Edgar Filing: STEELCASE INC

SCS-2.27.2015-10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-K



þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 27, 2015



¨	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		38-0819050
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)

901 44th Street SE Grand Rapids, Michigan		49508
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (616) 247-2710

Securities registered pursuant to Section 12(b) of the Act:





Title of each class	Name of each exchange on which registered
Class A Common Stock	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 þ No ¨

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 ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

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 þ 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

(Do not check if a smaller reporting company)

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

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 price of the Class A Common Stock on the New York Stock Exchange, as of August 29, 2014 (the last day of the registrant’s most recently completed second fiscal quarter) was approximately $1.3 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 13, 2015, 89,983,993 shares of the registrant’s Class A Common Stock and 32,200,413 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 2015 Annual Meeting of Shareholders, to be held on July 15, 2015, are incorporated by reference in Part III of this Form 10-K.

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STEELCASE INC.

FORM 10-K

YEAR ENDED FEBRUARY 27, 2015

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		Page No.
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosures	10
	Supplementary Item. Executive Officers of the Registrant	11
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	88
Item 9A.	Controls and Procedures	88
Item 9B.	Other Information	88
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	89
Item 13.	Certain Relationships and Related Transactions, and Director Independence	89
Item 14.	Principal Accounting Fees and Services	89
Part IV
Item 15.	Exhibits, Financial Statement Schedules	90
Signatures		91
Schedule II		S-1
Index of Exhibits		E-1

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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®, Details®, Designtex®, PolyVision® and Turnstone®, we offer a comprehensive portfolio of solutions inspired by the insights gained from our human-centered research process and support the social, economic and sustainable needs of people. We are a globally integrated enterprise, headquartered in Grand Rapids, Michigan, U.S.A., with approximately 10,700 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 is to continue to translate our insights into products, applications and experiences that will help the world’s leading organizations amplify the performance of their people, teams and enterprise and to leverage our global scale. While continuing to build our own globally integrated enterprise, we also intend to grow our presence in emerging markets.

Over the past several years, we have continued 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 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.

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. 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 and freestanding furniture systems and complementary products such as storage, tables and ergonomic 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—Insight-led performance in an interconnected world

The Steelcase brand takes our insights 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 entities) that are often large with complex needs and have an increasingly global reach. We strive to meet their diverse needs

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while minimizing complexity by using a platform approach—from product components to common processes—wherever possible.

Steelcase sub-brands include:


•	Details, which researches, designs and markets worktools, personal lighting and furniture that provide healthy and productive connections between people, their technology, their workplaces and their work.


•	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—Insight-led inspiration

Coalesse offers a collection of furnishings that expresses the new freedom of work. It is part of the rapidly growing crossover 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 roaming.

Designtex

Designtex offers applied surface solutions that enhance environments and is a leading resource for applied surface knowledge, innovation and sustainability. Designtex products are premium surface materials designed to enhance seating, walls, work stations, floors and ceilings 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 educational institutions and architectural panels or special applications for commercial or infrastructure applications.

Turnstone—Insight-led simplicity

Turnstone was created 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 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, Details 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, higher education, insurance, financial services, manufacturing and information technology, but no industry or vertical market individually represented more than 13% of the Americas segment revenue in 2015.

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

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accounted for approximately 6% of the segment’s revenue in 2015, and the five largest independent dealers collectively accounted for approximately 21% of the segment’s revenue in 2015.

In 2015, the Americas segment recorded revenue of $2,180.7, or 71.3% of our consolidated revenue, and as of the end of the year had approximately 7,000 employees, of which approximately 4,700 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, the United Kingdom and Spain. In 2015, approximately 81% 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 2015.

We serve EMEA customers through approximately 400 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 2015. The five largest independent dealers collectively accounted for approximately 8% of the segment’s revenue in 2015. 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 2015, our EMEA segment recorded revenue of $595.4, or 19.4% 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 and other countries in Southeast Asia, primarily under the Steelcase brand with an emphasis on freestanding furniture systems, storage and seating solutions. We sell directly and through approximately 50 independent and company-owned 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 established 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 and wall covering products 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 multiple applications but primarily for sale to third-party fabricators and distributors to create static whiteboards and chalkboards sold in the primary and secondary education markets globally.

In 2015, the Other category accounted for $283.6, or 9.3% of our consolidated revenue, and as of the end of the year had approximately 1,600 employees, of which approximately 900 related to manufacturing.

Corporate

Corporate expenses include unallocated portions of shared service functions such as information technology, human resources, finance, executive, corporate facilities, legal and research.

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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 27, 2015, our investment in these unconsolidated joint ventures and other equity investments totaled $59.1. 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 less than 1% of our consolidated revenue in 2015, and our five largest customers collectively accounted for less than 3% of our consolidated revenue. However, these percentages do not include revenue from various U.S. federal government agencies. In 2015, 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 4% of our consolidated revenue in 2015. The five largest independent dealers collectively accounted for approximately 15% of our consolidated revenue in 2015. 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 large 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 United States and Mexico), Europe (in France, Germany, Spain and the Czech Republic) 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 maintain efficiencies and cost savings by minimizing 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 fifteen years by implementing continuous one-piece flow, platforming our processes and product offerings and developing a global network of integrated suppliers.

These changes to our manufacturing model have reduced the capital needs of our business, inventory levels 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 2015, we transferred ownership of a manufacturing facility in Wisches, France, to a third party and are in the process of transferring its activities to other Steelcase facilities. We also initiated procedures to close a manufacturing facility in High Point, North Carolina and are in the process of transferring its activities to other Steelcase facilities. In 2014, we initiated procedures related to the closure of a manufacturing facility in Germany and the establishment of a new manufacturing facility in the Czech Republic.

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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 are capturing raw material and component cost savings available through lower cost suppliers around the globe. This global development of potential sources of supply has enhanced our leverage with domestic 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, company-owned and dedicated fleet delivery services. We have implemented a network of regional distribution centers to reduce freight costs and improve service to our dealers and customers. Some of these distribution centers are located within our manufacturing facilities, and we have engaged third-party logistics providers to operate some of these regional distribution centers.

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 cost, quality and reliability of supply.

Research, Design and Development

Our extensive global research — a combination of user observations, feedback sessions and sophisticated analysis — 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.

Exclusive of royalty payments, we invested $38.5, $35.9 and $36.0 in research, design and development activities in 2015, 2014 and 2013, respectively. We continue to invest approximately one to two percent of our revenue in research, design and development each year. Royalties are sometimes paid to external designers of our products as the products are sold. 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,” “Details,” “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.

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Employees

As of February 27, 2015, we had approximately 10,700 employees, of which approximately 6,600 work in manufacturing. Additionally, we had approximately 1,700 temporary workers who primarily work in manufacturing. Approximately 100 employees in the U.S. are covered by collective bargaining agreements. Internationally, 2,100 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 and regulations 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 Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room 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.

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Our industry is influenced significantly by cyclical macroeconomic factors and secular changes 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. Increasingly, 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.

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 been recovering over the past several years, the European industry has remained in recession. 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.

Our continuing efforts to improve our business model could result in additional restructuring costs, may result in customer disruption and may distract management from other activities.

Over the last fifteen years, we have implemented a number of restructuring actions to transform our business through the reinvention of our industrial system and white collar processes and have significantly reduced our manufacturing footprint. While we believe we have made substantial progress, we continue to evolve and optimize our business model to be more flexible and agile in meeting changing demand, and incremental restructuring actions may be necessary. We are engaged in a multi-year strategy in EMEA to improve revenue and the fitness of our business model, which includes the exit of two manufacturing facilities in France and Germany, the establishment of a new manufacturing facility in the Czech Republic and the establishment of a new Learning + Innovation Center in Germany. The success of these initiatives is dependent on several factors, including our ability to negotiate with related work councils and manage these actions without disrupting existing customer commitments or impacting operating efficiency. Further, these actions may take longer than anticipated, prove more costly than expected and may distract management from other activities, and we may not fully realize the expected benefits of our restructuring activities, either of which would have a negative impact on our profitability.

