[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q3 2023 financial statements report increased revenue and net income, stable assets, positive operating cash flow, and a significant cash decrease from acquisitions [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Statement of Income Highlights (in millions, except per share data) | Metric | Three Months Ended Nov 25, 2022 | Three Months Ended Nov 26, 2021 | Nine Months Ended Nov 25, 2022 | Nine Months Ended Nov 26, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $826.9 | $738.2 | $2,430.9 | $2,019.6 | | **Gross Profit** | $237.8 | $203.6 | $680.2 | $565.1 | | **Operating Income** | $20.5 | $15.9 | $36.8 | $18.0 | | **Net Income** | $11.4 | $9.6 | $19.6 | $6.2 | | **Diluted EPS** | $0.10 | $0.08 | $0.17 | $0.05 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (in millions) | Metric | Nov 25, 2022 | Feb 25, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $55.0 | $200.9 | | Inventories | $378.5 | $326.2 | | Total current assets | $914.5 | $959.2 | | Total assets | $2,268.4 | $2,261.0 | | Total current liabilities | $679.1 | $567.2 | | Long-term debt | $445.6 | $477.4 | | Total liabilities | $1,458.8 | $1,408.8 | | Total shareholders' equity | $809.6 | $852.2 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Highlights for Nine Months Ended (in millions) | Metric | Nov 25, 2022 | Nov 26, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1.4 | $(59.1) | | Net cash used in investing activities | $(127.5) | $(51.3) | | Net cash used in financing activities | $(16.6) | $(101.5) | | Net decrease in cash | $(145.3) | $(213.5) | | Cash, end of period | $61.7 | $282.1 | - The significant use of cash in investing activities for the nine months ended Nov 25, 2022, was primarily driven by acquisitions totaling **$105.3 million**[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - In Q3 2022, the company acquired Viccarbe Habitat, S.L. for **$34.9 million** in cash, with up to an additional **$13.5 million** in contingent consideration, resulting in goodwill of **$25.8 million** and identifiable intangible assets of **$11.7 million**[69](index=69&type=chunk)[70](index=70&type=chunk) - In Q2 2023, the company acquired Halcon Furniture LLC for **$127.5 million**, funded by cash and borrowings, resulting in goodwill of **$37.1 million** and identifiable intangible assets of **$51.8 million**[74](index=74&type=chunk)[75](index=75&type=chunk) - The company initiated restructuring actions in Q3 2023 to reduce operational spending, resulting in **$10.6 million** of costs related to the termination of approximately **130** salaried employees in the Americas segment and Corporate functions[87](index=87&type=chunk) Revenue by Segment (in millions) | Segment | Three Months Ended Nov 25, 2022 | Three Months Ended Nov 26, 2021 | Nine Months Ended Nov 25, 2022 | Nine Months Ended Nov 26, 2021 | | :--- | :--- | :--- | :--- | :--- | | 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 | | **Total** | **$826.9** | **$738.2** | **$2,430.9** | **$2,019.6** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q3 2023 revenue grew **12%** from pricing benefits, improving gross margins, despite a **17%** order decline due to macroeconomic concerns, maintaining sufficient liquidity [Results of Operations](index=22&type=section&id=Results%20of%20Operations) - Q3 2023 revenue increased **12%** YoY to **$826.9 million**, driven by significant pricing benefits which exceeded inflation, with organic revenue growth at **13%**[94](index=94&type=chunk)[97](index=97&type=chunk) - Orders declined by **17%** in Q3 2023 compared to the prior year across all segments, attributed to softening demand from macroeconomic and geopolitical concerns[95](index=95&type=chunk) - Gross margin improved as cost of sales as a percentage of revenue decreased by **140 basis points** in Q3 2023, driven by approximately **$55 million** in higher pricing benefits, net of inflation[98](index=98&type=chunk) - Operating expenses increased by **$20.4 million** in Q3 2023, primarily due to higher variable compensation (**$14.9 million**), expenses from acquisitions (**$8.1 million**), and higher marketing/sales expenses (**$3.4 million**)[99](index=99&type=chunk)[101](index=101&type=chunk) [Business Segment Review](index=26&type=section&id=Business%20Segment%20Review) - **Americas:** Revenue grew **19%** in Q3 YoY to **$594.7 million**, driven by pricing benefits (~**$65 million**) and higher volume (~**$30 million**), with operating income increasing to **$21.2 million** from **$11.1 million**[109](index=109&type=chunk)[110](index=110&type=chunk) - **EMEA:** Revenue decreased **6%** in Q3 YoY to **$157.7 million**, as higher pricing benefits (~**$15 million**) were more than offset by unfavorable currency translation (~**$25 million**) and lower volume, causing operating income to fall to **$4.2 million** from **$8.3 million**[114](index=114&type=chunk)[115](index=115&type=chunk) - **Other:** Revenue increased **7%** in Q3 YoY to **$74.5 million**, driven by growth in India, Designtex, and China, though the segment posted an operating loss of **$0.3 million** compared to income of **$2.0 million** in the prior year[119](index=119&type=chunk)[120](index=120&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Sources (in millions) | Source | Nov 25, 2022 | Feb 25, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $55.0 | $200.9 | | Company-owned life insurance | $161.2 | $168.0 | | Availability under credit facilities | $229.0 | $262.0 | | **Total liquidity sources available** | **$445.2** | **$630.9** | - Total consolidated debt was **$516.0 million** as of November 25, 2022, including **$34.0 million** outstanding under the **$250.0 million** global committed bank facility[139](index=139&type=chunk)[142](index=142&type=chunk) - The company is implementing cost-saving initiatives, including workforce reductions expected to save ~**$19 million** annually and winding down its aviation department for an additional ~**$11 million** in annualized savings[146](index=146&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material changes to its market risk exposures, including foreign currency, interest rates, commodity, and equity prices, during Q3 2023 - There were no material changes in the company's market risks related to foreign exchange, interest rates, commodity prices, or fixed income and equity prices during Q3 2023[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of November 25, 2022, with no material changes to internal control over financial reporting during Q3 - The CEO and CFO concluded that as of November 25, 2022, the company's disclosure controls and procedures were effective[156](index=156&type=chunk) - No material changes to the internal control over financial reporting were identified during the third fiscal quarter[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022 - There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended February 25, 2022[160](index=160&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2023, **64,184** shares were repurchased for tax withholding, not under the public program, with **$6.4 million** remaining for future repurchases Q3 2023 Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 8/27/2022 - 9/30/2022 | — | $— | | 10/1/2022 - 10/28/2022 | 45,358 | $6.97 | | 10/29/22 - 11/25/2022 | 18,826 | $6.95 | | **Total** | **64,184** | **N/A** | - All shares repurchased in Q3 were to satisfy tax withholding obligations for equity awards and were not part of the publicly announced repurchase plan[163](index=163&type=chunk) - As of November 25, 2022, **$6.4 million** remained available under the company's share repurchase program approved in January 2016[138](index=138&type=chunk)[162](index=162&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Form 10-Q exhibits include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, alongside Inline XBRL documents - The exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[165](index=165&type=chunk) - Interactive Data Files (Inline XBRL documents) are also included as exhibits[165](index=165&type=chunk)

Steelcase® Investor Presentation FY2023 Third Quarter Investment Thesis Steelcase Q3, 2023 We believe the office will continue to be very relevant for innovation, culture and collaboration Steelcase is an industry leader in a changing workplace environment that we believe provides growth opportunities Efforts to diversify the customers and markets we serve brings additional opportunity Experienced management team has led the company through similar previous cycles Recent price-cost tailwinds expected to con ...

Steelcase Inc. (NYSE:SCS) Q3 2023 Results Earnings Conference Call December 20, 2022 8:30 AM ET Company Participants Mike O'Meara - Director, Investor Relations and Financial Planning and Analysis Sara Armbruster - President and Chief Executive Officer David Sylvester - Senior Vice President and Chief Financial Officer Conference Call Participants Reuben Garner - The Benchmark Company Greg Burns - Sidoti & Company Steven Ramsey - Thompson Research Group Budd Bugatch - Water Tower Research Operator Good morn ...

[PART I. Financial Information](index=3&type=section&id=PART%20I%20Financial%20Information) This section presents unaudited financial statements, management's analysis, market risks, and controls [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents revenues, costs, gross profit, operating income, and net income (loss) over specified periods Condensed Consolidated Statements of Operations (Unaudited) (in millions, except per share data) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $863.3 | $724.8 | $1,604.0 | $1,281.4 | | Cost of sales | $612.5 | $518.0 | $1,160.7 | $919.9 | | Gross profit | $250.8 | $206.8 | $442.4 | $361.5 | | Operating income | $28.9 | $33.9 | $16.3 | $2.1 | | Net income (loss) | $19.6 | $24.7 | $8.2 | $(3.4) | | Basic EPS | $0.17 | $0.21 | $0.07 | $(0.03) | | Diluted EPS | $0.17 | $0.21 | $0.07 | $(0.03) | | Dividends declared and paid per common share | $0.145 | $0.145 | $0.290 | $0.245 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Details net income (loss) and other comprehensive income (loss) components for total comprehensive income (loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (in millions) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $19.6 | $24.7 | $8.2 | $(3.4) | | Total other comprehensive income (loss), net | $(20.8) | $(12.1) | $(39.2) | $(10.9) | | Comprehensive income (loss) | $(1.2) | $12.6 | $(31.0) | $(14.3) | - Foreign currency translation adjustments were a significant negative contributor to other comprehensive income (loss), with a **$(21.3) million impact** for the three months ended August 26, 2022, and **$(39.9) million** for the six months ended August 26, 2022[13](index=13&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents a snapshot of the Company's assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in millions) | Asset/Liability | August 26, 2022 | February 25, 2022 | | :------------------------------------------ | :-------------- | :---------------- | | Cash and cash equivalents | $52.2 | $200.9 | | Accounts receivable, net | $413.3 | $340.4 | | Inventories | $396.7 | $326.2 | | Total current assets | $952.9 | $959.2 | | Total assets | $2,302.6 | $2,261.0 | | Accounts payable | $274.2 | $243.6 | | Short-term borrowings and current portion of long-term debt | $118.1 | $5.1 | | Total current liabilities | $725.1 | $567.2 | | Total liabilities | $1,503.2 | $1,408.8 | | Total shareholders' equity | $799.4 | $852.2 | - Cash and cash equivalents decreased significantly from **$200.9 million to $52.2 million**, while short-term borrowings increased from **$5.1 million to $118.1 million**, indicating a shift in liquidity management[16](index=16&type=chunk) - Goodwill increased from **$242.8 million to $277.0 million**, and other intangible assets, net, increased from **$85.5 million to $123.0 million**, reflecting recent acquisitions[16](index=16&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Outlines changes in common shares, paid-in capital, retained earnings, and accumulated other comprehensive income Key Changes in Shareholders' Equity (in millions, except share data) | Metric | Three Months Ended Aug 26, 2022 | Six Months Ended Aug 26, 2022 | | :-------------------------------------- | :------------------------------ | :---------------------------- | | Common shares outstanding, end of period | 112,762,002 | 112,762,002 | | Additional paid-in capital, end of period | $13.7 | $13.7 | | Accumulated other comprehensive income (loss), end of period | $(89.8) | $(89.8) | | Retained earnings, end of period | $875.5 | $875.5 | | Total shareholders' equity | $799.4 | $799.4 | - Accumulated other comprehensive income (loss) significantly declined from **$(50.6) million** at the beginning of the six-month period to **$(89.8) million**, primarily due to foreign currency translation adjustments[19](index=19&type=chunk)[41](index=41&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Categorizes cash flows into operating, investing, and financing activities, impacting cash balances Condensed Consolidated Statements of Cash Flows (Unaudited) (in millions) | Activity | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :------------------------------------------ | :---------------------------- | :---------------------------- | | Net cash used in operating activities | $(74.4) | $(61.6) | | Net cash used in investing activities | $(115.3) | $(6.5) | | Net cash provided by (used in) financing activities | $43.3 | $(59.9) | | Effect of exchange rate changes on cash and cash equivalents | $(2.0) | $(0.6) | | Net decrease in cash, cash equivalents and restricted cash | $(148.4) | $(128.6) | | Cash and cash equivalents and restricted cash, end of period | $58.6 | $367.0 | - Net cash used in investing activities increased substantially from **$(6.5) million** in the prior year to **$(115.3) million**, primarily due to acquisitions, net of cash acquired, totaling **$(105.4) million**[22](index=22&type=chunk)[138](index=138&type=chunk) - Financing activities shifted from using cash **$(59.9) million** to providing cash **$43.3 million**, driven by significant borrowings on the global committed bank facility (**$266.8 million**) partially offset by repayments (**$187.0 million**)[22](index=22&type=chunk)[139](index=139&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) Describes accounting principles and conventions for unaudited interim financial statements - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, not including all disclosures for complete annual statements[27](index=27&type=chunk) - All references to 'Steelcase,' 'we,' 'our,' 'Company' refer to Steelcase Inc. and its subsidiaries, with fiscal years ending in February[28](index=28&type=chunk) [2. New Accounting Standards](index=8&type=section&id=2.