company’s cash flows from operations can be affected by numerous factors including the uncertainty of COVID-19 and its impact on global operations, 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. 38 Ta b le of Contents Critical Accounting Policies and Estimates The policies and estimates discussed below are considered by management to be critical to an understanding of our consolidated financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimations about the effects of matters that are inherently uncertain.
Expected interest payments are those associated with borrowings under the Syndicated Credit Facility and Senior Notes consistent with our contractually scheduled principal repayments. Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures.
Expected interest payments are those associated with borrowings under the Facility and Senior Notes consistent with our contractually scheduled principal repayments. Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures.
On November 17, 2020, we issued $300 million aggregate principal amount of 5.50% Senior Notes due 2028 (the “Senior Notes”), which are discussed further below. As of January 2, 2022, we had $300.0 million of Senior Notes outstanding. It is important for you to consider that we have a significant amount of indebtedness.
On November 17, 2020, we issued $300 million aggregate principal amount of 5.50% Senior Notes due 2028 (the “Senior Notes”), which are discussed further below. As of January 1, 2023, we had $300.0 million of Senior Notes outstanding. It is important for you to consider that we have a significant amount of indebtedness.
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 and Canadian dollars into U.S. dollars have affected our consolidated net sales and operating income or loss during the past three years: 2021 2020 2019 (in millions) Impact of changes in foreign currency on consolidated net sales $ 23.9 $ 7.1 $ (26.2) Impact of changes in foreign currency on consolidated operating income (loss) 3.2 0.9 (3.9) 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 2021 2020 2019 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 64.0 62.8 60.3 Gross profit on sales 36.0 37.2 39.7 Selling, general and administrative expenses 27.0 30.2 29.0 Restructuring, asset impairment and other charges 0.3 (0.4) 1.0 Goodwill and intangible asset impairment charge — 11.0 — Operating income (loss) 8.7 (3.6) 9.7 Interest/Other expense 2.7 3.6 2.2 Income (loss) before income tax expense 6.0 (7.2) 7.5 Income tax expense (benefit) 1.4 (0.7) 1.7 Net income (loss) 4.6 % (6.5) % 5.8 % Consolidated Net Sales Below we provide information regarding our consolidated net sales and analyze those results for each of the last three fiscal years.
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 and Canadian dollars into U.S. dollars have affected our consolidated net sales and operating income or loss during the past three years: 2022 2021 2020 (in millions) Impact of changes in foreign currency on consolidated net sales $ (58.8) $ 23.9 $ 7.1 Impact of changes in foreign currency on consolidated operating income (loss) (8.3) 3.2 0.9 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 2022 2021 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 66.3 64.0 62.8 Gross profit 33.7 36.0 37.2 Selling, general and administrative expenses 25.0 27.0 30.2 Restructuring, asset impairment and other charges 0.2 0.3 (0.4) Goodwill and intangible asset impairment charge 2.8 — 11.0 Operating income (loss) 5.7 8.7 (3.6) Interest/Other expense, net 2.6 2.7 3.6 Income (loss) before income tax expense 3.1 6.0 (7.2) Income tax expense (benefit) 1.7 1.4 (0.7) Net income (loss) 1.4 % 4.6 % (6.5) % Consolidated Net Sales Below we provide information regarding our consolidated net sales and analyze those results for each of the last three fiscal years.
Our current and long-term pension obligations include contributions and expected benefit payments to be paid by the Company related to certain defined benefit pension plans and excludes the expected benefit payments for two of our funded foreign defined benefit plans as these obligations will be paid by the plans over the next ten years.
Our pension obligations include contributions and expected benefit payments to be paid by the Company related to certain defined benefit pension plans and excludes the expected benefit payments for two of our funded foreign defined benefit plans as these obligations will be paid by the plans over the next ten years.
Fiscal year 2021 also included $3.9 million of restructuring charges in connection with the planned closure of our Thailand manufacturing operations anticipated to occur in 2022. Consolidated net income for 2021 was $55.2 million or $0.94 per share, compared to consolidated net loss of $71.9 million, or $1.23 per share, in 2020.
Fiscal year 2021 also included $3.9 million of restructuring charges in connection with the planned closure of our Thailand manufacturing operations which occurred in 2022. Consolidated net income for 2021 was $55.2 million or $0.94 per share, compared to consolidated net loss of $71.9 million, or $1.23 per share, in 2020.
To the extent the actual collectability of our accounts receivable differs from our estimates by 10%, our 2021 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.
To the extent the actual collectability of our accounts receivable differs from our estimates by 10%, our 2022 net income would be higher or lower by approximately $0.2 million, on an after-tax basis, depending on whether the actual collectability was better or worse, respectively, than the estimated allowance. Product Warranties.
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 50% in 2021, 51% in 2020, and 49% in 2019. Because we have substantial international operations, we are impacted, from time to time, by international developments that affect foreign currency transactions.
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 47% in 2022, 50% in 2021, and 51% in 2020. Because we have substantial international operations, we are impacted, from time to time, by international developments that affect foreign currency transactions.
