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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 26, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-13873
----------------
STEELCASE INC.
MICHIGAN 38-0819050
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
901 44TH STREET GRAND RAPIDS, MICHIGAN 49508
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
(616) 247-2710
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common stock, as of the latest practicable date: As of December 31, 1999, the
Registrant had outstanding 25,182,185 shares of Class A Common Stock and
127,194,140 shares of Class B Common Stock.
Exhibit index located on page 20.
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STEELCASE INC. FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 26, 1999
INDEX
PAGE
NO.
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income
Three and Nine Months Ended November 26, 1999 and November 27, 1998... 3
Condensed Consolidated Balance Sheets
As of November 26, 1999 and February 26, 1999......................... 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended November 26, 1999 and November 27, 1998............. 5
Notes to Condensed Consolidated Financial Statements................... 6-12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 13-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 20
Signatures............................................................... 21
Exhibit Index............................................................ 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ------------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
--------- --------- -------- --------
Net sales........................... $ 881.0 $ 687.6 $2,404.7 $2,063.9
Cost of sales....................... 586.7 446.9 1,575.4 1,304.8
--------- --------- -------- --------
Gross profit........................ 294.3 240.7 829.3 759.1
Selling, general and administrative
expenses........................... 216.0 163.9 601.6 512.2
--------- --------- -------- --------
Operating income.................... 78.3 76.8 227.7 246.9
Interest expense.................... (4.7) -- (10.9) --
Other income, net................... 1.3 11.6 9.2 20.3
--------- --------- -------- --------
Income before provision for income
taxes and equity in net income
(loss) of joint ventures and dealer
transitions........................ 74.9 88.4 226.0 267.2
Provision for income taxes.......... 29.2 31.0 88.1 98.9
--------- --------- -------- --------
Income before equity in net income
(loss) of joint ventures and dealer
transitions........................ 45.7 57.4 137.9 168.3
Equity in net income (loss) of joint
ventures and dealer transitions.... (0.4) -- 2.3 5.8
--------- --------- -------- --------
Net income.......................... $ 45.3 $ 57.4 $ 140.2 $ 174.1
========= ========= ======== ========
Earnings per share (basic and
diluted)........................... $ 0.30 $ 0.37 $ 0.92 $ 1.13
========= ========= ======== ========
Dividends per share of common
stock.............................. $ 0.11 $ 0.10 $ 0.33 $ 0.30
========= ========= ======== ========
See accompanying notes to condensed consolidated financial statements.
3
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
NOV. 26 , FEB. 26,
1999 1999
ASSETS ----------- --------
Current assets:
Cash and cash equivalents............................. $ 60.4 $ 67.5
Accounts receivable, net.............................. 599.2 348.9
Notes receivable and leased assets.................... 183.8 140.4
Inventories........................................... 177.7 96.5
Other current assets.................................. 100.2 84.1
-------- --------
Total current assets............................ 1,121.3 737.4
Property and equipment, net............................. 909.8 739.0
Notes receivable and leased assets...................... 262.6 209.1
Joint ventures and dealer transitions................... 54.9 210.4
Goodwill and other intangible assets, net............... 416.9 99.6
Other assets............................................ 208.4 187.0
-------- --------
Total assets.................................... $2,973.9 $2,182.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable...................................... $ 218.9 $ 102.1
Short-term borrowings and current portion of long-term
debt................................................. 178.4 --
Accrued expenses:
Employee compensation............................... 153.7 92.8
Employee benefit plan obligations................... 77.9 51.8
Other............................................... 267.6 200.1
-------- --------
Total current liabilities....................... 896.5 446.8
-------- --------
Long-term liabilities:
Long-term debt........................................ 230.1 --
Employee benefit plan obligations..................... 233.2 222.8
Other long-term liabilities........................... 49.7 12.9
-------- --------
Total long-term liabilities..................... 513.0 235.7
-------- --------
Total liabilities............................... 1,409.5 682.5
-------- --------
Shareholders' equity:
Common stock.......................................... 357.2 379.4
Accumulated other comprehensive income................ (18.0) (15.0)
Retained earnings..................................... 1,225.2 1,135.6
-------- --------
Total shareholders' equity...................... 1,564.4 1,500.0
-------- --------
Total liabilities and shareholders' equity...... $2,973.9 $2,182.5
======== ========
See accompanying notes to condensed consolidated financial statements.
4
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
NINE MONTHS ENDED
------------------
NOV. 26, NOV. 27,
1999 1998
-------- --------
OPERATING ACTIVITIES
Net income.................................................. $ 140.2 $ 174.1
Depreciation and amortization............................... 100.3 75.9
Changes in current assets and liabilities, net of corporate
acquisitions............................................... (113.9) 11.8
Other, net.................................................. 18.2 23.4
------- -------
Net cash provided by operating activities................. 144.8 285.2
------- -------
INVESTING ACTIVITIES
Capital expenditures........................................ (113.1) (138.3)
Corporate acquisitions, net of cash acquired................ (206.3) --
Other, net.................................................. (15.0) (13.5)
------- -------
Net cash used in investing activities..................... (334.4) (151.8)
------- -------
FINANCING ACTIVITIES
Proceeds from issuance of debt.............................. 281.1 --
Repayments of debt.......................................... (75.2) --
Short-term borrowings, net.................................. 49.4 --
Common stock issuance....................................... -- 24.8
Common stock repurchase..................................... (22.2) (15.0)
Dividends paid.............................................. (50.6) (46.2)
------- -------
Net cash provided by (used in) financing activities....... 182.5 (36.4)
------- -------
Net increase (decrease) in cash and cash equivalents...... (7.1) 97.0
Cash and cash equivalents, beginning of period.......... 67.5 103.1
------- -------
Cash and cash equivalents, end of period................ $ 60.4 $ 200.1
======= =======
See accompanying notes to condensed consolidated financial statements.
