e10vq

Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

As of September 25, 2003, Steelcase Inc. had 44,573,858 shares of Class A Common Stock and 103,274,533 shares of Class B Common Stock outstanding.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Results for interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 2003 (“Form 10-K”). As used in this Report, unless otherwise expressly stated or the content otherwise requires, all references to “Steelcase,” “we,” “our,” “Company” and similar references are to Steelcase Inc. and its majority owned subsidiaries.

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation.

Unless the context otherwise indicates, reference to a year relates to a fiscal year, ended in February of the year indicated, rather than a calendar year. Additionally, references to quarters are as follows: Q2 2004 references the second quarter of fiscal 2004. All amounts are in millions, except per share data, data presented as a percentage or unless otherwise indicated.

Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) 46 requires that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity shall be included in the consolidated financial statements of the business enterprise. At its Board meeting on October 8, 2003, the FASB voted to defer the implementation date of FIN 46 relating to potential variable interest entities that existed prior to February 1, 2003. As such, this statement is effective for us beginning 04 2004. We are currently evaluating how the provisions of this Interpretation may apply to our aircraft lease and our equity interests in dealers.

In May 2000, we began leasing aircraft through a synthetic lease structure that is currently accounted for as an operating lease. Beginning in Q4 2004, the aircraft will be capitalized on our balance sheet and the related obligation will be recorded as debt as required by the provisions of this Interpretation. The impact of this accounting change on the consolidated statements of operations will be an increase in depreciation and interest expense, partially offset by the fact that the recording of rent expense will no longer be required.

From time to time, we obtain equity interests in dealers that we intend to resell as soon as practicable (“dealer transitions”). We use the equity method of accounting for majority-owned dealers with a transition plan in place and where the nature of the relationship is one in which we do not exercise participative control. These unconsolidated dealers are included in Equity Investment in Dealer Transitions in the accompanying Condensed Consolidated Balance Sheets (see Note 7 in our Form 10-K for the year ended February 28, 2003 for additional information). There are also other dealers in ownership transition to which we have provided transition financing and where we do not hold an equity interest. We are currently evaluating whether any of these transition dealers would be defined as variable interest entities under the provisions of this Interpretation and, if so, whether the Company would be deemed the primary beneficiary of the entity.

Statement of Financial Accounting Standards (“SFAS”) No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. We do not expect this statement will have a material effect on our financial statements.

SFAS No. 150 modifies the traditional definition of liabilities to encompass certain obligations that must be settled through the issuance of equity shares. These obligations are considered liabilities as opposed to equity or mezzanine financing under the provisions of SFAS No. 150. This statement does not apply to features that are embedded in a financial instrument that is not a derivative in its entirety. It is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of Q3 2004. We do not have any of the instruments covered by this statement; therefore, we do not expect this statement to have a material effect on our financial statements.

Basic earnings per share is based on the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of additional common shares that would have been outstanding if the shares under our Stock Incentive Plans had been issued and the dilutive effect of restricted shares to the extent those shares have not vested.

Diluted earnings per share includes effects of shares issued under our Stock Incentive Plans. Because they were not dilutive, our calculation of diluted earnings per share do not reflect the effects of 8.9 million and 7.4 million options for the quarter and first six months ended August 29, 2003 and August 23, 2002, respectively.

Prior to 2004, we accounted for our stock incentive plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Given the terms of the Company’s plans, no stock-based employee compensation cost was recognized in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Effective at the beginning of 2004, it is the Company’s policy to expense stock-based compensation using the fair value based method of accounting. Fair value is measured on the grant date of the related equity instrument and is recognized as compensation expense over the applicable vesting period. We estimate the fair value of stock options using the Black-Scholes option-pricing model. As permitted by SFAS No. 148, Accounting for Stock-Based Compensation— Transition and Disclosure, we adopted the prospective transition method, under which compensation cost will be recognized for all awards granted, modified or settled on or after March 1, 2003. Since there have been no stock options granted in 2004, no compensation expense has been recognized.

The following table illustrates the effect on net income and earnings per share as if we had applied the fair value recognition provisions to all outstanding and unvested awards:

Comprehensive income (loss) is comprised of net income (loss) and all changes to shareholders’ equity except those due to investments by, and distributions to, shareholders.

Foreign currency translation adjustments of $8.1 during the first two quarters of 2004 included the realization of $4.1 of currency translation losses in Q1 2004 related to our Brazilian operations, which accumulated over many years. In accordance with GAAP, we previously recorded these unrealized losses as a reduction in shareholders’ equity through the Accumulated Other Comprehensive Loss line. Upon disposition, we recognized the loss through the Condensed Consolidated Statements of Operations. Since the unrealized currency translation losses were previously recognized as reductions of shareholders’ equity, the current realization of these losses through the Condensed Consolidated Statements of Operations had no effect on shareholders’ equity as of August 29, 2003. The remaining $4.0 of the $8.1 related to other current unrealized foreign currency translation adjustments and is reported within stockholders’ equity in Accumulated Other Comprehensive Loss.

Inventories are stated at the lower of cost or market and are valued based upon the last-in, first-out (“LIFO”) method, the first-in, first-out (“FIFO”) method or the average cost method. The North America segment primarily uses the LIFO method to value its inventory. The companies in the Steelcase Design Partnership (“SDP”) segment use the inventory valuation methods that were in place at the time we acquired them. The subsidiaries in the International segment value their inventory using the FIFO method.

The portion of inventories determined by the LIFO method aggregated $50.6 as of August 29, 2003 and $61.6 as of February 28, 2003.

There were no impairments of goodwill or reallocations of goodwill between operating segments during Q2 2004. A summary of changes in goodwill during 2004, by business segment, is as follows:

In Q2 2004, we acquired certain assets of a dealer through one of the dealers we currently consolidate. The purchase price of $2.2 included goodwill and other intangibles of $1.6. A final purchase price allocation will be completed by the end of 2004.

As of August 29, 2003 and February 28, 2003, our other intangible assets and related accumulated amortization consisted of the following:

In Q2 2004, we recorded amortization expense of $2.6 on intangible assets subject to amortization compared to $3.3 in Q2 2003. For the six months ended August 29, 2003 we recorded amortization expense of $5.0 compared to $7.8 for the six months ended August 23, 2002. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the following five fiscal years is as follows: 2004: $8.5; 2005: $7.2; 2006: $6.9; 2007: $6.9; and 2008: $6.9. As acquisitions and dispositions occur in the future, these amounts may vary.

During Q2 2004, we continued to reduce costs by restructuring certain areas of our business. Severance and impairment costs related to business exit and restructuring activities are summarized in the following table:

Below is a reconciliation of the restructuring reserve for activity during 2004:

During 2003, our severance charges for workforce reductions related to 1,425 positions, 1,360 of which occurred as of August 29, 2003. During the first two quarters of 2004, we reserved for additional workforce reductions of approximately 525 positions, of which 430 have already occurred. The remaining 160 previously announced workforce reductions related to International plant consolidations will occur during the balance of 2004.

During 2004, business exit and other costs related to International plant rationalization, and North America and International asset impairments.

During Q2 2004, we finalized a new $250 million 3-year global committed bank facility. Our obligations under this facility are unsecured and unsubordinated. As of August 29, 2003, we had no borrowings against the facility. This facility replaced our $200 million 3-year global committed bank facility that was originally scheduled to expire in April 2004. Maturities under the new facility range from overnight to six months depending on our needs, subject to certain limitations. Interest on borrowings of a term of one month or greater is based on LIBOR plus a margin or a base rate, as selected by us. Interest on borrowings of a term of less than one month is based on the higher of the prime rate or the federal funds rate plus 0.5% and a margin. The Company may, at its option, and

subject to customary conditions, request to increase the aggregate commitment by up to $100 million by obtaining at least one commitment from one or more lenders.

The new facility requires us to satisfy financial covenants including a minimum net worth covenant, a maximum debt ratio covenant and a minimum interest coverage ratio covenant. As of August 29, 2003, we are in compliance with all covenants under this facility and our other financing and lease facilities.

The Board of Directors has authorized share repurchases of up to 11 million shares. We did not repurchase any common shares during Q2 2004. Approximately 3.8 million shares remain available for repurchase under the program and we have no outstanding share repurchase commitments.

Under the Steelcase Inc. Incentive Compensation Plan, the Compensation Committee of the Board of Directors approved and granted 200,000 restricted shares of stock and 48,000 restricted stock units (“RSUs”) in March 2003 to certain members of management. These restricted stock shares and RSUs vest in March 2006 and may be forfeited if a participant leaves the Company for reasons other than retirement, disability or death prior to the vesting date. The restricted stock grants are expensed ratably over the vesting period based on the value of the restricted stock grant on the date of the grant. The RSUs are expensed over the 3-year vesting period based on the current market value of the shares to be granted. The aggregate market value of the restricted stock shares at the date of issuance of $1.9 was recorded as deferred compensation, a separate component of shareholders’ equity, and is being amortized over the three-year vesting period of the grants.

