UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

 

FORM 10-Q

 

 

For the transition period from           to

 

Commission File Number 1-13873

 

 

 

 

STEELCASE INC.

(Exact name of registrant as specified in its charter)

 

 

(Registrant’s telephone number, including area code) (616) 247-2710
None
(Former name, former address and former fiscal year, if changed since last report)

 

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 þ     No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes o     No o

 

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

 

(Do not check if a smaller reporting company)

 

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

 

As of January 4, 2010, Steelcase Inc. had 78,353,210 shares of Class A Common Stock and 54,518,052 shares of Class B Common Stock outstanding.

 

 

STEELCASE INC.
FORM 10-Q

FOR THE QUARTER ENDED NOVEMBER 27, 2009

INDEX

 

 

 

STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)

 

 

See accompanying notes to the condensed consolidated financial statements.

 

STEELCASE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)

 

 

See accompanying notes to the condensed consolidated financial statements.

STEELCASE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)

 

 

See accompanying notes to the condensed consolidated financial statements.

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

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 contained in our Annual Report on Form 10-K for the fiscal year ended February 27, 2009 (“Form 10-K”). The Condensed Consolidated Balance Sheet as of February 27, 2009 was derived from the audited Consolidated Balance Sheet included in our Form 10-K.

 

As used in this Report, unless otherwise expressly stated or the content 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. In addition, reference to a year relates to the fiscal year, ended in February of the year indicated, rather than the calendar year, unless indicated by a specific date. 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.

 

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation. In Q4 2009, we completed a review of certain indirect manufacturing costs to improve the consistency of classification of these costs across our business units and reportable segments. Based on our analysis, we adjusted our 2009 results to conform to this presentation by increasing cost of sales and decreasing operating expenses by $6.4 and $19.0 for the three and nine months ended November 28, 2008, respectively.

 

We have performed a review of subsequent events through the time of filing of the Quarterly Report on Form 10-Q on January 5, 2010, and concluded there were no events or transactions that occurred during this period that required recognition or disclosure in our financial statements.

 

 

 

In Q3 2007, the Financial Accounting Standards Board (“FASB”) issued a new accounting statement on fair value measurements. This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures of fair value measurements. In Q4 2008, the FASB issued new guidance that delayed the effective date of the fair value measurements statement for certain non-financial assets and liabilities until fiscal years beginning after November 15, 2008. We adopted the new accounting statement for financial assets and liabilities beginning in Q1 2009, and for non-financial assets and liabilities beginning in Q1 2010, and it did not have a material impact on our consolidated financial statements. See Note 6 for additional information.

 

In Q1 2010, the FASB issued additional guidance that addresses the determination of fair values when there is no active market or where the price inputs represent distressed sales. It also reaffirms that the objective of fair value measurement is to reflect an asset’s sale price in an orderly transaction at the date of the financial statements. We adopted the new guidance beginning in Q2 2010, and it did not have a material impact on our consolidated financial statements. See Note 6 for additional information.

 

In Q1 2010, the FASB issued new guidance on interim disclosures about fair value of financial instruments. The guidance enhances consistency in financial reporting by increasing the frequency of fair

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

value disclosures to a quarterly basis for any financial instruments. We adopted the new guidance beginning in Q2 2010. See Note 6 for additional information.

 

In Q2 2010, the FASB issued additional guidance on measuring liabilities at fair value and reaffirmed the practice of measuring fair value using quoted market prices when a liability is traded as an asset. We adopted the new guidance beginning in Q3 2010, and it did not have a material impact on our consolidated financial statements. See Note 6 for additional information.

 

 

In Q4 2008, the FASB issued a new accounting statement on noncontrolling interests in consolidated financial statements. This statement requires that the noncontrolling interest in the equity of a consolidated subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. We adopted the new accounting statement beginning in Q1 2010. As the amount of net income and interests of noncontrolling owners are not material, we have not separately presented such information in our condensed consolidated financial statements for the periods presented.

 

 

In Q1 2010, the FASB issued new guidance on the recognition and presentation of other-than-temporary impairments. The guidance was designed to create greater consistency in the timing of impairment recognition and provide greater clarity about the credit and noncredit components of impaired debt securities that are not expected to be sold. We adopted the new guidance beginning in Q2 2010, and it did not have a material impact on our consolidated financial statements. See Note 6 for additional information.

