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Note 18 - Acquisition of Nora | 12 Months Ended
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Dec. 30, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE 18 – ACQUISITION OF NORA On June 14, 2018, the Company entered into a share purchase and transfer agreement to acquire the issued and outstanding shares of nora, nora’s outstanding third -party debt, and receivables related to nora’s shareholder loans. Nora is the holding company for a Germany-based manufacturer and multinational marketer of resilient floor coverings, including rubber flooring. In connection with the signing of the nora share purchase and transfer agreement, the Company entered into a derivative instrument to address the foreign currency risk associated with a portion of the nora purchase price. This option instrument did not qualify for hedge accounting, and the mark-to-market expense of $2.8 million to record the instrument at fair value at the end of the second quarter of 2018 was recorded in other expense in our consolidated statement of operations during the second quarter. The option instrument had a notional value of €315 million (or approximately $364 million as of the end of the second quarter of 2018 ) and an initial maturity of 120 days. Upon completion of the nora acquisition as discussed below, the option instrument was terminated and the Company recognized a loss of approximately $1.4 million upon termination, which was recorded in other expense in our Consolidated Condensed Statement of Operations during the third quarter of 2018. 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 this acquisition is expected to advance the Company’s growth strategy in expanding market segments, particularly in the healthcare, life sciences and education market segments. Similar to Interface, nora operates on an international footprint and the Company expects the acquisition will also allow for geographic sales synergies as well. The transaction was accounted for as a business combination using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recorded at their fair market values as of the acquisition date. The results of operations for this acquisition have been consolidated with those of the Company from the acquisition date forward. Tangible assets and liabilities of nora systems GmbH were valued as of the acquisition date using a market analysis, and intangible assets were valued using a discounted cash flow analysis. As of December 30, 2018, the estimated fair values of the assets acquired and liabilities assumed are not final. The provisional amount for assumed tax liabilities are subject to revision. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The amounts represent a provisional measurement of the fair values, and is therefore subject to change:
|  | As of August 7 th , 2018 |
|  | (In thousands) |
Assets acquired (excluding goodwill) |  | $ | 359,335 |
Liabilities assumed |  |  | (96,868 | )
Net assets acquired |  |  | 262,467 |
Purchase price |  |  | 447,192 |
Goodwill, excess of purchase price |  | $ | 184,725 |
Acquired intangible assets of $103.3 million include $60.8 million of trademarks and tradenames that are not subject to amortization and will instead be subject to annual impairment testing, or more frequent testing should there be a significant change in business conditions. The remaining intangible assets include developed technology of $39.1 million that will be amortized on a straight-line basis over the estimated useful life of 7 years and backlog of $3.4 million that will be amortized on a straight-line basis over the estimated useful life of six months. The acquired inventory includes a step-up of inventory to fair value of approximately $26.6 million which will be recognized in earnings over the expected turns of the inventory. This step-up of inventory to fair value was fully amortized by the end of 2018. As of December 30, 2018, recognized goodwill of $184.7 million and net intangible assets of $97.7 million were assigned pro-rata to the Company’s three operating segments. Goodwill includes subsequent purchase price accounting adjustments of approximately $1.4 million related to additional liabilities that existed at the acquisition date. None of the goodwill is expected to be deductible for income tax purposes. The fair value of acquired accounts receivable was $31.0 million with the gross value being $32.8 million. The Company expects approximately $1.8 million to be uncollectible. The Company recognized $9.5 million of transaction costs related to the nora acquisition for 2018. Approximately $5.3 million of these expenses are included in selling, general and administrative expenses in the consolidated statement of operations and $4.2 million are included in other expenses related to the derivative instrument the Company used to address the foreign currency risk associated with a portion of the nora purchase price. The Company also recognized $8.8 million of debt issuance costs in connection with the amended and restated Syndicated Credit Facility, which were recorded as a reduction of long-term debt in the consolidated balance sheet. The amounts of revenue and net loss of nora included in the Company’s consolidated statements of operations from the acquisition date to December 30, 2018 are as follows (in thousands):
Revenue |  | $ | 112,563 |
Net loss |  |  | (20,030 | )
The following represents the pro forma consolidated statement of operations as if nora had been included in the consolidated results of the Company as of January 1, 2017. These are estimated for pro forma purposes only and do not necessarily reflect the results had nora been included as of the beginning of 2018 and 2017.
Pro Forma Consolidated Statement of Operations |
(In thousands) |
|  | 2018 |  |  | 2017 |
Revenue |  | $ | 1,340,449 |  |  | $ | 1,229,766 |
Net income |  |  | 96,909 |  |  |  | 48,655 |
Pro forma net income for 2018 excludes any transaction related costs as these are non-recurring costs for the combined Company.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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