It is also important for you to consider that borrowings under our Syndicated Credit Facility comprise a substantial portion of our indebtedness, and that these borrowings are based on variable interest rates (as described below) that expose the Company to the risk that short-term interest rates may increase.
It is also important for you to consider that borrowings under our Facility comprise a substantial portion of our indebtedness, and that these borrowings are based on variable interest rates (as described below) that expose the Company to the risk that interest rates may increase.
To the extent the actual warranty expense differs from our estimates by 10%, our 2021 net income would be higher or lower by approximately $0.2 million, on an after-tax basis, depending on whether the actual expense is lower or higher, respectively, than the estimated provision.
To the extent the actual warranty expense differs from our estimates by 10%, our 2022 net income would be higher or lower by approximately $0.1 million, on an after-tax basis, depending on whether the actual expense is lower or higher, respectively, than the estimated provision.
The AMS operating segment is unchanged from prior year and continues to include the United States, Canada and Latin America geographic areas. See Note 20 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.
The AMS operating segment continues to include the United States, Canada and Latin America geographic areas. See Note 20 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.
In addition, the Company pays a commitment fee ranging from 0.20% to 0.40% 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. LIBOR Transition The U.K.
In addition, the Company pays a commitment fee ranging from 0.20% to 0.40% 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. 36 Ta b le of Contents LIBOR Transition The U.K.
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 January 2, 2022 and January 3, 2021, was $5.0 million and $6.6 million, respectively.
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 January 1, 2023 and January 2, 2022, was $4.0 million and $5.0 million, respectively.
Our long-term debt obligations include the contractually scheduled principal repayment of our term loan borrowings under the Syndicated Credit Facility, which matures in 2025, and $300 million on our Senior Notes due in 2028. Operating and finance lease obligations consist of undiscounted lease payments due over the term of the lease.
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 2027, and $300 million on our Senior Notes due in 2028. Operating and finance lease obligations consist of undiscounted lease payments due over the term of the lease.
In 2021, the strengthening of the Euro, Australian dollar, Chinese Renminbi and British Pound sterling against the U.S. dollar had a positive impact on our net sales and operating income. In 2020, the strengthening of the Euro, British Pound sterling, and Chinese Renminbi against the U.S. dollar had a positive impact on our net sales and operating income.
In 2022, the weakening of the Euro, Australian dollar, British Pound sterling and Chinese Renminbi against the U.S. dollar had a negative impact on our net sales and operating income. In 2021, the strengthening of the Euro, Australian dollar, Chinese Renminbi and British Pound sterling against the U.S. dollar had a positive impact on our net sales and operating income.
Our warranty and sales allowance reserve on January 2, 2022 and January 3, 2021, was $2.7 million and $3.2 million, respectively. Actual warranty expense incurred could vary significantly from amounts that we estimate.
Our warranty and sales allowance reserve on January 1, 2023 and January 2, 2022, was $2.1 million and $2.7 million, respectively. Actual warranty expense incurred could vary significantly from amounts that we estimate.
Our Syndicated Credit Facility matures in November of 2025 and the Senior Notes, as discussed below, mature in December 2028. We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms, or at all.
Our Facility matures in October of 2027, and the Senior Notes, as discussed below, mature in December 2028. We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms, or at all.
We generate our cash and other liquidity requirements primarily from our operations and from borrowings or letters of credit under our Syndicated Credit Facility and Senior Notes discussed below. We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months and we expect to generate sufficient cash to meet our long-term obligations.
We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”) discussed below. We anticipate that our liquidity is sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations.
Of the $95.6 million of cash in foreign jurisdictions, approximately $12.9 million represents 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.
Of the $92.1 million of cash in foreign jurisdictions, approximately $43.4 million represents 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.
Fiscal year 2021 included 52 weeks, fiscal year 2020 included 53 weeks, and fiscal year 2019 included 52 weeks.
Fiscal year 2022 included 52 weeks, fiscal year 2021 included 52 weeks, and fiscal year 2020 included 53 weeks.
While we believe that adequate write-downs for inventory obsolescence have been made in the consolidated financial statements, consumer tastes and preferences will continue to change and we could experience additional inventory write-downs in the future. Our inventory reserve on January 2, 2022 and January 3, 2021, was $27.1 million and $35.0 million, respectively.
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 January 1, 2023 and January 2, 2022, was $28.5 million and $27.1 million, respectively.
Excludes non-recurring items related to intangible asset impairment charges, restructuring, asset impairment, severance and other costs. See Note 20 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
Excludes intangible asset impairment charges, Cyber Event costs, and restructuring, asset impairment, severance and other costs. See Note 20 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
Interest on Eurocurrency-based loans and fees for letters of credit are charged at varying rates computed by applying a margin ranging from 1.25% to 3.00% over the applicable Eurocurrency rate, depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.
