2017
ANNUALREPORT
FINANCIAL HIGHLIGHTS
Stock Performance
($ Dollars)
300
250
200
150
100
50
0
02/24/12
02/22/13
02/28/14
02/27/15
02/26/16
02/24/17
S&P 500 Stock Index
Peer Group
Steelcase
NOTES:
1. This graph shows the yearly percentage change in
3. The Peer Group consists of three companies that manufacture
cumulative total shareholder return, assuming a $100
investment on February 24, 2012.
2. The S&P 500 Stock Index is used as a performance
indicator of the overall stock market.
office furniture and have industry characteristics that we
believe are similar to Steelcase. The peer group consists of
Herman Miller, Inc., HNI Corporation and Knoll, Inc. The returns
of each company in this group are weighted by their relative
market capitalization at the beginning of each fiscal year.
Revenue
($ Billions)
Gross Margin
(% Of Revenue)
Net Income
($ Millions)
Cash Returned
to Shareholders
($ Millions)
3
.
3
3
7
.
1
3
6
.
1
2 3
.
0
3
9
.
9
2
0
.
3
$
9
.
2
$
1
.
3
$
1
.
3
$
0
.
3
$
3
.
0
7
1
$
6
.
4
2
1
$
7
.
7
8
$
1
.
6
8
$
8
.
8
3
$
4
.
6
5
$
4
.
8
4
$
9
.
9
4
$
3
.
6
3
$
9
.
9
1
$
8
.
5
4
$
2
.
0
5
$
5
.
2
5
$
0
.
7
5
$
5
.
8
5
$
FY: 13
14
15
16
17
FY:
13
14
15
16
17
FY:
13
14
15 16
17
FY:
13
14
15
16
17
Common Stock Repurchases
Dividends Paid
To our shareholders:
We saw the benefits in fiscal year 2017 of the restructuring and business model improvements we’ve
done over the past decade. For the year, Steelcase reported $200 million in operating income, the
highest since the start of the financial crisis in fiscal year 2009. This represented 6.6 percent of revenue,
which was our best operating income margin since fiscal year 2001.
And we achieved this in a year when sales were essentially flat, which I will talk about later in this letter.
During fiscal year 2017, the restructuring and disruption costs experienced over the past two years
because of our EMEA (Europe, Middle East and Africa) manufacturing footprint changes had ended.
Although uncertain economic and political environments continue to impact demand in some markets,
our EMEA operations network is now stable and providing even better service to our customers than
before the restructuring activities began. In addition, gross margins in that segment are improving
and, despite posting an operating loss for the full year, EMEA achieved a small operating profit in the
third quarter and significantly improved full year results compared to the prior year, evidence that the
restructuring actions are paying back.
We believe this past year could also mark a turning point for our Asia Pacific business, which exceeded
our expectations and was nicely profitable for the full year. With the greatest momentum in China and
India, our Asia Pacific team ended the year with record sales and orders in the fourth quarter. And it’s very
promising to see our customer base in the region begin to evolve toward large, local companies that are
expanding outward from Asia and seeking our help in other parts of the world.
In the Americas, our project orders strengthened in the second half of fiscal year 2017, contributing to
organic revenue growth in the second half of the year compared to declines earlier in the year. We saw
significant declines in demand from the energy sector and were not able to fully offset this drop. We are
disappointed by the lack of overall sales growth, but we are confident in our ability to respond.
In the Americas and other established markets, many customers are making the transition from traditional
corporate applications, where we have a large installed base, to a wide range of new work environments
to support new ways of working and a new generation of workers. In the short run, customers preparing
for larger changes ahead are scaling back incremental updates of existing spaces, which creates a
headwind. But in the longer run, we believe these forces will lead to more large project opportunities
among our legacy accounts. That’s good for our business.
These new work environments often include furniture inspired by hospitality and residential trends,
which creates an opportunity for us to broaden our offering. We have introduced new products that are
on trend – and sales of these products are ahead of our internal forecasts – and updated our spaces
and marketing materials to demonstrate ways that we can support customers who want to be “less
corporate.” We will continue to build our offering through our own product development and through
partnerships, aimed at recapturing our share of wallet with customers and our dealers, by delivering the
quality, reliability and scale efficiencies our customers expect from Steelcase.
There are other significant themes that will drive our business in the coming year and beyond. More
and more companies are recognizing our point of view that the workspace is a key driver of employee
engagement and retention. CEOs who are competing for talent want offices that support creativity and
innovation, which requires a range of individual and shared work settings.
Another theme that is beginning to emerge is the desire to understand the effectiveness of these different
types of spaces. Companies want to track utilization to ensure they are making the best use of their real
estate and are helping their people do their best work.
Steelcase has been investing for several years in the development of the “smart and connected” office.
Several months ago, we announced an alliance with Microsoft. We’re working together on a couple of
fronts to solve customer issues – about how to integrate space and technology to unlock creativity and
productivity of people, and about how we can add value for our customers by providing data about how
spaces are being used.
At our NeoCon trade show this past June, we demonstrated two products – Steelcase® Workplace Advisor
and Personal Assistant – that track, store and analyze space utilization data in a secure way. We believe
customers will be willing to subscribe to this steady stream of information, and that users will find value in
a tool that helps them easily find available spaces to meet or do heads-down work.
With a strong balance sheet and having put restructuring activities behind us, our company is ready to
invest in growth. The general business climate appears favorable for our industry and we believe that we
are positioned to gain market share – both in our core business and in new categories such as technology.
We are adding resources to support product innovation and customer relationships, and we continue to
seek partners who can help us expand our offerings.
Finally, a bit of personal recognition: Bill Crawford has been a member of our board since 1979 and he
will be retiring in July. Bill already retired from Steelcase once – 17 years ago – after nearly 35 years of
employee service that included serving as President of the Steelcase Design Partnership. Bill has been
a valuable advisor, a great advocate for people and a living example of our core values.
At the same time, we have welcomed two new board members during the past year, and nominated a third.
Tim Brown, CEO and president of IDEO, and Todd Kelsey, president and CEO of Plexus Corp, are already
making their contributions felt. Jenny Niemann, president and CEO of Forward Space, an independent
Steelcase dealership, has been nominated as a candidate for approval by shareholders at our annual
meeting in July.
Our team, from the members of our board of directors to our employees around the world, is committed to
building shareholder value. Our people are the biggest reason why we continue to lead our global industry,
and why I’m positive about the future. Thanks for your continued interest in Steelcase.
James P. Keane
President and Chief Executive Officer
Steelcase Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 24, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 1-13873
____________________________
STEELCASE INC.
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of
incorporation or organization)
901 44th Street SE
Grand Rapids, Michigan
(Address of principal executive offices)
38-0819050
(IRS employer identification number)
49508
(Zip Code)
Registrant’s telephone number, including area code: (616) 247-2710
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock
Title of each class
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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
No
No
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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
Smaller reporting company
Emerging growth company
Accelerated filer
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates, computed by reference to the closing
No
price of the Class A Common Stock on the New York Stock Exchange, as of August 26, 2016 (the last day of the registrant’s most recently completed second
fiscal quarter) was approximately $1.2 billion. There is no quoted market for registrant’s Class B Common Stock, but shares of Class B Common Stock may
be converted at any time into an equal number of shares of Class A Common Stock.
As of April 10, 2017, 86,903,762 shares of the registrant’s Class A Common Stock and 31,097,549 shares of the registrant’s Class B Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s definitive proxy statement for its 2017 Annual Meeting of Shareholders, to be held on July 12, 2017, are incorporated by
reference in Part III of this Form 10-K.
STEELCASE INC.
FORM 10-K
YEAR ENDED FEBRUARY 24, 2017
TABLE OF CONTENTS
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Supplementary Item. Executive Officers of the Registrant
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Item 15.
Item 16.
Signatures
Schedule II
Index of Exhibits
Page No.
1
6
11
11
11
11
12
14
16
17
34
37
88
88
88
89
89
89
89
89
90
90
91
S-1
E-1
PART I
Item 1. Business:
The following business overview is qualified in its entirety by the more detailed information included
elsewhere or incorporated by reference in this Annual Report on Form 10-K (“Report”). As used in this Report,
unless otherwise expressly stated or the context otherwise requires, all references to “Steelcase,” “we,” “our,”
“Company” and similar references are to Steelcase Inc. and its subsidiaries in which a controlling interest is
maintained. Unless the context otherwise indicates, reference to a year relates to the fiscal year, ended in February
of the year indicated, rather than a calendar year. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third
and fourth quarter, respectively, of the fiscal year indicated. All amounts are in millions, except share and per share
data, data presented as a percentage or as otherwise indicated.
Overview
At Steelcase, our purpose is to unlock human promise by creating great experiences at work, wherever work
happens, and in environments that include education and healthcare. Through our family of brands that include
Steelcase®, Coalesse®, Designtex®, PolyVision® and Turnstone®, we offer a comprehensive portfolio of solutions
that support the social, economic and sustainability needs of people and are inspired by the insights gained from
our human-centered research process. We are a globally integrated enterprise, headquartered in Grand Rapids,
Michigan, U.S.A., with approximately 11,700 employees. Steelcase was founded in 1912 and became publicly
traded in 1998, and our stock is listed on the New York Stock Exchange under the symbol “SCS”.
Our growth strategy continues to focus on translating our research-based insights into products, applications
and experiences that will help the world’s leading organizations amplify the performance of their people, teams and
enterprise. We help our customers create workplace destinations that augment human interaction by supporting
the physical, cognitive and emotional needs of their people, while also optimizing the value of their real estate
investments. We continue to invest in research and product development and have launched new products,
applications and experiences designed to address the significant trends that are impacting the workplace, such as
global integration, disruptive technologies, worker mobility, distributed teams and the need for enhanced
collaboration and innovation.
We also continue to focus on growth through leveraging our global scale. Our global scale allows us to
provide local differentiation, as we serve customers around the globe through significant sales, manufacturing and
administrative operations in the Americas, Europe and Asia Pacific. We remain committed to our strategy as a
globally integrated enterprise and growing our presence in emerging markets alongside our global customers and
where we believe we can serve the needs of workers and organizations.
We market our products and services primarily through a network of independent and company-owned
dealers and also sell directly to end-use customers. We extend our reach with a limited presence in retail and web-
based sales channels.
Our Offerings
Our brands provide an integrated portfolio of furniture settings, user-centered technologies and interior
architectural products across a range of price points. Our furniture portfolio includes panel-based furniture systems,
storage, desks, benches, tables and complementary products such as worktools. Our seating products include task
chairs which are highly ergonomic, seating that can be used in collaborative or casual settings and specialty seating
for specific vertical markets such as healthcare and education. Our technology solutions support group
collaboration by integrating furniture and technology. Our interior architectural products include full and partial
height walls and doors. We also offer services designed to reduce costs and enhance the performance of people,
wherever they work. Among these services are workplace strategy consulting, lease origination services, furniture
and asset management and hosted spaces.
Steelcase
The Steelcase brand takes our insights from research and delivers high performance, sustainable work
environments while striving to be a trusted partner. Being a trusted partner means understanding and helping our
customers and partners who truly seek to elevate their performance. The Steelcase brand's core customers are
leading organizations (such as corporations, healthcare organizations, colleges/universities and government
1
entities) that are often large with ever-changing complex needs and have an increasingly global reach. We strive to
meet their diverse needs while minimizing complexity by using a platform approach—from product components to
common processes—wherever possible.
Steelcase sub-brands include:
• Steelcase Health, which is focused on creating healthcare environments that enable empathy,
empowerment and connection for patients, care partners and providers engaged in the healthcare
experience.
• Steelcase Education, which is focused on helping schools, colleges and universities create the most
effective, rewarding and inspiring "active learning" environments to meet the evolving needs of students
and educators.
Coalesse
Coalesse offers a collection of furnishings that expresses a new freedom at work. Coalesse targets the
rapidly growing crossover and ancillary market—homes and offices, meeting rooms and social spaces, private
retreats and public places—and is addressing the fluid intersections of work and life where boundaries are
collapsing and creativity is increasing.
Designtex
Designtex offers applied materials that enhance environments and is a leading resource for applied surface
knowledge, innovation and sustainability. Designtex products are premium fabrics and surface materials and
imaging solutions designed to enhance seating, walls, work stations and floors and can provide privacy, way-
finding, motivation, communications and artistic expression.
PolyVision
PolyVision is the world's leading supplier of ceramic steel surfaces for use in various applications including
static whiteboards and chalkboards used in educational institutions and architectural panels or special applications
for commercial or infrastructure projects.
Turnstone
Turnstone is based on the belief that the world needs more successful entrepreneurs and small businesses
and that great spaces to work can help that happen. Turnstone makes it easier for these companies to create
insight-led places to work, going to market through our dealer channel or using web-based tools.
Reportable Segments
We operate on a worldwide basis within our Americas and EMEA reportable segments plus an Other
category. Additional information about our reportable segments, including financial information about geographic
areas, is contained in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Note 18 to the consolidated financial statements.
Americas Segment
Our Americas segment serves customers in the United States (“U.S.”), Canada, the Caribbean Islands and
Latin America. Our portfolio of integrated architecture, furniture and technology products is marketed to corporate,
government, healthcare, education and retail customers through the Steelcase, Coalesse and Turnstone brands.
We serve Americas customers mainly through approximately 400 independent and company-owned dealer
locations, and we also sell directly to end-use customers. Our end-use customers tend to be larger multinational,
regional or local companies and are distributed across a broad range of industries and vertical markets, including
healthcare, manufacturing, higher education, financial services, insurance, information technology and government.
No industry or vertical market individually represented more than 13% of the Americas segment revenue in 2017.
Each of our dealers maintains its own sales force which is complemented by our sales representatives who
work closely with our dealers throughout the selling process. The largest independent dealer in the Americas
accounted for approximately 6% of the segment’s revenue in 2017, and the five largest independent dealers
collectively accounted for approximately 18% of the segment’s revenue in 2017.
2
In 2017, the Americas segment recorded revenue of $2,231.9, or 73.6% of our consolidated revenue, and as
of the end of the year had approximately 7,900 employees, of which approximately 5,300 related to manufacturing.
The Americas office furniture industry is highly competitive, with a number of competitors offering similar
categories of products. The industry competes on a combination of insight, product performance, design, price and
relationships with customers, architects and designers. Our most significant competitors in the U.S. are Haworth,
Inc., Herman Miller, Inc., HNI Corporation and Knoll, Inc. Together with Steelcase, domestic revenue from these
companies represents approximately one-half of the U.S. office furniture industry.
EMEA Segment
Our EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase
and Coalesse brands, with an emphasis on freestanding furniture systems, storage and seating solutions. Our
largest presence is in Western Europe, where we believe we are among the market leaders in Germany, France
and Spain. In 2017, approximately 84% of EMEA revenue was from Western Europe. The remaining revenue was
from other parts of Europe, the Middle East and Africa. No individual country in the EMEA segment represented
more than 6% of our consolidated revenue in 2017.
We serve EMEA customers through approximately 350 independent and company-owned dealer locations.
No single independent dealer in the EMEA segment accounted for more than 3% of the segment’s revenue in 2017.
The five largest independent dealers collectively accounted for approximately 11% of the segment’s revenue in
2017. In certain geographic markets, we sell directly to end-use customers. Our end-use customers tend to be
larger multinational, regional or local companies spread across a broad range of industries and vertical markets,
including financial services, higher education, healthcare, government and information technology.
In 2017, our EMEA segment recorded revenue of $503.9, or 16.6% of our consolidated revenue, and as of
the end of the year had approximately 2,100 employees, of which approximately 1,000 related to manufacturing.
The EMEA office furniture market is highly competitive and fragmented. We compete with many local and
regional manufacturers in many different markets. In several cases, these competitors focus on specific product
categories.
Other Category
The Other category includes Asia Pacific, Designtex and PolyVision.
Asia Pacific serves customers in the People’s Republic of China (including Hong Kong), India, Australia,
Japan, Singapore, Korea, Taiwan, Malaysia and other countries in Southeast Asia, primarily under the Steelcase
brand with an emphasis on freestanding furniture systems, seating and storage solutions. We sell directly and
through approximately 50 independent dealer locations to end-use customers. Our end-use customers tend to be
larger multinational or regional companies spread across a broad range of industries and are located in both mature
and emerging markets. Our competition in Asia Pacific is fragmented and includes large global competitors as well
as many regional and local manufacturers.
Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by architects and
designers directly to end-use customers through a direct sales force primarily in North America.
PolyVision manufactures ceramic steel surfaces for use in various applications globally, including static
whiteboards and chalkboards sold through third party fabricators and distributors to the primary and secondary
education markets and architectural panels and other special applications sold through general contractors for
commercial and infrastructure projects.
In 2017, the Other category accounted for $296.6, or 9.8% of our consolidated revenue, and as of the end of
the year had approximately 1,700 employees, of which approximately 900 related to manufacturing.
Corporate
Corporate expenses include unallocated portions of shared service functions such as information technology,
corporate facilities, finance, human resources, research, legal and customer aviation.
3
Joint Ventures and Other Equity Investments
We enter into joint ventures and other equity investments from time to time to expand or maintain our
geographic presence, support our distribution network or invest in new business ventures, complementary products
or services. As of February 24, 2017, our investment in these unconsolidated joint ventures and other equity
investments totaled $50.5. Our share of the earnings from joint ventures and other equity investments is recorded in
Other income (expense), net on the Consolidated Statements of Income.
Customer and Dealer Concentrations
Our largest customer accounted for approximately 1% of our consolidated revenue in 2017, and our five
largest customers collectively accounted for approximately 5% of our consolidated revenue. However, these
percentages do not include revenue from various U.S. federal government agencies. In 2017, our sales to U.S.
federal government agencies represented approximately 3% of our consolidated revenue. We do not believe our
business is dependent on any single or small number of end-use customers, the loss of which would have a
material adverse effect on our business.
No single independent dealer accounted for more than 5% of our consolidated revenue in 2017. The five
largest independent dealers collectively accounted for approximately 13% of our consolidated revenue in 2017. We
do not believe our business is dependent on any single dealer, the loss of which would have a sustained material
adverse effect upon our business.
Working Capital
Our accounts receivable are from our dealers and direct-sale customers. Payment terms vary by country and
region. The terms of our Americas segment, and certain markets within the EMEA segment, encourage prompt
payment from dealers by offering an early settlement discount. Other international markets have, by market
convention, longer payment terms. We are not aware of any special or unusual practices or conditions related to
working capital items, including accounts receivable, inventories and accounts payable, which are significant to
understanding our business or the industry at large.
Backlog
Our products are generally manufactured and shipped within two to six weeks following receipt of an order;
however, in recent years our mix of project business has increased and customer-requested shipment dates have
increasingly extended beyond historical averages. Nevertheless, we do not view the amount of backlog at any
particular time as a meaningful indicator of longer-term shipments.
Global Manufacturing and Supply Chain
Manufacturing and Logistics
We have manufacturing operations throughout North America (in the U.S. and Mexico), Europe (in France,
Germany, Spain, the Czech Republic and Belgium) and Asia (in China, Malaysia and India). Our global
manufacturing operations are centralized under a single organization to serve our customers’ needs across multiple
brands and geographies.
Our manufacturing model is predominately make-to-order with lead times typically ranging from two to six
weeks. We manufacture our products using lean manufacturing principles, which allow us to achieve efficiencies
and cost savings and minimize the amount of inventory on hand. As a result, we largely purchase direct materials
and components as needed to meet demand. We have evolved our manufacturing and supply chain systems
significantly over the last two decades by implementing continuous one-piece flow, platforming our processes and
product offerings and developing a global network of integrated suppliers. We also purchase finished goods
manufactured by third parties predominantly on a make-to-order basis.
These changes to our manufacturing model have reduced the capital needs of our business and the footprint
of our manufacturing space and have allowed us to improve quality, delivery performance and the customer
experience. We continue to identify opportunities to improve the fitness of our business and strengthen our long-
term competitiveness.
In addition to our ongoing focus on enhancing the efficiency of our manufacturing operations, we also seek to
reduce costs through our global sourcing effort. We have capitalized on the platforming of our product offering and
4
are capturing raw material and component cost savings available through lower cost suppliers around the globe.
This platforming of our product offering and global development of potential sources of supply has enhanced our
leverage with supply sources, and we have been able to reduce cycle times through improvements with our
partners throughout the supply chain.
Our physical distribution system utilizes commercial transport, dedicated fleet and company-owned delivery
services. We have implemented a network of regional distribution centers to reduce freight costs and improve
service to our dealers and customers.
Raw Materials
We source raw materials and components from a significant number of suppliers around the world. Those
raw materials include steel, petroleum-based products, aluminum, other metals, wood, particleboard and other
materials and components. To date, we have not experienced any significant difficulties in obtaining these raw
materials.
The prices for certain commodities such as steel, petroleum-based products, aluminum, other metals, wood
and particleboard have fluctuated in recent years due to changes in global supply and demand. Our global supply
chain team continually evaluates current market conditions, the financial viability of our suppliers and available
supply options on the basis of quality, reliability of supply and cost.
Research, Design and Development
Our extensive global research—a combination of user observations, feedback sessions and sophisticated
analyses—has helped us develop social, spatial and informational insights into work effectiveness. We maintain
collaborative relationships with external world-class innovators, including leading universities, think tanks and
knowledge leaders, to expand and deepen our understanding of how people work.
Understanding patterns of work enables us to identify and anticipate user needs across the globe. Our
design teams explore and develop prototypical solutions to address these needs. These solutions vary from
furniture, architecture and technology solutions to single products or enhancements to existing products and across
different vertical market applications such as professional services, healthcare and higher education.
Organizationally, global design leadership directs strategy and project work, which is distributed to design studios
around the world and sometimes involves external design services.
Our marketing team evaluates product concepts using several criteria, including financial return metrics, and
chooses which products will be developed and launched. Designers then work closely with engineers and suppliers
to co-develop products and processes that incorporate innovative user features with efficient manufacturing
practices. Products are tested for performance, quality and compliance with applicable standards and regulations.
We invested $35.8, $33.0 and $35.4 in research, design and development activities in 2017, 2016 and 2015,
respectively. We continue to invest more than one percent of our revenue in research, design and development
each year. In addition, we sometimes pay royalties to external designers of our products as the products are sold,
and these costs are not included in research and development expenses.
Intellectual Property
We generate and hold a significant number of patents in a number of countries in connection with the
operation of our business. We also hold a number of trademarks that are very important to our identity and
recognition in the marketplace. We do not believe that any material part of our business is dependent on the
continued availability of any one or all of our patents or trademarks or that our business would be materially
adversely affected by the loss of any of such, except the “Steelcase,” “Coalesse,” “Designtex,” “PolyVision” and
“Turnstone” trademarks.
We occasionally enter into license agreements under which we pay a royalty to third parties for the use of
patented products, designs or process technology. We have established a global network of intellectual property
licenses with our subsidiaries.
5
Employees
As of February 24, 2017, we had approximately 11,700 employees, of which approximately 7,200 work in
manufacturing. Additionally, we had approximately 1,900 temporary workers who primarily work in manufacturing.
Approximately 100 employees in the U.S. are covered by collective bargaining agreements. Outside of the U.S.,
approximately 2,900 employees are represented by workers' councils that operate to promote the interests of
workers. Management promotes positive relations with employees based on empowerment and teamwork.
Environmental Matters
We are subject to a variety of federal, state, local and foreign laws and regulations relating to the discharge of
materials into the environment, or otherwise relating to the protection of the environment (“Environmental Laws”).
We believe our operations are in substantial compliance with all Environmental Laws. We do not believe existing
Environmental Laws have had or will have any material effects upon our capital expenditures, earnings or
competitive position.
Under certain Environmental Laws, we could be held liable, without regard to fault, for the costs of
remediation associated with our existing or historical operations. We could also be held responsible for third-party
property and personal injury claims or for violations of Environmental Laws relating to contamination. We are a
party to, or otherwise involved in, proceedings relating to several contaminated properties being investigated and
remediated under Environmental Laws, including as a potentially responsible party in several Superfund site
cleanups. Based on our information regarding the nature and volume of wastes allegedly disposed of or released
at these properties, the total estimated cleanup costs and other financially viable potentially responsible parties, we
do not believe the costs to us associated with these properties will be material, either individually or in the
aggregate. We have established reserves that we believe are adequate to cover our anticipated remediation costs.
However, certain events could cause our actual costs to vary from the established reserves. These events include,
but are not limited to: a change in governmental regulations or cleanup standards or requirements; undiscovered
information regarding the nature and volume of wastes allegedly disposed of or released at these properties; and
other factors increasing the cost of remediation or the loss of other potentially responsible parties that are financially
capable of contributing toward cleanup costs.
Available Information
We file annual reports, quarterly reports, proxy statements and other documents with the Securities and
Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The public may
read and copy any materials we file with the SEC at the SEC’s Office of FOIA Services at 100 F Street, NE,
Washington, D.C. 20549-2736. The public may obtain information on the operation of the Office of FOIA Services
by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website at www.sec.gov that contains
reports, proxy and information statements and other information regarding issuers, including Steelcase, that file
electronically with the SEC.
We also make available free of charge through our internet website, www.steelcase.com, our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports,
as soon as reasonably practicable after we electronically file such reports with or furnish them to the SEC. In
addition, our Corporate Governance Principles, Code of Ethics, Code of Business Conduct and the charters for the
Audit, Compensation and Nominating and Corporate Governance Committees are available free of charge through
our website or by writing to Steelcase Inc., Investor Relations, GH-3E-12, PO Box 1967, Grand Rapids, Michigan
49501-1967.
We are not including the information contained on our website as a part of, or incorporating it by reference
into, this Report.
Item 1A. Risk Factors:
The following risk factors and other information included in this Report should be carefully considered. The
risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we do
not know about currently, or that we currently believe are less significant, may also adversely affect our business,
operating results, cash flows and financial condition. If any of these risks actually occur, our business, operating
results, cash flows and financial condition could be materially adversely affected.
6
Our industry is influenced significantly by cyclical macroeconomic factors that are difficult to predict.
Our revenue is generated predominantly from the office furniture industry, and demand for office furniture is
influenced heavily by a variety of factors, including macroeconomic factors such as corporate profits, non-residential
fixed investment, white-collar employment and commercial office construction and vacancy rates. According to the
U.S.-based Business and Institutional Furniture Manufacturers Association and European-based Centre for
Industrial Studies, the U.S. and European office furniture industries have gone through two major downturns in
recent history. Consumption declined by more than 30% and 20% from calendar year 2000 to 2003, and again by
over 30% and 23% from 2007 to 2009, in the U.S. and Europe, respectively. While the U.S. office furniture industry
has generally recovered, the European industry has not improved significantly following the most recent downturn.
During these downturns, our revenue declined in similar proportion and our profitability was significantly reduced.
Although we have made a number of changes to adapt our business model to these cycles, our profitability could
be impacted in the future by cyclical downturns. In addition, the pace of industry recovery, by geography or vertical
market, may vary after a cyclical downturn. These macroeconomic factors are difficult to predict, and if we are
unsuccessful in adapting our business as economic cyclical changes occur, our results may be adversely affected.
Failure to respond to changes in workplace trends and the competitive landscape may adversely affect
our revenue and profits.
Advances in technology, the globalization of business, changing workforce demographics and shifts in work
styles and behaviors are changing the world of work and may have a significant impact on the types of workplace
products and services purchased by our customers, the level of revenue associated with our offerings and the
geographic location of the demand. For example, in recent years, these trends have resulted in a reduction in the
amount of office floor space allocated per employee, a reduction in the number, size and price of typical
workstations, an increase in work occurring in more collaborative settings and in a variety of locations beyond the
traditional office, an increase in residential and lounge-type settings, and broader price offering levels. The
confluence of these factors has attracted new competitors from outside the traditional office furniture industry, such
as real estate management service firms, technology-based firms, general construction contractors and retail and
online residential furniture providers, offering products and services which compete with those offered by us and our
dealers.
In addition, the traditional office furniture industry is highly competitive, with a number of competitors offering
similar categories of products. We compete on a variety of factors, including: brand recognition and reputation;
insight from our research; product design and features; price, lead time, delivery and service; product quality;
strength of dealers and other distributors and relationships with customers and key influencers, such as architects,
designers and facility managers. If we are unsuccessful in developing and offering solutions which respond to
changes in workplace trends and generate revenue to offset the impact of reduced numbers, size and price of
typical workstations, or we or our dealers are unsuccessful in competing with existing competitors and new
competitive offerings which could arise from outside our industry, our revenue and profits may be adversely
affected.
We may not be able to successfully develop, implement and manage our diversification and growth
strategies.
Our longer-term success depends on our ability to successfully develop, implement and manage strategies
that will preserve our position as the world’s largest office furniture manufacturer, as well as expand our offerings
into adjacent and emerging markets. In particular, our diversification and growth strategies include:
•
•
•
•
•
•
•
translating our research regarding the world of work into innovative solutions which address market and
user needs,
growing our market share with existing customers and new customers,
continuing our expansion into adjacent markets such as healthcare clinical spaces, classrooms, libraries
and other educational settings and smaller companies,
expanding our product categories to include additional architecture and technology product offerings,
growing our market share in markets such as China, India and central, eastern, and southern Europe, the
Middle East and Africa,
investing in acquisitions and new business ventures and
developing new alliances and additional channels of distribution.
7
If these strategies to diversify and increase our revenues are not sufficient, or if we do not execute these
strategies successfully, our profitability may be adversely affected.
We have been and expect to continue making investments in strategic growth initiatives and new product
development. If our return on these investments is lower, or develops more slowly, than we anticipate, our
profitability may be adversely affected.
We may be adversely affected by changes in raw material and commodity costs.
We procure raw materials (including steel, petroleum-based products, aluminum, other metals, wood and
particleboard) from a significant number of sources globally. These raw materials are not rare or unique to our
industry. The costs of these commodities, as well as fuel and energy costs, can fluctuate due to changes in global
supply and demand, larger currency movements and changes in import tariffs and trade barriers, which can also
cause supply interruptions. In the short-term, significant increases in raw material and commodity costs can be very
difficult to offset with price increases because of existing contractual commitments with our customers, and it is
difficult to find effective financial instruments to hedge against such changes. As a result, our gross margins can be
adversely affected in the short-term by significant increases in these costs. If we are not successful in passing along
higher raw material and commodity costs to our customers over the longer-term because of competitive pressures,
our profitability could be negatively impacted.