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 and an increase in work occurring in more collaborative settings and in a variety of locations beyond the traditional office. The confluence of these factors could attract new competitors from outside the traditional office furniture industry, such as real estate management service firms, technology-based firms or general construction contractors, 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.

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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 needs,


•	growing our market share with existing customers and new customers,


•	continuing our expansion into adjacent markets such as healthcare clinical spaces and classrooms, libraries and other educational settings and smaller companies,


•	growing our market share in markets such as China, India, Brazil, central, eastern, and southern Europe, Africa and the Middle East,


•	investing in acquisitions and new business ventures and


•	developing new alliances and additional channels of distribution.

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 and larger currency movements, which can also cause supply interruptions. In the short-term, rapid 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 by short-term increases in these costs. Also, 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 results of operations and 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 these currency exchange 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 results of operations and financial condition.

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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.

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,


•	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.

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 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 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 $107.2 as of February 27, 2015. 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.

There may be significant limitations to our utilization of net operating loss carryforwards to offset future taxable income.

We have deferred tax asset values related to net operating loss carryforwards (“NOLs”) residing primarily in various non-U.S. jurisdictions totaling $83.3, against which valuation allowances totaling $67.3 have been recorded. We may be unable to generate sufficient taxable income from future operations in the applicable jurisdictions, or implement tax, business or other planning strategies, to fully utilize the recorded value of our NOLs. We have NOLs

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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 20 SC Transport Inc. employees as of February 27, 2015. The most recent estimate of our potential withdrawal liability is $23.8 as of February 27, 2015.


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 in excess of that needed 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	13	5	8
EMEA	5	4	1
Other	4	2	2
Total	22	11	11

In 2015, we added one leased warehouse in the Americas and added one owned manufacturing facility and exited one owned manufacturing facility in EMEA. In 2016, we expect to exit one additional leased manufacturing facility in EMEA, as previously announced.


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.

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Supplementary Item. Executive Officers of the Registrant:

Our executive officers are:



Name	Age	Position
Guillaume M. Alvarez	55	Senior Vice President, EMEA
Sara E. Armbruster	44	Vice President, Strategy, Research and New Business Innovation
Ulrich H. E. Gwinner	51	President, Asia Pacific
James P. Keane	55	President and Chief Executive Officer, Director
Robert G. Krestakos	53	Vice President, Global Operations
Terrence J. Lenhardt	55	Vice President, Chief Information Officer
James N. Ludwig	51	Vice President, Global Design and Product Engineering
Mark T. Mossing	57	Corporate Controller and Chief Accounting Officer
Gale Moutrey	56	Vice President, Communications
Lizbeth S. O’Shaughnessy	53	Senior Vice President, Chief Administrative Officer, General Counsel and Secretary
Eddy F. Schmitt	43	Senior Vice President, Americas
Allan W. Smith, Jr.	47	Vice President, Global Marketing
David C. Sylvester	50	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, Vice President, Global Client Collaboration from May 2010 to October 2011 and Vice President, Global Alliances from May 2008 to May 2010. Mr. Alvarez 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, Vice President, Finance-Steelcase Group Americas & EMEA from February 2011 to February 2013 and Vice President, Finance-Steelcase North America from February 2005 to February 2011. 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. Mr. Mossing was Vice President, Corporate Controller from September 1999 to April 2008 and has been employed by Steelcase since 1993.

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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.

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 Vice President, Chief Legal Officer and Secretary from July 2007 to April 2011. Ms. O'Shaughnessy 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 Vice President, Sales, France from June 2006 to February 2011. Mr. Schmitt 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 General Manager, Furniture and Technology from June 2009 to January 2011. Mr. Smith has been employed by Steelcase since 1991.

David C. Sylvester has been Senior Vice President, Chief Financial Officer since April 2011. Mr. Sylvester was Vice President, Chief Financial Officer from October 2006 to April 2011 and has been employed by Steelcase since 1995.

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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 13, 2015, we had outstanding 122,184,406 shares of common stock with 6,600 shareholders of record. Of these amounts, 89,983,993 shares are Class A Common Stock with 6,519 shareholders of record and 32,200,413 shares are Class B Common Stock with 81 shareholders of record.



Class A Common Stock Per Share Price Range	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2015
High	$	17.27	$	17.94	$	18.22	$	18.84
Low	$	13.98	$	14.30	$	15.13	$	16.33
2014
High	$	15.60	$	15.89	$	16.95	$	16.77
Low	$	12.16	$	13.23	$	13.76	$	13.60

Dividends

The declaration of dividends is subject to the discretion of our Board of Directors and to compliance with applicable laws. Dividends in 2015 and 2014 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 includes a restriction on the aggregate amount of cash dividend payments and share repurchases we may make in any fiscal year. As long as our leverage ratio is less than 2.50 to 1.00, there is no restriction on cash dividends and share repurchases. If our leverage ratio is between 2.50 to 1.00 and the maximum permitted under the facility, our ability to fund more than $35.0 in cash dividends and share repurchases in aggregate in any fiscal year may be restricted, depending on our liquidity. As of February 27, 2015, our leverage ratio was less than 2.50 to 1.00. See Note 12 to the consolidated financial statements for additional information.



Total Dividends Paid
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2015		$	13.6		$	13.0		$	13.0		$	12.9		$	52.5
2014		$	12.5		$	12.6		$	12.5		$	12.6		$	50.2

Fourth Quarter Share Repurchases

The following is a summary of share repurchase activity during Q4 2015:



Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(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)
11/29/2014 - 01/02/2015	809	$	16.90	—	$	61.6
01/03/2015 - 01/30/2015	940	$	17.82	—	$	61.6
01/31/2015 - 02/27/2015	—	$	—	—	$	61.6
Total	1,749	(2)		—

_______________________________________

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(1)	In December 2007, our Board of Directors approved a share repurchase program permitting the repurchase of up to $250 of shares of our common stock. This program has no specific expiration date.


(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.

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Item 6.	Selected Financial Data:



	Year Ended
Financial Highlights	February 27, 2015			February 28, 2014			February 22, 2013			February 24, 2012			February 25, 2011
Operating Results:
Revenue	$	3,059.7		$	2,988.9		$	2,868.7		$	2,749.5		$	2,437.1
Gross profit	916.0			945.2			866.0			809.7			717.5
Operating income	144.9			165.9			59.3			97.1			51.5
Income before income tax expense	137.0			147.2			54.9			82.0			51.4
Net income	86.1			87.7			38.8			56.7			20.4
Supplemental Operating Data:
Restructuring costs	$	(40.6	)	$	(6.6	)	$	(34.7	)	$	(30.5	)	$	(30.6	)
Goodwill and intangible asset impairment charges	—			(12.9		)	(59.9		)	—			—
Share Data:
Basic earnings per common share	$	0.69		$	0.70		$	0.30		$	0.43		$	0.15
Diluted earnings per common share	$	0.68		$	0.69		$	0.30		$	0.43		$	0.15
Weighted average shares outstanding - basic	124.4			126.0			127.4			131.9			132.9
Weighted average shares outstanding - diluted	126.0			127.3			129.1			131.9			132.9
Dividends paid per common share	$	0.42		$	0.40		$	0.36		$	0.24		$	0.16
Balance Sheet Data:
Cash and cash equivalents	$	176.5		$	201.8		$	150.4		$	112.1		$	142.2
Short-term investments	68.3			119.5			100.5			79.1			350.8
Company-owned life insurance ("COLI")	159.5			154.3			225.8			227.6			223.1
Working capital (1)	310.2			351.7			293.8			240.2			275.5
Total assets	1,721.8			1,726.7			1,689.6			1,678.9			1,974.4
Total debt	284.3			287.0			289.0			291.5			546.8
Total liabilities	1,058.0			1,049.6			1,021.6			992.4			1,278.1
Total shareholders’ equity	663.8			677.1			668.0			686.5			696.3
Statement of Cash Flow Data:
Net cash provided by (used in):
Operating activities	$	84.2		$	178.8		$	187.3		$	101.7		$	72.7
Investing activities	(14.3		)	(25.2		)	(85.5		)	203.2			(254.3		)
Financing activities	(89.8		)	(101.6		)	(64.2		)	(334.3		)	211.1

________________________


(1)	Working capital equals current assets minus current liabilities, as presented in the Consolidated Balance Sheets.