%20New%20Accounting%20Standards) Discusses assessment of recently issued accounting standards and their expected financial impact - The Company has assessed all issued but not yet adopted Accounting Standards Updates (ASUs) and concluded that none are expected to have a material effect on its consolidated financial statements[29](index=29&type=chunk) [3. Revenue](index=9&type=section&id=3.%20Revenue) Disaggregates revenue by product category and geographic segment, detailing customer deposits Disaggregated Revenue by Product Category and Segment (in millions) | Product Category Data | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | **Americas** | | | | | | Desking, benching, systems and storage | $303.4 | $244.3 | $563.7 | $429.4 | | Seating | $203.3 | $165.5 | $359.5 | $283.7 | | Other | $144.9 | $113.5 | $249.2 | $186.5 | | **EMEA** | | | | | | Desking, benching, systems and storage | $49.4 | $41.7 | $105.1 | $96.5 | | Seating | $45.7 | $55.7 | $99.0 | $89.6 | | Other | $42.7 | $41.5 | $90.1 | $76.4 | | **Other** | | | | | | Desking, benching, systems and storage | $14.1 | $14.5 | $25.8 | $25.3 | | Seating | $22.3 | $16.2 | $39.7 | $30.7 | | Other | $37.5 | $31.9 | $71.9 | $63.3 | | **Total Revenue** | $863.3 | $724.8 | $1,604.0 | $1,281.4 | Reportable Geographic Revenue (in millions) | Reportable Geographic Revenue | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :---------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | United States | $634.6 | $493.5 | $1,136.3 | $852.8 | | Foreign locations | $228.7 | $231.3 | $467.7 | $428.6 | | **Total Revenue** | $863.3 | $724.8 | $1,604.0 | $1,281.4 | - Customer deposits increased from **$53.4 million to $65.3 million** during the six months ended August 26, 2022, including **$24.3 million** from the Halcon acquisition[34](index=34&type=chunk) [4. Earnings (Loss) Per Share](index=10&type=section&id=4.%20Earnings%20%28Loss%29%20Per%20Share) Explains computation of basic and diluted earnings (loss) per share using the two-class method - Earnings per share are computed using the two-class method, accounting for participating securities like restricted stock units[36](index=36&type=chunk) Earnings (Loss) Per Share (in millions, except per share data) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net Income (Loss) used in calculation | $18.9 | $24.1 | $7.9 | $(3.3) | | Basic Shares (in millions) | 112.8 | 114.9 | 112.8 | 115.2 | | Diluted Shares (in millions) | 113.3 | 115.5 | 113.3 | 115.2 | | Basic EPS | $0.17 | $0.21 | $0.07 | $(0.03) | | Diluted EPS | $0.17 | $0.21 | $0.07 | $(0.03) | [5. Accumulated Other Comprehensive Income (Loss)](index=11&type=section&id=5.%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) Details components and changes in accumulated other comprehensive income (loss), including foreign currency Changes in Accumulated Other Comprehensive Income (Loss) (in millions) | Component | Balance as of Feb 25, 2022 | Net OCI (Loss) during period (6 months) | Balance as of Aug 26, 2022 | | :------------------------------------------ | :------------------------- | :-------------------------------------- | :------------------------- | | Unrealized gain on investment | $0.3 | $0.0 | $0.3 | | Pension and other post-retirement liability adjustments | $5.2 | $0.2 | $5.4 | | Derivative amortization | $(6.7) | $0.5 | $(6.2) | | Foreign currency translation adjustments | $(49.4) | $(39.9) | $(89.3) | | **Total** | $(50.6) | $(39.2) | $(89.8) | - Foreign currency translation adjustments were the primary driver of the decrease in accumulated other comprehensive income (loss), contributing **$(39.9) million** to the net other comprehensive loss for the six months ended August 26, 2022[41](index=41&type=chunk) [6. Fair Value](index=13&type=section&id=6.%20Fair%20Value) Describes fair value measurements of financial instruments, including derivatives and debt - The Company uses derivative financial instruments, specifically foreign exchange forward contracts, to manage exposures to foreign exchange rates and interest rates, not for speculative purposes[47](index=47&type=chunk) Fair Value of Financial Instruments (in millions) | Instrument | August 26, 2022 (Total) | February 25, 2022 (Total) | | :------------------------------ | :---------------------- | :------------------------ | | **Assets:** | | | | Cash and cash equivalents | $52.2 | $200.9 | | Restricted cash | $6.4 | $6.1 | | Foreign exchange forward contracts | $1.8 | $1.0 | | Auction rate security | $2.6 | $2.6 | | **Liabilities:** | | | | Foreign exchange forward contracts | $(0.7) | $(0.3) | - The fair value of total debt was **$538.3 million** as of August 26, 2022, compared to its carrying amount of **$563.5 million**[46](index=46&type=chunk) [7. Inventories](index=14&type=section&id=7.%20Inventories) Provides a breakdown of inventory components: raw materials, work-in-process, and finished goods Inventories (in millions) | Category | August 26, 2022 | February 25, 2022 | | :------------------------ | :-------------- | :---------------- | | Raw materials and work-in-process | $276.4 | $208.2 | | Finished goods | $153.7 | $146.9 | | Revaluation to LIFO | $33.4 | $28.9 | | **Total Inventories** | $396.7 | $326.2 | - Inventories increased by **$70.5 million** from February 25, 2022, to August 26, 2022, primarily driven by an increase in raw materials and work-in-process[49](index=49&type=chunk) [8. Short-Term Borrowings](index=15&type=section&id=8.%20Short-Term%20Borrowings) Details the Company's short-term borrowing arrangements, including its global committed bank facility - The Company has a **$250.0 million** global committed bank facility expiring in 2025, with **$79.8 million** outstanding as of August 26, 2022, at an effective interest rate of **3.75%**[52](index=52&type=chunk) - Borrowings under the facility in Q2 2023 were used to fund a portion of the Halcon acquisition and support global operating requirements[52](index=52&type=chunk) - The Company was in compliance with all covenants under the facility as of August 26, 2022, and the facility does not restrict cash dividend payments or share repurchases[53](index=53&type=chunk) [9. Share-Based Compensation](index=16&type=section&id=9.%20Share-Based%20Compensation) Outlines accounting for performance units and restricted stock units, including expense and tax benefits - Performance Units (PSUs) are issued to employees, earned over a three-year period based on performance and market conditions (Total Shareholder Return)[55](index=55&type=chunk) PSU Expense and Tax Benefit (in millions) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Expense (credit) | $(0.2) | $0.4 | $3.9 | $5.6 | | Tax benefit | $0.0 | $0.1 | $1.0 | $1.4 | - Restricted Stock Units (RSUs) awarded during the six months ended August 26, 2022, totaled **1,068,507 units**, with restrictions lapsing one to three years after the grant date[61](index=61&type=chunk) RSU Expense and Tax Benefit (in millions) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :---------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Expense | $3.3 | $1.5 | $11.2 | $9.2 | | Tax benefit | $0.8 | $0.4 | $2.8 | $2.3 | [10. Leases](index=18&type=section&id=10.%20Leases) Describes operating lease arrangements, lease costs, and future minimum lease payments - The Company has operating leases for various facilities and equipment expiring through 2036, with options to renew or terminate[65](index=65&type=chunk) Lease Expense and Cash Flow Information (in millions) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating lease cost, net of sublease income | $13.0 | $12.7 | $24.5 | $25.4 | | Operating cash flows used for operating leases | $13.6 | $13.4 | $27.1 | $26.8 | | Leased assets obtained in exchange for new operating lease obligations | $10.3 | $15.7 | $13.5 | $17.3 | Future Minimum Lease Payments as of August 26, 2022 (in millions) | Fiscal Year Ending in February | Amount | | :----------------------------- | :----- | | 2023 | $23.3 | | 2024 | $49.0 | | 2025 | $44.7 | | 2026 | $34.9 | | 2027 | $28.1 | | Thereafter | $53.0 | | **Total Lease Payments** | $233.0 | | Less: Interest | $23.6 | | **Present Value of Lease Liabilities** | $209.4 | [11. Acquisitions](index=19&type=section&id=11.%20Acquisitions) Details recent acquisitions, including purchase prices, intangible assets, and goodwill recognized - In Q3 2022, Steelcase acquired Viccarbe Habitat, S.L. for **$34.9 million** in cash, with up to an additional **$15.1 million** in contingent consideration and **$7.0 million** based on milestones and continued employment[70](index=70&type=chunk) - The Viccarbe acquisition resulted in **$11.7 million** in identifiable intangible assets (trademark, dealer relationships, know-how/designs) and **$25.8 million** in goodwill, recorded in the EMEA segment[71](index=71&type=chunk)[72](index=72&type=chunk) - In Q2 2023, Steelcase acquired Halcon Furniture LLC for **$127.5 million** (adjusted for customer deposits and working capital), funded by cash and borrowings[75](index=75&type=chunk) - The Halcon acquisition resulted in **$51.8 million** in identifiable intangible assets (dealer relationships, trademark, know-how/designs, backlog) and **$36.9 million** in goodwill, recorded in the Americas segment[76](index=76&type=chunk)[77](index=77&type=chunk) [12. Reportable Segments](index=21&type=section&id=12.%20Reportable%20Segments) Provides financial information for the Company's Americas, EMEA, and Other reportable segments - The Company operates through three reportable segments: Americas, EMEA, and Other (Asia Pacific and Designtex), with unallocated corporate expenses reported as Corporate[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) Reportable Segment Revenue and Operating Income (Loss) (in millions) | Segment | Three Months Ended Aug 26, 2022 Revenue | Three Months Ended Aug 27, 2021 Revenue | Six Months Ended Aug 26, 2022 Revenue | Six Months Ended Aug 27, 2021 Revenue | | :-------- | :-------------------------------------- | :-------------------------------------- | :------------------------------------ | :------------------------------------ | | Americas | $651.6 | $523.3 | $1,172.4 | $899.6 | | EMEA | $137.8 | $138.9 | $294.2 | $262.5 | | Other | $73.9 | $62.6 | $137.4 | $119.3 | | **Total** | $863.3 | $724.8 | $1,604.0 | $1,281.4 | | | **Operating Income (Loss)** | **Operating Income (Loss)** | **Operating Income (Loss)** | **Operating Income (Loss)** | | Americas | $43.5 | $44.7 | $42.3 | $29.7 | | EMEA | $(6.8) | $(1.6) | $(5.5) | $(7.3) | | Other | $(1.3) | $(4.2) | $(4.2) | $(9.5) | | Corporate | $(6.5) | $(5.0) | $(16.3) | $(10.8) | | **Total** | $28.9 | $33.9 | $16.3 | $2.1 | Reportable Segment Total Assets (in millions) | Segment | August 26, 2022 | February 25, 2022 | | :-------- | :-------------- | :---------------- | | Americas | $1,358.1 | $1,110.4 | | EMEA | $420.0 | $475.2 | | Other | $227.0 | $227.6 | | Corporate | $297.5 | $447.8 | | **Total** | $2,302.6 | $2,261.0 | [13. Restructuring Activities](index=23&type=section&id=13.