Steelcase Investor Presentation FY2022 Fourth Quarter March 23, 2022 | --- | --- | |--------------------------------------|-------------------------------------------------------------------------------------------------------| | | | | Investment Thesis Steelcase Q4, 2022 | | | | We believe the office will continue to be very relevant for innovation, culture, and collaboration | | | An industry leader in a changing workplace environment that we believe provides growth opportunities | | | Experienced managem ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________ FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-13873 ___________________________________________________________ STEELCASE INC. (Exact name of registrant as specified in its charter) Michigan 38-0819050 (State or other jurisdiction of incorporation ...

Steelcase Inc. (NYSE:SCS) Q3 2022 Earnings Conference Call December 17, 2021 8:30 AM ET Company Participants Michael O'Meara - Investor Relations Sara Armbruster - President and Chief Executive Officer Dave Sylvester - Senior Vice President and Chief Financial Officer Conference Call Participants Reuben Garner - The Benchmark Company Greg Burns - Sidoti & Company Rudy Yang - Berenberg Steven Ramsey - Thompson Research Group Stuart Linde - Water Tower Research Operator Good morning. My name is Dexter, and I ...

PART I. [FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including statements of operations, comprehensive income (loss), balance sheets, changes in shareholders' equity, and cash flows, along with their accompanying notes, for the periods ended August 27, 2021 [Condensed Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This statement details the company's unaudited consolidated operating results, showing a decline in net income for the quarter and a net loss year-to-date compared to prior periods Three Months Ended August 27, 2021 vs. August 28, 2020 | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :------------------- | :------------------- | :------------------- | :---------- | | Revenue | 724.8 | 818.8 | (94.0) | | Gross profit | 206.8 | 269.6 | (62.8) | | Operating income | 33.9 | 88.6 | (54.7) | | Net income (loss) | 24.7 | 55.5 | (30.8) | | Diluted EPS | 0.21 | 0.47 | (0.26) | | Dividends per share | 0.145 | 0.100 | 0.045 | Six Months Ended August 27, 2021 vs. August 28, 2020 | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :------------------- | :------------------- | :------------------- | :---------- | | Revenue | 1,281.4 | 1,301.6 | (20.2) | | Gross profit | 361.5 | 392.3 | (30.8) | | Operating income | 2.1 | 36.3 | (34.2) | | Net income (loss) | (3.4) | 17.4 | (20.8) | | Diluted EPS | (0.03) | 0.15 | (0.18) | | Dividends per share | 0.245 | 0.170 | 0.075 | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Comprehensive income decreased significantly for both the three and six months ended August 27, 2021, primarily due to negative foreign currency translation adjustments Three Months Ended August 27, 2021 vs. August 28, 2020 | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :-------------------------------- | :------------------- | :------------------- | :---------- | | Net income (loss) | 24.7 | 55.5 | (30.8) | | Foreign currency translation adjustments | (12.7) | 22.4 | (35.1) | | Comprehensive income (loss) | 12.6 | 77.1 | (64.5) | Six Months Ended August 27, 2021 vs. August 28, 2020 | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :-------------------------------- | :------------------- | :------------------- | :---------- | | Net income (loss) | (3.4) | 17.4 | (20.8) | | Foreign currency translation adjustments | (11.8) | 13.5 | (25.3) | | Comprehensive income (loss) | (14.3) | 30.4 | (44.7) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets, primarily from cash, while total liabilities increased and shareholders' equity declined As of August 27, 2021 vs. February 26, 2021 | Metric | August 27, 2021 ($M) | February 26, 2021 ($M) | Change ($M) | | :------------------------------------------ | :------------------- | :------------------- | :---------- | | Cash and cash equivalents | 360.7 | 489.8 | (129.1) | | Accounts receivable | 334.0 | 279.0 | 55.0 | | Inventories | 233.4 | 193.5 | 39.9 | | Total current assets | 1,030.0 | 1,045.4 | (15.4) | | Total assets | 2,313.5 | 2,354.0 | (40.5) | | Accounts payable | 234.4 | 181.3 | 53.1 | | Total current liabilities | 547.7 | 515.0 | 32.7 | | Total liabilities | 1,412.2 | 1,393.5 | 18.7 | | Total shareholders' equity | 901.3 | 960.5 | (59.2) | [Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Unaudited)) Shareholders' equity decreased during the period, primarily due to net loss, dividends, and share repurchases, partially offset by share-based compensation Six Months Ended August 27, 2021 | Metric | Amount ($M) | | :------------------------------------------ | :---------- | | Retained earnings, beginning of period | 988.0 | | Net income (loss) | (3.4) | | Dividends paid | (29.2) | | Common stock repurchases | (3.2) | | Retained earnings, end of period | 952.2 | | Total shareholders' equity, end of period | 901.3 | - Common shares outstanding **decreased** from **114,908,676** at the beginning of the period to **113,821,358** at the end of the period, primarily due to common stock repurchases of **2,227,000 shares**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) The company experienced a net decrease in cash and equivalents, primarily driven by cash used in operating and financing activities Six Months Ended August 27, 2021 vs. August 28, 2020 | Cash Flow Data | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :------------------------------------------ | :------------------- | :------------------- | :---------- | | Net cash provided by (used in) operating activities | (61.6) | 44.9 | (106.5) | | Net cash used in investing activities | (6.5) | (6.0) | (0.5) | | Net cash used in financing activities | (59.9) | (63.8) | 3.9 | | Net decrease in cash, cash equivalents and restricted cash | (128.6) | (24.7) | (103.9) | | Cash and cash equivalents and restricted cash, end of period | 367.0 | 522.4 | (155.4) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes to the condensed consolidated financial statements cover basis of presentation, accounting standards, revenue, earnings per share, comprehensive income, fair value, inventories, share-based compensation, leases, and reportable segments [1. BASIS OF PRESENTATION](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION) Interim financial statements are prepared under GAAP for interim information and should not be considered indicative of full-year results - Interim financial statements are prepared in accordance with **GAAP** for interim financial information and do not include all information and footnotes for complete financial statements[25](index=25&type=chunk) - Results for interim periods should **not be considered indicative** of results to be expected for a full year[25](index=25&type=chunk) - References to "Steelcase," "we," "our," "Company" refer to **Steelcase Inc. and its subsidiaries**[26](index=26&type=chunk) [2. NEW ACCOUNTING STANDARDS](index=8&type=section&id=2.%20NEW%20ACCOUNTING%20STANDARDS) The company evaluates all ASUs issued by FASB and has concluded that those not disclosed are either not applicable or not expected to materially affect its consolidated financial statements - The company evaluates all **Accounting Standards Updates (ASUs)** issued by the **FASB**[27](index=27&type=chunk) - ASUs not disclosed are either not applicable or not expected to have a **material effect** on consolidated financial statements[27](index=27&type=chunk) [3. REVENUE](index=9&type=section&id=3.%20REVENUE) Revenue declined year-over-year for the quarter and year-to-date, with regional variations, while customer deposits increased Disaggregated Revenue by Product Category (Three Months Ended August 27, 2021 vs. August 28, 2020) | Product Category Data | August 27, 2021 ($M) | August 28, 2020 ($M) | | :-------------------------------- | :------------------- | :------------------- | | **Americas** | | | | Desking, benching, systems and storage | 244.3 | 310.7 | | Seating | 165.5 | 195.0 | | Other | 113.5 | 125.5 | | **EMEA** | | | | Desking, benching, systems and storage | 41.7 | 47.9 | | Seating | 55.7 | 45.8 | | Other | 41.5 | 32.2 | | **Other** | | | | Desking, benching, systems and storage | 14.5 | 10.4 | | Seating | 16.2 | 18.7 | | Other | 31.9 | 32.6 | | **Total Revenue** | **724.8** | **818.8** | Reportable Geographic Revenue (Three Months Ended August 27, 2021 vs. August 28, 2020) | Reportable Geographic Revenue | August 27, 2021 ($M) | August 28, 2020 ($M) | | :---------------------------- | :------------------- | :------------------- | | United States | 493.5 | 597.6 | | Foreign locations | 231.3 | 221.2 | | **Total Revenue** | **724.8** | **818.8** | - Customer deposits **increased** from **$33.7 million** as of February 26, 2021, to **$47.4 million** as of August 27, 2021[32](index=32&type=chunk) [4. EARNINGS (LOSS) PER SHARE](index=10&type=section&id=4.%20EARNINGS%20(LOSS)%20PER%20SHARE) Diluted earnings per share decreased for the quarter, resulting in a year-to-date diluted loss per share, computed using the two-class method - Diluted earnings per share was **$0.21** for the three months ended August 27, 2021, compared to **$0.47** for the prior year period[35](index=35&type=chunk) - Diluted loss per share was **$0.03** for the six months ended August 27, 2021, compared to earnings per share of **$0.15** for the prior year period[36](index=36&type=chunk) - Earnings (loss) per share is computed using the **two-class method**, which includes participating securities (restricted stock units with non-forfeitable dividend rights)[34](index=34&type=chunk) [5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=11&type=section&id=5.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Accumulated other comprehensive income (loss) worsened, primarily due to negative foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) Balances | Component | Balance as of Feb 26, 2021 ($M) | Balance as of Aug 27, 2021 ($M) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Unrealized gain (loss) on investments | 0.3 | 0.5 | | Pension and other post-retirement liability adjustments | (6.6) | (6.3) | | Derivative amortization | (7.6) | (7.2) | | Foreign currency translation adjustments | (26.1) | (37.9) | | **Total** | **(40.0)** | **(50.9)** | - Net other comprehensive income (loss) for the six months ended August 27, 2021, was **$(10.9) million**, primarily driven by **$(11.8) million** in foreign currency translation adjustments[38](index=38&type=chunk) - Total reclassifications out of accumulated other comprehensive income (loss) for the six months ended August 27, 2021, was **$0.3 million**, mainly from derivative amortization[40](index=40&type=chunk) [6. FAIR VALUE](index=13&type=section&id=6.%20FAIR%20VALUE) The company uses derivative financial instruments to manage market exposures, with total debt fair value exceeding its carrying amount - The company uses **derivative financial instruments** to manage exposures to foreign exchange rates and interest rates, not for speculative or trading purposes[44](index=44&type=chunk) - The fair value of total debt was **$565.8 million** as of August 27, 2021, compared to a carrying amount of **$484.5 million**[43](index=43&type=chunk) Fair Value of Financial Instruments (August 27, 2021) | Fair Value of Financial Instruments | Level 1 ($M) | Level 2 ($M) | Level 3 ($M) | Total ($M) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | **Assets:** | | | | | | Cash and cash equivalents | 360.7 | — | — | 360.7 | | Restricted cash | 6.3 | — | — | 6.3 | | Foreign exchange forward contracts | — | 0.6 | — | 0.6 | | Auction rate security | — | — | 2.8 | 2.8 | | **Liabilities:** | | | | | | Foreign exchange forward contracts | — | (0.3) | — | (0.3) | [7. INVENTORIES](index=14&type=section&id=7.%20INVENTORIES) Total inventories increased, reflecting growth in both raw materials/work-in-process and finished goods Inventories (August 27, 2021 vs. February 26, 2021) | Inventories | August 27, 2021 ($M) | February 26, 2021 ($M) | | :------------------------ | :------------------- | :------------------- | | Raw materials and work-in-process | 139.5 | 126.0 | | Finished goods | 118.3 | 86.4 | | Revaluation to LIFO | 24.4 | 18.9 | | **Total Inventories** | **233.4** | **193.5** | - The portion of inventories determined by the **LIFO method** was **$102.1 million** as of August 27, 2021, up from **$89.1 million** as of February 26, 2021[46](index=46&type=chunk) [8. SHARE-BASED COMPENSATION](index=14&type=section&id=8.%20SHARE-BASED%20COMPENSATION) The company grants Performance Units and Restricted Stock Units to employees, with unrecognized compensation expense remaining for both as of the period end [Performance Units](index=14&type=section&id=Performance%20Units) Performance Units are granted to employees, earned over three years based on performance and market conditions, with remaining unrecognized compensation expense - Performance units (PSUs) are earned over a **three-year performance period** based on performance conditions and market conditions (total shareholder return relative to a comparison group)[47](index=47&type=chunk) - Fair values of market conditions for PSUs granted in 2022, 2021, and 2020 were **$6.1 million**, **$3.7 million**, and **$1.6 million**, respectively, calculated using the **Monte Carlo simulation model**[53](index=53&type=chunk) - As of August 27, 2021, there was **$1.0 million** of remaining unrecognized compensation expense related to granted nonvested PSUs, expected to be recognized over a weighted-average period of **1.8 years**[54](index=54&type=chunk) [Restricted Stock Units](index=15&type=section&id=Restricted%20Stock%20Units) Restricted Stock Units are awarded to employees with three-year vesting, and unrecognized compensation expense remains for these awards - **Restricted stock units (RSUs)** have transfer restrictions that lapse **three years** after the grant date, at which time they are issued as unrestricted shares of Class A Common Stock[56](index=56&type=chunk) - During the six months ended August 27, 2021, **839,818 shares** were awarded[56](index=56&type=chunk) - As of August 27, 2021, there was **$8.9 million** of remaining unrecognized compensation expense related to nonvested RSUs, expected to be recognized over a weighted-average period of **1.9 years**[57](index=57&type=chunk) [9. LEASES](index=16&type=section&id=9.%20LEASES) The company holds operating leases for various assets, with a weighted-average remaining lease term of 6.2 years and a 3.7% discount rate - Operating lease cost for the six months ended August 27, 2021, was **$26.3 million**[61](index=61&type=chunk) - The weighted-average remaining lease term was **6.2 years**, and the weighted-average discount rate was **3.7%** as of August 27, 2021[61](index=61&type=chunk) Future Minimum Lease Payments as of August 27, 2021 | Fiscal year ending in February | Amount ($M) | | :----------------------------- | :---------- | | 2022 | 26.1 | | 2023 | 48.4 | | 2024 | 43.5 | | 2025 | 41.2 | | 2026 | 32.9 | | Thereafter | 73.3 | | **Total lease payments** | **265.4** | [10. REPORTABLE SEGMENTS](index=17&type=section&id=10.