<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 22, 1999
STEELCASE INC.
(Exact Name of Registrant as Specified in its Charter)
Michigan 1-13873 38-0819050
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification Number)
Incorporation)
901 44th Street
Grand Rapids, Michigan 49508
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (616) 247-2710
<PAGE>
This Amendment amends Item 7 of the Current Report on Form 8-K of Steelcase
Inc., dated April 22, 1999. Such Current Report on Form 8-K did not include
audited consolidated financial statements of Steelcase Strafor S.A. and
subsidiaries, the business acquired in the transaction, which were not available
at the time the Current Report on Form 8-K was filed. This Amendment is filed to
provide audited consolidated financial statements of the business acquired and
the required pro forma condensed combined financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
Pursuant to paragraph (a)(4) of Item 7 of Form 8-K, the Company hereby
files the financial information listed in the Index on page
F-1 herein and incorporated by reference herein.
(b) Pro forma financial information
Pursuant to paragraph (a)(4) of Item 7 of Form 8-K, the Company hereby
files the pro forma financial information listed in the Index on page
F-1 herein and incorporated by reference herein.
(c) Exhibits
See Exhibit Index
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 16, 1999
STEELCASE INC.
By: /s/ Alwyn Rougier-Chapman
------------------------------------------
Alwyn Rougier-Chapman
Senior Vice-President-Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND OTHER INFORMATION
Page Numbers
Financial Statements of Business Acquired
The audited consolidated financial statements as of
December 31, 1998 and for the year then ended of
Steelcase Strafor S.A. and subsidiaries, including
the report of independent auditor:
Report of Independent Auditor F-2
Consolidated Statement of Income
for the year ended December 31, 1998 F-3
Consolidated Balance Sheet as of
December 31, 1998 F-4 and F-5
Consolidated Statement of
Changes in Shareholders' Equity
for the year ended December 31, 1998 F-6
Consolidated Statement of Cash Flows
for the year ended December 31, 1998 F-7
Notes to Consolidated Financial Statements F-8 through F-29
Pro Forma Financial Information:
Description of Unaudited Pro Forma Condensed
Combined Financial Statements F-30
Unaudited Pro Forma Condensed Combined
Statement of Income for the year ended
February 26, 1999 F-31 and F-32
Unaudtied Pro Forma Condensed Combined
Balance Sheet as of February 26, 1999 F-33 and F-34
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements F-35 and F-36
F-1
<PAGE>
Report of Independent Auditor
April 22, 1999
To the Shareholders of Steelcase Strafor S.A.,
We have audited the accompanying consolidated balance sheet of Steelcase Strafor
S.A. (a French corporation and an equally owned joint venture of Steelcase Inc.
and Strafor Facom S.A.) and subsidiaries (hereinafter referred to as "the
Company") as of December 31, 1998, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the year then ended,
stated in French francs. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Steelcase Strafor
S.A. and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles in the United States of America.
BARBIER FRINAULT & ASSOCIES
Arthur Andersen
Philippe Guenne
F-2
<PAGE>
STEELCASE STRAFOR S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the year ended December 31, 1998
(In thousands of French francs)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net sales FF 2,989,702
Cost of sales 2,111,438
- --------------------------------------------------------------------------------
Gross profit 878,264
- --------------------------------------------------------------------------------
Selling, general and administrative expenses 681,556
- --------------------------------------------------------------------------------
Operating income 196,708
- --------------------------------------------------------------------------------
Interest expense ( 11,839)
Other income, net 2,963
- --------------------------------------------------------------------------------
Net income before provision for income taxes 187,832
- --------------------------------------------------------------------------------
Provision for income taxes 82,727
- --------------------------------------------------------------------------------
Net income FF 105,105
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
STEELCASE STRAFOR S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(In thousands of French francs, except share data)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents FF 271,944
Accounts receivable, less allowance of FF 57,331 1,038,816
Accounts receivable affiliates 6,308
Inventories 254,597
Prepaid expenses and other assets 115,677
Deferred income taxes 19,756
- --------------------------------------------------------------------------------
Total current assets 1,707,098
- --------------------------------------------------------------------------------
Property and equipment, net 812,239
Notes receivable 16,537
Investments in/advances to affiliates 112,682
Dealer transitions 66,981
Deferred income taxes 3,654
Goodwill and other intangible assets, net of accumulated
amortization of FF 264,364 1,134,934
Other assets 8,959
- --------------------------------------------------------------------------------
Total assets FF 3,863,084
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
STEELCASE STRAFOR S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(In thousands of French francs, except share data)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdrafts FF 287,196
Accounts and notes payable 477,185
Accounts and notes payable affiliates 456,081
Current portion of long-term debt 41,265
Deferred income taxes 2,053
Accrued liabilities 497,729
- --------------------------------------------------------------------------------
Total current liabilities 1,761,509
- --------------------------------------------------------------------------------
Long-term liabilities:
Long-term debt 136,036
Notes payable affiliates 386,018
Deferred income taxes 16,329
Employee benefit plan obligations 68,319
Long service benefits 6,490
Other 197,101
- --------------------------------------------------------------------------------
Total long-term liabilities 810,293
- --------------------------------------------------------------------------------
Total liabilities 2,571,802
- --------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, FF 500 par value, 2,207,520 shares authorized,
issued and outstanding 1,103,760
Additional paid in capital 99,672
Accumulated other comprehensive income/(loss) (180,592)
Retained earnings 268,442
- --------------------------------------------------------------------------------
Total shareholders' equity 1,291,282
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity FF 3,863,084
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