Interest on Eurocurrency-based loans (or SOFR-based and alternative currency loans following the fifth amendment to the Facility as discussed below) and fees for letters of credit are charged at varying rates computed by applying a margin ranging from 1.25% to 3.00% over the applicable Eurocurrency rate (or SOFR rate or alternative currency rate following the fifth amendment to the Facility as discussed below), depending on the Company’s consolidated net leverage ratio as of the most recently completed fiscal quarter.
Recent Accounting Pronouncements Please see Note 2 entitled “Recent Accounting Pronouncements” in Item 8 of this Report for discussion of these items. 40 Tab le of Contents
Recent Accounting Pronouncements Please see Note 2 entitled “Recent Accounting Pronouncements” in Item 8 of this Report for discussion of these items. 41 Ta b le of Contents
More than half of our consolidated net sales were in non-corporate office markets in fiscal year 2021 and fiscal year 2020, primarily in education, healthcare, government, retail, and residential/living market segments.
More than half of our consolidated net sales were in non-corporate office markets in fiscal year 2022 and fiscal year 2021, primarily in education, healthcare, retail, public buildings, hospitality and residential/living market segments.
On a market segment basis, the EAAA sales increase was most significant in non-corporate office market segments including retail (up 53.8%), public buildings (up 30.2%) and healthcare (up 19.0%). Sales in the corporate office market increased 2.4% in 2021 compared to 2020. These increases were partially offset by a decrease in the education (down 2.6%) market segment.
On a market segment basis, the 2021 EAAA sales increase was most significant in non-corporate office market segments including retail (up 53.8%), public buildings (up 30.2%) and healthcare (up 19.0%). Sales in the corporate office market increased 2.4% in 2021 compared to 2020.
See Item 1, “Business” of this Annual Report on Form 10-K for additional information regarding our mix of modular carpet and resilient flooring sales in corporate office verses non-corporate office market segments for the last three fiscal years by reportable segment.
See Item 1, entitled “Business,” included in this Annual Report on Form 10-K for additional information regarding our mix of sales in corporate office verses non-corporate office market segments for the last three fiscal years by reportable segment.
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, foreclosing mortgages on real estate assets, taking possession of or selling personal property assets, collecting accounts receivables, or exercising proxies to take control of the pledged stock of domestic and first-tier 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, foreclosing mortgages on real estate assets, taking possession of or selling personal property assets, collecting accounts receivable, or exercising proxies to take control of the pledged stock of domestic and first-tier material foreign subsidiaries. 37 Ta b le of Contents Under the Facility, we are required to make quarterly amortization payments of the term loan borrowings.
This decrease was partially offset by the non-deductible SEC fine. Segment Results As discussed above, in fiscal year 2021 the Company determined that it has two operating and reportable segments – AMS and EAAA. Segment information presented below for fiscal years 2020 and 2019 have been restated to conform to the new reportable segment structure.
This increase was partially offset by a decrease in non-deductible business expenses. Segment Results As discussed above, in 2021 the Company determined that it has two operating and reportable segments – AMS and EAAA. Segment information presented below for 2020 has been recast to conform to the new reportable segment structure.
The Company used the net proceeds to repay $269.7 million of outstanding term loan borrowings and $21.0 million of outstanding revolving loan borrowings under the Facility. In connection with the issuance of the Senior Notes, the Company recorded $5.7 million of debt issuance costs.
Interest is paid semi-annually on June 1 and December 1 of each year. The Company used the net proceeds to repay $269.7 million of outstanding term loan borrowings and $21.0 million of outstanding revolving loan borrowings under the Facility. In connection with the issuance of the Senior Notes, the Company recorded $5.7 million of debt issuance costs.
These decreases were partially offset by higher labor costs of approximately $11.0 million due to higher performance-based compensation as target performance measures were achieved in 2021, partially offset by cost savings from prior year headcount reduction initiatives.
These decreases were partially offset by higher labor costs of approximately $11.0 million due to higher performance-based compensation as target performance measures were achieved in 2021, partially offset by cost savings from prior year headcount reduction initiatives. As a percentage of net sales, SG&A expenses decreased to 27.0% in 2021 versus 30.2% in 2020.
For information regarding the current variable interest rates of these borrowings, the potential impact on our interest expense from hypothetical increases in short term interest rates, and the interest rate swap transaction, please see the discussion in Item 7A of this Report.
For information regarding the current variable interest rates of these borrowings, the potential impact on our interest expense from hypothetical increases in short term interest rates, and the interest rate swap transaction, please see the discussion in Item 7A of this Report. We are not a party to any material off-balance sheet arrangements.
As of January 2, 2022, we had $225.1 million of borrowings outstanding under our Syndicated Credit Facility, of which $217.6 million were term loan borrowings and $7.5 million were revolving loan borrowings. Additionally, $1.6 million in letters of credit were outstanding under the Syndicated Credit Facility at the end of fiscal year 2021.
As of January 1, 2023, we had $226.3 million of borrowings outstanding under our Facility, of which $202.1 million were term loan borrowings and $24.2 million were revolving loan borrowings. Additionally, $1.6 million in letters of credit were outstanding under the Facility at the end of fiscal year 2022.
