<PAGE>
- --------------------------------------------------------------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 26, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-13873
----------------
STEELCASE INC.
MICHIGAN 38-0819050
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
901 44TH STREET GRAND RAPIDS, MICHIGAN 49508
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(616) 247-2710
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
----------------
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 [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common stock, as of the latest practicable date: As of December 31, 1999, the
Registrant had outstanding 25,182,185 shares of Class A Common Stock and
127,194,140 shares of Class B Common Stock.
Exhibit index located on page 20.
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<PAGE>
STEELCASE INC. FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 26, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Three and Nine Months Ended November 26, 1999 and November 27, 1998... 3
Condensed Consolidated Balance Sheets
As of November 26, 1999 and February 26, 1999......................... 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended November 26, 1999 and November 27, 1998............. 5
Notes to Condensed Consolidated Financial Statements................... 6-12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 13-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 20
Signatures............................................................... 21
Exhibit Index............................................................ 22
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ------------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................... $ 881.0 $ 687.6 $2,404.7 $2,063.9
Cost of sales....................... 586.7 446.9 1,575.4 1,304.8
--------- --------- -------- --------
Gross profit........................ 294.3 240.7 829.3 759.1
Selling, general and administrative
expenses........................... 216.0 163.9 601.6 512.2
--------- --------- -------- --------
Operating income.................... 78.3 76.8 227.7 246.9
Interest expense.................... (4.7) -- (10.9) --
Other income, net................... 1.3 11.6 9.2 20.3
--------- --------- -------- --------
Income before provision for income
taxes and equity in net income
(loss) of joint ventures and dealer
transitions........................ 74.9 88.4 226.0 267.2
Provision for income taxes.......... 29.2 31.0 88.1 98.9
--------- --------- -------- --------
Income before equity in net income
(loss) of joint ventures and dealer
transitions........................ 45.7 57.4 137.9 168.3
Equity in net income (loss) of joint
ventures and dealer transitions.... (0.4) -- 2.3 5.8
--------- --------- -------- --------
Net income.......................... $ 45.3 $ 57.4 $ 140.2 $ 174.1
========= ========= ======== ========
Earnings per share (basic and
diluted)........................... $ 0.30 $ 0.37 $ 0.92 $ 1.13
========= ========= ======== ========
Dividends per share of common
stock.............................. $ 0.11 $ 0.10 $ 0.33 $ 0.30
========= ========= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
(UNAUDITED)
NOV. 26 , FEB. 26,
1999 1999
ASSETS ----------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 60.4 $ 67.5
Accounts receivable, net.............................. 599.2 348.9
Notes receivable and leased assets.................... 183.8 140.4
Inventories........................................... 177.7 96.5
Other current assets.................................. 100.2 84.1
-------- --------
Total current assets............................ 1,121.3 737.4
Property and equipment, net............................. 909.8 739.0
Notes receivable and leased assets...................... 262.6 209.1
Joint ventures and dealer transitions................... 54.9 210.4
Goodwill and other intangible assets, net............... 416.9 99.6
Other assets............................................ 208.4 187.0
-------- --------
Total assets.................................... $2,973.9 $2,182.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable...................................... $ 218.9 $ 102.1
Short-term borrowings and current portion of long-term
debt................................................. 178.4 --
Accrued expenses:
Employee compensation............................... 153.7 92.8
Employee benefit plan obligations................... 77.9 51.8
Other............................................... 267.6 200.1
-------- --------
Total current liabilities....................... 896.5 446.8
-------- --------
Long-term liabilities:
Long-term debt........................................ 230.1 --
Employee benefit plan obligations..................... 233.2 222.8
Other long-term liabilities........................... 49.7 12.9
-------- --------
Total long-term liabilities..................... 513.0 235.7
-------- --------
Total liabilities............................... 1,409.5 682.5
-------- --------
Shareholders' equity:
Common stock.......................................... 357.2 379.4
Accumulated other comprehensive income................ (18.0) (15.0)
Retained earnings..................................... 1,225.2 1,135.6
-------- --------
Total shareholders' equity...................... 1,564.4 1,500.0
-------- --------
Total liabilities and shareholders' equity...... $2,973.9 $2,182.5
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------
NOV. 26, NOV. 27,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 140.2 $ 174.1
Depreciation and amortization............................... 100.3 75.9
Changes in current assets and liabilities, net of corporate
acquisitions............................................... (113.9) 11.8
Other, net.................................................. 18.2 23.4
------- -------
Net cash provided by operating activities................. 144.8 285.2
------- -------
INVESTING ACTIVITIES
Capital expenditures........................................ (113.1) (138.3)
Corporate acquisitions, net of cash acquired................ (206.3) --
Other, net.................................................. (15.0) (13.5)
------- -------
Net cash used in investing activities..................... (334.4) (151.8)
------- -------
FINANCING ACTIVITIES
Proceeds from issuance of debt.............................. 281.1 --
Repayments of debt.......................................... (75.2) --
Short-term borrowings, net.................................. 49.4 --
Common stock issuance....................................... -- 24.8
Common stock repurchase..................................... (22.2) (15.0)
Dividends paid.............................................. (50.6) (46.2)
------- -------
Net cash provided by (used in) financing activities....... 182.5 (36.4)
------- -------
Net increase (decrease) in cash and cash equivalents...... (7.1) 97.0
Cash and cash equivalents, beginning of period.......... 67.5 103.1
------- -------
Cash and cash equivalents, end of period................ $ 60.4 $ 200.1
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to 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
the registrant's Annual Report on Form 10-K for the fiscal year ended February
26, 1999 ("10-K Report"). For purposes hereof, "Steelcase Inc." or the
"Company" means Steelcase Inc. and its majority owned subsidiaries unless the
context requires otherwise.
The November 26, 1999 condensed consolidated financial statements include
the accounts and balances of Steelcase Strafor S.A. and subsidiaries
("Steelcase Strafor"), which became a wholly-owned subsidiary of the Company
effective March 31, 1999. Additionally, the results of operations of Steelcase
Strafor from April 1, 1999 through September 30, 1999 have been consolidated
with the Company's results of operations. However, due to the effective date
of the acquisition, and the fact that the Company accounts for Steelcase
Strafor on a two-month lag, the results of operations of Steelcase Strafor for
the three months ended March 31, 1999 have not been consolidated with the
Company's results of operations. The Company's 50% equity in net income of
Steelcase Strafor for the three months ended March 31, 1999 and for the nine
months ended November 27, 1998 is included in equity in net income of joint
ventures and dealer transitions in the accompanying condensed consolidated
statements of income.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Steelcase
Inc. and its majority-owned subsidiaries. During the normal course of
business, the Company may obtain equity interests in dealers which the Company
intends to resell as soon as practicable ("dealer transitions"). The financial
statements for majority-owned dealer transitions for which no specific
transition plan has been adopted or is in the process of being adopted at the
acquisition date are consolidated with the Company's financial statements.
Majority-owned dealer transitions with a transition plan that has been adopted
or is in the process of being adopted at the acquisition date are accounted
for under the equity method of accounting and included in joint ventures and
dealer transitions in the accompanying consolidated balance sheet at the
Company's equity in the net assets of those entities, principally based on
audited financial statements for each applicable year.
All significant intercompany accounts, transactions and profits have been
eliminated in consolidation. Foreign currency-denominated assets and
liabilities are translated into U.S. dollars at the exchange rates existing at
the balance sheet date. Income and expense items are translated at the average
exchange rates during the respective periods. Translation adjustments
resulting from fluctuations in the exchange rates are recorded in accumulated
other comprehensive income, a separate component of shareholder's equity.
Gains and losses resulting from the exchange rate fluctuations on transactions
denominated in currencies other than the functional currency are not material.
6
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EARNINGS PER SHARE
The following table reconciles the numerator and denominators used in the
calculations of basic and diluted earnings per share ("EPS") (in millions):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV.
NOV. 26, NOV. 27, 26, NOV. 27,
1999 1998 1999 1998
-------- -------- ------- --------
<S> <C> <C> <C> <C>
NUMERATOR:
Net income numerator for both basic and
diluted EPS........................... $ 45.3 $ 57.4 $ 140.2 $174.1
======= ======= ======= =======
DENOMINATORS:
Denominator for basic EPS-Weighted
average
common shares outstanding............. 152.5 153.9 153.0 153.8
Potentially dilutive shares resulting
from stock options.................... -- -- 0.1 --
------- ------- ------- -------
Denominator for diluted EPS............ 152.5 153.9 153.1 153.8
======= ======= ======= =======
</TABLE>
COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and all changes to
shareholders' equity, except those due to investments by owners and
distributions to owners. Comprehensive income and its components consist of
the following (in millions):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income............................. $45.3 $57.4 $140.2 $174.1
Other comprehensive income:
Foreign currency translation
adjustments......................... 8.1 11.3 (8.2) 2.7
Unrealized gain (loss) on
investments......................... 3.5 0.3 5.5 (0.3)
Minimum pension liabilities.......... -- -- (0.3) --
----- ----- ------ ------
Comprehensive income................... $56.9 $69.0 $137.2 $176.5
===== ===== ====== ======
</TABLE>
7
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Inventories are
valued based upon the last-in, first-out ("LIFO") method and the average cost
method.
