(Exact name of registrant as specified in its charter)
Michigan
38-0819050
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
901 44th Street SE
Grand Rapids,
Michigan
49508
(Address of principal executive offices)
(Zip Code)
(616) 247-2710
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Class A Common Stock
SCS
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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 16, 2021, Steelcase Inc. had 87,021,731 shares of Class A Common Stock and 25,074,494 shares of Class B Common Stock outstanding.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
November 26, 2021
November 27, 2020
OPERATING ACTIVITIES
Net income
$
6.2
$
19.5
Depreciation and amortization
62.2
64.1
Goodwill impairment charge
—
17.6
Restructuring costs
—
27.0
Deferred income taxes
(9.6)
17.9
Non-cash stock compensation
13.4
11.9
Equity in income of unconsolidated affiliates
(4.4)
(6.7)
Dividends received from unconsolidated affiliates
4.7
5.2
Other
(19.5)
(12.4)
Changes in operating assets and liabilities:
Accounts receivable
(68.6)
105.2
Inventories
(93.4)
(16.4)
Other assets
(18.3)
(22.9)
Accounts payable
77.5
(47.0)
Employee compensation liabilities
(15.3)
(130.5)
Employee benefit obligations
(13.5)
(25.2)
Customer deposits
21.3
30.4
Accrued expenses and other liabilities
(1.8)
(0.5)
Net cash provided by (used in) operating activities
(59.1)
37.2
INVESTING ACTIVITIES
Capital expenditures
(45.3)
(32.1)
Proceeds from disposal of fixed assets
17.4
7.3
Acquisition, net of cash acquired
(32.6)
—
Other
9.2
7.0
Net cash used in investing activities
(51.3)
(17.8)
FINANCING ACTIVITIES
Dividends paid
(45.9)
(31.8)
Common stock repurchases
(54.0)
(42.7)
Borrowings on global committed bank facility
—
250.0
Repayments on global committed bank facility
—
(250.0)
Other
(1.6)
(2.1)
Net cash used in financing activities
(101.5)
(76.6)
Effect of exchange rate changes on cash and cash equivalents
(1.6)
1.8
Net decrease in cash, cash equivalents and restricted cash
(213.5)
(55.4)
Cash and cash equivalents and restricted cash, beginning of period (1)
495.6
547.1
Cash and cash equivalents and restricted cash, end of period (2)
$
282.1
$
491.7
_______________________________________
(1)These amounts include restricted cash of $5.8 and $6.1 as of February 26, 2021 and February 28, 2020, respectively.
(2)These amounts include restricted cash of $6.9 and $7.3 as of November 26, 2021 and November 27, 2020, respectively.
Restricted cash primarily represents funds held in escrow for potential future workers’ compensation and product liability claims. Restricted cash is included as part of Other assets in the Condensed Consolidated Balance Sheets.
See accompanying notes to the condensed consolidated financial statements.
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 26, 2021 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 26, 2021 was derived from the audited Consolidated Balance Sheet included in our Form 10-K.
As used in this Quarterly Report on Form 10-Q (“Report”), unless otherwise expressly stated or the context otherwise requires, all references to “Steelcase,” “we,” “our,” “Company” and similar references are to Steelcase Inc. and its subsidiaries in which a controlling interest is maintained. Unless the context otherwise indicates, reference to a year relates to the fiscal year, ended in February of the year indicated, rather than a calendar year. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.
2.NEW ACCOUNTING STANDARDS
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.
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
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Americas
Desking, benching, systems and storage
$
240.1
$
202.8
$
669.5
$
681.9
Seating
143.0
121.3
426.7
412.8
Other (1)
117.2
92.3
303.7
286.8
EMEA
Desking, benching, systems and storage
62.2
48.5
158.7
140.3
Seating
61.1
61.7
150.7
138.5
Other (1)
44.9
33.1
121.3
89.9
Other
Desking, benching, systems and storage
13.8
12.4
39.1
33.5
Seating
21.3
17.2
52.0
48.1
Other (1)
34.6
28.2
97.9
87.3
$
738.2
$
617.5
$
2,019.6
$
1,919.1
_______________________________________
(1)The Other product category data consists primarily of products sold by consolidated dealers, textiles and surface materials, worktools, architecture, technology and other uncategorized product lines and services.
Reportable geographic information is as follows:
Reportable Geographic Revenue
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
United States
$
474.6
$
392.9
$
1,327.4
$
1,314.0
Foreign locations
263.6
224.6
692.2
605.1
$
738.2
$
617.5
$
2,019.6
$
1,919.1
Contract Balances
At times, we receive payments from customers before revenue is recognized, resulting in the recognition of a contract liability (Customer deposits) presented in the Condensed Consolidated Balance Sheets.
Changes in the Customer deposits balance during the nine months ended November 26, 2021 are as follows:
Customer Deposits
Balance as of February 26, 2021
$
33.7
Recognition of revenue related to beginning of year customer deposits
(30.7)
Customer deposits received, net of revenue recognized during the period
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4.EARNINGS PER SHARE
Earnings 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 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 26, 2021
Three Months Ended November 27, 2020
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
$
9.6
116.0
116.3
$
2.1
117.7
118.0
Impact of participating securities
(0.3)
(3.2)
(3.2)
—
(2.9)
(2.9)
Amounts used in calculating earnings per share, excluding participating securities
$
9.3
112.8
113.1
$
2.1
114.8
115.1
Earnings per share
$
0.08
$
0.08
$
0.02
$
0.02
There were no anti-dilutive performance units excluded from the computation of diluted earnings per share for the three months ended November 26, 2021 and November 27, 2020.