Financing activities for 2020 include higher loan borrowings of $320.0 million primarily due to the issuance of $300 million of Senior Notes, offset by (1) higher repayments of revolving and term loan borrowings as the proceeds from the issuance of the Senior Notes were used to repay $290.7 million of outstanding term and revolving loan borrowings under the Syndicated Credit Facility, and (2) a decrease in dividends paid of $9.8 million. 34 Tab le of Contents We ended 2019 with $81.3 million in cash, an increase of $0.3 million during the year.
Financing activities for 2020 include higher loan borrowings of $320.0 million primarily due to the issuance of $300 million of Senior Notes, offset by (1) higher repayments of revolving and term loan borrowings as the proceeds from the issuance of the Senior Notes were used to repay $290.7 million of outstanding term and revolving loan borrowings under the Facility, and (2) a decrease in dividends paid of $9.8 million.
As outlined in the table above, we have approximately $79.2 million in material contractual cash obligations due by the end of fiscal year 2022, which includes, among other things, scheduled debt repayments under the Syndicated Credit Facility, pension contributions, interest payments on our debt and lease commitments.
As outlined in the table above, we have approximately $86.4 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 lease commitments.
In 2021, we repaid approximately $60 million in term loan borrowings which contributed to the increase in cash used in financing activities (compared with 2020, when repayments on term loan borrowings were largely funded with the proceeds from the issuance of the $300 million Senior Notes).
In 2021, we repaid approximately $60 million in term loan borrowings which contributed to the increase in cash used in financing activities (compared with 2020, when repayments on term loan borrowings were largely funded with the proceeds from the issuance of the $300 million Senior Notes). 35 Ta b le of Contents We ended 2020 with $103.1 million in cash, an increase of $21.8 million during the year.
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 2021 2020 2019 2021 compared with 2020 2020 compared with 2019 (in thousands) EAAA segment net sales $ 549,182 $ 509,844 $ 585,917 7.7 % (13.0) % EAAA segment AOI (1) 37,268 21,403 28,832 74.1 % (25.8) % (1) Includes allocation of corporate SG&A expenses.
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 2022 2021 2020 2022 compared with 2021 2021 compared with 2020 (in thousands) EAAA segment net sales $ 544,179 $ 549,182 $ 509,844 (0.9) % 7.7 % EAAA segment AOI (1) 30,058 37,268 21,403 (19.3) % 74.1 % (1) Includes allocation of corporate SG&A expenses.
We ended 2020 with $103.1 million in cash, an increase of $21.8 million during the year. The increase was primarily due to the following: • Cash provided by operating activities was $119.1 million for 2020, which represents a decrease of $22.7 million compared to 2019.
The increase was primarily due to the following: • Cash provided by operating activities was $119.1 million for 2020, which represents a decrease of $22.7 million compared to 2019.
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) in Projected Benefit Obligation (in millions) 1% increase in actuarial assumption for discount rate $ (47.1) 1% decrease in actuarial assumption for discount rate 60.2 Domestic Salary Continuation Plan Increase (Decrease) in Projected Benefit Obligation (in millions) 1% increase in actuarial assumption for discount rate $ (3.0) 1% decrease in actuarial assumption for discount rate 3.6 39 Tab le of Contents Allowances for Expected Credit Losses.
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) in Projected Benefit Obligation (in millions) 1% increase in actuarial assumption for discount rate $ (22.5) 1% decrease in actuarial assumption for discount rate 26.7 Domestic Salary Continuation Plan Increase (Decrease) in Projected Benefit Obligation (in millions) 1% increase in actuarial assumption for discount rate $ (1.9) 1% decrease in actuarial assumption for discount rate 2.2 Allowances for Expected Credit Losses.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Impact of the COVID-19 Pandemic On March 1, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services.
Impact of the COVID-19 Pandemic On March 1, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the virus continues to impact areas where we operate and sell our products and services. The COVID-19 pandemic has had material adverse effects on our business, results of operations, and financial condition.
During 2021, we had consolidated net sales of $1,200.4 million, up 8.8% compared to $1,103.3 million in 2020, primarily due to the rebound in economic activity in certain countries following the impacts of COVID-19.
Consolidated net income for 2022 was $19.6 million or $0.33 per share, compared to consolidated net income of $55.2 million, or $0.94 per share, in 2021. During 2021, we had consolidated net sales of $1,200.4 million, up 8.8% compared to $1,103.3 million in 2020, primarily due to the rebound in economic activity in certain countries following the impacts of COVID-19.
Government stimulus programs, increased COVID-19 vaccination rates, and fewer COVID-19 related restrictions in some places contributed to a rebound in economic activity in certain countries driving higher revenues globally compared to fiscal year 2020.
Government stimulus programs, increased COVID-19 vaccination rates, and fewer COVID-19 related restrictions in some places contributed to a rebound in economic activity in certain countries in 2021 driving higher revenues globally compared to fiscal year 2020. Our global supply chain and manufacturing operations, however, experienced increased adverse impacts and disruptions in 2021 from COVID-19.