Inventories consist of (in millions):
<TABLE>
<CAPTION>
NOV. 26, FEB. 26,
1999 1999
-------- --------
<S> <C> <C>
Finished goods............................................. $ 90.6 $40.9
Work in process............................................ 37.1 32.3
Raw materials.............................................. 97.5 70.8
------ -----
225.2 144.0
LIFO reserve............................................... (47.5) (47.5)
------ -----
$177.7 $96.5
====== =====
</TABLE>
At November 26, 1999, inventories determined by the LIFO inventory method
amounted to $162.7 million, or approximately 72% of the Company's inventories.
ACQUISITIONS
On April 22, 1999, Steelcase Inc., through its wholly-owned French
subsidiary, Steelcase SAS, acquired the 50% equity interest in Steelcase
Strafor held by its joint venture partner, Strafor Facom S.A. The purchase was
effective as of March 31, 1999. As a part of this transaction, the Company
also acquired Strafor Facom S.A.'s 5% equity interest in Werndl BuroMobeL AG
("Werndl"), 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 approximated $227 million including transaction costs of
approximately $2 million, and was funded by approximately $75 million of
existing cash balances, $111 million of short-term borrowings and $41 million
of long-term debt. For more information regarding the acquisition of Steelcase
Strafor, please refer to the Company's Current Report on Form 8-K dated May 7,
1999 and amended June 16, 1999.
As a result of this acquisition, which was accounted for under the purchase
method of accounting, Steelcase Strafor is now wholly-owned by the Company.
Accordingly, the November 26, 1999 condensed consolidated balance sheet
includes the accounts and balances of Steelcase Strafor. Additionally, the
results of operations of Steelcase Strafor from April 1, 1999 through
September 30, 1999 have been consolidated with the Company's results of
operations.
Management currently estimates that the excess of the aggregate cost of the
Steelcase Strafor acquisition over the historical book value of the net assets
acquired will be allocated and amortized as follows (in millions):
<TABLE>
<CAPTION>
AMORTIZATION ANNUAL
PERIOD AMOUNT AMORTIZATION
------------ ------ ------------
<S> <C> <C> <C>
Estimated fair value adjustment of
property, plant
and equipment............................ 10 years $25.0 $2.5
Estimated intangible assets, including 15 years to
patents, trade-marks and other 40 years
identifiable intangible assets and
goodwill................................. $95.1 $3.7
</TABLE>
8
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma data summarizes the combined results of
operations of the Company and Steelcase Strafor as if the acquisition had
occurred at the beginning of the nine month period ended November 27, 1998,
and includes the effect of purchase accounting adjustments that are based upon
preliminary information and certain management estimates which are subject to
revision in future periods based on additional information, such as final
appraisals. In addition, the Steelcase Strafor results of operations include
the pro forma effects of the acquisition of Werndl, a business acquired by
Steelcase Strafor on December 16, 1998. No adjustment has been included in the
pro forma amounts for any anticipated cost savings or other synergies.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Results of Operations (in millions):
Revenues............................. $881.0 $822.1 $2,553.0 $2,490.8
Gross profit......................... 294.3 280.7 877.1 891.7
Operating income..................... 78.3 78.6 236.6 274.6
Net income........................... 45.3 53.8 138.2 168.5
</TABLE>
Effective August 31, 1999, the Company acquired an 89% equity interest in a
significant dealer located in the Northeast United States, for $33.7 million.
The Company considers this transaction to be a dealer transition. However,
because no transition plan had been adopted or was in the process of being
adopted on the acquisition date, the transaction was accounted for under the
purchase method of accounting. Accordingly, this dealer's results of
operations subsequent to August 31, 1999 have been consolidated with the
Company's results of operations. The transaction was completed for $24.0
million in cash and $9.7 million in a note payable, and resulted in the
Company recording an intangible asset of $29.7 million for the excess of the
purchase price over the estimated fair value of the net assets acquired, which
is being amortized over 15 years.
Effective September 4, 1999, the Company purchased the remaining 50% equity
interest of Clestra Hauserman, Inc. ("Clestra") for $6.4 million. Clestra,
based in Solon, Ohio, designs, manufactures, installs and services moveable
and demountable steel walls for office interiors. The transaction, which was
completed for $5.2 million in cash and $1.2 million in settlement of a note
receivable, was accounted for under the purchase method of accounting. As a
result, the Company reduced long term assets by $8.1 million for the excess of
the estimated fair value of the net assets acquired over the purchase price,
and the results of operations of Clestra subsequent to September 4, 1999 have
been consolidated with the Company's results of operations. The Company's 50%
equity interest in the net loss of Clestra through September 4, 1999 is
included in equity in net income of joint ventures and dealer transitions in
the accompanying condensed consolidated statements of income.
9
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
<TABLE>
<CAPTION>
INTEREST RATE NOV. 26, FEB. 26,
AVERAGE/RANGE MATURITY 1999 1999
------------- ---------- -------- --------
<S> <C> <C> <C> <C>
U.S. dollar obligations:
Revolving credit facilities
(1)............................ 5.75% 2000 $ 22.7 $ --
Notes payable (2)............... 7.00% --7.87% 2000--2006 63.7 --
Lease receivables transfer
facility (3)................... 6.69% 2000--2006 150.9 --
Other........................... 2.3 --
------ -----
239.6 --
Foreign currency obligations:
Revolving credit facilities
(4)............................ 2.88% 2000--2004 132.1 --
Notes payable (5)............... 2.38% --7.80% 2000--2011 36.3 --
Other........................... 0.5 --
------ -----
168.9 --
------ -----
Total short-term borrowings and
long-term debt................... 408.5 --
Short-term borrowings and current
portion
of long-term debt................ 178.4 --
------ -----
Long-term debt.................... $230.1 $ --
====== =====
</TABLE>
- --------
(1) In April 1999, the Company established a 364-day unsecured committed
revolving credit facility with various financial institutions under which
it may borrow up to $200.0 million. Borrowings under the facility mature
at various dates throughout the year depending on the borrowing terms,
which range from one to six months as selected by the Company, subject to
certain limitations. Interest on committed borrowings, which is due no
later than the maturity of such borrowings, is based on LIBOR or a
floating base rate, as selected by the Company, in each case plus a margin
for the applicable borrowing term. The agreement which, subject to certain
conditions, may be renewed annually for additional 364-day periods,
contains certain covenants which include, among others, minimum levels of
tangible net worth, interest coverage and debt ratio.
Additionally, the Company has entered into agreements with certain
financial institutions which provide for borrowings on unsecured non-
committed short-term credit facilities of up to $70.0 million at variable
interest rates determined by agreement at the time of borrowing. These
agreements expire within one year and subject to certain conditions may be
renewed annually.
(2) Notes payable represents various amounts payable to banks and others.
Certain agreements contain convenants which include, among others, minimum
levels of tangible net worth, interest coverage and debt ratio.
Approximately $12.9 million of notes payable are collateralized by lease
receivables, including the leased assets.
(3) In October 1999, the Company established a $200 million committed lease
receivables transfer facility under which it has the right, subject to
certain conditions, to receive advances against the transfer of certain
lease receivables. The advances are funded either by a bank sponsored
conduit vehicle via the issuance of commercial paper or by committed
financial institutions. Borrowings under the facility are repaid from the
cash flow of specified lease receivables related to Company's leasing
portfolio. The facility may be renewed annually, and advances on the
facility are due monthly over the next seven years with principal payments
determined based upon the related underlying leases. An initial advance of
10
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$154.9 million was funded on October 20, 1999. Interest on the facility is
based on the floating commercial paper rate or LIBOR plus a margin (an
effective rate of 5.86% at November 26, 1999). Lease payments on the
underlying lease receivables are based upon fixed interest rates.
Therefore, to hedge the exposure to changes in interest rates, the Company
entered into an interest rate swap that effectively provides a 6.69% fixed
rate for the initial advance.
