ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Our revenues are derived from sales of floorcovering products, primarily modular carpet, resilient flooring, including luxury vinyl tile (“LVT”), rubber flooring products, and installation services and accessories. Our business, as well as the commercial interiors industry in general, is cyclical in nature and is impacted by economic conditions and trends that affect the markets for commercial and institutional business space. The commercial interiors industry, including the market for floorcovering products, is largely driven by reinvestment by corporations and institutions into their existing operations in the form of new fixtures and furnishings for their workplaces. In significant part, the timing and amount of such reinvestments are impacted by the profitability of those entities. As a result, macroeconomic factors such as employment rates, office vacancy rates, work from home policies, capital spending, productivity and efficiency gains that impact profitability in general, also affect our business.
The Company has two operating and reportable segments – namely Americas (“AMS”) and Europe, Africa, Asia and Australia (collectively “EAAA”). The AMS operating segment includes the United States, Canada and Latin America geographic areas. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information . The results of operations discussion below also includes segment information.
We focus our marketing and sales efforts on both corporate office and non-corporate office market segments, to reduce somewhat our exposure to economic cycles that affect the corporate office market segment more adversely, as well as to capture additional market share. More than half of our consolidated net sales were in non-corporate office markets in fiscal years 2025, 2024, and 2023, primarily in education, healthcare, public buildings, retail, residential/living, hospitality, transportation, and consumer residential market segments.
Executive Summary
Our One Interface strategy continues to fuel growth as we strengthen global capabilities, improve commercial productivity, and simplify and optimize our operations. During 2025, we had consolidated net sales of $1,386.9 million, up 5.4% compared to $1,315.7 million in 2024, primarily due to higher customer demand — particularly in the healthcare and education market segments. Consolidated operating income for 2025 was $164.0 million compared to consolidated operating income of $134.4 million in 2024, primarily due to higher sales and higher gross profit margin driven by higher average sales prices, favorable product mix, and manufacturing efficiencies, partially offset by higher input costs and tariff costs. Consolidated net income for 2025 was $116.1 million, or $1.96 per diluted share, compared to consolidated net income of $86.9 million, or $1.48 per diluted share, in 2024.
During 2024, we had consolidated net sales of $1,315.7 million, up 4.3% compared to $1,261.5 million in 2023, primarily due to increased customer demand – particularly in the retail and education market segments. Consolidated operating income for 2024 was $134.4 million compared to consolidated operating income of $104.5 million in 2023, primarily due to higher sales volumes and lower raw material costs. Consolidated net income for 2024 was $86.9 million, or $1.48 per diluted share, compared to consolidated net income of $44.5 million, or $0.76 per diluted share, in 2023.
A detailed discussion of our 2025 and 2024 consolidated and segment performance appears below under “Analysis of Results of Operations”.
Cybersecurity Event
As previously disclosed in our current report on Form 8-K filed with the Commission on November 23, 2022, we discovered a cybersecurity attack on November 20, 2022, perpetrated by unauthorized third parties, affecting our IT systems. During fiscal year 2024, we recovered $5.6 million in insurance proceeds representing business interruption proceeds and reimbursement of certain costs in connection with the Cyber Event. Of the total insurance proceeds received in fiscal year 2024, $4.8 million of business interruption proceeds were recognized as a benefit in other expense / income, net in the consolidated statements of operations and $0.8 million was recognized as a reduction of selling, general and administrative expenses. The insurance claim for the Cyber Event was closed at the end of fiscal year 2024, and we are not expecting to receive any additional proceeds in connection with the Cyber Event.
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During 2023, we incurred approximately $1.1 million in connection with the investigation of the Cyber Event, which was recognized in selling, general, and administrative expenses in the consolidated statements of operations.
Impact of Macroeconomic Conditions
Disruptions in economic markets due to inflation, the impact of tariffs on the demand for our products, a challenging supply chain environment, slow market conditions in certain parts of the globe, significant financial pressures in the commercial office market globally, and geopolitical factors including wars, civil and political unrest, and other conflicts, all pose challenges which may adversely affect our future performance . Management believes it is reasonably likely that these challenges will continue to affect our future operations and demand for our products to some degree during fiscal year 2026. W e plan to continue evaluating our cost structure and global manufacturing footprint to identify and activate opportunities to decrease costs and optimize our global cost structure.
The Company expects higher production volumes and lower per unit fixed costs in 2026, and anticipates these impacts will benefit our gross profit margin in 2026. We also expect that continuing challenges in supply chain markets, tariff costs, and higher raw material costs will adversely impact our performance in 2026. We anticipate that continuing slow market conditions in parts of the globe and significant financial pressures in the commercial office market globally will adversely impact our future performance and demand for our products.