5
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals and adjustments)
considered necessary for a fair presentation of the condensed consolidated
financial statements have been included. Results for interim periods should
not be considered indicative of results to be expected for a full year.
Reference should be made to the consolidated financial statements contained in
the registrant's Annual Report on Form 10-K for the fiscal year ended February
26, 1999 ("10-K Report"). For purposes hereof, "Steelcase Inc." or the
"Company" means Steelcase Inc. and its majority owned subsidiaries unless the
context requires otherwise.
The November 26, 1999 condensed consolidated financial statements include
the accounts and balances of Steelcase Strafor S.A. and subsidiaries
("Steelcase Strafor"), which became a wholly-owned subsidiary of the Company
effective March 31, 1999. Additionally, the results of operations of Steelcase
Strafor from April 1, 1999 through September 30, 1999 have been consolidated
with the Company's results of operations. However, due to the effective date
of the acquisition, and the fact that the Company accounts for Steelcase
Strafor on a two-month lag, the results of operations of Steelcase Strafor for
the three months ended March 31, 1999 have not been consolidated with the
Company's results of operations. The Company's 50% equity in net income of
Steelcase Strafor for the three months ended March 31, 1999 and for the nine
months ended November 27, 1998 is included in equity in net income of joint
ventures and dealer transitions in the accompanying condensed consolidated
statements of income.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Steelcase
Inc. and its majority-owned subsidiaries. During the normal course of
business, the Company may obtain equity interests in dealers which the Company
intends to resell as soon as practicable ("dealer transitions"). The financial
statements for majority-owned dealer transitions for which no specific
transition plan has been adopted or is in the process of being adopted at the
acquisition date are consolidated with the Company's financial statements.
Majority-owned dealer transitions with a transition plan that has been adopted
or is in the process of being adopted at the acquisition date are accounted
for under the equity method of accounting and included in joint ventures and
dealer transitions in the accompanying consolidated balance sheet at the
Company's equity in the net assets of those entities, principally based on
audited financial statements for each applicable year.
All significant intercompany accounts, transactions and profits have been
eliminated in consolidation. Foreign currency-denominated assets and
liabilities are translated into U.S. dollars at the exchange rates existing at
the balance sheet date. Income and expense items are translated at the average
exchange rates during the respective periods. Translation adjustments
resulting from fluctuations in the exchange rates are recorded in accumulated
other comprehensive income, a separate component of shareholder's equity.
Gains and losses resulting from the exchange rate fluctuations on transactions
denominated in currencies other than the functional currency are not material.
6
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EARNINGS PER SHARE
The following table reconciles the numerator and denominators used in the
calculations of basic and diluted earnings per share ("EPS") (in millions):
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV.
NOV. 26, NOV. 27, 26, NOV. 27,
1999 1998 1999 1998
-------- -------- ------- --------
NUMERATOR:
Net income numerator for both basic and
diluted EPS........................... $ 45.3 $ 57.4 $ 140.2 $174.1
======= ======= ======= =======
DENOMINATORS:
Denominator for basic EPS-Weighted
average
common shares outstanding............. 152.5 153.9 153.0 153.8
Potentially dilutive shares resulting
from stock options.................... -- -- 0.1 --
------- ------- ------- -------
Denominator for diluted EPS............ 152.5 153.9 153.1 153.8
======= ======= ======= =======
COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and all changes to
shareholders' equity, except those due to investments by owners and
distributions to owners. Comprehensive income and its components consist of
the following (in millions):
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
-------- -------- -------- --------
Net income............................. $45.3 $57.4 $140.2 $174.1
Other comprehensive income:
Foreign currency translation
adjustments......................... 8.1 11.3 (8.2) 2.7
Unrealized gain (loss) on
investments......................... 3.5 0.3 5.5 (0.3)
Minimum pension liabilities.......... -- -- (0.3) --
----- ----- ------ ------
Comprehensive income................... $56.9 $69.0 $137.2 $176.5
===== ===== ====== ======
7
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Inventories are
valued based upon the last-in, first-out ("LIFO") method and the average cost
method.
Inventories consist of (in millions):
NOV. 26, FEB. 26,
1999 1999
-------- --------
Finished goods............................................. $ 90.6 $40.9
Work in process............................................ 37.1 32.3
Raw materials.............................................. 97.5 70.8
------ -----
225.2 144.0
LIFO reserve............................................... (47.5) (47.5)
------ -----
$177.7 $96.5
====== =====
At November 26, 1999, inventories determined by the LIFO inventory method
amounted to $162.7 million, or approximately 72% of the Company's inventories.
ACQUISITIONS
On April 22, 1999, Steelcase Inc., through its wholly-owned French
subsidiary, Steelcase SAS, acquired the 50% equity interest in Steelcase
Strafor held by its joint venture partner, Strafor Facom S.A. The purchase was
effective as of March 31, 1999. As a part of this transaction, the Company
also acquired Strafor Facom S.A.'s 5% equity interest in Werndl BuroMobeL AG
("Werndl"), 3% equity interest in Pohlschroder GmbH, and 50% equity interest
in Details S.A. The purchase price paid to Strafor Facom S.A. for these equity
interests approximated $227 million including transaction costs of
approximately $2 million, and was funded by approximately $75 million of
existing cash balances, $111 million of short-term borrowings and $41 million
of long-term debt. For more information regarding the acquisition of Steelcase
Strafor, please refer to the Company's Current Report on Form 8-K dated May 7,
1999 and amended June 16, 1999.
As a result of this acquisition, which was accounted for under the purchase
method of accounting, Steelcase Strafor is now wholly-owned by the Company.
Accordingly, the November 26, 1999 condensed consolidated balance sheet
includes the accounts and balances of Steelcase Strafor. Additionally, the
results of operations of Steelcase Strafor from April 1, 1999 through
September 30, 1999 have been consolidated with the Company's results of
operations.