%20Restructuring%20Activities) Describes restructuring actions, including costs for employee terminations and business exit - In Q4 2022, the Board approved restructuring actions to exit the technology business, incurring **$4.7 million** in costs in the Americas segment, primarily for severance and business exit costs[89](index=89&type=chunk) - Restructuring costs included **$1.8 million** for employee termination and **$2.4 million** for business exit costs in Q1 2023, plus a **$0.5 million** impairment charge in Q2 2023[89](index=89&type=chunk) [14. Subsequent Events](index=23&type=section&id=14.%20Subsequent%20Events) Discloses significant events after the balance sheet date, including planned operational spending reductions - On September 21, 2022, the Board authorized actions to reduce operational spending, including the elimination of up to **180 salaried positions** in the Americas and Corporate functions, expected to incur approximately **$8 million** in restructuring costs in Q3 2023[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition, operations, liquidity, and capital resources [Financial Summary](index=24&type=section&id=Financial%20Summary) Provides an overview of reportable segments and the use of non-GAAP financial measures - The Company's reportable segments are Americas, EMEA, and Other, with Corporate covering unallocated expenses[95](index=95&type=chunk) - Non-GAAP financial measures used include organic revenue growth, adjusted operating income (loss), and adjusted earnings per share, which are reconciled to GAAP measures[94](index=94&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Analyzes consolidated revenue, gross profit, operating income, and net income (loss) Consolidated Statement of Operations Data (in millions, except per share data) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Revenue | $863.3 | $724.8 | $1,604.0 | $1,281.4 | | Gross profit | $250.8 | $206.8 | $442.4 | $361.5 | | Operating income | $28.9 | $33.9 | $16.3 | $2.1 | | Net income (loss) | $19.6 | $24.7 | $8.2 | $(3.4) | | Diluted EPS | $0.17 | $0.21 | $0.07 | $(0.03) | - Q2 2023 revenue increased **19% year-over-year** to **$863.3 million**, driven by strong order backlog, significant pricing benefits (approximately **$80 million**), and the Halcon acquisition[98](index=98&type=chunk)[101](index=101&type=chunk) - Year-over-year pricing benefits of approximately **$80 million** exceeded inflation by approximately **$30 million** in Q2 2023[98](index=98&type=chunk) - Q2 2023 operating income decreased by **$5.0 million** to **$28.9 million**, but excluding a prior-year land sale gain, operating income increased due to higher volume and pricing benefits, partially offset by higher operating expenses[100](index=100&type=chunk) - Year-to-date 2023 net income was **$8.2 million**, a significant improvement from a net loss of **$3.4 million** in the prior year, with operating income increasing by **$14.2 million** to **$16.3 million**[104](index=104&type=chunk) Organic Revenue Growth by Segment | Segment | Q2 2023 Organic Growth % | Year-to-date 2023 Organic Growth % | | :-------- | :----------------------- | :--------------------------------- | | Americas | 21% | 28% | | EMEA | 12% | 24% | | Other | 21% | 17% | | **Consolidated** | 20% | 26% | [Interest Expense, Investment Income and Other Income (Expense), Net](index=27&type=section&id=Interest%20Expense%2C%20Investment%20Income%20and%20Other%20Income%20%28Expense%29%2C%20Net) Details interest expense, investment income, and other net income (expense) components Interest Expense, Investment Income and Other Income (Expense), Net (in millions) | Metric | Three Months Ended Aug 26, 2022 | Three Months Ended Aug 27, 2021 | Six Months Ended Aug 26, 2022 | Six Months Ended Aug 27, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Interest expense | $(7.2) | $(6.4) | $(13.6) | $(12.8) | | Investment income | $0.3 | $0.1 | $0.4 | $0.3 | | Total other income, net | $4.4 | $1.8 | $7.5 | $1.0 | | **Total interest expense, investment income and other income, net** | $(2.5) | $(4.5) | $(5.7) | $(11.5) | - Interest expense increased due to borrowings on the global committed bank facility in Q2 2023[109](index=109&type=chunk) - Total other income, net, increased by **$2.6 million** in Q2 2023 and **$6.5 million** year-to-date, primarily driven by higher income from unconsolidated affiliates and foreign exchange gains[109](index=109&type=chunk) [Business Segment Review](index=27&type=section&id=Business%20Segment%20Review) Provides a detailed review of financial performance for each reportable segment [Americas](index=28&type=section&id=Americas) Reviews Americas segment's revenue growth, operating income, and cost of sales performance - Americas revenue increased by **25% in Q2 2023** and **30% year-to-date**, driven by higher volume (including acquisitions like Halcon) and pricing benefits[113](index=113&type=chunk) - Q2 2023 operating income decreased by **$1.2 million**, but adjusted operating income improved by **$2.0 million**, excluding a prior-year land sale gain[112](index=112&type=chunk) - Cost of sales as a percentage of revenue decreased by **120 basis points** in Q2 2023 due to higher volume and pricing benefits, net of inflation[114](index=114&type=chunk) [EMEA](index=29&type=section&id=EMEA) Analyzes EMEA segment's revenue, operating results, and impact of currency translation and inflation - EMEA revenue decreased by **1% in Q2 2023** due to unfavorable currency translation effects offsetting pricing benefits, but increased **12% year-to-date**[118](index=118&type=chunk) - Q2 2023 operating results decreased by **$5.2 million**, primarily due to higher cost of sales as a percentage of revenue driven by inflation[117](index=117&type=chunk)[119](index=119&type=chunk) - Year-to-date operating results improved by **$1.8 million**, driven by higher revenue and lower operating expenses as a percentage of revenue[117](index=117&type=chunk) [Other](index=30&type=section&id=Other) Examines Other segment's revenue and operating results, driven by volume and pricing benefits - The Other category's revenue increased by **18% in Q2 2023** and **15% year-to-date**, driven by higher volume and pricing benefits across India, Southeast Asia, Designtex, and Japan[123](index=123&type=chunk) - Operating results improved by **$2.9 million in Q2 2023** and **$5.3 million year-to-date**, attributed to higher revenue, lower cost of sales, and reduced operating expenses as a percentage of revenue[122](index=122&type=chunk) [Corporate](index=30&type=section&id=Corporate) Discusses changes in unallocated corporate operating expenses, including COLI income and spending - Corporate operating expenses increased by **$1.5 million in Q2 2023** and **$5.5 million year-to-date**, primarily due to lower Company-owned life insurance (COLI) income and higher spending, partially offset by lower deferred compensation expense[128](index=128&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) Defines and explains the Company's use of non-GAAP financial measures - Organic revenue growth excludes the impact of acquisitions, divestitures, and foreign currency translation effects to provide a consistent comparison[130](index=130&type=chunk) - Adjusted operating income (loss) and adjusted earnings per share exclude amortization of purchased intangible assets and restructuring costs to offer a more consistent view of operating performance[131](index=131&type=chunk)[132](index=132&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the Company's cash flows, liquidity sources, and capital expenditure plans Liquidity Sources (in millions) | Source | August 26, 2022 | February 25, 2022 | | :-------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $52.2 | $200.9 | | Company-owned life insurance | $161.7 | $168.0 | | Availability under credit facilities | $136.4 | $262.0 | | **Total liquidity sources available** | $350.3 | $630.9 | - Net cash used in operating activities increased to **$(74.4) million** year-to-date 2023, primarily due to increased inventory levels and accounts receivable[136](index=136&type=chunk)[137](index=137&type=chunk) - Net cash used in investing activities significantly increased to **$(115.3) million** year-to-date 2023, mainly due to acquisitions[136](index=136&type=chunk)[138](index=138&type=chunk) - Net cash provided by financing activities was **$43.3 million** year-to-date 2023, driven by borrowings on the global committed bank facility[136](index=136&type=chunk)[139](index=139&type=chunk) - The Company expects its liquidity position, credit facilities, and future cash generation to be sufficient to finance known or foreseeable liquidity needs[146](index=146&type=chunk) - Planned capital expenditures for 2023 are estimated at **$50 million to $60 million**, and a quarterly dividend of **$0.10 per share** was announced for Q3 2023[148](index=148&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) Confirms no material changes to the critical accounting estimates previously disclosed - There have been no material changes to the critical accounting estimates identified in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022[151](index=151&type=chunk) [Recently Issued Accounting Standards](index=35&type=section&id=Recently%20Issued%20Accounting%20Standards) Refers to Note 2 for information on recently issued accounting standards - Refer to Note 2 of the condensed consolidated financial statements for information on recently issued accounting standards[152](index=152&type=chunk) [Forward-looking Statements](index=35&type=section&id=Forward-looking%20Statements) Highlights forward-looking statements and associated risks and uncertainties impacting future financial conditions - The report contains forward-looking statements regarding future events, plans, and financial conditions, which are subject to risks and uncertainties including economic conditions, acts of terrorism, cyberattacks, and changes in costs or demand[153](index=153&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risks, including foreign currency, interest rates, and commodity prices - No material changes occurred in foreign exchange risk, interest rate risk, commodity price risk, or fixed income and equity price risk during Q2 2023[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and no material changes to internal financial reporting controls - Disclosure controls and procedures were evaluated and deemed effective as of August 26, 2022[160](index=160&type=chunk) - No material changes occurred in internal control over financial reporting during the second fiscal quarter[161](index=161&type=chunk) [PART II. Other Information](index=37&type=section&id=PART%20II%20Other%20Information) This section covers risk factors, equity security sales, and required exhibits for the report [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022[164](index=164&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Share repurchases in Q2 2023 were solely for tax withholding on equity awards, not public plans Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) | | :------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------------- | | 5/28/2022 - 7/1/2022 | 198 | $11.92 | $6.4 | | 7/2/2022 - 7/29/2022 | — | — | $6.4 | | 7/30/22 - 8/26/2022 | — | — | $6.4 | | **Total** | 198 | | | - All **198 shares** repurchased in Q2 2023 were to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards[167](index=167&type=chunk) - As of August 26, 2022, **$6.4 million** remained available under the **$150 million** share repurchase program approved in 2016[141](index=141&type=chunk)[166](index=166&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL documents - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[169](index=169&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q, certifying its submission by the CFO - The report was signed by David C. Sylvester, Senior Vice President, Chief Financial Officer, on September 23, 2022[174](index=174&type=chunk)