Our global presence subjects us to risks that may negatively affect our profitability and financial
condition.
We have manufacturing facilities, sales locations and offices in many countries, and as a result, we are
subject to risks associated with doing business globally. Our success depends on our ability to manage the
complexity associated with designing, developing, manufacturing and selling our solutions in a variety of countries.
Our global presence is also subject to market risks, which in turn could have an adverse effect on our business,
operating results or financial condition, including:
•
•
differing business practices, cultural factors and regulatory requirements,
political, social and economic instability, natural disasters, security concerns, including terrorist activity,
armed conflict and civil or military unrest, and global health issues, and
•
intellectual property protection challenges.
Our global footprint makes us vulnerable to currency exchange rate fluctuations and currency controls.
We primarily sell our products in U.S. dollars and euros, but we generate some of our revenues and pay
some of our expenses in other currencies. Our results are affected by the strength of the currencies in countries
where we manufacture or purchase goods relative to the strength of the currencies in countries where our products
are sold. We use foreign currency derivatives to hedge some of the short-term volatility of these exposures. There
can be no assurance that such hedging will be economically effective. If we are not successful in managing
currency exchange rate fluctuations, it could have an adverse effect on our business, operating results or financial
condition.
Although we operate globally in multiple currencies, we report our results in U.S. dollars, and thus our
reported results may be positively or negatively impacted by the strengthening or weakening of the other currencies
in which we operate against the U.S. dollar.
In addition, we face restrictions in certain countries that limit or prevent the transfer of funds to other countries
or the exchange of the local currency to other currencies, which could have a negative impact on our profitability.
We also face risks associated with fluctuations in currency exchange rates that may lead to a decline in the value of
the funds held in certain jurisdictions, as well as the value of intercompany balances denominated in foreign
currencies.
Changes in tariffs, global trade agreements or government procurement could adversely affect our
business.
More than 40% of the goods we sell to customers in the U.S., including U.S. government agencies, are
manufactured outside of the U.S., predominantly by our subsidiaries in Mexico. Our Mexican manufacturing
subsidiaries operate as maquiladoras, importing the majority of their raw materials and component parts from the
U.S. We also operate shared services centers in several foreign locations that support our business globally,
8
including our U.S. locations. The implementation of any new tariffs or a border adjustment tax, the repeal of the
North American Free Trade Agreement or other global trade agreements, or changes in U.S. government
procurement rules requiring goods to be produced in the U.S. could have an adverse impact on our business,
operating results or financial condition.
We are increasingly reliant on a global network of suppliers.
Our migration to a less vertically integrated manufacturing model has increased our dependency on a global
network of suppliers. We are reliant on the timely flow of raw materials, components and finished goods from third-
party suppliers. The flow of such materials, components and goods may be affected by:
•
•
•
•
•
fluctuations in the pricing, availability and quality of raw materials,
the financial solvency of our suppliers and their supply chains,
changes in international trade agreements or tariffs,
disruptions caused by labor activities and
damage and loss of production from accidents, natural disasters and other causes.
Any disruptions or fluctuations in the pricing, supply and delivery of raw materials, component parts and
finished goods or deficiencies in our ability to manage our global network of suppliers could have an adverse impact
on our business, operating results or financial condition.
The elimination of redundant capabilities among our regional manufacturing facilities could adversely
affect our business.
Over the past two decades, we made significant changes to our manufacturing model as a result of the
implementation of lean manufacturing principles, and we decreased our total manufacturing footprint globally by
approximately 65%. These changes also eliminated redundant capabilities, and many of our products are currently
produced in only one location in each of the three geographic regions in which we operate (the Americas, EMEA
and Asia Pacific). In addition, our manufacturing model is predominately make-to-order. As a result, any issue
which impacts the production capabilities of one of our manufacturing locations, such as natural disasters,
disruptions in the supply of materials or components, equipment failures or disruptions caused by labor activities,
could have an adverse impact on our business, operating results or financial condition.
We rely largely on a network of independent dealers to market, deliver and install our products, and
disruptions and increasing consolidations within our dealer network could adversely affect our business.
From time to time, we or a dealer may choose to terminate our relationship, or the dealer could face financial
insolvency or difficulty in transitioning to new ownership. Our business is influenced by our ability to initiate and
manage new and existing relationships with independent dealers, and establishing new dealers in a market can
take considerable time and resources. Disruption of dealer coverage within a specific local market could have an
adverse impact on our business within the affected market. The loss or termination of a significant number of
dealers or the inability to establish new dealers could cause difficulties in marketing and distributing our products
and have an adverse effect on our business, operating results or financial condition. In the event that a dealer in a
strategic market experiences financial difficulty, we may choose to make financial investments in the dealership,
which would reduce the risk of disruption but increase our financial exposure. Alternatively, we may elect to
purchase and operate dealers in certain markets which also would require use of our capital and increase our
financial exposure.
Our diversification and growth strategies into adjacent markets, such as healthcare and education, and the
increasing complexity of our technology and architectural products are driving the need for our dealers to develop
additional capabilities and invest in additional resources to support such products and markets. Some of our
smaller dealers do not have the scale to leverage such investments, and as a result, we have seen and may
continue to see increased consolidation within our dealer network. This increased concentration and size of dealers
could increase our exposure to the risks discussed above.
We may be adversely impacted by product defects.
Product defects can occur within our own product development and manufacturing processes or through our
increasing reliance on third parties for product development, manufacturing and testing activities. We incur various
expenses related to product defects, including product warranty costs, product recall and retrofit costs and product
9
liability costs, which can have an adverse impact on our results of operations. In addition, the reputation of our
brands may be diminished by product defects and recalls.
We maintain a reserve for our product warranty costs based on certain estimates and our knowledge of
current events and actions, but our actual warranty costs may exceed our reserve, resulting in a need to increase
our accruals for warranty charges. We purchase insurance coverage to reduce our exposure to significant levels of
product liability claims and maintain a reserve for our self-insured losses based upon estimates of the aggregate
liability using claims experience and actuarial assumptions. Incorrect estimates or any significant increase in the
rate of our product defect expenses could have a material adverse effect on our results of operations.
We may be required to record impairment charges related to goodwill and indefinite-lived intangible
assets which would adversely affect our results of operations.
We have net goodwill of $106.7 as of February 24, 2017. Goodwill and other acquired intangible assets with
indefinite lives are not amortized but are evaluated for impairment annually and whenever an event occurs or
circumstances change such that it is more likely than not that an impairment may exist. Poor performance in
portions of our business where we have goodwill or intangible assets, or declines in the market value of our equity,
may result in impairment charges, which would adversely affect our results of operations.
Changes in corporate tax laws could adversely effect our business.
We are subject to income taxes in the U.S. and various foreign jurisdictions, and more than 55% of our
income tax expense in 2017 related to the U.S. federal corporate income tax. As of February 24, 2017, we had
deferred tax assets of $99.5 based on the current U.S. corporate income tax rate of 35%. Corporate tax reform and
tax law changes are being considered in many jurisdictions, including the U.S. Such tax law changes, if enacted,
could have a material adverse effect on our business, operating results or financial position. Specifically, a
reduction in applicable tax rates may require us to revalue and write-down our deferred tax assets.
There may be significant limitations to our utilization of net operating loss carryforwards to offset future
taxable income.
We have deferred tax assets related to net operating loss carryforwards (“NOLs”) residing primarily in various
non-U.S. jurisdictions totaling $57.0, against which valuation allowances totaling $7.9 have been recorded. We
may be unable to generate sufficient taxable income from future operations in the jurisdictions in which we maintain
deferred tax assets related to NOLs, or implement tax, business or other planning strategies, to fully utilize the
recorded value of our NOLs. We have NOLs in various currencies that are also subject to foreign exchange risk,
which could reduce the amount we may ultimately realize. Additionally, future changes in tax laws or interpretations
of such tax laws may limit our ability to fully utilize our NOLs.
Costs related to our participation in a multi-employer pension plan could increase.
Our subsidiary SC Transport Inc. contributes to the Central States, Southeast and Southwest Areas Pension
Fund, a multi-employer pension plan, based on obligations arising under a collective bargaining agreement with our
SC Transport Inc. employees. The plan is not administered by or in any way controlled by us. We have relatively
little control over the level of contributions we are required to make to the plan, and it is substantially underfunded.
As a result, contributions are scheduled to increase, and we expect that contributions to the plan may be subject to
further increases. The amount of any increase or decrease in our required contributions to the multi-employer
pension plan will depend upon the outcome of collective bargaining, actions taken by trustees who manage the
plan, governmental regulations, the actual return on assets held in the plan, the continued viability and contributions
of other employers which contribute to the plan, and the potential payment of a withdrawal liability, among other
factors.
Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may
incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the
withdrawing employer under very complex actuarial and allocation rules. We could incur a withdrawal liability if we
substantially reduce the number of SC Transport Inc. employees. There were a total of 16 SC Transport Inc.
employees as of February 24, 2017. The most recent estimate of our potential withdrawal liability is $27.1 as of
February 24, 2017.
10
Item 1B. Unresolved Staff Comments:
None.
Item 2. Properties:
We have operations at locations throughout the U.S. and around the world. None of our owned properties are
mortgaged or are held subject to any significant encumbrance. We believe our facilities are in good operating
condition and, at present, are sufficient to meet volume needs currently and for the foreseeable future. Our global
headquarters is located in Grand Rapids, Michigan, U.S.A. Our owned and leased principal manufacturing and
distribution center locations with greater than 100,000 square feet are as follows:
Segment/Category Primarily Supported
Number of Principal
Locations
Owned
Leased
Americas
EMEA
Other
Total
12
5
4
21
5
4
2
11
7
1
2
10
In 2017, we added one leased distribution facility in EMEA and exited one leased manufacturing facility in the
Americas.
Item 3. Legal Proceedings:
We are involved in litigation from time to time in the ordinary course of our business. Based on known
information, we do not believe we are a party to any lawsuit or proceeding that is likely to have a material adverse
effect on the Company.
Item 4. Mine Safety Disclosures:
Not applicable.
11
Supplementary Item. Executive Officers of the Registrant:
Our executive officers are:
Name
Guillaume M. Alvarez
Sara E. Armbruster
Ulrich H. E. Gwinner
James P. Keane
Robert G. Krestakos
Terrence J. Lenhardt
James N. Ludwig
Mark T. Mossing
Gale Moutrey
Lizbeth S. O’Shaughnessy
Eddy F. Schmitt
Allan W. Smith, Jr.
David C. Sylvester
Age
57
46
53
57
55
57
53
59
58
55
45
49
52
Senior Vice President, EMEA
Position
Vice President, Strategy, Research and New Business Innovation
President, Asia Pacific
President and Chief Executive Officer, Director
Vice President, Global Operations
Vice President, Chief Information Officer
Vice President, Global Design and Product Engineering
Corporate Controller and Chief Accounting Officer
Vice President, Communications
Senior Vice President, Chief Administrative Officer, General
Counsel and Secretary
Senior Vice President, Americas
Vice President, Global Marketing
Senior Vice President, Chief Financial Officer
Guillaume M. Alvarez has been Senior Vice President, EMEA since March 2014. Mr. Alvarez was Senior Vice
President, Sales, EMEA from October 2011 to March 2014 and has been employed by Steelcase since 1984.
Sara E. Armbruster has been Vice President, Strategy, Research and New Business Innovation since
January 2014. Ms. Armbruster was Vice President, WorkSpace Futures and Corporate Strategy from May 2009 to
January 2014 and has been employed by Steelcase since 2007.
Ulrich H. E. Gwinner has been President, Asia Pacific since March 2014. Mr. Gwinner was President,
Steelcase Asia Pacific from May 2007 to March 2014 and has been employed by Steelcase since 2000.
James P. Keane has been President and Chief Executive Officer since March 2014. Mr. Keane was
President and Chief Operating Officer from April 2013 to March 2014, Chief Operating Officer from November 2012
to April 2013 and President, Steelcase Group from October 2006 to November 2012. Mr. Keane has been
employed by Steelcase since 1997.
Robert G. Krestakos has been Vice President, Global Operations since February 2015. Mr. Krestakos was
Vice President, Chief Information Officer and Operations-Americas from December 2013 to February 2015 and Vice
President, Chief Information Officer from June 2007 to December 2013. Mr. Krestakos has been employed by
Steelcase since 1992.
Terrence J. Lenhardt has been Vice President, Chief Information Officer since January 2015. Mr. Lenhardt
was Vice President, Finance-Americas, EMEA & Asia Pacific from February 2013 to January 2015 and Vice
President, Finance-Steelcase Group Americas & EMEA from February 2011 to February 2013. Mr. Lenhardt has
been employed by Steelcase since 1994.
James N. Ludwig has been Vice President, Global Design and Product Engineering since March 2014. Mr.
Ludwig was Vice President, Global Design from March 2008 to March 2014 and has been employed by Steelcase
since 1999.
Mark T. Mossing has been Corporate Controller and Chief Accounting Officer since April 2008 and has been
employed by Steelcase since 1993.
Gale Moutrey has been Vice President, Communications since March 2014. Ms. Moutrey was Vice
President, Brand Communications from March 2001 to March 2014 and has been employed by Steelcase since
1984.
12
Lizbeth S. O’Shaughnessy has been Senior Vice President, Chief Administrative Officer, General Counsel
and Secretary since June 2014. Ms. O'Shaughnessy was Senior Vice President, Chief Legal Officer and Secretary
from April 2011 to June 2014 and has been employed by Steelcase since 1992.
Eddy F. Schmitt has been Senior Vice President, Americas since March 2014. Mr. Schmitt was Senior Vice
President, Sales and Distribution, Americas from February 2011 to March 2014 and has been employed by
Steelcase since 2003.
Allan W. Smith, Jr. has been Vice President, Global Marketing since September 2013. Mr. Smith was Vice
President, Applications & Product Marketing-Steelcase Brand from January 2011 to September 2013 and has been
employed by Steelcase since 1991.
David C. Sylvester has been Senior Vice President, Chief Financial Officer since April 2011 and has been
employed by Steelcase since 1995.
13
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities:
Common Stock
Our Class A Common Stock is listed on the New York Stock Exchange under the symbol “SCS”. Our Class B
Common Stock is not registered under the Exchange Act or publicly traded. See Note 14 to the consolidated
financial statements for additional information. As of the close of business on April 10, 2017, we had outstanding
118,001,311 shares of common stock with 6,055 shareholders of record. Of these amounts, 86,903,762 shares are
Class A Common Stock with 5,989 shareholders of record and 31,097,549 shares are Class B Common Stock with
66 shareholders of record.
Class A Common Stock
Per Share Price Range
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
2017
High
Low
2016
High
Low
Dividends
$
$
$
$
15.89 $
12.47 $
16.36 $
16.35 $
13.06 $
12.67 $
20.45 $
16.88 $
19.79 $
20.30 $
16.06 $
17.07 $
18.14
15.35
20.37
11.67
The declaration of dividends is subject to the discretion of our Board of Directors and to compliance with
applicable laws. Dividends in 2017 and 2016 were declared and paid quarterly. The amount and timing of future
dividends depends upon our results of operations, financial condition, cash requirements, future business
prospects, general business conditions and other factors that our Board of Directors may deem relevant at the time.
Our unsecured revolving syndicated credit facility does not include any restrictions on cash dividend
payments or share repurchases. See Note 12 to the consolidated financial statements for additional information.
2017
2016
Total Dividends Paid
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
$
15.2 $
15.1 $
14.4 $
14.0 $
14.5 $
14.0 $
14.4 $
13.9 $
58.5
57.0
Fourth Quarter Share Repurchases
The following is a summary of share repurchase activity during Q4 2017:
(a)
Total Number of
Shares
Purchased
(b)
Average Price
Paid per Share
—
17.10
—
— $
577 $
— $
577 (2)
(c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (1)
(d)
Approximate Dollar
Value of Shares
that May Yet be
Purchased
Under the Plans
or Programs (1)
— $
— $
— $
—
126.5
126.5
126.5
Period
11/26/2016 - 12/30/2016
12/31/2016 - 01/27/2017
01/28/2017 - 2/24/2017
Total
_______________________________________
(1)
In January 2016, the Board of Directors approved a share repurchase program permitting the repurchase of
up to $150 of shares of our common stock. This program has no specific expiration date. On October 10,
2016, we entered into a stock repurchase agreement with a third party broker under which the broker is
authorized to repurchase up to 5 million shares of our common stock on our behalf during the period from
October 11, 2016 through March 23, 2017, subject to certain price, market and volume constraints specified
14
in the agreement. Shares purchased under the agreement are part of the Company's share repurchase
program approved in January 2016.
(2) All of these shares were repurchased to satisfy participants’ tax withholding obligations upon the vesting of
restricted stock unit grants, pursuant to the terms of our Incentive Compensation Plan.
15
Item 6. Selected Financial Data:
Financial Highlights
February 24,
2017
February 26,
2016
February 27,
2015
February 28,
2014
February 22,
2013
Year Ended
Operating Results:
Revenue
Gross profit
Operating income
Income before income tax expense
Net income
Supplemental Operating Data:
Restructuring costs
Goodwill and intangible asset impairment
charges
Capital expenditures
Share Data:
Basic earnings per common share
Diluted earnings per common share
Weighted average shares outstanding -
basic
Weighted average shares outstanding -
diluted
Dividends paid per common share
Balance Sheet Data:
Cash and cash equivalents
Short-term investments
Company-owned life insurance ("COLI")
Working capital (1)
Total assets
Total debt
Total liabilities
Total shareholders’ equity
Statement of Cash Flow Data:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
________________________
$
3,032.4 $
3,060.0 $
3,059.7 $
2,988.9 $
2,868.7
1,010.4
200.2
196.3
124.6
971.2
174.6
174.8
170.3
916.0
144.9
137.0
86.1
945.2
165.9
147.2
87.7
866.0
59.3
54.9
38.8
$
(5.1) $
(19.9) $
(40.6) $
(6.6) $
(34.7)
—
(61.1)
—
(93.4)
—
(97.5)
(12.9)
(86.8)
(59.9)
(74.0)
$
$
$
$
$
1.03 $
1.03 $
1.37 $
1.36 $
0.69 $
0.68 $
0.70 $
0.69 $
0.30
0.30
120.7
124.3
124.4
126.0
127.4
121.2
125.3
126.0
127.3
0.48 $
0.45 $
0.42 $
0.40 $
197.1 $
181.9 $
176.5 $
201.8 $
73.4
168.8
295.8
1,792.0
297.4
1,025.5
766.5
84.1
160.4
266.4
1,808.6
299.1
1,071.7
736.9
68.3
159.5
264.9
1,719.6
282.1
1,055.8
663.8
119.5
154.3
295.3
1,724.0
289.7
1,052.3
677.1
129.1
0.36
150.4
100.5
225.8
237.1
1,686.4
292.2
1,024.8
668.0
170.7 $
(48.4)
(105.9)
186.4 $
(87.8)
(90.1)
84.2 $
(14.3)
(89.8)
178.8 $
(25.2)
(101.6)
187.3
(85.5)
(64.2)
(1) Working capital equals current assets minus current liabilities, as presented in the Consolidated Balance
Sheets.
16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations:
The following review of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and accompanying notes thereto included elsewhere within this Report.
Non-GAAP Financial Measures
This item contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a
numerical measure of a company’s financial performance that excludes or includes amounts so as to be different
than the most directly comparable measure calculated and presented in accordance with GAAP in the consolidated
statements of income, balance sheets or statements of cash flows of the company. Pursuant to the requirements of
Regulation G, we have provided a reconciliation below of non-GAAP financial measures to the most directly
comparable GAAP financial measure.
The non-GAAP financial measures used are: (1) organic revenue growth (decline), which represents the
change in revenue over the prior year excluding estimated currency translation effects and the impacts of
acquisitions and divestitures, and (2) adjusted operating income (loss), which represents operating income (loss)
excluding restructuring costs (benefits). These measures are presented because management uses this information
to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful
for investors.
Financial Summary
Results of Operations
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category.
Unallocated corporate expenses are reported as Corporate.
Statement of Operations Data—
Consolidated
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Revenue
Cost of sales
Restructuring costs
Gross profit
Operating expenses
Restructuring costs
Operating income
Interest expense
Investment income
Other income, net
Income before income tax expense
Income tax expense
Net income
Earnings per share:
Basic
Diluted
$ 3,032.4
2,017.8
4.2
1,010.4
809.3
0.9
200.2
(17.2)
1.4
11.9
196.3
71.7
124.6
1.03
1.03
$
$
$
100.0% $ 3,060.0
100.0% $ 3,059.7
100.0%
66.5
0.2
33.3
26.7
—
6.6
(0.5)
—
0.4
6.5
2.4
2,075.5
13.3
971.2
790.0
6.6
174.6
(17.6)
1.5
16.3
174.8
4.5
67.8
0.5
31.7
25.8
0.2
5.7
(0.6)
0.1
0.5
5.7
0.1
4.1% $
170.3
5.6% $
2,106.2
37.5
916.0
768.0
3.1
144.9
(17.7)
1.4
8.4
137.0
50.9
86.1
68.8
1.2
30.0
25.1
0.1
4.8
(0.6)
—
0.3
4.5
1.7
2.8%
$
$
1.37
1.36
$
$
0.69
0.68
17
Organic Revenue Growth (Decline)—Consolidated
Prior year revenue
Divestitures
Currency translation effects *
Prior year revenue, adjusted
Current year revenue
Acquisition
Current year revenue, adjusted
Organic growth (decline) $
Organic growth (decline) %
________________________
Year Ended
February 24,
2017
$ 3,060.0
—
(12.5)
3,047.5
3,032.4
(6.8)
3,025.6
(21.9)
$
February 26,
2016
$ 3,059.7
(3.2)
(110.1)
2,946.4
3,060.0
(22.6)
3,037.4
91.0
$
(1)%
3%
* Currency translation effects represent the net effect of translating prior year foreign currency revenues using the
average exchange rate on a monthly basis during the current year.
Reconciliation of Operating Income to
Adjusted Operating Income
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Operating income
Add: restructuring costs
Adjusted operating income
$
$
200.2
5.1
205.3
6.6% $
174.6
5.7% $
144.9
0.2
19.9
0.7
40.6
6.8% $
194.5
6.4% $
185.5
4.8%
1.3
6.1%
Overview
In 2017, revenue declined slightly compared to the prior year; the Americas and EMEA each experienced a
modest revenue decline and the Other category achieved revenue growth of 5%, driven largely by Asia Pacific. The
revenue decline reflected an ongoing shift in demand in the Americas from products for traditional private offices
and cubicle spaces towards more open-plan and collaborative solutions as well as continued reduction in demand
within the energy sector. This decline was partially offset by revenue generated by a number of products launched
over the past 18 months to address the emerging trends and other strategic initiatives. We believe that these
actions have built momentum across all segments of our business including the strengthening of our internal
estimates of project orders in the Americas expected to ship over the next four quarters compared to the prior year.
Despite the decline in revenue, we recorded an operating income margin of 6.6% in 2017 which represented
our highest operating income margin in over 15 years. Our restructuring actions in EMEA were completed, and we
have stabilized our industrial model through the elimination of disruption costs and inefficiencies associated with
operational footprint changes and other manufacturing and distribution issues experienced in the prior year. As a
result, cost of sales as a percentage of revenue in EMEA improved by 640 basis points compared to the prior year,
which contributed significantly to the 130 basis point improvement of consolidated cost of sales. We have been and
expect to continue increasing our operating expenses and capital investments in support of our various growth
initiatives.
2017 compared to 2016
We recorded net income of $124.6 and diluted earnings per share of $1.03 in 2017 compared to net income
of $170.3 and diluted earnings per share of $1.36 in 2016. Net income in 2016 was positively impacted by the
reversal of a valuation allowance recorded against net deferred tax assets in France of $56.0 and the gain from the
partial sale of an investment in an unconsolidated affiliate. Operating income in 2017 increased by $25.6 to $200.2
compared to the prior year. The improvement was driven by a reduction of cost of sales as a percent of revenue in
EMEA and lower restructuring costs, partially offset by higher operating expenses in the Americas. After adjusting
for the impact of restructuring costs, adjusted operating income of $205.3 in 2017, or 6.8% of revenue, represented
an increase of $10.8 compared to the prior year.
Revenue of $3,032.4 in 2017 represented a decrease of $27.6, or less than 1%, compared to the prior year.
The decrease in revenue was driven by lower revenue in the Americas and EMEA, partially offset by revenue
growth in the Other category. After adjusting for a $6.8 favorable impact of an acquisition in the Americas and $12.5
18
of unfavorable currency translation effects, the organic revenue decline was $21.9 or less than 1%. On an organic
basis, revenue declined by 1% in the Americas and 2% in EMEA, while revenue in the Other category grew by 6%.
Cost of sales decreased by 130 basis points to 66.5% percent of revenue in 2017 compared to 2016. The
improvement was primarily due to a 640 basis point improvement in EMEA, driven by the elimination of disruption
costs and inefficiencies associated with operational footprint changes and other manufacturing and distribution
issues experienced in the prior year, as well as benefits from cost reduction efforts, gross margin improvement
initiatives and favorable shifts in business mix. Disruption costs and inefficiencies included labor premiums paid to
employees during transition periods and labor inefficiencies caused by work stoppages or slowdowns resulting from
restructuring activities. They also included incremental logistics costs caused by split shipments (linked to labor
inefficiencies) and interim supply chains during production moves. Lastly, these costs included duplicate labor and
overhead at the new Czech Republic facility and other plants impacted by production moves. Cost of sales in the
Americas and Other category improved modestly compared to the prior year.
Operating expenses of $809.3 in 2017 represented an increase of 90 basis points as a percent of revenue
compared to the prior year. Operating expenses increased by $13.0 in the Americas, $3.4 in EMEA and $3.3 in the
Other category. The increase in the Americas was driven by higher sales, product development and marketing
costs, partially offset by a reduction in variable compensation expense. The increase in EMEA was primarily driven
by costs associated with the new Learning + Innovation Center in Munich, Germany partially offset by favorable
currency translation effects. The increase in the Other category was driven by Designtex and Asia Pacific which
posted strong revenue growth compared to the prior year.
We recorded net restructuring costs of $5.1 in 2017 compared to net restructuring costs of $19.9 in 2016.
The 2017 amount included final costs related to the closure of the manufacturing facility in High Point, North
Carolina, the closure of the manufacturing facility in Durlangen, Germany and the establishment of the Munich
Learning + Innovation Center. The 2016 amount included costs associated with those three projects as well as the
exit of a manufacturing facility in Wisches, France, partially offset by a $2.8 gain related to the sale of a facility in the
Americas. See further discussion in Note 19 to the consolidated financial statements.
Our 2017 effective tax rate was 36.5% compared to a 2016 effective tax rate of 2.6%. The 2017 effective tax
rate reflected discrete tax expense associated with a change in the statutory tax rate in France which was partially
offset by discrete tax benefits related to the outcome of a tax audit in EMEA. The 2016 rate reflected a discrete tax
benefit related to the reversal of a valuation allowance recorded against net deferred tax assets in France of $56.0
which resulted from the implementation of a contract manufacturing model in Q4 2015 between our U.S. parent
company and our Steelcase European subsidiaries. As a result of this discrete tax benefit, our 2016 effective tax
rate was significantly lower than the U.S. federal statutory tax rate of 35%. See further discussion in Note 15 to the
consolidated financial statements.
2016 compared to 2015
We recorded net income of $170.3 and diluted earnings per share of $1.36 in 2016 compared to net income
of $86.1 and diluted earnings per share of $0.68 in 2015. Net income in 2016 was positively impacted by the
reversal of a valuation allowance recorded against net deferred tax assets in France and a gain from the partial sale
of an investment in an unconsolidated affiliate in Q4 2016. These significant items, net of the associated variable
compensation expense and income tax expense, had a combined favorable impact on net income of approximately
$53 and on diluted earnings per share of approximately $0.42. The comparison of net income from 2016 to 2015
was also positively impacted by restructuring charges which were $20.7 lower in 2016 compared to 2015. Our
2016 results reflected strong operating performance in the Americas and improved operating performance in Asia
Pacific, partially offset by higher costs in EMEA associated with manufacturing footprint changes and other
operational challenges.
Revenue for 2016 of $3,060.0 represented a slight increase compared to the prior year. Growth in the
Americas of 3% was offset by a decline of 13% in EMEA. The growth in the Americas was driven by increased
volume, and approximately one-third of the growth rate was attributable to improved pricing. The revenue
comparison in EMEA reflected $79.2 of unfavorable currency translation effects. Organic revenue growth for 2016
was $91.0 or 3%, with growth of 3% in the Americas segment, 1% in the EMEA segment and 4% in the Other
category.
Operating income in 2016 of $174.6 or 5.7% of revenue compared to $144.9 or 4.8% in the prior year. The
increase was driven by a $20.7 reduction in restructuring costs, strong operating performance in the Americas and
improved operating performance in Asia Pacific, partially offset by an increase in cost of sales as a percent of
19
revenue in EMEA and $13.7 of variable compensation expense associated with the large favorable tax item and
non-operating gain recorded in Q4 2016. Adjusted operating income in 2016 increased by $9.0 or 4.9% to $194.5
compared to the prior year. The 2016 adjusted operating income margin of 6.4% represented a 30 basis point
improvement compared to the prior year and reflected an impact of approximately 50 basis points from variable
compensation expense associated with the two large items recorded in Q4 2016.
Cost of sales in 2016 was 67.8% as a percent of revenue, a 100 basis point decrease compared to 2015.
The improvement was primarily driven by a 120 basis point improvement in the Americas, due to lower material,
freight and distribution costs and improvements in negotiated customer pricing, partially offset by a 190 basis point
decline in EMEA driven by manufacturing and distribution issues associated with the manufacturing footprint
changes and an unfavorable shift in business mix. Cost of sales included disruption costs and inefficiencies of
approximately $20 and $28 in 2016 and 2015, respectively, in EMEA.
