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 25, 2022 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 25, 2022 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 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.
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 27, 2022 | May 28, 2021 | | |
Americas | | | | | | | | |
Desking, benching, systems and storage | $ | 260.3 | | | $ | 185.1 | | | | | | |
Seating | 156.2 | | | 118.2 | | | | | | |
Other (1) | 104.3 | | | 73.0 | | | | | | |
EMEA | | | | | | | | |
Desking, benching, systems and storage | 55.7 | | | 54.8 | | | | | | |
Seating | 53.3 | | | 33.9 | | | | | | |
Other (1) | 47.4 | | | 34.9 | | | | | | |
Other | | | | | | | | |
Desking, benching, systems and storage | 11.7 | | | 10.8 | | | | | | |
Seating | 17.4 | | | 14.5 | | | | | | |
Other (1) | 34.4 | | | 31.4 | | | | | | |
| $ | 740.7 | | | $ | 556.6 | | | | | | |
_______________________________________(1)The other product category data 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 27, 2022 | May 28, 2021 | | | | |
United States | $ | 501.8 | | | $ | 359.3 | | | | | | | | | | |
Foreign locations | 238.9 | | | 197.3 | | | | | | | | | | |
| $ | 740.7 | | | $ | 556.6 | | | | | | | | | | |
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 during the three months ended May 27, 2022 are as follows:
| | | | | | | | |
| Customer Deposits |
Balance as of February 25, 2022 | $ | 53.4 | | |
Recognition of revenue related to beginning of year customer deposits | (37.0) | | |
Customer deposits received, net of revenue recognized during the period | 33.1 | | |
Balance as of May 27, 2022 | $ | 49.5 | | |
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 (loss) 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 27, 2022 | Three Months Ended May 28, 2021 |
Net Loss | Basic Shares (in millions) | Diluted Shares (in millions) | Net Loss | Basic Shares (in millions) | Diluted Shares (in millions) |
Amounts used in calculating earnings (loss) per share | $ | (11.4) | | | 116.7 | | | 116.7 | | | $ | (28.1) | | | 118.3 | | | 118.3 | | |
Impact of participating securities | 0.4 | | | (4.0) | | | (4.0) | | | 0.6 | | | (2.7) | | | (2.7) | | |
Amounts used in calculating earnings (loss) per share, excluding participating securities | $ | (11.0) | | | 112.7 | | | 112.7 | | | $ | (27.5) | | | 115.6 | | | 115.6 | | |
| | | | | | | | | | | | |
Earnings (loss) per share | | | $ | (0.10) | | | $ | (0.10) | | | | | $ | (0.24) | | | $ | (0.24) | | |
| | | | | | | | | | | | |
There were 0.4 and 0.5 anti-dilutive performance units excluded from the computation of diluted earnings (loss) per share for the three months ended May 27, 2022 and May 28, 2021, respectively.
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 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on investments | Pension and other post-retirement liability adjustments | Derivative amortization | Foreign currency translation adjustments | Total |
Balance as of February 25, 2022 | $ | 0.3 | | | $ | 5.2 | | | $ | (6.7) | | | $ | (49.4) | | | $ | (50.6) | | |
Other comprehensive income (loss) before reclassifications | (0.3) | | | 0.5 | | | — | | | (18.6) | | | (18.4) | | |
Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (0.3) | | | 0.3 | | | — | | | — | | |
Net other comprehensive income (loss) during the period | (0.3) | | | 0.2 | | | 0.3 | | | (18.6) | | | (18.4) | | |
Balance as of May 27, 2022 | $ | — | | | $ | 5.4 | | | $ | (6.4) | | | $ | (68.0) | | | $ | (69.0) | | |
The following table provides details about reclassifications out of accumulated other comprehensive income (loss) for the three months ended May 27, 2022 and May 28, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Detail of Accumulated Other Comprehensive Income (Loss) Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line in the Condensed Consolidated Statements of Operations |
Three Months Ended | | |
May 27, 2022 | May 28, 2021 | | | | |
| | | | | | | | | | | | | |
Amortization of pension and other post-retirement actuarial losses (gains) | $ | (0.4) | | | $ | (0.1) | | | | | | | | | | | Other income (expense), net |
| | | | | | | | | | | | | |
Income tax expense | 0.1 | | | — | | | | | | | | | | | Income tax benefit |
| (0.3) | | | (0.1) | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivative amortization | 0.4 | | | 0.3 | | | | | | | | | | | Interest expense |
Income tax benefit | (0.1) | | | (0.1) | | | | | | | | | | | Income tax benefit |
| 0.3 | | | 0.2 | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total reclassifications | $ | — | | | $ | 0.1 | | | | | | | | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6.FAIR VALUE
The carrying amounts for many of our financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable, short-term borrowings and certain other liabilities, approximate their fair value due to their relatively short maturities. Our foreign exchange forward contracts and long-term investments are measured at fair value on the Condensed Consolidated Balance Sheets.