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Analysis of Results of Operations
Consolidated Results
The discussion and analyses below reflects the factors and trends discussed in the preceding sections. Fiscal years 2025, 2024, and 2023 each included 52 weeks.
The following table presents the amounts (in U.S. dollars) by which the exchange rates for translating Euros, British Pounds sterling, Australian dollars, Chinese Renminbi, Canadian dollars, and other currencies into U.S. dollars have affected our consolidated net sales and operating income during the past three years:
(in millions)
Impact of changes in foreign currency on consolidated net sales
Impact of changes in foreign currency on consolidated operating income
Consolidated net sales denominated in currencies other than the U.S. dollar were approximately 43% in 2025, 43% in 2024, and 46% in 2023. Because we have substantial international operations, we include the impact of fluctuations in foreign currency exchange rates in our discussion below.
The following table presents, as a percentage of net sales, certain items included in our consolidated statements of operations during the past three years.
Fiscal Year
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring, asset impairment, other (gains) and charges
Operating income
Interest/Other expense, net
Income before income tax expense
Income tax expense
Net income
Consolidated Net Sales
Below is information regarding our consolidated net sales, and analysis of those results, for each of the last three fiscal years.
Fiscal Year
Percentage Change
2025 compared with 2024
2024 compared with 2023
(in thousands)
Consolidated net sales
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Consolidated net sales for 2025 compared with 2024
For 2025, consolidated net sales increased $71.2 million (5.4%) compared to 2024, comprised of higher sales volume (approximately 3.0%) and higher average sales prices (approximately 2.4%). Fluctuations in currency exchange rates had a positive impact of approximately $14.9 million on consolidated net sales for 2025, primarily due to the strengthening of the Euro against the U.S. dollar. On a market segment basis, the sales increase was most significant in the healthcare, education, public buildings, and transportation market segments. See the segment results discussion below for additional information on market segments.
Consolidated net sales for 2024 compared with 2023
For 2024, consolidated net sales increased $54.2 million (4.3%) compared to 2023, comprised of higher sales volume (approximately 2.7%) and higher average sales prices (approximately 1.6%). Fluctuations in currency exchange rates had a negative impact of $1.8 million on consolidated net sales for 2024, indicating that if currency levels had remained constant year-over-year, our 2024 net sales would have been higher by this amount. On a market segment basis, the sales increase was most significant in the retail, education, residential living, and public buildings market segments partially offset by decreases in the hospitality, corporate office, and consumer residential market segments. See the segment results discussion below for additional information on market segments.
Consolidated Cost and Expenses
The following table presents our consolidated cost of sales and selling, general and administrative (“SG&A”) expenses during the past three years:
Fiscal Year
Percentage Change
2025 compared with 2024
2024 compared with 2023
(in thousands)
Consolidated cost of sales
Consolidated selling, general and administrative expenses
Consolidated Cost of Sales
For 2025, consolidated cost of sales increased $16.8 million (2.0%) compared to 2024, primarily due to higher sales volume, increased tariff costs on rubber and luxury vinyl tile products imported into the U.S. (approximately $7.3 million), and higher raw material costs, partially offset by lower manufacturing costs driven by favorable fixed cost absorption on higher volume and production efficiencies. Currency translation had a negative impact on consolidated cost of sales for 2025 and increased our costs by approximately $9.1 million (1.1%) compared to 2024. As a percentage of net sales, our consolidated cost of sales decreased to 61.3% in 2025 versus 63.3% in 2024. Management believes it is reasonably likely that lower per unit fixed costs due to higher production volumes and plant productivity initiatives will reduce our costs to some degree in 2026. These favorable impacts are expected to be partially offset by continuing tariff costs and higher raw material costs in 2026.
For 2024, our consolidated cost of sales increased $12.3 million (1.5%) compared to 2023, primarily due to higher sales partially offset by lower raw material costs. Currency translation had a positive impact on consolidated cost of sales and partially reduced our costs by approximately $1.4 million (0.2%) compared to 2023. As a percentage of net sales, our consolidated cost of sales decreased to 63.3% in 2024 versus 65.0% in 2023.
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Consolidated Gross Profit
For 2025, consolidated gross profit, as a percentage of net sales, was 38.7% compared to 36.7% for 2024. The increase in gross profit percentage was primarily due to higher average sales prices and favorable product mix (approximately 1%) and lower manufacturing costs (approximately 1%) as discussed above. Management believes it is reasonably likely that gross profit in 2026 will be positively impacted by lower manufacturing costs as result of production efficiencies partially offset by continuing tariff and higher raw material costs.