%20REPORTABLE%20SEGMENTS) The company operates through three reportable segments: Americas, EMEA, and Other (Asia Pacific and Designtex), plus a Corporate category for unallocated expenses. Revenue and operating income are key metrics for segment evaluation and resource allocation - Reportable segments include **Americas** (U.S., Canada, Caribbean, Latin America), **EMEA** (Europe, Middle East, Africa), and **Other** (Asia Pacific and Designtex)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) Revenue by Segment (Three Months Ended August 27, 2021 vs. August 28, 2020) | Segment | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :-------- | :------------------- | :------------------- | :---------- | | Americas | 523.3 | 631.2 | (107.9) | | EMEA | 138.9 | 125.9 | 13.0 | | Other | 62.6 | 61.7 | 0.9 | | **Total** | **724.8** | **818.8** | **(94.0)** | Operating Income (Loss) by Segment (Three Months Ended August 27, 2021 vs. August 28, 2020) | Segment | August 27, 2021 ($M) | August 28, 2020 ($M) | Change ($M) | | :-------- | :------------------- | :------------------- | :---------- | | Americas | 44.7 | 94.6 | (49.9) | | EMEA | (1.6) | (3.5) | 1.9 | | Other | (4.2) | 1.1 | (5.3) | | Corporate | (5.0) | (3.6) | (1.4) | | **Total** | **33.9** | **88.6** | **(54.7)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis covers the company's financial condition, operating results by segment, liquidity, capital resources, and non-GAAP financial measures [Non-GAAP Financial Measures](index=19&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures, including organic revenue growth (decline) and adjusted operating income (loss), to monitor and evaluate financial results and trends, believing this information is useful for investors - **Non-GAAP financial measures** used are **organic revenue growth (decline)** and **adjusted operating income (loss)**[75](index=75&type=chunk) - Organic revenue growth (decline) excludes impacts of acquisitions, divestitures, and estimated currency translation effects[75](index=75&type=chunk) - Adjusted operating income (loss) excludes goodwill impairment charges and restructuring costs[75](index=75&type=chunk) [Financial Summary](index=19&type=section&id=Financial%20Summary) The financial summary provides a high-level overview of the company's consolidated statement of operations data, highlighting revenue, gross profit, operating income, and net income (loss) for the three and six months ended August 27, 2021, compared to the prior year Consolidated Statement of Operations Data (Three Months Ended August 27, 2021 vs. August 28, 2020) | Metric | August 27, 2021 ($M) | % of Revenue | August 28, 2020 ($M) | % of Revenue | | :-------------------------- | :------------------- | :----------- | :------------------- | :----------- | | Revenue | 724.8 | 100.0% | 818.8 | 100.0% | | Gross profit | 206.8 | 28.5% | 269.6 | 32.9% | | Operating income | 33.9 | 4.7% | 88.6 | 10.8% | | Net income (loss) | 24.7 | 3.4% | 55.5 | 6.8% | | Diluted EPS | 0.21 | | 0.47 | | Consolidated Statement of Operations Data (Six Months Ended August 27, 2021 vs. August 28, 2020) | Metric | August 27, 2021 ($M) | % of Revenue | August 28, 2020 ($M) | % of Revenue | | :-------------------------- | :------------------- | :----------- | :------------------- | :----------- | | Revenue | 1,281.4 | 100.0% | 1,301.6 | 100.0% | | Gross profit | 361.5 | 28.2% | 392.3 | 30.1% | | Operating income | 2.1 | 0.2% | 36.3 | 2.8% | | Net income (loss) | (3.4) | (0.3)% | 17.4 | 1.3% | | Diluted EPS | (0.03) | | 0.15 | | [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Orders increased in Q2 2022, but revenue declined due to supply chain disruptions, leading to increased cost of sales and a year-to-date net loss - Orders grew **24%** in Q2 2022 compared to the prior year and **12%** compared to Q1 2022, indicating strengthening demand[83](index=83&type=chunk) - Q2 2022 revenue **decreased by 11%** to **$724.8 million**, negatively impacted by at least **$40 million** due to shipment delays from supply chain disruptions in the Americas[86](index=86&type=chunk) - Cost of sales as a percentage of revenue **increased by 520 basis points** in Q2 2022, driven by lower revenue, approximately **$20 million** of higher inflation costs, and **$5 million** of higher freight cost inefficiencies[87](index=87&type=chunk) Q2 2022 Organic Revenue Growth (Decline) vs. Q2 2021 | Segment | Organic Growth (Decline) $M | Organic Growth (Decline) % | | :-------- | :-------------------------- | :------------------------- | | Americas | (123.1) | (19)% | | EMEA | 6.7 | 5% | | Other | (0.5) | (1)% | | **Consolidated** | **(116.9)** | **(14)%** | - Year-to-date 2022 **net loss** was **$3.4 million**, compared to net income of **$17.4 million** in the prior year, impacted by a **goodwill impairment charge** and restructuring costs in the prior year[90](index=90&type=chunk) [Interest Expense, Investment Income and Other Income, Net](index=22&type=section&id=Interest%20Expense,%20Investment%20Income%20and%20Other%20Income,%20Net) Total interest expense, investment income, and other income, net, showed an improvement for the quarter but a decline year-to-date, influenced by a prior-year investment gain Total Interest Expense, Investment Income and Other Income, Net (Three Months Ended August 27, 2021 vs. August 28, 2020) | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------------ | :------------------- | :------------------- | | Interest expense | (6.4) | (6.8) | | Investment income | 0.1 | 0.2 | | Other income, net | 1.8 | 0.8 | | **Total** | **(4.5)** | **(5.8)** | Total Interest Expense, Investment Income and Other Income, Net (Six Months Ended August 27, 2021 vs. August 28, 2020) | Metric | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------------ | :------------------- | :------------------- | | Interest expense | (12.8) | (14.1) | | Investment income | 0.3 | 1.0 | | Other income, net | 1.0 | 4.8 | | **Total** | **(11.5)** | **(8.3)** | - Other income, net in year-to-date 2021 included a **$2.8 million gain** related to additional proceeds from the partial sale of an investment in an unconsolidated affiliate[95](index=95&type=chunk) [Business Segment Review](index=22&type=section&id=Business%20Segment%20Review) Segment performance varied, with Americas experiencing declines, EMEA showing growth and improved operating loss, and Other facing increased costs and pandemic disruptions, while Corporate expenses rose [Americas](index=22&type=section&id=Americas) The Americas segment experienced significant revenue and operating income declines, primarily due to lower demand, higher cost of sales, and supply chain disruptions - Q2 2022 revenue for Americas was **$523.3 million**, a **decrease of 17%** compared to the prior year[100](index=100&type=chunk) - Operating income in the Americas **declined by $49.9 million** in Q2 2022 compared to the prior year, driven by lower revenue and higher cost of sales as a percentage of revenue[98](index=98&type=chunk) - Cost of sales as a percentage of revenue **increased by 650 basis points** in Q2 2022, driven by approximately **$17 million** of **higher inflation costs** and **$5 million** of higher freight cost inefficiencies[101](index=101&type=chunk) - Revenue in Q2 2022 was negatively impacted by at least **$40 million** due to shipment delays caused by supply chain disruptions[100](index=100&type=chunk) [EMEA](index=23&type=section&id=EMEA) The EMEA segment reported revenue growth and an improved operating loss for both the quarter and year-to-date, partly due to the absence of a prior-year impairment charge - Q2 2022 revenue for EMEA was **$138.9 million**, an **increase of 10%** compared to the prior year, primarily driven by Orangebox[106](index=106&type=chunk) - The **operating loss** in EMEA **improved by $1.9 million** in Q2 2022 compared to the prior year, driven by higher revenue and lower cost of sales as a percentage of revenue[105](index=105&type=chunk) - Cost of sales as a percentage of revenue **decreased by 120 basis points** in Q2 2022, driven by higher revenue and **$1.4 million** from **favorable shifts in business mix**[107](index=107&type=chunk) - Year-to-date 2022 **operating loss improved by $20.8 million** compared to the prior year, which included a **$17.6 million goodwill impairment charge**[105](index=105&type=chunk) [Other](index=24&type=section&id=Other) The Other category saw revenue growth driven by China, offset by pandemic impacts elsewhere, but reported an operating loss due to higher costs and operating expenses - Q2 2022 revenue in the Other category was **$62.6 million**, an **increase of 1%** compared to the prior year, with strengthened demand in China largely offset by negative impacts in India and Southeast Asia due to COVID-19[111](index=111&type=chunk) - The Other category posted an **operating loss** of **$4.2 million** in Q2 2022, compared to operating income of **$1.1 million** in the prior year[110](index=110&type=chunk) - Cost of sales as a percentage of revenue **increased by 420 basis points** in Q2 2022, driven by **inefficiencies** associated with pandemic-related disruptions and approximately **$1 million** of **higher inflation costs**[112](index=112&type=chunk) [Corporate](index=25&type=section&id=Corporate) Corporate operating expenses increased in Q2 2022 and year-to-date, driven by lower COLI income, higher employee costs (due to fewer temporary reductions compared to prior year), and increased discretionary spending - Operating expenses for Corporate were **$5.0 million** in Q2 2022, an **increase from $3.6 million** in the prior year[115](index=115&type=chunk) - The **increase** was driven by **lower** COLI income, **higher** employee costs (due to temporary hour and pay reductions in the prior year), and **higher** discretionary spending[115](index=115&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity, including cash and COLI, decreased year-to-date, primarily from operating and financing activities, while capital expenditures increased and credit facilities remain available Liquidity Sources (August 27, 2021 vs. February 26, 2021) | Liquidity Sources | August 27, 2021 ($M) | February 26, 2021 ($M) | | :-------------------------- | :------------------- | :------------------- | | Cash and cash equivalents | 360.7 | 489.8 | | Company-owned life insurance | 169.8 | 169.5 | | Availability under credit facilities | 265.5 | 265.9 | | **Total liquidity sources available** | **796.0** | **925.2** | - As of August 27, 2021, total liquidity (cash and cash equivalents plus COLI cash surrender value) aggregated to **$530.5 million**[133](index=133&type=chunk) - The company targets a range of **$75 million to $175 million** in cash and cash equivalents for operating requirements[116](index=116&type=chunk) [Cash provided by (used in) operating activities](index=26&type=section&id=Cash%20provided%20by%20(used%20in)%20operating%20activities) Net cash used in operating activities represented a significant shift from prior-year cash provided, primarily due to working capital changes and lower employee compensation liabilities Cash Flow Data — Operating Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Operating Activities | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------ | :------------------- | :------------------- | | Net income (loss) | (3.4) | 17.4 | | Changes in accounts receivable, inventories and accounts payable | (45.3) | 21.3 | | Employee compensation liabilities | (30.7) | (120.8) | | Customer deposits | 14.0 | 74.3 | | **Net cash provided by (used in) operating activities** | **(61.6)** | **44.9** | - In year-to-date 2022, cash was used in working capital, driven by **increased** accounts receivable and inventory[122](index=122&type=chunk) [Cash used in investing activities](index=26&type=section&id=Cash%20used%20in%20investing%20activities) Net cash used in investing activities increased slightly, mainly due to higher capital expenditures, partially offset by proceeds from asset disposals Cash Flow Data — Investing Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Investing Activities | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------ | :------------------- | :------------------- | | Capital expenditures | (31.8) | (18.0) | | Proceeds from disposal of fixed assets | 16.8 | 7.1 | | Other | 8.5 | 4.9 | | **Net cash used in investing activities** | **(6.5)** | **(6.0)** | - Capital expenditures were **higher** compared to year-to-date 2021 due to reduced spending in the prior year as a result of the COVID-19 pandemic[123](index=123&type=chunk) - Proceeds from the disposal of fixed assets in year-to-date 2022 primarily related to **$16.6 million** from the sale of land[123](index=123&type=chunk) [Cash used in financing activities](index=27&type=section&id=Cash%20used%20in%20financing%20activities) Net cash used in financing activities decreased slightly, primarily due to dividends paid and common stock repurchases Cash Flow Data — Financing Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Financing Activities | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------ | :------------------- | :------------------- | | Dividends paid | (29.2) | (20.1) | | Common stock repurchases | (30.9) | (42.3) | | Borrowings on lines of credit | — | 250.0 | | Repayments on lines of credit | — | (250.0) | | **Net cash used in financing activities** | **(59.9)** | **(63.8)** | - The company repurchased **2,227,000 shares** of Class A common stock in year-to-date 2022[125](index=125&type=chunk) - As of August 27, 2021, **$29.9 million** remained available under the **$150 million** share repurchase program[126](index=126&type=chunk) [Off-Balance Sheet Arrangements](index=27&type=section&id=Off-Balance%20Sheet%20Arrangements) No material changes occurred in the company's off-balance sheet arrangements during Q2 2022 - No **material change** in off-balance sheet arrangements occurred during Q2 2022[127](index=127&type=chunk) [Contractual Obligations](index=27&type=section&id=Contractual%20Obligations) No material changes occurred in the company's contractual obligations during Q2 2022 - No **material change** in contractual obligations occurred during Q2 2022[128](index=128&type=chunk) [Liquidity Facilities](index=27&type=section&id=Liquidity%20Facilities) The company maintained available capacity under its credit facilities, with total consolidated debt primarily consisting of term notes due in 2029 Liquidity Facilities (August 27, 2021) | Liquidity Facilities | Amount ($M) | | :-------------------------- | :---------- | | Global committed bank facility | 250.0 | | Other committed bank facility | 6.0 | | Various uncommitted lines | 18.3 | | Total credit lines available | 274.3 | | Less: Borrowings outstanding | (2.9) | | Less: Other guarantees and letters of credit | (5.9) | | **Available capacity** | **265.5** | - Total consolidated debt as of August 27, 2021, was **$484.5 million**, primarily consisting of **$444.4 million** in term notes due in 2029 with an effective interest rate of **5.6%**[132](index=132&type=chunk) [Liquidity Outlook](index=28&type=section&id=Liquidity%20Outlook) The company anticipates sufficient liquidity for foreseeable needs, with projected increases in capital expenditures and a declared quarterly dividend - Total liquidity of **$530.5 million** (cash and cash equivalents plus COLI) is expected to be **sufficient** to finance known or foreseeable liquidity needs[133](index=133&type=chunk) - Capital expenditures are expected to total approximately **$65 million to $75 million** in 2022, compared to **$41.3 million** in 2021[134](index=134&type=chunk) - A quarterly dividend of **$0.145 per share**, or approximately **$17 million**, was announced to be paid in Q3 2022[135](index=135&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) There have been no changes in the company's critical accounting estimates during Q2 2022 - No **changes** in critical accounting estimates occurred during Q2 2022[136](index=136&type=chunk) [Recently Issued Accounting Standards](index=28&type=section&id=Recently%20Issued%20Accounting%20Standards) Refer to Note 2 to the condensed consolidated financial statements for information on recently issued accounting standards - Refer to Note 2 to the condensed consolidated financial statements for details on recently issued accounting standards[137](index=137&type=chunk) [Forward-looking Statements](index=28&type=section&id=Forward-looking%20Statements) The report contains forward-looking statements regarding future events and operations, which are based on management's beliefs and assumptions. These statements involve risks and uncertainties, including competitive and economic conditions, acts of terrorism, cyberattacks, the COVID-19 pandemic, regulatory changes, and input costs. The company undertakes no obligation to update these statements - Forward-looking statements discuss goals, intentions, and expectations about future trends, plans, events, results of operations, or financial condition[138](index=138&type=chunk) - These statements are based on current beliefs and assumptions, which may ultimately prove inaccurate, and involve risks and uncertainties[138](index=138&type=chunk) - Risks include competitive and general economic conditions, acts of terrorism, cyberattacks, the COVID-19 pandemic, **changes** in legal/regulatory environment, raw material costs, and currency fluctuations[138](index=138&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) The company's market risks, including foreign currency exchange, interest rates, commodity prices, and fixed income and equity prices, remained consistent with those disclosed in its prior Annual Report on Form 10-K, with no material changes during Q2 2022 - The nature of market risks (foreign currency exchange, interest rates, commodity prices, fixed income and equity prices) faced by the company as of August 27, 2021, is the same as disclosed in its Annual Report on Form 10-K[139](index=139&type=chunk) [Foreign Exchange Risk](index=28&type=section&id=Foreign%20Exchange%20Risk) No material change in foreign exchange risk occurred during Q2 2022 - No **material change** in foreign exchange risk occurred during Q2 2022[140](index=140&type=chunk) [Interest Rate Risk](index=29&type=section&id=Interest%20Rate%20Risk) No material change in interest rate risk occurred during Q2 2022 - No **material change** in interest rate risk occurred during Q2 2022[141](index=141&type=chunk) [Commodity Price Risk](index=29&type=section&id=Commodity%20Price%20Risk) No material change in commodity price risk occurred during Q2 2022 - No **material change** in commodity price risk occurred during Q2 2022[142](index=142&type=chunk) [Fixed Income and Equity Price Risk](index=29&type=section&id=Fixed%20Income%20and%20Equity%20Price%20Risk) No material change in fixed income and equity price risk occurred during Q2 2022 - No **material change** in fixed income and equity price risk occurred during Q2 2022[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 27, 2021. There were no material changes in internal control over financial reporting during the second fiscal quarter - Management, under the supervision of the **CEO and CFO**, evaluated and concluded that disclosure controls and procedures were **effective** as of August 27, 2021[144](index=144&type=chunk) - No **material changes** in internal control over financial reporting occurred during the second fiscal quarter[145](index=145&type=chunk) PART II. [OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including risk factors, equity sales, exhibits, and signatures [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) 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 26, 2021 - No **material changes** to the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended February 26, 2021, occurred[147](index=147&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) The company repurchased common stock during the quarter, with a remaining balance under its approved share repurchase program Share Repurchase Activity During Q2 2022 | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Approximate Dollar Value of Shares that May Yet be Purchased ($M) | | :-------------------- | :------------------------------- | :------------------------------- | :---------------------------------------------------------------- | | 5/29/2021 - 7/2/2021 | 343,326 | 14.73 | 51.4 | | 7/3/2021 - 7/30/2021 | 1,239,220 | 14.16 | 33.9 | | 7/31/2021 - 8/27/2021 | 291,258 | 13.74 | 29.9 | | **Total** | **1,873,804** | | | - The repurchases are part of a **$150 million** share repurchase program approved by the Board of Directors in January 2016[150](index=150&type=chunk) - **6,331 shares** were repurchased to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards[151](index=151&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) Exhibits filed with the Form 10-Q include the Incentive Compensation Plan, Restricted Stock Units Agreement, CEO/CFO certifications, and Inline XBRL documents - Exhibits include the **Steelcase Inc. Incentive Compensation Plan** and **Form of Restricted Stock Units Agreement (FY 2022)**[153](index=153&type=chunk) - Certifications of the **CEO and CFO** pursuant to **Section 302** and **Section 906** of the **Sarbanes-Oxley Act of 2002** are included[153](index=153&type=chunk) - **Inline XBRL documents** (Instance, Schema, Calculation Linkbase, Labels Linkbase, Presentation Linkbase, Definition Linkbase) are provided[153](index=153&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report is signed by Robin L. Zondervan, Vice President, Corporate Controller & Chief Accounting Officer, on behalf of Steelcase Inc. on September 24, 2021 - The report is signed by **Robin L. Zondervan**, Vice President, Corporate Controller & Chief Accounting Officer[158](index=158&type=chunk) - The signature date is **September 24, 2021**[158](index=158&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2022, Steelcase reported revenue of $725 million and earnings per share of $0.21, which were below the estimated ranges provided earlier [30][31] - The company experienced a 14% organic decline in revenue compared to the prior year, primarily due to a higher backlog from the previous year [31] - Operating income increased by $66 million sequentially, driven by a $168 million increase in revenue [34] Business Line Data and Key Metrics Changes - Total orders grew 24% year-over-year and 12% sequentially, with strong growth across all segments [7][36] - The Americas saw a sequential order growth of 10%, while EMEA and other regions experienced 17% and 20% growth respectively [36] - The backlog at the end of Q2 was 22% higher than the prior year, indicating strong demand despite supply chain challenges [41] Market Data and Key Metrics Changes - The company noted that order levels in the Americas were approaching or exceeding pre-pandemic levels, with significant recovery in EMEA and APAC regions [7][8] - In Asia Pacific, order levels were within 5% of FY '20 levels, despite significant declines in India due to pandemic impacts [8] Company Strategy and Development Direction - Steelcase is focusing on adapting to hybrid work environments, emphasizing the need for flexible office spaces and products [13][21] - The company plans to introduce new products that provide flexibility, privacy, and control to meet evolving customer needs [23][24] - There is a commitment to continue investing in product development and exploring growth opportunities in vertical markets such as education and healthcare [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery, noting strong order rates and minimal cancellations despite ongoing supply chain challenges [12][49] - The company anticipates continued inflationary pressures but has implemented multiple price increases to mitigate impacts [49][47] - Future prospects for fiscal 2023 include improved demand from a broader reopening of offices and potential pricing benefits offsetting inflation [48] Other Important Information - The company announced a third price increase due to ongoing commodity inflation, particularly in steel [10] - Management highlighted a strong commitment to ESG initiatives, including reducing carbon emissions and enhancing diversity, equity, and inclusion (DEI) efforts [17][100] Q&A Session Summary Question: Insights on order trends and potential softening - Management noted that while there are mixed signals in leading indicators, strong order growth continues, and there is no immediate concern about a slowdown [51][54] Question: Impact of pricing increases on demand - There has been no evidence of delayed orders or dampened demand due to price increases, although management acknowledges the risk [56] Question: Improvement in the Indian market - Supply and demand conditions in India have improved, with factories ramping back up and a growing pipeline of orders [58][59] Question: Confidence in revenue guidance amid supply chain issues - Management expects ongoing supply chain challenges but has factored these into their revenue outlook for Q3 and Q4 [66] Question: Differences in supply chain issues between the U.S. and EMEA - The Americas face more discrete supplier issues, while EMEA has been less affected by the broader supply chain challenges [78]

| --- | --- | --- | |-----------------------------------|-------|-------| | | | | | Investor | | | | Presentation FY2022 First Quarter | | | | | | | | | | 1 | Steelcase Q1, 2022 Investment thesis We believe the office will continue to be very relevant for innovation, culture, and collaboration 2 Industry leader in a changing workplace environment that we believe provides growth opportunities Experienced management team has led the company through similar previous cycles Liquidity position is very strong Ste ...

[UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q](index=1&type=section&id=UNITED%20STATES%20SECURITIES%20AND%20EXCHANGE%20COMMISSION%20FORM%2010-Q) This document is the quarterly report filed with the SEC for the period ended May 28, 2021 [Registrant Information](index=1&type=section&id=Registrant%20Information) This section identifies Steelcase Inc. as the registrant, a large accelerated filer, for the quarterly period ended May 28, 2021, with its Class A Common Stock traded on the New York Stock Exchange. It also provides details on outstanding common stock shares as of June 22, 2021 - Steelcase Inc. is a **large accelerated filer**, indicating it meets specific market capitalization and reporting requirements[3](index=3&type=chunk) Title of each class | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :-------------------------------------- | | Class A Common Stock | SCS | New York Stock Exchange | Outstanding Common Stock as of June 22, 2021 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Class A Common Stock | 90,582,958 | | Class B Common Stock | 25,096,994 | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) This section provides an organized listing of all chapters and sub-sections within the quarterly report [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part contains the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [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 and notes for Q1 2022 [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, costs, and net loss for the three-month periods ended May 28, 2021 Condensed Consolidated Statements of Operations (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | Change (YoY) | | :----------------------------- | :------------------------- | :------------------------- | :----------- | | Revenue | $556.6 | $482.8 | +15.3% | | Cost of sales | $401.9 | $360.1 | +11.6% | | Gross profit | $154.7 | $122.7 | +26.1% | | Operating expenses | $186.5 | $157.4 | +18.5% | | Goodwill impairment charge | $— | $17.6 | -100% | | Operating loss | $(31.8) | $(52.3) | +39.2% | | Net loss | $(28.1) | $(38.1) | +26.3% | | Basic EPS | $(0.24) | $(0.33) | +27.3% | | Diluted EPS | $(0.24) | $(0.33) | +27.3% | | Dividends declared and paid per common share | $0.100 | $0.070 | +42.9% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the net loss and other comprehensive income (loss) components for the three-month periods Condensed Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------------------------------------ | :------------------------- | :------------------------- | | Net loss | $(28.1) | $(38.1) | | Total other comprehensive income (loss), net | $1.2 | $(8.6) | | Comprehensive loss | $(26.9) | $(46.7) | - Total other comprehensive income (loss), net improved significantly from a loss of **$8.6 million** in Q1 **2020** to a gain of **$1.2 million** in Q1 **2021**, primarily due to foreign currency translation adjustments[12](index=12&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at period ends Condensed Consolidated Balance Sheets (Period End) | Metric | May 28, 2021 (in millions) | February 26, 2021 (in millions) | Change (QoQ) | | :-------------------------------- | :------------------------- | :------------------------------ | :----------- | | Cash and cash equivalents | $397.2 | $489.8 | -18.9% | | Total current assets | $992.1 | $1,045.4 | -5.29% | | Total assets | $2,289.6 | $2,354.0 | -2.8% | | Total current liabilities | $498.2 | $515.0 | -3.26% | | Total liabilities | $1,359.3 | $1,393.5 | -2.5% | | Total shareholders' equity | $930.3 | $960.5 | -3.14% | - Cash and cash equivalents decreased by **$92.6 million** quarter-over-quarter, contributing to a reduction in total current assets and total assets[15](index=15&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement outlines changes in shareholders' equity from net loss, dividends, and share repurchases Changes in Shareholders' Equity (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------------------------------------ | :------------------------- | :------------------------- | | Total shareholders' equity, beginning of period | $960.5 (Feb 26, 2021) | $960.5 (Feb 28, 2020) | | Net loss | $(28.1) | $(38.1) | | Dividends paid | $(12.1) | $(8.4) | | Common stock repurchases | $(4.3) | $(42.3) | | Total shareholders' equity, end of period | $930.3 | $881.0 | - Shareholders' equity decreased by **$30.2 million** in Q1 **2022**, primarily due to net loss and dividend payments, partially offset by an increase in additional paid-in capital[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended) | Activity | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------------------------------------------ | :------------------------- | :------------------------- | | Net cash used in operating activities | $(63.6) | $(93.4) | | Net cash used in investing activities | $(13.0) | $(2.7) | | Net cash provided by (used in) financing activities | $(16.8) | $193.7 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(93.1) | $96.3 | | Cash and cash equivalents and restricted cash, end of period | $402.5 | $643.4 | - The company experienced a net decrease in cash and cash equivalents of **$93.1 million** in Q1 **2022**, a significant shift from a **$96.3 million** increase in Q1 **2021**. This was primarily driven by cash used in operating and investing activities, and a shift from cash provided by financing activities to cash used in financing activities[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements [1. BASIS OF PRESENTATION](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION) The condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Regulation S-X, and do not include all information for complete annual statements. All adjustments are considered normal and recurring. Fiscal year references relate to the year ending in February - Interim financial statements are prepared under GAAP and Regulation S-X, with fiscal years ending in February[26](index=26&type=chunk)[27](index=27&type=chunk) [2. NEW ACCOUNTING STANDARDS](index=8&type=section&id=2.%20NEW%20ACCOUNTING%20STANDARDS) The company evaluates all new Accounting Standards Updates (ASUs) issued by FASB and has concluded that those not disclosed are either not applicable or not expected to materially affect its consolidated financial statements - No new accounting standards are expected to have a material effect on the financial statements[28](index=28&type=chunk) [3. REVENUE](index=9&type=section&id=3.