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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, the impacts of acquisitions and divestitures and an additional week of revenue in 2014; and (2) adjusted operating income (loss), which represents operating income (loss) excluding restructuring costs (benefits) and goodwill and intangible asset impairment charges. 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	Year Ended
Statement of Operations Data— Consolidated	February 27, 2015					February 28, 2014					February 22, 2013
Revenue	$	3,059.7		100.0	%	$	2,988.9		100.0	%	$	2,868.7		100.0	%
Cost of sales	2,106.2			68.8		2,046.5			68.5		1,987.8			69.3
Restructuring costs (benefits)	37.5			1.2		(2.8		)	(0.1	)	14.9			0.5
Gross profit	916.0			30.0		945.2			31.6		866.0			30.2
Operating expenses	768.0			25.1		757.0			25.3		727.0			25.3
Goodwill and intangible asset impairment charges	—			—		12.9			0.4		59.9			2.1
Restructuring costs	3.1			0.1		9.4			0.3		19.8			0.7
Operating income	144.9			4.8		165.9			5.6		59.3			2.1
Interest expense	(17.7		)	(0.6	)	(17.8		)	(0.6	)	(17.8		)	(0.6	)
Investment income (loss)	1.4			—		(0.3		)	—		3.7			0.1
Other income (expense), net	8.4			0.3		(0.6		)	—		9.7			0.3
Income before income tax expense	137.0			4.5		147.2			5.0		54.9			1.9
Income tax expense	50.9			1.7		59.5			2.0		16.1			0.5
Net income	$	86.1		2.8	%	$	87.7		3.0	%	$	38.8		1.4	%
Earnings per share:
Basic	$	0.69				$	0.70				$	0.30
Diluted	$	0.68				$	0.69				$	0.30

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Organic Revenue Growth—Consolidated	Year Ended
Organic Revenue Growth—Consolidated	February 27, 2015			February 28, 2014
Prior year revenue	$	2,988.9		$	2,868.7
Divestitures	(1.5		)	(6.3		)
Impact of additional week *	(42.0		)	—
Currency translation effects **	(26.7		)	7.4
Prior year revenue, adjusted	2,918.7			2,869.8
Current year revenue	3,059.7			2,988.9
Acquisitions	—			(11.4		)
Impact of additional week *	—			(42.0		)
Current year revenue, adjusted	3,059.7			2,935.5
Organic growth $	$	141.0		$	65.7
Organic growth %	5		%	2		%

________________________

* 2014 included 53 weeks of revenue in the Americas and Other category. EMEA always ends its fiscal year on the last day of February, so the comparison to the prior year is generally consistent.

** Currency translation effects represent the net effect of translating prior year foreign currency revenues using the average exchange rate on a quarterly basis during the current year.



Adjusted Operating Income — Consolidated	Year Ended
Adjusted Operating Income — Consolidated	February 27, 2015				February 28, 2014				February 22, 2013
Operating income	$	144.9	4.8	%	$	165.9	5.6	%	$	59.3	2.1	%
Add: goodwill and intangible asset impairment charges	—		—		12.9		0.4		59.9		2.1
Add: restructuring costs	40.6		1.3		6.6		0.2		34.7		1.2
Adjusted operating income	$	185.5	6.1	%	$	185.4	6.2	%	$	153.9	5.4	%

Overview

During 2015, organic revenue growth was 5% compared to the prior year, which represented the fifth consecutive year of organic growth. This growth is generally consistent with or better than global trends in our industry and was driven in part by increased project business, which has produced variability in order patterns and the timing of shipments. We realized organic revenue growth of 3% in the Americas, 8% in EMEA and 10% in the Other category. We expect to continue to see modest growth over the near future for our industry in the Americas as companies continue to modernize their work environments, but the outlook for our industry in EMEA remains variable by market and less optimistic. The organic revenue growth in the Other category during 2015 was primarily driven by PolyVision.

Our consolidated adjusted operating income margin was 6.1% in 2015, compared to 6.2% in 2014 and 5.4% in 2013. Operating performance remained strong in the Americas segment with an adjusted operating income margin of 11.4% in 2015. Our EMEA segment reported an increase in adjusted operating losses in 2015 primarily due to higher disruption costs and inefficiencies associated with manufacturing footprint changes, as further described below. The Other category maintained a consistent adjusted operating income margin in 2015, as improvements at PolyVision and Designtex were offset by a decline in Asia Pacific.

In 2015, we made significant progress on improving our operating fitness and global competitiveness in our EMEA segment. This included the implementation of restructuring actions related to the closure of a manufacturing facility in Durlangen, Germany, the establishment of a new facility in the Czech Republic and the transfer of the activities of our facility in Wisches, France to a third party before eventually moving related production to other Steelcase facilities. In addition, in Q1 2016 we announced a project to establish a Learning + Innovation Center in Munich, Germany.

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2015 compared to 2014

We recorded net income of $86.1 in 2015 compared to net income of $87.7 in 2014. Overall, 2015 adjusted operating income of $185.5 represented a slight improvement compared to the prior year. A lower effective tax rate and lower non-operating charges largely offset higher restructuring costs in 2015.

Operating income of $144.9 in 2015 compared to operating income of $165.9 in 2014. The small improvement in adjusted operating income was driven by benefits of organic revenue growth and improved pricing (net of inflation) in the Americas being offset by increased disruption costs and inefficiencies associated with our manufacturing footprint changes in EMEA and higher operating expenses after taking into consideration the extra week in the prior year and favorable currency translation effects.

Revenue for 2015 was $3,059.7 compared to $2,988.9 for 2014, representing organic revenue growth of 5%. We realized organic growth of 3% in the Americas segment, 8% in the EMEA segment and 10% in the Other category. Revenue continued to include a higher mix of project business.

Cost of sales increased to 68.8% of revenue in 2015, a 30 basis point increase compared to 2014. The increase was driven primarily by higher disruption costs and inefficiencies in EMEA and higher overhead, warranty, and freight and distribution costs in the Americas, but this increase was largely offset by operating leverage from the revenue growth across our segments and improved pricing (net of inflation) and benefits of on-going cost reduction efforts in the Americas. Disruption costs and inefficiencies include labor premiums paid to employees during transition periods and labor inefficiencies caused by work stoppages or slowdowns resulting from restructuring activities. They also include incremental logistics costs caused by split shipments (linked to labor inefficiencies) and interim supply chains during production moves. Lastly, these costs include duplicate labor and overhead at the new Czech Republic facility and other plants impacted by production moves. We believe these costs are temporary and will be eliminated once the manufacturing changes in EMEA are complete and the industrial model returns to normal levels of operating efficiency.

Operating expenses of $768.0 increased by $11.0 in 2015 compared to 2014 but decreased 20 basis points as a percentage of sales. The year-over-year comparison included the following:


•	approximately $10.3 of costs associated with an extra week in the prior year,


•	favorable foreign currency translation effects of $4.7,


•	a reduction of $2.0 in environmental charges,


•	a reduction of $0.9 related to divestitures,


•	higher variable compensation expense of $8.6,


•	higher costs associated with a dealer accounts receivable reserve of $4.0, and


•	other costs of $16.3 primarily related to increased spending on sales staff, marketing and product development initiatives in the Americas, higher tax consulting and a biennial sales and dealer conference.