On August 29, 2003, the Company sold substantially all of the net assets of its marine hardware and accessories business (previously reported under the Other category) for cash proceeds of $47.9 and a pre-tax net gain of $31.9 or $20.0 after-tax. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the operating results of this business have been segregated as discontinued operations for all periods presented and include the amounts indicated in the following table:

We operate on a worldwide basis within three reportable segments: North America, SDP and International, plus an “Other” category. We evaluate performance and allocate resources based on operating income.

Our North America segment consists of manufacturing, sales operations and consolidated dealers in the United States and Canada, and includes the Company’s Steelcase and Turnstone brands.

The SDP includes Brayton International, The Designtex Group, Office Details Inc., Metropolitan Furniture Corporation and Vecta and their brands. These companies operate autonomously and report to the president of the SDP. They focus on higher-end design furniture products and niche applications for lobby and reception areas, conference rooms, private offices, healthcare and learning environments, as well as the design and distribution of surface materials and ergonomic tools for the workplace.

Our International segment includes all sales and manufacturing operations outside the United States and Canada, and includes the Company’s Steelcase and Werndl brands.

Within the “Other” category are the Company’s Financial Services, PolyVision and IDEO subsidiaries, ventures and unallocated corporate expenses. Financial Services provides leasing services to customers primarily in North America to facilitate the purchase of our products, and provides selected financing services to our dealers. PolyVision Corporation designs and manufactures visual communications products, such as static and electronic whiteboards. IDEO provides design and innovation services. Approximately 85% of corporate expenses, which represent shared services, are charged to the operating segments as part of a corporation allocation.

We are contingently liable under loan guarantees for certain Steelcase dealers and joint ventures in the event of default or non-performance of the financial repayment of the liability. The guarantees generally have terms ranging from one to ten years. No loss has been experienced and no material losses are anticipated under these agreements. Reserves for loan guarantees totaled $0.7 as of August 29, 2003.

We are also party to performance bonds for certain installation or construction activities of certain Steelcase dealers and a joint venture. Under these agreements, we are liable to make financial payments if the installation or construction activities are not completed under their specified guidelines and claims are filed. Projects with performance bonds have completion dates ranging from one to three years.

Where we have supplied performance bonds related to a joint venture, we require any significant subcontractors to supply us with performance bonds to provide coverage in the event they cause a performance failure or delay. Performance bonds supplied by subcontractors totaled $40.0 as of August 29, 2003, which reduces our risk of exposure. Additionally, our joint venture agreement requires our partner to share in any losses related to these performance bonds. Where we have supplied performance bonds for dealers, we have the ability to step in and cure performance failures by the dealers thereby mitigating our potential losses. No loss has been experienced under these performance bonds; however, reserves totaling $1.1 are recorded as of August 29, 2003 to cover potential losses.

The maximum amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees and performance bonds are as follows:

The accrued liability for warranty costs is based on an estimated amount needed to cover future warranty obligations for products sold. This estimated amount is determined by historical product data and management’s knowledge of current events and actions.

The following review of our financial condition and results of operations should be read in conjunction with our fiscal year 2003 Form 10-K. Unless the context otherwise indicates, reference to a year relates to a fiscal year, ended in February of the year indicated, rather than a calendar year. Additionally, references to quarters are as follows: Q2 2004 references the second quarter of fiscal 2004. All amounts are in millions, except per share data, data presented as a percentage or unless otherwise indicated.

Our second quarter net income reflects a gain on sale of discontinued operations. As disclosed in Note 11 of the condensed consolidated financial statements, we sold our Attwood marine business during the quarter for cash proceeds of $47.9 and an after-tax gain of $20.0. The results of Attwood and the gain on the sale are presented as discontinued operations. Thus, sales and net loss from continuing operations for the periods presented have been restated to exclude the results of Attwood.

We incurred an operating loss of $1.8, which includes $7.4 of restructuring costs in the quarter. The operating loss is an improvement over the prior year quarter, despite lower sales, due to better operating expense control and lower restructuring costs.

Revenue decreased 5.0% compared to Q2 2003 primarily due to the continued global industry downturn. However, revenue increased 10.2% over Q1 2004 primarily because of a 16.8% increase in North America shipments.

Gross profit percent declined 2.3 points in Q2 2004 compared to Q2 2003 and 2.0 points on a year-to-date basis due to increased restructuring costs and increased underabsorption of fixed manufacturing costs due to lower revenue.

Operating expenses in the quarter were significantly lower than the prior year quarter in total dollars and declined 2.0 points as a percent of revenue. All business units have been focused on cost control, have reduced headcount and deferred or eliminated non-critical discretionary and project spending.

We incurred pre-tax restructuring costs, including severance and impairment charges, of $7.4 during the quarter including $4.9 of restructuring and impairment charges in International and $2.5 of restructuring, severance and impairment charges in North America. We have reduced our global workforce by more than 3,600 positions since Q2 2003 and by nearly 10,500 positions, or 43%, since Q3 2001.

Average debt outstanding remained relatively stable in Q2 2004 and for the year-to-date period then ended compared to the same periods in the prior year. Thus, interest expense remained stable during these periods.

During 2003, we began implementation of a new leasing strategy for our Financial Services business. We will continue to originate leases for customers, but use a third party to provide lease funding. This relationship allows us to retain control over customer relationships without bearing the credit or residual risk related to those leases. In connection with this strategy, we have sold substantial portions of our lease portfolio since Q1 2003 resulting in a gain on the sale of leased assets of $2.8 for the six months ended August 29, 2003. We continue to explore options to sell the remaining lease portfolio.

The loss on dealer transitions during Q2 2004 related to an International dealer transition investment originally made in 1999. We took over full ownership of this dealer during the quarter and reduced the carrying value of the investment to the net book value of the underlying tangible assets, which approximates its fair value.

During Q2 2004, we sold property in the United Kingdom for net cash proceeds of about $11.5 and a pre-tax non-operating gain of $7.0. The facility was idle for about 3 years as a result of prior restructuring work.

See additional information regarding our business segments in Note 12 of the condensed consolidated financial statements.

North America revenue accounted for 56.5% of consolidated revenue in Q2 2004. Revenue decreased 8.4% versus the prior year quarter, but increased 16.8% from Q1 2004. The decrease in revenue compared to Q2 2003 was a result of the continued industry downturn. The increase from Q1 2004 reflects strong backlog at the end of Q1 2004, which shipped in Q2 2004. Orders increased slightly compared to Q1 2004, but were volatile throughout Q2 2004.

Gross profit percentage was flat in the quarter versus the same period last year. Productivity improvements and cost reductions offset increased restructuring costs and underabsorption of fixed overhead. Also affecting gross profits were increased discounts, rebates and incentives which are subtracted from gross revenue to calculate revenue. The increase in these items reduced gross profit by almost 1.0% of revenue versus the prior year quarter.

Operating expenses, versus the prior year quarter, declined significantly in total dollars and as a percent of revenue due to previous cost reduction activities and ongoing spending control. Total headcount as of August 29, 2003 was approximately 8,300, a reduction of about 21% compared to Q2 2003, or a reduction of approximately 47% since Q3 2001.

We maintain loss reserves related to dealer trade receivables, and we closely monitor the financial condition of these dealers. Generally, Steelcase dealers in North America have successfully reduced costs and taken other steps to manage through the downturn. We have processes that allow us to monitor and react quickly to changes in credit quality of our dealers. We believe our reserves adequately reflect these credit risks. However, if these dealers experience a prolonged or deeper reduction in revenues, the likelihood of losses would increase and additional charges or reserves would be necessary.

SDP revenue decreased 2.3% compared to Q2 2003 and accounted for 12.0% of consolidated revenue in Q2 2004. Order rates have remained relatively stable within the SDP companies. Year-to-date SDP revenue has not declined as significantly as the North America segment primarily due to less dependency on project business and greater penetration outside commercial office furniture in markets such as healthcare, education and hospitality.

Gross profit dropped in Q2 2004 compared to the prior year primarily due to operational inefficiencies at some of the companies, which led to the underabsorption of fixed costs. There were no restructuring and impairment costs recorded in the quarter or year-to-date for 2004 or 2003.

The decrease in operating expenses in the quarter and for the year was due to cost reductions implemented in the past year. There were no restructuring charges to operating expenses during the quarter. Restructuring costs recorded in the prior year related to severance charges.

International revenue represented 19.7% of consolidated revenue in Q2 2004. Revenue increased 2.7% compared to Q2 2003 and 11.3% on a year-to-date basis. This increase includes a $16.1 and a $15.3 currency translation benefit for the quarter and six month period ended August 29, 2003, respectively. Had currency exchange rates remained constant in the current year, revenue in Q2 2004 would have been about 11% lower than Q2 2003 and about 7% lower on a year-to-date basis. International markets are not yet showing consistent signs of recovery.

