þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended August 28, 2015 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan | 38-0819050 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | |
901 44th Street SE Grand Rapids, Michigan (Address of principal executive offices) | 49508 (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
STEELCASE INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED August 28, 2015 INDEX | ||
Page No. | ||
Item 1. | Financial Statements: |
STEELCASE INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in millions, except per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||
Revenue | $ | 819.0 | $ | 786.7 | $ | 1,524.5 | $ | 1,509.8 | |||||||
Cost of sales | 547.9 | 536.1 | 1,032.9 | 1,040.6 | |||||||||||
Restructuring costs (benefits) | 4.3 | 6.2 | 8.2 | (4.3 | ) | ||||||||||
Gross profit | 266.8 | 244.4 | 483.4 | 473.5 | |||||||||||
Operating expenses | 199.7 | 191.4 | 384.8 | 383.3 | |||||||||||
Restructuring costs | 7.0 | 0.2 | 5.0 | 1.0 | |||||||||||
Operating income | 60.1 | 52.8 | 93.6 | 89.2 | |||||||||||
Interest expense | (4.3 | ) | (4.4 | ) | (8.8 | ) | (8.8 | ) | |||||||
Investment income | 0.5 | 0.5 | 0.9 | 0.9 | |||||||||||
Other income, net | 2.2 | 3.2 | 4.3 | 6.7 | |||||||||||
Income before income tax expense | 58.5 | 52.1 | 90.0 | 88.0 | |||||||||||
Income tax expense | 21.3 | 21.6 | 32.8 | 36.5 | |||||||||||
Net income | $ | 37.2 | $ | 30.5 | $ | 57.2 | $ | 51.5 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.30 | $ | 0.24 | $ | 0.46 | $ | 0.41 | |||||||
Diluted | $ | 0.30 | $ | 0.24 | $ | 0.45 | $ | 0.41 | |||||||
Dividends declared and paid per common share | $ | 0.1125 | $ | 0.1050 | $ | 0.2250 | $ | 0.2100 |
Three Months Ended | Six Months Ended | ||||||||||||||
August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||
Net income | $ | 37.2 | $ | 30.5 | $ | 57.2 | $ | 51.5 | |||||||
Other comprehensive income (loss), net: | |||||||||||||||
Unrealized gain (loss) on investments | (0.2 | ) | (0.1 | ) | (0.2 | ) | — | ||||||||
Pension and other post-retirement liability adjustments | (1.2 | ) | (1.3 | ) | (2.3 | ) | (2.6 | ) | |||||||
Foreign currency translation adjustments | (3.2 | ) | (2.3 | ) | (6.8 | ) | (1.6 | ) | |||||||
Total other comprehensive loss, net | (4.6 | ) | (3.7 | ) | (9.3 | ) | (4.2 | ) | |||||||
Comprehensive income | $ | 32.6 | $ | 26.8 | 47.9 | 47.3 |
STEELCASE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) | |||||||
(Unaudited) | |||||||
August 28, 2015 | February 27, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 161.4 | $ | 176.5 | |||
Short-term investments | 45.9 | 68.3 | |||||
Accounts receivable, net of allowances of $14.3 and $14.6 | 368.9 | 325.6 | |||||
Inventories | 176.8 | 166.2 | |||||
Deferred income taxes | 40.0 | 46.4 | |||||
Prepaid expenses | 22.8 | 16.5 | |||||
Other current assets | 44.5 | 55.5 | |||||
Total current assets | 860.3 | 855.0 | |||||
Property, plant and equipment, net of accumulated depreciation of $953.5 and $1,055.9 | 403.6 | 389.5 | |||||
Company-owned life insurance ("COLI") | 160.8 | 159.5 | |||||
Deferred income taxes | 94.5 | 100.1 | |||||
Goodwill | 106.7 | 107.2 | |||||
Other intangible assets, net of accumulated amortization of $42.1 and $41.1 | 14.7 | 14.7 | |||||
Investments in unconsolidated affiliates | 59.2 | 59.1 | |||||
Other assets | 34.6 | 34.5 | |||||
Total assets | $ | 1,734.4 | $ | 1,719.6 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 227.5 | $ | 215.0 | |||
Short-term borrowings and current maturities of long-term debt | 2.5 | 2.5 | |||||
Accrued expenses: | |||||||
Employee compensation | 128.2 | 151.9 | |||||
Employee benefit plan obligations | 23.2 | 29.4 | |||||
Customer deposits | 33.2 | 25.1 | |||||
Product warranties | 25.3 | 22.4 | |||||
Other | 108.7 | 99.0 | |||||
Total current liabilities | 548.6 | 545.3 | |||||
Long-term liabilities: | |||||||
Long-term debt less current maturities | 278.8 | 279.6 | |||||
Employee benefit plan obligations | 155.2 | 158.2 | |||||
Other long-term liabilities | 62.8 | 72.7 | |||||
Total long-term liabilities | 496.8 | 510.5 | |||||
Total liabilities | 1,045.4 | 1,055.8 | |||||
Shareholders’ equity: | |||||||
Common stock | — | — | |||||
Additional paid-in capital | 11.4 | 5.0 | |||||
Accumulated other comprehensive loss | (38.7 | ) | (29.4 | ) | |||
Retained earnings | 716.3 | 688.2 | |||||
Total shareholders’ equity | 689.0 | 663.8 | |||||
Total liabilities and shareholders’ equity | $ | 1,734.4 | $ | 1,719.6 |
STEELCASE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | |||||||
Six Months Ended | |||||||
August 28, 2015 | August 29, 2014 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 57.2 | $ | 51.5 | |||
Depreciation and amortization | 32.6 | 29.3 | |||||
Deferred income taxes | 13.3 | 18.1 | |||||
Non-cash restructuring costs (benefits) | 13.2 | (3.3 | ) | ||||
Non-cash stock compensation | 14.2 | 12.6 | |||||
Equity in income of unconsolidated affiliates | (6.6 | ) | (7.4 | ) | |||
Dividends received from unconsolidated affiliates | 6.6 | 5.4 | |||||
Other | (1.0 | ) | (3.5 | ) | |||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (40.2 | ) | (43.2 | ) | |||
Inventories | (9.4 | ) | (32.5 | ) | |||
Assets related to derivative instruments | 22.9 | (4.7 | ) | ||||
Other assets | (20.3 | ) | (10.4 | ) | |||
Accounts payable | 12.4 | 32.2 | |||||
Employee compensation liabilities | (41.1 | ) | (54.5 | ) | |||
