scs-20230526

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 26, 2023


or
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-13873

___________________________________________________________

STEELCASE INC.

(Exact name of registrant as specified in its charter)


Michigan		38-0819050
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
901 44th Street SE
Grand Rapids,	Michigan	49508
(Address of principal executive offices)		(Zip Code)

(616) 247-2710

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock	SCS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of June 20, 2023, Steelcase Inc. had 93,588,645 shares of Class A Common Stock and 20,414,413 shares of Class B Common Stock outstanding.

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STEELCASE INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED May 26, 2023 INDEX


		Page No.

PART I	Financial Information	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations for the Three Months Ended May 26, 2023 and May 27, 2022	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended May 26, 2023 and May 27, 2022	2
	Condensed Consolidated Balance Sheets as of May 26, 2023 and February 24, 2023	3
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended May 26, 2023 and May 27, 2022	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 26, 2023 and May 27, 2022	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

PART II	Other Information	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29
Signatures		30

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements:

STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in millions, except per share data)


	Three Months Ended
	May 26, 2023		May 27, 2022
Revenue	$	751.9	$	740.7
Cost of sales	515.9		548.2
Restructuring costs	1.4		0.9
Gross profit	234.6		191.6
Operating expenses	220.6		200.9
Restructuring costs	6.7		3.3
Operating income (loss)	7.3		(12.6)
Interest expense	(6.6)		(6.4)
Investment income	0.5		0.1
Other income, net	1.7		3.1
Income (loss) before income tax expense (benefit)	2.9		(15.8)
Income tax expense (benefit)	1.4		(4.4)
Net income (loss)	$	1.5	$	(11.4)
Earnings (loss) per share:
Basic	$	0.01	$	(0.10)
Diluted	$	0.01	$	(0.10)
Dividends declared and paid per common share	$	0.100	$	0.145

See accompanying notes to the condensed consolidated financial statements.

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STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in millions)


	Three Months Ended
	May 26, 2023		May 27, 2022
Net income (loss)	$	1.5	$	(11.4)
Other comprehensive income (loss), net:
Unrealized loss on investment	—		(0.3)
Pension and other post-retirement liability adjustments	(0.6)		0.2
Derivative amortization	0.2		0.3
Foreign currency translation adjustments	3.2		(18.6)
Total other comprehensive income (loss), net	2.8		(18.4)
Comprehensive income (loss)	$	4.3	$	(29.8)

See accompanying notes to the condensed consolidated financial statements.

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STEELCASE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


	(Unaudited)
	May 26, 2023		February 24, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	40.2	$	90.4

Accounts receivable, net of allowance of $6.8 and $6.5	363.3		373.3
Inventories	307.3		319.7

Prepaid expenses	34.5		28.9
Assets held for sale	29.0		29.0

Other current assets	41.6		42.7
Total current assets	815.9		884.0
Property, plant and equipment, net of accumulated depreciation of $1,100.7 and $1,088.6	373.1		376.5
Company-owned life insurance ("COLI")	159.7		157.3
Deferred income taxes	117.6		117.3
Goodwill	277.0		276.8
Other intangible assets, net of accumulated amortization of $102.0 and $97.6	107.5		111.2
Investments in unconsolidated affiliates	51.4		51.1
Right-of-use operating lease assets	193.5		198.3
Other assets	29.8		30.3
Total assets	$	2,125.5	$	2,202.8
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	215.3	$	203.5
Short-term borrowings and current portion of long-term debt	0.8		35.7
Current operating lease obligations	46.0		44.7
Accrued expenses:
Employee compensation	79.3		120.0
Employee benefit plan obligations	20.5		31.2
Accrued promotions	25.8		26.7
Customer deposits	51.1		50.8


Other	94.8		90.7
Total current liabilities	533.6		603.3
Long-term liabilities:
Long-term debt less current maturities	445.7		445.5
Employee benefit plan obligations	95.4		103.0
Long-term operating lease obligations	163.5		169.9
Other long-term liabilities	58.2		54.9
Total long-term liabilities	762.8		773.3
Total liabilities	1,296.4		1,376.6
Shareholders’ equity:

Additional paid-in capital	30.1		19.4
Accumulated other comprehensive income (loss)	(69.7)		(72.5)
Retained earnings	868.7		879.3
Total shareholders’ equity	829.1		826.2
Total liabilities and shareholders’ equity	$	2,125.5	$	2,202.8

See accompanying notes to the condensed consolidated financial statements.

