UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| ☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended NovemberAugust 27, 20202021
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| or |
| ☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-13873
STEELCASE INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
| Michigan | | 38-0819050 |
(State or other jurisdiction
of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| 901 44th Street SE | | |
| Grand Rapids, | Michigan | | 49508 |
| (Address of principal executive offices) | | (Zip Code) |
(616) 247-2710
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Class A Common Stock | SCS | New York Stock Exchange |
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 Data 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of December 18, 2020,September 21, 2021, Steelcase Inc. had 88,362,01988,343,089 shares of Class A Common Stock and 26,546,65725,076,994 shares of Class B Common Stock outstanding.
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STEELCASE INC. FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED NovemberAugust 27, 20202021
INDEX |
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements:
| | | | | | | | | | | | | | |
STEELCASE INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS (Unaudited) (in millions, except per share data) |
| | | | Three Months Ended | Nine Months Ended | | Three Months Ended | Six Months Ended |
| | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Revenue | Revenue | $ | 617.5 | | | $ | 955.2 | | | $ | 1,919.1 | | | $ | 2,777.5 | | | Revenue | $ | 724.8 | | | $ | 818.8 | | | $ | 1,281.4 | | | $ | 1,301.6 | | |
| Cost of sales | Cost of sales | 437.3 | | | 639.1 | | | 1,339.7 | | | 1,869.5 | | | Cost of sales | 518.0 | | | 542.3 | | | 919.9 | | | 902.4 | | |
| Restructuring costs | Restructuring costs | 2.3 | | | 0 | | | 9.2 | | | 0 | | | Restructuring costs | — | | | 6.9 | | | — | | | 6.9 | | |
| Gross profit | Gross profit | 177.9 | | | 316.1 | | | 570.2 | | | 908.0 | | | Gross profit | 206.8 | | | 269.6 | | | 361.5 | | | 392.3 | | |
| Operating expenses | Operating expenses | 168.8 | | | 241.0 | | | 498.5 | | | 720.0 | | | Operating expenses | 172.9 | | | 172.3 | | | 359.4 | | | 329.7 | | |
| Goodwill impairment charge | Goodwill impairment charge | 0 | | | 0 | | | 17.6 | | | 0 | | | Goodwill impairment charge | — | | | — | | | — | | | 17.6 | | |
| Restructuring costs | Restructuring costs | 9.1 | | | 0 | | | 17.8 | | | 0 | | | Restructuring costs | — | | | 8.7 | | | — | | | 8.7 | | |
| Operating income | Operating income | 0 | | | 75.1 | | | 36.3 | | | 188.0 | | | Operating income | 33.9 | | | 88.6 | | | 2.1 | | | 36.3 | | |
| Interest expense | Interest expense | (6.6) | | | (6.7) | | | (20.7) | | | (20.1) | | | Interest expense | (6.4) | | | (6.8) | | | (12.8) | | | (14.1) | | |
| Investment income | Investment income | 0.2 | | | 1.3 | | | 1.2 | | | 3.8 | | | Investment income | 0.1 | | | 0.2 | | | 0.3 | | | 1.0 | | |
| Other income, net | Other income, net | 2.2 | | | 4.1 | | | 7.0 | | | 8.3 | | | Other income, net | 1.8 | | | 0.8 | | | 1.0 | | | 4.8 | | |
| Income (loss) before income tax expense (benefit) | Income (loss) before income tax expense (benefit) | (4.2) | | | 73.8 | | | 23.8 | | | 180.0 | | | Income (loss) before income tax expense (benefit) | 29.4 | | | 82.8 | | | (9.4) | | | 28.0 | | |
| Income tax expense (benefit) | Income tax expense (benefit) | (6.3) | | | 18.9 | | | 4.3 | | | 46.8 | | | Income tax expense (benefit) | 4.7 | | | 27.3 | | | (6.0) | | | 10.6 | | |
| Net income | $ | 2.1 | | | $ | 54.9 | | | $ | 19.5 | | | $ | 133.2 | | | |
| Earnings per share: | | | | | | | | | |
| Net income (loss) | | Net income (loss) | $ | 24.7 | | | $ | 55.5 | | | $ | (3.4) | | | $ | 17.4 | | |
| Earnings (loss) per share: | | Earnings (loss) per share: | | | | | | | | |
| Basic | Basic | $ | 0.02 | | | $ | 0.46 | | | $ | 0.17 | | | $ | 1.11 | | | Basic | $ | 0.21 | | | $ | 0.47 | | | $ | (0.03) | | | $ | 0.15 | | |
| Diluted | Diluted | $ | 0.02 | | | $ | 0.46 | | | $ | 0.17 | | | $ | 1.11 | | | Diluted | $ | 0.21 | | | $ | 0.47 | | | $ | (0.03) | | | $ | 0.15 | | |
| Dividends declared and paid per common share | Dividends declared and paid per common share | $ | 0.100 | | | $ | 0.145 | | | $ | 0.270 | | | $ | 0.435 | | | Dividends declared and paid per common share | $ | 0.145 | | | $ | 0.100 | | | $ | 0.245 | | | $ | 0.170 | | |
See accompanying notes to the condensed consolidated financial statements.
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
| | | | Three Months Ended | Nine Months Ended | | Three Months Ended | Six Months Ended |
| | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Net income | $ | 2.1 | | | $ | 54.9 | | | $ | 19.5 | | | $ | 133.2 | | | |
| Net income (loss) | | Net income (loss) | $ | 24.7 | | | $ | 55.5 | | | $ | (3.4) | | | $ | 17.4 | | |
| Other comprehensive income (loss), net: | Other comprehensive income (loss), net: | | Other comprehensive income (loss), net: | |
| Unrealized gain (loss) on investments | Unrealized gain (loss) on investments | 0.3 | | | (0.1) | | | 0.2 | | | (0.2) | | | Unrealized gain (loss) on investments | — | | | 0.1 | | | 0.2 | | | (0.1) | | |
| Pension and other post-retirement liability adjustments | Pension and other post-retirement liability adjustments | (0.3) | | | (1.1) | | | (1.1) | | | (1.6) | | | Pension and other post-retirement liability adjustments | 0.4 | | | (1.1) | | | 0.3 | | | (0.8) | | |
| Derivative amortization | Derivative amortization | 0.3 | | | 0.3 | | | 0.7 | | | 0.7 | | | Derivative amortization | 0.2 | | | 0.2 | | | 0.4 | | | 0.4 | | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | 7.2 | | | 6.4 | | | 20.7 | | | (7.9) | | | Foreign currency translation adjustments | (12.7) | | | 22.4 | | | (11.8) | | | 13.5 | | |
| Total other comprehensive income (loss), net | Total other comprehensive income (loss), net | 7.5 | | | 5.5 | | | 20.5 | | | (9.0) | | | Total other comprehensive income (loss), net | (12.1) | | | 21.6 | | | (10.9) | | | 13.0 | | |
| Comprehensive income | $ | 9.6 | | | $ | 60.4 | | | $ | 40.0 | | | $ | 124.2 | | | |
| Comprehensive income (loss) | | Comprehensive income (loss) | $ | 12.6 | | | $ | 77.1 | | | $ | (14.3) | | | $ | 30.4 | | |
See accompanying notes to the condensed consolidated financial statements.
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STEELCASE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) |
| | | (Unaudited) | | | (Unaudited) | |
| | November 27,
2020 | February 28,
2020 | | August 27,
2021 | February 26,
2021 |
| ASSETS | ASSETS | | ASSETS | |
| Current assets: | Current assets: | | | | | Current assets: | | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 484.4 | | | $ | 541.0 | | | Cash and cash equivalents | $ | 360.7 | | | $ | 489.8 | | |
| | Accounts receivable | Accounts receivable | 283.6 | | | 381.8 | | | Accounts receivable | 334.0 | | | 279.0 | | |
| Allowance for doubtful accounts | Allowance for doubtful accounts | (9.3) | | | (9.4) | | | Allowance for doubtful accounts | (9.1) | | | (8.7) | | |
| Inventories | Inventories | 235.0 | | | 215.0 | | | Inventories | 233.4 | | | 193.5 | | |
| | Prepaid expenses | Prepaid expenses | 19.3 | | | 21.6 | | | Prepaid expenses | 36.6 | | | 20.9 | | |
| | Income taxes receivable | | Income taxes receivable | 51.7 | | | 49.5 | | |
| Other current assets | Other current assets | 71.8 | | | 38.8 | | | Other current assets | 22.7 | | | 21.4 | | |
| Total current assets | Total current assets | 1,084.8 | | | 1,188.8 | | | Total current assets | 1,030.0 | | | 1,045.4 | | |
| Property, plant and equipment, net of accumulated depreciation of $1,040.2 and $977.7 | 415.3 | | | 426.3 | | | |
| Property, plant and equipment, net of accumulated depreciation of $1,081.3 and $1,063.2 | | Property, plant and equipment, net of accumulated depreciation of $1,081.3 and $1,063.2 | 402.1 | | | 410.8 | | |
| Company-owned life insurance ("COLI") | Company-owned life insurance ("COLI") | 167.7 | | | 160.0 | | | Company-owned life insurance ("COLI") | 169.8 | | | 169.5 | | |
| Deferred income taxes | Deferred income taxes | 110.9 | | | 124.6 | | | Deferred income taxes | 115.7 | | | 113.3 | | |
| Goodwill | Goodwill | 215.3 | | | 233.6 | | | Goodwill | 218.1 | | | 218.1 | | |
| Other intangible assets, net of accumulated amortization of $68.8 and $56.7 | 91.3 | | | 102.9 | | | |
| Other intangible assets, net of accumulated amortization of $79.8 and $73.3 | | Other intangible assets, net of accumulated amortization of $79.8 and $73.3 | 82.3 | | | 90.4 | | |
| Investments in unconsolidated affiliates | Investments in unconsolidated affiliates | 55.4 | | | 52.3 | | | Investments in unconsolidated affiliates | 49.4 | | | 51.5 | | |
| Right-of-use operating lease assets | Right-of-use operating lease assets | 213.1 | | | 237.9 | | | Right-of-use operating lease assets | 219.4 | | | 225.4 | | |
| Other assets | Other assets | 31.5 | | | 39.0 | | | Other assets | 26.7 | | | 29.6 | | |
| Total assets | Total assets | $ | 2,385.3 | | | $ | 2,565.4 | | | Total assets | $ | 2,313.5 | | | $ | 2,354.0 | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| Current liabilities: | Current liabilities: | | | | | Current liabilities: | | | | |
| Accounts payable | Accounts payable | $ | 200.8 | | | $ | 244.3 | | | Accounts payable | $ | 234.4 | | | $ | 181.3 | | |
| Short-term borrowings and current portion of long-term debt | Short-term borrowings and current portion of long-term debt | 2.6 | | | 2.9 | | | Short-term borrowings and current portion of long-term debt | 6.1 | | | 4.7 | | |
| Current operating lease obligations | Current operating lease obligations | 41.9 | | | 43.1 | | | Current operating lease obligations | 43.3 | | | 43.8 | | |
| Accrued expenses: | Accrued expenses: | | | | | Accrued expenses: | | | | |
| Employee compensation | Employee compensation | 95.2 | | | 191.7 | | | Employee compensation | 65.4 | | | 90.1 | | |
| Employee benefit plan obligations | Employee benefit plan obligations | 24.0 | | | 44.7 | | | Employee benefit plan obligations | 18.3 | | | 24.9 | | |
| Accrued promotions | Accrued promotions | 30.4 | | | 35.3 | | | Accrued promotions | 26.4 | | | 27.8 | | |
| Customer deposits | Customer deposits | 59.9 | | | 28.6 | | | Customer deposits | 47.4 | | | 33.7 | | |
| | Other | Other | 114.2 | | | 100.3 | | | Other | 106.4 | | | 108.7 | | |
| Total current liabilities | Total current liabilities | 569.0 | | | 690.9 | | | Total current liabilities | 547.7 | | | 515.0 | | |
| Long-term liabilities: | Long-term liabilities: | | | | | Long-term liabilities: | | | | |
| Long-term debt less current maturities | Long-term debt less current maturities | 480.2 | | | 481.4 | | | Long-term debt less current maturities | 478.4 | | | 479.2 | | |
| Employee benefit plan obligations | Employee benefit plan obligations | 147.9 | | | 148.3 | | | Employee benefit plan obligations | 145.2 | | | 152.9 | | |
| Long-term operating lease obligations | Long-term operating lease obligations | 191.4 | | | 214.0 | | | Long-term operating lease obligations | 193.4 | | | 199.5 | | |
| Other long-term liabilities | Other long-term liabilities | 49.0 | | | 60.4 | | | Other long-term liabilities | 47.5 | | | 46.9 | | |
| Total long-term liabilities | Total long-term liabilities | 868.5 | | | 904.1 | | | Total long-term liabilities | 864.5 | | | 878.5 | | |
| Total liabilities | Total liabilities | 1,437.5 | | | 1,595.0 | | | Total liabilities | 1,412.2 | | | 1,393.5 | | |
| Shareholders’ equity: | Shareholders’ equity: | | | | | Shareholders’ equity: | | | | |
| | Additional paid-in capital | Additional paid-in capital | 3.5 | | | 28.4 | | | Additional paid-in capital | — | | | 12.5 | | |
| Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (48.8) | | | (69.3) | | | Accumulated other comprehensive income (loss) | (50.9) | | | (40.0) | | |
| Retained earnings | Retained earnings | 993.1 | | | 1,011.3 | | | Retained earnings | 952.2 | | | 988.0 | | |
| Total shareholders’ equity | Total shareholders’ equity | 947.8 | | | 970.4 | | | Total shareholders’ equity | 901.3 | | | 960.5 | | |
| Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 2,385.3 | | | $ | 2,565.4 | | | Total liabilities and shareholders’ equity | $ | 2,313.5 | | | $ | 2,354.0 | | |
See accompanying notes to the condensed consolidated financial statements.
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions, except share and per share data)
| | | Three Months Ended | Nine Months Ended | | Three Months Ended | Six Months Ended |
| | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Changes in common shares outstanding: | Changes in common shares outstanding: | | Changes in common shares outstanding: | |
| Common shares outstanding, beginning of period | Common shares outstanding, beginning of period | 114,776,546 | | | 117,243,960 | | | 117,202,000 | | | 116,766,610 | | | Common shares outstanding, beginning of period | 115,664,399 | | | 114,759,549 | | | 114,908,676 | | | 117,202,000 | | |
| Common stock issuances | Common stock issuances | 21,351 | | | 10,167 | | | 48,241 | | | 33,039 | | | Common stock issuances | 14,204 | | | 13,941 | | | 27,297 | | | 26,890 | | |
| Common stock repurchases | Common stock repurchases | (44,201) | | | (177,123) | | | (3,288,795) | | | (524,379) | | | Common stock repurchases | (1,873,804) | | | (205) | | | (2,227,000) | | | (3,244,594) | | |
| Performance units issued as common stock | 0 | | | 0 | | | 174,888 | | | 0 | | | |
| Restricted units issued as common stock | 139,114 | | | 116,094 | | | 756,476 | | | 917,828 | | | |
| Performance and restricted stock units issued as common stock | | Performance and restricted stock units issued as common stock | 16,559 | | | 3,261 | | | 1,112,385 | | | 792,250 | | |
| Common shares outstanding, end of period | Common shares outstanding, end of period | 114,892,810 | | | 117,193,098 | | | 114,892,810 | | | 117,193,098 | | | Common shares outstanding, end of period | 113,821,358 | | | 114,776,546 | | | 113,821,358 | | | 114,776,546 | | |
| | Changes in paid-in capital (1): | | |
| Paid-in capital, beginning of period | $ | 1.7 | | | $ | 26.5 | | | $ | 28.4 | | | $ | 16.4 | | | |
| Changes in additional paid-in capital (1): | | Changes in additional paid-in capital (1): | |
| Additional paid-in capital, beginning of period | | Additional paid-in capital, beginning of period | $ | 21.3 | | | $ | — | | | $ | 12.5 | | | $ | 28.4 | | |
| Common stock issuances | Common stock issuances | 0.2 | | | 0.2 | | | 0.6 | | | 0.6 | | | Common stock issuances | 0.2 | | | 0.2 | | | 0.4 | | | 0.4 | | |
| Common stock repurchases | Common stock repurchases | (0.4) | | | (2.8) | | | (36.8) | | | (8.7) | | | Common stock repurchases | (23.4) | | | — | | | (27.7) | | | (36.4) | | |
| Performance units and restricted stock units expense | 2.0 | | | 2.1 | | | 11.3 | | | 13.7 | | | |
| Other | 0 | | | 0 | | | 0 | | | 4.0 | | | |
| Paid-in capital, end of period | 3.5 | | | 26.0 | | | 3.5 | | | 26.0 | | | |
| Performance and restricted stock units expense | | Performance and restricted stock units expense | 1.9 | | | 1.5 | | | 14.8 | | | 9.3 | | |
| Additional paid-in capital, end of period | | Additional paid-in capital, end of period | — | | | 1.7 | | | — | | | 1.7 | | |
| | Changes in accumulated other comprehensive income (loss): | Changes in accumulated other comprehensive income (loss): | | Changes in accumulated other comprehensive income (loss): | |
| Accumulated other comprehensive income (loss), beginning of period | Accumulated other comprehensive income (loss), beginning of period | (56.3) | | | (61.8) | | | (69.3) | | | (47.3) | | | Accumulated other comprehensive income (loss), beginning of period | (38.8) | | | (77.9) | | | (40.0) | | | (69.3) | | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | 7.5 | | | 5.5 | | | 20.5 | | | (9.0) | | | Other comprehensive income (loss) | (12.1) | | | 21.6 | | | (10.9) | | | 13.0 | | |
| | Accumulated other comprehensive income (loss), end of period | Accumulated other comprehensive income (loss), end of period | (48.8) | | | (56.3) | | | (48.8) | | | (56.3) | | | Accumulated other comprehensive income (loss), end of period | (50.9) | | | (56.3) | | | (50.9) | | | (56.3) | | |
| | Changes in retained earnings: | Changes in retained earnings: | | Changes in retained earnings: | |
| Retained earnings, beginning of period | Retained earnings, beginning of period | 1,002.7 | | | 924.5 | | | 1,011.3 | | | 880.7 | | | Retained earnings, beginning of period | 947.8 | | | 958.9 | | | 988.0 | | | 1,011.3 | | |
| Net income | 2.1 | | | 54.9 | | | 19.5 | | | 133.2 | | | |
| Net income (loss) | | Net income (loss) | 24.7 | | | 55.5 | | | (3.4) | | | 17.4 | | |
| Dividends paid | Dividends paid | (11.7) | | | (17.4) | | | (31.8) | | | (51.9) | | | Dividends paid | (17.1) | | | (11.7) | | | (29.2) | | | (20.1) | | |
| Common stock repurchases | Common stock repurchases | — | | | 0 | | | (5.9) | | | 0 | | | Common stock repurchases | (3.2) | | | — | | | (3.2) | | | (5.9) | | |
| Retained earnings, end of period | Retained earnings, end of period | 993.1 | | | 962.0 | | | 993.1 | | | 962.0 | | | Retained earnings, end of period | 952.2 | | | 1,002.7 | | | 952.2 | | | 1,002.7 | | |
| Total shareholders' equity | Total shareholders' equity | $ | 947.8 | | | $ | 931.7 | | | $ | 947.8 | | | $ | 931.7 | | | Total shareholders' equity | $ | 901.3 | | | $ | 948.1 | | | $ | 901.3 | | | $ | 948.1 | | |
(1)Shares of our Class A and Class B common stock have no par value; thus, there are no balances for common stock.