Operating expenses of $790.0 in 2016 increased by $22.0 or 70 basis points as a percent of revenue
compared to the prior year. Higher variable compensation expense of $21, additional expenses of $4 related to
acquisitions, net of divestitures and other increases in operating expenses, including costs associated with
establishing our new Learning + Innovation Center in Munich, were partially offset by approximately $24 of
favorable currency translation effects.
We recorded net restructuring costs of $19.9 in 2016 compared to net restructuring costs of $40.6 in 2015.
The 2016 amount included costs primarily associated with the closure of the Durlangen facility, and severance
provisions related to the relocation of activities to the Learning + Innovation Center in Munich. The 2015 amount
was primarily associated with manufacturing footprint changes in EMEA, partially offset by a gain related to the sale
of an idle facility in the Americas.
In Q4 2015, we implemented changes in EMEA to align our tax structure with the management of our globally
integrated business. Our U.S. parent company became the principal in a contract manufacturing model with our
Steelcase European subsidiaries. During 2016, we generated taxable income for our French subsidiaries and
allowed for partial utilization of the net operating loss carryforwards in France. In Q4 2016, we recognized a
discrete tax benefit of $56.0 related to the reversal of the remaining valuation allowance recorded against our
French net deferred tax assets. As a result of this discrete tax benefit, our 2016 effective tax rate of 2.6% was
significantly lower than the U.S. federal statutory tax rate of 35%. Our 2015 effective tax rate was 37.2%.
Interest Expense, Investment Income and Other Income, Net
Interest Expense, Investment Income and Other Income, Net
Interest expense
Investment income
Other income (expense), net:
Equity in income of unconsolidated affiliates
Foreign exchange gain (loss)
Miscellaneous, net
Total other income, net
Total interest expense, investment income and other income, net
$
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
(17.2) $
(17.6) $
(17.7)
1.4
1.5
1.4
9.7
3.4
(1.2)
11.9
(3.9) $
13.4
(4.0)
6.9
16.3
0.2 $
15.2
(5.0)
(1.8)
8.4
(7.9)
Miscellaneous, net in 2016 included an $8.5 gain related to the partial sale of an unconsolidated affiliate.
Business Segment Disclosure
See Note 18 to the consolidated financial statements for additional information regarding our business
segments.
20
Americas
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with
a portfolio of integrated architecture, furniture and technology products marketed to corporate, government,
healthcare, education and retail customers through the Steelcase, Coalesse and Turnstone brands.
Statement of Operations Data—
Americas
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Revenue
Cost of sales
Restructuring costs (benefits)
Gross profit
Operating expenses
Restructuring costs (benefits)
Operating income
$ 2,231.9
1,453.4
100.0% $ 2,256.0
1,473.6
65.1
100.0% $ 2,180.7
1,449.3
65.3
100.0%
66.5
2.6
775.9
530.7
—
245.2
$
0.1
34.8
23.8
—
2.4
780.0
517.7
(2.9)
0.1
34.6
23.0
(0.1)
(10.0)
741.4
481.5
—
(0.5)
34.0
22.1
—
11.0% $
265.2
11.7% $
259.9
11.9%
Organic Revenue Growth (Decline)—Americas
Prior year revenue
Currency translation effects *
Prior year revenue, adjusted
Current year revenue
Acquisition
Current year revenue, adjusted
Organic growth (decline) $
Organic growth (decline) %
________________________
Year Ended
February 24,
2017
February 26,
2016
$ 2,256.0
$ 2,180.7
(0.9)
2,255.1
2,231.9
(6.8)
(19.0)
2,161.7
2,256.0
(22.6)
2,225.1
2,233.4
$
(30.0)
$
71.7
(1)%
3%
* Currency translation effects represent the net effect of translating prior year foreign currency revenues using the
average exchange rate on a monthly basis during the current year.
Reconciliation of Operating Income to
Adjusted Operating Income—Americas
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Operating income
Add: restructuring costs (benefits)
Adjusted operating income
$
$
245.2
2.6
247.8
11.0% $
265.2
11.7% $
259.9
0.1
(0.5)
—
(10.0)
11.1% $
264.7
11.7% $
249.9
11.9%
(0.5)
11.4%
2017 compared to 2016
Operating income in the Americas decreased by $20.0 in 2017 compared to the prior year. The decline was
driven by lower sales volume and higher sales and marketing costs. After adjusting for the impact of restructuring
costs, adjusted operating income decreased by $16.9 in 2017 compared to the prior year.
The Americas revenue represented 73.6% of consolidated revenue in 2017. Revenue for 2017 of $2,231.9
represented a decrease of $24.1 or 1% compared to 2016, and the decrease was due to lower volume. The
decrease in revenue was driven by an ongoing shift in demand from products for traditional private offices and
cubicle spaces towards more open-plan and collaborative solutions as well as a decline of approximately $45 in the
Energy vertical market. These declines were partially offset by revenue generated by new products launched over
the past 18 months. After adjusting for $0.9 of unfavorable currency translation effects and a $6.8 favorable impact
of an acquisition, the organic revenue decline in 2017 was $30.0 or 1% compared to the prior year.
21
Cost of sales in 2017 was 65.1% of revenue which compared to 65.3% of revenue in 2016. The slight
decrease was primarily due to the benefits associated with cost reduction efforts, partially offset by unfavorable
shifts in business mix.
Operating expenses in 2017 increased by $13.0, or 80 basis points as a percent of revenue, compared to the
prior year. The increase was primarily due to $10.5 of higher sales, product development and marketing costs and
higher corporate costs, partially offset by a reduction of $5 in variable compensation expense. We have been, and
expect to continue increasing our operating expenses in support of various growth initiatives including new product
introductions and other strategic actions.
Restructuring costs of $2.6 in 2017 were associated with the closure of the High Point facility and compared
to net restructuring benefits of $0.5 in 2016 which included a $2.8 gain related to the sale of a facility, partially offset
by costs associated with the High Point closure. See further discussion in Note 19 to the consolidated financial
statements.
2016 compared to 2015
Operating income in the Americas in 2016 improved by $5.3 compared to the prior year. Benefits associated
with the revenue growth and lower cost of sales as a percent of revenue were partially offset by higher operating
expenses and a reduction in net restructuring benefits compared to the prior year. The variable compensation
expense associated with the large favorable tax item and non-operating gain recorded in Q4 2016 had a $10.6
impact on operating income. Adjusted operating income improved by $14.8 to 11.7% of revenue; the variable
compensation expense associated with the two large items recorded in Q4 had an impact of approximately 50 basis
points on adjusted operating income as a percent of revenue.
The Americas revenue represented 73.7% of consolidated revenue in 2016. Revenue for 2016 of $2,256.0
increased $75.3 or 3.5% compared to 2015 and reflected $19.0 of unfavorable currency translation effects and a
$22.6 favorable impact of an acquisition. The revenue growth included higher volume and approximately one-third
of the growth rate was attributable to improvements in negotiated customer pricing. Revenue growth in 2016 is
categorized as follows:
• Product categories — Six out of seven product categories grew in 2016, led by Furniture, Turnstone and
Seating. Architectural Solutions also improved by achieving a double-digit percentage growth rate.
Technology declined compared to the prior year.
• Vertical markets — Federal Government, Financial Services, Technical and Professional and
Manufacturing experienced strong growth rates, while Energy declined.
• Geographic regions — The East and South Business Groups showed growth over 2015, while the West
Business Group declined.
• Contract type — Project sales and continuing business experienced growth, while marketing programs
declined year-over-year.
Organic revenue growth in 2016 was $71.7 or 3% compared to the prior year.
Cost of sales decreased 120 basis points to 65.3% of revenue in 2016 compared to 66.5% of revenue in
2015. The primary drivers of the improvement were lower material, freight and distribution costs, which had an
impact of approximately 200 basis points, and improvements in negotiated customer pricing, partially offset by
unfavorable foreign currency exchange rates (Canadian dollar to U.S. dollar) and higher variable compensation
costs.
Operating expenses in 2016 increased by $36.2, or 90 basis points as a percent of revenue, compared to the
prior year primarily due to $14 of higher variable compensation expense of which $7.2 related to the two large items
recorded in Q4 2016, $7 related to a small dealer acquisition and $5 of higher sales and marketing costs.
A net restructuring benefit of $0.5 recognized in 2016 included a $2.8 gain related to the sale of our Corporate
Development Center that was closed as part of previously announced restructuring actions, partially offset by costs
associated with the closure of the High Point facility. A net restructuring benefit of $10.0 in 2015 primarily related to
proceeds received from the sale of an idle manufacturing facility exited as part of previously announced
restructuring actions, partially offset by costs related to the closure of the High Point facility.
22
EMEA
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase
and Coalesse brands, with an emphasis on freestanding furniture systems, storage and seating solutions.
Statement of Operations Data—EMEA
February 24,
2017
Revenue
Cost of sales
Restructuring costs
Gross profit
Operating expenses
Restructuring costs
Operating loss
$
$
503.9
370.7
1.6
131.6
151.6
0.9
(20.9)
100.0 % $
73.6
0.3
26.1
30.1
0.1
Year Ended
February 26,
2016
520.6
416.3
10.9
93.4
148.2
9.5
100.0 % $
80.0
2.1
17.9
28.5
1.8
February 27,
2015
595.4
465.2
47.5
82.7
162.4
3.1
100.0 %
78.1
8.0
13.9
27.3
0.5
(4.1)% $
(64.3)
(12.4)% $
(82.8)
(13.9)%
Year Ended
Organic Revenue Growth (Decline)—EMEA
Prior year revenue
Divestitures
Currency translation effects *
Prior year revenue, adjusted
Current year revenue
Organic growth (decline) $
Organic growth (decline) %
________________________
February 24,
2017
520.6
—
(9.0)
511.6
503.9
(7.7)
$
$
February 26,
2016
595.4
(3.2)
(79.2)
513.0
520.6
7.6
$
$
(2)%
1%
* Currency translation effects represent the net effect of translating prior year foreign currency revenues using the
average exchange rate on a monthly basis during the current year.
Reconciliation of Operating Loss to
Adjusted Operating Loss—EMEA
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Operating loss
Add: restructuring costs
Adjusted operating loss
2017 compared to 2016
$
$
(20.9)
2.5
(18.4)
(4.1)% $
(64.3)
(12.4)% $
(82.8)
(13.9)%
0.4
20.4
3.9
50.6
8.5
(3.7)% $
(43.9)
(8.5)% $
(32.2)
(5.4)%
Operating results in EMEA improved significantly in 2017 compared to the prior year. The improvement was
due to a significant decrease in cost of sales as a percent of revenue and lower restructuring costs compared to the
prior year. After adjusting for the impact of restructuring costs, the adjusted operating loss improved by $25.5
compared to the prior year.
EMEA revenue represented 16.6% of consolidated revenue in 2017. Revenue declined by $16.7 or 3%
compared to the prior year due to volume declines in the United Kingdom, Middle East and Africa, partially offset by
revenue growth in central Europe, Iberia, Germany and France. After adjusting for $9.0 of unfavorable currency
translation effects, the organic revenue decline was $7.7 or 2%.
Cost of sales as a percent of revenue decreased significantly in 2017 compared to the prior year, driven by
the elimination of disruption costs and inefficiencies associated with operational footprint changes and other
manufacturing and distribution issues experienced in the prior year. We incurred approximately $3 of costs related
to these issues in 2017 compared to approximately $26 in 2016. The 2017 results also benefited from cost
reduction efforts, gross margin improvement initiatives and favorable shifts in business mix.
23
Operating expenses in 2017 increased by $3.4 compared to the prior year and reflected higher costs
associated with our new Learning + Innovation Center in Munich partially offset by favorable currency translation
effects. Operating expenses as a percent of revenue increased by 160 basis points in 2017.
Restructuring costs of $2.5 incurred in 2017 were related to the closure of the Durlangen facility which was
completed in Q1 2017 and the establishment of the Learning + Innovation Center in Munich. Restructuring costs of
$20.4 incurred in 2016 primarily related to the same two projects. See further discussion in Note 19 to the
consolidated financial statements.
2016 compared to 2015
Operating results in EMEA reflected a significant decrease in restructuring costs compared to the prior year,
offset by an increase in cost of sales and operating expenses as a percent of revenue compared to the prior year.
EMEA's adjusted operating loss increased by $11.7.
EMEA revenue represented 17.0% of consolidated revenue in 2016. Revenue for 2016 reflected $79.2 of
unfavorable currency translation effects and a $3.2 unfavorable impact from divestitures. Organic revenue growth
was $7.6 or 1%, driven by growth in Iberia.
Cost of sales as a percent of revenue increased by 190 basis points in 2016 compared to the prior year.
During 2016, we experienced manufacturing and distribution issues including power outages and equipment
failures at our new facility in the Czech Republic and other startup related issues which resulted in incremental
costs, labor inefficiencies and dealer incentives and reimbursements of approximately $6 in aggregate which were
incurred in the second and third quarters of 2016. The 2016 results also reflected unfavorable shifts in product and
business mix partially offset by the benefits from restructuring activities.
Cost of sales in 2016 and 2015 included $20 and $28, respectively, of disruption costs and inefficiencies
associated with the manufacturing footprint changes initiated in prior years.
Operating expenses in 2016 decreased by $14.2 compared to the prior year. The 2016 operating expenses
reflected favorable currency translation effects of $19. Operating expenses in local currency increased in 2016
primarily due to costs associated with establishing our new Learning + Innovation Center in Munich and higher
variable compensation expense. Operating expenses as a percent of revenue increased by 120 basis points in
2016.
Restructuring costs of $20.4 incurred in 2016 primarily consisted of costs associated with the closure of the
Durlangen facility and severance provisions related to the relocation of activities to the Learning + Innovation
Center in Munich. Net restructuring costs of $50.6 incurred in 2015 were primarily associated with the transfer of
the assets and activities of the Wisches manufacturing facility to a third party and costs related to the closure of the
Durlangen facility.
Other
The Other category includes Asia Pacific, Designtex and PolyVision. Asia Pacific serves customers in Asia
and Australia primarily under the Steelcase brand with an emphasis on freestanding furniture systems, seating and
storage solutions. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by
architects and designers directly to end-use customers through a direct sales force primarily in North America.
PolyVision manufactures ceramic steel surfaces for use in various applications globally, including static whiteboards
and chalkboards sold through third party fabricators and distributors to the primary and secondary education
markets and architectural panels and other special applications sold through general contractors for commercial
and infrastructure projects.
24
Statement of Operations Data—Other
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Revenue
Cost of sales
Restructuring costs
Gross profit
Operating expenses
Restructuring costs
Operating income
$
296.6
193.7
—
102.9
89.9
—
100.0% $
65.3
—
34.7
30.3
—
283.4
185.6
—
97.8
86.6
—
100.0% $
65.5
—
34.5
30.5
—
283.6
191.7
—
91.9
87.1
—
$
13.0
4.4% $
11.2
4.0% $
4.8
100.0%
67.6
—
32.4
30.7
—
1.7%
Organic Revenue Growth—Other
Prior year revenue
Currency translation effects *
Prior year revenue, adjusted
Current year revenue
Organic growth $
Organic growth %
________________________
Year Ended
February 24,
2017
283.4
$
February 26,
2016
283.6
$
(2.6)
280.8
296.6
$
15.8
$
(11.9)
271.7
283.4
11.7
6%
4%
* Currency translation effects represent the net effect of translating prior year foreign currency revenues using the
average exchange rate on a monthly basis during the current year.
Reconciliation of Operating Income to
Adjusted Operating Income—Other
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Operating income
Add: restructuring costs
Adjusted operating income
2017 compared to 2016
$
$
13.0
—
13.0
4.4% $
11.2
4.0% $
—
—
—
4.4% $
11.2
4.0% $
4.8
—
4.8
1.7%
—
1.7%
Operating results in the Other category improved in 2017 compared to the prior year driven by improved
performance in Asia Pacific, partially offset by lower income at PolyVision, while operating performance at
Designtex was consistent with the prior year. The 2017 performance in Asia Pacific represented record sales and
operating income levels.
Revenue in the Other category represented 9.8% of consolidated revenue in 2017. Revenue in 2017
increased by $13.2 or 5% compared to the prior year due to strong growth in Asia Pacific and Designtex partially
offset by lower volume at PolyVision.
Cost of sales as a percent of revenue decreased slightly in 2017 compared to the prior year. Asia Pacific and
Designtex posted improvements, while gross margin performance at PolyVision was consistent with the prior year.
Operating expenses as a percent of revenue decreased slightly in 2017 compared to the prior year. The
improvement was driven by Asia Pacific, while operating expenses as a percent of revenue at Designtex and
PolyVision increased modestly compared with the prior year.
2016 compared to 2015
Revenue in the Other category represented 9.3% of consolidated revenue in 2016. Operating results in the
Other category in 2016 improved significantly compared to the prior year. Improved operating performance in Asia
25
Pacific offset lower operating performance at PolyVision, while operating performance at Designtex was
comparable to the prior year.
Cost of sales as a percent of revenue decreased by 210 basis points in 2016 compared to the prior year.
Improvements in Asia Pacific were partially offset by higher costs at PolyVision. The decrease in cost of sales in
Asia Pacific was driven by favorable foreign currency exchange rates and improved business and product mix.
Asia Pacific recorded operating income in the 2016 compared to an operating loss in the prior year. The
improvement was driven by organic revenue growth, favorable foreign currency exchange rates and improved
business mix.
Operating income at PolyVision declined compared to the prior year. The decline was driven by reduced
volume, an increase in cost of sales as a percent of revenue and higher operating expense.
Corporate
Corporate expenses include unallocated portions of shared service functions, such as information technology,
corporate facilities, finance, human resources, research, legal and customer aviation, plus deferred compensation
expense and income or losses associated with COLI.
Operating expenses
Statement of Operations Data—Corporate
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
37.1 $
37.5 $
37.0
Liquidity and Capital Resources
Liquidity
Based on current business conditions, we target maintaining a range of $75 to $150 in cash and cash
equivalents and short-term investments to fund day-to-day operations, including seasonal disbursements,
particularly the annual payment of accrued variable compensation and retirement plan contributions in Q1 of each
fiscal year. In addition, we may carry additional liquidity for potential investments in strategic initiatives and as a
cushion against economic volatility.
Liquidity Sources
Cash and cash equivalents
Short-term investments
Company-owned life insurance
Availability under credit facilities
Total liquidity
February 24,
2017
February 26,
2016
$
197.1 $
73.4
168.8
150.3
$
589.6 $
181.9
84.1
160.4
151.7
578.1
As of February 24, 2017, we held a total of $270.5 in cash and cash equivalents and short-term investments.
The majority of our short-term investments are located in the U.S. Of our total $197.1 in cash and cash equivalents,
72% was located in the U.S. and the remaining 28%, or $56.0, was located outside of the U.S., primarily in France,
China (including Hong Kong), Mexico, and Canada. Amounts located outside the U.S. would be taxable if
repatriated to the U.S. as dividends, but we do not anticipate repatriating such amounts or needing them for
operations in the U.S. Such amounts are considered available to repay intercompany debt, available to meet local
working capital requirements or permanently reinvested in foreign subsidiaries.
The majority of our short-term investments are maintained in a managed investment portfolio, which primarily
consists of corporate debt securities and U.S. agency debt securities.
Our investments in COLI policies are intended to be utilized as a long-term funding source for long-term
benefit obligations. However, COLI can be used as a source of liquidity. We believe the financial strength of the
issuing insurance companies associated with our COLI policies is sufficient to meet their obligations. COLI
investments are recorded at their net cash surrender value. See Note 9 to the consolidated financial statements for
more information.
26
Availability under credit facilities may be reduced related to compliance with applicable covenants. See
Liquidity Facilities for more information.
The following table summarizes our consolidated statements of cash flows:
Net cash flow provided by (used in):
Cash Flow Data
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Cash provided by operating activities
Cash Flow Data—Operating Activities
Net income
Depreciation and amortization
Gain from partial sale of investment in unconsolidated affiliate
Deferred income taxes
Restructuring gains on sale of fixed assets
Non-cash stock compensation
Equity in income of unconsolidated affiliates
Dividends received from unconsolidated affiliates
Other
Changes in accounts receivable, inventories and accounts payable
Assets related to derivative instruments
VAT recoverable
Long-term income taxes receivable
Changes in employee compensation liabilities
Changes in other operating assets and liabilities
Net cash provided by operating activities
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
170.7 $
186.4 $
(48.4)
(105.9)
(1.2)
15.2
181.9
(87.8)
(90.1)
(3.1)
5.4
176.5
$
197.1 $
181.9 $
84.2
(14.3)
(89.8)
(5.4)
(25.3)
201.8
176.5
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
124.6 $
170.3 $
60.3
—
26.8
—
19.8
(9.7)
9.9
(8.8)
16.3
(1.8)
17.0
(18.5)
(8.8)
(56.4)
65.7
(8.5)
(68.3)
(2.8)
21.0
(13.4)
12.4
0.3
3.4
22.3
(28.9)
—
20.4
(7.5)
$
170.7 $
186.4 $
86.1
59.9
—
0.4
(12.0)
18.4
(15.2)
10.7
(5.1)
(58.3)
(23.8)
(4.3)
—
(0.8)
28.2
84.2
The decrease in cash provided by operating activities in 2017 compared to 2016 was partially driven by
higher variable compensation payments compared to the prior year and a decrease in various accrued expense
accounts offset by a reduction in VAT recoverable. 2016 also included proceeds from the settlement of foreign
exchange forward contracts. The increase in cash provided by operating activities in 2016 compared to 2015 was
largely due to a decrease in the use of working capital related to modest organic revenue growth in Q4 2016
compared to strong organic revenue growth in Q4 2015 and the settlement of foreign exchange contracts, partially
offset by an increase in VAT recoverable.
27
Cash used in investing activities
Cash Flow Data—Investing Activities
Capital expenditures
Proceeds from disposal of fixed assets
Purchases of investments
Liquidations of investments
Proceeds from partial sale of investment in unconsolidated affiliate
Other
Net cash used in investing activities
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
$
(61.1) $
1.9
(112.6)
126.6
—
(3.2)
(48.4) $
(93.4) $
5.6
(105.7)
95.1
18.0
(7.4)
(87.8) $
(97.5)
19.7
(91.4)
149.1
—
5.8
(14.3)
Capital expenditures in 2017 were primarily related to investments in manufacturing operations and the
establishment of the Learning + Innovation Center in Munich. Capital expenditures in 2016 included $26.0 in
progress payments toward a new aircraft and investments in manufacturing operations. Capital expenditures in
2015 were primarily related to investments in manufacturing operations, including a new manufacturing location in
the Czech Republic, and product development.
Liquidations of short-term investments were higher in 2017 compared to 2016 in order to fund higher variable
compensation payments and other liquidity needs. The net increase in investments in 2016 was related to our
increase in cash provided by operating activities and the proceeds from the partial sale of an investment in an
unconsolidated affiliate. The net reduction in investments in 2015 was primarily related to the funding of
restructuring costs in EMEA.
Cash provided by investing activities in 2015 included the receipt of proceeds related to the sale of a former
manufacturing facility.
Cash used in financing activities
Cash Flow Data—Financing Activities
Dividends paid
Common stock repurchases
Excess tax benefit from vesting of stock awards
Net borrowings and repayments of debt
Net cash used in financing activities
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
(58.5) $
(57.0) $
(48.4)
3.3
(2.3)
(56.4)
7.0
16.3
(52.5)
(36.3)
1.6
(2.6)
$
(105.9) $
(90.1) $
(89.8)
We paid dividends of $0.12, $0.1125 and $0.105 per common share during each quarter in 2017, 2016 and
2015, respectively. On March 21, 2017, our Board of Directors declared a dividend of $0.1275 per common share to
be paid in Q1 2018.
During 2017, 2016 and 2015, we made common stock repurchases of $48.4, $56.4, and $36.3, respectively,
all of which related to our Class A Common Stock. As of February 24, 2017, we had $126.5 of remaining availability
under the $150 share repurchase program approved by our Board of Directors in Q4 2016.
Share repurchases of Class A Common Stock to enable participants to satisfy tax withholding obligations
upon vesting of restricted stock, restricted stock units and performance units, pursuant to the terms of our Incentive
Compensation Plan, were $6.9, $13.0, and $4.9 in 2017, 2016 and 2015, respectively.
Capital Resources
Off-Balance Sheet Arrangements
We are contingently liable under loan and lease guarantees for certain independent dealers in the event of
default or non-performance of the financial repayment of a liability. In certain cases, we also guarantee completion
of contracts by our dealers. Due to the contingent nature of guarantees, the full value of the guarantees is not
28
recorded on our Consolidated Balance Sheets; however, when necessary, we record reserves to cover potential
losses. As of February 24, 2017 and February 26, 2016, there were no reserves for guarantees recorded on our
Consolidated Balance Sheets.
Contractual Obligations
Our contractual obligations as of February 24, 2017 were as follows:
Contractual Obligations
Total
Payments Due by Period
1-3
Years
Less than
1 Year
3-5
Years
Long-term debt and short-term borrowings
Estimated interest on debt obligations
Operating leases
Committed capital expenditures
Purchase obligations
Other liabilities
Employee benefit and compensation obligations
Total
$
$
297.4 $
68.7
211.4
21.6
63.6
0.9
278.8
942.4 $
2.8 $
16.8
50.3
21.6
39.8
0.9
148.0
280.2 $
5.5 $
254.0 $
33.5
71.1
—
17.1
—
36.0
17.4
43.5
—
6.7
—
18.7
163.2 $
340.3 $
After 5
Years
35.1
1.0
46.5
—
—
—
76.1
158.7
Total consolidated debt as of February 24, 2017 was $297.4. Of our total debt, $248.8 is in the form of term
notes due in 2021 and $48.0 is related to financing secured by two of our corporate aircraft due in 2024.
We have commitments related to certain sales offices, showrooms, warehouses and equipment under non-
cancelable operating leases that expire at various dates through 2026. Minimum payments under operating leases,
net of sublease rental income, are presented in the contractual obligations table above.
Committed capital expenditures represent obligations we have related to property, plant and equipment
purchases.
Purchase obligations represent obligations under non-cancelable contracts to purchase goods or services
beyond the needs of meeting current backlog or production.
Other liabilities represent obligations for foreign exchange forward contracts.
Employee benefit and compensation obligations represent contributions and benefit payments expected to be
made for our post-retirement, pension, deferred compensation, defined contribution, severance arrangements and
variable compensation plans. Our obligations related to post-retirement benefit plans are not contractual, and the
plans could be amended at the discretion of the Compensation Committee of our Board of Directors. We limited our
disclosure of post-retirement and pension contributions and benefit payments to 10 years as information beyond
this time period was not available. See Note 13 to the consolidated financial statements for additional information.
The contractual obligations table above is presented as of February 24, 2017. The amounts of these
obligations could change materially over time as new contracts or obligations are initiated and existing contracts or
obligations are terminated or modified. We anticipate the cash expected to be generated from future operations,
current cash and cash equivalents and short-term investment balances, funds available under our credit facilities
and funds available from COLI will be sufficient to fulfill our existing contractual obligations.
29
Liquidity Facilities
Our total liquidity facilities as of February 24, 2017 were:
Liquidity Facilities
Global committed bank facility
Various uncommitted lines
Total credit lines available
Less: borrowings outstanding
Available capacity
February 24,
2017
$
$
125.0
25.3
150.3
—
150.3
We have a $125 global committed five-year bank facility which was entered into in Q3 2017. This facility
amended and restated our former facility which was scheduled to expire in Q1 2018. As of February 24, 2017, there
were no borrowings outstanding under the facility, our availability was not limited, and we were in compliance with
all covenants under the facility.
The various uncommitted lines may be changed or canceled by the applicable lenders at any time. There
were no outstanding borrowings under uncommitted facilities as of February 24, 2017.
In addition, we have credit agreements of $35.2 which can be utilized to support letters of credit, bank
guarantees, or foreign exchange contracts. Letters of credit and bank guarantees of $12.3 were outstanding under
these facilities as of February 24, 2017. We had no draws against our standby letters of credit during 2017 or 2016.
Total consolidated debt as of February 24, 2017 was $297.4. Our debt primarily consists of $248.8 in term
notes due in Q4 2021 with an effective interest rate of 6.6%. In addition, we have a term loan with a balance as of
February 24, 2017 of $48.0. This term loan has a floating interest rate based on 30-day LIBOR plus 1.20% and is
due in 2024. The term notes are unsecured, and the term loan is secured by two of our corporate aircraft. The term
notes and the term loan contain no financial covenants and are not cross-defaulted to our other debt facilities.
See Note 12 to the consolidated financial statements for additional information.
Liquidity Outlook
Our current cash and cash equivalents and short-term investment balances, funds available under our credit
facilities, funds available from COLI and cash generated from future operations are expected to be sufficient to
finance our known or foreseeable liquidity needs. We continue to maintain a conservative approach to liquidity and
have flexibility over significant uses of cash including our capital expenditures and discretionary operating
expenses.
Our significant funding requirements include operating expenses, non-cancelable operating lease obligations,
capital expenditures, variable compensation and retirement plan contributions, dividend payments and debt service
obligations.
We expect capital expenditures to total approximately $80 to $90 in 2018 compared to $61 in 2017. This
amount includes investments in our global manufacturing operations, product development and new Learning +
Innovation Center in Munich, Germany. We closely manage capital spending to ensure we are making investments
that we believe will sustain our business and preserve our ability to introduce innovative new products.
On March 21, 2017, we announced a quarterly dividend on our common stock of $0.1275 per share, or $15.3,
to be paid in Q1 2018. Future dividends will be subject to approval by our Board of Directors.
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our
consolidated financial statements and accompanying notes. Our consolidated financial statements were prepared
in accordance with accounting principles generally accepted in the United States of America. These principles
require the use of estimates and assumptions that affect amounts reported and disclosed in the consolidated
financial statements and accompanying notes. Although these estimates are based on historical data and
management’s knowledge of current events and actions it may undertake in the future, actual results may differ
30
from the estimates if different conditions occur. The accounting estimates that typically involve a higher degree of
judgment and complexity are listed and explained below. These estimates were discussed with the Audit
Committee of our Board of Directors and affect all of our segments.