For 2024, consolidated gross profit, as a percentage of net sales, was 36.7% compared to 35.0% for 2023. The increase in gross profit percentage was primarily due to (i) lower costs (approximately 1%) driven by lower raw material costs and lower fixed costs per unit as a result of higher volume and (ii) higher pricing (approximately 1%).
Consolidated SG&A Expenses
For 2025, consolidated SG&A expenses were $373.4 million versus $348.5 million in 2024. SG&A expenses increased $24.8 million (7.1%) in 2025 compared to 2024, primarily due to (i) higher variable compensation of $8.6 million as a result of higher commissions on increased sales and higher bonus costs driven by improved operating results, (ii) higher employee benefits and labor costs of $8.3 million, (iii) higher severance costs of $4.5 million due to employee separations, and (iv) higher professional fees of $2.6 million. Currency fluctuations had a negative impact on consolidated SG&A expenses and increased our costs by approximately $3.5 million (1.0%) compared to 2024. As a percentage of net sales, SG&A expenses increased to 26.9% in 2025 versus 26.5% in 2024.
For 2024, consolidated SG&A expenses were $348.5 million versus $339.0 million in 2023. Currency translation had no material impact on consolidated SG&A expenses for 2024. Consolidated SG&A expenses increased $9.5 million (2.8%) in 2024 compared to 2023, primarily due to higher people costs of $15.7 million driven by increased variable compensation as a result of higher operating income compared to 2023, partially offset by lower severance costs of $5.6 million driven by employee headcount reduction and cost saving initiatives in the prior year period. As a percentage of net sales, SG&A expenses decreased to 26.5% in 2024 versus 26.9% in 2023.
Restructuring Plan
Pursuant to a previous restructuring plan, the Company completed the sale of its Thailand manufacturing facility during 2023 and recognized a gain of $2.7 million.
See Note 15 entitled “Restructuring and Other” of Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Interest Expense
For 2025, interest expense was $19.5 million, versus $23.2 million in 2024, primarily due to lower interest rates and lower outstanding borrowings under the Syndicated Credit Facility for most of 2025. On December 3, 2025, the outstanding borrowings under the $300 million Senior Notes were redeemed and the debt was extinguished. In addition, the Syndicated Credit Facility was amended and restated. In connection with these transactions, we recorded $3.1 million of debt extinguishment costs, which are recognized in interest expense in the consolidated statements of operations. See Note 9 entitled “Long-Term Debt” of Part II, Item 8 of this Annual Report on Form 10-K for additional information. Our average borrowing rate under the Syndicated Credit Facility as of December 28, 2025, was 5.12% compared to 5.62% at December 29, 2024.
For 2024, our interest expense was $23.2 million, versus $31.8 million in 2023, primarily due to lower outstanding term loan borrowings under the Syndicated Credit Facility. Our average borrowing rate under the Syndicated Credit Facility as of December 29, 2024, was 5.62% compared to 6.61% at December 31, 2023.
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Other Expense / Income, net
During 2025, other expense (income), net, was $7.6 million versus $(2.4) million in 2024. The increase of $9.9 million was primarily due to $4.7 million in foreign currency transaction losses from the strengthening of the Euro against the U.S. dollar and higher pension cost of approximately $1.1 million. The increase was also impacted by non-recurring insurance proceeds recognized in 2024, as discussed immediately below.
During 2024, other expense (income), net, was $(2.4) million versus $9.1 million in 2023. The decrease was primarily due to the receipt in 2024 of $4.8 million of business interruption insurance proceeds related to the Cyber Event and $2.4 million of insurance proceeds related to a property casualty loss that occurred in fiscal year 2023. These benefits were partially offset by the recognition of $2.2 million of cumulative translation losses reclassified from accumulated other comprehensive loss due to the substantial liquidation of our foreign subsidiary in Thailand during 2024.
Tax
For fiscal year 2025, the Company recorded income tax expense of $20.8 million on pre-tax income of $136.9 million, resulting in an effective tax rate of 15.2% compared with income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4%, for fiscal year 2024. The decrease in the effective tax rate for fiscal year 2025, compared to fiscal year 2024, was primarily due to the remeasurement and adjustment of deferred taxes, favorable changes related to the utilization of foreign tax credit carryforwards and an increase in the Foreign-Derived Intangible Income deduction. See Note 16 entitled “Income Taxes” of Part II Item 8 of this Annual Report on Form 10-K for additional information .