(4) In August 1999, the Company established an unsecured committed multi-
currency revolving credit facility with various financial institutions
under which it may borrow up to Euro ("EUR") 200.0 million or its
equivalent in optional currencies. The agreement is comprised of two
tranches; tranche A is a EUR 75.0 million, 364 day revolving facility and
tranche B is a EUR 125.0 million five year term facility. Tranche A
facility borrowings, which amounted to $29.4 million at November 26, 1999,
mature at various dates throughout the year depending on the borrowing
terms. Subject to certain conditions, the tranche A facility may be
renewed annually for additional 364 day periods. Tranche B facility
borrowings, which amounted to $68.4 million at November 26, 1999,
effectively mature at the end of the facility term. Interest on each
borrowing, which is due no later than the maturity of such borrowing, is
based on EURIBOR, LIBOR or a floating base rate as selected by the
Company, in each case, plus a margin for the applicable borrowing term.
The agreement contains certain covenants, which include, among others,
minimum levels of tangible net worth, interest coverage and debt ratio.
Additionally, the Company has entered into agreements with certain foreign
financial institutions which provide for foreign borrowings on unsecured
non-committed short-term credit facilities approximating $125.0 million,
with interest rates determined by agreement at the time of borrowing.
Borrowings on these agreements, which mature within one year and subject to
certain conditions may be renewed annually, amounted to $34.3 million at
November 26, 1999.
(5) Notes payable represents foreign capitalized lease obligations,
collateralized by the underlying leased assets, and various other foreign
third party notes payable.
Annual maturities on short-term borrowings and long-term debt for the next
five years subsequent to Nov. 26, 1999 are as follows (in millions):
<TABLE>
<S> <C>
2000.................................................................. $178.4
2001.................................................................. 67.2
2002.................................................................. 46.9
2003.................................................................. 12.6
2004.................................................................. 80.3
Thereafter............................................................ 23.1
------
$408.5
======
</TABLE>
COMMON STOCK REPURCHASE PROGRAM
On June 17, 1998, the Company's Board of Directors ("Board") approved a
common stock repurchase program authorizing the repurchase of up to three
million shares of common stock. On September 22, 1999, the Board authorized
additional common stock repurchases of up to three million shares. During the
third quarter of fiscal 2000 ("Q3 2000"), the Company repurchased 107,400
Class B common shares at a cost of $1.4 million. As of November 26, 1999,
total repurchases amounted to $37.2 million, 3,999,130 shares remain available
for repurchase under the programs, and the Company has outstanding commitments
to repurchase 250,600 of those remaining shares.
11
<PAGE>
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OPERATING SEGMENTS
In accordance with Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information, the
Company operates on a worldwide basis within a single reportable segment, the
office furniture industry. The office furniture segment includes several
operating segments that manufacture an extensive range of steel and wood
office furniture products. The nature of the products, production processes,
types of customers and methods of distribution are consistent across segments
and therefore have been aggregated into one reported segment. The Company's
primary product lines include office furniture systems, seating, storage
solutions, desks and casegoods, and interior architectural products.
The Company evaluates performance and allocates resources based on net
income or loss. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies in
the 10-K Report. Management views interest income, interest expense, and
certain other non-operating xcosts as being associated with the office
furniture segment since this segment is the Company's primary activity and
accounts for the majority of the Company's net sales, assets and net income.
CONTINGENCY
As described in the Company's 10-K Report, the Company's warranty policy
offers a lifetime warranty on Steelcase brand products, subject to certain
exceptions, 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. In accordance with this warranty policy, the
Company recorded an accrual of $5.0 million in cost of sales, $3.1 million on
an after-tax basis, in Q3 2000 for costs associated with the implementation of
several aesthetic, performance and quality improvements related to the new
Pathways portfolio of products. Management anticipates that the Company will
likely incur an additional $2.0 to $4.0 million after-tax charge in the fourth
quarter of fiscal 2000 ("Q4 2000") for continuing the aforementioned
improvements.
Additionally Management anticipates that the Company will likely incur a
one-time charge during Q4 2000 to cover the costs of product improvements to
the architectural elements of Pathways to address some ambiguities embedded in
various model building codes which may be adopted locally and applied to some
of the Pathways portfolio. The enhancements will also address inconsistencies
between the model building codes and existing furniture based standards,
particularly with respect to the various methods of testing under each.
Although final costs are being determined, the Company estimates that the
material and installation costs of the product improvements could range from
$8.0 million to $12.0 million after-tax. The modifications will be offered to
all existing Pathway's customers for installation at their site at the
Company's expense over the coming months.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the accompanying Condensed
Consolidated Financial Statements of the Company and Management's Discussion
and Analysis of Financial Condition and Results of Operations set forth in the
10-K Report.
RESULTS OF OPERATIONS
The following table sets forth condensed consolidated statement of income
data for the three and nine month periods ended November 26, 1999 and November
27, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED PERCENTAGE NINE MONTHS ENDED PERCENTAGE
----------------- CHANGE ----------------- CHANGE
NOV. 26, NOV. 27, INCREASE/ NOV. 26, NOV. 27, INCREASE/
1999 1998 (DECREASE) 1999 1998 (DECREASE)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 28.1% 100.0% 100.0% 16.5%
Cost of sales........... 66.6 65.0 31.3% 65.5 63.2 20.7%
----- ----- ----- -----
Gross profit............ 33.4 35.0 22.3% 34.5 36.8 9.2%
Selling, general and
administrative
expenses............... 24.5 23.8 31.8% 25.0 24.8 17.5%
----- ----- ----- -----
Operating income........ 8.9 11.2 2.0% 9.5 12.0 (7.8)%
Interest expense........ (0.5) -- n/m (0.5) -- n/m
Other income, net....... 0.1 1.7 (88.8)% 0.4 0.9 (54.7)%
----- ----- ----- -----
Income before provision
for income taxes and
equity in net income
(loss) of joint
ventures and dealer
transitions............ 8.5 12.9 (15.3)% 9.4 12.9 (15.4)%
Provision for income
taxes.................. 3.3 4.5 (5.8)% 3.7 4.8 (10.9)%
----- ----- ----- -----
Income before equity in
net income (loss) of
joint ventures and
dealer transitions..... 5.2 8.4 (20.4)% 5.7 8.1 (18.1)%
Equity in net income
(loss) of joint
ventures and dealer
transitions............ (0.1) -- n/m 0.1 0.3 (60.3)%
----- ----- ----- -----
Net income.............. 5.1% 8.4% (21.1)% 5.8% 8.4% (19.5)%
===== ===== ===== =====
</TABLE>
- --------
n/m = not meaningful
OVERVIEW
Consolidated net sales of $881.0 million for the third quarter of fiscal
2000 ("Q3 2000") increased 28.1% as compared to the third quarter of fiscal
1999 ("Q3 1999"), primarily attributable to the impact of the acquisition of
Steelcase Strafor S.A. and subsidiaries ("Steelcase Strafor") and other
domestic acquisitions. This is the second quarter that the Company is
presenting consolidated results of operations including Steelcase Strafor's
results of operations since the date of acquisition.
The Company completed and announced the acquisition of the remaining 50%
equity interest in Steelcase Strafor on April 22, 1999. The acquisition was
effective as of March 31, 1999 and has been accounted for pursuant to the
purchase method of accounting in the accompanying condensed consolidated
financial statements as of November 26, 1999. The Company accounts for the
results of operations of Steelcase Strafor on a two month lag.
The Company posted an earnings decrease of 21.1% for Q3 2000, with net
income of $45.3 million and basic and diluted earnings per share of $0.30,
compared to net income of $57.4 million and basic and diluted earnings per
share of $0.37 in the prior year's third quarter. The decrease in
profitability is primarily
13
<PAGE>
attributable to the one-time positive impact of tax litigation in Q3 1999 and
the following factors, some of which represent a continuation of the factors
affecting the Company's Q2 2000 earnings:
. Continued competitive pricing pressures.
. Disruptions to the manufacturing process from new product introductions
and ramp-up costs, increased order levels and process changes.
. Margin pressures from the mix of new products, which typically have
initial lower margins.
. Amortization of intangibles relating to the acquisition of the remaining
50% equity interest in Steelcase Strafor.
. Acquisition financing costs and interest expense arising from credit
facilities used to fund the acquisition of the remaining 50% equity
interest in Steelcase Strafor.
. Costs associated with the implementation of several aesthetic,
performance and quality improvements related to Pathways.
As noted above, Q3 1999 net income reflects the impact of the favorable
resolution of income tax litigation dating back to 1989, primarily related to
investment tax credits and accelerated depreciation on the Company's Corporate
Development Center. The resolution of these matters allowed the Company to
reduce its expected effective tax rate for 1999 to 37.0%, and record interest
income of $5.8 million. These matters increased Q3 1999 consolidated net
income by $6.2 million, or $0.04 per share.