Income Taxes
Our annual effective tax rate is based on income, statutory tax rates and tax planning strategies in various
jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and
respective governmental taxing authorities. Significant judgment is required in determining our tax expense and in
evaluating tax positions.
We are audited by the U.S. Internal Revenue Service under the Compliance Assurance Process (“CAP”).
Under CAP, the U.S. Internal Revenue Service works with large business taxpayers to identify and resolve issues
prior to the filing of a tax return. Accordingly, we expect to record minimal liabilities for U.S. Federal uncertain tax
positions. Tax positions are reviewed regularly for state, local and non-U.S. tax liabilities associated with uncertain
tax positions and balances are adjusted as new information becomes available. Our liability for uncertain tax
positions in these jurisdictions is $0.2 as of February 24, 2017.
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences
attributable to temporary differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the temporary differences are expected to reverse. In
evaluating our ability to recover deferred tax assets within the jurisdiction from which they arise, we consider all
positive and negative evidence. These expectations require significant judgment and are developed using
forecasts of future taxable income that are consistent with the internal plans and estimates we are using to manage
the underlying business. Changes in tax laws and rates could also affect recorded deferred tax assets and
liabilities in the future.
Future tax benefits of tax losses are recognized to the extent that realization of these benefits is considered
more likely than not. As of February 24, 2017, we recorded tax benefits from net operating loss carryforwards of
$57.0. We also have recorded valuation allowances totaling $7.9 against these assets, which reduced our recorded
tax benefit to $49.1. It is considered more likely than not that a $49.1 cash benefit will be realized on these
carryforwards in future periods. This determination is based on the expectation that related operations will be
sufficiently profitable or various tax, business and other planning strategies will enable us to utilize the
carryforwards. To the extent that available evidence raises doubt about the realization of a deferred tax asset, a
valuation allowance would be established or adjusted. A change in judgment regarding our expected ability to
realize deferred tax assets would be accounted for as a discrete tax expense or benefit in the period in which it
occurs.
During 2017, we amended certain of our U.S. federal income tax returns for prior periods to claim an
aggregate of $17.0 of foreign tax credits. We believe that the refunds generated by these amendments will not be
received within the next 12 months, and we have classified them as non-current assets. As of February 24, 2017,
the remaining deferred tax assets related to tax credit carryforwards was $17.4 and consisted primarily of U.S.
foreign tax credits and investment tax credits granted by the Czech Republic. The U.S. foreign tax credit
carryforward period is 10 years, and utilization of foreign tax credits is restricted to 35% of foreign source taxable
income in that year. We have projected our pretax domestic earnings and foreign source income based on
historical results and expect to fully utilize the remaining excess foreign tax credits (as well as the remaining other
credits) within the allowable carryforward period. The carryforward period for the Czech Republic investment tax
credits is also 10 years. We have projected our pretax earnings in the Czech Republic and also expect to fully
utilize these credits within the allowable carryover period. Similar to our treatment of operating loss carryforwards,
a valuation allowance would be established on the credit carryforwards if available evidence raises doubt about
their expected realization.
A 10% decrease in the expected amount of cash benefit to be realized on the carryforwards would have
resulted in a decrease in net income for 2017 of approximately $6.7.
See Note 15 to the consolidated financial statements for additional information.
31
Goodwill and Other Intangible Assets
Goodwill represents the difference between the purchase price and the related underlying tangible and
identifiable intangible net asset values resulting from business acquisitions. Annually in Q4, or earlier if conditions
indicate it is necessary, the carrying value of the reporting unit is compared to an estimate of its fair value. If the
estimated fair value of the reporting unit is less than the carrying value, goodwill is impaired and is written down to
its estimated fair value. Goodwill is assigned to and the fair value is tested at the reporting unit level. In 2017, we
evaluated goodwill and intangible assets using six reporting units: the Americas, Red Thread, EMEA, Asia Pacific,
Designtex and PolyVision.
Annually in Q4, or earlier if conditions indicate it is necessary, we also perform an impairment analysis of our
intangible assets not subject to amortization using an income approach based on the cash flows attributable to the
related products. An impairment loss is recognized if the carrying amount of a long-lived asset exceeds its
estimated fair value. In testing for impairment, we first determine if the asset is recoverable and then compare the
discounted cash flows over the asset’s remaining life to the carrying value.
During Q4 2017, we performed our annual impairment assessment of goodwill in our reporting units. In the
first step to test for potential impairment, we measured the estimated fair value of our reporting units using a
discounted cash flow (“DCF”) valuation method. The DCF analysis calculated the present value of projected cash
flows and a residual value using discount rates that ranged from 10.0% to 15.0%. Considerable management
judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows in measuring
fair value. Assumptions used in our impairment valuations, such as forecasted growth rates, expected levels of
operating income and estimated capital investment, are consistent with our current internal projections. These
assumptions could change over time, which may result in future impairment charges.
There were no impairments for any reporting units in 2017.
As of February 24, 2017, we had remaining goodwill and net intangible assets recorded on our Consolidated
Balance Sheet as follows:
Reportable Segment
Americas
EMEA
Other category
Total
Goodwill
Other Intangible
Assets, Net
$
$
88.2 $
—
18.5
106.7 $
12.6
0.3
3.9
16.8
As of the valuation date, the enterprise value available for goodwill determined as described above is in
excess of the underlying reported value of goodwill as follows:
Americas
Other category
Reportable Segment
Enterprise Value
Available in Excess
of Goodwill
$
1,297.0
33.0
For each reporting unit, the excess enterprise value available for goodwill is primarily driven by the residual
value of future years. Thus, increasing the discount rate by 1%, leaving all other assumptions unchanged, would
reduce the enterprise value in excess of goodwill to the following amounts:
Americas
Other category
Reportable Segment
Enterprise Value
Available in Excess
of Goodwill
$
1,094.0
25.0
As of February 24, 2017, no reporting unit had goodwill balances in excess of enterprise value available for
goodwill based on the sensitivity analysis above.
See Note 2 and Note 10 to the consolidated financial statements for additional information.
32
Pension and Other Post-Retirement Benefits
We sponsor a number of domestic and foreign plans to provide pension, medical and life insurance benefits
to retired employees. As of February 24, 2017 and February 26, 2016, the benefit obligations, fair value of plan
assets and funded status of these plans were as follows:
Fair value of plan assets
Benefit plan obligations
Funded status
Defined Benefit
Pension Plans
Post-Retirement
Plans
February 24,
2017
February 26,
2016
February 24,
2017
February 26,
2016
$
$
46.7 $
96.8
(50.1) $
47.3 $
93.4
(46.1) $
— $
46.0
(46.0) $
—
66.2
(66.2)
The post-retirement medical and life insurance plans are unfunded. As of February 24, 2017, approximately
67% of our unfunded defined benefit pension obligations is related to our non-qualified supplemental retirement
plan that is limited to a select group of management approved by the Compensation Committee. Our investments
in whole life and variable life COLI policies with a net cash surrender value of $168.8 as of February 24, 2017 are
intended to be utilized as a long-term funding source for post-retirement medical benefits, deferred compensation
and defined benefit pension plan obligations. The asset values of the COLI policies are not segregated in a trust
specifically for the plans and thus are not considered plan assets. Changes in the values of these policies have no
effect on the post-retirement benefits expense, defined benefit pension expense or benefit obligations recorded in
the consolidated financial statements.
We recognize the cost of benefits provided during retirement over the employees’ active working lives.
Inherent in this approach is the requirement to use various actuarial assumptions to predict and measure costs and
obligations many years prior to the settlement date. Key actuarial assumptions that require significant management
judgment and have a material impact on the measurement of our consolidated benefits expense and benefit
obligations include, among others, the discount rate and health care cost trend rates. These and other assumptions
are reviewed with our actuaries and updated annually based on relevant external and internal factors and
information, including, but not limited to, benefit payments, expenses paid from the plan, rates of termination,
medical inflation, regulatory requirements, plan changes and governmental coverage changes.
To conduct our annual review of discount rates, we perform a matching exercise of projected plan cash flows
against spot rates on a yield curve comprised of high quality corporate bonds as of the measurement date (the
Ryan ALM Top Third curve). The measurement dates for our retiree benefit plans are consistent with the last day in
February. Accordingly, we select discount rates to measure our benefit obligations that are consistent with market
indices at the end of February.
Based on consolidated benefit obligations as of February 24, 2017, a one percentage point decline in the
weighted-average discount rate used for benefit plan measurement purposes would have changed the 2017
consolidated benefits expense by less than $1 and the consolidated benefit obligations by less than $7. All
obligation-related experience gains and losses are amortized using a straight-line method over the average
remaining service period of active plan participants.
To conduct our annual review of healthcare cost trend rates, we model our actual claims cost data over a
historical period, including an analysis of the pre-65 age group and other important demographic components of our
covered retiree population. This data is adjusted to eliminate the impact of plan changes and other factors that
would tend to distort the underlying cost inflation trends. Our initial healthcare cost trend rate is reviewed annually
and adjusted as necessary to remain consistent with recent historical experience and our expectations regarding
short-term future trends. As of February 24, 2017, our initial rate of 7.28% for pre-age 65 retirees was trended
downward by each year, until the ultimate trend rate of 4.50% was reached. The ultimate trend rate is adjusted
annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an
appropriate healthcare cost premium. Post-age 65 trend rates are not applicable as our plan provides a fixed
subsidy for post-age 65 benefits.
Based on consolidated benefit obligations as of February 24, 2017, a one percentage point increase or
decrease in the assumed healthcare cost trend rates would have changed the 2017 consolidated benefits expense
by less than $1 and changed the consolidated benefit obligations by less than $1. All experience gains and losses
are amortized using a straight-line method, over at least the minimum amortization period prescribed by accounting
guidance.
33
Despite the previously described policies for selecting key actuarial assumptions, we periodically experience
material differences between assumed and actual experience. Our consolidated net unamortized prior service
credits and net experience losses are recorded in Accumulated other comprehensive income (loss) on the
Consolidated Balance Sheets.
See Note 13 to the consolidated financial statements for additional information.
Forward-Looking Statements
From time to time, in written and oral statements, we discuss our expectations regarding future events and
our plans and objectives for future operations. These forward-looking statements discuss goals, intentions and
expectations as to future trends, plans, events, results of operations or financial condition, or state other information
relating to us, based on current beliefs of management as well as assumptions made by, and information currently
available to, us. Forward-looking statements generally are accompanied by words such as “anticipate,” “believe,”
“could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” or other similar
words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are
based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be
inaccurate. Forward-looking statements involve a number of risks and uncertainties that could cause actual results
to vary from our expectations because of factors such as, but not limited to, competitive and general economic
conditions domestically and internationally; acts of terrorism, war, governmental action, natural disasters and other
Force Majeure events; changes in the legal and regulatory environment; changes in raw materials and commodity
costs; currency fluctuations; changes in customer demands; and the other risks and contingencies detailed in this
Report and our other filings with the SEC. We undertake no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise.
Recently Issued Accounting Standards
See Note 3 to the consolidated financial statements for information regarding recently issued accounting
standards.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk:
We are exposed to market risks from foreign currency exchange, interest rates, commodity prices and fixed
income and equity prices, which could affect our operating results, financial position and cash flows.
Foreign Currency Exchange Risk
We are exposed to foreign currency exchange rate risk primarily on sales commitments, anticipated sales
and purchases and assets and liabilities denominated in currencies other than the U.S. dollar. In 2017, 2016 and
2015, we transacted business in 17 primary currencies worldwide, of which the most significant were the U.S.
dollar, the euro, the Canadian dollar, the United Kingdom pound sterling, the Mexican peso, the Chinese renminbi
and the Malaysian ringgit. Revenue from foreign locations represented approximately 31% of our consolidated
revenue in 2017, 30% in 2016 and 32% in 2015. We actively manage the foreign currency exposures that are
associated with committed foreign currency purchases and sales created in the normal course of business at the
local entity level. Exposures that cannot be naturally offset within a local entity to an immaterial amount are often
hedged with foreign currency derivatives or netted with offsetting exposures at other entities. We do not use
derivatives for trading or speculative purposes. Our results are affected by the strength of the currencies in
countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our
products are sold.
We estimate that an additional 10% strengthening of the U.S. dollar against local currencies would have
decreased operating income by less than $5 in 2017 and increased operating income by less than $5 in 2016 and
2015. These estimates assume no changes other than the exchange rate itself. However, this quantitative measure
has inherent limitations. The sensitivity analysis disregards the possibility that rates can move in opposite directions
and that gains from one currency may or may not be offset by losses from another currency.
The translation of the assets and liabilities of our international subsidiaries is made using the foreign currency
exchange rates as of the end of the fiscal year. Translation adjustments are not included in determining net income
but are included in Accumulated other comprehensive income (loss) within shareholders’ equity on the
Consolidated Balance Sheets until a sale or substantially complete liquidation of the net investment in the
34
international subsidiary takes place. In certain markets, we could recognize a significant gain or loss related to
unrealized cumulative translation adjustments if we were to exit the market and liquidate our net investment. As of
February 24, 2017 and February 26, 2016, the cumulative net currency translation adjustments reduced
shareholders’ equity by $63.3 and $50.9, respectively.
Foreign currency exchange gains and losses reflect transaction gains and losses, which arise from monetary
assets and liabilities denominated in currencies other than a business unit’s functional currency and are recorded in
Other income (expense), net on the Consolidated Statements of Income. In 2017 net foreign exchange gains were
$3.4. In 2016 and 2015, net foreign currency exchange losses were $4.0 and $5.0, respectively.
See Note 2 to the consolidated financial statements for additional information.
Interest Rate Risk
We are exposed to interest rate risk primarily on our short-term and long-term investments and short-term
and long-term borrowings. Our short-term investments are primarily invested in U.S. agency debt securities, U.S.
government debt securities and highly-rated corporate debt securities. The risk on our short-term and long-term
borrowings is primarily related to a floating interest rate loan with a balance of $48.0 and $50.1 as of February 24,
2017 and February 26, 2016, respectively. This loan bears a floating interest rate based on 30-day LIBOR plus
1.20%.
We estimate a 1% increase in interest rates would have increased our net income by less than $1 in 2017,
2016 and 2015, mainly as a result of higher interest income on our investments. Significant changes in interest
rates could have an impact on the market value of our managed fixed-income investment portfolio. However, this
quantitative measure has inherent limitations since not all of our investments are in similar asset classes. In
addition, our investment manager actively manages certain investments, thus our results could be better or worse
than market returns. As of February 24, 2017, approximately 57% of our fixed-income investments mature within
one year, approximately 10% in two years, approximately 10% in three years and approximately 23% in four or
more years.
See Note 6 and Note 12 to the consolidated financial statements for additional information.
Commodity Price Risk
We are exposed to commodity price risk primarily on our raw material purchases. These raw materials are
not rare or unique to our industry. The cost of steel, petroleum-based products, aluminum, other metals, wood,
particleboard and other commodities, such as fuel and energy, has fluctuated in recent years due to changes in
global supply and demand. Our gross margins could be affected if these types of costs continue to fluctuate. We
actively manage these raw material costs through global sourcing initiatives and price increases on our products.
However, in the short-term, rapid increases in raw material costs can be very difficult to offset with price increases
because of contractual agreements with our customers, and it is difficult to find effective financial instruments to
hedge against such changes.
As a result of changes in commodity costs, cost of sales decreased approximately $6 and $40 during 2017
and 2016, respectively, and cost of sales increased approximately $6 in 2015. The decrease in commodity costs
during 2017 was driven primarily by lower transportation and other costs, partially offset by higher steel costs. The
decrease in commodity costs during 2016 was driven primarily by lower steel costs. We estimate that a 1%
increase in commodity prices, assuming no offsetting benefit of price increases, would have decreased our
operating income by approximately $12 in 2017, 2016 and 2015. This quantitative measure has inherent limitations
given the likelihood of implementing pricing actions to offset significant increases in commodity prices.
Fixed Income and Equity Price Risk
We are exposed to fixed income and equity price risk primarily on the cash surrender value associated with
our investments in variable life COLI policies. Our variable life COLI policies were allocated at approximately 40%
fixed income and 60% equity investments as of February 24, 2017.
We estimate a 10% adverse change in the value of the equity portion of our variable life COLI investments
would reduce our net income in 2017, 2016 and 2015 by approximately $3, $3 and $2, respectively. However,
given that a portion of the investments in COLI policies are intended to be utilized as a long-term funding source for
deferred compensation obligations, any adverse change in the equity portion of our variable life COLI investments
may be partially offset by favorable changes in deferred compensation liabilities. We estimate that the risk of
35
changes in the value of the variable life COLI investments due to other factors, including changes in interest rates,
yield curve and portfolio duration, would not have a material impact on our results of operations or financial
condition. This quantitative measure has inherent limitations since not all of our investments are in similar asset
classes.
See Note 6 and Note 9 to the consolidated financial statements for additional information.
36
Item 8. Financial Statements and Supplementary Data:
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining effective internal control over financial reporting.
This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted in the United States of America,
and that receipts and expenditures are being made only in accordance with authorizations of management and the
Board of Directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only
reasonable assurance and may not prevent or detect all misstatements. Further, because of changes in conditions,
effectiveness of internal control over financial reporting may vary over time.
Management assessed the effectiveness of the system of internal control over financial reporting based on
the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management determined that our system
of internal control over financial reporting was effective as of February 24, 2017.
Deloitte & Touche LLP, the independent registered certified public accounting firm that audited our financial
statements included in this annual report on Form 10-K, also audited the effectiveness of our internal control over
financial reporting, as stated in their report which is included herein.
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
STEELCASE INC.
GRAND RAPIDS, MICHIGAN
We have audited the internal control over financial reporting of Steelcase Inc. and subsidiaries (the
“Company”) as of February 24, 2017, based on criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's
management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of February 24, 2017, based on the criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as of and for the year
ended February 24, 2017 of the Company and our report dated April 14, 2017 expressed an unqualified opinion on
those financial statements and financial statement schedule.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Grand Rapids, Michigan
April 14, 2017
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
STEELCASE INC.
GRAND RAPIDS, MICHIGAN
We have audited the accompanying consolidated balance sheets of Steelcase Inc. and subsidiaries (the
“Company”) as of February 24, 2017 and February 26, 2016, and the related consolidated statements of income,
comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period
ended February 24, 2017. Our audits also included the financial statement schedule listed in the Index at Item 15.
These financial statements and financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Steelcase Inc. and subsidiaries at February 24, 2017 and February 26, 2016 and the results of their
operations and their cash flows for each of the three years in the period ended February 24, 2017, in conformity
with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of February 24, 2017, based on the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated April 14, 2017 expressed an unqualified opinion
on the Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Grand Rapids, Michigan
April 14, 2017
39
STEELCASE INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Year Ended
Revenue
Cost of sales
Restructuring costs
Gross profit
Operating expenses
Restructuring costs
Operating income
Interest expense
Investment income
Other income, net
Income before income tax expense
Income tax expense
Net income
Earnings per share:
Basic
Diluted
February 24,
2017
3,032.4 $
February 26,
2016
3,060.0 $
February 27,
2015
3,059.7
$
2,017.8
2,075.5
2,106.2
4.2
1,010.4
809.3
0.9
200.2
(17.2)
1.4
11.9
196.3
71.7
13.3
971.2
790.0
6.6
174.6
(17.6)
1.5
16.3
174.8
4.5
124.6 $
170.3 $
37.5
916.0
768.0
3.1
144.9
(17.7)
1.4
8.4
137.0
50.9
86.1
1.03 $
1.03 $
1.37 $
1.36 $
0.69
0.68
$
$
$
See accompanying notes to the consolidated financial statements.
40
STEELCASE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income (loss), gross:
Unrealized gain (loss) on investments
Pension and other post-retirement liability adjustments
Derivative adjustments
Foreign currency translation adjustments
Total other comprehensive income (loss), gross
Other comprehensive income (loss), tax (expense) benefit:
Unrealized gain (loss) on investments
Pension and other post-retirement liability adjustments
Derivative adjustments
Foreign currency translation adjustments
Total other comprehensive income (loss), tax (expense) benefit
Other comprehensive income (loss), net:
Unrealized gain (loss) on investments
Pension and other post-retirement liability adjustments
Derivative adjustments
Foreign currency translation adjustments
Total other comprehensive income (loss), net
Comprehensive income
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
124.6 $
170.3 $
86.1
(1.4)
4.7
—
(12.4)
(9.1)
0.5
(2.4)
—
—
(1.9)
(0.2)
2.6
—
(12.2)
(9.8)
—
(0.4)
—
—
(0.4)
—
(16.8)
0.1
(19.2)
(35.9)
—
5.7
—
—
5.7
(0.9)
2.3
—
(12.4)
(11.0)
113.6 $
(0.2)
2.2
—
(12.2)
(10.2)
160.1 $
—
(11.1)
0.1
(19.2)
(30.2)
55.9
$
See accompanying notes to the consolidated financial statements.
41
STEELCASE INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances of $11.2 and $11.7
Inventories
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation of $959.6 and $936.8
Company-owned life insurance ("COLI")
Deferred income taxes
Goodwill
Other intangible assets, net of accumulated amortization of $43.2 and $42.7
Investments in unconsolidated affiliates
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Short-term borrowings and current portion of long-term debt
Accrued expenses:
Employee compensation
Employee benefit plan obligations
Accrued promotions
Customer deposits
Product warranties
Other
Total current liabilities
Long-term liabilities:
Long-term debt less current maturities
Employee benefit plan obligations
Other long-term liabilities
Total long-term liabilities
Total liabilities
Shareholders’ equity:
Preferred stock-no par value; 50,000,000 shares authorized, none issued and
outstanding
Class A common stock-no par value; 475,000,000 shares authorized, 85,975,298
and 87,759,355 issued and outstanding
Class B common stock-no par value, convertible into Class A common stock on a
one-for-one basis; 475,000,000 shares authorized, 31,348,049 and 31,611,411
issued and outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
February 24,
2017
February 26,
2016
$
197.1 $
73.4
307.6
163.1
19.1
58.9
819.2
408.1
168.8
179.6
106.7
16.8
50.5
42.3
1,792.0 $
216.8 $
2.8
$
$
154.3
35.0
19.0
15.9
20.4
59.2
523.4
294.6
134.3
73.2
502.1
1,025.5
—
—
181.9
84.1
322.7
159.4
19.6
56.2
823.9
411.6
160.4
211.6
106.4
13.7
51.0
30.0
1,808.6
209.6
2.5
169.9
36.5
21.7
18.6
20.5
78.2
557.5
296.6
142.5
75.1
514.2
1,071.7
—
—
—
—
(50.6)
817.1
766.5
1,792.0 $
—
—
(39.6)
776.5
736.9
1,808.6
$
See accompanying notes to the consolidated financial statements.
42
STEELCASE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in millions, except share and per share data)
Common
Shares
Outstanding
Class A
Common
Stock
Class B
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Shareholders’
Equity
February 28, 2014
Common stock issuance
Common stock repurchases
Tax effect of exercise of stock awards
Performance units issued as common stock
Restricted stock units issued as common stock
Performance units and restricted stock units expense
Other repurchases related to stock vested not yet issued
Other comprehensive income (loss)
Dividends paid ($0.42 per share)
Net income
February 27, 2015
Common stock issuance
Common stock repurchases
Tax effect of exercise of stock awards
Performance units issued as common stock
Restricted stock units issued as common stock
Performance units and restricted stock units expense
Other repurchases related to stock vested not yet issued
Other comprehensive income (loss)
Dividends paid ($0.45 per share)
Net income
February 26, 2016
Common stock issuance
Common stock repurchases
Tax effect of exercise of stock awards
Performance units issued as common stock
Restricted stock units issued as common stock
Performance units and restricted stock units expense
Other repurchases related to stock vested not yet issued
Other comprehensive income (loss)
Dividends paid ($0.48 per share)
Net income
February 24, 2017
122,876,764
$
— $
— $
— $
0.8
$
676.3
$
48,064
(2,365,897)
453,627
455,989
121,468,547
$
— $
— $
39,052
(3,737,573)
1,026,000
574,740
(21.7)
(30.2)
(52.5)
86.1
$
(29.4) $
688.2
$
(25.0)
0.8
(14.6)
1.6
17.6
(0.4)
5.0
0.7
(31.4)
7.0
20.3
(1.6)
119,370,766
$
— $
— $
— $
(39.6) $
776.5
$
(10.2)
(57.0)
170.3
48,045
(3,507,238)
469,232
942,542
0.7
(22.9)
3.3
19.1
(0.2)
(25.5)
(11.0)
(58.5)
124.6
117,323,347
$
— $
— $
— $
(50.6) $
817.1
$
677.1
0.8
(36.3)
1.6
17.6
(0.4)
(30.2)
(52.5)
86.1
663.8
0.7
(56.4)
7.0
20.3
(1.6)
(10.2)
(57.0)
170.3
736.9
0.7
(48.4)
3.3
19.1
(0.2)
(11.0)
(58.5)
124.6
766.5
See accompanying notes to the consolidated financial statements.
43
STEELCASE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Gain from partial sale of investment in unconsolidated affiliate
Deferred income taxes
Restructuring gains on sale of fixed assets
Non-cash stock compensation
Equity in income of unconsolidated affiliates
Dividends received from unconsolidated affiliates
Other
Changes in operating assets and liabilities, net of acquisition
Accounts receivable
Inventories
Assets related to derivative instruments
VAT recoverable
Long-term income taxes receivable
Other assets
Accounts payable
Employee compensation liabilities
Accrued expenses and other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Capital expenditures
Proceeds from disposal of fixed assets
Purchases of investments
Liquidations of investments
Proceeds from partial sale of investment in unconsolidated affiliate
Other
Net cash used in investing activities
FINANCING ACTIVITIES
Dividends paid
Common stock repurchases
Excess tax benefit from vesting of stock awards
Borrowings of long-term debt and lines of credit, net of issuance costs
Repayment of long-term debt and lines of credit
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Cash Flow Information:
Income taxes paid, net of refunds received
Interest paid, net of amounts capitalized
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
124.6
$
170.3
$
86.1
60.3
—
26.8
—
19.8
(9.7)
9.9
(8.8)
11.9
(5.1)
(1.8)
17.0
(18.5)
(19.6)
9.5
(8.8)
(36.8)
170.7
(61.1)
1.9
(112.6)
126.6
—
(3.2)
(48.4)
(58.5)
(48.4)
3.3
—
(2.3)
(105.9)
(1.2)
15.2
181.9
65.7
(8.5)
(68.3)
(2.8)
21.0
(13.4)
12.4
0.3
0.7
6.8
22.3
(28.9)
—
2.9
(4.1)
20.4
(10.4)
186.4
(93.4)
5.6
(105.7)
95.1
18.0
(7.4)
(87.8)
(57.0)
(56.4)
7.0
51.1
(34.8)
(90.1)
(3.1)
5.4
176.5
$
$
$
197.1
$
181.9
$
67.7
17.0
$
$
57.0
17.1
$
$
59.9
—
0.4
(12.0)
18.4
(15.2)
10.7
(5.1)
(43.7)
(27.2)
(23.8)
(4.3)
—
12.1
12.6
(0.8)
16.1
84.2
(97.5)
19.7
(91.4)
149.1
—
5.8
(14.3)
(52.5)
(36.3)
1.6
—
(2.6)
(89.8)
(5.4)
(25.3)
201.8
176.5
60.4
17.2
See accompanying notes to the consolidated financial statements.
44
STEELCASE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
NATURE OF OPERATIONS
Steelcase is the global leader in furnishing the work experience in office environments. Founded in 1912, we
are headquartered in Grand Rapids, Michigan, U.S.A. and employ approximately 11,700 employees. We operate
manufacturing and distribution center facilities in 21 principal locations. We distribute products through various
channels, including independent and company-owned dealers in more than 800 locations throughout the world, and
have led the global office furniture industry in revenue every year since 1974. We operate under the Americas and
EMEA reportable segments plus an “Other” category. Additional information about our reportable segments is
contained in Note 18.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Steelcase Inc. and its subsidiaries. We
consolidate entities in which we maintain a controlling interest. All material intercompany transactions and balances
have been eliminated in consolidation. We also consolidate variable interest entities when appropriate.
Investments in entities where our equity ownership falls between 20% and 50%, or where we otherwise have
significant influence, are accounted for under the equity method of accounting. All other investments in
unconsolidated affiliates are accounted for under the cost method of accounting. These investments are reported
as Investments in unconsolidated affiliates on the Consolidated Balance Sheets, and income from equity method
and cost method investments are reported in Other income, net on the Consolidated Statements of Income. See
Note 11 for additional information.
Fiscal Year
Our fiscal year ends on the last Friday in February, with each fiscal quarter typically including 13 weeks. The
fiscal years ended February 24, 2017, February 26, 2016 and February 27, 2015 contained 52 weeks. Reference to
a year relates to the fiscal year, ended in February of the year indicated, rather than the calendar year, unless
indicated by a specific date. Additionally, Q1, Q2, Q3 and Q4 reference the first, second, third and fourth quarter,
respectively, of the fiscal year indicated. All amounts are in millions, except share and per share data, data
presented as a percentage or as otherwise indicated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the
amounts and disclosures in the consolidated financial statements and accompanying notes. Although these
estimates are based on historical data and management’s knowledge of current events and actions we may
undertake in the future, actual results may differ from these estimates under different assumptions or conditions.
Foreign Currency
For most foreign operations, local currencies are considered the functional currencies. We translate assets
and liabilities of these subsidiaries to their U.S. dollar equivalents at exchange rates in effect as of the balance
sheet date. Translation adjustments are not included in determining net income but are recorded in Accumulated
other comprehensive income (loss) on the Consolidated Balance Sheets unless and until a sale or a substantially
complete liquidation of the net investment in the international subsidiary takes place. We translate Consolidated
Statements of Income accounts at average exchange rates for the applicable period.
Foreign currency transaction gains and losses, net of derivative impacts, arising primarily from changes in
exchange rates on foreign currency denominated intercompany loans and other intercompany transactions and
balances between foreign locations, are recorded in Other income, net on the Consolidated Statements of Income.
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Cash and Cash Equivalents
Cash and cash equivalents include demand bank deposits and highly liquid investment securities with an
original maturity of three months or less. Cash equivalents are reported at cost and approximate fair value.