Computation of Earnings Per Share
Nine Months Ended November 26, 2021
Nine Months Ended November 27, 2020
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
$
6.2
117.4
117.8
$
19.5
117.4
117.7
Impact of participating securities
(0.2)
(3.0)
(3.0)
(0.4)
(2.5)
(2.5)
Amounts used in calculating earnings per share, excluding participating securities
$
6.0
114.4
114.8
$
19.1
114.9
115.2
Earnings per share
$
0.05
$
0.05
$
0.17
$
0.17
There were no anti-dilutive performance units excluded from the computation of diluted earnings per share for the nine months ended November 26, 2021 and November 27, 2020.
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 26, 2021 and November 27, 2020:
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
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Amortization of pension and other post-retirement actuarial losses (gains)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6.FAIR VALUE
The carrying amounts for many of our financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts and notes payable, short-term borrowings and certain other liabilities, approximate their fair value due to their relatively short maturities. Our foreign exchange forward contracts and long-term investments are measured at fair value in the Condensed Consolidated Balance Sheets.
Our total debt is carried at cost and was $482.9 and $483.9 as of November 26, 2021 and February 26, 2021, respectively. The fair value of our total debt is measured using a discounted cash flow analysis based on current market interest rates for similar types of instruments and was $552.4 and $568.1 as of November 26, 2021 and February 26, 2021, respectively. The estimation of the fair value of our total debt is based on Level 2 fair value measurements.
We periodically use derivative financial instruments to manage exposures to movements in foreign exchange rates and interest rates. The use of these financial instruments modifies the exposure of these risks with the intention to reduce our risk of short-term volatility. We do not use derivatives for speculative or trading purposes.
Assets and liabilities measured at fair value as of November 26, 2021 and February 26, 2021 are summarized below:
November 26, 2021
Fair Value of Financial Instruments
Level 1
Level 2
Level 3
Total
Assets:
Cash and cash equivalents
$
274.1
$
—
$
—
$
274.1
Restricted cash
6.9
—
—
6.9
Foreign exchange forward contracts
—
0.2
—
0.2
Auction rate security
—
—
2.7
2.7
$
281.0
$
0.2
$
2.7
$
283.9
Liabilities:
Foreign exchange forward contracts
$
—
$
(2.1)
$
—
$
(2.1)
$
—
$
(2.1)
$
—
$
(2.1)
February 26, 2021
Fair Value of Financial Instruments
Level 1
Level 2
Level 3
Total
Assets:
Cash and cash equivalents
$
489.8
$
—
$
—
$
489.8
Restricted cash
5.8
—
—
5.8
Foreign exchange forward contracts
—
1.1
—
1.1
Auction rate security
—
—
2.6
2.6
$
495.6
$
1.1
$
2.6
$
499.3
Liabilities:
Foreign exchange forward contracts
$
—
$
(0.8)
$
—
$
(0.8)
$
—
$
(0.8)
$
—
$
(0.8)
Below is a roll-forward of assets and liabilities measured at fair value using Level 3 inputs for the nine months ended November 26, 2021:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7.INVENTORIES
Inventories
November 26, 2021
February 26, 2021
Raw materials and work-in-process
$
162.8
$
126.0
Finished goods
151.3
86.4
314.1
212.4
Revaluation to LIFO
28.0
18.9
$
286.1
$
193.5
The portion of inventories determined by the LIFO method was $125.1 and $89.1 as of November 26, 2021 and February 26, 2021, respectively.
8. 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 26, 2021, the following PSUs have been issued and remained outstanding:
•448,300 PSUs to be earned over a three-year performance period of 2022 through 2024 (the "2022 PSUs"),
•529,500 PSUs to be earned over a three-year performance period of 2021 through 2023 (the "2021 PSUs") and
•296,600 PSUs to be earned over a three-year performance period of 2020 through 2022 (the "2020 PSUs").
In Q1 2022, the performance conditions were established for Tranche 1 of the 2022 PSUs, Tranche 2 of the 2021 PSUs and Tranche 3 of the 2020 PSUs. Accordingly, one-third of each of these PSUs were considered granted in Q1 2022.
In Q1 2021, the performance conditions were established for Tranche 1 of the 2021 PSUs and Tranche 2 of the 2020 PSUs. These performance conditions involved a qualitative assessment which was made by the Compensation Committee in Q4 2021. Accordingly, one-third of each of these PSUs were considered granted in Q4 2021.
In Q1 2020, the performance conditions were established for Tranche 1 of the 2020 PSUs. Accordingly, one-third of the 2020 PSUs were considered granted in Q1 2020.
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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 fair value of $6.1, $3.7 and $1.6 for the PSUs with market conditions granted in 2022, 2021 and 2020, respectively. The Monte Carlo simulation was computed using the following assumptions:
FY22 Award
FY21 Award
FY20 Award
Tranche 1
Tranche 2
Tranche 1
Tranche 3
Tranche 2
Tranche 1
Risk-free interest rate (1)
0.3
%
0.2
%
0.2
%
0.1
%
0.1
%
2.3
%
Expected term
3 years
2 years
2 years
1 year
1 year
3 years
Estimated volatility (2)
53.5
%
61.3
%
58.1
%
56.1
%
74.1
%
32.5
%
_______________________________________
(1)Based on the U.S. Government bond benchmark on the grant date.
(2)Represents the historical price volatility of our Class A Common Stock for the three-year period.
The total PSU expense (credit) and associated tax benefit (expense) for all outstanding awards for the three and nine months ended November 26, 2021 and November 27, 2020 are as follows:
Three Months Ended
Nine Months Ended
Performance Units
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Expense (credit)
$
(4.1)
$
0.1
$
1.5
$
0.4
Tax benefit (expense)
(1.0)
—
0.4
0.1
As of November 26, 2021, there was $0.3 of remaining unrecognized compensation expense related to granted nonvested PSUs, which is expected to be recognized over a remaining weighted-average period of 1.4 years.