STEELCASE STRAFOR S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
For the year ended December 31, 1998
(In thousands of French francs)
<CAPTION>
Accumulated
Additional other Total Total
Common paid in comprehensive Retained shareholders' comprehensive
stock capital income/(loss) earnings equity income
----- ------- ------------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 FF 1,103,760 99,672 (142,520) 163,337 1,224,249
- -------------------------------------------------------------------------------------------------------------------------
Other comprehensive
income/(loss) ( 38,072) ( 38,072) FF ( 38,072)
Net income 105,105 105,105 105,105
- -------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998 FF 1,103,760 99,672 (180,592) 268,442 1,291,282 FF 67,033
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<TABLE>
STEELCASE STRAFOR S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 1998
(In thousands of French francs)
<CAPTION>
OPERATING ACTIVITIES:
<S> <C>
Net income FF 105,105
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 132,432
Deferred income taxes 9,833
Employee benefit plan obligations cost 4,862
Long service benefits cost 6,490
Changes in operating assets and liabilities, net of corporate acquisitions:
Accounts and notes receivable, net (including affiliates) ( 24,012)
Inventories 13,827
Prepaid expenses and other (including affiliates) assets ( 15,717)
Accounts payable ( 24,073)
Other liabilities ( 28,274)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 180,473
- -----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Corporate acquisition, net of cash acquired (579,892)
Capital expenditures ( 8,414)
Notes receivable and other long-term assets 5,984
Notes receivable and investments in/advances to affiliates ( 25,083)
- -----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (607,405)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdrafts 152,727
Repayments of indebtedness ( 43,624)
Proceeds from bank borrowings 8,813
Proceeds from affiliates borrowings, net of repayments 363,933
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 481,849
- -----------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 54,917
Cash and cash equivalents, beginning of year 221,899
Effect of foreign exchange rate changes on cash and cash equivalents ( 4,872)
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year FF 271,944
=================================================================================================================
Cash paid for income taxes 53,804
Cash paid for interest expense 29,447
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(In thousands of French francs
unless otherwise indicated)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1 Nature of business
Steelcase Strafor S.A. and its subsidiaries is a Strasbourg, France
based manufacturer and provider of office furniture and related
products and services. Steelcase Strafor is an equally owned joint
venture which was formed in 1974 between Steelcase Inc. and Strafor
Facom S.A. and a leading office furniture company in Europe with 15
manufacturing facilities in six countries and a network of independent
dealers in approximately 190 locations.
1.2 Basis of accounting and consolidation policies
The accompanying consolidated financial statements include the
accounts of Steelcase Strafor S.A. and all of its majority-owned
subsidiaries ("the Company"), except for dealers, which the company
has acquired with the intention of reselling as soon as practicable
("dealer transitions"). The company's investments in dealer
transitions are carried at its equity in the net assets of those
entities.
The Company maintains its statutory records on the basis of the
accounting principles generally accepted in France. The accompanying
consolidated financial statements have been adjusted to conform to
accounting principles generally accepted in the United States as
described in paragraphs 1.3 to 1.14 below.
All significant intercompany accounts, transactions and profits have
been eliminated in consolidation.
F-8
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
1.21 Translation of consolidated financial statements
The financial statements of foreign subsidiaries as of December 31,
1998 have been translated into French francs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52
"Foreign currency translation" by applying the exchange rate at the
balance sheet date for foreign currency denominated assets and
liabilities and the average exchange rate for the year for the
profit and loss accounts. The resulting translation gain or loss is
included in other comprehensive income, as a separate component of
shareholders' equity.
1.22 Conversion of foreign currency transactions
Monetary assets and liabilities, denominated in foreign currencies,
are converted at the exchange rate prevailing at the balance sheet
date. The related unrealized gains or losses are included in
earnings.
1.3 Use of estimates
The preparation of financial statements in conformity with United
States generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Although
these estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately differ
from actual results.
1.4 Revenue recognition
Net sales include product sales and service revenues. Product sales
and service revenues are recognized as products are shipped and
services rendered. Service revenues are not material.
F-9
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
1.5 Cash and cash equivalents
The Company considers all highly liquid investments with insignificant
interest rate risk and purchased with an original maturity of three
months or less to be cash equivalents.
Cash equivalents amounted to 49,504 as of December 31, 1998.
1.6 Inventories
Inventories are stated at the lower of cost, generally determined on a
weighted average unit cost method, or market.
1.7 Intangible assets and property and equipment
1.71 Goodwill and other intangible assets
Goodwill and other intangibles are stated at cost and
amortized on a straight-line basis over periods ranging from
15 to 40 years. Amortization expense amounted to 15,678 for
1998.
1.72 Property and equipment
Property and equipment are stated at cost. For purposes of the
accompanying consolidated financial statements, depreciation
is provided on a straight-line basis over the estimated useful
lives set forth below, and recognition is given to deferred
income taxes resulting from the excess of accelerated over
straight-line depreciation.
F-10
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Useful lives of property and equipment are as follows:
Years
-----
Buildings 10-50
Machinery and equipment 3-8
Furniture and fixtures and leasehold improvements 8-10
Capitalized software 1-3
Major improvements of existing properties are capitalized. Cost of
assets retired or otherwise disposed of, less accumulated
depreciation, is eliminated from the property accounts and any gains
or losses are credited or charged to income.