Employee benefit obligations | (12.4 | ) | (9.4 | ) | |||
Accrued expenses and other liabilities | 12.3 | 3.6 | |||||
Net cash provided by (used in) operating activities | 53.7 | (16.2 | ) | ||||
INVESTING ACTIVITIES | |||||||
Capital expenditures | (47.4 | ) | (44.3 | ) | |||
Proceeds from disposal of fixed assets | 4.2 | 19.1 | |||||
Purchases of short-term investments | (14.8 | ) | (58.6 | ) | |||
Liquidations of short-term investments | 37.1 | 105.1 | |||||
Acquisitions, net of cash acquired | (6.9 | ) | — | ||||
Other | 0.3 | 11.0 | |||||
Net cash provided by (used in) investing activities | (27.5 | ) | 32.3 | ||||
FINANCING ACTIVITIES | |||||||
Dividends paid | (29.1 | ) | (26.6 | ) | |||
Common stock repurchases | (11.9 | ) | (34.3 | ) | |||
Excess tax benefit from vesting of stock awards | 3.0 | 0.2 | |||||
Repayments of long-term debt | (1.2 | ) | (1.2 | ) | |||
Net cash used in financing activities | (39.2 | ) | (61.9 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (2.1 | ) | (0.3 | ) | |||
Net decrease in cash and cash equivalents | (15.1 | ) | (46.1 | ) | |||
Cash and cash equivalents, beginning of period | 176.5 | 201.8 | |||||
Cash and cash equivalents, end of period | $ | 161.4 | $ | 155.7 |
1. | BASIS OF PRESENTATION |
2. | NEW ACCOUNTING STANDARDS |
3. | EARNINGS PER SHARE |
Three Months Ended | Six Months Ended | ||||||||||||||
Computation of Earnings per Share | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||
Net income | $ | 37.2 | $ | 30.5 | $ | 57.2 | $ | 51.5 | |||||||
Adjustment for earnings attributable to participating securities | (0.8 | ) | (0.6 | ) | (1.2 | ) | (0.9 | ) | |||||||
Net income used in calculating earnings per share | $ | 36.4 | $ | 29.9 | $ | 56.0 | $ | 50.6 | |||||||
Weighted-average common shares outstanding including participating securities (in millions) | 124.8 | 124.8 | 124.6 | 125.0 | |||||||||||
Adjustment for participating securities (in millions) | (2.7 | ) | (2.5 | ) | (2.5 | ) | (2.3 | ) | |||||||
Shares used in calculating basic earnings per share (in millions) | 122.1 | 122.3 | 122.1 | 122.7 | |||||||||||
Effect of dilutive stock-based compensation (in millions) | 1.1 | 1.2 | 1.1 | 1.3 | |||||||||||
Shares used in calculating diluted earnings per share (in millions) | 123.2 | 123.5 | 123.2 | 124.0 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.30 | $ | 0.24 | $ | 0.46 | $ | 0.41 | |||||||
Diluted | $ | 0.30 | $ | 0.24 | $ | 0.45 | $ | 0.41 | |||||||
Total common shares outstanding at period end (in millions) | 122.1 | 121.3 | 122.1 | 121.3 | |||||||||||
Anti-dilutive performance units excluded from computation of diluted earnings per share (in millions) | 0.1 | 0.1 | 0.1 | 0.1 |
4. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
Unrealized gain on investments | Pension and other post-retirement liability adjustments | Foreign currency translation adjustments | Total | |||||||||||||
Balance as of May 29, 2015 | $ | 0.8 | $ | 7.4 | $ | (42.3 | ) | $ | (34.1 | ) | ||||||
Other comprehensive income (loss) before reclassifications | (0.2 | ) | — | (3.2 | ) | (3.4 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (1.2 | ) | — | (1.2 | ) | ||||||||||
Net current period other comprehensive income (loss) | (0.2 | ) | (1.2 | ) | (3.2 | ) | (4.6 | ) | ||||||||
Balance as of August 28, 2015 | $ | 0.6 | $ | 6.2 | $ | (45.5 | ) | $ | (38.7 | ) |
Unrealized gain on investments | Pension and other post-retirement liability adjustments | Foreign currency translation adjustments | Total | |||||||||||||
Balance as of February 27, 2015 | $ | 0.8 | $ | 8.5 | $ | (38.7 | ) | $ | (29.4 | ) | ||||||
Other comprehensive income (loss) before reclassifications | (0.2 | ) | — | (6.8 | ) | (7.0 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (2.3 | ) | — | (2.3 | ) | ||||||||||
Net current period other comprehensive income (loss) | (0.2 | ) | (2.3 | ) | (6.8 | ) | (9.3 | ) | ||||||||
Balance as of August 28, 2015 | $ | 0.6 | $ | 6.2 | $ | (45.5 | ) | $ | (38.7 | ) |
Detail of Accumulated Other Comprehensive Income (Loss) Components | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line in the Condensed Consolidated Statements of Income | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||
Amortization of pension and other post-retirement liability adjustments | |||||||||||||
Actuarial losses (gains) | 0.1 | — | 0.2 | — | Cost of sales | ||||||||
Actuarial losses (gains) | 0.2 | 0.1 | 0.4 | 0.2 | Operating expenses | ||||||||
Prior service cost (credit) | (1.1 | ) | (1.0 | ) | (2.1 | ) | (2.1 | ) | Cost of sales | ||||
Prior service cost (credit) | (1.2 | ) | (1.2 | ) | (2.4 | ) | (2.4 | ) | Operating expenses | ||||
0.8 | 0.8 | 1.6 | 1.7 | Income tax expense | |||||||||
Total reclassifications | (1.2 | ) | (1.3 | ) | (2.3 | ) | (2.6 | ) | Net income |
5. | FAIR VALUE |
August 28, 2015 | |||||||||||||||
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | 161.4 | $ | — | $ | — | $ | 161.4 | |||||||
Restricted cash | 2.5 | — | — | 2.5 | |||||||||||
Managed investment portfolio and other investments | |||||||||||||||
Corporate debt securities | — | 17.0 | — | 17.0 | |||||||||||
U.S. agency debt securities | — | 17.0 | — | 17.0 | |||||||||||
Asset backed securities | — | 6.0 | — | 6.0 | |||||||||||
U.S. government debt securities | 5.5 | — | — | 5.5 | |||||||||||
Municipal debt securities | — | 0.3 | — | 0.3 | |||||||||||
Other investments | — | 0.1 | — | 0.1 | |||||||||||
