2014 Steelcase Inc. BUSINESS OVERVIEW Q3FY15

Transcription

1 2014 Steelcase Inc. BUSINESS OVERVIEW Q3FY15

2 Table of Contents Who We Are What We Do What We See Why Invest in Us Appendix

3 WHO WE ARE

4 WHO WE ARE We have a legacy of innovation Our purpose: Unlocking human promise by creating great experiences, wherever work happens

5 WHO WE ARE We work with the world's leading organizations to help amplify the performance of their people, teams and enterprise by creating places designed to augment human interaction the kind of human interaction that results in value for an organization. And it is not just about the corporate world We think about how we can augment human interaction in places designed for education and healing. 5

6 WHO WE ARE Our global capability is also our local differentiator Our scale allows us to bring insights and resources to local markets beyond anything local competitors can offer. GLOBAL OFFICE FURNITURE MARKET SALES ($ in billions) BUSINESS SEGMENT REVENUE MIX (Steelcase Inc. - fiscal 2014) $3.0 $2.5 $2.0 Outside Home Country Home Country EMEA 19% $1.5 $1.0 $0.5 $0.0 Other 9% Americas 72% Most recently published annual data and/or internal estimates 6

7 WHO WE ARE Human-centered design We apply a human centered research process and work with a broad network of research partners. GESTURE GLOBAL POSTURE STUDY 2,000+ PEOPLE 11 COUNTRIES Universities & Academic Research Independent Research Institutions Corporate Research Organizations Industrial Research Consortia Technical University of Denmark Stanford University Georgia Institute of Technology Institute for People and Technology Illinois Institute of Technology / ID Harvard Graduate School of Education Michigan State University MIT Media Lab University of Michigan Santa Fe Institute Fraunhofer Institute Berlage Institute Innovaro Singularity University Argonne National Laboratory Oakridge National Laboratory Intel Research IBM Research Microsoft Research Xerox PARC Arup Hewlett Packard Labs Mayo Clinic Center for Innovation IDEO OERC, Office Ergonomics Research Committee Comfort Council MIT, Things That Think MIT, House_n Actipole 21 Emerge Alliance GIE Enjeu Energie Positive Michigan Innovation Cooperative University of Delft Royal College of Art Ohio State University Kyushu University Japan University of Southern California Carbon Fiber Consortium, Oakridge National Laboratory Harvard Learning Innovations Laboratory Composite & Nanocomposite Advanced Manufacturing Ctr.

8 WHO WE ARE A sustainable future Steelcase honors the inherent connections between our actions and our impacts. 100% Our investment in renewable energy investments is equal to 100 percent of our global electricity use. 60% Since 2001, we have decreased our global energy use by 60 percent. 8

9 WHAT WE DO

10 WHAT WE DO OUR CORE BRANDS U.S. MARKET ISSUES- BASED SEGMENTATION* Insight-led performance curious energetic conversational Premium design-oriented Insight-led simplicity creative accessible informal Insight-led inspiration cultured progressive engaging Performanceoriented Simplicityoriented DISTRIBUTION CHANNELS * Company-owned dealers Web, retail, other channels Price/ convenience -oriented Independently-owned dealers Direct to customer *Qualitative; discussion purposes only 10

11 WHAT WE DO Where we ll play Leading organizations Wherever work happens Coalesse Turnstone Education Health Emerging geographies Brazil India China South Africa Southeast Asia Eastern Europe How we ll win Translate insights into products, applications, solutions and services Leverage our scale to become a globally integrated enterprise 11

12 WHAT WE DO Capabilities we will need Improved capacity utilization Optimized platforms and diversity of offerings Shared services structures Financial Strength Maintain strong balance sheet Disciplined cash management 12

13 WHAT WE DO We help our clients create workplaces designed for today and tomorrow An ecosystem of interconnected and interdependent spaces that support the physical, cognitive and emotional needs of people. WELLBEING IN THE WORKPLACE Optimism fostering creativity and innovation Mindfulness fully engaged Authenticity really yourself Belonging connecting to others Meaning a sense of purpose Vitality get-up-and-go 13

14 WHAT WE DO Power of place This provides users with choice + control over a palette of places that offer: a range of postures a range of mixed presence experiences a range of privacy I I/SHARED SHARED WE/SHARED WE I / OWNED WE/OWNED OWNED 14