There were no goodwill and intangible asset impairment charges in 2015. Goodwill and intangible asset impairment charges of $12.9 were recorded in 2014 and related to Asia Pacific within the Other category. See further details on these items in Note 10 to the consolidated financial statements.

We recorded net restructuring costs of $40.6 in 2015 compared to $6.6 in 2014. The 2015 net charges included the following:


•	severance and business exit costs of $50.6 primarily associated with manufacturing footprint changes in EMEA,


•	a gain of $12.0 related to the sale of an idle facility in the Americas segment exited in connection with previously announced restructuring actions, and


•	severance and business exit costs of $2.0 primarily associated with a plant closure in the Americas segment.

See further discussion and detail of these items in the Business Segment Disclosure analysis below and in Note 19 to the consolidated financial statements.

Our 2015 effective tax rate was 37.2%, which is higher than the U.S. federal statutory tax rate of 35%. The higher tax rate is being driven by the losses in EMEA, which resulted in deferred tax assets in various jurisdictions

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for which full valuation allowances have been recorded, partially offset by net discrete tax benefits primarily related to tax credits in the Czech Republic associated with the investment in a new manufacturing facility in that country.

2014 compared to 2013

We recorded net income of $87.7 in 2014 compared to net income of $38.8 in 2013. The increase in 2014 was driven in large part by improved operating results. The increase was also a result of year-over-year declines in goodwill and other intangible asset impairment charges and restructuring costs, partially offset by higher non-operating charges and a higher effective tax rate in 2014.

Operating income grew to $165.9 in 2014 compared to $59.3 in 2013. The 2014 adjusted operating income of $185.4 represented an increase of $31.5 compared to the prior year. The improvement was driven by strength in the Americas, partially offset by higher adjusted operating losses in EMEA and lower adjusted operating income in the Other category.

Revenue for 2014 was $2,988.9 compared to $2,868.7 for 2013, representing organic revenue growth of 2%. We realized organic growth of 5% in the Americas segment and 2% in the Other category while the EMEA segment experienced an organic decline of 8%. Revenue continued to include a higher mix of project business from some of our largest corporate customers.

Cost of sales decreased to 68.5% of revenue in 2014, an 80 basis point improvement compared to 2013. The improvement was primarily driven by benefits associated with organic revenue growth, net pricing adjustments and various other cost reductions in the Americas, partially offset by costs associated with the changes to the EMEA manufacturing footprint and higher competitive discounting in EMEA and Asia Pacific.

Operating expenses of $757.0 increased by $30.0 in 2014 compared to 2013 but remained flat as a percentage of sales. The year-over-year comparison included the following:


•	unfavorable foreign currency translation effects of $3.0,


•	costs of $3.7 related to acquisitions, net of a divestiture,


•	approximately $10.3 of costs related to the additional week,


•	higher variable compensation expense of $2.9,


•	a reduction of $1.6 in environmental charges, and


•	other costs of $11.7 related to increased spending on marketing, product development and other initiatives in the Americas, net of benefits from restructuring activities and other cost reduction efforts in EMEA.

Goodwill and intangible asset impairment charges in 2014 totaled $12.9 and related to Asia Pacific within the Other category. Goodwill impairment charges in 2013 totaled $59.9 and related to the EMEA segment and Designtex within the Other category. See further details on these items in Note 10 to the consolidated financial statements.

We recorded net restructuring costs of $6.6 in 2014 compared to $34.7 in 2013. The 2014 net charges included the following:


•	severance and business exit costs of $7.9 associated with actions in the EMEA segment,


•	a gain of $4.5 related to the sale of an idle facility in the EMEA segment exited in connection with previously announced restructuring actions and


•	business exit costs of $0.9 associated with the completion of the integration of PolyVision's global technology business into the Steelcase Education Solutions group.

See further discussion and detail of these items in the Business Segment Disclosure analysis below and in Note 19 to the consolidated financial statements.

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Our 2014 effective tax rate was 40.4%, which is higher than the U.S. federal statutory tax rate of 35%. The higher tax rate was driven by the losses in EMEA, for which no tax benefit has been recognized due to the recording of full valuation allowances. Income taxes also reflect unfavorable adjustments to valuation allowances associated with deferred tax assets, including tax loss carryforwards (primarily in EMEA) and the non-deductible nature of the goodwill impairment charges in Asia Pacific, largely offset by an $8.5 benefit associated with a tax strategy in Asia Pacific. See Note 15 to the consolidated financial statements for additional information.

Interest Expense, Investment Income (Loss) and Other Income (Expense), Net



Interest Expense, Investment Income (Loss) and Other Income (Expense), Net	Year Ended
	February 27, 2015			February 28, 2014			February 22, 2013
Interest expense	$	(17.7	)	$	(17.8	)	$	(17.8	)
Investment income (loss)	1.4			(0.3		)	3.7
Other income (expense), net:
Equity in income of unconsolidated ventures	15.2			10.2			9.4
Foreign exchange gain (loss)	(5.0		)	(5.0		)	1.2
Miscellaneous, net	(1.8		)	(5.8		)	(0.9		)
Total other income (expense), net	8.4			(0.6		)	9.7
Total interest expense, investment income (loss) and other income (expense), net	$	(7.9	)	$	(18.7	)	$	(4.4	)

A charge to miscellaneous other expense of $6.0 was recorded in 2014 related to a minority equity investment.

Business Segment Disclosure

See Note 18 to the consolidated financial statements for additional information regarding our business segments.

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, Details and Turnstone brands.



Statement of Operations Data— Americas	Year Ended
Statement of Operations Data— Americas	February 27, 2015					February 28, 2014				February 22, 2013
Revenue	$	2,180.7		100.0	%	$	2,154.4	100.0	%	$	2,015.1	100.0	%
Cost of sales	1,449.3			66.5		1,438.2		66.8		1,384.4		68.7
Restructuring costs (benefits)	(10.0		)	(0.5	)	0.7		—		13.9		0.7
Gross profit	741.4			34.0		715.5		33.2		616.8		30.6
Operating expenses	481.5			22.1		467.1		21.7		433.8		21.5
Goodwill and intangible asset impairment charges	—			—		—		—		—		—
Restructuring costs	—			—		1.0		0.1		14.7		0.7
Operating income	$	259.9		11.9	%	$	247.4	11.4	%	$	168.3	8.4	%

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Organic Revenue Growth—Americas	Year Ended
Organic Revenue Growth—Americas	February 27, 2015			February 28, 2014
Prior year revenue	$	2,154.4		$	2,015.1
Divestitures	—			—
Impact of additional week *	(36.2		)	—
Currency translation effects **	(10.3		)	(6.3		)
Prior year revenue, adjusted	2,107.9			2,008.8
Current year revenue	2,180.7			2,154.4
Acquisitions	—			—
Impact of additional week *	—			(36.2		)
Current year revenue, adjusted	2,180.7			2,118.2
Organic growth $	$	72.8		$	109.4
Organic growth %	3		%	5		%

________________________

* 2014 included 53 weeks of revenue.

** Currency translation effects represent the net effect of translating prior year foreign currency revenues using the average exchange rate on a quarterly basis during the current year.



Adjusted Operating Income—Americas	Year Ended
Adjusted Operating Income—Americas	February 27, 2015					February 28, 2014				February 22, 2013
Operating income	$	259.9		11.9	%	$	247.4	11.4	%	$	168.3	8.4	%
Add: goodwill and intangible asset impairment charges	—			—		—		—		—		—
Add: restructuring costs (benefits)	(10.0		)	(0.5	)	1.7		0.1		28.6		1.4
Adjusted operating income	$	249.9		11.4	%	$	249.1	11.5	%	$	196.9	9.8	%

2015 compared to 2014

Operating income in the Americas grew to $259.9 in 2015, compared to $247.4 in 2014. Adjusted operating income in 2015 grew to $249.9 from $249.1 in 2014, an increase of $0.8 or 0.3%. The improvement was due to benefits associated with the organic revenue growth, improved pricing (net of inflation) and manufacturing cost reduction efforts, partially offset by higher operating expenses.