Foreign exchange forward contracts | — | 1.2 | — | 1.2 | |||||||||||
Canadian asset-backed commercial paper restructuring notes | — | 3.1 | — | 3.1 | |||||||||||
Auction rate securities | — | — | 9.6 | 9.6 | |||||||||||
$ | 169.4 | $ | 44.7 | $ | 9.6 | $ | 223.7 | ||||||||
Liabilities | |||||||||||||||
Foreign exchange forward contracts | — | (6.0 | ) | — | (6.0 | ) | |||||||||
$ | — | $ | (6.0 | ) | $ | — | $ | (6.0 | ) | ||||||
February 27, 2015 | |||||||||||||||
Fair Value of Financial Instruments | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | |||||||||||||||
Cash and cash equivalents | $ | 176.5 | $ | — | $ | — | $ | 176.5 | |||||||
Restricted cash | 2.5 | — | — | 2.5 | |||||||||||
Managed investment portfolio and other investments | |||||||||||||||
Corporate debt securities | — | 30.7 | — | 30.7 | |||||||||||
U.S. agency debt securities | — | 24.1 | — | 24.1 | |||||||||||
Asset backed securities | — | 7.7 | — | 7.7 | |||||||||||
U.S. government debt securities | 4.3 | — | — | 4.3 | |||||||||||
Municipal debt securities | — | 0.8 | — | 0.8 | |||||||||||
Other investments | — | 0.7 | — | 0.7 | |||||||||||
Foreign exchange forward contracts | — | 24.1 | — | 24.1 | |||||||||||
Canadian asset-backed commercial paper restructuring notes | — | 3.4 | — | 3.4 | |||||||||||
Auction rate securities | — | — | 9.7 | 9.7 | |||||||||||
$ | 183.3 | $ | 91.5 | $ | 9.7 | $ | 284.5 | ||||||||
Liabilities | |||||||||||||||
Foreign exchange forward contracts | $ | — | $ | (3.1 | ) | $ | — | $ | (3.1 | ) | |||||
$ | — | $ | (3.1 | ) | $ | — | $ | (3.1 | ) |
Roll-Forward of Fair Value Using Level 3 Inputs | Auction Rate Securities | ||
Balance as of February 27, 2015 | $ | 9.7 | |
Unrealized loss on investments | (0.1 | ) | |
Other-than-temporary impairments | — | ||
Currency translation adjustment | — | ||
Balance as of August 28, 2015 | $ | 9.6 |
6. | INVENTORIES |
Inventories | August 28, 2015 | February 27, 2015 | |||||
Raw materials and work-in-process | $ | 93.3 | $ | 96.9 | |||
Finished goods | 102.9 | 90.4 | |||||
196.2 | 187.3 | ||||||
Revaluation to LIFO | 19.4 | 21.1 | |||||
$ | 176.8 | $ | 166.2 |
7. | INCOME TAXES |
8. | SHARE-BASED COMPENSATION |
2016 Awards | 2015 Awards | 2014 Awards | ||||
Three-year risk-free interest rate (1) | 0.8 | % | 0.7 | % | 0.3 | % |
Expected term | 3 years | 3 years | 3 years | |||
Estimated volatility (2) | 29.4 | % | 42.2 | % | 44.7 | % |
(1) | Based on the U.S. government bond benchmark on the grant date. |
(2) | Represents the historical price volatility of the Company’s common stock for the three-year period preceding the grant date. |
Three Months Ended | Six Months Ended | |||||||||||||||
Performance Units | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||
Expense | $ | 2.9 | $ | 0.9 | $ | 5.4 | $ | 3.5 | ||||||||
Tax benefit | 1.0 | 0.3 | 1.9 | 1.3 |
Maximum Number of Shares That May Be Issued Under Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit | |||
Nonvested as of February 27, 2015 | 1,418,312 | $ | 16.63 | ||
Granted | 536,820 | 21.42 | |||
Nonvested as of August 28, 2015 | 1,955,132 | $ | 17.95 |
Three Months Ended | Six Months Ended | |||||||||||||||
Restricted Stock Units | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||
Expense | $ | 2.3 | $ | 2.0 | $ | 8.4 | $ | 8.7 | ||||||||
Tax benefit | 0.8 | 0.7 | 3.0 | 3.1 |
Nonvested Units | Total | Weighted-Average Grant Date Fair Value per Unit | |||
Nonvested as of February 27, 2015 | 2,110,822 | $ | 14.61 | ||
Granted | 562,962 | 18.65 | |||
Vested | (18,469 | ) | 10.97 | ||
Forfeited | (4,250 | ) | 16.27 | ||
Nonvested as of August 28, 2015 | 2,651,065 | $ | 15.51 |
9. | REPORTABLE SEGMENTS |
Three Months Ended | Six Months Ended | |||||||||||||||
Reportable Segment Statement of Operations Data | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||
Revenue | ||||||||||||||||
Americas | $ | 615.5 | $ | 580.3 | $ | 1,135.2 | $ | 1,086.6 | ||||||||
EMEA | 128.1 | 131.1 | 248.0 | 278.7 | ||||||||||||
Other | 75.4 | 75.3 | 141.3 | 144.5 | ||||||||||||
$ | 819.0 | $ | 786.7 | $ | 1,524.5 | $ | 1,509.8 | |||||||||
Operating income (loss) | ||||||||||||||||
Americas | $ | 91.7 | $ | 80.1 | $ | 145.8 | $ | 133.3 | ||||||||
EMEA | (24.9 | ) | (21.7 | ) | (38.4 | ) | (29.4 | ) | ||||||||
Other | 3.4 | 3.4 | 4.3 | 3.4 | ||||||||||||
Corporate | (10.1 | ) | (9.0 | ) | (18.1 | ) | (18.1 | ) | ||||||||
$ | 60.1 | $ | 52.8 | $ | 93.6 | $ | 89.2 |
Reportable Segment Balance Sheet Data | August 28, 2015 | February 27, 2015 | ||||||
Total assets | ||||||||
Americas | $ | 1,013.6 | $ | 956.1 | ||||
EMEA | 286.7 | 290.2 | ||||||
Other | 166.0 | 163.1 | ||||||
Corporate | 268.1 | 310.2 | ||||||
$ | 1,734.4 | $ | 1,719.6 |
10. | RESTRUCTURING ACTIVITIES |
Three Months Ended | Six Months Ended | ||||||||||||||
Restructuring Costs (Benefits) | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||
Cost of sales | |||||||||||||||
Americas | $ | 0.7 | $ | 0.7 | $ | 1.5 | $ | (10.9 | ) | ||||||
EMEA | 3.6 | 5.5 | 6.7 | 6.6 | |||||||||||
Other | — | — | — | — | |||||||||||
4.3 | 6.2 | 8.2 | (4.3 | ) | |||||||||||
Operating expenses | |||||||||||||||
Americas | — | — | (2.8 | ) | — | ||||||||||
EMEA | 7.0 | 0.2 | 7.8 | 1.0 | |||||||||||
Other | — | — | — | — | |||||||||||
7.0 | 0.2 | 5.0 | 1.0 | ||||||||||||
Total | $ | 11.3 | $ | 6.4 | $ | 13.2 | $ | (3.3 | ) |
Restructuring Reserve | Employee Termination Costs | Business Exits and Related Costs | Total | ||||||||
