Raj Mehan - Assistant Treasurer and Director of Investor Relations Jim Keane - President, Chief Executive Officer, Director Dave Sylvester - Chief Financial Officer, Senior Vice President

Bobby Griffin - Raymond James Josh Borstein - Longbow Research Todd Schwartzman - Sidoti & Co. Peter van Roden - Spitfire Capital

Thank you, Ben. Good morning everyone.

Thank you for joining us for the recap of our fourth quarter financial results and fiscal 2015 results. Here with me today are Jim Keane, our President and Chief Executive Officer, Dave Sylvester, our Senior Vice President and Chief Financial Officer, Mark Mossing, Corporate Controller and Chief Accounting Officer.

Our fourth quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast and this webcast is a copyrighted production of Steelcase, Inc.

Presentation slides that accompany this webcast are available on ir.steelcase.com and a replay of this call will also be posted to the site later today. Our discussion today may include references to non-GAAP financial measures and forward-looking statements.

Reconciliations to the most comparable GAAP measures and the risks associated with the use of forward-looking statements are included in our earnings release and webcast slides. We are incorporating by reference into this conference call, the text of our Safe Harbor statement, included in yesterday's release.

Following our prepared remarks, we will respond to questions from investors and analysts. I will now turn the call over to our President and Chief Executive Officer.

Jim?

Thanks Raj. Good morning everyone.

I will start with some perspective on our fourth quarter and fiscal year results before turning it over to Dave for some deeper analysis. Our fourth quarter earnings in total were as we expected, but we did get some help from favorable tax items which helped to offset lower than expected revenues and some currency headwinds.

The revenue miss was in the Americas, but we still had 4% organic growth over the prior year. Americas orders grew 5% organically, which met our expectations.

So we maintained a pretty strong backlog going into the new fiscal year. We continue to be pleased to see a lot of project opportunities in the market and our win rate and profitability remained quite strong.

We feel it was a good quarter. It's just that we expected even better revenues.

So where did we miss? We got off to a slow start with soft December orders in the Americas.

January orders were much better but these orders won't ship until Q1 or even Q2. Project business remained strong and we are seeing a shift back to larger projects and a strengthening in demand from our larger customers.

But larger projects often mean longer lead times and we received orders in January and February that won't ship until the summer. We have a normal level of uncertainty in the U.S.

economy driven by the strong dollar and other factors that affect our customers. But we are not seeing signs of a broader slowdown in the Americas.

Again, our win rate has been consistent and we haven't seen any significant change in competitive dynamics. Orders have been pretty good in early March.

Our pipeline of opportunities are strong and we would expect to see continued modest growth as we enter the new fiscal year. The first quarter revenue outlook fully reflects the longer order to ship cycles we have been experiencing since it seems to be a persistent trend.

EMEA had a breakthrough quarter with 23% organic revenue growth and I would like congratulate Guillaume Alvarez and his team for this performance. EMEA has been steadily building backlog throughout the year and this quarter it was great to see it converting to revenue.

Of course, that's an unusually high quarter for shipments and we don't expect to sustain that kind of extraordinary growth, but the strong quarter is clear evidence that the work we have already done to strengthen our product portfolio, our brand and our sales model is gaining traction. The implementation of our operations restructuring, which will help future profitability is also on track, thanks to a huge investment of time and energy by every one on the senior leadership team and many others as well.

We will continue to invest in EMEA and announced earlier this month our intention to create a new learning and innovation center in Munich, which will bring together innovation related positions currently based in other facilities in France and Germany. This will also become a destination for learning and a hub for leadership in the region.

So it's an investment in our people who have just delivered a great quarter in terms of revenue growth. We expect it will open over the next two years.

And Dave Sylvester, who does a great job wearing multiple hats, has overall responsibility for getting it done. I will reflect for a moment on the full year we just completed.

We began ramping up sales and production of several important new products, including Gesture, our flagship task chair, V.I.A., a new system of architectural products that delivers outstanding acoustic performance and in EMEA, we launched Ology, a new height adjustable desking system that allows us to better leverage our operational scale while delivering a better user experience. Of course we have more new products coming in fiscal year 2016 and I would like to recognize our global product development teams led by James Ludwig and Allan Smith for their efforts.