As a percentage of net sales, SG&A expenses decreased to 27.0% in 2021 versus 30.2% in 2020. 28 Tab le of Contents For 2020, our consolidated SG&A expenses decreased $55.9 million (14.4%) versus 2019. Currency translation had a $1.5 million (0.4%) negative impact on the year-over-year comparison.
As a percentage of net sales, SG&A expenses decreased to 25.0% in 2022 versus 27.0% in 2021. For 2021, our consolidated SG&A expenses decreased $8.9 million (2.7%) versus 2020. Currency translation had a $5.3 million (1.6%) negative impact on the year-over-year comparison.
In 2019, the weakening of the Euro, British Pound sterling, Australian dollar, Canadian dollar and Chinese Renminbi against the U.S. dollar had a negative impact on our net sales and operating income.
In 2020, the strengthening of the Euro, British Pound sterling, and Chinese Renminbi against the U.S. dollar had a positive impact on our net sales and operating loss.
These charges are included in selling, general and administrative expenses in the consolidated statements of operations. 29 Tab le of Contents Interest Expense For 2021, our interest expense increased $0.5 million to $29.7 million, versus $29.2 million in 2020, primarily due to (1) higher fixed-rate interest expense on the Senior Notes debt, which replaced variable-rate debt under the Syndicated Credit Facility, and (2) $4.9 million of deferred losses recognized on terminated interest rate swaps that were reclassified from accumulated other comprehensive loss into interest expense during the year.
Our average borrowing rate under the Syndicated Credit Facility as of January 1, 2023 was 5.78% compared to 1.91% at January 2, 2022. 30 Ta b le of Contents For 2021, our interest expense increased $0.5 million to $29.7 million, versus $29.2 million in 2020, primarily due to (1) higher fixed-rate interest expense on the Senior Notes debt, which replaced variable-rate debt under the Syndicated Credit Facility, and (2) $4.9 million of deferred losses recognized on terminated interest rate swaps that were reclassified from accumulated other comprehensive loss into interest expense during the year.
The Senior Notes can be redeemed on or after December 1, 2023, at specified redemption prices. See Note 9 entitled “Long-Term Debt” in Item 8 of this report for additional information.
The Senior Notes can be redeemed on or after December 1, 2023, at specified redemption prices. See Note 9 entitled “Long-Term Debt” in Item 8 of this Report for additional information. Forward-Looking Statements The Company continues to be challenged by high inflation and a dynamic geopolitical environment.
As of January 2, 2022, and January 3, 2021, we had state net operating loss carryforwards of $153.0 million and $142.7 million, respectively.
As of January 1, 2023, and January 2, 2022, we had state net operating loss carryforwards of $162.8 million and $153.0 million, respectively.
Currency translation had a $16.2 million (2.3%) negative impact on the year-over-year comparison. In 2021, the impact of COVID-19 continued to challenge our global supply chain which contributed to higher cost of sales and lower gross profit margins — particularly in the United States.
In 2021, the impact of COVID-19 continued to challenge our global supply chain which contributed to higher cost of sales and lower gross profit margins — particularly in the United States.
During the first quarter of 2020, as a result of changes in macroeconomic conditions related to the COVID-19 pandemic, we recognized a charge of $121.3 million for the impairment of goodwill and certain intangible assets. See Note 12 entitled “Goodwill and Intangible Assets” of Part II, Item 8 of this Annual Report for additional information.
During the first quarter of 2020, as a result of changes in macroeconomic conditions related to the COVID-19 pandemic, we recognized a charge of $121.3 million for the impairment of goodwill and certain intangible assets.
Currency fluctuations had an approximately $0.9 million (1.4%) positive impact on AOI for 2020. 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.
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.
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 2021 2020 2019 2021 compared with 2020 2020 compared with 2019 (in thousands) Consolidated cost of sales $ 767,665 $ 692,688 $ 810,062 10.8 % (14.5) % Consolidated selling, general and administrative expenses 324,315 333,229 389,117 (2.7) % (14.4) % For 2021, our consolidated costs of sales increased $75.0 million (10.8%) compared to 2020, primarily due to higher net sales and the continued adverse impacts of COVID-19.
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 2022 2021 2020 2022 compared with 2021 2021 compared with 2020 (in thousands) Consolidated cost of sales $ 860,186 $ 767,665 $ 692,688 12.1 % 10.8 % Consolidated selling, general and administrative expenses 324,190 324,315 333,229 0.0 % (2.7) % Consolidated Cost of Sales For 2022, our consolidated cost of sales increased $92.5 million (12.1%) compared to 2021, primarily due to higher sales and continuing inflationary pressures on raw materials and freight costs.
The Company’s foreign subsidiaries and certain non-material domestic subsidiaries are considered non-guarantors. Net sales for the non-guarantor subsidiaries were approximately $594 million for fiscal year 2021 and $548 million for fiscal year 2020. Total indebtedness of the non-guarantor subsidiaries was approximately $45 million as of January 2, 2022, and $88 million as of January 3, 2021.