For fiscal year 2024, the Company recorded income tax expense of $26.6 million on pre-tax income of $113.6 million, resulting in an effective tax rate of 23.4% compared with income tax expense of $19.1 million on pre-tax income of $63.7 million, resulting in an effective tax rate of 30.1%, for fiscal year 2023. The decrease in the effective tax rate for fiscal year 2024, compared to fiscal year 2023, was primarily due to the release of the valuation allowance on interest expense carryforwards, favorable tax benefits related to share-based compensation, and a favorable tax benefit related to a change in tax rate related to the UK pension plan. These favorable changes were partially offset by a decrease in favorable tax benefits related to the repatriation of previously taxed foreign earnings and utilization of foreign tax benefits.
Segment Results
As discussed above, the Company has two operating and reportable segments – AMS and EAAA. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information .
During fiscal year 2024, the Company implemented a cost center realignment initiative as part of the Company’s efforts to centralize certain global/shared functions. During 2024, SG&A expenses for these global support functions were allocated to each reportable segment consistent with the allocation methodology used to allocate corporate overhead in prior periods. Fiscal year 2023 amounts below were not recast as there was no material impact to either reportable segment. There were no changes to the composition of the Company’s operating or reportable segments.
AMS Segment – Net Sales and Adjusted Operating Income (“AOI”)
The following table presents AMS segment net sales and AOI for the last three fiscal years:
Fiscal Year
Percentage Change
2025 compared with 2024
2024 compared with 2023
(in thousands)
AMS segment net sales
AMS segment AOI (1)
(1) Includes allocation of corporate and global support SG&A expenses as discussed above. Excludes Cyber Event impact and restructuring, asset impairment, severance, and other, net. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
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AMS Segment Net Sales for 2025 compared with 2024
During 2025, net sales in AMS increased 5.4% versus 2024, comprised of higher sales volume - particularly increased rubber flooring volume and higher average sales prices. On a market segment basis, the AMS sales increase was most significant in the healthcare (up 21.4%), education (up 8.2%), public buildings (up 10.7%), and corporate office (up 1.5%) market segments, partially offset by decreases in the residential living (down 4.1%) and retail (down 2.5%) market segments.
AMS Segment Net Sales for 2024 compared with 2023
During 2024, net sales in AMS increased 8.7% versus 2023, comprised of higher sales volume and higher average sales prices. On a market segment basis, the AMS sales increase was most significant in the retail (up 81.5%), education (up 13.5%), public buildings (up 27.9%), and residential living (up 23.3%) market segments partially offset by decreases in the corporate office (down 1.7%), hospitality (down 18.0%), and consumer residential (down 10.4%) market segments.
AMS AOI for 2025 compared with 2024
AOI in AMS increased 28.8% during 2025 compared to 2024. Higher gross profit in 2025, driven by higher sales, favorable product mix, and manufacturing efficiencies, partially offset by tariff costs, contributed to the increase in AMS AOI for 2025. As a percentage of net sales, AOI increased to 16.3% in 2025 versus 13.3% in 2024.
AMS AOI for 2024 compared with 2023
AOI in AMS increased 21.4% during 2024 compared to 2023. Higher gross profit in 2024, driven by higher sales, lower raw material costs, and favorable fixed cost absorption contributed to the increase in AMS AOI for 2024. AMS SG&A expenses as a percentage of net sales decreased approximately 0.8% compared to 2023, also contributed to the increase in AOI. As a percentage of net sales, AOI increased to 13.3% in 2024 versus 11.9% in 2023 .
EAAA Segment – Net Sales and AOI
The following table presents EAAA segment net sales and AOI for the last three fiscal years:
Fiscal Year
Percentage Change
2025 compared with 2024
2024 compared with 2023
(in thousands)
EAAA segment net sales
EAAA segment AOI (1)
(1) Includes allocation of corporate and global support SG&A expenses as discussed above. Excludes purchase accounting amortization, Cyber Event impact, and restructuring, asset impairment, severance, and other, net. See Note 19 entitled “Segment Information” included in Item 8 of this Annual Report on Form 10-K for additional information.
EAAA Segment Net Sales for 2025 compared with 2024
During 2025, net sales in EAAA increased 5.5% versus 2024, primarily due to favorable currency fluctuations of approximately $15.9 million (3.1%) from the strengthening of the Euro against the U.S. dollar, higher sales volume, and higher average sales prices. On a market segment basis, the EAAA sales increase was most significant in the transportation (up 35.7%), public buildings (up 24.5%), healthcare (up 18.1%), and education (up 5.8%) market segments.
