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 November 25, 2022May 26, 2023
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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)
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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:
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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 19, 2022,June 20, 2023, Steelcase Inc. had 92,531,45093,588,645 shares of Class A Common Stock and 20,454,41320,414,413 shares of Class B Common Stock outstanding.
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STEELCASE INC. FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED November 25, 2022May 26, 2023
INDEX |
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements:
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STEELCASE INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS (Unaudited) (in millions, except per share data) |
| | | Three Months Ended | Nine Months Ended | | Three Months Ended | |
| | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 | |
Revenue | Revenue | $ | 826.9 | | | $ | 738.2 | | | $ | 2,430.9 | | | $ | 2,019.6 | | | Revenue | $ | 751.9 | | | $ | 740.7 | | | |
Cost of sales | Cost of sales | 587.7 | | | 534.6 | | | 1,748.4 | | | 1,454.5 | | | Cost of sales | 515.9 | | | 548.2 | | | |
Restructuring costs | Restructuring costs | 1.4 | | | — | | | 2.3 | | | — | | | Restructuring costs | 1.4 | | | 0.9 | | | |
Gross profit | Gross profit | 237.8 | | | 203.6 | | | 680.2 | | | 565.1 | | | Gross profit | 234.6 | | | 191.6 | | | |
Operating expenses | Operating expenses | 208.1 | | | 187.7 | | | 630.4 | | | 547.1 | | | Operating expenses | 220.6 | | | 200.9 | | | |
Restructuring costs | Restructuring costs | 9.2 | | | — | | | 13.0 | | | — | | | Restructuring costs | 6.7 | | | 3.3 | | | |
Operating income | 20.5 | | | 15.9 | | | 36.8 | | | 18.0 | | | |
Operating income (loss) | | Operating income (loss) | 7.3 | | | (12.6) | | | |
Interest expense | Interest expense | (7.6) | | | (6.5) | | | (21.2) | | | (19.3) | | | Interest expense | (6.6) | | | (6.4) | | | |
Investment income | Investment income | 0.3 | | | 0.1 | | | 0.7 | | | 0.4 | | | Investment income | 0.5 | | | 0.1 | | | |
Other income, net | Other income, net | 3.4 | | | 2.5 | | | 10.9 | | | 3.5 | | | Other income, net | 1.7 | | | 3.1 | | | |
Income before income tax expense (benefit) | 16.6 | | | 12.0 | | | 27.2 | | | 2.6 | | | |
Income (loss) before income tax expense (benefit) | | Income (loss) before income tax expense (benefit) | 2.9 | | | (15.8) | | | |
Income tax expense (benefit) | Income tax expense (benefit) | 5.2 | | | 2.4 | | | 7.6 | | | (3.6) | | | Income tax expense (benefit) | 1.4 | | | (4.4) | | | |
Net income | $ | 11.4 | | | $ | 9.6 | | | $ | 19.6 | | | $ | 6.2 | | | |
Earnings per share: | | | | | | | | | |
Net income (loss) | | Net income (loss) | $ | 1.5 | | | $ | (11.4) | | | |
Earnings (loss) per share: | | Earnings (loss) per share: | | | | | |
Basic | Basic | $ | 0.10 | | | $ | 0.08 | | | $ | 0.17 | | | $ | 0.05 | | | Basic | $ | 0.01 | | | $ | (0.10) | | | |
Diluted | Diluted | $ | 0.10 | | | $ | 0.08 | | | $ | 0.17 | | | $ | 0.05 | | | Diluted | $ | 0.01 | | | $ | (0.10) | | | |
Dividends declared and paid per common share | Dividends declared and paid per common share | $ | 0.100 | | | $ | 0.145 | | | $ | 0.390 | | | $ | 0.390 | | | Dividends declared and paid per common share | $ | 0.100 | | | $ | 0.145 | | | |
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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 | |
| | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 | |
Net income | $ | 11.4 | | | $ | 9.6 | | | $ | 19.6 | | | $ | 6.2 | | | |
Net income (loss) | | Net income (loss) | $ | 1.5 | | | $ | (11.4) | | | |
Other comprehensive income (loss), net: | Other comprehensive income (loss), net: | | Other comprehensive income (loss), net: | | |
Unrealized gain (loss) on investment | (0.1) | | | (0.1) | | | (0.1) | | | 0.1 | | | |
Unrealized loss on investment | | Unrealized loss on investment | — | | | (0.3) | | | |
Pension and other post-retirement liability adjustments | Pension and other post-retirement liability adjustments | (0.4) | | | 0.4 | | | (0.2) | | | 0.7 | | | Pension and other post-retirement liability adjustments | (0.6) | | | 0.2 | | | |
Derivative amortization | Derivative amortization | 0.2 | | | 0.3 | | | 0.7 | | | 0.7 | | | Derivative amortization | 0.2 | | | 0.3 | | | |
Foreign currency translation adjustments | Foreign currency translation adjustments | 8.8 | | | (13.3) | | | (31.1) | | | (25.1) | | | Foreign currency translation adjustments | 3.2 | | | (18.6) | | | |
Total other comprehensive income (loss), net | Total other comprehensive income (loss), net | 8.5 | | | (12.7) | | | (30.7) | | | (23.6) | | | Total other comprehensive income (loss), net | 2.8 | | | (18.4) | | | |
Comprehensive income (loss) | Comprehensive income (loss) | $ | 19.9 | | | $ | (3.1) | | | $ | (11.1) | | | $ | (17.4) | | | Comprehensive income (loss) | $ | 4.3 | | | $ | (29.8) | | | |
See accompanying notes to the condensed consolidated financial statements.
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STEELCASE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) |
| | | (Unaudited) | | | (Unaudited) | |
| | November 25, 2022 | February 25, 2022 | | May 26, 2023 | February 24, 2023 |
ASSETS | ASSETS | | ASSETS | |
Current assets: | Current assets: | | | | | Current assets: | | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 55.0 | | | $ | 200.9 | | | Cash and cash equivalents | $ | 40.2 | | | $ | 90.4 | | |
| Accounts receivable, net of allowance of $6.5 and $8.0 | 400.1 | | | 340.4 | | | |
Accounts receivable, net of allowance of $6.8 and $6.5 | | Accounts receivable, net of allowance of $6.8 and $6.5 | 363.3 | | | 373.3 | | |
Inventories | Inventories | 378.5 | | | 326.2 | | | Inventories | 307.3 | | | 319.7 | | |
| Prepaid expenses | Prepaid expenses | 28.6 | | | 24.0 | | | Prepaid expenses | 34.5 | | | 28.9 | | |
Income taxes receivable | 16.3 | | | 41.7 | | | |
Assets held for sale | | Assets held for sale | 29.0 | | | 29.0 | | |
| Other current assets | Other current assets | 36.0 | | | 26.0 | | | Other current assets | 41.6 | | | 42.7 | | |
Total current assets | Total current assets | 914.5 | | | 959.2 | | | Total current assets | 815.9 | | | 884.0 | | |
Property, plant and equipment, net of accumulated depreciation of $1,110.3 and $1,089.0 | 404.8 | | | 392.8 | | | |
Property, plant and equipment, net of accumulated depreciation of $1,100.7 and $1,088.6 | | Property, plant and equipment, net of accumulated depreciation of $1,100.7 and $1,088.6 | 373.1 | | | 376.5 | | |
Company-owned life insurance ("COLI") | Company-owned life insurance ("COLI") | 161.2 | | | 168.0 | | | Company-owned life insurance ("COLI") | 159.7 | | | 157.3 | | |
Deferred income taxes | Deferred income taxes | 116.4 | | | 121.2 | | | Deferred income taxes | 117.6 | | | 117.3 | | |
Goodwill | Goodwill | 278.0 | | | 242.8 | | | Goodwill | 277.0 | | | 276.8 | | |
Other intangible assets, net of accumulated amortization of $101.2 and $86.4 | 117.2 | | | 85.5 | | | |
Other intangible assets, net of accumulated amortization of $102.0 and $97.6 | | Other intangible assets, net of accumulated amortization of $102.0 and $97.6 | 107.5 | | | 111.2 | | |
Investments in unconsolidated affiliates | Investments in unconsolidated affiliates | 49.4 | | | 53.1 | | | Investments in unconsolidated affiliates | 51.4 | | | 51.1 | | |
Right-of-use operating lease assets | Right-of-use operating lease assets | 195.4 | | | 209.8 | | | Right-of-use operating lease assets | 193.5 | | | 198.3 | | |
Other assets | Other assets | 31.5 | | | 28.6 | | | Other assets | 29.8 | | | 30.3 | | |
Total assets | Total assets | $ | 2,268.4 | | | $ | 2,261.0 | | | Total assets | $ | 2,125.5 | | | $ | 2,202.8 | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | |
Current liabilities: | Current liabilities: | | | | | Current liabilities: | | | | |
Accounts payable | Accounts payable | $ | 250.0 | | | $ | 243.6 | | | Accounts payable | $ | 215.3 | | | $ | 203.5 | | |
Short-term borrowings and current portion of long-term debt | Short-term borrowings and current portion of long-term debt | 70.4 | | | 5.1 | | | Short-term borrowings and current portion of long-term debt | 0.8 | | | 35.7 | | |
Current operating lease obligations | Current operating lease obligations | 42.6 | | | 44.2 | | | Current operating lease obligations | 46.0 | | | 44.7 | | |
Accrued expenses: | Accrued expenses: | | | | | Accrued expenses: | | | | |
Employee compensation | Employee compensation | 105.0 | | | 75.6 | | | Employee compensation | 79.3 | | | 120.0 | | |
Employee benefit plan obligations | Employee benefit plan obligations | 27.6 | | | 25.4 | | | Employee benefit plan obligations | 20.5 | | | 31.2 | | |
Accrued promotions | Accrued promotions | 27.5 | | | 32.9 | | | Accrued promotions | 25.8 | | | 26.7 | | |
Customer deposits | Customer deposits | 56.3 | | | 53.4 | | | Customer deposits | 51.1 | | | 50.8 | | |
| Other | Other | 99.7 | | | 87.0 | | | Other | 94.8 | | | 90.7 | | |
Total current liabilities | Total current liabilities | 679.1 | | | 567.2 | | | Total current liabilities | 533.6 | | | 603.3 | | |
Long-term liabilities: | Long-term liabilities: | | | | | Long-term liabilities: | | | | |
Long-term debt less current maturities | Long-term debt less current maturities | 445.6 | | | 477.4 | | | Long-term debt less current maturities | 445.7 | | | 445.5 | | |
Employee benefit plan obligations | Employee benefit plan obligations | 111.6 | | | 126.7 | | | Employee benefit plan obligations | 95.4 | | | 103.0 | | |
Long-term operating lease obligations | Long-term operating lease obligations | 168.7 | | | 182.2 | | | Long-term operating lease obligations | 163.5 | | | 169.9 | | |
Other long-term liabilities | Other long-term liabilities | 53.8 | | | 55.3 | | | Other long-term liabilities | 58.2 | | | 54.9 | | |
Total long-term liabilities | Total long-term liabilities | 779.7 | | | 841.6 | | | Total long-term liabilities | 762.8 | | | 773.3 | | |
Total liabilities | Total liabilities | 1,458.8 | | | 1,408.8 | | | Total liabilities | 1,296.4 | | | 1,376.6 | | |
Shareholders’ equity: | Shareholders’ equity: | | | | | Shareholders’ equity: | | | | |
| Additional paid-in capital | Additional paid-in capital | 15.6 | | | 1.5 | | | Additional paid-in capital | 30.1 | | | 19.4 | | |
Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (81.3) | | | (50.6) | | | Accumulated other comprehensive income (loss) | (69.7) | | | (72.5) | | |
Retained earnings | Retained earnings | 875.3 | | | 901.3 | | | Retained earnings | 868.7 | | | 879.3 | | |
Total shareholders’ equity | Total shareholders’ equity | 809.6 | | | 852.2 | | | Total shareholders’ equity | 829.1 | | | 826.2 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 2,268.4 | | | $ | 2,261.0 | | | Total liabilities and shareholders’ equity | $ | 2,125.5 | | | $ | 2,202.8 | | |
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 | |
| | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 | |
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 | 112,762,002 | | | 113,821,358 | | | 112,109,294 | | | 114,908,676 | | | Common shares outstanding, beginning of period | 112,988,721 | | | 112,109,294 | | | |
Common stock issuances | Common stock issuances | 26,047 | | | 16,109 | | | 68,428 | | | 43,406 | | | Common stock issuances | 37,250 | | | 21,172 | | | |
Common stock repurchases | Common stock repurchases | (64,184) | | | (1,764,083) | | | (343,485) | | | (3,991,083) | | | Common stock repurchases | (429,624) | | | (279,103) | | | |
Performance and restricted stock units issued as common stock | Performance and restricted stock units issued as common stock | 212,936 | | | 104,825 | | | 1,102,564 | | | 1,217,210 | | | Performance and restricted stock units issued as common stock | 1,357,239 | | | 889,128 | | | |
Common shares outstanding, end of period | Common shares outstanding, end of period | 112,936,801 | | | 112,178,209 | | | 112,936,801 | | | 112,178,209 | | | Common shares outstanding, end of period | 113,953,586 | | | 112,740,491 | | | |
| Changes in additional paid-in capital (1): | 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 | $ | 13.7 | | | $ | — | | | $ | 1.5 | | | $ | 12.5 | | | Additional paid-in capital, beginning of period | $ | 19.4 | | | $ | 1.5 | | | |
Common stock issuances | Common stock issuances | 0.3 | | | 0.2 | | | 0.8 | | | 0.6 | | | Common stock issuances | 0.3 | | | 0.2 | | | |
Common stock repurchases | Common stock repurchases | (0.5) | | | — | | | (3.9) | | | (27.7) | | | Common stock repurchases | (3.3) | | | (3.4) | | | |
Performance and restricted stock units expense (credit) | 2.1 | | | (0.2) | | | 17.2 | | | 14.6 | | | |
Performance and restricted stock units expense | | Performance and restricted stock units expense | 13.7 | | | 12.0 | | | |
Additional paid-in capital, end of period | Additional paid-in capital, end of period | 15.6 | | | — | | | 15.6 | | | — | | | Additional paid-in capital, end of period | 30.1 | | | 10.3 | | | |
| 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 | (89.8) | | | (50.9) | | | (50.6) | | | (40.0) | | | Accumulated other comprehensive income (loss), beginning of period | (72.5) | | | (50.6) | | | |
Other comprehensive income (loss) | Other comprehensive income (loss) | 8.5 | | | (12.7) | | | (30.7) | | | (23.6) | | | Other comprehensive income (loss) | 2.8 | | | (18.4) | | | |
| Accumulated other comprehensive income (loss), end of period | Accumulated other comprehensive income (loss), end of period | (81.3) | | | (63.6) | | | (81.3) | | | (63.6) | | | Accumulated other comprehensive income (loss), end of period | (69.7) | | | (69.0) | | | |
| Changes in retained earnings: | Changes in retained earnings: | | Changes in retained earnings: | | |
Retained earnings, beginning of period | Retained earnings, beginning of period | 875.5 | | | 952.2 | | | 901.3 | | | 988.0 | | | Retained earnings, beginning of period | 879.3 | | | 901.3 | | | |
Net income | 11.4 | | | 9.6 | | | 19.6 | | | 6.2 | | | |
Net income (loss) | | Net income (loss) | 1.5 | | | (11.4) | | | |
Dividends paid | Dividends paid | (11.6) | | | (16.7) | | | (45.6) | | | (45.9) | | | Dividends paid | (12.1) | | | (17.1) | | | |
Common stock repurchases | — | | | (23.1) | | | — | | | (26.3) | | | |
Performance and restricted stock units expense (credit) | — | | | (1.8) | | | — | | | (1.8) | | | |
| Retained earnings, end of period | Retained earnings, end of period | 875.3 | | | 920.2 | | | 875.3 | | | 920.2 | | | Retained earnings, end of period | 868.7 | | | 872.8 | | | |
Total shareholders' equity | Total shareholders' equity | $ | 809.6 | | | $ | 856.6 | | | $ | 809.6 | | | $ | 856.6 | | | Total shareholders' equity | $ | 829.1 | | | $ | 814.1 | | | |
(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 | | Three Months Ended |
| | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | | | | OPERATING ACTIVITIES | | | | |
Net income | $ | 19.6 | | | $ | 6.2 | | | |
Net income (loss) | | Net income (loss) | $ | 1.5 | | | $ | (11.4) | | |
Depreciation and amortization | Depreciation and amortization | 67.2 | | | 62.2 | | | Depreciation and amortization | 20.4 | | | 20.2 | | |
Share-based compensation | Share-based compensation | 18.0 | | | 13.4 | | | Share-based compensation | 14.0 | | | 12.2 | | |
Restructuring costs | Restructuring costs | 15.3 | | | — | | | Restructuring costs | 8.1 | | | 4.2 | | |
| Other | Other | (4.3) | | | (28.8) | | | Other | (1.3) | | | (4.2) | | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | | | | Changes in operating assets and liabilities: | | | | |
Accounts receivable | Accounts receivable | (68.1) | | | (68.6) | | | Accounts receivable | 11.3 | | | (14.5) | | |
