Steelcase(SCS) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION 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) 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) 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) 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 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 ($M) | | :------------------------------------------ | :------------------- | :------------------- | :---------- | | Cash and cash equivalents | 360.7 | 489.8 | (129.1) | | Accounts receivable | 334.0 | 279.0 | 55.0 | | Inventories | 233.4 | 193.5 | 39.9 | | Total current assets | 1,030.0 | 1,045.4 | (15.4) | | Total assets | 2,313.5 | 2,354.0 | (40.5) | | Accounts payable | 234.4 | 181.3 | 53.1 | | Total current liabilities | 547.7 | 515.0 | 32.7 | | Total liabilities | 1,412.2 | 1,393.5 | 18.7 | | Total shareholders' equity | 901.3 | 960.5 | (59.2) | Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) Shareholders' equity decreased during the period, primarily due to net loss, dividends, and share repurchases, partially offset by share-based compensation Six Months Ended August 27, 2021 | Metric | Amount ($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] Condensed Consolidated Statements of Cash Flows (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 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 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] - Results for interim periods should not be considered indicative of results to be expected for a full year[25] - References to "Steelcase," "we," "our," "Company" refer to Steelcase Inc. and its subsidiaries[26] 2. NEW ACCOUNTING STANDARDS 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] - ASUs not disclosed are either not applicable or not expected to have a material effect on consolidated financial statements[27] 3. REVENUE 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] 4. EARNINGS (LOSS) PER SHARE 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] - Diluted loss per share was $0.03 for the six months ended August 27, 2021, compared to earnings per share of $0.15 for the prior year period[36] - Earnings (loss) per share is computed using the two-class method, which includes participating securities (restricted stock units with non-forfeitable dividend rights)[34] 5. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) worsened, primarily due to negative foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) Balances | Component | Balance as of Feb 26, 2021 ($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] - 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] 6. FAIR VALUE 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] - The fair value of total debt was $565.8 million as of August 27, 2021, compared to a carrying amount of $484.5 million[43] Fair Value of Financial Instruments (August 27, 2021) | Fair Value of Financial Instruments | Level 1 ($M) | Level 2 ($M) | Level 3 ($M) | Total ($M) | | :---------------------------------- | :----------- | :----------- | :----------- | :--------- | | Assets: | | | | | | Cash and cash equivalents | 360.7 | — | — | 360.7 | | Restricted cash | 6.3 | — | — | 6.3 | | Foreign exchange forward contracts | — | 0.6 | — | 0.6 | | Auction rate security | — | — | 2.8 | 2.8 | | Liabilities: | | | | | | Foreign exchange forward contracts | — | (0.3) | — | (0.3) | 7. INVENTORIES Total inventories increased, reflecting growth in both raw materials/work-in-process and finished goods Inventories (August 27, 2021 vs. February 26, 2021) | Inventories | August 27, 2021 ($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] 8. SHARE-BASED COMPENSATION 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 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] - 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] - 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] Restricted Stock Units 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] - During the six months ended August 27, 2021, 839,818 shares were awarded[56] - 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] 9. LEASES 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 $26.3 million[61] - The weighted-average remaining lease term was 6.2 years, and the weighted-average discount rate was 3.7% as of August 27, 2021[61] Future Minimum Lease Payments as of August 27, 2021 | Fiscal year ending in February | Amount ($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 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][66][67] 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 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 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] - Organic revenue growth (decline) excludes impacts of acquisitions, divestitures, and estimated currency translation effects[75] - Adjusted operating income (loss) excludes goodwill impairment charges and restructuring costs[75] Financial Summary 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 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] - 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] - 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] 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 $17.4 million in the prior year, impacted by a goodwill impairment charge and restructuring costs in the prior year[90] Interest Expense, Investment Income and Other Income, Net Total interest expense, investment income, and other income, net, showed an improvement for the quarter but a decline year-to-date, influenced by a prior-year investment gain Total Interest Expense, Investment Income and Other Income, Net (Three Months Ended August 27, 2021 vs. August 28, 2020) | Metric | August 27, 2021 ($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] Business Segment Review 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 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] - 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] - 