Outstanding checks in excess of funds on deposit are classified as Accounts payable on the Consolidated Balance
Sheets. Our restricted cash balance as of February 24, 2017 and February 26, 2016 was $2.5, and consisted of
funds held in escrow for potential future workers’ compensation claims. Our restricted cash balance is classified in
Other assets on the Consolidated Balance Sheets.
Allowances for Credit Losses
Allowances for credit losses related to accounts receivable and notes receivable are maintained at a level
considered by management to be adequate to absorb an estimate of probable future losses existing at the balance
sheet date. In estimating probable losses, we review accounts that are past due or in bankruptcy. We consider an
accounts receivable or notes receivable balance past due when payment is not received within the stated terms.
We review accounts that may have higher credit risk using information available about the debtor, such as financial
statements, news reports and published credit ratings. We also use general information regarding industry trends,
the economic environment and information gathered through our network of field-based employees. Using an
estimate of current fair market value of any applicable collateral and other credit enhancements, such as third party
guarantees, we arrive at an estimated loss for specific concerns and estimate an additional amount for the
remainder of trade balances based on historical trends and other factors previously referenced. Receivable
balances are written off when we determine the balance is uncollectible. Subsequent recoveries, if any, are credited
to bad debt expense when received.
Concentrations of Credit Risk
Our trade receivables are primarily due from independent dealers who, in turn, carry receivables from their
customers. We monitor and manage the credit risk associated with individual dealers and direct customers where
applicable. Dealers are responsible for assessing and assuming credit risk of their customers and may require their
customers to provide deposits, letters of credit or other credit enhancement measures. Some sales contracts are
structured such that the customer payment or obligation is direct to us. In those cases, we typically assume the
credit risk. Whether from dealers or customers, our trade credit exposures are not concentrated with any particular
entity.
Inventories
Inventories are stated at the lower of cost or market. The Americas segment primarily uses the last in, first
out (“LIFO”) method to value its inventories. The EMEA segment values inventories primarily using the first in, first
out method. Businesses within the Other category primarily use the first in, first out or the average cost inventory
valuation methods. See Note 7 for additional information.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Major improvements that materially extend the useful lives
of the assets are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred.
Depreciation is provided using the straight-line method over the estimated useful lives of the assets.
Long-lived assets such as property, plant and equipment are tested for impairment when conditions indicate
that the carrying value may not be recoverable. We evaluate several conditions, including, but not limited to, the
following: a significant decrease in the market price of an asset or an asset group; a significant adverse change in
the extent or manner in which a long-lived asset is being used, including an extended period of idleness; and a
current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of
significantly before the end of its previously estimated useful life. We review the carrying value of our held and used
long-lived assets utilizing estimates of future undiscounted cash flows. If the carrying value of a long-lived asset is
considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived
asset exceeds its estimated fair value.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
When assets are classified as “held for sale,” losses are recorded for the difference between the carrying
amount of the property, plant and equipment and the estimated fair value less estimated selling costs. Assets are
considered “held for sale” when it is expected that the asset is going to be sold within twelve months.
Operating Leases
Rent expense under operating leases is recorded on a straight-line basis over the lease term unless the lease
contains an escalation clause which is not fixed and determinable. The lease term begins when we have the right
to control the use of the leased property, which is typically before rent payments are due under the terms of the
lease. If a lease has a fixed and determinable escalation clause, the difference between rent expense and rent paid
is recorded as deferred rent. Rent expense under operating leases that do not have an escalation clause or where
escalation is based on an inflation index is expensed over the lease term as it is payable. See Note 17 for
additional information.
Goodwill and Other Intangible Assets
Goodwill represents the difference between the purchase price and the related underlying tangible and
identifiable intangible net asset fair values resulting from business acquisitions. Annually in Q4, or earlier if
conditions indicate it is necessary, the carrying value of the reporting unit is compared to an estimate of its fair
value. If the estimated fair value of the reporting unit is less than the carrying value, goodwill is impaired and is
written down to its estimated fair value. Goodwill is assigned to and the fair value is tested at the reporting unit
level. We evaluate goodwill and intangible assets using six reporting units: the Americas, Red Thread, EMEA, Asia
Pacific, Designtex and PolyVision. See Note 10 for additional information.
Other intangible assets subject to amortization consist primarily of proprietary technology, trademarks,
customer relationships and non-compete agreements and are amortized over their estimated useful economic lives
using the straight-line method. Other intangible assets not subject to amortization, consisting of certain trademarks,
are accounted for and evaluated for potential impairment in a manner consistent with goodwill. See Note 10 for
additional information.
Contingencies
Loss contingencies are accrued if the loss is probable and the amount of the loss can be reasonably
estimated. Legal costs associated with potential loss contingencies are expensed as incurred. We are involved in
litigation from time to time in the ordinary course of our business. Based on known information, we do not believe
we are party to any lawsuit or proceeding, individually and in the aggregate, that is likely to have a material adverse
impact on the consolidated financial statements.
Self-Insurance
We are self-insured for certain losses relating to domestic workers’ compensation, product liability and
employee medical, dental, and short-term disability claims. We purchase insurance coverage to reduce our
exposure to significant levels of certain of these claims. Self-insured losses are accrued based upon estimates of
the aggregate liability for uninsured claims incurred as of the balance sheet date using current and historical claims
experience and certain actuarial assumptions. These estimates are subject to uncertainty due to a variety of
factors, including extended lag times in the reporting and resolution of claims, and trends or changes in claim
settlement patterns, insurance industry practices and legal interpretations. As a result, actual costs could differ
significantly from the estimated amounts. Adjustments to estimated reserves are recorded in the period in which the
change in estimate occurs.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Net Reserve for Estimated Domestic Workers' Compensation Claims
Assets:
Long-term - Other assets
Liabilities:
Current - Accrued expenses - other
Long-term - Other long-term liabilities
Net reserve
Year Ended
February 24,
2017
February 26,
2016
$
4.0 $
4.0
2.4
13.9
16.3
$
12.3 $
3.5
13.4
16.9
12.9
The other long-term asset balance represents the portion of claims expected to be paid by a third party
insurance provider.
Net Reserve for Estimated Product Liability Claims
Assets:
Long-term - Other long-term assets
Liabilities:
Current - Accrued expenses - other
Long-term - Other long-term liabilities
Net reserve
Year Ended
February 24,
2017
February 26,
2016
$
2.4 $
1.4
7.3
8.7
$
6.3 $
2.7
1.5
8.3
9.8
7.1
The other long-term asset balance represents the portion of claims expected to be paid by a third party
insurance provider.
The estimate for unpaid employee medical, dental, and short-term disability claims incurred as of February
24, 2017 and February 26, 2016 was $4.5 and $3.8, respectively, and is recorded within Accrued expenses: Other
on the Consolidated Balance Sheets.
Product Warranties
We offer warranties ranging from 3 years to lifetime for most products, subject to certain exceptions. These
warranties provide for the free repair or replacement of any covered product, part or component that fails during
normal use because of a defect in materials or workmanship. The accrued liability for product warranties is based
on an estimated amount needed to cover product warranty costs, including product recall and retrofit costs, incurred
as of the balance sheet date determined by historical claims experience and our knowledge of current events and
actions.
Roll-Forward of Accrued
Liability for Product Warranties
Balance as of beginning of period
Accruals related to product warranties, recalls and retrofits
Reductions for settlements
Currency translation adjustments
Balance as of end of period
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
42.1 $
39.4 $
19.5
(20.1)
(0.2)
18.1
(16.0)
0.6
$
41.3 $
42.1 $
37.3
17.1
(13.6)
(1.4)
39.4
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Our reserve for estimated settlements expected to be paid beyond one year as of February 24, 2017 and
February 26, 2016 was $20.9 and $21.6, respectively, and is included in Other long-term liabilities on the
Consolidated Balance Sheets.
Pension and Other Post-Retirement Benefits
We sponsor a number of domestic and foreign plans to provide pension benefits and medical and life
insurance benefits to retired employees. We measure the net over-funded or under-funded positions of our defined
benefit pension plans and post-retirement benefit plans as of the end of each fiscal year and display that position as
an asset or liability on the Consolidated Balance Sheets. Any unrecognized prior service credit (cost) or experience
gains (losses) are reported, net of tax, as a component of Accumulated other comprehensive income (loss) in
shareholders’ equity. See Note 13 for additional information.
Environmental Matters
Environmental expenditures related to current operations are expensed or capitalized as appropriate.
Expenditures related to an existing condition allegedly caused by past operations, and not associated with current
or future revenue generation, are expensed. Generally, the timing of these accruals coincides with completion of a
feasibility study or our commitment to a formal plan of action. Liabilities are recorded on a discounted basis as site-
specific plans indicate the amount and timing of cash payments are fixed or reliably determinable. We have ongoing
monitoring and identification processes to assess how known exposures are progressing against the accrued cost
estimates, as well as processes to identify other potential exposures.
Environmental Contingencies
Current:
Accrued expenses - other
Long-Term:
Other long-term liabilities
Total environmental contingencies (discounted)
Year Ended
February 24,
2017
February 26,
2016
$
$
0.6 $
3.3
3.9 $
1.0
3.5
4.5
The environmental liabilities were discounted using a rate of 4.0% as of February 24, 2017 and February 26,
2016. Our undiscounted liabilities were $4.8 and $5.7 as of February 24, 2017 and February 26, 2016, respectively.
Based on our ongoing evaluation of these matters, we believe we have accrued sufficient reserves to absorb the
costs of all known environmental assessments and the remediation costs of all known sites.
Asset Retirement Obligations
We record all known asset retirement obligations for which the liability’s fair value can be reasonably
estimated. We also have known conditional asset retirement obligations that are not reasonably estimable due to
insufficient information about the timing and method of settlement of the obligation. Accordingly, these obligations
have not been recorded in the consolidated financial statements. A liability for these obligations will be recorded in
the period when sufficient information regarding timing and method of settlement becomes available to make a
reasonable estimate of the liability’s fair value. In addition, there may be conditional asset retirement obligations we
have not yet discovered, and therefore, these obligations also have not been included in the consolidated financial
statements.
Revenue Recognition
Revenue consists substantially of product sales and related service revenue. Product sales are reported net
of discounts and are recognized when title and risks associated with ownership have passed to the dealer or
customer. Under sales contracts with our dealers, this typically occurs when product is shipped to the dealer or
directly to the customer. In cases where we have a direct sales contract with the customer, title and risks associated
with ownership often transfer upon delivery or acceptance by the customer. Revenue from services is recognized
when the services have been rendered. Revenue does not include sales tax, as we consider ourselves a pass-
through entity for collecting and remitting sales taxes.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Cost of Sales
Cost of sales includes material, labor and overhead. Included within these categories are such items as
compensation expense, logistics costs (including shipping and handling costs), facilities expense, depreciation and
warranty expense.
Operating Expenses
Operating expenses include selling, general and administrative expenses not directly related to the
procurement, manufacturing and delivery of our products. Included in these expenses are items such as employee
compensation expense, research and development expense, rental expense, depreciation, royalty expense,
information technology services, professional services and travel and entertainment expense.
Research and Development Expenses
Research and development expenses, which are expensed as incurred, were $35.8 for 2017, $33.0 for 2016
and $35.4 for 2015.
Income Taxes
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences
attributable to temporary differences between the consolidated financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. These deferred income tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are
expected to reverse. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized
in the Consolidated Statements of Income in the period that includes the enactment date.
We have net operating loss carryforwards available in certain jurisdictions to reduce future taxable income.
Future tax benefits associated with net operating loss carryforwards are recognized to the extent that realization of
these benefits is considered more likely than not. This determination is based on the expectation that related
operations will be sufficiently profitable or various tax, business and other planning strategies will enable us to utilize
the net operating loss carryforwards. In making this determination we consider all available positive and negative
evidence. To the extent that available evidence raises doubt about the realization of a deferred income tax asset, a
valuation allowance is established.
We record reserves for uncertain tax positions except to the extent it is more likely than not that the tax
position will be sustained on audit, based on the technical merits of the position. Periodic changes in reserves for
uncertain tax positions are reflected in the provision for income taxes. See Note 15 for additional information.
Share-Based Compensation
Our share-based compensation consists of restricted stock units and performance units. Our policy is to
expense share-based compensation using the fair-value based method of accounting for all awards granted,
modified or settled.
Restricted stock units and performance units are credited to shareholders' equity as they are expensed over
the requisite service periods based on the grant date fair value of the shares expected to be issued. See Note 16 for
additional information.
Financial Instruments
The carrying amounts of our financial instruments, consisting of cash and cash equivalents, accounts and
notes receivable, accounts and notes payable and certain other liabilities, approximate their fair value due to their
relatively short maturities. Our short-term investments, foreign exchange forward contracts and long-term
investments are measured at fair value on the Consolidated Balance Sheets. Our total debt is carried at cost and
was $297.4 and $299.1 as of February 24, 2017 and February 26, 2016, respectively. The fair value of our total debt
is measured using a discounted cash flow analysis based on current market interest rates for similar types of
instruments and was approximately $330 and $326 as of February 24, 2017 and February 26, 2016, respectively.
The estimation of the fair value of our total debt is based on Level 2 fair value measurements.
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
See Note 6 and Note 12 for additional information.
We periodically use derivative financial instruments to manage exposures to movements in interest rates and
foreign exchange rates. The use of these financial instruments modifies the exposure of these risks with the
intention to reduce our risk of short-term volatility. We do not use derivatives for speculative or trading purposes.
Foreign Exchange Forward Contracts
A portion of our revenue and earnings is exposed to changes in foreign exchange rates. We seek to manage
our foreign exchange risk largely through operational means, including matching same currency revenue with same
currency costs and same currency assets with same currency liabilities. Foreign exchange risk is also partially
managed through the use of derivative instruments. Foreign exchange forward contracts serve to reduce the risk of
conversion or translation of certain foreign denominated transactions, assets and liabilities. We primarily use
derivatives for intercompany loans and certain forecasted transactions. The foreign exchange forward contracts
relate principally to the euro, the Mexican peso, the United Kingdom pound sterling, the Canadian dollar, the
Australian dollar and the Japanese yen. See Note 6 for additional information.
Assets and liabilities related to derivative instruments as of February 24, 2017 and February 26, 2016 are
summarized below:
Consolidated Balance Sheets
Other current assets
Accrued expenses
Total net fair value of derivative instruments (1)
________________________
February 24,
2017
February 26,
2016
$
$
3.5 $
(0.9)
2.6 $
1.8
(3.3)
(1.5)
(1) The notional amounts of the outstanding foreign exchange forward contracts were $101.2 as of February 24,
2017 and $145.4 as of February 26, 2016.
Net gains (losses) recognized from derivative instrument activity in 2017, 2016 and 2015 are summarized
below:
Gain (Loss) Recognized in Consolidated Statements of Income
Cost of sales
Operating expenses
Other income, net
Total net gains
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
$
(1.1) $
0.8
1.2
0.9 $
(0.8) $
(0.8)
3.0
1.4 $
(1.6)
(0.6)
23.8
21.6
The net gains or losses recognized from derivative instruments in other income, net are largely offset by
related foreign currency gains or losses on our intercompany loans and intercompany accounts payable.
3.
NEW ACCOUNTING STANDARDS
In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("ASU") No. 2017-04, Intangible - Goodwill and Other (Topic 350), which simplifies the test of goodwill impairment.
The updated guidance eliminates Step 2 of the goodwill impairment test which required an entity to compare the
implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The goodwill impairment
test will now only require an entity to perform its annual, or interim, comparison of the fair value of a reporting unit to
its carrying amount. The amended guidance should be adopted on a prospective basis for the annual, or any
interim, goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted for
interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to early
adopt this standard as of the date of our next interim or annual goodwill impairment test. We do not anticipate that
the adoption of this standard will have a material impact on our consolidated financial statements.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
In November 2016 and August 2016, the FASB issued ASU No. 2016-18 and ASU No. 2016-15, Statement of
Cash Flows (Topic 230), which update the guidance as to how restricted cash, certain cash receipts and certain
cash payments should be presented and classified. The updates are intended to reduce diversity in practice. The
amendments are effective for fiscal years, and interim periods within those years, beginning after December 15,
2017, with early adoption permitted, including adoption in an interim period. We do not anticipate that the adoption
of this standard will have a material impact on our consolidated financial statements.
In October 2015, FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The update is intended to
improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. We
plan to adopt this accounting guidance in Q1 2018. The updated guidance will not have a material impact on our
consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which
replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected
credit losses. The update is intended to provide financial statement users with more useful information about
expected credit losses. The amended guidance is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2019, with early adoption permitted for the fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2018. We are currently evaluating the impact of the adoption of
this standard on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), which
is part of the FASB Simplification Initiative. The updated guidance simplifies the accounting for share-based
payment transactions. The amended guidance is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016, with early adoption permitted. We plan to adopt this accounting guidance in
Q1 2018. Under the new standard the income tax effects of our share-based compensation awards will be
recognized as a component of income tax expense instead of as a component of additional paid-in capital.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease
accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising
from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures.
The amended guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2018, with early adoption permitted. We expect the adoption of this guidance will result in a material
increase in the assets and liabilities on our Consolidated Balance Sheets.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10),
which updates the recognition and measurement of financial assets and financial liabilities. The updated guidance
changes the accounting and disclosure of equity investments (except those that are consolidated or accounted for
under the equity method). The amended guidance is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact of
the adoption of this standard on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts with Customers (Topic 606),
which establishes a new standard on revenue recognition. The new standard outlines a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most
current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The standard is designed to create greater comparability for financial statement users across industries
and jurisdictions and also requires enhanced disclosures. The guidance is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2017, with early adoption permitted for fiscal years
beginning after December 15, 2016. We are in the process of evaluating the impact that will result from the
adoption of the new standard, but based on analysis performed as of February 24, 2017, we do not anticipate a
significant impact on our consolidated financial statements. We currently plan to apply the new standard using the
modified retrospective method beginning in 2019.
4.
EARNINGS PER SHARE
Earnings per share is computed using the two-class method. The two-class method determines earnings per
share for each class of common stock and participating securities according to dividends or dividend equivalents
and their respective participation rights in undistributed earnings. Participating securities represent restricted stock
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
units in which the participants have non-forfeitable rights to dividend equivalents during the performance period.
Diluted earnings per share includes the effects of certain performance units in which the participants have forfeitable
rights to dividend equivalents during the performance period.
Net income
Computation of Earnings per Share
Adjustment for earnings attributable to participating securities
Net income used in calculating earnings per share
Weighted-average common shares outstanding including participating
securities (in millions)
Adjustment for participating securities (in millions)
Shares used in calculating basic earnings per share (in millions)
Effect of dilutive stock-based compensation (in millions)
Shares used in calculating diluted earnings per share (in millions)
Earnings per share:
Basic
Diluted
Total common shares outstanding at period end (in millions)
Anti-dilutive performance units excluded from computation of diluted
earnings per share (in millions)
5.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
$
$
$
124.6 $
170.3 $
(2.4)
(3.4)
122.2 $
166.9 $
120.7
(2.3)
118.4
0.5
118.9
124.3
(2.5)
121.8
1.0
122.8
1.03 $
1.03 $
1.37 $
1.36 $
117.3
119.4
86.1
(1.6)
84.5
124.4
(2.3)
122.1
1.6
123.7
0.69
0.68
121.5
0.3
—
—
The following table summarizes the changes in accumulated balances of other comprehensive income (loss)
during the years ended February 24, 2017 and February 26, 2016:
Balance as of February 27, 2015
$
0.8 $
8.5 $
(38.7) $
(29.4)
Unrealized
gain on
investments
Pension and
other post-
retirement
liability
adjustments
Foreign
currency
translation
adjustments
Total
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net other comprehensive income (loss) during period
—
(0.2)
(0.2)
7.2
(12.2)
(5.0)
(5.0)
2.2
—
(12.2)
Balance as of February 26, 2016
$
0.6 $
10.7 $
(50.9) $
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income (loss)
Net other comprehensive income (loss) during period
(0.5)
(0.4)
(0.9)
6.8
(12.4)
(4.5)
2.3
—
(12.4)
Balance as of February 24, 2017
$
(0.3) $
13.0 $
(63.3) $
53
(5.2)
(10.2)
(39.6)
(6.1)
(4.9)
(11.0)
(50.6)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The following table provides details about reclassifications out of accumulated other comprehensive income
(loss) for the years ended February 24, 2017 and February 26, 2016:
Amount Reclassified from Accumulated
Other Comprehensive Income (Loss)
Year Ended
Detail of Accumulated Other Comprehensive
Income (Loss) Components
February 24,
2017
February 26,
2016
Affected Line in the Consolidated
Statements of Income
Unrealized gains on investments
$
(0.5) $
(0.2) Other income (expense), net
Amortization of pension and other post-
retirement liability adjustments
Actuarial (gains) losses
Actuarial losses
Prior service credit
Prior service credit
Settlements
0.1
(0.4)
(0.2)
0.1
(4.0)
(4.8)
0.9
3.5
(4.5)
— Income tax expense
(0.2) Net income
0.2 Cost of sales
0.8 Operating expenses
(4.2) Cost of sales
(5.0) Operating expenses
— Cost of sales
3.2 Income tax expense
(5.0) Net income
Total reclassifications
$
(4.9) $
(5.2)
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
6.
FAIR VALUE
Fair value measurements are classified under the following hierarchy:
Level 1 — Inputs based on quoted market prices for identical assets or liabilities in active markets at the
measurement date.
Level 2 — Inputs based on quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived valuations in which all
significant inputs or significant value-drivers are observable in active markets.
Level 3 — Inputs reflect management’s best estimate of what market participants would use to price the
asset or liability at the measurement date in model-driven valuations. The inputs are unobservable in the
market and significant to the instrument’s valuation.
Fair value measurements are classified according to the lowest level input or value-driver that is significant to
the valuation. A measurement may therefore be classified within Level 3 even though there may be other significant
inputs that are readily observable.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Assets and liabilities measured at fair value in our Consolidated Balance Sheets as of February 24, 2017 and
February 26, 2016 are summarized below:
Fair Value of Financial Instruments
Level 1
Level 2
Level 3
Total
February 24, 2017
Assets:
Cash and cash equivalents
Restricted cash
Managed investment portfolio and other investments
Corporate debt securities
U.S. agency debt securities
Municipal debt securities
Asset-backed securities
U.S. government debt securities
Foreign exchange forward contracts
Auction rate securities
Liabilities:
Foreign exchange forward contracts
$
197.1 $
2.5
—
—
—
—
2.4
—
—
— $
—
33.6
18.6
15.1
3.7
—
3.5
—
— $
197.1
—
—
—
—
—
—
—
3.5
2.5
33.6
18.6
15.1
3.7
2.4
3.5
3.5
$
$
$
202.0 $
74.5 $
3.5 $
280.0
— $
— $
(0.9) $
(0.9) $
— $
— $
(0.9)
(0.9)
Fair Value of Financial Instruments
Level 1
Level 2
Level 3
Total
February 26, 2016
Assets:
Cash and cash equivalents
Restricted cash
Managed investment portfolio and other investments
Corporate debt securities
U.S. agency debt securities
Municipal debt securities
Asset-backed securities
U.S. government debt securities
Foreign exchange forward contracts
Auction rate securities
Canadian asset-backed commercial paper restructuring
notes
$
181.9 $
2.5
—
—
—
—
8.2
—
—
—
— $
—
31.7
34.7
0.3
9.2
—
1.8
—
3.1
— $
181.9
—
—
—
—
—
—
—
4.4
—
2.5
31.7
34.7
0.3
9.2
8.2
1.8
4.4
3.1
Liabilities:
Foreign exchange forward contracts
192.6 $
80.8 $
4.4 $
277.8
— $
— $
(3.3) $
(3.3) $
— $
— $
(3.3)
(3.3)
$
$
$
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Managed Investment Portfolio and Other Investments
Our managed investment portfolio consists of U.S. agency debt securities, corporate debt securities, asset
backed securities, U.S. government debt securities and municipal debt securities. Our investment manager
operates under a mandate to keep the average duration of investments under two years. Our managed investment
portfolio and other investments are considered available-for-sale. Fair values for these investments are based upon
valuations for identical or similar instruments in active markets, with the resulting net unrealized holding gains or
losses reflected net of tax as a component of Accumulated other comprehensive income (loss) on the Consolidated
Balance Sheets.
The cost basis for these investments, determined using the specific identification method, was $73.4 and
$84.1 as of February 24, 2017 and February 26, 2016, respectively. Net unrealized losses were $0.1 for 2017 and
$0.0 for 2016. As of February 24, 2017, approximately 57% of the debt securities mature within one year,
approximately 10% in two years, approximately 10% in three years and approximately 23% in four or more years.
Foreign Exchange Forward Contracts
From time to time, we enter into forward contracts to reduce the risk of translation into U.S. dollars of certain
foreign-denominated transactions, assets and liabilities. We primarily hedge intercompany working capital loans
and certain forecasted currency flows from foreign-denominated transactions. The fair value of foreign exchange
forward contracts is based on a valuation model that calculates the differential between the contract price and the
market-based forward rate.
Canadian Asset-Backed Commercial Paper Restructuring Notes
As of February 26, 2016, we held four floating-rate Canadian asset-backed commercial paper restructuring
notes. These notes replaced an investment in Canadian asset-backed commercial paper, which, as a result of a
lack of liquidity in the market in 2008, failed to settle on maturity and went into default. These assets were
considered to be Level 2 investments due to increased market liquidity and price transparency since that time. All
four notes have been liquidated as of February 24, 2017.
Auction Rate Securities
As of February 24, 2017, we held auction rate securities (“ARS”) with a total par value of $6.5. While there
has been no payment default with respect to our ARS, these investments are not widely traded and therefore do not
currently have a readily determinable market value. We receive higher penalty interest rates on the securities
ranging from 30-Day LIBOR plus 2.0 to 2.5%. We have the intent and ability to hold these securities until recovery
of market value or maturity, and we believe the current inability to easily liquidate these investments will have no
impact on our ability to fund our ongoing operations.
To estimate fair value, we used an internally-developed discounted cash flow analysis. Our discounted cash
flow analysis considers, among other factors, (i) the credit ratings of the ARS, (ii) the credit quality of the underlying
securities or the credit rating of issuers, (iii) the estimated timing and amount of cash flows, (iv) the formula
applicable to each security which defines the penalty interest rate and (v) discount rates equal to the sum of (a) the
yield on U.S. Treasury securities with a term through the estimated workout date plus (b) a risk premium based on
similarly rated observable securities. These assumptions are based on our current judgment and our view of
current market conditions. Based upon these factors, ARS with an original par value of approximately $6.5 have
been adjusted to an estimated fair value of $3.5 as of February 24, 2017. The difference between par value and fair
value is comprised of other-than-temporary impairment losses and unrealized losses on our ARS investments of
$2.5 and $0.5, respectively. The investments other-than-temporarily impaired were impaired due to general credit
declines, and the impairments were recorded in Investment income in the Consolidated Statements of Income.
Unrealized gains are recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance
Sheets. The unrealized gains are due to changes in interest rates and are expected to fluctuate over the
contractual term of the instruments. A deterioration in market conditions or the use of different assumptions could
result in a different valuation and additional impairments. For example, an increase to the discount rate of 100 basis
points would reduce the estimated fair value of our investment in ARS by approximately $0.4.
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Below is a roll-forward of assets and liabilities measured at estimated fair value using Level 3 inputs for the
years ended February 24, 2017 and February 26, 2016:
Roll-forward of Fair Value Using Level 3 Inputs
Balance as of February 27, 2015
Unrealized gain on investments
Redemption of auction rate securities at par
Balance as of February 26, 2016
Unrealized loss on investments
Balance as of February 24, 2017
Auction Rate
Securities
$
$
$
$
9.7
(0.1)
(5.2)
4.4
(0.9)
3.5
There were no other-than-temporary impairments or transfers into or out of Level 3 during either 2017 or
2016. Our policy is to value any transfers between levels of the fair value hierarchy based on end of period fair
values.
7.
INVENTORIES
Inventories
Raw materials and work-in-process
Finished goods
Revaluation to LIFO
February 24,
2017
February 26,
2016
$
79.6 $
101.7
181.3
18.2
$
163.1 $
80.4
96.9
177.3
17.9
159.4
The portion of inventories determined by the LIFO method aggregated $77.9 and $76.3 as of February 24,
2017 and February 26, 2016, respectively.
8.
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment
Land
Machinery and equipment
Buildings and improvements
Capitalized software
Furniture and fixtures
Leasehold improvements
Construction in progress
Accumulated depreciation
Estimated
Useful Lives
(Years)
February 24,
2017
February 26,
2016
3 – 15
10 – 40
3 – 10
5 – 8
3 – 10
$
31.7 $
703.8
383.4
104.5
55.9
59.0
29.4
1,367.7
(959.6)
408.1 $
$
32.7
660.7
379.3
105.4
56.9
56.0
57.4
1,348.4
(936.8)
411.6
A majority of the net book value of property, plant and equipment as of February 24, 2017 relates to
machinery and equipment of $184.7 and buildings and improvements of $110.2. A majority of the net book value of
property, plant and equipment as of February 26, 2016 relates to machinery and equipment of $158.5 and building
and improvements of $110.1. Depreciation expense on property, plant and equipment was $59.3 for 2017, $63.3 for
2016 and $57.1 for 2015. The estimated cost to complete construction in progress was $21.6 and $27.5 as of
February 24, 2017 and February 26, 2016, respectively.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
9.
COMPANY-OWNED LIFE INSURANCE
Our investments in company-owned life insurance (“COLI”) policies are recorded at their net cash surrender
value.
Our investments in COLI policies are intended to be utilized as a long-term funding source for post-retirement
medical benefits, deferred compensation and defined benefit pension plan obligations, which as of February 24,
2017 aggregated approximately $146, with a related deferred tax asset of approximately $54. The designations of
our COLI investments as funding sources for our benefit obligations do not result in these investments representing
a committed funding source for these obligations. They are subject to claims from creditors, and we can redesignate
them to another purpose at any time.