Inventories | Inventories | (48.2) | | | (93.4) | | | Inventories | 12.1 | | | (50.6) | | |
Income taxes receivable | Income taxes receivable | 25.4 | | | (1.6) | | | Income taxes receivable | (2.4) | | | 25.3 | | |
Other assets | Other assets | (15.7) | | | (16.7) | | | Other assets | (0.8) | | | (13.2) | | |
Accounts payable | Accounts payable | 7.8 | | | 77.5 | | | Accounts payable | 11.3 | | | 16.7 | | |
Employee compensation liabilities | Employee compensation liabilities | 17.0 | | | (15.3) | | | Employee compensation liabilities | (49.1) | | | (18.5) | | |
Employee benefit obligations | Employee benefit obligations | (14.0) | | | (13.5) | | | Employee benefit obligations | (19.3) | | | (17.2) | | |
Customer deposits | (19.8) | | | 21.3 | | | |
| Accrued expenses and other liabilities | Accrued expenses and other liabilities | 1.2 | | | (1.8) | | | Accrued expenses and other liabilities | 5.5 | | | (4.1) | | |
Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | 1.4 | | | (59.1) | | | Net cash provided by (used in) operating activities | 11.3 | | | (55.1) | | |
INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | | INVESTING ACTIVITIES | | | | |
Capital expenditures | Capital expenditures | (42.8) | | | (45.3) | | | Capital expenditures | (11.7) | | | (13.6) | | |
Proceeds from disposal of fixed assets | 5.6 | | | 17.4 | | | |
Acquisitions, net of cash acquired | (105.3) | | | (32.6) | | | |
| Other | Other | 15.0 | | | 9.2 | | | Other | 0.5 | | | 6.3 | | |
Net cash used in investing activities | Net cash used in investing activities | (127.5) | | | (51.3) | | | Net cash used in investing activities | (11.2) | | | (7.3) | | |
FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | | FINANCING ACTIVITIES | | | | |
Dividends paid | Dividends paid | (45.6) | | | (45.9) | | | Dividends paid | (12.1) | | | (17.1) | | |
Common stock repurchases | (3.9) | | | (54.0) | | | |
| Borrowings on global committed bank facility | Borrowings on global committed bank facility | 480.9 | | | — | | | Borrowings on global committed bank facility | 67.2 | | | — | | |
Repayments on global committed bank facility | Repayments on global committed bank facility | (446.9) | | | — | | | Repayments on global committed bank facility | (67.2) | | | — | | |
Repayments on note payable | | Repayments on note payable | (32.2) | | | — | | |
Other | Other | (1.1) | | | (1.6) | | | Other | (6.0) | | | (3.6) | | |
Net cash used in financing activities | Net cash used in financing activities | (16.6) | | | (101.5) | | | Net cash used in financing activities | (50.3) | | | (20.7) | | |
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (2.6) | | | (1.6) | | | Effect of exchange rate changes on cash and cash equivalents | (0.4) | | | (1.3) | | |
Net decrease in cash, cash equivalents and restricted cash | Net decrease in cash, cash equivalents and restricted cash | (145.3) | | | (213.5) | | | Net decrease in cash, cash equivalents and restricted cash | (50.6) | | | (84.4) | | |
Cash and cash equivalents and restricted cash, beginning of period (1) | Cash and cash equivalents and restricted cash, beginning of period (1) | 207.0 | | | 495.6 | | | Cash and cash equivalents and restricted cash, beginning of period (1) | 97.2 | | | 207.0 | | |
Cash and cash equivalents and restricted cash, end of period (2) | Cash and cash equivalents and restricted cash, end of period (2) | $ | 61.7 | | | $ | 282.1 | | | Cash and cash equivalents and restricted cash, end of period (2) | $ | 46.6 | | | $ | 122.6 | | |
(1)These amounts include restricted cash of $6.1$6.8 and $5.8$6.1 as of February 25, 202224, 2023 and February 26, 2021,25, 2022, respectively.
(2)These amounts include restricted cash of $6.7$6.4 and $6.9$5.9 as of November 25,May 26, 2023 and May 27, 2022, and November 26, 2021, respectively.
Restricted cash primarily represents funds held in escrow for potential future workers’ compensation and product liability claims. Restrictedclaims. The restricted cash balance is included as part of Other assets on 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 25, 202224, 2023 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 25, 202224, 2023 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
We evaluate all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our consolidated financial statements. We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are either not applicable to us or are not expected to have a material effect on our consolidated financial statements.
Adoption of New Accounting Standards Issued But Not Yet Adopted
In September 2022, the FASB issuedEffective Q1 2024, we adopted ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50), which is intended to enhance transparency of supplier finance programs by requiring disclosure of key terms, amounts outstanding (including a rollforward of outstanding amounts) and a description of where such amounts are presented in the consolidated financial statements.
We participate in a supplier finance program in Spain offered by a third-party financial institution. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022.program allows participating suppliers the ability to finance our payment obligations prior to their scheduled due dates at a discounted price set by the financial institution. We expecthave extended payment terms with suppliers that have voluntarily chosen to participate in the adoptionprogram. As of this guidance will modify our disclosures but we do not expect it to have a material effect May 26, 2023, the outstanding amount of program obligations, reported in Accounts payable on our consolidated financial statements.the Condensed Consolidated Balance Sheets, was $0.8. The amount settled through the program during Q1 2024 was $2.2.
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 | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | May 26, 2023 | May 27, 2022 | |
Americas | Americas | | Americas | | |
Desking, benching, systems and storage | Desking, benching, systems and storage | $ | 263.7 | | | $ | 240.1 | | | $ | 827.4 | | | $ | 669.5 | | | Desking, benching, systems and storage | $ | 250.2 | | | $ | 260.3 | | | |
Seating | Seating | 174.1 | | | 143.0 | | | 533.6 | | | 426.7 | | | Seating | 152.8 | | | 156.2 | | | |
Other (1) | Other (1) | 156.9 | | | 117.2 | | | 406.1 | | | 303.7 | | | Other (1) | 169.8 | | | 127.3 | | | |
EMEA | | |
Desking, benching, systems and storage | 55.6 | | | 62.2 | | | 160.7 | | | 158.7 | | | |
Seating | 54.8 | | | 61.1 | | | 153.8 | | | 150.7 | | | |
Other (1) | 47.3 | | | 44.9 | | | 137.4 | | | 121.3 | | | |
Other | | |
International | | International | | |
Desking, benching, systems and storage | Desking, benching, systems and storage | 13.8 | | | 13.8 | | | 39.6 | | | 39.1 | | | Desking, benching, systems and storage | 61.6 | | | 67.4 | | | |
Seating | Seating | 21.5 | | | 21.3 | | | 61.2 | | | 52.0 | | | Seating | 62.0 | | | 70.7 | | | |
Other (1) | Other (1) | 39.2 | | | 34.6 | | | 111.1 | | | 97.9 | | | Other (1) | 55.5 | | | 58.8 | | | |
| | $ | 826.9 | | | $ | 738.2 | | | $ | 2,430.9 | | | $ | 2,019.6 | | | | $ | 751.9 | | | $ | 740.7 | | | |
_______________________________________(1)The other product category data by segment consists primarily of products sold by consolidated dealers, textiles and surface materials, worktools, architecture and other uncategorized product lines and services, less promotions and incentives on all product categories.
Reportable geographic information is as follows:
| Reportable Geographic Revenue | Reportable Geographic Revenue | Three Months Ended | Nine Months Ended | | Reportable Geographic Revenue | Three Months Ended | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | Reportable Geographic Revenue | May 26, 2023 | May 27, 2022 | |
United States | United States | $ | 576.0 | | | $ | 474.6 | | | $ | 1,712.3 | | | $ | 1,327.4 | | | | United States | $ | 532.7 | | | $ | 501.8 | | | |
Foreign locations | Foreign locations | 250.9 | | | 263.6 | | | 718.6 | | | 692.2 | | | | Foreign locations | 219.2 | | | 238.9 | | | |
| | $ | 826.9 | | | $ | 738.2 | | | $ | 2,430.9 | | | $ | 2,019.6 | | | | | $ | 751.9 | | | $ | 740.7 | | | |
Contract Balances
At times, we receive payments from customers before revenue is recognized, resulting in the recognition of a contract liability (Customer deposits) presented on the Condensed Consolidated Balance Sheets.
Changes in the Customer deposits balance for the ninethree months ended November 25, 2022May 26, 2023 are as follows:
| | | | | | | | |
| Customer Deposits |
Balance as of February 25, 202224, 2023 | $ | 53.450.8 | | |
Recognition of revenue related to beginning of year customer deposits | (48.4)(31.4) | | |
Customer deposits received, net of revenue recognized during the period | 27.0 | | |
Customer deposits acquired (1) | 24.331.7 | | |
Balance as of November 25, 2022May 26, 2023 | $ | 56.351.1 | | |
(1)Represents customer deposits acquired from Halcon Furniture LLC ("Halcon") as of the acquisition date. See Note 11 for additional information.
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 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computation of Earnings Per Share | Three Months Ended November 25, 2022 | Three Months Ended November 26, 2021 |
Net Income | Basic Shares (in millions) | Diluted Shares (in millions) | Net Income | Basic Shares (in millions) | Diluted Shares (in millions) |
Amounts used in calculating earnings per share | $ | 11.4 | | | 117.2 | | | 117.6 | | | $ | 9.6 | | | 116.0 | | | 116.3 | | |
Impact of participating securities | (0.4) | | | (4.4) | | | (4.4) | | | (0.3) | | | (3.2) | | | (3.2) | | |
Amounts used in calculating earnings per share, excluding participating securities | $ | 11.0 | | | 112.8 | | | 113.2 | | | $ | 9.3 | | | 112.8 | | | 113.1 | | |
| | | | | | | | | | | | |
Earnings per share | | | $ | 0.10 | | | $ | 0.10 | | | | | $ | 0.08 | | | $ | 0.08 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computation of Earnings (Loss) Per Share | Three Months Ended May 26, 2023 | Three Months Ended May 27, 2022 |
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 | $ | 1.5 | | | 117.9 | | | 118.4 | | | $ | (11.4) | | | 116.7 | | | 116.7 | | |
Impact of participating securities | (0.1) | | | (4.1) | | | (4.1) | | | 0.4 | | | (4.0) | | | (4.0) | | |
Amounts used in calculating earnings (loss) per share, excluding participating securities | $ | 1.4 | | | 113.8 | | | 114.3 | | | $ | (11.0) | | | 112.7 | | | 112.7 | | |
| | | | | | | | | | | | |
Earnings (loss) per share | | | $ | 0.01 | | | $ | 0.01 | | | | | $ | (0.10) | | | $ | (0.10) | | |
| | | | | | | | | | | | |
There were no anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the three months ended November 25, 2022 and NovemberMay 26, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computation of Earnings Per Share | Nine Months Ended November 25, 2022 | Nine Months Ended November 26, 2021 |
Net Income | Basic Shares (in millions) | Diluted Shares (in millions) | Net Income | Basic Shares (in millions) | Diluted Shares (in millions) |
Amounts used in calculating earnings per share | $ | 19.6 | | | 117.1 | | | 117.4 | | | $ | 6.2 | | | 117.4 | | | 117.8 | | |
Impact of participating securities | (0.7) | | | (4.3) | | | (4.3) | | | (0.2) | | | (3.0) | | | (3.0) | | |
Amounts used in calculating earnings per share, excluding participating securities | $ | 18.9 | | | 112.8 | | | 113.1 | | | $ | 6.0 | | | 114.4 | | | 114.8 | | |
| | | | | | | | | | | | |
Earnings per share | | | $ | 0.17 | | | $ | 0.17 | | | | | $ | 0.05 | | | $ | 0.05 | | |
| | | | | | | | | | | | |
2023. There were no0.4 million anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the ninethree months ended November 25, 2022 and November 26, 2021.May 27, 2022.
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 November 25, 2022:May 26, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investment | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
Balance as of August 26, 2022 | $ | 0.3 | | | $ | 5.4 | | | $ | (6.2) | | | $ | (89.3) | | | $ | (89.8) | | |
Other comprehensive income (loss) before reclassifications | (0.1) | | | (0.1) | | | — | | | 8.8 | | | 8.6 | | |
Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (0.3) | | | 0.2 | | | — | | | (0.1) | | |
Net other comprehensive income (loss) during the period | (0.1) | | | (0.4) | | | 0.2 | | | 8.8 | | | 8.5 | | |
Balance as of November 25, 2022 | $ | 0.2 | | | $ | 5.0 | | | $ | (6.0) | | | $ | (80.5) | | | $ | (81.3) | | |
The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the nine months ended November 25, 2022:
| | | Unrealized gain (loss) on investment | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total | | Unrealized gain (loss) on investment | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
Balance as of February 25, 2022 | $ | 0.3 | | | $ | 5.2 | | | $ | (6.7) | | | $ | (49.4) | | | $ | (50.6) | | | |
Balance as of February 24, 2023 | | Balance as of February 24, 2023 | $ | (0.1) | | | $ | 9.3 | | | $ | (5.7) | | | $ | (76.0) | | | $ | (72.5) | | |
Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | (0.1) | | | 0.7 | | | — | | | (31.1) | | | (30.5) | | | Other comprehensive income (loss) before reclassifications | — | | | (0.1) | | | — | | | 3.2 | | | 3.1 | | |
Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (0.9) | | | 0.7 | | | — | | | (0.2) | | | Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (0.5) | | | 0.2 | | | — | | | (0.3) | | |
Net other comprehensive income (loss) during the period | Net other comprehensive income (loss) during the period | (0.1) | | | (0.2) | | | 0.7 | | | (31.1) | | | (30.7) | | | Net other comprehensive income (loss) during the period | — | | | (0.6) | | | 0.2 | | | 3.2 | | | 2.8 | | |
Balance as of November 25, 2022 | $ | 0.2 | | | $ | 5.0 | | | $ | (6.0) | | | $ | (80.5) | | | $ | (81.3) | | | |
Balance as of May 26, 2023 | | Balance as of May 26, 2023 | $ | (0.1) | | | $ | 8.7 | | | $ | (5.5) | | | $ | (72.8) | | | $ | (69.7) | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended November 25, 2022May 26, 2023 and November 26, 2021:May 27, 2022:
| 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 | Affected Line in the Condensed Consolidated Statements of Operations | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | Detail of Accumulated Other Comprehensive Income (Loss) Components | May 26, 2023 | Affected Line in the Condensed Consolidated Statements of Operations | |
| Amortization of pension and other post-retirement actuarial (gains) losses | $ | (0.4) | | | $ | (0.1) | | | $ | (1.2) | | | $ | (0.2) | | | | Other income, net | |
Amortization of pension and other post-retirement actuarial gains | | Amortization of pension and other post-retirement actuarial gains | $ | (0.6) | | | $ | (0.4) | | | | Other income, net |
| Income tax expense | Income tax expense | 0.1 | | | 0.1 | | | 0.3 | | | 0.1 | | | | Income tax expense (benefit) | Income tax expense | 0.1 | | | 0.1 | | | | Income tax expense (benefit) |
| | (0.3) | | | — | | | (0.9) | | | (0.1) | | | | | | (0.5) | | | (0.3) | | | | |
| Derivative amortization | Derivative amortization | 0.3 | | | 0.4 | | | 1.0 | | | 1.0 | | | | Interest expense | Derivative amortization | 0.3 | | | 0.4 | | | | Interest expense |
Income tax benefit | Income tax benefit | (0.1) | | | (0.1) | | | (0.3) | | | (0.3) | | | | Income tax expense (benefit) | Income tax benefit | (0.1) | | | (0.1) | | | | Income tax expense (benefit) |
| | 0.2 | | | 0.3 | | | 0.7 | | | 0.7 | | | | | | 0.2 | | | 0.3 | | | | |
| | Total reclassifications | Total reclassifications | $ | (0.1) | | | $ | 0.3 | | | $ | (0.2) | | | $ | 0.6 | | | | | Total reclassifications | $ | (0.3) | | | $ | — | | | | |
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 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 and contingent consideration are measured at fair value on the Condensed Consolidated Balance Sheets.