See accompanying notes to the condensed consolidated financial statements.
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STEELCASE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) |
| | | | Nine Months Ended | | Six Months Ended |
| | November 27,
2020 | November 22,
2019 | | August 27,
2021 | August 28,
2020 |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | | | | | OPERATING ACTIVITIES | | | | |
| Net income | $ | 19.5 | | | $ | 133.2 | | | |
| Net income (loss) | | Net income (loss) | $ | (3.4) | | | $ | 17.4 | | |
| Depreciation and amortization | Depreciation and amortization | 64.1 | | | 62.9 | | | Depreciation and amortization | 41.2 | | | 43.3 | | |
| Goodwill impairment charge | Goodwill impairment charge | 17.6 | | | 0 | | | Goodwill impairment charge | — | | | 17.6 | | |
| | Restructuring costs | Restructuring costs | 27.0 | | | 0 | | | Restructuring costs | — | | | 15.6 | | |
| Deferred income taxes | Deferred income taxes | 17.9 | | | 13.9 | | | Deferred income taxes | (3.1) | | | 18.0 | | |
| | Non-cash stock compensation | Non-cash stock compensation | 11.9 | | | 14.3 | | | Non-cash stock compensation | 15.2 | | | 9.7 | | |
| | Equity in income of unconsolidated affiliates | Equity in income of unconsolidated affiliates | (6.7) | | | (9.9) | | | Equity in income of unconsolidated affiliates | (2.1) | | | (3.9) | | |
| Dividends received from unconsolidated affiliates | Dividends received from unconsolidated affiliates | 5.2 | | | 8.8 | | | Dividends received from unconsolidated affiliates | 4.0 | | | 2.8 | | |
| Other | Other | (12.4) | | | (3.6) | | | Other | (19.4) | | | (12.5) | | |
| Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | | | | Changes in operating assets and liabilities: | | | | |
| Accounts receivable | Accounts receivable | 105.2 | | | (60.8) | | | Accounts receivable | (58.0) | | | 58.0 | | |
| Inventories | Inventories | (16.4) | | | (25.2) | | | Inventories | (42.0) | | | (0.2) | | |
| | Other assets | Other assets | (22.9) | | | 12.1 | | | Other assets | (20.3) | | | (10.8) | | |
| Accounts payable | Accounts payable | (47.0) | | | 41.6 | | | Accounts payable | 54.7 | | | (36.5) | | |
| Employee compensation liabilities | Employee compensation liabilities | (130.5) | | | (8.8) | | | Employee compensation liabilities | (30.7) | | | (120.8) | | |
| | Employee benefit obligations | Employee benefit obligations | (25.2) | | | (5.7) | | | Employee benefit obligations | (14.9) | | | (24.9) | | |
| Customer deposits | Customer deposits | 30.4 | | | 6.2 | | | Customer deposits | 14.0 | | | 74.3 | | |
| | Accrued expenses and other liabilities | Accrued expenses and other liabilities | (0.5) | | | 39.8 | | | Accrued expenses and other liabilities | 3.2 | | | (2.2) | | |
| Net cash provided by operating activities | 37.2 | | | 218.8 | | | |
| Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | (61.6) | | | 44.9 | | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | | INVESTING ACTIVITIES | | | | |
| Capital expenditures | Capital expenditures | (32.1) | | | (49.1) | | | Capital expenditures | (31.8) | | | (18.0) | | |
| Proceeds from disposal of fixed assets | Proceeds from disposal of fixed assets | 7.3 | | | 1.0 | | | Proceeds from disposal of fixed assets | 16.8 | | | 7.1 | | |
| | Other | Other | 7.0 | | | 2.0 | | | Other | 8.5 | | | 4.9 | | |
| Net cash used in investing activities | Net cash used in investing activities | (17.8) | | | (46.1) | | | Net cash used in investing activities | (6.5) | | | (6.0) | | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | | FINANCING ACTIVITIES | | | | |
| Dividends paid | Dividends paid | (31.8) | | | (51.9) | | | Dividends paid | (29.2) | | | (20.1) | | |
| Common stock repurchases | Common stock repurchases | (42.7) | | | (8.7) | | | Common stock repurchases | (30.9) | | | (42.3) | | |
| | Borrowings on lines of credit | 250.0 | | | 0 | | | |
| Repayments on lines of credit | (250.0) | | | 0 | | | |
| | Borrowings on global committed bank facility | | Borrowings on global committed bank facility | — | | | 250.0 | | |
| Repayments on global committed bank facility | | Repayments on global committed bank facility | — | | | (250.0) | | |
| Other | Other | (2.1) | | | (3.5) | | | Other | 0.2 | | | (1.4) | | |
| Net cash used in financing activities | Net cash used in financing activities | (76.6) | | | (64.1) | | | Net cash used in financing activities | (59.9) | | | (63.8) | | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | 1.8 | | | (0.8) | | | Effect of exchange rate changes on cash and cash equivalents | (0.6) | | | 0.2 | | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (55.4) | | | 107.8 | | | |
| Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | (128.6) | | | (24.7) | | |
| Cash and cash equivalents and restricted cash, beginning of period (1) | Cash and cash equivalents and restricted cash, beginning of period (1) | 547.1 | | | 264.8 | | | Cash and cash equivalents and restricted cash, beginning of period (1) | 495.6 | | | 547.1 | | |
| Cash and cash equivalents and restricted cash, end of period (2) | Cash and cash equivalents and restricted cash, end of period (2) | $ | 491.7 | | | $ | 372.6 | | | Cash and cash equivalents and restricted cash, end of period (2) | $ | 367.0 | | | $ | 522.4 | | |
(1)These amounts include restricted cash of $6.1$5.8 and $3.5$6.1 as of February 28, 202026, 2021 and February 22, 2019,28, 2020, respectively.
(2)These amounts include restricted cash of $7.3$6.3 and $4.9$6.5 as of NovemberAugust 27, 20202021 and November 22, 2019,August 28, 2020, respectively.
Restricted cash primarily represents funds held in escrow for potential future workers’ compensation and product liability claims. Restricted cash is included as part of Other assets in the Condensed Consolidated Balance Sheets.
See accompanying notes to the condensed consolidated financial statements.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 202026, 2021 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 28, 202026, 2021 was derived from the audited Consolidated Balance Sheet included in our Form 10-K.
As used in this Quarterly Report on Form 10-Q (“Report”), unless otherwise expressly stated or the context otherwise requires, all references to “Steelcase,” “we,” “our,” “Company” and similar references are to Steelcase Inc. and its subsidiaries in which a controlling interest is maintained. Unless the context otherwise indicates, reference to a year relates to the fiscal year, ended in February of the year indicated, rather than a calendar year. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.
2.NEW ACCOUNTING STANDARDS
Adoption of NewWe evaluate all Accounting Standards
In December 2019, Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740), which is intendedfor consideration of their applicability to enhance various aspects of the accounting for income taxes. The new guidance updates the calculation of income taxes in an interim period when year-to-date losses exceed the anticipated loss for the year. We adopted this guidance in Q1 2021 on a prospective basis. The adoption of this guidance did not have a material effect on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses. We adopted this guidance in Q1 2021 using a modified retrospective transition approach. The adoption of this guidance did not have a material effect on our consolidated financial statements. We estimate our allowance for doubtful accounts based upon several factors, including customer credit qualityhave assessed all ASUs issued but not yet adopted and historical write-off trends. We also use general information regarding industry trends, the economic environment and information gathered through our network of field-based employees. The adoption of this guidance didconcluded that those not significantly impact our accounting policiesdisclosed are either not applicable to us or methods utilized to determine the allowance for doubtful accounts.
Accounting Standards Issued But Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which amends ASC 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General. The amended guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. The amended guidance is effective for fiscal years ending after December 15, 2020. The adoption of this guidance will modify our disclosures but isare not expected to have a material effect on our consolidated financial statements.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3.REVENUE
Disaggregation of Revenue
The following table provides information about disaggregated revenue by product category for each of our reportable segments:
| | Product Category Data | Product Category Data | Three Months Ended | Nine Months Ended | Product Category Data | Three Months Ended | Six Months Ended |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Americas | Americas | | Americas | |
| Desking, benching, systems and storage | Desking, benching, systems and storage | $ | 202.8 | | | $ | 351.7 | | | $ | 681.9 | | | $ | 1,058.5 | | | Desking, benching, systems and storage | $ | 244.3 | | | $ | 310.7 | | | $ | 429.4 | | | $ | 479.1 | | |
| Seating | Seating | 121.3 | | | 197.3 | | | 412.8 | | | 588.6 | | | Seating | 165.5 | | | 195.0 | | | 283.7 | | | 291.5 | | |
| Other (1) | Other (1) | 92.3 | | | 141.9 | | | 286.8 | | | 359.6 | | | Other (1) | 113.5 | | | 125.5 | | | 186.5 | | | 194.5 | | |
| EMEA | EMEA | | EMEA | |
| Desking, benching, systems and storage | Desking, benching, systems and storage | 48.5 | | | 66.1 | | | 140.3 | | | 187.0 | | | Desking, benching, systems and storage | 41.7 | | | 47.9 | | | 96.5 | | | 91.8 | | |
| Seating | Seating | 61.7 | | | 60.7 | | | 138.5 | | | 174.0 | | | Seating | 55.7 | | | 45.8 | | | 89.6 | | | 76.8 | | |
| Other (1) | Other (1) | 33.1 | | | 41.6 | | | 89.9 | | | 122.9 | | | Other (1) | 41.5 | | | 32.2 | | | 76.4 | | | 56.8 | | |
| Other | Other | | Other | |
| Desking, benching, systems and storage | Desking, benching, systems and storage | 12.4 | | | 16.7 | | | 33.5 | | | 46.9 | | | Desking, benching, systems and storage | 14.5 | | | 10.4 | | | 25.3 | | | 21.1 | | |
| Seating | Seating | 17.2 | | | 21.4 | | | 48.1 | | | 65.3 | | | Seating | 16.2 | | | 18.7 | | | 30.7 | | | 30.9 | | |
| Other (1) | Other (1) | 28.2 | | | 57.8 | | | 87.3 | | | 174.7 | | | Other (1) | 31.9 | | | 32.6 | | | 63.3 | | | 59.1 | | |
| | $ | 617.5 | | | $ | 955.2 | | | $ | 1,919.1 | | | $ | 2,777.5 | | | | $ | 724.8 | | | $ | 818.8 | | | $ | 1,281.4 | | | $ | 1,301.6 | | |
(1)The Other product category data by segment consists primarily of products sold by consolidated dealers, textiles and surface materials, worktools, architecture, technology and other uncategorized product lines and services.
Reportable geographic information is as follows:
| | Reportable Geographic Revenue | Reportable Geographic Revenue | Three Months Ended | Nine Months Ended | | Reportable Geographic Revenue | Three Months Ended | Six Months Ended | |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | Reportable Geographic Revenue | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| United States | United States | $ | 392.9 | | | $ | 705.4 | | | $ | 1,314.0 | | | $ | 1,922.1 | | | | United States | $ | 493.5 | | | $ | 597.6 | | | $ | 852.8 | | | $ | 921.1 | | | |
| Foreign locations | Foreign locations | 224.6 | | | 249.8 | | | 605.1 | | | 855.4 | | | | Foreign locations | 231.3 | | | 221.2 | | | 428.6 | | | 380.5 | | | |
| | $ | 617.5 | | | $ | 955.2 | | | $ | 1,919.1 | | | $ | 2,777.5 | | | | | $ | 724.8 | | | $ | 818.8 | | | $ | 1,281.4 | | | $ | 1,301.6 | | | |
Contract Balances
At times, we receive payments from customers before revenue is recognized, resulting in the recognition of a contract liability (Customer deposits) presented in the Condensed Consolidated Balance Sheets.
Changes in the Customer deposits balance during the ninesix months ended NovemberAugust 27, 20202021 are as follows:
| | | | | | | | |
| Customer Deposits |
Balance as of February 28, 202026, 2021 | $ | 28.633.7 | | |
| Recognition of revenue related to beginning of year customer deposits | (25.7) | | |
| Customer deposits received, net of revenue recognized during the period | 57.039.4 | | |
Balance as of NovemberAugust 27, 20202021 | $ | 59.947.4 | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4.EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed using the two-class method. The two-class method determines earnings (loss) per share for each class of common stock and participating securities according to dividends or dividend equivalents and their respective participation rights in undistributed earnings. Participating securities represent restricted stock units in which the participants have non-forfeitable rights to dividend equivalents during the performance period. Diluted earnings (loss) per share includes the effects of certain performance units in which the participants have forfeitable rights to dividend equivalents during the performance period.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended | |
| Computation of Earnings per Share | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | |
| Net income | $ | 2.1 | | | $ | 54.9 | | | $ | 19.5 | | | $ | 133.2 | | | | | | |
| Adjustment for earnings attributable to participating securities | 0 | | | (1.1) | | | (0.4) | | | (2.6) | | | | | | |
| Net income used in calculating earnings per share | $ | 2.1 | | | $ | 53.8 | | | $ | 19.1 | | | $ | 130.6 | | | | | | |
| Weighted-average common shares outstanding including participating securities (in millions) | 117.7 | | | 119.5 | | | 117.4 | | | 119.6 | | | | | | |
| Adjustment for participating securities (in millions) | (2.9) | | | (2.3) | | | (2.5) | | | (2.3) | | | | | | |
| Shares used in calculating basic earnings per share (in millions) | 114.8 | | | 117.2 | | | 114.9 | | | 117.3 | | | | | | |
| Effect of dilutive stock-based compensation (in millions) | 0.3 | | | 0.6 | | | 0.3 | | | 0.5 | | | | | | |
| Shares used in calculating diluted earnings per share (in millions) | 115.1 | | | 117.8 | | | 115.2 | | | 117.8 | | | | | | |
| Earnings per share: | | | | | | | | | | | | |
| Basic | $ | 0.02 | | | $ | 0.46 | | | $ | 0.17 | | | $ | 1.11 | | | | | | |
| Diluted | $ | 0.02 | | | $ | 0.46 | | | $ | 0.17 | | | $ | 1.11 | | | | | | |
| Total common shares outstanding at period end (in millions) | 114.9 | | | 117.2 | | | 114.9 | | | 117.2 | | | | | | |
| Anti-dilutive performance units excluded from the computation of diluted earnings per share (in millions) | 0 | | | 0 | | | 0 | | | 0 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Computation of Earnings (Loss) Per Share | Three Months Ended August 27, 2021 | Three Months Ended August 28, 2020 |
| Net Income (Loss) | Basic Shares
(in millions) | Diluted Shares
(in millions) | Net Income (Loss) | Basic Shares
(in millions) | Diluted Shares
(in millions) |
| Amounts used in calculating earnings (loss) per share | $ | 24.7 | | | 118.0 | | | 118.6 | | | $ | 55.5 | | | 117.6 | | | 117.8 | | |
| Impact of participating securities | (0.6) | | | (3.1) | | | (3.1) | | | (1.3) | | | (2.8) | | | (2.8) | | |
| Amounts used in calculating earnings (loss) per share, excluding participating securities | $ | 24.1 | | | 114.9 | | | 115.5 | | | $ | 54.2 | | | 114.8 | | | 115.0 | | |
| | | | | | | | | | | | |
| Earnings (loss) per share | | | $ | 0.21 | | | $ | 0.21 | | | | | $ | 0.47 | | | $ | 0.47 | | |
| | | | | | | | | | | | |
There were no anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the three months ended August 27, 2021 and August 28, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Computation of Earnings (Loss) Per Share | Six Months Ended August 27, 2021 | Six Months Ended August 28, 2020 |
| Net Income (Loss) | Basic Shares
(in millions) | Diluted Shares
(in millions) | Net Income (Loss) | Basic Shares
(in millions) | Diluted Shares
(in millions) |
| Amounts used in calculating earnings (loss) per share | $ | (3.4) | | | 118.1 | | | 118.1 | | | $ | 17.4 | | | 117.4 | | | 117.6 | | |
| Impact of participating securities | 0.1 | | | (2.9) | | | (2.9) | | | (0.4) | | | (2.4) | | | (2.4) | | |
| Amounts used in calculating earnings (loss) per share, excluding participating securities | $ | (3.3) | | | 115.2 | | | 115.2 | | | $ | 17.0 | | | 115.0 | | | 115.2 | | |
| | | | | | | | | | | | |
| Earnings (loss) per share | | | $ | (0.03) | | | $ | (0.03) | | | | | $ | 0.15 | | | $ | 0.15 | | |
| | | | | | | | | | | | |
There were 0.5 million anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the six months ended August 27, 2021 and none for the six months ended August 28, 2020.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended NovemberAugust 27, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investments | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
| Balance as of August 28, 2020 | $ | (0.2) | | | $ | (3.9) | | | $ | (8.2) | | | $ | (44.0) | | | $ | (56.3) | | |
| Other comprehensive income (loss) before reclassifications | 0.3 | | | (0.1) | | | 0 | | | 7.2 | | | 7.4 | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | 0 | | | (0.2) | | | 0.3 | | | 0 | | | 0.1 | | |
| Net current period other comprehensive income (loss) | 0.3 | | | (0.3) | | | 0.3 | | | 7.2 | | | 7.5 | | |
| Balance as of November 27, 2020 | $ | 0.1 | | | $ | (4.2) | | | $ | (7.9) | | | $ | (36.8) | | | $ | (48.8) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investments | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
| Balance as of May 28, 2021 | $ | 0.5 | | | $ | (6.7) | | | $ | (7.4) | | | $ | (25.2) | | | $ | (38.8) | | |
| Other comprehensive income (loss) before reclassifications | — | | | 0.4 | | | — | | | (12.7) | | | (12.3) | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | — | | | 0.2 | | | — | | | 0.2 | | |
| Net other comprehensive income (loss) during the period | — | | | 0.4 | | | 0.2 | | | (12.7) | | | (12.1) | | |
| Balance as of August 27, 2021 | $ | 0.5 | | | $ | (6.3) | | | $ | (7.2) | | | $ | (37.9) | | | $ | (50.9) | | |
The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended August 27, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investments | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