Restructuring charges in the quarter caused a 4.0 point decrease in margins versus one year ago, and 4.5 points of the 4.6-point decrease in the year-to-date margins. The remaining 2.0 decrease in Q2 2004 margins versus Q2 2003 was primarily due to underabsorption of fixed manufacturing costs, salary and wage increases in the current year and shipment of large projects with lower margins.

There were no restructuring or related charges recorded in Q2 2004 or Q2 2003 in operating expenses. Operating expenses as reported remained relatively stable for both the quarter and year-to-date periods, but declined significantly in constant dollars. Operating expenses as a percent of

revenue improved significantly in the quarter and year-to-date versus the prior year. Cost control and the realization of benefits from workforce reductions and plant restructuring over the past two years led to this operating expense improvement.

Weak economic conditions in certain countries continue to put pressure on some of our dealers. We continue to monitor the financial condition of dealers for changes in credit quality. We believe our reserves adequately reflect these credit risks. However, if dealers experience a deeper reduction in revenues, the likelihood of losses would increase and additional charges or reserves would be necessary.

As mentioned in Note 12 of the condensed consolidated financial statements, the Other category includes the operating companies of Financial Services, PolyVision and IDEO and miscellaneous revenue and expenses from ventures and unallocated corporate expenses. The revenues and expenses generated from the businesses comprising the Other category are not directly tied to the office furniture manufacturing industry, thus have not been materially affected by the industry downturn.

As mentioned earlier, we sold substantially all the assets of the Attwood marine business during the quarter and are reporting it as a discontinued operation. As such, revenue and operating profit information was restated to exclude Attwood both for this quarter and prior periods. Attwood was previously included in the Other category.

The significant improvement in operating income (loss) for Q2 2004 and the six month period ended August 29, 2003 versus the corresponding periods of the prior year is primarily attributed to the divestiture of an unprofitable business venture in the prior fiscal year.

The Financial Services business provides lease financing to end customers and dealer financing. Our underlying net investment in leases represents multiple sales to individual end customers and there are some concentrations of credit risk with certain customers. We closely monitor our receivable exposure and the overall financial condition of the dealers with which we extend financing. We have processes that allow us to monitor and react quickly to changes in credit quality of our lease customers and dealers. We maintain loss reserves related to lease and dealer finance receivables and we believe our reserves adequately reflect the credit risks associated with the customers and dealers. However, a deterioration in the financial stability of certain larger lease customers and dealers would likely require us to record additional charges and reserves.

As of August 29, 2003, our financial position included cash and cash equivalents of $172.6. Total consolidated debt as of August 29, 2003 was $316.0 consisting primarily of 5-year term notes and term financings from banks. Our consolidated debt to capitalization ratio was 20.3% at the end of the quarter compared to 20.8% at the end of Q4 2003. These funds, in addition to cash generated from future operations and available credit facilities, are expected to be sufficient to finance our known or foreseeable liquidity and capital needs.

Of the $29.8 of debt payments due in less than one year, $19.6 relates to various United States and foreign term obligations with interest rates ranging from 5.96% to 8.21%. The remaining $10.2 relates to various foreign revolving credit facilities with interest rates ranging from 2.65% to 3.15%.

During Q2 2004, we finalized a new $250 million 3-year global committed bank facility. Our obligations under this facility are unsecured and unsubordinated. As of August 29, 2003, we had no borrowings against the facility. This facility replaced our $200 million 3-year global committed bank facility that was originally scheduled to expire in April 2004. The Company may, at its option, and subject to customary conditions, request to increase the aggregate commitment by up to $100 million by obtaining at least one commitment from one or more lenders. The new facility requires us to satisfy financial covenants including a minimum net worth covenant, a maximum debt ratio covenant and a minimum interest coverage ratio covenant. As of August 29, 2003, we are in compliance with all covenants under this facility and our other financing and lease facilities.

Our long-term debt rating is BBB from Standard & Poor’s and Baa3 from Moody’s Investor Services. Both agencies currently have the Company under review for possible downgrade. Any downgrade in our long-term debt rating by either agency could increase our facility fee and our cost of borrowing, should we choose to borrow under the facility. However, we do not believe any increase in our facility fee or cost of borrowing would be material to our financial statements. Additionally, a downgrade in our rating by one of the rating agencies below investment grade would trigger an asset coverage test covenant.

Over the last six months, we had a slight use of cash in operations due to the following:


	•	Accounts receivable increased approximately $30.0 compared to year-end 2003 primarily due to revenue increases in PolyVision and the North America segment.

	•	Inventory decreased approximately $6.0 across all segments of our business due to improved turns.

	•	Accounts payable decreased approximately $11.0 compared to February 28, 2003 primarily driven by a decrease in our International segment.

The use of cash recorded as “Other, net” for the six months ended August 29, 2003 was primarily driven by gains on the sales of leased assets of $2.8 versus a loss of $6.1 for the same period last year and restructuring payments/ settlements of $3.1 compared to accruals of $2.9 in the prior year. See further explanation of the sales of leased assets in the Interest Expense; Other Income (Expense), Net; and Income Taxes section above.

Capital expenditures were $8.1 in the quarter for a total year-to-date amount that is more than 50% lower than the prior year. The economic downturn has reduced the need for expenditures related to additional capacity; as a result, capital expenditures are $47.6 less than depreciation on a year-to-date basis. Our capital spending is focused on sustaining business and preserving our ability to introduce new, innovative products.

During Q2 2004, we recorded proceeds from the disposal of fixed assets of $12.6. These included net proceeds of $11.5 from the sale of property in the United Kingdom, as discussed under the Interest Expense; Other Income (Expense), Net; and Income Taxes section above. The remainder of the proceeds from the disposal of fixed assets relates to various other properties sold in connection with our restructuring activities.

Proceeds on sale of discontinued operations were from the sale of our Attwood subsidiary. See additional information regarding the sale in Note 11 to the condensed consolidated financial statements and in the Second Quarter and Fiscal Year to Date Financial Review section above.

Sales of leased assets continued in Q2 2004 as our Financial Services business applied its new funding strategy. During the current quarter, leased assets were sold for proceeds of $1.8. The current year increase in notes receivable and leased assets is primarily due to increases in Financial Services project financing and asset-based lending to our North America dealers.

During Q2 2003, we sold a portion of our minority equity ownership in Modernform, which provided cash of $9.5. This is included in the “Other, net” component of the investing activities.

For the six months ended August 29, 2003, no significant or unusual financing activities used or generated cash. In 2003, we used cash generated by the sales of leased assets to pay down borrowings.

We paid common stock dividends of $0.06 per share during each of the first two quarters of 2004 and 2003. The exercise of employee stock options generated $0.3 and $3.6 of cash in Q2 2004 and Q1 2003, respectively.

The Board of Directors has authorized share repurchases of up to 11 million shares. We did not repurchase any common shares for the six months ended August 29, 2003 or August 23, 2002.

From time to time, in written reports and oral statements, the Company discusses its expectations regarding future performance. For example, certain portions of this report contain various “forward-looking statements.” Such statements involve certain risks and uncertainties that could cause actual results to vary. The Company’s performance may differ materially from that contemplated by forward-looking statements for a variety of reasons, including, but not limited to: competitive and general economic conditions/ uncertainty domestically and internationally; delayed or lost sales and other impacts related to acts of terrorism, acts of war or governmental action; changes in domestic or international laws, rules and regulations, including the impact of changed environmental laws, rules or regulations; major disruptions at our key facilities or in the supply of any key raw materials; competitive pricing pressure; pricing changes by the Company or its competitors; currency fluctuations; changes in customer demand and order patterns; changes in the financial stability of customers or dealers (including changes in their ability to pay amounts owed to the Company); changes in relationships with customers, suppliers, employees and dealers; product (sales) mix; the success (including product performance and customer acceptance) of new products, current product innovations and platform simplification, and their impact on the Company’s manufacturing processes; the ability of the Company to effectively cull products; possible acquisitions or divestitures by the Company; the Company’s ability to reduce costs, including ramp-up costs associated with new products and to improve margins on new products; the impact of workforce reductions (including elimination of temporary workers, hourly layoffs, early retirement programs and salaried workforce reductions); the Company’s ability to successfully integrate acquired businesses, initiate and manage alliances and increased global sourcing, transition production of products or components from one of its manufacturing facilities to another or to third parties as a result of production rationalization, implement technology initiatives and migrate to a less vertically integrated manufacturing model; changes in business strategies and decisions; and other risks detailed in the Company’s Form 10-K for the year ended February 28, 2003 and other filings with the Securities and Exchange Commission.

