INTERFACE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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. The COVID-19 pandemic has had material adverse
effects on our business, results of operations, and financial condition, and it
is anticipated that this will continue for an indefinite period of time. The
duration of the pandemic will ultimately determine the extent to which our
operations are impacted. We continue to monitor our operations and have
implemented various programs to mitigate the effects on our business including
reductions in employees, labor costs, marketing expenses, consulting expenses,
travel costs, various other costs, and capital expenditures, as well as reducing
the amount of the cash dividend that we pay on our common stock and suspending
and reducing shifts in our production facilities, temporarily furloughing
employees, and implementing other cost reduction or avoidance initiatives.

During fiscal year 2020, the COVID-19 pandemic resulted in lower revenues across
all geographic regions. Our sales mix shifted towards more non-corporate office
market segments as the COVID-19 pandemic reduced corporate spending impacting
sales in the corporate office market. In 2020, consolidated net sales declined
17.9% compared to 2019 primarily due to COVID-19. As discussed above, the
Company implemented, and continues to implement, various cost cutting
initiatives to mitigate the effects of COVID-19 on our operations. During 2020,
the Company recorded $12.9 million of voluntary and involuntary severance costs,
which are included in selling, general and administrative expenses in the
consolidated statements of operations. We anticipate future annualized savings
of approximately $15 million as a result of these separation initiatives.

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.

In response to the reduced demand and to enhance employee safety measures, we
temporarily suspended production in our U.S. manufacturing facilities from March
18, 2020 to March 23, 2020, and then again from April 6, 2020 to April 13, 2020.
We also substantially reduced production in our Craigavon, U.K. facility
beginning on April 20, 2020 through the end of the third quarter, and our
Thailand, China, and Australia plants were at times operating in reduced shifts
in light of reduced demand. During the first quarter of 2020, our Asia-Pacific
region was primarily impacted by COVID-19 due to government shutdowns in China
and the temporary closure of our China plant in late January 2020 to February 9,
2020. In addition, almost all of our salesforce and administrative employees
globally continue to work remotely in accordance with the Company's ongoing
safety measures, as well as any local government orders and "shelter in place"
directives in place from time to time.

As a result of the COVID-19 pandemic, government grants and payroll protection
programs are available in various countries globally to provide assistance to
companies impacted by the pandemic. The CARES Act enacted in the United States
(see Note 17 entitled "Income Taxes" included in Item 8 of this Annual Report on
Form 10-K for additional information) and a payroll protection program enacted
in the Netherlands (the "NOW Program") provide benefits related to payroll costs
either as reimbursements, lower payroll tax rates or deferral of payroll tax
payments. The NOW Program provides eligible companies with reimbursement of
labor costs as an incentive to retain employees and continue paying them in
accordance with the Company's customary compensation practices. During fiscal
year 2020, the Company qualified for benefits under several payroll protection
programs and recognized a reduction in payroll costs of approximately $7.3
million, which are recorded as a $6.1 million reduction of selling, general and
administrative expenses and a $1.2 million reduction of cost of sales in the
consolidated statements of operations, as the Company believes it is probable
that the benefits received will not be repaid.

General

Our revenues are derived from sales of floorcovering products, primarily modular
carpet, luxury vinyl tile ("LVT") and, starting in August 2018, 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. The
commercial interiors industry, including the market for floorcovering products,
is largely driven by reinvestment by corporations into their existing businesses
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 corporations. 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.


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As noted above, our sales mix of corporate office verses non-corporate office
market segments has shifted towards non-corporate office markets in fiscal year
2020 primarily due to the impacts of COVID-19 on the corporate office market. We
focus our marketing and sales efforts on both corporate office and non-corporate
office 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.

Our mix of modular carpet and resilient flooring sales in corporate office
verses non-corporate office market segments for the last three fiscal years is
summarized below:

                                              2020                                                        2019                                                        2018
                           Corporate Office         Non-Corporate Office               Corporate Office         Non-Corporate Office              

Corporate Office         Non-Corporate Office
Americas                                    37  %                     63  %                             47  %                     53  %                             45  %                     55  %

Company-wide                                47  %                     53  %                             61  %                     39  %                             60  %                     40  %



During 2020, we had net sales of $1,103.3 million, down 17.9% compared to
$1,343.0 million in 2019, primarily due to the impacts of COVID-19. The
operating loss for 2020 was $39.3 million compared to operating income of $130.9
million in 2019. Net loss for 2020 was $71.9 million, or $1.23 per share,
compared to net income of $79.2 million, or $1.34 per share, in 2019. The 2020
period was impacted by a $121.3 million goodwill and intangible asset impairment
loss recorded in the first quarter and $12.9 million of severance charges
related to cost saving initiatives in response to COVID-19. These charges were
partially offset by $9.3 million of lower payroll costs due to furloughs and
credits from payroll protection programs.