Our total debt is carried at cost and was $482.4 and $482.5 as of May 27, 2022 and February 25, 2022, respectively. The fair value of our total debt is measured using a discounted cash flow analysis based on current market interest rates for similar types of instruments and was $451.0 and $516.7 as of May 27, 2022 and February 25, 2022, respectively. The estimation of the fair value of our total debt is based on Level 2 fair value measurements.
We periodically use derivative financial instruments to manage exposures to movements in foreign exchange rates and interest rates. The use of these financial instruments modifies the exposure of these risks with the intention to reduce our risk of short-term volatility. We do not use derivatives for speculative or trading purposes.
Assets and liabilities measured at fair value as of May 27, 2022 and February 25, 2022 are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| May 27, 2022 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 116.7 | | | $ | — | | | $ | — | | | $ | 116.7 | | |
Restricted cash | 5.9 | | | — | | | — | | | 5.9 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 2.3 | | | — | | | 2.3 | | |
Auction rate security | — | | | — | | | 2.2 | | | 2.2 | | |
| | | | | | | | |
| $ | 122.6 | | | $ | 2.3 | | | $ | 2.2 | | | $ | 127.1 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| | | | | | | | |
| February 25, 2022 |
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total |
Assets: | | | | | | | | |
Cash and cash equivalents | $ | 200.9 | | | $ | — | | | $ | — | | | $ | 200.9 | | |
Restricted cash | 6.1 | | | — | | | — | | | 6.1 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Foreign exchange forward contracts | — | | | 1.0 | | | — | | | 1.0 | | |
Auction rate security | — | | | — | | | 2.6 | | | 2.6 | | |
| | | | | | | | |
| $ | 207.0 | | | $ | 1.0 | | | $ | 2.6 | | | $ | 210.6 | | |
Liabilities: | | | | | | | | |
Foreign exchange forward contracts | $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
| $ | — | | | $ | (0.3) | | | $ | — | | | $ | (0.3) | | |
Below is a roll-forward of assets and liabilities measured at fair value using Level 3 inputs for the three months ended May 27, 2022:
| | | | | | | | | | |
Roll-Forward of Fair Value Using Level 3 Inputs | Auction Rate Security | | |
Balance as of February 25, 2022 | $ | 2.6 | | | | |
Unrealized gain on investment | (0.4) | | | | |
| | | | |
Balance as of May 27, 2022 | $ | 2.2 | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7.INVENTORIES
| | | | | | | | | | | | | | | | | | |
Inventories | May 27, 2022 | February 25, 2022 | | | | |
Raw materials and work-in-process | $ | 234.9 | | | $ | 208.2 | | | | | | |
Finished goods | 168.0 | | | 146.9 | | | | | | |
| 402.9 | | | 355.1 | | | | | | |
Revaluation to LIFO | 30.9 | | | 28.9 | | | | | | |
| $ | 372.0 | | | $ | 326.2 | | | | | | |
The portion of inventories determined by the LIFO method was $165.7 and $141.4 as of May 27, 2022 and February 25, 2022, respectively.
8. SHARE-BASED COMPENSATION
Performance Units
We have issued performance units (“PSUs”) to certain employees which are earned over a three-year performance period based on performance conditions established annually by the Compensation Committee within the first three months of the applicable fiscal year. The PSUs are then modified based on achievement of certain total shareholder return results relative to a comparison group of companies, which is a market condition. When the performance conditions for a fiscal year are established, or if the performance conditions involve a qualitative assessment and such assessment has been made, one-third of the PSUs issued are considered granted. Therefore, each of the three fiscal years within the performance period is considered an individual tranche of the award (referred to as "Tranche 1," "Tranche 2" and "Tranche 3," respectively).
As of May 27, 2022, the following PSUs have been issued and remained outstanding:
•428,700 PSUs to be earned over the period of 2023 through 2025 (the "2023 PSUs"),
•448,300 PSUs to be earned over the period of 2022 through 2024 (the "2022 PSUs") and
•529,500 PSUs to be earned over the period of 2021 through 2023 (the "2021 PSUs").
Once granted, the PSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the remaining performance period. For participants who are or become retirement-eligible during the performance period, the PSUs are expensed over the period ending on the date the participant becomes retirement-eligible.