THREE AND NINE MONTHS ENDED NOVEMBER 26, 1999 COMPARED TO THREE AND NINE
MONTHS ENDED NOVEMBER 27, 1998
The following table sets forth comparative sales information by segment (in
millions):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED PERCENTAGE ENDED PERCENTAGE
----------------- CHANGE ----------------- CHANGE
NOV. 26, NOV. 27, INCREASE/ NOV. 26, NOV. 27, INCREASE/
1999 1998 (DECREASE) 1999 1998 (DECREASE)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Office furniture--U.S.
only................... $645.8 $599.7 7.7% $1,863.3 $1,803.7 3.3%
Office furniture--
Europe(1).............. 148.5 -- n/m 284.7 -- n/m
Office furniture--
International
(excluding Europe) &
Canada................. 53.0 61.5 (13.8)% 151.3 167.0 (9.4)%
Services & other
businesses............. 33.7 26.4 27.7% 105.4 93.2 13.1%
------ ------ -------- --------
Consolidated net sales.. $881.0 $687.6 28.1% $2,404.7 $2,063.9 16.5%
====== ====== ======== ========
</TABLE>
- --------
n/m = not meaningful
(1) Steelcase Strafor recorded net sales of $148.5 million in Q3 2000, an
increase of 31.8% over third quarter fiscal 1999 net sales of $112.7
million. Steelcase Strafor fiscal 1999 net sales have been adjusted from
amounts previously reported in order to conform the classification of
certain sales deductions and other charges with those reflected in the
Company's condensed consolidated financial statements.
Steelcase Inc. posted record net sales, increasing 28.1% and 16.5% over the
comparable prior year three and nine month periods, primarily attributable to
the Steelcase Strafor acquisition. Excluding the effects of the Steelcase
Strafor acquisition, Q3 2000 consolidated net sales increased 6.5% as a result
of domestic acquisitions and strong new product sales, partially offset by
decreases in the non-European international office furniture businesses.
14
<PAGE>
The Company's U.S. office furniture net sales increased 7.7% for Q3 2000,
principally as a result of domestic acquisitions, strong performance of the
Company's new products, and strong net sales growth for the quarter in the
Company's Design Partnership , Wood, and Revest operations, as a group. Q3
2000 net sales for the Company's Steel furniture operations, which are the
Company's largest business unit and represent approximately 70% of annualized
U.S. revenues, remained flat compared to Q3 1999.
Domestic acquisitions accounted for approximately two-thirds of the
Company's U.S. office furniture sales growth for Q3 2000. Excluding all
acquisitions, U.S. net sales increased 2.5%. On September 4, 1999, the Company
acquired the remaining 50% interest in Clestra Hauserman Inc. and accordingly,
has consolidated its results of operations during this quarter. Clestra
Hauserman is a leading provider of steel moveable walls and partitions in
North America. This acquisition expands the Company's Pathways portfolio of
architectural product options. Additionally, effective August 31, 1999, the
Company acquired a majority interest in a significant dealer located in the
Northeast United States. This acquisition is intended to secure the
opportunity for a smooth ownership transition in a key geographical area and
does not represent a change in philosophy regarding independent ownership of
the dealer network. The Company had not adopted nor was in the process of
adopting a transition plan with respect to this dealer on the acquisition
date, and therefore the results of operations the dealer have been
consolidated with the Company's results of operations according to the
Company's consolidation guidelines. Finally, the impact of the J. M. Lynne
acquisition, which was consummated in Q4 1999, has also contributed to the
current period sales growth.
The Business and Institutional Furniture Manufacturers' Association
reported a revised sales growth forecast of (1.0)% to 0.0% for calendar year
1999. Management estimates that the Company will experience modest sales
growth for the fiscal year, excluding the effects of the Steelcase Strafor
acquisition.
Steelcase Strafor net sales for the three month period ended September 30,
1999 increased 31.8%, primarily attributable to the acquisition of Werndl
BuroMobeL ("Werndl") in December 1998. Steelcase Strafor net sales excluding
the Werndl acquisition increased 7.2% versus the prior year third quarter due
to a reduction in the backlog of sales in France and the United Kingdom offset
by the negative impact of the Euro exchange rate versus the United States
dollar. In Q2 2000, a fire in a manufacturing facility in the United Kingdom
and the effects of a seven-day strike in May at the Strasbourg facility caused
an increase in backlog which returned to normal levels this quarter.
Additionally, net sales were also impacted by increased volume in most other
countries, particularly Spain, Italy and the Netherlands.
The Company's international net sales, excluding Europe, decreased 13.8%
for Q3 2000 primarily as a result of continued softness in demand,
particularly in South America, Canada, and Australia, coupled with the adverse
impact of currency devaluation in Brazil.
The Q3 2000 gross margin of 33.4% reflected a decrease of 1.6 percentage
points from the 35.0% Q3 1999 gross margin. The decreases of 1.6 and 2.3 gross
profit percentage points for Q3 2000 and the nine months ended November 26,
1999, respectively, were driven by several factors. First, they were impacted
by competitive pricing pressures on gross margins in the steel furniture
operations. Management believes the competitive pricing situation is primarily
a result of excess capacity in the industry and low industry growth rates
projected for the current calendar year. Second, margins were also impacted by
disruptions to the manufacturing process from new product ramp-up, increased
order levels and process changes. New products such as the Answer(R) system,
the expanded Pathways(R) portfolio of products, and the Leap(TM) chair have
placed additional demands on the manufacturing process resulting in increased
manufacturing costs. Sales of these new products have increased during the
first nine months of fiscal 2000, resulting in increased pressure on margins.
Disruptions from new process changes and increased order levels are also
negatively affecting the short-term gross margins. The Company is currently
changing production processes to better leverage its investment in technology,
including enterprise management and plant scheduling software. These
investments are intended to reduce inventory levels, reduce material handling
costs and increase visibility to the Company's cost structure.
15
<PAGE>
Third, as described in the Company's 10-K Report, the Company's warranty
policy offers a lifetime warranty on Steelcase brand products, subject to
certain exceptions, 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. In accordance with this warranty policy,
the Company recorded an accrual of $5.0 million in cost of sales, $3.1 million
on an after-tax basis, in Q3 2000 for costs associated with the implementation
of several aesthetic, performance and quality improvements related to the new
Pathways portfolio of products. Management anticipates that the Company will
likely incur an additional $2.0 to $4.0 million after-tax charge in the fourth
quarter of fiscal 2000 ("Q4 2000") for continuing the aforementioned
improvements. Finally, margins were impacted by historically lower gross
margins from Steelcase Strafor. These negative factors were offset by
decreased incentive compensation, which is linked to profitability.
Management expects gross margin levels to continue to trail fiscal 1999
levels in Q4 2000 and throughout the next fiscal year due to pricing
pressures, manufacturing issues related to new products as discussed above,
and the impact of historically lower gross margins from Steelcase Strafor.
Additionally, Management anticipates that the Company will likely incur a one-
time charge during Q4 2000 to cover the costs of product improvements to the
architectural elements of Pathways to address some ambiguities embedded in
various model building codes which may be adopted locally and applied to some
of the Pathways portfolio. The enhancements will also address inconsistencies
between the model building codes and existing furniture based standards,
particularly with respect to the various methods of testing under each.
Although final costs are being determined, the Company estimates that the
material and installation costs of the product improvements could range from
$8.0 million to $12.0 million after-tax. The modifications will be offered to
all existing Pathway's customers for installation at their site at the
Company's expense over the coming months.
Selling, general and administrative expenses, as a percentage of sales,
increased from 23.8% in Q3 1999 to 24.5% in Q3 2000 as a result of the
Steelcase Strafor consolidation, and the related impact of amortization of
intangible assets. Selling, general and administrative expenses, as a
percentage of sales, increased from 24.8% in the first nine months of fiscal
1999 to 25.0% for the first nine months of fiscal 2000. Furthermore, during
Q2 2000, the Company recorded a charge in the amount of $6.0 million ($3.7
million net of tax) related to the valuation of accounts receivable in Europe.
Excluding the effects of the Steelcase Strafor acquisition and the reserve
increase for doubtful European receivables, SG&A as a percentage of sales has
decreased slightly compared to the prior year. This decrease is primarily
attributable to cost controlling measures and decreased incentive compensation
to management which is linked to growth.
Other income, net of interest expense, decreased $15.0 million and $22.0
million compared to Q3 1999 and the first nine months of fiscal 1999,
respectively, as a result of one-time interest income aggregating $5.8 million
in Q3 1999 related to the tax settlement previously noted and increased
interest expense and decreased interest income resulting from the Steelcase
Strafor acquisition. Additionally, in Q2 2000 the Company recorded a valuation
reserve in the amount of $2.8 million ($1.7 million net of tax) to record a
permanent impairment on an investment in a "high tech" company.