 

 

In Q2 2009, the FASB issued new guidance on determining whether instruments granted in share-based payment transactions are participating securities. The guidance clarifies that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and should be included in the computation of earnings per share pursuant to the two-class method. We adopted the new guidance in Q1 2010. Upon adoption, we were required to retrospectively adjust earnings per share data to conform to the provisions of the new guidance. The application of the provisions of the new guidance did not change earnings per share amounts for any of the periods presented. See Note 4 for additional information.

 

 

In Q2 2010, the FASB issued a new accounting statement which changes the consolidation model for variable interest entities. This statement requires companies to qualitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”) based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The new accounting statement is effective Q1 2011. We are currently evaluating the potential impact on our consolidated financial statements.

 

 

During Q3 2010, a consolidated variable interest dealer, which received significant financial support from us, was purchased by an independent third party. As a result, we deconsolidated the dealer. The loss recognized upon deconsolidation was not material. For the three months ended November 27,

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

2009, our Condensed Consolidated Statement of Operations included $3.1 of revenue, $0.6 of gross profit, $1.3 of operating expenses, $0.7 of operating loss and $0.7 of other expense, net related to the consolidated dealer. For the nine months ended November 27, 2009, our Condensed Consolidated Statement of Operations included $8.0 of revenue, $2.2 of gross profit, $3.3 of operating expenses, $1.1 of operating loss and $0.2 of other expense, net related to the consolidated dealer.

 

 

During Q1 2010, we adopted the FASB’s new guidance on the determination of participating securities, which required us to retrospectively adjust earnings per share data. As a result of the adoption, we increased weighted average shares outstanding for basic earnings per share and decreased the effect of dilutive stock-based compensation for the three and nine months ended November 28, 2008 by 0.2 million shares and 0.3 million shares, respectively. However, earnings per share amounts did not change for any of the periods presented.

 

Basic earnings per share is based on the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share also includes the effects of shares and potential shares issued under our stock incentive plan. However, for the three and nine months ended November 27, 2009 and November 28, 2008, diluted earnings per share does not reflect the effects of 3.6 million options and 4.4 million options, respectively, because those potential shares were not dilutive.

 

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

 

 

Comprehensive income is comprised of net income and all changes to shareholders’ equity except those due to investments by, and distributions to, shareholders.

 

 

 

Foreign currency translation adjustments of $12.2 and $32.0 for the three and nine months ended November 27, 2009, respectively, reflect the impact on our condensed consolidated financial statements of the changes in certain consolidated foreign currency values (principally the euro, Canadian dollar and British pound) relative to the U.S. dollar. As of November 27, 2009, approximately 26% of our assets were denominated in currencies other than the U.S. dollar, the majority of which were denominated in euros. In Q3 2010, we determined we had not appropriately recorded deferred income taxes related to the minimum

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

pension liability associated with our 2005 adoption of the accounting requirements related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Accordingly, we recorded an adjustment to increase deferred income taxes by $6.0 with a corresponding amount to the minimum pension liability. This adjustment was not considered material to our current filing or any other prior period filing.

 

 

The carrying amounts of our financial instruments, consisting of cash and cash equivalents, short-term investments, accounts and notes receivable, foreign exchange forward contracts, accounts and notes payable, short-term borrowings and certain other liabilities, approximate their fair value due to their relatively short maturities. Our long-term investments are measured at fair value on the Condensed Consolidated Balance Sheets. We carry our long-term debt at cost. The fair value of our long-term debt was approximately $302 and $235 as of November 27, 2009 and February 27, 2009, respectively. The fair value of our long-term debt is measured using a discounted cash flow analysis based on current market interest rates for similar types of instruments.

 

We periodically use derivative financial instruments to manage exposures to movements in interest rates and foreign exchange 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.

 

 

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

Below is a roll-forward of assets and liabilities measured at fair value using Level 3 inputs for the nine months ended November 27, 2009:

 

 

The other-than-temporary impairments recognized on our auction rate securities and privately-held equity investments during the nine months ended November 27, 2009 were recognized in Other income (expense), net on the Condensed Consolidated Statement of Operations.