Assets related to capital leases are depreciated over the estimated
useful life of the asset.
Buildings under capital leases are depreciated over 15 to 20 years and
machinery and equipment under capital leases are depreciated over 6 to
8 years.
Software maintenance, Year 2000 related matters and training costs are
expensed as incurred.
The Company assesses its long-lived assets, goodwill and other intangible
assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable, in accordance with SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", based on an evaluation of undiscounted projected cash flows through
the remaining amortization period. If an impairment exists, a current
charge to income is recognized.
F-11
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
1.8 Income taxes
Deferred tax assets and liabilities have been recorded in accordance
with SFAS No. 109 "Accounting for income taxes".
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and are measured using
enacted tax rates expected to apply to taxable income in the years in
which the temporary differences are expected to reverse.
1.9 Product warranty
The Company offers a warranty, which provides for the free repair or
replacement of any covered product or component that fails during
normal use because of a defect in design, materials or workmanship.
Estimated product warranty costs are provided for at the time of sale.
The Company provides an accrual for estimated future warranty costs
based upon the historical relationship of warranty costs to sales. The
accrued liability for warranty costs included in accrued liabilities
in the accompanying balance sheet is 12,341 as of December 31, 1998.
1.10 Research and development
Research and development expenses are charged to expense when
incurred, and approximated 33,034 in 1998.
1.11 Advertising
Advertising costs, which are expensed as incurred, approximated 11,810
in 1998.
F-12
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
1.12 Fair value of financial instruments
The carrying amount of the Company's financial instruments, consisting
of cash equivalents, investments, accounts and notes receivable,
accounts and notes payable and certain other liabilities, approximate
their fair value due to their relatively short maturities.
The fair value of the Company's long-term debt is estimated by
discounting the future cash flows of each instrument at rates
currently offered to the Company for similar debt instruments of
comparable maturities by the Company's bankers. The carrying amount of
the Company's long-term debt approximates their fair value due to
interest rates which reflect current market conditions.
1.13 Environmental matters
The Company is subject to numerous domestic and foreign governmental
regulations that relate directly or indirectly to the use, storage,
handling, treatment, emission, discharge, disposal and remediation of,
and exposure to, hazardous and non-hazardous substances, materials and
waste. Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate
to an existing condition allegedly caused by past operations, that are
not associated with current or future revenue generation, are
expensed. The Company's accounting policy is to provide for any
probable environmental liability when the amount can be reasonably
estimated.
The Company does not believe that environmental regulations have had
to date a material adverse effect on its results of operations and
does not anticipate that any material expenditures will be required to
enable it to comply with existing laws and regulations. Although
liabilities, claims and requirements relating to environmental matters
have not materially affected the Company to date, there can be no
assurance that they will not have a material adverse effect on the
Company's financial condition or results of operations. As of December
31, 1998, accrued environmental liabilities are not material.
F-13
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
1.14 Recently issued accounting pronouncements
In June 1998, the Financial Accounting Standard Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured
at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset
related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess
the effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 and cannot be applied retroactively. The impact of this SFAS on
the Company's consolidated financial statements is not expected to be
material.
2. COMPREHENSIVE INCOME
Pursuant to SFAS No. 130, "Reporting Comprehensive Income", the Company has
reported the components of total comprehensive income in the accompanying
consolidated statement of shareholders' equity. Total comprehensive income is
comprised of net income and all changes to shareholders' equity, except those
due to investments by owners and distributions to owners. For the Company,
other comprehensive income consists of foreign currency translation
adjustments and minimum pension liabilities, for the year ended December 31,
1998 as follows:
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments (36,193)
Minimum pension liability adjustment ( 1,879)
- ------------------------------------------------------------------------------
Other comprehensive income/(loss) (38,072)
==============================================================================
F-14
<PAGE>
<TABLE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
<CAPTION>
3. INVENTORIES
<S> <C>
Inventories at December 31, 1998 consist of:
Raw materials and supplies 124,731
Work in process 33,781
Finished goods 110,032
---------
Total gross value 268,544
Less reserve for obsolete and excess inventories ( 13,947)
- ----------------------------------------------------------------------------------------------------
Total 254,597
====================================================================================================
4. PROPERTY AND EQUIPMENT, NET
Property and equipment as of December 31, 1998 consist of:
Land 205,833
Buildings 621,564
Machinery and equipment 897,340
Furniture and fixtures 127,170
Leasehold improvements 54,973
Capitalized software 40,859
Construction in progress 23,902
- ----------------------------------------------------------------------------------------------------
1,971,641
- ----------------------------------------------------------------------------------------------------
Accumulated depreciation and amortization (1,159,402)
- ----------------------------------------------------------------------------------------------------
812,239
====================================================================================================
</TABLE>
Depreciation and amortization expense approximated 114,440 for 1998.
Construction in progress consists of numerous equipment and facility
projects, none of which are individually material.
F-15
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
The Company is obligated under various capital leases for operating
facilities and equipment that expire at various dates during the next eight
years. Amortization of assets held under capital leases is included with
depreciation expense. The company has no material operating lease
commitments.