Net sales for the non-guarantor subsidiaries were approximately $597 million for fiscal year 2022, $594 million for fiscal year 2021, and $548 million for fiscal year 2020. Total indebtedness of the non-guarantor subsidiaries was approximately $43 million as of January 1, 2023, and $45 million as of January 2, 2022.
These impacts to our supply chain and manufacturing operations increased our costs, decreased our ability to achieve manufacturing targets, increased lead times to our customers, and adversely affected our gross profit margin as a percentage of net sales.
These impacts to our supply chain and manufacturing operations increased our costs, decreased our ability to achieve manufacturing targets, increased lead times to our customers, and adversely affected our gross profit margin as a percentage of net sales. During fiscal year 2020, the COVID-19 pandemic resulted in 17.9% lower consolidated net sales compared to fiscal year 2019.
Management’s judgement 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.
If actual market conditions are less favorable than those projected by management, additional write-downs may be required. Management’s judgement 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.
Fiscal Year Percentage Change 2021 2020 2019 2021 compared with 2020 2020 compared with 2019 (in thousands) Consolidated net sales $ 1,200,398 $ 1,103,262 $ 1,343,029 8.8 % (17.9) % 27 Tab le of Contents Consolidated net sales for 2021 compared with 2020 For 2021, our consolidated net sales increased $97.1 million (8.8%) compared to 2020, comprised of higher sales volumes (approximately 5.1%) and higher prices (approximately 3.7%).
Fiscal Year Percentage Change 2022 2021 2020 2022 compared with 2021 2021 compared with 2020 (in thousands) Consolidated net sales $ 1,297,919 $ 1,200,398 $ 1,103,262 8.1 % 8.8 % 28 Ta b le of Contents Consolidated net sales for 2022 compared with 2021 For 2022, our consolidated net sales increased $97.5 million (8.1%) compared to 2021, comprised of higher sales volumes (approximately 5.4%) and higher prices (approximately 2.7%, including the impact of currency fluctuations).
Approximately $1.7 million of this cash was located in the U.S., and the remaining $95.6 million was located outside of the U.S. The cash located outside of the U.S. is indefinitely reinvested in the respective jurisdictions (except as identified below).
The cash located outside of the U.S. is indefinitely reinvested in the respective jurisdictions (except as identified below).
Management believes it is reasonably likely these impacts will continue and affect our future operations and results to some degree, particularly during the first half of 2022. During fiscal year 2020, the COVID-19 pandemic resulted in 17.9% lower consolidated net sales compared to fiscal year 2019.
Management believes it is reasonably likely these impacts will continue to affect our future operations and results to some degree, particularly during the first half of 2023. During fiscal year 2021, the COVID-19 pandemic had less of an impact on our overall financial results compared with the prior year as consolidated net sales increased 8.8% compared to fiscal year 2020.
During fiscal year 2021, the COVID-19 pandemic had less of an impact on our overall financial results as consolidated net sales increased 8.8% compared to fiscal year 2020.
The duration of the pandemic will ultimately determine the extent to which our operations are impacted. During fiscal year 2022, the COVID-19 pandemic continued to have less of an impact on our overall financial results compared with the prior year as consolidated net sales increased 8.1% compared to 2021.
See Note 20 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information . 30 Tab le of Contents 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 2021 2020 2019 2021 compared with 2020 2020 compared with 2019 (in thousands) AMS segment net sales $ 651,216 $ 593,418 $ 757,112 9.7 % (21.6) % AMS segment AOI (1) 85,014 89,097 120,921 (4.6) % (26.3) % (1) Includes allocation of corporate SG&A expenses.
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 2022 2021 2020 2022 compared with 2021 2021 compared with 2020 (in thousands) AMS segment net sales $ 753,740 $ 651,216 $ 593,418 15.7 % 9.7 % AMS segment AOI (1) 102,370 85,014 89,097 20.4 % (4.6) % (1) Includes allocation of corporate SG&A expenses.
AOI as a percentage of net sales increased to 6.8% in 2021 compared to 4.2% in 2020, due primarily to higher sales as discussed above. EAAA AOI for 2020 compared with 2019 AOI in EAAA decreased 25.8% during 2020 versus 2019, primarily due to the impacts of COVID-19 which resulted in lower sales volumes in 2020.
AOI as a percentage of net sales increased to 6.8% in 2021 compared to 4.2% in 2020, due primarily to higher sales as discussed above.
Under the Facility, we are required to make quarterly amortization payments of the term loan borrowings. The amortization payments are due on the last day of the calendar quarter. We are currently in compliance with all covenants under the Facility and anticipate that we will remain in compliance with the covenants for the foreseeable future.
The amortization payments are due on the last day of the calendar quarter. We are in compliance with all covenants under the Facility and anticipate that we will remain in compliance with the covenants for the foreseeable future. In the fourth quarter of 2020, we terminated our interest rate swaps and paid approximately $13 million to terminate the swap agreements.
Executive Overview Our revenues are derived from sales of floorcovering products, primarily modular carpet, luxury vinyl tile (“LVT”) and rubber flooring products. 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.