Management currently estimates that the excess of the aggregate cost of the
Steelcase Strafor acquisition over the historical book value of the net assets
acquired will be allocated and amortized as follows (in millions):
AMORTIZATION ANNUAL
PERIOD AMOUNT AMORTIZATION
------------ ------ ------------
Estimated fair value adjustment of
property, plant
and equipment............................ 10 years $25.0 $2.5
Estimated intangible assets, including 15 years to
patents, trade-marks and other 40 years
identifiable intangible assets and
goodwill................................. $95.1 $3.7
8
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma data summarizes the combined results of
operations of the Company and Steelcase Strafor as if the acquisition had
occurred at the beginning of the nine month period ended November 27, 1998,
and includes the effect of purchase accounting adjustments that are based upon
preliminary information and certain management estimates which are subject to
revision in future periods based on additional information, such as final
appraisals. In addition, the Steelcase Strafor results of operations include
the pro forma effects of the acquisition of Werndl, a business acquired by
Steelcase Strafor on December 16, 1998. No adjustment has been included in the
pro forma amounts for any anticipated cost savings or other synergies.
THREE MONTHS NINE MONTHS
ENDED ENDED
----------------- -----------------
NOV. 26, NOV. 27, NOV. 26, NOV. 27,
1999 1998 1999 1998
-------- -------- -------- --------
Results of Operations (in millions):
Revenues............................. $881.0 $822.1 $2,553.0 $2,490.8
Gross profit......................... 294.3 280.7 877.1 891.7
Operating income..................... 78.3 78.6 236.6 274.6
Net income........................... 45.3 53.8 138.2 168.5
Effective August 31, 1999, the Company acquired an 89% equity interest in a
significant dealer located in the Northeast United States, for $33.7 million.
The Company considers this transaction to be a dealer transition. However,
because no transition plan had been adopted or was in the process of being
adopted on the acquisition date, the transaction was accounted for under the
purchase method of accounting. Accordingly, this dealer's results of
operations subsequent to August 31, 1999 have been consolidated with the
Company's results of operations. The transaction was completed for $24.0
million in cash and $9.7 million in a note payable, and resulted in the
Company recording an intangible asset of $29.7 million for the excess of the
purchase price over the estimated fair value of the net assets acquired, which
is being amortized over 15 years.
Effective September 4, 1999, the Company purchased the remaining 50% equity
interest of Clestra Hauserman, Inc. ("Clestra") for $6.4 million. Clestra,
based in Solon, Ohio, designs, manufactures, installs and services moveable
and demountable steel walls for office interiors. The transaction, which was
completed for $5.2 million in cash and $1.2 million in settlement of a note
receivable, was accounted for under the purchase method of accounting. As a
result, the Company reduced long term assets by $8.1 million for the excess of
the estimated fair value of the net assets acquired over the purchase price,
and the results of operations of Clestra subsequent to September 4, 1999 have
been consolidated with the Company's results of operations. The Company's 50%
equity interest in the net loss of Clestra through September 4, 1999 is
included in equity in net income of joint ventures and dealer transitions in
the accompanying condensed consolidated statements of income.
9
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
INTEREST RATE NOV. 26, FEB. 26,
AVERAGE/RANGE MATURITY 1999 1999
------------- ---------- -------- --------
U.S. dollar obligations:
Revolving credit facilities
(1)............................ 5.75% 2000 $ 22.7 $ --
Notes payable (2)............... 7.00% --7.87% 2000--2006 63.7 --
Lease receivables transfer
facility (3)................... 6.69% 2000--2006 150.9 --
Other........................... 2.3 --
------ -----
239.6 --
Foreign currency obligations:
Revolving credit facilities
(4)............................ 2.88% 2000--2004 132.1 --
Notes payable (5)............... 2.38% --7.80% 2000--2011 36.3 --
Other........................... 0.5 --
------ -----
168.9 --
------ -----
Total short-term borrowings and
long-term debt................... 408.5 --
Short-term borrowings and current
portion
of long-term debt................ 178.4 --
------ -----
Long-term debt.................... $230.1 $ --
====== =====
- --------
(1) In April 1999, the Company established a 364-day unsecured committed
revolving credit facility with various financial institutions under which
it may borrow up to $200.0 million. Borrowings under the facility mature
at various dates throughout the year depending on the borrowing terms,
which range from one to six months as selected by the Company, subject to
certain limitations. Interest on committed borrowings, which is due no
later than the maturity of such borrowings, is based on LIBOR or a
floating base rate, as selected by the Company, in each case plus a margin
for the applicable borrowing term. The agreement which, subject to certain
conditions, may be renewed annually for additional 364-day periods,
contains certain covenants which include, among others, minimum levels of
tangible net worth, interest coverage and debt ratio.
Additionally, the Company has entered into agreements with certain
financial institutions which provide for borrowings on unsecured non-
committed short-term credit facilities of up to $70.0 million at variable
interest rates determined by agreement at the time of borrowing. These
agreements expire within one year and subject to certain conditions may be
renewed annually.
(2) Notes payable represents various amounts payable to banks and others.
Certain agreements contain convenants which include, among others, minimum
levels of tangible net worth, interest coverage and debt ratio.
Approximately $12.9 million of notes payable are collateralized by lease
receivables, including the leased assets.
(3) In October 1999, the Company established a $200 million committed lease
receivables transfer facility under which it has the right, subject to
certain conditions, to receive advances against the transfer of certain
lease receivables. The advances are funded either by a bank sponsored
conduit vehicle via the issuance of commercial paper or by committed
financial institutions. Borrowings under the facility are repaid from the
cash flow of specified lease receivables related to Company's leasing
portfolio. The facility may be renewed annually, and advances on the
facility are due monthly over the next seven years with principal payments
determined based upon the related underlying leases. An initial advance of
10
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$154.9 million was funded on October 20, 1999. Interest on the facility is
based on the floating commercial paper rate or LIBOR plus a margin (an
effective rate of 5.86% at November 26, 1999). Lease payments on the
underlying lease receivables are based upon fixed interest rates.