%20REVENUE) Revenue is disaggregated by product category and geographic location, showing an overall increase in Q1 2022 compared to Q1 2021 across all segments and regions. Contract liabilities (customer deposits) also increased during the period Disaggregated Revenue by Product Category (Three Months Ended) | Product Category | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :-------------------------------- | :------------------------- | :------------------------- | | **Americas** | | | | Desking, benching, systems and storage | $185.1 | $168.4 | | Seating | $118.2 | $96.5 | | Other | $73.0 | $69.0 | | **EMEA** | | | | Desking, benching, systems and storage | $54.8 | $43.9 | | Seating | $33.9 | $31.0 | | Other | $34.9 | $24.6 | | **Other** | | | | Desking, benching, systems and storage | $10.8 | $10.7 | | Seating | $14.5 | $12.2 | | Other | $31.4 | $26.5 | | **Total Revenue** | $556.6 | $482.8 | Reportable Geographic Revenue (Three Months Ended) | Geographic Region | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------------------ | :------------------------- | :------------------------- | | United States | $359.3 | $323.5 | | Foreign locations | $197.3 | $159.3 | | **Total Revenue** | $556.6 | $482.8 | Changes in Customer Deposits (Three Months Ended May 28, 2021) | Item | Amount (in millions) | | :------------------------------------------ | :------------------- | | Balance as of February 26, 2021 | $33.7 | | Recognition of revenue related to beginning of year customer deposits | $(18.3) | | Customer deposits received, net of revenue recognized during the period | $26.8 | | Balance as of May 28, 2021 | $42.2 | [4. EARNINGS (LOSS) PER SHARE](index=10&type=section&id=4.%20EARNINGS%20(LOSS)%20PER%20SHARE) Earnings (loss) per share is computed using the two-class method, which accounts for participating securities. Both basic and diluted EPS were $(0.24) for Q1 2022, an improvement from $(0.33) in Q1 2021 Earnings (Loss) Per Share (Three Months Ended) | Metric | May 28, 2021 | May 29, 2020 | | :------------------------------------------ | :----------- | :----------- | | Net Loss (in millions) | $(28.1) | $(38.1) | | Basic Shares (in millions) | 118.3 | 117.3 | | Diluted Shares (in millions) | 118.3 | 117.3 | | Earnings (loss) per share (Basic) | $(0.24) | $(0.33) | | Earnings (loss) per share (Diluted) | $(0.24) | $(0.33) | - Anti-dilutive performance units excluded from diluted EPS computation were **0.5 million** in Q1 **2022** and **0.3 million** in Q1 **2021**[36](index=36&type=chunk) [5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=10&type=section&id=5.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Accumulated other comprehensive income (loss) improved from $(40.0) million at February 26, 2021, to $(38.8) million at May 28, 2021, primarily due to net other comprehensive income of $1.2 million during the period, driven by foreign currency translation adjustments Changes in Accumulated Other Comprehensive Income (Loss) (Three Months Ended May 28, 2021) | Component | Balance as of Feb 26, 2021 (in millions) | Net OCI (L) during period (in millions) | Balance as of May 28, 2021 (in millions) | | :------------------------------------ | :--------------------------------------- | :-------------------------------------- | :--------------------------------------- | | Unrealized gain (loss) on investments | $0.3 | $0.2 | $0.5 | | Pension and other post-retirement liability adjustments | $(6.6) | $(0.1) | $(6.7) | | Derivative amortization | $(7.6) | $0.2 | $(7.4) | | Foreign currency translation adjustments | $(26.1) | $0.9 | $(25.2) | | **Total** | $(40.0) | $1.2 | $(38.8) | Reclassifications from Accumulated Other Comprehensive Income (Loss) (Three Months Ended) | Detail of Components | May 28, 2021 (in millions) | May 29, 2020 (in millions) | Affected Line in Condensed Consolidated Statements of Operations | | :------------------------------------------------ | :------------------------- | :------------------------- | :------------------------------------------------------------- | | Amortization of pension and other post-retirement actuarial losses (gains) | $(0.1) | $(0.2) | Other income (expense), net / Income tax benefit | | Derivative amortization | $0.2 | $0.2 | Interest expense / Income tax benefit | | **Total reclassifications** | $0.1 | $— | | [6. FAIR VALUE](index=12&type=section&id=6.%20FAIR%20VALUE) The company measures certain financial instruments at fair value, including foreign exchange forward contracts and long-term investments. Total debt is carried at cost but its fair value is estimated using discounted cash flow analysis. The company uses derivatives to manage foreign exchange and interest rate exposures, not for speculation - The fair value of total debt was **$566.8 million** as of May 28, 2021, compared to its carrying amount of **$483.7 million**[42](index=42&type=chunk) Fair Value of Financial Instruments (May 28, 2021) | Fair Value of Financial Instruments | Level 1 (in millions) | Level 2 (in millions) | Level 3 (in millions) | Total (in millions) | | :---------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------------------ | | **Assets:** | | | | | | Cash and cash equivalents | $397.2 | $— | $— | $397.2 | | Restricted cash | $5.3 | $— | $— | $5.3 | | Foreign exchange forward contracts | $— | $0.8 | $— | $0.8 | | Auction rate security | $— | $— | $2.8 | $2.8 | | **Total Assets** | $402.5 | $0.8 | $2.8 | $406.1 | | **Liabilities:** | | | | | | Foreign exchange forward contracts | $— | $(0.5) | $— | $(0.5) | | **Total Liabilities** | $— | $(0.5) | $— | $(0.5) | - The auction rate security, measured using Level **3** inputs, increased in value from **$2.6 million** to **$2.8 million** during the quarter[43](index=43&type=chunk) [7. INVENTORIES](index=13&type=section&id=7.%20INVENTORIES) Total inventories increased to $227.6 million as of May 28, 2021, from $193.5 million at February 26, 2021, driven by increases in both raw materials/work-in-process and finished goods Inventories (Period End) | Inventory Category | May 28, 2021 (in millions) | February 26, 2021 (in millions) | | :------------------------- | :------------------------- | :------------------------------ | | Raw materials and work-in-process | $137.1 | $126.0 | | Finished goods | $113.2 | $86.4 | | Revaluation to LIFO | $(22.7) | $(18.9) | | **Total Inventories** | $227.6 | $193.5 | - The portion of inventories determined by the LIFO method increased from **$89.1 million** to **$96.5 million**[45](index=45&type=chunk) [8. SHARE-BASED COMPENSATION](index=13&type=section&id=8.%20SHARE-BASED%20COMPENSATION) The company grants Performance Units (PSUs) and Restricted Stock Units (RSUs) to employees. PSU expense for Q1 2022 was $5.2 million, and RSU expense was $7.7 million. Significant numbers of PSUs and RSUs were granted during the quarter, with remaining unrecognized compensation expense for both Performance Units (PSUs) Expense and Tax Benefit (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------- | :------------------------- | :------------------------- | | Expense | $5.2 | $0.2 | | Tax benefit | $1.3 | $0.1 | Restricted Stock Units (RSUs) Expense and Tax Benefit (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------- | :------------------------- | :------------------------- | | Expense | $7.7 | $7.6 | | Tax benefit | $1.9 | $2.3 | - As of May 28, 2021, there was **$1.3 million** of unrecognized compensation expense for PSUs (weighted-average period of **1.9 years**) and **$10.8 million** for RSUs (weighted-average period of **2.1 years**)[53](index=53&type=chunk)[56](index=56&type=chunk) [9. LEASES](index=15&type=section&id=9.%20LEASES) The company has operating leases for various assets expiring through 2031. Operating lease cost remained stable at $13.1 million for Q1 2022 and Q1 2021. The weighted-average remaining lease term is 6.5 years with a discount rate of 3.8% Lease Expense (Three Months Ended) | Lease Component | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :-------------------- | :------------------------- | :------------------------- | | Operating lease cost | $13.1 | $13.1 | | Sublease rental income | $(0.4) | $(0.3) | | **Total** | $12.7 | $12.8 | Supplemental Lease Information (Three Months Ended) | Information | May 28, 2021 | May 29, 2020 | | :------------------------------------------ | :----------- | :----------- | | Operating cash flows used for operating leases | $13.4 | $12.6 | | Leased assets obtained in exchange for new operating lease obligations | $1.6 | $0.5 | | Weighted-average remaining term | 6.5 years | 7.0 years | | Weighted-average discount rate | 3.8 % | 4.0 % | Future Minimum Lease Payments as of May 28, 2021 | Fiscal Year | Amount (in millions) | | :------------ | :------------------- | | 2022 | $39.0 | | 2023 | $45.5 | | 2024 | $40.1 | | 2025 | $37.8 | | 2026 | $30.1 | | Thereafter | $72.4 | | **Total lease payments** | $264.9 | | Less interest | $(30.4) | | **Present value of lease liabilities** | $234.5 | [10. REPORTABLE SEGMENTS](index=16&type=section&id=10.%20REPORTABLE%20SEGMENTS) Steelcase operates through three reportable segments: Americas, EMEA, and Other (Asia Pacific and Designtex), plus a Corporate category for unallocated expenses. All segments showed revenue growth in Q1 2022 compared to Q1 2021, and operating losses improved in Americas and EMEA, while increasing in the Other category and Corporate - The Americas segment serves customers in the U.S., Canada, the Caribbean Islands, and Latin America. The EMEA segment serves customers in Europe, the Middle East, and Africa. The Other category includes Asia Pacific and Designtex[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) Reportable Segment Revenue (Three Months Ended) | Segment | May 28, 2021 (in millions) | May 29, 2020 (in millions) | Change (YoY) | | :-------- | :------------------------- | :------------------------- | :----------- | | Americas | $376.3 | $333.9 | +12.7% | | EMEA | $123.6 | $99.5 | +24.2% | | Other | $56.7 | $49.4 | +14.8% | | **Total** | $556.6 | $482.8 | +15.3% | Reportable Segment Operating Loss (Three Months Ended) | Segment | May 28, 2021 (in millions) | May 29, 2020 (in millions) | Change (YoY) | | :-------- | :------------------------- | :------------------------- | :----------- | | Americas | $(15.0) | $(23.5) | +36.2% | | EMEA | $(5.7) | $(24.6) | +76.8% | | Other | $(5.3) | $(1.6) | -231.3% | | Corporate | $(5.8) | $(2.6) | -123.1% | | **Total** | $(31.8) | $(52.3) | +39.2% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&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 performance and condition for Q1 2022. It highlights a 15% revenue growth, broad-based across all segments, and an improved operating loss. The discussion also covers non-GAAP financial measures, segment-specific performance, liquidity, capital resources, and forward-looking statements - Revenue grew **15%** in Q1 **2022** compared to the prior year, with orders growing **11%** YoY and **25%** QoQ (compared to Q4 **2021**), indicating strengthening demand as companies plan for return-to-office[81](index=81&type=chunk) - Cost of sales as a percentage of revenue decreased by **240 basis points**, driven by lower overhead and labor costs, despite approximately **$7 million** in inflation from higher commodity and logistics costs[82](index=82&type=chunk)[86](index=86&type=chunk) - Backlog of customer orders was approximately **20%** lower than the prior year but **39%** higher than at the end of Q4 **2021**, with most expected to ship in Q2 **2022**[83](index=83&type=chunk) [Non-GAAP Financial Measures](index=18&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures used by management to assess performance - Non-GAAP financial measures used include organic revenue growth (excluding acquisitions, divestitures, and currency effects) and adjusted operating loss (excluding goodwill impairment charges)[76](index=76&type=chunk) Reconciliation of Operating Loss to Adjusted Operating Loss (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :-------------------------- | :------------------------- | :------------------------- | | Operating loss | $(31.8) | $(52.3) | | Add: goodwill impairment charge | $— | $17.6 | | **Adjusted operating loss** | $(31.8) | $(34.7) | [Financial Summary & Overview](index=18&type=section&id=Financial%20Summary%20%26%20Overview) This section summarizes the company's financial performance and key operational highlights Q1 2022 Organic Revenue Growth by Segment | Segment | Q1 2021 Revenue (adjusted) (in millions) | Q1 2022 Revenue (in millions) | Organic Growth $ (in millions) | Organic Growth % | | :-------- | :--------------------------------------- | :---------------------------- | :----------------------------- | :--------------- | | Americas | $348.6 | $376.3 | $27.7 | 8 % | | EMEA | $109.6 | $123.6 | $14.0 | 13 % | | Other | $51.1 | $56.7 | $5.6 | 11 % | | **Consolidated** | $509.3 | $556.6 | $47.3 | 9 % | - Consolidated revenue grew **15%** in Q1 **2022**, with organic revenue growth of **9%** after adjusting for a **$12.8 million** dealer acquisition and **$13.7 million** in currency translation effects[79](index=79&type=chunk)[85](index=85&type=chunk) [Results of Operations (Consolidated)](index=18&type=section&id=Results%20of%20Operations%20(Consolidated)) This section analyzes consolidated financial results, detailing revenue, cost of sales, operating expenses, and net loss Consolidated Statement of Operations Data (Three Months Ended) | Metric | May 28, 2021 (in millions) | % of Revenue | May 29, 2020 (in millions) | % of Revenue | | :------------------------ | :------------------------- | :----------- | :------------------------- | :----------- | | Revenue | $556.6 | 100.0 % | $482.8 | 100.0 % | | Cost of sales | $401.9 | 72.2 % | $360.1 | 74.6 % | | Gross profit | $154.7 | 27.8 % | $122.7 | 25.4 % | | Operating expenses | $186.5 | 33.5 % | $157.4 | 32.6 % | | Operating loss | $(31.8) | (5.7)% | $(52.3) | (10.8)% | | Net loss | $(28.1) | (5.0)% | $(38.1) | (7.9)% | - Net loss improved to **$28.1 million** in Q1 **2022** from **$38.1 million** in Q1 **2021**, partly due to the absence of a **$17.6 million** goodwill impairment charge present in the prior year[84](index=84&type=chunk) - Operating expenses increased by **$29.1 million**, influenced by higher variable compensation and discretionary spending, partially offset by workforce reductions[88](index=88&type=chunk) [Interest Expense, Investment Income and Other Income (Expense), Net](index=20&type=section&id=Interest%20Expense,%20Investment%20Income%20and%20Other%20Income%20(Expense),%20Net) This section details non-operating income and expense, including interest, investment income, and foreign exchange impacts Interest Expense, Investment Income and Other Income (Expense), Net (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :------------------------------------------ | :------------------------- | :------------------------- | | Interest expense | $(6.4) | $(7.3) | | Investment income | $0.2 | $0.8 | | Equity in income of unconsolidated affiliates | $1.3 | $1.9 | | Foreign exchange gain (loss) | $(0.2) | $0.1 | | Net periodic pension and post-retirement credit, excluding service cost | $(0.2) | $— | | Miscellaneous income (expense), net | $(1.7) | $2.0 | | **Total interest expense, investment income and other income (expense), net** | $(7.0) | $(2.5) | - Total interest expense, investment income and other income (expense), net, decreased by **$4.5 million**, primarily due to a **$2.8 million** gain from the partial sale of an investment in Q1 **2021** and higher miscellaneous expenses in Q1 **2022**[90](index=90&type=chunk) [Business Segment Review](index=20&type=section&id=Business%20Segment%20Review) This section analyzes the financial performance of each reportable business segment [Americas Segment](index=20&type=section&id=Americas%20Segment) The Americas segment's operating loss improved by $8.5 million in Q1 2022, driven by a 13% revenue increase and a 320 basis point decrease in cost of sales as a percentage of revenue. Organic revenue growth was 8% Americas Segment Statement of Operations Data (Three Months Ended) | Metric | May 28, 2021 (in millions) | % of Revenue | May 29, 2020 (in millions) | % of Revenue | | :------------------ | :------------------------- | :----------- | :------------------------- | :----------- | | Revenue | $376.3 | 100.0 % | $333.9 | 100.0 % | | Cost of sales | $272.5 | 72.4 % | $252.3 | 75.6 % | | Operating loss | $(15.0) | (4.0)% | $(23.5) | (7.0)% | - Organic revenue growth for Americas was **8%**, after adjusting for a **$12.8 million** dealer acquisition and **$1.9 million** in currency translation effects[94](index=94&type=chunk) - Operating expenses increased by **$13.7 million**, partially