Reserve balance as of February 27, 2015 | $ | 13.7 | $ | 1.6 | $ | 15.3 | |||||
Additions | 11.6 | 4.3 | 15.9 | ||||||||
Payments | (2.4 | ) | (4.5 | ) | (6.9 | ) | |||||
Adjustments | 0.1 | — | 0.1 | ||||||||
Reserve balance as of August 28, 2015 | $ | 23.0 | $ | 1.4 | $ | 24.4 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations: |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Statement of Operations Data | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Revenue | $ | 819.0 | 100.0 | % | $ | 786.7 | 100.0 | % | $ | 1,524.5 | 100.0 | % | $ | 1,509.8 | 100.0 | % | |||||||||||
Cost of sales | 547.9 | 66.9 | 536.1 | 68.1 | 1,032.9 | 67.8 | 1,040.6 | 68.9 | |||||||||||||||||||
Restructuring costs (benefits) | 4.3 | 0.5 | 6.2 | 0.8 | 8.2 | 0.5 | (4.3 | ) | (0.3 | ) | |||||||||||||||||
Gross profit | 266.8 | 32.6 | 244.4 | 31.1 | 483.4 | 31.7 | 473.5 | 31.4 | |||||||||||||||||||
Operating expenses | 199.7 | 24.4 | 191.4 | 24.4 | 384.8 | 25.2 | 383.3 | 25.4 | |||||||||||||||||||
Restructuring costs | 7.0 | 0.9 | 0.2 | — | 5.0 | 0.4 | 1.0 | 0.1 | |||||||||||||||||||
Operating income | 60.1 | 7.3 | 52.8 | 6.7 | 93.6 | 6.1 | 89.2 | 5.9 | |||||||||||||||||||
Interest expense | (4.3 | ) | (0.5 | ) | (4.4 | ) | (0.6 | ) | (8.8 | ) | (0.6 | ) | (8.8 | ) | (0.6 | ) | |||||||||||
Investment income | 0.5 | 0.1 | 0.5 | 0.1 | 0.9 | 0.1 | 0.9 | 0.1 | |||||||||||||||||||
Other income, net | 2.2 | 0.2 | 3.2 | 0.4 | 4.3 | 0.3 | 6.7 | 0.4 | |||||||||||||||||||
Income before income tax expense | 58.5 | 7.1 | 52.1 | 6.6 | 90.0 | 5.9 | 88.0 | 5.8 | |||||||||||||||||||
Income tax expense | 21.3 | 2.6 | 21.6 | 2.7 | 32.8 | 2.1 | 36.5 | 2.4 | |||||||||||||||||||
Net income | $ | 37.2 | 4.5 | % | $ | 30.5 | 3.9 | % | $ | 57.2 | 3.8 | % | $ | 51.5 | 3.4 | % | |||||||||||
Earnings per share: | |||||||||||||||||||||||||||
Basic | $ | 0.30 | $ | 0.24 | $ | 0.46 | $ | 0.41 | |||||||||||||||||||
Diluted | $ | 0.30 | $ | 0.24 | $ | 0.45 | $ | 0.41 |
Q2 2016 Organic Revenue Growth | Americas | EMEA | Other | Consolidated | ||||||||||||
Q2 2015 revenue | $ | 580.3 | $ | 131.1 | $ | 75.3 | $ | 786.7 | ||||||||
Divestitures | — | (0.7 | ) | — | (0.7 | ) | ||||||||||
Currency translation effects* | (5.1 | ) | (20.9 | ) | (3.6 | ) | (29.6 | ) | ||||||||
Q2 2015 revenue, adjusted | 575.2 | 109.5 | 71.7 | 756.4 | ||||||||||||
Q2 2016 revenue | 615.5 | 128.1 | 75.4 | 819.0 | ||||||||||||
Acquisition | $ | (7.0 | ) | $ | — | $ | — | $ | (7.0 | ) | ||||||
Q2 2016 revenue, adjusted | $ | 608.5 | $ | 128.1 | $ | 75.4 | $ | 812.0 | ||||||||
Organic growth $ | $ | 33.3 | $ | 18.6 | $ | 3.7 | $ | 55.6 | ||||||||
Organic growth % | 6 | % | 17 | % | 5 | % | 7 | % | ||||||||
* Currency translation effects represent the estimated net effect of translating Q2 2015 foreign currency revenues using the average exchange rates during Q2 2016. |
Year-to-Date 2016 Organic Revenue Growth | Americas | EMEA | Other | Consolidated | ||||||||||||
Year-to-date 2015 revenue | $ | 1,086.6 | $ | 278.7 | $ | 144.5 | $ | 1,509.8 | ||||||||
Divestitures | — | (2.1 | ) | — | (2.1 | ) | ||||||||||
Currency translation effects* | (9.0 | ) | (48.0 | ) | (6.6 | ) | (63.6 | ) | ||||||||
Year-to-date 2015 revenue, adjusted | 1,077.6 | 228.6 | 137.9 | 1,444.1 | ||||||||||||
Year-to-date 2016 revenue | 1,135.2 | 248.0 | 141.3 | 1,524.5 | ||||||||||||
Acquisition | $ | (7.0 | ) | $ | — | $ | — | $ | (7.0 | ) | ||||||
Year-to-date 2016 revenue, adjusted | $ | 1,128.2 | $ | 248.0 | $ | 141.3 | $ | 1,517.5 | ||||||||
Organic growth $ | $ | 50.6 | $ | 19.4 | $ | 3.4 | $ | 73.4 | ||||||||
Organic growth % | 5 | % | 8 | % | 2 | % | 5 | % | ||||||||
* Currency translation effects represent the estimated net effect of translating year-to-date 2015 foreign currency revenues using the average exchange rates during year-to-date 2016. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Operating income | $ | 60.1 | 7.3 | % | $ | 52.8 | 6.7 | % | $ | 93.6 | 6.1 | % | $ | 89.2 | 5.9 | % | |||||||||||
Add: restructuring costs (benefits) | 11.3 | 1.4 | 6.4 | 0.8 | 13.2 | 0.9 | (3.3 | ) | (0.2 | ) | |||||||||||||||||
Adjusted operating income | $ | 71.4 | 8.7 | % | $ | 59.2 | 7.5 | % | $ | 106.8 | 7.0 | % | $ | 85.9 | 5.7 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
Interest Expense, Investment Income and Other Income, Net | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||
Interest expense | $ | (4.3 | ) | $ | (4.4 | ) | $ | (8.8 | ) | $ | (8.8 | ) | |||
Investment income | 0.5 | 0.5 | 0.9 | 0.9 | |||||||||||
Other income (expense), net: | |||||||||||||||
Equity in income of unconsolidated ventures | 3.3 | 3.7 | 6.5 | 7.4 | |||||||||||
Foreign exchange loss | (1.0 | ) | (0.2 | ) | (1.6 | ) | (0.5 | ) | |||||||
Miscellaneous, net | (0.1 | ) | (0.3 | ) | (0.6 | ) | (0.2 | ) | |||||||
Total other income, net | 2.2 | 3.2 | 4.3 | 6.7 | |||||||||||
Total interest expense, investment income and other income, net | $ | (1.6 | ) | $ | (0.7 | ) | $ | (3.6 | ) | $ | (1.2 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Statement of Operations Data — Americas | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Revenue | $ | 615.5 | 100.0 | % | $ | 580.3 | 100.0 | % | $ | 1,135.2 | 100.0 | % | $ | 1,086.6 | 100.0 | % | |||||||||||
Cost of sales | 391.7 | 63.7 | 380.7 | 65.6 | 738.0 | 65.0 | 726.6 | 66.9 | |||||||||||||||||||
Restructuring costs (benefits) | 0.7 | 0.1 | 0.7 | 0.1 | 1.5 | 0.1 | (10.9 | ) | (1.0 | ) | |||||||||||||||||