During 2019, we had net sales of $1,343.0 million, up 13.9% compared to $1,179.6
million in 2018. Operating income for 2019 was $130.9 million as compared to
$76.4 million in 2018. Net income for 2019 was $79.2 million, or $1.34 per
share, compared with $50.3 million, or $0.84 per share, in 2018. The 2019 period
included the results of the acquired nora business for the full fiscal year,
$5.9 million of purchase accounting amortization in connection with the nora
acquisition, and $12.9 million of restructuring and other charges. The 2018
period included the results of the nora acquisition (described below) from
August 7, 2018 through the end of the 2018 fiscal year.

On August 7, 2018, the Company completed the acquisition of nora for a purchase
price of €385.1 million, or $447.2 million at the exchange rate as of the
transaction date, including acquired cash of €40.0 million ($46.5 million) for a
net purchase price of €345.1 million ($400.7 million). Nora is an industry
leader in the rubber flooring market, and the acquisition has expanded the
Company's presence within non-corporate office market segments since the
acquisition date.

Restructuring Plans

On December 23, 2019, the Company committed to a new restructuring plan to
improve efficiencies and decrease costs across its worldwide operations, and
more closely align its operating structure with its business strategy. The plan
involved a reduction of approximately 105 employees and early termination of two
office leases. As a result of this plan, the Company recorded a pre-tax
restructuring charge in the fourth quarter of 2019 of approximately $9.0
million. The charge was comprised of severance expenses ($8.8 million) and lease
exit costs ($0.2 million). The restructuring charge was expected to result in
future cash expenditures of approximately $9.0 million for payment of these
employee severance and lease exit costs. The Company expected the plan to yield
annualized savings of approximately $6.0 million. A portion of the annualized
savings was realized on the income statement in fiscal year 2020, with the
remaining portion of the annualized savings expected to be realized in fiscal
year 2021.


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On December 29, 2018, the Company committed to a new restructuring plan in its
continuing efforts to improve efficiencies and decrease costs across its
worldwide operations, and more closely align its operating structure with its
business strategy. The plan involved (i) a restructuring of its sales and
administrative operations in the United Kingdom, (ii) a reduction of
approximately 200 employees, primarily in the Europe and Asia-Pacific geographic
regions, and (iii) the write-down of certain underutilized and impaired assets
that included information technology assets and obsolete manufacturing
equipment. As a result of this plan, the Company recorded a pre-tax
restructuring and asset impairment charge in the fourth quarter of 2018 of
approximately $20.5 million. The charge was comprised of severance expenses
(approximately $10.8 million), impairment of assets (approximately $8.6 million)
and other items (approximately $1.1 million). The charge was expected to result
in future cash expenditures of $12 million, primarily for severance payments
(approximately $10.8 million). The restructuring plan was completed at the end
of fiscal year 2020.

Goodwill, Intangible Asset and Fixed Asset Impairment
During 2020, 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 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. These charges are included
in selling, general and administrative expenses in the consolidated statements
of operations.

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Analysis of Results of Operations

The following discussion and analyses reflect the factors and trends discussed in the preceding sections.

Net sales denominated in currencies other than the U.S. dollar were
approximately 51% in 2020, 49% in 2019, and 49% in 2018. Because we have such
substantial international operations, we are impacted, from time to time, by
international developments that affect foreign currency transactions. 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 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 2018, the
strengthening of the Euro and British pound sterling against the U.S. dollar had
a positive impact on our net sales and operating income.

The following table presents the amounts (in U.S. dollars) by which the exchange
rates for translating Euros, British pounds sterling, Australian dollars and
Canadian dollars into U.S. dollars have affected our net sales and operating
income during the past three years:
                                                             2020        

2019 2018

                                                                     (in 

millions)

Impact of changes in foreign currency on net sales $ 7.1 $ (26.2) $ 8.4 Impact of changes in foreign currency on operating income 0.9 (3.9) 1.2

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
                                                       2020          2019         2018
Net sales                                              100.0  %     100.0  %     100.0  %
Cost of sales                                           62.8         60.3         63.6
Gross profit on sales                                   37.2         39.7         36.4
Selling, general and administrative expenses            30.2         29.0   

28.2

Restructuring, asset impairment and other charges (0.4) 1.0

1.7

Goodwill and intangible asset impairment charge         11.0            -            -
Operating income (loss)                                 (3.6)         9.7          6.5
Interest/Other expense                                   3.6          2.2          1.8
Income (loss) before income tax expense                 (7.2)         7.5          4.7
Income tax expense (benefit)                            (0.7)         1.7          0.4
Net income (loss)                                       (6.5) %       5.8  %       4.3  %



Net Sales

Below we provide information regarding our net sales and analyze those results
for each of the last three fiscal years. Fiscal year 2020 includes 53 weeks, and
fiscal years 2019 and 2018 were both 52 week periods.