The Americas revenue represented 71.3% of consolidated revenue in 2015. Revenue for 2015 was $2,180.7 compared to $2,154.4 in 2014, an increase of $26.3 or 1.2%. After adjusting for currency translation effects and the impact of an additional week in 2014, organic revenue growth was $72.8 or 3%. Organic revenue growth in 2015 is categorized as follows:


•	Product categories — Five out of seven product categories grew in 2015, led by Furniture and Coalesse. Architectural Solutions and Turnstone also improved by achieving double digit percentage growth. Technology and Health declined compared to the prior year.


•	Vertical markets — Energy, Technical and Professional, Information Technology and Insurance experienced strong growth rates, while Federal Government declined.


•	Geographic regions — All regions showed growth over 2014, led by the West Business Group.


•	Contract type — The strongest growth came from project sales, while continuing business grew modestly and marketing programs declined year-over-year.

Cost of sales improved to 66.5% of revenue in 2015 compared to 66.8% of revenue in 2014. The improvement was largely driven by improved pricing (net of inflation) and continued cost reduction efforts, offset partially by higher warranty and freight and distribution costs.

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Operating expenses increased by $14.4 in 2015 compared to 2014, which included expenses associated with an extra week. Adjusted for the impact of the additional week, operating expenses increased primarily due to increased spending on sales staff, marketing and product development initiatives, higher variable compensation and an increase in the allowance for doubtful accounts. Operating expenses increased modestly as a percentage of sales to 22.1% in 2015 from 21.7% in 2014.

A net restructuring gain of $10.0 recognized 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 a manufacturing facility in High Point, North Carolina.

2014 compared to 2013

Operating income in the Americas grew to $247.4 in 2014, compared to $168.3 in 2013. Adjusted operating income in 2014 grew to $249.1 from $196.9 in 2013, an increase of $52.2 or 26.5%. The improvement was driven by organic revenue growth, improved customer mix, various cost reduction efforts in manufacturing and logistics and benefits from pricing adjustments and previous restructuring actions, offset in part by increased spending on marketing, product development and other initiatives and the impact of a higher mix of lower margin project business.

The Americas revenue represented 72.1% of consolidated revenue in 2014. Revenue for 2014 was $2,154.4 compared to $2,015.1 in 2013, an increase of $139.3 or 6.9%. After adjusting for currency translation effects and the impact of an additional week, organic revenue growth was $109.4 or 5%. Revenue growth in 2014 is categorized as follows:


•	Product categories — Seven out of nine product categories grew in 2014, led by Architectural Solutions, Details and Turnstone. The Wood and Nurture categories declined compared to the prior year.


•	Vertical markets — Information Technology, Insurance, Technical and Professional and Education experienced strong growth rates, while Energy, Federal Government and Financial Services declined.


•	Geographic regions — All regions showed growth over 2013, led by the East Business Group.


•	Contract type — The strongest growth came from project sales, while continuing business grew modestly and marketing programs declined year-over-year.

Cost of sales improved to 66.8% of revenue in 2014 compared to 68.7% of revenue in 2013. The improvement was largely driven by the benefits of organic revenue growth, improved customer mix, various cost reduction efforts in manufacturing and logistics and benefits from pricing adjustments and previous restructuring actions.

Operating expenses increased by $33.3 in 2014 compared to 2013 primarily due to higher spending on marketing, product development and other initiatives and the impact of the additional week. Operating expenses increased slightly as a percentage of sales to 21.7% in 2014 from 21.5% in 2013.

Restructuring costs of $1.7 incurred in 2014 were primarily related to the completion of the integration of PolyVision's global technology business into Steelcase Education.

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, seating and storage solutions.

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Statement of Operations Data—EMEA	Year Ended
Statement of Operations Data—EMEA	February 27, 2015					February 28, 2014					February 22, 2013
Revenue	$	595.4		100.0	%	$	566.9		100.0	%	$	594.8		100.0	%
Cost of sales	465.2			78.1		429.5			75.8		434.0			73.0
Restructuring costs (benefits)	47.5			8.0		(3.6		)	(0.6	)	1.0			0.2
Gross profit	82.7			13.9		141.0			24.8		159.8			26.8
Operating expenses	162.4			27.3		164.2			29.0		171.6			28.8
Goodwill and intangible asset impairment charges	—			—		—			—		35.1			5.9
Restructuring costs	3.1			0.5		8.2			1.4		4.0			0.7
Operating loss	$	(82.8	)	(13.9	)%	$	(31.4	)	(5.6	)%	$	(50.9	)	(8.6	)%



Organic Revenue Growth (Decline)—EMEA	Year Ended
Organic Revenue Growth (Decline)—EMEA	February 27, 2015			February 28, 2014
Prior year revenue	$	566.9		$	594.8
Divestitures	(1.5		)	(6.3		)
Impact of additional week *	—			—
Currency translation effects **	(13.5		)	15.9
Prior year revenue, adjusted	551.9			604.4
Current year revenue	595.4			566.9
Acquisitions	—			(11.4		)
Impact of additional week *	—			—
Current year revenue, adjusted	595.4			555.5
Organic growth (decline) $	$	43.5		$	(48.9	)
Organic growth (decline) %	8		%	(8		)%

________________________

*EMEA always ends its fiscal year on the last day of February, so the comparison to the prior year is generally consistent.

** Currency translation effects represent the net effect of translating prior year foreign currency revenues using the average exchange rate on a quarterly basis during the current year.



Adjusted Operating Loss—EMEA	Year Ended
Adjusted Operating Loss—EMEA	February 27, 2015					February 28, 2014					February 22, 2013
Operating loss	$	(82.8	)	(13.9	)%	$	(31.4	)	(5.6	)%	$	(50.9	)	(8.6	)%
Add: goodwill and intangible asset impairment charges	—			—		—			—		35.1			5.9
Add: restructuring costs	50.6			8.5		4.6			0.8		5.0			0.9
Adjusted operating loss	$	(32.2	)	(5.4	)%	$	(26.8	)	(4.8	)%	$	(10.8	)	(1.8	)%

2015 compared to 2014

EMEA reported an operating loss of $82.8 in 2015 compared to an operating loss of $31.4 in 2014. The adjusted operating loss of $32.2 in 2015 represented an increase of $5.4 compared to 2014. Overall, the increased loss was primarily driven by higher disruption costs and inefficiencies associated with the manufacturing footprint changes, partially offset by organic revenue growth.

EMEA revenue represented 19.4% of consolidated revenue in 2015. Revenue for 2015 was $595.4 compared to $566.9 in 2014. Organic revenue growth was 8% after adjusting for currency translation effects and a small

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divestiture. During 2015, growth in project business in France, Iberia and the United Kingdom was partially offset by a decline in Germany partially due to customer disruption associated with the manufacturing footprint changes.

Cost of sales increased to 78.1% of revenue in 2015, a 230 basis point deterioration compared to 2014. The deterioration was driven by higher disruption costs and inefficiencies associated with manufacturing footprint changes, offset in part by operating leverage associated with organic revenue growth.

Operating expenses decreased by $1.8 in 2015 primarily due to favorable foreign currency translation effects. Operating expenses as a percentage of sales decreased to 27.3% in 2015 from 29.0% in 2014.

Net restructuring costs of $50.6 incurred in 2015 were primarily associated with the transfer of the assets and activities of the Wisches, France manufacturing facility to a third party, which included a $27.3 facilitation payment, and costs related to the closure of a manufacturing facility in Durlangen, Germany.