Our total debt is carried at cost and was $516.0$446.5 and $482.5$481.2 as of November 25, 2022May 26, 2023 and February 25, 2022,24, 2023, 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 $451.9$379.9 and $516.7$405.9 as of November 25, 2022May 26, 2023 and February 25, 2022,24, 2023, respectively. The estimation of the fair value of our total debt is based on Level 2 fair value measurements.
We periodicallymay 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.
In connection with the acquisition of Viccarbe Habitat, S.L in Q3 2022, up to an additional $13.9 (or €13.0) is payable to the sellers based upon the achievement of certain revenue and operating income targets over a three-year period ending in 2025. This amount was considered to be contingent consideration and was treated for accounting purposes as part of the total purchase price of the acquisition. We used the Monte Carlo simulation model to calculate the fair value of the contingent consideration as of the acquisition date, which represents a Level 3 measurement. At each subsequent reporting date, changes in the fair value of the liability are recorded to Operating expenses until the liability is settled.
Assets and liabilities measured at fair value within our Condensed Consolidated Balance Sheets as of November 25, 2022May 26, 2023 and February 25, 202224, 2023 are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| November 25, 2022 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 55.0 | | | $ | — | | | $ | — | | | $ | 55.0 | | |
Restricted cash | 6.7 | | | — | | | — | | | 6.7 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 2.3 | | | — | | | 2.3 | | |
Auction rate security | — | | | — | | | 2.5 | | | 2.5 | | |
| | | | | | | | |
| $ | 61.7 | | | $ | 2.3 | | | $ | 2.5 | | | $ | 66.5 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.1) | | | $ | — | | | $ | (0.1) | | |
| $ | — | | | $ | (0.1) | | | $ | — | | | $ | (0.1) | | |
| | | | | | | | |
| February 25, 2022 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 200.9 | | | $ | — | | | $ | — | | | $ | 200.9 | | |
Restricted cash | 6.1 | | | — | | | — | | | 6.1 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 1.0 | | | — | | | 1.0 | | |
Auction rate security | — | | | — | | | 2.6 | | | 2.6 | | |
| | | | | | | | |
| $ | 207.0 | | | $ | 1.0 | | | $ | 2.6 | | | $ | 210.6 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
Below is a roll-forward of assets and liabilities measured at fair value using Level 3 inputs for the nine months ended November 25, 2022:
| | | | | | | | | | |
Roll-Forward of Fair Value Using Level 3 Inputs | Auction Rate Security | | |
Balance as of February 25, 2022 | $ | 2.6 | | | | |
Unrealized loss on investment | (0.1) | | | | |
| | | | |
Balance as of November 25, 2022 | $ | 2.5 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| May 26, 2023 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 40.2 | | | $ | — | | | $ | — | | | $ | 40.2 | | |
Restricted cash | 6.4 | | | — | | | — | | | 6.4 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 1.8 | | | — | | | 1.8 | | |
Auction rate security | — | | | — | | | 2.1 | | | 2.1 | | |
| | | | | | | | |
| $ | 46.6 | | | $ | 1.8 | | | $ | 2.1 | | | $ | 50.5 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
Contingent consideration | — | | | — | | | (9.7) | | | (9.7) | | |
| $ | — | | | $ | (0.3) | | | $ | (9.7) | | | $ | (10.0) | | |
| | | | | | | | |
| February 24, 2023 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 90.4 | | | $ | — | | | $ | — | | | $ | 90.4 | | |
Restricted cash | 6.8 | | | — | | | — | | | 6.8 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 2.3 | | | — | | | 2.3 | | |
Auction rate security | — | | | — | | | 2.1 | | | 2.1 | | |
| | | | | | | | |
| $ | 97.2 | | | $ | 2.3 | | | $ | 2.1 | | | $ | 101.6 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
Contingent consideration | — | | | — | | | (9.5) | | | (9.5) | | |
| $ | — | | | $ | (0.3) | | | $ | (9.5) | | | $ | (9.8) | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Below is a roll-forward of assets and liabilities measured at estimated fair value using Level 3 inputs during the three months ended May 26, 2023:
| | | | | | | | | | | | | | |
Roll-forward of Fair Value Using Level 3 Inputs | Auction Rate Security - Other Assets | Contingent Consideration - Other Long-Term Liabilities |
Balance as of February 24, 2023 | $ | 2.1 | | | $ | 9.5 | | |
Unrealized gain (loss) on investment | — | | | — | | |
Foreign currency (gain) loss | — | | | 0.2 | | |
Change in estimated fair value | — | | | — | | |
Balance as of May 26, 2023 | $ | 2.1 | | | $ | 9.7 | | |
7.INVENTORIES
| Inventories | Inventories | November 25, 2022 | February 25, 2022 | | Inventories | May 26, 2023 | February 24, 2023 | |
Raw materials and work-in-process | Raw materials and work-in-process | $ | 260.9 | | | $ | 208.2 | | | | Raw materials and work-in-process | $ | 221.0 | | | $ | 232.8 | | | |
Finished goods | Finished goods | 151.1 | | | 146.9 | | | | Finished goods | 116.8 | | | 118.1 | | | |
| | 412.0 | | | 355.1 | | | | | 337.8 | | | 350.9 | | | |
Revaluation to LIFO | Revaluation to LIFO | 33.5 | | | 28.9 | | | | Revaluation to LIFO | 30.5 | | | 31.2 | | | |
| | $ | 378.5 | | | $ | 326.2 | | | | | $ | 307.3 | | | $ | 319.7 | | | |
The portion of inventories determined by the LIFO method was $153.6aggregated to $140.8 and $141.4$134.1 as of November 25, 2022May 26, 2023 and February 25, 2022,24, 2023, respectively.
8.SHORT-TERM BORROWINGS
We have a $250.0 global committed bank facility, which 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. On April 27, 2023, the credit facility was amended. As amended, interest on borrowings under the facility is based on the rate selected by us from the following options (with all capitalized terms having the meanings provided in the credit agreement, as amended):
•the Applicable Floating Rate Margin in effect plus the greatest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.5%, (iii) the Term SOFR Reference Rate for a one-month interest period plus 1.10% or (iv) 0.75%;
•the Applicable Term Benchmark/RFR Margin in effect plus (i) for borrowings in U.S. dollars, the Term SOFR Reference Rate plus 0.10%, or (ii) for borrowings in euros, the Adjusted EURIBOR Rate; or
•the Applicable Term Benchmark/RFR Margin in effect plus the Daily Simple SOFR Rate plus 0.10%.
In Q2 2023,Q1 2024, we borrowed $68.0and repaid $67.2 under the facility to fund our operations and the balloon payment of $31.8 for a portion of our acquisition of Halcon, and we made net repayments undernote payable that matured during the facility in Q3 2023.quarter. As of November 25, 2022, our totalMay 26, 2023, there were no borrowings outstanding under the facility were $34.0, which had an effective interest rate of 5.37%.
The facility does not include any restrictions on cash dividend payments or share repurchases. As of November 25, 2022, we were in compliance with all covenants under the facility.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
9. SHARE-BASED COMPENSATION
Performance Units
We have issued performance units (“PSUs”) to certain employees which are earned over a three-year performance period based on performance conditions established 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, 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 November 25, 2022,May 26, 2023, the following PSUs have been issued and remained outstanding:
•767,600 PSUs to be earned over the period of 2024 through 2026 (the "2024 PSUs"),
•428,700 PSUs to be earned over the period of 2023 through 2025 (the "2023 PSUs"), and
•448,300 PSUs to be earned over the period of 2022 through 2024 (the "2022 PSUs") and
•529,500 PSUs to be earned over the period of 2021 through 2023 (the "2021 PSUs").
Once granted, the PSUs are expensed and 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, the PSUs are expensed over the period ending on the date the participant becomes retirement-eligible. The awards will be forfeited if a participant leaves the company for reasons other than retirement, disability or death or if the participant engages in any competition with us, as defined in the Inventive Compensation Plan.
As of November 25, 2022,May 26, 2023, the 2024 PSUs, 2023 PSUs 2022 PSUs and 20212022 PSUs were considered granted as follows:
•In Q1 2024, the performance conditions were established for Tranche 1 of the 2024 PSUs, Tranche 2 of the 2023 PSUs and Tranche 3 of the 2022 PSUs, and accordingly, such tranches were considered granted in Q1 2024.
•In Q1 2023, the performance conditions were established for Tranche 1 of the 2023 PSUs and Tranche 2 of the 2022 PSUs and Tranche 3 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2023.
•In Q1 2022, the performance conditions were established for Tranche 1 of the 2022 PSUs, and Tranche 2 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2022.
•In Q1 2021, the performance conditions were established for Tranche 1 of the 2021 PSUs. These performance conditions involved a qualitative assessment which was made by the Compensation Committee in Q4 2021. Accordingly, such tranche was considered granted in Q4 2021.Q1 2022.
We used the Monte Carlo simulation model to calculate the fair value of the market conditions on the respective grant dates, which resulted in a total fair value of $5.2, $4.8$4.5, $3.5 and $2.3 for the PSUs with market conditions granted in 2024, 2023 2022 and 2021,2022, respectively, that remained outstanding as of November 25, 2022.May 26, 2023. The Monte Carlo simulation was computed using the following assumptions:
| | | FY23 Award | FY22 Award | FY21 Award | | 2024 PSUs | 2023 PSUs | 2022 PSUs |
Tranche 1 | Tranche 2 | Tranche 1 | Tranche 3 | Tranche 2 | Tranche 1 | Tranche 1 | Tranche 2 | Tranche 1 | Tranche 3 | Tranche 2 | Tranche 1 |
Risk-free interest rate (1) | Risk-free interest rate (1) | 2.6 | % | | 2.3 | % | | 0.3 | % | | 1.6 | % | | 0.2 | % | | 0.2 | % | | Risk-free interest rate (1) | 3.7 | % | | 4.0 | % | | 2.6 | % | | 4.7 | % | | 2.3 | % | | 0.3 | % | |
Expected term | Expected term | 3 years | | 2 years | | 3 years | | 1 year | | 2 years | | 2 years | | Expected term | 3 years | | 2 years | | 3 years | | 1 year | | 2 years | | 3 years | |
Estimated volatility (2) | Estimated volatility (2) | 52.2 | % | | 43.8 | % | | 53.5 | % | | 28.7 | % | | 61.3 | % | | 58.1 | % | | Estimated volatility (2) | 44.1 | % | | 37.8 | % | | 52.2 | % | | 45.5 | % | | 43.8 | % | | 53.5 | % | |
(1)Based on the U.S. Government bond benchmark on the grant date.
(2)Represents the historical price volatility of our Class A Common Stock for the three-year period precedingprior to the grant date.
date which is equivalent to the expected term of the tranche.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The total PSU expense (credit) and associated tax benefit recorded during the three and nine months ended November 25,May 26, 2023 and May 27, 2022 and November 26, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended | |
Performance Units | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | |
Expense (credit) | $ | (1.3) | | | $ | (4.1) | | | $ | 2.6 | | | $ | 1.5 | | | | | | |
Tax benefit (expense) | (0.3) | | | (1.0) | | | 0.7 | | | 0.4 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
Performance Units | May 26, 2023 | May 27, 2022 | | | | |
Expense | $ | 5.4 | | | $ | 4.1 | | | | | | | | | | |
Tax benefit | 1.4 | | | 1.0 | | | | | | | | | | |
The PSU activity for the ninethree months ended November 25, 2022May 26, 2023 is as follows:
| Maximum Number of Shares of Nonvested Units | Maximum Number of Shares of Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit | Maximum Number of Shares of Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit |
Nonvested as of February 25, 2022 | 1,205,833 | | $ | 14.21 | | |
Nonvested as of February 24, 2023 | | Nonvested as of February 24, 2023 | 1,060,231 | | $ | 13.11 | |
Granted | Granted | 1,125,192 | | 11.13 | | Granted | 1,315,664 | | 8.30 | |
| Nonvested as of November 25, 2022 | 2,331,025 | | $ | 12.72 | | |
Nonvested as of May 26, 2023 | | Nonvested as of May 26, 2023 | 2,375,895 | | $ | 10.44 | |
As of November 25, 2022,May 26, 2023, there was $0.6$3.6 of remaining unrecognized compensation expense related to nonvested PSUs, which is expected to be recognized over a remaining weighted-average period of 1.82.1 years.
Restricted Stock Units
During the ninethree months ended November 25, 2022,May 26, 2023, we awarded 1,222,8491,545,505 restricted stock units ("RSUs") to certain employees. RSUs have restrictions on transfer which lapse oneup to three years after the date of grant, at which time the RSUs will beare 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 grant date. Generally, RSUs awarded are not forfeitable upon a qualifying retirement. For participants of those awards who are or become retirement-eligible during the service period, the RSUs are expensed over the period ending on the date that the participant becomes retirement-eligible. Typically, these awards will be forfeited if a participant leaves the company for reasons other than retirement, disability or death or if the participant engages in any competition with us, as defined in the Incentive Compensation Plan.