Therefore, to hedge the exposure to changes in interest rates, the Company
entered into an interest rate swap that effectively provides a 6.69% fixed
rate for the initial advance.
(4) In August 1999, the Company established an unsecured committed multi-
currency revolving credit facility with various financial institutions
under which it may borrow up to Euro ("EUR") 200.0 million or its
equivalent in optional currencies. The agreement is comprised of two
tranches; tranche A is a EUR 75.0 million, 364 day revolving facility and
tranche B is a EUR 125.0 million five year term facility. Tranche A
facility borrowings, which amounted to $29.4 million at November 26, 1999,
mature at various dates throughout the year depending on the borrowing
terms. Subject to certain conditions, the tranche A facility may be
renewed annually for additional 364 day periods. Tranche B facility
borrowings, which amounted to $68.4 million at November 26, 1999,
effectively mature at the end of the facility term. Interest on each
borrowing, which is due no later than the maturity of such borrowing, is
based on EURIBOR, LIBOR or a floating base rate as selected by the
Company, in each case, plus a margin for the applicable borrowing term.
The agreement contains certain covenants, which include, among others,
minimum levels of tangible net worth, interest coverage and debt ratio.
Additionally, the Company has entered into agreements with certain foreign
financial institutions which provide for foreign borrowings on unsecured
non-committed short-term credit facilities approximating $125.0 million,
with interest rates determined by agreement at the time of borrowing.
Borrowings on these agreements, which mature within one year and subject to
certain conditions may be renewed annually, amounted to $34.3 million at
November 26, 1999.
(5) Notes payable represents foreign capitalized lease obligations,
collateralized by the underlying leased assets, and various other foreign
third party notes payable.
Annual maturities on short-term borrowings and long-term debt for the next
five years subsequent to Nov. 26, 1999 are as follows (in millions):
2000.................................................................. $178.4
2001.................................................................. 67.2
2002.................................................................. 46.9
2003.................................................................. 12.6
2004.................................................................. 80.3
Thereafter............................................................ 23.1
------
$408.5
======
COMMON STOCK REPURCHASE PROGRAM
On June 17, 1998, the Company's Board of Directors ("Board") approved a
common stock repurchase program authorizing the repurchase of up to three
million shares of common stock. On September 22, 1999, the Board authorized
additional common stock repurchases of up to three million shares. During the
third quarter of fiscal 2000 ("Q3 2000"), the Company repurchased 107,400
Class B common shares at a cost of $1.4 million. As of November 26, 1999,
total repurchases amounted to $37.2 million, 3,999,130 shares remain available
for repurchase under the programs, and the Company has outstanding commitments
to repurchase 250,600 of those remaining shares.
11
STEELCASE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OPERATING SEGMENTS
In accordance with Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information, the
Company operates on a worldwide basis within a single reportable segment, the
office furniture industry. The office furniture segment includes several
operating segments that manufacture an extensive range of steel and wood
office furniture products. The nature of the products, production processes,
types of customers and methods of distribution are consistent across segments
and therefore have been aggregated into one reported segment. The Company's
primary product lines include office furniture systems, seating, storage
solutions, desks and casegoods, and interior architectural products.
The Company evaluates performance and allocates resources based on net
income or loss. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies in
the 10-K Report. Management views interest income, interest expense, and
certain other non-operating xcosts as being associated with the office
furniture segment since this segment is the Company's primary activity and
accounts for the majority of the Company's net sales, assets and net income.
CONTINGENCY
As described in the Company's 10-K Report, the Company's warranty policy
offers a lifetime warranty on Steelcase brand products, subject to certain
exceptions, which provides for the free repair or replacement of any covered
product or component that fails during normal use because of a defect in
design, materials or workmanship. In accordance with this warranty policy, the
Company recorded an accrual of $5.0 million in cost of sales, $3.1 million on
an after-tax basis, in Q3 2000 for costs associated with the implementation of
several aesthetic, performance and quality improvements related to the new
Pathways portfolio of products. Management anticipates that the Company will
likely incur an additional $2.0 to $4.0 million after-tax charge in the fourth
quarter of fiscal 2000 ("Q4 2000") for continuing the aforementioned
improvements.
Additionally Management anticipates that the Company will likely incur a
one-time charge during Q4 2000 to cover the costs of product improvements to
the architectural elements of Pathways to address some ambiguities embedded in
various model building codes which may be adopted locally and applied to some
of the Pathways portfolio. The enhancements will also address inconsistencies
between the model building codes and existing furniture based standards,
particularly with respect to the various methods of testing under each.
Although final costs are being determined, the Company estimates that the
material and installation costs of the product improvements could range from
$8.0 million to $12.0 million after-tax. The modifications will be offered to
all existing Pathway's customers for installation at their site at the
Company's expense over the coming months.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the accompanying Condensed
Consolidated Financial Statements of the Company and Management's Discussion
and Analysis of Financial Condition and Results of Operations set forth in the
10-K Report.
RESULTS OF OPERATIONS
The following table sets forth condensed consolidated statement of income
data for the three and nine month periods ended November 26, 1999 and November
27, 1998.