                                                              Fiscal Year                                            Percentage Change
                                             2020                 2019                 2018             2020 compared with        2019 compared with
                                                             (in thousands)                                    2019                      2018
Net sales
    Americas                            $   593,418          $   757,112          $   682,261                      (21.6) %                   11.0  %
    Europe                                  351,287              393,194              319,677                      (10.7) %                   23.0  %
    Asia-Pacific                            158,557              192,723              177,635                      (17.7) %                    8.5  %
Net sales                               $ 1,103,262          $ 1,343,029          $ 1,179,573                      (17.9) %                   13.9  %


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Net sales for 2020 compared with 2019

For fiscal year 2020, our net sales decreased $239.8 million (17.9%) compared to
2019. As discussed above, the decrease was primarily due to the impacts of
COVID-19 resulting in lower sales volumes globally. 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. On
a geographic basis, we experienced sales declines across all our regions. Sales
in the Americas were down 21.6%, sales in Europe were down 10.7% as reported in
U.S. dollars, and sales in our Asia-Pacific region were down 17.7%.

The sales decrease of 21.6% in the Americas in 2020 was due primarily to the
impacts of COVID-19 and lower carpet tile sales volumes. On a market segment
basis, the sales decrease in the Americas was most significant in the corporate
office (down 33.8%), retail (down 34.8%), healthcare (down 15.2%) and education
(down 8.3%) market segments, partially offset by increases in the residential
living (up 23.8%) and public buildings (up 8.2%) market segments.

In Europe, net sales in the region decreased both in U.S. dollars (down 10.7%)
and local currency (down 12.5%). The decrease in sales was due primarily to the
impacts of COVID-19 and lower carpet tile sales volumes, partially offset by the
strengthening of the Euro and British pound sterling against the U.S. dollar. On
a market segment basis, the sales decrease in Europe was most significant in the
corporate office (down 18.0%), hospitality (down 47.5%) and public buildings
(down 14.2%) market segments, partially offset by increases in the
transportation (up 40.3%), leisure (up 57.1%), healthcare (up 10.5%) and
education (up 9.0%) market segments.

In the Asia-Pacific region, net sales decreased 17.7% primarily due to the
impacts of COVID-19 and lower carpet tile sales volumes. This sales decrease was
partially offset by the strengthening of the Chinese Renminbi against the U.S.
dollar. On a market segment basis, the sales decrease in Asia-Pacific was most
significant in the corporate office (down 21.4%), retail (down 43.2%),
healthcare (down 32.6%), hospitality (down 34.3%) and public buildings (down
20.3%) market segments, partially offset by increases in the leisure (up 63.5%)
and education (up 15.5%) market segments.

Net sales for 2019 compared with 2018

For 2019, our net sales increased $163.5 million (13.9%) compared to 2018. As
discussed above, the 2019 period included revenue from the nora acquisition for
the full fiscal year. The 2018 period included nora revenue only from the
acquisition date on August 7, 2018 to the end of the 2018 fiscal year of $112.6
million during that stub period. The increase in net sales was primarily volume
related and not materially impacted by changing prices. Fluctuations in currency
exchange rates had a negative impact on our year-over-year sales comparison of
approximately $26.2 million, meaning that if currency levels had remained
constant year over year, our 2019 sales would have been higher by this amount.
On a geographic basis, including the impact of the nora acquisition, we
experienced sales growth across all of our regions. Sales in the Americas were
up 11.0%, sales in Europe were up 23.0% as reported in U.S. dollars, and sales
in Asia-Pacific were up 8.5%.

The sales increase of 11.0% in the Americas in 2019 was due primarily to the
impact of the nora acquisition and growth from our LVT products. The legacy
Americas carpet and LVT business grew approximately 3.6% for the year.  This
increase in the legacy business was due to increased sales in the corporate
office market segment (up 8.6%) as well as increases in the healthcare (up
18.2%) and education (up 7.6%) market segments.  These legacy sales increases
were partially offset by a decline in the retail market segment (down 24.6%).

In Europe, sales in the region were up in both U.S. dollars (up 23.0%) and local
currency (up 29.1%). This increase was due primarily to the impact of the nora
acquisition and growth from our LVT products offset by weakening of the Euro and
British pound sterling against the U.S. dollar. The legacy European carpet and
LVT business declined 2.7% on a U.S. dollar basis, but grew 2.6% in local
currency.  The sales growth in local currency in the legacy European business
was most pronounced in the corporate office segment (up 6.9%). The decline in
legacy sales on a U.S. dollars basis was primarily due to the weakening of the
Euro and British pound sterling against the U.S. dollar.

In Asia-Pacific, sales increased 8.5% primarily due to the impact of the nora
acquisition and growth in our LVT products. This sales increase was partially
offset by the weakening of the Australian dollar and lower sales in Australia.
The legacy Asia-Pacific carpet and LVT business declined 3.9% on a U.S. dollar
basis, but increased 0.1% in local currency.  The sales decline in the legacy
Asia-Pacific business was primarily in the corporate (down 5.7%) and government
(down 17.9%) market segments, partially offset by increases in the retail market
segment (up 12.0%).



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Cost and Expenses

The following table presents our overall cost of sales and selling, general and administrative ("SG&A") expenses during the past three years:

                                                         Fiscal Year                                            Percentage Change
                                          2020               2019               2018              2020 compared                2019 compared
                                                        (in thousands)                              with 2019                    with 2018
Cost of sales                         $ 692,688          $ 810,062          $ 749,690                      (14.5) %                         8.1  %
Selling, general and administrative
expenses                                333,229            389,117            332,975                      (14.4) %                        16.9  %



For 2020, our costs of sales decreased $117.4 million (14.5%) compared to 2019,
primarily due to lower net sales. Currency translation had a $4.7 million (0.6%)
negative impact on the year-over-year comparison. As a percentage of sales, our
costs of sales increased to 62.8% in 2020 versus 60.3% in 2019, primarily due to
changes in fixed cost absorption driven by lower production volumes due to the
impact of COVID-19.