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STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in millions, except share and per share data)


	Three Months Ended
	May 26, 2023		May 27, 2022
Changes in common shares outstanding:
Common shares outstanding, beginning of period	112,988,721		112,109,294
Common stock issuances	37,250		21,172
Common stock repurchases	(429,624)		(279,103)
Performance and restricted stock units issued as common stock	1,357,239		889,128
Common shares outstanding, end of period	113,953,586		112,740,491

Changes in additional paid-in capital (1):
Additional paid-in capital, beginning of period	$	19.4	$	1.5
Common stock issuances	0.3		0.2
Common stock repurchases	(3.3)		(3.4)
Performance and restricted stock units expense	13.7		12.0
Additional paid-in capital, end of period	30.1		10.3

Changes in accumulated other comprehensive income (loss):
Accumulated other comprehensive income (loss), beginning of period	(72.5)		(50.6)
Other comprehensive income (loss)	2.8		(18.4)

Accumulated other comprehensive income (loss), end of period	(69.7)		(69.0)

Changes in retained earnings:
Retained earnings, beginning of period	879.3		901.3
Net income (loss)	1.5		(11.4)
Dividends paid	(12.1)		(17.1)


Retained earnings, end of period	868.7		872.8
Total shareholders' equity	$	829.1	$	814.1

_______________________________________

(1)Shares of our Class A and Class B common stock have no par value; thus, there are no balances for common stock.

See accompanying notes to the condensed consolidated financial statements.

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STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)


	Three Months Ended
	May 26, 2023		May 27, 2022
OPERATING ACTIVITIES
Net income (loss)	$	1.5	$	(11.4)
Depreciation and amortization	20.4		20.2
Share-based compensation	14.0		12.2
Restructuring costs	8.1		4.2



Other	(1.3)		(4.2)
Changes in operating assets and liabilities:
Accounts receivable	11.3		(14.5)
Inventories	12.1		(50.6)
Income taxes receivable	(2.4)		25.3
Other assets	(0.8)		(13.2)
Accounts payable	11.3		16.7
Employee compensation liabilities	(49.1)		(18.5)
Employee benefit obligations	(19.3)		(17.2)

Accrued expenses and other liabilities	5.5		(4.1)
Net cash provided by (used in) operating activities	11.3		(55.1)
INVESTING ACTIVITIES
Capital expenditures	(11.7)		(13.6)


Other	0.5		6.3
Net cash used in investing activities	(11.2)		(7.3)
FINANCING ACTIVITIES
Dividends paid	(12.1)		(17.1)

Borrowings on global committed bank facility	67.2		—
Repayments on global committed bank facility	(67.2)		—
Repayments on note payable	(32.2)		—
Other	(6.0)		(3.6)
Net cash used in financing activities	(50.3)		(20.7)
Effect of exchange rate changes on cash and cash equivalents	(0.4)		(1.3)
Net decrease in cash, cash equivalents and restricted cash	(50.6)		(84.4)
Cash and cash equivalents and restricted cash, beginning of period (1)	97.2		207.0
Cash and cash equivalents and restricted cash, end of period (2)	$	46.6	$	122.6

_______________________________________

(1)These amounts include restricted cash of $6.8 and $6.1 as of February 24, 2023 and February 25, 2022, respectively.

(2)These amounts include restricted cash of $6.4 and $5.9 as of May 26, 2023 and May 27, 2022, respectively.

Restricted cash primarily represents funds held in escrow for potential future workers’ compensation and product liability claims. The restricted cash balance is included as part of Other assets on the Condensed Consolidated Balance Sheets.

See accompanying notes to the condensed consolidated financial statements.

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STEELCASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions in Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 24, 2023 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 24, 2023 was derived from the audited Consolidated Balance Sheet included in our Form 10-K.

As used in this Quarterly Report on Form 10-Q (“Report”), unless otherwise expressly stated or the context otherwise requires, all references to “Steelcase,” “we,” “our,” “Company” and similar references are to Steelcase Inc. and its subsidiaries in which a controlling interest is maintained. Unless the context otherwise indicates, reference to a year relates to the fiscal year, ended in February of the year indicated, rather than a calendar year. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.