The PSU activity for the nine months ended November 26, 2021 is as follows:
Maximum Number of Shares That May Be Issued Under Nonvested Units
Total
Weighted-Average Grant Date Fair Value per Unit
Nonvested as of February 26, 2021
898,156
$
14.06
Granted
1,019,517
14.38
Nonvested as of November 26, 2021
1,917,673
$
14.23
Restricted Stock Units
During the nine months ended November 26, 2021, we awarded 1,155,818 restricted stock units ("RSUs") to certain employees. RSUs have restrictions on transfer which lapse three years after the date of grant, at which time the RSUs will be issued as unrestricted shares of Class A Common Stock. RSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the requisite service period based on the value of the shares on the date of grant. For participants who are or become retirement-eligible during the service period, the RSUs are expensed over the period ending on the date the participant becomes retirement-eligible.
The total RSU expense and associated tax benefit for all outstanding awards for the three and nine months ended November 26, 2021 and November 27, 2020 are as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of November 26, 2021, there was $10.6 of remaining unrecognized compensation expense related to nonvested RSUs, which is expected to be recognized over a weighted-average period of 2.1 years.
The RSU activity for the nine months ended November 26, 2021 is as follows:
Nonvested Units
Total
Weighted-Average Grant Date Fair Value per Unit
Nonvested as of February 26, 2021
2,285,965
$
12.11
Granted
1,155,818
13.89
Vested
(121,384)
12.95
Forfeited
(65,085)
12.92
Nonvested as of November 26, 2021
3,255,314
$
12.58
9. LEASES
We have operating leases for corporate offices, sales offices, showrooms, manufacturing facilities, vehicles and equipment that expire at various dates through 2035. Certain lease agreements include contingent rental payments based on per unit usage over contractual levels (e.g., miles driven or machine hours used) and others include rental payments adjusted periodically for inflationary indexes. Additionally, some leases include options to renew or terminate the leases which can be exercised at our discretion.
The components of lease expense are as follows:
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Operating lease cost
$
13.2
$
12.8
$
39.5
$
38.8
Sublease rental income
(0.5)
(0.7)
(1.4)
(1.6)
$
12.7
$
12.1
$
38.1
$
37.2
Supplemental cash flow and other information related to leases are as follows:
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Cash flow information:
Operating cash flows used for operating leases
$
13.6
$
12.6
$
40.4
$
37.3
Leased assets obtained in exchange for new operating lease obligations
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the future minimum lease payments as of November 26, 2021:
Fiscal year ending in February
Amount (1)
2022
$
13.1
2023
50.2
2024
45.8
2025
43.2
2026
34.2
Thereafter
81.3
Total lease payments
$
267.8
Less: Interest
28.3
Present value of lease liabilities
$
239.5
_______________________________________
(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.
10.ACQUISITIONS
Viccarbe Habitat, S.L.
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), less an adjustment for working capital estimated at $1.5 (or €1.3), in an all-cash transaction using cash on-hand. An additional amount of $15.1 (or €13.0) is payable to the sellers based upon the achievement of certain sales and operating income targets over a three year period. 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. As a result, we recorded a related liability of $4.9 (or €4.2). An additional amount of $7.0 (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 will be 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, $25.6 related to goodwill and $5.3 related to tangible assets. The tangible assets mainly consisted of working capital (primarily accounts receivable, inventory and accounts payable), property, plant and equipment and deferred tax liabilities. 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 intention to expand the manufacturing of Viccarbe products in geographic regions outside of EMEA and 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 will be amortized over periods ranging from 9 to 13 years from the date of acquisition. The purchase price allocation for the acquisition was incomplete as of November 26, 2021. The amounts recognized related to the purchase price allocation will be finalized no later than one year after the acquisition date.
The following table summarizes the acquired identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Intangible Assets
Useful Life (Years)
Fair Value
Trademark
9.0
$
4.6
Dealer relationships
13.0
3.8
Know-how/designs
9.0
3.3
$
11.7
The fair value of the acquired intangible assets will be amortized on a straight-line basis over the remaining useful life. The estimated amortization expense for the next five years is as follows:
Fiscal Year Ending in February
Amount
2022
$
0.4
2023
1.1
2024
1.1
2025
1.2
2026
1.1
$
4.9
11. REPORTABLE SEGMENTS
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category. Unallocated corporate expenses are reported as Corporate.
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of furniture, architectural and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Smith System, AMQ, Orangebox and Viccarbe brands.
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase, Orangebox, Coalesse and Viccarbe brands, with a comprehensive portfolio of furniture, architectural and technology products.
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, architectural and technology products. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by architects and designers directly to end-use customers through a direct sales force primarily in North America.
We primarily review and evaluate revenue and operating income by segment in both our internal review processes and for our external financial reporting. We also allocate resources primarily based on revenue and operating income. Total assets by segment include manufacturing and other assets associated with each segment.
Corporate costs include unallocated portions of shared service functions such as information technology, corporate facilities, finance, human resources, research, legal and customer aviation, plus deferred compensation expense and income or losses associated with COLI. Corporate assets consist primarily of unallocated cash and cash equivalents, COLI, fixed assets and right-of-use assets related to operating leases.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue and operating income (loss) for the three and nine months ended November 26, 2021 and November 27, 2020 and total assets as of November 26, 2021 and February 26, 2021 by segment are presented in the following table:
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations:
This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 26, 2021. Reference to a year relates to the fiscal year, ended in February of the year indicated, rather than the calendar year, unless indicated by a specific date. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.
Non-GAAP Financial Measures
This item contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the condensed consolidated statements of income, balance sheets or statements of cash flows of the company. Pursuant to the requirements of Regulation G, we have provided a reconciliation below of the non-GAAP financial measures to the most directly comparable GAAP financial measure.
The non-GAAP financial measures used are (1) organic revenue growth (decline), which represents the change in revenue excluding the impacts of acquisitions and divestitures and estimated currency translation effects, and (2) adjusted operating income (loss), which represents operating income (loss) excluding goodwill impairment charges and restructuring costs. These measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors.