For 2019, our costs of sales increased $60.4 million (8.1%) compared with 2018.
Included in 2019 are costs of sales for the acquired nora business for the full
year, which includes purchase accounting amortization of $5.9 million related to
acquired intangible assets. Fluctuations in currency exchange rates had a 1.8%
positive impact on the year-over-year comparison. In absolute dollars, the
increase in costs of sales was a result of higher sales for 2019 as compared to
2018, as well as the full year impact of the acquired nora business. As a
percentage of sales, our costs of sales decreased to 60.3% in 2019 versus 63.6%
in 2018. This decrease was primarily due to productivity initiatives and the
nora non-recurring inventory step-up amortization which occurred in 2018, but
did not recur in 2019.

For 2020, our 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. SG&A expenses were lower in 2020 primarily due to (1)
lower selling expenses of $54.8 million due to lower net sales, (2) $7.3 million
of payroll expense credits related to COVID-19 wage support government
assistance programs, and (3) $9.2 million lower performance-based compensation
due to forfeitures and target performance measures not being met due to
COVID-19. These reductions were partially offset by $12.9 million of severance
expenses due to voluntary and involuntary separations, and a $5.0 million fine
to settle the SEC matter as referenced in Item 8 Note 18 - "Commitments and
Contingencies". As a percentage of sales, SG&A expenses increased to 30.2% in
2020 versus 29.0% in 2019 primarily due to lower net sales.

For 2019, our SG&A expenses increased $56.1 million (16.9%) versus 2018.
Included in the 2019 period were a full year of SG&A expenses for the acquired
nora business versus only a stub period of approximately five months in 2018.
Fluctuations in currency rates had a 1.5% favorable impact on SG&A expenses. The
increase in SG&A expenses during the year was primarily due to (1) higher
selling expenses for the full year impact in 2019 of the acquired nora business,
(2) higher year-over-year legal expenses of $3.5 million related to the SEC
matter discussed in Note 18 - "Commitments and Contingencies", and (3) higher
selling expenses related to bringing the Company's global sales organization
together for a meeting to accelerate the nora integration, advance our selling
system transformation, and engage the sales force in the Company's
sustainability mission. These increases were partially offset by lower stock
compensation expense of $5.8 million compared to prior year. As a percentage of
sales, SG&A expenses increased to 29.0% in 2019 versus 28.2% in 2018.

Interest Expense

For 2020, our interest expense increased $3.6 million to $29.2 million, versus
$25.6 million in 2019, primarily due to (1) a $3.6 million loss on
extinguishment of debt to amend the Syndicated Credit Facility and repay a
portion of outstanding indebtedness thereunder, and (2) a $3.9 million
reclassification from accumulated other comprehensive income for deferred
interest rate swap losses due to the termination of our interest rate swap
contracts. These increases were partially offset by lower average interest rates
on our borrowings under the Syndicated Credit Facility (our average borrowing
rate for 2020 was 1.89% compared to 3.27% in 2019) and lower outstanding
borrowings under the Syndicated Credit Facility compared to 2019.


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For 2019, our interest expense increased $10.2 million to $25.6 million, versus
$15.4 million in 2018. This increase was a result of higher outstanding
borrowings incurred in August 2018 to complete the nora acquisition offset
slightly by lower average interest rates on our borrowings (our average
borrowing rate, including the impact of interest rate swaps, for 2019 was 3.27%
as compared to 3.50% for 2018). Our interest rate swaps, entered into in 2017
and 2019, had approximately $0.2 million impact on interest expense for 2019.

Tax

For the year ended January 3, 2021, the Company recorded 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%. The effective tax rate for this period was significantly impacted
by a non-deductible goodwill impairment charge and recognition of income tax
benefits related to uncertain tax positions taken in prior years on discontinued
operations. Excluding the impact of the non-deductible goodwill impairment
charge and recognition of income tax benefits related to uncertain tax positions
on discontinued operations, the effective tax rate was 14.1% for 2020 compared
to 22.2% in 2019. The decrease in the effective tax rate, excluding the goodwill
impairment charge and recognition of income tax benefits related to uncertain
tax positions on discontinued operations, was primarily due to the favorable
impacts of amending prior year tax returns, retroactive election of the GILTI
High-tax Exclusion in the 2019 tax return and reduction in non-deductible
employee compensation. This decrease was partially offset by the non-deductible
SEC penalty.