Income tax expense for both Q3 2000 and the first nine months of fiscal
2000 was 39.0% of income before taxes, as compared to 35.1% and 37.0% for Q3
1999 and the first nine months of fiscal 1999, respectively. Income tax
expense has increased to 39.0% of income before taxes as a result of the
impact on the current year of higher income tax rates in Europe and the
favorable resolution of income tax matters in the prior year as discussed
above. Management expects the full year tax rate for fiscal 2000 to be 39.0%
compared to a tax rate of 37.0% for fiscal 1999.
Equity in net income from joint ventures and dealer transitions decreased
to $(0.4) million and $2.3 million for Q3 2000 and the first nine months of
fiscal 2000, respectively, from $0.0 million and $5.8 million for Q3 1999 and
the first nine months of fiscal 1999, respectively, primarily as a result of
the acquisition of Steelcase Strafor, which had previously been accounted for
under the equity method of accounting.
16
<PAGE>
For the reasons set forth above, net income decreased 21.1% to $45.3
million in Q3 2000, from $57.4 million in Q3 1999, and decreased 19.5% to
$140.2 million for the nine months ended November 26, 1999, from $174.1
million for the nine months ended November 27, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and working capital requirements are primarily met with cash generated
from operating activities, which aggregated $144.8 million for the nine months
ended November 26, 1999. The Company's financial position at November 26, 1999
includes cash and cash equivalents of $60.4 million. These funds, in addition
to cash generated from future operations and available credit facilities, are
expected to be sufficient to finance the known or foreseeable future liquidity
and capital needs of the Company.
Management intends to leverage the significant financial resources
available to the Company to meet its growth objectives. During fiscal 2000,
the Company has obtained long-term debt financing from bank syndicates in
Europe and the United States. Total debt at November 26, 1999 aggregated
$408.5 million, which was approximately 21% of total capitalization
(stockholders' equity and debt).
The principal change in working capital, net of acquisitions, for the nine
months ended November 26, 1999 is attributable to the Company's finance
subsidiary, Steelcase Financial Services Inc. ("SFSI"). SFSI's asset base
continues to grow as SFSI increases its investment in leased assets. SFSI's
asset base increased a total of $98.1 million for the nine month period ended
November 26, 1999. Additionally, accounts receivable, inventories and prepaid
expenses have all increased during the first nine months of fiscal 2000,
primarily attributable to the effects of the Steelcase Strafor acquisition and
other domestic acquisitions.
Capital expenditures were $113.1 million for the nine months ended November
26, 1999, compared to $138.3 million for the nine months ended November 27,
1998. In Q3 1999, the company purchased two facilities in the San Francisco
Bay area for $26 million. One building was acquired to relieve production
constraints and the other to house the west coast Work Life Center. The
Company continues to invest in corporate and showroom facilities, new product
development, SAP implementations, new manufacturing equipment, and a new
Corporate Learning and Development Center in Grand Rapids. Management
anticipates investing $34.0 million on a new wood furniture facility beginning
Q4 2000. The Company's investments are intended to improve productivity and
safety, increase capacity, decrease the impact on the environment, and
facilitate the launch of new services and products. Management expects capital
expenditures to increase significantly in the fourth quarter of fiscal 2000
and to total approximately $165 million for the year.
On April 22, 1999, the Company completed the acquisition of the remaining
50% equity interest in Steelcase Strafor resulting in cash outlays, net of
cash acquired, of $178 million. The purchase price and associated transaction
costs of $227 million were paid principally from bank financing aggregating
$152 million at April 22, 1999, and cash reserves of $75 million. The
financing was comprised of a long-term component of $41 million and short-term
financing of $111 million.
Management continues to evaluate an optimal capital structure for the
Company in light of its long-term growth strategies. In Q3 2000, the Company
established a $200 million lease receivables transfer facility and effectively
replaced the above mentioned short-term financing with borrowings on this
facility. The facility is renewable annually, with borrowings on the facility
maturing in accordance with the underlying leases.
Additionally, the Company has an unsecured, committed credit facility of
EUR 200 million from bank syndicates in Europe to provide liquidity and
finance capital expenditures for its European operations. The agreement is
comprised of two tranches: tranche A is a EUR 75.0 million, 364 day revolving
facility, and tranche B is a EUR 125.0 million, five year term facility. The
euro facility will serve as a natural hedge against currency translation
exposures. During Q3 2000, the Company secured borrowings of approximately
$29.4 million and $68.4 million on tranche A and tranche B, respectively,
primarily for the long term refinancing of a short term payable to Strafor
Facom S.A..
17
<PAGE>
The Company paid a common stock dividend of $0.33 per share, or $50.6
million, and $0.30 per share, or $46.2 million, during the first nine months
of fiscal 2000 and 1999, respectively. During Q1 1999, eligible employees
purchased Class A common shares pursuant to the terms of the Employee Discount
Option Grant, resulting in proceeds to the Company of $24.8 million. During
the first nine months of fiscal 2000, the Company repurchased 327,570 Class A
common shares for $6.2 million and 879,000 Class B shares for $16.0 million,
under a three million share repurchase program authorized by the Board on June
17, 1998. Effective September 22, 1999, the Board authorized additional common
stock repurchases of up to three million shares. Management anticipates that
the stock repurchase program will not reduce the Company's tradeable share
float in the long run as it expects that Class B common shares will continue
to convert into Class A common shares over time.
YEAR 2000
Beginning in 1994, the Company actively engaged in replacing or modifying
all business software applications as well as manufacturing and other
equipment with embedded technology that could fail or generate erroneous
results as a result of Year 2000 date processing ("Year 2000 issues"), issues
affecting Steelcase Inc. and most other companies. Prior to December 31, 1999,
the Company completed the modification or replacement of all critical business
applications, technical infrastructure components and manufacturing equipment,
as well as contingency and business continuity planning activities for
critical business processes within the Company.
As of this filing, all the Company's individual business units, majority-
owned subsidiaries and unconsolidated joint ventures are reporting an overall
state of normal business operations. Additionally, key suppliers and dealers
are reporting normal business operations as well. There have been no Year 2000
issues reported or discovered that would be expected to have a material impact
on the Company's operations or future results of operations.
However, if Year 2000 issues develop subsequent to the date of this filing
among key suppliers and dealers, providers of utilities or governmental
services, or if unforeseen circumstances arise, such issues could have a
material impact on the Company's operations including, but not limited to,
delays in shipments of products resulting in loss of revenues, increased
operating costs, loss of customers or suppliers, or other significant
disruptions to the Company's business. The Company believes, however, that its
Year 2000 readiness program, including contingency and business continuity
plans, has been and will continue to be successful, and therefore, the extent
of the impact that any externally generated Year 2000 issues will have on the
Company's operations will continue to be minimal.
Management views the process of assessing and remediating Year 2000 issues
as an on-going effort which will require continued focus, testing and
verification throughout calendar year 2000. Costs incurred through the date of
this filing specifically to address Year 2000 issues approximated $16 million.
Future costs anticipated to remedy Year 2000 issues have been budgeted and are
not expected to exceed an additional $2 million.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the euro. There will be a transition period from January 1,
1999 through January 1, 2002, at which time all legal tender will convert to
the euro. The transition period is anticipated to resolve difficulties in
handling local currencies and the euro simultaneously, while remaining
flexible to the market. The Company's primary exposure to the euro conversion
is concentrated in Steelcase Strafor. Steelcase Strafor has created an
internal Euro Committee, a pan-European multifunctional team whose goal is to
determine the impact of this currency change on products, markets, and
information systems. Based on the Euro Committee's work to date, the Company
does not expect the euro conversion to have a material impact on Steelcase
Strafor's financial position, or on the Company as a whole.
18
<PAGE>
SAFE HARBOR PROVISION
There are certain forward-looking statements under the Contingency, Results
of Operations for the Three and Nine Months Ended November 26, 1999 Compared
to Three and Nine Months Ended November 27, 1998, Liquidity and Capital
Resources, Year 2000, Euro Conversion, and Recently Issued Accounting
Standards sections, particularly those with respect to the amount of warranty
reserve and one time after-tax charges to be taken in the fourth quarter,
including the material and installation costs of product improvements, gross
margin levels trailing fiscal 1999 levels in Q4 and throughout the next fiscal
year, the Company's sales growth for fiscal 2000, future tax rates, product
offerings, liquidity and capital needs, capital expenditures and investments
for Q4 of fiscal 2000, conversion of Class B common shares to Class A common
shares, the expected ability of and costs to the Company and its key dealers
and suppliers to successfully manage Year 2000 issues, and the impact of the
euro conversion on the financial position of Steelcase Strafor and the
Company. Such statements involve certain risks and uncertainties that could
cause actual results to vary from stated expectations. The Company's
performance may differ materially from that contemplated by such statements
for a variety of reasons, including, but not limited to, competitive and
general economic conditions domestically and internationally, changes in
customer order patterns, competitive pricing pressures, the ability to
decrease disruptions to the manufacturing process from new product
introductions, increased order levels and product mix and process changes, the
ability to decrease, over time, ramp up costs associated with new products,
continued success in technological advances, including development and
implementation of new processes and strategic products for specific market
segments, the ability to grow new businesses and successfully integrate and
operate any acquired businesses, the impact on the Company' business due to
internal systems or systems of suppliers, key customers, dealers and other
third parties adversely affected by Year 2000 issues, costs, including claims,
due to Year 2000 issues and remediation efforts, the future success of new
products and their impact on our manufacturing processes, the impact of the
euro conversion, and other risks detailed in the Company's 10-K Report for the
year ended February 26, 1999, and its other filings with the Securities and
Exchange Commission.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities, establishes accounting and
reporting standards for derivative instruments, requiring recognition of the
fair value of all derivatives as assets or liabilities on the balance sheet.