 

 

 

The portion of inventories determined by the LIFO method aggregated $47.7 as of November 27, 2009 and $47.8 as of February 27, 2009. During the nine months ended November 27, 2009, a reduction in inventory quantities resulted in a liquidation of applicable LIFO inventory quantities carried at lower costs in prior years. This LIFO liquidation resulted in a $1.1 decrease in the LIFO reserve, along with additional deflationary impacts of $1.7 during the nine months ended November 27, 2009.

 

 

Investments in company-owned life insurance (“COLI”) policies were made with the intention of utilizing them as a long-term funding source for post-retirement medical benefits, deferred compensation and supplemental retirement plan obligations, which as of November 27, 2009 aggregated approximately $165, with a related deferred tax asset of approximately $70. However, the COLI policies do not represent a committed funding source for these obligations. They are subject to claims from creditors, and we can designate them to another purpose at any time.

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

Following is a summary of COLI as of November 27, 2009 and February 27, 2009:

 

 

For the three and nine months ended November 27, 2009, the net returns in cash surrender value, normal insurance expenses and death benefit gains resulted in income of $5.3 and $35.9, respectively. The allocation of COLI income or loss between Cost of sales and Operating expenses in the Condensed Consolidated Statements of Operations is consistent with the costs associated with the long-term employee benefit obligations that COLI is intended to fund.

 

 

 

During Q2 2010, we borrowed $47.0 at a floating interest rate based on 30-day LIBOR plus 3.35%. The loan has a term of seven years and requires fixed monthly principal payments of $0.2 based on a 20-year amortization schedule with a $30 balloon payment due in Q2 2017. The loan is secured by our two corporate aircraft, contains no financial covenants and is not cross-defaulted to our other debt facilities.

 

 

On September 21, 2009, we amended our former $200 global committed bank facility, scheduled to mature in Q2 2011. The amendment reduced the facility to $125, deferred the calculation of the maximum leverage ratio for Q2 2010 for purposes of determining compliance with the leverage ratio covenant until November 16, 2009 and required that revolving loans made from the date of the amendment through November 16, 2009 shall be Floating Rate Loans and may not be Eurocurrency Rate Loans or Eurocurrency Rate Advances (as each was defined in the credit agreement). On November 13, 2009, we amended our former credit facility again to further defer the calculation of the maximum leverage ratio for Q2 2010 and extend the requirement that revolving loans shall be Floating Rate Loans and may not be Eurocurrency Rate Loans or Eurocurrency Rate Advances (as each was defined in the credit agreement) until December 18, 2009.

 

On December 16, 2009, we entered into a $125 global committed, syndicated credit facility (“New Facility”). The New Facility has a three-year term and replaces our previous global committed credit facility that was scheduled to expire in Q2 2011. At our option, and subject to certain conditions, we may increase the aggregate commitment under the New Facility by up to $75 by obtaining at least one commitment from one or more lenders. Borrowings under this facility are unsecured and unsubordinated. There are no borrowings outstanding under the New Facility, although $15 of capacity is currently utilized through an issued letter of credit.

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

We can use borrowings under the New Facility for general corporate purposes, including friendly acquisitions. Interest on borrowings under the New Facility is based on one of the following two options, as selected by us:

 

 

The New Facility requires us to satisfy two financial covenants:

 

 

As of November 27, 2009, we were in compliance with all covenants under our former credit facility. As of December 16, 2009, we were in compliance with all covenants under the New Facility.

 

The New Facility requires us to comply with certain other terms and conditions, including a restricted payment covenant which establishes a maximum level of dividends and/or other equity-related distributions or payments (such as share repurchases) we may make in a fiscal year. We are permitted to make dividends and/or other equity-related distributions or payments of up to $25 per year provided we remain compliant with the financial covenants and other conditions set forth in the credit agreement. We are permitted to make dividends and/or other equity-related distributions or payments in excess of $25 in a fiscal year to the extent that our Liquidity (as defined in the credit agreement) and Leverage Ratio (as defined in the credit agreement) meet certain thresholds set forth in the credit agreement.