15 WHAT WE SEE

16 WHAT WE SEE The U.S. industry is a portion of the overall opportunity $15 $12 $9 $6 $3 $- U.S. OFFICE FURNITURE SHIPMENTS (TTM, $billions) Oct2014 Year U.S. Production % Change Consumption % Change ($Billion) 2000 $ % $ % 2001 $ % $ % 2002 $ % $ % 2003 $ % $ % 2004 $ % $ % 2005 $ % $ % 2006 $ % $ % 2007 $ % $ % 2008 $ % $ % 2009 $ % $ % 2010 $ % $ % 2011 $ % $ % 2012 $ % $ % 2013 $ % $ % 2014Fcst $ % $ % 2015Fcst $ $ % EUROPEAN OFFICE FURNITURE CONSUMPTION (Annual, Billions) 10 Europe Consumption Market Size: CY B Euros CY B Euros CY B Euros CY B Euros CY B Euros CY B Euros U.S. ~$12B EUROPE ~$9B REST OF WORLD $XB Consumption Based Estimates: Office Furniture Consumption Most Recent Available Forecast 16 Source: BIFMA; CSIL

17 WHAT WE SEE The traditional drivers of demand are strengthening CORPORATE PROFITS AFTER-TAX (U.S.) With IVA and CCA adjustments ($billions) CASH AND ST INVESTMENTS S&P 500 ($ Billion) NON-RESIDENTIAL FIXED INVESTMENT (U.S.) Equipment ($billions) $2,500 $1,600 $1,100 $2,000 $1,500 $1,200 $800 $900 $1,000 $500 $400 $0 $ Q Q Q32014 VACANCY RATES AND NET ABSORPTION (U.S.) Net Absorption Vacancy Rate (%) (msf) 20% 25 18% % % Q % -5 10% % -20 6% Net Absorption -25 Vacancy Rates -30 4% -35 2% % -50 Millions total non-farm jobs (in thousands) JOB GROWTH (U.S.) Non-Farm Payroll Unemployment Rate Nov % 10% 8% 6% 4% 2% 0% Unemployment Rate (%) $ ARCHITECTURAL BILLING INDEX Inquiries Billings Index Commerical / Industrial 2001 Nov 2014 Sources: BEA, Economy.com, BLS; BIFMA; 17

18 WHAT WE SEE Demand is also being driven by major forces of change Global integration and distributed teams Disruptive technologies and worker mobility Changing nature of work Real estate optimization Cultural, professional and generational diversity at work 18

19 WHY INVEST IN US

20 INVEST IN US GROWTH Places designed to augment human interaction 20

21 INVEST IN US GROWTH Places designed to augment human interaction ] 21

22 INVEST IN US GROWTH Places designed to augment human interaction ] ] 22

23 INVEST IN US GROWTH Inspiring destinations for work We translate insights from 1st & 3rd places to make 2nd places the most comfortable, productive, and inspiring places to work. 1 st place 2 nd place 3 rd place (home) (office) (other) Personal Social Collaborative 23

24 INVEST IN US GROWTH Small companies Multi-channel strategy to support buying through dealers, retailers, or online. Space matters The culture of small companies in larger organizations 24

25 INVEST IN US GROWTH Steelcase Education Integrated active learning environments. Classroom Change is driven by pedagogy. Technology needs careful integration. Space impacts learning. Library media:scape In-between 25

26 INVEST IN US GROWTH Steelcase Health Connected care environments. Connect Empower Humanize 26

27 INVEST IN US GROWTH Emerging Geographic tension We have a unique ability to satisfy workplace needs of customers wherever they do work. Primary Manufacturing Locations Joint Ventures FY14 Revenue Mix Rest of World 11% U.S. & Canada 72% Western Europe 17% (Germany, France, U.K., Spain/Portugal, Benelux, Italy) INDEPENDENT AND COMPANY-OWNED DEALER LOCATIONS Americas: ~ 400; EMEA & Asia: ~440 27

28 INVEST IN US GROWTH We continue to expand and invest in China and India 28

29 INVEST IN US Improve the fitness of the business Improve capacity utilization Lean Principles Simplicity Global supply chain 10+ years Ongoing journey Product platforms Valued features Common parts Third-party sourcing In-house best shoring MANUFACTURING CONSOLIDATION STORAGE PRODUCT LINE EXAMPLE THIRD-PARTY SOURCING 20 ~ 18.5 (Million square feet, msf) ~ 63% reduction ~ 6.9 Number of parts ~80% reduction 0 FY00 (Million square feet, msf) FY14 Before After Today Tomorrow directional Americas * EMEA * Other Category * The company has recently announced actions which would further reduce total manufacturing footprint by ~0.4 msf 29