Property and equipment recorded under capital leases and included in the
above property and equipment, net summary at December 31, 1998, are as
follows:
Land 9,745
Buildings 160,886
Machinery and equipment 81,144
- ------------------------------------------------------------------------------
251,775
- ------------------------------------------------------------------------------
Accumulated depreciation (160,997)
- ------------------------------------------------------------------------------
90,778
==============================================================================
Future minimum lease payments for capital leases as of December 31, 1998 are:
1999 14,986
2000 14,438
2001 11,106
2002 11,191
2003 11,295
2004 and thereafter 33,022
--------
Total minimum lease payments 96,038
Less amount representing interests
(rates from 3,9% to 4,35%) (18,124)
-------
Present value of net minimum
lease payments 77,914
Less current installments (10,936)
-------
Obligation under capital leases 66,978
======
F-16
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
5. INCOME TAX AND PROVISION
The provision for income taxes consists, as of December 31, 1998 of:
Current tax charge France 12,001
Current tax charge other countries 60,893
------
Total current tax charge 72,894
Deferred tax charge France 8,140
Deferred tax charge other countries 1,693
------
Total deferred tax charge 9,833
------------------------------------------------------------------------------
82,727
==============================================================================
F-17
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Temporary differences between financial statement carrying amounts and tax
bases of assets and liabilities at December 31, 1998, that give rise to
significant portions of deferred income taxes relate to the following:
December 31, 1998
-----------------
Deferred income tax assets:
Net operating loss carry forward 50,819
Accrued vacation pay and other liabilities 11,380
Reserves and allowances 10,033
Employee benefit plan obligations 15,211
Other 4,548
-----------------------------------------------------------------------------
91,991
-----------------------------------------------------------------------------
Valuation allowance (58,500)
-----------------------------------------------------------------------------
Total deferred income tax assets 33,491
=============================================================================
Deferred income tax liabilities:
- Property and equipment (16,097)
- Net leased assets ( 6,256)
- Other ( 6,110)
-----------------------------------------------------------------------------
Total deferred income tax liabilities (28,463)
=============================================================================
-----------------------------------------------------------------------------
Net deferred tax 5,028
=============================================================================
Aggregate deferred tax amounts are summarized below :
Assets:
- Current 19,756
- Non-current 3,654
Liabilities:
- Current ( 2,053)
- Non-current (16,329)
-----------------------------------------------------------------------------
Total 5,028
=============================================================================
F-18
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Net operating losses of: 208 expire in 2000
2,821 expire in 2001
1,042 expire in 2002
and 46,748 can be offset indefinitely.
A valuation allowance has been recorded for deferred tax assets to reflect
an amount management considers to be "more likely than not" realizable.
For France, the statutory tax rate was 42% in 1998. The rate will decrease
to 40% in 1999 and to 37% in 2000.
For the other countries where the Company operates, the statutory income tax
rates range from 18% to 45%.
The effective income tax rate on pretax income varied from the statutory
French income tax rate as set forth in the following table:
%
--
Statutory French income tax rate 42.0
Goodwill and intangible asset amortization 3.9
Other, net ( 1.9)
----------------------------------------------------------------
Effective income tax rate 44.0
================================================================
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1998 consist of:
-----------------------------------------------------------------------------
Goodwill 947,512
Trademarks 422,125
Other 29,661
-----------------------------------------------------------------------------
1,399,298
-----------------------------------------------------------------------------
Less accumulated amortization ( 264,364)
-----------------------------------------------------------------------------
1,134,934
=============================================================================
F-19
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
During 1998, the Company recorded goodwill and other intangible assets of
694,200 related to the acquisition of Werndl AG. See Note 16 to the
consolidated financial statements.
Trademarks consist principally of the brands A.F. Sistemas and Gordon
Russell, which are being amortized over a 40-year useful life.
7. DEALER TRANSITIONS
Dealer transitions as of December 31, 1998 consist of:
Advances to transition dealers 54,787
Investments in transition dealers 12,194
------------------------------------------------------------------------------
66,981
==============================================================================
8. NOTES RECEIVABLE
Notes receivable as of December 31, 1998, consist of the following:
Dealers 14,611
Personnel and other 1,926
------------------------------------------------------------------------------
16,537
==============================================================================
Loans to dealers consist of advances to independent dealers, and are subject
to variable interest rates, from approximately 3% to 8%, and are generally
secured either through property mortgage, or a dealer personal guarantee.
F-20
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
9. AFFILIATED COMPANIES
Affiliated companies' balances and transactions as of and for the year ended
December 31, 1998 consist of the following:
Accounts receivable affiliates
Steelcase Inc. 3,879
Other 2,429
-----------------------------------------------------------------------------
Total accounts receivable affiliates 6,308
=============================================================================
Investments in/advances to affiliates
Strafor Facom S.A. and subsidiaries 103,150
Other 9,532
-----------------------------------------------------------------------------
Total investments in/advances to affiliates 112,682
=============================================================================
Accounts and notes payable affiliates
Steelcase Inc. 3,695
Strafor Facom S.A. 452,386
-----------------------------------------------------------------------------
Total accounts and notes payable affiliates 456,081
=============================================================================
Notes payable affiliated companies (non-current)
Steelcase Inc. 369,121
Other 16,897
-----------------------------------------------------------------------------
Total notes payable affiliated companies (non-current) 386,018
=============================================================================
In December 1998, the Company issued a note payable to Steelcase Inc. in the
amount of 372,814 to fund in part the acquisition of Werndl AG. This note
initially matured on December 1999 and the interest rate is 6 month US LIBOR
+0.50 spread. Recently, new dates of reimbursement have been set and the
note has therefore been classified as long-term.