2014 compared to 2013

EMEA reported an operating loss of $31.4 in 2014 compared to an operating loss of $50.9 in 2013. The 2013 operating loss included goodwill impairment charges of $35.1. The adjusted operating loss of $26.8 in 2014 represented an increase of $16.0 compared to 2013. Overall, the increased loss was primarily driven by the organic revenue decline (including higher levels of competitive discounting) and disruption costs associated with the changes in the EMEA manufacturing footprint, offset in part by benefits from restructuring activities and other cost reduction efforts.

EMEA revenue represented 19.0% of consolidated revenue in 2014. Revenue for 2014 was $566.9 compared to $594.8 in 2013. Organic revenue declined 8% after adjusting for currency translation effects and acquisitions, net of a divestiture. During 2014, growth in the export markets of the central, eastern and southern parts of Europe (as a group) was more than offset by declines across Western Europe, most notably France and Germany.

Cost of sales increased to 75.8% of revenue in 2014, a 280 basis point deterioration compared to 2013. The deterioration was driven by lower absorption of fixed costs associated with the organic revenue decline (including higher levels of competitive discounting), disruption costs associated with the changes in the EMEA manufacturing footprint and various inefficiencies in manufacturing and logistics.

Operating expenses decreased by $7.4 in 2014 as $4.1 of additional operating expenses related to acquisitions, net of a divestiture, and unfavorable currency translation effects were more than offset by the benefits from recent restructuring activities and other cost reduction efforts. Operating expenses as a percentage of sales rose slightly to 29.0% in 2014 from 28.8% in 2013.

Net restructuring costs of $4.6 incurred in 2014 were primarily associated with the reorganization of the sales, marketing and support functions in France, partially offset by a gain on the sale of a facility in connection with previously announced restructuring actions.

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, storage and seating solutions. Designtex designs and sells surface materials including textiles and wall coverings which are specified by architects and designers directly to end-use customers primarily in North America. PolyVision manufactures ceramic steel surfaces for use in multiple applications but primarily for sale to third-party fabricators and distributors to create static whiteboards and chalkboards sold in the primary and secondary education markets globally.

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Statement of Operations Data—Other	Year Ended
Statement of Operations Data—Other	February 27, 2015				February 28, 2014					February 22, 2013
Revenue	$	283.6	100.0	%	$	267.6		100.0	%	$	258.8		100.0	%
Cost of sales	191.7		67.6		178.8			66.8		169.4			65.5
Restructuring costs	—		—		0.1			—		—			—
Gross profit	91.9		32.4		88.7			33.2		89.4			34.5
Operating expenses	87.1		30.7		84.3			31.5		83.6			32.3
Goodwill and intangible asset impairment charges	—		—		12.9			4.8		24.8			9.6
Restructuring costs	—		—		0.2			0.1		1.1			0.4
Operating income (loss)	$	4.8	1.7	%	$	(8.7	)	(3.2	)%	$	(20.1	)	(7.8	)%



Organic Revenue Growth—Other	Year Ended
Organic Revenue Growth—Other	February 27, 2015			February 28, 2014
Prior year revenue	$	267.6		$	258.8
Divestitures	—			—
Impact of additional week *	(5.8		)	—
Currency translation effects **	(2.9		)	(2.2		)
Prior year revenue, adjusted	258.9			256.6
Current year revenue	283.6			267.6
Acquisitions	—			—
Impact of additional week *	—			(5.8		)
Current year revenue, adjusted	283.6			261.8
Organic growth $	$	24.7		$	5.2
Organic growth %	10		%	2		%

________________________

* 2014 included 53 weeks of revenue.

** Currency translation effects represent the net effect of translating prior year foreign currency revenues using the average exchange rate on a quarterly basis during the current year.



Adjusted Operating Income—Other	Year Ended
Adjusted Operating Income—Other	February 27, 2015				February 28, 2014					February 22, 2013
Operating income (loss)	$	4.8	1.7	%	$	(8.7	)	(3.2	)%	$	(20.1	)	(7.8	)%
Add: goodwill and intangible asset impairment charges	—		—		12.9			4.8		24.8			9.6
Add: restructuring costs	—		—		0.3			0.1		1.1			0.4
Adjusted operating income	$	4.8	1.7	%	$	4.5		1.7	%	$	5.8		2.2	%

2015 compared to 2014

The Other category reported operating income of $4.8 in 2015 compared to an operating loss of $8.7 in 2014. The 2014 results included goodwill and intangible asset impairment charges of $12.9. Adjusted operating income increased by $0.3 driven by a higher adjusted operating income at PolyVision and Designtex, partially offset by higher adjusted operating losses in Asia Pacific.

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Revenue of $283.6 in 2015 increased by $16.0 compared to revenue of $267.6 in 2014. Excluding the impact of the additional week in 2014 and currency translation effects, organic revenue growth was $24.7 or 10%. PolyVision was the largest contributor to the growth, and Designtex and Asia Pacific also grew in 2015.

Cost of sales increased to 67.6% of revenue in 2015, a 80 basis point deterioration compared to 2014. The erosion in 2015 was primarily driven by higher cost of sales in Asia Pacific due to business mix shifts, competitive pricing pressures and higher overhead costs linked to the opening of a new facility in India, partially offset by better absorption of fixed costs associated with the revenue growth at PolyVision.

Operating expenses increased by $2.8 to $87.1 in 2015 compared to $84.3 in 2014. The increase was primarily driven by sales and marketing investments at Designtex. Operating expenses as a percentage of sales decreased in both 2015 and 2014.

2014 compared to 2013

The Other category reported an operating loss of $8.7 in 2014 compared to an operating loss of $20.1 in 2013. The 2014 results included goodwill and intangible asset impairment charges of $12.9, compared to a goodwill impairment charge of $24.8 in 2013. Adjusted operating income decreased by $1.3 primarily driven by a higher operating loss in Asia Pacific and lower operating income at Designtex, partially offset by higher operating income at PolyVision.

Revenue of $267.6 in 2014 increased by $8.8 compared to revenue of $258.8 in 2013. Excluding currency translation effects and the approximate impact of the additional week, organic revenue grew $5.2 or 2%, driven by PolyVision.

Cost of sales increased to 66.8% of revenue in 2014, a 130 basis point deterioration compared to 2013. The erosion in 2014 was primarily driven by higher competitive discounting in Asia Pacific.

Operating expenses increased by $0.7 to $84.3 in 2014 compared to $83.6 in 2013. The increase was primarily driven by sales and marketing investments at Designtex, partially offset by cost reduction efforts in Asia Pacific.

Corporate

Corporate expenses include unallocated portions of shared service functions such as information technology, human resources, finance, executive, corporate facilities, legal and research.



Statement of Operations Data—Corporate	Year Ended
Statement of Operations Data—Corporate	February 27, 2015		February 28, 2014		February 22, 2013
Operating expenses	$	37.0	$	41.4	$	38.0

The decrease of $4.4 in 2015 was primarily due to lower environmental remediation costs and higher income associated with COLI. Operating expenses in 2014 increased by $3.4 compared to 2013 primarily due to higher earnings associated with deferred compensation and higher variable compensation expense.

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.

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Liquidity Sources	February 27, 2015		February 28, 2014
Cash and cash equivalents	$	176.5	$	201.8
Short-term investments	68.3		119.5
Company-owned life insurance	159.5		154.3
Availability under credit facilities	154.7		163.6
Total liquidity	$	559.0	$	639.2

As of February 27, 2015, we held a total of $244.8 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 $176.5 in cash and cash equivalents, 64% was located in the U.S. and the remaining 36%, or $64.1, was located outside of the U.S., primarily in France, Mexico, China, Canada and Hong Kong. The amounts located outside the U.S. would be taxable if repatriated to the U.S., 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 if needed. 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.

Availability under credit facilities may be reduced by the use of cash and cash equivalents and short-term investments for purposes other than the repayment of debt as a result of constraints related to our maximum leverage ratio covenant. See Liquidity Facilities for more information.