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.
See Note 12 entitled “Goodwill and Intangible Assets” of Part II, Item 8 of this Annual Report for additional information. During 2020, we also recognized fixed asset impairment charges of $5.0 million primarily related to certain FLOR design center closures and other projects that were abandoned or indefinitely delayed.
During 2022 and 2021, we recognized fixed asset impairment charges of $2.9 million and $4.4 million, respectively, for projects that were abandoned. During 2020, we recognized fixed asset impairment charges of $5.0 million primarily related to certain FLOR design center closures and other projects that were abandoned or indefinitely delayed.
We are not a party to any material off-balance sheet arrangements. 33 Tab le of Contents Analysis of Cash Flows The following table presents a summary of cash flows for fiscal years 2021, 2020 and 2019: Fiscal Year 2021 2020 2019 (in thousands) Net cash provided by (used in): Operating activities $ 86,689 $ 119,070 $ 141,768 Investing activities (28,071) (61,689) (74,222) Financing activities (60,858) (42,715) (66,677) Effect of exchange rate changes on cash (3,561) 7,086 (557) Net change in cash and cash equivalents (5,801) 21,752 312 Cash and cash equivalents at beginning of period 103,053 81,301 80,989 Cash and cash equivalents at end of period $ 97,252 $ 103,053 $ 81,301 We ended 2021 with $97.3 million in cash, a decrease of $5.8 million during the year.
The increase of $41.2 million was primarily due to higher raw material costs and freight costs due to continuing inflationary pressures and inventory build driven by higher customer demand. 34 Ta b le of Contents Analysis of Cash Flows The following table presents a summary of cash flows for fiscal years 2022, 2021 and 2020: Fiscal Year 2022 2021 2020 (in thousands) Net cash provided by (used in): Operating activities $ 43,061 $ 86,689 $ 119,070 Investing activities (18,437) (28,071) (61,689) Financing activities (19,490) (60,858) (42,715) Effect of exchange rate changes on cash (4,822) (3,561) 7,086 Net change in cash and cash equivalents 312 (5,801) 21,752 Cash and cash equivalents at beginning of period 97,252 103,053 81,301 Cash and cash equivalents at end of period $ 97,564 $ 97,252 $ 103,053 We ended 2022 with $97.6 million in cash, an increase of $0.3 million during the year.
As a result, macroeconomic factors such as employment rates, office vacancy rates, capital spending, productivity and efficiency gains that impact corporate profitability in general, also affect our business. 25 Tab le of Contents During fiscal year 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas and determined that it has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).
During fiscal year 2021, the Company largely completed its integration of the nora acquisition, and integration of its European and Asia-Pacific commercial areas, and determined that it has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”).
Restructuring Plans On September 8, 2021, the Company committed to a new restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations.
Restructuring Plans On September 8, 2021, the Company committed to a restructuring plan that continues to focus on efforts to improve efficiencies and decrease costs across its worldwide operations. The plan involves a reduction of approximately 188 employees and the closure of the Company’s carpet tile manufacturing facility in Thailand at the end of the first quarter of 2022.
Sales in the corporate office market increased 6.8% in 2021 compared to 2020. These increases were partially offset by decreases in the hospitality (down 38.3%) and public buildings (down 20%) market segments. AMS segment net sales for 2020 compared with 2019 During 2020, net sales in AMS decreased 21.6% versus the comparable period in 2019.
On a market segment basis, the AMS sales increase was most significant in non-corporate office market segments including healthcare (up 19.1%), retail (up 19.1%) and education (up 18.3%). Sales in the corporate office market increased 6.8% in 2021 compared to 2020. These increases were partially offset by decreases in the hospitality (down 38.3%) and public buildings (down 20%) market segments.
To the extent that actual obsolescence of our inventory differs from our estimate by 10%, our 2021 net income would be higher or lower by approximately $2.1 million, on an after-tax basis. 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.
To the extent that actual obsolescence of our inventory differs from our estimate by 10%, our 2022 net income would be higher or lower by approximately $1.3 million, on an after-tax basis. 40 Ta b le of Contents Pension Benefits.
Fluctuations in currency exchange rates had a positive impact on our year-over-year sales comparison of approximately $7.1 million, meaning that if currency levels had remained constant year over year, our 2020 sales would have been lower by this amount.
Fluctuations in currency exchange rates had a negative impact on our year-over-year consolidated net sales comparison of approximately $58.8 million, meaning that if currency levels had remained constant year-over-year, our 2022 net sales would have been higher by this amount. On a market segment basis, the sales increase was most significant in the corporate office, retail and education market segments.
Senior Notes On November 17, 2020, the Company issued $300 million aggregate principal amount of 5.50% Senior Notes due 2028. The Senior Notes bear an interest rate at 5.50% per annum and mature on December 1, 2028. Interest is paid semi-annually on June 1 and December 1 of each year, beginning on June 1, 2021.