EAAA Segment Net Sales for 2024 compared with 2023
During 2024, net sales in EAAA decreased 1.8% versus 2023, primarily due to lower sales volume. Currency fluctuations had a negative impact of approximately $0.8 million (0.2%) on EAAA net sales for 2024 compared to 2023 due to the weakening of the Euro, Chinese Renminbi, and Australian dollar against the U.S dollar, partially offset by the strengthening of the British Pound sterling against the U.S. dollar. On a market segment basis, the EAAA sales decrease was most significant in the public buildings (down 21%), hospitality (down 24.1%), and healthcare (down 6.8%) market segments, partially offset by an increase in the residential living (up 9.1%) market segment.
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EAAA AOI for 2025 compared with 2024
AOI in EAAA increased 4.8% during 2025 versus 2024, primarily due to higher gross profit margin driven by favorable manufacturing costs and higher sales volume. Currency fluctuations had a positive impact of approximately $2.8 million (3.8%) on EAAA AOI in 2025 compared to 2024, primarily due to the strengthening of the Euro against the U.S. dollar. As a percentage of net sales, AOI was 6.7% in 2025 versus 6.8% in 2024.
EAAA AOI for 2024 compared with 2023
AOI in EAAA increased 21.7% during 2024 versus 2023. Higher gross profit in 2024, driven by lower raw material costs partially offset by lower sales volume contributed to the increase in EAAA AOI for 2024. Currency fluctuations had no material impact on EAAA AOI in 2024 compared to 2023. As a percentage of net sales, AOI was 6.8% in 2024 versus 5.5% in 2023.
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Financial Condition, Liquidity and Capital Resources
General
In our business, we require cash and other liquid assets primarily to purchase raw materials and to pay other manufacturing costs, in addition to funding normal course SG&A expenses, anticipated capital expenditures, interest expense and potential special projects. We generate our cash and other liquidity requirements primarily from our operations and from borrowings under our Syndicated Credit Facility (the “Facility”).
We anticipate that our liquidity, cash flows from operations, cash and cash equivalents, and other sources of liquidity are sufficient to meet our obligations for the next 12 months, and we expect to generate sufficient cash to meet our long-term obligations. However, the Company’s cash flows from operations can be affected by numerous factors including raw material availability and cost, demand for our products, and other factors described in “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.
Below are estimates of our material cash requirements for future periods. The short-term period represents payments due within the 12 months following December 28, 2025, and the long-term period represents payments due beyond the short-term period.
Payments Due by Period
Short-Term
Long-Term
Total
(in thousands)
Long-term debt obligations
Operating and finance lease obligations
Expected interest payments
Purchase obligations
Pension cash obligations
Total
Historically, we use more cash in the first half of the fiscal year, as we pay insurance premiums, taxes and incentive compensation and build up inventory in preparation for the holiday/vacation season of our international operations. As outlined in the table above, we have approximately $70.0 million in material contractual cash obligations due within the next year, which includes, among other things, scheduled debt repayments under the Facility, pension contributions, interest payments on our debt, and payments on our lease obligations. Our long-term debt obligations include the contractually scheduled principal repayment of our term loan and revolving loan borrowings under the Facility, which matures in 2030. Operating and finance lease obligations consist of undiscounted lease payments due over the lease term. Expected interest payments are those associated with borrowings under the Facility consistent with our contractually scheduled principal repayments. Our purchase obligations are for non-cancellable agreements primarily for raw material purchases and capital expenditures. Our pension obligations include contributions and expected benefit payments to be paid by the Company related to certain defined benefit pension plans and exclude the expected benefit payments for two of our funded foreign defined benefit plans as these obligations will be paid by the plans.
Based on current interest rates and debt levels, we expect our aggregate interest expense for 2026 to be approximately $10 million. We estimate aggregate capital expenditures in 2026 to be approximately $55 million, although we are not committed to this amount.
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Liquidity
As of December 28, 2025, we had $71.3 million in cash, which was mostly located outside of the U.S. We consider cash located outside of the U.S. as indefinitely reinvested in the respective jurisdictions (except as identified below). We believe that our strategic plans and business needs, particularly for working capital needs and capital expenditure requirements in Europe, Asia, and Australia, support our assertion that a portion of our cash in foreign locations will be reinvested and remittance will be postponed indefinitely. Of the cash held in foreign jurisdictions, approximately $13.3 million relates to earnings which we have determined are not permanently reinvested, and as such we have provided for foreign withholding and U.S. state income taxes on these amounts in accordance with applicable accounting standards.