The following table summarizes our consolidated statements of cash flows:



Cash Flow Data	Year Ended
Cash Flow Data	February 27, 2015			February 28, 2014			February 22, 2013
Net cash flow provided by (used in):
Operating activities	$	84.2		$	178.8		$	187.3
Investing activities	(14.3		)	(25.2		)	(85.5		)
Financing activities	(89.8		)	(101.6		)	(64.2		)
Effect of exchange rate changes on cash and cash equivalents	(5.4		)	(0.6		)	0.7
Net increase (decrease) in cash and cash equivalents	(25.3		)	51.4			38.3
Cash and cash equivalents, beginning of period	201.8			150.4			112.1
Cash and cash equivalents, end of period	$	176.5		$	201.8		$	150.4

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Cash provided by operating activities



Cash Flow Data—Operating Activities	Year Ended
Cash Flow Data—Operating Activities	February 27, 2015			February 28, 2014			February 22, 2013
Net income	$	86.1		$	87.7		$	38.8
Depreciation and amortization	59.9			60.0			58.3
Goodwill and intangible asset impairment charges	—			12.9			59.9
Deferred income taxes	0.4			14.1			(3.0		)
Non-cash restructuring costs	11.6			6.6			34.7
Non-cash stock compensation	18.4			16.8			9.6
Equity in income of unconsolidated affiliates	(15.2		)	(10.2		)	(9.4		)
Dividends received from unconsolidated affiliates	10.7			6.2			5.4
Other	(5.6		)	2.1			3.6
Changes in accounts receivable, inventories and accounts payable	(58.3		)	(16.1		)	(7.3		)
Changes in employee compensation liabilities	(11.3		)	5.5			5.8
Changes in other operating assets and liabilities	(12.5		)	(6.8		)	(9.1		)
Net cash provided by operating activities	$	84.2		$	178.8		$	187.3

The decrease in cash provided by operating activities in 2015 compared to 2014 was due to an increase in the use of working capital to fund strong organic growth in Q4 2015 compared to modest growth in Q4 2014, increased payments associated with restructuring activities in EMEA, lower utilization of foreign tax credit carryforwards in the U.S. and the timing of employee payroll liabilities. Cash provided by operating activities decreased slightly in 2014 when compared to 2013.

Cash used in investing activities



Cash Flow Data—Investing Activities	Year Ended
Cash Flow Data—Investing Activities	February 27, 2015			February 28, 2014			February 22, 2013
Capital expenditures	$	(97.5	)	$	(86.8	)	$	(74.0	)
Proceeds from disposal of fixed assets	19.7			9.5			15.5
Purchases of investments	(91.4		)	(146.7		)	(78.6		)
Liquidations of investments	149.1			122.3			62.6
Liquidations of COLI	—			74.5			—
Acquisitions, net of cash acquired	—			—			(6.2		)
Other	5.8			2.0			(4.8		)
Net cash used in investing activities	$	(14.3	)	$	(25.2	)	$	(85.5	)

Capital expenditures in 2015 were primarily related to investments in manufacturing operations, including a new manufacturing location in the Czech Republic, and product development. Cash provided by investing activities included the receipt of proceeds related to the sale of a former manufacturing facility. The net reduction in investments in 2015 is primarily related to the funding of the restructuring costs in EMEA. During 2014, we reduced our COLI investments by withdrawing basis of $74.5 (tax-free), and we reinvested the proceeds in short-term investments.

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Cash used in financing activities



Cash Flow Data—Financing Activities	Year Ended
Cash Flow Data—Financing Activities	February 27, 2015			February 28, 2014			February 22, 2013
Dividends paid	$	(52.5	)	$	(50.2	)	$	(45.8	)
Common stock repurchases	(36.3		)	(49.9		)	(19.9		)
Other	(1.0		)	(1.5		)	1.5
Net cash used in financing activities	$	(89.8	)	$	(101.6	)	$	(64.2	)

We paid dividends of $0.105, $0.10 and $0.09 per common share during each quarter in 2015, 2014 and 2013, respectively. On March 24, 2015, our Board of Directors declared a dividend of $0.1125 per common share to be paid in Q1 2016.

During 2015, 2014 and 2013, we made common stock repurchases of $36.3, $49.9, and $19.9, respectively, all of which related to our Class A Common Stock. As of February 27, 2015, we had $61.6 of remaining availability under the $250 share repurchase program approved by our Board of Directors in Q4 2008.

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 $4.9, $6.6 and $3.0 in 2015, 2014 and 2013, 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 recorded on our Consolidated Balance Sheets; however, when necessary, we record reserves to cover potential losses. As of February 27, 2015 and February 28, 2014, there were no reserves for guarantees recorded on our Consolidated Balance Sheets.

Contractual Obligations

Our contractual obligations as of February 27, 2015 were as follows:



Contractual Obligations	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
Long-term debt and short-term borrowings	$	284.3	$	2.5	$	31.5	$	0.1	$	250.2
Estimated interest on debt obligations	113.4		17.1		32.3		31.9		32.1
Operating leases	138.3		32.2		46.6		31.7		27.8
Committed capital expenditures	43.0		43.0		—		—		—
Purchase obligations	49.3		35.8		12.8		0.7		—
Other liabilities	3.1		3.1		—		—		—
Employee benefit and compensation obligations	275.8		119.8		40.3		27.6		88.1
Total	$	907.2	$	253.5	$	163.5	$	92.0	$	398.2

Total consolidated debt as of February 27, 2015 was $284.3. Of our total debt, $249.9 is in the form of term notes due in 2021 and $33.5 is related to financing secured by our two corporate aircraft due in 2017.

We have commitments related to certain sales offices, showrooms, warehouses and equipment under non-cancelable operating leases that expire at various dates through 2025. 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, with the majority related to progress payments toward a replacement corporate aircraft.

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Purchase obligations represent obligations under non-cancelable signed 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 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 current as of February 27, 2015. 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.

Liquidity Facilities

Our total liquidity facilities as of February 27, 2015 were:



Liquidity Facilities	February 27, 2015
Global committed bank facility	$	125.0
Various uncommitted lines	29.7
Total credit lines available	154.7
Less: borrowings outstanding	—
Available capacity	$	154.7

We have a $125 global committed five-year unsecured revolving syndicated credit facility which was entered into in 2013. The facility requires us to satisfy financial covenants including a maximum leverage ratio covenant and a minimum interest coverage ratio covenant. Additionally, the facility requires us to comply with certain other terms and conditions, including a restricted payment covenant which establishes a maximum level of dividends and other equity-related distributions or payments (such as share repurchases) we may make in a fiscal year. As of February 27, 2015, 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 on uncommitted facilities as of February 27, 2015. In addition, we have a revolving letter of credit agreement for $11.5 of which $9.5 was utilized primarily for standby letters of credit in support of our self-insured workers’ compensation programs as of February 27, 2015. There were no draws on our standby letters of credit during 2015.

Total consolidated debt as of February 27, 2015 was $284.3. Our debt primarily consists of $249.9 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 27, 2015 of $33.5. This term loan has a floating interest rate based on 30-day LIBOR plus 3.35% and is due in Q2 2017. The term notes are unsecured, the term loan is secured by two corporate aircraft, and neither the term notes nor the term loan contain financial covenants or are 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 believe the timing, strength and continuity of the economic recovery across the geographies we serve remain uncertain which may challenge our level of cash generation from operations. 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.

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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 $100 in 2016 compared to $98 in 2015. This amount includes progress payments toward a replacement corporate aircraft, global upgrades to various manufacturing technologies and investments in showrooms. 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 24, 2015, we announced a quarterly dividend on our common stock of $0.1125 per share, or $13.7, to be paid in Q1 2016. Future dividends will be subject to approval by our Board of Directors and compliance with the restricted payment covenant of our credit facilities.

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 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.

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 2015, 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 2015, 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 and reconciled the sum of the fair values of our reporting units to our total market capitalization plus a control premium (our “adjusted market capitalization”). The control premium represents an estimate associated with obtaining control of the company in an acquisition of the outstanding shares of Class A Common Stock and Class B Common Stock. The DCF analysis used the present value of projected cash flows and a residual value. 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 and cost of capital, are consistent with our current internal projections.