| Balance as of February 26, 2021 | $ | 0.3 | | | $ | (6.6) | | | $ | (7.6) | | | $ | (26.1) | | | $ | (40.0) | | |
| Other comprehensive income (loss) before reclassifications | 0.2 | | | 0.4 | | | — | | | (11.8) | | | (11.2) | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (0.1) | | | 0.4 | | | — | | | 0.3 | | |
| Net other comprehensive income (loss) during the period | 0.2 | | | 0.3 | | | 0.4 | | | (11.8) | | | (10.9) | | |
| Balance as of August 27, 2021 | $ | 0.5 | | | $ | (6.3) | | | $ | (7.2) | | | $ | (37.9) | | | $ | (50.9) | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the nine months ended November 27, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investments | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
| Balance as of February 28, 2020 | $ | (0.1) | | | $ | (3.1) | | | $ | (8.6) | | | $ | (57.5) | | | $ | (69.3) | | |
| Other comprehensive income (loss) before reclassifications | 0.2 | | | (0.4) | | | 0 | | | 20.7 | | | 20.5 | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | 0 | | | (0.7) | | | 0.7 | | | 0 | | | 0 | | |
| Net current period other comprehensive income (loss) | 0.2 | | | (1.1) | | | 0.7 | | | 20.7 | | | 20.5 | | |
| Balance as of November 27, 2020 | $ | 0.1 | | | $ | (4.2) | | | $ | (7.9) | | | $ | (36.8) | | | $ | (48.8) | | |
The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three and ninesix months ended NovemberAugust 27, 20202021 and November 22, 2019:August 28, 2020:
| Detail of Accumulated Other
Comprehensive Income (Loss) Components | Detail of Accumulated Other
Comprehensive Income (Loss) Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line in the Condensed Consolidated Statements of Income | Detail of Accumulated Other
Comprehensive Income (Loss) Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line in the Condensed Consolidated Statements of Operations |
| Three Months Ended | | Nine Months Ended | Detail of Accumulated Other
Comprehensive Income (Loss) Components | Three Months Ended | Six Months Ended | Affected Line in the Condensed Consolidated Statements of Operations | |
November 27,
2020 | November 22,
2019 | | November 27,
2020 | November 22,
2019 | Detail of Accumulated Other
Comprehensive Income (Loss) Components | August 27,
2021 | August 28,
2020 | August 27,
2021 | Affected Line in the Condensed Consolidated Statements of Operations | |
| Amortization of pension and other post-retirement liability adjustments | | | | |
| Actuarial losses (gains) | $ | (0.3) | | | $ | (0.8) | | | | $ | (0.9) | | | $ | (2.3) | | | Other income, net | |
| | Amortization of pension and other post-retirement actuarial losses (gains) | | Amortization of pension and other post-retirement actuarial losses (gains) | $ | — | | | $ | (0.3) | | | $ | (0.1) | | | $ | (0.6) | | | | Other income, net |
| Prior service cost (credit) | Prior service cost (credit) | 0 | | | (0.1) | | | | (0.1) | | | (0.2) | | | Other income, net | Prior service cost (credit) | — | | | (0.1) | | | — | | | (0.1) | | | | Other income, net |
| Income tax expense | | Income tax expense | — | | | 0.1 | | | — | | | 0.2 | | | | Income tax expense (benefit) |
| | | — | | | (0.3) | | | (0.1) | | | (0.5) | | | | |
| | Derivative amortization | | Derivative amortization | 0.3 | | | 0.3 | | | 0.6 | | | 0.6 | | | | Interest expense |
| Income tax benefit | | Income tax benefit | (0.1) | | | (0.1) | | | (0.2) | | | (0.2) | | | | Income tax expense (benefit) |
| | 0.1 | | | 0.4 | | | | 0.3 | | | 0.7 | | | Income tax expense (benefit) | | 0.2 | | | 0.2 | | | 0.4 | | | 0.4 | | | | |
| | (0.2) | | | (0.5) | | | | (0.7) | | | (1.8) | | | |
| | Derivative amortization | 0.4 | | | 0.4 | | | | 1.0 | | | 1.0 | | | Interest expense | |
| (0.1) | | | (0.1) | | | | (0.3) | | | (0.3) | | | Income tax expense (benefit) | |
| 0.3 | | | 0.3 | | | | 0.7 | | | 0.7 | | | |
| | Realized gain on sale of investment | 0 | | | 0 | | | | 0 | | | (0.7) | | | Investment income | |
| | 0 | | | 0 | | | | 0 | | | 0.2 | | | Income tax expense (benefit) | |
| | 0 | | | 0 | | | | 0 | | | (0.5) | | | |
| | Total reclassifications | Total reclassifications | $ | 0.1 | | | $ | (0.2) | | | | $ | 0 | | | $ | (1.6) | | | Total reclassifications | $ | 0.2 | | | $ | (0.1) | | | $ | 0.3 | | | $ | (0.1) | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6.FAIR VALUE
The carrying amounts for many of our financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts and notes payable, short-term borrowings and certain other liabilities, approximate their fair value due to their relatively short maturities. Our foreign exchange forward contracts and long-term investments are measured at fair value in the Condensed Consolidated Balance Sheets.
Our total debt is carried at cost and was $482.8$484.5 and $484.3$483.9 as of NovemberAugust 27, 20202021 and February 28, 2020,26, 2021, respectively. The fair value of our total debt is measured using a discounted cash flow analysis based on current market interest rates for similar types of instruments and was $556.7$565.8 and $560.0$568.1 as of NovemberAugust 27, 20202021 and February 28, 2020,26, 2021, respectively. The estimation of the fair value of our total debt is based on Level 2 fair value measurements.
We periodically use derivative financial instruments to manage exposures to movements in foreign exchange rates and interest rates. The use of these financial instruments modifies the exposure of these risks with the intention to reduce our risk of short-term volatility. We do not use derivatives for speculative or trading purposes.
Assets and liabilities measured at fair value as of NovemberAugust 27, 20202021 and February 28, 202026, 2021 are summarized below:
| | | | November 27, 2020 | | August 27, 2021 |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total | Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Assets: | Assets: | | | | | | | | | Assets: | | | | | | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 484.4 | | | $ | 0 | | | $ | 0 | | | $ | 484.4 | | | Cash and cash equivalents | $ | 360.7 | | | $ | — | | | $ | — | | | $ | 360.7 | | |
| Restricted cash | Restricted cash | 7.3 | | | 0 | | | 0 | | | 7.3 | | | Restricted cash | 6.3 | | | — | | | — | | | 6.3 | | |
| | Foreign exchange forward contracts | Foreign exchange forward contracts | 0 | | | 3.1 | | | 0 | | | 3.1 | | | Foreign exchange forward contracts | — | | | 0.6 | | | — | | | 0.6 | | |
| Auction rate securities | 0 | | | 0 | | | 2.4 | | | 2.4 | | | |
| Auction rate security | | Auction rate security | — | | | — | | | 2.8 | | | 2.8 | | |
| | | | $ | 491.7 | | | $ | 3.1 | | | $ | 2.4 | | | $ | 497.2 | | | | $ | 367.0 | | | $ | 0.6 | | | $ | 2.8 | | | $ | 370.4 | | |
| Liabilities: | Liabilities: | | | | | | | | | Liabilities: | | | | | | | | |
| Foreign exchange forward contracts | Foreign exchange forward contracts | $ | 0 | | | $ | (0.8) | | | $ | 0 | | | $ | (0.8) | | | Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| | $ | 0 | | | $ | (0.8) | | | $ | 0 | | | $ | (0.8) | | | |
| | | | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| | | | February 28, 2020 | | February 26, 2021 |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total | Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
| Assets: | Assets: | | | | | | | | | Assets: | | | | | | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 541.0 | | | $ | 0 | | | $ | 0 | | | $ | 541.0 | | | Cash and cash equivalents | $ | 489.8 | | | $ | — | | | $ | — | | | $ | 489.8 | | |
| Restricted cash | Restricted cash | 6.1 | | | 0 | | | 0 | | | 6.1 | | | Restricted cash | 5.8 | | | — | | | — | | | 5.8 | | |
| | Foreign exchange forward contracts | Foreign exchange forward contracts | 0 | | | 1.2 | | | 0 | | | 1.2 | | | Foreign exchange forward contracts | — | | | 1.1 | | | — | | | 1.1 | | |
| Auction rate securities | 0 | | | 0 | | | 2.1 | | | 2.1 | | | |
| Auction rate security | | Auction rate security | — | | | — | | | 2.6 | | | 2.6 | | |
| | | | $ | 547.1 | | | $ | 1.2 | | | $ | 2.1 | | | $ | 550.4 | | | | $ | 495.6 | | | $ | 1.1 | | | $ | 2.6 | | | $ | 499.3 | | |
| Liabilities: | Liabilities: | | | | | | | | | Liabilities: | | | | | | | | |
| Foreign exchange forward contracts | Foreign exchange forward contracts | $ | 0 | | | $ | (0.5) | | | $ | 0 | | | $ | (0.5) | | | Foreign exchange forward contracts | $ | — | | | $ | (0.8) | | | $ | — | | | $ | (0.8) | | |
| | | $ | 0 | | | $ | (0.5) | | | $ | 0 | | | $ | (0.5) | | | | $ | — | | | $ | (0.8) | | | $ | — | | | $ | (0.8) | | |
Below is a roll-forward of assets and liabilities measured at fair value using Level 3 inputs for the ninesix months ended NovemberAugust 27, 2020:2021:
| | | | | | | | | | |
| Roll-Forward of Fair Value Using Level 3 Inputs | Auction Rate SecuritiesSecurity | | |
Balance as of February 28, 202026, 2021 | $ | 2.12.6 | | | | |
Unrealized gain on investmentsinvestment | 0.30.2 | | | | |
| | | | |
Balance as of NovemberAugust 27, 20202021 | $ | 2.42.8 | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7.INVENTORIES
| | Inventories | Inventories | November 27,
2020 | February 28,
2020 | Inventories | August 27,
2021 | February 26,
2021 |
| Raw materials and work-in-process | Raw materials and work-in-process | $ | 130.8 | | | $ | 122.0 | | | Raw materials and work-in-process | $ | 139.5 | | | $ | 126.0 | | |
| Finished goods | Finished goods | 123.3 | | | 112.8 | | | Finished goods | 118.3 | | | 86.4 | | |
| | | 254.1 | | | 234.8 | | | | 257.8 | | | 212.4 | | |
| Revaluation to LIFO | Revaluation to LIFO | 19.1 | | | 19.8 | | | Revaluation to LIFO | 24.4 | | | 18.9 | | |
| | | $ | 235.0 | | | $ | 215.0 | | | | $ | 233.4 | | | $ | 193.5 | | |
The portion of inventories determined by the LIFO method was $106.5$102.1 and $93.8$89.1 as of NovemberAugust 27, 20202021 and February 28, 2020,26, 2021, respectively.
8.GOODWILL
A summary of the changes in goodwill balances during the nine months ended November 27, 2020, by reportable segment, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill | Americas | | EMEA | | Other | | Total | |
| Goodwill | $ | 206.1 | | | $ | 283.5 | | | $ | 47.9 | | | $ | 537.5 | | |
| Accumulated impairment losses | (1.7) | | | (265.0) | | | (37.2) | | | (303.9) | | |
| Balance as of February 28, 2020 | 204.4 | | | 18.5 | | | 10.7 | | | 233.6 | | |
| Impairment charge (1) | 0 | | | (17.6) | | | 0 | | | (17.6) | | |
| Currency translation adjustments | 0.2 | | | (0.9) | | | 0 | | | (0.7) | | |
| Goodwill | 206.3 | | | 282.6 | | | 47.9 | | | 536.8 | | |
| Accumulated impairment losses | (1.7) | | | (282.6) | | | (37.2) | | | (321.5) | | |
| Balance as of November 27, 2020 | $ | 204.6 | | | $ | 0 | | | $ | 10.7 | | | $ | 215.3 | | |
_______________________________________
(1)In Q1 2021, we recorded a goodwill impairment charge in the EMEA segment related to the Orangebox U.K. reporting unit.
We evaluate goodwill for impairment annually in Q4, or earlier if conditions indicate it is necessary. In Q1 2021, we determined that a triggering event occurred which resulted in an interim impairment evaluation of goodwill for each of our reporting units. During Q1 2021, the market price of our Class A Common Stock declined significantly in connection with overall stock market trends related to the global economic impact of the COVID-19 pandemic. The reduction in revenue in Q1 2021 and changes to our forecasted revenue growth rates and expected operating margins related to the economic disruption of the COVID-19 pandemic were also factors that led to the completion of our interim impairment analysis.
For goodwill, we compare the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than the carrying value, the difference is recorded as an impairment loss. We estimate the fair value of our reporting units using the income approach, which calculates the fair value of each reporting unit based on the present value of its estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. For the evaluation that we conducted in Q1 2021, such conditions included the deterioration of industry and market conditions driven by the COVID-19 pandemic. The discount rates used are based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting units' ability to execute on the projected cash flows. In certain circumstances, we corroborate the results determined using the income approach with a market-based approach that uses observable comparable company information to support the appropriateness of the fair value estimates.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As a result of our goodwill impairment testing, we determined that the carrying value of the Orangebox U.K. reporting unit (included in the EMEA segment) exceeded its fair value, resulting in a $17.6 goodwill impairment charge in Q1 2021. Following the charge, the reporting unit had no remaining goodwill. During Q1 2021, we also tested the recoverability of the Orangebox U.K. long-lived assets (other than goodwill) and concluded that those assets were not impaired.
For each of our other reporting units, we determined that the fair value of the reporting unit substantially exceeded its carrying value, and no goodwill impairment existed. We also determined that no impairment existed related to the long-lived asset groups for any of our other reporting units.
9.SHORT-TERM BORROWINGS
Our $250.0 committed unsecured revolving syndicated credit facility expires in 2025. At our option, and subject to certain conditions, we may increase the aggregate commitment under the facility by up to $125.0 by obtaining at least one commitment from one or more lenders. During Q1 2021, we borrowed $250.0 under the facility and repaid $5.0. During Q2 2021, we repaid the remaining balance of $245.0 under the facility, and there were no borrowings outstanding under the facility as of November 27, 2020.
The facility does not include any restrictions on cash dividend payments or share repurchases. As of November 27, 2020, we were in compliance with all covenants under the facility.
10.INCOME TAXES
In Q1 2021, the U.S. government enacted tax legislation to provide economic stimulus and support to businesses during the COVID-19 pandemic, referred to as the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). In connection with our analysis of the impact of the CARES Act, we recorded a net tax benefit of $8.7 during the nine months ended November 27, 2020, driven primarily by provisions within the CARES Act which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act when the federal statutory income tax rate was 35%.
We have historically calculated the provision for income tax expense (benefit) during interim periods by applying an estimate of the annualized effective tax rate for the full fiscal year to the pre-tax income (loss) for the year-to-date period. In Q1 2021, we utilized the year-to-date actual effective tax rate to calculate our income tax expense (benefit), as we determined that it was the most reliable estimate of the annual effective tax rate. In Q2 2021 and Q3 2021, as a result of improved pre-tax income, we applied the estimated annualized effective tax rate for the fiscal year to pre-tax income for the year-to-date period to calculate our income tax expense.
11.SHARE-BASED COMPENSATION
Performance Units
During the nine months ended November 27, 2020, weWe have issued two sets of performance units (“PSUs”) to certain employees. The first set, consisting of 303,973 PSUs, will be earned at the end of 2021 (the “2021 Short-Term PSUs”), and the second set, consisting of 529,500 PSUs, will beemployees which are earned over a three-year performance period of 2021 through 2023 (the “2021 Long-Term PSUs”). The 2021 Short-Term PSUs will be earned based on our Compensation Committee’s qualitative assessment of management’s performance in 2021 in a number of specified areas (collectively, the “2021 Performance Measures”). The 2021 Long-Term PSUs will be earned based on achievement of certain performance conditions andestablished annually by the Compensation Committee within the first three months of the applicable fiscal year. The PSUs are then modified based on achievement of certain total shareholder return results relative to a comparison group of companies. Thecompanies, which is a market condition. When the performance conditions for a fiscal year are established, or if the performance conditions involve a qualitative assessment and such assessment has been made, one-third of the PSUs issued are considered granted. Therefore, each of the three fiscal years within the performance period is considered an individual tranche of the award (referred to as "Tranche 1," "Tranche 2" and "Tranche 3," respectively).
As of August 27, 2021, Long-Termthe following PSUs consisthave been issued and remained outstanding:
•448,300 PSUs to be earned over a three-year performance period of 2022 through 2024 (the "2022 PSUs"),
•529,500 PSUs to be earned over a three-year performance period of 2021 through 2023 (the "2021 PSUs") and
•296,600 PSUs to be earned over a three-year performance period of 2020 through 2022 (the "2020 PSUs").
In Q1 2022, the performance conditions were established for Tranche 1 of the 2022 PSUs, Tranche 2 of the 2021 Performance MeasuresPSUs and Tranche 3 of the 2020 PSUs. Accordingly, one-third of each of these PSUs were considered granted in Q1 2022.
In Q1 2021, the performance conditions were established for 2022Tranche 1 of the 2021 PSUs and 2023Tranche 2 of the 2020 PSUs. These performance conditions involved a qualitative assessment which will be establishedwas made by the Compensation Committee in future periods. Due to the qualitative assessment,Q4 2021. Accordingly, one-third of each of these awards are notPSUs were considered granted under GAAP. Whenin Q4 2021.
In Q1 2020, the Compensation Committee determines whether or not, and to what extent,performance conditions were established for Tranche 1 of the 2021 Performance Measures have been met, the 2021 Short-Term PSUs and2020 PSUs. Accordingly, one-third of the 2021 Long-Term2020 PSUs will bewere considered granted. granted in Q1 2020.