This past year also included the decision to initiate the restructuring of our manufacturing in EMEA through the transfer of a factory in France to a third-party, the closure of a factory in Germany and the construction and opening of a new greenfield factory in the Czech Republic. These are large investments in our future and we expect to begin to see the benefits in the second half of fiscal 2016.

As I mentioned previously, everyone in the leadership team played an important role, but I want to recognize in particular the contributions of Hamid Khorramian, who has been our Senior Vice President of Global Operations and who announced his retirement recently. Hamid and his global team designed and implemented the new operations model for EMEA just as they did years ago for the Americas.

And that Americas reinvention helped us achieve the strong performance we are able to deliver today. I want to thank Hamid for decades of service to the employees and shareholders of Steelcase.

Bob Krestakos has assumed responsibility for global operations after many years serving as our CIO. Terry Lenhardt, who many of you know from his finance role, has stepped into the CIO role to help us leverage the power of big data and advanced analytics in our business.

Both will report to me in these roles joining a very strong, stable management team with whom it is my pleasure to work every day. A number of us just came back from the TED Conference held in Vancouver, Canada every year.

You may know that Steelcase is a longtime sponsor of the conference and we provide all the furniture in the main theater and simulcast areas. I get to talk to a number of current and potential customers while I am there and they get to experience our latest products in an inspiring setting and that alone is worth a lot to our brand.

But we bring a big team of Steelcase leaders every year who hear some of the greatest minds in our planet imagine the future and our people also build relationships with other attendees who are creating that future as they start up new businesses and invent new industries. Just having them there to experience a TED Conference is a priceless investment in our people.

Meanwhile this week in Grand Rapids, Laurent Bernard, our VP of Global Talent Management and his team are initiating a two-year leadership training program with some of our people while a newly hired group of America's employees just finished 11 weeks of training and yet another group of global employees just graduated from a year-long development program. I met with all of them this week as did many other executives here because it's so important that we build the capabilities we will need as a company.

I am so excited about quality of the people who are attracted to work at Steelcase and the possibilities they will create for our future. The investments in learning we made in Grand Rapids many years ago and the investments we will soon make in Munich continue this legacy of believing that we can create great value by unlocking human promise.

I will now turn over to Dave for a thorough discussion of our results and outlook.

Thank you, Jim. I will start with a few high-level comments about our fourth quarter results and balance sheet, provide some additional color commentary around our order patterns and outlook for the first quarter and the balance of the year and then we will move to your questions.

Overall, as Jim said, we feel good about the business and our outlook for fiscal 2016. For the quarter $0.21 and adjusted earnings per share was consistent with our expectations, but we got there differently than we expected, as a favorable effective tax rate covered the negative impacts of lower-than-expected volume and $3 million of foreign exchange losses.

In addition, slightly favorable gross margins compared to our expectations were offset by slightly higher operating expenses, which included a $2 million of additional increase in the allowance for doubtful accounts related to a specific dealer issue. Organic revenue growth of approximately 7% was at the low end of our estimated range, primarily due to lower-than-expected revenue in the Americas.

As Jim said, total orders in the Americas met our expectations, but did not translate into the level of sales growth we had forecasted. The reasons include a combination of softer than expected order rates early in the quarter, a continued increase in the mix of longer lead time project business and average requested delivery dates in general that continued to run longer than historical trends.

As a result, much of our order growth in the quarter ended up in backlog at the end of the fourth quarter and our 4% organic revenue growth in the Americas was lower-than-expected. The other categories organic growth of 4% was also a little short of expectations as order patterns at Designtex hit a soft patch early in the quarter.

For EMEA, the 23% organic growth was stronger-than-expected as most large project installations toward the end of the quarter remained on schedule compared to some delays we had anticipated plus day-to-day business began to improve in Germany following the impacts of disruption we had experienced in the second and third quarter. Our adjusted operating income margin of 5.8% reflected the increase in the allowance for doubtful accounts, plus approximately $2 million of variable compensation expense associated with the favorable effective tax rate, net of the foreign currency losses in the quarter.