Gains and losses resulting from changes in fair value would be included in
income, or in comprehensive income, depending on whether the instrument
qualifies for hedge accounting and the type of hedging instrument involved.
SFAS No. 137 Accounting for Derivative Instruments and Hedging Activities-
Deferral of the Effective Date of FASB Statement No. 133 makes this statement
effective for fiscal years beginning after June 15, 2000. Management intends
to adopt the provisions of SFAS No. 133 during the Company's fiscal year 2002.
The impact of this pronouncement on the Company's financial results is
currently being evaluated.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. EXHIBITS
See Exhibit Index
2. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended November 26,
1999.
20
<PAGE>
SIGNATURES
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, THEREUNTO DULY AUTHORIZED.
Steelcase Inc.
/s/ Alwyn Rougier-Chapman
_____________________________________
ALWYN ROUGIER-CHAPMAN
Senior Vice President--Finance,
Chief Financial Officer and
Treasurer (Duly Authorized Officer
and Principal Financial Officer)
Date: January 10, 2000
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
DESIGNATION DESCRIPTION
----------- -----------
<C> <S>
10.11 Steelcase Inc. Deferred Compensation Plan
Financial Data Schedule, for the nine months ended November 26,
27.1 1999.
</TABLE>
<PAGE>
EXHIBIT 10.11
STEELCASE INC.
DEFERRED COMPENSATION PLAN
Effective September 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE ..........................................................................1
ARTICLE I
DEFINITIONS........................................................................1
1.1 Administrative Committee.........................................1
1.2 Beneficiary......................................................1
1.3 Base Salary......................................................1
1.4 Bonus............................................................2
1.5 Code.............................................................2
1.6 Competition......................................................2
1.7 Deferral Account.................................................2
1.8 Deferral Date....................................................2
1.9 Deferral Period..................................................2
1.10 Deferral Year....................................................2
1.11 Disabled.........................................................2
1.12 Election Period..................................................3
1.13 Employee.........................................................3
1.14 ERISA............................................................3
1.15 Gross Misconduct.................................................3
1.16 Participant......................................................3
1.17 Payment Date.....................................................3
1.18 Plan Year........................................................3
ARTICLE II
ELIGIBILITY........................................................................4
ARTICLE III
DEFERRAL OF BASE SALARY OR BONUS...................................................4
3.1 Deferral Elections...............................................4
3.2 Changes and Revocations in Elections.............................4
3.3 Special Rules for First Plan Year................................5
ARTICLE IV
DEFERRAL ACCOUNT...................................................................5
4.1 Deferral Accounts...............................................5
4.2 Debits/Credits to Deferral Accounts.............................5
4.3 Investment Media................................................5
</TABLE>
<PAGE>
ARTICLE V
PAYMENTS .................................................................6
5.1 Timing.................................................6
5.2 Form for Payment.......................................6
5.3 Payment Medium.........................................7
5.4 Accelerated Benefit Payment............................7
ARTICLE VI
MISCELLANEOUS.............................................................8
6.1 No Trust...............................................8
6.2 Funding Arrangements...................................8
6.3 Nonforfeitability......................................8
6.4 Spendthrift Provision..................................9
6.5 Successors, Etc........................................9
6.6 Severability...........................................9
6.7 Governing Law..........................................9
6.8 No Employment Rights...................................9
6.9 Number Construction....................................9
6.10 Amendment and Termination of Plan......................9
6.11 Interpretation and Implementation......................9
6.12 Administrative Committee..............................10
6.13 Claims and Appeals....................................10
6.14 Other Benefits........................................10
ii
<PAGE>
PREAMBLE
Steelcase Inc. (the "Company") is establishing the Steelcase Inc.
Deferred Compensation Plan (the "Plan"), effective September 1, 1999, to provide
a select group of its management and highly compensated employees an opportunity
to defer a portion of their income.
ARTICLE I
DEFINITIONS
The following words and phrases, wherever capitalized, shall have the
following meanings, unless the context requires otherwise:
1.1 "Administrative Committee" means the Chief Executive Officer, the
Chief Financial Officer, the Vice President Human Resources and the Director of
Compensation and/or any other individuals designated by the Compensation
Committee of the Company's Board of Directors to administer this Plan and any
other plan designated by the Compensation Committee.
1.2 "Beneficiary" means the individual, trust, or other entity
designated by the Participant to receive any amounts payable with respect to the
Participant under the Plan after the Participant's death. A Participant may
designate or change a Beneficiary by filing a signed designation with the
Committee on a form approved by the Committee. A Participant's Will is not
effective for this purpose. If the Participant has not designated a Beneficiary
or none so designated survive, the Beneficiary will be the Participant's
surviving spouse, if any; otherwise the Participant's children, including those
by adoption, dividing the distribution equally among the Participant's children,
with the living issue of any deceased child taking their parent's share by right
of representation; if none, the Participant's parents, in equal shares; if none,
the Participant's living brothers and sisters in equal shares; if none the
Participant's estate, if under active administration, and if not, the
Participant's heirs under the laws of Intestacy of the State of Michigan.
Notwithstanding the above, if the Participant designates his or her spouse as a
Beneficiary, and the Participant later divorces that spouse, the Participant's
designation of his or her spouse as Beneficiary shall be null and void, and the
portion of the Participant's benefits that would, but for this provision, be
payable to the Participant's spouse will be payable instead as designated in the
Participant's designation of Beneficiary as if the spouse had predeceased the
Participant.
1.3 "Base Salary" means a Participant's regular salary (unreduced by
any deferrals made on a pre-tax basis to any plan under Code Sections 401(k) or
125), exclusive of any Bonus, deferred compensation payments, fringe benefits,
and other special items, such as stock options.
1
<PAGE>
1.4 "Bonus" means, with respect to any Plan Year, the annual bonus paid
to the Participant for the Company's related fiscal year under the Company's
Management Incentive Plan, excluding the long-term incentive portion of such
bonus, and any additional amount which is designated by the Administrative
Committee as a bonus available for deferral for that Plan Year for purposes of
this Plan.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Competition" means directly or indirectly engaging in competition
with the Company or any subdivision, subsidiary, or affiliate of the Company or
becoming employed by or performing services for any person or entity engaged in
competition with the Company or any subdivision, subsidiary, or affiliate of the
Company without prior approval of the Administrative Committee. A Participant
engages in competitive activity if the Participant is engaged in self-employment
or employment other than with the Company, its affiliates, or distributors, in
the manufacture, design or distribution of office furniture or office systems,
or by providing services to entities which are engaged in such manufacture,
design or distribution. By way of example, such entities include, but are not
limited to: Haworth, Inc.; Herman Miller, Inc.; Hon Industries, Inc.; Knoll,
Inc.; Teknion, Inc.; U.S. Office Products Company; and their affiliates and
dealers. The ownership of a one-percent or greater interest in any entity
engaged in competitive activities will be deemed the equivalent of actual
employment or self-employment.
1.7 "Deferral Account" means the bookkeeping account established by the
Administrative Committee with respect to the Participant pursuant to Article IV
(Deferral Account) for the purpose of recording the amount of the Participant's
Base Salary and Bonus being deferred pursuant to this Plan and the amount of any
earnings, profits, gains or losses credited/debited thereto pursuant to Article
IV (Deferral Account).
1.8 "Deferral Date" means the date on which the deferred portion of the
Base Salary and/or Bonus would have been paid to the Participant had the
Participant not made an election to defer under Section 3.1 (Deferral Election).
1.9 "Deferral Period" means the interval between the Deferral Date and
the first Payment Date.
1.10 "Deferral Year" means a Plan Year during which Base Salary or
Bonus is earned by a Participant and is deferred pursuant to Article III
(Deferral of Base Salary or Bonus).
1.11 "Disabled" or "Disability" means a physical or mental condition of
the Participant which either qualifies him or her for long-term disability
benefits under the Company's long term disability plan, or if he or she is not
covered by that plan, would qualify him or her for such benefits if he or she
were covered (as determined by the Administrative Committee).