THREE MONTHS
ENDED PERCENTAGE NINE MONTHS ENDED PERCENTAGE
----------------- CHANGE ----------------- CHANGE
NOV. 26, NOV. 27, INCREASE/ NOV. 26, NOV. 27, INCREASE/
1999 1998 (DECREASE) 1999 1998 (DECREASE)
-------- -------- ---------- -------- -------- ----------
Net sales............... 100.0% 100.0% 28.1% 100.0% 100.0% 16.5%
Cost of sales........... 66.6 65.0 31.3% 65.5 63.2 20.7%
----- ----- ----- -----
Gross profit............ 33.4 35.0 22.3% 34.5 36.8 9.2%
Selling, general and
administrative
expenses............... 24.5 23.8 31.8% 25.0 24.8 17.5%
----- ----- ----- -----
Operating income........ 8.9 11.2 2.0% 9.5 12.0 (7.8)%
Interest expense........ (0.5) -- n/m (0.5) -- n/m
Other income, net....... 0.1 1.7 (88.8)% 0.4 0.9 (54.7)%
----- ----- ----- -----
Income before provision
for income taxes and
equity in net income
(loss) of joint
ventures and dealer
transitions............ 8.5 12.9 (15.3)% 9.4 12.9 (15.4)%
Provision for income
taxes.................. 3.3 4.5 (5.8)% 3.7 4.8 (10.9)%
----- ----- ----- -----
Income before equity in
net income (loss) of
joint ventures and
dealer transitions..... 5.2 8.4 (20.4)% 5.7 8.1 (18.1)%
Equity in net income
(loss) of joint
ventures and dealer
transitions............ (0.1) -- n/m 0.1 0.3 (60.3)%
----- ----- ----- -----
Net income.............. 5.1% 8.4% (21.1)% 5.8% 8.4% (19.5)%
===== ===== ===== =====
- --------
n/m = not meaningful
OVERVIEW
Consolidated net sales of $881.0 million for the third quarter of fiscal
2000 ("Q3 2000") increased 28.1% as compared to the third quarter of fiscal
1999 ("Q3 1999"), primarily attributable to the impact of the acquisition of
Steelcase Strafor S.A. and subsidiaries ("Steelcase Strafor") and other
domestic acquisitions. This is the second quarter that the Company is
presenting consolidated results of operations including Steelcase Strafor's
results of operations since the date of acquisition.
The Company completed and announced the acquisition of the remaining 50%
equity interest in Steelcase Strafor on April 22, 1999. The acquisition was
effective as of March 31, 1999 and has been accounted for pursuant to the
purchase method of accounting in the accompanying condensed consolidated
financial statements as of November 26, 1999. The Company accounts for the
results of operations of Steelcase Strafor on a two month lag.
The Company posted an earnings decrease of 21.1% for Q3 2000, with net
income of $45.3 million and basic and diluted earnings per share of $0.30,
compared to net income of $57.4 million and basic and diluted earnings per
share of $0.37 in the prior year's third quarter. The decrease in
profitability is primarily
13
attributable to the one-time positive impact of tax litigation in Q3 1999 and
the following factors, some of which represent a continuation of the factors
affecting the Company's Q2 2000 earnings:
. Continued competitive pricing pressures.
. Disruptions to the manufacturing process from new product introductions
and ramp-up costs, increased order levels and process changes.
. Margin pressures from the mix of new products, which typically have
initial lower margins.
. Amortization of intangibles relating to the acquisition of the remaining
50% equity interest in Steelcase Strafor.
. Acquisition financing costs and interest expense arising from credit
facilities used to fund the acquisition of the remaining 50% equity
interest in Steelcase Strafor.
. Costs associated with the implementation of several aesthetic,
performance and quality improvements related to Pathways.
As noted above, Q3 1999 net income reflects the impact of the favorable
resolution of income tax litigation dating back to 1989, primarily related to
investment tax credits and accelerated depreciation on the Company's Corporate
Development Center. The resolution of these matters allowed the Company to
reduce its expected effective tax rate for 1999 to 37.0%, and record interest
income of $5.8 million. These matters increased Q3 1999 consolidated net
income by $6.2 million, or $0.04 per share.
THREE AND NINE MONTHS ENDED NOVEMBER 26, 1999 COMPARED TO THREE AND NINE
MONTHS ENDED NOVEMBER 27, 1998
The following table sets forth comparative sales information by segment (in
millions):
THREE MONTHS NINE MONTHS
ENDED PERCENTAGE ENDED PERCENTAGE
----------------- CHANGE ----------------- CHANGE
NOV. 26, NOV. 27, INCREASE/ NOV. 26, NOV. 27, INCREASE/
1999 1998 (DECREASE) 1999 1998 (DECREASE)
-------- -------- ---------- -------- -------- ----------
NET SALES
Office furniture--U.S.
only................... $645.8 $599.7 7.7% $1,863.3 $1,803.7 3.3%
Office furniture--
Europe(1).............. 148.5 -- n/m 284.7 -- n/m
Office furniture--
International
(excluding Europe) &
Canada................. 53.0 61.5 (13.8)% 151.3 167.0 (9.4)%
Services & other
businesses............. 33.7 26.4 27.7% 105.4 93.2 13.1%
------ ------ -------- --------
Consolidated net sales.. $881.0 $687.6 28.1% $2,404.7 $2,063.9 16.5%
====== ====== ======== ========
- --------
n/m = not meaningful
(1) Steelcase Strafor recorded net sales of $148.5 million in Q3 2000, an
increase of 31.8% over third quarter fiscal 1999 net sales of $112.7
million. Steelcase Strafor fiscal 1999 net sales have been adjusted from
amounts previously reported in order to conform the classification of
certain sales deductions and other charges with those reflected in the
Company's condensed consolidated financial statements.
Steelcase Inc. posted record net sales, increasing 28.1% and 16.5% over the
comparable prior year three and nine month periods, primarily attributable to
the Steelcase Strafor acquisition. Excluding the effects of the Steelcase
Strafor acquisition, Q3 2000 consolidated net sales increased 6.5% as a result
of domestic acquisitions and strong new product sales, partially offset by
decreases in the non-European international office furniture businesses.
14
The Company's U.S. office furniture net sales increased 7.7% for Q3 2000,
principally as a result of domestic acquisitions, strong performance of the
Company's new products, and strong net sales growth for the quarter in the
Company's Design Partnership , Wood, and Revest operations, as a group. Q3
2000 net sales for the Company's Steel furniture operations, which are the
Company's largest business unit and represent approximately 70% of annualized
U.S. revenues, remained flat compared to Q3 1999.