Gross profit | 223.1 | 36.2 | 198.9 | 34.3 | 395.7 | 34.9 | 370.9 | 34.1 | |||||||||||||||||||
Operating expenses | 131.4 | 21.3 | 118.8 | 20.5 | 252.7 | 22.3 | 237.6 | 21.8 | |||||||||||||||||||
Restructuring benefits | — | — | — | — | (2.8 | ) | (0.2 | ) | — | — | |||||||||||||||||
Operating income | $ | 91.7 | 14.9 | % | $ | 80.1 | 13.8 | % | $ | 145.8 | 12.8 | % | $ | 133.3 | 12.3 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income — Americas | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Operating income | $ | 91.7 | 14.9 | % | $ | 80.1 | 13.8 | % | $ | 145.8 | 12.8 | % | $ | 133.3 | 12.3 | % | |||||||||||
Add: restructuring costs (benefits) | 0.7 | 0.1 | 0.7 | 0.1 | (1.3 | ) | (0.1 | ) | (10.9 | ) | (1.0 | ) | |||||||||||||||
Adjusted operating income | $ | 92.4 | 15.0 | % | $ | 80.8 | 13.9 | % | $ | 144.5 | 12.7 | % | $ | 122.4 | 11.3 | % |
• | Product categories — Five out of seven categories grew in Q2 2016, led by Furniture, Turnstone and Seating. Technology and Health declined compared to the prior year. |
• | Vertical markets — Financial Services, Manufacturing, Insurance Services, Technical and Professional and Federal Government experienced strong growth rates, while Energy and Healthcare declined year-over-year. |
• | Geographic regions — The East Business Group posted strong growth, while the West and South Business Groups declined. |
• | Contract type — Project business and continuing business had strong growth, while marketing programs declined year-over-year. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Statement of Operations Data — EMEA | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Revenue | $ | 128.1 | 100.0 | % | $ | 131.1 | 100.0 | % | $ | 248.0 | 100.0 | % | $ | 278.7 | 100.0 | % | |||||||||||
Cost of sales | 106.6 | 83.2 | 105.3 | 80.3 | 201.7 | 81.3 | 217.0 | 77.9 | |||||||||||||||||||
Restructuring costs | 3.6 | 2.8 | 5.5 | 4.2 | 6.7 | 2.7 | 6.6 | 2.3 | |||||||||||||||||||
Gross profit | 17.9 | 14.0 | 20.3 | 15.5 | 39.6 | 16.0 | 55.1 | 19.8 | |||||||||||||||||||
Operating expenses | 35.8 | 28.0 | 41.8 | 31.9 | 70.2 | 28.3 | 83.5 | 29.9 | |||||||||||||||||||
Restructuring costs | 7.0 | 5.5 | 0.2 | 0.2 | 7.8 | 3.1 | 1.0 | 0.4 | |||||||||||||||||||
Operating loss | $ | (24.9 | ) | (19.5 | )% | $ | (21.7 | ) | (16.6 | )% | $ | (38.4 | ) | (15.4 | )% | $ | (29.4 | ) | (10.5 | )% |
Reconciliation of Operating Loss to Adjusted Operating Loss — EMEA | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | ||||||||||||||||||||||||
Operating loss | $ | (24.9 | ) | (19.5 | )% | $ | (21.7 | ) | (16.6 | )% | $ | (38.4 | ) | (15.4 | )% | $ | (29.4 | ) | (10.5 | )% | |||||||
Add: restructuring costs | 10.6 | 8.3 | 5.7 | 4.4 | 14.5 | 5.8 | 7.6 | 2.7 | |||||||||||||||||||
Adjusted operating loss | $ | (14.3 | ) | (11.2 | )% | $ | (16.0 | ) | (12.2 | )% | $ | (23.9 | ) | (9.6 | )% | $ | (21.8 | ) | (7.8 | )% |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Statement of Operations Data — Other | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Revenue | $ | 75.4 | 100.0 | % | $ | 75.3 | 100.0 | % | $ | 141.3 | 100.0 | % | $ | 144.5 | 100.0 | % | |||||||||||
Cost of sales | 49.6 | 65.8 | 50.1 | 66.5 | 93.2 | 66.0 | 97.0 | 67.1 | |||||||||||||||||||
Restructuring costs | — | — | — | — | — | — | — | — | |||||||||||||||||||
Gross profit | 25.8 | 34.2 | 25.2 | 33.5 | 48.1 | 34.0 | 47.5 | 32.9 | |||||||||||||||||||
Operating expenses | 22.4 | 29.7 | 21.8 | 29.0 | 43.8 | 31.0 | 44.1 | 30.5 | |||||||||||||||||||
Restructuring costs | — | — | — | — | — | — | — | — | |||||||||||||||||||
Operating income | $ | 3.4 | 4.5 | % | $ | 3.4 | 4.5 | % | $ | 4.3 | 3.0 | % | $ | 3.4 | 2.4 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
Reconciliation of Operating Income to Adjusted Operating Income — Other | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||||||||||||||
Operating income | $ | 3.4 | 4.5 | % | $ | 3.4 | 4.5 | % | $ | 4.3 | 3.0 | % | $ | 3.4 | 2.4 | % | |||||||||||
Add: restructuring costs | — | — | — | — | — | — | — | — | |||||||||||||||||||
Adjusted operating income | $ | 3.4 | 4.5 | % | $ | 3.4 | 4.5 | % | $ | 4.3 | 3.0 | % | $ | 3.4 | 2.4 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
Statement of Operations Data — Corporate | August 28, 2015 | August 29, 2014 | August 28, 2015 | August 29, 2014 | |||||||||||
Operating expenses | $ | 10.1 | $ | 9.0 | $ | 18.1 | $ | 18.1 |
Liquidity Sources | August 28, 2015 | February 27, 2015 | |||||
Cash and cash equivalents | $ | 161.4 | $ | 176.5 | |||
Short-term investments | 45.9 | 68.3 | |||||
Company-owned life insurance | 160.8 | 159.5 | |||||
Availability under credit facilities | 151.1 | 154.7 | |||||
Total liquidity | $ | 519.2 | $ | 559.0 |
Six Months Ended | |||||||
Cash Flow Data | August 28, 2015 | August 29, 2014 | |||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 53.7 | $ | (16.2 | ) | ||
Investing activities | (27.5 | ) | 32.3 | ||||
Financing activities | (39.2 | ) | (61.9 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (2.1 | ) | (0.3 | ) | |||
Net decrease in cash and cash equivalents | (15.1 | ) | (46.1 | ) | |||
Cash and cash equivalents, beginning of period | 176.5 | 201.8 | |||||
Cash and cash equivalents, end of period | $ | 161.4 | $ | 155.7 |
Six Months Ended | |||||||
Cash Flow Data — Operating Activities | August 28, 2015 | August 29, 2014 | |||||
Net income | $ | 57.2 | $ | 51.5 | |||
Depreciation and amortization | 32.6 | 29.3 | |||||