The costs associated with the long-term benefit obligations that the investments are intended to fund are
recorded in Operating expenses on the Consolidated Statements of Income. As these costs may exceed the net
returns in cash surrender value, normal insurance expenses and any death benefit gains related to our investments
in COLI policies (“COLI income”), we record all COLI income in Operating expenses on the Consolidated
Statements of Income. COLI income recorded in Operating expenses on the Consolidated Statements of Income
totaled $9.5 in 2017, $0.8 in 2016 and $5.8 in 2015.
The balances of our COLI investments as of February 24, 2017 and February 26, 2016 were as follows:
Type
Whole life
COLI policies
Ability to Choose
Investments
No ability
Variable life
COLI policies
Can allocate
across a set of
choices provided
by the insurance
companies
Net Return
A rate of return
set periodically
by the
insurance
companies
Fluctuates
depending on
performance of
underlying
investments
Target Asset
Allocation as of
February 24, 2017
Not applicable
Net Cash Surrender Value
February 24,
2017
February 26,
2016
$
125.6 $
121.7
40% fixed
income; 60%
equity
43.2
38.7
$
168.8 $
160.4
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
10. GOODWILL & OTHER INTANGIBLE ASSETS
A summary of the changes in goodwill during the years ended February 24, 2017 and February 26, 2016, by
reportable segment, is as follows:
Goodwill
Americas
EMEA
Other
Total
Goodwill
Accumulated impairment losses
Balance as of February 27, 2015
Currency translation adjustments
Goodwill
Accumulated impairment losses
Balance as of February 26, 2016
Currency translation adjustments
Goodwill
Accumulated impairment losses
Balance as of February 24, 2017
$
$
90.4 $
265.0 $
116.5 $
471.9
(1.7)
(265.0)
(98.0)
(364.7)
88.7 $
— $
18.5 $
107.2
(0.8)
89.6
(1.7)
—
265.0
(265.0)
—
116.5
(98.0)
(0.8)
471.1
(364.7)
$
87.9 $
— $
18.5 $
106.4
0.3
89.9
(1.7)
—
265.0
(265.0)
—
116.5
(98.0)
0.3
471.4
(364.7)
$
88.2 $
— $
18.5 $
106.7
Our goodwill impairment evaluation is a two step process. In step one, we compare the fair value of each
reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value, goodwill is not
impaired, and no further testing is required. If the fair value of the reporting unit is less than the carrying value, we
perform step two to measure the amount of impairment loss, if any. In step two, the reporting unit's fair value is
allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a
hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit
was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than
the carrying value, the difference is recorded as an impairment loss.
We estimated the fair value of our reporting units using the income approach, which calculates the fair value
of each reporting unit based on the present value of its estimated future cash flows. Cash flow projections are
based on management's estimates of revenue growth rates and operating margins, taking into consideration
industry and market conditions. The discount rates used are based on the weighted-average cost of capital adjusted
for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting
units' ability to execute on the projected cash flows. The estimation of the fair value of our reporting units represents
a Level 3 measurement.
Based on the results of the annual impairment test, we concluded that no goodwill impairment existed as of
February 24, 2017 or February 26, 2016. We will continue to evaluate goodwill, on an annual basis in Q4, and
whenever events or changes in circumstances, such as significant adverse changes in business climate or
operating results, changes in management's business strategy or significant declines in our stock price, indicate that
there may be a potential indicator of impairment.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
As of February 24, 2017 and February 26, 2016, our other intangible assets and related accumulated
amortization consisted of the following:
Other Intangible Assets
Intangible assets subject to
amortization:
Proprietary technology
Trademarks
Non-compete agreements
Other
Intangible assets not subject to
amortization:
Trademarks and other
February 24, 2017
February 26, 2016
Weighted
Average
Useful Life
(Years)
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
8.3 $ 26.8 $
23.0 $
10.0
5.1
5.0
9.0
1.6
9.8
47.2
9.0
1.6
9.6
43.2
3.8 $ 22.8 $
—
9.2
—
0.2
4.0
1.6
10.1
43.7
22.7 $
9.2
1.4
9.4
42.7
0.1
—
0.2
0.7
1.0
n/a
12.8
$ 60.0 $
—
12.8
12.7
—
12.7
43.2 $ 16.8 $ 56.4 $
42.7 $ 13.7
In 2017 and 2016, no intangible asset impairment charges were recorded.
We recorded amortization expense on intangible assets subject to amortization of $1.0 in 2017, $1.8 in 2016
and $1.6 for 2015. Based on the current amount of intangible assets subject to amortization, the estimated
amortization expense for each of the following five years is as follows:
Year Ending in February
Amount
2018
2019
2020
2021
2022
$
$
0.6
0.4
0.4
0.4
0.4
2.2
Future events, such as acquisitions, dispositions or impairments, may cause these amounts to vary.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
11.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
We enter into joint ventures and other equity investments from time to time to expand or maintain our
geographic presence, support our distribution network or invest in new business ventures, complementary products
and services. Our investments in unconsolidated affiliates and related direct ownership interests are summarized
below:
Investments in unconsolidated affiliates
February 24, 2017
February 26, 2016
Investment
Balance
Ownership
Interest
Investment
Balance
Ownership
Interest
Equity method investments
Dealer relationships
Manufacturing joint ventures
IDEO and other
Cost method investments
Dealer relationship
Other
$
25.2 20%-40%
$
23.4 20%-40%
8.7 49%
9.9 10%-35%
43.8
11.5 49%
9.6 10%-39%
44.5
5.8 Less than 10%
0.9 Less than 10%
5.8 Less than 10%
0.7 Less than 10%
6.7
50.5
6.5
51.0
$
Total investments in unconsolidated affiliates
$
Our equity in earnings of unconsolidated affiliates is recorded in Other income (expense), net on the
Consolidated Statements of Income and is summarized below:
Equity in earnings of unconsolidated affiliates
Dealer relationships
Manufacturing joint ventures
IDEO and other
Total equity in earnings of unconsolidated affiliates
Dealer Relationships
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
$
8.0 $
6.9 $
1.1
0.6
4.8
1.7
6.5
5.7
3.0
9.7 $
13.4 $
15.2
We have invested in dealers from time to time to expand or maintain our geographic presence and support
our distribution network.
Manufacturing Joint Ventures
We have entered into manufacturing joint ventures from time to time to expand or maintain our geographic
presence. The manufacturing joint ventures primarily consist of Steelcase Jeraisy Company Limited, which is
located in the Kingdom of Saudi Arabia and is engaged in the manufacturing of wood and metal office furniture
systems, accessories and related products for the Kingdom.
IDEO
IDEO LP is an innovation and design firm that uses a human-centered, design-based approach to generate
new offerings and build new capabilities for its customers. IDEO serves Steelcase and a variety of other
organizations within consumer products, financial services, healthcare, information technology, government,
transportation and other industries. During Q4 2016, we sold a portion of our equity interest in IDEO and recorded
a gain of $8.5 in Other income (expense), net on the Consolidated Statement on Income. As of February 24, 2017
and February 26, 2016 we owned a 10% equity interest in IDEO.
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The summarized financial information presented below represents the combined accounts of our equity
method investments in unconsolidated affiliates.
Consolidated Balance Sheets
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total long-term liabilities
Total liabilities
Statements of Income
Revenue
Gross profit
Income before income tax expense
Net income
Supplemental Information
February 24,
2017
February 26,
2016
$
$
$
$
177.3 $
37.9
215.2 $
98.6 $
9.9
108.5 $
180.2
35.6
215.8
101.7
11.8
113.5
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
649.1 $
182.2
635.1 $
182.1
40.8
36.9
43.5
40.4
573.5
167.3
49.7
46.2
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
Dividends received from unconsolidated affiliates
$
9.9 $
12.5 $
Sales to unconsolidated affiliates
Amount due from unconsolidated affiliates
270.0
10.6
273.3
10.6
10.7
277.4
11.0
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
12.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Debt Obligations
Interest Rate Range as
of February 24, 2017
Fiscal Year
Maturity Range
February 24,
2017
February 26,
2016
U.S. dollar obligations:
Senior notes (1)
Revolving credit facilities (2)(4)
Notes payable (3)
Capitalized lease obligations
Foreign currency obligations:
Revolving credit facilities (4)
Notes payable
Capitalized lease obligations
Total short-term borrowings and long-term debt
Short-term borrowings and current portion of
long-term debt (5)
Long-term debt
________________________
6.375%
2.0%
6.0%- 9.0%
1.4%
2021 $
248.8 $
248.2
2022
2024
2020
—
48.0
—
296.8
—
0.3
0.3
—
50.1
0.1
298.4
—
0.3
0.4
297.4
299.1
2.8
2.5
$
294.6 $
296.6
(1) We have $250 of unsecured unsubordinated senior notes, due in February 2021 (“2021 Notes”). The 2021
Notes were issued at 99.953% of par value. The bond discount of $0.1 and direct debt issuance costs of $3.0
were deferred and are being amortized over the life of the 2021 Notes. Although the coupon rate of the 2021
Notes is 6.375%, the effective interest rate is 6.6% after taking into account the impact of the direct debt
issuance costs, a deferred loss on interest rate locks related to the debt issuance and the bond discount. The
2021 Notes rank equally with all of our other unsecured unsubordinated indebtedness, and they contain no
financial covenants. We may redeem some or all of the 2021 Notes at any time. The redemption price would
equal the greater of (1) the principal amount of the notes being redeemed; or (2) the present value of the
remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual
basis at the comparable U.S. Treasury rate plus 45 basis points; plus, in both cases, accrued and unpaid
interest. If the notes are redeemed within 3 months of maturity, the redemption price would be equal to the
principal amount of the notes being redeemed plus accrued and unpaid interest. Amortization expense related
to the direct debt issuance costs and bond discount on the 2021 Notes was $0.3 in 2017, 2016 and 2015.
(2) We have a $125 global committed five-year bank facility which was entered into in Q3 2017. This facility
amended and restated the former facility which was scheduled to expire in Q1 2018. As of February 24, 2017
and February 26, 2016, there were no borrowings outstanding under the facilities, our availability was not
limited, and we were in compliance with all covenants under the facilities. We have $5.0 in other revolving
credit facilities, from which we had no borrowings outstanding as of February 24, 2017 and February 26,
2016.
In addition, we have revolving credit agreements of $35.2 which can be utilized to support bank guarantees,
letters of credit, overdrafts and foreign exchange contracts. As of February 24, 2017, we had $12.3 in
outstanding bank guarantees and standby letters of credit against these facilities. We had no draws against
our standby letters of credit during 2017 or 2016.
(3) We have a $48.0 note payable with an original amount of $50.0 at a floating interest rate based on 30-day
LIBOR plus 1.20%. The loan has a term of seven years and requires fixed monthly principal payments of $0.2
on a 20-year amortization schedule with a $32 balloon payment due in 2024. The loan is secured by two
corporate aircraft, contains no financial covenants and is not cross-defaulted to our other debt facilities.
(4) We have unsecured uncommitted short-term credit facilities of up to $1.6 of U.S. dollar obligations and up to
$18.7 of foreign currency obligations with various financial institutions available for working capital purposes
as of February 24, 2017. Interest rates are variable and determined at the time of borrowing. These credit
facilities have no stated expiration date but may be changed or canceled by the banks at any time. There
were no borrowings on these facilities as of February 24, 2017 and February 26, 2016.
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
(5) The weighted-average interest rate for short-term borrowings and the current portion of long-term debt was
1.8% as of February 24, 2017 and February 26, 2016.
The annual maturities of short-term borrowings and long-term debt for each of the following five years are as
follows:
2018
2019
2020
2021
2022
Thereafter
Year Ending in February
Amount
$
$
2.8
2.8
2.7
251.4
2.6
35.1
297.4
Global Credit Facility
Our $125 committed five-year unsecured revolving syndicated credit facility expires in 2022. At our option,
and subject to certain conditions, we may increase the aggregate commitment under the New Facility by up to $75
by obtaining at least one commitment from one of the lenders. There are currently no borrowings outstanding under
the facility.
We can use borrowings under the facility for general corporate purposes, including friendly acquisitions. Interest
on borrowings is based on the rate, as selected by us, between the following two options:
•
the greatest of the prime rate, the Federal fund effective rate plus 0.5%, and the Eurocurrency rate for a
one month interest period plus 1%, plus the applicable margin as set forth in the credit agreement; or
•
the Eurocurrency rate plus the applicable margin as set forth in the credit agreement.
The facility requires us to satisfy two financial covenants:
• A maximum leverage ratio covenant, which is measured by the ratio of (x) indebtedness (as determined
under the credit agreement) less unrestricted cash (as determined under the credit agreement) to (y)
trailing four quarter Adjusted EBITDA (as determined under the credit agreement) and is required to be no
greater than 3:1. (In the context of certain permitted acquisitions, we have a one-time ability, subject to
certain conditions, to increase the maximum ratio to 3.25 to 1.0 for four consecutive quarters).
• A minimum interest coverage ratio covenant, which is measured by the ratio of (y) trailing four quarter
Adjusted EBITDA (as determined under the credit agreement) to (z) trailing four quarter interest expense
and is required to be no less than 3.5:1.
The facility does not include any restrictions on cash dividend payments or share repurchases. As of February
24, 2017 and February 26, 2016, we were in compliance with all covenants under the current facility and our previous
unsecured revolving syndicated credit facility, respectively.
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
13.
EMPLOYEE BENEFIT PLAN OBLIGATIONS
Employee Benefit Plan Obligations (net)
Defined contribution retirement plans
Post-retirement medical benefits
Defined benefit pension plans
Deferred compensation plans and agreements
Employee benefit plan assets
Short-term asset
Long-term asset
Employee benefit plan obligations
Current portion
Long-term portion
February 24,
2017
February 26,
2016
$
23.8 $
46.0
50.1
49.2
$
169.1 $
22.5
66.2
46.1
43.1
177.9
$
$
$
$
0.2 $
—
0.2 $
—
1.1
1.1
35.0 $
134.3
169.3 $
36.5
142.5
179.0
Defined Contribution Retirement Plans
Substantially all of our U.S. employees are eligible to participate in defined contribution retirement plans,
primarily the Steelcase Inc. Retirement Plan (the “Retirement Plan”). Company contributions, including discretionary
profit sharing and 401(k) matching contributions, and employee 401(k) pre-tax contributions fund the Retirement
Plan. All contributions are made to a trust which is held for the sole benefit of participants. Company contributions
for our defined contribution retirement plans are discretionary.
Total expense under all defined contribution retirement plans was $32.7 for 2017, $28.8 for 2016 and $26.3 for
2015. We expect to fund approximately $34.5 related to our defined contribution plans in 2018, including funding
related to our discretionary profit sharing contributions.
Post-Retirement Medical Benefits
We maintain post-retirement benefit plans that provide medical and life insurance benefits to certain North
American-based retirees and eligible dependents. The plans were frozen to new participants in 2003. We accrue
the cost of post-retirement benefits during the service periods of employees based on actuarial calculations for each
plan. These plans are unfunded, but our investments in COLI policies are intended to be utilized as a long-term
funding source for these benefit obligations. See Note 9 for additional information. While we do not expect the timing
of cash flows to closely match, we intend to hold the policies until maturity, and we expect the policies will generate
insufficient cash to cover the obligation payments over the next several years and generate excess cash in later
years.
In Q4 2017, we made changes to certain retiree participation assumptions based on the results of our retiree
participation experience study. These changes resulted in a reduction to the accumulated post-retirement projected
benefit obligation of $17.8.
Defined Benefit Pension Plans
Our defined benefit pension plans include various qualified domestic and foreign retirement plans as well as
non-qualified supplemental retirement plans that are limited to a select group of management approved by the
Compensation Committee. The benefit plan obligations for the non-qualified supplemental retirement plans are
primarily related to the Steelcase Inc. Executive Supplemental Retirement Plan. This plan is unfunded, but our
investments in COLI policies are intended to be utilized as a long-term funding source for these benefit obligations.
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
See Note 9 for additional information. The funded status of our defined benefit pension plans (excluding our
investments in COLI policies) is as follows:
Defined Benefit Pension
Plan Obligations
Qualified Plans
Domestic
Foreign
Non-qualified
Supplemental
Retirement
Plans
Qualified Plans
Domestic
Foreign
Non-qualified
Supplemental
Retirement
Plans
February 24, 2017
February 26, 2016
Plan assets
Projected benefit plan obligations
Funded status
Short-term asset
Long-term asset
Current liability
Long-term liability
Total benefit plan obligations
Accumulated benefit obligation
$
$
$
$
$
$
7.9 $
38.8 $
— $
8.1 $
39.2 $
7.9
55.1
33.8
9.5
50.9
—
33.0
(16.3) $
(33.8) $
(1.4) $
(11.7) $
(33.0)
— $
— $
— $
—
—
0.2 $
— $
(0.1)
(16.4)
— $
(16.3) $
7.9 $
51.0 $
— $
— $
(3.5)
(30.3)
(33.8) $
33.5 $
— $
— $
—
(1.4)
— $
1.1 $
(0.1)
(12.7)
(1.4) $
(11.7) $
9.5 $
47.2 $
—
—
(3.4)
(29.6)
(33.0)
32.6
As of February 24, 2017, we had two qualified domestic plans in fully funded status and one qualified foreign
plan in an over-funded status, as plan assets of $18.4 exceeded projected benefit plan obligations of $18.2 by $0.2.
Subsequent to year-end, we entered into agreements to annuitize the remaining benefit plan obligations, resulting in
a settlement charge of approximately $7 for losses previously accumulated in other comprehensive income for these
three plans.
Summary Disclosures for Defined Benefit Pension and Post-Retirement Plans
The following tables summarize our defined benefit pension and post-retirement plans.
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Changes in Assets, Benefit Obligations and Funded Status
Change in plan assets:
Defined Benefit
Pension Plans
Post-Retirement
Plans
February 24,
2017
February 26,
2016
February 24,
2017
February 26,
2016
Fair value of plan assets, beginning of year
$
47.3
$
54.5
$
— $
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Estimated Medicare subsidies received
Expenses
Currency changes
Benefits paid
Fair value of plan assets, end of year
Change in benefit obligations:
Benefit plan obligations, beginning of year
Service cost
Interest cost
Net actuarial (gain) loss
Plan participants’ contributions
Medicare subsidies received
Currency changes
Benefits paid
Benefit plan obligations, end of year
Funded status
Amounts recognized on the Consolidated Balance Sheets:
Short-term asset
Long-term asset
Current liability
Long-term liability
Net amount recognized
Amounts recognized in accumulated other comprehensive
income—pretax:
Actuarial loss (gain)
Prior service cost (credit)
Total amounts recognized in accumulated other comprehensive
income—pretax
Estimated amounts to be amortized from accumulated other
comprehensive income into net periodic benefit cost over
the next fiscal year:
Actuarial loss (gain)
Prior service cost (credit)
Total amounts recognized in accumulated other comprehensive
income—pretax
68
$
$
$
$
$
$
$
4.7
6.0
—
—
(0.2)
(2.7)
(8.4)
46.7
(1.2)
4.0
—
—
(0.2)
(4.2)
(5.6)
47.3
93.4
103.6
2.8
3.1
9.4
—
—
(3.5)
(8.4)
96.8
3.1
3.0
(6.2)
—
—
(4.5)
(5.6)
93.4
—
5.2
2.3
0.1
—
—
(7.6)
—
66.2
0.5
2.8
(18.3)
2.3
0.1
—
(7.6)
46.0
(50.1) $
(46.1) $
(46.0) $
0.2
$
— $
— $
—
(3.6)
(46.7)
1.1
(3.5)
(43.7)
—
(3.9)
(42.1)
(50.1) $
(46.1) $
(46.0) $
23.4
$
19.4
$
(28.4) $
(0.7)
(0.9)
(9.3)
—
—
3.4
2.7
0.1
—
—
(6.2)
—
73.7
0.7
2.6
(7.0)
2.7
0.1
(0.4)
(6.2)
66.2
(66.2)
—
—
(4.5)
(61.7)
(66.2)
(10.9)
(17.9)
22.7
$
18.5
$
(37.7) $
(28.8)
7.6
$
(0.2)
0.8
$
(0.2)
(3.7) $
(7.0)
7.4
$
0.6
$
(10.7) $
(0.8)
(8.6)
(9.4)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Components of
Expense
February 24,
2017
February 26,
2016
February 27,
2015
February 24,
2017
February 26,
2016
February 27,
2015
Pension Plans
Year Ended
Post-Retirement Plans
Year Ended
Components of expense:
Service cost
Interest cost
Amortization of net loss (gain)
Amortization of prior year service
cost (credit)
Expected return on plan assets
Adjustment due to plan curtailment
Adjustment due to plan settlement
Net expense (credit) recognized in
Consolidated Statements of Income
Other changes in plan assets and
benefit obligations recognized in
other comprehensive income
(pre-tax):
Net actuarial loss (gain)
Prior service cost (credit)
Amortization of gain (loss)
Amortization of prior year service
credit (cost)
Gain (losses) recognized as part of
the curtailment / settlement
Prior service cost recognized as a
part of curtailment / settlement
Total recognized in other
comprehensive income
Total recognized in net periodic
benefit cost and other
comprehensive income (pre-tax)
$
2.8 $
3.1 $
3.2 $
0.5 $
0.7 $
3.1
0.7
(0.2)
(1.9)
—
0.9
5.4
6.9
—
(1.7)
0.2
—
—
5.4
3.0
0.9
(0.2)
(2.5)
—
—
4.3
(2.4)
—
(0.9)
0.2
—
—
(3.1)
3.6
0.8
—
(3.2)
0.1
(2.2)
2.3
7.8
(1.4)
(0.8)
—
(1.0)
(0.1)
4.5
2.8
(0.8)
(8.6)
—
—
—
(6.1)
(18.3)
—
0.8
8.6
—
—
(8.9)
2.6
0.1
(9.0)
—
—
—
(5.6)
(7.0)
—
(0.1)
9.0
—
—
1.9
0.6
2.9
(0.5)
(9.1)
—
—
—
(6.1)
4.8
—
(0.2)
9.1
—
—
13.7
$
10.8 $
1.2 $
6.8 $
(15.0) $
(3.7) $
7.6
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Pension and Other Post-Retirement Liability Adjustments
Balance as of February 27, 2015
Amortization of prior service cost (credit) included in net periodic pension
cost
Net prior service (cost) credit during period
Net actuarial gain (loss) arising during period
Amortization of net actuarial (gain) loss included in net periodic pension
cost
Net actuarial gain (loss) during period
Foreign currency translation adjustments
Current period change
Balance as of February 26, 2016
Amortization of prior service cost (credit) included in net periodic pension
cost
Net prior service (cost) credit during period
Net actuarial gain (loss) arising during period
Amortization of net actuarial (gain) loss included in net periodic pension
cost
Net actuarial gain (loss) during period
Foreign currency translation adjustments
Current period change
Balance as of February 24, 2017
Before Tax
Amount
Tax (Expense)
Benefit
$
7.7 $
0.8 $
Net of
Tax Amount
8.5
(9.2)
(9.2)
9.4
1.0
10.4
1.4
2.6
3.6
3.6
(3.5)
(0.4)
(3.9)
(0.1)
(0.4)
(5.6)
(5.6)
5.9
0.6
6.5
1.3
2.2
$
10.3 $
0.4 $
10.7
(8.7)
(8.7)
11.4
0.8
12.2
1.2
4.7
3.4
3.4
(5.4)
(0.2)
(5.6)
(0.2)
(2.4)
(5.3)
(5.3)
6.0
0.6
6.6
1.0
2.3
$
15.0 $
(2.0) $
13.0
Weighted-Average
Assumptions
February 24,
2017
February 26,
2016
February 27,
2015
February 24,
2017
February 26,
2016
February 27,
2015
Pension Plans
Year Ended
Post-Retirement Plans
Year Ended
Weighted-average assumptions
used to determine benefit
obligations:
Discount rate
Rate of salary progression
Weighted-average assumptions
used to determine net periodic
benefit cost:
Discount rate
Expected return on plan assets
Rate of salary progression
2.90%
2.70%
3.30%
2.30%
3.10%
2.30%
3.86%
4.34%
3.73%
3.60%
4.30%
2.80%
3.70%
4.20%
2.80%
3.90%
4.20%
2.70%
4.29%
3.72%
4.32%
The measurement dates for our retiree benefit plans are consistent with our fiscal year-end. Accordingly, we
select discount rates to measure our benefit obligations that are consistent with market indices at the end of each
year. In evaluating the expected return on plan assets, we consider the expected long-term rate of return on plan
assets based on the specific allocation of assets for each plan, an analysis of current market conditions and the
views of leading financial advisors and economists.
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The assumed healthcare cost trend was 7.28% for pre-age 65 retirees as of February 24, 2017, gradually
declining to 4.50% after ten years. As of February 26, 2016, the assumed healthcare cost trend was 7.72% for pre-
age 65 retirees, gradually declining to 4.50% after eleven years. Post-age 65 trend rates are not applicable as our
plan provides a fixed subsidy for post-age 65 benefits. A one percentage point change in assumed healthcare cost
trend rates would have had the following effects as of February 24, 2017:
Health Cost Trend Sensitivity
Effect on total of service and interest cost components
Effect on post-retirement benefit obligation
Plan Assets
One percentage
point increase
$
— $
One percentage
point decrease
—
$
0.2 $
(0.2)
The investments of the domestic plans are managed by third-party investment managers. The investment
strategy for the domestic plans is to maximize returns while taking into consideration the investment horizon and
expected volatility to ensure there are sufficient assets to pay benefits as they come due.
The investments of the foreign plans are managed by third-party investment managers who follow local
regulations. In general, the investment strategy is designed to accumulate a diversified portfolio among markets,
asset classes or individual securities in order to reduce market risk and assure that the pension assets are available
to pay benefits as they come due.
Our pension plans’ weighted-average investment allocation strategies and weighted-average target asset
allocations by asset category as of February 24, 2017 and February 26, 2016 are reflected in the following table.
The target allocations are established by the investment committees of each plan in consultation with external
advisors after consideration of the associated risk and expected return of the underlying investments.
Asset Category
Equity securities
Debt securities
Real estate
Other (1)
Total
________________________
February 24, 2017
February 26, 2016
Actual
Allocations
Target
Allocations
50%
54%
Actual
Allocations
57%
29
2
19
27
—
19
34
2
7
Target
Allocations
55%
39
—
6
100%
100%
100%
100%
(1) Represents guaranteed insurance contracts, money market funds and cash.
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The fair value of the pension plan assets as of February 24, 2017 and February 26, 2016, by asset category
are as follows:
Fair Value of Pension Plan Assets
Level 1
Level 2
Level 3
Total
February 24, 2017
Cash and cash equivalents
Equity securities:
International
Fixed income securities:
Bond funds
Other investments:
Group annuity contract (1)
Guaranteed insurance contracts (2)
Property funds
$
6.3 $
— $
— $
6.3
—
—
—
—
0.8
7.1 $
23.4
13.6
—
—
—
37.0 $
—
—
1.9
0.7
—
2.6 $
23.4
13.6
1.9
0.7
0.8
46.7
$
Fair Value of Pension Plan Assets
Level 1
Level 2
Level 3
Total
February 26, 2016
Cash and cash equivalents
$
0.5 $
— $
— $
Equity securities:
U.S. large-cap
U.S. small-cap
U.S. index
International
Fixed income securities:
Bond funds
Other investments:
Group annuity contract (1)
Guaranteed insurance contracts (2)
Property funds
________________________
0.8
0.8
0.8
—
—
—
—
0.9
—
—
—
23.8
16.7
—
—
—
—
—
—
—
—
2.0
1.0
—
0.5
0.8
0.8
0.8
23.8
16.7
2.0
1.0
0.9
$
3.8 $
40.5 $
3.0 $
47.3
(1) Group annuity contracts are valued utilizing a discounted cash flow model. The term “cash flow” refers to the
future principal and interest payments we expect to receive on a given asset in the general account. The
model projects future cash flows separately for each investment period and each category of investment.
(2) Guaranteed insurance contracts are valued at book value, which approximates fair value, and are calculated
using the prior year balance plus or minus investment returns and changes in cash flows.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy for any periods presented.
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Below is a roll-forward of plan assets measured at estimated fair value using Level 3 inputs for the years
ended February 24, 2017 and February 26, 2016:
Balance as of February 27, 2015
Roll-forward of Fair Value Using Level 3 Inputs
Unrealized return on plan assets, including changes in foreign exchange rates
Purchases, sales, and other, net
Balance as of February 26, 2016
Unrealized return on plan assets, including changes in foreign exchange rates
Purchases, sales, and other, net
Balance as of February 24, 2017
Group
Annuity
Contract
$
$
$
2.1 $
0.1
(0.2)
2.0 $
0.1
(0.2)
1.9 $
Guaranteed
Insurance
Contracts
1.3
—
(0.3)
1.0
—
(0.3)
0.7
We expect to contribute approximately $5 to our pension plans and fund approximately $4 related to our post-
retirement plans in 2018. The estimated future benefit payments under our pension and post-retirement plans are as
follows:
Year Ending in February
2018 (1)
2019
2020
2021
2022
2023 - 2027
________________________
Pension Plans
$
22.8 $
4.7
4.3
3.4
3.9
25.0
Post-
retirement
Plans
4.0
3.9
3.8
3.7
3.6
16.6
(1) The future benefit plan payments in 2018 include approximately $18 related to the annuitization of three
qualified plans.
Multi-Employer Pension Plan
Our subsidiary SC Transport Inc. contributes to the Central States, Southeast and Southwest Areas Pension
Fund based on obligations arising from a collective bargaining agreement covering 16 SC Transport Inc. employees.
This plan provides retirement benefits to participants based on their service to contributing employers. The benefits
are paid from assets held in trust for that purpose. Trustees are appointed by employers and unions; however, we
are not a trustee. The trustees typically are responsible for determining the level of benefits to be provided to
participants and for such matters as the investment of the assets and the administration of the plan.
Based on the most recent information available, we believe that the projected benefit obligations in this multi-
employer plan significantly exceed the value of the assets held in trust to pay benefits. Because we are one of a
number of employers contributing to this plan, it is difficult to ascertain what the exact amount of the under-funding
would be, although we anticipate the contribution per participating employee will increase at each contract
renegotiation. We believe that funding levels have not changed significantly since year-end.