Steelcase undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

(a) Disclosure Controls and Procedures. The Company’s Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act), have concluded that as of August 29, 2003, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company would be made known to them by others within those entities.

(b) Internal Controls. During the period covered by this report, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We are involved in litigation from time to time in the ordinary course of our business. Based on known information, we believe we are not a party to any lawsuit or proceeding that is likely to have a material adverse effect on the Company.

Notwithstanding the above, in connection with the stack tests at the Grand Rapids energy center, the Company has completed modeling to access the potential impact of the variance in the stack diameter. The Michigan Department of Environment Quality (“MDEQ”) has concurred with our conclusion that the modeling demonstrates no adverse emission impact arising from the stack diameter variance. Although these preliminary communications are positive, the MDEQ and/or the Environmental Protection Agency (“EPA”) could seek to impose penalties or other costs in connection with the notice of violation issued on April 24, 2003. Any potential penalties or costs cannot be estimated at this time.

Item 2. Changes in Securities and Use of Proceeds

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its annual meeting of shareholders on June 26, 2003. At this meeting, shareholders voted on one proposal presented in the Company’s definitive proxy statement. The results of the votes follow:

1. Proposal to elect three Directors to serve three-year terms expiring at the 2006 annual meeting.

There were no votes cast against, abstentions or broker non-votes with respect to any nominee named above. Directors continuing in office: James P. Hackett, Earl D. Holton, Michael J. Jandernoa, David W. Joos, Peter M. Wege II, P. Craig Welch, Jr. and Kate Pew Wolters.

A Current Report on Form 8-K was filed June 24, 2003 reporting under Item 12, Results of Operations and Financial Condition, Steelcase Inc.’s first quarter fiscal 2004 earnings release.

A Current Report on Form 8-K was filed June 24, 2003 reporting under Item 9, Regulation FD Disclosure, Steelcase Inc. held a public webcast regarding its first quarter 2004 results, which were announced on June 23, 2003.

A Current Report on Form 8-K was filed June 26, 2003 reporting under Item 5, Other Events, Steelcase Inc. announced that its Board of Directors named Robert C. Pew III as non-executive board chair and announced the re-election of Mr. Pew III, Lisa Valk Long and William P. Crawford to serve additional three-year terms as directors.

A Current Report on Form 8-K was filed August 7, 2003 reporting under Item 5, Other Events and Regulation FD Disclosure, Steelcase Inc. completed a new $250 million syndicated bank facility on July 29, 2003. The new Credit Agreement was attached as Exhibit 10.1 under Item 7, Financial Statements, Pro Forma Financial Information and Exhibits.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	By:	/s/ JAMES P. KEANE



	James P. Keane
	Senior Vice President,
	Chief Financial Officer
	(Duly Authorized Officer and
	Principal Financial Officer)