offset by a **$10 million** benefit from workforce reductions[96](index=96&type=chunk) [EMEA Segment](index=21&type=section&id=EMEA%20Segment) The EMEA segment's operating loss improved significantly by $18.9 million in Q1 2022, largely due to the absence of a $17.6 million goodwill impairment charge from the prior year. Revenue increased by 24%, with organic growth of 13% EMEA Segment Statement of Operations Data (Three Months Ended) | Metric | May 28, 2021 (in millions) | % of Revenue | May 29, 2020 (in millions) | % of Revenue | | :------------------ | :------------------------- | :----------- | :------------------------- | :----------- | | Revenue | $123.6 | 100.0 % | $99.5 | 100.0 % | | Cost of sales | $89.5 | 72.4 % | $75.3 | 75.7 % | | Operating loss | $(5.7) | (4.6)% | $(24.6) | (24.7)% | | Goodwill impairment charge | $— | — | $17.6 | 17.7 % | | Adjusted operating loss | $(5.7) | (4.6)% | $(7.0) | (7.0)% | - Adjusted for the goodwill impairment charge, EMEA's operating loss improved by **$1.3 million**, driven by higher revenue and lower cost of sales as a percentage of revenue[98](index=98&type=chunk) - Organic revenue growth for EMEA was **13%**, after adjusting for **$10.1 million** of currency translation effects[99](index=99&type=chunk) [Other Category (Asia Pacific and Designtex)](index=21&type=section&id=Other%20Category%20(Asia%20Pacific%20and%20Designtex)) The Other category, comprising Asia Pacific and Designtex, saw its operating loss increase by $3.7 million in Q1 2022. While revenue grew by 15% (11% organic), this was offset by higher operating expenses and an increase in cost of sales as a percentage of revenue Other Category Statement of Operations Data (Three Months Ended) | Metric | May 28, 2021 (in millions) | % of Revenue | May 29, 2020 (in millions) | % of Revenue | | :------------------ | :------------------------- | :----------- | :------------------------- | :----------- | | Revenue | $56.7 | 100.0 % | $49.4 | 100.0 % | | Cost of sales | $39.9 | 70.4 % | $32.5 | 65.8 % | | Operating loss | $(5.3) | (9.3)% | $(1.6) | (3.2)% | - Cost of sales as a percentage of revenue increased by **460 basis points**, driven by unfavorable business mix, currency translation effects, and higher logistics costs[106](index=106&type=chunk) - Operating expenses increased due to higher wage and benefit expenses (following temporary pay reductions in the prior year) and increased discretionary spending[106](index=106&type=chunk) [Corporate](index=22&type=section&id=Corporate) Corporate operating expenses increased in Q1 2022, primarily due to higher deferred compensation expense, increased wage and benefit expenses (compared to temporary reductions in the prior year), and variable compensation expense, partially offset by higher COLI income Corporate Operating Expenses (Three Months Ended) | Metric | May 28, 2021 (in millions) | May 29, 2020 (in millions) | | :----------------- | :------------------------- | :------------------------- | | Operating expenses | $5.8 | $2.6 | - The increase in corporate operating expenses was driven by **$3.0 million** of higher deferred compensation expense, higher wage and benefit expenses, and **$0.9 million** of variable compensation expense, partially offset by **$1.9 million** of higher COLI income[108](index=108&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position, including cash and cash equivalents, COLI, and credit facilities, is expected to be sufficient for foreseeable needs. Cash used in operating activities decreased, while cash used in investing activities increased due to higher capital expenditures. Financing activities shifted from providing cash to using cash, mainly due to reduced borrowings and increased dividends Liquidity Sources (Period End) | Liquidity Source | May 28, 2021 (in millions) | February 26, 2021 (in millions) | | :-------------------------- | :------------------------- | :------------------------------ | | Cash and cash equivalents | $397.2 | $489.8 | | Company-owned life insurance | $168.9 | $169.5 | | Availability under credit facilities | $265.5 | $265.9 | | **Total liquidity sources available** | $831.6 | $925.2 | - Cash used in operating activities decreased to **$63.6 million** in Q1 **2022** from **$93.4 million** in Q1 **2021**, driven by lower annual payments for variable compensation and retirement plan contributions[113](index=113&type=chunk)[114](index=114&type=chunk) - Capital expenditures increased to **$18.4 million** in Q1 **2022** from **$9.4 million** in Q1 **2021**, reflecting investments in manufacturing, IT, and product development[115](index=115&type=chunk) - Financing activities shifted from providing **$193.7 million** in Q1 **2021** to using **$16.8 million** in Q1 **2022**, primarily due to no new borrowings on the global committed bank facility and increased dividends[113](index=113&type=chunk)[116](index=116&type=chunk) - Total consolidated debt as of May 28, 2021, was **$483.7 million**, primarily consisting of **$444.2 million** in term notes due in **2029** with a **5.6%** effective interest rate[125](index=125&type=chunk) - The company announced a quarterly dividend of **$0.145** per share for Q2 **2022**, an increase from **$0.10** per share paid in Q1 **2022**[116](index=116&type=chunk)[128](index=128&type=chunk) [Critical Accounting Estimates](index=25&type=section&id=Critical%20Accounting%20Estimates) This section discusses critical accounting estimates that could materially impact financial results - No material changes in critical accounting estimates occurred during Q1 **2022**[129](index=129&type=chunk) [Recently Issued Accounting Standards](index=25&type=section&id=Recently%20Issued%20Accounting%20Standards) This section updates on new accounting standards and their potential impact on financial statements - Refer to Note **2** for information on recently issued accounting standards[130](index=130&type=chunk) [Forward-looking Statements](index=25&type=section&id=Forward-looking%20Statements) This section cautions that forward-looking statements are subject to risks and uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, which are subject to various risks and uncertainties including economic conditions, pandemics, cyberattacks, regulatory changes, and input costs[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the company's market risks, including foreign currency exchange, interest rates, commodity prices, and fixed income and equity prices, remained consistent with those disclosed in its prior annual report - No material changes in foreign exchange risk, interest rate risk, commodity price risk, or fixed income and equity price risk occurred during Q1 **2022**[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of May 28, 2021, concluding they were effective. There were no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of May 28, **2021**[137](index=137&type=chunk) - No material changes to internal control over financial reporting occurred during the first fiscal quarter[138](index=138&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes additional information not covered in financial statements, such as risk factors and equity sales [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the company's Annual Report on Form 10-K for a detailed explanation of business risks, stating that no material changes to these risk factors occurred during Q1 2022 - No material changes to the risk factors set forth in the Form **10-K** for the fiscal year ended February 26, **2021**, occurred during Q1 **2022**[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity during Q1 2022, which primarily involved repurchases to satisfy tax withholding obligations for equity awards. The company had $56.4 million remaining under its $150 million share repurchase program Summary of Share Repurchase Activity (Q1 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | 2/27/2021 - 4/2/2021 | 353,196 | $14.16 | — | | 4/3/2021 - 4/30/2021 | — | $— | — | | 5/1/2021 - 5/28/2021 | — | $— | — | | **Total** | 353,196 | | — | - All repurchased shares were made to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards[144](index=144&type=chunk) - As of May 28, 2021, **$56.4 million** remained available under the **$150 million** share repurchase program approved in January **2016**[118](index=118&type=chunk)[145](index=145&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and various Inline 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**)[146](index=146&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report is signed on behalf of Steelcase Inc. by Robin L. Zondervan, Vice President, Corporate Controller & Chief Accounting Officer, on June 25, 2021 - The report was signed by Robin L. Zondervan, Vice President, Corporate Controller & Chief Accounting Officer, on June 25, **2021**[150](index=150&type=chunk)

Steelcase Inc. (NYSE:SCS) Q1 2022 Earnings Conference Call June 24, 2021 8:30 AM ET Company Participants Michael O’Meara - Investor Relations Jim Keane - President and Chief Executive Officer Dave Sylvester - Senior Vice President and Chief Financial Officer Sara Armbruster - Executive Vice President Conference Call Participants Reuben Garner - Benchmark Group Budd Bugatch - Water Tower Research Rudy Yang - Berenberg Capital Kathryn Thompson - TRG Operator Good morning. My name is Patricia and I will be you ...

```markdown PART I [Item 1. Business](index=4&type=section&id=Item%201%2E%20Business) Steelcase Inc. is a global leader in work furnishings, offering diverse products, with 2021 revenue significantly impacted by the pandemic - Steelcase Inc. is a Michigan corporation, founded in **1912**, publicly traded since **1998** on the NYSE under 'SCS', and headquartered in Grand Rapids, Michigan, U.S.A[15](index=15&type=chunk)[16](index=16&type=chunk) - The company's global scale and reach enable it to provide a consistent experience to global customers while offering local differentiation[17](index=17&type=chunk) - Steelcase's purpose is to unlock human promise by transforming work, worker, and workplace through a comprehensive portfolio of furniture, architectural, and technology products[16](index=16&type=chunk) - The company markets products through independent and company-owned dealers, direct sales to end-use customers, and web-based, retail, and technology distribution channels, including work-from-home and learn-from-home products[18](index=18&type=chunk) - Steelcase operates on a worldwide basis within its Americas and EMEA reportable segments, plus an Other category (Asia Pacific and Designtex), with approximately **11,100** employees globally[16](index=16&type=chunk)[27](index=27&type=chunk)[54](index=54&type=chunk) [Overview](index=4&type=section&id=Overview) - Steelcase Inc. is a Michigan corporation, founded in **1912**, publicly traded since **1998** on the NYSE under 'SCS', and headquartered in Grand Rapids, Michigan, U.S.A[15](index=15&type=chunk)[16](index=16&type=chunk) - The company's global scale and reach enable it to provide a consistent experience to global customers while offering local differentiation[17](index=17&type=chunk) [Our Offerings](index=4&type=section&id=Our%20Offerings) - Steelcase offers a comprehensive portfolio including furniture systems, seating, storage, desks, benches, tables, work accessories, lighting, mobile power, screens, interior architectural products (walls, pods), and technology solutions for collaboration and scheduling[19](index=19&type=chunk) - The company also provides services such as workplace strategy consulting, data-driven space measurement, lease origination, and furniture and asset management[19](index=19&type=chunk) [Reportable Segments](index=5&type=section&id=Reportable%20Segments) - The Americas segment serves customers in the U.S., Canada, the Caribbean Islands, and Latin America through brands like Steelcase, Coalesse, Smith System, AMQ, and Orangebox, primarily via a network of approximately **400** independent and company-owned dealers[28](index=28&type=chunk)[29](index=29&type=chunk) - The EMEA segment serves Europe, the Middle East, and Africa under Steelcase, Orangebox, and Coalesse brands, mainly through approximately **340** independent and company-owned dealers, with a strong presence in Western Europe[32](index=32&type=chunk)[33](index=33&type=chunk) - The Other category includes Asia Pacific (Australia, China, India, Japan, Korea, Southeast Asia) primarily under the Steelcase brand, and Designtex, which sells textiles, wall coverings, and surface imaging solutions[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [Marketing Partnerships](index=8&type=section&id=Marketing%20Partnerships) - Steelcase has marketing partnerships with companies like Blu Dot, Bolia, Microsoft, and West Elm to offer complementary products and services, leveraging its scale[39](index=39&type=chunk) - These partnerships involve purchasing and reselling partner products, marketing products for a fee, or co-developing and co-marketing products[39](index=39&type=chunk) [Joint Ventures and Other Equity Investments](index=8&type=section&id=Joint%20Ventures%20and%20Other%20Equity%20Investments) - As of February **26**, **2021**, investments in unconsolidated joint ventures and other equity investments totaled **$51.5 million**[40](index=40&type=chunk) [Customer and Dealer Concentrations](index=8&type=section&id=Customer%20and%20Dealer%20Concentrations) - The largest customer accounted for approximately **2%** of consolidated revenue in **2021**, and the five largest customers collectively accounted for approximately **6%**. Sales to U.S. federal government agencies represented approximately **3%** of consolidated revenue in **2021**[41](index=41&type=chunk) - No single independent Steelcase dealer accounted for more than **4%** of consolidated revenue in **2021**, and the five largest independent dealers collectively accounted for approximately **12%**[42](index=42&type=chunk) [Manufacturing and Logistics](index=8&type=section&id=Manufacturing%20and%20Logistics) - Steelcase has manufacturing operations in North America (U.S., Mexico), Europe (France, Germany, Spain, U.K., Czech Republic), and Asia (China, Malaysia, India)[43](index=43&type=chunk) - The manufacturing model is predominantly make-to-order with lead times typically ranging from two to six weeks, utilizing lean manufacturing principles[44](index=44&type=chunk) [Materials](index=9&type=section&id=Materials) - Approximately **57%** of the cost of sales in **2021** related to raw materials, components, and finished goods, including steel, petroleum-based products, aluminum, other metals, wood, and particleboard[47](index=47&type=chunk) - During **2021**, steel availability was negatively impacted by COVID-19 disruptions, and in Q**1** **2022**, foam availability in the U.S. was affected by severe weather, leading to negative impacts on procurement costs[47](index=47&type=chunk) [Research, Design and Development](index=9&type=section&id=Research%2C%20Design%20and%20Development) - Steelcase incurred **$48.1 million**, **$50.6 million**, and **$53.7 million** in research, design, and development expenses in **2021**, **2020**, and **2019**, respectively[51](index=51&type=chunk) - The company leverages global research and external innovators to develop social, spatial, and informational insights into work effectiveness, translating them into innovative products and solutions[48](index=48&type=chunk)[49](index=49&type=chunk) [Human Capital Resources](index=9&type=section&id=Human%20Capital%20Resources) - As of February **26**, **2021**, Steelcase had approximately **11,100** employees, with about **6,300** in manufacturing and distribution, and **800** temporary workers[54](index=54&type=chunk) - The company's core values include integrity, truth, commitment, dignity and respect, positive relationships, environmental protection, and excellence[52](index=52&type=chunk) - In response to COVID-19, Steelcase implemented safety measures, paid full health insurance premiums for temporarily laid-off U.S. employees, and offered flexible schedules and emotional wellbeing