The total RSU expense and associated tax benefit for the three and nine months ended November 25,May 26, 2023 and May 27, 2022 and November 26, 2021 are as follows:
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | |
Restricted Stock Units | Restricted Stock Units | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | Restricted Stock Units | May 26, 2023 | May 27, 2022 | |
Expense | Expense | $ | 3.4 | | | $ | 2.1 | | | $ | 14.6 | | | $ | 11.3 | | | | Expense | $ | 8.3 | | | $ | 7.9 | | | |
Tax benefit | Tax benefit | 0.9 | | | 0.5 | | | 3.7 | | | 2.8 | | | | Tax benefit | 2.1 | | | 2.0 | | | |
The RSU activity for the ninethree months ended November 25, 2022May 26, 2023 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 25, 2022 | 3,445,438 | | $ | 11.86 | | |
Nonvested as of February 24, 2023 | | Nonvested as of February 24, 2023 | 3,293,268 | | $ | 12.11 | |
Granted | Granted | 1,222,849 | | 10.67 | | Granted | 1,545,505 | | 7.89 | |
Vested | Vested | (223,936) | | 14.67 | | Vested | (12,477) | | 11.78 | |
Forfeited | Forfeited | (72,030) | | 12.65 | | Forfeited | (24,802) | | 10.98 | |
Nonvested as of November 25, 2022 | 4,372,321 | | $ | 11.38 | | |
Nonvested as of May 26, 2023 | | Nonvested as of May 26, 2023 | 4,801,494 | | $ | 10.76 | |
As of November 25, 2022,May 26, 2023, there was $16.4$16.9 of remaining unrecognized compensation expense related to nonvested RSUs, which is expected to be recognized over a remaining weighted-average period of 1.61.8 years.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
10. LEASES
We have operating leases for corporate offices, sales offices, showrooms, manufacturing and distribution facilities, vehicles and equipment that expire at various dates through 2036.2035. Certain lease agreements include contingent rental payments based on per unit usage over contractual levels (e.g., miles driven or machine hours operated) 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 components of lease expense forduring the three and nine months ended November 25,May 26, 2023 and May 27, 2022 and November 26, 2021 are as follows:
| | | Three Months Ended | | Nine Months Ended | | | | Three Months Ended | | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 | |
Operating lease cost | Operating lease cost | $ | 13.2 | | | $ | 13.2 | | | $ | 38.8 | | | $ | 39.5 | | | | Operating lease cost | $ | 13.6 | | | $ | 12.1 | | | |
Sublease rental income | Sublease rental income | (0.6) | | | (0.5) | | | (1.7) | | | (1.4) | | | | Sublease rental income | (0.5) | | | (0.6) | | | |
| | $ | 12.6 | | | $ | 12.7 | | | $ | 37.1 | | | $ | 38.1 | | | | | $ | 13.1 | | | $ | 11.5 | | | |
Supplemental cash flow and other information related to leases forduring the three and nine months ended November 25,May 26, 2023 and May 27, 2022 and November 26, 2021 areis as follows:
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | May 26, 2023 | May 27, 2022 | |
Cash flow information: | Cash flow information: | | | Cash flow information: | | |
Operating cash flows used for operating leases | Operating cash flows used for operating leases | $ | 13.3 | | | $ | 13.6 | | | $ | 40.4 | | | $ | 40.4 | | | | Operating cash flows used for operating leases | $ | 14.1 | | | $ | 13.5 | | | |
Leased assets obtained in exchange for new operating lease obligations | Leased assets obtained in exchange for new operating lease obligations | $ | 11.7 | | | $ | 17.0 | | | $ | 25.2 | | | $ | 34.3 | | | | Leased assets obtained in exchange for new operating lease obligations | $ | 5.0 | | | $ | 3.2 | | | |
As of November 25,May 26, 2023 and May 27, 2022, and November 26, 2021, the weighted-average remaining lease terms were 5.45.1 years and 6.25.8 years, respectively, and the weighted-average discount rates were 3.9%4.3% and 3.6%, respectively.
The following table summarizes the future minimum lease payments as of November 25, 2022:May 26, 2023:
| Fiscal year ending in February | Fiscal year ending in February | Amount (1) | Fiscal year ending in February | Amount (1) |
2023 | $ | 11.6 | | | |
2024 | 2024 | 51.1 | | | 2024 | $ | 40.0 | | |
2025 | 2025 | 48.8 | | | 2025 | 53.3 | | |
2026 | 2026 | 37.0 | | | 2026 | 42.6 | | |
2027 | 2027 | 30.1 | | | 2027 | 34.0 | | |
2028 | | 2028 | 25.2 | | |
Thereafter | Thereafter | 56.8 | | | Thereafter | 39.2 | | |
Total lease payments | Total lease payments | $ | 235.4 | | | Total lease payments | $ | 234.3 | | |
Less: Interest | Less: Interest | 24.1 | | | Less: Interest | 24.8 | | |
Present value of lease liabilities | Present value of lease liabilities | $ | 211.3 | | | Present value of lease liabilities | $ | 209.5 | | |
(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.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
11.ACQUISITIONS
Viccarbe
In Q3 2022, we acquired Viccarbe Habitat, S.L. ("Viccarbe"), a Spanish designer of contemporary furniture for high-performance collaborative and social spaces. The transaction included the purchase of all the outstanding capital stock of Viccarbe for $34.9 (or €30.0) in an all-cash transaction using cash on-hand. Up to an additional $13.5 (or €13.0) is payable to the sellers based upon the achievement of certain revenue and operating income targets over a three-year period. This amount was determined to be contingent consideration and was treated for accounting purposes as part of the total purchase price of the acquisition. We used the Monte Carlo simulation model to calculate the fair value of the contingent consideration as of the acquisition date, which represents a Level 3 measurement. As a result, we recorded a related liability of $4.4 (or €4.2). An additional amount of $6.2 (or €6.0) is also payable to the sellers based upon the achievement of certain milestones and continued employment over a five-year period, which is being expensed over the service period on a straight-line basis.
Tangible assets and liabilities of Viccarbe were valued as of the acquisition date using a market analysis, and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $11.7 related to identifiable intangible assets, $25.8 related to goodwill and $5.1 related to tangible assets. The tangible assets mainly consisted of working capital (primarily accounts receivable, inventory and accounts payable) and property, plant and equipment. Additionally, we recorded a deferred tax liability in the amount of $2.9 associated with the tax basis difference in acquired book assets. The goodwill was recorded in the EMEA segment and is not deductible for income tax purposes in Spain. The goodwill resulting from the acquisition is primarily related to the growth potential of Viccarbe and our intentions to expand the manufacturing of Viccarbe products in geographic regions outside of EMEA and to offer Viccarbe products through our global distribution network. Intangible assets are principally related to the Viccarbe trade name, dealer relationships and internally developed know-how and designs, which are being amortized over periods ranging from 9 to 13 years from the date of acquisition. As of November 25, 2022, the purchase accounting for the Viccarbe acquisition was complete.
The following table summarizes the purchased identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:
| | | | | | | | | | | | | | |
Other Intangible Assets | Useful Life (Years) | Fair Value |
|
Trademark | 9.0 | | $ | 4.6 | | |
Dealer relationships | 13.0 | | 3.8 | | |
Know-how and designs | 9.0 | | 3.3 | | |
| | | $ | 11.7 | | |
The fair values of the purchased intangible assets are being amortized on a straight-line basis over their useful lives. The following table summarizes the estimated future amortization expense for the next five years as of November 25, 2022:
| | | | | | | | |
Fiscal Year Ending in February | Amount |
2023 | $ | 0.3 | | |
2024 | 1.0 | | |
2025 | 1.1 | | |
2026 | 1.0 | | |
2027 | 1.0 | | |
| $ | 4.4 | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
HalconHALCON
In Q2 2023, we acquired Halcon,HALCON, a Minnesota-based designer and manufacturer of precision-tailored wood furniture for the workplace. The transaction included the purchase of all the outstanding membership interests of HalconHALCON for $127.5 less customer deposits of $24.3, plus an adjustment of $1.9 for working capital. The acquisition was funded using a combination of cash on-hand and borrowings under our global committed bank facility. Up to an additional $7.5 iswas payable to the sellers based upon the achievement of certain revenue and gross margin targets over a six-month period. This amount was determined to be contingent consideration and was treated for accounting purposes as part of the total purchase price of the acquisition. We used the Monte Carlo simulation model to calculate the fair value of the contingent consideration as of the acquisition date, which represents a Level 3 measurement. Based upon the results of the calculation, we did not record a liability for the contingent consideration.consideration, and we were not required to make a payment at the settlement date in 2023. An additional amount of $2.0 is also payable to a seller based upon continued employment over a three-year period, which is being expensed over the service period on a straight-line basis.
Tangible assets and liabilities of HalconHALCON were valued as of the acquisition date using a market analysis, and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $51.8 related to identifiable intangible assets, $37.1$36.6 related to goodwill and $16.2$16.7 related to tangible assets. The tangible assets mainly consisted of property, plant and equipment of $30.6, working capital (primarily inventory of $12.3)$12.8) and customer deposits of $24.3. The goodwill was recorded in the Americas segment and is deductible for U.S. income tax purposes. The goodwill resulting from the acquisition is primarily related to the growth potential of HalconHALCON expected to be driven by new product development, geographic expansion and the integration of HalconHALCON products into our dealer network. Intangible assets are principally related to dealer relationships, the HalconHALCON trade name and internally developed know-how and designs, which are being amortized over periods ranging from 9 to 10 years from the date of acquisition. We also acquired a backlog of orders which are expected to shipshipped throughout 2023. As of May 26, 2023, the remainder of 2023. The purchase price allocationaccounting for the HALCON acquisition was incomplete as of November 25, 2022, as we are evaluating certain deferred tax balances. The amounts recognized related to the purchase price allocation will be finalized no later than one year after the acquisition date.complete.
The following table summarizes the purchased identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:
| | | | | | | | | | | | | | |
Other Intangible Assets | Useful Life (Years) | Fair Value |
|
Dealer relationships | 10.0 | | $ | 21.5 | | |
Trademark | 9.0 | | 14.0 | | |
Know-how and designs | 9.0 | | 12.0 | | |
Backlog | 0.7 | | 4.3 | | |
| | | $ | 51.8 | | |
The fair values of the purchased intangible assets isare being amortized on a straight-line basis over their useful lives. The following table summarizes the estimated future amortization expense for the next five years as of November 25, 2022:May 26, 2023:
| Fiscal Year Ending in February | Fiscal Year Ending in February | Amount | Fiscal Year Ending in February | Amount |
2023 | $ | 2.3 | | | |
2024 | 2024 | 5.0 | | | 2024 | $ | 3.8 | | |
2025 | 2025 | 5.1 | | | 2025 | 5.1 | | |
2026 | 2026 | 5.0 | | | 2026 | 5.0 | | |
2027 | 2027 | 5.0 | | | 2027 | 5.0 | | |
2028 | | 2028 | 5.0 | | |
| | $ | 22.4 | | | | $ | 23.9 | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12. REPORTABLE SEGMENTS
OurAs of the end of Q1 2024, we realigned our reportable segments consistfor financial reporting purposes as a result of changes in how we monitor business performance and allocate resources to support our top strategic priorities. During the quarter, we simplified our internal reporting to summarize the results of all brands by geography including utilization of previously unallocated Corporate expenses. This change is parallel to the organizational structure that is used by our Chief Executive Officer in the capacity as chief operating decision maker ("CODM") for making operating and investment decisions and assessing business performance.
The operating segments regularly reviewed by the CODM are (1) the Americas, (2) Europe, the Middle East and Africa ("EMEA") and (3) Asia Pacific. Asia Pacific serves customers in Australia, China, India, Japan, Korea and other countries in Southeast Asia. We primarily review and evaluate revenue, gross profit and operating income (loss) by these segments in our internal review processes and reporting. We also allocate resources among these segments primarily based on revenue, gross profit and operating income (loss). Total assets by segment include manufacturing and other assets associated with each segment.
For purposes of segment reporting externally, we have aggregated the EMEA and Asia Pacific operating segments as an International segment based upon their similarity in certain quantitative and qualitative characteristics as defined in the Other category. Unallocated corporate expenses are reported as Corporate.Accounting Standards Codification ("ASC") 280, Segment Reporting. We evaluated the economic similarity of these operating segments including patterns and trends for revenue, gross profit and operating income (loss) in addition to the similarity in the nature of products and services, types of customers, and production and distribution processes in these regions. We concluded that these operating segments met the criteria for aggregation consistent with the basic principles and objectives of segment reporting described in ASC 280. The change in our reportable segments did not result in a change to our reporting units for purposes of goodwill impairment testing.
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of furniture and architectural products that are marketed to corporate, government, healthcare, education and retail customers primarily through the Steelcase, AMQ, Coalesse, AMQ,Designtex, HALCON, Orangebox, Smith System Orangebox,and Viccarbe and Halcon brands.
The EMEAInternational segment serves customers in Europe, the Middle EastEMEA and Africa primarily under the Steelcase, Coalesse, Orangebox and Viccarbe brands,Asia Pacific with a comprehensive portfolio of furniture and architectural products.
The Other category includes Asia Pacificproducts that are marketed to corporate, government, education and Designtex. Asia Pacific servesretail customers in Australia, China, India, Japan, Korea and other countries in Southeast Asia primarily underthrough the Steelcase, brand with a comprehensive portfolioCoalesse, Orangebox, Smith System and Viccarbe brands.
As required by ASC 280, all presented segment data reflects the reclassification of furniture and architectural products. Designtex 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.
We primarily review and evaluate revenue and operating income bypreviously reported 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 expenses 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, fixed assets, investments in unconsolidated affiliates and right-of-use assets related to operating leases.
data. Revenue, gross profit and operating income (loss) for the three and nine months ended November 25,May 26, 2023 and May 27, 2022 and November 26, 2021 and total assets and goodwill as of November 25, 2022May 26, 2023 and February 25, 202224, 2023 by segment are presented in the following tables:tables which reflect the realigned segments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended | |
Reportable Segment Statement of Operations Data | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | |
Revenue | | | | | | | | | | | | |
Americas | $ | 594.7 | | | $ | 500.3 | | | $ | 1,767.1 | | | $ | 1,399.9 | | | | | | |
EMEA | 157.7 | | | 168.2 | | | 451.9 | | | 430.7 | | | | | | |
Other | 74.5 | | | 69.7 | | | 211.9 | | | 189.0 | | | | | | |
| $ | 826.9 | | | $ | 738.2 | | | $ | 2,430.9 | | | $ | 2,019.6 | | | | | | |
Operating income (loss) | | | | | | | | | | | | |
Americas | $ | 21.2 | | | $ | 11.1 | | | $ | 63.5 | | | $ | 40.8 | | | | | | |
EMEA | 4.2 | | | 8.3 | | | (1.3) | | | 1.0 | | | | | | |
Other | (0.3) | | | 2.0 | | | (4.5) | | | (7.5) | | | | | | |
Corporate | (4.6) | | | (5.5) | | | (20.9) | | | (16.3) | | | | | | |
| $ | 20.5 | | | $ | 15.9 | | | $ | 36.8 | | | $ | 18.0 | | | | | | |
| | | | | | | | | | | | | | | |
Reportable Segment Balance Sheet Data | November 25, 2022 | February 25, 2022 | |
Total assets | | | | | |
Americas | $ | 1,313.1 | | | $ | 1,110.4 | | | |
EMEA | 443.9 | | | 475.2 | | | |
Other | 223.4 | | | 227.6 | | | |
Corporate | 288.0 | | | 447.8 | | | |
| $ | 2,268.4 | | | $ | 2,261.0 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
Reportable Segment Statement of Operations Data | May 26, 2023 | May 27, 2022 | | | | |
Revenue | | | | | | | | | | | | |
Americas | $ | 572.8 | | | $ | 543.8 | | | | | | | | | | |
International | 179.1 | | | 196.9 | | | | | | | | | | |
| $ | 751.9 | | | $ | 740.7 | | | | | | | | | | |
Gross Profit | | | | | | | | | | | | |
Americas | $ | 183.6 | | | $ | 139.1 | | | | | | | | | | |
International | 51.0 | | | 52.5 | | | | | | | | | | |
| $ | 234.6 | | | $ | 191.6 | | | | | | | | | | |
Operating Income (Loss) | | | | | | | | | | | | |
Americas | $ | 19.8 | | | $ | (10.7) | | | | | | | | | | |
International | (12.5) | | | (1.9) | | | | | | | | | | |
| $ | 7.3 | | | $ | (12.6) | | | | | | | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | | |
Reportable Segment Balance Sheet Data | May 26, 2023 | February 24, 2023 | |
Total assets | | | | | |
Americas | $ | 1,579.9 | | | $ | 1,631.2 | | | |
International | 545.6 | | | 571.6 | | | |
| $ | 2,125.5 | | | $ | 2,202.8 | | | |
| | | | | |
Goodwill | | | | | |
Americas | $ | 268.4 | | | $ | 268.3 | | | |
International | 8.6 | | | 8.5 | | | |
| $ | 277.0 | | | $ | 276.8 | | | |
13. RESTRUCTURING ACTIVITIES
In Q4 2022, our Board2023, we implemented a series of Directors approved restructuring actions, primarily related to the exitwind down of our technology businesscustomer aviation function in connection with our strategy to shift from offering a portfolio of technology products toward partnering with technology companies toreinvent our go-to-market model and create integrated collaborative solutions.new customer experiences. The restructuring actions primarily included involuntary terminations of the majority ofapproximately 23 salaried employees ofin the business and the terminationAmericas segment. We expect to incur approximately $4.4 of supplier and customer contracts related to the business. We incurred $4.7 in restructuring costs in the Americas segment related to these actions, primarily consisting of cash severance payments and payment of other business exit costs. We recorded $1.8 related to employee termination costs and $2.4 related to business exit and other related costs during Q1 2023. In Q2 2023, we recorded a charge of $0.5 related to the impairment of a right-of-use operating lease asset which was utilized by our technology business. These restructuring actions are complete.