27 EX-4.43 3 k79988exv4w43.txt THIRD AMENDMENT TO PARTICIPATION AGREEMENT EXECUTION VERSION EXHIBIT 4.43 THIRD AMENDMENT TO PARTICIPATION AGREEMENT (STEELCASE TRUST NO. 2000-1) THIS THIRD AMENDMENT TO PARTICIPATION AGREEMENT (Steelcase Trust No. 2000-1), dated as of August 1, 2003 (this "Amendment"), is by and among (i) STEELCASE INC., a Michigan corporation (herein, together with its successors and assigns permitted hereunder, called "Lessee"), (ii) WELLS FARGO BANK NORTHWEST, N.A. (formerly known as First Security Bank, National Association), a national banking association (the "Trust Company"), not in its individual capacity except as expressly provided herein, but solely as Certificate Trustee under the Trust Agreement (herein in such capacity, together with its successors and permitted assigns, called the "Certificate Trustee"), (iii) WELLS FARGO BANK NEVADA, N.A. (formerly known as First Security Trust Company of Nevada), not in its individual capacity, except as expressly stated herein, but solely as Administrative Agent ("Administrative Agent"), (iv) BANC OF AMERICA LEASING & CAPITAL, LLC and SCOTIABANC INC. (each herein, together with its successors and permitted assigns, called a "Certificate Holder" and collectively, the "Certificate Holders"), (v) HATTERAS FUNDING CORPORATION, a Delaware corporation (the "CP Lender") and (vi) BANK OF AMERICA, NATIONAL ASSOCIATION, FIFTH THIRD BANK (f/k/a Old Kent Bank), THE NORTHERN TRUST COMPANY, and THE BANK OF NOVA SCOTIA (each herein, together with its successors and permitted assigns, as a Facility Lender called a "Facility Lender" and collectively, the "Facility Lenders" and as a Liquidity Bank under the LAPA, a "Liquidity Bank" and collectively, the "Liquidity Banks"). W I T N E S S E T H: WHEREAS, Lessee, Certificate Trustee, Administrative Agent, the Certificate Holders, the CP Lender, the Facility Lenders and Bank of America, National Association, not in its individual capacity but solely as Administrator, are parties to that certain Participation Agreement (Steelcase Trust No. 2000-1) dated as of May 26, 2000 (as amended, restated, supplemented or otherwise modified and in effect, the "Participation Agreement"), pursuant to which Certificate Trustee has purchased the Aircraft and has concurrently leased the Aircraft to Lessee; WHEREAS, the parties hereto desire to amend the Participation Agreement in certain respects; NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS. 1.1 Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meaning set forth in the Participation Agreement. In the case of any conflict between the provisions of this Amendment and the provisions of the Operative Documents, the provisions of this Amendment shall control construction of the terms. SECTION 2. AMENDMENT TO PARTICIPATION AGREEMENT. 2.1 Amendment to Section 5.1(o). The phrase "Section 5.02(c), (d) and (e)" that appears twice in Section 5.1(o) of the Participation Agreement is hereby deleted in each place in which it appears and replaced in each place with the phrase "Section 7.4(A), (B) and (C)." 2.2 Amendment to Section 5.1(p). (a) Clause (vii) of Section 5.1(p) is hereby deleted in its entirety and replaced with the following new clause (vii): "(vii) (A) Liens on receivables and related security securing a Permitted Receivables Financing (as defined below) and (B) Liens securing Debt of the Lessee or any Subsidiary of Lessee in favor of Bank One, NA (Main Office Chicago), as administrative agent, and the lenders under the Credit Agreement; and" (b) Section 5.1(p) is further amended by adding the following new term after the definition of "Debt" at the end thereof: "Permitted Receivables Financing" means any transaction or series of transactions that may be entered into by Lessee or any Subsidiary of Lessee pursuant to which Lessee and/or any Subsidiary of Lessee may, directly or indirectly, sell, convey or otherwise transfer its receivables (including related security and collections) to a special purpose entity (an "SPV") established solely for the purpose of purchasing such receivables (including related security and collections); provided that (i) the amount of obligations of Lessee or any such Subsidiary that would be characterized as principal if such transaction or series of transactions were structured as a secured lending transaction rather than as a purchase does not exceed $100,000,000 in the aggregate and (ii) such obligations are non-recourse to Lessee and its Subsidiaries (other than an SPV) other than limited recourse customary for receivables financings of the same kind. 2.3 Appendix A. The definition of "Credit Agreement" in Appendix A to the Participation Agreement is hereby deleted in its entirety and replaced with the following definition: "Credit Agreement" means that certain Credit Agreement dated as of July 29, 2003 among Lessee, as borrower, the financial institutions party thereto, Bank One, NA (Main Office Chicago), as administrative agent, and Bank of America, N.A., as syndication agent." SECTION 3. REPRESENTATIONS AND WARRANTIES OF LESSEE. 3.1 Representations and Warranties of Lessee. In order to induce the parties hereto to enter into this Amendment, Lessee hereby represents and warrants to the parties hereto that: (a) Power; Authority. It is validly existing under the laws of the State of Michigan; it has the power and authority to enter into this Amendment; and this 2 Amendment constitutes its legal, valid and binding obligations and is enforceable against it in accordance with its terms. (b) No Default. No Event of Default has occurred and is continuing. SECTION 4. MISCELLANEOUS. 4.1 Continued Effectiveness of Operative Documents. Except as specifically amended hereby, each of the Participation Agreement and the other Operative Documents shall remain unchanged and continue in full force and effect. After the execution of this Amendment by the parties hereto, any reference to the Participation Agreement (including Appendix A thereto) in any Operative Document shall be to the Participation Agreement, as amended hereby. 4.2 Release. In consideration of entering into this Amendment, except with respect to obligations expressly set forth in the Operative Documents, Lessee releases the other parties hereto and each of their respective Affiliates, Subsidiaries, officers, employees, representatives, agents, counsel and directors from any and all actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, now known or unknown, suspected or unsuspected to the extent that any of the foregoing arises from any action or failure to act with respect to this Amendment or any other Operative Document, on or prior to the date hereof. 4.3 Governing Law. THIS AMENDMENT SHALL HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE (EXCEPT TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 4.4 Counterparts. This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. 4.5 Direction. The Certificate Holders direct the Certificate Trustee and the Facility Lenders hereby direct the Administrative Agent to enter into this Amendment. 4.6 Successors and Assigns. This Amendment shall be binding upon and shall be enforceable by the parties hereto and their respective permitted successors and assigns. The terms and provisions of this Amendment are for the purpose of defining the relative rights and obligations of Lessee, Certificate Trustee and the other parties hereto with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Amendment. 4.7 Entire Agreement. This Amendment and all documents referred to herein constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede any prior expressions of intent or understandings with respect to this Amendment. 4.8 Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 3 4.9 Severability. Wherever possible, each provision of this Amendment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. [The remainder of this page is intentionally left blank.] 4 IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above. STEELCASE INC., as Lessee By: /s/ Gary P. Malburg ---------------------------------- Name: Gary P. Malburg -------------------------------- Title: Vice President, Finance and Treasurer ------------------------------- WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity but solely as Certificate Trustee By: /s/ Val T. Orton_ ---------------------------------- Name: Val T. Orton -------------------------------- Title: Trust Officer ------------------------------- WELLS FARGO BANK NEVADA, N.A., not in its individual capacity but solely as Administrative Agent By: /s/ Val T. Orton ---------------------------------- Name: Val T. Orton -------------------------------- Title: Trust Officer ------------------------------- HATTERAS FUNDING CORPORATION, as CP Lender By: /s/ Christopher T. Burt ---------------------------------- Name: Christopher T. Burt -------------------------------- Title: Vice President ------------------------------- 5 BANC OF AMERICA LEASING & CAPITAL, LLC, as a Certificate Holder By: /s/ Anita L. Garfagnoli ---------------------------------- Name: Anita L. Garfagnoli -------------------------------- Title: Vice President ------------------------------- SCOTIABANC INC., as a Certificate Holder By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- BANK OF AMERICA, NATIONAL ASSOCIATION, as a Facility Lender By: /s/ Robert Mauriello ---------------------------------- Name: Robert Mauriello -------------------------------- Title: Principal ------------------------------- FIFTH THIRD BANK (f/k/a Old Kent Bank), as a Facility Lender By: /s/ Seth W. Watson, III ---------------------------------- Name: Seth W. Watson, III -------------------------------- Title: Vice President ------------------------------- THE NORTHERN TRUST COMPANY, as a Facility Lender By: /s/ Peter R. Martinets ---------------------------------- Name: Peter R. Martinets -------------------------------- Title: Vice President ------------------------------- 6 THE BANK OF NOVA SCOTIA, as a Facility Lender By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- 7 EX-4.44 4 k79988exv4w44.txt FIFTH AMENDMENT TO LOAN AGREEMENT EXHIBIT 4.44 FIFTH AMENDMENT TO LOAN AGREEMENT THIS FIFTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of August 7, 2003, is by and among Steelcase SAS, a Societe par Actions Simplifiee organized and existing under the laws of the Republic of France (the "Borrower"), Steelcase Inc., a Michigan corporation (the "Guarantor"), and Societe Generale, a bank organized and existing under the laws of the Republic of France, acting through its Chicago Branch (the "Lender"). WHEREAS, the Borrower, the Guarantor and the Lender are parties to that certain Loan Agreement dated as of April 9, 1999, as amended by that certain First Amendment to Loan Agreement dated as of June 15, 2001, as further amended by that certain Second Amendment to Loan Agreement dated as of November 9, 2001, as further amended by that certain Third Amendment to Loan Agreement dated as of November 5, 2002, and as further amended by that certain Fourth Amendment to Loan Agreement and Waiver dated as of April 17, 2003 (the "Fourth Amendment") (as such Loan Agreement is further amended hereby and as it may be, from time to time hereafter, amended, restated, supplemented or otherwise modified and in effect, the "Loan Agreement"), pursuant to which the Lender has made certain loans to the Borrower; WHEREAS, the Guarantor has entered into a Credit Agreement (the "New Long Term Credit Agreement") dated as of July 29, 2003 with Bank One, NA (Main Office Chicago), as administrative agent, Bank of America, N.A., as syndication agent and the financial institutions (including the Lender) party thereto; WHEREAS, the Fourth Amendment contemplates that the financial covenants in Section 10.2 of the Loan Agreement would be amended to conform with any material replacement of the financial covenants in the Credit Agreement (Long-Term Multicurrency Revolving Credit Facility) dated as of April 5, 2001 among the Guarantor and the banks and agents party thereto (the "Citibank Facility"); WHEREAS, the Citibank Facility has terminated and certain provisions of the New Long Term Credit Agreement replace the financial covenants in the Citibank Facility; and WHEREAS, the parties hereto wish to conform the financial covenants in Section 10.2 of the Loan Agreement with the analogous provisions of the New Long Term Credit Agreement and to make certain other conforming changes. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows: 1. Defined Terms. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. Amendment of Loan Agreement. The Loan Agreement is hereby amended as follows: (a) Section 1 - New Definitions. Section 1 of the Loan Agreement is amended by inserting the following new definitions therein in alphabetical order: (i) `Adjusted EBITDA' means, with respect to the Guarantor and its consolidated Subsidiaries (all as determined in accordance with GAAP): (a) EBITDA, minus (b) any extraordinary or unusual gains or non-recurring gains (including any restructuring gains, all such non-recurring gains to be determined by the Guarantor in a manner consistent with the Guarantor's consolidated financial statements for the fiscal year ending February 28, 2003) to the extent added in computing such EBITDA (or plus any extraordinary or unusual non-cash losses or charges or non-recurring non-cash losses or charges (other than any such non-cash loss or charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), including any non-cash restructuring losses or charges, all such non-recurring non-cash losses or charges to be determined by the Guarantor in a manner consistent with the Guarantor's consolidated financial statements for the fiscal year ending February 28, 2003) to the extent deducted in computing such EBITDA, and plus (i) any ---- loss or charge on the sale of the Guarantor's lease portfolio or (ii) any loss or charge on the disposition of any non-strategic assets divested in the fiscal year ending February 27, 2004 to the extent such losses or charges do not in the aggregate exceed $25,000,000), plus (c) cash charges (net of cash gains) in an aggregate amount not to exceed $20,000,000 to the extent deducted in computing such EBITDA identified for the fiscal year ending February 27, 2004 relating to restructuring activities, plus (d) any non-cash impairments to fixed assets or goodwill or other intangible assets to the extent deducted in computing such EBITDA and such fixed assets or goodwill or other intangible assets are identified on the Guarantor's consolidated balance sheet for the fiscal quarter ending May 30, 2003, plus (e) for the fiscal quarter ending May 30, 2003, $13,000,000 (attributable to net nonrecurring charges occurring during the fiscal quarter ended August 23, 2002), plus (f) for the fiscal quarters ending May 30, 2003 and August 29, 2003, $31,000,000 (attributable to net nonrecurring charges occurring during the fiscal quarter ended November 22, 2002), minus (g) for the fiscal quarters ending May 30, 2003, August 29, 2003 and November 28, 2003, $23,000,000 (attributable to net nonrecurring gains occurring during the fiscal quarter ended February 28, 2003). - 2 - (ii) `Capital Expenditures' means, for any period, the aggregate of all expenditures by the Guarantor and its consolidated Subsidiaries during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or similar fixed asset accounts on the consolidated balance sheet of the Guarantor and its Subsidiaries; provided, however, that with respect to expenditures relating to the acquisition of an asset in an exchange of a like-kind asset, such expenditures shall be net of any proceeds received by, or amounts credited to, the Guarantor or its consolidated Subsidiaries in connection with the sale or exchange of the existing asset that is being functionally replaced within 180 days of such sale or exchange. (iii) `Consolidated Net Worth' means, at a particular date, the amount reported as shareholders' equity on the consolidated balance sheet for the Guarantor and its consolidated Subsidiaries for the most recent fiscal quarter for which financial statements are publicly available determined in accordance with GAAP." (iv) `Permitted Receivables Financing' means any transaction or series of transactions that may be entered into by the Guarantor or any Subsidiary pursuant to which the Guarantor and/or any of its Subsidiaries may sell, convey or otherwise transfer, directly or indirectly, to a newly-formed special purpose entity (an "SPV") established solely for the purpose of purchasing receivables and related assets in connection with such transaction or series of transactions or any other Person, any receivables and related security for the purpose of obtaining financing; provided that (i) the amount of obligations that would be characterized as principal if such transaction or series of transactions were structured as a secured lending transaction rather than as a