A note payable to Strafor Facom for 360,000 with an original maturity of
January 1999 has been renewed in January 1999 and will be repaid in July
1999, and has therefore been classified as a current note payable on the
accompanying balance sheet. The interest rate on this note was 4.16% in
1998.
F-21
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
10. LONG-TERM DEBT
Long-term debt at December 31, 1998 consists of the following:
December 31, 1998
-----------------
Bank loans 98,519
Capitalized lease obligations (see Note 4) 77,914
Other 868
-----------------------------------------------------------------------------
177,301
-----------------------------------------------------------------------------
Current portion of long-term debt ( 41,265)
-----------------------------------------------------------------------------
136,036
=============================================================================
Bank loans are subject to interest rates ranging from 4.5% to 7.25%.
The maturity of long-term debt can be summarized as follows:
Year
1999 41,265
2000 17,325
2001 14,765
2002 15,376
2003 15,547
After 2003 73,023
------
177,301
=======
F-22
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
11. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1998, are as follows:
Accrued vacation pay and employee expenses 76,891
Income taxes and other taxes 69,996
Employee compensation and payroll taxes 147,383
Dealer incentives 42,794
Warranty provision 12,341
Down-payment from customers 10,763
Other 137,561
-----------------------------------------------------------------------------
497,729
=============================================================================
12. STOCKHOLDERS' EQUITY
Retained earnings
As explained in Note 1.2, net income and retained earnings as presented in
the accompanying financial statements are determined in accordance with
United States generally accepted accounting principles and differ from
statutory accounts.
As of December 31, 1998, Steelcase Strafor S.A.'s statutory retained
earnings available for distribution amounted to 423,077.
F-23
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
13. CONTINGENCIES AND COMMITMENTS
13.1 Legal proceedings
The Company is involved in litigation from time to time in the
ordinary course of its business. The Company has provided under
accrued liabilities for litigation when a loss was considered probable
and could be reasonably estimated.
Based on known information, management believes that the Company is
not currently party to any material litigation.
13.2 Hedging instruments, concentration of audit risk and off-balance
sheet risk
Financial instruments, which potentially subject the Company to
concentrations of investment and credit risk, primarily consist of
cash equivalents, accounts receivable, and notes receivable. The
Company places its cash with high-quality financial institutions and
invests in high-quality securities and commercial paper. The Company
limits its exposure, by policy, to any one financial institution or
debtor.
The Company's customers consist primarily of independent dealers in
the office furniture industry. They are dispersed primarily across
Europe. All probable uncollectable accounts and notes receivable have
been appropriately considered in establishing the allowances for
losses. In general, the Company obtains security interests in the
assets of the customer. However, these security interests are
generally secondary to the interests of the customer's primary
lenders.
Guarantees of debt obligations are conditional commitments issued by
the Company to guarantee the performance of certain subsidiaries'
private borrowings arrangements. The Company has guaranteed
approximately 152,000. Although this amount represents the maximum
exposure to loss, management believes the actual risk of loss to be
insignificant.
F-24
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
The Company has entered into forward exchange contracts in order to
obtain foreign currencies at specified rates for the settlement of a
specified volume of transactions denominated in foreign currencies.
Hedging is based on expected future cash flows of receivables and
payables for each currency. The Company's policy provides systematic
hedging of its exchange positions and of its subsidiaries' needs. The
Company does not use these financial instruments for speculative or
trading purposes. The gain or loss on forward exchange contracts is
recorded in the income statement in the same period the underlying
transactions are settled, and generally offset. The net loss is
immaterial as of December 31, 1998.
14. EMPLOYEE BENEFIT PLAN OBLIGATIONS
The Company provides various defined benefit pension plans to its employees.
These plans are principally available to all employees in France, Germany,
United Kingdom and Marocco.
The Company calculates its benefit obligation considering the following:
. the actuarial method used is the projected unit credit method. However,
when the benefit formulas attribute more benefits to senior employees or
when the plans are integrated with social security systems or
multiemployer plans, the Company has elected to apply the projected unit
credit service pro-rata method to avoid delayed recognition of pension
costs;
. the market-related value of assets is computed with a spread of
investments gains and losses over 5 years;
. prior service cost and experience gains and losses are amortized over
the average residual active life of participants.
F-25
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Disclosure requirements as of and for the year ended December 31, 1998, in
accordance with SFAS 132, is as follows:
Change in benefit obligation
Benefit obligation, beginning of year 91,768
Service cost 3,272
Interest cost 5,663
Net actuarial loss 2,453
Benefits paid ( 4,387)
- --------------------------------------------------------------------------------
Benefit obligation, end of year 98,769
================================================================================
Change in plan assets
Fair value of plan assets, beginning of year 23,047
Actual return on plan assets 1,338
Benefits paid ( 1,479)
- --------------------------------------------------------------------------------
Fair value of plan assets, end of year 22,906
================================================================================
Funded status (75,863)
Unrecognized net actuarial loss 10,238
Unrecognized transition obligation ( 815)
- --------------------------------------------------------------------------------
Net amount recognized (66,440)
================================================================================
Amounts recognized in the consolidated balance sheet:
Employee benefit plan obligations (68,319)
Other comprehensive income 1,879
- --------------------------------------------------------------------------------
Net amount recognized (66,440)
================================================================================
Components of expense
Service cost 3,215
Interest cost 5,663
Expected return on plan assets ( 1,338)
Amortization of actuarial loss 571
Amortization of transition obligation ( 407)
- --------------------------------------------------------------------------------
Net expense 7,704
================================================================================
F-26
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Actuarial assumptions have been determined by actuaries on an individual
plan basis:
Weighted-average assumptions
Discount rate 5%
Rate of salary progression 5%
Expected return on plan assets 2.5%
Long service benefits as shown on the balance sheet has been evaluated
using the same method and assumptions as for retirement indemnities but
assuming the benefits will be paid when the seniority required is obtained.