30 IINVEST IN US Improve the fitness of the business Leverage global business centers Reinvent SG&A processes SHRINK TO GROW Leverage technology Consolidate functions as appropriate Reinvent processes Rebalance global workforce Captive centers: Monterrey, Mexico Kuala Lumpur, Malaysia Cluj-Napoca, Romania 30

31 INVEST IN US How we re doing our results Financial strength and flexibility $1,000 $800 Debt PRIORITIES FOR CASH (Q3FY15, $ Million) $600 $400 $200 Credit Facility COLI Cash & ST Inv. Equity Business reinvestment Dividends Share repurchases $0 Liquidity Profile Capital Base 31

32 INVEST IN US How we re doing our results Maintain disciplined cash management ($ Million) $400 $300 $200 $100 $0 -$100 CASH FLOW FROM OPERATIONS & ADJUSTED EBITDA MARGINS Cash Flow From Operations Adjusted EBITDA Margin 14% 12% 10% 8% 6% 4% FY01 FY14 2% $0 FY01 FY14 0% ($ millions) CAPITAL EXPENDITURES VS. DEPRECIATION AND AMORTIZATION $300 $200 $100 Payments Included for Replacement Corporate Aircraft Capital Expenditures $18 $14 $13 $10 D&A $20 $0.16 QUARTERLY DIVIDENDS PAID PER SHARE* DIVIDENDS* and SHARE REPURCHASES $300 Dividends Repurchases $0.12 To be Paid Jan 2015 ($ millions) $200 $0.08 $0.04 $100 $0.00 Q4FY99 Q4FY15 $0 FY01 FY14 Share Repurchases Per Year (Millions) Class A Class B * Excludes special cash dividend of $1.75/share paid January 2008 * Excludes special cash dividend of $1.75/share ($247.5 million) paid January 2008

33 INVEST IN US How we re doing our results Adjusted Operating Income Margin (% of revenue) 12% 10% 8% 6% 4% 2% 0% -2% $4.0B 7.6% $2.3B Restructuring Cost & Goodwill and Intangible Asset Impairments Reported Revenue $3.4B 6.5% $2.3B $3.0B 6.2% Revenue ($ Billion) $4.5 $4.0 $3.5 $3.1B 6.3% $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 SUMMARY INVESTMENT MERITS Research Innovation Fit Global Platforms Financial Strength & Flexibility -4% FY01 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 TFQ $0.0 33

34 Dec 2014 APPENDIX

35 APPENDIX Forward looking statements From time to time, in written and oral statements, we discuss our expectations regarding future events and our plans and objectives for future operations. These forward-looking statements generally are accompanied by words such as anticipate, believe, could, estimate, expect, forecast, intend, may, possible, potential, predict, project or other similar words, phrases or expressions. Forwardlooking statements involve a number of risks and uncertainties that could cause actual results to vary from our expectations because of factors such as, but not limited to, competitive and general economic conditions domestically and internationally; acts of terrorism, war, governmental action, natural disasters and other Force Majeure events; changes in the legal and regulatory environment; our restructuring activities; changes in raw materials and commodity costs; currency fluctuations; changes in customer demand; and the other risks and contingencies detailed in our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. We undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. 35

36 APPENDIX Understanding the balance sheet* FY14 Total Assets ~ $1.7B, down from peak of $3.2B in FY01 Conservative Liquidity Position (Uses: Operating, Reinvestment, Strategic, Dividend Management Annualized Working Capital ~10-11% of sales FY14 ~$377; down from peak of ~$940 in FY00 Company-owned Life insurance (COLI) largely ear-marked to offset LT benefit obligations Cash/ST Investments Other Current Assets Net PP&E Current Liabilities Other LT Liabilities Long-term Debt Majority related to employee benefit obligations Immaterial unfunded pension obligations Fixed Rate: ~$ year senior notes Variable Rate: ~$38 Aircraft Financing Mainly related to employee benefit obligations and tax credit carryforwards COLI Def. Tax Asset Goodwill Other LT Assets Equity Excess liquidity used to reduce capital base; normally done through share repurchases Goodwill related to Americas and Designtex in the Other Category * Millions unless otherwise noted. 36