Our effective tax rate in 2019 was 22.2%, compared with an effective tax rate of
8.6% in 2018. The increase in our effective tax rate in 2019 compared to 2018
was primarily due to a nonrecurring $6.7 million tax benefit realized in 2018
related to the impacts of the U.S. Tax Cuts and Jobs Act enacted into law in
2017. In addition, there was a net increase in our effective tax rate in 2019
due to less U.S. federal and foreign tax credits which was partially offset by a
reduction in non-deductible expenses, favorable change in unrecognized tax
benefits and a higher portion of income earned in foreign jurisdictions not
subject to U.S. state income taxes.

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 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.

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.

At January 3, 2021, we had $103.1 million in cash. Approximately $1.7 million of
this cash was located in the U.S., and the remaining $101.4 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). 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 $101.4
million of cash in foreign jurisdictions, approximately $13.7 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.

As of January 3, 2021, we had $285.2 million of borrowings outstanding under our
Syndicated Credit Facility, of which $282.2 million were term loan borrowings
and $3.0 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 2020. As of January 3, 2021, we had additional borrowing
capacity of $295.4 million under the Syndicated Credit Facility and $6.0 million
of additional borrowing capacity under our other credit facilities in place at
other non-U.S. subsidiaries.

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 3, 2021, we had $300.0 million of Senior Notes outstanding.


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We have approximately $81.2 million in contractual cash obligations due by the
end of fiscal year 2021, which includes, among other things, pension cash
contributions, interest payments on our debt and lease commitments. Based on
current interest rates and debt levels, we expect our aggregate interest expense
for 2021 to be between $32 million and $33 million. We estimate aggregate
capital expenditures in 2021 to be approximately $30 million, although we are
not committed to these amounts.

It is important for you to consider that we have a significant amount of
indebtedness. 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. 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.

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 may increase. During
2020, we entered into fixed rate Senior Notes (as described below) which reduced
the amount of indebtedness subject to interest rate risk. In the fourth quarter
of 2020, we terminated our interest rate swaps that were previously being used
to fix a portion of our variable rate debt. 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.

Syndicated Credit Facility

On August 7, 2018, we amended and restated our Syndicated Credit Facility (the
"Facility") in connection with the nora acquisition. The purpose of the amended
and restated Facility was to fund the nora purchase price and related fees and
expenses of the acquisition, and to increase the credit available to us and our
subsidiaries following the closing of the nora acquisition in view of the larger
enterprise.

On December 18, 2019, the Company again amended the Facility, with certain of
its wholly-owned foreign subsidiaries as co-borrowers. The primary purpose of
this amendment was to allow the Company to make various intercompany
transactions.

On July 15, 2020 and November 17, 2020, the Company entered into the second and
third amendments, respectively, to its Facility. The primary purpose of the
second amendment was to provide the Company with a less restrictive consolidated
net leverage ratio covenant in response to the COVID-19 pandemic. The primary
purpose of the third amendment was to extend the maturity date of the Facility
to November 2025, replace the consolidated net leverage ratio covenant with a
consolidated secured net leverage ratio, and modify various interest rate
provisions. See Note 9 - "Long-Term Debt" in Item 8 of this Report for
additional information.

At January 3, 2021, the Facility provides the Company and certain of its subsidiaries with a multicurrency revolving loan facility up to $300 million, as well as other U.S. denominated and multicurrency term loans.

In connection with the 2018 amendment to the Facility as discussed above, we
recorded $8.8 million of debt issuance costs associated with the new term loans
that are reflected as a reduction of long-term debt. In connection with the
second and third amendments to the Facility as discussed above, the Company
recorded debt issuance costs of $1.5 million and $0.9 million, respectively.
These debt issuance costs were allocated between term and revolving loans and a
portion recorded as a reduction of long-term debt ($1.1 million) for the term
loans and other assets ($1.3 million) for the revolving loans, in accordance
with applicable accounting standards. As of January 3, 2021, total outstanding
debt issuance costs were $10.6 million.

Interest Rates and Fees

Under the Facility, interest on base rate loans is charged at varying rates
computed by applying a margin ranging from 0.25% to 2.00%, depending on the
Company's consolidated net leverage ratio (as defined in the Facility agreement)
as of the most recently completed fiscal quarter. 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.  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.



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Covenants

The Facility contains standard and customary covenants for agreements of this
type, including various reporting, affirmative and negative covenants. Among
other things, these covenants limit 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.

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.

Events of Default

If we breach or fail to perform any of the affirmative or negative covenants
under the Facility, or if other specified events occur (such as a bankruptcy or
similar event or a change of control of Interface, Inc. or certain subsidiaries,
or if we breach or fail to perform any covenant or agreement contained in any
instrument relating to any of our other indebtedness exceeding $20 million),
after giving effect to any applicable notice and right to cure provisions, an
event of default will exist. If an event of default exists and is continuing,
the lenders' Administrative Agent may, and upon the written request of a
specified percentage of the lender group shall:

•declare all commitments of the lenders under the facility terminated;
•declare all amounts outstanding or accrued thereunder immediately due and
payable; and
•exercise other rights and remedies available to them under the agreement and
applicable law.