Domestic acquisitions accounted for approximately two-thirds of the
Company's U.S. office furniture sales growth for Q3 2000. Excluding all
acquisitions, U.S. net sales increased 2.5%. On September 4, 1999, the Company
acquired the remaining 50% interest in Clestra Hauserman Inc. and accordingly,
has consolidated its results of operations during this quarter. Clestra
Hauserman is a leading provider of steel moveable walls and partitions in
North America. This acquisition expands the Company's Pathways portfolio of
architectural product options. Additionally, effective August 31, 1999, the
Company acquired a majority interest in a significant dealer located in the
Northeast United States. This acquisition is intended to secure the
opportunity for a smooth ownership transition in a key geographical area and
does not represent a change in philosophy regarding independent ownership of
the dealer network. The Company had not adopted nor was in the process of
adopting a transition plan with respect to this dealer on the acquisition
date, and therefore the results of operations the dealer have been
consolidated with the Company's results of operations according to the
Company's consolidation guidelines. Finally, the impact of the J. M. Lynne
acquisition, which was consummated in Q4 1999, has also contributed to the
current period sales growth.
The Business and Institutional Furniture Manufacturers' Association
reported a revised sales growth forecast of (1.0)% to 0.0% for calendar year
1999. Management estimates that the Company will experience modest sales
growth for the fiscal year, excluding the effects of the Steelcase Strafor
acquisition.
Steelcase Strafor net sales for the three month period ended September 30,
1999 increased 31.8%, primarily attributable to the acquisition of Werndl
BuroMobeL ("Werndl") in December 1998. Steelcase Strafor net sales excluding
the Werndl acquisition increased 7.2% versus the prior year third quarter due
to a reduction in the backlog of sales in France and the United Kingdom offset
by the negative impact of the Euro exchange rate versus the United States
dollar. In Q2 2000, a fire in a manufacturing facility in the United Kingdom
and the effects of a seven-day strike in May at the Strasbourg facility caused
an increase in backlog which returned to normal levels this quarter.
Additionally, net sales were also impacted by increased volume in most other
countries, particularly Spain, Italy and the Netherlands.
The Company's international net sales, excluding Europe, decreased 13.8%
for Q3 2000 primarily as a result of continued softness in demand,
particularly in South America, Canada, and Australia, coupled with the adverse
impact of currency devaluation in Brazil.
The Q3 2000 gross margin of 33.4% reflected a decrease of 1.6 percentage
points from the 35.0% Q3 1999 gross margin. The decreases of 1.6 and 2.3 gross
profit percentage points for Q3 2000 and the nine months ended November 26,
1999, respectively, were driven by several factors. First, they were impacted
by competitive pricing pressures on gross margins in the steel furniture
operations. Management believes the competitive pricing situation is primarily
a result of excess capacity in the industry and low industry growth rates
projected for the current calendar year. Second, margins were also impacted by
disruptions to the manufacturing process from new product ramp-up, increased
order levels and process changes. New products such as the Answer(R) system,
the expanded Pathways(R) portfolio of products, and the Leap(TM) chair have
placed additional demands on the manufacturing process resulting in increased
manufacturing costs. Sales of these new products have increased during the
first nine months of fiscal 2000, resulting in increased pressure on margins.
Disruptions from new process changes and increased order levels are also
negatively affecting the short-term gross margins. The Company is currently
changing production processes to better leverage its investment in technology,
including enterprise management and plant scheduling software. These
investments are intended to reduce inventory levels, reduce material handling
costs and increase visibility to the Company's cost structure.
15
Third, as described in the Company's 10-K Report, the Company's warranty
policy offers a lifetime warranty on Steelcase brand products, subject to
certain exceptions, which provides for the free repair or replacement of any
covered product or component that fails during normal use because of a defect
in design, materials or workmanship. In accordance with this warranty policy,
the Company recorded an accrual of $5.0 million in cost of sales, $3.1 million
on an after-tax basis, in Q3 2000 for costs associated with the implementation
of several aesthetic, performance and quality improvements related to the new
Pathways portfolio of products. Management anticipates that the Company will
likely incur an additional $2.0 to $4.0 million after-tax charge in the fourth
quarter of fiscal 2000 ("Q4 2000") for continuing the aforementioned
improvements. Finally, margins were impacted by historically lower gross
margins from Steelcase Strafor. These negative factors were offset by
decreased incentive compensation, which is linked to profitability.
Management expects gross margin levels to continue to trail fiscal 1999
levels in Q4 2000 and throughout the next fiscal year due to pricing
pressures, manufacturing issues related to new products as discussed above,
and the impact of historically lower gross margins from Steelcase Strafor.
Additionally, Management anticipates that the Company will likely incur a one-
time charge during Q4 2000 to cover the costs of product improvements to the
architectural elements of Pathways to address some ambiguities embedded in
various model building codes which may be adopted locally and applied to some
of the Pathways portfolio. The enhancements will also address inconsistencies
between the model building codes and existing furniture based standards,
particularly with respect to the various methods of testing under each.
Although final costs are being determined, the Company estimates that the
material and installation costs of the product improvements could range from
$8.0 million to $12.0 million after-tax. The modifications will be offered to
all existing Pathway's customers for installation at their site at the
Company's expense over the coming months.
Selling, general and administrative expenses, as a percentage of sales,
increased from 23.8% in Q3 1999 to 24.5% in Q3 2000 as a result of the
Steelcase Strafor consolidation, and the related impact of amortization of
intangible assets. Selling, general and administrative expenses, as a
percentage of sales, increased from 24.8% in the first nine months of fiscal
1999 to 25.0% for the first nine months of fiscal 2000. Furthermore, during
Q2 2000, the Company recorded a charge in the amount of $6.0 million ($3.7
million net of tax) related to the valuation of accounts receivable in Europe.