Deferred income taxes | 13.3 | 18.1 | |||||
Non-cash restructuring costs (benefits) | 13.2 | (3.3 | ) | ||||
Non-cash stock compensation | 14.2 | 12.6 | |||||
Equity in income of unconsolidated affiliates | (6.6 | ) | (7.4 | ) | |||
Dividends received from unconsolidated affiliates | 6.6 | 5.4 | |||||
Other | (1.0 | ) | (3.5 | ) | |||
Changes in accounts receivable, inventories and accounts payable | (37.2 | ) | (43.5 | ) | |||
Changes in employee compensation liabilities | (41.1 | ) | (54.5 | ) | |||
Assets related to derivative instruments | 22.9 | (4.7 | ) | ||||
Changes in other operating assets and liabilities | (20.4 | ) | (16.2 | ) | |||
Net cash provided by (used in) operating activities | $ | 53.7 | $ | (16.2 | ) |
Six Months Ended | |||||||
Cash Flow Data — Investing Activities | August 28, 2015 | August 29, 2014 | |||||
Capital expenditures | $ | (47.4 | ) | $ | (44.3 | ) | |
Proceeds from disposal of fixed assets | 4.2 | 19.1 | |||||
Purchases of short-term investments | (14.8 | ) | (58.6 | ) | |||
Liquidations of short-term investments | 37.1 | 105.1 | |||||
Acquisitions, net of cash acquired | (6.9 | ) | — | ||||
Other | 0.3 | 11.0 | |||||
Net cash provided by (used in) investing activities | $ | (27.5 | ) | $ | 32.3 |
Six Months Ended | |||||||
Cash Flow Data — Financing Activities | August 28, 2015 | August 29, 2014 | |||||
Dividends paid | $ | (29.1 | ) | $ | (26.6 | ) | |
Common stock repurchases | (11.9 | ) | (34.3 | ) | |||
Other | 1.8 | (1.0 | ) | ||||
Net cash used in financing activities | $ | (39.2 | ) | $ | (61.9 | ) |
Liquidity Facilities | August 28, 2015 | ||
Global committed bank facility | $ | 125.0 | |
Other committed bank facilities | 8.1 | ||
Various uncommitted lines | 18.0 | ||
Total credit lines available | 151.1 | ||
Less: Borrowings outstanding | — | ||
Available capacity | $ | 151.1 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk: |
Item 4. | Controls and Procedures: |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds: |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | (d) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) (in millions) | ||||||
05/30/2015 - 07/03/2015 | 31,673 | $ | 17.19 | 31,673 | $ | 60.1 | ||||
07/04/2015 - 07/31/2015 | 477 | $ | 18.38 | — | $ | 60.1 | ||||
08/01/2015 - 08/28/2015 | — | $ | — | — | $ | 60.1 | ||||
Total | 32,150 | (2) | 31,673 |
(1) | In December 2007, our Board of Directors approved a share repurchase program permitting the repurchase of up to $250 of shares of our common stock. This program has no specific expiration date. |
(2) | 477 shares were repurchased to satisfy participants’ tax withholding obligations upon the vesting of restricted stock unit grants, pursuant to the terms of our Incentive Compensation Plan. |
Item 6. | Exhibits: |
STEELCASE INC. |
By: | /s/ Mark T. Mossing |
Mark T. Mossing Corporate Controller and Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer) |
Exhibit No. | Description |
10.1 | Steelcase Inc. Incentive Compensation Plan, as amended and restated as of July 15, 2015 |
10.2 | 2016-1 Amendment to the Steelcase Inc. Deferred Compensation Plan |
31.1 | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Schema Document |
101.CAL | XBRL Calculation Linkbase Document |
101.LAB | XBRL Labels Linkbase Document |
101.PRE | XBRL Presentation Linkbase Document |
101.DEF | XBRL Definition Linkbase Document |
ARTICLE 1. | Establishment, Objectives, and Duration |
ARTICLE 2. | Definitions |
(a) | any Person (other than any Initial Holder or Permitted Transferee) (i) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below, and (ii) the combined voting power of the securities of the Company that are Beneficially Owned by such Person exceeds the combined voting power of the securities of the Company that are Beneficially Owned by all Initial Holders and Permitted Transferees at the time of such acquisition by such Person or at any time thereafter; or |
(b) | the following individuals cease for any reason to constitute a majority of the number of Directors then serving: individuals who, on the date hereof, constitute the Board and any new Director (other than a Director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of Directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or |
(c) | there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with or involving any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent |
(d) | the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty-five percent (55%) of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. |
ARTICLE 3. | Administration |
ARTICLE 4. | Shares Subject to the Plan and Maximum Awards |
(a) | Stock Options: The maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to any Award granted in any one fiscal year to any one single Participant shall be five hundred thousand (500,000). |
(b) | SARs: The maximum aggregate number of Shares that may be granted in the form of Stock Appreciation Rights, pursuant to any Award granted in any one fiscal year to any one single Participant shall be five hundred thousand (500,000). |
(c) | Restricted Stock: The maximum aggregate grant with respect to Awards of Restricted Stock granted in any one fiscal year to any one Participant shall be two hundred and fifty thousand (250,000). |