The risks of participating in a multi-employer plan are different from the risks associated with single-employer
plans in the following respects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to
employees of other participating employers.
•
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be
borne by the remaining participating employers.
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
•
If a participating employer chooses to stop participating in a multi-employer plan or otherwise has
participation in the plan drop below certain levels, that employer may be required to pay the plan an
amount based on the underfunded status of the plan, referred to as a withdrawal liability.
Our participation in this plan is outlined in the tables below. Expense is recognized at the time our
contributions are funded, in accordance with applicable accounting standards. Any adjustment for a withdrawal
liability would be recorded at the time the liability is both probable and can be reasonably determined. The most
recent estimate of our potential withdrawal liability is $27.1.
EIN - Pension
Plan Number
Plan
Month /
Day End
Date
366044243-001
12/31
Pension
Protection Act
Zone Status (1)
2016
Red
2015
Red
FIP/RP Status
Pending /
Implemented
(2)
Implemented
Contributions
2017
$0.3
2016
$0.3
2015
$0.3
Surcharges
Imposed or
Amortization
Provisions
No
Pension Fund
Central States, Southeast and
Southwest Areas Pension
Fund
________________________
(1) The most recent Pension Protection Act Zone Status available in 2016 and 2015 relates to the plan's two most
recent fiscal year-ends. The zone status is based on information received from the plan certified by the plan’s
actuary. Among other factors, red zone status plans are generally less than 65 percent funded and are
considered in critical status.
(2) The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan or a
rehabilitation plan is either pending or has been implemented by the trustees of the plan.
The following table describes the expiration of the collective bargaining agreement associated with the multi-
employer plan in which we participate:
Pension Fund
Total Collective
Bargaining
Agreements
Central States, Southeast and Southwest Areas Pension Fund
1
Expiration
Date
3/31/2018
% of Associates
Under Collective
Bargaining
Agreement
Over 5%
Contribution
2017
0.1%
No
At the date the financial statements were issued, the Form 5500 was not available for the plan year ending in
2016.
Deferred Compensation Programs
We maintain four deferred compensation programs. The first deferred compensation program is closed to new
entrants. In this program, certain employees elected to defer a portion of their compensation in return for a fixed
benefit to be paid in installments beginning when the participant reaches age 70. Under the second plan, certain
employees may elect to defer a portion of their compensation. The third plan is intended to restore retirement
benefits that would otherwise be paid under the Retirement Plan but are precluded as a result of the limitations on
eligible compensation under Internal Revenue Code Section 401(a)(17). Under the fourth plan, our non-employee
directors may elect to defer all or a portion of their board retainer and committee fees. The deferred amounts in the
last three plans earn a return based on the investment option selected by the participant.
These deferred compensation obligations are unfunded, but our investments in COLI policies are intended to
be utilized as a long-term funding source for these deferred compensation obligations. See Note 9 for additional
information.
Deferred compensation expense, which represents annual participant earnings on amounts that have been
deferred, and restoration retirement benefits were $8.5 for 2017, $5.9 for 2016 and $5.7 for 2015.
14. CAPITAL STRUCTURE
Terms of Class A Common Stock and Class B Common Stock
The holders of common stock are generally entitled to vote as a single class on all matters upon which
shareholders have a right to vote, subject to the requirements of applicable laws and the rights of any outstanding
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
series of preferred stock to vote as a separate class. Each share of Class A Common Stock entitles its holder to
one vote, and each share of Class B Common Stock entitles its holder to 10 votes. Each share of Class B Common
Stock is convertible into a share of Class A Common Stock on a one-for-one basis (i) at the option of the holder at
any time, (ii) upon transfer to a person or entity which is not a Permitted Transferee (as defined in our Second
Restated Articles of Incorporation, as amended), (iii) with respect to shares of Class B Common Stock acquired
after February 20, 1998, at such time as a corporation, partnership, limited liability company, trust or charitable
organization holding such shares ceases to be controlled or owned 100% by Permitted Transferees and (iv) on the
date on which the number of shares of Class B Common Stock outstanding is less than 15% of all of the then
outstanding shares of common stock (calculated without regard to voting rights).
Except for the voting and conversion features described above, the terms of Class A Common Stock and
Class B Common Stock are generally similar. That is, the holders are entitled to equal dividends when declared by
our Board of Directors and generally will receive the same per share consideration in the event of a merger and be
treated on an equal per share basis in the event of a liquidation or winding up of Steelcase Inc. In addition, we are
not entitled to issue additional shares of Class B Common Stock, or issue options, rights or warrants to subscribe
for additional shares of Class B Common Stock, except that we may make a pro rata offer to all holders of common
stock of rights to purchase additional shares of the class of common stock held by them, and any dividend payable
in common stock will be paid in the form of Class A Common Stock to Class A holders and Class B Common Stock
to Class B holders. Neither class of stock may be split, divided or combined unless the other class is proportionally
split, divided or combined.
Preferred Stock
Our Second Restated Articles of Incorporation, as amended, authorize our Board of Directors, without any
vote or action by our shareholders, to create one or more series of preferred stock up to the limit of our authorized
but unissued shares of preferred stock and to fix the designations, preferences, rights, qualifications, limitations and
restrictions thereof, including the voting rights, dividend rights, dividend rate, conversion rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares
constituting any series.
Share Repurchases and Conversions
The 2017 and 2016 activity for share repurchases is as follows (share data in millions):
Share repurchases
Class A Common Stock
Class B Common Stock
Year ended
February 24,
2017
February 26,
2016
Total number
of shares
Price Paid
Total number
of shares
Price Paid
3.5 $
— $
48.4
—
3.7 $
— $
56.4
—
During 2017 and 2016, 0.3 million and 0.6 million shares of our Class B Common Stock were converted to
Class A Common Stock, respectively.
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
15.
INCOME TAXES
Provision for Income Taxes
The provision for income taxes on income before income taxes consists of:
Provision for Income Taxes—Expense
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
Current income taxes:
Federal
State and local
Foreign
Deferred income taxes:
Federal
State and local
Foreign
Income tax expense
$
18.4 $
47.7 $
9.5
17.0
44.9
21.4
1.2
4.2
26.8
12.5
12.6
72.8
(12.7)
(3.3)
(52.3)
(68.3)
$
71.7 $
4.5 $
40.0
8.8
1.7
50.5
4.9
1.3
(5.8)
0.4
50.9
Income taxes were based on the following sources of income (loss) before income tax expense:
Source of Income (Loss) Before Income Tax Expense
Domestic
Foreign
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
$
136.0 $
114.9 $
60.3
59.9
196.3 $
174.8 $
146.2
(9.2)
137.0
The total income tax expense we recognized is reconciled to that computed by applying the U.S. federal
statutory tax rate of 35% as follows:
Income Tax Provision Reconciliation
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
Tax expense at the U.S. federal statutory rate
$
68.7 $
61.2 $
State and local income taxes, net of federal
Valuation allowance provisions and adjustments (1)
Foreign investment tax credits (2)
COLI income (3)
Foreign operations, less applicable foreign tax credits (4)
Impact of change to statutory tax rates (5)
Research tax credit
Tax reserve adjustments (6)
Other
Total income tax expense recognized
________________________
6.5
(2.2)
—
(3.3)
(2.0)
9.3
(1.8)
(5.3)
1.8
6.7
(59.9)
(1.5)
(0.7)
(1.6)
(0.1)
(1.9)
—
2.3
$
71.7 $
4.5 $
48.0
6.3
6.1
(5.7)
(2.0)
(1.7)
0.2
(1.7)
(2.0)
3.4
50.9
(1) The valuation allowance provisions were based on current year activity, and the valuation allowance
adjustments were based on various factors, which are further detailed below.
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
(2)
Investment tax credits were granted by the Czech Republic for investments in qualifying manufacturing
equipment.
(3) The increase in the cash surrender value of COLI policies, net of normal insurance expenses, plus death
benefit gains are non-taxable.
(4) The foreign operations, less applicable foreign tax credits, amounts include the rate differential from the U.S.
rate on foreign operations.
(5) During Q4 2017 a reduction to the French corporate tax rate was enacted and the rate reduction resulted in
the revaluation of certain deferred tax assets of our French tax group, causing an increase of $7.9 to tax
expense. Also during 2017, further reductions to the United Kingdom statutory rate were recognized, and
these reductions increased tax expense by $1.5. Other tax rate changes in various jurisdictions accounted for
$0.1 of net reductions in tax expense.
(6) Tax reserve adjustments in 2017 related to a French income tax audit that was effectively settled upon
completion in 2017. Tax reserve adjustments in 2015 related to a German income tax audit which was
completed in 2015.
Deferred Income Taxes
The significant components of deferred income taxes are as follows:
Deferred Income Taxes
February 24,
2017
February 26,
2016
Deferred income tax assets:
Employee benefit plan obligations and deferred compensation
$
108.8 $
114.4
Foreign and domestic net operating loss carryforwards
Reserves and accruals
Tax credit carryforwards
Other, net
Total deferred income tax assets
Valuation allowances
Net deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Intangible assets
Prepaid expenses
Total deferred income tax liabilities
57.0
29.8
17.4
21.2
234.2
(7.9)
226.3
40.9
3.6
3.1
47.6
Net deferred income taxes
Net deferred income taxes is comprised of the following components:
Deferred income tax assets—non-current
Deferred income tax liabilities—non-current
$
178.7 $
179.6
(0.9)
69.7
29.1
28.2
18.9
260.3
(10.6)
249.7
36.4
2.7
—
39.1
210.6
211.6
(1.0)
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those
operations. Under U.S. GAAP, we are generally required to record U.S. deferred taxes on the anticipated
repatriation of foreign income as the income is recognized for financial reporting purposes. An exception under
certain accounting guidance permits us not to record a U.S. deferred tax liability for foreign income that we expect
to reinvest in foreign operations and for which remittance will be postponed indefinitely. If it becomes apparent that
some or all undistributed income will be remitted in the foreseeable future, the related deferred taxes are recorded
in that period. In determining indefinite reinvestment, we regularly evaluate the capital needs of our foreign
operations considering all available information, including operating and capital plans, regulatory capital
requirements, debt requirements and cash flow needs, as well as the applicable tax laws to which our foreign
subsidiaries are subject. We expect existing foreign cash, cash equivalents and cash flows from future foreign
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
operations to be sufficient to fund foreign operations. Debt and capital financing are available from the U.S. in the
event foreign circumstances change. In addition, we expect our existing domestic cash balances and availability of
domestic financing sources to be sufficient to fund domestic operating activities for at least the next 12 months and
thereafter for the foreseeable future. Should we require more capital in the U.S. than is available domestically, we
could repatriate future earnings from foreign jurisdictions, which could result in higher effective tax rates. As of
February 24, 2017, we have not made a provision for U.S. or additional foreign withholding taxes on approximately
$121.0 of unremitted foreign earnings and profits we consider permanently reinvested. We believe the U.S. tax
cost, net of related foreign tax credits, on the unremitted foreign earnings would be approximately $13.5 if the
amounts were not considered permanently reinvested.
We establish valuation allowances against deferred tax assets when it is more likely than not that all or a
portion of the deferred tax assets will not be realized. All evidence, both positive and negative, is identified and
considered in making the determination. Future realization of the existing deferred tax asset ultimately depends, in
part, on the existence of sufficient taxable income of appropriate character within the carryforward period available
under tax law applicable in the jurisdiction in which the losses were incurred.
At February 24, 2017, the valuation allowance of $7.9 included $7.5 relating to foreign deferred tax assets. In
2017, there was an aggregate decrease of $2.7 in the valuation allowances, including tax rate changes and
expirations of $2.2 and currency fluctuations and other adjustments of $0.5. In Q4 2015, we implemented changes
in EMEA to align our tax structure with the management of our globally integrated business. Our U.S. parent
company became the principal in a contract manufacturing model with Steelcase European subsidiaries. In Q4
2016, we reached the conclusion that there was sufficient positive evidence, including acceptance of our new tax
structure by the U.S. Internal Revenue Service, sustained profitability in our French subsidiaries and other factors,
which caused us to reverse valuation allowances of $56.0 recorded against net deferred tax assets in France.
In updating our assessment of the ultimate realization of deferred tax assets, we considered the following
factors:
•
•
•
•
the nature, frequency and severity of cumulative losses in recent years,
the predictability of future income,
prudent and feasible tax planning strategies that could be implemented, to protect the loss of the
deferred tax assets and
the effect of reversing taxable temporary differences.
Based on our evaluation of these factors, particularly increasing cumulative losses, we were unable to assert
that it is more likely than not that the deferred tax assets in our owned dealers in France and the United Kingdom,
Morocco, China, Singapore, Hong Kong, Belgium and Brazil would be realized as of February 24, 2017.
Taxes Payable or Refundable
During 2017, we amended certain of our U.S. federal income tax returns for prior periods to claim certain
foreign tax credits. We believe that the refunds generated by these amendments will not be received within the next
12 months, and we have classified them as non-current assets.
Income taxes currently payable or refundable are reported on the Consolidated Balance Sheets as follows:
Income Taxes
Other current assets:
Income taxes receivable
Other long-term assets:
Income taxes receivable
Accrued expenses:
Income taxes payable
78
February 24,
2017
February 26,
2016
$
$
$
19.0 $
18.5
6.4 $
5.5
—
5.2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Net Operating Loss and Tax Credit Carryforwards
Operating loss and tax credit carryforwards expire as follows:
Net Operating Loss
Carryforwards (Gross)
Net Operating Loss
Carryforwards (Tax Effected)
Year Ending February
2018
2019
2020
2021
2022-2037
No expiration
Valuation allowances
Net benefit
Federal
$ — $ — $
State
International
Federal
State
International
Total
2.4 $ — $ — $
0.8 $
0.8 $
—
—
—
—
—
—
—
—
23.1
—
$ — $ 23.1 $
2.5
2.4
—
—
202.9
210.2
—
—
—
—
—
—
—
—
—
—
1.3
—
1.3
(0.4)
0.7
0.5
—
—
53.7
55.7
(7.5)
0.7
0.5
—
1.3
53.7
57.0
(7.9)
$ — $
0.9 $
48.2 $ 49.1 $
—
—
—
—
17.4
—
17.4
—
17.4
Tax Credit
Carryforwards
Future tax benefits for net operating loss and tax credit carryforwards are recognized to the extent that
realization of these benefits is considered more likely than not. It is considered more likely than not that a benefit of
$66.5 will be realized on these net operating loss and tax credit carryforwards. This determination is based on the
expectation that related operations will be sufficiently profitable or various tax, business and other planning
strategies available to us will enable utilization of the carryforwards. We assess the available positive and negative
evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets.
Valuation allowances are recorded to the extent realization of these carryovers is not more likely than not.
Uncertain Tax Positions
We are subject to taxation in the U.S. and various states and foreign jurisdictions with varying statutes of
limitation. Tax years that remain subject to examination by major tax jurisdictions include: the United States 2017,
Canada 2014 through 2017, France 2013 through 2017 and Germany 2013 through 2017. We adjust these
reserves, as well as the related interest and penalties, in light of changing facts and circumstances.
We are audited by the U.S. Internal Revenue Service under the Compliance Assurance Process (“CAP”).
Under CAP, the U.S. Internal Revenue Service works with large business taxpayers to identify and resolve issues
prior to the filing of a tax return. Accordingly, we have recorded no liabilities for U.S. Federal uncertain tax positions.
We recognize interest and penalties associated with uncertain tax positions in income tax expense, and these
items were insignificant for 2017, 2016 and 2015.
As of February 24, 2017 and February 26, 2016, the liability for uncertain tax positions, including interest and
penalties, reported on the Consolidated Balance Sheets was as follows:
Liability for Uncertain Tax Positions
Other accrued expenses
Other long-term liabilities
February 24,
2017
February 26,
2016
$
$
— $
0.2
0.2 $
—
0.2
0.2
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits
Balance as of beginning of period
Gross decreases—tax positions in prior period
Currency translation adjustment
Balance as of end of period
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
$
8.6 $
8.8 $
(5.3)
(0.5)
—
(0.2)
2.8 $
8.6 $
12.7
(1.9)
(2.0)
8.8
We have taken tax positions in a non-U.S. jurisdiction that do not meet the more likely than not test required
under the uncertain tax position accounting guidance. Since the tax positions have increased net operating loss
carryforwards, the underlying deferred tax asset is shown net of an $2.6 liability for uncertain tax positions.
Unrecognized tax benefits of $2.8, if favorably resolved, would be recorded as an income tax benefit. It is
unlikely that the amount of unrecognized tax benefits will significantly change due to expiring statutes or audit
activity in the next twelve months.
16. SHARE-BASED COMPENSATION
The Steelcase Inc. Incentive Compensation Plan (the “Incentive Compensation Plan”) provides for the
issuance of share-based compensation awards to employees and members of our Board of Directors. There are
25,000,000 shares of Class A Common Stock reserved for issuance under our Incentive Compensation Plan, with
7,880,288 and 8,982,609 shares remaining for future issuance under our Incentive Compensation Plan as of
February 24, 2017 and February 26, 2016, respectively.
A variety of awards may be granted under the Incentive Compensation Plan, including stock options, stock
appreciation rights (“SARs”), restricted stock, restricted stock units, performance shares, performance units, cash-
based awards, phantom shares and other share-based awards. Outstanding awards under the Incentive
Compensation Plan vest over a period of three years. Our Board of Directors may amend or terminate the Incentive
Compensation Plan at its discretion subject to certain provisions as stipulated within the plan.
For awards granted prior to July 15, 2015, in the event of a “change in control,” as defined in the Incentive
Compensation Plan,
•
if at least six months have elapsed following the award date, any performance-based conditions imposed
with respect to outstanding awards shall be deemed to be fully earned and a pro rata portion of each such
outstanding award granted for all outstanding performance periods shall become payable in shares of
Class A Common Stock; and
•
all restrictions imposed on restricted stock units that are not performance-based shall lapse.
For awards granted after July 15, 2015, in the event of a "change in control",
•
•
performance-based conditions imposed on outstanding awards will be deemed to be, immediately prior to
the change in control, the greater of (1) the applicable performance achieved through the date of the
change in control or (2) the target level of performance; and
all restrictions imposed on all outstanding awards of restricted stock units and performance units will
lapse if either (1) the awards are assumed by an acquirer or successor and the awardee experiences a
qualifying termination during the two year period following the change in control or (2) the awards are not
assumed by an acquirer or successor.
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Share-based awards currently outstanding under the Incentive Compensation Plan are as follows:
Total Outstanding Awards
Performance units (1)
Restricted stock units
Total outstanding awards
________________________
February 24,
2017
916,420
1,731,507
2,647,927
(1) This amount includes the maximum number of shares that may be issued under outstanding performance unit
awards; however, the actual number of shares which may be issued will be determined based on the
satisfaction of certain criteria, and therefore may be significantly lower.
Performance Units
Performance units have been granted only to our executive officers. These awards are earned after a three-
year performance period and only if the performance criteria stated in the applicable award are achieved. After
completion of the performance period, the number of performance units earned will be issued as shares of Class A
Common Stock. The aggregate number of shares of Class A Common Stock that ultimately may be issued under
performance units where the performance period has not been completed ranged from 0 to 916,420 shares as of
February 24, 2017. The awards will be forfeited if a participant leaves the company for reasons other than
retirement, disability or death or if the participant engages in any competition with us, as defined in the Incentive
Compensation Plan and determined by the Administrative Committee in its discretion.
A dividend equivalent is calculated based on the actual number of units earned at the end of the performance
period equal to the dividends that would have been payable on the earned units had they been held during the
entire performance period as Class A Common Stock. At the end of the performance period, the dividend
equivalents are paid in the form of cash.
All of the performance units granted in 2017 and half of the performance units granted in 2016 and 2015 can
be earned based on achievement of certain total shareholder return results relative to a comparison group of
companies ("TSR PSUs"), which is a market condition. The number of shares that may be earned under the TSR
PSUs can range from 0% to 200% of the target amount. The TSR PSUs are expensed and recorded in Additional
paid-in capital on the Consolidated Balance Sheets over the performance periods. Based on actual performance
results, the TSR PSUs granted in 2015 were earned at 55.0% of the target level and 84,009 shares of Class A
Common Stock were issued to participants in Q1 2018.
The remaining half of the performance units granted in 2016 and 2015 can be earned based on our three-
year average return on invested capital ("ROIC PSUs"), which is a performance condition. The number of shares
that may be earned under the ROIC PSUs can range from 0% to 200% of the target amount. The ROIC PSUs are
expensed and recorded in Additional paid-in capital on the Consolidated Balance Sheets over the performance
periods based on the probability that the performance condition will be met. The expense recorded is adjusted as
the estimate of the total number of ROIC PSUs that will ultimately be earned changes. The weighted-average grant
date fair value per share of ROIC PSUs granted in 2016 and 2015 was $18.68 and $16.69, respectively. The fair
value is equal to the closing price of shares of our Class A Common Stock on the date of the grant. Based on
actual performance results, the ROIC PSUs granted in 2015 were earned at 172.0% of the target level and 262,735
shares of Class A Common Stock were issued to participants in Q1 2018.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The fair values of the TSR PSUs were calculated on their respective grant dates using the Monte Carlo
simulation model, which resulted in a fair value of $3.1, $5.7 and $6.1 for the TSR PSUs granted in 2017, 2016 and
2015, respectively. The Monte Carlo simulation was computed using the following assumptions:
Three-year risk-free interest rate (1)
Expected term
Estimated volatility (2)
________________________
2017 Awards
0.9%
2016 Awards
0.8%
2015 Awards
0.7%
3 years
31.2%
3 years
29.4%
3 years
42.2%
(1) Based on the U.S. Government bond benchmark on the grant date.
(2) Represents the historical price volatility of our Company’s Class A Common Stock for the three-year period
preceding the grant date.
The Monte Carlo simulation resulted in the following weighted-average grant date fair values per TSR PSU:
Grant Date Fair Value per TSR PSU
Weighted-average grant date fair value per share of TSR PSUs granted
during 2017, 2016 and 2015
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
16.33 $
24.15 $
23.25
The total performance units expense and associated tax benefit in 2017, 2016 and 2015 was as follows:
Performance Units
Expense
Tax benefit
The 2017 activity for performance units is as follows:
Nonvested as of February 26, 2016
Maximum Number of Nonvested Units
Granted
Vested
Nonvested as of February 24, 2017
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
5.6 $
2.0
7.4 $
2.7
5.1
1.8
Total
1,147,844 $
379,600
(611,024)
916,420
Weighted-Average
Grant Date
Fair Value per Unit
20.66
16.33
20.00
19.31
As of February 24, 2017, there was $3.7 of remaining unrecognized compensation cost related to nonvested
performance units. That cost is expected to be recognized over a remaining weighted-average period of 1.5 years.
The total fair value of performance units vested following completion of the three-year performance periods
during 2017, 2016 and 2015 was $5.6, $7.0 and $20.9, respectively. The fair value was determined based upon the
closing price of shares of our Class A Common Stock as of the date the Compensation Committee of our Board of
Directors certified the awards.
Restricted Stock Units
Restricted stock units (“RSUs”) have restrictions on transfer which lapse three years after the date of grant, at
which time RSUs are issued as unrestricted shares of Class A Common Stock. These awards will be forfeited if a
participant leaves the company for reasons other than retirement, disability or death or if the participant engages in
any competition with us, as defined in the Incentive Compensation Plan and determined by the Administrative
Committee in its discretion. RSUs are expensed and recorded in Additional paid-in capital on the Consolidated
Balance Sheets over the requisite service period based on the value of the shares on the grant date.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
The weighted-average grant date fair value per share of RSUs granted in 2017, 2016 and 2015 is as follows:
Grant Date Fair Value per Share
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
Weighted-average grant date fair value per share of RSUs granted
$
14.66 $
18.82 $
16.68
The total RSUs expense and associated tax benefit in 2017, 2016 and 2015 is as follows:
Restricted Stock Units
Expense
Tax benefit
Year Ended
February 24,
2017
February 26,
2016
February 27,
2015
$
13.5 $
12.9 $
4.9
4.6
12.5
4.5
Holders of RSUs receive cash dividends equal to the dividends we declare and pay on our Class A Common
Stock, which are included in Dividends paid on the Consolidated Statements of Cash Flows.
The 2017 activity for RSUs is as follows:
Nonvested as of February 26, 2016
Nonvested Units
Granted
Vested
Forfeited
Nonvested as of February 24, 2017
Weighted-Average
Grant Date
Fair Value
per Share
18.45
14.66
16.47
16.90
16.38
Total
1,638,888 $
975,663
(846,337)
(36,707)
1,731,507
There was $9.1 of remaining unrecognized compensation cost related to RSUs as of February 24, 2017.
That cost is expected to be recognized over a weighted-average period of 1.8 years.
The total fair value of RSUs vested was $13.1, $16.6 and $10.9 during 2017, 2016 and 2015, respectively.
The fair value was determined based upon the closing price of shares of our Class A Common Stock on the dates
the awards vested.
Unrestricted Share Grants
Under the Incentive Compensation Plan, unrestricted shares of our Class A Common Stock may be issued to
members of our Board of Directors as compensation for director’s fees. We granted a total of 48,045, 39,052 and
48,064 unrestricted shares at a weighted average grant date fair value per share of $15.20, $18.24 and $16.22
during 2017, 2016 and 2015, respectively.
17. COMMITMENTS
We lease certain sales offices, showrooms, warehouses and equipment under non-cancelable operating
leases that expire at various dates through 2026. During the normal course of business, we have entered into sale-
leaseback arrangements for certain facilities. Accordingly, these leases are accounted for as operating leases, and
the related gains from the sale of the properties are recorded as deferred gains and are amortized over the lease
term. Total deferred gains are included as a component of Other long-term liabilities on the Consolidated Balance
Sheets and amounted to $1.5 as of February 24, 2017 and $3.8 as of February 26, 2016.
Gross rent expense under all non-cancelable operating leases was $49.8, $48.8 and $50.5 for 2017, 2016
and 2015, respectively. Sublease rental income was $4.0, $5.2 and $5.3 for 2017, 2016 and 2015, respectively.
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Our estimated future minimum annual rental commitments and sublease rental income under non-cancelable
operating leases as of February 24, 2017 are as follows:
Year Ending in February
Minimum annual
rental commitments
Minimum annual
sublease rental income
2018
2019
2020
2021
2022
Thereafter
$
$
50.3 $
38.6
32.5
23.7
19.8
46.5
211.4 $
Minimum annual
rental commitments, net
46.1
35.4
29.3
20.8
17.0
44.6
193.2
(4.2) $
(3.2)
(3.2)
(2.9)
(2.8)
(1.9)
(18.2) $
18. REPORTABLE SEGMENTS
Our reportable segments consist of the Americas segment, the EMEA segment and the Other category.
Unallocated corporate expenses are reported as Corporate.
The Americas segment serves customers in the U.S., Canada, the Caribbean Islands and Latin America with
a portfolio of integrated architecture, furniture and technology products marketed to corporate, government,
healthcare, education and retail customers through the Steelcase, Coalesse and Turnstone brands.
The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase
and Coalesse brands, with an emphasis on freestanding furniture systems, storage and seating solutions.
The Other category includes Asia Pacific, Designtex and PolyVision. Asia Pacific serves customers in Asia
and Australia primarily under the Steelcase brand with an emphasis on freestanding furniture systems, seating and
storage solutions. Designtex primarily sells textiles, wall coverings and surface imaging solutions specified by
architects and designers directly to end-use customers through a direct sales force primarily in North America.
PolyVision manufactures ceramic steel surfaces for use in various applications globally, including static whiteboards
and chalkboards sold through third party fabricators and distributors to the primary and secondary education
markets and architectural panels and other special applications sold through general contractors for commercial
and infrastructure projects.
We primarily review and evaluate operating income by segment in both our internal review processes and for
external financial reporting. We also allocate resources primarily based on operating income. Total assets by
segment include manufacturing and other assets associated with each segment.
Corporate costs include unallocated portions of shared service functions such as information technology,
corporate facilities, finance, human resources, research, legal and customer aviation. Corporate assets consist
primarily of unallocated cash, short term investment balances and COLI balances.
No single customer represented more than 5% of our consolidated revenue in 2017, 2016 or 2015.
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Operating Segment Data
Americas
EMEA
Other
Corporate
Consolidated
2017
Revenue
Operating income (loss)
Total assets
Capital expenditures
Depreciation & amortization
2016
Revenue
Operating income (loss)
Total assets
Capital expenditures
Depreciation & amortization
2015
Revenue
Operating income (loss)
Total assets
Capital expenditures
Depreciation & amortization
$
2,231.9 $
503.9 $
296.6 $
— $
3,032.4
245.2
960.7
35.9
42.7
(20.9)
297.4
20.6
12.7
13.0
191.1
4.6
4.9
(37.1)
342.8
—
—
200.2
1,792.0
61.1
60.3
$
2,256.0 $
520.6 $
283.4 $
— $
3,060.0
265.2
981.1
71.2
48.5
(64.3)
332.6
14.7
11.7
11.2
179.9
7.5
5.5
(37.5)
315.0
—
—
174.6
1,808.6
93.4
65.7
$
2,180.7 $
595.4 $
283.6 $
— $
3,059.7
259.9
956.1
49.5
40.1
(82.8)
290.2
42.0
13.5
4.8
163.1
6.0
6.3
(37.0)
310.2
—
—
144.9
1,719.6
97.5
59.9
The accounting policies of each of the reportable segments are the same as those described in Note 2.
Revenue comparisons have been impacted by divestitures and deconsolidations along with currency translation
effects. In addition, operating income (loss) has been significantly impacted restructuring costs. See Note 19 for
additional information.
Reportable geographic information is as follows:
Reportable Geographic Data
Revenue:
United States
Foreign locations
Long-lived assets:
United States
Foreign locations
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
$
$
$
2,104.4 $
928.0
3,032.4 $
2,152.7 $
907.3
3,060.0 $
2,075.7
984.0
3,059.7
655.8 $
130.8
786.6 $
633.8 $
127.8
761.6 $
615.2
130.1
745.3
Revenue is attributable to countries based on the location of the customer. No country other than the
U.S. represented greater than 10% of our consolidated revenue or long-lived assets in 2017, 2016 or 2015. Our
EMEA business is spread across a number of geographic regions, with Western Europe representing approximately
84% of EMEA revenue in 2017.