services[59](index=59&type=chunk)[60](index=60&type=chunk) [Intellectual Property](index=11&type=section&id=Intellectual%20Property) - Steelcase holds a significant number of patents and trademarks, with 'Steelcase,' 'Coalesse,' 'Designtex,' 'Smith System,' 'AMQ,' and 'Orangebox' trademarks being materially important to its business[61](index=61&type=chunk) [Environmental Matters](index=11&type=section&id=Environmental%20Matters) - The company believes its operations are in substantial compliance with all Environmental Laws and does not expect existing laws to have material effects on capital expenditures, earnings, or competitive position[63](index=63&type=chunk) - Steelcase is involved in proceedings related to several contaminated properties, including Superfund site cleanups, but does not believe the associated costs will be material[64](index=64&type=chunk) [Available Information](index=12&type=section&id=Available%20Information) - Steelcase files annual, quarterly, and current reports, proxy statements, and other documents with the SEC, available on www.sec.gov and www.steelcase.com[66](index=66&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A%2E%20Risk%20Factors) Steelcase faces risks from the COVID-19 pandemic, macroeconomic factors, supply chain, global operations, and financial challenges - The COVID-19 pandemic has significantly and adversely affected Steelcase's business, causing disruptions in manufacturing, supply chains, and a negative impact on global demand for office furniture, leading to a delay of approximately **$60 million** in Q**3** **2021** revenue[69](index=69&type=chunk)[70](index=70&type=chunk)[98](index=98&type=chunk) - Demand for office furniture is influenced by cyclical macroeconomic factors such as corporate profits, non-residential fixed investment, white-collar employment, and commercial office construction and vacancy rates[72](index=72&type=chunk) - The company is vulnerable to changes in raw material, commodity, and other input costs (e.g., steel, petroleum-based products), which can fluctuate due to global supply and demand, currency movements, and trade barriers, potentially impacting gross margins[80](index=80&type=chunk) - Steelcase recorded a **$17.6 million** goodwill impairment charge in Q**1** **2021** related to its Orangebox U.K. reporting unit due to poor performance[92](index=92&type=chunk) [Macroeconomic and Workplace Trends Risk Factors](index=12&type=section&id=Macroeconomic%20and%20Workplace%20Trends%20Risk%20Factors) - The COVID-19 pandemic caused significant disruptions in manufacturing, distribution, and supply chains, requiring many office workers to work from home, negatively impacting global demand for office furniture[69](index=69&type=chunk) - Workplace trends, including increased working from home and demand for residential/lounge products in offices, necessitate continuous development of diverse solutions to maintain competitiveness[73](index=73&type=chunk)[75](index=75&type=chunk) - Growth strategies include translating research into innovative products, growing market share, realizing value from acquisitions, expanding into adjacent markets (healthcare, education), enhancing work-from-home offerings, and developing marketing partnerships[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [Manufacturing, Supply Chain and Distribution Risk Factors](index=14&type=section&id=Manufacturing%2C%20Supply%20Chain%20and%20Distribution%20Risk%20Factors) - Changes in tariffs, global trade agreements, or government procurement rules could impact import costs and raw material costs, adversely affecting gross margins and price competitiveness[79](index=79&type=chunk) - Reliance on a global network of suppliers exposes the company to risks like raw material availability fluctuations, supplier solvency, labor disruptions, and production losses from natural disasters or cyberattacks[82](index=82&type=chunk) - Disruptions or consolidations within the independent dealer network, which is crucial for marketing, delivery, and installation, could adversely affect business operations and financial condition[83](index=83&type=chunk)[85](index=85&type=chunk) [Global Footprint Risk Factors](index=15&type=section&id=Global%20Footprint%20Risk%20Factors) - Operating globally subjects Steelcase to risks such as differing business practices, political/economic instability, natural disasters, security concerns, and intellectual property protection challenges[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The company is vulnerable to currency exchange rate fluctuations and currency controls, which can impact revenues, expenses, and the value of reported results and intercompany balances[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) [Financial Risk Factors](index=16&type=section&id=Financial%20Risk%20Factors) - Steelcase may be required to record impairment charges related to goodwill, which totaled **$218.1 million** as of February **26**, **2021**, adversely affecting results of operations[92](index=92&type=chunk) - Changes in corporate tax laws could affect the effective tax rate and the valuation of deferred tax assets and liabilities; as of February **26**, **2021**, net deferred tax assets were **$106.3 million**[93](index=93&type=chunk) - Costs related to participation in a multi-employer pension plan (Central States, Southeast and Southwest Areas Pension Fund) could increase, with a potential withdrawal liability increase of approximately **$13 million** in case of a mass withdrawal[95](index=95&type=chunk)[96](index=96&type=chunk) [General Risk Factors](index=17&type=section&id=General%20Risk%20Factors) - Reliance on information technology systems exposes the company to risks of extended disruptions, significant security breaches, or cyberattacks, which could result in operational slowdowns, revenue loss, or data compromise[97](index=97&type=chunk) - A cyberattack in Q**3** **2021** resulted in a temporary shutdown of global operations and a delay of approximately **$60 million** in revenue, though it was not deemed materially adverse[98](index=98&type=chunk) - Product defects, whether from internal processes or third-party manufacturing, can lead to warranty, recall, and liability costs, and reputational damage[100](index=100&type=chunk)[101](index=101&type=chunk) [Item 1B. Unresolved Staff Comments](index=18&type=section&id=Item%201B%2E%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report [Item 2. Properties](index=18&type=section&id=Item%202%2E%20Properties) Steelcase operates **23** principal manufacturing and distribution center locations globally, with **10** owned and **13** leased facilities, and its global headquarters in Grand Rapids, Michigan, U.S.A Principal Manufacturing and Distribution Center Locations (as of Feb 26, 2021) | Segment/Category Primarily Supported | Number of Principal Locations | Owned | Leased | | :----------------------------------- | :---------------------------- | :---- | :----- | | Americas | 14 | 5 | 9 | | EMEA | 6 | 5 | 1 | | Other category | 3 | — | 3 | | Total | 23 | 10 | 13 | [Item 3. Legal Proceedings](index=18&type=section&id=Item%203%2E%20Legal%20Proceedings) Steelcase is involved in litigation from time to time in the ordinary course of business but does not believe any current lawsuit or proceeding is likely to have a material adverse effect on the company - The company does not believe it is a party to any lawsuit or proceeding that is likely to have a material adverse effect on the Company[104](index=104&type=chunk) [Item 4. Mine Safety Disclosures](index=18&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This item is not applicable to Steelcase Inc [Supplementary Item. Information About Our Executive Officers](index=19&type=section&id=Supplementary%20Item%2E%20Information%20About%20Our%20Executive%20Officers) This section lists the executive officers of Steelcase Inc., including their age and current positions, along with a brief overview of their tenure and previous roles within the company Executive Officers of Steelcase Inc. | Name | Age | Position | | :-------------------- | :-- | :-------------------------------------------------------------------- | | Guillaume M. Alvarez | 61 | Senior Vice President, EMEA | | Sara E. Armbruster | 50 | Executive Vice President, Director | | Donna K. Flynn | 53 | Vice President, Global Talent Management | | Ulrich H. E. Gwinner | 59 | President, Asia Pacific | | James P. Keane | 61 | President and Chief Executive Officer, Director | | Robert G. Krestakos | 59 | Vice President, Global Operations | | James N. Ludwig | 57 | Vice President, Global Design and Product Engineering | | Lizbeth S. O'Shaughnessy | 59 | Senior Vice President, Chief Administrative Officer, General Counsel and Secretary | | Eddy F. Schmitt | 49 | Senior Vice President, Americas | | Allan W. Smith, Jr. | 53 | Vice President, Global Marketing | | David C. Sylvester | 56 | Senior Vice President, Chief Financial Officer | | Robin L. Zondervan | 41 | Vice President, Corporate Controller & Chief Accounting Officer | PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205%2E%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Steelcase Inc.'s Class A Common Stock is listed on the NYSE, while Class B Common Stock is not publicly traded, with **$56.4 million** remaining under the share repurchase program - Class A Common Stock is listed on the New York Stock Exchange (SCS); Class B Common Stock is not publicly traded[114](index=114&type=chunk) Common Stock Outstanding (as of April 16, 2021) | Class of Stock | Shares Outstanding | | :----------------- | :----------------- | | Class A Common Stock | 90,050,455 | | Class B Common Stock | 25,613,944 | - No share repurchases occurred in Q**4** **2021**. Approximately **$56.4 million** remained available under the **$150 million** share repurchase program approved in January **2016**[115](index=115&type=chunk) [Item 6. Selected Financial Data](index=21&type=section&id=Item%206%2E%20Selected%20Financial%20Data) This section provides a five-year summary of Steelcase Inc.'s selected financial data, highlighting key operating results, supplemental operating data, share data, balance sheet data, and cash flow data Selected Financial Highlights (Year Ended February 26, 2021 vs. February 28, 2020) | Financial Highlight | Feb 26, 2021 (Millions) | Feb 28, 2020 (Millions) | Change (YoY) | | :---------------------------- | :---------------------- | :---------------------- | :----------- | | Revenue | $2,596.2 | $3,723.7 | -30.3% | | Gross profit | $762.8 | $1,215.2 | -37.2% | | Operating income | $43.0 | $257.0 | -83.2% | | Net income | $26.1 | $199.7 | -86.9% | | Diluted earnings per common share | $0.22 | $1.66 | -86.7% | | Cash and cash equivalents | $489.8 | $541.0 | -9.5% | | Total assets | $2,354.0 | $2,565.4 | -8.2% | | Total liabilities | $1,393.5 | $1,595.0 | -12.7% | | Total shareholders' equity | $960.5 | $970.4 | -1.0% | | Net cash provided by operating activities | $64.8 | $360.8 | -82.0% | - Dividends paid per common share decreased from **$0.58** in **2020** to **$0.37** in **2021**[117](index=117&type=chunk) - Restructuring costs of **$28.6 million** and goodwill impairment charges of **$17.6 million** were recorded in **2021**, compared to none in **2020**[117](index=117&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's Discussion and Analysis reviews Steelcase Inc.'s financial condition and operations for fiscal year **2021**, highlighting significant declines in revenue and income due to the COVID-19 pandemic, partially offset by cost reduction actions - In **2021**, revenue declined **30%** compared to the prior year, with operating income of **$43.0 million**, a decrease of **$214.0 million** from **2020**[128](index=128&type=chunk)[129](index=129&type=chunk) - Net income was **$26.1 million** and diluted EPS was **$0.22** in **2021**, down from **$199.7 million** and **$1.66**, respectively, in **2020**[129](index=129&type=chunk) - Cost of sales as a percentage of revenue increased by **280 basis points** to **70.2%** in **2021**, driven by decreased revenue and higher direct labor and logistics inefficiencies, partially offset by overhead reductions and pricing benefits[131](index=131&type=chunk) [Non-GAAP Financial Measures](index=22&type=section&id=Non-GAAP%20Financial%20Measures) - Non-GAAP financial measures used include organic revenue growth (decline) and adjusted operating income (loss), which exclude currency translation effects, acquisitions/divestitures, additional week impacts, goodwill impairment charges, and restructuring costs[121](index=121&type=chunk) Organic Revenue Growth (Decline) — Consolidated | Metric | Feb 26, 2021 | Feb 28, 2020 | | :-------------------------- | :----------- | :----------- | | Prior year revenue, adjusted | $3,639.0 | $3,496.1 | | Current year revenue, adjusted | $2,596.2 | $3,675.3 | | Organic growth (decline) $ | $(1,042.8) | $179.2 | | Organic growth (decline) % | (29)% | 5% | Reconciliation of Operating Income to Adjusted Operating Income | Metric | Feb 26, 2021 (Millions) | Feb 28, 2020 (Millions) | Feb 22, 2019 (Millions) | | :-------------------------- | :---------------------- | :---------------------- | :---------------------- | | Operating income | $43.0 | $257.0 | $183.6 | | Add: goodwill impairment charge | $17.6 | — | — | | Add: restructuring costs | $28.6 | — | — | | Adjusted operating income | $89.2 | $257.0 | $183.6 | [Financial Summary](index=22&type=section&id=Financial%20Summary) Consolidated Statement of Operations Data (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | % of Revenue | Feb 28, 2020 (Millions) | % of Revenue | | :-------------------------- | :---------------------- | :----------- | :---------------------- | :----------- | | Revenue | $2,596.2 | 100.0% | $3,723.7 | 100.0% | | Cost of sales | $1,822.8 | 70.2% | $2,508.5 | 67.4% | | Restructuring costs | $10.6 | 0.4% | — | — | | Gross profit | $762.8 | 29.4% | $1,215.2 | 32.6% | | Operating expenses | $684.2 | 26.4% | $958.2 | 25.7% | | Goodwill impairment charge | $17.6 | 0.6% | — | — | | Restructuring costs | $18.0 | 0.7% | — | — | | Operating income | $43.0 | 1.7% | $257.0 | 6.9% | | Net income | $26.1 | 1.0% | $199.7 | 5.4% | - The **2021** effective tax rate was (**0.8%)**, reflecting **$11.7 million** in CARES Act benefits and the non-deductible **$17.6 million** goodwill impairment charge, compared to **18.6%** in **2020**[134](index=134&type=chunk) - Operating expenses decreased by **$274.0 million** year-over-year, primarily due to **$112 million** lower discretionary spending, **$69 million** lower wage/benefit expenses, and **$69.3 million** reduction in variable compensation[131](index=131&type=chunk)[132](index=132&type=chunk) [Interest Expense, Investment Income and Other Income, Net](index=25&type=section&id=Interest%20Expense%2C%20Investment%20Income%20and%20Other%20Income%2C%20Net) Interest Expense, Investment Income and Other Income, Net (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | Feb 28, 2020 (Millions) | | :---------------------------------------------- | :---------------------- | :---------------------- | | Interest expense | $(27.1) | $(27.3) | | Investment income | $1.4 | $5.4 | | Equity in income of unconsolidated affiliates | $9.3 | $12.3 | | Foreign exchange gain (loss) | $(2.3) | $0.3 | | Net periodic pension and post-retirement credit (expense), excluding service cost | $(0.3) | $0.9 | | Miscellaneous income (expense), net | $1.9 | $(3.4) | | Total other income, net | $8.6 | $10.1 | | Total interest expense, investment income and other income, net | $(17.1) | $(11.8) | - Investment income decreased by **$4.0 million** in **2021** due to lower market interest rates[136](index=136&type=chunk) - Miscellaneous income (expense), net in **2021** included a **$2.8 million** gain from additional proceeds from a partial sale of an unconsolidated affiliate investment in **2018**[136](index=136&type=chunk) [Business Segment Disclosure](index=25&type=section&id=Business%20Segment%20Disclosure) [Americas](index=25&type=section&id=Americas) Americas Segment Statement of