Excluding the effects of the Steelcase Strafor acquisition and the reserve
increase for doubtful European receivables, SG&A as a percentage of sales has
decreased slightly compared to the prior year. This decrease is primarily
attributable to cost controlling measures and decreased incentive compensation
to management which is linked to growth.
Other income, net of interest expense, decreased $15.0 million and $22.0
million compared to Q3 1999 and the first nine months of fiscal 1999,
respectively, as a result of one-time interest income aggregating $5.8 million
in Q3 1999 related to the tax settlement previously noted and increased
interest expense and decreased interest income resulting from the Steelcase
Strafor acquisition. Additionally, in Q2 2000 the Company recorded a valuation
reserve in the amount of $2.8 million ($1.7 million net of tax) to record a
permanent impairment on an investment in a "high tech" company.
Income tax expense for both Q3 2000 and the first nine months of fiscal
2000 was 39.0% of income before taxes, as compared to 35.1% and 37.0% for Q3
1999 and the first nine months of fiscal 1999, respectively. Income tax
expense has increased to 39.0% of income before taxes as a result of the
impact on the current year of higher income tax rates in Europe and the
favorable resolution of income tax matters in the prior year as discussed
above. Management expects the full year tax rate for fiscal 2000 to be 39.0%
compared to a tax rate of 37.0% for fiscal 1999.
Equity in net income from joint ventures and dealer transitions decreased
to $(0.4) million and $2.3 million for Q3 2000 and the first nine months of
fiscal 2000, respectively, from $0.0 million and $5.8 million for Q3 1999 and
the first nine months of fiscal 1999, respectively, primarily as a result of
the acquisition of Steelcase Strafor, which had previously been accounted for
under the equity method of accounting.
16
For the reasons set forth above, net income decreased 21.1% to $45.3
million in Q3 2000, from $57.4 million in Q3 1999, and decreased 19.5% to
$140.2 million for the nine months ended November 26, 1999, from $174.1
million for the nine months ended November 27, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and working capital requirements are primarily met with cash generated
from operating activities, which aggregated $144.8 million for the nine months
ended November 26, 1999. The Company's financial position at November 26, 1999
includes cash and cash equivalents of $60.4 million. These funds, in addition
to cash generated from future operations and available credit facilities, are
expected to be sufficient to finance the known or foreseeable future liquidity
and capital needs of the Company.
Management intends to leverage the significant financial resources
available to the Company to meet its growth objectives. During fiscal 2000,
the Company has obtained long-term debt financing from bank syndicates in
Europe and the United States. Total debt at November 26, 1999 aggregated
$408.5 million, which was approximately 21% of total capitalization
(stockholders' equity and debt).
The principal change in working capital, net of acquisitions, for the nine
months ended November 26, 1999 is attributable to the Company's finance
subsidiary, Steelcase Financial Services Inc. ("SFSI"). SFSI's asset base
continues to grow as SFSI increases its investment in leased assets. SFSI's
asset base increased a total of $98.1 million for the nine month period ended
November 26, 1999. Additionally, accounts receivable, inventories and prepaid
expenses have all increased during the first nine months of fiscal 2000,
primarily attributable to the effects of the Steelcase Strafor acquisition and
other domestic acquisitions.
Capital expenditures were $113.1 million for the nine months ended November
26, 1999, compared to $138.3 million for the nine months ended November 27,
1998. In Q3 1999, the company purchased two facilities in the San Francisco
Bay area for $26 million. One building was acquired to relieve production
constraints and the other to house the west coast Work Life Center. The
Company continues to invest in corporate and showroom facilities, new product
development, SAP implementations, new manufacturing equipment, and a new
Corporate Learning and Development Center in Grand Rapids. Management
anticipates investing $34.0 million on a new wood furniture facility beginning
Q4 2000. The Company's investments are intended to improve productivity and
safety, increase capacity, decrease the impact on the environment, and
facilitate the launch of new services and products. Management expects capital
expenditures to increase significantly in the fourth quarter of fiscal 2000
and to total approximately $165 million for the year.
On April 22, 1999, the Company completed the acquisition of the remaining
50% equity interest in Steelcase Strafor resulting in cash outlays, net of
cash acquired, of $178 million. The purchase price and associated transaction
costs of $227 million were paid principally from bank financing aggregating
$152 million at April 22, 1999, and cash reserves of $75 million. The
financing was comprised of a long-term component of $41 million and short-term
financing of $111 million.
Management continues to evaluate an optimal capital structure for the
Company in light of its long-term growth strategies. In Q3 2000, the Company
established a $200 million lease receivables transfer facility and effectively
replaced the above mentioned short-term financing with borrowings on this
facility. The facility is renewable annually, with borrowings on the facility
maturing in accordance with the underlying leases.
Additionally, the Company has an unsecured, committed credit facility of
EUR 200 million from bank syndicates in Europe to provide liquidity and
finance capital expenditures for its European operations. The agreement is
comprised of two tranches: tranche A is a EUR 75.0 million, 364 day revolving
facility, and tranche B is a EUR 125.0 million, five year term facility. The
euro facility will serve as a natural hedge against currency translation
exposures. During Q3 2000, the Company secured borrowings of approximately
$29.4 million and $68.4 million on tranche A and tranche B, respectively,
primarily for the long term refinancing of a short term payable to Strafor
Facom S.A..
17
The Company paid a common stock dividend of $0.33 per share, or $50.6
million, and $0.30 per share, or $46.2 million, during the first nine months
of fiscal 2000 and 1999, respectively. During Q1 1999, eligible employees
purchased Class A common shares pursuant to the terms of the Employee Discount
Option Grant, resulting in proceeds to the Company of $24.8 million. During
the first nine months of fiscal 2000, the Company repurchased 327,570 Class A
common shares for $6.2 million and 879,000 Class B shares for $16.0 million,
under a three million share repurchase program authorized by the Board on June
17, 1998. Effective September 22, 1999, the Board authorized additional common
stock repurchases of up to three million shares. Management anticipates that
the stock repurchase program will not reduce the Company's tradeable share
float in the long run as it expects that Class B common shares will continue
to convert into Class A common shares over time.