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Our global product offerings consist of furniture, interior architecture, technology and services. These product
offerings are marketed, distributed and managed primarily as a group of similar products on an overall portfolio
basis. The following is a summary of revenue by product category. As product line information is not readily
available for the Company as a whole, this summary represents a reasonable estimate of revenue by product
category based on the best information available:
Year Ended
Product Category Data
Systems and storage
Seating
Other (1)
Total
________________________
February 24,
2017
1,428.2 $
February 26,
2016
1,533.4 $
February 27,
2015
1,588.7
$
917.8
686.4
938.9
587.7
954.8
516.2
$
3,032.4 $
3,060.0 $
3,059.7
(1) Other consists primarily of consolidated dealers, textiles and surface materials, worktools, architecture,
technology, and other uncategorized product lines, and services, none of which are individually greater than
10% of consolidated revenue.
19. RESTRUCTURING ACTIVITIES
In Q1 2016, we announced restructuring actions in EMEA related to the establishment of a Learning +
Innovation Center in Munich, Germany. In connection with these actions, we incurred $2.8 of business exit and
other related costs in the EMEA segment, including $0.9 during 2017 and $1.9 during 2016. We also incurred $6.9
of employee termination costs in the EMEA segment, including $0.2 during 2017 and $6.7 during 2016. These
restructuring actions are complete.
In Q2 2015, we announced restructuring actions in EMEA related to the exit of a manufacturing facility in
Wisches, France, and the transfer of its activities to other existing facilities in the EMEA region. We incurred $1.1 of
business exit and other costs in the EMEA segment in connection with these actions during 2016. During 2015, we
incurred $32.8 of business exit and other costs in the EMEA segment in connection with these actions, including
$27.3 for a facilitation payment related to the transfer of the facility to a third party. These restructuring actions are
complete.
In Q1 2015, we announced restructuring actions in the Americas to close a manufacturing facility in High
Point, North Carolina. In connection with these actions, we incurred a total of $4.2 of business exit and other
related costs in the Americas segment, including $2.6 during 2017, $0.9 during 2016 and $0.7 during 2015. We
also incurred $3.1 of employee termination costs in the Americas segment, including $1.5 during 2016 and $1.6
during 2015. These restructuring actions are complete.
In Q1 2015, we recognized a $12.0 gain related to the sale of an idle manufacturing facility in the Americas
segment that was closed as part of previously completed restructuring actions.
In Q3 2014, we announced restructuring actions in EMEA to close a manufacturing facility in Durlangen,
Germany, and to establish a new manufacturing location in Stribro, Czech Republic. In connection with this project,
we incurred a total of $8.8 related to business exit and other related costs in the EMEA segment, including $1.6
during 2017, $4.9 during 2016 and $1.6 during 2015. We also incurred $17.5 of employee termination costs,
including $4.8 during 2016 and $12.7 during 2015. These restructuring actions are complete.
In Q1 2014, we announced restructuring actions in EMEA to reorganize the sales, marketing and support
functions in France. We incurred $1.9 of employee termination costs in the EMEA segment in connection with these
actions during 2015. These restructuring actions are complete.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
STEELCASE INC.
Restructuring costs are summarized in the following table:
Restructuring Costs
Cost of sales
Americas
EMEA
Other
Operating expenses
Americas
EMEA
Other
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
2.6 $
2.4 $
(10.0)
1.6
—
4.2
—
0.9
—
0.9
10.9
—
13.3
(2.9)
9.5
—
6.6
47.5
—
37.5
—
3.1
—
3.1
$
5.1 $
19.9 $
40.6
Below is a summary of the charges, payments and adjustments to the restructuring reserve balance during
2017, 2016 and 2015:
Reserve balance as of February 28, 2014
Restructuring Reserve
Additions
Payments
Adjustments
Reserve balance as of February 27, 2015
Additions
Payments
Adjustments
Reserve balance as of February 26, 2016
Additions
Payments
Adjustments
Reserve balance as of February 24, 2017
Workforce
Reductions
Business Exits
and Related
Costs
Total
$
$
$
$
7.7 $
16.4
(8.6)
(1.8)
13.7 $
14.5
(17.8)
(0.4)
10.0 $
0.3
(5.7)
(0.3)
4.3 $
2.0 $
35.0
(34.5)
(0.9)
1.6 $
8.2
(8.0)
(1.0)
0.8 $
4.8
(4.3)
(0.3)
1.0 $
9.7
51.4
(43.1)
(2.7)
15.3
22.7
(25.8)
(1.4)
10.8
5.1
(10.0)
(0.6)
5.3
The workforce reductions reserve balance as of February 24, 2017 primarily relates to restructuring actions in
EMEA.
87
20. UNAUDITED QUARTERLY RESULTS
Unaudited Quarterly Results
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2017
Revenue
Gross profit
Operating income
Net income
Basic earnings per share
Diluted earnings per share
2016
Revenue
Gross profit
Operating income
Net income
Basic earnings per share
Diluted earnings per share
$
718.8 $
758.0 $
786.5 $
769.1 $
3,032.4
229.8
263.1
261.9
255.6
1,010.4
33.3
19.4
0.16
0.16
61.9
38.2
0.32
0.31
54.6
41.2
0.34
0.34
50.4
25.8
0.22
0.21
200.2
124.6
1.03
1.03
$
705.5 $
819.0 $
787.6 $
747.9 $
3,060.0
216.6
266.8
253.5
234.3
33.5
20.0
0.16
0.16
60.1
37.2
0.30
0.30
55.2
35.6
0.29
0.28
25.8
77.5
0.63
0.62
971.2
174.6
170.3
1.37
1.36
Revenue comparisons have been impacted by currency translation effects along with acquisitions and
divestitures. In addition, operating income has been significantly impacted by restructuring costs. See Note 19 for
further details.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure:
None.
Item 9A. Controls and Procedures:
(a) Disclosure Controls and Procedures. Our management, under the supervision and with the participation of
our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended), as of February
24, 2017. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of
February 24, 2017, our disclosure controls and procedures were effective in (1) recording, processing, summarizing
and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit
under the Exchange Act and (2) ensuring that information required to be disclosed by us in such reports is
accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have included a report of management’s
assessment of the design and effectiveness of our internal control over financial reporting as part of this Report.
The independent registered public accounting firm of Deloitte & Touche LLP also attested to, and reported on, the
effectiveness of our internal control over financial reporting. Management’s report and the independent registered
public accounting firm’s attestation report are included in this Report in Item 8: Financial Statements and
Supplementary Data under the captions entitled “Management’s Report on Internal Control Over Financial
Reporting” and “Report of Independent Registered Public Accounting Firm.”
(c) Internal Control Over Financial Reporting. There were no changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information:
None.
88
PART III
Item 10. Directors, Executive Officers and Corporate Governance:
Certain information regarding executive officers required by this Item is set forth as a Supplementary Item at
the end of Part I of this Report. Other information required by this item is contained in Item 1: Business under the
caption “Available Information” or will be contained in our 2017 Proxy Statement under the captions “Proposal 1 —
Election of Directors,” “Committees of the Board of Directors,” “Other Corporate Governance Matters” and
“Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated into this Report by reference.
Item 11. Executive Compensation:
The information required by Item 11 will be contained in our 2017 Proxy Statement, under the captions
“Committees of the Board of Directors,” “Director Compensation,” “Compensation Committee Report,”
“Compensation Discussion and Analysis” and “Executive Compensation, Retirement Programs and Other
Arrangements” and is incorporated into this Report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters:
The information required by Item 12 that is not listed below will be contained in our 2017 Proxy Statement,
under the caption “Stock Ownership of Management and Certain Beneficial Owners,” and is incorporated into this
Report by reference.
Securities authorized for issuance under equity compensation plans as of February 24, 2017 are as follows:
Number of securities
to be issued upon
exercise
of outstanding
warrants and rights
Weighted-average
exercise price of
outstanding
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in the
second column)
2,647,927 (1)
n/a (2)
7,880,288
—
2,647,927
n/a
n/a
—
7,880,288
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
________________________
(1) This amount includes outstanding restricted stock units and the maximum number of shares that may be
issued under outstanding performance units.
(2) The weighted average exercise price excludes performance units and restricted stock units, as there is no
exercise price associated with these awards. The only outstanding warrants or rights are performance units
and restricted stock units.
All equity awards were granted under our Incentive Compensation Plan. See Note 16 to the consolidated
financial statements for additional information.
Item 13. Certain Relationships and Related Transactions, and Director Independence:
The information required by Item 13 will be contained in our 2017 Proxy Statement, under the captions
“Director Independence” and “Related Person Transactions” and is incorporated into this Report by reference.
Item 14. Principal Accounting Fees and Services:
The information required by Item 14 will be contained in our 2017 Proxy Statement under the caption “Fees
Paid to Principal Independent Auditor” and is incorporated into this Report by reference.
89
PART IV
Item 15. Exhibits, Financial Statement Schedules:
(a) Financial Statements and Schedules
The following documents are filed as part of this report:
1. Consolidated Financial Statements (Item 8)
• Management’s Report on Internal Control Over Financial Reporting
• Reports of Independent Registered Public Accounting Firm
• Consolidated Statements of Income for the Years Ended February 24, 2017, February 26, 2016 and
February 27, 2015
• Consolidated Statements of Comprehensive Income for the Years Ended February 24, 2017, February
26, 2016 and February 27, 2015
• Consolidated Balance Sheets as of February 24, 2017 and February 26, 2016
• Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended February 24,
2017, February 26, 2016 and February 27, 2015
• Consolidated Statements of Cash Flows for the Years Ended February 24, 2017, February 26, 2016 and
February 27, 2015
• Notes to the Consolidated Financial Statements
2. Financial Statement Schedules (S-1)
Schedule II—Valuation and Qualifying Accounts
All other schedules required by Form 10-K have been omitted because they are not applicable or the required
information is disclosed elsewhere in this Report.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
See Index of Exhibits
(b) Exhibits
The response to this portion of Item 15 is submitted as a separate section of this Report. See Item 15(a)(3)
above.
(c) Financial Statement Schedules
The response to this portion of Item 15 is submitted as a separate section of this Report. See Item 15(a)(2)
above.
Item 16. Form 10-K Summary:
None.
90
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
STEELCASE INC.
By:
/s/ MARK T. MOSSING
Mark T. Mossing
Corporate Controller and
Chief Accounting Officer
(Duly Authorized Officer and
Principal Accounting Officer)
Date: April 14, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated:
Signature
/s/ JAMES P. KEANE
James P. Keane
/s/ DAVID C. SYLVESTER
David C. Sylvester
/s/ MARK T. MOSSING
Mark T. Mossing
/s/ LAWRENCE J. BLANFORD
Lawrence J. Blanford
/s/ TIMOTHY C.E. BROWN
Timothy C.E. Brown
/s/ WILLIAM P. CRAWFORD
William P. Crawford
/s/ CONNIE K. DUCKWORTH
Connie K. Duckworth
/s/ DAVID W. JOOS
David W. Joos
/s/ TODD P. KELSEY
Todd P. Kelsey
/s/ ROBERT C. PEW III
Robert C. Pew III
/s/ CATHY D. ROSS
Cathy D. Ross
/s/ PETER M. WEGE II
Peter M. Wege II
/s/ P. CRAIG WELCH, JR.
P. Craig Welch, Jr.
/s/ KATE PEW WOLTERS
Kate Pew Wolters
Title
President and Chief Executive Officer,
Director (Principal Executive Officer)
Senior Vice President, Chief Financial
Officer (Principal Financial Officer)
Corporate Controller and Chief Accounting
Officer (Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Chair of the Board of Directors, Director
Director
Director
Director
Director
91
Date
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
April 14, 2017
SCHEDULE II
STEELCASE INC.
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Losses on Accounts Receivable
Balance as of beginning of period
Additions:
Charged to costs and expenses
Charged to other accounts
Deductions (1)
Other adjustments (2)
Balance as of end of period
________________________
(1) Primarily represents excess of accounts written off over recoveries.
(2) Primarily represents currency translation adjustments.
Valuation Allowance for Deferred Income Tax Assets
Balance as of beginning of period
Additions:
Charged to costs and expenses
Charged to other accounts
Deductions and expirations
Other adjustments (1)
Balance as of end of period
________________________
(1) Primarily represents currency translation adjustments.
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
11.7 $
14.6 $
13.0
4.5
—
(5.2)
0.2
$
11.2 $
5.5
—
(7.8)
(0.6)
11.7 $
5.5
—
(2.3)
(1.6)
14.6
February 24,
2017
Year Ended
February 26,
2016
February 27,
2015
$
10.6 $
72.7 $
81.8
(1.8)
—
(0.4)
(0.5)
7.9 $
(58.3)
—
(1.5)
(2.3)
10.6 $
6.3
—
—
(15.4)
72.7
$
S-1
Exhibit
No.
3.1
3.2
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
Index of Exhibits
Description
Second Restated Articles of Incorporation of the Company, as amended (1)
Amended By-laws of Steelcase Inc., as amended April 17, 2014 (2)
Indenture for Senior Debt Securities, dated as of August 7, 2006 among Steelcase Inc.
as Issuer and JP Morgan Trust Company, National Association as Trustee (3)
Form of Global Note Representing 6.375% Senior Notes Due 2021 (4)
Officers’ Certificate of Steelcase Inc. establishing the terms of the 6.375% Senior Notes
Due 2021 (5)
Second Amended and Restated Credit Agreement, dated as of September 23, 2016
among Steelcase Inc. and JPMorgan Chase Bank, N.A., as Administrative Agent; Bank
of America, N.A., and Wells Fargo Bank, National Association as Co-Syndication
Agents; HSBC Bank USA, National Association as Documentation Agent; and certain
other lenders (6)
Steelcase Inc. Restoration Retirement Plan (7)
2015-1 Amendment to the Steelcase Inc. Restoration Retirement Plan (8)
2016-1 Amendment to the Steelcase Inc. Restoration Retirement Plan (9)
Steelcase Inc. Deferred Compensation Plan (10)
2009-1 Amendment to the Steelcase Inc. Deferred Compensation Plan (11)
2013-1 Amendment to the Steelcase Inc. Deferred Compensation Plan (12)
2015-1 Amendment to the Steelcase Inc. Deferred Compensation Plan (13)
Deferred Compensation Agreement dated May 4, 1998, between Steelcase Inc. and
William P. Crawford (14)
Steelcase Inc. Non-Employee Director Deferred Compensation Plan, as amended and
restated effective July 10, 2012 (15)
Steelcase Inc. Executive Severance Plan (16)
2009-1 Amendment to the Steelcase Inc. Executive Severance Plan (17)
2010-1 Amendment to the Steelcase Inc. Executive Severance Plan (18)
2010-2 Amendment to the Steelcase Inc. Executive Severance Plan (19)
Steelcase Inc. Executive Supplemental Retirement Plan, as amended and restated as of
March 27, 2003 (20)
2006-1 Amendment to the Steelcase Inc. Executive Supplemental Retirement Plan (21)
2006-2 Amendment to the Steelcase Inc. Executive Supplemental Retirement Plan (22)
2009-1 Amendment to the Steelcase Inc. Executive Supplemental Retirement Plan (23)
2012-1 Amendment to the Steelcase Inc. Executive Supplemental Retirement Plan (24)
2015-1 Amendment to the Steelcase Inc. Executive Supplemental Retirement Plan (25)
Steelcase Inc. Management Incentive Plan, as amended and restated as of
February 24, 2012 (26)
Steelcase Inc. Incentive Compensation Plan, as amended and restated as of July 15,
2015 (27)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(TSR) (FY 2015) (28)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(ROIC) (FY 2015) (29)
Steelcase Inc. Incentive Compensation Plan Form of Restricted Stock Units Agreement
(FY 2015) (30)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(TSR) (FY 2016) (31)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(ROIC) (FY 2016) (32)
E-1
Exhibit
No.
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
21.1
23.1
31.1
31.2
32.1
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
Description
Steelcase Inc. Incentive Compensation Plan Form of Restricted Stock Units Agreement
(FY 2016) (33)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(TSR) (FY 2017) (34)
Steelcase Inc. Incentive Compensation Plan Form of Cash-Based Award Agreement
(ROIC) (FY 2017) (35)
Steelcase Inc. Incentive Compensation Plan Form of Restricted Stock Units Agreement
(FY 2017) (36)
Steelcase Inc. Incentive Compensation Plan Form of Performance Units Agreement
(TSR) (FY 2018)
Steelcase Inc. Incentive Compensation Plan Form of Cash-Based Award Agreement
(ROIC) (FY 2018)
Steelcase Inc. Incentive Compensation Plan Form of Restricted Stock Units Agreement
(FY 2018)
Summary of Steelcase Benefit Plan for Outside Directors (37)
Summary of Compensation for the Board of Directors of Steelcase Inc., as updated April
14, 2016 (38)
Subsidiaries of the Registrant
Consent of Deloitte & Touche LLP
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Instance Document
XBRL Schema Document
XBRL Calculation Linkbase Document
XBRL Labels Linkbase Document
XBRL Presentation Linkbase Document
XBRL Definition Linkbase Document
________________________
(1) Filed as Exhibit 3.1 to the Company’s Form 8-K, as filed with the Commission on July 15, 2011 (commission
file number 001-13873), and incorporated herein by reference.
(2) Filed as Exhibit No 3.2 to the Company's Form 10-K, as filed with the Commission on April 17, 2014
(commission file number 001-13873), and incorporated herein by reference.
(3) Filed as Exhibit No. 4.1 to the Company’s Form 8-K, as filed with the Commission on August 7, 2006
(commission file number 001-13873), and incorporated herein by reference.
(4) Filed as Exhibit No. 4.2 to the Company’s Form 8-K, as filed with the Commission on February 3, 2011
(commission file number 001-13873), and incorporated herein by reference.
(5) Filed as Exhibit No. 4.3 to the Company’s Form 8-K, as filed with the Commission on February 3, 2011
(commission file number 001-13873), and incorporated herein by reference.
(6) Filed as Exhibit No. 10.1 to the Company's Form 8-K, as filed with the Commission on September 28, 2016
(commission file number 001-13873), and incorporated herein by reference.
(7) Filed as Exhibit No. 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
November 28, 2008, as filed with the Commission on January 7, 2009 (commission file number 001-13873),
and incorporated herein by reference.
(8) Filed as Exhibit No. 10.2 to the Company's Form 8-K, as filed with the Commission on January 16, 2015
(commission file number 001-13873), and incorporated herein by reference.
E-2
(9) Filed as Exhibit No. 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
August 28, 2015, as filed with the Commission on September 29, 2015 (commission file number 001-13873),
and incorporated herein by reference.
(10) Filed as Exhibit No. 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
November 28, 2008, as filed with the Commission on January 7, 2009 (commission file number 001-13873),
and incorporated herein by reference.
(11) Filed as Exhibit No. 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
November 28, 2008, as filed with the Commission on January 7, 2009 (commission file number 001-13873),
and incorporated herein by reference.
(12) Filed as Exhibit No. 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
August 24, 2012, as filed with the Commission on October 1, 2012 (commission file number 001-13873), and
incorporated herein by reference.
(13) Filed as Exhibit No. 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
November 28, 2014, as filed with the Commission on December 23, 2014 (commission file number
001-13873), and incorporated herein by reference.
(14) Filed as Exhibit No. 10.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 27, 1998, as filed with the Commission on May 28, 1998 (commission file number 001-13873), and
incorporated herein by reference.
(15) Filed as Exhibit No. 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
August 24, 2012, as filed with the Commission on October 1, 2012 (commission file number 001-13873), and
incorporated herein by reference.
(16) Filed as Exhibit No. 10.1 to the Company’s Form 8-K, as filed with the Commission on February 9, 2007
(commission file number 001-13873), and incorporated herein by reference.
(17) Filed as Exhibit No. 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
August 29, 2008, as filed with the Commission on October 7, 2008 (commission file number 001-13873), and
incorporated herein by reference.
(18) Filed as Exhibit No. 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
August 28, 2009, as filed with the Commission on October 5, 2009 (commission file number 001-13873), and
incorporated herein by reference.
(19) Filed as Exhibit No. 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended
November 27, 2009, as filed with the Commission on January 5, 2010 (commission file number 001-13873),
and incorporated herein by reference.
(20) Filed as Exhibit No. 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 28, 2003, as filed with the Commission on May 16, 2003 (commission file number 001-13873), and
incorporated herein by reference.
(21) Filed as Exhibit No. 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 25, 2005, as filed with the Commission on May 6, 2005 (commission file number 001-13873), and
incorporated herein by reference.
(22) Filed as Exhibit No. 10.01 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
May 27, 2005, as filed with the Commission on July 1, 2005 (commission file number 001-13873), and
incorporated herein by reference.
(23) Filed as Exhibit No. 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
August 29, 2008, as filed with the Commission on October 7, 2008 (commission file number 001-13873), and
incorporated herein by reference.
(24) Filed as Exhibit No. 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 24, 2012, as filed with the Commission on April 23, 2012 (commission file number 001-13873), and
incorporated herein by reference.
(25) Filed as Exhibit No. 10.1 to the Company’s Form 8-K, as filed with the Commission on January 16, 2015
(commission file number 001-13873), and incorporated herein by reference.
(26) Filed as Exhibit No. 10.1 to the Company’s Form 8-K, as filed with the Commission on July 16, 2012
(commission file number 001-13873), and incorporated herein by reference.
E-3
(27) Filed as Exhibit No. 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
August 28, 2015, as filed with the Commission on September 29, 2015 (commission file number 001-13873),
and incorporated herein by reference.
(28) Filed as Exhibit No. 10.25 to the Company's Form 10-K, for the fiscal year ended February 28, 2014, as filed
with the Commission on April 17, 2014 (commission file number 001-13873), and incorporated herein by
reference.
(29) Filed as Exhibit No. 10.26 to the Company's Form 10-K, for the fiscal year ended February 28, 2014, as filed
with the Commission on April 17, 2014 (commission file number 001-13873), and incorporated herein by
reference.
(30) Filed as Exhibit No. 10.27 to the Company's Form 10-K, for the fiscal year ended February 28, 2014, as filed
with the Commission on April 17, 2014 (commission file number 001-13873), and incorporated herein by
reference.
(31) Filed as Exhibit No. 10.1 to the Company's Form 8-K, as filed with the Commission on April 17, 2015
(commission file number 001-13873), and incorporated herein by reference.
(32) Filed as Exhibit No. 10.2 to the Company's Form 8-K, as filed with the Commission on April 17, 2015
(commission file number 001-13873), and incorporated herein by reference.
(33) Filed as Exhibit No. 10.3 to the Company's Form 8-K, as filed with the Commission on April 17, 2015
(commission file number 001-13873), and incorporated herein by reference.
(34) Filed as Exhibit No. 10.30 to the Company's Form 10-K, for the fiscal year ended February 26, 2016, as filed
with the Commission on April 15, 2016 (commission file number 001-13873), and incorporated herein by
reference.
(35) Filed as Exhibit No. 10.31 to the Company's Form 10-K, for the fiscal year ended February 26, 2016, as filed
with the Commission on April 15, 2016 (commission file number 001-13873), and incorporated herein by
reference.
(36) Filed as Exhibit No. 10.32 to the Company's Form 10-K, for the fiscal year ended February 26, 2016, as filed
with the Commission on April 15, 2016 (commission file number 001-13873), and incorporated herein by
reference.
(37) Filed as Exhibit No. 10.42 to the Company’s Annual Report on Form 10-K for the fiscal year ended
February 26, 2010, as filed with the Commission on April 26, 2010 (commission file number 001-13873), and
incorporated herein by reference.
(38) Filed as Exhibit No. 10.34 to the Company's Form 10-K, for the fiscal year ended February 26, 2016, as filed
with the Commission on April 15, 2016 (commission file number 001-13873), and incorporated herein by
reference.
E-4
DIRECTORS AND EXECUTIVE OFFICERS
Directors
Lawrence J. Blanford 1, 3
Retired; formerly President
and Chief Executive Officer,
Green Mountain Coffee Roasters, Inc.
Timothy C.E. Brown
Chief Executive Officer and President,
IDEO LP
William P. Crawford
Retired; formerly President
and Chief Executive Officer,
Steelcase Design Partnership
Connie K. Duckworth 2, 3, 4
Chairman and
Chief Executive Officer,
ARZU, Inc.
David W. Joos 1, 2
Retired; formerly President
and Chief Executive Officer,
CMS Energy Corporation and
Consumers Energy Company
James P. Keane 3
President and
Chief Executive Officer,
Steelcase Inc.
Todd P. Kelsey
President and Chief Executive Officer,
Plexus Corp.
Robert C. Pew III 3
Chair of the Board of
Directors, Steelcase Inc.;
Private Investor
Cathy D. Ross 1, 2
Retired; formerly
Executive Vice President
and Chief Financial Officer,
Federal Express Corporation
Peter M. Wege II 1, 4
Chairman of the
Board of Directors,
Contract Pharmaceuticals
Limited
P. Craig Welch, Jr. 2, 4
Member Manager,
Honzo Fund, LLC
Kate Pew Wolters 2
Philanthropist;
President, Kate and
Richard Wolters Foundation
Executive Officers
Guillaume M. Alvarez
Senior Vice President,
EMEA
Sara E. Armbruster
Vice President,
Strategy, Research and
New Business Innovation
Ulrich H. E. Gwinner
President, Asia Pacific
James P. Keane
President and
Chief Executive Officer
Robert G. Krestakos
Vice President,
Global Operations
Terrence J. Lenhardt
Vice President,
Chief Information Officer
James N. Ludwig
Vice President, Global Design
and Product Engineering
Mark T. Mossing
Corporate Controller and
Chief Accounting Officer
Gale Moutrey
Vice President,
Communications
Lizbeth S. O’Shaughnessy
Senior Vice President,
Chief Administrative Officer,
General Counsel and Secretary
Eddy F. Schmitt
Senior Vice President, Americas
Allan W. Smith, Jr.
Vice President,
Global Marketing
David C. Sylvester
Senior Vice President,
Chief Financial Officer
1 = Audit Committee
2 = Compensation Committee
3 = Executive Committee
4 = Nominating and Corporate Governance Committee
CORPORATE INFORMATION
Global Headquarters
Steelcase Inc.
901 44th Street
Grand Rapids, MI 49508
Phone: (616) 247-2710
Products and Services
For the address and telephone
number of your nearest
Steelcase dealer or for information
about our products, please
call (800) 333-9939 or visit our
website at www.steelcase.com.
Common Stock Data
Steelcase Inc. Class A Common
Stock is listed on the New York
Stock Exchange under the
symbol SCS. The Class B
Common Stock is not publicly
traded but is convertible into
Class A Common Stock on a
one-for-one basis.
Shareholder Account Inquiries
Registered shareholders can
access their account online. Log
on to www.shareowneronline.com
to view share balance, change
address, complete certain
transactions and get answers to
other stock-related inquiries.
You can also write or call the
Steelcase transfer agent at:
Wells Fargo Bank, N.A.
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Phone: (866) 457-8829
Outside the continental
U.S. and Canada:
(651) 450-4064
Independent Auditors
Deloitte & Touche LLP
38 Commerce, SW
Suite 600
Grand Rapids, MI 49503
Phone: (616) 336-7900
Shareholder Reports and
Investor Inquiries
You can request copies of financial
documents, such as this annual
report and Form 10-K, free of
charge, by contacting:
Steelcase Inc.
Investor Relations
P.O. Box 1967
Grand Rapids, MI 49501-1967
Phone: (616) 246-4251
Fax: (616) 247-2627
Email: ir@steelcase.com
Investor Relations on the Web
If you wish to review investor
information as soon as it becomes
available, please visit ir.steelcase.com.
You can subscribe to email alerts
and receive notification whenever
events, SEC filings or news releases
are posted to the website. You may
also submit requests for printed
financial materials.
Corporate Sustainability Report
This report details our efforts to
protect the environment and
be good corporate citizens.
You can read the report online at
www.steelcase.com/discover/
steelcase/sustainability.
Annual Meeting
The annual meeting of Steelcase
shareholders will be held on
Wednesday, July 12, 2017, at
11 a.m. EDT via a live webcast at
www.virtualshareholdermeeting.com/
scs2017.
Contact the Steelcase
Board of Directors
To report issues about Steelcase
accounting, internal controls and
procedures, auditing matters or other
concerns to the Board of Directors or
Audit Committee, write to:
Steelcase Board of Directors
Chair of the Board
c/o Steelcase Inc.
P.O. Box 1967
Grand Rapids, MI 49501-1967
Phone (800) 437-6167
(in the U.S., Canada or Mexico)
Collect (704) 943-1134
(from outside the United States)
Certifications
Steelcase has included as Exhibits
31.1 and 31.2 to its Annual Report on
Form 10-K for fiscal year 2017 filed
with the Securities and Exchange
Commission all required certifications
of the Steelcase Chief Executive
Officer and Chief Financial Officer
regarding the quality of the company’s
public disclosures in its fiscal
2017 reports in accordance with
Section 302 of the Sarbanes-Oxley
Act of 2002. In July 2016, the
Steelcase Chief Executive Officer
provided to the New York Stock
Exchange (NYSE), the annual CEO
certification regarding Steelcase
compliance with the NYSE’s corporate
governance listing standards.
Forward-looking Statements
Certain statements in this document
are “forward-looking statements”
within the meaning of the Private
Securities Litigation Reform Act.
These statements are based
on management’s current
expectations and are subject to
uncertainty and changes in
circumstances. Actual results may
differ materially from those included
in these statements due to a variety
of factors. For more information
about forward-looking statements
and the factors that may cause
actual results to vary, please see the
Forward-looking Statements section
in our Annual Report on Form 10-K,
which is included herein.
Call 800.333.9939 or visit Steelcase.com
facebook.com/Steelcase
twitter.com/Steelcase
youtube.com/SteelcaseTV
©2017 Steelcase Inc. All rights reserved. All specifications subject to change without notice.
Trademarks used herein are the property of Steelcase Inc. or of their respective owners. Printed in U.S.A. FSC certified.