37 APPENDIX FY14 select statistics AMERICAS EMEA OTHER Number of dealer locations ~ 400 ~ 400 ~ 40 Employees non-manufacturing ~2,200 ~ 1,100 ~ 800 Employees manufacturing ~ 4,600 ~ 1,100 ~ 900 Number of primary manufacturing locations Michigan 2 Alabama 1 Mexico 2 France 2 Germany 2 Spain 1 China 1 Malaysia 1 India 1 FY14 Top 5 Verticals in Americas Segment * FY14 Product Mix FY14 Long-term Benefit Obligations Funding Status Total Obligation $150 25% Other Deferred Tax Asset 30% Seating $154 $95 After-tax Obligation Healthcare Higher Education Insurance Financial Svces Information Technology * No Vertical Represented More than 13% of Americas Revenue * Millions unless otherwise noted. 45% Product Mix Systems/ Storage Assets (COLI) Liabilities 37

38 FY11 FY12 FY13 FY14 $345 $271 $259 $268 FY11 FY12 FY13 FY14 FY11 FY12 FY13 $556 $611 $595 $1,536 $1,868 $2,015 $2,154 FY14 $567 APPENDIX FY14 select statistics Americas Revenue Trend ($MM) EMEA Revenue Trend ($MM) CAGR 11.9% CAGR 1% Other Revenue Trend ($MM) Class A and B Shares (MM) CAGR -8.1% Class A Shares Class B Shares 38

39 APPENDIX Non-GAAP financial measures This presentation contains certain non-gaap financial measures. A non-gaap financial measure is defined as a numerical measure of a company s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the company. Pursuant to the requirements of Regulation G, the company has provided a reconciliation of non-gaap financial measures to the most directly comparable GAAP financial measure. The non-gaap financial measures used within this presentation are: adjusted operating income (loss), which represents operating income (loss), excluding restructuring costs and goodwill and intangible asset impairment charges and adjusted Earnings Before Interest Taxes and Depreciation and Amortization (EBITDA) Margin, which represents EBITDA, excluding restructuring costs and goodwill and intangible asset impairment charges. These measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors. ADJUSTED OPERATING INCOME MARGIN (Percent of Revenue) FY01 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Q3FY15 - TFQ Operating Income (Loss) Margin as Reported 7.6% -3.2% 0.7% 2.9% 3.7% 5.9% 0.0% -0.5% 2.1% 3.5% 2.1% 5.6% 5.3% Restructuring Costs 2.3% 0.5% 1.3% 0.8% 1.2% 1.5% 1.3% 1.1% 1.2% 0.2% 1.0% Goodwill and intangible asset impairment charges 0.3% 0.6% 2.0% 2.1% 0.4% Adjusted Operating Income (Loss) Margin 7.6% -0.9% 1.2% 4.2% 4.8% 6.5% 3.2% 1.0% 3.4% 4.6% 5.4% 6.2% 6.3% TFQ Trailing Four Quarters 39

40 APPENDIX Non-GAAP financial measures ADJUSTED EBITDA MARGIN $ Million FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Revenue $3,989 $3,038 $2,530 $2,346 $2,614 $2,869 $3,097 $3,421 $3,184 $2,292 $2,437 $2,750 $2,869 $2,989 Income before income tax expense $301 ($5) ($67) ($93) $5 $76 $125 $211 ($9) ($31) $51 $82 $55 $147 Interest Expense ($18) ($21) ($21) ($19) ($21) ($18) ($19) ($17) ($17) ($18) ($19) ($26) ($18) ($18) Depreciation and amortization $163 $172 $157 $141 $128 $119 $101 $92 $87 $74 $64 $56 $58 $58 Restructuring costs $0 $50 $61 $54 $13 $39 $24 ($0) $38 $35 $31 $31 $35 $7 Goodwill and intangible asset impairment charges $0 $0 $0 $0 $0 $0 $11 $21 $65 $0 $0 $4 $60 $13 Adjusted EBITDA $482 $238 $173 $121 $167 $253 $279 $341 $199 $96 $166 $199 $226 $243 EBITDA Margin (% of Revenue) 12.1% 7.8% 6.8% 5.1% 6.4% 8.8% 9.0% 10.0% 6.2% 4.2% 6.8% 7.2% 7.9% 8.1% 40