In Q3 2023, our Board of Directors approved restructuring actions to reduce operational spending across certain functions in response to a recent decline in order volume and lower-than-expected return-to-office trends in the Americas segment. The restructuring actions included terminations of approximately 130 salaried employees in the Americas segment and Corporate functions. In Q3 2023, we incurred $10.6 of restructuring costs related to these actions in the Americas segment, consisting of cash severance payments and other separation-related benefits. TheIn Q1 2024, we recorded $0.7 of restructuring costs in the Americas segment for these actions. We also incurred $3.6 of workforce reductions and other separation-related benefits in Q3 2023 represent the total expectedAmericas segment for these actions in Q4 2023. We expect these actions to be completed in Q2 2024.
In Q1 2024, we announced a series of restructuring actions in response to continued decline in order volume, persisting inflationary pressures, and decreasing plant utilization. These actions involve the involuntary terminations of approximately 40 to 50 salaried roles in EMEA, the elimination of approximately 240 positions in Asia Pacific, and the involuntary terminations of approximately 30 employees in the Americas in connection with the closing of our regional distribution center in Atlanta, Georgia. We expect to incur restructuring costs of approximately $14 to $17 in the International segment and approximately $2 in the Americas segment related to these actions, which areconsisting of cash severance payments and other separation-related benefits. We incurred restructuring costs of $6.8 in the International segment and $0.6 in the Americas segment for these actions during Q1 2024. We expect these actions to be substantially complete.completed by the end of 2024.
The following table details the changes in the restructuring reserve balance for the ninethree months ended November 25, 2022:May 26, 2023:
| | | | | | | | | | | | | | | | | | | | |
| Workforce Reductions | Business Exit and Related Costs | Total |
Balance as of February 25, 2022 | $ | — | | | $ | — | | | $ | — | | |
Restructuring costs | 12.4 | | | 2.4 | | | 14.8 | | |
Payments | (11.0) | | | (2.4) | | | (13.4) | | |
Balance as of November 25, 2022 | $ | 1.4 | | | $ | — | | | $ | 1.4 | | |
| | | | | | | | | | | | |
| Workforce Reductions | | |
Balance as of February 24, 2023 | $ | 4.0 | | | | | | |
Restructuring costs | 8.1 | | | | | | |
Payments | (4.1) | | | | | | |
Balance as of May 26, 2023 | $ | 8.0 | | | | | | |
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 ("MD&A") should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 25, 2022.24, 2023. 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.
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. The non-GAAP financial measures used are (1) organic revenue growth (decline), (2) adjusted operating income (loss) and (3) adjusted earnings (loss) per share. Pursuant to the requirements of Regulation G, we have provided a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP financial measure in the tables below. These measures are supplemental to, and should be used in conjunction with, the most comparable GAAP measures. Management uses these non-GAAP financial measures to monitor and evaluate financial results and trends. See Non-GAAP Financial Measures for a description of these measures and why management believes they are also useful to investors.
Financial Summary
Our reportable segments consist of the Americas segment the EMEA segment and the Other category. Unallocated corporate expenses are reported as Corporate.International segment. See Note 12 to the condensed consolidated financial statements for additional information.
Results of Operations
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | |
Statement of Operations Data | Statement of Operations Data | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | Statement of Operations Data | May 26, 2023 | May 27, 2022 | |
Revenue | Revenue | $ | 826.9 | | | 100.0 | % | | $ | 738.2 | | | 100.0 | % | | $ | 2,430.9 | | | 100.0 | % | | $ | 2,019.6 | | | 100.0 | % | | | Revenue | $ | 751.9 | | | 100.0 | % | | $ | 740.7 | | | 100.0 | % | | |
Cost of sales | Cost of sales | 587.7 | | | 71.0 | | | 534.6 | | | 72.4 | | | 1,748.4 | | | 71.9 | | | 1,454.5 | | | 72.0 | | | | Cost of sales | 515.9 | | | 68.6 | | | 548.2 | | | 74.0 | | | |
Restructuring costs | Restructuring costs | 1.4 | | | 0.2 | | | — | | | — | | | 2.3 | | | 0.1 | | | — | | | — | | | | Restructuring costs | 1.4 | | | 0.2 | | | 0.9 | | | 0.1 | | | |
Gross profit | Gross profit | 237.8 | | | 28.8 | | | 203.6 | | | 27.6 | | | 680.2 | | | 28.0 | | | 565.1 | | | 28.0 | | | | Gross profit | 234.6 | | | 31.2 | | | 191.6 | | | 25.9 | | | |
Operating expenses | Operating expenses | 208.1 | | | 25.2 | | | 187.7 | | | 25.4 | | | 630.4 | | | 26.0 | | | 547.1 | | | 27.1 | | | | Operating expenses | 220.6 | | | 29.3 | | | 200.9 | | | 27.1 | | | |
Restructuring costs | Restructuring costs | 9.2 | | | 1.1 | | | — | | | — | | | 13.0 | | | 0.5 | | | — | | | — | | | | Restructuring costs | 6.7 | | | 0.9 | | | 3.3 | | | 0.5 | | | |
Operating income | 20.5 | | | 2.5 | | | 15.9 | | | 2.2 | | | 36.8 | | | 1.5 | | | 18.0 | | | 0.9 | | | | |
Operating income (loss) | | Operating income (loss) | 7.3 | | | 1.0 | | | (12.6) | | | (1.7) | | | |
Interest expense | Interest expense | (7.6) | | | (0.9) | | | (6.5) | | | (0.9) | | | (21.2) | | | (0.9) | | | (19.3) | | | (1.0) | | | | Interest expense | (6.6) | | | (0.9) | | | (6.4) | | | (0.9) | | | |
Investment income | Investment income | 0.3 | | | — | | | 0.1 | | | — | | | 0.7 | | | — | | | 0.4 | | | — | | | | Investment income | 0.5 | | | 0.1 | | | 0.1 | | | — | | | |
Other income, net | Other income, net | 3.4 | | | 0.4 | | | 2.5 | | | 0.3 | | | 10.9 | | | 0.5 | | | 3.5 | | | 0.2 | | | | Other income, net | 1.7 | | | 0.2 | | | 3.1 | | | 0.5 | | | |
Income before income tax expense (benefit) | 16.6 | | | 2.0 | | | 12.0 | | | 1.6 | | | 27.2 | | | 1.1 | | | 2.6 | | | 0.1 | | | | |
Income (loss) before income tax expense (benefit) | | Income (loss) before income tax expense (benefit) | 2.9 | | | 0.4 | | | (15.8) | | | (2.1) | | | |
Income tax expense (benefit) | Income tax expense (benefit) | 5.2 | | | 0.6 | | | 2.4 | | | 0.3 | | | 7.6 | | | 0.3 | | | (3.6) | | | (0.2) | | | | Income tax expense (benefit) | 1.4 | | | 0.2 | | | (4.4) | | | (0.6) | | | |
Net income | $ | 11.4 | | | 1.4 | % | | $ | 9.6 | | | 1.3 | % | | $ | 19.6 | | | 0.8 | % | | $ | 6.2 | | | 0.3 | % | | | |
Earnings per share: | | | | | | | | | | | | | | | | | | |
Net income (loss) | | Net income (loss) | $ | 1.5 | | | 0.2 | % | | $ | (11.4) | | | (1.5) | % | | |
Earnings (loss) per share: | | Earnings (loss) per share: | | | | | | | | | |
Basic | Basic | $ | 0.10 | | | | | $ | 0.08 | | | | | $ | 0.17 | | | | $ | 0.05 | | | | | | Basic | $ | 0.01 | | | | | $ | (0.10) | | | | | |
Diluted | Diluted | $ | 0.10 | | | | | $ | 0.08 | | | | | $ | 0.17 | | | | $ | 0.05 | | | | | | Diluted | $ | 0.01 | | | | | $ | (0.10) | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Q3 2023 Organic Revenue Growth | Americas | EMEA | Other | Consolidated |
Q3 2022 revenue | $ | 500.3 | | | $ | 168.2 | | | $ | 69.7 | | | $ | 738.2 | | |
Acquisitions | 18.9 | | | 1.2 | | | — | | | 20.1 | | |
| | | | | | | | |
Currency translation effects | (1.7) | | | (24.7) | | | (3.0) | | | (29.4) | | |
Q3 2022 revenue, adjusted | 517.5 | | | 144.7 | | | 66.7 | | | 728.9 | | |
Q3 2023 revenue | 594.7 | | | 157.7 | | | 74.5 | | | 826.9 | | |
| | | | | | | | |
| | | | | | | | |
Organic growth $ | $ | 77.2 | | | $ | 13.0 | | | $ | 7.8 | | | $ | 98.0 | | |
Organic growth % | 15 | % | | 9 | % | | 12 | % | | 13 | % | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Q1 2024 Organic Revenue Growth (Decline) | Americas | International | Consolidated |
Q1 2023 revenue | $ | 543.8 | | $ | 196.9 | | $ | 740.7 | |
Acquisition | 19.7 | | — | | 19.7 | |
Divestitures | (2.4) | | (2.3) | | (4.7) | |
Currency translation effects | (1.8) | | (2.8) | | (4.6) | |
Q1 2023 revenue, adjusted | 559.3 | | 191.8 | | 751.1 | |
Q1 2024 revenue | 572.8 | | 179.1 | | 751.9 | |
| | | | | | |
| | | | | | |
Organic growth (decline) $ | $ | 13.5 | | $ | (12.7) | | $ | 0.8 | |
Organic growth (decline) % | 2 | % | | (7) | % | | — | % | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income (Loss) | Three Months Ended | |
May 26, 2023 | May 27, 2022 | | |
Operating income (loss) | $ | 7.3 | | | 1.0 | % | | $ | (12.6) | | | (1.7) | % | | | | | | | | | |
Amortization of purchased intangible assets | 4.3 | | | 0.5 | | | 3.8 | | | 0.5 | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Restructuring costs | 8.1 | | | 1.1 | | | 4.2 | | | 0.6 | | | | | | | | | | |
Adjusted operating income (loss) | $ | 19.7 | | | 2.6 | % | | $ | (4.6) | | | (0.6) | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year-to-date 2023 Organic Revenue Growth | Americas | EMEA | Other | Consolidated |
Year-to-date 2022 revenue | $ | 1,399.9 | | | $ | 430.7 | | | $ | 189.0 | | | $ | 2,019.6 | | |
Acquisitions | 35.0 | | | 6.2 | | | — | | | 41.2 | | |
Currency translation effects | (2.9) | | | (54.3) | | | (5.1) | | | (62.3) | | |
Year-to-date 2022 revenue, adjusted | 1,432.0 | | | 382.6 | | | 183.9 | | | 1,998.5 | | |
Year-to-date 2023 revenue | 1,767.1 | | | 451.9 | | | 211.9 | | | 2,430.9 | | |
Organic growth $ | $ | 335.1 | | | $ | 69.3 | | | $ | 28.0 | | | $ | 432.4 | | |
Organic growth % | 23 | % | | 18 | % | | 15 | % | | 22 | % | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income | Three Months Ended | Nine Months Ended |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 |
Operating income | $ | 20.5 | | | 2.5 | % | | $ | 15.9 | | | 2.2 | % | | $ | 36.8 | | | 1.5 | % | | $ | 18.0 | | | 0.9 | % | |
Amortization of purchased intangible assets | 6.6 | | | 0.8 | | | 3.6 | | | 0.4 | | | 16.8 | | | 0.7 | | | 10.8 | | | 0.5 | | |
| | | | | | | | | | | | | | | | |
Restructuring costs | 10.6 | | | 1.3 | | | — | | | — | | | 15.3 | | | 0.6 | | | — | | | — | | |
Adjusted operating income | $ | 37.7 | | | 4.6 | % | | $ | 19.5 | | | 2.6 | % | | $ | 68.9 | | | 2.8 | % | | $ | 28.8 | | | 1.4 | % | |
| Adjusted Earnings Per Share | Three Months Ended | Nine Months Ended | |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | |
Earnings per share | $ | 0.10 | | | $ | 0.08 | | | $ | 0.17 | | | $ | 0.05 | | | |
Adjusted Earnings (Loss) Per Share | | Adjusted Earnings (Loss) Per Share | Three Months Ended | |
| May 26, 2023 | May 27, 2022 | |
Earnings (loss) per share | | Earnings (loss) per share | $ | 0.01 | | | $ | (0.10) | | | |
Amortization of purchased intangible assets, per share | Amortization of purchased intangible assets, per share | 0.05 | | | 0.03 | | | 0.14 | | | 0.09 | | | Amortization of purchased intangible assets, per share | 0.04 | | | 0.03 | | | |
Income tax effect of amortization of purchased intangible assets, per share | Income tax effect of amortization of purchased intangible assets, per share | (0.02) | | | — | | | (0.04) | | | (0.02) | | | Income tax effect of amortization of purchased intangible assets, per share | (0.01) | | | (0.01) | | | |
Restructuring costs, per share | Restructuring costs, per share | 0.09 | | | — | | | 0.13 | | | — | | | Restructuring costs, per share | 0.07 | | | 0.04 | | | |
Income tax effect of restructuring costs, per share | Income tax effect of restructuring costs, per share | (0.02) | | | — | | | (0.03) | | | — | | | Income tax effect of restructuring costs, per share | (0.02) | | | (0.01) | | | |
Adjusted earnings per share | $ | 0.20 | | | $ | 0.11 | | | $ | 0.37 | | | $ | 0.12 | | | |
Adjusted earnings (loss) per share | | Adjusted earnings (loss) per share | $ | 0.09 | | | $ | (0.05) | | | |
Overview
In Q3Q1 2024, we realigned our reportable segments for financial reporting purposes. Effective as of the end of Q1 2024, Designtex and previously unallocated Corporate expenses are now included in the Americas segment, and the Europe, the Middle East and Africa ("EMEA") and Asia Pacific operating segments are aggregated and reported as the International segment. All prior year results are reclassified so as to be directly comparable to these realigned segments.