For additional information on interest rates, please see Item 7A and Note 9 entitled “Long-Term Debt” in Item 8 of this Report. Senior Notes On November 17, 2020, the Company issued $300 million aggregate principal amount of 5.50% Senior Notes due 2028. The Senior Notes bear an interest rate at 5.50% per annum and mature on December 1, 2028.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeRate-Sensitive Liabilities 2022 2023 2024 2025 Thereafter Total Fair Value (in thousands) Long-term Debt: Variable Rate $ 15,002 $ 15,002 $ 15,002 $ 180,125 $ — $ 225,131 $ 225,131 Fixed Rate — — — — 300,000 300,000 315,039 Our weighted average interest rate for our outstanding borrowings under the Syndicated Credit Facility as of January 2, 2022 and January 3, 2021 was 1.91% and 1.89%, respectively.
Biggest changeRate-Sensitive Liabilities 2023 2024 2025 2026 Thereafter Total Fair Value (in thousands) Long-term Debt: Variable Rate $ 10,211 $ 10,211 $ 10,211 $ 10,211 $ 185,488 $ 226,332 $ 226,332 Fixed Rate — — — — 300,000 300,000 248,652 Our weighted average interest rate for our outstanding borrowings under the Facility as of January 1, 2023 and January 2, 2022 was 5.78% and 1.91%, respectively.
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, Thailand and Australia, and sell our products in more than 100 countries.
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.
Foreign Currency Exchange Rate Risk As of January 2, 2022, a 10% decrease or increase in the levels of foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would result in a decrease in the fair value of our short-term financial instruments (primarily cash, accounts receivable and accounts payable) of approximately $11.3 million or an increase in the fair value of our financial instruments of approximately $13.8 million, respectively.
Foreign Currency Exchange Rate Risk As of January 1, 2023, a 10% decrease or increase in the levels of foreign currency exchange rates against the U.S. dollar, with all other variables held constant, would result in a decrease in the fair value of our short-term financial instruments (primarily cash, accounts receivable and accounts payable) of approximately $11.3 million or an increase in the fair value of our financial instruments of approximately $13.8 million, respectively.
The carrying value of the Company’s borrowings under our Syndicated Credit Facility approximates fair value as the Facility bears variable interest rates that are similar to existing market rates.
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.
Based on a hypothetical immediate 100 basis point increase in interest rates, with all other variables held constant, the fair value of our fixed rate long-term debt would be impacted by a net decrease of $10.8 million.
Based on a hypothetical immediate 100 basis point increase in interest rates, with all other variables held constant, the fair value of our fixed rate long-term debt would be impacted by a net decrease of $11.6 million.
The discount rates used for the present value computations were selected based on market interest and foreign currency exchange rates in effect at January 2, 2022. The values that result from these computations are then compared with the market values of the financial instruments.
The discount rates used for the present value computations were selected based on market interest and foreign currency exchange rates in effect at January 1, 2023. The values that result from these computations are then compared with the market values of the financial instruments.
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 January 2, 2022.
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 January 1, 2023.
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. 42 Tab le of Contents
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. 43 Ta b le of Contents
Conversely, a 100 basis point decrease in interest rates would result in a net increase in the fair value of our fixed rate long-term debt of $6.0 million.
Conversely, a 100-basis point decrease in interest rates would result in a net increase in the fair value of our fixed rate long-term debt of $12.3 million.
As a result, we consider the risk of counter-party default to be minimal. There were no active derivative instruments as of January 2, 2022. Interest Rate Market Risk Exposure Changes in interest rates affect the interest paid on certain of our debt.
As a result, we consider the risk of counter-party default to be minimal. There were no active derivative instruments as of January 1, 2023. Interest Rate Market Risk Exposure Changes in interest rates affect the interest paid on our variable rate debt.
The following table summarizes our market risks associated with our variable rate debt obligations under the Syndicated Credit Facility and fixed rate Senior Notes debt as of January 2, 2022. For debt obligations, the table presents principal cash flows by year of maturity.
The following table summarizes our market risks associated with our variable rate debt obligations under the Facility and fixed rate Senior Notes debt as of January 1, 2023. For debt obligations, the table presents principal cash flows by year of maturity.
During 2021, we recognized a $40.1 million increase in our accumulated other comprehensive loss – foreign currency translation adjustment account compared with January 3, 2021, because of the strengthening of the Euro, British Pound sterling, Australian dollar, and Chinese Renminbi against the U.S. dollar in 2021.
During 2022, we recognized a $38.3 million increase in our accumulated other comprehensive loss – foreign currency translation adjustment account compared with January 2, 2022, because of the weakening of the Euro, British Pound sterling, Australian dollar, and Chinese Renminbi against the U.S. dollar in 2022.
The differences are the hypothetical gains or losses associated with each type of risk. 41 Tab le of Contents Interest Rate Risk As discussed above, our Syndicated Credit Facility is comprised of a combination of term loan and revolving loan borrowings.
The differences are the hypothetical gains or losses associated with each type of risk. 42 Ta b le of Contents Interest Rate Risk As discussed above, our Facility is comprised of a combination of term loan and revolving loan borrowings.

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