Once granted, the expense for these awards will be determined based on the target achievedPSUs are expensed and the fair value of the market condition on the grant date. The expense will be recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the remaining performance period. For participants who are or become retirement-eligible during the performance period, if any.the PSUs are expensed over the period ending on the date the participant becomes retirement-eligible.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
DuringWe used the nine months ended November 22, 2019, we issued 296,600 PSUsMonte Carlo simulation model to certain employees which will be earned over a three-year performance period of 2020 through 2022 (the “2020 Long-Term PSUs”). The 2020 Long-Term PSUs will be earned based on achievement of certain performance conditions and then modified based on achievement of certain total shareholder return results relative to a comparison group of companies. The performance conditions for the first year of the performance period were established in Q1 2020, and accordingly, 98,867 of the 2020 Long-Term PSUs were considered granted in Q1 2020. The 2021 Performance Measures have been established as the performance conditions for the second year of the performance period of the 2020 Long-Term PSUs, and accordingly, no additional portion of such awards have been considered granted. When the Compensation Committee determines whether or not, and to what extent, the 2021 Performance Measures have been met, an additional one-third of these awards will be considered granted. Once granted, the expense for these awards will be determined based on the target achieved andcalculate the fair value of the market conditionconditions on the respective grant dates, which resulted in a fair value of $6.1, $3.7 and $1.6 for the PSUs with market conditions granted in 2022, 2021 and 2020, respectively. The Monte Carlo simulation was computed using the following assumptions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FY22 Award | FY21 Award | FY20 Award |
| Tranche 1 | Tranche 2 | Tranche 1 | Tranche 3 | Tranche 2 | Tranche 1 |
| Risk-free interest rate (1) | 0.3 | % | | 0.2 | % | | 0.2 | % | | 0.1 | % | | 0.1 | % | | 2.3 | % | |
| Expected term | 3 years | | 2 years | | 2 years | | 1 year | | 1 year | | 3 years | |
| Estimated volatility (2) | 53.5 | % | | 61.3 | % | | 58.1 | % | | 56.1 | % | | 74.1 | % | | 32.5 | % | |
(1)Based on the U.S. Government bond benchmark on the grant date. The expense will be recorded in
(2)Additional paid-in capital onRepresents the Condensed Consolidated Balance Sheets overhistorical price volatility of our Class A Common Stock for the remaining performancethree-year period. The performance conditions for 2022 for these awards will be established by the Compensation Committee in future periods.
The total PSU expense and associated tax benefit for all outstanding awards for the three and ninesix months ended NovemberAugust 27, 20202021 and November 22, 2019August 28, 2020 are as follows:
| | | | Three Months Ended | Nine Months Ended | | | Three Months Ended | Six Months Ended | |
| Performance Units | Performance Units | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | Performance Units | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Expense | Expense | $ | 0.1 | | | $ | 0.3 | | | $ | 0.4 | | | $ | 2.0 | | | | Expense | $ | 0.4 | | | $ | 0.1 | | | $ | 5.6 | | | $ | 0.3 | | | |
| Tax benefit | Tax benefit | 0 | | | 0 | | | 0.1 | | | 0.5 | | | | Tax benefit | 0.1 | | | — | | | 1.4 | | | 0.1 | | | |
As of NovemberAugust 27, 2020,2021, there was $0.2$1.0 of remaining unrecognized compensation costexpense related to granted nonvested PSUs, which is expected to be recognized over a remaining weighted-average period of 1.01.8 years.
There were noThe PSU grants, vestings or forfeituresactivity for the ninesix months ended NovemberAugust 27, 2020.2021 is as follows:
| | | | | | | | |
| Maximum Number of Shares That May Be Issued Under Nonvested Units | Total | Weighted-Average
Grant Date
Fair Value
per Unit |
| Nonvested as of February 26, 2021 | 898,156 | | $ | 14.06 | |
| Granted | 1,019,517 | | 14.38 | |
| | |
| Nonvested as of August 27, 2021 | 1,917,673 | | $ | 14.23 | |
Restricted Stock Units
During the ninesix months ended NovemberAugust 27, 2020,2021, we awarded 1,371,077839,818 restricted stock units ("RSUs") to certain employees. RSUs have restrictions on transfer which lapse three years after the date of grant, at which time the RSUs will be issued as unrestricted shares of Class A Common Stock. RSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the requisite service period based on the value of the shares on the date of grant. For participants who are or become retirement-eligible during the service period, the RSUs are expensed over the period ending on the date the participant becomes retirement-eligible.
The total RSU expense and associated tax benefit for all outstanding awards for the three and ninesix months ended NovemberAugust 27, 20202021 and November 22, 2019August 28, 2020 are as follows:
| | | | Three Months Ended | Nine Months Ended | | | Three Months Ended | Six Months Ended | |
| Restricted Stock Units | Restricted Stock Units | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | Restricted Stock Units | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Expense | Expense | $ | 1.9 | | | $ | 1.8 | | | $ | 10.9 | | | $ | 11.7 | | | | Expense | $ | 1.5 | | | $ | 1.4 | | | $ | 9.2 | | | $ | 9.0 | | | |
| Tax benefit | Tax benefit | 0.5 | | | 0.5 | | | 2.8 | | | 3.1 | | | | Tax benefit | 0.4 | | | 0.4 | | | 2.3 | | | 2.3 | | | |
As of NovemberAugust 27, 2020,2021, there was $8.1$8.9 of remaining unrecognized compensation costexpense related to nonvested RSUs, which is expected to be recognized over a weighted-average period of 2.01.9 years.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The RSU activity for the ninesix months ended NovemberAugust 27, 20202021 is as follows:
| | Nonvested Units | Nonvested Units | Total | Weighted-Average
Grant Date
Fair Value
per Unit | Nonvested Units | Total | Weighted-Average
Grant Date
Fair Value
per Unit |
| Nonvested as of February 28, 2020 | 1,761,124 | | $ | 15.28 | | |
| Nonvested as of February 26, 2021 | | Nonvested as of February 26, 2021 | 2,285,965 | | $ | 12.11 | |
| Granted | Granted | 1,371,077 | | 9.49 | | Granted | 839,818 | | 14.45 | |
| Vested | Vested | (149,625) | | 15.12 | | Vested | (16,559) | | 14.00 | |
| Forfeited | Forfeited | (42,668) | | 14.34 | | Forfeited | (48,220) | | 12.57 | |
| Nonvested as of November 27, 2020 | 2,939,908 | | $ | 12.60 | | |
| Nonvested as of August 27, 2021 | | Nonvested as of August 27, 2021 | 3,061,004 | | $ | 12.74 | |
12.9. LEASES
We have operating leases for corporate offices, sales offices, showrooms, manufacturing facilities, vehicles and equipment that expire at various dates through 2031. Certain lease agreements include contingent rental payments based on per unit usage over contractual levels (e.g., miles driven or machine hours used) and others include rental payments adjusted periodically for inflationary indexes. Additionally, some leases include options to renew or terminate the leases which can be exercised at our discretion. The lease terms utilized in determining right-of-use assets and lease liabilities include the noncancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods. Our leases do not contain any residual value guarantees or material restrictive covenants. As most of our leases do not provide an implicit discount rate, we use an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The estimated incremental borrowing rate represents the estimated rate of interest we would have had to pay to borrow on a collateralized basis an amount equal to the lease payments for a similar period of time.
As a result of the COVID-19 pandemic, the FASB staff issued a question and answer document (the "Staff Q&A") on the application of lease accounting guidance related to lease concessions provided as a result of the pandemic. The Staff Q&A provides interpretive guidance allowing companies the option to account for lease concessions related to the pandemic consistent with how those concessions would be accounted for under ASU 2016-02, Leases (Topic 842), as though enforceable rights and obligations for those concessions existed at the beginning of the contract (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). This interpretive guidance was issued in order to reduce the costs and complexities of applying lease modification accounting under Topic 842 to leases impacted by the effects of the pandemic. We have elected to apply the interpretive guidance provided in the Staff Q&A to rent deferrals and abatements received related to the pandemic. Accordingly, we have not remeasured the related right-of-use asset or lease liability for the affected leases. The lease concessions were not material for the nine months ended November 27, 2020.
The components of lease expense are as follows:
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | Six Months Ended | | |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Operating lease cost | Operating lease cost | $ | 12.8 | | | $ | 13.0 | | | $ | 38.8 | | | $ | 37.6 | | | | Operating lease cost | $ | 13.2 | | | $ | 12.9 | | | $ | 26.3 | | | $ | 26.0 | | | |
| Sublease rental income | Sublease rental income | (0.7) | | | (0.4) | | | (1.6) | | | (0.8) | | | | Sublease rental income | (0.5) | | | (0.6) | | | (0.9) | | | (0.9) | | | |
| | $ | 12.1 | | | $ | 12.6 | | | $ | 37.2 | | | $ | 36.8 | | | | | $ | 12.7 | | | $ | 12.3 | | | $ | 25.4 | | | $ | 25.1 | | | |
Supplemental cash flow and other information related to leases are as follows:
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | Six Months Ended | |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Cash flow information: | Cash flow information: | | Cash flow information: | | |
| Operating cash flows used for operating leases | Operating cash flows used for operating leases | $ | 12.6 | | | $ | 9.5 | | | $ | 37.3 | | | $ | 32.9 | | | Operating cash flows used for operating leases | $ | 13.4 | | | $ | 12.1 | | | $ | 26.8 | | | $ | 24.7 | | | |
| Leased assets obtained in exchange for new operating lease obligations | Leased assets obtained in exchange for new operating lease obligations | $ | 0.7 | | | $ | 25.6 | | | $ | 2.6 | | | $ | 83.8 | | | Leased assets obtained in exchange for new operating lease obligations | $ | 15.7 | | | $ | 1.4 | | | $ | 17.3 | | | $ | 1.9 | | | |
| | | | | | | | | | | | | | |
| August 27,
2021 | August 28,
2020 |
| Other information: | | | | |
| Weighted-average remaining term | 6.2 years | | 6.8 years | |
| Weighted-average discount rate | 3.7 | % | | 4.0 | % | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | |
| November 27,
2020 | November 22,
2019 |
| Other information: | | | | |
| Weighted-average remaining term | 6.7 years | | 7.4 years | |
| Weighted-average discount rate | 4.0 | % | | 4.1 | % | |
The following table summarizes the future minimum lease payments as of NovemberAugust 27, 2020:2021:
| | Fiscal year ending in February | Fiscal year ending in February | Amount (1) | Fiscal year ending in February | Amount (1) |
| 2021 | $ | 12.6 | | | |
| 2022 | 2022 | 48.6 | | | 2022 | $ | 26.1 | | |
| 2023 | 2023 | 42.0 | | | 2023 | 48.4 | | |
| 2024 | 2024 | 36.6 | | | 2024 | 43.5 | | |
| 2025 | 2025 | 34.2 | | | 2025 | 41.2 | | |
| 2026 | | 2026 | 32.9 | | |
| Thereafter | Thereafter | 92.6 | | | Thereafter | 73.3 | | |
| Total lease payments | Total lease payments | 266.6 | | | Total lease payments | $ | 265.4 | | |
| Less interest | 33.3 | | | |
| Less: Interest | | Less: Interest | 28.7 | | |
| Present value of lease liabilities | Present value of lease liabilities | $ | 233.3 | | | Present value of lease liabilities | $ | 236.7 | | |
(1)Lease payments include options to extend lease terms that are reasonably certain of being exercised. The payments exclude legally binding minimum lease payments for leases signed but not yet commenced.
13.10. REPORTABLE SEGMENTS
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category. Unallocated corporate costsexpenses are reported as Corporate.
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of integrated architecture, furniture, architectural and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Smith System, AMQ Turnstone and Orangebox brands.
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase, Orangebox and Coalesse brands, with an emphasis on freestandinga comprehensive portfolio of furniture, systems, storagearchitectural and seating solutions.technology products.
The Other category includes Asia Pacific and Designtex. Asia Pacific serves customers in AsiaAustralia, China, India, Japan, Korea and Australiaother countries in Southeast Asia primarily under the Steelcase brand with an emphasis on freestandinga comprehensive portfolio of furniture, systems, seatingarchitectural and storage solutions.technology products. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by architects and designers directly to end-use customers through a direct sales force primarily in North America. In 2020, the Other category also included PolyVision which was sold during Q4 2020.
We primarily review and evaluate revenue and operating income by segment in both our internal review processes and for our external financial reporting. We also allocate resources primarily based on revenue and operating income. Total assets by segment include manufacturing and other assets associated with each segment.
Corporate costs include unallocated portions of shared service functions such as information technology, corporate facilities, finance, human resources, research, legal and customer aviation, plus deferred compensation expense and income or losses associated with COLI. Corporate assets consist primarily of unallocated cash and cash equivalents, COLI, balances, fixed assets and right-of-use assets related to operating leases.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue and operating income (loss) for the three and ninesix months ended NovemberAugust 27, 20202021 and November 22, 2019August 28, 2020 and total assets as of NovemberAugust 27, 20202021 and February 28, 202026, 2021 by segment are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended | |
| Reportable Segment Statement of Operations Data | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | |
| Revenue | | | | | | | | | | | | |
| Americas | $ | 416.4 | | | $ | 690.9 | | | $ | 1,381.5 | | | $ | 2,006.7 | | | | | | |
| EMEA | 143.3 | | | 168.4 | | | 368.7 | | | 483.9 | | | | | | |
| Other | 57.8 | | | 95.9 | | | 168.9 | | | 286.9 | | | | | | |
| | $ | 617.5 | | | $ | 955.2 | | | $ | 1,919.1 | | | $ | 2,777.5 | | | | | | |
| Operating income (loss) | | | | | | | | | | | | |
| Americas | $ | 13.8 | | | $ | 74.7 | | | $ | 84.9 | | | $ | 197.4 | | | | | | |
| EMEA | (3.7) | | | 6.3 | | | (31.8) | | | 1.6 | | | | | | |
| Other | (2.2) | | | 3.3 | | | (2.7) | | | 14.5 | | | | | | |
| Corporate | (7.9) | | | (9.2) | | | (14.1) | | | (25.5) | | | | | | |
| | $ | 0 | | | $ | 75.1 | | | $ | 36.3 | | | $ | 188.0 | | | | | | |
| | | | | | | | | | | | | | | |
| Reportable Segment Balance Sheet Data | November 27,
2020 | February 28,
2020 | |
| Total assets | | | | | |
| Americas | $ | 1,038.8 | | | $ | 1,067.3 | | | |
| EMEA | 413.9 | | | 454.5 | | | |
| Other | 214.1 | | | 225.6 | | | |
| Corporate | 718.5 | | | 818.0 | | | |
| | $ | 2,385.3 | | | $ | 2,565.4 | | | |
14. RESTRUCTURING ACTIVITIES
In Q2 2021, our Board of Directors approved a series of restructuring actions in response to continued order declines in the Americas compared to the prior year and continued economic uncertainty related to the COVID-19 pandemic. The restructuring actions included early retirements and voluntary and involuntary terminations of approximately 300 salaried employees and early retirements of approximately 160 hourly employees. We incurred $11.4 and $27.0 in restructuring costs in the Americas segment in connection with these actions during the three and nine months ended November 27, 2020, respectively, consisting of cash severance payments and payment of other separation-related benefits. We expect all of the actions to be completed by the end of 2021.following table:
The following table details the changes in the restructuring reserve balance as of November 27, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended | |
| Reportable Segment Statement of Operations Data | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | | |
| Revenue | | | | | | | | | | | | |
| Americas | $ | 523.3 | | | $ | 631.2 | | | $ | 899.6 | | | $ | 965.1 | | | | | | |
| EMEA | 138.9 | | | 125.9 | | | 262.5 | | | 225.4 | | | | | | |
| Other | 62.6 | | | 61.7 | | | 119.3 | | | 111.1 | | | | | | |
| | $ | 724.8 | | | $ | 818.8 | | | $ | 1,281.4 | | | $ | 1,301.6 | | | | | | |
| Operating income (loss) | | | | | | | | | | | | |
| Americas | $ | 44.7 | | | $ | 94.6 | | | $ | 29.7 | | | $ | 71.1 | | | | | | |
| EMEA | (1.6) | | | (3.5) | | | (7.3) | | | (28.1) | | | | | | |
| Other | (4.2) | | | 1.1 | | | (9.5) | | | (0.5) | | | | | | |
| Corporate | (5.0) | | | (3.6) | | | (10.8) | | | (6.2) | | | | | | |
| | $ | 33.9 | | | $ | 88.6 | | | $ | 2.1 | | | $ | 36.3 | | | | | | |
| | | | | | | | |
| Workforce reductions |
Balance as of February 28, 2020 | $ | 0 | | |
Restructuring costs | 27.0 | | |
Payments | (25.5) | | |
Balance as of November 27, 2020 | $ | 1.5 | | |
| | | | | | | | | | | | | | | |
| Reportable Segment Balance Sheet Data | August 27,
2021 | February 26,
2021 | |
| Total assets | | | | | |
| Americas | $ | 1,093.9 | | | $ | 1,015.3 | | | |
| EMEA | 420.7 | | | 414.4 | | | |
| Other | 212.9 | | | 211.3 | | | |
| Corporate | 586.0 | | | 713.0 | | | |
| | $ | 2,313.5 | | | $ | 2,354.0 | | | |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations:
This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 28, 2020.26, 2021. Reference to a year relates to the fiscal year, ended in February of the year indicated, rather than the calendar year, unless indicated by a specific date. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.
Non-GAAP Financial Measures
This item contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the condensed consolidated statements of income,operations, balance sheets or statements of cash flows of the company. Pursuant to the requirements of Regulation G, we have provided a reconciliation below of the non-GAAP financial measures to the most directly comparable GAAP financial measure.
The non-GAAP financial measures used are (1) organic revenue decline,growth (decline), which represents the change in revenue excluding the impacts of acquisitions and divestitures and estimated currency translation effects, and (2) adjusted operating income (loss), which represents operating income (loss) excluding goodwill impairment charges and restructuring costs. These measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors.
Financial Summary
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category. Unallocated corporate costsexpenses are reported as Corporate.