Financial Data and Key Metrics Changes - The second quarter revenue grew 20% organically compared to the prior year, with double-digit growth across all segments, although it was slightly below the expected range [25][27] - Earnings for the second quarter exceeded expectations, driven by higher pricing benefits and favorable inventory adjustments [27][28] - Inflationary pressures have accumulated to $270 million over the last six quarters, but for the first time since fiscal 2021, year-over-year pricing benefits exceeded inflation this quarter [28] Business Line Data and Key Metrics Changes - The AMQ business revenue grew 50% this quarter compared to the prior year, focusing on small and midsized customers [17] - The education business, particularly Smith System, achieved its highest quarterly revenue in history, growing by more than 50% year-over-year [18] - Retail business revenue grew 17% versus the prior year, with increased investments allocated to drive further growth [18] Market Data and Key Metrics Changes - Order volume in the Americas core business was down 8%, indicating a slowdown in demand patterns [13] - EMEA posted an operating loss of $6.8 million, impacted by project slippages and inflation [29] - The Americas saw a 7% growth in orders, while EMEA experienced a 4% growth, with Asia Pacific showing weakness except for India [32] Company Strategy and Development Direction - The company remains focused on leading the hybrid work transformation and is committed to helping organizations adapt to new workplace strategies [10][12] - Investments in innovation and acquisitions, such as Halcon, are part of the strategy to enhance market share and diversify revenue [12][15] - The company is adjusting its operational model to drive greater efficiency and resiliency while reducing planned spending levels [15][35] Management's Comments on Operating Environment and Future Outlook - Management noted that the return to office levels are improving, but some companies are pausing investments due to economic uncertainty [13] - The company is planning to implement additional actions to reduce spending, targeting approximately $20 million in annualized savings [35] - Despite challenges, management believes the strategy is working, with positive customer interactions and a strong backlog of approximately $946 million [37][41] Other Important Information - The company has been recognized for its commitment to ESG, including educational webinars for suppliers and transparency in material health [19][21] - The company adjusted its dividend to strengthen liquidity and support capital allocation for reinvestments [36][102] Q&A Session Summary Question: Can you elaborate on the thought process behind the cuts to corporate headcount and the dividend? - Management acknowledged mixed signals in pipeline activity and decided to take action due to increased economic uncertainty while balancing market share gains [49][50] Question: What is the current status of price-cost dynamics relative to pre-pandemic levels? - Management indicated that cumulative inflationary costs have reached $270 million, and while pricing actions are starting to offset these costs, they are still behind [55][56] Question: How is the acquisition of Halcon performing? - Management reported positive feedback and enthusiasm regarding the Halcon acquisition, which is dealing with similar supply chain challenges [92] Question: What is the sentiment regarding order patterns despite positive presales activity? - Management noted that while sentiment is positive, economic concerns may be impacting order patterns, and there is uncertainty about future demand [112][113] Question: Is the company considering further acquisitions in the education vertical? - Management stated that while they are open to acquisitions, they do not see it as necessary for continued success in the education market [117]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Steelcase Inc.'s unaudited condensed consolidated financial statements, including statements of operations, comprehensive income (loss), balance sheets, changes in shareholders' equity, cash flows, and detailed notes on accounting policies, revenue, earnings per share, fair value, inventories, share-based compensation, leases, acquisitions, segments, restructuring, and subsequent events [Condensed Consolidated Statements of Operations](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(Unaudited)) This section provides a comparative overview of the company's unaudited condensed consolidated statements of operations for the three months ended May 27, 2022, and May 28, 2021 **Three Months Ended May 27, 2022 vs. May 28, 2021 (in $ million, except per share data):** | Metric | May 27, 2022 | May 28, 2021 | Change in $ | Percentage Change | | :-------------------------------- | :----------- | :----------- | :---------- | :---------------- | | Revenue | $740.7 | $556.6 | $184.1 | 33.1% | | Gross Profit | $191.6 | $154.7 | $36.9 | 23.9% | | Operating Loss | $(12.6) | $(31.8) | $19.2 | 60.4% | | Net Loss | $(11.4) | $(28.1) | $16.7 | 59.4% | | Basic Earnings Per Share | $(0.10) | $(0.24) | $0.14 | 58.3% | | Diluted Earnings Per Share | $(0.10) | $(0.24) | $0.14 | 58.3% | | Dividends per Common Share | $0.145 | $0.100 | $0.045 | 45.0% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)%20(Unaudited)) This section presents the unaudited condensed consolidated statements of comprehensive income (loss) for the three months ended May 27, 2022, and May 28, 2021 **Three Months Ended May 27, 2022 vs. May 28, 2021 (in $ million):** | Metric | May 27, 2022 | May 28, 2021 | Change in $ | Percentage Change | | :------------------------------------------ | :----------- | :----------- | :---------- | :---------------- | | Net Loss | $(11.4) | $(28.1) | $16.7 | 59.4% | | Foreign Currency Translation Adjustments | $(18.6) | $0.9 | $(19.5) | -2166.7% | | Total Other Comprehensive Income (Loss), Net | $(18.4) | $1.2 | $(19.6) | -1633.3% | | Comprehensive Loss | $(29.8) | $(26.9) | $(2.9) | -10.8% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a comparative overview of the company's unaudited condensed consolidated balance sheets as of May 27, 2022, and February 25, 2022 **As of May 27, 2022 vs. February 25, 2022 (in $ million):** | Metric | May 27, 2022 | February 25, 2022 | Change in $ | Percentage Change | | :-------------------------- | :----------- | :---------------- | :---------- | :---------------- | | Cash and Cash Equivalents | $116.7 | $200.9 | $(84.2) | -41.9% | | Inventories | $372.0 | $326.2 | $45.8 | 14.0% | | Total Current Assets | $917.6 | $959.2 | $(41.6) | -4.3% | | Total Assets | $2,186.8 | $2,261.0 | $(74.2) | -3.3% | | Total Current Liabilities | $587.3 | $567.2 | $20.1 | 3.5% | | Total Liabilities | $1,372.7 | $1,408.8 | $(36.1) | -2.6% | | Total Shareholders' Equity | $814.1 | $852.2 | $(38.1) | -4.5% | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS'%20EQUITY%20(Unaudited)) This section presents the unaudited condensed consolidated statements of changes in shareholders' equity for the three months ended May 27, 2022, and May 28, 2021 **Three Months Ended May 27, 2022 vs. May 28, 2021 (in $ million, except share data):** | Metric | May 27, 2022 | May 28, 2021 | Change (Shares) | Change in $ | | :------------------------------------------ | :----------- | :----------- | :-------------- | :---------- | | Common Shares Outstanding, End of Period | 112,740,491 | 115,664,399 | (2,923,908) | N/A | | Additional Paid-in Capital, End of Period | $10.3 | $21.3 | N/A | $(11.0) | | Accumulated Other Comprehensive Income (Loss), End of Period | $(69.0) | $(38.8) | N/A | $(30.2) | | Retained Earnings, End of Period | $872.8 | $947.8 | N/A | $(75.0) | | Total Shareholders' Equity | $814.1 | $930.3 | N/A | $(116.2) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(Unaudited)) This section provides a comparative overview of the company's unaudited condensed consolidated statements of cash flows for the three months ended May 27, 2022, and May 28, 2021 **Three Months Ended May 27, 2022 vs. May 28, 2021 (in $ million):** | Cash Flow Activity | May 27, 2022 | May 28, 2021 | Change in $ | Percentage Change | | :------------------------------------------------ | :----------- | :----------- | :---------- | :---------------- | | Net Cash Used in Operating Activities | $(55.1) | $(63.6) | $8.5 | 13.4% | | Net Cash Used in Investing Activities | $(7.3) | $(13.0) | $5.7 | 43.8% | | Net Cash Used in Financing Activities | $(20.7) | $(16.8) | $(3.9) | -23.2% | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(84.4) | $(93.1) | $8.7 | 9.3% | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $122.6 | $402.5 | $(279.9) | -69.5% | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes supporting the condensed consolidated financial statements [1. Basis of Presentation](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This section outlines the accounting principles and standards used for preparing the interim financial statements - The condensed consolidated financial statements adhere to Generally Accepted Accounting Principles (GAAP) for interim financial information and Article 10 of Regulation S-X, omitting some disclosures found in complete annual financial statements[26](index=26&type=chunk) - Interim results should not be considered indicative of full-year performance[26](index=26&type=chunk) [2. New Accounting Standards](index=8&type=section&id=2.%20NEW%20ACCOUNTING%20STANDARDS) This section discusses the company's assessment of recently issued accounting standards - The company has evaluated all issued but not yet adopted Accounting Standards Updates (ASUs) and determined that none are expected to materially impact its consolidated financial statements[28](index=28&type=chunk) [3. Revenue](index=9&type=section&id=3.%20REVENUE) This section details the disaggregation of revenue by product category and geographic location, along with changes in customer deposits **Disaggregated Revenue by Product Category (Three Months Ended May 27, 2022 vs. May 28, 2021, in $ million):** | Product Category | May 27, 2022 | May 28, 2021 | Change in $ | Percentage Change | | :-------------------------------- | :----------- | :----------- | :---------- | :---------------- | | **Americas** | | | | | | Desking, Benching, Systems, and Storage | $260.3 | $185.1 | $75.2 | 40.6% | | Seating | $156.2 | $118.2 | $38.0 | 32.1% | | Other | $104.3 | $73.0 | $31.3 | 42.9% | | **EMEA** | | | | | | Desking, Benching, Systems, and Storage | $55.7 | $54.8 | $0.9 | 1.6% | | Seating | $53.3 | $33.9 | $19.4 | 57.2% | | Other | $47.4 | $34.9 | $12.5 | 35.8% | | **Other** | | | | | | Desking, Benching, Systems, and Storage | $11.7 | $10.8 | $0.9 | 8.3% | | Seating | $17.4 | $14.5 | $2.9 | 20.0% | | Other | $34.4 | $31.4 | $3.0 | 9.6% | | **Total Revenue** | **$740.7** | **$556.6** | **$184.1** | **33.1%** | **Reportable Geographic Revenue (Three Months Ended May 27, 2022 vs. May 28, 2021, in $ million):** | Geographic Location | May 27, 2022 | May 28, 2021 | Change in $ | Percentage Change | | :------------------ | :----------- | :----------- | :---------- | :---------------- | | United States | $501.8 | $359.3 | $142.5 | 39.7% | | Foreign Locations | $238.9 | $197.3 | $41.6 | 21.1% | | **Total Revenue** | **$740.7** | **$556.6** | **$184.1** | **33.1%** | **Changes in Customer Deposits (Three Months Ended May 27, 2022, in $ million):** | Item | Amount | | :------------------------------------------ | :----- | | Balance as of February 25, 2022 | $53.4 | | Revenue Recognition from Beginning-of-Year Customer Deposits | $(37.0) | | Customer Deposits Received, Net of Revenue Recognized | $33.1 | | Balance as of May 27, 2022 | $49.5 | [4. Earnings (Loss) Per Share](index=10&type=section&id=4.%20EARNINGS%20(LOSS)%20PER%20SHARE) This section provides details on the calculation of basic and diluted earnings (loss) per share **Earnings (Loss) Per Share (Three Months Ended May 27, 2022 vs. May 28, 2021):** | Metric | May 27, 2022 | May 28, 2021 | | :---------------------------------------------------------------- | :----------- | :----------- | | Net Loss ($ million) | $(11.4) | $(28.1) | | Basic Shares (million) | 116.7 | 118.3 | | Diluted Shares (million) | 116.7 | 118.3 | | Impact of Participating Securities (Net Loss, $ million) | $0.4 | $0.6 | | Impact of Participating Securities (Shares, million) | $(4.0) | $(2.7) | | Basic Earnings (Loss) Per Share | $(0.10) | $(0.24) | | Diluted Earnings (Loss) Per Share | $(0.10) | $(0.24) | - The computation utilizes the two-class method, accounting for participating securities such as restricted stock units with non-forfeitable dividend rights[34](index=34&type=chunk) - Anti-dilutive performance units were excluded from diluted EPS computation, totaling **0.4 million** in Q1 2023 and **0.5 million** in Q1 2022[35](index=35&type=chunk) [5. Accumulated Other Comprehensive Income (Loss)](index=11&type=section&id=5.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This section details the changes in accumulated other comprehensive income (loss) by component and reclassifications out of AOCI **Changes in Accumulated Other Comprehensive Income (Loss) (Three Months Ended May 27, 2022, in $ million):** | Component | Balance as of Feb 25, 2022 | Other Comprehensive Income (Loss) Before Reclassifications | Amounts Reclassified | Net Other Comprehensive Income (Loss) During the Period | Balance as of May 27, 2022 | | :------------------------------------------ | :------------------------- | :------------------------------------------------------- | :------------------- | :---------------------------------------------------- | :------------------------- | | Unrealized Gain (Loss) on Investments | $0.3 | $(0.3) | $0.0 | $(0.3) | $0.0 | | Pension and Other Post-Retirement Liability Adjustments | $5.2 | $0.5 | $(0.3) | $0.2 | $5.4 | | Derivative Amortization | $(6.7) | $0.0 | $0.3 | $0.3 | $(6.4) | | Foreign Currency Translation Adjustments | $(49.4) | $(18.6) | $0.0 | $(18.6) | $(68.0) | | **Total** | **$(50.6)** | **$(18.4)** | **$0.0** | **$(18.4)** | **$(69.0)** | **Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Three Months Ended, in $ million):** | Detail of Components | May 27, 2022 | May 28, 2021 | Affected Line in Condensed Consolidated Statements of Operations | | :---------------------------------------------------- | :----------- | :----------- | :--------------------------------------------------------------- | | Amortization of Pension and Other Post-Retirement Actuarial Losses (Gains) | $(0.4) | $(0.1) | Other income (expense), net | | Income Tax Expense (Benefit) | $0.1 | $0.0 | Income tax benefit | | Derivative Amortization | $0.4 | $0.3 | Interest expense | | Income Tax Benefit | $(0.1) | $(0.1) | Income tax benefit | | **Total Reclassifications** | **$0.0** | **$0.1** | | [6. Fair Value](index=12&type=section&id=6.