YEAR 2000
Beginning in 1994, the Company actively engaged in replacing or modifying
all business software applications as well as manufacturing and other
equipment with embedded technology that could fail or generate erroneous
results as a result of Year 2000 date processing ("Year 2000 issues"), issues
affecting Steelcase Inc. and most other companies. Prior to December 31, 1999,
the Company completed the modification or replacement of all critical business
applications, technical infrastructure components and manufacturing equipment,
as well as contingency and business continuity planning activities for
critical business processes within the Company.
As of this filing, all the Company's individual business units, majority-
owned subsidiaries and unconsolidated joint ventures are reporting an overall
state of normal business operations. Additionally, key suppliers and dealers
are reporting normal business operations as well. There have been no Year 2000
issues reported or discovered that would be expected to have a material impact
on the Company's operations or future results of operations.
However, if Year 2000 issues develop subsequent to the date of this filing
among key suppliers and dealers, providers of utilities or governmental
services, or if unforeseen circumstances arise, such issues could have a
material impact on the Company's operations including, but not limited to,
delays in shipments of products resulting in loss of revenues, increased
operating costs, loss of customers or suppliers, or other significant
disruptions to the Company's business. The Company believes, however, that its
Year 2000 readiness program, including contingency and business continuity
plans, has been and will continue to be successful, and therefore, the extent
of the impact that any externally generated Year 2000 issues will have on the
Company's operations will continue to be minimal.
Management views the process of assessing and remediating Year 2000 issues
as an on-going effort which will require continued focus, testing and
verification throughout calendar year 2000. Costs incurred through the date of
this filing specifically to address Year 2000 issues approximated $16 million.
Future costs anticipated to remedy Year 2000 issues have been budgeted and are
not expected to exceed an additional $2 million.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the euro. There will be a transition period from January 1,
1999 through January 1, 2002, at which time all legal tender will convert to
the euro. The transition period is anticipated to resolve difficulties in
handling local currencies and the euro simultaneously, while remaining
flexible to the market. The Company's primary exposure to the euro conversion
is concentrated in Steelcase Strafor. Steelcase Strafor has created an
internal Euro Committee, a pan-European multifunctional team whose goal is to
determine the impact of this currency change on products, markets, and
information systems. Based on the Euro Committee's work to date, the Company
does not expect the euro conversion to have a material impact on Steelcase
Strafor's financial position, or on the Company as a whole.
18
SAFE HARBOR PROVISION
There are certain forward-looking statements under the Contingency, Results
of Operations for the Three and Nine Months Ended November 26, 1999 Compared
to Three and Nine Months Ended November 27, 1998, Liquidity and Capital
Resources, Year 2000, Euro Conversion, and Recently Issued Accounting
Standards sections, particularly those with respect to the amount of warranty
reserve and one time after-tax charges to be taken in the fourth quarter,
including the material and installation costs of product improvements, gross
margin levels trailing fiscal 1999 levels in Q4 and throughout the next fiscal
year, the Company's sales growth for fiscal 2000, future tax rates, product
offerings, liquidity and capital needs, capital expenditures and investments
for Q4 of fiscal 2000, conversion of Class B common shares to Class A common
shares, the expected ability of and costs to the Company and its key dealers
and suppliers to successfully manage Year 2000 issues, and the impact of the
euro conversion on the financial position of Steelcase Strafor and the
Company. Such statements involve certain risks and uncertainties that could
cause actual results to vary from stated expectations. The Company's
performance may differ materially from that contemplated by such statements
for a variety of reasons, including, but not limited to, competitive and
general economic conditions domestically and internationally, changes in
customer order patterns, competitive pricing pressures, the ability to
decrease disruptions to the manufacturing process from new product
introductions, increased order levels and product mix and process changes, the
ability to decrease, over time, ramp up costs associated with new products,
continued success in technological advances, including development and
implementation of new processes and strategic products for specific market
segments, the ability to grow new businesses and successfully integrate and
operate any acquired businesses, the impact on the Company' business due to
internal systems or systems of suppliers, key customers, dealers and other
third parties adversely affected by Year 2000 issues, costs, including claims,
due to Year 2000 issues and remediation efforts, the future success of new
products and their impact on our manufacturing processes, the impact of the
euro conversion, and other risks detailed in the Company's 10-K Report for the
year ended February 26, 1999, and its other filings with the Securities and
Exchange Commission.
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities, establishes accounting and
reporting standards for derivative instruments, requiring recognition of the
fair value of all derivatives as assets or liabilities on the balance sheet.
Gains and losses resulting from changes in fair value would be included in
income, or in comprehensive income, depending on whether the instrument
qualifies for hedge accounting and the type of hedging instrument involved.
SFAS No. 137 Accounting for Derivative Instruments and Hedging Activities-
Deferral of the Effective Date of FASB Statement No. 133 makes this statement
effective for fiscal years beginning after June 15, 2000. Management intends
to adopt the provisions of SFAS No. 133 during the Company's fiscal year 2002.
The impact of this pronouncement on the Company's financial results is
currently being evaluated.
19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. EXHIBITS
See Exhibit Index
2. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the three months ended November 26,
1999.
20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Steelcase Inc.
/s/ Alwyn Rougier-Chapman
_____________________________________
ALWYN ROUGIER-CHAPMAN
Senior Vice President--Finance,
Chief Financial Officer and
Treasurer (Duly Authorized Officer
and Principal Financial Officer)
Date: January 10, 2000
EXHIBIT INDEX
DESIGNATION DESCRIPTION
----------- -----------
10.11 Steelcase Inc. Deferred Compensation Plan
Financial Data Schedule, for the nine months ended November 26,
27.1 1999.