 

 

For the three and nine months ended November 27, 2009, the income tax expense (benefit) approximated the income (loss) before income taxes. The resulting effective tax rate of 100% was driven in large part by significant non-taxable income from COLI.

 

 

In Q3 2010, we awarded a total of 236,500 restricted stock units (“RSUs”) under the Steelcase Inc. Incentive Compensation Plan (the “Incentive Compensation Plan”) to key individuals based upon personal contributions during 2010. These RSUs will vest at the end of subsequent one-year and three-year periods or at the time a participant becomes a qualified retiree. RSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the vesting period based on the value of the shares on the grant date. Total RSUs expense and associated tax benefit for the three months ended November 27, 2009 were $0.4 and $0.2, respectively. Total RSUs expense and associated tax benefit for the nine months ended November 27, 2009 were $0.7 and $0.3, respectively.

 

In Q1 2010, we awarded a total of 783,000 performance units (“PSUs”) under the Incentive Compensation Plan to our executive officers. The performance measure for these awards is based on relative total shareholder return during a performance period of 2010 through 2012. After completion of the performance period for these PSUs, the number of shares earned will be determined and issued as Class A Common Stock. Whether or not the performance criteria are met, a number of shares equal to 25% of the target award will be earned as of the end of 2012, if the participant remains employed by the

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

Company through that date, and will be deemed to be earned at the time a participant becomes a qualified retiree if that occurs prior to the end of 2012. Dividend equivalents will be paid in cash during the performance period on the target award of PSUs in amounts equal to any cash dividends that the Company declares and pays on its Class A Common Stock.

 

PSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the performance and vesting periods based on the estimated market value of the award on the grant date and the estimated number of shares to be issued. Outstanding awards under the Incentive Compensation Plan vest over a period of three to five years or at the time a participant becomes a qualified retiree. Total PSUs expense and associated tax benefit for the three months ended November 27, 2009 were $0.4 and $0.2, respectively. Total PSUs expense and associated tax benefit for the nine months ended November 27, 2009 were $3.5 and $1.3, respectively, primarily as a result of awards issued to retirement-eligible participants in Q1 2010.

 

 

We operate within North America and International reportable segments, plus an “Other” category. The Other category includes the Coalesse Group, PolyVision and IDEO. Unallocated corporate expenses are reported as Corporate.

 

Revenue and operating income (loss) for the three and nine months ended November 27, 2009 and November 28, 2008 and total assets as of November 27, 2009 and February 27, 2009 by segment are presented below:

 

 

 

STEELCASE INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

 

 

 

During Q3 2010, we substantially completed a series of actions, announced in Q2 2010, to further reduce our global workforce and consolidate additional manufacturing facilities. For the three and nine months ended November 27, 2009, we incurred net restructuring costs related to these actions of $4.8 and $21.3, respectively, mainly due to employee termination costs.

 

During Q2 2010, we substantially completed a series of actions, announced in Q4 2009, to consolidate additional manufacturing and distribution facilities in North America, reduce our white-collar workforce and other operating costs globally and continue to expand our white-collar reinvention initiatives. For the nine months ended November 27, 2009, we incurred net restructuring costs related to these actions of $3.7, primarily for equipment moves and employee termination costs. Total program costs associated with these actions have been $17.6, mainly attributable to employee termination costs.

 

Restructuring costs are summarized in the following table:

 

 

Below is a summary of the net additions, payments and adjustments to the restructuring reserve balance for the nine months ended November 27, 2009:

 

 

The workforce reductions reserve balance as of November 27, 2009 primarily related to the global workforce reductions announced in Q2 2010. The business exits and related costs reserve balance as of November 27, 2009 primarily related to the lease impairments recorded in connection with the closure of manufacturing facilities in the North America segment and Other category.

 

 

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 27, 2009. Reference to a year relates to the fiscal year, ended in February of the year indicated, rather than the calendar year, unless indicated by a specific date. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter, respectively, of the fiscal year indicated. Year-to-date references the nine months ended for the fiscal year indicated. All amounts are in millions, except share and per share data, data presented as a percentage or as otherwise indicated.