As of December 28, 2025, we had $181.8 million of borrowings outstanding under our Facility, of which $175.6 million were term loan borrowings and $6.2 million were revolving loan borrowings. Additionally, $0.6 million in letters of credit were outstanding under the Facility at the end of fiscal year 2025. As of December 28, 2025, we had additional borrowing capacity of $243.2 million under the Facility. As of December 28, 2025, the weighted average interest rate on borrowings outstanding under the Facility was 5.12%.
It is important for you to consider that we have a significant amount of indebtedness. Our Facility matures on December 3, 2030. We cannot assure you that we will be able to renegotiate or refinance any of our debt on commercially reasonable terms, or at all. If we are unable to refinance our debt or obtain new financing, we would have to consider other options, such as selling assets to meet our debt service obligations and other liquidity needs, or using cash, if available, that would have been used for other business purposes.
We have borrowings based on variable interest rates (as described below) that expose the Company to the risk that interest rates may increase. For information regarding the current variable interest rates of these borrowings, and the potential impact on our interest expense from hypothetical increases in interest rates, please see the discussion in Item 7A of this Report.
We are not a party to any material off-balance sheet arrangements.
Balance Sheet
Accounts receivable, net, were $174.5 million at December 28, 2025, compared to $171.1 million at December 29, 2024. The increase of $3.3 million was primarily due to the impact of higher net sales as a result of increased customer demand in 2025.
Inventories, net, were $275.0 million at December 28, 2025, compared to $260.6 million at December 29, 2024. The increase of $14.4 million was primarily due to finished goods inventory build as higher customer demand is expected to continue into 2026. Currency fluctuations also impacted the increase in inventories due to the strengthening of the Euro against the U.S. dollar.
Analysis of Cash Flows
The following table presents a summary of cash flows for fiscal years 2025, 2024 and 2023:
Fiscal Year
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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We ended 2025 with $71.3 million in cash, a decrease of $27.9 million during the year. The decrease was primarily due to the following:
• Cash provided by operating activities was $167.9 million for 2025, which represents an increase of $19.5 million compared to 2024. The increase in operating cash flows was primarily due to higher sales during 2025 and the impact of foreign currency from the strengthening of the Euro against the U.S. dollar resulting in a source of cash from higher receivables.
• Cash used in investing activities was $46.2 million for 2025, which represents an increase of $15.8 million compared to 2024. The increase was primarily due to an increase in capital expenditures attributable to a greater capital investment in manufacturing automation and robotics solutions in 2025.
• Cash used in financing activities was $159.3 million for 2025, which represents an increase of $34.1 million compared to 2024. The increase was primarily attributable to the repayment of the $300 million Senior Notes in 2025, partially offset by $170 million of proceeds from new term loan borrowings under the amended and restated Syndicated Credit Facility on December 3, 2025. In 2025, we repurchased $18.1 million of our outstanding common stock. See section below entitled “Share Repurchases” for additional information.
We ended 2024 with $99.2 million in cash, a decrease of $11.3 million during the year. The decrease was primarily due to the following:
• Cash provided by operating activities was $148.4 million for 2024, which represents an increase of $6.4 million compared to 2023. The increase in operating cash flows was primarily due to higher sales during 2024 resulting in a source of cash from lower inventory balances partially offset by a use of cash as a result of higher accounts receivable. The 2023 comparable period includes a source of cash for accounts receivable as delayed customer billings related to the 2022 Cyber Event were collected in 2023.
• Cash used in investing activities was $30.4 million for 2024, which represents an increase of $10.9 million compared to 2023. The increase was primarily attributable to an increase in capital expenditures due to increased capital investment partially offset by $2.4 million of insurance proceeds related to a 2023 property casualty loss. The 2023 comparable period includes proceeds of approximately $6.6 million from the sale of the Company’s Thailand real estate.
• Cash used in financing activities was $125.2 million for 2024, which represents an increase of $13.7 million compared to 2023. The increase was primarily attributable to higher prepayments of term loan borrowings during 2024 compared to 2023.
We ended 2023 with $110.5 million in cash, an increase of $12.9 million during the year. The increase was primarily due to the following:
• Cash provided by operating activities was $142.0 million for 2023, which represents an increase of $99.0 million compared to 2022. The increase in operating cash flows was primarily due to a greater source of cash from working capital in 2023. Specifically, customer collections in 2023 contributed to a decrease in accounts receivable, primarily attributable to delays in customer billings from the Cyber Event, in which due dates for those delayed billings were pushed from the fourth quarter of 2022 to the first quarter of 2023. The 2022 comparable period also included a greater use of cash for working capital attributable to an increase in inventories compared with 2023.