The Projected Benefit Obligation (PBO) amounts to 6,490 as of December 31,
1998.
15. OPERATING SEGMENTS
The Company adopted SFAS NO. 131, "Disclosure about Segments of an
Enterprise and Related Information", effective for the year ended December
31, 1998. In accordance with SFAS NO. 131, the Company has a single
reportable segment: the office furniture industry. The office furniture
segment includes fifteen operating units for the year ended December 31,
1998, which manufacture and sell a broad line of metal and wood office
furniture including office furniture systems, seating, storage solutions,
desks, casegoods and other related products.
Reportable geographic information for the year ended December 31, 1998, is
as follows:
Net Sales Long-lived Assets
France FF 1,121,138 FF 423,779
Germany 498,730 916,070
Other European countries 1,211,380 577,372
Other exports 158,454 29,952
----------------------------------------------------------------------------
Total FF 2,989,702 FF 1,947,173
============================================================================
F-27
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
16. ACQUISITIONS
As of December 16, 1998, the Company acquired 90% of the outstanding stock
of Werndl AG, a German company located in Munich which manufactures and
sells office furniture. The total consideration paid to acquire the 90%
interest in Werndl was 748,300 and includes 167,500 of contingent
consideration based on future earnings of calendar years 1999 and 2000.
Management believes it is more likely than not that this contingent
consideration will be paid and has accounted for it as additional goodwill.
The acquisition of Werndl has been accounted for using the purchase method
of accounting. However, the results of operations of Werndl have not been
included in the Company's consolidated income statement because of the late
date of the transaction and immaterial effect upon the consolidated income
statement.
The excess of the purchase price over the fair value of the net identifiable
assets acquired of 54,100 totals 694,200 and has been recorded as goodwill
and other intangible assets and is being amortized on a straight-line basis
over periods ranging from 15 to 40 years.
F-28
<PAGE>
STEELCASE STRAFOR SA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
17. SUBSEQUENT EVENT
Steelcase Inc. and Strafor Facom, the equal joint-venture partners of
Steelcase Strafor S.A. entered into an agreement on April 22, 1999, whereby
Steelcase Inc. purchased Strafor Facom S.A.'s entire 50% interest in the
Company. Accordingly, the Company is now a wholly owned subsidiary of
Steelcase Inc.
F-29
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On April 22, 1999, Steelcase Inc. and subsidiaries (the "Company"), through its
wholly-owned French subsidiary, Steelcase SAS, acquired the 50% equity interest
in Steelcase Strafor S.A. and subsidiaries ("Strafor") held by its joint venture
partner, Strafor Facom S.A. (a French company traded on the Bourse de Paris).
The purchase was effective as of March 31, 1999. As part of this transaction,
the Company also acquired Strafor Facom S.A.'s 5% equity interest in Werndl
BuroMobeL AG, 3% equity interest in Pohlschroder GmbH, and 50% equity interest
in Details S.A. The purchase price paid to Strafor Facom S.A. for these equity
interests was paid in cash and equaled approximately $225 million. The
acquisition and associated transaction costs of approximately $2 million were
funded by short-term loans from Citicorp USA, Inc. ($100 million) and The
Northern Trust ($11.2 million), a 30-year loan from Societe Generale (net amount
of $41 million) and from the Company's available cash reserves ($75 million).
The terms of the acquisition were established through arm's-length negotiations
between the Company and Strafor Facom S.A.
As a result of this acquisition, which was accounted for under the purchase
method of accounting, Strafor is now wholly-owned by the Company. Accordingly,
the accounts and transactions of Strafor will be included in the consolidated
financial statements of the Company from the effective date of the acquisition.
The Company's year end is the last Friday in February. Strafor's year end is
December 31.
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
February 26, 1999 and Unaudited Pro Forma Condensed Combined Statement of Income
for the year then ended illustrate the effect of the Strafor acquisition as if
the acquisition had occurred on February 26, 1999 for the Pro Forma Condensed
Combined Balance Sheet and as if the acquisition had occurred and been effective
as of the beginning of the year then ended for the Pro Forma Condensed Combined
Statement of Income, which includes Strafor's results of operations for the
year ended December 31, 1998. The purchase accounting adjustments are based
upon prelimimary information and certain management estimates which are subject
to revision in future periods based on additional information such as final
appraisals. No adjustment has been included in the pro forma amounts for any
anticipated cost savings or other synergies.
These Unaudited Pro Forma Condensed Combined Financial Statements should be read
in conjunction with the historical consolidated financial statements of
Steelcase Strafor S.A. and Steelcase Inc. The historical consolidated financial
statements of Steelcase Strafor S.A. and accompanying notes as of December 31,
1998 and for the year then ended are contained in this Form 8-K/A on pages F-1
to F-29. These financial statements are prepared in the local currency of
France, French francs, and have been translated to U.S. dollars using the
average exchange rate for the period for revenues and expenses and using the
exchange rate as of the balance sheet date for assets and liabilities. The
historical consolidated financial statements of Steelcase Inc. and accompanying
notes as of February 26, 1999 and for the year then ended are contained in the
Company's Form 10-K dated May 27, 1999.