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] - Revenue in Q2 2022 was negatively impacted by at least $40 million due to shipment delays caused by supply chain disruptions[100] 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] - 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] - 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] - 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] 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] - 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] - 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] 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 $3.6 million in the prior year[115] - The increase was driven by lower COLI income, higher employee costs (due to temporary hour and pay reductions in the prior year), and higher discretionary spending[115] Liquidity and Capital Resources Total liquidity, including cash and COLI, decreased year-to-date, primarily from operating and financing activities, while capital expenditures increased and credit facilities remain available Liquidity Sources (August 27, 2021 vs. February 26, 2021) | Liquidity Sources | August 27, 2021 ($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] - The company targets a range of $75 million to $175 million in cash and cash equivalents for operating requirements[116] Cash provided by (used in) operating activities Net cash used in operating activities represented a significant shift from prior-year cash provided, primarily due to working capital changes and lower employee compensation liabilities Cash Flow Data — Operating Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Operating Activities | August 27, 2021 ($M) | August 28, 2020 ($M) | | :------------------------------------ | :------------------- | :------------------- | | Net income (loss) | (3.4) | 17.4 | | Changes in accounts receivable, inventories and accounts payable | (45.3) | 21.3 | | Employee compensation liabilities | (30.7) | (120.8) | | Customer deposits | 14.0 | 74.3 | | Net cash provided by (used in) operating activities | (61.6) | 44.9 | - In year-to-date 2022, cash was used in working capital, driven by increased accounts receivable and inventory[122] Cash used in investing activities Net cash used in investing activities increased slightly, mainly due to higher capital expenditures, partially offset by proceeds from asset disposals Cash Flow Data — Investing Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Investing Activities | August 27, 2021 ($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] - Proceeds from the disposal of fixed assets in year-to-date 2022 primarily related to $16.6 million from the sale of land[123] Cash used in financing activities Net cash used in financing activities decreased slightly, primarily due to dividends paid and common stock repurchases Cash Flow Data — Financing Activities (Six Months Ended August 27, 2021 vs. August 28, 2020) | Cash Flow Data — Financing Activities | August 27, 2021 ($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] - As of August 27, 2021, $29.9 million remained available under the $150 million share repurchase program[126] Off-Balance Sheet Arrangements No material changes occurred in the company's off-balance sheet arrangements during Q2 2022 - No material change in off-balance sheet arrangements occurred during Q2 2022[127] Contractual Obligations No material changes occurred in the company's contractual obligations during Q2 2022 - No material change in contractual obligations occurred during Q2 2022[128] Liquidity Facilities The company maintained available capacity under its credit facilities, with total consolidated debt primarily consisting of term notes due in 2029 Liquidity Facilities (August 27, 2021) | Liquidity Facilities | Amount ($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] Liquidity Outlook 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] - Capital expenditures are expected to total approximately $65 million to $75 million in 2022, compared to $41.3 million in 2021[134] - A quarterly dividend of $0.145 per share, or approximately $17 million, was announced to be paid in Q3 2022[135] Critical Accounting Estimates 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] Recently Issued Accounting Standards 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] Forward-looking Statements 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] - These statements are based on current beliefs and assumptions, which may ultimately prove inaccurate, and involve risks and uncertainties[138] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Foreign Exchange Risk No material change in foreign exchange risk occurred during Q2 2022 - No material change in foreign exchange risk occurred during Q2 2022[140] Interest Rate Risk No material change in interest rate risk occurred during Q2 2022 - No material change in interest rate risk occurred during Q2 2022[141] Commodity Price Risk No material change in commodity price risk occurred during Q2 2022 - No material change in commodity price risk occurred during Q2 2022[142] Fixed Income and Equity Price Risk 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the second fiscal quarter[145] PART II. OTHER INFORMATION This section provides additional information, including risk factors, equity sales, exhibits, and signatures Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - 6,331 shares were repurchased to satisfy participants' tax withholding obligations upon the issuance of shares under equity awards[151] Item 6. Exhibits 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] - Certifications of the CEO and CFO pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included[153] - Inline XBRL documents (Instance, Schema, Calculation Linkbase, Labels Linkbase, Presentation Linkbase, Definition Linkbase) are provided[153] 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] - The signature date is September 24, 2021[158]