 

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation. During 2009, we completed a review of certain indirect manufacturing costs to determine the consistency of classification of these costs across our business units and reportable segments. Based on our analysis, we adjusted our 2009 results to increase cost of sales and decrease operating expenses by the following amounts:

 

 

Financial Summary

 

 

Results of Operations

 

 

Overview

 

We recorded Q3 2010 net income of $0 compared to net income of $0.4 in Q3 2009, and year-to-date 2010 net income of $0 compared to $54.0 in the same period in 2009. The quarter and year-to-date comparisons are significantly impacted by results from company-owned life insurance

(“COLI”), which reflected significant income in the current periods compared to significant losses in the prior year periods. Beyond COLI, the Q3 2010 and year-to-date 2010 deteriorations were primarily driven by lower volume, which was partially offset by benefits from prior restructuring activities and other cost reduction efforts, lower commodity costs, lower variable compensation expense and temporary reductions in employee salaries and retirement benefits.

 

Our revenue decreased $195.2 or 24.1% in Q3 2010 compared to Q3 2009. Q3 2010 revenue was positively impacted by approximately $16 from currency translation effects compared to Q3 2009. Year-to-date 2010 revenue decreased $789.1 or 31.2% compared to the same period in 2009. Year-to-date 2010 revenue was negatively impacted by approximately $47 from currency translation effects and $16 of sales related to divestitures compared to the same period in 2009. The global economic slowdown and turmoil in the capital markets had the effect of significantly decreasing the demand for office furniture. Q3 2010 and year-to-date 2010 revenue declines were broad-based, significantly affecting almost all of our geographies, vertical markets and product categories. We expect the effects of the global economic slowdown to continue to impact the demand for office furniture across all of our segments through the remainder of 2010. However, percentage declines compared to the prior year are expected to further moderate in Q4 2010, as we entered this downturn beginning in Q3 2009.

 

Cost of sales was 70.8% of revenue in Q3 2010, a 110 basis point improvement compared to Q3 2009. The improvement was due to benefits from prior restructuring activities and other cost reduction efforts, an increase in COLI income of $20, lower commodity costs of approximately $18, temporary reductions in employee salaries and retirement benefits of $5 and a reduction of $2 in variable compensation expense, all which more than offset lower absorption of fixed costs associated with the revenue decline and warranty and inventory reserve adjustments of $5 in Q3 2010.

 

Year-to-date 2010 cost of sales increased to 70.5% of revenue, a 110 basis point deterioration compared to the same period in 2009. The deterioration was driven by lower fixed cost absorption associated with the revenue decline, partially mitigated by benefits from prior restructuring activities and other cost reduction efforts, lower commodity costs of approximately $37, an increase in COLI income of $37, a reduction of $16 in variable compensation expense and temporary reductions in employee salaries and retirement benefits of $14.

 

Operating expenses decreased by $47.8 in Q3 2010 compared to Q3 2009. The decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, an increase in COLI income of $13, temporary reductions in employee salaries and retirement benefits of $5 and a reduction of $3 in variable compensation expense, partially offset by unfavorable currency translation effects of approximately $3. In addition, we recorded reductions in general accounts receivable reserves and accrued expenses of $2.

 

Year-to-date 2010 operating expenses decreased by $174.4 compared to the same period in 2009. The decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, a reduction of $38 in variable compensation expense, an increase in COLI income of $25, temporary reductions in employee salaries and retirement benefits of $15 and favorable currency translation effects of approximately $10. Year-to-date 2010 operating expenses increased as a percent of revenue due to reduced volume leverage.

 

We recorded restructuring costs of $4.8 in Q3 2010 and $25.0 year-to-date in 2010 primarily related to the global workforce reductions and the consolidation of manufacturing facilities in the North America segment and Other category. Over the past 21 months, we have launched various restructuring activities that we estimate have resulted in approximately $20 of quarterly fixed cost savings in 2010 compared to 2009. See Note 13 to the condensed consolidated financial statements for additional information.

 

Q3 2010 income tax expense approximated income before taxes and year-to-date 2010 income tax benefit approximated the loss before income taxes. The resulting effective tax rate of 100% was driven in large part by significant non-taxable income from COLI.

Interest Expense and Other Income, Net