2
<PAGE>
1.12 "Election Period" means the once-per-year period designated by the
Administrative Committee before each Deferral Year during which elections under
Articles III (Deferral of Base Salary or Bonus) and V (Payments) must be made.
1.13 "Employee" means a person who is employed by the Company, or any
of its subsidiaries or affiliates.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.15 "Gross Misconduct" means any conduct determined to be "gross
misconduct" by the Administrative Committee.
1.16 "Participant" means an Employee who:
(a) participates in the Company's Management Incentive Plan and
has a minimum Base Salary in an amount determined by the
Administrative Committee; or
(b) is designated by the Administrative Committee as eligible to
participate in the Plan for a particular period;
and
(c) consents in writing to the Company's purchase and ownership
of insurance on his or her life.
A list of the Participants for each Deferral Year shall be maintained by the
Administrative Committee and is hereby incorporated by reference.
1.17 "Payment Date" means the date payments of a Deferral Account
commence pursuant to Section 5.1 (Timing) and each annual anniversary of that
date.
1.18 "Plan Year" means the Company's fiscal year, which is currently
the approximately 12-month period ending on the last Friday of February each
year, except that the first Plan Year shall be a short Plan Year beginning
September 1, 1999, and ending on February 25, 2000.
3
<PAGE>
ARTICLE II
ELIGIBILITY
Prior to the Election Period before each Deferral Year, the
Administrative Committee shall identify the Participants who shall be eligible
to make an election to defer their Base Salary and/or Bonus for the following
five Deferral Years.
ARTICLE III
DEFERRAL OF BASE SALARY OR BONUS
3.1 Deferral Elections. During the Election Period, for the first
Deferral Year in which a Participant is eligible to participate in the Plan, the
Participant may elect a specified dollar amount of his or her Base Salary and/or
a specified percentage (in whole percentages only) of his or her Bonus to be
earned in the following five Deferral Years which shall not be paid in cash, but
shall instead be deferred and distributed to the Participant (or in the event of
the Participant's death, to his or her Beneficiary) in accordance with the
provisions of Article V (Payments). During the Election Period occuring at the
end of that five-Deferral Year period, and during the Election Period at the end
of each five-Deferral Year period thereafter, the Participant may make a similar
elction for the five Deferral Years following the applicable Election Period.
The minimum annual deferral amount is $2,500. The maximum annual deferral amount
is 25% of the Participant's Base Salary and 50% of the Participant's Bonus. The
Administrative Committee may further limit or increase, at any time prior to the
expiration of an Election Period, the maximum amount of Base Salary or Bonus
that can be deferred by any Participant annually in the following Deferral
Years. Any election to defer shall not be effective unless the Participant also
completes any forms as may be required by the Administrative Committee,
including, but not limited to, the selection of investment media in which his or
her Deferral Account shall be deemed invested pursuant to Section 4.3
(Investment Media) and any life insurance forms.
3.2 Changes and Revocations in Elections. Elections generally may not
be changed during the five Deferral Years for which they are in effect, except
that an election to increase the amount deferred may be made during an Election
Period with respect to the Deferral Years remaining in the five-Deferral Year
Period, subject to the Plan maximums and any additional limits as may be
imposed by the Administrative Committee. Upon approval of the Administrative
Committee, a Participant may at any time, with respect to Base Salary or Bonus
amounts not year earned, either decrease the amount to be deferred from Base
Salary and/or Bonus or revoke his or her election entirely. If an election to
defer Bonus amounts is changed or revoked during the course of the Plan Year,
the amount of Bonus deferred for the Plan Year shall be pro-rated to reflect the
proportion of the Plan Year during which the election(s) to defer was (were) in
effect.
3.3 Special Rules for First Plan Year. An election made by Participants
during the first Election Period to defer Base Salary shall apply to Base Salary
earned on and after September 20, 1999. If an election is made by a Participant
during the first Election Period to defer Bonus, the amount to be deferred for
the first Deferral Year shall be determined by multiplying the amount of the
Participant's Bonus earned for the Company's fiscal year ending in February 2000
by a fraction, the numerator of which is the number of days between September
20, 1999, and February 25, 2000 (the last day of the Company's fiscal year), and
the denominator of which is 365.
4
<PAGE>
ARTICLE IV
DEFERRAL ACCOUNT
4.1 Deferral Accounts. The Administrative Committee shall establish a
Deferral Account for each Participant. The portion of each Participant's Base
Salary and Bonus deferred pursuant to Article III (Deferral of Base Salary or
Bonus) shall be credited to his or her Deferral Account as of the applicable
Deferral Date. The Administrative Committee may establish subaccounts within
each Deferral Account for each Deferral Year, as may be necessary to properly
record each Participant's deferral. The Administrative Committee shall maintain
records for each Deferral Account and any subaccounts until the balance of the
Deferral Account has been paid in full pursuant to Article V (Payments). The
Administrative Committee may engage the services of any third parties it deems
appropriate to provide assistance with record keeping.
4.2 Debits/Credits to Deferral Accounts. As of the dates as may be
designated by the Administrative Committee subsequent to the establishment of
the Participant's Deferral Account, until the first day of the Plan Year
following the Participant's termination of employment, death, or Disability, the
Administrative Committee shall credit/debit the Deferral Account with earnings,
profits, gains or losses that would have been credited/debited if assets equal
to the balance of the Deferral Account had been invested in certain designated
mutual funds or other investment media. Thereafter, the Administrative Committee
shall credit the Deferral Account with a rate of interest to be determined by
the Administrative Committee until the entire Deferral Account is distributed.
In the event the Participant is terminated from employment on account of Gross
Misconduct or subsequent to his or her termination of employment engages in
Competition with the Company, the Participant's Deferral Account to be paid
pursuant to Section 5.1 (Timing) and Section 5.2 (Form of Payment) shall be
reduced by any debits or credits previously made to the Deferral Account under
this Section 4.2.
4.3 Investment Media. The Administrative Committee, in its sole
discretion, may periodically designate certain mutual funds or other investment
media (having varying risk/return characteristics) from which the Participant
may request that his or her Deferral Account should, for purposes of Section 4.2
(Debits/Credits to Deferral Accounts), be deemed invested. The Participant may
request that he or she be permitted to alter his or her selection among any such
funds, either for the Participant's existing Deferral Account balance and/or
future deferrals, in one percent increments (or in such other increments as the
Administrative Committee may specify), once in each Plan Year quarter (or at
other intervals selected by the Administrative Committee), to be effective as of
the first day of the next Plan Year quarter (or at other times specified by the
Administrative Committee). Subaccounts within each Deferral Account shall be
deemed invested pro rata within the funds selected by the Participant. The
Administrative Committee may elect either to invest deferred amounts as elected
by the Participant, invest the deferred amounts in any other manner or not
invest the deferred amounts. The actual investment of any Deferral Account shall
not affect the obligation of the Company to provide a benefit as if the Deferral
Account were actually invested as suggested by the Participant. The
Administrative Committee shall establish such procedures and forms as are
appropriate to implement the fund selection process of this Section 4.3.
5
<PAGE>
ARTICLE V
PAYMENTS
5.1 Timing. The Participant's Deferral Account shall be paid or begin
to be paid to the Participant, or to his or her Beneficiary in the event of his
or her death, as soon as administratively feasible following the end of the Plan
Year in which Participant terminates employment, becomes Disabled, or dies.
5.2 Form for Payment. The Participant shall elect in writing, as part
of his or her initial deferral election under Section 3.1 (Deferral Elections),
the period over which the balance of his or her Deferral Account shall be paid
by the Company to the Participant (or in the event of his or her death, to his
or her Beneficiary) from among the following:
(a) one lump sum,
(b) annual payments over a period of five years, or
(c) annual payments over a period of ten years;
provided, however, that the Administrative Committee may elect to distribute the
entire nonforfeitable balance of the Deferral Account, as described in Section
6.3 (Nonforfeitability), in a single lump sum payment to the Participant or his
or her Beneficiary if the balance of the Deferral Account is less than $50,000,
or in the event the Participant becomes Disabled, dies, is terminated from
employment on account of Gross Misconduct, or subsequent to his or her
termination of employment engages in Competition with the Company. The
Participant's election may be changed at any time, but shall not be effective
unless the Participant remains employed with the Company or its affiliates for
at least 12 months after the change of election is filed with the Administrative
Committee.
5.3 Payment Medium. The payments made by the Company with respect to
the Participant's Deferral Account pursuant to Sections 5.1 (Timing) and 5.2
(Form for Payment) above shall be made in cash (reduced by applicable tax
withholdings) and annual payments made in accordance with Section 5.2(b) shall
be in an amount equal to a percentage of his or her relevant subaccount balance
on the relevant Payment Date, determined by dividing the subaccount balance at
the applicable Payment Date by the total remaining years of the payout term.