The favorable effective tax rate was driven by adoption of a contract manufacturing or transfer pricing model in EMEA at the beginning of January and the favorable resolution of a multiyear tax audit in Germany. More on the transfer pricing change in a few minutes.

Shifting to year-over-year comparisons. Our fourth quarter adjusted operating income of $43.5 million was approximately $8 million lower than last year.

The year-over-year comparison is impacted by a few anomalies. Two of the anomalies were in the prior year and had a combined favorable impact of approximately $7 million.

First, the prior year included an estimated $3 million of profitability associated with an extra week of shipments, which increased prior year revenue by approximately $54 million. Second, the prior year also included $6 million of non-operating charges related to a minority equity investment and $3 million of unfavorable tax adjustments, which had the effect of decreasing variable compensation expense and thus increasing adjusted operating income by approximately $4 million.

The year-over-year comparison is also impacted by one anomaly in the current year results. The current year included $4.8 million of favorable tax adjustments, which had the effect of increasing variable compensation and thus decreasing adjusted operating income by approximately $3 million.

Beyond those items, we did have operating leverage from the organic revenue growth and benefits from improved pricing in the Americas, but it was largely offset by higher operating expenses and approximately $3 million of higher disruption and inefficiencies associated with our manufacturing footprint changes in EMEA. The higher operating expenses were driven by increased spending on sales, including recent hires and related costs, marketing and product development, the $2 million increase in the allowance for doubtful accounts, $1.5 million of lower income and $1 million of higher earnings on deferred compensation.

Sequentially, fourth quarter adjusted operating income decreased by approximately $13 million compared to the third quarter. The impact of seasonally lower volume was reduced in part by favorable shifts in business mix in the Americas, lower disruption and inefficiencies in EMEA and lower operating expenses.

In addition, variable compensation expense increased in the fourth quarter due to the favorable tax items compared to a decrease in the third quarter due to the impacts of higher restructuring costs and changes in estimates within the calculations. Switching to restructuring costs.

In total, they were consistent with our expectations for the quarter. Slightly lower costs in EME were offset by the delay of a small gain expected from the sale of a facility, which is now expected to take place during the first quarter.

Income tax expense in the current quarter was reduced by $3.1 million due to the impact of implementing a new transfer pricing model in EMEA and $1.7 million associated with the resolution of a multiyear tax audit in Germany. We also recorded a positive impact from the retroactive reinstatement of the U.S.

research credit for 2014 but that impact was offset by additional valuation allowances against deferred tax assets in China and net negative provision to return adjustments associated with filing fiscal 2014 state and foreign tax returns. The transfer pricing changes in EMEA were driven by how we are now running Steelcase.

It is more of a globally integrated enterprise versus a regionally independent organization. For tax purposes, this means that our U.S.

parent company has become the principal in a contract manufacturing model between the U.S. and the European legal entities.

Therefore, the U.S. legal entity will bear all residual economic benefits and costs associated with the model.

The mechanics of this model result in substantially all EMEA manufacturing cost being billed to the U.S. at cost plus an appropriate markup.

And the U.S. charging the distribution entities in EMEA an appropriate product cost to allow for customary levels of profitability as distributors.

While these changes will not impact their segment reporting or operating results, it does have an impact on our effective tax rate and the utilization of our net operating loss carryforwards in EMEA. As a result, we currently estimate our effective tax rate will approximate 38% for fiscal 2016.

And we expect to begin utilizing our net operating loss carryforwards in EMEA with implementation of this model. Moving to the balance sheet and cash flow.

The $77 million of cash generated from operating activities during the fourth quarter reflected $12 million from seasonally lower working capital compared to uses of cash in each of the first three quarters. For the full year, cash from operations of $84 million compared to $179 million in the prior year which included utilization of approximately $28 million of tax credit carryforwards compared to approximately $19 million in the current year.

The prior year was also favorably impacted by approximately $14 million related to the timing of global payroll accruals. Beyond those items, the current year included approximately $31 million of higher payments of restructuring costs, including the facilitation payment associated with the transfer of our operations in Wisches, France.