Results of Operations
| | | | Three Months Ended | Nine Months Ended | | | Three Months Ended | Six Months Ended | |
| Statement of Operations Data | Statement of Operations Data | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | Statement of Operations Data | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Revenue | Revenue | $ | 617.5 | | | 100.0 | % | | $ | 955.2 | | | 100.0 | % | | $ | 1,919.1 | | | 100.0 | % | | $ | 2,777.5 | | | 100.0 | % | | | Revenue | $ | 724.8 | | | 100.0 | % | | $ | 818.8 | | | 100.0 | % | | $ | 1,281.4 | | | 100.0 | % | | $ | 1,301.6 | | | 100.0 | % | | |
| Cost of sales | Cost of sales | 437.3 | | | 70.9 | | | 639.1 | | | 66.9 | | | 1,339.7 | | | 69.8 | | | 1,869.5 | | | 67.3 | | | | Cost of sales | 518.0 | | | 71.5 | | | 542.3 | | | 66.3 | | | 919.9 | | | 71.8 | | | 902.4 | | | 69.4 | | | |
| Restructuring costs | Restructuring costs | 2.3 | | | 0.3 | | | — | | | — | | | 9.2 | | | 0.5 | | | — | | | — | | | | Restructuring costs | — | | | — | | | 6.9 | | | 0.8 | | | — | | | — | | | 6.9 | | | 0.5 | | | |
| Gross profit | Gross profit | 177.9 | | | 28.8 | | | 316.1 | | | 33.1 | | | 570.2 | | | 29.7 | | | 908.0 | | | 32.7 | | | | Gross profit | 206.8 | | | 28.5 | | | 269.6 | | | 32.9 | | | 361.5 | | | 28.2 | | | 392.3 | | | 30.1 | | | |
| Operating expenses | Operating expenses | 168.8 | | | 27.3 | | | 241.0 | | | 25.2 | | | 498.5 | | | 26.0 | | | 720.0 | | | 25.9 | | | | Operating expenses | 172.9 | | | 23.8 | | | 172.3 | | | 21.0 | | | 359.4 | | | 28.0 | | | 329.7 | | | 25.3 | | | |
| Goodwill impairment charge | Goodwill impairment charge | — | | | — | | | — | | | — | | | 17.6 | | | 0.9 | | | — | | | — | | | | Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | 17.6 | | | 1.4 | | | |
| Restructuring costs | Restructuring costs | 9.1 | | | 1.5 | | | — | | | — | | | 17.8 | | | 0.9 | | | — | | | — | | | | Restructuring costs | — | | | — | | | 8.7 | | | 1.1 | | | — | | | — | | | 8.7 | | | 0.6 | | | |
| Operating income | Operating income | — | | | — | | | 75.1 | | | 7.9 | | | 36.3 | | | 1.9 | | | 188.0 | | | 6.8 | | | | Operating income | 33.9 | | | 4.7 | | | 88.6 | | | 10.8 | | | 2.1 | | | 0.2 | | | 36.3 | | | 2.8 | | | |
| Interest expense | Interest expense | (6.6) | | | (1.1) | | | (6.7) | | | (0.7) | | | (20.7) | | | (1.2) | | | (20.1) | | | (0.7) | | | | Interest expense | (6.4) | | | (0.9) | | | (6.8) | | | (0.8) | | | (12.8) | | | (1.0) | | | (14.1) | | | (1.1) | | | |
| Investment income | Investment income | 0.2 | | | — | | | 1.3 | | | 0.1 | | | 1.2 | | | 0.1 | | | 3.8 | | | 0.1 | | | | Investment income | 0.1 | | | — | | | 0.2 | | | — | | | 0.3 | | | — | | | 1.0 | | | 0.1 | | | |
| Other income, net | Other income, net | 2.2 | | | 0.4 | | | 4.1 | | | 0.4 | | | 7.0 | | | 0.4 | | | 8.3 | | | 0.3 | | | | Other income, net | 1.8 | | | 0.2 | | | 0.8 | | | 0.1 | | | 1.0 | | | 0.1 | | | 4.8 | | | 0.4 | | | |
| Income (loss) before income tax expense (benefit) | Income (loss) before income tax expense (benefit) | (4.2) | | | (0.7) | | | 73.8 | | | 7.7 | | | 23.8 | | | 1.2 | | | 180.0 | | | 6.5 | | | | Income (loss) before income tax expense (benefit) | 29.4 | | | 4.0 | | | 82.8 | | | 10.1 | | | (9.4) | | | (0.7) | | | 28.0 | | | 2.2 | | | |
| Income tax expense (benefit) | Income tax expense (benefit) | (6.3) | | | (1.0) | | | 18.9 | | | 2.0 | | | 4.3 | | | 0.2 | | | 46.8 | | | 1.7 | | | | Income tax expense (benefit) | 4.7 | | | 0.6 | | | 27.3 | | | 3.3 | | | (6.0) | | | (0.4) | | | 10.6 | | | 0.9 | | | |
| Net income | $ | 2.1 | | | 0.3 | % | | $ | 54.9 | | | 5.7 | % | | $ | 19.5 | | | 1.0 | % | | $ | 133.2 | | | 4.8 | % | | | |
| Earnings per share: | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | Net income (loss) | $ | 24.7 | | | 3.4 | % | | $ | 55.5 | | | 6.8 | % | | $ | (3.4) | | | (0.3) | % | | $ | 17.4 | | | 1.3 | % | | |
| Earnings (loss) per share: | | Earnings (loss) per share: | | | | | | | | | | | | | | | | | |
| Basic | Basic | $ | 0.02 | | | | | $ | 0.46 | | | | | $ | 0.17 | | | | $ | 1.11 | | | | | | Basic | $ | 0.21 | | | | | $ | 0.47 | | | | | $ | (0.03) | | | | $ | 0.15 | | | | | |
| Diluted | Diluted | $ | 0.02 | | | | | $ | 0.46 | | | | | $ | 0.17 | | | | $ | 1.11 | | | | | | Diluted | $ | 0.21 | | | | | $ | 0.47 | | | | | $ | (0.03) | | | | $ | 0.15 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q3 2021 Organic Revenue Decline | Americas | EMEA | Other | Consolidated |
| Q3 2020 revenue | $ | 690.9 | | | $ | 168.4 | | | $ | 95.9 | | | $ | 955.2 | | |
| | | | | | | | |
| Divestiture | — | | | — | | | (14.9) | | | (14.9) | | |
| Currency translation effects* | 0.2 | | | 10.2 | | | 0.6 | | | 11.0 | | |
| Q3 2020 revenue, adjusted | 691.1 | | | 178.6 | | | 81.6 | | | 951.3 | | |
| Q3 2021 revenue | 416.4 | | | 143.3 | | | 57.8 | | | 617.5 | | |
| | | | | | | | |
| | | | | | | | |
| Organic decline $ | $ | (274.7) | | | $ | (35.3) | | | $ | (23.8) | | | $ | (333.8) | | |
| Organic decline % | (40) | % | | (20) | % | | (29) | % | | (35) | % | |
| | | | | | | | |
| * Currency translation effects represent the estimated net effect of translating Q3 2020 foreign currency revenues using the average exchange rates during Q3 2021. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Q2 2022 Organic Revenue Growth (Decline) | Americas | EMEA | Other | Consolidated |
| Q2 2021 revenue | $ | 631.2 | | | $ | 125.9 | | | $ | 61.7 | | | $ | 818.8 | | |
| Dealer acquisition | 13.1 | | | — | | | — | | | 13.1 | | |
| | | | | | | | |
| Currency translation effects* | 2.1 | | | 6.3 | | | 1.4 | | | 9.8 | | |
| Q2 2021 revenue, adjusted | 646.4 | | | 132.2 | | | 63.1 | | | 841.7 | | |
| Q2 2022 revenue | 523.3 | | | 138.9 | | | 62.6 | | | 724.8 | | |
| | | | | | | | |
| | | | | | | | |
| Organic growth (decline) $ | $ | (123.1) | | | $ | 6.7 | | | $ | (0.5) | | | $ | (116.9) | | |
| Organic growth (decline) % | (19) | % | | 5 | % | | (1) | % | | (14) | % | |
| | | | | | | | |
| * Currency translation effects represent the estimated net effect of translating Q2 2021 foreign currency revenues using the average exchange rates during Q2 2022. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year-to-date 2021 Organic Revenue Decline | Americas | EMEA | Other | Consolidated |
| Year-to-date 2020 revenue | $ | 2,006.7 | | | $ | 483.9 | | | $ | 286.9 | | | $ | 2,777.5 | | |
| | | | | | | | |
| Divestiture | — | | | — | | | (48.2) | | | (48.2) | | |
| Currency translation effects* | (2.0) | | | 8.1 | | | (1.8) | | | 4.3 | | |
| Year-to-date 2020 revenue, adjusted | 2,004.7 | | | 492.0 | | | 236.9 | | | 2,733.6 | | |
| Year-to-date 2021 revenue | 1,381.5 | | | 368.7 | | | 168.9 | | | 1,919.1 | | |
| | | | | | | | |
| Organic decline $ | (623.2) | | | (123.3) | | | (68.0) | | | (814.5) | | |
| Organic decline % | (31) | % | | (25) | % | | (29) | % | | (30) | % | |
| | | | | | | | |
| * Currency translation effects represent the estimated net effect of translating year-to-date 2020 foreign currency revenues using the average exchange rates during year-to-date 2021. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income to Adjusted Operating Income | Three Months Ended | Nine Months Ended |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 |
| Operating income | $ | — | | | — | % | | $ | 75.1 | | | 7.9 | % | | $ | 36.3 | | | 1.9 | % | | $ | 188.0 | | | 6.8 | % | |
| Add: goodwill impairment charge | — | | | — | | | — | | | — | | | 17.6 | | | 0.9 | | | — | | | — | | |
| Add: restructuring costs | 11.4 | | | 1.8 | | | — | | | — | | | 27.0 | | | 1.4 | | | — | | | — | | |
| Adjusted operating income | $ | 11.4 | | | 1.8 | % | | $ | 75.1 | | | 7.9 | % | | $ | 80.9 | | | 4.2 | % | | $ | 188.0 | | | 6.8 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year-to-date 2022 Organic Revenue Growth (Decline) | Americas | EMEA | Other | Consolidated |
| Year-to-date 2021 revenue | $ | 965.1 | | | $ | 225.4 | | | $ | 111.1 | | | $ | 1,301.6 | | |
| Dealer acquisition | 25.9 | | | — | | | — | | | 25.9 | | |
| | | | | | | | |
| Currency translation effects* | 4.2 | | | 16.4 | | | 3.2 | | | 23.8 | | |
| Year-to-date 2021 revenue, adjusted | 995.2 | | | 241.8 | | | 114.3 | | | 1,351.3 | | |
| Year-to-date 2022 revenue | 899.6 | | | 262.5 | | | 119.3 | | | 1,281.4 | | |
| | | | | | | | |
| | | | | | | | |
| Organic growth (decline) $ | $ | (95.6) | | | $ | 20.7 | | | $ | 5.0 | | | $ | (69.9) | | |
| Organic growth (decline) % | (10) | % | | 9 | % | | 4 | % | | (5) | % | |
| | | | | | | | |
| * Currency translation effects represent the estimated net effect of translating 2021 foreign currency revenues using the average exchange rates during 2022. |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income to Adjusted Operating Income | Three Months Ended | Six Months Ended |
August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Operating income | $ | 33.9 | | | 4.7 | % | | $ | 88.6 | | | 10.8 | % | | $ | 2.1 | | | 0.2 | % | | $ | 36.3 | | | 2.8 | % | |
| Add: Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | 17.6 | | | 1.4 | | |
| Add: Restructuring costs | — | | | — | | | 15.6 | | | 1.9 | | | — | | | — | | | 15.6 | | | 1.1 | | |
| Adjusted operating income | $ | 33.9 | | | 4.7 | % | | $ | 104.2 | | | 12.7 | % | | $ | 2.1 | | | 0.2 | % | | $ | 69.5 | | | 5.3 | % | |
Overview
During 2021, the COVID-19 pandemic, actions taken by various governments and third partiesQ2 2022, we continued to combat the spread of COVID-19 and the related global economic uncertainty resulted in significant declines in our revenuesee strengthening demand, and orders compared to the prior year. We took a number of actions to conserve capital and reduce our cost structure in response to such events, including significantly reducing salaries in the first half of the year and substantially reducing discretionary spending. By the end of Q2 2021, we restored most of our global salaried workforce to full pay, and in Q2 and Q3 2021, we implemented workforce reductions in the Americas which lowered our annualized costs by approximately $40. We recorded $11.4 and $27.0 of restructuring costs in Q3 2021 and year-to-date 2021, respectively, related to the workforce reductions.
In Q3 2021, our revenue declined 35%grew 24% compared to the prior year and we had break-even operating income.12% compared to Q1 2022. Revenue in the Americas in Q2 2021 benefited from strong beginning order backlog due to pandemic-related restrictions on manufacturing and delivery activities during Q1 2021. Revenue in the Americas in Q2 2022 was negatively impacted by at least $40 due to shipment delays caused by supply chain disruptions. During the quarter, our pipeline of project opportunities and requests for proposals in the Americas declined compared to Q1 2022 as recent trends in the COVID-19 pandemic caused some companies to delay their return to the office.
Cost of sales as a percentage of revenue increased by 520 basis points in Q2 2022 compared to the prior year. The revenue declineincrease was driven by lower revenue, significant inflation in steel and other commodities, and freight cost inefficiencies due to supply chain disruptions. We expect the impactsinflationary pressures from steel and other commodities to continue to impact our cost of sales through 2022, but we expect our recent price increases to more fully offset these costs in 2023.
Q2 2022 Compared to Q2 2021
We recorded net income of $24.7 and diluted earnings per share of $0.21 in Q2 2022 compared to net income of $55.5 and diluted earnings per share of $0.47 in the COVID-19 pandemic, as wellprior year. The prior year results included restructuring costs in the Americas, which decreased net income by $9.5 and diluted earnings per share by $0.08. Operating income of $33.9 in Q2 2022 decreased by $54.7 compared to the prior year, which included $15.6 of restructuring costs. The decrease was driven by lower revenue in the Americas and higher cost of sales as a delaypercentage of approximately $60 of revenue to Q4 2021 due to a temporary global operations shutdown we implemented to protect our systems during a cyberattack we experienced during the quarter. The impact of the decline in revenue was partially mitigated by savings from cost reduction actions and lower variable compensation expense.
Q3 2021 Compared to Q3 2020
We recorded net incomeRevenue of $2.1 and diluted earnings per share of $0.02$724.8 in Q3 2021 compared to net income of $54.9 and diluted earnings per share of $0.46 in the prior year. The Q3 2021 results included restructuring costs of $11.4 in the Americas segment which had the effect of decreasing diluted earnings per share by $0.06, net of related tax benefits. Break-even operating income in Q3 2021 represented a $75.1 decline from the prior year. The decrease was driven by the impact of lower revenue and restructuring costs, partially offset by cost reduction actions implemented across all segments and lower variable compensation expense. Excluding the impact of the restructuring costs, adjusted operating income of $11.4 in Q3 2021Q2 2022 represented a decrease of $63.7 compared to the prior year.
Revenue of $617.5 in Q3 2021 represented a decrease of $337.7$94.0 or 35%11% compared to the prior year. The decline was broad-based across all segments, driven by reduced demand due to underlying economic uncertainty related to the COVID-19 pandemic, and approximately $60 of shipments were delayed to Q4 2021 as a result of the temporary operations shutdown in Q3 2021. Revenue declined by 40%17% in the Americas, 15%while revenue grew by 10% in EMEA and 40%1% in the Other category compared to the prior year. Revenue in the Americas in Q2 2021 benefited from strong beginning order backlog due to pandemic-related restrictions during Q1 2021. Revenue in the Americas in Q2 2022 was negatively impacted by at least $40 due to shipment delays caused by supply chain disruptions. After adjusting for a $14.9$13.1 impact from the divestiture of PolyVision in Q4 2020a dealer acquisition and $11.0$9.8 of currency translation effects, the organic revenue decline was $333.8$116.9 or 35%14% compared to the prior year. The organic revenue decline was 40%19% in the Americas 20% in EMEA and 29%1% in the Other category, while EMEA posted 5% organic revenue growth compared to the prior year.
Cost of sales as a percentage of revenue increased by 400520 basis points to 70.9% of revenue in Q3 2021Q2 2022 compared to Q3 2020.the prior year. The increase was driven by lower revenue, as well as approximately $12$20 of higher inflation costs, relatednet of pricing benefits, and approximately $5 of higher freight cost inefficiencies due to direct labor and logistics, of which approximately $4 was related to the temporary operations shutdown, partially offset by approximately $16 of lower overhead costs, of which approximately $7 was attributable to lower wage and benefit expenses as a result of workforce reductions, and $10.8 of lower variable compensation expense.supply chain disruptions. Cost of sales as a percentage of revenue increased by 320650 basis points in the Americas 590 basis points in EMEA and 200by 420 basis points in the Other category.category, while EMEA improved by 120 basis points.
Operating expenses of $168.8$172.9 in Q3 2021Q2 2022 represented a decreasean increase of $72.2$0.6 compared to the prior year. The decrease was driven by anprior year included approximately $29 reduction$22 of lower employee costs as a result of temporary hour and pay reductions and gains of $4.1 from the sale of land. The current year included a $15.4 gain from the sale of land, approximately $10 of benefits related to workforce reductions in discretionary spending, $25.5the prior year and $12.4 of lower variable compensation, expensepartially offset by approximately $6 of higher discretionary spending and approximately $12$3.2 from an acquisition.
Our Q2 2022 effective tax rate of lower wage and benefit expenses as16.0%, which included $3.8 of discrete tax benefits, compared to a resultQ2 2021 effective tax rate of workforce reductions.33.0%.
We recorded restructuring costs of $11.4 in the Americas segment in Q3
Year-to-date 2022 Compared to Year-to-date 2021 related to workforce reduction actions taken as a result of reduced demand due to the COVID-19 pandemic. See Note 14 to the condensed consolidated financial statements for further information.
We recorded a tax benefityear-to-date 2022 net loss of $6.3 in Q3 2021$3.4 and a diluted loss per share of $0.03, compared to tax expense of $18.9 in the prior year. The Q3 2021 amount was primarily driven by benefits available under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). See Note 10 to the condensed consolidated financial statements for further details.