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Collateral

Pursuant to a Second Amended and Restated Security and Pledge Agreement, the
Facility is secured by substantially all of the assets of Interface, Inc. and
our domestic subsidiaries (subject to exceptions for certain immaterial
subsidiaries), including all of the stock of our domestic subsidiaries and up to
65% of the stock of our 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 receivables, or exercising proxies to take control of the
pledged stock of domestic and first-tier material foreign subsidiaries.

 As of January 3, 2021, we had outstanding $282.2 million of term loan borrowing
and $3.0 million of revolving loan borrowings under the Facility, and had $1.6
million in letters of credit outstanding under the Facility. As of January 3,
2021, the weighted average interest rate on borrowings outstanding under the
Facility was 1.89%.

Under the Facility, we are required to make quarterly amortization payments of
the term loan borrowings, which commenced in the fourth quarter of 2018. 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.

In the third quarter of 2017 and first quarter of 2019, we entered into interest
rate swap transactions that fixed the variable interest rate with respect to
$100 million and $150 million, respectively, of the term loan borrowings then
outstanding under the Syndicated Credit Facility. In the fourth quarter of 2020,
we terminated both interest rate swaps and paid approximately $13 million to
terminate the swap agreements. 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. Interest is paid semi-annually on June
1 and December 1 of each year, beginning on June 1, 2021. 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 debt issuance costs were recorded as a
reduction of long-term debt in the consolidated balance sheets and will be
amortized over the life of the outstanding debt.

The Senior Notes are unsecured and are guaranteed, jointly and severally, by
each of the Company's material domestic subsidiaries, all of which also
guarantee the obligations of the Company under its existing Facility. The
Company's foreign subsidiaries and certain non-material domestic subsidiaries
are considered non-guarantors. Net sales for the non-guarantor subsidiaries were
approximately $548 million for fiscal year 2020. Total indebtedness of the
non-guarantor subsidiaries was approximately $88 million as of January 3, 2021.
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.


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Analysis of Cash Flows

The following table presents a summary of cash flows for fiscal years 2020,
2019, and 2018:

                                                                  Fiscal Year
                                                      2020           2019           2018
                                                                (in thousands)
Net cash provided by (used in):
Operating activities                               $ 119,070      $ 141,768      $  91,767
Investing activities                                 (61,689)       (74,222)      (455,685)
Financing activities                                 (42,715)       (66,677)       361,526
Effect of exchange rate changes on cash                7,086           (557)        (3,656)
Net change in cash and cash equivalents               21,752            312 

(6,048)

Cash and cash equivalents at beginning of period 81,301 80,989

87,037

Cash and cash equivalents at end of period $ 103,053 $ 81,301

$ 80,989

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 decrease was
primarily due to lower net income due to the impacts of COVID-19, offset by
working capital sources of cash, specifically a decrease in accounts receivable
of $40.1 million, lower inventories of $38.7 million and lower prepaid and other
expenses of $13.0 million. These sources of cash were offset by a $60.9 million
use of cash in accounts payable and accrued expenses to fund normal operations.

•Cash used in investing activities was $61.7 million for 2020, which represents
a decrease of $12.5 million from 2019. The decrease was primarily due to lower
capital expenditures compared to 2019 due to fewer project demands and lower
capital investment as a result of the impacts of COVID-19.

•Cash used in financing activities was $42.7 million for 2020, which represents
a decrease of $24.0 million compared to 2019. Financing activities for 2020
include higher loan borrowings of $320.0 million 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.

We ended 2019 with $81.3 million in cash, an increase of $0.3 million during the
year. The most significant uses of cash in 2019 were (1) repayments on our
Syndicated Credit Facility of $111.7 million offset by borrowings of $90
million, (2) capital expenditures of $74.6 million, (3) $25.2 million to
repurchase 1.6 million shares of the Company's outstanding common stock, and (3)
dividend payments of $15.4 million These uses were offset by cash flow from
operations of $141.8 million, primarily generated from (1) net income of $79.2
million, (2) $19.4 million for increases in accounts payable and accrued
expenses, and (3) $2.6 million due to a decrease in inventories. These sources
of cash were reduced by working capital uses of (1) $9.7 million due to
increases in prepaid expenses and (2) $0.9 million due to increases in accounts
receivable.

We ended 2018 with $81.0 million in cash, a decrease of $6.0 million during the
year. During 2018, we borrowed $462.8 million of new term loan debt to finance
the acquisition of nora. The cash purchase price for nora, net of cash acquired,
was $400.7 million. Other than the nora purchase transaction, the most
significant uses of cash in 2018 were (1) repayments on our Syndicated Credit
Facility of $64.5 million, (2) capital expenditures of $54.9 million, (3)
dividend payments of $15.5 million and (4) $14.5 million of cash used to
repurchase our common stock. These uses were offset by cash flow generated by
operations of $91.8 million. Our cash flow from operations was primarily
generated by net income of $50.3 million. This net income was offset by working
capital uses, primarily $18.8 million for an increase in inventory and $15.5
million due to increases in prepaid and other current assets. The Company
generated cash of $9.9 million for increases in accounts payable and accrued
expenses. In addition to working capital generation of cash, the Company also
borrowed $17 million under its Syndicated Credit Facility during 2018.