Plus, we used significantly higher cash to fund growth in working capital at the end of the current year compared to the prior year as fourth quarter organic revenue growth of 7% this year was substantially higher than the fourth quarter organic revenue growth of 2% in the prior year. Capital expenditures totaled $28 million in the fourth quarter and related to manufacturing investments, new product introductions, a deposit on a replacement aircraft and completion of the new plant in the Czech Republic.

Capital expenditures for the full year totaled $97 million and we expect similar levels or approximately $100 million in fiscal 2016. This is higher than our normal targeted level of approximately 2.5% of sales and reflects additional deposits on the replacement aircraft and initial investment in the new learning plus innovation center in Munich, Germany announced earlier this month.

We returned approximately $13 million to shareholders in the fourth quarter through the payment of a cash dividend of $0.105 per share and yesterday the Board approved an increased dividend of $0.1125 per share to be paid in the first quarter. Turning to order patterns.

I will start with the Americas where our orders in the fourth quarter grew approximately 5% compared to the prior year, adjusted for the extra week. Order growth rates within the quarter were a little choppy.

Growth was strongest in January, growing approximately 9%, but we also grew orders in December and February, albeit at a rate closer to 3% compared to the prior year, adjusted for the extra week. As I said earlier, order patterns in the Americas continued to reflect a high mix of long lead time project business and request in general for extended delivery dates.

As a result, customer order backlog for the Americas ended the quarter up approximately 8% compared to the prior year. However, a large portion of the growth was driven by orders from two specific customers with requested shipment dates beyond the end of the first quarter.

Across quote types, we experienced a double-digit percentage increase in orders related to project business and a mid-single-digit percentage increase related to our marketing programs aimed at smaller day-to-day business while orders from continuing agreements declined by a mid-single-digit percentage. Regarding project business, the growth in orders was driven by large projects from some of our largest customers, which is different than the trend we saw over the last two quarters when many small to midsize projects drove the growth.

Project orders as a percentage of total orders continued to increase in the Americas reaching 50% this quarter, which is meaningfully higher than our historical average. The decline in orders from continuing agreements was driven by a relatively tough comparison in the prior year which included significant orders from three customers in the energy, information technology and healthcare sectors.

Across all vertical markets in the Americas, orders grew in the financial services, insurance, technical, professional, state and local government and manufacturing sectors while energy, information technology, federal government, healthcare and education declined against the prior year. Switching to EMEA.

Orders in constant currency declined by approximately 8% in total compared to the prior year which included initial orders related to a large government project in France, which we began shipping in the third and fourth quarter of fiscal 2015. Orders were otherwise down approximately 5%.

We experienced solid order growth in the Middle East, Iberia and the Central Eastern and southern parts of Europe as a group. Orders in the United Kingdom and France declined more than the overall average.

We remain optimistic about near-term growth prospects in the U.K., while our project pipeline and day-to-day business in France remains challenged. The order decline in Germany was less than the overall average and slightly better than expected as day-to-day business began to improve following the disruption from the manufacturing footprint changes in the second and third quarter.

Customer order backlog for EMEA ended the quarter down a mid to high single-digit percentage compared to the prior year which included orders related to large government project in France I just mentioned. Within the other category, order growth was strongest in Asia-Pacific, but Designtex and PolyVision also grew orders resulting in total order growth of approximately 6% for the group.

To summarize, our order patterns in the Americas continued to reflect solid growth in project business, driven by large projects with some of our largest customers this quarter. EMEA order patterns remain choppy, but we continue to believe we have seen the bottom of the recession in Western Europe.

Asia-Pacific orders grew nicely this quarter following a modest decline in the third quarter and growth in the second quarter, making it difficult to assess whether or not they maybe emerging out of the demand low we have been experiencing over the past couple of years. We did see a soft patch in Designtex orders early in the quarter, but they rebounded in February and we continue to believe our growth strategies are gaining traction.

Finally, PolyVision remained solid. Turning to the first quarter of fiscal 2016, factoring out an estimated $39 million of unfavorable currency translation effects and the impact of a small divestiture, we expect to report organic revenue growth of 1% to 4% compared to the prior year.

Sequentially, the first quarter revenue estimate represents an organic decline of between 2% and 6%, which is a little more than our typical seasonality primarily driven by the strength of EMEA's 23% organic growth rate in the fourth quarter. We expect approximately $5 million of disruption and inefficiencies in the first quarter associated with the changes in our manufacturing footprint in EMEA.