As of May 27, 2022, the 2023 PSUs, 2022 PSUs and 2021 PSUs were considered granted as follows:
•In Q1 2023, the performance conditions were established for Tranche 1 of the 2023 PSUs, Tranche 2 of the 2022 PSUs and Tranche 3 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2023.
•In Q1 2022, the performance conditions were established for Tranche 1 of the 2022 PSUs and Tranche 2 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2022.
•In Q1 2021, the performance conditions were established for Tranche 1 of the 2021 PSUs, and accordingly, such tranche was considered granted in Q1 2021.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We used the Monte Carlo simulation model to calculate the fair value of the market conditions on the respective grant dates, which resulted in a total fair value of $5.2, $4.8 and $2.3 for the PSUs with market conditions granted in 2023, 2022 and 2021, respectively, that remain outstanding as of May 27, 2022. The Monte Carlo simulation was computed using the following assumptions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FY23 Award | FY22 Award | FY21 Award |
Tranche 1 | Tranche 2 | Tranche 1 | Tranche 3 | Tranche 2 | Tranche 1 |
Risk-free interest rate (1) | 2.6 | % | | 2.3 | % | | 0.3 | % | | 1.6 | % | | 0.2 | % | | 0.2 | % | |
Expected term | 3 years | | 2 years | | 3 years | | 1 year | | 2 years | | 2 years | |
Estimated volatility (2) | 52.2 | % | | 43.8 | % | | 53.5 | % | | 28.7 | % | | 61.3 | % | | 58.1 | % | |
_______________________________________
(1)Based on the U.S. Government bond benchmark on the grant date.
(2)Represents the historical price volatility of our Class A Common Stock for the three-year period preceding the grant date.
The total PSU expense and associated tax benefit recorded during the three months ended May 27, 2022 and May 28, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
Performance Units | May 27, 2022 | May 28, 2021 | | | | |
Expense | $ | 4.1 | | | $ | 5.2 | | | | | | | | | | |
Tax benefit | 1.0 | | | 1.3 | | | | | | | | | | |
The PSU activity for the three months ended May 27, 2022 is as follows:
| | | | | | | | |
Maximum Number of Shares of Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit |
Nonvested as of February 25, 2022 | 1,205,833 | | $ | 14.21 | |
Granted | 1,125,192 | | 11.13 | |
| | |
Nonvested as of May 27, 2022 | 2,331,025 | | $ | 12.72 | |
As of May 27, 2022, there was $1.5 of remaining unrecognized compensation cost related to nonvested PSUs, which is expected to be recognized over a remaining weighted-average period of 2.2 years.
Restricted Stock Units
During the three months ended May 27, 2022, we awarded 1,008,424 restricted stock units ("RSUs") to certain employees. RSUs have restrictions on transfer which lapse one to three years after the date of grant, at which time the RSUs will be issued as unrestricted shares of Class A Common Stock. RSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the requisite service period based on the value of the shares on the grant date. For participants who are or become retirement-eligible during the service period for awards that are considered retirement-eligible, the RSUs are expensed over the period ending on the date that the participant becomes retirement-eligible.
The total RSU expense and associated tax benefit for the three months ended May 27, 2022 and May 28, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
Restricted Stock Units | May 27, 2022 | May 28, 2021 | | | | |
Expense | $ | 7.9 | | | $ | 7.7 | | | | | | | | | | |
Tax benefit | 2.0 | | | 1.9 | | | | | | | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The RSU activity for the three months ended May 27, 2022 is as follows:
| | | | | | | | |
Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit |
Nonvested as of February 25, 2022 | 3,445,438 | | $ | 11.86 | |
Granted | 1,008,424 | | 11.21 | |
Vested | (10,500) | | 14.27 | |
Forfeited | (10,200) | | 14.37 | |
Nonvested as of May 27, 2022 | 4,433,162 | | $ | 11.70 | |
As of May 27, 2022, there was $22.1 of remaining unrecognized compensation expense related to nonvested RSUs, which is expected to be recognized over a weighted-average period of 1.9 years.
9. LEASES
We have operating leases for corporate offices, sales offices, showrooms, manufacturing and distribution facilities, vehicles and equipment that expire at various dates through 2035. Certain lease agreements include contingent rental payments based on per unit usage over contractual levels (e.g., miles driven or machine hours used) and others include rental payments adjusted periodically for inflationary indexes. Additionally, some leases include options to renew or terminate the leases which can be exercised at our discretion.