%20FAIR%20VALUE) This section provides information on the fair value of financial instruments and the company's risk management strategies - The fair value of total debt was **$451.0 million** as of May 27, 2022, compared to its carrying amount of **$482.4 million**, measured using Level 2 inputs[41](index=41&type=chunk) **Fair Value of Financial Instruments (in $ million):** | Category | Level 1 (May 27, 2022) | Level 2 (May 27, 2022) | Level 3 (May 27, 2022) | Total (May 27, 2022) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | **Assets:** | | | | | | Cash and Cash Equivalents | $116.7 | — | — | $116.7 | | Restricted Cash | $5.9 | — | — | $5.9 | | Foreign Exchange Forward Contracts | — | $2.3 | — | $2.3 | | Auction Rate Security | — | — | $2.2 | $2.2 | | **Total Assets** | **$122.6** | **$2.3** | **$2.2** | **$127.1** | | **Liabilities:** | | | | | | Foreign Exchange Forward Contracts | — | $(0.3) | — | $(0.3) | | **Total Liabilities** | **—** | **$(0.3)** | **—** | **$(0.3)** | - The company uses derivative financial instruments to manage foreign exchange and interest rate exposures, not for speculative purposes[42](index=42&type=chunk) [7. Inventories](index=13&type=section&id=7.%20INVENTORIES) This section details the composition of inventories, including raw materials, work-in-process, and finished goods, and the impact of LIFO revaluation **Inventories (in $ million):** | Category | May 27, 2022 | February 25, 2022 | | :-------------------------------- | :----------- | :---------------- | | Raw Materials and Work-in-Process | $234.9 | $208.2 | | Finished Goods | $168.0 | $146.9 | | Total (Before LIFO Revaluation) | $402.9 | $355.1 | | Revaluation to LIFO | $30.9 | $28.9 | | **Total Inventories** | **$372.0** | **$326.2** | | Portion Determined by LIFO Method | $165.7 | $141.4 | [8. Share-Based Compensation](index=13&type=section&id=8.%20SHARE-BASED%20COMPENSATION) This section provides information on performance units (PSUs) and restricted stock units (RSUs), including grants, expense, and unrecognized compensation costs - Performance Units (PSUs) are earned over a three-year period based on performance and market conditions, with **1,125,192 units** granted in Q1 2023[45](index=45&type=chunk)[50](index=50&type=chunk) **Performance Units Expense and Tax Benefit (Three Months Ended, in $ million):** | Metric | May 27, 2022 | May 28, 2021 | | :------- | :----------- | :----------- | | Expense | $4.1 | $5.2 | | Tax Benefit | $1.0 | $1.3 | - Restricted Stock Units (RSUs) have transfer restrictions that lapse one to three years after grant, with **1,008,424 units** awarded in Q1 2023[51](index=51&type=chunk)[54](index=54&type=chunk) **Restricted Stock Units Expense and Tax Benefit (Three Months Ended, in $ million):** | Metric | May 27, 2022 | May 28, 2021 | | :------- | :----------- | :----------- | | Expense | $7.9 | $7.7 | | Tax Benefit | $2.0 | $1.9 | - As of May 27, 2022, remaining unrecognized compensation cost for PSUs was **$1.5 million** (2.2 years weighted-average period) and for RSUs was **$22.1 million** (1.9 years weighted-average period)[50](index=50&type=chunk)[54](index=54&type=chunk) [9. Leases](index=15&type=section&id=9.%20LEASES) This section details lease expenses, supplemental lease information, and future minimum lease payments **Lease Expense (Three Months Ended, in $ million):** | Metric | May 27, 2022 | May 28, 2021 | | :------------------ | :----------- | :----------- | | Operating Lease Cost | $12.1 | $13.1 | | Sublease Rental Income | $(0.6) | $(0.4) | | **Total** | **$11.5** | **$12.7** | **Supplemental Lease Information (Three Months Ended):** | Metric | May 27, 2022 | May 28, 2021 | | :------------------------------------------ | :----------- | :----------- | | Operating Cash Flows Used for Operating Leases | $13.5 | $13.4 | | Leased Assets Obtained for New Operating Lease Obligations | $3.2 | $1.6 | | Weighted-Average Remaining Term | 5.8 years | 6.5 years | | Weighted-Average Discount Rate | 3.6% | 3.8% | **Future Minimum Lease Payments as of May 27, 2022 (in $ million):** | Fiscal Year Ending in February | Amount | | :----------------------------- | :----- | | 2023 | $38.6 | | 2024 | $46.3 | | 2025 | $44.4 | | 2026 | $33.4 | | 2027 | $26.8 | | Thereafter | $49.4 | | **Total Lease Payments** | **$238.9** | | Less: Interest | $23.5 | | **Present Value of Lease Liabilities** | **$215.4** | [10. Acquisitions](index=16&type=section&id=10.%20ACQUISITIONS) This section provides details on the acquisition of Viccarbe, including the purchase price, intangible assets, and goodwill recognized - In Q3 2022, Steelcase acquired Viccarbe, a Spanish contemporary furniture designer, for **$34.9 million** in cash, with up to an additional **$15.1 million** contingent on performance targets[60](index=60&type=chunk) - The acquisition resulted in **$11.7 million** in identifiable intangible assets (trademark, dealer relationships, know-how/designs) and **$25.8 million** in goodwill, recorded in the EMEA segment[61](index=61&type=chunk) **Estimated Future Amortization Expense for Viccarbe Intangible Assets as of May 27, 2022 (in $ million):** | Fiscal Year Ending in February | Amount | | :----------------------------- | :----- | | 2023 | $0.8 | | 2024 | $1.1 | | 2025 | $1.1 | | 2026 | $1.1 | | 2027 | $1.1 | | **Total (next 5 years)** | **$5.2** | [11. Reportable Segments](index=17&type=section&id=11.%20REPORTABLE%20SEGMENTS) This section presents financial data disaggregated by the company's reportable segments: Americas, EMEA, and Other, along with corporate unallocated expenses - Steelcase operates through three reportable segments: Americas, EMEA, and Other, with unallocated corporate expenses reported as Corporate[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) **Reportable Segment Statement of Operations Data (Three Months Ended, in $ million):** | Segment | May 27, 2022 Revenue | May 28, 2021 Revenue | May 27, 2022 Operating Income (Loss) | May 28, 2021 Operating Income (Loss) | | :-------- | :------------------- | :------------------- | :----------------------------------- | :----------------------------------- | | Americas | $520.8 | $376.3 | $(1.2) | $(15.0) | | EMEA | $156.4 | $123.6 | $1.3 | $(5.7) | | Other | $63.5 | $56.7 | $(2.9) | $(5.3) | | Corporate | N/A | N/A | $(9.8) | $(5.8) | | **Consolidated** | **$740.7** | **$556.6** | **$(12.6)** | **$(31.8)** | **Reportable Segment Balance Sheet Data (Total Assets, in $ million):** | Segment | May 27, 2022 | February 25, 2022 | | :-------- | :----------- | :---------------- | | Americas | $1,143.0 | $1,110.4 | | EMEA | $454.9 | $475.2 | | Other | $219.8 | $227.6 | | Corporate | $369.1 | $447.8 | | **Consolidated** | **$2,186.8** | **$2,261.0** | [12. Restructuring Activities](index=19&type=section&id=12.%20RESTRUCTURING%20ACTIVITIES) This section details restructuring costs incurred in the Americas segment related to exiting a technology business and the associated reserve balance - In Q1 2023, Steelcase recorded **$4.2 million** in restructuring costs in the Americas segment related to exiting its technology business, including **$1.8 million** for employee termination and **$2.4 million** for business exit costs[73](index=73&type=chunk) - The restructuring actions are expected to be completed by the end of Q3 2023[73](index=73&type=chunk) **Changes in Restructuring Reserve Balance as of May 27, 2022 (in $ million):** | Item | Workforce Reductions | Business Exit and Related Costs | Total | | :-------------------------- | :------------------- | :------------------------------ | :---- | | Balance as of February 25, 2022 | $0.0 | $0.0 | $0.0 | | Restructuring Costs | $1.8 | $2.4 | $4.2 | | Payments | $(1.5) | $(1.5) | $(3.0) | | **Balance as of May 27, 2022** | **$0.3** | **$0.9** | **$1.2** | [13. Subsequent Events](index=19&type=section&id=13.%20SUBSEQUENT%20EVENTS) This section describes significant events that occurred after the balance sheet date, including the acquisition of Halcon Furniture LLC - On June 10, 2022, Steelcase acquired Halcon Furniture LLC for **$127.5 million** in cash, plus a **$3.1 million** working capital adjustment and up to **$9.5 million** in contingent payments[75](index=75&type=chunk) - The Halcon acquisition was funded using cash on-hand and **$68.0 million** in borrowings under the global committed bank facility, with **$18.2 million** repaid by June 24, 2022[75](index=75&type=chunk)[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the quarter, including a financial summary, detailed analysis of consolidated and segment-specific performance, non-GAAP financial measures, liquidity and capital resources, critical accounting estimates, recently issued accounting standards, and forward-looking statements [Financial Summary](index=20&type=section&id=Financial%20Summary) This section provides an overview of the company's reportable segments and the non-GAAP financial measures used in the analysis - The company's reportable segments are Americas, EMEA, and Other, with unallocated corporate expenses reported as Corporate[80](index=80&type=chunk) - Non-GAAP financial measures, including organic revenue growth, adjusted operating income (loss), and adjusted earnings (loss) per share, are used and reconciled to GAAP measures for consistent comparison[79](index=79&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section analyzes the consolidated statement of operations data, organic revenue growth, and adjusted operating income and earnings per share **Consolidated Statement of Operations Data (Three Months Ended, in $ million, except per share data):** | Metric | May 27, 2022 | % of Revenue | May 28, 2021 | % of Revenue | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $740.7 | 100.0% | $556.6 | 100.0% | | Cost of Sales | $548.2 | 74.0% | $401.9 | 72.2% | | Gross Profit | $191.6 | 25.9% | $154.7 | 27.8% | | Operating Loss | $(12.6) | (1.7)% | $(31.8) | (5.7)% | | Net Loss | $(11.4) | (1.5)% | $(28.1) | (5.0)% | | Basic Earnings Per Share | $(0.10) | N/A | $(0.24) | N/A | | Diluted Earnings Per Share | $(0.10) | N/A | $(0.24) | N/A | **Q1 2023 Organic Revenue Growth (in $ million):** | Segment | Q1 2022 Revenue | Acquisition | Currency Translation Effects | Q1 2022 Revenue, Adjusted | Q1 2023 Revenue | Organic Growth ($ million) | Organic Growth (%) | | :---------- | :-------------- | :---------- | :--------------------------- | :------------------------ | :-------------- | :------------------------- | :----------------- | | Americas | $376.3 | $1.0 | $(0.5) | $376.8 | $520.8 | $144.0 | 38% | | EMEA | $123.6 | $2.5 | $(11.5) | $114.6 | $156.4 | $41.8 | 36% | | Other | $56.7 | — | $(0.6) | $56.1 | $63.5 | $7.4 | 13% | | **Consolidated** | **$556.6** | **$3.5** | **$(12.6)** | **$547.5** | **$740.7** | **$193.2** | **35%** | **Adjusted Operating Income (Loss) and Adjusted Earnings (Loss) Per Share (Three Months Ended):** | Metric | May 27, 2022 | % of Revenue | May 28, 2021 | % of Revenue | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | | Operating Loss | $(12.6) | (1.7)% | $(31.8) | (5.7)% | | Amortization of Purchased Intangible Assets | $3.8 | 0.5% | $3.6 | 0.6% | | Restructuring Costs | $4.2 | 0.6% | — | — | | **Adjusted Operating Loss** | **$(4.6)** | **(0.6)%** | **$(28.2)** | **(5.1)%** | | Earnings (Loss) Per Share | $(0.10) | N/A | $(0.24) | N/A | | Amortization of Purchased Intangible Assets, Per Share | $0.03 | N/A | $0.03 | N/A | | Income Tax Effect of Amortization of Purchased Intangible Assets, Per Share | $(0.01) | N/A | $(0.01) | N/A | | Restructuring Costs, Per Share | $0.04 | N/A | — | N/A | | Income Tax Effect of Restructuring Costs, Per Share | $(0.01) | N/A | — | N/A | | **Adjusted Earnings (Loss) Per Share** | **$(0.05)** | **N/A** | **$(0.22)** | **N/A** | - Revenue grew **33%** in Q1 2023, driven by a strong order backlog and pricing benefits, with orders increasing by **22%** year-over-year[83](index=83&type=chunk) - Inflation in steel, commodities, fuel, and logistics costs negatively impacted gross profit by approximately **$12 million** in Q1 2023, leading to additional global price increases and surcharges[84](index=84&type=chunk) - Operating loss improved by **$19.2 million**, primarily due to higher volume, despite an increased cost of sales as a percentage of revenue and **$4.2 million** in restructuring costs[85](index=85&type=chunk) [Interest Expense, Investment Income and Other Income (Expense), Net](index=22&type=section&id=Interest%20Expense,%20Investment%20Income%20and%20Other%20Income%20(Expense),%20Net) This section analyzes the