• Cash used in investing activities was $19.5 million for 2023, which represents an increase of $1.1 million compared to 2022. The increase was primarily attributable to an increase in capital expenditures due to increased capital investment, partially offset by the proceeds of approximately $6.6 million from the sale of the Company’s Thailand real estate in 2023.
• Cash used in financing activities was $111.6 million for 2023, which represents an increase of $92.1 million compared to 2022. The year-over-year difference was primarily due to lower revolving loan borrowings combined with higher repayments of term loan borrowings in 2023 as a result of cash generated from operating activities as described above.
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• Fiscal year 2022 also included repurchases of the Company’s common stock that did not occur in 2023, which partially offset the increased use of cash for financing activities in 2023 compared with 2022.
Share Repurchases
In May 2022, the Company adopted a new share repurchase program in which the Company is authorized to repurchase up to $100 million of its outstanding shares of common stock. The program has no specific expiration date. During fiscal year 2025, the Company repurchased 750,166 shares of common stock at a weighted average price of $24.23 per share pursuant to this program. No shares of common stock were repurchased during 2024 and 2023 pursuant to this program. As of December 28, 2025, approximately $64.7 million remained authorized pursuant to this program for future share repurchases. The program does not require the Company to repurchase a specific number or amount of shares, or to do so within any specific time periods. With the remaining availability under this program, the Company may repurchase shares of common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations. The Company’s repurchases may be made through a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.
Syndicated Credit Facility
In the normal course of business, in addition to using our available cash, we fund our operations by borrowing under our Facility. On December 3, 2025, the Company entered into the third amended and restated Facility agreement. In connection with this amendment the Company revised certain material terms which include, but are not limited to, the addition of a $170 million term loan, extending the maturity date to December 2030, and reducing our revolving loan facility to $250 million. For additional information, please see Note 9 entitled “Long-Term Debt” in Item 8 of this Annual Report on Form 10-K.
The Company was in compliance with all covenants under the Facility as of December 28, 2025, and anticipates that it will remain in compliance with the covenants for the foreseeable future.
Senior Notes
On December 3, 2025, the Company redeemed all of its $300 million outstanding principal amount of 5.50% Senior Notes. The Senior Notes were redeemed at a redemption price of 100% of their principal amount, plus accrued and unpaid interest. The redemption was funded using proceeds from the amended term loan facility and available cash on hand. As a result of the debt extinguishment, the Company recognized a loss of $2.1 million resulting from the write-off of unamortized debt issuance costs on the Senior Notes.
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Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires that we make estimates and assumptions about future events that affect the reported amounts of assets and liabilities in the consolidated financial statements. Our significant accounting policies are described in Note 1 entitled ”Summary of Significant Accounting Policies” of the consolidated financial statements.
For the year ended December 28, 2025, the assumptions related to goodwill and impairment of long lived assets were no longer considered critical accounting estimates.
The following discussion addresses our critical accounting estimates as of December 28, 2025, that require significant management judgment, or use of significant assumptions, or complex estimates.
Deferred Income Tax Assets and Liabilities. The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards. The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws and incorporate management’s assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes may result in materially different carrying values of income tax assets and liabilities and results of operations.
We evaluate the recoverability of these deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. We use our historical experience and our short-term and long-term business forecasts to provide insight. Further, our global business portfolio gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future deductions. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. As of December 28, 2025, and December 29, 2024, we had state net operating loss carryforwards of $153.7 million and $190.1 million, respectively. Certain of these state net operating loss carryforwards are reserved with a valuation allowance because, based on the available evidence, we believe it is more likely than not that we would not be able to utilize those deferred tax assets in the future. The remaining year-end 2025 amounts are expected to be fully recoverable within the applicable statutory expiration periods. If the actual amounts of taxable income differ from our estimates, the amount of our valuation allowance could be materially impacted.
Trademark and Trade Name Intangible Assets. Trademark and trade name intangible assets acquired in connection with the nora acquisition are not subject to amortization, but are tested for impairment annually in the fourth quarter, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the intangible assets below their carrying amount. For the annual test performed, the Company prepared valuations of the intangible assets using the present value of cash flows under the relief from royalty method, which requires significant management estimates of forecasted revenue and the use of an estimated intangible asset required rate of return, which was 11% for the 2025 test.
As a result of the 2025 intangible assets impairment testing, we determined that the estimated fair value exceeded the carrying value and there was no indication of impairment of the trademark and trade name intangible assets.