The components of lease expense for the three months ended May 27, 2022 and May 28, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | |
May 27, 2022 | May 28, 2021 | | | | | | |
Operating lease cost | $ | 12.1 | | | $ | 13.1 | | | | | | | | | | | | | | |
Sublease rental income | (0.6) | | | (0.4) | | | | | | | | | | | | | | |
| $ | 11.5 | | | $ | 12.7 | | | | | | | | | | | | | | |
Supplemental cash flow and other information related to leases for the three months ended May 27, 2022 and May 28, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | |
May 27, 2022 | May 28, 2021 | | | | |
Cash flow information: | | | | | | | | | | | | |
Operating cash flows used for operating leases | $ | 13.5 | | | $ | 13.4 | | | | | | | | | | |
Leased assets obtained in exchange for new operating lease obligations | $ | 3.2 | | | $ | 1.6 | | | | | | | | | | |
Other information: | | | | | | | | | | | | |
Weighted-average remaining term | 5.8 years | | 6.5 years | | | | | | | | | |
Weighted-average discount rate | 3.6 | % | | 3.8 | % | | | | | | | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the future minimum lease payments as of May 27, 2022:
| | | | | | | | |
Fiscal year ending in February | Amount (1) |
2023 | $ | 38.6 | | |
2024 | 46.3 | | |
2025 | 44.4 | | |
2026 | 33.4 | | |
2027 | 26.8 | | |
Thereafter | 49.4 | | |
Total lease payments | $ | 238.9 | | |
Less: Interest | 23.5 | | |
Present value of lease liabilities | $ | 215.4 | | |
_______________________________________
(1)Lease payments include options to extend lease terms that are reasonably certain of being exercised. The payments exclude legally binding minimum lease payments for leases signed but not yet commenced.
10.ACQUISITIONS
Viccarbe
In Q3 2022, we acquired Viccarbe, a Spanish designer of contemporary furniture for high-performance collaborative and social spaces. The transaction included the purchase of all the outstanding capital stock of Viccarbe for $34.9 (or €30.0) in an all-cash transaction using cash on-hand. Up to an additional $15.1 (or €13.0) is payable to the sellers based upon the achievement of certain sales and operating income targets over a three-year period. This amount was determined to be contingent consideration and was treated for accounting purposes as part of the total purchase price of the acquisition. We used the Monte Carlo simulation model to calculate the fair value of the contingent consideration as of the acquisition date, which represents a Level 3 measurement. As a result, we recorded a related liability of $4.9 (or €4.2). An additional amount of $7.0 (or €6.0) is also payable to the sellers based upon the achievement of certain milestones and continued employment over a five-year period, which will be expensed over the service period on a straight-line basis.
Tangible assets and liabilities of Viccarbe were valued as of the acquisition date using a market analysis and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $11.7 related to identifiable intangible assets, $25.8 related to goodwill and $5.1 related to tangible assets. The tangible assets mainly consisted of working capital (primarily accounts receivable, inventory and accounts payable) and property, plant and equipment. Additionally, we recorded a deferred tax liability in the amount of $2.9 associated with the tax basis difference in acquired book assets. The goodwill was recorded in the EMEA segment and is not deductible for income tax purposes in Spain. The goodwill resulting from the acquisition is primarily related to the growth potential of Viccarbe and our intention to expand the manufacturing of Viccarbe products in geographic regions outside of EMEA and to offer Viccarbe products through our global distribution network. Intangible assets are principally related to the Viccarbe trade name, dealer relationships and internally developed know-how and designs, which will be amortized over periods ranging from 9 to 13 years from the date of acquisition. The purchase price allocation for the acquisition was incomplete as of May 27, 2022. We are still evaluating certain deferred tax balances and working capital adjustments. The amounts recognized related to the purchase price allocation will be finalized no later than one year after the acquisition date.
The following table summarizes the purchased identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | |
Other Intangible Assets | Useful Life (Years) | Fair Value |
|
Trademark | 9.0 | | $ | 4.6 | | |
Dealer relationships | 13.0 | | 3.8 | | |
Know-how/designs | 9.0 | | 3.3 | | |
| | | $ | 11.7 | | |
The fair value of the purchased intangible assets will be amortized on a straight-line basis over its remaining useful life. The following table summarizes the estimated future amortization expense for the next five years as of May 27, 2022:
| | | | | | | | |
Fiscal Year Ending in February | Amount |
2023 | $ | 0.8 | | |
2024 | 1.1 | | |
2025 | 1.1 | | |
2026 | 1.1 | | |
2027 | 1.1 | | |
| $ | 5.2 | | |
11. REPORTABLE SEGMENTS
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category. Unallocated corporate expenses are reported as Corporate.
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with a comprehensive portfolio of furniture and architectural products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, AMQ, Smith System, Orangebox and Viccarbe brands.
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase, Coalesse, Orangebox and Viccarbe brands, with a comprehensive portfolio of furniture and architectural products.