Operations Data (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | % of Revenue | Feb 28, 2020 (Millions) | % of Revenue | | :-------------------------- | :---------------------- | :----------- | :---------------------- | :----------- | | Revenue | $1,848.5 | 100.0% | $2,672.9 | 100.0% | | Cost of sales | $1,285.1 | 69.5% | $1,789.1 | 66.9% | | Restructuring costs | $10.6 | 0.6% | — | — | | Gross profit | $552.8 | 29.9% | $883.8 | 33.1% | | Operating expenses | $437.8 | 23.7% | $643.8 | 24.1% | | Operating income | $97.0 | 5.2% | $240.0 | 9.0% | - Americas revenue declined by **$824.4 million** (**31%**) in **2021** compared to **2020**, with an organic decline of **30%**, primarily due to reduced industry demand from the COVID-19 pandemic[143](index=143&type=chunk) - Operating income in the Americas declined by **$143.0 million** in **2021**, including **$28.6 million** in restructuring costs related to workforce reductions[142](index=142&type=chunk)[145](index=145&type=chunk) [EMEA](index=27&type=section&id=EMEA) EMEA Segment Statement of Operations Data (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | % of Revenue | Feb 28, 2020 (Millions) | % of Revenue | | :-------------------------- | :---------------------- | :----------- | :---------------------- | :----------- | | Revenue | $511.3 | 100.0% | $669.6 | 100.0% | | Cost of sales | $380.4 | 74.4% | $473.2 | 70.7% | | Gross profit | $130.9 | 25.6% | $196.4 | 29.3% | | Operating expenses | $145.6 | 28.5% | $186.5 | 27.8% | | Goodwill impairment charge | $17.6 | 3.4% | — | — | | Operating income (loss) | $(32.3) | (6.3)% | $9.9 | 1.5% | - EMEA revenue decreased by **$158.3 million** (**24%**) in **2021**, with an organic decline of **26%**, primarily due to reduced demand from the COVID-19 pandemic, partially offset by favorable currency translation effects[151](index=151&type=chunk) - EMEA operating results declined by **$42.2 million** in **2021**, including a **$17.6 million** goodwill impairment charge related to the Orangebox U.K. reporting unit[150](index=150&type=chunk) [Other](index=28&type=section&id=Other) Other Category Statement of Operations Data (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | % of Revenue | Feb 28, 2020 (Millions) | % of Revenue | | :-------------------------- | :---------------------- | :----------- | :---------------------- | :----------- | | Revenue | $236.4 | 100.0% | $381.2 | 100.0% | | Cost of sales | $157.3 | 66.5% | $246.2 | 64.6% | | Gross profit | $79.1 | 33.5% | $135.0 | 35.4% | | Operating expenses | $78.9 | 33.4% | $95.6 | 25.1% | | Operating income | $0.2 | 0.1% | $39.4 | 10.3% | - Revenue in the Other category decreased by **$144.8 million** (**38%**) in **2021**, driven by lower demand in Asia Pacific and Designtex due to COVID-19, and a **$61.5 million** impact from the PolyVision divestiture[159](index=159&type=chunk) - Operating income in the Other category decreased by **$39.2 million** in **2021**, with the prior year including a **$20.4 million** benefit from the PolyVision sale[158](index=158&type=chunk) [Corporate](index=30&type=section&id=Corporate) Corporate Operating Expenses (2021 vs. 2020) | Metric | Feb 26, 2021 (Millions) | Feb 28, 2020 (Millions) | | :----------------- | :---------------------- | :---------------------- | | Operating expenses | $21.9 | $32.3 | - Corporate operating expenses decreased in **2021** due to **$6.2 million** higher COLI income, lower discretionary spending, and reduced wage/benefit expenses, partially offset by a **$4.2 million** increase in deferred compensation expense[163](index=163&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Sources Available (as of Feb 26, 2021 vs. Feb 28, 2020) | Liquidity Source | Feb 26, 2021 (Millions) | Feb 28, 2020 (Millions) | | :-------------------------- | :---------------------- | :---------------------- | | Cash and cash equivalents | $489.8 | $541.0 | | Company-owned life insurance | $169.5 | $160.0 | | Availability under credit facilities | $265.9 | $273.3 | | Total liquidity sources available | $925.2 | $974.3 | - Net cash provided by operating activities decreased significantly to **$64.8 million** in **2021** from **$360.8 million** in **2020**, primarily due to lower net income[167](index=167&type=chunk)[168](index=168&type=chunk) - In **2021**, Steelcase borrowed and repaid **$250.0 million** under its global credit facility for additional liquidity during the COVID-19 pandemic[173](index=173&type=chunk) - Total consolidated debt as of February **26**, **2021**, was **$483.9 million**, primarily consisting of **$444.1 million** in term notes due in **2029**[177](index=177&type=chunk)[185](index=185&type=chunk) [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) - Critical accounting estimates include business combinations and goodwill, income taxes, and pension and other post-retirement benefits, which involve significant management judgment and assumptions[191](index=191&type=chunk) - In Q**1** **2021**, a **$17.6 million** goodwill impairment charge was recorded for the Orangebox U.K. reporting unit due to its carrying value exceeding fair value[196](index=196&type=chunk) - As of February **26**, **2021**, net deferred tax assets were **$106.3 million**, with valuation allowances of **$6.6 million**, primarily related to foreign deferred tax assets[200](index=200&type=chunk)[424](index=424&type=chunk) [Forward-Looking Statements](index=37&type=section&id=Forward-Looking%20Statements) - Forward-looking statements discuss future trends, plans, events, results, or financial condition, based on current beliefs and assumptions, but involve risks and uncertainties that could cause actual results to vary[210](index=210&type=chunk) [Recently Issued Accounting Standards](index=38&type=section&id=Recently%20Issued%20Accounting%20Standards) - Steelcase adopted ASU No. **2019-12** (Income Taxes) and ASU No. **2016-13** (Financial Instruments - Credit Losses) in Q**1** **2021**, neither of which had a material effect on consolidated financial statements[322](index=322&type=chunk)[324](index=324&type=chunk) - ASU No. **2018-14** (Disclosure Framework - Defined Benefit Plans) was adopted in Q**4** **2021**, modifying disclosures but not materially affecting financial statements[323](index=323&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Steelcase Inc. is exposed to market risks from foreign currency exchange, interest rates, commodity prices, and fixed income and equity prices, which are managed through operational strategies and derivatives - Foreign currency exchange risk is managed by matching revenue with same-currency costs and assets with same-currency liabilities, and through foreign currency derivatives[213](index=213&type=chunk) - Revenue from foreign locations represented approximately **33%** of consolidated revenue in **2021**[213](index=213&type=chunk) - A **1%** increase in commodity prices, without offsetting price increases, would have decreased operating income by approximately **$11 million** in **2021**[220](index=220&type=chunk) [Foreign Currency Exchange Risk](index=38&type=section&id=Foreign%20Currency%20Exchange%20Risk) - Steelcase transacted business in **16** primary currencies in **2021**, with the U.S. dollar, euro, U.K. pound sterling, Chinese renminbi, Canadian dollar, Malaysian ringgit, Indian rupee, and Mexican peso being the most significant[213](index=213&type=chunk) - An additional **10%** strengthening of the U.S. dollar against local currencies would have increased operating income by approximately **$10 million** in **2021**[214](index=214&type=chunk) - Cumulative net currency translation adjustments reduced shareholders' equity by **$26.1 million** as of February **26**, **2021**[215](index=215&type=chunk) [Interest Rate Risk](index=38&type=section&id=Interest%20Rate%20Risk) - Interest rate risk primarily affects cash and cash equivalents, long-term investments, and a floating interest rate loan of **$37.5 million** (as of Feb **26**, **2021**) based on **30-day** LIBOR plus **1.20%**[217](index=217&type=chunk) - A **1%** increase in interest rates would have increased net income by less than **$2 million** in **2021** and **2020**, mainly from higher interest income on cash equivalents[218](index=218&type=chunk) [Commodity Price Risk](index=39&type=section&id=Commodity%20Price%20Risk) - Commodity price risk arises from raw material purchases (steel, petroleum-based products, aluminum, wood, etc.), with costs fluctuating due to global supply/demand[219](index=219&type=chunk) - Cost of sales decreased approximately **$8 million** in **2021** due to lower steel and plastic costs in the first three quarters, despite rising costs in Q**4**[220](index=220&type=chunk) [Fixed Income and Equity Price Risk](index=39&type=section&id=Fixed%20Income%20and%20Equity%20Price%20Risk) - Fixed income and equity price risk are primarily associated with variable life COLI policies, which totaled **$58.2 million** as of February **26**, **2021**, allocated approximately **50%** fixed income and **50%** equity[221](index=221&type=chunk) - A **10%** adverse change in the equity portion of variable life COLI investments would reduce net income by approximately **$3 million** in **2021**[222](index=222&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=40&type=section&id=Item%208%2E%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Steelcase Inc.'s audited consolidated financial statements, including statements of income, comprehensive income, balance sheets, changes in shareholders' equity, and cash flows, along with management's and independent auditor's reports - Management assessed the effectiveness of internal control over financial reporting as effective as of February **26**, **2021**, based on the COSO framework[228](index=228&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of February **26**, **2021**[234](index=234&type=chunk)[243](index=243&type=chunk) - A critical audit matter identified was the goodwill impairment evaluation for AMQ and Orangebox U.K. reporting units, due to significant judgments in estimating fair values and sensitivity of operating changes on future cash flows[248](index=248&type=chunk)[250](index=250&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=40&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) - Management is responsible for establishing and maintaining effective internal control over financial reporting, designed to provide reasonable assurance regarding financial reporting reliability[225](index=225&type=chunk) - Management concluded that the system of internal control over financial reporting was effective as of February **26**, **2021**[228](index=228&type=chunk) [Report of Independent Registered Public Accounting Firm (Internal Control)](index=41&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%28Internal%20Control%29) - Deloitte & Touche LLP audited the internal control over financial reporting of Steelcase Inc. and subsidiaries as of February **26**, **2021**, based on COSO criteria[233](index=233&type=chunk) - The auditor expressed an unqualified opinion, stating that the company maintained, in all material respects, effective internal control over financial reporting[233](index=233&type=chunk) [Report of Independent Registered Public Accounting Firm (Financial Statements)](index=42&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%28Financial%20Statements%29) - Deloitte & Touche LLP audited the consolidated financial statements for the three years ended February **26**, **2021**, and expressed an unqualified opinion on their fair presentation in conformity with U.S. GAAP[242](index=242&type=chunk) - The critical audit matter identified was the goodwill impairment evaluation for the AMQ and Orangebox U.K. reporting units, due to significant judgments in estimating fair values[248](index=248&type=chunk)[250](index=250&type=chunk) [Consolidated Statements of Income](index=44&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (in millions, except per share data) | Metric | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :-------------------------- | :----------- | :----------- | :----------- | | Revenue | $2,596.2 | $3,723.7 | $3,443.2 | | Cost of sales | $1,822.8 | $2,508.5 | $2,355.3 | | Restructuring costs | $10.6 | — | — | | Gross profit | $762.8 | $1,215.2 | $1,087.9 | | Operating expenses | $684.2 | $958.2 | $904.3 | | Goodwill impairment charge | $17.6 | — | — | | Restructuring costs | $18.0 | — | — | | Operating income | $43.0 | $257.0 | $183.6 | | Interest expense | $(27.1) | $(27.3) | $(37.5) | | Investment income | $1.4 | $5.4 | $2.9 | | Other income, net | $8.6 | $10.1 | $14.9 | | Income before income tax expense (benefit) | $25.9 | $245.2 | $163.9 | | Income tax expense (benefit) | $(0.2) | $45.5 | $37.9 | | Net income | $26.1 | $199.7 | $126.0 | | Basic earnings per share | $0.22 | $1.67 | $1.06 | | Diluted earnings per share | $0.22 | $1.66 | $1.05 | [Consolidated Statements of Comprehensive Income](index=45&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income (in millions) | Metric | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Net income | $26.1 | $199.7 | $126.0 | | Other comprehensive income (loss), net: | | | | | Unrealized gain (loss) on investments | $0.4 | $(0.1) | $0.3 | | Pension and other post-retirement liability adjustments | $(3.5) | $(12.8) | $(5.0) | | Derivative amortization | $1.0 | $1.0 | $(9.6) | | Foreign currency translation adjustments | $31.4 | $(10.1) | $(22.7) | | Total other comprehensive income (loss), net | $29.3 | $(22.0) | $(37.0) | | Comprehensive income | $55.4 | $177.7 | $89.0 | [Consolidated Balance Sheets](index=46&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets (in millions) | Asset/Liability/Equity | Feb 26, 2021 | Feb 28, 2020 | | :---------------------------------- | :----------- | :----------- | | **ASSETS** | | | | Cash and cash equivalents | $489.8 | $541.0 | | Accounts receivable, net | $270.3 | $372.4 | | Inventories | $193.5 | $215.0 | | Total current assets | $1,045.4 | $1,188.8 | | Property, plant and equipment, net | $410.8 | $426.3 | | Goodwill | $218.1 | $233.6 | | Total assets | $2,354.0 | $2,565.4 | | **LIABILITIES** | | | | Accounts payable | $181.3 | $244.3 | | Total current liabilities | $515.0 | $690.9 | | Long-term debt less current maturities | $479.2 | $481.4 | | Total liabilities | $1,393.5 | $1,595.0 | | **SHAREHOLDERS' EQUITY** | | | | Total shareholders' equity | $960.5 | $970.4 | [Consolidated Statements of Changes in Shareholders' Equity](index=48&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Consolidated Statements of Changes in Shareholders' Equity (in millions, except share data) | Metric | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Common shares outstanding, beginning of period | 117,202,000 | 116,766,610 | 116,157,443 | | Common shares outstanding, end of period | 114,908,676 | 117,202,000 | 116,766,610 | | Paid-in capital, end of period | $12.5 | $28.4 | $16.4 | | Accumulated other comprehensive income (loss), end of period | $(40.0) | $(69.3) | $(47.3) | | Retained earnings, end of period | $988.0 | $1,011.3 | $880.7 | | Total shareholders' equity | $960.5 | $970.4 | $849.8 | - Common stock repurchases totaled **$42.7 million** in **2021**, compared to **$8.7 million** in **2020**[264](index=264&type=chunk) - Dividends paid decreased from **$69.1 million** in **2020** to **$43.5 million** in **2021**[264](index=264&type=chunk) [Consolidated Statements of Cash Flows](index=49&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in millions) | Activity | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :---------------------------------------- | :----------- | :----------- | :----------- | | Net cash provided by operating activities | $64.8 | $360.8 | $131.2 | | Net cash provided by (used in) investing activities | $(30.6) | $4.5 | $(271.6) | | Net cash provided by (used in) financing activities | $(87.8) | $(81.9) | $122.3 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(51.5) | $282.3 | $(20.8) | | Cash and cash equivalents and restricted cash, end of period | $495.6 | $547.1 | $264.8 | - Capital expenditures decreased to **$41.3 million** in **2021** from **$73.4 million** in **2020**[267](index=267&type=chunk) - In **2021**, the company borrowed and repaid **$250.0 million** on lines of credit, while in **2020**, it received **$72.6 million** from business divestitures[267](index=267&type=chunk) [Notes to the Consolidated Financial Statements](index=50&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [1. NATURE OF OPERATIONS](index=50&type=section&id=1.