Financial Summary
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category. Unallocated corporate expenses are reported as Corporate.
* Currency translation effects represent the estimated net effect of translating Q3 2021 foreign currency revenues using the average exchange rates during Q3 2022.
* Currency translation effects represent the estimated net effect of translating year-to-date 2021 foreign currency revenues using the average exchange rates during year-to-date 2022.
Reconciliation of Operating Income to Adjusted Operating Income
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Operating income
$
15.9
2.2
%
$
—
—
%
$
18.0
0.9
%
$
36.3
1.9
%
Add: Goodwill impairment charge
—
—
—
—
—
—
17.6
0.9
Add: Restructuring costs
—
—
11.4
1.8
—
—
27.0
1.4
Adjusted operating income
$
15.9
2.2
%
$
11.4
1.8
%
$
18.0
0.9
%
$
80.9
4.2
%
Overview
During Q3 2022, we continued to see strengthening demand and a broader recovery of our industry. Our orders grew by 40% compared to the prior year, and revenue increased by 20% compared to the prior year. Supply chain disruptions in the Americas in the current year resulted in extended lead-times, shipment delays and adjustments to delivery schedules which we estimate caused at least $35 of revenue to shift from Q3 2022 into Q4 2022 compared to at least $40 of revenue which we estimate shifted from Q2 2022 to Q3 2022 for similar reasons. Revenue in Q3 2021 was negatively impacted by a delay of approximately $60 of shipments to Q4 2021 due to a temporary global operations shutdown we implemented to protect our systems during a cyberattack. During the quarter, our pipeline of project opportunities, requests for proposals and product mock-ups remained consistent with the levels we saw in Q2 2022.
The supply chain disruptions in the Americas, combined with continued significant inflation in steel and other commodities, net of pricing benefits, had an impact of approximately $40 on cost of sales in Q3 2022 compared to the prior year. We expect the supply chain disruptions and inflationary pressures from steel and other commodities to continue to impact our cost of sales in Q4 2022 and into 2023, but we expect our recent price increases to offset the current level of inflation in 2023.
Q3 2022 Compared to Q3 2021
We recorded net income of $9.6 and diluted earnings per share of $0.08 in Q3 2022 compared to net income of $2.1 and diluted earnings per share of $0.02 in the prior year. The prior year results included restructuring costs in the Americas, which decreased net income by $7.0 and diluted earnings per share by $0.06.
Operating income of $15.9 in Q3 2022 compared to break-even operating income in the prior year, which included $11.4 of restructuring costs. The increase was driven by higher revenue, partially offset by higher cost of sales as a percentage of revenue.
Revenue of $738.2 in Q3 2022 represented an increase of $120.7 or 20% compared to the prior year, driven by growth across all segments. Supply chain disruptions in the Americas in the current year resulted in extended lead-times, shipment delays and adjustments to delivery schedules which we estimate caused at least $35 of revenue to shift from Q3 2022 into Q4 2022 compared to at least $40 of revenue which we estimate shifted from Q2 2022 to Q3 2022 for similar reasons. Revenue in the prior year was negatively impacted by a delay of approximately $60 of shipments to Q4 2021 as a result of the temporary operations shutdown in Q3 2021. Revenue grew by 20% in the Americas, 17% in EMEA and 21% in the Other category compared to the prior year. After adjusting for a $12.9 impact from acquisitions and $0.3 of currency translation effects, the organic revenue growth was $107.5 or 17% compared to the prior year. The organic revenue growth was 17% in the Americas, 17% in EMEA and 20% in the Other category compared to the prior year.
Cost of sales as a percentage of revenue increased by 150 basis points in Q3 2022 compared to the prior year. The increase was driven by approximately $29 of higher inflation costs, net of pricing benefits, and approximately $11 of higher freight and labor costs and inefficiencies due to supply chain disruptions, partially offset by the benefits of higher revenue. Cost of sales as a percentage of revenue increased by 430 basis points in the Americas, while EMEA improved by 490 basis points and the Other category improved by 150 basis points.
Operating expenses of $187.7 in Q3 2022 represented an increase of $18.9, but a decline of 190 basis points as a percentage of revenue, compared to the prior year. The current year included approximately $13 of higher marketing and sales expenses, approximately $6 of higher discretionary spending and employee costs in other functional areas and $3.5 from acquisitions, partially offset by $2.9 of lower variable compensation expense.
Our Q3 2022 effective tax rate was 20.0%, which included $1.2 of discrete tax benefits. In the prior year, we recorded an income tax benefit of $6.3, which was primarily driven by benefits available under the U.S. Coronavirus Aid, Relief, and Economic Security Act.
Year-to-date 2022 Compared to Year-to-date 2021
We recorded year-to-date 2022 net income of $6.2 and diluted earnings per share of $0.05 compared to year-to-date 2021 net income of $19.5 and diluted earnings per share of $0.17. In year-to-date 2021, the results included: (1) a goodwill impairment charge related to the EMEA segment, which had the effect of decreasing net income by $17.6 and diluted earnings per share by $0.15, and (2) restructuring costs due to workforce reductions in the Americas, which had the effect of decreasing net income by $16.5 and diluted earnings per share by $0.14. Year-to-date 2022 operating income of $18.0 represented a decrease of $18.3 compared to the prior year. The decrease was due to higher cost of sales as a percentage of revenue and higher operating expenses, partially offset by higher revenue and the impact of the goodwill impairment charge and restructuring costs in the prior year. Excluding the impact of the goodwill impairment charge and restructuring costs in the prior year, adjusted operating income decreased by $62.9 in year-to-date 2022 compared to year-to-date 2021.