We believe that our liquidity position will provide sufficient funds to meet our current commitments and other cash requirements for the foreseeable future.

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Funding Obligations

We have various contractual obligations that we must fund as part of our normal
operations. The following table discloses aggregate information about our
contractual obligations and the periods in which payments are due. The amounts
and time periods are measured from January 3, 2021.

                                                                                          Payments Due by Period
                                            Total Payments          Less than                                                More than
                                                 Due                  1 year           1-3 years          3-5 years           5 years
                                                                                  (in thousands)
Long-Term Debt Obligations(1)             $       585,215          $  

15,319 $ 30,638 $ 239,258 $ 300,000 Operating and Finance Lease Obligations(2)

                                    143,198             20,653             30,457             21,344             70,744
Expected Interest Payments(3)                     160,257             23,439             45,729             41,589             49,500
Unconditional Purchase Obligations(4)              14,529             14,529                  -                  -                  -
Pension Cash Obligations(5)                        36,923              7,262              6,315              6,624             16,722

Total Contractual Cash Obligations(6) $ 940,122 $ 81,202 $ 113,139 $ 308,815 $ 436,966

(1)Total long-term debt in the consolidated balance sheet includes a reduction
for unamortized debt issuance costs of $8.6 million which are excluded from the
long-term debt obligations in the table above. The table above includes $15.3
million classified as the current portion of long-term debt in the consolidated
balance sheet of January 3, 2021.

(2)Operating and finance lease obligations represent undiscounted future lease payments.

(3)Expected interest payments to be made in future periods reflect anticipated
interest payments related to the $300.0 million of 5.50% Senior Notes due 2028
outstanding, $282.2 million of Term Loan borrowings outstanding and the $3.0
million of revolving loan borrowings outstanding under our Syndicated Credit
Facility as of January 3, 2021. We have also assumed in the presentation above
that these borrowings will remain outstanding until maturity with the exception
of the required amortization payments for our term loan borrowings.

(4)Unconditional purchase obligations do not include unconditional purchase
obligations that are included as liabilities in our consolidated balance sheet.
Our capital expenditure commitments of approximately $9.6 million are included
in the table above.

(5)We have three foreign defined benefit plans and a domestic salary
continuation plan. Our domestic salary continuation plan and the nora plan are
unfunded plans, and we do not currently have any commitments to make
contributions to these plans. However, the table above includes the expected
benefit payments for these unfunded plans which will be paid by the Company. We
use insurance instruments to hedge our exposure under the salary continuation
plan. Contributions to our other employee benefit plans are at our discretion.
The above table does not reflect expected benefit payments for two of our funded
foreign defined benefit plans of approximately $114.8 million, which will be
paid by the plans over the next ten years.

(6)The above table does not reflect unrecognized tax benefits of $10.8 million,
the timing of which payments are uncertain. See Note 17 entitled "Income Taxes"
in Item 8 of this Report for further information.








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Forward-Looking Statement on Impact of COVID-19

While we are aggressively managing our response to the COVID-19 pandemic, its
impacts on our full year fiscal 2021 results and beyond are uncertain. 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; and (3) the
ability of our sales channels, supply chain, manufacturing, and distribution
partners to continue operating through disruptions. Any or all of these factors
could negatively impact our financial position, results of operations, cash
flows, and outlook. As the impact of the COVID-19 pandemic continues to affect
companies with global operations, we anticipate that our business and results in
the first quarter of 2021 will continue to be adversely affected, and the
timeline and pace of recovery is uncertain. Due to customary seasonality and the
impact of COVID-19, we anticipate a sequential decrease in revenue and operating
income in the first quarter of fiscal year 2021 compared with the fourth quarter
of 2020.

During 2020, the Company implemented several cost reduction and avoidance
initiatives to align with anticipated customer demand, including a voluntary
employee separation program, temporary employee furloughs and other time-and-pay
reduction programs, involuntary employee separations where necessary to
streamline roles and responsibilities, and various other cost reducing
initiatives. The Company also suspended merit-based salary increases, as well as
its 401(k) and Non-Qualified Savings Plan (NSP) matching contributions, and
benefited from lower than originally anticipated performance-based compensation
and variable compensation for 2020. In addition, the Company reduced its capital
spending plans.

In January 2021, the Company resumed its 401(k) and NSP matching contributions
on a prospective basis, as well as customary merit-based salary increases for
fiscal year 2021. The Company will also establish new performance-based
compensation and variable compensation targets for fiscal year 2021. All of
these items will increase costs compared to fiscal year 2020.

Cash flows from operations, cash and cash equivalents, and other sources of
liquidity are expected to be available and sufficient to meet foreseeable cash
requirements. However, the Company's cash flows from operations can be affected
by numerous factors including 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.




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Critical Accounting Policies

The policies 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. Specific risks for these critical accounting policies are
described in the following paragraphs. For all of these policies, management
cautions that future events may not develop as forecasted, and the best
estimates routinely require adjustment.

Impairment of Long-Lived Assets. 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. A loss is then recognized for the difference, if any,
between the fair value of the asset (as estimated by management using its best
judgment) and the carrying value of the asset. The management estimate of fair
value considers undiscounted cash flows, market conditions and trends, and other
industry specific metrics. If actual market value is less favorable than that
estimated by management, additional write-downs may be required.