components of interest expense, investment income, and other income (expense), net **Interest Expense, Investment Income and Other Income (Expense), Net (Three Months Ended, in $ million):** | Metric | May 27, 2022 | May 28, 2021 | | :---------------------------------------------------- | :----------- | :----------- | | Interest Expense | $(6.4) | $(6.4) | | Investment Income | $0.1 | $0.2 | | Equity in Income of Unconsolidated Affiliates | $2.3 | $1.3 | | Foreign Exchange Gains (Losses) | $1.5 | $(0.2) | | Net Periodic Pension and Post-Retirement Credit, Excluding Service Cost | — | $(0.2) | | Miscellaneous Income (Expense), Net | $(0.7) | $(1.7) | | **Total Interest Expense, Investment Income, and Other Income (Expense), Net** | **$(3.2)** | **$(7.0)** | - Total other income (expense), net increased by **$3.9 million**, driven by a **$1.7 million** increase in foreign exchange gains and a **$1.0 million** increase in income from unconsolidated affiliates[90](index=90&type=chunk) [Business Segment Review](index=22&type=section&id=Business%20Segment%20Review) This section provides a detailed review of the financial performance for each of the company's reportable business segments [Americas](index=22&type=section&id=Americas) This section reviews the Americas segment's revenue, cost of sales, gross profit, and operating income (loss) performance **Americas Segment Statement of Operations Data (Three Months Ended, in $ million):** | Metric | May 27, 2022 | % of Revenue | May 28, 2021 | % of Revenue | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $520.8 | 100.0% | $376.3 | 100.0% | | Cost of Sales | $390.0 | 74.9% | $272.5 | 72.4% | | Gross Profit | $129.9 | 24.9% | $103.8 | 27.6% | | Operating Loss | $(1.2) | (0.2)% | $(15.0) | (4.0)% | | **Adjusted Operating Income (Loss)** | **$5.6** | **1.1%** | **$(12.4)** | **(3.3)%** | - Americas revenue increased by **38%** to **$520.8 million**, with organic growth of **38%**, driven by higher volume (**$110 million**) and pricing benefits (**$35 million**)[95](index=95&type=chunk) - Operating loss improved by **$13.8 million**, and adjusted operating income improved by **$18.0 million**, despite a **250 basis point** increase in cost of sales as a percentage of revenue due to inflation[94](index=94&type=chunk)[96](index=96&type=chunk) [EMEA](index=23&type=section&id=EMEA) This section reviews the EMEA segment's revenue, cost of sales, gross profit, and operating income (loss) performance **EMEA Segment Statement of Operations Data (Three Months Ended, in $ million):** | Metric | May 27, 2022 | % of Revenue | May 28, 2021 | % of Revenue | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $156.4 | 100.0% | $123.6 | 100.0% | | Cost of Sales | $114.1 | 73.0% | $89.5 | 72.4% | | Gross Profit | $42.3 | 27.0% | $34.1 | 27.6% | | Operating Income (Loss) | $1.3 | 0.8% | $(5.7) | (4.6)% | | **Adjusted Operating Income (Loss)** | **$2.5** | **1.6%** | **$(4.7)** | **(3.8)%** | - EMEA revenue increased by **27%** to **$156.4 million**, with organic growth of **36%**, driven by higher volume (**$30 million**) and pricing benefits (**$10 million**), partially offset by unfavorable currency translation effects (**$11 million**)[100](index=100&type=chunk) - Operating income improved by **$7.0 million**, and adjusted operating income improved by **$7.2 million**, despite a **60 basis point** increase in cost of sales as a percentage of revenue[99](index=99&type=chunk)[101](index=101&type=chunk) [Other](index=24&type=section&id=Other) This section reviews the "Other" category's revenue, cost of sales, gross profit, and operating income (loss) performance **Other Category Statement of Operations Data (Three Months Ended, in $ million):** | Metric | May 27, 2022 | % of Revenue | May 28, 2021 | % of Revenue | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $63.5 | 100.0% | $56.7 | 100.0% | | Cost of Sales | $44.1 | 69.4% | $39.9 | 70.4% | | Gross Profit | $19.4 | 30.6% | $16.8 | 29.6% | | Operating Loss | $(2.9) | (4.6)% | $(5.3) | (9.3)% | - Revenue in the Other category increased by **12%** to **$63.5 million**, with organic growth of **13%**, driven by India, Southeast Asia, Designtex, and Japan, partially offset by COVID-19 impacts in China[106](index=106&type=chunk) - Operating loss improved by **$2.4 million**, and cost of sales as a percentage of revenue decreased by **100 basis points** due to higher volume and lower overhead costs[105](index=105&type=chunk)[107](index=107&type=chunk) [Corporate](index=24&type=section&id=Corporate) This section reviews the corporate operating expenses and the factors contributing to their changes **Corporate Operating Expenses (Three Months Ended, in $ million):** | Metric | May 27, 2022 | May 28, 2021 | | :------------------ | :----------- | :----------- | | Operating Expenses | $9.8 | $5.8 | - Corporate operating expenses increased by **$4.0 million**, primarily due to **$4.8 million** lower Company-Owned Life Insurance (COLI) income and approximately **$3 million** higher spending, partially offset by **$4.1 million** lower deferred compensation expense[110](index=110&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=Non-GAAP%20Financial%20Measures) This section defines the non-GAAP financial measures used by the company and explains their relevance for financial analysis - Organic revenue growth is defined as revenue growth excluding the impact of acquisitions, divestitures, and foreign currency translation effects, providing a consistent comparison of revenue[112](index=112&type=chunk) - Adjusted operating income (loss) and adjusted earnings (loss) per share exclude amortization of purchased intangible assets and restructuring costs, net of related income tax effects, to offer a more consistent comparison of operating performance[113](index=113&type=chunk)[117](index=117&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, cash flow activities, debt, and future capital expenditure plans **Liquidity Sources (in $ million):** | Metric | May 27, 2022 | February 25, 2022 | | :-------------------------------- | :----------- | :---------------- | | Cash and Cash Equivalents | $116.7 | $200.9 | | Company-Owned Life Insurance | $162.8 | $168.0 | | Availability Under Credit Facilities | $261.9 | $262.0 | | **Total Liquidity Sources Available** | **$541.4** | **$630.9** | **Cash Flow Data (Three Months Ended, in $ million):** | Cash Flow Activity | May 27, 2022 | May 28, 2021 | | :------------------------------------------------ | :----------- | :----------- | | Net Cash Used in Operating Activities | $(55.1) | $(63.6) | | Net Cash Used in Investing Activities | $(7.3) | $(13.0) | | Net Cash Used in Financing Activities | $(20.7) | $(16.8) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(84.4) | $(93.1) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $122.6 | $402.5 | - Cash used in operating activities decreased by **$8.5 million**, driven by lower annual payments for variable compensation and retirement plans, partially offset by increased working capital due to higher inventory and accounts receivable[119](index=119&type=chunk) - Dividends paid were **$0.145 per common share** in Q1 2023 (**$17.1 million**) compared to **$0.10 per common share** in Q1 2022 (**$12.1 million**)[122](index=122&type=chunk) - The company repurchased **279,103 shares** of Class A common stock in Q1 2023, primarily to satisfy tax withholding obligations for equity awards, with **$6.4 million** remaining under the **$150 million** repurchase program[123](index=123&type=chunk) **Liquidity Facilities as of May 27, 2022 (in $ million):** | Facility | Amount | | :-------------------------------- | :----- | | Global Committed Bank Facility | $250.0 | | Other Committed Bank Facility | $3.9 | | Various Uncommitted Facilities | $11.0 | | Total Credit Lines Available | $264.9 | | Less: Borrowings Outstanding | $(3.0) | | **Available Capacity** | **$261.9** | - Total consolidated debt was **$482.4 million**, primarily consisting of **$444.5 million** in term notes due in 2029 (**5.6% interest rate**) and a **$34.1 million** term loan due in Q1 2024 (floating interest rate)[127](index=127&type=chunk) - The company expects its liquidity position, credit facilities, and future operations to be sufficient to finance foreseeable liquidity needs, including planned capital expenditures of **$60-70 million** in 2023 and quarterly dividends[128](index=128&type=chunk)[130](index=130&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no changes to the critical accounting estimates previously disclosed - There have been no changes in the critical accounting estimates identified in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022[133](index=133&type=chunk) [Recently Issued Accounting Standards](index=28&type=section&id=Recently%20Issued%20Accounting%20Standards) This section refers to the notes to the financial statements for information on recently issued accounting standards - Information regarding recently issued accounting standards is provided in Note 2 to the condensed consolidated financial statements[134](index=134&type=chunk) [Forward-looking Statements](index=28&type=section&id=Forward-looking%20Statements) This section highlights that the report contains forward-looking statements and outlines the associated risks and uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, which involve risks and uncertainties that could cause actual results to differ materially[135](index=135&type=chunk) - Key risks include competitive and economic conditions, acts of terrorism, cyberattacks, the COVID-19 pandemic, regulatory changes, raw material costs, currency fluctuations, and changes in customer demand[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risks, including foreign currency exchange, interest rates, commodity prices, and fixed income and equity prices - The nature of market risks faced by the company as of May 27, 2022, remains consistent with those disclosed in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022[136](index=136&type=chunk) - No material changes occurred in foreign exchange risk, interest rate risk, commodity price risk, or fixed income and equity price risk during Q1 2023[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting - Management, under the supervision of the CEO and CFO, concluded that disclosure controls and procedures were effective as of May 27, 2022[141](index=141&type=chunk) - There were no material changes in internal control over financial reporting during the first fiscal quarter[142](index=142&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors - For a detailed explanation of risks, refer to the Risk Factors section in the Annual Report on Form 10-K for the fiscal year ended February 25, 2022[144](index=144&type=chunk) - No material changes to the risk factors have occurred since the filing of the Annual Report on Form 10-K[144](index=144&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides a summary of the company's equity security repurchase activities during the first quarter **Issuer Purchases of Equity Securities (Q1 2023):** | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased Under Publicly Announced Plans or Programs | Approximate Dollar Value Remaining for Repurchase ($ million) | | :------------------- | :----------------------- | :--------------------------- | :---------------------------------------------------------- | :------------------------------------------------------------ | | 2/26/2022 - 4/1/2022 | 276,035 | $12.25 | — | $6.4 | | 4/2/2022 - 4/29/2022 | 2,891 | $11.46 | — | $6.4 | | 4/30/2022 - 5/27/2022 | 177 | $11.73 | — | $6.4 | | **Total** | **279,103** | N/A | **—** | N/A | - All shares repurchased were to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards, as per the Incentive Compensation Plan[148](index=148&type=chunk) - As of May 27, 2022, **$6.4 million** remained available under the **$150 million** share repurchase program approved in January 2016[147](index=147&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report - The exhibits include a Voluntary Mutual Separation Agreement, CEO and CFO certifications (Sarbanes-Oxley Act), and Inline XBRL documents[149](index=149&type=chunk) [Signatures](index=32&type=section&id=Signatures) This section contains the signature of the duly authorized officer, confirming the submission of the report - The report is signed by David C. Sylvester, Senior Vice President, Chief Financial Officer, as the duly authorized officer, principal financial officer, and principal accounting officer[154](index=154&type=chunk)

Steelcase Inc. (NYSE:SCS) Q1 2023 Earnings Conference Call June 23, 2022 8:30 AM ET Company Participants Michael O'Meara - Director, Investor Relations and Financial Planning and Analysis Sara Armbruster - President and Chief Executive Officer David Sylvester - Senior Vice President and Chief Financial Officer Conference Call Participants Greg Burns - Sidoti Kathryn Thompson - Thompson Research Group Budd Bugatch - Water Tower Research Operator Good morning. My name is Rob and I will be your conference oper ...