Year-to-date 2022 revenue of $2,019.6 represented an increase of $100.5 or 5% compared to year-to-date 2021. Revenue increased by 1% in the Americas, 17% in EMEA and 12% in the Other category compared to the prior year. After adjusting for $38.8 of impact from acquisitions and $24.1 of currency translation effects, the organic revenue growth was $37.6 or 2% compared to the prior year. The Americas had an organic revenue decline of 2%, while the organic revenue growth was 12% in EMEA and 10% in the Other category compared to the prior year.
Cost of sales as a percentage of revenue increased by 220 basis points in year-to-date 2022 compared to year-to-date 2021. The increase was driven by approximately $57 of higher inflation costs, net of pricing benefits, and approximately $16 of higher freight and labor costs and inefficiencies due to supply chain disruptions, partially offset by the benefits of higher revenue and $6.6 of lower variable compensation expense. Cost of sales as a percentage of revenue increased by 370 basis points in the Americas and by 220 basis points in the Other category, while EMEA improved by 320 basis points.
Operating expenses of $547.1 in year-to-date 2022 represented an increase of $48.6, or 110 basis points as a percentage of revenue, compared to the prior year. The prior year included approximately $41 of lower employee costs as a result of temporary hour and pay reductions and gains of $6.7 from the sale of land. The current year included approximately $26 of higher marketing and sales expenses, approximately $11 of higher discretionary spending in other functional areas and $9.5 from acquisitions, partially offset by approximately $18 of lower
employee costs (due to the benefits from workforce reductions in the prior year), a $15.4 gain from the sale of land and $9.6 of lower variable compensation expense.
Our year-to-date 2022 effective tax rate was (138.5)% compared to a year-to-date 2021 effective tax rate of 18.1%. The year-to-date 2022 effective tax rate included $4.6 of discrete tax benefits. The year-to-date 2021 effective tax rate reflected the non-deductible nature of the goodwill impairment charge recorded in Q1 2021.
Interest Expense, Investment Income and Other Income, Net
Three Months Ended
Nine Months Ended
Interest Expense, Investment Income and Other Income, Net
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Interest expense
$
(6.5)
$
(6.6)
$
(19.3)
$
(20.7)
Investment income
0.1
0.2
0.4
1.2
Other income, net:
Equity in income of unconsolidated affiliates
2.2
2.6
4.5
6.6
Foreign exchange gains (losses)
0.9
0.1
0.6
(1.0)
Net periodic pension and post-retirement credit, excluding service cost
(0.2)
—
(0.5)
(0.1)
Miscellaneous income (expense), net
(0.4)
(0.5)
(1.1)
1.5
Total other income, net
2.5
2.2
3.5
7.0
Total interest expense, investment income and other income, net
$
(3.9)
$
(4.2)
$
(15.4)
$
(12.5)
Interest expense in year-to-date 2021 included the impact of borrowings under our global credit facility in Q1 2021, which were repaid during Q2 2021. Other income, net in year-to-date 2021 included a $2.8 gain related to additional proceeds received in the prior year from the partial sale of an investment in an unconsolidated affiliate in 2018.
Business Segment Review
See Note 10 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, architectural and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Smith System, AMQ, Orangebox and Viccarbe brands.
Three Months Ended
Nine Months Ended
Statement of Operations Data — Americas
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Revenue
$
500.3
100.0
%
$
416.4
100.0
%
$
1,399.9
100.0
%
$
1,381.5
100.0
%
Cost of sales
370.3
74.0
290.4
69.7
1,015.4
72.5
950.8
68.8
Restructuring costs
—
—
2.3
0.6
—
—
9.2
0.7
Gross profit
130.0
26.0
123.7
29.7
384.5
27.5
421.5
30.5
Operating expenses
118.9
23.8
100.8
24.2
343.7
24.6
318.8
23.1
Restructuring costs
—
—
9.1
2.2
—
—
17.8
1.3
Operating income
$
11.1
2.2
%
$
13.8
3.3
%
$
40.8
2.9
%
$
84.9
6.1
%
Reconciliation of Operating Income to Adjusted Operating Income — Americas
Operating income in the Americas declined by $2.7 in Q3 2022 compared to the prior year. The decline was driven by higher cost of sales as a percentage of revenue, partially offset by higher revenue and $11.4 of restructuring costs related to workforce reductions in the prior year. Excluding the impact of the restructuring costs in the prior year, adjusted operating income decreased by $14.1 in Q3 2022 compared to the prior year. Operating income in year-to-date 2022 represented a decrease of $44.1 compared to year-to-date 2021. The decrease was driven by higher cost of sales as a percentage of revenue and higher operating expenses, partially offset by higher revenue and $27.0 of restructuring costs in the prior year. Excluding the impact of restructuring costs in the prior year, year-to-date 2022 adjusted operating income represented a decrease of $71.1 compared to the prior year.
The Americas revenue represented 67.8% of consolidated revenue in Q3 2022. Q3 2022 revenue of $500.3 represented an increase of $83.9 or 20% compared to the prior year. Supply chain disruptions in the Americas in the current year resulted in extended lead-times, shipment delays and adjustments to delivery schedules which we estimate caused at least $35 of revenue to shift from Q3 2022 into Q4 2022 compared to at least $40 of revenue which we estimate shifted from Q2 2022 to Q3 2022 for similar reasons. Revenue in the prior year was negatively impacted by a delay of approximately $50 of shipments to Q4 2021 as a result of the temporary operations shutdown in Q3 2021. After adjusting for a $12.2 impact from acquisitions and $0.7 of currency translation effects, the organic revenue growth was $71.0 or 17% compared to the prior year. Year-to-date 2022 revenue of $1,399.9 represented an increase of $18.4 or 1% compared to year-to-date 2021. After adjusting for a $38.1 impact from acquisitions and $4.9 of currency translation effects, the organic revenue decline was $24.6 or 2% compared to the prior year.
