NOTE

– ACQUISITION OF NORA

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 condensed 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.

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 growing 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 will be 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.

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)

Cash	$	46,495
Accounts receivables		30,996
Inventories		93,352
Other assets and prepaids		5,616
Property plant and equipment		79,538
Intangible assets		103,338
Total identifiable assets acquired		359,335

Current liabilities		(27,285	)
Deferred taxes		(29,277	)
Other long-term liabilities		(38,929	)
Total liabilities assumed		(95,491	)
Net identifiable assets acquired		263,844
Goodwill		183,348
Net assets acquired / cash paid	$	447,192

Acquired intangibles 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

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 inventory amount above 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 will be fully amortized by the end of

2018.

As of

September 30, 2018,

the balances, net of accumulated amortization where applicable, of the acquired intangible assets from the nora acquisition were (in thousands):

Developed technology	$	38,048
Trademarks and tradenames		59,880
Backlog		2,252
Goodwill		183,348

As of

September 30, 2018,

the recognized goodwill of

$183.3

million and acquired intangible assets, net of amortization of

$100.2

million, were assigned pro-rata to the Company’s

three

operating segments.

None

of the goodwill is expected to be deductible for income tax purposes.

The fair value of acquired accounts receivable was

$30.1

million with the gross value being

$31.9

million. The Company expects

$1.8

million to be uncollectible.

The Company recognized

$8.2

million of transaction costs related to the nora acquisition for the

nine

months ended

September 30, 2018.

Approximately

$4.0

million of these expenses are included in selling, general and administrative expenses in the consolidated condensed 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 credit facility, which were recorded as a reduction of long-term debt in the consolidated condensed balance sheet.

The amounts of revenue and net loss of nora included in the Company’s consolidated condensed statements of operations from the acquisition date to

September 30, 2018

are as follows (in thousands):

Revenue		$	41,159
Net loss			(12,455	)

The following represents the pro forma consolidated condensed 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)

	Nine months ended		Nine months ended
	September 30, 2018		October 1, 2017
Revenue	$	1,001,919	$	929,521
Net income		74,390		38,793

Pro forma net income for the

nine

months ended

September 30, 2018,

excludes any transaction related costs as these are non-recurring costs for the combined Company.