| --- | --- | --- | |--------------------------------------------|-------|-------| | | | | | | | | | | | | | Investor Presentation FY2023 First Quarter | | | | June 22, 2022 | | | | --- | --- | |--------------------------------------|-----------------------------------------------------------------------------------------------| | | | | Investment Thesis Steelcase Q1, 2023 | We believe the office will continue to be very relevant for | | | innovation, culture, and collaboration An industry leader in a chang ...

[PART I](index=3&type=section&id=Part%20I) [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Steelcase Inc. is a global leader in workplace furniture and architectural products, focusing on hybrid work solutions, market expansion, and profitability through innovation and sustainable practices - Steelcase Inc. is a globally integrated enterprise, headquartered in Grand Rapids, Michigan, U.S.A., with approximately **11,800 employees**, founded in 1912 and publicly traded since 1998 (NYSE: SCS)[13](index=13&type=chunk) - Strategic priorities include leading the transformation toward hybrid work, deepening presence in key adjacent growth opportunities (geographic and vertical markets), enhancing capabilities for smaller/mid-sized customers, creating value through market-leading performance in people, products, and planet, and driving profitability initiatives[16](index=16&type=chunk) - The company offers a comprehensive portfolio of furniture (systems, seating, storage, desks, tables, accessories) and architectural products (full/partial height walls, free-standing pods), along with services like workplace strategy consulting and asset management[17](index=17&type=chunk)[18](index=18&type=chunk) - Steelcase operates globally within its Americas and EMEA reportable segments, plus an Other category (Asia Pacific and Designtex)[27](index=27&type=chunk) - Research, design, and development expenses were **$45.4 million** in 2022, **$48.1 million** in 2021, and **$50.6 million** in 2020, reflecting ongoing investment in innovation[53](index=53&type=chunk) - As of February 25, 2022, Steelcase had approximately **11,800 employees**, with **6,900** in manufacturing and distribution, and an additional **1,100** temporary workers[62](index=62&type=chunk) [Overview](index=3&type=section&id=Overview) [Strategic Priorities](index=3&type=section&id=Strategic%20Priorities) [Our Offerings](index=3&type=section&id=Our%20Offerings) [Brands](index=4&type=section&id=Brands) [Marketing Partnerships](index=5&type=section&id=Marketing%20Partnerships) [Reportable Segments](index=5&type=section&id=Reportable%20Segments) [Joint Ventures and Other Equity Investments](index=6&type=section&id=Joint%20Ventures%20and%20Other%20Equity%20Investments) [Customer and Dealer Concentrations](index=6&type=section&id=Customer%20and%20Dealer%20Concentrations) [Manufacturing and Logistics](index=6&type=section&id=Manufacturing%20and%20Logistics) [Materials](index=7&type=section&id=Materials) [Research, Design and Development](index=7&type=section&id=Research,%20Design%20and%20Development) [Intellectual Property](index=7&type=section&id=Intellectual%20Property) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) [Environmental Matters](index=9&type=section&id=Environmental%20Matters) [Available Information](index=10&type=section&id=Available%20Information) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks from macroeconomic shifts, supply chain disruptions, global operations, financial factors, and operational vulnerabilities - The COVID-19 pandemic significantly impacted global demand for office furniture, leading to increased raw material, transportation, and labor costs, and supply chain disruptions[68](index=68&type=chunk)[69](index=69&type=chunk) - The company's industry is cyclical, influenced by macroeconomic factors like corporate profits and employment, making it vulnerable to downturns[69](index=69&type=chunk) - Failure to adapt to evolving workplace trends (e.g., hybrid work, demand for residential-style office products) and increased competition from new market entrants could adversely affect revenue and profits[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Reliance on a global network of suppliers exposes the company to risks from raw material availability, labor shortages, shipping delays, and geopolitical events, which significantly increased costs in 2022[78](index=78&type=chunk) - Goodwill of **$242.8 million** as of February 25, 2022, is subject to annual impairment testing, with poor performance or market value declines potentially leading to impairment charges[89](index=89&type=chunk) - The company relies on the integrity and security of its IT systems, making it vulnerable to cyberattacks, security breaches, and system disruptions that could impact operations, revenue, and reputation[94](index=94&type=chunk) [Item 1B. Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments from the SEC were reported - No unresolved staff comments were reported[98](index=98&type=chunk) [Item 2. Properties](index=16&type=section&id=Item%202.%20Properties) Steelcase operates 21 global manufacturing and distribution centers, 9 owned and 12 leased, with headquarters in Grand Rapids, Michigan - Steelcase operates **21** principal manufacturing and distribution center locations globally[99](index=99&type=chunk) Principal Manufacturing and Distribution Center Locations (Greater than 100,000 sq ft) | Segment/Category Primarily Supported | Number of Principal Locations | Owned | Leased | | :----------------------------------- | :---------------------------- | :---- | :----- | | Americas | 14 | 5 | 9 | | EMEA | 5 | 4 | 1 | | Other category | 2 | — | 2 | | Total | 21 | 9 | 12 | [Item 3. Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine litigation, but no material adverse effects are anticipated from current lawsuits or proceedings - The company is involved in litigation in the ordinary course of business but does not believe any lawsuit or proceeding is likely to have a material adverse effect[100](index=100&type=chunk) [Item 4. Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This disclosure item is not applicable to Steelcase Inc - Mine Safety Disclosures are not applicable[101](index=101&type=chunk) [Supplementary Item. Information About Our Executive Officers](index=17&type=section&id=Supplementary%20Item.%20Information%20About%20Our%20Executive%20Officers) This section provides a list of Steelcase Inc.'s executive officers, detailing their age, current positions, and tenure Executive Officers of Steelcase Inc. | Name | Age | Position | | :------------------ | :-- | :-------------------------------------------------------------------- | | Sara E. Armbruster | 51 | President and Chief Executive Officer, Director | | Donna K. Flynn | 54 | Vice President, Global Talent Management | | Robert G. Krestakos | 60 | Vice President, Global Operations | | Steven D. Miller | 47 | Vice President, Chief Technology Officer | | Lizbeth S. O'Shaughnessy | 60 | Senior Vice President, Chief Administrative Officer, General Counsel and Secretary | | Allan W. Smith, Jr. | 54 | Senior Vice President, Chief Revenue Officer | | David C. Sylvester | 57 | Senior Vice President, Chief Financial Officer | [PART II](index=18&type=section&id=Part%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Steelcase Inc.'s Class A Common Stock trades on NYSE, with 112.7 million shares outstanding as of April 2022, and recent share repurchases - Class A Common Stock is listed on the New York Stock Exchange (NYSE) under the symbol 'SCS'. Class B Common Stock is not publicly traded[109](index=109&type=chunk) - As of April 12, 2022, there were **88,075,177** shares of Class A Common Stock and **24,658,382** shares of Class B Common Stock outstanding[5](index=5&type=chunk)[109](index=109&type=chunk) Q4 2022 Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) (in millions) | | :----------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------------- | | 11/27/2021 - 12/31/2021 | 102,391 | $11.77 | 99,938 | $6.4 | | 01/01/2022 - 01/28/2022 | — | — | — | $6.4 | | 01/29/2022 - 02/25/2022 | 3,328 | $12.67 | — | $6.4 | | Total | 105,719 (2) | | 99,938 | | [Item 6. [Reserved]](index=18&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Steelcase's 2022 financial performance showed revenue growth and strong orders, but net income declined due to inflation and supply chain costs, while liquidity remained robust - Orders grew **25%** in 2022 compared to the prior year, reflecting broad recovery and growth across most geographies, leading to a **77% higher backlog** of approximately **$787 million**[118](index=118&type=chunk) - Significant inflation in raw materials (steel, other commodities) and higher freight and labor costs decreased gross profit by approximately **$106 million** in 2022. Three list price increases were announced to offset these impacts[119](index=119&type=chunk) Consolidated Statement of Operations Data (in millions, except per share data) | Statement of Operations Data—Consolidated | February 25, 2022 | February 26, 2021 | February 28, 2020 | | :---------------------------------------- | :---------------- | :---------------- | :---------------- | | Revenue | $2,772.7 | $2,596.2 | $3,723.7 | | Cost of sales | 2,011.2 | 1,822.8 | 2,508.5 | | Gross profit | 761.5 | 762.8 | 1,215.2 | | Operating expenses | 741.4 | 684.2 | 958.2 | | Operating income | 20.1 | 43.0 | 257.0 | | Net income (loss) | $4.0 | $26.1 | $199.7 | | Earnings per share: Basic | $0.03 | $0.22 | $1.67 | | Earnings per share: Diluted | $0.03 | $0.22 | $1.66 | Organic Revenue Growth (Decline) — Consolidated | Metric | Year Ended February 25, 2022 | Year Ended February 26, 2021 | | :-------------------------- | :--------------------------- | :--------------------------- | | Prior year revenue | $2,596.2 | $3,723.7 | | Acquisitions | 44.8 | 2.2 | | Divestitures | — | (61.5) | | Impact of additional week** | — | (48.4) | | Currency translation effects* | 16.0 | 23.0 | | Prior year revenue, adjusted | 2,657.0 | 3,639.0 | | Current year revenue | 2,772.7 | 2,596.2 | | Organic growth (decline) | $115.7 | $(1,042.8) | | Organic growth (decline) % | 4% | (29)% | - Net income decreased from **$26.1 million** in 2021 to **$4.0 million** in 2022, and diluted EPS decreased from **$0.22** to **$0.03**. The 2021 results included a **$17.6 million** goodwill impairment charge and **$17.4 million** in restructuring costs[120](index=120&type=chunk) Liquidity Sources (in millions) | Liquidity Sources | February 25, 2022 | February 26, 2021 | | :------------------------ | :---------------- | :---------------- | | Cash and cash equivalents | $200.9 | $489.8 | | Company-owned life insurance | 168.0 | 169.5 | | Availability under credit facilities | 262.0 | 265.9 | | Total liquidity sources available | $630.9 | $925.2 | [Non-GAAP Financial Measures](index=18&type=section&id=Non-GAAP%20Financial%20Measures) [Financial Summary](index=19&type=section&id=Financial%20Summary) [Overview](index=20&type=section&id=Overview) [Interest Expense, Investment Income and Other Income, Net](index=21&type=section&id=Interest%20Expense,%20Investment%20Income%20and%20Other%20Income,%20Net) [Business Segment Disclosure](index=21&type=section&id=Business%20Segment%20Disclosure) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) [Recently Issued Accounting Standards](index=32&type=section&id=Recently%20Issued%20Accounting%20Standards) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Steelcase manages