Cost of sales as a percentage of revenue increased by 430 basis points in Q3 2022 compared to the prior year. The increase was driven by approximately $27 of higher inflation costs, net of pricing benefits, and approximately $10 of higher freight and labor costs and inefficiencies due to supply chain disruptions, partially offset by the benefits of higher revenue. Cost of sales as a percentage of revenue increased by 370 basis points in year-to-date 2022 compared to year-to-date 2021. The increase was driven by approximately $51 of higher inflation costs, net of pricing benefits, and approximately $15 of higher freight and labor costs and inefficiencies due to supply chain disruptions, partially offset by $5.6 of lower variable compensation expense.
Operating expenses in Q3 2022 increased by $18.1, but decreased by 40 basis points as a percentage of revenue, compared to the prior year. The current year included approximately $13 of higher marketing and sales expenses, approximately $5 of higher discretionary spending and employee costs in other functional areas and $2.8 from acquisitions, partially offset by $1.6 of lower variable compensation expense. Operating expenses in year-to-date 2022 increased by $24.9, or 150 basis points as a percentage of revenue, compared to year-to-date 2021. The prior year included approximately $30 of lower employee costs as a result of temporary hour and pay reductions and gains of $6.7 from the sale of land. The current year included approximately $22 of higher marketing and sales expenses, approximately $7 of higher discretionary spending in other functional areas and $8.8 from acquisitions, partially offset by approximately $18 of lower employee costs (due to the benefits from workforce reductions in the prior year), a $15.4 gain from the sale of land and $6.9 of lower variable compensation expense.
EMEA
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase, Orangebox, Coalesse and Viccarbe brands, with a comprehensive portfolio of furniture, architectural and technology products.
Reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss) — EMEA
Three Months Ended
Nine Months Ended
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Operating income (loss)
$
8.3
4.9
%
$
(3.7)
(2.6)
%
$
1.0
0.2
%
$
(31.8)
(8.6)
%
Add: Goodwill impairment charge
—
—
—
—
—
—
17.6
4.8
Adjusted operating income (loss)
$
8.3
4.9
%
$
(3.7)
(2.6)
%
$
1.0
0.2
%
$
(14.2)
(3.8)
%
EMEA operating income improved by $12.0 in Q3 2022 compared to the prior year. The increase was driven by higher revenue, lower cost of sales as a percentage of revenue and lower operating expenses as a percentage of revenue. Operating income in EMEA in year-to-date 2022 improved by $32.8 compared to year-to-date 2021, which included a $17.6 goodwill impairment charge related to our Orangebox U.K. reporting unit. Adjusted for the goodwill impairment charge, operating income improved by $15.2, driven by the same factors as the quarter.
EMEA revenue represented 22.8% of consolidated revenue in Q3 2022. Q3 2022 revenue of $168.2 represented an increase of $24.9 or 17% compared to the prior year. Revenue in the prior year was negatively impacted by a delay of approximately $10 of shipments to Q4 2021 as a result of the temporary operations shutdown in Q3 2021. The increase in Q3 2022 was broad-based across most markets, driven by growth in the United Kingdom, including Orangebox, and in Iberia. After adjusting for $0.8 of currency translation effects and a $0.7 impact from an acquisition, the organic revenue growth was $25.0 or 17% compared to the prior year. Year-to-date 2022 revenue increased by $62.0 or 17% compared to year-to-date 2021. The increase was broad-based across most markets, driven by the same factors as the quarter. The increase was also impacted by a delay of approximately $10 of shipments in the prior year to Q4 2021. After adjusting for $15.6 of currency translation effects and a $0.7 impact from an acquisition, the organic revenue growth was $45.7 or 12% compared to the prior year.
Cost of sales as a percentage of revenue decreased by 490 basis points in Q3 2022 compared to the prior year. The improvement was driven by higher revenue, partially offset by approximately $1 of higher inflation costs, net of pricing benefits. Cost of sales as a percentage of revenue decreased by 320 basis points in year-to-date 2022 compared to year-to-date 2021. The improvement was driven by higher revenue and approximately $3 of benefits from shifts in business mix, partially offset by approximately $4 of higher inflation costs, net of pricing benefits.
Operating expenses in Q3 2022 increased by $2.5, but decreased by 260 basis points as a percentage of revenue, compared to the prior year, which included approximately $2 of lower employee costs as a result of temporary hour and pay reductions. The remaining increase was driven by approximately $1 of higher discretionary spending and $0.7 from an acquisition, partially offset by $0.8 of lower variable compensation expense. Year-to-date 2022 operating expenses increased by $14.2, but decreased by 70 basis points as a percentage of revenue, compared to year-to-date 2021, which included approximately $8 of lower employee costs as a result of temporary hour and pay reductions. The remaining increase was driven by approximately $4 of higher marketing and sales expenses, approximately $3 of higher discretionary spending and $0.7 from an acquisition, partially offset by $1.7 of lower 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, architectural and technology products. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by architects and designers directly to end-use customers through a direct sales force primarily in North America.
Operating income in the Other category improved by $4.2 in Q3 2022 compared to the prior year. The improvement was driven by higher revenue, lower cost of sales as a percentage of revenue and lower operating expenses as a percentage of revenue. Year-to-date 2022 operating results decreased by $4.8 compared to year-to-date 2021, driven by higher cost of sales as a percentage of revenue, partially offset by higher revenue.
Revenue in the Other category represented 9.4% of consolidated revenue in Q3 2022. Q3 2022 revenue of $69.7 represented an increase of $11.9 or 21% compared to the prior year. The increase was primarily driven by China, Designtex and Japan, partially offset by India, Southeast Asia and Australia. After adjusting for $0.4 of currency translation effects, the organic revenue growth was $11.5 or 20% compared to the prior year. Year-to-date 2022 revenue of $189.0 represented an increase of $20.1 or 12% compared to year-to-date 2021. The increase was primarily driven by China, Designtex, Japan and Australia, partially offset by India and Southeast Asia. After adjusting for $3.6 of currency translation effects, the organic revenue growth was $16.5 or 10% compared to the prior year.