Our revenue in Q1 2024 continued to benefit from the pricing actions we implemented over the past two years in response to significant inflationary pressures, but volume declines compared to the prior year substantially offset the pricing benefits in the Americas and more than offset the pricing benefits in International. Orders (adjusted for the impact of an acquisition, divestitures and currency translation effects) declined by 7% in Q1 2024 compared to the prior year but grew 21% sequentially compared to Q4 2023, which is consistent with the seasonal increase in the prior year. Inflationary pressures continued to moderate during the quarter, and improvements in our revenue increased 12%supply chain reliability contributed to better operational performance and faster order fulfillment patterns in the Americas which, along with higher pricing benefits, resulted in a significant improvement in our gross margin. In response to softening demand trends, we announced a series of restructuring actions in International. We also initiated restructuring actions in the Americas in connection with the closing of our regional distribution center in Atlanta, Georgia.
We recorded net income of $1.5 and earnings per share of $0.01 in Q1 2024 compared to a net loss of $11.4 and loss per share of $0.10 in the prior year. Operating income of $7.3 in Q1 2024 represented an improvement of $19.9 compared to an operating loss of $12.6 in the prior year.The improvement was driven by higher pricing benefits, partially offset by the impacts of lower volume and higher operating expenses. We reported adjusted operating income of $19.7 and adjusted earnings per share of $0.09 in Q1 2024, and we reported an adjusted operating loss of $4.6 and an adjusted loss per share of $0.05 in the prior year.
Revenue of $751.9 in Q1 2024 represented an increase of $11.2 or 2% compared to the prior year, driven by strong beginning order backlog and significant pricing benefits. We continued to experience significant inflation in commodities, fuel and logistics costs during the quarter, but gross margin improved compared to the prior year as our year-over-year pricing benefits have exceeded year-over-year inflation. Beginning in Q4 2023 and into the first half of 2024, we expect to have continued gross margin improvement from our pricing actions, as we aim to recover the cumulative impact of inflation incurred over the past two years.
Our orders declined by 17% in Q3 2023 compared to the prior year, with declines across all segments. Orders were impacted by softening industry demand patterns believed to be driven by reduced sentiment related to growing macroeconomic and geopolitical concerns. In response to these demand patterns, we have initiated actions to reduce our operational spending, including workforce reductionsgrowth in the Americas in Q3 2023, and we intend to maintain our focus on controlled spending during Q4 2023. In addition, we recently announced actions to wind down our aviation department and sell our corporate aircraft.
Q3 2023 Compared to Q3 2022
We recorded net income of $11.4 and earnings per share of $0.10 in Q3 2023 compared to net income of $9.6 and earnings per share of $0.08 in the prior year.Operating income of $20.5 in Q3 2023 represented an increase of $4.6 compared to operating income of $15.9 in the prior year.The increase was driven by higher pricing benefits, net of inflation, and higher volume, which improved gross margin, partially offset by higher operating expenses and $10.6 of restructuring costs related to workforce reductionsa decline in the Americas. We reported adjusted operating income of $37.7 and adjusted earnings per share of $0.20 in Q3 2023, and we had adjusted operating income of $19.5 and adjusted earnings per share of $0.11 in the prior year.
Revenue of $826.9 in Q3 2023 represented an increase of $88.7 or 12% compared to the prior year.International. Approximately $85$80 of the increase was related to higher pricing benefits, and approximately $30 was related to higher volume (including acquisitions), partially offset by approximately $29$65 related to lower volume (net of a $19.7 benefit from an acquisition) and $4.6 of unfavorable currency translation effects, primarily in EMEA.effects. Revenue increased by 19%5% in the Americas, and by 7% in the Other category, while EMEAInternational revenue decreased by 6%9%. Organic revenue growth was $98.0 or 13%flat compared to the prior year, with 15%2% growth in the Americas 9% growthbut a 7% decline in EMEA and 12% growth in the Other category.International.
Cost of sales as a percentage of revenue decreased by 140540 basis points in Q3 2023Q1 2024 compared to the prior year.The improvement was driven by approximately $55$80 of higher pricing benefits, net of inflation, and the benefits of higher volume, partially offset by approximately $8the impacts of higher fixed overhead costslower volume and labor inefficiencies and $6.5$4.6 of higher variable compensation expense. Cost of sales as a percentage of revenue improved by 300640 basis points in the Americas but increasedand by 240220 basis points in EMEA and by 230 basis points in the Other category.International.
Operating expenses increased by $20.4$19.7 in Q3 2023, but decreased by 20Q1 2024, or 220 basis points as a percentage of revenue, compared to the prior year. Compared toyear, which included a $4.0 gain from the prior year, operatingsale of land. Operating expenses in Q3 2023Q1 2024 included:
•$14.9 $9.0 of higher variable compensation expense
•$8.1 and $6.2 from acquisitions and
•$3.4 of higher marketing, product development and sales expenses,
•partially offset by $5.9 of favorable currency translation effects.an acquisition.
We recorded restructuring costs of $10.6$8.1 in the AmericasQ1 2024 and $4.2 in Q3Q1 2023. See Note 13 to the condensed consolidated financial statements for additional information.
Our Q3Q1 2024 effective tax rate was approximately 48%, which included $0.6 of discrete tax expense, compared to a Q1 2023 effective tax rate was 31.3% compared to a Q3 2022 effective tax rate of 20.0%27.8%.
Year-to-date 2023 Compared to Year-to-date 2022
We recorded net income of $19.6 and earnings per share of $0.17 in year-to-date 2023 compared to net income of $6.2 and earnings per share of $0.05 in the prior year. Operating income of $36.8 in year-to-date 2023 represented an increase of $18.8 compared to operating income of $18.0 in the prior year.The increase was driven by higher volume and higher pricing benefits, net of inflation, which improved gross margin, and lower operating expenses as a percentage of revenue, partially offset by $15.3 of restructuring costs. We reported adjusted operating income of $68.9 and adjusted earnings per share of $0.37 in year-to-date 2023, and we had adjusted operating income of $28.8 and adjusted earnings per share of $0.12 in the prior year.
Revenue of $2,430.9 in year-to-date 2023 represented an increase of $411.3 or 20% compared to the prior year, driven by growth across all segments.Approximately $250 of the increase was related to higher volume (including acquisitions), and approximately $215 was related to higher pricing benefits, partially offset by approximately $62 of unfavorable currency translation effects, primarily in EMEA. Revenue increased by 26% in the Americas, 5% in EMEA and 12% in the Other category. Organic revenue growth was $432.4 or 22% compared to the prior year, with 23% growth in the Americas, 18% growth in EMEA and 15% growth in the Other category.
Cost of sales as a percentage of revenue decreased by 10 basis points in year-to-date 2023 compared to the prior year.The improvement was driven by approximately $86 of higher pricing benefits, net of inflation, and the benefits of higher volume, mostly offset by approximately $26 of higher fixed overhead costs and labor inefficiencies and $10.3 of higher variable compensation expense. Cost of sales as a percentage of revenue improved by 70 basis points in the Americas,but increased by 220 basis points in EMEA and by 30 basis points in the Other category.
Operating expenses increased by $83.3 in year-to-date 2023, but decreased by 110 basis points as a percentage of revenue, compared to the prior year, which included a $15.4 gain from the sale of land. Operating expenses in year-to-date 2023 included:
•$28.6 of higher marketing, product development and sales expenses,
•$23.5 of higher variable compensation expense,
•$17.9 from acquisitions and
•$10.7 of higher spending in other functional areas, primarily information technology, facilities and strategy,
•partially offset by $14.5 of favorable currency translation effects and a $4.0 gain from the sale of land.
We recorded restructuring costs of $15.3 in the Americas in year-to-date 2023. See Note 13 to the condensed consolidated financial statements for additional information.
Our year-to-date 2023 effective tax rate was 27.9% compared to a year-to-date 2022 effective tax rate of (138.5)%, which included $4.6 of discrete tax benefits.
Interest Expense, Investment Income and Other Income, Net
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended |
Interest Expense, Investment Income and Other Income, Net | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 |
Interest expense | $ | (7.6) | | | $ | (6.5) | | | $ | (21.2) | | | $ | (19.3) | | |
Investment income | 0.3 | | | 0.1 | | | 0.7 | | | 0.4 | | |
Other income, net: | | | | | | | | |
Equity in income of unconsolidated affiliates | 4.4 | | | 2.2 | | | 9.9 | | | 4.5 | | |
Foreign exchange gains (losses) | (0.4) | | | 0.9 | | | 1.2 | | | 0.6 | | |
Net periodic pension and post-retirement credit, excluding service cost | (0.6) | | | (0.2) | | | (1.0) | | | (0.5) | | |
Miscellaneous income (expense), net | — | | | (0.4) | | | 0.8 | | | (1.1) | | |
Total other income, net | 3.4 | | | 2.5 | | | 10.9 | | | 3.5 | | |
Total interest expense, investment income and other income, net | $ | (3.9) | | | $ | (3.9) | | | $ | (9.6) | | | $ | (15.4) | | |
Interest expense increased in Q3 2023 and year-to-date 2023 compared to the prior year as a result of borrowings under our global committed bank facility. Total other income, net increased by $0.9 in Q3 2023 compared to the prior year, driven by a $2.2 increase in income recorded from our unconsolidated affiliates, partially offset by a $1.3 increase of foreign exchange losses. Total other income, net increased by $7.4 in year-to-date 2023 compared to the prior year, driven by a $5.4 increase in income recorded from our unconsolidated affiliates and a $0.6 increase of foreign exchange gains.
| | | | | | | | | | | | | | | | | | |
| Three Months Ended | |
Interest Expense, Investment Income and Other Income, Net | May 26, 2023 | May 27, 2022 | | |
Interest expense | $ | (6.6) | | | $ | (6.4) | | | | | | |
Investment income | 0.5 | | | 0.1 | | | | | | |
Other income, net: | | | | | | | | |
Equity in income of unconsolidated affiliates | 1.9 | | | 2.3 | | | | | | |
Foreign exchange gains (losses) | 0.5 | | | 1.5 | | | | | | |
Net periodic pension and post-retirement credit, excluding service cost | (0.1) | | | — | | | | | | |
Miscellaneous income (expense), net | (0.6) | | | (0.7) | | | | | | |
Total other income, net | 1.7 | | | 3.1 | | | | | | |
Total interest expense, investment income and other income, net | $ | (4.4) | | | $ | (3.2) | | | | | | |
Business Segment Review
See Note 12 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 furniture and architectural products that are marketed to corporate, government, healthcare, education and retail customers primarily through the Steelcase, AMQ, Coalesse, AMQ,Designtex, HALCON, Orangebox, Smith System Orangebox,and Viccarbe and Halcon brands.
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | |
Statement of Operations Data — Americas | Statement of Operations Data — Americas | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | Statement of Operations Data — Americas | May 26, 2023 | May 27, 2022 | |
Revenue | Revenue | $ | 594.7 | | | 100.0 | % | | $ | 500.3 | | | 100.0 | % | | $ | 1,767.1 | | | 100.0 | % | | $ | 1,399.9 | | | 100.0 | % | | | Revenue | $ | 572.8 | | | 100.0 | % | | $ | 543.8 | | | 100.0 | % | | |
Cost of sales | Cost of sales | 422.1 | | | 71.0 | | | 370.3 | | | 74.0 | | | 1,268.0 | | | 71.8 | | | 1,015.4 | | | 72.5 | | | | Cost of sales | 388.6 | | | 67.8 | | | 403.8 | | | 74.2 | | | |
Restructuring costs | Restructuring costs | 1.4 | | | 0.2 | | | — | | | — | | | 2.3 | | | 0.1 | | | — | | | — | | | | Restructuring costs | 0.6 | | | 0.1 | | | 0.9 | | | 0.2 | | | |
Gross profit | Gross profit | 171.2 | | | 28.8 | | | 130.0 | | | 26.0 | | | 496.8 | | | 28.1 | | | 384.5 | | | 27.5 | | | | Gross profit | 183.6 | | | 32.1 | | | 139.1 | | | 25.6 | | | |
Operating expenses | Operating expenses | 140.8 | | | 23.7 | | | 118.9 | | | 23.8 | | | 420.3 | | | 23.8 | | | 343.7 | | | 24.6 | | | | Operating expenses | 163.1 | | | 28.5 | | | 146.5 | | | 27.0 | | | |
| Restructuring costs | Restructuring costs | 9.2 | | | 1.5 | | | — | | | — | | | 13.0 | | | 0.7 | | | — | | | — | | | | Restructuring costs | 0.7 | | | 0.1 | | | 3.3 | | | 0.6 | | | |
Operating income | $ | 21.2 | | | 3.6 | % | | $ | 11.1 | | | 2.2 | % | | $ | 63.5 | | | 3.6 | % | | $ | 40.8 | | | 2.9 | % | | | |
Operating income (loss) | | Operating income (loss) | $ | 19.8 | | | 3.5 | % | | $ | (10.7) | | | (2.0) | % | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted Operating Income — Americas | Three Months Ended | Nine Months Ended |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 |
Operating income | $ | 21.2 | | | 3.6 | % | | $ | 11.1 | | | 2.2 | % | | $ | 63.5 | | | 3.6 | % | | $ | 40.8 | | | 2.9 | % | |
Amortization of purchased intangible assets | 5.5 | | | 1.0 | | | 2.6 | | | 0.5 | | | 13.4 | | | 0.8 | | | 7.8 | | | 0.6 | | |
| | | | | | | | | | | | | | | | |
Restructuring costs | 10.6 | | | 1.7 | | | — | | | — | | | 15.3 | | | 0.8 | | | — | | | — | | |
Adjusted operating income | $ | 37.3 | | | 6.3 | % | | $ | 13.7 | | | 2.7 | % | | $ | 92.2 | | | 5.2 | % | | $ | 48.6 | | | 3.5 | % | |
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Adjusted Operating Income (Loss) — Americas | Three Months Ended | |
May 26, 2023 | May 27, 2022 | | |
Operating income (loss) | $ | 19.8 | | | 3.5 | % | | $ | (10.7) | | | (2.0) | % | | | | | | | | | |
Amortization of purchased intangible assets | 3.1 | | | 0.5 | | | 2.6 | | | 0.5 | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Restructuring costs | 1.3 | | | 0.2 | | | 4.2 | | | 0.8 | | | | | | | | | | |
Adjusted operating income (loss) | $ | 24.2 | | | 4.2 | % | | $ | (3.9) | | | (0.7) | % | | | | | | | | | |
Operating income in the Americas increased by $10.1$30.5 in Q3 2023Q1 2024 compared to the prior year.year, which included a $4.0 gain from the sale of land. The increase was driven by higher pricing benefits, net of inflation,improved operational efficiencies and higher volume, which improved gross margin,lower restructuring costs, partially offset by the impacts of lower volume and higher operating expenses and $10.6 of restructuring costs.expenses. Adjusted operating income of $37.3$24.2 in Q3 2023Q1 2024 represented an improvement of $23.6$28.1 compared to the prior year.
The Americas revenue represented 76.2% of consolidated revenue in Q1 2024. In Q1 2024, revenue increased by $29.0 or 5% compared to the prior year. Operating income inApproximately $65 of the Americas increased by $22.7 in year-to-date 2023 compared to the prior year, which included a $15.4 gain from the sale of land. The year-to-date improvementincrease was driven by higher revenue and lower operating expenses as a percentage of revenue. Year-to-date 2023 operating income also included $15.3 of restructuring costs. Adjusted operating income of $92.2 in year-to-date 2023 represented an improvement of $43.6 compared to the prior year.