purchase does not exceed $100,000,000 in the aggregate and (ii) such obligations are non-recourse to the Guarantor and its Subsidiaries (other than an SPV) other than limited recourse customary for receivables financings of the same kind. (b) Section 1 - "Subsidiary". The definition of "Subsidiary" in Section 1 is hereby amended to add the following sentences at the end thereof: For purposes of the covenants in Section 10.2 of this Agreement and the terms used therein, the term "Subsidiary" or "Subsidiaries" shall exclude the following "owned dealer affiliates" of the Guarantor: (i) New Tangram, LLC, Office Environments of New England, LLC and Texas Wilson Office Products, LLP for so long as (x) in the case of New Tangram, LLC, such entity retains the characteristics of an owned dealer affiliate set forth in the immediately succeeding clause (ii) (unless the Lender otherwise consents) and (y) in the case of Office Environments of New England, LLC and Texas Wilson Office Products, LLP, each such entity retains the characteristics of an owned dealer affiliate set forth in the immediately succeeding clauses (ii)(A) and (ii)(B) (unless the Lender - 3 - otherwise consents), and (ii) any other entity (A) of which the Guarantor owns, directly or indirectly, a majority of the voting interests of such entity or exercises management control, (B) which was formed or acquired to facilitate the restructuring, consolidation or sale of an entity that is an authorized Steelcase dealer, (C) the management of which has the right to buy out such entity's shares over time and (D) the financial results of which are not incorporated in the Guarantor's consolidated financial statements or, if such entity's financial results are incorporated in the Guarantor's consolidated financial statements, the net income attributable to such entity is subtracted from the Guarantor's consolidated financial results. (c) Section 10.1.1 Section 10.1.1 is hereby amended by deleting clause (vii) in its entirety and inserting the following new clause (vii): "(vii) (A) Liens on receivables and related security securing a Permitted Receivables Financing and (B) Liens on the capital stock of any Subsidiary securing Debt of the Guarantor or any Subsidiary in favor of Bank One, NA (Main Office Chicago), as administrative agent (the "Administrative Agent"), with respect to that certain Credit Agreement dated as of July 29, 2003 among Guarantor, the financial institutions party thereto, the Administrative Agent, Bank of America, N.A., as syndication agent, as the same may be amended, restated supplemented or modified from time to time; and" (d) Section 10.2.1. Section 10.2.1 is hereby deleted in its entirety and replaced with the following new Section 10.2.1: "10.2.1 Minimum Net Worth. The Guarantor shall not permit its Consolidated Net Worth at any time to be less than the sum of (a) $1,000,000,000 plus (b) for each fiscal year beginning with the fiscal year ending February 27, 2004, the sum of fifty percent (50%) of Net Income (if positive) for such fiscal year, plus (c) fifty percent (50%) of the net cash proceeds resulting from the issuance by the Guarantor of any capital stock (other than sales of shares of the Guarantor's Class A common stock occurring substantially contemporaneously with a dollar-for-dollar repurchase of shares of the Guarantor's Class B common stock); provided that, if representing an overall loss, charge or deduction, an amount not to exceed $150,000,000 in the accumulated other comprehensive income or loss accounts (or similarly entitled accounts) of the Guarantor and its Subsidiaries (it being understood and agreed that such accounts reflect such non-cash adjustments as foreign currency translation and transaction adjustments, net unrealized gains/losses on all investments, minimum pension liability and other FASB87 and FASB133 related adjustments), shall in each case be excluded in calculating the Guarantor's Consolidated Net Worth. The Guarantor's compliance with this covenant shall be calculated and tested as of the end of each fiscal quarter of the Guarantor upon relevant financial statements becoming publicly available." - 4 - (e) Section 10.2.2. Section 10.2.2 is hereby deleted in its entirety and replaced with the following new Section 10.2.2: "10.2.2 Maximum Debt Ratio. The Guarantor shall not permit the ratio (the "Debt Ratio") of (i) Debt of the Guarantor and its Subsidiaries on a consolidated basis to (ii) Adjusted EBITDA to be greater than (a) 3.00 to 1.00 as of the end of each fiscal quarter of the Guarantor through the fiscal quarter ending August 27, 2004 and (b) 2.75 to 1.00 as of the end of each fiscal quarter of the Guarantor thereafter. The Debt Ratio shall be calculated, upon relevant financial statements becoming publicly available, as of the last day of each fiscal quarter of the Guarantor based upon (a) for Debt, Debt as of the last day of each such fiscal quarter and (b) for EBITDA, the actual amount for the four (4) most recently completed fiscal quarters." (f) Section 10.2.3. Section 10.2.3 is hereby deleted in its entirety and replaced with the following new Section 10.2.3: "10.2.3 Minimum Interest Coverage Ratio. The Guarantor shall not permit the ratio (the "Interest Coverage Ratio") of (i) Adjusted EBITDA minus Capital Expenditures of the Guarantor and its consolidated Subsidiaries to (ii) interest expense of the Guarantor and its Subsidiaries on a consolidated basis to be less than 2.50 to 1.00 for each four (4) fiscal quarter period of the Guarantor. The Interest Coverage Ratio shall be calculated, upon relevant financial statements becoming publicly available, as of the last day of each fiscal quarter of the Guarantor based upon (a) for Adjusted EBITDA and Capital Expenditures, the actual amount for the last four most recently completed fiscal quarters and (b) for interest expense, interest expense as of the last day of such fiscal quarter." 3. Representations and Warranties. In order to induce the Lender to enter into this Amendment, each of the Borrower and the Guarantor hereby represents and warrants to the Lender that: (a) Power; Authority. It is validly existing in the jurisdiction in which it has been organized; it has the power and authority to enter into this Amendment; and this Amendment constitutes its legal, valid and binding obligations and is enforceable against it in accordance with its terms. (b) No Default. After giving effect to this Amendment, no Event of Default shall have occurred and be continuing. 4. Conditions to Effectiveness. The effectiveness of this Amendment is expressly conditioned upon the Borrower delivering to the Lender this Amendment executed by the Borrower, the Guarantor and the Lender. - 5 - 5. Ratification. Each of the Guaranty and, except as specifically amended hereby, the Loan Agreement shall remain unchanged and continue in full force and effect and the Borrower and the Guarantor hereby ratify and confirm the Guaranty and the Loan Agreement, as amended hereby. After the execution of this Amendment by all parties, any references to the "Loan Agreement" or the "Agreement" in the Loan Agreement, the Note, the Guaranty, the Participation Agreement or any other document in connection therewith shall be to the Loan Agreement, as amended hereby. 6. Miscellaneous. (a) Successors and Assigns. This Amendment shall be binding upon and shall be enforceable by the Borrower, the Lender and their respective permitted successors and assigns; provided that the Borrower shall have no right to assign or transfer its rights or obligations hereunder without the prior written consent of the Lender. The terms and provisions of this Amendment are for the purpose of defining the relative rights and obligations of Borrower and Lender with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Amendment. (b) Entire Agreement. This Amendment and all documents referred to herein constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede any prior expressions of intent or understandings with respect to this Amendment. (c) Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. (d) Severability. Wherever possible, each provision of this Amendment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. (e) Counterparts. This Amendment may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. (f) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York (including without limitation Sections 5-1401 and 5-1402 of the New York General Obligations Law) without giving effect to the principles of conflicts of law. [signature page follows] - 6 - IN WITNESS WHEREOF, this Fifth Amendment to Loan Agreement has been duly executed as of the date first written above. STEELCASE SAS, as Borrower By: /s/ Yvan Stehly ------------------------------------ Name: Yvan Stehly ---------------------------------- Title: President --------------------------------- STEELCASE INC., as Guarantor By: /s/ Gary P. Malburg ------------------------------------ Name: Gary P. Malburg ---------------------------------- Title: Vice President and Treasurer --------------------------------- SOCIETE GENERALE, as Lender By: /s/ Milissa A. Goeden ------------------------------------ Name: Milissa A. Goeden ---------------------------------- Title: Vice President --------------------------------- EX-10.2 5 k79988exv10w2.txt 2004-1 AMENDMENT TO NON-EMPLOYEE DIRECTOR PLAN EXHIBIT 10.2 2004-1 AMENDMENT TO STEELCASE INC. NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN This is an amendment by Steelcase Inc. (the "Company"). W I T N E S S E T H WHEREAS, the Company adopted and maintains the Steelcase Inc. Non-Employee Director Deferred Compensation Plan, effective June 23, 1999 (the "Plan"); and WHEREAS, pursuant to Section 6.8 of the Plan, the Company reserved the right to amend the Plan at any time; and WHEREAS, in order to align more closely the performance of the Company (as reflected in its common stock) with the pecuniary interests of each non-employee director, the Company is desirous of amending the Plan to provide that twenty-five percent (25%) of retainer fees payable to each non-employee director shall be deferred under the Plan and deemed invested in Company "phantom stock," unless otherwise elected by the director to be paid in Class A Common Stock of the Company. NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Plan is hereby amended, effective as of August 1, 2003, in the following respects: 1. Section 1.7 (Mandatory Deferral) is amended to read as follows: "1.7 `MANDATORY DEFERRAL' means the amount required to be deferred by a Participant pursuant to Article III of this Plan as in effect before this Amendment. No Mandatory Deferrals shall be made under this Plan after August 31, 2003." 2. The following new Section 1.11 is added to the Plan, and all other sections of Article I are renumbered accordingly: "1.11 `PERFORMANCE DEFERRAL' means the amount of a Participant's quarterly retainer fees deferred, if any, pursuant to Section 3.1." 3. The following new Section 1.14 is added to the Plan, and all other sections of Article I are renumbered accordingly: "1.14 `SPECIAL 2003 ELECTION PERIOD' means the period beginning August 1, 2003, through August 29, 2003, during which elections under Section 3.1 must be made with respect to the remainder of the Plan Year beginning March 1, 2003; however, a new Participant may make elections pursuant to Section 3.3 notwithstanding this Special 2003 Election Period." 4. Article III (Deferral of Director's Fees) is hereby amended to read as follows: "ARTICLE III DIRECTOR PAYMENT AND DEFERRALS 3.1 Participant Election Between Deferral and Stock. Twenty-five percent (25%) of the Participant's quarterly retainer fees shall not be paid in the form of cash, but shall instead be deferred and distributed later to the Participant (or in the event of the Participant's death, to his or her Beneficiary) in accordance with the provisions of Article V of this Plan. Notwithstanding the preceding sentence, a Participant may elect during the applicable Election Period or Special 2003 Election Period, as the case may be, to receive such amount in the form of Steelcase Inc. Class A Common Stock in lieu of deferral. 3.2 Participant Election Between Cash and Deferral. During the applicable Election Period, a Participant may elect a percentage (in one percent (1%) increments, up to one hundred percent (100%)) of the Participant's Director's Fees remaining following application of Section 3.1, to be earned in the following Plan Year, that shall not be paid in cash, but shall instead be deferred and distributed later to the Participant (or in the event of the Participant's death, to his or her Beneficiary) in accordance with the provisions of Article V. All elections under this Section 3.2 shall be made separately with respect to the Participant's meeting fees and the portion of quarterly retainer fees remaining following application of Section 3.1. 3.3 Initial and Subsequent Election Periods. Any elections made pursuant to Sections 3.1 and 3.2 by a new Participant during the Participant's initial Election Period shall apply only to Director's Fees earned for the remainder of the Plan Year following the date of the election. Elections are irrevocable once the Plan Year for which they are in effect has begun. Elections shall remain in effect for all subsequent Plan Years unless a new election is made during a subsequent Election Period. 3.4 Special 2003 Election Rules. Notwithstanding any election previously made by a Participant for the Plan Year beginning March 1, 2003, the following election rules shall apply: (a) If the Participant's elections in effect on July 31, 2003, direct the deferral of at least twenty-five percent (25%) of quarterly retainer 2 fees and the Participant does not elect during the Special 2003 Election Period to receive Steelcase Inc. Class A Common Stock pursuant to Section 3.1, then the percentage of the Participant's quarterly retainer fees to be deferred pursuant to Section 3.2 during the period beginning September 1, 2003, through February 27, 2004, if any, shall be equal to the percentage of retainer fees to be deferred as elected as of July 31, 2003, less twenty-five percent (25%). (b) If the Participant's elections in effect on July 31, 2003, direct the deferral of less than twenty-five percent (25%) of quarterly retainer fees, then the Participant shall be deemed to have elected to be paid in cash for the portion of quarterly retainer fees remaining following application of Section 3.1. The Participant's election with respect to any meeting fees in effect as of July 31, 2003, shall remain intact for the remaining portion of the Plan Year beginning on March 1, 2003." 5. The term "Mandatory Deferral" is deleted and replaced with the term "Mandatory Deferral and Performance Deferral, if any," (in the singular or plural form, as the case may be) throughout Section 4.3 (Investment Media). IN WITNESS WHEREOF, the Company has caused this 2004-1 Amendment to the Steelcase Inc. Non-Employee Director Deferred Compensation Plan to be executed by its duly authorized representative this 30th day of June, 2003. STEELCASE INC. By: /s/ Nancy W. Hickey ------------------------------------ Its: Sr. Vice President, Global Strategic Resources & Chief Administrative Officer 3 EX-31.1 6 k79988exv31w1.txt CERTIFICATION OF CEO PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER SARBANES-OXLEY ACT SECTION 302 I, James P. Hackett, President and Chief Executive Officer of Steelcase Inc., certify that: 1) I have reviewed this quarterly report on Form 10-Q of Steelcase Inc.; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ JAMES P. HACKETT --------------------- Name: James P. Hackett Title: President and Chief Executive Officer October 10, 2003 EX-31.2 7 k79988exv31w2.txt CERTIFICATION OF CFO PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER SARBANES-OXLEY ACT SECTION 302 I, James P. Keane, Senior Vice President, Chief Financial Officer of Steelcase Inc., certify that: 1) I have reviewed this quarterly report on Form 10-Q of Steelcase Inc.; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ JAMES P. KEANE ------------------- Name: James P. Keane Title: Senior Vice President, Chief Financial Officer October 10, 2003 EX-32.1 8 k79988exv32w1.txt CERTIFICATION OF CEO AND CFO PURSUANT TO SEC. 906 EXHIBIT 32.1 CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Steelcase Inc. (the "Company") for the quarterly period ended August 29, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), James P. Hackett, as Chief Executive Officer of the Company, and James P. Keane, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ JAMES P. HACKETT --------------------- Name: James P. Hackett Title: President and Chief Executive Officer October 10, 2003 /s/ JAMES P. KEANE --------------------- Name: James P. Keane Title: Senior Vice President, Chief Financial Officer October 10, 2003 This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----