(d) | Performance Shares/Performance Units and Cash-Based Awards: The maximum aggregate payout (determined as of the end of the applicable Performance Period) with respect to Cash-Based Awards or Awards of Performance Shares or Performance Units granted in any one fiscal year to any one Participant shall be equal to the value of seven hundred and fifty thousand (750,000) Shares. |
(e) | Phantom Shares: The maximum aggregate payout (determine at the end of the applicable Performance Period) with respect to Phantom Shares granted in any one fiscal year to any one Participant shall be equal to the value of seven hundred and fifty thousand (750,000) Shares. |
(f) | Other Share-Based Awards: The maximum aggregate number of Shares that may be granted in the form of other Share-Based Awards, pursuant to any Award granted in any one fiscal year to one single Participant shall be two hundred and fifty thousand (250,000). |
ARTICLE 5. | Eligibility and Participation |
ARTICLE 6. | Stock Options |
ARTICLE 7. | Stock Appreciation Rights |
(a) | the difference between the Fair Market Value of a Share on the date of exercise over the grant price; by |
(b) | the number of Shares with respect to which the SAR is exercised. |
ARTICLE 8. | Restricted Stock |
ARTICLE 9. | Performance Units, Performance Shares, and Cash-Based Awards |
ARTICLE 10. | Phantom Shares |
ARTICLE 11. | Other Share-Based Awards |
ARTICLE 12. | Performance Measures |
(a) | earnings per share; |
(b) | net income (before or after taxes); |
(c) | return measures (including, but not limited to, assets, equity, sales, investment, return on invested capital (“ROIC”) or internal rate of return); |
(d) | cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on investment (discounted or otherwise), or cumulative cash flow per share); |
(e) | earnings before or after taxes (including, but not limited to, earnings before all or any interest, taxes, depreciation and/or amortization (“EBIT”, “EBITA”, “EBITDA”); |
(f) | gross revenues or sales; |
(g) | operating profit (including, but not limited to, net operating profit after taxes (“NOPAT”); |
(h) | margins (including, but not limited to, gross margin, operating margin or pre-tax profit margin); |
(i) | operating expenses; |
(j) | working capital; |
(k) | share price (including, but not limited to, growth measures, total shareholder return (“TSR”) and relative total shareholder return); |
(l) | dividend payments; |
(m) | implementation or completion of critical projects or processes; |
(n) | strategic business criteria, consisting of one or more objectives based on meeting specified market share, market penetration, product launch, inventory goals, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, productivity ratios, expense targets or cost reduction goals, and budget comparisons; |
(o) | personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long-term business goals, management |
(p) | any combination of, or a specified increase or decrease in, any of the foregoing. |
ARTICLE 13. | Beneficiary Designation |
ARTICLE 14. | Deferrals |
ARTICLE 15. | Rights of Employees/Directors |
ARTICLE 16. | Change in Control |
(a) | Performance Awards. In the event that a Change in Control occurs during a Performance Period, |
(i) | all outstanding Awards, other than the Cash-Based Awards, subject to performance-based vesting shall, immediately prior to the Change in Control, (I) be converted to an Award with a number of Shares underlying such Award equal to the greater of (x) the number of Shares earned as determined using the applicable performance achieved through the date of the Change in Control, as determined by the Committee in its sole discretion or (y) the target number of Shares, (II) cease to be subject to the achievement of performance criteria and (III) vest in full at the end of the Performance Period provided the Participant is employed by or is providing services to the Company or any Affiliate on such date; and |
(ii) | all outstanding Cash-Based Awards subject to performance-based vesting shall, immediately prior to the Change in Control, (I) be converted to a Cash-Based Award equal to the greater of (x) an amount of cash earned as determined using the applicable performance achieved through the date of the Change in Control, as determined by the Committee in its sole discretion or (y) the target level of cash, (II) cease to be subject to the achievement of performance criteria, (III) during the remainder of the Performance Period, be credited with such reasonable interest rate as the Committee shall determine (and until the Committee determines otherwise, such interest rate shall equal the three-year U.S. Treasury rate, as adjusted for the Company’s credit rating as of the end of the Company’s fiscal year prior to the Change in Control) and (IV) vest in full at the end of the Performance Period provided the Participant is employed by or is providing services to the Company or any Affiliate on such date. |
(b) | Assumption/Substitution of Awards. Unless otherwise determined by the Board and/or evidenced in an Award Agreement, with respect to each outstanding Award that is assumed or substituted in connection with a Change in Control, in the event that (1) a Change in Control occurs and (2) the Participant’s employment or service is terminated by the Company, its successor or affiliate thereof without Cause or the Participant resigns with Good Reason, in either case, on or after the effective date of the Change in Control but prior to twenty-four (24) months following such Change in Control, then: |