%20NATURE%20OF%20OPERATIONS) - Steelcase is the global leader in furnishing work experiences in office environments, founded in **1912**, headquartered in Grand Rapids, Michigan, U.S.A., with approximately **11,100** employees[271](index=271&type=chunk) - The company operates manufacturing and distribution center facilities in **23** principal locations and distributes products through approximately **800** dealer locations worldwide[271](index=271&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=50&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The consolidated financial statements include Steelcase Inc. and its subsidiaries, with intercompany transactions eliminated[272](index=272&type=chunk) - The fiscal year ends on the last Friday in February; fiscal years **2021** and **2019** had **52** weeks, while **2020** had **53** weeks[274](index=274&type=chunk) - Inventories are stated at the lower of cost or net realizable value, with the Americas segment primarily using LIFO and EMEA primarily using FIFO[281](index=281&type=chunk) - Research and development expenses were **$48.1 million** for **2021**, **$50.6 million** for **2020**, and **$53.7 million** for **2019**[304](index=304&type=chunk) - The company uses derivative financial instruments to manage exposures to interest rates and foreign exchange rates, not for speculative purposes[315](index=315&type=chunk) [3. NEW ACCOUNTING STANDARDS](index=57&type=section&id=3.%20NEW%20ACCOUNTING%20STANDARDS) - Steelcase adopted ASU No. **2019-12** (Income Taxes) and ASU No. **2016-13** (Financial Instruments - Credit Losses) in Q**1** **2021**, with no material effect on consolidated financial statements[322](index=322&type=chunk)[324](index=324&type=chunk) - ASU No. **2018-14** (Disclosure Framework - Defined Benefit Plans) was adopted in Q**4** **2021**, modifying disclosures but not materially affecting financial statements[323](index=323&type=chunk) [4. REVENUE](index=58&type=section&id=4.%20REVENUE) Disaggregated Revenue by Product Category (in millions) | Product Category Data | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :------------------------------ | :----------- | :----------- | :----------- | | **Americas** | | | | | Desking, benching, systems and storage | $912.0 | $1,377.5 | $1,233.9 | | Seating | $559.4 | $784.2 | $706.3 | | Other | $377.1 | $511.2 | $530.0 | | **EMEA** | | | | | Desking, benching, systems and storage | $196.4 | $254.4 | $233.2 | | Seating | $185.9 | $235.6 | $187.1 | | Other | $129.0 | $179.6 | $196.7 | | **Other** | | | | | Desking, benching, systems and storage | $49.8 | $63.6 | $59.1 | | Seating | $69.1 | $94.1 | $93.6 | | Other | $117.5 | $223.5 | $203.3 | | **Total** | $2,596.2 | $3,723.7 | $3,443.2 | Reportable Geographic Revenue (in millions) | Geographic Revenue | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :----------------- | :----------- | :----------- | :----------- | | United States | $1,739.5 | $2,469.7 | $2,170.3 | | Foreign locations | $856.7 | $1,254.0 | $1,272.9 | | Total | $2,596.2 | $3,723.7 | $3,443.2 | - Customer deposits increased from **$28.6 million** at February **28**, **2020**, to **$33.7 million** at February **26**, **2021**[330](index=330&type=chunk) [5. EARNINGS PER SHARE](index=59&type=section&id=5.%20EARNINGS%20PER%20SHARE) Computation of Earnings per Share (in millions, except per share data) | Metric | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :------------------------------------------ | :----------- | :----------- | :----------- | | Net income | $26.1 | $199.7 | $126.0 | | Net income used in calculating earnings per share | $25.5 | $195.8 | $123.5 | | Shares used in calculating basic earnings per share | 114.9 | 117.3 | 116.7 | | Shares used in calculating diluted earnings per share | 115.2 | 117.9 | 117.1 | | Basic earnings per share | $0.22 | $1.67 | $1.06 | | Diluted earnings per share | $0.22 | $1.66 | $1.05 | [6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=60&type=section&id=6.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Changes in Accumulated Other Comprehensive Income (Loss) (in millions) | Component | Feb 26, 2021 | Feb 28, 2020 | | :------------------------------------------ | :----------- | :----------- | | Balance as of beginning of period | $(69.3) | $(47.3) | | Net other comprehensive income (loss) during period | $29.3 | $(22.0) | | Balance as of end of period | $(40.0) | $(69.3) | - Foreign currency translation adjustments contributed **$31.4 million** in net other comprehensive income in **2021**, reversing a **$(10.1) million** loss in **2020**[334](index=334&type=chunk) [7. FAIR VALUE](index=61&type=section&id=7.%20FAIR%20VALUE) Fair Value of Financial Instruments (in millions) | Instrument | Feb 26, 2021 (Total) | Feb 28, 2020 (Total) | | :------------------------------ | :------------------- | :------------------- | | **Assets:** | | | | Cash and cash equivalents | $489.8 | $541.0 | | Restricted cash | $5.8 | $6.1 | | Foreign exchange forward contracts | $1.1 | $1.2 | | Auction rate security | $2.6 | $2.1 | | **Total Assets** | $499.3 | $550.4 | | **Liabilities:** | | | | Foreign exchange forward contracts | $(0.8) | $(0.5) | | **Total Liabilities** | $(0.8) | $(0.5) | - The fair value of foreign exchange forward contracts is based on a valuation model calculating the differential between contract price and market-based forward rate[340](index=340&type=chunk) - An auction rate security (ARS) investment had a fair value of **$2.6 million** as of February **26**, **2021**, estimated using an internally-developed discounted cash flow analysis[342](index=342&type=chunk)[343](index=343&type=chunk) [8. INVENTORIES](index=63&type=section&id=8.%20INVENTORIES) Inventories (in millions) | Inventory Category | Feb 26, 2021 | Feb 28, 2020 | | :-------------------------- | :----------- | :----------- | | Raw materials and work-in-process | $126.0 | $122.0 | | Finished goods | $86.4 | $112.8 | | Total | $212.4 | $234.8 | | Revaluation to LIFO | $18.9 | $19.8 | | **Net Inventories** | $193.5 | $215.0 | - The portion of inventories determined by the LIFO method aggregated **$89.1 million** as of February **26**, **2021**[347](index=347&type=chunk) [9. PROPERTY, PLANT AND EQUIPMENT](index=63&type=section&id=9.%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) Property, Plant and Equipment (in millions) | Category | Feb 26, 2021 | Feb 28, 2020 | | :------------------------ | :----------- | :----------- | | Land | $36.4 | $34.4 | | Machinery and equipment | $790.4 | $755.5 | | Buildings and improvements | $405.4 | $393.4 | | Capitalized software | $76.2 | $67.0 | | Furniture and fixtures | $63.2 | $58.5 | | Leasehold improvements | $77.8 | $72.6 | | Construction in progress | $24.6 | $22.6 | | Total Gross | $1,474.0 | $1,404.0 | | Accumulated depreciation | $(1,063.2) | $(977.7) | | **Net Property, Plant and Equipment** | $410.8 | $426.3 | - Depreciation expense on property, plant and equipment was **$68.8 million** for **2021**, **$73.2 million** for **2020**, and **$69.3 million** for **2019**[348](index=348&type=chunk) [10. COMPANY-OWNED LIFE INSURANCE](index=64&type=section&id=10.%20COMPANY-OWNED%20LIFE%20INSURANCE) - Investments in company-owned life insurance (COLI) policies are recorded at their net cash surrender value and are intended as a long-term funding source for post-retirement medical benefits, deferred compensation, and defined benefit pension plan obligations[350](index=350&type=chunk)[351](index=351&type=chunk) - COLI income, recorded in Operating expenses, totaled **$12.3 million** in **2021**, **$6.6 million** in **2020**, and **$7.5 million** in **2019**[352](index=352&type=chunk) COLI Investments Net Cash Surrender Value (in millions) | Type | Feb 26, 2021 | Feb 28, 2020 | | :------------ | :----------- | :----------- | | Whole life | $111.3 | $110.3 | | Variable life | $58.2 | $49.7 | | Total | $169.5 | $160.0 | [11. GOODWILL & OTHER INTANGIBLE ASSETS](index=65&type=section&id=11.%20GOODWILL%20%26%20OTHER%20INTANGIBLE%20ASSETS) Goodwill by Reportable Segment (in millions) | Segment | Feb 26, 2021 | Feb 28, 2020 | | :-------------- | :----------- | :----------- | | Americas | $207.4 | $204.4 | | EMEA | — | $18.5 | | Other category | $10.7 | $10.7 | | Total | $218.1 | $233.6 | - In Q**1** **2021**, a **$17.6 million** goodwill impairment charge was recorded in the EMEA segment related to the Orangebox U.K. reporting unit, leaving no remaining goodwill for that unit[356](index=356&type=chunk)[360](index=360&type=chunk) Other Intangible Assets, Net (in millions) | Category | Feb 26, 2021 | Feb 28, 2020 | | :---------------------------- | :----------- | :----------- | | Intangible assets subject to amortization | $90.3 | $94.0 | | Intangible assets not subject to amortization | $0.1 | $8.9 | | Total | $90.4 | $102.9 | - Amortization expense on intangible assets was **$16.3 million** in **2021**, **$12.4 million** in **2020**, and **$12.3 million** in **2019**[363](index=363&type=chunk) [12. INVESTMENTS IN UNCONSOLIDATED AFFILIATES](index=67&type=section&id=12.%20INVESTMENTS%20IN%20UNCONSOLIDATED%20AFFILIATES) Investments in Unconsolidated Affiliates (in millions) | Investment Type | Feb 26, 2021 | Feb 28, 2020 | | :-------------------------- | :----------- | :----------- | | Equity method investments | $42.1 | $43.9 | | Cost method investments | $9.4 | $8.4 | | Total investments | $51.5 | $52.3 | Equity in Earnings of Unconsolidated Affiliates (in millions) | Category | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :-------------------------- | :----------- | :----------- | :----------- | | Dealer relationships | $8.0 | $9.8 | $9.9 | | Manufacturing joint venture | $0.7 | $1.4 | $2.8 | | IDEO and other | $0.6 | $1.0 | $1.0 | | Total equity in earnings | $9.3 | $12.2 | $13.7 | - Sales to unconsolidated affiliates were **$201.5 million** in **2021**, down from **$305.7 million** in **2020**[370](index=370&type=chunk) [13. SHORT-TERM BORROWINGS AND LONG-TERM DEBT](index=69&type=section&id=13.%20SHORT-TERM%20BORROWINGS%20AND%20LONG-TERM%20DEBT) Debt Obligations (in millions) | Debt Obligations | Feb 26, 2021 | Feb 28, 2020 | | :-------------------------------- | :----------- | :----------- | | U.S. dollar obligations | $483.6 | $483.8 | | Foreign currency obligations | $0.3 | $0.5 | | Total short-term borrowings and long-term debt | $483.9 | $484.3 | | Short-term borrowings and current portion of long-term debt | $4.7 | $2.9 | | Long-term debt | $479.2 | $481.4 | - The company has **$444.1 million** in unsecured unsubordinated senior notes due in **2029** with an effective interest rate of **5.6%**[374](index=374&type=chunk) - A **$250.0 million** global committed bank facility expires in **2025**; no borrowings were outstanding as of February **26**, **2021**, but **$3.7 million** in guarantees reduced availability[377](index=377&type=chunk)[378](index=378&type=chunk) [14. DERIVATIVE INSTRUMENTS](index=71&type=section&id=14.%20DERIVATIVE%20INSTRUMENTS) - Steelcase uses derivative financial instruments, such as an interest rate lock, to manage exposure to interest rate movements and reduce volatility, not for speculative trading[382](index=382&type=chunk)[383](index=383&type=chunk) - A **$13.0 million** loss from the termination of an interest rate lock in **2019** is being amortized over the **10-year** life of the **2029** Notes[384](index=384&type=chunk) [15. EMPLOYEE BENEFIT PLAN OBLIGATIONS](index=71&type=section&id=15.%20EMPLOYEE%20BENEFIT%20PLAN%20OBLIGATIONS) Employee Benefit Plan Obligations (net, in millions) | Obligation Type | Feb 26, 2021 | Feb 28, 2020 | | :---------------------------------- | :----------- | :----------- | | Defined contribution retirement plans | $12.1 | $28.1 | | Post-retirement medical benefits | $42.7 | $44.3 | | Defined benefit pension plans | $62.5 | $61.8 | | Deferred compensation plans and agreements | $60.5 | $58.8 | | Total | $177.8 | $193.0 | - Total expense under all defined contribution retirement plans was **$19.3 million** for **2021**, down from **$37.5 million** in **2020**[387](index=387&type=chunk) - The funded status of defined benefit pension plans (excluding COLI) was **$(52.7) million** as of February **26**, **2021**, with plan assets of **$33.2 million** and projected benefit obligations of **$85.9 million**[390](index=390&type=chunk)[392](index=392&type=chunk) - A **$9.8 million** liability for withdrawal from a multi-employer pension plan (Central States, Southeast and Southwest Areas Pension Fund) was recorded as of February **26**, **2021**, with potential for a **$13 million** increase in case of mass withdrawal[405](index=405&type=chunk)[407](index=407&type=chunk) [16. CAPITAL STRUCTURE](index=78&type=section&id=16.%20CAPITAL%20STRUCTURE) - Class A Common Stock holders have one vote per share, while Class B Common Stock holders have **10** votes per share; Class B shares are convertible to Class A on a one-for-one basis under certain conditions[413](index=413&type=chunk) - The Board of Directors is authorized to create preferred stock series without shareholder vote[415](index=415&type=chunk) Share Repurchases (in millions) | Share Class | Feb 26, 2021 (Shares) | Price Paid (Millions) | Feb 28, 2020 (Shares) | Price Paid (Millions) | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Class A Common Stock | 3.3 | $42.7 | 0.5 | $8.7 | | Class B Common Stock | — | — | — | — | [17. INCOME TAXES](index=79&type=section&id=17.%20INCOME%20TAXES) Provision for Income Tax Expense (Benefit) (in millions) | Tax Type | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :-------------------------- | :----------- | :----------- | :----------- | | Current income tax expense (benefit) | $(15.6) | $33.1 | $39.0 | | Deferred income tax expense (benefit) | $15.4 | $12.4 | $(1.1) | | Total income tax expense (benefit) | $(0.2) | $45.5 | $37.9 | - The **2021** tax rate reflected **$11.7 million** in CARES Act benefits and the non-deductible **$17.6 million** goodwill impairment charge[418](index=418&type=chunk)[421](index=421&type=chunk) Net Deferred Income Taxes (in millions) | Component | Feb 26, 2021 | Feb 28, 2020 | | :-------------------------- | :----------- | :----------- | | Total deferred income tax assets | $217.6 | $225.5 | | Valuation allowances | $(6.6) | $(5.7) | | Net deferred income tax assets | $211.0 | $219.8 | | Total deferred income tax liabilities | $104.7 | $102.0 | | Net deferred income taxes | $106.3 | $117.8 | - Unrecognized tax benefits totaled **$2.3 million** as of February **26**, **2021**, primarily related to foreign tax positions[432](index=432&type=chunk)[433](index=433&type=chunk) [18. SHARE-BASED COMPENSATION](index=83&type=section&id=18.%20SHARE-BASED%20COMPENSATION) - The Incentive Compensation Plan reserves **25,000,000** shares of Class A Common Stock for awards, with **2,087,863** shares remaining for future issuance as of February **26**, **2021**[434](index=434&type=chunk) Share-Based Compensation Expense (in millions) | Award Type | Feb 26, 2021 | Feb 28, 2020 | Feb 22, 2019 | | :------------------ | :----------- | :----------- | :----------- | | Performance Units | $7.7 | $2.7 | $4.2 | | Restricted Stock Units | $12.4 |

Steelcase Inc. (NYSE:SCS) Q4 2021 Results Earnings Conference Call March 24, 2021 8:30 AM ET Company Participants Mike O'Meara - Director, Investor Relations Jim Keane - President & Chief Executive Officer Dave Sylvester - Senior Vice President & Chief Financial Officer Conference Call Participants Steven Ramsey - TRG Reuben Garner - Benchmark Operator Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Steelcase’s Fourth Quar ...