(MARK ONE)

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

For the quarterly period ended August 29, 2003

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-13873


Michigan		38-0819050
(State of incorporation)		(I.R.S. Employer Identification No.)

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


PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
Third Amendment to Participation Agreement
Fifth Amendment to Loan Agreement
2004-1 Amendment to Non-Employee Director Plan
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO and CFO Pursuant to Sec. 906




		Page No.


Part I	Financial Information

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended August 29, 2003 and August 23, 2002.		3
	Condensed Consolidated Balance Sheets as of August 29, 2003 and February 28, 2003.		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended August 29, 2003 and August 23, 2002.		5
	Notes to Condensed Consolidated Financial Statements		6-15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16-24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24

Item 4.	Controls and Procedures		24

Part II.	Other Information

Item 1.	Legal Proceedings		24

Item 2.	Changes in Securities and Use of Proceeds		25

Item 3.	Defaults Upon Senior Securities		25

Item 4.	Submission of Matters to a Vote of Security Holders		25

Item 5.	Other Information		25

Item 6.	Exhibits and Reports on Form 8-K		25

Signatures			26

Exhibit Index			27





			Three Months Ended						Six Months Ended
			August 29,			August 23,			August 29,			August 23,
			2003			2002			2003			2002


Revenue			$	612.1		$	644.2		$	1,167.7		$	1,270.5
Cost of sales				437.1			451.7			836.2			898.0
Restructuring costs				7.3			1.6			17.5			5.2

		Gross profit		167.7			190.9			314.0			367.3
Operating expenses				169.4			191.4			336.3			380.7
Restructuring costs				0.1			12.3			4.8			16.5

		Operating loss		(1.8	)		(12.8	)		(27.1	)		(29.9	)
Interest expense				(5.1	)		(5.2	)		(9.9	)		(10.3	)
Other income (expense), net				1.7			3.5			8.2			(1.3	)

Loss from continuing operations before income tax benefit				(5.2	)		(14.5	)		(28.8	)		(41.5	)
Income tax benefit				(2.0	)		(6.0	)		(10.8	)		(16.1	)

		Loss from continuing operations		(3.2	)		(8.5	)		(18.0	)		(25.4	)
Income from discontinued operations, net of applicable taxes				1.3			1.2			2.7			2.7
Gain on sale of net assets of discontinued operations, net of applicable taxes of $11.9.				20.0			—			20.0			—

		Income (loss) before cumulative effect of accounting change		18.1			(7.3	)		4.7			(22.7	)
Cumulative effect of accounting change				—			—			—			(229.9	)

		Net income (loss)	$	18.1		$	(7.3	)	$	4.7		$	(252.6	)

Basic and diluted per share data:
	Loss from continuing operations		$	(0.02	)	$	(0.06	)	$	(0.12	)	$	(0.17	)
	Income from discontinued operations			0.14			0.01			0.15			0.02
	Cumulative effect of accounting change			—			—			—			(1.56	)

	Earnings (loss)		$	0.12		$	(0.05	)	$	0.03		$	(1.71	)