Year-to-Date 2021 Compared to Year-to-Date 2020
We recorded year-to-date 2021 net income of $19.5$17.4 and diluted earnings per share of $0.17, compared to year-to-date 2020 net income of $133.2 and diluted earnings per share of $1.11.$0.15. In year-to-date 2021, the results included: (1) a goodwill impairment charge related to the EMEA segment, which had the effect of decreasing net income by $17.6 and diluted earnings per share by $0.15, and (2) restructuring costs due to workforce reductions in the Americas, segment, which had the effect of decreasing net income by $16.5$9.5 and diluted earnings per share by $0.14.$0.08. Year-to-date 20212022 operating income of $36.3$2.1 represented a decrease of $151.7$34.2 compared to the prior year. The decrease was due to lower revenue across all segments, restructuring costsin the Americas, higher cost of sales as a percentage of revenue and higher operating expenses, partially offset by the impact of the goodwill impairment charge partially offset by lower operating expenses and overhead costs.restructuring costs in the prior year. Excluding the impact of the goodwill impairment charge and restructuring costs andin the impairment charge,prior year, adjusted operating income decreased by $107.1$67.4 in year-to-date 2022 compared to the prior year.year-to-date 2021.
Year-to-date 20212022 revenue of $1,919.1$1,281.4 represented a decrease of $858.4$20.2 or 31%2% compared to year-to-date 2020. The decline was broad-based across all segments due to the impacts of the COVID-19 pandemic.2021. Revenue declined by 31%7% in the Americas, 24%while revenue grew by 16% in EMEA and 41%7% in the Other category. After adjusting for a $48.2$25.9 impact from the divestiture of PolyVisiona dealer acquisition and $4.3$23.8 of currency translation effects, the organic revenue decline was $814.5$69.9 or 30%5%. The organic revenue decline was 10% in the Americas, and organic revenue growth was 9% in EMEA and 4% in the Other category.
Cost of sales as a percentage of revenue increased by 240 basis points in year-to-date 2022 compared to year-to-date 2021. The increase was driven by lower revenue, approximately $28 of higher inflation costs, net of pricing benefits, and approximately $5 of higher freight cost inefficiencies due to supply chain disruptions. Cost of sales as a percentage of revenue increased by 330 basis points in the Americas and by 430 basis points in the Other category, while EMEA improved by 210 basis points.
Operating expenses of $359.4 in year-to-date 2022 represented an increase of $29.7 compared to the prior year. The organic revenue decline was 31%prior year included approximately $41 of lower employee costs as a result of temporary hour and pay reductions and gains of $6.7 from the sale of land. The current year included approximately $20 of benefits related to workforce reductions in the Americas, 25%prior year, a $15.4 gain from the sale of land and $6.7 of lower variable compensation (partially offset by $5.7 of higher variable compensation in EMEA and 29%Q1 2022 driven by the timing of when a portion of stock compensation expense was recorded in the Other category.prior year), partially offset by approximately $10 of increased discretionary spending and $6.0 from an acquisition.
Our year-to-date 2022 effective tax rate was 63.8% compared to a year-to-date 2021 effective tax rate of 37.9%. The year-to-date 2022 effective tax rate reflected the impact of our lower earnings and included $3.4 of discrete tax benefits. The year-to-date 2021 effective tax rate reflected the non-deductible nature of the goodwill impairment charge recorded in Q1 2021.
Cost of sales as a percentage of revenue increased by 250 basis points to 69.8% of revenue in year-to-date 2021 compared to the prior year. The increase was driven by lower revenue, as well as approximately $24 of higher costs related to direct labor and logistics, of which approximately $4 was related to the temporary operations shutdown in Q3 2021, partially offset by approximately $32 of lower overhead costs, of which approximately $15 was attributable to lower wage and benefit expenses related to workforce reductions and temporary salary reductions, pricing benefits and $20.0 of lower variable compensation expense. Cost of sales as a percentage of revenue increased by 210 basis points in the Americas, 370 basis points in EMEA and 190 basis points in the Other category.
Operating expenses of $498.5 in year-to-date 2021 represented a decrease of $221.5 compared to the prior year. The decrease was driven by approximately $88 of reduced discretionary spending, approximately $55 of lower wage and benefit expenses related to workforce reductions and temporary salary reductions and $48.8 of lower variable compensation expense. Operating expenses also included $6.7 of gains from the sale of land and $4.2 of higher COLI income in year-to-date 2021.
We recorded restructuring costs of $27.0 in the Americas segment in year-to-date 2021 related to workforce reduction actions taken as a result of reduced demand due to the COVID-19 pandemic. See Note 14 to the condensed consolidated financial statements for further information.
Our year-to-date 2021 effective tax rate was 18.1% compared to a year-to-date 2020 effective tax rate of 26.0%. The year-to-date 2021 tax rate reflected the non-deductible nature of the goodwill impairment charge recorded in Q1 2021 as well as $10.5 of benefits related to the restructuring costs and $8.7 of other net benefits primarily related to the CARES Act. See Note 10 to the condensed consolidated financial statements for further details.
Interest Expense, Investment Income and Other Income, Net
| | | | Three Months Ended | Nine Months Ended | | Three Months Ended | Six Months Ended |
| Interest Expense, Investment Income and Other Income, Net | Interest Expense, Investment Income and Other Income, Net | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | Interest Expense, Investment Income and Other Income, Net | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Interest expense | Interest expense | $ | (6.6) | | | $ | (6.7) | | | $ | (20.7) | | | $ | (20.1) | | | Interest expense | $ | (6.4) | | | $ | (6.8) | | | $ | (12.8) | | | $ | (14.1) | | |
| Investment income | Investment income | 0.2 | | | 1.3 | | | 1.2 | | | 3.8 | | | Investment income | 0.1 | | | 0.2 | | | 0.3 | | | 1.0 | | |
| Other income (expense), net: | | | | | | | | | |
| Other income, net: | | Other income, net: | | | | | | | | |
| Equity in income of unconsolidated affiliates | Equity in income of unconsolidated affiliates | 2.6 | | | 4.1 | | | 6.6 | | | 9.8 | | | Equity in income of unconsolidated affiliates | 1.0 | | | 2.1 | | | 2.3 | | | 4.0 | | |
| Foreign exchange gains (losses) | 0.1 | | | 0.1 | | | (1.0) | | | 0.2 | | | |
| Foreign exchange gain (loss) | | Foreign exchange gain (loss) | (0.1) | | | (1.2) | | | (0.3) | | | (1.1) | | |
| Net periodic pension and post-retirement credit, excluding service cost | Net periodic pension and post-retirement credit, excluding service cost | — | | | 0.2 | | | (0.1) | | | 0.7 | | | Net periodic pension and post-retirement credit, excluding service cost | (0.1) | | | (0.1) | | | (0.3) | | | (0.1) | | |
| Miscellaneous income (expense), net | Miscellaneous income (expense), net | (0.5) | | | (0.3) | | | 1.5 | | | (2.4) | | | Miscellaneous income (expense), net | 1.0 | | | — | | | (0.7) | | | 2.0 | | |
| Total other income, net | Total other income, net | 2.2 | | | 4.1 | | | 7.0 | | | 8.3 | | | Total other income, net | 1.8 | | | 0.8 | | | 1.0 | | | 4.8 | | |
| Total interest expense, investment income and other income, net | Total interest expense, investment income and other income, net | $ | (4.2) | | | $ | (1.3) | | | $ | (12.5) | | | $ | (8.0) | | | Total interest expense, investment income and other income, net | $ | (4.5) | | | $ | (5.8) | | | $ | (11.5) | | | $ | (8.3) | | |
Investment income decreased by $1.1 and $2.6, respectively,Interest expense in Q3Q2 2021 and year-to-date 2021 compared toincluded the prior year due to lower market interest rates.impact of borrowings under our global credit facility in Q1 2021, which were repaid during Q2 2021. Other income, net decreased by $1.9 in Q3year-to-date 2021 compared to the prior year primarily due to lower income from unconsolidated affiliates. Year-to-date 2021 other income, net decreased by $1.3 compared to the prior year primarily due to lower income from unconsolidated affiliates and foreign exchange losses, partially offset byincluded a $2.8 gain related to additional proceeds received in the prior year from the partial sale of an investment in an unconsolidated affiliate in 2018.
Business Segment Review
See Note 1310 to the condensed consolidated financial statements for additional information regarding our business segments.
Americas
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of integrated architecture, furniture, architectural and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Turnstone, Smith System, AMQ and Orangebox brands.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended | |
| Statement of Operations Data — Americas | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | | |
| Revenue | $ | 523.3 | | | 100.0 | % | | $ | 631.2 | | | 100.0 | % | | $ | 899.6 | | | 100.0 | % | | $ | 965.1 | | | 100.0 | % | | | | | | | | |
| Cost of sales | 372.6 | | | 71.2 | | | 408.1 | | | 64.7 | | | 645.1 | | | 71.7 | | | 660.4 | | | 68.4 | | | | | | | | | |
| Restructuring costs | — | | | — | | | 6.9 | | | 1.0 | | | — | | | — | | | 6.9 | | | 0.7 | | | | | | | | | |
| Gross profit | 150.7 | | | 28.8 | | | 216.2 | | | 34.3 | | | 254.5 | | | 28.3 | | | 297.8 | | | 30.9 | | | | | | | | | |
| Operating expenses | 106.0 | | | 20.3 | | | 112.9 | | | 17.9 | | | 224.8 | | | 25.0 | | | 218.0 | | | 22.6 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Restructuring costs | — | | | — | | | 8.7 | | | 1.4 | | | — | | | — | | | 8.7 | | | 0.9 | | | | | | | | | |
| Operating income | $ | 44.7 | | | 8.5 | % | | $ | 94.6 | | | 15.0 | % | | $ | 29.7 | | | 3.3 | % | | $ | 71.1 | | | 7.4 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income to Adjusted Operating Income — Americas | Three Months Ended | Six Months Ended |
August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Operating income | $ | 44.7 | | | 8.5 | % | | $ | 94.6 | | | 15.0 | % | | $ | 29.7 | | | 3.3 | % | | $ | 71.1 | | | 7.4 | % | |
| | | | | | | | | | | | | | | | |
| Add: Restructuring costs | — | | | — | | | 15.6 | | | 2.4 | | | — | | | — | | | 15.6 | | | 1.6 | | |
| Adjusted operating income | $ | 44.7 | | | 8.5 | % | | $ | 110.2 | | | 17.4 | % | | $ | 29.7 | | | 3.3 | % | | $ | 86.7 | | | 9.0 | % | |
Operating income in the Americas declined by $49.9 in Q2 2022 compared to the prior year. The decline was driven by lower revenue and higher cost of sales as a percentage of revenue, partially offset by lower operating expenses and $15.6 of restructuring costs related to workforce reductions in the prior year. Excluding the impact of the restructuring costs in the prior year, adjusted operating income decreased by $65.5 in Q2 2022 compared to the prior year. Operating income in year-to-date 2022 represented a decrease of $41.4 compared to year-to-date 2021. The decrease was driven by lower revenue, higher cost of sales as a percentage of revenue and higher operating expenses, partially offset by the restructuring costs in the prior year. Excluding the impact of restructuring costs in
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended | |
| Statement of Operations Data — Americas | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | |
| Revenue | $ | 416.4 | | | 100.0 | % | | $ | 690.9 | | | 100.0 | % | | $ | 1,381.5 | | | 100.0 | % | | $ | 2,006.7 | | | 100.0 | % | | | | | | | | |
| Cost of sales | 290.4 | | | 69.7 | | | 459.3 | | | 66.5 | | | 950.8 | | | 68.8 | | | 1,339.0 | | | 66.7 | | | | | | | | | |
| Restructuring costs | 2.3 | | | 0.6 | | | — | | | — | | | 9.2 | | 0.7 | | | — | | | — | | | | | | | | | |
| Gross profit | 123.7 | | | 29.7 | | | 231.6 | | | 33.5 | | | 421.5 | | | 30.5 | | | 667.7 | | | 33.3 | | | | | | | | | |
| Operating expenses | 100.8 | | | 24.2 | | | 156.9 | | | 22.7 | | | 318.8 | | | 23.1 | | | 470.3 | | | 23.5 | | | | | | | | | |
| Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | |
| Restructuring costs | 9.1 | | | 2.2 | | | — | | | — | | | 17.8 | | 1.3 | | | — | | | — | | | | | | | | | |
| Operating income | $ | 13.8 | | | 3.3 | % | | $ | 74.7 | | | 10.8 | % | | $ | 84.9 | | | 6.1 | % | | $ | 197.4 | | | 9.8 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income to Adjusted Operating Income — Americas | Three Months Ended | Nine Months Ended |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 |
| Operating income | $ | 13.8 | | | 3.3 | % | | $ | 74.7 | | | 10.8 | % | | $ | 84.9 | | | 6.1 | % | | $ | 197.4 | | | 9.8 | % | |
| Add: goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Add: restructuring costs | 11.4 | | | 2.8 | | | — | | | — | | | 27.0 | | | 2.0 | | | — | | | — | | |
| Adjusted operating income | $ | 25.2 | | | 6.1 | % | | $ | 74.7 | | | 10.8 | % | | $ | 111.9 | | | 8.1 | % | | $ | 197.4 | | | 9.8 | % | |
Operating income in the Americas declined by $60.9 in Q3 2021 compared to the prior year. The Q3 2021 results included $11.4 of restructuring costs. The remaining decline was driven by lower revenue, partially offset by cost reductions. Excluding the impact of the restructuring costs,year, year-to-date 2022 adjusted operating income decreased by $49.5 in Q3 2021 compared to the prior year. Operating income in year-to-date 2021 decreased by $112.5 compared to the prior year. Therepresented a decrease was driven by the same factors as the quarter. Excluding the impact of the restructuring costs, year-to-date 2021 adjusted operating income decreased by $85.5$57.0 compared to the prior year.
The Americas revenue represented 67.4%72.2% of consolidated revenue in Q3 2021. Q3 2021Q2 2022. Q2 2022 revenue of $416.4$523.3 represented a decrease of $274.5$107.9 or 40%17% compared to the prior year. Revenue in Q2 2021 benefited from strong beginning order backlog due to pandemic-related restrictions during Q1 2021. Revenue in Q2 2022 was negatively impacted by at least $40 due to shipment delays caused by supply chain disruptions. After adjusting for a $13.1 impact from a dealer acquisition and $2.1 of currency translation effects, the organic revenue decline was $123.1 or 19% compared to the prior year. Year-to-date 2022 revenue of $899.6 represented a decrease of $65.5 or 7% compared to year-to-date 2021. The decrease was driven by reduced industry demand due to the ongoing uncertainty related to the COVID-19 pandemic and approximately $50 of delayed shipments as a result of the temporary operations shutdown during Q3 2021. Year-to-date 2021COVID-19 pandemic and the impact of shipment delays caused by supply chain disruptions on our revenue in Q2 2022. After adjusting for a $25.9 impact from a dealer acquisition and $4.2 of $1,381.5 represented a decrease of $625.2currency translation effects, the organic revenue decline was $95.6 or 31%10% compared to year-to-date 2020. The decrease was driven by the same factors as the quarter.prior year.
Cost of sales as a percentage of revenue increased by 320650 basis points in Q3 2021 compared to Q3 2020. The increase was driven by lower revenue, as well as approximately $11 of higher costs related to direct labor and logistics, of which approximately $3 was related to the temporary operations shutdown, partially offset by approximately $15 of lower overhead costs, of which approximately $7 was attributable to lower wage and benefit expenses related to workforce reductions and $9.8 of lower variable compensation expense. Year-to-date 2021 cost of sales as a percentage of revenue increased by 210 basis pointsQ2 2022 compared to the prior year. The increase was driven by the lower revenue, as well as approximately $16$17 of higher inflation costs, related to direct labor and logistics, partially offset bynet of pricing benefits, and approximately $27$5 of lower overheadhigher freight cost inefficiencies due to supply chain disruptions. Cost of sales as a percentage of revenue increased by 330 basis points in year-to-date 2022 compared to year-to-date 2021. The increase was driven by approximately $24 of higher inflation costs, net of whichpricing benefits, and approximately $13 was attributable$5 of higher freight cost inefficiencies due to lower wage and benefit expenses related to workforce reductions and temporary salary reductions and $17.9 of lower variable compensation expense.supply chain disruptions.
Operating expenses in Q3 2021Q2 2022 decreased by $56.1$6.9 compared to the prior year. The decrease was driven byprior year included approximately $23$17 of lower discretionary spending, $19.9employee costs as a result of temporary hour and pay reductions and gains of $4.1 from the sale of land. The current year included a $15.4 gain from the sale of land, approximately $10 of benefits related to workforce reductions in the prior year and $9.6 of lower variable compensation, expensepartially offset by approximately $4 of higher discretionary spending and $3.2 from an acquisition. Operating expenses in year-to-date 2022 increased by $6.8 compared to year-to-date 2021. The prior year included approximately $9$30 of lower wageemployee costs as a result of temporary hour and benefit expensespay reductions and gains of $6.7 from the sale of land. The current year included approximately $20 of benefits related to workforce reductions. Year-to-date 2021 operating expenses decreased by $151.5 compared toreductions in the prior year. The decrease was driven by approximately $60year, a $15.4 gain from the sale of lower discretionary spending, $38.2land and $5.3 of lower variable compensation (partially offset by $4.3 of higher variable compensation in Q1 2022 driven by the timing of when a portion of stock compensation expense was recorded in the prior year), partially offset by $6.0 from an acquisition and approximately $36$4 of lower wage and benefit expenses related to workforce reductions and temporary salary reductions. Operating expenses also included $6.7 from gains onhigher discretionary spending in the sale of land in year-to-date 2021.
We recorded restructuring costs of $11.4 in Q3 2021 and $27.0 in year-to-date 2021 related to workforce reduction actions taken as a result of reduced demand due to the COVID-19 pandemic. See Note 14 to the condensed consolidated financial statements for further information.