The Other category includes Asia Pacific and Designtex. Asia Pacific serves customers in Australia, China, India, Japan, Korea and other countries in Southeast Asia primarily under the Steelcase brand with a comprehensive portfolio of furniture and architectural products. Designtex sells textiles, wall coverings and surface imaging solutions specified by architects and designers directly to end-use customers through a direct sales force primarily in North America.
We primarily review and evaluate revenue and operating income by segment in both our internal review processes and for our external financial reporting. We also allocate resources primarily based on revenue and operating income. Total assets by segment include manufacturing and other assets associated with each segment.
Corporate costs include unallocated portions of shared service functions such as information technology, corporate facilities, finance, human resources, research, legal and customer aviation, plus deferred compensation expense and income or losses associated with COLI. Corporate assets consist primarily of unallocated cash and cash equivalents, COLI, fixed assets, investments in unconsolidated affiliates and right-of-use assets related to operating leases.
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue and operating income (loss) for the three months ended May 27, 2022 and May 28, 2021 and total assets as of May 27, 2022 and February 25, 2022 by segment are presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
Reportable Segment Statement of Operations Data | May 27, 2022 | May 28, 2021 | | | | |
Revenue | | | | | | | | | | | | |
Americas | $ | 520.8 | | | $ | 376.3 | | | | | | | | | | |
EMEA | 156.4 | | | 123.6 | | | | | | | | | | |
Other | 63.5 | | | 56.7 | | | | | | | | | | |
| $ | 740.7 | | | $ | 556.6 | | | | | | | | | | |
Operating income (loss) | | | | | | | | | | | | |
Americas | $ | (1.2) | | | $ | (15.0) | | | | | | | | | | |
EMEA | 1.3 | | | (5.7) | | | | | | | | | | |
Other | (2.9) | | | (5.3) | | | | | | | | | | |
Corporate | (9.8) | | | (5.8) | | | | | | | | | | |
| $ | (12.6) | | | $ | (31.8) | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Reportable Segment Balance Sheet Data | May 27, 2022 | February 25, 2022 | |
Total assets | | | | | |
Americas | $ | 1,143.0 | | | $ | 1,110.4 | | | |
EMEA | 454.9 | | | 475.2 | | | |
Other | 219.8 | | | 227.6 | | | |
Corporate | 369.1 | | | 447.8 | | | |
| $ | 2,186.8 | | | $ | 2,261.0 | | | |
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12. RESTRUCTURING ACTIVITIES
In Q4 2022, our Board of Directors approved restructuring actions related to the exit of our technology business in connection with our strategy to shift from offering a portfolio of technology products toward partnering with technology companies to create integrated collaborative solutions. The restructuring actions include involuntary terminations of the majority of salaried employees of the business and the termination of supplier and customer contracts related to the business. We expect to incur approximately $5 in restructuring costs in the Americas segment related to these actions, consisting of cash severance payments and payment of other business exit costs. We recorded $1.8 related to employee termination costs and $2.4 related to business exit and other related costs in Q1 2023 for actions initiated during the quarter. We expect all of the actions to be completed by the end of Q3 2023.
The following table details the changes in the restructuring reserve balance as of May 27, 2022:
| | | | | | | | | | | | | | | | | | | | |
| Workforce reductions | Business exit and related costs | Total |
Balance as of February 25, 2022 | $ | — | | | $ | — | | | $ | — | | |
Restructuring costs | 1.8 | | | 2.4 | | | 4.2 | | |
Payments | (1.5) | | | (1.5) | | | (3.0) | | |
Balance as of May 27, 2022 | $ | 0.3 | | | $ | 0.9 | | | $ | 1.2 | | |
13. SUBSEQUENT EVENTS
On June 10, 2022, we acquired Halcon Furniture LLC ("Halcon"), a Minnesota-based designer and manufacturer of precision-tailored wood furniture for the workplace. The transaction included the purchase of all the outstanding membership interests of Halcon for $127.5 plus an adjustment of $3.1 for working capital in an all-cash transaction. Up to an additional $9.5 is payable to the seller, contingent upon the achievement of certain performance targets and continued employment of the seller over a specified period. The acquisition was funded using a combination of cash on-hand and borrowings under our global committed bank facility.
To fund a portion of the acquisition of Halcon, on June 9, 2022, we borrowed $35.0 under our global committed bank facility subject to an effective interest rate of 2.75%, and on June 10, 2022, we borrowed an additional $33.0 under our global committed bank facility subject to an effective interest rate of 2.32%. We repaid a total of $18.2 related to these borrowings as of June 24, 2022.