The Unaudited Pro Forma Condensed Combined Financial Statements are presented
for informational purposes only and are not intended to be indicative of actual
results had the transactions occurred as of the dates indicated above nor do
they purport to indicate results which may be attained in the future.
F-30
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
FOR THE YEAR ENDED FEBRUARY 26, 1999 (IN MILLIONS, EXCEPT PER SHARE DATA)
STEELCASE INC. STRAFOR WERNDL
HISTORICAL HISTORICAL HISTORICAL
AS REPORTED (2) AS REPORTED (2) AS REPORTED (2)
===================== ====================== =======================
<S> <C> <C> <C>
Net sales $ 2,742.5 $ 506.9 $ 100.0
Cost of sales 1,753.1 358.1 61.6
-------------------- -------------------- ------------------
Gross profit 989.4 148.8 38.4
Selling, general, administrative expenses 672.2 115.5 23.9
--------------------- ------------------- ------------------
Operating income 317.2 33.3 14.5
Other income (expenses):
Interest expense - (2.0) (1.5)
Interest income and other 20.2 0.6 -
----------------------- -------------------- -------------------
Income before provision for income taxes and equity in
net income of joint ventures and dealer transitions 337.4 31.9 13.0
Provision for income taxes 124.9 14.0 7.8
---------------------- ------------------- ------------------
Income before equity in net income of
joint ventures and dealer transitions 212.5 17.9 5.2
Equity in net income of joint
ventures and dealer transitions 8.9 - -
---------------------- -------------------- -----------------
Net income $ 221.4 $ 17.9 $ 5.2
====================== ==================== ===================
Earnings per share:
Basic and diluted $ 1.44
======================
Number of shares issued and outstanding:
Basic and diluted 153.8
======================
</TABLE>
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (1)
FOR THE YEAR ENDED FEBRUARY 26, 1999 (IN MILLIONS, EXCEPT PER SHARE DATA)
STEELCASE INC.
PRO FORMA PRO FORMA
ADJUSTMENTS (4) COMBINED
----------- ---------------
<S> <C> <C>
Net sales $ (5.0) $ 3,344.4
Cost of sales (5.0) 2,167.8
--------------- --------------
Gross profit - 1,176.6
Selling, general, administrative expenses 10.0 821.6
--------------- --------------
Operating income (10.0) 355.0
Other income (expenses):
Interest expense (10.5) (14.0)
Interest income and other (9.5) 11.3
--------------- ---------------
Income before provision for income taxes and equity in
net income of joint ventures and dealer transitions (30.0) 352.3
Provision for income taxes (10.0) 136.7
--------------- --------------
Income before equity in net income of
joint ventures and dealer transitions (20.0) 215.6
Equity in net income of joint
ventures and dealer transitions (8.9) -
--------------- ---------------
Net income $ (28.9) $ 215.6
============== ==============
Earnings per share:
Basic and diluted $ 1.40
==============
Number of shares issued and outstanding:
Basic and diluted 153.8
===============
</TABLE>
The accompanying notes are an integral part of this statement
F-32
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (1)
FEBRUARY 26, 1999
(IN MILLIONS)
STEELCASE INC. STRAFOR WERNDL
HISTORICAL HISTORICAL HISTORICAL
AS REPORTED (2) AS REPORTED (2) AS REPORTED (2)
=================== ======================== ========================
<S> <C> <C> <C>
Current assets $ 737.4 $ 304.9 $ -
Property and equipment, net 739.0 145.1 -
Goodwill and other intangible assets, net 99.6 202.7 -
Other assets 606.5 37.3 -
----------------- --------------------- -------------------
Total assets $ 2,182.5 $ 690.0 $ -
================= ===================== ===================
Current liabilities $ 446.8 $ 314.8 $ -
Long-term debt - 93.2 -
Other liabilities 235.7 51.5 -
----------------- --------------------- -------------------
Total liabilities 682.5 459.5 -
----------------- --------------------- -------------------
Shareholders' equity:
Common stock 379.4 197.1 -
Additional paid-in capital - 17.8
Retained earnings 1,135.6 47.9 -
Accumlated other comprehensive income (15.0) (32.3) -
----------------- --------------------- -------------------
Total shareholders' equity 1,500.0 230.5 -
----------------- --------------------- -------------------
Total liabilities and
shareholders' equity $ 2,182.5 $ 690.0 $ -
================= ==================== ==================
</TABLE>
The accompanying notes are an integral part of this statement.
F-33
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (1)
FEBRUARY 26, 1999
(IN MILLIONS)
STEELCASE INC.
PRO FORMA PRO FORMA
ADJUSTMENTS (3) COMBINED
=========== ==============
<S> <C> <C>
Current assets $ (75.0) $ 967.3
Property and equipment, net 25.0 909.1
Goodwill and other intangible assets, net 93.2 395.5
Other assets (187.9) 455.9
-------------- -----------------
Total assets $ (144.7) $ 2,727.8
============== ================
Current liabilities $ 111.2 $ 872.8
Long-term debt (25.4) 67.8
Other liabilities 287.2
-------------- ------------------
Total liabilities 85.8 1,227.8
-------------- ------------------
Shareholders' equity:
Common stock (197.1) 379.4
Additional paid-in capital (17.8) -
Retained earnings (47.9) 1,135.6
Accumlated other comprehensive income 32.3 (15.0)
-------------- -----------------
Total shareholders' equity (230.5) 1,500.0
-------------- -----------------
Total liabilities and
shareholders' equity $ (144.7) $ 2,727.8
============== ================
The accompanying notes are an integral part of this statement.