market risks including foreign currency, interest rates, and commodity prices, which significantly impacted 2022 costs - Foreign currency exchange risk is managed through operational matching of revenue and costs, and derivative instruments. Foreign revenue accounted for approximately **33%** of consolidated revenue in both 2022 and 2021[194](index=194&type=chunk) - A **10% strengthening** of the U.S. dollar against local currencies would have increased operating income by approximately **$8 million** in 2022 and **$10 million** in 2021[195](index=195&type=chunk) - Commodity price risk, particularly for steel and petroleum-based products, significantly increased cost of sales by approximately **$127 million** in 2022. A **1% increase** in commodity prices could decrease operating income by about **$13 million**[201](index=201&type=chunk)[202](index=202&type=chunk) - Interest rate risk primarily stems from a **$34.9 million** floating-rate term loan (LIBOR + 1.20%). A **1% interest rate increase** would have increased net income by less than **$1 million** in 2022[199](index=199&type=chunk)[200](index=200&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides Steelcase Inc.'s audited consolidated financial statements, including income, balance sheets, cash flows, and auditor reports, with detailed accounting notes - Management assessed the effectiveness of internal control over financial reporting as effective as of February 25, 2022, based on the COSO framework[210](index=210&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting and on the consolidated financial statements for the year ended February 25, 2022[215](index=215&type=chunk)[216](index=216&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - Goodwill for the AMQ Reporting Unit was identified as a critical audit matter due to significant management judgments in estimating fair value, requiring extensive auditor effort and specialist involvement[229](index=229&type=chunk)[230](index=230&type=chunk) [MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING](index=35&type=section&id=MANAGEMENT'S%20REPORT%20ON%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Internal Control)](index=36&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20(Internal%20Control)) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Financial Statements)](index=37&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM%20(Financial%20Statements)) [CONSOLIDATED STATEMENTS OF INCOME](index=39&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)](index=40&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) [CONSOLIDATED BALANCE SHEETS](index=41&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) [CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY](index=42&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS'%20EQUITY) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=43&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) [NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS](index=44&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. NATURE OF OPERATIONS](index=44&type=section&id=1.%20NATURE%20OF%20OPERATIONS) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=44&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) [3. NEW ACCOUNTING STANDARDS](index=51&type=section&id=3.%20NEW%20ACCOUNTING%20STANDARDS) [4. REVENUE](index=53&type=section&id=4.%20REVENUE) [5. EARNINGS PER SHARE](index=54&type=section&id=5.%20EARNINGS%20PER%20SHARE) [6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=56&type=section&id=6.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) [7. FAIR VALUE](index=57&type=section&id=7.%20FAIR%20VALUE) [8. INVENTORIES](index=59&type=section&id=8.%20INVENTORIES) [9. PROPERTY, PLANT AND EQUIPMENT](index=59&type=section&id=9.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) [10. COMPANY-OWNED LIFE INSURANCE](index=60&type=section&id=10.%20COMPANY-OWNED%20LIFE%20INSURANCE) [11. GOODWILL AND OTHER INTANGIBLE ASSETS](index=61&type=section&id=11.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) [12. INVESTMENTS IN UNCONSOLIDATED AFFILIATES](index=63&type=section&id=12.%20INVESTMENTS%20IN%20UNCONSOLIDATED%20AFFILIATES) [13. SHORT-TERM BORROWINGS AND LONG-TERM DEBT](index=65&type=section&id=13.%20SHORT-TERM%20BORROWINGS%20AND%20LONG-TERM%20DEBT) [14. EMPLOYEE BENEFIT PLAN OBLIGATIONS](index=67&type=section&id=14.%20EMPLOYEE%20BENEFIT%20PLAN%20OBLIGATIONS) [15. CAPITAL STRUCTURE](index=74&type=section&id=15.%20CAPITAL%20STRUCTURE) [16. INCOME TAXES](index=75&type=section&id=16.%20INCOME%20TAXES) [17. SHARE-BASED COMPENSATION](index=79&type=section&id=17.%20SHARE-BASED%20COMPENSATION) [18. LEASES](index=83&type=section&id=18.%20LEASES) [19. ACQUISITIONS](index=84&type=section&id=19.%20ACQUISITIONS) [20. DIVESTITURE](index=85&type=section&id=20.%20DIVESTITURE) [21. REPORTABLE SEGMENTS](index=86&type=section&id=21.%20REPORTABLE%20SEGMENTS) [22. RESTRUCTURING ACTIVITIES](index=87&type=section&id=22.%20RESTRUCTURING%20ACTIVITIES) [23. UNAUDITED QUARTERLY RESULTS](index=88&type=section&id=23.%20UNAUDITED%20QUARTERLY%20RESULTS) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=89&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure were reported - No changes in or disagreements with accountants on accounting and financial disclosure were reported[493](index=493&type=chunk) [Item 9A. Controls and Procedures](index=89&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors confirmed effective disclosure controls and internal control over financial reporting as of February 25, 2022 - Management, under the supervision of the CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective as of February 25, 2022[494](index=494&type=chunk) - Deloitte & Touche LLP attested to the effectiveness of the company's internal control over financial reporting[495](index=495&type=chunk) - There were no changes in internal control over financial reporting during the fourth fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[495](index=495&type=chunk) [Item 9B. Other Information](index=89&type=section&id=Item%209B.%20Other%20Information) No other information is reported in this item - No other information was reported[496](index=496&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection](index=89&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspection) This disclosure item is not applicable to Steelcase Inc - Disclosure regarding foreign jurisdictions that prevent inspection is not applicable[497](index=497&type=chunk) [PART III](index=90&type=section&id=Part%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=90&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Executive officer information is in Part I, with other director and corporate governance details incorporated from the 2022 Proxy Statement - Information on executive officers is provided in a supplementary item at the end of Part I[500](index=500&type=chunk) - Other information on directors and corporate governance will be incorporated by reference from the 2022 Proxy Statement[500](index=500&type=chunk) [Item 11. Executive Compensation](index=90&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details will be incorporated by reference from the 2022 Proxy Statement - Information on executive compensation will be contained in the 2022 Proxy Statement and incorporated by reference[501](index=501&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details securities authorized under equity compensation plans as of February 25, 2022, with further ownership details from the 2022 Proxy Statement Securities Authorized for Issuance Under Equity Compensation Plans (as of February 25, 2022) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :---------------------------------------------- | :------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 4,651,271 | n/a | 5,484,088 | | Equity compensation plans not approved by security holders | — | n/a | — | | Total | 4,651,271 | n/a | 5,484,088 | - All equity awards were granted under the company's Incentive Compensation Plan[504](index=504&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=90&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information on related transactions and director independence will be incorporated by reference from the 2022 Proxy Statement - Information on certain relationships and related transactions, and director independence will be contained in the 2022 Proxy Statement and incorporated by reference[505](index=505&type=chunk) [Item 14. Principal Accounting Fees and Services](index=90&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information will be incorporated by reference from the 2022 Proxy Statement - Information on principal accounting fees and services will be contained in the 2022 Proxy Statement and incorporated by reference[506](index=506&type=chunk) [PART IV](index=91&type=section&id=Part%20IV) [Item 15. Exhibits, Financial Statement Schedules](index=91&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and an index of exhibits, including corporate documents and certifications - The report includes consolidated financial statements (Income, Comprehensive Income, Balance Sheets, Changes in Shareholders' Equity, Cash Flows) and accompanying notes[508](index=508&type=chunk) - Schedule II—Valuation and Qualifying Accounts is also filed as part of this report[508](index=508&type=chunk) - An extensive index of exhibits, including corporate governance documents, credit agreements, compensation plans, and certifications, is provided[509](index=509&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk) [Item 16. Form 10-K Summary](index=95&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is provided in this report - No Form 10-K Summary is provided[519](index=519&type=chunk) [SCHEDULE II](index=95&type=section&id=SCHEDULE%20II) Schedule II details allowances for accounts receivable losses and deferred income tax assets for fiscal years 2020-2022 Allowance for Losses on Accounts Receivable (in millions) | Allowance for Losses on Accounts Receivable | February 25, 2022 | February 26, 2021 | February 28, 2020 | | :---------------------------------------- | :---------------- | :---------------- | :---------------- | | Balance as of beginning of period | $8.7 | $9.4 | $8.7 | | Additions: Charged to costs and expenses | 2.8 | 6.2 | 7.3 | | Deductions (1) | (3.3) | (7.3) | (5.9) | | Other adjustments (2) | (0.2) | 0.4 | (0.7) | | Balance as of end of period | $8.0 | $8.7 | $9.4 | Valuation Allowance for Deferred Income Tax Assets (in millions) | Valuation Allowance for Deferred Income Tax Assets | February 25, 2022 | February 26, 2021 | February 28, 2020 | | :------------------------------------------------- | :---------------- | :---------------- | :---------------- | | Balance as of beginning of period | $6.6 | $5.7 | $7.8 | | Additions: Charged to costs and expenses | (2.7) | 0.4 | (1.9) | | Deductions and expirations | — | — | — | | Other adjustments (1) | (0.2) | 0.5 | (0.2) | | Balance as of end of period | $3.7 | $6.6 | $5.7 |

Steelcase Inc. (NYSE:SCS) Q4 2022 Results Earnings Conference Call March 24, 2022 8:30 AM ET Company Participants Michael O'Meara - Director, Investor Relations and Financial Planning and Analysis Sara Armbruster - President and Chief Executive Officer David Sylvester - Senior Vice President and Chief Financial Officer Conference Call Participants Greg Burns - Sidoti & Company Reuben Garner - The Benchmark Company Steven Ramsey - Thompson Research Group Rudy Yang - Berenberg Capital Markets Budd Bugatch - W ...