The Americas revenue represented 71.9% of consolidated revenue in Q3 2023. In Q3 2023, revenue increased by $94.4 or 19% compared to the prior year. The increase included approximately $65 related to higher pricing benefits, partially offset by approximately $35 related to lower volume (net of a $19.7 benefit from an acquisition) and approximately $30 related to higher volume (including acquisitions).$2 of unfavorable currency translation effects. Organic revenue growth in Q3 2023Q1 2024 was $77.2$13.5 or 15%2% compared to the prior year. The Americas revenue represented 72.7% of consolidated revenue in year-to-date 2023. Year-to-date 2023 revenue of $1,767.1 represented an increase of $367.2 or 26% compared to the prior year.Approximately $205 of the increase related to higher volume, and approximately $165 related to higher pricing benefits. Organic revenue growth in year-to-date 2023 was $335.1 or 23% compared to the prior year.
Cost of sales as a percentage of revenue improved by 300640 basis points in Q3 2023Q1 2024 compared to the prior year. The improvement was driven by approximately $49$65 of higher pricing benefits, netand approximately $5 from operational efficiencies as a result of inflation, and the benefits of higher volume,improvements in our supply chain reliability, partially offset by approximately $8the impacts of higher fixed overhead costslower volume and labor inefficiencies and $6.0 of higher variable compensation expense. Cost of sales as a percentage of revenue improved by 70 basis points in year-to-date 2023 compared to the prior year. The improvement was driven by approximately $66 of higher pricing benefits, net of inflation, and the benefits of higher volume, partially offset by approximately $25 of higher fixed overhead costs and labor inefficiencies and $9.0$4.5 of higher variable compensation expense.
Operating expenses increased by $21.9$16.6 in Q3 2023, but decreased by 10 basis points as a percentage of revenue, compared to the prior year. The current year included $11.8 of higher variable compensation expense and $7.3 from acquisitions. Operating expenses in year-to-date 2023 increased by $76.6, but decreased by 80Q1 2024, or 150 basis points as a percentage of revenue, compared to the prior year, which included a $15.4$4.0 gain from the sale of land. Operating expenses in year-to-date 2023 included:
•$20.9 of higher marketing, product development and sales expenses,
•$17.8Q1 2024 included $8.5 of higher variable compensation expense and $6.2 from an acquisition.
We recorded restructuring costs of $1.3 in Q1 2024 and $4.2 in Q1 2023. See Note 13 to the condensed consolidated financial statements for additional information.
•$10.8 of higher spending in other functional areas, primarily information technology, facilities and strategy,
•partially offset by a $4.0 gain from the sale of land.
EMEAInternational
The EMEAInternational segment serves customers in Europe, the Middle EastEMEA and Africa primarily under the Steelcase, Coalesse, Orangebox and Viccarbe brands,Asia Pacific with a comprehensive portfolio of furniture and architectural products.products that are marketed to corporate, government, education and retail customers primarily through the Steelcase, Coalesse, Orangebox, Smith System and Viccarbe brands.
| | | Three Months Ended | Nine Months Ended | | | Three Months Ended | |
Statement of Operations Data — EMEA | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | |
Statement of Operations Data — International | | Statement of Operations Data — International | May 26, 2023 | May 27, 2022 | |
Revenue | Revenue | $ | 157.7 | | | 100.0 | % | | $ | 168.2 | | | 100.0 | % | | $ | 451.9 | | | 100.0 | % | | $ | 430.7 | | | 100.0 | % | | | Revenue | $ | 179.1 | | | 100.0 | % | | $ | 196.9 | | | 100.0 | % | | |
Cost of sales | Cost of sales | 114.5 | | | 72.6 | | | 118.1 | | | 70.2 | | | 333.9 | | | 73.9 | | | 309.0 | | | 71.7 | | | | Cost of sales | 127.3 | | | 71.1 | | | 144.4 | | | 73.3 | | | |
| Restructuring costs | | Restructuring costs | 0.8 | | | 0.4 | | | — | | | — | | | |
Gross profit | Gross profit | 43.2 | | | 27.4 | | | 50.1 | | | 29.8 | | | 118.0 | | | 26.1 | | | 121.7 | | | 28.3 | | | | Gross profit | 51.0 | | | 28.5 | | | 52.5 | | | 26.7 | | | |
Operating expenses | Operating expenses | 39.0 | | | 24.7 | | | 41.8 | | | 24.9 | | | 119.3 | | | 26.4 | | | 120.7 | | | 28.1 | | | | Operating expenses | 57.5 | | | 32.1 | | | 54.4 | | | 27.7 | | | |
| Operating income (loss) | $ | 4.2 | | | 2.7 | % | | $ | 8.3 | | | 4.9 | % | | $ | (1.3) | | | (0.3) | % | | $ | 1.0 | | | 0.2 | % | | | |
Restructuring costs | | Restructuring costs | 6.0 | | | 3.4 | | | — | | | — | | | |
Operating loss | | Operating loss | $ | (12.5) | | | (7.0) | % | | $ | (1.9) | | | (1.0) | % | | |
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Adjusted Operating Income — EMEA | Three Months Ended | Nine Months Ended |
November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 |
Operating income (loss) | $ | 4.2 | | | 2.7 | % | | $ | 8.3 | | | 4.9 | % | | $ | (1.3) | | | (0.3) | % | | $ | 1.0 | | | 0.2 | % | |
Amortization of purchased intangible assets | 1.1 | | | 0.7 | | | 1.0 | | | 0.6 | | | 3.4 | | | 0.8 | | | 3.0 | | | 0.7 | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted operating income | $ | 5.3 | | | 3.4 | % | | $ | 9.3 | | | 5.5 | % | | $ | 2.1 | | | 0.5 | % | | $ | 4.0 | | | 0.9 | % | |
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Adjusted Operating Loss — International | Three Months Ended | |
May 26, 2023 | May 27, 2022 | | |
Operating loss | $ | (12.5) | | | (7.0) | % | | $ | (1.9) | | | (1.0) | % | | | | | | | | | |
Amortization of purchased intangible assets | 1.2 | | | 0.7 | | | 1.2 | | | 0.6 | | | | | | | | | | |
Restructuring costs | 6.8 | | | 3.8 | | | — | | | — | | | | | | | | | | |
Adjusted operating loss | $ | (4.5) | | | (2.5) | % | | $ | (0.7) | | | (0.4) | % | | | | | | | | | |
Operating incomeThe operating loss in EMEA decreasedInternational increased by $4.1$10.6 in Q3 2023Q1 2024 compared to the prior year. The declineincrease was driven by lower volume, higher costoperating expenses and $6.8 of sales asrestructuring costs, partially offset by higher pricing benefits. The adjusted operating loss of $4.5 in Q1 2024 represented a percentagedecline of revenue.The operating results in EMEA decreased by $2.3 in year-to-date 2023$3.8 compared to the prior year. The decline was driven by higher cost of sales as a percentage of revenue.
EMEAInternational revenue represented 19.1%23.8% of consolidated revenue in Q3 2023.Q1 2024. In Q3 2023,Q1 2024, revenue decreased by $10.5$17.8 or 6%9% compared to the prior year. Approximately $15 of higher pricing benefits were more than offset by approximately $25 of unfavorable currency translation effects and lower volume. Organic revenue growth was $13.0 or 9% compared to the prior year, driven by Germany and Spain. EMEA revenue represented 18.6% of consolidated revenue in year-to-date 2023. In year-to-date 2023, revenue of $451.9 represented an increase of $21.2 or 5% compared to the prior year, driven by growth across all markets. Approximately $40 of the increase was$30 related to higher pricing benefits,lower volume and approximately $30 was related to higher volume, partially offset by approximately $54$3 of unfavorable currency translation effects. Organic revenue growth year-to-date 2023decline was $69.3$12.7 or 18%7% compared to the prior year.
Cost of sales as a percentage of revenue increasedimproved by 240220 basis points in Q3 2023Q1 2024 compared to the prior year. The increaseimprovement was driven by approximately $8 of higher inflation, approximately $1 in higher freight and labor inefficiencies, approximately $1 of unfavorable currency impacts and the impact of lower volume, partially offset by approximately $15$10 of higher pricing benefits. Costbenefits, net of sales as a percentage of revenue increased by 220 basis points in year-to-date 2023 compared to the prior year. The increase was driven by approximately $24 of higher inflation, approximately $3 in higher overhead costs and freight and labor inefficiencies and approximately $2 of unfavorable currency impacts, partially offset by the benefitsimpacts of higherlower volume and approximately $40 of higher pricing benefits.logistics and labor costs.
Operating expenses decreasedincreased by $2.8$3.1 in Q3 2023,Q1 2024, or 20 basis points as a percentage of revenue, compared to the prior year.The current year included $5.9 of favorable currency translation effects, partially offset by $1.8 of higher variable compensation expense and $0.7 from an acquisition.Operating expenses decreased by $1.4 in year-to-date 2023, or 170440 basis points as a percentage of revenue, compared to the prior year. The current year included $14.5 of favorable currency translation effects, partially offset by $4.8approximately $3 of higher marketing, product development and sales expenses, $3.6 from an acquisition and $3.3 of higher variable compensation expense.
Other
The Other category includes Asia Pacific and Designtex. Asia Pacific serves customers in Australia, China, India, Japan, Korea and other countries in Southeast Asia primarily under the Steelcase brand with a comprehensive portfolio of furniture and architectural products. Designtex 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.
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| Three Months Ended | Nine Months Ended | | | | | | | |
Statement of Operations Data — Other | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | | | | | | |
Revenue | $ | 74.5 | | | 100.0 | % | | $ | 69.7 | | | 100.0 | % | | $ | 211.9 | | | 100.0 | % | | $ | 189.0 | | | 100.0 | % | | | | | | | | |
Cost of sales | 51.1 | | | 68.6 | | | 46.2 | | | 66.3 | | | 146.5 | | | 69.1 | | | 130.1 | | | 68.8 | | | | | | | | | |
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Gross profit | 23.4 | | | 31.4 | | | 23.5 | | | 33.7 | | | 65.4 | | | 30.9 | | | 58.9 | | | 31.2 | | | | | | | | | |
Operating expenses | 23.7 | | | 31.8 | | | 21.5 | | | 30.8 | | | 69.9 | | | 33.0 | | | 66.4 | | | 35.2 | | | | | | | | | |
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Operating income (loss) | $ | (0.3) | | | (0.4) | % | | $ | 2.0 | | | 2.9 | % | | $ | (4.5) | | | (2.1) | % | | $ | (7.5) | | | (4.0) | % | | | | | | | | |
Operating results in the Other category decreased by $2.3 in Q3 2023 compared to the prior year. The decline was driven by higher cost of sales as a percentage of revenue and higher operating expenses as a percentage of revenue.Year-to-date 2023 operating results improved by $3.0 compared to the prior year. The improvement was driven by higher revenue and lower operating expenses as a percentage of revenue.
Revenue in the Other category represented 9.0% of consolidated revenue in Q3 2023. In Q3 2023, revenue increased by $4.8 or 7% compared to the prior year,driven by India, Designtex and China. Approximately $4 of the increase was related to higher volume, and approximately $1 was related to higher pricing benefits, partially offset by approximately $3 of unfavorable currency translation effects.Organic revenue growth was $7.8 or 12% compared to the prior year.Revenue in the Other category represented 8.7% of consolidated revenue in year-to-date 2023. Year-to-date 2023 revenue of $211.9 represented an increase of $22.9 or 12% compared to the prior year, driven by India, Designtex and Southeast Asia. Approximately $16 of the increase was related to higher volume, and approximately $10 was related to higher pricing benefits, partially offset by approximately $5 of unfavorable currency translation effects. Organic revenue growth was $28.0 or 15% compared to the prior year.
Cost of sales as a percentage of revenue increased by 230 basis points in Q3 2023 compared to the prior year. The increase was driven by approximately $2 of higher inflation, and unfavorable currency impacts, partially offset by the benefits of higher volume and higher pricing benefits. Cost of sales as a percentage of revenue increased by 30 basis points in year-to-date 2023 compared to the prior year. The increase was driven by approximately $6 of higher inflation, and unfavorable currency impacts, mostly offset by the benefits of higher volume and approximately $10 of higher pricing benefits.
Operating expenses increased by $2.2 in Q3 2023, or 100 basis points as a percentage of revenue, compared to the prior year. The increase was driven by $2.1 of higher marketing, product development and sales expenses and $0.6 of higher variable compensation expense.Operating expenses increased by $3.5 in year-to-date 2023, but decreased by 220 basis points as a percentage of revenue, compared to the prior year. The increase was driven by the same factors as the quarter.
Corporate
Corporate expenses 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.
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| Three Months Ended | Nine Months Ended | |
Statement of Operations Data — Corporate | November 25, 2022 | November 26, 2021 | November 25, 2022 | November 26, 2021 | | |
Operating expenses | $ | 4.6 | | | $ | 5.5 | | | $ | 20.9 | | | $ | 16.3 | | | | | | |
Operating expenses decreased by $0.9 in Q3 2023 compared to the prior year. Operating expenses increased by $4.6 in year-to-date 2023 compared to the prior year, driven by $8.0 of lower COLI income, $1.9 of higher employee costs and $1.0 of higher variable compensation expense, partially offset by $6.3 of lower deferred compensation expense.expenses.
Non-GAAP Financial Measures
The non-GAAP financial measures used in this MD&A are: (1) organic revenue growth (decline), (2) adjusted operating income (loss) and (3) adjusted earnings (loss) per share.
Organic Revenue Growth (Decline)
We define organic revenue growth (decline) as revenue growth (decline) excluding the impact of acquisitions and divestitures and foreign currency translation effects.Organic revenue growth (decline) is calculated by adjusting prior year revenue to include revenues of acquired companies prior to the date of the company's acquisition, to exclude revenues of divested companies and to use current year average exchange rates in the calculation of foreign-denominated revenue. We believe organic revenue growth (decline) is a meaningful metric to investors as it provides a more consistent comparison of our revenue to prior periods as well as to industry peers.
Adjusted Operating Income (Loss) and Adjusted Earnings (Loss) Per Share
We define adjusted operating income (loss) as operating income (loss) excluding amortization of purchased intangible assets and restructuring costs. We define adjusted earnings (loss) per share as earnings (loss) per share,
on a diluted basis, excluding amortization of purchased intangible assets and restructuring costs, net of related income tax effects.
•Amortization of purchased intangible assets: We may record intangible assets (such as backlog, dealer relationships, trademarks, know-how and designs and proprietary technology) when we acquire companies. We allocate the fair value of purchase consideration to net tangible and intangible assets acquired based on their estimated fair values. The fair value estimates for these intangible assets require management to make significant estimates and assumptions, which include the useful lives of intangible assets. We believe that adjusting for amortization of purchased intangible assets provides a more consistent comparison of our operating performance to prior periods as well as to industry peers. As our business strategy in recent years has included an increased number of acquisitions, intangible asset amortization has become more significant.
•Restructuring costs: Restructuring costs may be recorded as our business strategies change or in response to changing market trends and economic conditions. We believe that adjusting for restructuring costs, which are primarily associated with business exit and workforce reduction costs, provides a more consistent comparison of our operating performance to prior periods as well as to industry peers.