6
<PAGE>
Example: Assume Participant elected a five-year payout. An amount equal
to the subaccount balance would be paid out as indicated
below.
Percentage of Sub-
Payment Date Account Balance Paid
First Payment Date 20%
Second Payment Date 25%
Third Payment Date 33 1/3%
Fourth Payment Date 50%
Fifth Payment Date 100%
5.4 Accelerated Benefit Payment. Notwithstanding anything to the
contrary herein, the Company shall pay the amount(s) payable under this Plan to
a Participant before such amount(s) would otherwise be paid (and in discharge of
all obligations with respect thereto) if, based on any of the following events,
the Administrative Committee determines, in good faith based on consultation
with counsel, that such Participant has or will recognize income for federal
income tax purposes with respect to such amount(s) before such amount(s) are
otherwise to be paid:
(a) a change in the Code or Title I of ERISA, or the Treasury
or Department of Labor Regulations thereunder, respectively, or a
binding or predominant judicial construction thereof,
(b) a published ruling or similar announcement issued by the
Internal Revenue Service or the Department of Labor,
(c) a decision by a court of competent jurisdiction involving
a Participant, a Beneficiary, the Company or any of the Company's
subsidiaries or affiliates, or
(d) a final determination of tax liability following a
contested tax or ERISA dispute or audit (or a closing agreement made
under Section 7121 of the Code) that involves a Participant, a
Beneficiary, the Company or any of the Company's subsidiaries or
affiliates.
ARTICLE VI
MISCELLANEOUS
6.1 No Trust. Nothing contained in this Plan and no action taken
pursuant to the provisions hereof shall create or deem to create a trust of any
7
<PAGE>
kind, or a fiduciary relationship between the Company and the Participant, his
or her Beneficiary or any other person. To the extent that any person acquires
the right to receive benefits from the Company under this Plan, such right shall
be no greater than the right of any other unsecured general creditor of the
Company, and such person shall have no claim on, or any beneficial interest in,
any assets of the Company. The Company may establish bookkeeping reserves or any
funding media, including grantor trusts, to cover its obligation to make the
payments contemplated under Article V (Payments), but amounts designated in such
bookkeeping reserves or contained in such funding media as are established shall
remain solely those of the Company and shall be subject to the claims of the
creditors of the Company until actually paid to the Participant or his or her
Beneficiary. The provisions of this Plan do not operate as a guarantee that
sufficient assets will exist for the Company to pay any Plan benefits.
6.2 Funding Arrangements. It is the Company's intention that the
amounts deferred under this Plan shall be unfunded for tax purposes and for
purposes of Title I of ERISA. All such amounts shall continue for all purposes
to be part of the general funds of the Company and the Plan shall constitute a
mere promise by the Company to make benefit payments in the future. The Company
may, but is not required to, deposit in an insurance contract(s) or a trust
amounts sufficient to pay benefits under the Plan. Any trust created by the
Company and any assets held by the trust to assist the Company in meeting its
obligations under the Plan will conform to the terms of the model trust as
described in Revenue Procedure 92-64. Any amounts deposited in an insurance
contract or trust will be subject to the Company's general creditors in the
event of the Company's insolvency or under such other circumstances as may be
specified by the insurance contract or trust agreement.
6.3 Nonforfeitability. The Participant's rights to any payments under
this Plan, shall at all times be nonforfeitable, except that in the event the
Participant's employment is terminated for Gross Misconduct, or subsequent to
his or her termination of employment the Participant engages in Competition with
the Company, the Participant shall forfeit any earnings credited to his or her
Deferral Account and the Participant shall be entitled only to the amount of
Bonus and Base Salary he or she has deferred under the Plan.
6.4 Spendthrift Provision. Benefits, payments, proceeds, claims, rights
or interest of the Participant or his or her Beneficiary to or under this Plan
shall not be subject in any manner to any claims, attachments or encumbrances
due to the death, contracts, liabilities, engagements or torts of the
Participant or his or her Beneficiary, directly or indirectly, or be subject to
any claim of any creditor of the Participant or his or her Beneficiary, through
legal process or otherwise; nor shall the Participant or his or her Beneficiary
be able or permitted in any manner to transfer, encumber, pledge, anticipate,
alienate, sell, or assign any such benefits, payments, proceeds, claims, rights
or interest, contingent or otherwise.
8
<PAGE>
6.5 Successors, Etc. This Plan shall be binding upon and benefit the
Company and its successors, and the Participant and his or her Beneficiary,
their heirs and personal representatives, all in accordance and subject to the
terms of this Plan.
6.6 Severability. Each provision of this Plan shall be independent of
and separable from every other provision of this Plan and should any provision
of this Plan be deemed or be declared to be contrary to or unenforceable under
any law, whether constitutional, statutory or otherwise, all of the remaining
provisions of this Plan shall remain in full force and effect.
6.7 Governing Law. This Plan shall be governed in all respects, whether
as to validity, construction, capacity, performance or otherwise, under the laws
of the State of Michigan, except to the extent superseded by federal law.
6.8 No Employment Rights. The Participant's relationship with the
Company is that of an employee at will and the Company may terminate his or her
employment with the Company at any time, with or without cause, except as may
otherwise be set forth in a separate written agreement with the Participant.
Nothing contained in this Plan shall be construed as conferring upon the
Participant the right to continue in the employ of the Company as an executive
or in any other capacity. For purposes of this Section 6.8, the term "Company"
includes any subsidiary or affiliate of the Company that employs the
Participant.
6.9 Number Construction. In all cases where they would so apply, words
used in the singular shall be construed to include the plural.
6.10 Amendment and Terminstion of Plan. The Company may amend or
terminate this Plan at any time with respect to amounts not yet credited to the
Participant's Deferral Account; provided however, no such termination shall
affect the Participant's interest in amounts previously deferred. In the event
the Plan is terminated, the Company may, in its sole discretion, immediately
distribute the balance of the Participants' Deferral Accounts regardless of the
Deferral Periods elected pursuant to Section 5.1 (Timing).
6.11 Interpretation and Implementation. The Administrative Committee
shall have exclusive and final authority and sole and absolute discretion with
respect to (a) the interpretation and implementation of the terms and provisions
of this Plan, (b) exercising any of its powers or duties under this Plan and (c)
the adoption or amendment of such procedures or practices as it deems necessary,
helpful or appropriate, for purposes of administering this Plan.
6.12 Administrative Committee. The Administrative Committee may
delegate any of its powers, authorities or responsibilities under the Plan to
any other person or committee so designated by it in writing. The Administrative
Committee may employ the agents or advisors it deems appropriate to fulfill its
duties under the Plan. No member of the Administrative Committee shall be
personally liable to any person for any action taken or omitted in connection
9
<PAGE>
with performing its duties under the Plan, unless due to that member's own
willful misconduct, gross negligence, or lack of good faith. Members of the
Administrative Committee shall not participate in any action with respect to
benefits they may receive as Participants in the Plan.
6.13 Claims and Appeals. In the event a Participant or Beneficiary
believes he or she is entitled to a payment from the Company which has not been
made, he or she may submit a claim for benefits to the Administrative Committee.
Any denial of the claim shall be made by the Administrative Committee in writing
and shall specify the Plan provisions upon which the denial is based and any
additional information or documentation which the Participant would need to
submit to perfect his or her claim. The Participant may appeal in writing to the
Administrative Committee any denial of his or her claim within 90 days following
the denial, and shall include any additional information or documentation
helpful to support his or her claim. The Administrative Committee's decision
shall be made in writing within 90 days of receipt of the appeal and shall be
final and binding on the Participant and the Company.
6.14 Other Benefits. Any other benefits which are based on the
Participant's compensation level (e.g., disability, life, or pension benefits)
shall be construed to be based on the Participant's compensation before
reduction under this Plan, except to the extent such construction would conflict
with the terms of that benefit plan. If a conflict exists, the Company shall use
its best efforts to revise the other plan to the extent permitted by law.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by
its duly authorized officer, this 6th day of August, 1999, to be effective
September 1, 1999.
STEELCASE INC.
By: /s/ ALWYN ROUGIER-CHAPMAN
--------------------------------------------
Alwyn Rougier-Chapman
Its: Senior Vice President-Finance,
Chief Financial Officer and Treasurer
10
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<PAGE>
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<PERIOD-START> FEB-27-1999
<PERIOD-END> NOV-26-1999
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<CURRENT-ASSETS> 1,121
<PP&E> 2,368
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0
0
<COMMON> 357
<OTHER-SE> 1,207
<TOTAL-LIABILITY-AND-EQUITY> 2,974
<SALES> 2,405
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<CGS> 1,575
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