(i) | Any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; |
(ii) | Any restriction periods and restrictions imposed on all outstanding Awards of Restricted Stock, Performance Units, Performance Shares, and Cash-Based Awards and Share-Based Awards shall lapse and be settled as soon as reasonable practicable, but in no event later than ten (10) days following such termination of employment; and |
(iii) | Notwithstanding anything to the contrary, if the Change in Control event does not constitute a change in ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company under Section 409A of the Code, and if the |
(c) | No Assumption/Substitution of Awards. Unless otherwise determined by the Board and/or evidenced in an Award Agreement, with respect to each outstanding Award that is not assumed or substituted in connection with a Change in Control, immediately upon the occurrence of the Change in Control, |
(i) | Any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term; |
(ii) | Any restriction periods and restrictions imposed on all outstanding Awards of Restricted Stock, Performance Units, Performance Shares, and Cash-Based Awards and Share-Based Awards shall lapse and be settled as soon as reasonable practicable, but in no event later than ten (10) days following the Change in Control; and |
(iii) | Notwithstanding anything to the contrary, if the Company determines any Award constitutes deferred compensation subject to Section 409A of the Code, then to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the vesting of such Award shall be accelerated as of the effective date of the Change in Control in accordance with clauses (i) and (ii) above, but the Company shall pay such Award on its scheduled payment date, but in no event more than 90 days following the scheduled payment date. |
(d) | Assumed/Substituted. For purposes of this Section 16.1, the Awards shall be considered assumed or substituted for if, following the Change in Control, (i) any adjustments necessary to preserve the intrinsic value of the Participant’s outstanding Awards have been made, and the Company’s acquirer or successor, as applicable, irrevocably assumes the Company’s obligations under this Plan or (ii) such acquirer or successor replaces the Participant’s outstanding Awards with Awards having substantially the same intrinsic value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s Awards immediately prior to the Change in Control. In addition, the Awards shall be considered assumed or substituted for only if any equity based Awards, after the Change in Control, relate to common stock of the Company’s acquirer or successor which is publicly held and widely traded on an established stock exchange. In respect of any Awards that are assumed or substituted and are converted into deferred cash awards, during the remainder of the applicable period prior to payment of such Award, the deferred cash award shall be credited with such reasonable interest rate as the Committee shall determine immediately prior to the Change in Control (and until the Committee determines otherwise, such interest rate shall equal the three-year U.S. Treasury rate, as adjusted for the Company’s credit rating as of the end of the Company’s fiscal year prior to the Change in Control). |
(e) | Cashout of Awards. Notwithstanding any other provision of the Plan, in the event of a Change in Control in which the consideration paid to the holders of Shares is solely cash, the Board may, in its discretion to the extent such treatment does not result in tax penalties under Section 409A of the Code, provide that each Award shall, upon the occurrence of a Change in Control, be cancelled in exchange for a payment in an amount equal to (i) the excess of the consideration paid per Share in the Change in Control over the exercise |
ARTICLE 17. | Change in Capitalization |
ARTICLE 18. | Amendment, Modification, and Termination |
ARTICLE 19. | Clawback |
ARTICLE 20. | Withholding |
ARTICLE 21. | Indemnification |
ARTICLE 22. | Successors |
ARTICLE 23. | Legal Construction |
ARTICLE 24. | Execution |
STEELCASE INC. |
By: | /s/ Lizbeth O'Shaughnessy |
Lizbeth O'Shaughnessy | |
Its: | Senior Vice President, Chief Administrative Officer, General Counsel and Secretary |
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B. |
C. |
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E. |
STEELCASE INC. | |
Dated: September 21, 2015 | /s/ Lizbeth S. O’Shaughnessy |
Signature | |
Lizbeth S. O’Shaughnessy | |
Senior Vice President, Chief Administrative | |
Officer, General Counsel and Secretary |
1) | I have reviewed this quarterly report for the period ended August 28, 2015 on Form 10-Q of Steelcase Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ James P. Keane | ||
Name: | James P. Keane | |
Title: | President and Chief Executive Officer |
1) | I have reviewed this quarterly report for the period ended August 28, 2015 on Form 10-Q of Steelcase Inc.; |
2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ David C. Sylvester | ||
Name: | David C. Sylvester | |
Title: | Senior Vice President, Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ James P. Keane | ||
Name: | James P. Keane | |
Title: | President and Chief Executive Officer |
/s/ David C. Sylvester | ||
Name: | David C. Sylvester | |
Title: | Senior Vice President, Chief Financial Officer |
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