2.NEW ACCOUNTING STANDARDS

We evaluate all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our consolidated financial statements. We have assessed all ASUs issued but not yet adopted and concluded that those not disclosed are either not applicable to us or are not expected to have a material effect on our consolidated financial statements.

Adoption of New Accounting Standards

Effective Q1 2024, we adopted ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50), which is intended to enhance transparency of supplier finance programs by requiring disclosure of key terms, amounts outstanding (including a rollforward of outstanding amounts) and a description of where such amounts are presented in the consolidated financial statements.

We participate in a supplier finance program in Spain offered by a third-party financial institution. The program allows participating suppliers the ability to finance our payment obligations prior to their scheduled due dates at a discounted price set by the financial institution. We have extended payment terms with suppliers that have voluntarily chosen to participate in the program. As of May 26, 2023, the outstanding amount of program obligations, reported in Accounts payable on the Condensed Consolidated Balance Sheets, was $0.8. The amount settled through the program during Q1 2024 was $2.2.

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STEELCASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.REVENUE

Disaggregation of Revenue

The following table provides information about disaggregated revenue by product category for each of our reportable segments:


Product Category Data	Three Months Ended
	May 26, 2023		May 27, 2022
Americas
Desking, benching, systems and storage	$	250.2	$	260.3
Seating	152.8		156.2
Other (1)	169.8		127.3
International
Desking, benching, systems and storage	61.6		67.4
Seating	62.0		70.7
Other (1)	55.5		58.8
	$	751.9	$	740.7

_______________________________________

(1)The other product category data by segment consists primarily of products sold by consolidated dealers, textiles and surface materials, worktools, architecture and other uncategorized product lines and services, less promotions and incentives on all product categories.

Reportable geographic information is as follows:


Reportable Geographic Revenue	Three Months Ended
	May 26, 2023		May 27, 2022
United States	$	532.7	$	501.8
Foreign locations	219.2		238.9
	$	751.9	$	740.7

Contract Balances

At times, we receive payments from customers before revenue is recognized, resulting in the recognition of a contract liability (Customer deposits) presented on the Condensed Consolidated Balance Sheets.

Changes in the Customer deposits balance for the three months ended May 26, 2023 are as follows:


	Customer Deposits
Balance as of February 24, 2023	$	50.8
Recognition of revenue related to beginning of year customer deposits	(31.4)
Customer deposits received, net of revenue recognized during the period	31.7
Balance as of May 26, 2023	$	51.1

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STEELCASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed using the two-class method. The two-class method determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and their respective participation rights in undistributed earnings. Participating securities represent restricted stock units in which the participants have non-forfeitable rights to dividend equivalents during the performance period. Diluted earnings (loss) per share includes the effects of certain performance units in which the participants have forfeitable rights to dividend equivalents during the performance period.


Computation of Earnings (Loss) Per Share	Three Months Ended May 26, 2023						Three Months Ended May 27, 2022
	Net Income (Loss)		Basic Shares (in millions)		Diluted Shares (in millions)		Net Income (Loss)		Basic Shares (in millions)		Diluted Shares (in millions)
Amounts used in calculating earnings (loss) per share	$	1.5	117.9		118.4		$	(11.4)	116.7		116.7
Impact of participating securities	(0.1)		(4.1)		(4.1)		0.4		(4.0)		(4.0)
Amounts used in calculating earnings (loss) per share, excluding participating securities	$	1.4	113.8		114.3		$	(11.0)	112.7		112.7

Earnings (loss) per share			$	0.01	$	0.01			$	(0.10)	$	(0.10)

There were no anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the three months ended May 26, 2023. There were 0.4 million anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the three months ended May 27, 2022.

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STEELCASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended May 26, 2023:


	Unrealized gain (loss) on investment		Pension and other post-retirement liability adjustments			Derivative amortization		Foreign currency translation adjustments		Total
Balance as of February 24, 2023	$	(0.1)	$	9.3		$	(5.7)	$	(76.0)	$	(72.5)
Other comprehensive income (loss) before reclassifications	—		(0.1)			—		3.2		3.1
Amounts reclassified from accumulated other comprehensive income (loss)	—		(0.5)		<

SEC Form 10-Q filed by Steelcase Inc.