Cost of sales as a percentage of revenue decreased by 150 basis points in Q3 2022 compared to the prior year. The improvement was driven by higher revenue and approximately $1 of benefits from shifts in business mix, partially offset by $0.7 of higher inflation costs, net of pricing benefits, and $0.5 of higher freight costs and inefficiencies due to supply chain disruptions. Cost of sales as a percentage of revenue increased by 220 basis points in year-to-date 2022 compared to the prior year. The increase was driven by approximately $2 of higher inflation costs, net of pricing benefits, and $1.5 of higher freight costs and inefficiencies due to supply chain disruptions, partially offset by approximately $1 of benefits from shifts in business mix.
Operating expenses in Q3 2022 increased by $0.7, but decreased by 520 basis points as a percentage of revenue compared to the prior year, driven by higher discretionary spending. Operating expenses in year-to-date 2022 increased by $7.3, or 20 basis points as a percentage of revenue compared to year-to-date 2021, which included approximately $6 of lower employee costs as a result of temporary pay reductions. The remaining increase was driven by the same factor 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.
Three Months Ended
Six Months Ended
Statement of Operations Data — Corporate
November 26, 2021
November 27, 2020
November 26, 2021
November 27, 2020
Operating expenses
$
5.5
$
7.9
$
16.3
$
14.1
The decrease in operating expenses in Q3 2022 compared to the prior year was driven by $3.5 of lower deferred compensation expense, partially offset by $1.2 of lower COLI income. The increase in operating expenses in year-to-date 2022 was primarily driven by $3.5 of lower COLI income and higher employee costs as a result of temporary hour and pay reductions in the prior year, partially offset by $2.3 of lower deferred compensation expense.
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.
As of November 26, 2021, we held a total of $275.2 in cash and cash equivalents. Of that total, 79% was located in the U.S. and the remaining 21% was located primarily in China (including Hong Kong), Mexico, Singapore, Malaysia, India and Spain.
COLI investments are recorded at their net cash surrender value. Our investments in COLI policies are intended to be utilized as a long-term funding source for long-term benefit obligations. However, COLI can also be used as a source of liquidity. We believe the financial strength of the issuing insurance companies associated with our COLI policies is sufficient to meet their obligations.
Availability under credit facilities may be reduced related to compliance with applicable covenants. See Liquidity Facilities for more information.
The following table summarizes our Condensed Consolidated Statements of Cash Flows for the nine months ended November 26, 2021 and November 27, 2020:
Nine Months Ended
Cash Flow Data
November 26, 2021
November 27, 2020
Net cash provided by (used in):
Operating activities
$
(59.1)
$
37.2
Investing activities
(51.3)
(17.8)
Financing activities
(101.5)
(76.6)
Effect of exchange rate changes on cash and cash equivalents
(1.6)
1.8
Net decrease in cash, cash equivalents and restricted cash
(213.5)
(55.4)
Cash, cash equivalents and restricted cash, beginning of period
495.6
547.1
Cash, cash equivalents and restricted cash, end of period
$
282.1
$
491.7
Cash provided by (used in) operating activities
Nine Months Ended
Cash Flow Data — Operating Activities
November 26, 2021
November 27, 2020
Net income
$
6.2
$
19.5
Depreciation and amortization
62.2
64.1
Goodwill impairment charge
—
17.6
Restructuring costs
—
27.0
Changes in accounts receivable, inventories and accounts payable
(84.5)
41.8
Employee compensation liabilities
(15.3)
(130.5)
Employee benefit obligations
(13.5)
(25.2)
Changes in other operating assets and liabilities
(14.2)
22.9
Net cash provided by (used in) operating activities
$
(59.1)
$
37.2
Annual payments related to accrued variable compensation and retirement plan contributions totaled $50.4 in year-to-date 2022 compared to $148.0 in year-to-date 2021. In year-to-date 2022, we used cash in working capital, primarily driven by increased inventory levels in connection with supply chain disruptions and increased accounts receivable due to revenue growth.
Capital expenditures in year-to-date 2022 primarily related to investments in manufacturing operations, information technology, product development and customer-facing facilities. Capital expenditures were higher compared to year-to-date 2021 due to reduced spending in the prior year as a result of the COVID-19 pandemic. We sold land for proceeds of $17.2 in year-to-date 2022 and $7.1 in year-to-date 2021. Other investing activities in year-to-date 2022 included $7.0 of proceeds from COLI policy maturities. Other investing activities in year-to-date 2021 included $3.3 of additional proceeds from the partial sale of an investment in an unconsolidated affiliate in 2018.
Cash used in financing activities
Nine Months Ended
Cash Flow Data — Financing Activities
November 26, 2021
November 27, 2020
Dividends paid
$
(45.9)
$
(31.8)
Common stock repurchases
(54.0)
(42.7)
Borrowings on lines of credit
—
250.0
Repayments on lines of credit
—
(250.0)
Other
(1.6)
(2.1)
Net cash used in financing activities
$
(101.5)
$
(76.6)
We paid dividends of $0.10, $0.145 and $0.145 per common share in Q1 2022, Q2 2022 and Q3 2022, respectively, and $0.07, $0.10 and $0.10 per common share in Q1 2021, Q2 2021 and Q3 2021, respectively.
In year-to-date 2022, we repurchased 3,991,083 shares of Class A common stock, 392,812 of which were made to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards, pursuant to the terms of our Incentive Compensation Plan. In year-to-date 2021, we repurchased 3,288,795 shares of Class A common stock, 288,795 of which were made to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards, pursuant to the terms of our Incentive Compensation Plan.
As of November 26, 2021, we had $7.6 of remaining availability under the $150 share repurchase program approved by our Board of Directors in 2016.
Off-Balance Sheet Arrangements
During Q3 2022, no material change in our off-balance sheet arrangements occurred.