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.initiatives and material committed cash requirements.
| Liquidity Sources | Liquidity Sources | November 25, 2022 | February 25, 2022 | Liquidity Sources | May 26, 2023 | February 24, 2023 |
Cash and cash equivalents | Cash and cash equivalents | $ | 55.0 | | | $ | 200.9 | | | Cash and cash equivalents | $ | 40.2 | | | $ | 90.4 | | |
| Company-owned life insurance | Company-owned life insurance | 161.2 | | | 168.0 | | | Company-owned life insurance | 159.7 | | | 157.3 | | |
Availability under credit facilities | Availability under credit facilities | 229.0 | | | 262.0 | | | Availability under credit facilities | 270.4 | | | 269.7 | | |
Total liquidity sources available | Total liquidity sources available | $ | 445.2 | | | $ | 630.9 | | | Total liquidity sources available | $ | 470.3 | | | $ | 517.4 | | |
As of November 25, 2022,May 26, 2023, we held a total of $55.0$40.2 in cash and cash equivalents. Of that total, 17%10% was located in the U.S., and 83%90% was located outside of the U.S., primarily in China (including Hong Kong), Mexico, Malaysia, Singaporethe United Kingdom, India and Canada.Malaysia.
COLI investments are recorded at their net cash surrender value. Our investments in COLI policies are intended to be utilized as a 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 ninethree months ended November 25, 2022May 26, 2023 and November 26, 2021:May 27, 2022:
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| Nine Months Ended |
Cash Flow Data | November 25, 2022 | November 26, 2021 |
Net cash provided by (used in): | | | | |
Operating activities | $ | 1.4 | | | $ | (59.1) | | |
Investing activities | (127.5) | | | (51.3) | | |
Financing activities | (16.6) | | | (101.5) | | |
Effect of exchange rate changes on cash and cash equivalents | (2.6) | | | (1.6) | | |
Net decrease in cash, cash equivalents and restricted cash | (145.3) | | | (213.5) | | |
Cash, cash equivalents and restricted cash, beginning of period | 207.0 | | | 495.6 | | |
Cash, cash equivalents and restricted cash, end of period | $ | 61.7 | | | $ | 282.1 | | |
| | | | | | | | | | | | | | |
| Three Months Ended |
Cash Flow Data | May 26, 2023 | May 27, 2022 |
Net cash provided by (used in): | | | | |
Operating activities | $ | 11.3 | | | $ | (55.1) | | |
Investing activities | (11.2) | | | (7.3) | | |
Financing activities | (50.3) | | | (20.7) | | |
Effect of exchange rate changes on cash and cash equivalents | (0.4) | | | (1.3) | | |
Net decrease in cash, cash equivalents and restricted cash | (50.6) | | | (84.4) | | |
Cash, cash equivalents and restricted cash, beginning of period | 97.2 | | | 207.0 | | |
Cash, cash equivalents and restricted cash, end of period | $ | 46.6 | | | $ | 122.6 | | |
Cash provided by (used in) operating activities
| | | Nine Months Ended | | Three Months Ended |
Cash Flow Data — Operating Activities | Cash Flow Data — Operating Activities | November 25, 2022 | November 26, 2021 | Cash Flow Data — Operating Activities | May 26, 2023 | May 27, 2022 |
Net income | $ | 19.6 | | | $ | 6.2 | | | |
Net income (loss) | | Net income (loss) | $ | 1.5 | | | $ | (11.4) | | |
Depreciation and amortization | Depreciation and amortization | 67.2 | | | 62.2 | | | Depreciation and amortization | 20.4 | | | 20.2 | | |
Share-based compensation | Share-based compensation | 18.0 | | | 13.4 | | | Share-based compensation | 14.0 | | | 12.2 | | |
Restructuring costs | Restructuring costs | 15.3 | | | — | | | Restructuring costs | 8.1 | | | 4.2 | | |
Changes in accounts receivable, inventories and accounts payable | Changes in accounts receivable, inventories and accounts payable | (108.5) | | | (84.5) | | | Changes in accounts receivable, inventories and accounts payable | 34.7 | | | (48.4) | | |
Income taxes receivable | Income taxes receivable | 25.4 | | | (1.6) | | | Income taxes receivable | (2.4) | | | 25.3 | | |
Employee compensation liabilities | Employee compensation liabilities | 17.0 | | | (15.3) | | | Employee compensation liabilities | (49.1) | | | (18.5) | | |
Employee benefit obligations | Employee benefit obligations | (14.0) | | | (13.5) | | | Employee benefit obligations | (19.3) | | | (17.2) | | |
Changes in other operating assets and liabilities | Changes in other operating assets and liabilities | (38.6) | | | (26.0) | | | Changes in other operating assets and liabilities | 3.4 | | | (21.5) | | |
Net cash provided by (used in) operating activities | Net cash provided by (used in) operating activities | $ | 1.4 | | | $ | (59.1) | | | Net cash provided by (used in) operating activities | $ | 11.3 | | | $ | (55.1) | | |
In year-to-date 2023, cash provided by operating activities improved compared to the prior year, driven by the benefits of higher net income, partially offset by cash used in working capital driven primarily by increased levels of inventory. Annual payments related to accrued variable compensation and retirement plan contributions totaled $32.4$77.3 in year-to-date 2023Q1 2024 compared to $50.4$32.4 in the prior year. In year-to-dateQ1 2024, we generated cash from working capital primarily due to decreased levels of inventory related to supply chain improvements and improvements in the number of days sales outstanding related to accounts receivable. In Q1 2023, cash was used to meet working capital requirements primarily due to increased levels of inventory on-hand which were purchased to mitigate the impacts of supply chain disruptions. In Q1 2023, we received $33.5$29.7 related to the carryback of our fiscal year 2021 tax loss in the U.S., and we paid $13.4 of severance and other separation-related benefits and business exit costs related to restructuring activities in our Americas segment.
Cash used in investing activities
| | | Nine Months Ended | | Three Months Ended |
Cash Flow Data — Investing Activities | Cash Flow Data — Investing Activities | November 25, 2022 | November 26, 2021 | Cash Flow Data — Investing Activities | May 26, 2023 | May 27, 2022 |
Capital expenditures | Capital expenditures | $ | (42.8) | | | $ | (45.3) | | | Capital expenditures | $ | (11.7) | | | $ | (13.6) | | |
Proceeds from disposal of fixed assets | 5.6 | | | 17.4 | | | |
Acquisitions, net of cash acquired | (105.3) | | | (32.6) | | | |
| Other | Other | 15.0 | | | 9.2 | | | Other | 0.5 | | | 6.3 | | |
Net cash used in investing activities | Net cash used in investing activities | $ | (127.5) | | | $ | (51.3) | | | Net cash used in investing activities | $ | (11.2) | | | $ | (7.3) | | |
Capital expenditures in year-to-date 2023Q1 2024 were primarily related to investments in manufacturing operations, product development, customer-facing showrooms, facilities and information technology. Proceeds from the disposal of fixed assets included $5.6 and $17.2 related to the sale of land in year-to-date 2023 and year-to-date 2022, respectively. Other investing activities in year-to-date 2023the prior year included $7.5$5.6 of proceeds from the sale of an investment in an unconsolidated affiliate and $6.6land.
Cash used in financing activities
| | | Nine Months Ended | | Three Months Ended |
Cash Flow Data — Financing Activities | Cash Flow Data — Financing Activities | November 25, 2022 | November 26, 2021 | Cash Flow Data — Financing Activities | May 26, 2023 | May 27, 2022 |
Dividends paid | Dividends paid | $ | (45.6) | | | $ | (45.9) | | | Dividends paid | $ | (12.1) | | | $ | (17.1) | | |
Common stock repurchases | (3.9) | | | (54.0) | | | |
| Borrowings on global committed bank facility | Borrowings on global committed bank facility | 480.9 | | | — | | | Borrowings on global committed bank facility | 67.2 | | | — | | |
Repayments on global committed bank facility | Repayments on global committed bank facility | (446.9) | | | — | | | Repayments on global committed bank facility | (67.2) | | | — | | |
Repayments on note payable | | Repayments on note payable | (32.2) | | | — | | |
Other | Other | (1.1) | | | (1.6) | | | Other | (6.0) | | | (3.6) | | |
Net cash used in financing activities | Net cash used in financing activities | $ | (16.6) | | | $ | (101.5) | | | Net cash used in financing activities | $ | (50.3) | | | $ | (20.7) | | |
The following table details dividends paid$0.10 per common share during each quarter of year-to-date 2023in Q1 2024 and year-to-date 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend Data | First Quarter | | Second Quarter | | Third Quarter | | Total | |
2023 | | | | | | | | |
Dividends declared and paid per common share | $ | 0.145 | | | $ | 0.145 | | | $ | 0.100 | | | $ | 0.390 | | |
2022 | | | | | | | | |
Dividends declared and paid per common share | $ | 0.100 | | | $ | 0.145 | | | $ | 0.145 | | | $ | 0.390 | | |
$0.145 per common share in Q1 2023. In year-to-date 2023,Q1 2024, we borrowed and repaid $67.2 under our global committed bank facility to fund our operations and a balloon payment of $31.8 for a note payable that matured during the quarter. See Note 8 to the condensed consolidated financial statements for additional information.
Other financing activities include share repurchases. In Q1 2024, we repurchased 343,485429,624 shares of Class A common stock all of which 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. In year-to-date 2022,for $3.3, and in Q1 2023, we repurchased 3,991,083279,103 shares of Class A common stock 392,812 of whichfor $3.4. All 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.
As of November 25, 2022,May 26, 2023, we had $6.4 of remaining availability under the $150 share repurchase program approved by our Board of Directors in 2016.
Liquidity Facilities
The following table summarizes available capacity under our liquidity facilities as of November 25, 2022:May 26, 2023:
| | | | | | | | |
Liquidity Facilities | November 25,May 26,
20222023 |
Global committed bank facility | $ | 250.0 | | |
Other committed bank facility | 6.78.0 | | |
Various uncommitted facilities | 9.913.2 | | |
Total credit lines available | 266.6271.2 | | |
Less: Borrowings outstanding | (37.6)(0.8) | | |
| | |
Available capacity | $ | 229.0270.4 | | |
We have a $250.0 global committed bank facility in effect through 2025. As of November 25, 2022,May 26, 2023, there were $34.0 ofno borrowings outstanding, under the facility,our ability to borrow was not limited and we were in compliance with all covenants under the facility.
We have an $8.0 committed bank facility related to a subsidiary. As of November 25, 2022, totalMay 26, 2023, there were $0.8 in borrowings outstanding under the facility and our availability to borrow under the facility was limited to $6.7 based on eligible accounts receivable of the subsidiary and $3.6 was outstanding under the facility.not limited.
We have unsecured uncommitted short-term credit facilities available for working capital purposes with various financial institutions with a total U.S. dollar borrowing capacity of up to $3.8 and a total foreign currency borrowing capacity of up to $6.1$9.4 as of November 25, 2022.May 26, 2023. These credit facilities have no stated expiration date but may be changed or canceled by the banks at any time. As of November 25, 2022,May 26, 2023, there were no borrowings outstanding under these facilities.
Total consolidated debt as of November 25, 2022May 26, 2023 was $516.0.$446.5. In addition to borrowings under one of our creditcommitted bank facilities, we have $445.4$445.7 in term notes due in 2029 with an effective interest rate of 5.6%, and a term loan with a balance of $32.8 as of November 25, 2022, which has a floating interest rate based on 30-day LIBOR plus 1.20% and is due in Q1 2024.. The term notes are unsecured, and the term loan is secured by our two corporate aircraft. The term notes and the term loan contain no financial covenants and are not cross-defaulted to our other debt facilities.
Liquidity Outlook
As of November 25, 2022May 26, 2023, our total liquidity, which is comprised of cash and cash equivalents and the cash surrender value of COLI, aggregated to $216.2.199.9. Our liquidity position, funds available under our credit facilities and cash generated from future operations are expected to be sufficient to finance our known or foreseeable liquidity needs, including our material cash requirements.
During Q3 2023,Q1 2024, there have been no significant changes in the items that we have identified as our material committed cash requirements in our Annual Report on Form 10-K for the fiscal year ended February 25, 2022.
We also have other planned material usages of cash which we consider discretionary. This includes plans for capital expenditures which are expected to total approximately $50$70 to $60$80 in 20232024 compared to $60.5$59.1 in 2022.2023. In addition, we fund dividend payments declared by our Board of Directors. On December 19, 2022,June 21, 2023, we announced a quarterly dividend on our common stock of $0.10 per share, or approximately $11, to be paid in Q4 2023.
In year-to-date 2023, we implemented initiatives to reduce operational spending across certain functions, including workforce reductions in our Americas segment in Q3 2023 which are expected to result in annualized savings of approximately $19, and we expect to maintain our focus on controlled spending during Q4 2023. In Q4 2023, we initiated actions to wind down our aviation department and sell our two corporate aircraft, and we expect to use the proceeds from the sale of the corporate aircraft to pay down our term loan which is due in Q1Q2 2024. We expect approximately $11 in annualized savings as a result of these actions.
Our material cash requirements are subject to fluctuation based on business requirements, economic volatility or investments in strategic initiatives. We anticipate the cash expected to be generated from future operations and current cash and cash equivalents, funds available under our credit facilities and funds available from COLI will be sufficient to fulfill our existing material cash requirements.
Critical Accounting Estimates
During Q3 2023,Q1 2024, there have been no changes in the items that we have identified as critical accounting estimates in our Annual Report on Form 10-K for the fiscal year ended February 25, 2022.24, 2023.
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 differ materially from those in the forward-looking statements and 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 the market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) we faced by us as of November 25, 2022 is the same asMay 26, 2023 had not materially changed from what we disclosed in our Annual Report on Form 10-K for the fiscal year ended February 25, 2022.24, 2023. 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 2023,Q1 2024, no material change in foreign exchange risk occurred.
Interest Rate Risk
During Q3 2023,Q1 2024, no material change in interest rate risk occurred.
Commodity Price Risk
During Q3 2023,Q1 2024, no material change in commodity price risk occurred.
Fixed Income and Equity Price Risk
During Q3 2023,Q1 2024, 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 November 25, 2022.May 26, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of November 25, 2022,May 26, 2023, 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 thirdfirst 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 Annual Report on Form 10-K for the fiscal year ended February 25, 2022.24, 2023. There have not been any material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended February 25, 2022.24, 2023.
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 2023:Q1 2024:
| | | | | | | | | | | | | | |
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) |
8/27/2022 - 9/30/2022 | — | | $ | — | | — | | $ | 6.4 | |
10/1/2022 - 10/28/2022 | 45,358 | | $ | 6.97 | | — | | $ | 6.4 | |
10/29/22 - 11/25/2022 | 18,826 | | $ | 6.95 | | — | | $ | 6.4 | |
Total | 64,184 | | (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) |
02/25/2023 - 03/31/2023 | 429,624 | | $ | 7.71 | | — | | $ | 6.4 | |
04/01/2023 - 04/28/2023 | — | | $ | — | | — | | $ | 6.4 | |
04/29/2023 - 05/26/2023 | — | | $ | — | | — | | $ | 6.4 | |
Total | 429,624 | | (2) | — | | |
(1)In January 2016, the Board of Directors approved a share repurchase program, announced on January 19, 2016, permitting the repurchase of up to $150 of shares of our common stock.
(2)All 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 | Third Amended and Restated Credit Agreement, dated as of February 27, 2020 and amended December 21, 2021 and April 27, 2023, among Steelcase Inc.; JPMorgan Chase Bank, N.A., as Administrative Agent; Bank of America, N.A., and Wells Fargo Bank, National Association, as Co-Syndication Agents; HSBC Bank USA, National Association, as Documentation Agent; and certain other lenders | |
31.1 | | |
31.2 | | |
32.1 | | |
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________________
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/ DavidNICOLE C. SylvesterMCGRATH |
| DavidNicole C. SylvesterMcGrath
Senior Vice President, Corporate Controller & Chief FinancialAccounting Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer) |
Date: December 21, 2022June 23, 2023