As part of the annual reconciliation to our adjusted market capitalization, we made adjustments to the discount rates used in calculating the estimated fair value of the reporting units. The discount rates ranged from 11.5% to 15.0%. Due to the subjective nature of this reconciliation process, these assumptions could change over time, which may result in future impairment charges.

There were no impairments for any reporting units in 2015.

In 2014, as a result of our impairment analysis, we recorded a $12.3 impairment charge for goodwill and a $0.6 impairment charge for other intangible assets in our Asia Pacific reporting unit, and there was no remaining net

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goodwill in the Asia Pacific reporting unit as of February 27, 2015 and February 28, 2014. See further details in Note 10 to the consolidated financial statements.

As of February 27, 2015, we had remaining goodwill and net intangible assets recorded on our Consolidated Balance Sheets as follows:



Reportable Segment	Goodwill		Other Intangible Assets, Net
Americas	$	88.7	$	9.3
EMEA	—		1.1
Other category	18.5		4.3
Total	$	107.2	$	14.7

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:



Reportable Segment	Enterprise Value Available in Excess of Goodwill
Americas	$	1,542.0
Other category	68.0

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:



Reportable Segment	Enterprise Value Available in Excess of Goodwill
Americas	$	1,311.0
Other category	58.0

As of February 27, 2015, no reporting units 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.

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. Tax positions are reviewed quarterly, and balances are adjusted as new information becomes available.

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. Our liability for uncertain tax positions in these jurisdictions is $0.2 as of February 27, 2015.

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.

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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. We believe that this new model will generate taxable income for our Steelcase European subsidiaries and potentially allow for utilization of net operating loss carryforwards which currently reflect valuation allowances. As of February 27, 2015, we maintained a full valuation allowance against our French net deferred tax assets, totaling $61.1 due to the long history of large net operating losses in France, including losses generated in 2015, and the fact that the contract manufacturing model was not fully implemented in 2015. It is possible that sufficient positive evidence may become available in 2016 or future periods to reach a conclusion that the valuation allowance should be reversed. A change in judgment regarding our expected ability to realize net deferred tax assets would be accounted for as a discrete tax benefit in the period in which it occurs.

In 2014, we recorded a $20.2 worthless stock deduction and a $1.7 bad debt deduction that reduced our 2014 U.S. tax liabilities by $8.5. The deductions related to the liquidation of certain subsidiaries in the Asia Pacific region.

In 2013, we recorded excess foreign tax credits of $57.6. More specifically, we converted a wholly owned French holding company from a disregarded entity to a controlled foreign corporation for U.S. tax purposes, and the conversion caused outstanding intercompany debt to be treated as a deemed dividend taxable in the U.S. Foreign taxes paid on the income that generated the deemed dividend exceeded the U.S. tax cost creating excess foreign tax credits of $56.7. Other cash dividends received from our Canadian subsidiary resulted in excess foreign tax credits of $0.9.

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 27, 2015, we recorded tax benefits from operating loss carryforwards of $83.3, but we also have recorded valuation allowances totaling $67.3, which reduced our recorded tax benefit to $16.0. It is considered more likely than not that a $16.0 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 is established or adjusted.

Additionally, we have deferred tax assets related to tax credit carryforwards of $25.9. The majority of these credit carryforwards are the result of a tax planning strategy entered into during 2013. In 2015, we added $5.7 related to investment tax credits granted by the Czech Republic for investments in qualifying manufacturing equipment placed in service during 2015. We expect to utilize $14.7 of the U.S. credits with the filing of our 2015 U.S. tax return. 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 generated in 2015 is effectively 13 years. We have projected our pretax earnings in 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 will be established on the credit carryforwards if available evidence raises doubt about their expected realization.

As of February 27, 2015, we have recorded valuation allowances totaling $72.7 against deferred tax assets, including net operating losses of $67.3 and other deductible temporary tax differences of $5.4. The $15.1 of deferred tax assets related to net operating losses for which there is no valuation allowance recorded as of February 27, 2015 is anticipated to be realized through future operating profits. Our judgment related to the realization of deferred tax assets is based on current and expected market conditions and could change in the event market conditions and our profitability in these jurisdictions differ significantly from our current estimates. See the discussion above regarding our French net deferred tax assets.

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 2015 of approximately $4.2.

See Note 15 to the consolidated financial statements for additional information.

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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 27, 2015 and February 28, 2014, the benefit obligations, fair value of plan assets and funded status of these plans were as follows:



	Defined Benefit Pension Plans						Post-Retirement Plans
	February 27, 2015			February 28, 2014			February 27, 2015			February 28, 2014
Fair value of plan assets	$	54.5		$	55.0		$	—		$	—
Benefit plan obligations	103.6			103.5			73.7			69.1
Funded status	$	(49.1	)	$	(48.5	)	$	(73.7	)	$	(69.1	)

The post-retirement medical and life insurance plans are unfunded. As of February 27, 2015, approximately 68% 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 $159.5 as of February 27, 2015 are intended to be utilized as a long-term funding source for post-retirement medical benefits, deferred compensation and supplemental retirement 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 fund, 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 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 fiscal year.

Based on consolidated benefit obligations as of February 27, 2015, a one percentage point decline in the weighted-average discount rate used for benefit plan measurement purposes would have changed the 2015 consolidated benefits expense by less than $1 and the consolidated benefit obligations by less than $14. 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 27, 2015, our initial rate of 6.86% 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 due to our change to a fixed subsidy for post-age 65 benefits.

Based on consolidated benefit obligations as of February 27, 2015, a one percentage point increase or decrease in the assumed healthcare cost trend rates would have changed the 2015 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.

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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 recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets were $7.7 as of February 27, 2015 and $24.5 as of February 28, 2014.

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,”

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“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; our restructuring activities; 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 2015, 2014 and 2013, 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 and the Mexican peso. Revenue from foreign locations represented approximately 32% of our consolidated revenue in 2015, 32% in 2014 and 34% in 2013. 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 increased operating income by approximately $2 in 2015, $1 in 2014 and $2 in 2013. 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 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 27, 2015 and February 28, 2014, the cumulative net currency translation adjustments reduced shareholders’ equity by $38.7 and $19.5, 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. For 2015 and 2014, net foreign currency exchange losses were $5.0 and $5.1, respectively. For 2013, net foreign currency exchange gains were $1.2.

See Note 2 to the consolidated financial statements for additional information.

Interest Rate Risk

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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. Additionally, we held auction rate securities with a par value of $11.7 as of February 27, 2015. These investments are classified as long-term since no liquid markets currently exist for these securities. The risk on our short-term and long-term borrowings is primarily related to a loan with a balance of $33.5 and $35.8 as of February 27, 2015 and February 28, 2014, respectively. This loan bears a floating interest rate based on 30-day LIBOR plus 3.35%.

We estimate a 1% increase in interest rates would have increased our net income by approximately $1 in 2015, 2014 and 2013, 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 27, 2015, approximately 36% of our fixed-income investments mature within one year, approximately 28% in two years, approximately 29% in three years and approximately 7% 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 increased approximately $6 during 2015, decreased approximately $3 in 2014 and increased $2 in 2013. The increase in commodity costs during 2015 was driven primarily by higher steel and transportation 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 2015, 2014 and 2013. 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. During Q4 2015, our investments in variable life COLI policies were allocated at approximately 40% fixed income and 60% equity. During Q4 2014 through Q3 2015, our investments were allocated at approximately 50% fixed income and 50% equity. During Q1 2013 through Q3 2014, the majority of our investments in variable life COLI policies were in fixed income securities.

We estimate a 10% adverse change in the value of the equity portion of our variable life COLI investments would reduce our net income by approximately $2 in 2015 and 2014 and would not have been material in