Contractual Obligations
During Q3 2022, no material change in our contractual obligations occurred.
Liquidity Facilities
Our total liquidity facilities as of November 26, 2021 were:
Liquidity Facilities
November 26, 2021
Global committed bank facility
$
250.0
Other committed bank facility
4.7
Various uncommitted lines
19.2
Total credit lines available
273.9
Less: Borrowings outstanding
(1.7)
Less: Other guarantees
(1.6)
Available capacity
$
270.6
We have a $250.0 global committed bank facility in effect through 2025. As of November 26, 2021, there were no borrowings outstanding under the facility, and we were in compliance with all covenants under the facility.
We have a $12.5 committed bank facility related to a subsidiary, which has current availability of $4.7 based on eligible accounts receivable of the subsidiary. As of November 26, 2021, $1.7 was outstanding under the facility.
The various uncommitted lines may be changed or canceled by the applicable lenders at any time. There were no borrowings outstanding, and there were $1.6 of guarantees which reduced our availability, under the various uncommitted lines as of November 26, 2021.
In addition to the available capacity reflected in the table above, we have credit agreements totaling $33.9 which can be utilized to support bank guarantees, letters of credit or foreign exchange contracts. As of November 26, 2021, we had $12.7 in outstanding letters of credit and bank guarantees against these agreements. There were no draws against our letters of credit during year-to-date 2022 or year-to-date 2021.
Total consolidated debt as of November 26, 2021 was $482.9. Our debt primarily consists of $444.6 in term notes due in 2029 with an effective interest rate of 5.6%. In addition, we have a term loan with a balance of $35.5 as of November 26, 2021. The term loan has a floating interest rate based on 30-day LIBOR plus 1.20% and is due in 2024. The term notes are unsecured, and the term loan is secured by our two corporate aircraft. The term notes and the term loan do not contain financial covenants and are not cross-defaulted to our other debt facilities.
Liquidity Outlook
As of November 26, 2021, our total liquidity, which is comprised of cash and cash equivalents and the cash surrender value of COLI, aggregated to $445.2. Our liquidity position, funds available under our credit facilities and cash generated from operations are expected to be sufficient to finance our known or foreseeable liquidity needs.
Our significant funding requirements include operating expenses, non-cancelable operating lease obligations, capital expenditures, variable compensation and retirement plan contributions, dividend payments and debt service obligations. We have flexibility over some of these uses of cash, including capital expenditures and discretionary operating expenses, to preserve our liquidity position. We expect capital expenditures to total approximately $60 to $70 in 2022 compared to $41.3 in 2021.
On December 16, 2021, we announced a quarterly dividend on our common stock of $0.145 per share, or approximately $16, to be paid in Q4 2022. Future dividends will be subject to approval by our Board of Directors.
Critical Accounting Estimates
During Q3 2022, there have been no changes in the items that we have identified as critical accounting estimates.
Recently Issued Accounting Standards
See Note 2 to the condensed consolidated financial statements.
Forward-looking Statements
From time to time, in written and oral statements, we discuss our expectations regarding future events and our plans and objectives for future operations. These forward-looking statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on current beliefs of management as well as assumptions made by, and information currently available to, us. Forward-looking statements generally are accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “possible,” “potential,” “predict,” “project," "target” or other similar words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to vary from our expectations because of factors such as, but not limited to, competitive and general economic conditions domestically and internationally; acts of terrorism, war, governmental action, natural disasters, pandemics and other Force Majeure events; cyberattacks; the COVID-19 pandemic and the actions taken by various governments and third parties to combat the pandemic; changes in the legal and regulatory environment; changes in raw material, commodity and other input costs; currency fluctuations; changes in customer demand; and the other risks and contingencies detailed in this Report, our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
Item 3.Quantitative and Qualitative Disclosures About Market Risk:
The nature of market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) faced by us as of November 26, 2021 is the same as disclosed in our Annual Report on Form 10-K for the fiscal
year ended February 26, 2021. We are exposed to market risks from foreign currency exchange, interest rates, commodity prices and fixed income and equity prices, which could affect our operating results, financial position and cash flows.
Foreign Exchange Risk
During Q3 2022, no material change in foreign exchange risk occurred.
Interest Rate Risk
During Q3 2022, no material change in interest rate risk occurred.
Commodity Price Risk
During Q3 2022, no material change in commodity price risk occurred.
Fixed Income and Equity Price Risk
During Q3 2022, no material change in fixed income and equity price risk occurred.
Item 4.Controls and Procedures:
(a) Disclosure Controls and Procedures. Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of November 26, 2021. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of November 26, 2021, our disclosure controls and procedures were effective in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and (2) ensuring that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our third 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 26, 2021. 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 26, 2021.
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 2022:
Period
(a) Total Number of Shares Purchased
(b) Average Price Paid per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(d) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) (in millions)
8/28/2021 - 10/1/2021
1,193,884
$
13.13
1,193,884
$
14.2
10/2/2021 - 10/29/2021
511,769
$
12.41
478,484
$
8.3
10/30/201 - 11/26/2021
58,430
$
11.93
58,430
$
7.6
Total
1,764,083
(2)
1,730,798
_______________________________________
(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. On June 28, 2021, we entered into a stock repurchase agreement with an independent third party broker under which the broker is authorized to repurchase up to $50 of shares of our common stock on our behalf during the period June 28, 2021 through December 20, 2021, subject to certain price, market and volume constraints specified in the agreement. The agreement was established in accordance with Rule 10b5-1 under the Exchange Act. Shares purchased under the agreement are part of our share repurchase program approved in January 2016.
(2)33,285 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.
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* Management contract or compensatory plan or arrangement.
(1) Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on September 24, 2021 (commission file number 001-13873), and incorporated herein by reference.
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.
STEELCASE INC.
By:
/s/ Robin L. Zondervan
Robin L. Zondervan Vice President, Corporate Controller & Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer)
