Interface : 2021 Annual Report

Dear Fellow Shareowners,

So much has changed in the past couple of years that some things are hard to even recognize. That's not the case at Interface. We've been well-served by our culture and purpose, and I'm proud to share this report with you, and with it, my personal gratitude and our collective optimism for the future.

You may remember that I rejoined the company as CEO in January 2020, just in time to navigate a tumultuous period that tested us personally and as a company. This Annual Report reflects a story we're proud to be writing - one that has seen us advance strategy, reduce expenses, and grow our top line even as we encountered supply chain and inflationary headwinds. We stayed on track to make history with the introduction of the world's first (and only) cradle-to-gate carbon negative carpet tile products, earning recognition as a leader of "the global carbontech vanguard," according to the New York Times Magazine. This reminds us once again that having a purpose that is bigger than ourselves - and bigger than our industry - is our most important asset as a company.

We cemented our status as a global, world-class flooring solutions company by flexing our strategic muscle to build and grow a diversified product portfolio. Just a few years ago, nearly 100% of our sales were from carpet tile. Today, we have reached more than $120 million in LVT sales, and our acquisition of nora® has proven to be a resounding success as we continue to take share in the rubber category. Carpet tile accounts for approximately 60% of our 2021 sales.

Our diversified product portfolio has helped us deliver on a segmentation strategy that has moved us outside of the office market and further into healthcare, education, multi-family, and transportation - growth sectors that account for more than half of our global sales in 2021.

None of it would have happened without our people. We brought our best selves to every challenge and supported one another and Interface, balancing responsibilities and navigating the many unknowns we've all encountered over the past couple of years. We continue to attract and retain talent that sets us apart.

us halving our emissions by 2030, an important halfway milestone on our Climate Take Back journey. Our efforts are recognized by the marketplace: Newsweek named Interface one of America's Most Responsible Companies, and Fortune added us to the Change the World list. And our customers want us on their team. Attracted by our launch of the first-ever carbon negative carpet tile in 2020, major companies across the globe turned to Interface to support their own sustainability goals.

2022 and Beyond

I am excited about what 2022 holds for Interface and the opportunities that lie ahead.

We are focused on driving our growth strategy and will continue to make investments in the following key initiatives:

• • Capitalize on the commercial market recovery and continued investment in office renovations.

• • Expand our resilient portfolio with LVT and nora® rubber growth and the recent launch of our first rigid core LVT collection.

• • Drive growth in key segments and maximize FLOR® reach.

• • Optimize manufacturing and continue to transform and leverage SG&A.

Our company finds itself looking ahead with renewed energy and vitality that will accelerate our growth, and with new opportunities on the horizon as we welcome Laurel Hurd as our next President and Chief Executive Officer, effective April 18, 2022. Laurel is an impressive leader, bringing more than 30 years of sales management, product development and brand stewardship experience. She is well-respected and highly effective, known for developing top talent and building high-performing teams, all while driving a customer-centered philosophy. We are delighted to have attracted such coveted leadership talent to Interface to propel us forward.

Though this is the last time that I'll bring you our financial news, I remain dedicated to Interface as Chairman of the Board. It's an amazing time to be a part of Interface, and I'm incredibly excited for the future.

Sustainability Progress

The pandemic has not disrupted our purpose. We made significant progress toward our Climate Take Back™ mission in 2021 as we continue to have our sights set on becoming a carbon negative enterprise by 2040.

In September 2021, we became the first flooring manufacturer to have a third-party validated target from the Science Based Targets initiative (SBTi). We've committed to reducing our Scope 1 and 2 emissions by 50%; our Scope 3 emissions from purchased products and services by 50%; and our emissions from travel and commuting by 30% - all from a 2019 base year. This significant commitment has

Daniel T. Hendrix

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 _______________

Form 10-K

• ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the Fiscal Year Ended January 2, 2022

• ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.: 001-33994

INTERFACE INC

(Exact name of registrant as specified in its charter)

Georgia

58-1451243

(State of incorporation)

(I.R.S. Employer Identification No.)

1280 West Peachtree Street

AtlantaGeorgia

30309

(Address of principal executive offices)

(zip code)

Registrant's telephone number, including area code:

[phone]

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered:
Common Stock, $0.10 Par Value Per Share	TILE	Nasdaq Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No 

Aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of July 2, 2021: $899,737,344 (57,972,767 shares valued at the closing sale price of $15.52 on July 2, 2021). See Item 12.

Number of shares outstanding of each of the registrant's classes of Common Stock, as of February 18, 2022:

Class

Number of Shares

Common Stock, $0.10 par value per share

59,282,711

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III.

is page intentionally leſt blank

TABLE OF CONTENTS

Page

PART I................................................................................................................................................................................................2

ITEM 1. BUSINESS ............................................................................................................................................................................2

ITEM 1A. RISK FACTORS ................................................................................................................................................................10

ITEM 1B. UNRESOLVED STAFF COMMENTS.............................................................................................................................17

ITEM 2. PROPERTIES .......................................................................................................................................................................17

ITEM 3. LEGAL PROCEEDINGS.....................................................................................................................................................18

ITEM 4. MINE SAFETY DISCLOSURES .........................................................................................................................................18

PART II...............................................................................................................................................................................................19

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER

PURCHASES OF EQUITY SECURITIES .........................................................................................................................................19

ITEM 6. [RESERVED] .......................................................................................................................................................................21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS....................................................................................................................................................................................22

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...................................................37

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................................................................................39

CONSOLIDATED STATEMENTS OF OPERATIONS....................................................................................................................39

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ........................................................................................... 40

CONSOLIDATED BALANCE SHEETS ...........................................................................................................................................41

CONSOLIDATED STATEMENTS OF CASH FLOWS ....................................................................................................................42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ......................................................................................................... 43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.............................................................................88

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............................................................................. 90

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE....................................................................................................................................................................................91

ITEM 9A. CONTROLS AND PROCEDURES..................................................................................................................................91

ITEM 9B. OTHER INFORMATION ..................................................................................................................................................91

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS ...................................91

PART III ..............................................................................................................................................................................................92

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE .............................................................92

ITEM 11. EXECUTIVE COMPENSATION......................................................................................................................................92

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED

STOCKHOLDER MATTERS............................................................................................................................................................92

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ..................92

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES....................................................................................................92

PART IV ..............................................................................................................................................................................................93

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES..........................................................................................93

ITEM 16. FORM 10-K SUMMARY ...................................................................................................................................................96

SIGNATURES ....................................................................................................................................................................................98

1