EMEA
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase, Orangebox and Coalesse brands, with an emphasis on freestandinga comprehensive portfolio of furniture, systems, seatingarchitectural and storage solutions.technology products.
| | | | Three Months Ended | Nine Months Ended | | | Three Months Ended | Six Months Ended | |
| Statement of Operations Data — EMEA | Statement of Operations Data — EMEA | November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 | | Statement of Operations Data — EMEA | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Revenue | Revenue | $ | 143.3 | | | 100.0 | % | | $ | 168.4 | | | 100.0 | % | | $ | 368.7 | | | 100.0 | % | | $ | 483.9 | | | 100.0 | % | | | Revenue | $ | 138.9 | | | 100.0 | % | | $ | 125.9 | | | 100.0 | % | | $ | 262.5 | | | 100.0 | % | | $ | 225.4 | | | 100.0 | % | | |
| Cost of sales | Cost of sales | 107.7 | | | 75.2 | | | 116.7 | | | 69.3 | | | 276.4 | | | 75.0 | | | 345.0 | | | 71.3 | | | | Cost of sales | 101.4 | | | 73.0 | | | 93.4 | | | 74.2 | | | 190.9 | | | 72.7 | | | 168.7 | | | 74.8 | | | |
| Restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | |
| | Gross profit | Gross profit | 35.6 | | | 24.8 | | | 51.7 | | | 30.7 | | | 92.3 | | | 25.0 | | | 138.9 | | | 28.7 | | | | Gross profit | 37.5 | | | 27.0 | | | 32.5 | | | 25.8 | | | 71.6 | | | 27.3 | | | 56.7 | | | 25.2 | | | |
| Operating expenses | Operating expenses | 39.3 | | | 27.4 | | | 45.4 | | | 27.0 | | | 106.5 | | | 28.8 | | | 137.3 | | | 28.4 | | | | Operating expenses | 39.1 | | | 28.2 | | | 36.0 | | | 28.6 | | | 78.9 | | | 30.1 | | | 67.2 | | | 29.9 | | | |
| Goodwill impairment charge | Goodwill impairment charge | — | | | — | | | — | | | — | | | 17.6 | | | 4.8 | | | — | | | — | | | | Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | 17.6 | | | 7.8 | | | |
| Restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | |
| Operating income (loss) | $ | (3.7) | | | (2.6) | % | | $ | 6.3 | | | 3.7 | % | | $ | (31.8) | | | (8.6) | % | | $ | 1.6 | | | 0.3 | % | | | |
| | Operating loss | | Operating loss | $ | (1.6) | | | (1.2) | % | | $ | (3.5) | | | (2.8) | % | | $ | (7.3) | | | (2.8) | % | | $ | (28.1) | | | (12.5) | % | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss) — EMEA | Three Months Ended | Nine Months Ended |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 |
| Operating income (loss) | $ | (3.7) | | | (2.6) | % | | $ | 6.3 | | | 3.7 | % | | $ | (31.8) | | | (8.6) | % | | $ | 1.6 | | | 0.3 | % | |
| Add: goodwill impairment charge | — | | | — | | | — | | | — | | | 17.6 | | | 4.8 | | | — | | | — | | |
| Add: restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Adjusted operating income (loss) | $ | (3.7) | | | (2.6) | % | | $ | 6.3 | | | 3.7 | % | | $ | (14.2) | | | (3.8) | % | | $ | 1.6 | | | 0.3 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Loss to Adjusted Operating Loss — EMEA | Three Months Ended | Six Months Ended |
August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 |
| Operating loss | $ | (1.6) | | | (1.2) | % | | $ | (3.5) | | | (2.8) | % | | $ | (7.3) | | | (2.8) | % | | $ | (28.1) | | | (12.5) | % | |
| Add: Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | 17.6 | | | 7.8 | | |
| | | | | | | | | | | | | | | | |
| Adjusted operating loss | $ | (1.6) | | | (1.2) | % | | $ | (3.5) | | | (2.8) | % | | $ | (7.3) | | | (2.8) | % | | $ | (10.5) | | | (4.7) | % | |
The operating loss in EMEA operating income declinedimproved by $10.0$1.9 in Q3 2021Q2 2022 compared to the prior year. The decreaseimprovement was driven by higher revenue and lower cost of sales as a percentage of revenue, partially offset by lowerhigher operating expenses. Operating income declined by $33.4The operating loss in EMEA in year-to-date 20212022 improved by $20.8 compared to the prior year. The decline was driven by lower revenue andyear, which included a $17.6 goodwill impairment charge related to theour Orangebox U.K. reporting unit in Q1 2021, partially offset by lower operating expenses. Excluding the impact ofunit. Adjusted for the goodwill impairment charge, the year-to-date 2021 adjusted operating loss improved by $3.2 driven by higher revenue and lower cost of $14.2 representedsales as a declinepercentage of $15.8 compared to the prior year.revenue, partially offset by higher operating expenses.
EMEA revenue represented 23.2%19.2% of consolidated revenue in Q3 2021. Q3 2021Q2 2022. Q2 2022 revenue of $143.3$138.9 represented a decreasean increase of $25.1$13.0 or 15%10% compared to the prior year. The decreaseincrease was broad-based across most markets dueprimarily driven by Orangebox. After adjusting for $6.3 of currency translation effects, the organic revenue growth was $6.7 or 5% compared to reduced demand from the COVID-19 pandemic and approximately $10 of delayed shipments as a result of the temporary operations shutdown during Q3 2021, partially offsetprior year. Year-to-date 2022 revenue increased by approximately $17 of shipments for a project in the education sector that was in the order backlog at the beginning of the quarter. Year-to-date 2021 revenue declined by $115.2$37.1 or 24%16% compared to the prior year. The decreaseincrease was driven bybroad-based across most markets. After adjusting for $16.4 of currency translation effects, the same factors asorganic revenue growth was $20.7 or 9% compared to the quarter.prior year.
Cost of sales as a percentage of revenue increaseddecreased by 590120 basis points to 75.2% of revenue in Q3 2021Q2 2022 compared to the prior year. The increaseimprovement was driven by lowerhigher revenue and unfavorable$1.4 from favorable shifts in business mix, (which included apartially offset by approximately $2 of higher mixinflation costs, net of project business).pricing benefits. Cost of sales as a percentage of revenue increaseddecreased by 370210 basis points to 75.0% of revenue in year-to-date 20212022 compared to the prior year.year-to-date 2021. The increaseimprovement was driven by lowerhigher revenue and unfavorable$2.9 of favorable shifts in business mix, partially offset by approximately $5$3 of lower overhead costs.higher inflation costs, net of pricing benefits.
Operating expenses in Q3 2021 decreasedQ2 2022 increased by $6.1$3.1 compared to the prior year, which included approximately $2 of lower employee costs as a result of temporary hour and pay reductions in the prior year. The decreaseremaining increase was driven by approximately $1 of higher discretionary spending. Year-to-date 2022 operating expenses increased by $11.7 compared to year-to-date 2021, which included approximately $5 of lower employee costs as a result of temporary hour and pay reductions in the prior year. The remaining increase was driven by approximately $4 from lower discretionary spending, $2.5 of lower variable compensation expenseunfavorable currency translation effects and approximately $2 of lower wage and benefit expenses, partially offset by $2.8 of currency translation effects. Operating expenses for year-to-date 2021 decreased by $30.8 compared to the prior year. The decrease was driven by approximately $20 from lowerhigher discretionary spending, approximately $8 of lower wage and benefit expenses primarily related to temporary work hour reductions and $5.4 of lower variable compensation expense.
Other
The Other category in 2021 includes Asia Pacific and Designtex. Asia Pacific serves customers in AsiaAustralia, China, India, Japan, Korea and Australiaother countries in Southeast Asia primarily under the Steelcase brand with an emphasis on freestandinga comprehensive portfolio of furniture, systems, seatingarchitectural and storage solutions.technology products. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by architects and designers directly to end-use customers through a direct sales force primarily in North America. In 2020, the Other category also included PolyVision which was sold during Q4 2020. PolyVision manufactures ceramic steel surfaces for use in various applications globally, including static whiteboards and chalkboards sold through third party fabricators and distributors to the primary and secondary education markets and architectural panels and other special applications sold through general contractors for commercial and infrastructure projects.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended | | | | | | | | |
| Statement of Operations Data — Other | November 27,
2020 | November 22,
2019 | August 28,
2020 | November 22,
2019 | | | | | | | | |
| Revenue | $ | 57.8 | | | 100.0 | % | | $ | 95.9 | | | 100.0 | % | | $ | 168.9 | | | 100.0 | % | | $ | 286.9 | | | 100.0 | % | | | | | | | | | |
| Cost of sales | 39.2 | | | 67.8 | | | 63.1 | | | 65.8 | | | 112.5 | | | 66.6 | | | 185.5 | | | 64.7 | | | | | | | | | | |
| Restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | |
| Gross profit | 18.6 | | | 32.2 | | | 32.8 | | | 34.2 | | | 56.4 | | | 33.4 | | | 101.4 | | | 35.3 | | | | | | | | | | |
| Operating expenses | 20.8 | | | 36.0 | | | 29.5 | | | 30.8 | | | 59.1 | | | 35.0 | | | 86.9 | | | 30.2 | | | | | | | | | | |
| Goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | |
| Restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | |
| Operating income (loss) | $ | (2.2) | | | (3.8) | % | | $ | 3.3 | | | 3.4 | % | | $ | (2.7) | | | (1.6) | % | | $ | 14.5 | | | 5.1 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss) — Other | Three Months Ended | Nine Months Ended |
November 27,
2020 | November 22,
2019 | November 27,
2020 | November 22,
2019 |
| Operating income (loss) | $ | (2.2) | | | (3.8) | % | | $ | 3.3 | | | 3.4 | % | | $ | (2.7) | | | (1.6) | % | | $ | 14.5 | | | 5.1 | % | |
| Add: goodwill impairment charge | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Add: restructuring costs | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Adjusted operating income (loss) | $ | (2.2) | | | (3.8) | % | | $ | 3.3 | | | 3.4 | % | | $ | (2.7) | | | (1.6) | % | | $ | 14.5 | | | 5.1 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | Six Months Ended | | | | | | | |
| Statement of Operations Data — Other | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | | | | | | | |
| Revenue | $ | 62.6 | | | 100.0 | % | | $ | 61.7 | | | 100.0 | % | | $ | 119.3 | | | 100.0 | % | | $ | 111.1 | | | 100.0 | % | | | | | | | | |
| Cost of sales | 44.0 | | | 70.3 | | | 40.8 | | | 66.1 | | | 83.9 | | | 70.3 | | | 73.3 | | | 66.0 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Gross profit | 18.6 | | | 29.7 | | | 20.9 | | | 33.9 | | | 35.4 | | | 29.7 | | | 37.8 | | | 34.0 | | | | | | | | | |
| Operating expenses | 22.8 | | | 36.4 | | | 19.8 | | | 32.1 | | | 44.9 | | | 37.7 | | | 38.3 | | | 34.5 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating income (loss) | $ | (4.2) | | | (6.7) | % | | $ | 1.1 | | | 1.8 | % | | $ | (9.5) | | | (8.0) | % | | $ | (0.5) | | | (0.5) | % | | | | | | | | |
The Other category posted an operating loss of $2.2$4.2 in Q3 2021Q2 2022 compared to operating income of $3.3$1.1 in the prior year, which included $1.2 from PolyVision.year. The remaining decline in operating results in the current year was driven by lowerhigher cost of sales as a percentage of revenue partially offset by lowerand higher operating expenses. Year-to-date 20212022 operating results decreased by $17.2$9.0 compared to the prior year. The prior year, results included $5.6 from PolyVision and the remaining decrease was driven by the same factors as the quarter.
Revenue in the Other category represented 9.4%8.6% of consolidated revenue in Q3 2021. Q3 2021Q2 2022. Q2 2022 revenue of $57.8$62.6 represented a decreasean increase of $38.1$0.9 or 40%1% compared to the prior year. The decreaseyear as strengthened demand in China was drivenlargely offset by lower revenue in bothIndia and Southeast Asia, Pacific and Designtex as a result of reduced demand due towhich were negatively impacted by the COVID-19 pandemic and a $14.9 impact from the PolyVision divestiture.pandemic. After adjusting for the $14.9 impact of the divestiture and $0.6$1.4 of currency translation effects, the organic revenue decline was $23.8$0.5 or 29%1% compared to the prior year. Year-to-date 20212022 revenue of $168.9$119.3 represented a decreasean increase of $118.0$8.2 or 41%,7% compared to the prior year. The declineincrease was driven by China, Australia, Japan, and Designtex, partially offset by India and Southeast Asia, driven by the same factors as the quarter. After adjusting for the $48.2 impact of the divestiture and $1.8$3.2 of currency translation effects, the organic revenue declinegrowth was $68.0$5.0 or 29%,4% compared to the prior year.
Operating expenses
Cost of sales as a percentage of revenue increased by 420 basis points in Q3 2021 decreased by $8.7Q2 2022 compared to the prior year. The decreaseincrease was driven by inefficiencies associated with pandemic-related disruptions and approximately $4 from$1 of higher inflation costs, net of pricing benefits. Cost of sales as a percentage of revenue increased by 430 basis points in year-to-date 2022 compared to the prior year. The increase was driven by the same factors as the quarter.
Operating expenses in Q2 2022 increased by $3.0 compared to the prior year, which included approximately $3 of lower discretionary spending andemployee costs as a $2.9 impact fromresult of temporary pay reductions in the PolyVision divestiture.prior year. Operating expenses for year-to-date 2021 decreased2022 increased by $27.8$6.6 compared to the prior year, driven by approximately $10 of lower discretionary spending, a $8.8 impact from the PolyVision divestiture and approximately $6 of lower wage and benefit expenses related to temporary salary reductions.same factors as the quarter.
Corporate
Corporate costsexpenses include unallocated portions of shared service functions such as information technology, corporate facilities, finance, human resources, research, legal and customer aviation, plus deferred compensation expense and income or losses associated with COLI.
| | | | Three Months Ended | | Nine Months Ended | | Three Months Ended | Six Months Ended | |
| Statement of Operations Data — Corporate | Statement of Operations Data — Corporate | November 27,
2020 | November 22,
2019 | | November 27,
2020 | November 22,
2019 | Statement of Operations Data — Corporate | August 27,
2021 | August 28,
2020 | August 27,
2021 | August 28,
2020 | |
| Operating expenses | Operating expenses | $ | 7.9 | | | $ | 9.2 | | | | $ | 14.1 | | | $ | 25.5 | | | Operating expenses | $ | 5.0 | | | $ | 3.6 | | | $ | 10.8 | | | $ | 6.2 | | | |
The decreaseincrease in operating expenses in Q3 2021Q2 2022 compared to the prior year was driven by $2.0 of lower variable compensation expense and $1.2 of lower deferred compensation expense, partially offset by $1.8 of lower COLI income.income, higher employee costs as a result of temporary hour and pay reductions in the prior year and higher discretionary spending. The decrease forincrease in operating expenses in year-to-date 20212022 was driven by $4.2 of higher COLI income, $3.0 of lower variable compensation expense, lower wage and benefit expenses related to temporary salary reductions and lower discretionary spending, partially offset by an $1.2 increase in deferred compensation expense.the same factors as the quarter.
Liquidity and Capital Resources
Cash and cash equivalents are used to fund day-to-day operations, including seasonal disbursements, particularly the annual payment of accrued variable compensation and retirement plan contributions in Q1 of each fiscal year. During normal business conditions, we target a range of $75 to $175 in cash and cash equivalents to fund operating requirements. In addition, we may carry additional liquidity for potential investments in strategic initiatives and as a cushion against economic volatility, and from time to time, we may allow our cash and cash equivalents to temporarily fall below our targeted range to fund acquisitions and other growth initiatives.
| | Liquidity Sources | Liquidity Sources | November 27,
2020 | February 28,
2020 | Liquidity Sources | August 27,
2021 | February 26,
2021 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 484.4 | | | $ | 541.0 | | | Cash and cash equivalents | $ | 360.7 | | | $ | 489.8 | | |
| | Company-owned life insurance | Company-owned life insurance | 167.7 | | | 160.0 | | | Company-owned life insurance | 169.8 | | | 169.5 | | |
| Availability under credit facilities | Availability under credit facilities | 267.9 | | | 273.3 | | | Availability under credit facilities | 265.5 | | | 265.9 | | |
| Total liquidity sources available | Total liquidity sources available | $ | 920.0 | | | $ | 974.3 | | | Total liquidity sources available | $ | 796.0 | | | $ | 925.2 | | |
As of NovemberAugust 27, 2020,2021, we held a total of $484.4$360.7 in cash and cash equivalents. Of that total, 88%81% was located in the U.S. and the remaining 12%19% was located primarily in China (including Hong Kong), Mexico, India,the U.K., Malaysia, Singapore and the U.K.India.
COLI investments are recorded at their net cash surrender value. A portion of ourOur investments in COLI policies are intended to be utilized as a long-term funding source for long-term benefit obligations. However, COLI can also be used as a source of liquidity. We believe the financial strength of the issuing insurance companies associated with our COLI policies is sufficient to meet their obligations.
Availability under credit facilities may be reduced related to compliance with applicable covenants. See Liquidity Facilities for more information.
The following table summarizes our Condensed Consolidated Statements of Cash Flows for the ninesix months ended NovemberAugust 27, 20202021 and November 22, 2019:August 28, 2020:
| | | | Nine Months Ended | | Six Months Ended |
| Cash Flow Data | Cash Flow Data | November 27,
2020 | November 22,
2019 | Cash Flow Data | August 27,
2021 | August 28,
2020 |
| Net cash provided by (used in): | Net cash provided by (used in): | | | | | Net cash provided by (used in): | | | | |
| Operating activities | Operating activities | $ | 37.2 | | | $ | 218.8 | | | Operating activities | $ | (61.6) | | | $ | 44.9 | | |
| Investing activities | Investing activities | (17.8) | | | (46.1) | | | Investing activities | (6.5) | | | (6.0) | | |
| Financing activities | Financing activities | (76.6) | | | (64.1) | | | Financing activities | (59.9) | | | (63.8) | | |
| Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | 1.8 | | | (0.8) | | | Effect of exchange rate changes on cash and cash equivalents | (0.6) | | | 0.2 | | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (55.4) | | | 107.8 | | | |
| Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | (128.6) | | | (24.7) | | |
| Cash, cash equivalents and restricted cash, beginning of period | Cash, cash equivalents and restricted cash, beginning of period | 547.1 | | | 264.8 | | | Cash, cash equivalents and restricted cash, beginning of period | 495.6 | | | 547.1 | | |
| Cash, cash equivalents and restricted cash, end of period | Cash, cash equivalents and restricted cash, end of period | $ | 491.7 | | | $ | 372.6 | | | Cash, cash equivalents and restricted cash, end of period | $ | 367.0 | | | $ | 522.4 | | |
Cash provided by (used in) operating activities
| | | | Nine Months Ended | | Six Months Ended |
| Cash Flow Data — Operating Activities | Cash Flow Data — Operating Activities | November 27,
2020 | November 22,
2019 | Cash Flow Data — Operating Activities | August 27,
2021 | August 28,
2020 |
| Net income | $ | 19.5 | | | $ | 133.2 | | | |
| Net income (loss) | | Net income (loss) | $ | (3.4) | | | $ | 17.4 | | |
| Depreciation and amortization | Depreciation and amortization | 64.1 | | | 62.9 | | | Depreciation and amortization | 41.2 | | | 43.3 | | |
| Goodwill impairment charge | Goodwill impairment charge | 17.6 | | | — | | | Goodwill impairment charge | — | | | 17.6 | | |
| Restructuring costs | Restructuring costs | 27.0 | | | — | | | Restructuring costs | — | | | 15.6 | | |
| Changes in accounts receivable, inventories and accounts payable | Changes in accounts receivable, inventories and accounts payable | 41.8 | | | (44.4) | | | Changes in accounts receivable, inventories and accounts payable | (45.3) | | | 21.3 | | |
| Employee compensation liabilities | Employee compensation liabilities | (130.5) | | | (8.8) | | | Employee compensation liabilities | (30.7) | | | (120.8) | | |
| Employee benefit obligations | Employee benefit obligations | (25.2) | | | (5.7) | | | Employee benefit obligations | (14.9) | | | (24.9) | | |
| Customer deposits | Customer deposits | 30.4 | | | 6.2 | | | Customer deposits | 14.0 | | | 74.3 | | |
| Changes in other operating assets and liabilities | Changes in other operating assets and liabilities | (7.5) | | | 75.4 | | | Changes in other operating assets and liabilities | (22.5) | | | 1.1 | | |
| Net cash provided by operating activities | $ | 37.2 | | | $ | 218.8 | | | |
| Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | $ | (61.6) | | | $ | 44.9 | | |
Annual payments related to accrued variable compensation and retirement plan contributions totaled $50.4 in year-to-date 2022 compared to $148.0 in year-to-date 2021. In year-to-date 2022, we used cash in working capital, driven by increased accounts receivable and inventory. In year-to-date 2021, we generated cash from working capital, primarily driven by collections on accounts receivable. We alsoreceivable, and we offered deposit incentives to our dealers which drove a significant increase in customer deposits in Q1 and Q2 2021, which moderated in Q3 2021 as the incentives were discontinued. In year-to-date 2020, we utilized cash in working capital, primarily driven by strong revenue growth during that period. Annual payments related to accrued variable compensation and retirement plan contributions, typically made in Q1 each year, totaled $148.0 in year-to-date 2021 compared to $114.3 in year-to-date 2020. In year-to-date 2021, we paid $25.5 related to severance and other separation-related benefits for workforce reductions in our Americas segment which is reflected in the change in employee compensation liabilities. Changes in other operating assets and liabilities in year-to-date 2021 reflects a net $31.2 increase in income taxedeposits.
s receivable.