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 in accordance with applicable accounting standards 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 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 January 3, 2021, and December 29,
2019, we had state net operating loss carryforwards of $142.7 million and $87.6
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 2020
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.

Goodwill. Prior to the adoption of ASU 2017-04 "Intangibles-Goodwill and Other",
we tested goodwill for impairment at least annually using a two-step approach.
In the first step of this approach, we prepared valuations of reporting units,
using both a market comparable approach and an income approach, and those
valuations are compared with the respective book values of the reporting units
to determine whether any goodwill impairment exists. In preparing the
valuations, past, present and expected future performance is considered. If
impairment was indicated in this first step of the test, a step two valuation
approach was performed. The step two valuation approach compared the implied
fair value of goodwill to the book value of goodwill. The implied fair value of
goodwill was determined by allocating the estimated fair value of the reporting
unit to the assets and liabilities of the reporting unit, including both
recognized and unrecognized intangible assets, in the same manner as goodwill is
determined in a business combination under applicable accounting standards.
After completion of this step two test, a loss was recognized for the
difference, if any, between the fair value of the goodwill associated with the
reporting unit and the book value of that goodwill. If the actual fair value of
the goodwill was determined to be less than that estimated, an additional
write-down may be required.

 On December 30, 2019, the Company adopted Accounting Standards Update 2017-04,
"Intangibles - Goodwill and Other," that provides for the elimination of Step 2
from the goodwill impairment test. Under the new guidance, impairment charges
are recognized to the extent the carrying amount of a reporting unit exceeds its
fair value with certain limitations.




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In accordance with applicable accounting standards, the Company tests goodwill
for impairment annually and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. During the fourth quarters of 2020,
2019 and 2018, we performed the annual goodwill impairment test. We perform this
test at the reporting unit level. For our reporting units which carried a
goodwill balance as of January 3, 2021, no impairment of goodwill was indicated.
As of January 3, 2021, if our estimates of the fair value of our reporting units
were 10% lower, we believe no additional goodwill impairment would have existed.
However, the full extent of the future impact of COVID-19 on the Company's
operations is uncertain, and a prolonged COVID-19 pandemic could result in
additional impairment of goodwill.

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.

We estimate our reserves for inventory obsolescence by continuously examining
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 will continue to change
and we could experience additional inventory write-downs in the future. Our
inventory reserve on January 3, 2021 and December 29, 2019, was $35.0 million
and $28.3 million, respectively. To the extent that actual obsolescence of our
inventory differs from our estimate by 10%, our 2020 net income would be higher
or lower by approximately $3.2 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. 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 salary continuation plan and 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:

                                                                       Increase (Decrease) in
                                                                         Projected Benefit
Foreign Defined Benefit Plans                                                Obligation
                                                                           (in millions)
1% increase in actuarial assumption for discount rate                  $    

(55.8)

1% decrease in actuarial assumption for discount rate                                 72.0



                                                                        Increase (Decrease) in
                                                                           Projected Benefit
Domestic Salary Continuation Plan                                           

Obligation

                                                                             (in millions)
1% increase in actuarial assumption for discount rate                   $               (3.5)
1% decrease in actuarial assumption for discount rate                                    4.3




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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 January 3, 2021 and December 29, 2019, was $6.6 million and
$3.8 million, respectively. To the extent the actual collectability of our
accounts receivable differs from our estimates by 10%, our 2020 net income would
be higher or lower by approximately $0.6 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
periodically adjust these provisions to reflect changes in actual experience.
Our warranty and sales allowance reserve on January 3, 2021 and December 29,
2019, was $3.2 million and $3.9 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 2020 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.

nora Acquisition. We are required to estimate the fair value of the assets
acquired and liabilities assumed in business combinations as of the acquisition
date, including identified intangible assets. The amount of purchase price paid
in excess of the net assets acquired is recorded as goodwill. The fair values
are estimated in accordance with accounting standards which define fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. The fair values
of the net assets acquired are determined primarily using Level 3 inputs (inputs
that are unobservable to the marketplace participant).

The most significant of the fair value estimates is related to intangible assets
not subject to amortization and intangible assets subject to amortization. We
acquired $103.3 million of intangible assets in connection with the nora
acquisition. This amount of intangible assets was determined based primarily on
nora's projected cash flows. The projected cash flows include various
assumptions, including the timing of projects embedded in backlog, success in
securing future business, profitability of the business, and the appropriate
risk-adjusted discount rate used to discount the projected cash flows. At
January 3, 2021 intangible assets, net of amortization and impairments, were
approximately $87.7 million. The final residual value assigned to goodwill
related to the nora acquisition was $201.9 million, at the acquisition date
exchange rate. We completed our final valuation of the assets acquired and
liabilities assumed at the acquisition date in the second quarter of 2019. At
January 3, 2021, goodwill, net of impairments, was $165.8 million.

Off-Balance Sheet Arrangements

We are not a party to any material off-balance sheet arrangements.

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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