Dividends declared per common share			$	0.06		$	0.06		$	0.12		$	0.12

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents




					(Unaudited)
					August 29,			February 28,
					2003			2003


ASSETS
	Current assets:
		Cash and cash equivalents			$	172.6		$	128.9
		Accounts receivable:
			Third party, net			379.7			345.7
			Affiliate, net			19.0			21.5
		Notes receivable:
			Third party, net			49.2			37.7
			Affiliate, net			13.3			9.4
		Net investment in leases				25.7			37.8
		Inventories				121.0			129.8
		Deferred income taxes				82.1			71.7
		Other current assets				34.0			31.6

				Total current assets		896.6			814.1
	Property and equipment, net					713.0			774.0
	Notes receivable:
		Third party, net				24.0			18.1
		Affiliate, net				5.6			5.9
	Net investment in leases					72.0			101.9
	Equity investment in dealer transitions					18.2			21.2
	Deferred income taxes					103.1			101.7
	Goodwill					210.8			209.8
	Other intangible assets, net					91.2			96.2
	Other assets					193.4			199.3

				Total assets	$	2,327.9		$	2,342.2

LIABILITIES AND SHAREHOLDERS’ EQUITY
	Current liabilities:
		Accounts payable			$	139.4		$	145.4
		Short-term borrowings and current portion of long-term debt				29.8			30.0
		Accrued expenses:
			Employee compensation			76.3			90.9
			Employee benefit plan obligations			30.7			39.6
			Product warranties			20.6			26.0
			Workers’ compensation claims			26.7			25.8
			Income taxes payable			46.7			23.6
			Other			145.5			121.2

				Total current liabilities		515.7			502.5

	Long-term liabilities:
		Long-term debt				286.2			294.2
		Employee benefit plan obligations				233.2			237.8
		Other long-term liabilities				41.4			52.6

				Total long-term liabilities		560.8			584.6

				Total liabilities		1,076.5			1,087.1

	Shareholders’ equity:
		Common stock				288.4			286.1
		Accumulated other comprehensive loss				(41.5	)		(50.1	)
		Deferred compensation— restricted stock				(1.6	)		—
		Retained earnings				1,006.1			1,019.1

				Total shareholders’ equity		1,251.4			1,255.1

				Total liabilities and shareholders’ equity	$	2,327.9		$	2,342.2


	*SFAS No. 149— Amendment of Statement 133 on Derivative Instruments and Hedging Activities*


	*SFAS No. 150— Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity*


(1)	The denominator for basic EPS is used for calculating EPS for Q2 2004 and Q2 2003 and the first six months of 2004 and 2003 because potentially dilutive shares and diluted EPS are not applicable when a loss from continuing operations is reported.




	August 29,			February 28,
Inventories	2003			2003


Finished goods	$	56.6		$	63.1
Work in process		25.3			27.4
Raw materials		70.0			72.9

		151.9			163.4
LIFO reserve		(30.9	)		(33.6	)

	$	121.0		$	129.8





		Goodwill, net



		February 28,							August 29,
Business Segment		2003		Acquisitions		Dispositions			2003


North America		$	41.3	$	1.6	$	—		$	42.9
Steelcase Design Partnership			63.2		—		—			63.2
International			42.0		—		—			42.0
Other			63.3		—		(0.6	)		62.7

	Total	$	209.8	$	1.6	$	(0.6	)	$	210.8





			August 29, 2003						February 28, 2003



					Accumulated						Accumulated
Other Intangible Assets			Gross		Amortization		Net		Gross		Amortization		Net


Intangible assets subject to amortization:
	Proprietary technology		$	48.5	$	6.9	$	41.6	$	48.5	$	4.6	$	43.9
	Trademarks			32.5		19.7		12.8		32.5		17.8		14.7
	Non-compete agreements			1.9		1.4		0.5		1.9		1.1		0.8
	Other			7.1		3.0		4.1		7.1		2.5		4.6

		Total		90.0		31.0		59.0		90.0		26.0		64.0

Intangible assets not subject to amortization:
	Trademarks			32.2		—		32.2		32.2		—		32.2

		Total Intangible Assets	$	122.2	$	31.0	$	91.2	$	122.2	$	26.0	$	96.2





			Fiscal 2004



Restructuring Charges			Q1		Q2		Total


Cost of sales:
	North America		$	2.9	$	2.4	$	5.3
	International			7.3		4.9		12.2

				10.2		7.3		17.5

Operating expenses:
	North America			2.4		0.1		2.5
	International			0.3		—		0.3
	Other			2.0		—		2.0

				4.7		0.1		4.8

		Total	$	14.9	$	7.4	$	22.3




					Business
		Workforce			Exit and
Restructuring Reserve		Reductions			Other Costs			Total


Reserve balance as of February 28, 2003		$	11.2		$	7.2		$	18.4
	Additions		9.9			12.4			22.3
	Payments		(16.5	)		(8.9	)		(25.4	)

Reserve balance as of August 29, 2003		$	4.6		$	10.7		$	15.3




		August 29,		February 28,
Operating Segment Balance Sheet Data		2003		2003


Total assets
	North America	$	1,057.6	$	1,072.1
	Steelcase Design Partnership		147.2		152.6
	International		457.2		445.2
	Other		665.9		672.3

	Consolidated total assets	$	2,327.9	$	2,342.2


	*FIN 46— Consolidation of Variable Interest Entities*


	*Repurchase Program*


	*Restricted Stock Program*


13.	GUARANTEES, PERFORMANCE BONDS AND PRODUCT WARRANTY




	August 29,
Product Warranty	2003


Balance at beginning of quarter	$	22.5
Accruals for warranties		—
Settlements/ adjustments made during the quarter		(1.9	)

Balance at end of quarter	$	20.6


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations





		Three Months Ended						Six Months Ended



Interest Expense; Other Income (Expense), Net; and Income		August 29,			August 23,			August 29,			August 23,
Taxes		2003			2002			2003			2002


Interest expense		$	5.1		$	5.2		$	9.9		$	10.3

Other income (expense), net:
	Interest income	$	1.0		$	1.2		$	1.9		$	3.4
	Gain (loss) on sales of leased assets		0.1			(0.4	)		2.8			(6.1	)
	Loss on dealer transitions		(6.1	)		(0.1	)		(6.1	)		(1.4	)
	Gain (loss) on disposal of property and equipment		7.1			(0.5	)		9.9			(0.5	)
	Equity in net income of joint ventures and dealer transitions		0.4			1.6			0.3			1.5
	Miscellaneous, net		(0.8	)		1.7			(0.6	)		1.8

	Total other income (expense), net	$	1.7		$	3.5		$	8.2		$	(1.3	)

Total non-operating items, net		$	(3.4	)	$	(1.7	)	$	(1.7	)	$	(11.6	)

Effective income tax rate			37.5	%		37.5	%		37.5	%		37.5	%






	Three Months Ended									Six Months Ended



Income Statement Data—
North America	August 29, 2003				August 23, 2002					August 29, 2003					August 23, 2002



Revenue	$	346.0	100.0	%	$	377.7		100.0	%	$	642.2		100.0	%	$	768.7		100.0	%
Cost of sales		259.8	75.1			285.3		75.6			490.8		76.4			579.2		75.3
Restructuring costs		2.4	0.7			0.9		0.2			5.3		0.8			3.6		0.5

Gross profit		83.8	24.2			91.5		24.2			146.1		22.8			185.9		24.2
Operating expenses		80.3	23.2			91.8		24.2			159.5		24.9			189.8		24.7
Restructuring costs		0.1	—			2.5		0.7			2.5		0.4			5.2		0.7

Operating income (loss)	$	3.4	1.0	%	$	(2.8	)	(0.7	)%	$	(15.9	)	(2.5	)%	$	(9.1	)	(1.2	)%





	Payments Due by Period



			Less than		1-3		3-5		After 5
Contractual Obligations	Total		1 year		years		years		years


Long-term debt and short-term borrowings	$	316.0	$	29.8	$	32.5	$	253.7	$	—
Operating leases	$	267.6	$	46.9	$	72.9	$	43.1	$	104.7




		Amount


Global bank facility		$	250.0
Various uncommitted lines			118.5

	Total credit lines available		368.5
Less: borrowings outstanding			9.8

Available capacity		$	358.7




	For		Withheld


William P. Crawford		962,769,383		16,078,346
Elizabeth Valk Long		968,558,058		10,289,671
Robert C. Pew III		962,941,798		15,905,931




Exhibit
No.		Description


	4.43	Third Amendment to Participation Agreement (Steelcase Trust No. 2000-1) dated August 1, 2003 between Steelcase Inc. and various facility lenders

	4.44	Fifth Amendment to Loan Agreement dated as of August 7, 2003 by and among Steelcase SAS, Steelcase Inc. and Societe Generale

	10.2	2004-1 Amendment to Steelcase Inc. Non-Employee Director Deferred Compensation Plan

	31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1	Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002