There is inherent risk and uncertainty associated with key assumptions and estimates used in our impairment testing, including the impact of macroeconomic conditions. If we determine that the carrying value of the trademark and trade name intangible assets exceeds the estimated fair value, then we will recognize an impairment charge for the excess of the carrying value over the estimated fair value. To the extent actual revenues decrease by 10% from our estimates, there would be a corresponding 10% decrease in the fair value of the trademark and trade name intangible assets. A hypothetical 1% increase in the intangible asset rate of return would result in an 11% decrease in fair value of the trademark and trade name intangible assets. Neither of these hypothetical changes to key assumptions would cause fair value to be less than carrying value.
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Inventories. We determine the value of inventories using the lower of cost or net realizable value. We write down inventories for the difference between the carrying value of the inventories and their net realizable value. If actual market conditions are less favorable than those projected by management, additional write-downs may be required.
Management’s judgment in estimating our reserves for inventory obsolescence is based on continuous examination of our inventories to determine if there are indicators that carrying values exceed net realizable values. Experience has shown that significant indicators that could require the need for additional inventory write-downs are the age of the inventory, the length of its product life cycles, anticipated demand for our products and current economic conditions.
While we believe that adequate write-downs for inventory obsolescence have been made in the consolidated financial statements, consumer tastes and preferences may continue to change, and we could experience additional inventory write-downs in the future. Our inventory reserve on December 28, 2025 and December 29, 2024, was $35.5 million and $38.3 million, respectively. To the extent that actual obsolescence of our inventory differs from our estimate by 10%, our 2025 net income would be higher or lower by approximately $3.0 million, on an after-tax basis.
Allowances for Expected Credit Losses. We maintain allowances for expected credit losses resulting from the inability of customers to make required payments. Estimating the amount of future expected losses requires us to consider historical losses from our customers, as well as current market conditions and future forecasts of our customers’ ability to make payments for goods and services. By its nature, such an estimate is highly subjective, and it is possible that the amount of accounts receivable that we are unable to collect may be different than the amount initially estimated. Our allowance for expected credit losses on December 28, 2025 and December 29, 2024, was $5.2 million and $3.8 million, respectively. To the extent the actual collectability of our accounts receivable differs from our estimates by 10%, our 2025 net income would be higher or lower by approximately $0.4 million, on an after-tax basis, depending on whether the actual collectability was better or worse, respectively, than the estimated allowance.
Product Warranties. We typically provide limited warranties with respect to certain attributes of our carpet products (for example, warranties regarding excessive surface wear, edge ravel and static electricity) for periods ranging from ten to twenty years, depending on the particular carpet product and the environment in which the product is to be installed. Similar limited warranties are provided on certain attributes of our rubber and LVT products, typically for a period of 5 to 15 years. We typically warrant that any services performed will be free from defects in workmanship for a period of one year following completion. In the event of a breach of warranty, the remedy typically is limited to repair of the problem or replacement of the affected product. We record a provision related to warranty costs based on historical experience and future expectations, and periodically adjust these provisions to reflect changes in actual experience. Our warranty and sales allowance reserve on December 28, 2025 and December 29, 2024, was $3.9 million and $5.3 million, respectively. Actual warranty expense incurred could vary significantly from amounts that we estimate. To the extent the actual warranty expense differs from our estimates by 10%, our 2025 net income would be higher or lower by approximately $0.3 million, on an after-tax basis, depending on whether the actual expense is lower or higher, respectively, than the estimated provision.
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Pension Benefits. Net pension expense recorded is based on, among other things, assumptions about the discount rate, estimated return on plan assets and salary increases. While management believes these assumptions are reasonable, changes in these and other factors and differences between actual and assumed changes in the present value of liabilities or assets of our plans above certain thresholds could cause net annual expense to increase or decrease materially from year to year. The actuarial assumptions used in our foreign defined benefit plans reporting are reviewed periodically and compared with external benchmarks to ensure that they appropriately account for our future pension benefit obligation. The expected long-term rate of return on plan assets assumption is based on weighted average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets, and include input from actuaries, investment service firms and investment managers. The table below represents the changes to the projected benefit obligation as a result of changes in discount rate assumptions:
Foreign Defined Benefit Plans
Increase (Decrease) in
Projected Benefit Obligation
(in millions)
1% increase in actuarial assumption for discount rate
1% decrease in actuarial assumption for discount rate
For the year ended December 28, 2025, the discount rate used in the salary continuation plan is no longer considered a critical accounting estimate as a 1% increase or decrease in the discount rate would not have a material impact to the projected benefit obligation of the plan.
Recent Accounting Pronouncements
Please see Note 2 entitled “Recent Accounting Pronouncements” in Item 8 of this Report for discussion of these items.
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