</TABLE>
F-34
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. The unaudited pro forma financial data do not give effect to any potential
cost savings or other synergies that could result from the acquisition of
Strafor. The unaudited pro forma data are not necessarily indicative of the
operating results or financial position that would have occurred had the
Strafor acquisition been consummated at the dates indicated, nor necessarily
indicative of future operating results or financial position.
2. These columns represent historical results of operation and financial
position.
The December 31, 1998 historical balance sheet of Strafor, as reported,
includes the accounts of Werndl BuroMobeL AG ("Werndl"), a business acquired
by Strafor on December 16, 1998. As a result, this balance sheet also
reflects a preliminary purchase price allocation related to the Werndl
acquisition based upon the estimated fair value of assets and liabilities as
of the date of the acquisition. Therefore, a historical balance sheet of
Werndl is not included separately in the pro forma condensed combined
balance sheet. The Werndl historical statement of income is included to
reflect the acquisition of this business by Strafor as if the transaction
had ocurred and been effective as of the beginning of the year ended
December 31, 1998.
3. The pro forma balance sheet adjustments apply purchase accounting related to
the Strafor acquisition. The following is a calculation of the estimated
excess of the aggregate cost of the acquisition over the historical book
value of the net assets acquired.
<TABLE>
<S> <C>
Total cash payment to Strafor Facom S.A. $ 225.2
Existing investment in Strafor and Werndl 121.5
Estimated transaction costs 2.0
--------
Total consideration 348.7
Historical book value of Strafor net assets as of December 31, 1998 (230.5)
--------
Estimated excess of the aggregate cost of the acquisition over the
historical book value of the net assets acquired $ 118.2
========
</TABLE>
The purchase price and associated transaction costs were funded by short-
term borrowings ($111.2 million), long-term debt ($41 million) and the
Company's available cash reserves ($75 million). Management currently
estimates that the excess of the aggregate cost of the Strafor acquisition
over the historical book value of the net assets acquired will be allocated
and amortized as follows (in millions):
<TABLE>
<CAPTION>
Amortization Period Amount Annual Amortization
------------------- ------ -------------------
<S> <C> <C> <C>
Estimated fair value adjustment of
property, plant and equipment 10 years $ 25.0 $2.5
Estimated intangible assets, including
patents, trademarks and 15 years $ 93.2 $3.7
other identifiable intangible assets to
and goodwill 40 years
</TABLE>
F-35
<PAGE>
The pro forma adjustments reflect the preliminary allocation of the purchase
price to assets and liabilities assumed. The ultimate allocation of the purchase
price to the net assets acquired is subject to final determination of their
respective fair values, and as a result, these adjustments could change.
The pro forma balance sheet adjustments also include the elimination of
intercompany balances of $66.4 million between the Company and Strafor.
4. The pro forma statement of income adjustments include amortization expense of
intangible assets and goodwill in the amount of $10.0 million, interest expense
and lost interest income in the aggregate amount of $20.0 million and the
corresponding income tax effects as if the acquisitions of Strafor and Werndl
had occurred and been effective as of the beginning of the year ended December
31, 1998. Amortization expense reflects the amounts as calculated in Note 3
above plus a similar amount for Werndl, which based on management's current
estimates would approximate $3.8 million in total. Interest expense and lost
interest income reflect approximately $12.8 million related to the acquisition
of Strafor and $7.2 million related to the acquisition of Werndl. Interest
expense was calculated based on the Company's short-term and long-term borrowing
rates of approximately 5.5% and 7.5%, respectively. Lost interest income was
calculated based on the Company's average return on cash equivalents and short-
term investments, or 5.0%, experienced during the year ended February 26, 1999.
The pro forma statement of income adjustments also include the elimination of
intercompany sales and cost of sales between the Company and Strafor. Further,
these adjustments eliminate the equity in net income of joint ventures as
recorded by Steelcase Inc. for its 50% ownership interest of Strafor for the
year ended February 26, 1999.
F-36
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Stock Purchase Agreement between Steelcase Inc. and Strafor
Facom S.A., dated April 21, 1999.*
23 Consent of Arthur Andersen
99.1 Press release issued by Steelcase Inc., dated April 23,
1999.*
* Incorporated by reference to the like numbered exhibit to the Company's
Current Report on Form 8-K as filed with the Securities and Exchange
Commission on May 7, 1999.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Steelcase Inc.
Grand Rapids, Michigan
As independent public accountants, we hereby consent to the use of our report
dated April 22, 1999 relating to the consolidated financial statements of
Steelcase Strafor S.A. to be included in or made a part of the current report on
Form 8-K of Steelcase Inc. and to incorporation by reference in previously filed
Registration Statements for Steelcase Inc.'s Steelcase Inc. Incentive
Compensation Plan (Registration No. 333-46711) and Steelcase Inc. Employee Stock
Purchase Plan (Registration No. 333-46713).
By /s/ Philippe Guenne
--------------------
BARBIER FRINAULT & ASSOCIES
Arthur Andersen
Neuilly-sur-Seine, France
June 14, 1999