Cash used in investing activities
| | | | Nine Months Ended | | Six Months Ended |
| Cash Flow Data — Investing Activities | Cash Flow Data — Investing Activities | November 27,
2020 | November 22,
2019 | Cash Flow Data — Investing Activities | August 27,
2021 | August 28,
2020 |
| Capital expenditures | Capital expenditures | $ | (32.1) | | | $ | (49.1) | | | Capital expenditures | $ | (31.8) | | | $ | (18.0) | | |
| Proceeds from disposal of fixed assets | Proceeds from disposal of fixed assets | 7.3 | | | 1.0 | | | Proceeds from disposal of fixed assets | 16.8 | | | 7.1 | | |
| | Other | Other | 7.0 | | | 2.0 | | | Other | 8.5 | | | 4.9 | | |
| Net cash used in investing activities | Net cash used in investing activities | $ | (17.8) | | | $ | (46.1) | | | Net cash used in investing activities | $ | (6.5) | | | $ | (6.0) | | |
Capital expenditures in year-to-date 2021 were lower compared to the prior year due to our continued focus on reduced spending and were2022 primarily related to investments in manufacturing operations, information technology, customer-facing facilities and product development and customer-facing facilities. We sold land for proceedsdevelopment. Capital expenditures were higher compared to year-to-date 2021 due to reduced spending in the prior year as a result of $7.1the COVID-19 pandemic. Proceeds from the disposal of fixed assets in year-to-date 2021.2022 primarily related to $16.6 of proceeds from the sale of land. Other investing activities in year-to-date 2022 included $6.4 of proceeds from COLI policy maturities. Other investing activities in year-to-date 2021 included $3.3 of additional proceeds from the partial sale of an investment in an unconsolidated affiliate in 2018.
Cash used in financing activities
| | | | Nine Months Ended | | Six Months Ended |
| Cash Flow Data — Financing Activities | Cash Flow Data — Financing Activities | November 27,
2020 | November 22,
2019 | Cash Flow Data — Financing Activities | August 27,
2021 | August 28,
2020 |
| Dividends paid | Dividends paid | $ | (31.8) | | | $ | (51.9) | | | Dividends paid | $ | (29.2) | | | $ | (20.1) | | |
| Common stock repurchases | Common stock repurchases | (42.7) | | | (8.7) | | | Common stock repurchases | (30.9) | | | (42.3) | | |
| Borrowings on lines of credit | Borrowings on lines of credit | 250.0 | | | — | | | Borrowings on lines of credit | — | | | 250.0 | | |
| Repayments on lines of credit | Repayments on lines of credit | (250.0) | | | — | | | Repayments on lines of credit | — | | | (250.0) | | |
| Other | Other | (2.1) | | | (3.5) | | | Other | 0.2 | | | (1.4) | | |
| Net cash used in financing activities | Net cash used in financing activities | $ | (76.6) | | | $ | (64.1) | | | Net cash used in financing activities | $ | (59.9) | | | $ | (63.8) | | |
We paid dividends of $0.10 and $0.145 per common share in Q1 2022 and Q2 2022, respectively, and $0.07 $0.10 and $0.10 per common share in Q1 2021 and Q2 2021, and Q3 2021, respectively, and $0.145 per common share in each of Q1 2020, Q2 2020 and Q3 2020.respectively.
During year-to-date 2021, we borrowed and subsequently repaid $250.0 on our global credit facility.
In year-to-date 2021,2022, we repurchased 3,288,7952,227,000 shares of Class A common stock, 288,795359,527 of which were made to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards, pursuant to the terms of our Incentive Compensation Plan. In year-to-date 2020,2021, we repurchased 524,3793,244,594 shares of Class A common stock, 279,379244,594 of which were made to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards, pursuant to the terms of our Incentive Compensation Plan.
As of NovemberAugust 27, 2020,2021, we had $56.4$29.9 of remaining availability under the $150 share repurchase program approved by our Board of Directors in 2016.
Off-Balance Sheet Arrangements
During Q3 2021,Q2 2022, no material change in our off-balance sheet arrangements occurred.
Contractual Obligations
During year-to-date 2021, we borrowed and subsequently repaid $250.0 onQ2 2022, no material change in our global credit facility.contractual obligations occurred.See Liquidity Facilities for more information.
Liquidity Facilities
Our total liquidity facilities as of NovemberAugust 27, 20202021 were:
| | | | | | | | |
| Liquidity Facilities | NovemberAugust 27,
20202021 |
| Global committed bank facility | $ | 250.0 | | |
| Other committed bank facility | 6.0 | | |
| Various uncommitted lines | 20.118.3 | | |
| Total credit lines available | 270.1 274.3 | | |
| Less: Borrowings outstanding | (2.9) | | |
| Less: Other guarantees and letters of credit | (2.2)(5.9) | | |
| Available capacity | $ | 267.9265.5 | | |
We have a $250.0 global committed five-year bank facility in effect through 2025. As of NovemberAugust 27, 2020,2021, there were no borrowings outstanding under the facility and $2.2facility, there were $5.9 of guarantees reducingand letters of credit which reduced our availability. As of November 27, 2020,availability, and we were in compliance with all covenants under the facility.
OurWe have a $12.5 committed bank facility related to a subsidiary, which has current availability of $6.0 based on eligible accounts receivable of the subsidiary. As of August 27, 2021, $2.9 was outstanding under the facility.
The various uncommitted lines may be changed or canceled by the banksapplicable lenders at any time. There were no borrowings outstanding under the uncommitted facilities as of NovemberAugust 27, 2020.2021.
In addition to the available capacity reflected in the table above, we have revolving credit agreements totaling $37.3$28.6 which can be utilized to support bank guarantees, letters of credit bank guarantees or foreign exchange contracts. LettersAs of August 27, 2021, we had $7.4 in outstanding letters of credit and bank guarantees of $12.4 were outstanding underagainst these facilities as of November 27, 2020.agreements. There were no draws onagainst our letters of credit during year-to-date 20212022 or year-to-date 2020.2021.
Total consolidated debt as of NovemberAugust 27, 20202021 was $482.8.$484.5. Our debt primarily consists of $443.8$444.4 in term notes due in 2029 with an effective interest rate of 5.6%. In addition, we have a term loan with a balance of $36.1 as of NovemberAugust 27, 2020 of $38.1. This2021. The term loan has a floating interest rate based on 30-day LIBOR plus 1.20% and is due in 2024. The term notes are unsecured, and the term loan is secured by our two corporate aircraft. The term notes and the term loan do not contain financial covenants and are not cross-defaulted to our other debt facilities.
Liquidity Outlook
At NovemberAs of August 27, 2020,2021, our total liquidity, position,which is comprised of cash and cash equivalents and the cash surrender value of COLI, aggregated to $652.1.$530.5. Our liquidity position, funds available under our credit facilities and cash generated from operations are expected to be sufficient to finance our known or foreseeable liquidity needs.
Our significant funding requirements include operating expenses, non-cancelable operating lease obligations, capital expenditures, variable compensation and retirement plan contributions, dividend payments and debt service obligations. We have flexibility over some of these uses of cash, including capital expenditures and discretionary operating expenses, to preserve our liquidity position, and weposition. We expect our capital expenditures to total approximately $65 to $75 in 2021 will not exceed $502022 compared to $73.4$41.3 in 2020.
During Q1 2021, in response to the COVID-19 pandemic and related economic uncertainty, we took a number of actions to protect our liquidity, including borrowing under our global credit facility, temporarily reducing pay for most of our salaried workforce, eliminating travel and events, overtime, temporary labor and annual merit increases, and scaling back project spending. During Q2 2021, as we were able to resume our manufacturing activities globally and our revenue improved, we repaid all outstanding borrowings under our global credit facility, and by Q3 2021, we restored most of our global salaried workforce to full pay. In Q2 and Q3 2021, we implemented workforce reductions in our Americas segment, and we expect to maintain the majority of our other cost reduction efforts during the remainder of 2021.
On December 17, 2020,September 22, 2021, we announced a quarterly dividend on our common stock of $0.10$0.145 per share, or approximately $12,$17, to be paid in Q4 2021.Q3 2022. Future dividends will be subject to approval by our Board of Directors.
Critical Accounting Estimates
During Q3 2021,Q2 2022, there have been no changes in the items that we have identified as critical accounting estimates.
Recently Issued Accounting Standards
See Note 2 to the condensed consolidated financial statements.
Forward-looking Statements
From time to time, in written and oral statements, we discuss our expectations regarding future events and our plans and objectives for future operations. These forward-looking statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on current beliefs of management as well as assumptions made by, and information currently available to, us. Forward-looking statements generally are accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “possible,” “potential,” “predict,” “project,”" "target” or other similar words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to vary from our expectations because of factors such as, but not limited to, competitive and general economic conditions domestically and internationally; acts of terrorism, war, governmental action, natural disasters, pandemics and other Force Majeure events; cyberattacks; the COVID-19 pandemic and the actions taken by various governments and third parties to combat the pandemic; changes in the legal and regulatory environment; changes in raw material, commodity and other input costs; currency fluctuations; changes in customer demand; and the other risks and contingencies detailed in this Report, our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
Item 3.Quantitative and Qualitative Disclosures About Market Risk:
The nature of market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) faced by us as of NovemberAugust 27, 20202021 is the same as disclosed in our Annual Report on Form 10-K for the year ended February 28, 2020.26, 2021. We are exposed to market risks from foreign currency exchange, interest rates, commodity prices and fixed income and equity prices, which could affect our operating results, financial position and cash flows.
Foreign Exchange Risk
During Q3 2021,Q2 2022, no material change in foreign exchange risk occurred.
Interest Rate Risk
During Q3 2021,Q2 2022, no material change in interest rate risk occurred.
Commodity Price Risk
During Q3 2021,Q2 2022, no material change in commodity price risk occurred.
Fixed Income and Equity Price Risk
During Q3 2021,Q2 2022, no material change in fixed income and equity price risk occurred.
Item 4.Controls and Procedures:
(a) Disclosure Controls and Procedures. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of NovemberAugust 27, 2020.2021. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of NovemberAugust 27, 2020,2021, our disclosure controls and procedures were effective in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and (2) ensuring that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our thirdsecond fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. Risk Factors:
For a more detailed explanation of the risks affecting our business, please refer to the Risk Factors section in our Form 10-K for the fiscal year ended February 28, 2020.26, 2021. There have not been any material changes to the risk factors set forth in our Form 10-K for the fiscal year ended February 28, 2020, except for the following risk factors which supplement and update the risk factors previously disclosed and should be considered in conjunction with the Risk Factors section in our Form 10-K for the fiscal year ended February 28, 2020:
The COVID-19 pandemic has had, and is expected to continue to have, a significant and adverse effect on our business.
The COVID-19 pandemic and the actions taken by various governments and third parties to combat the spread of COVID-19 (including, in some cases, mandatory quarantines and other suspensions of non-essential business operations) caused significant disruptions in our manufacturing and distribution operations and supply chains during Q1 2021 and required many office workers globally to work from home on a temporary basis, which has had a negative impact on global demand for our industry. In response to these developments, we took a number of actions to reduce our spending, including temporary and permanent layoffs, temporary pay reductions and reduced spending on product development and strategic initiatives. These actions have had and may continue to have a negative impact on our employee retention and our growth strategies in the future.
The economic impacts of the COVID-19 pandemic have had a negative impact on many of our customers, particularly those in the retail, hospitality, automotive, aviation, energy and flexible real estate sectors, and thus has negatively affected our revenues and may increase credit risk for us and our dealers. In addition, the actions being taken by governments and third parties to prevent the spread of COVID-19 have resulted in increased working from home for an extended period of time, which has been impacting and may continue to impact overall demand for office furniture and our revenue.
The severity of these various impacts on our business will depend in part on the extent and duration of government quarantine or stay-at-home orders, the timing of when companies have their employees return to the office, the availability of government benefits and other stimulus efforts to mitigate the effects of the COVID-19 pandemic and the speed of the recovery of economic conditions globally and locally, all of which are highly uncertain and out of our control. The impacts of COVID-19 are far-reaching, and the duration and intensity of the impact on our business, our industry and the global economy are not yet fully known.26, 2021.
We rely on the integrity and security of our information technology systems, and our business could be materially adversely impacted by extended disruptions, significant security breaches or other compromises of these systems.
We rely on information technology systems to operate and manage our business and to process, maintain and safeguard information essential to our business as well as information relating to our customers, dealers, suppliers and employees. These systems are vulnerable to events beyond our reasonable control, including cyberattacks and security breaches, telecommunication and internet failures, natural disasters and power loss. Such events could result in operational slowdowns, shutdowns or other difficulties; loss of revenues or market share; compromise or loss of sensitive or proprietary information; destruction or corruption of data; costs of remediation, repair or recovery; breaches of obligations to third parties under privacy laws or contracts; or damage to our reputation or customer relationships; each of which, depending on the extent or duration of the event, could materially adversely impact our business, operating results or financial condition.
In October 2020, we detected a cyberattack that resulted in unauthorized access to our information technology systems. To protect our systems during that cyberattack, we temporarily shut down our global operations, which resulted in a delay of approximately $60 in revenue from Q3 2021 to Q4 2021; however, we do not believe this incident had or will have a materially adverse impact on our business, operating results or financial condition or the effectiveness of our internal controls.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds:
Issuer Purchases of Equity Securities
The following is a summary of share repurchase activity during Q3 2021:Q2 2022:
| | | | | | | | | | | | | | |
| Period | (a)
Total Number of
Shares Purchased | (b)
Average Price
Paid per Share | (c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (1) | (d)
Approximate Dollar
Value of Shares
that May Yet be
Purchased
Under the Plans
or Programs (1)
(in millions) |
| 8/29/2020 - 10/2/2020 | 3,241 | | $ | 12.34 | | — | | $ | 56.4 | |
| 10/3/2020 - 10/30/2020 | 38,275 | | $ | 10.70 | | — | | $ | 56.4 | |
| 10/31/2020 - 11/27/2020 | 2,685 | | $ | 10.44 | | — | | $ | 56.4 | |
| Total | 44,201 | | (2) | — | | |
| | | | | | | | | | | | | | |
| Period | (a)
Total Number of
Shares Purchased | (b)
Average Price
Paid per Share | (c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (1) | (d)
Approximate Dollar
Value of Shares
that May Yet be
Purchased
Under the Plans
or Programs (1)
(in millions) |
| 5/29/2021 - 7/2/2021 | 343,326 | | $ | 14.73 | | 342,425 | | $ | 51.4 | |
| 7/3/2021 - 7/30/2021 | 1,239,220 | | $ | 14.16 | | 1,236,014 | | $ | 33.9 | |
| 7/31/2021 - 8/27/2021 | 291,258 | | $ | 13.74 | | 289,034 | | $ | 29.9 | |
| Total | 1,873,804 | | (2) | 1,867,473 | | |
(1)In January 2016, the Board of Directors approved a share repurchase program permitting the repurchase of up to $150 of shares of our common stock. On June 28, 2021, we entered into a stock repurchase agreement with an independent third party broker under which the broker is authorized to repurchase up to $50 of shares of our common stock on our behalf during the period June 28, 2021 through December 20, 2021, subject to certain price, market and volume constraints specified in the agreement. The agreement was established in accordance with Rule 10b5-1 under the Exchange Act. Shares purchased under the agreement are part of our share repurchase program approved in January 2016.
(2)All of these6,331 shares were repurchased to satisfy participants’ tax withholding obligations upon the issuance of shares under equity awards, pursuant to the terms of our Incentive Compensation Plan.
Item 6.Exhibits:
| | | | | | | | |
Exhibit
No. | Description | |
| | |
| 10.1* | | |
| 10.2* | | |
| 31.1 | | |
| 31.2 | | |
| 32.1 | | |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Schema Document | |
| 101.CAL | Inline XBRL Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Labels LInkbaseLinkbase Document | |
| 101.PRE | Inline XBRL Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
________________
* Management contract or compensatory plan or arrangement.
(1) Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on July 16, 2021, (commission file number 001-13873), and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | |
| By: | /s/ Robin L. Zondervan |
| Robin L. Zondervan
Vice President, Corporate Controller and &
Chief Accounting Officer
(Duly Authorized Officer and
Principal Accounting Officer) |
Date: December 22, 2020September 24, 2021