This compares to approximately $3 million in the first quarter of fiscal 2015. As a result of these factors, we expect to report first quarter earnings within a range of $0.11 to $0.15 per share including restructuring costs of approximately $0.02 per share which translates to an adjusted earnings range of $0.13 to $0.17 per share.

For the full fiscal year of 2016, we expect revenue growth again this year and we expect to expand our adjusted operating income margins following a relatively flat year in 2015, largely due to significant disruption and inefficiencies in EMEA. How much we are able to expand our operating margins in fiscal 2016 will be a function of many things including volume and pricing, the mix of business, the pace of inflation and the level of investment in future growth ideas, including initial costs of the learning and innovation center in Munich.

In addition, the level of disruption we may experience and the amounts and timing of savings related to the completion of our manufacturing footprint changes in EMEA could vary from our current estimates. From a revenue perspective, we expect modest growth in the U.S.

contract office furniture industry and we are continuing to target revenue growth rates in excess of industry averages. We believe much of our growth in the Americas will continue to be driven by project business as the number and estimated size of projects in our pipeline remains high.

For EMEA, our topline will face a tough comparison in fiscal 2015, when we grew 8% organically compared to fiscal 2014 due in part to a few large projects, plus the broader economic and geopolitical sentiment in EMEA remains unsettled. Thus organic growth in EMEA, adjusted for the significant devaluation of the Euro, could be a challenge for the full fiscal year.

Lastly, we expect Asia-Pacific, Designtex and PolyVision, all to drive growth in the other category during fiscal 2016. As it relates to our expected contribution margin or operating leverage associated with the revenue growth, we expect the mix of project business to remain high and reflect a higher mix from some of our largest customers.

In addition, the current level of sales productivity in the Americas is near a 10-year high. So we expect to continue hiring additional salespeople in the Americas to support our growth aspirations.

One additional point related to operating leverage has to do with variable compensation expense. That is, as we realize benefits of our restructuring actions in EMEA, variable compensation expense will increase for the entire corporation as our annual employee incentives are linked to consolidated Steelcase, Inc.

results. In the Americas, we will be impacted the most as it represents the largest percentage of our global wage base.

The point is that the Americas contribution margin could be lowered by improvements in our operating results in EMEA. As a result of these factors, we estimate that our consolidated contribution margin associated with revenue growth will approximate the low to mid 20s, with the Americas ranging between 20% and 25% and EMEA ranging between 25% and 30%.

We expect disruption and inefficiencies in EMEA to reduce from an estimated $5 million in the first quarter to a small amount by the fourth quarter of fiscal 2016. And we expect benefits from the manufacturing footprint changes to begin feathering in during the second quarter and more completely by the fourth quarter.

We have included a webcast slide that lays this out in more detail. Finally, as we have stated many times, we believe staying invested in a variety of growth initiatives has been a key driver of our market share gains over the last four years.

In our webcast slides, we included a fiscal 2015 roll forward of operating expenses compared to the prior year. In this roll forward, you will note in other net column totaling $19 million which compares to an increase of $12 million in fiscal 2014, $7 million in fiscal 2013 and $20 million in fiscal 2012.

You can think of these amounts as the levels of costs which were invested back into the business to sustain our current and future momentum in the market. We had initially planned to invest more than $30 million in fiscal 2015 but we pulled back on spending around the world in order to reallocate resources in support of our decision to launch additional manufacturing footprint changes in EMEA.

We also attempted to cushion the impact of Asia-Pacific continuing to face a lull in demand again this year plus a few other underperforming areas in the business. For fiscal 2016, we expect to reinstate many of the investments that were delayed in fiscal 2015 and add a few additional strategies, all targeted to sustain our momentum.

As a result, however, we currently estimate this other net category within the operating expense roll forward for 2016 could fall within a range of $30 million to $40 million, including new hires in the sales force plus any other costs and investments in support of our targeted sales growth in 2016. The payback for these investments will come from our ability to sustain momentum with our growing global customer base and to continue growing faster than industry averages which we have done for the past four years in the U.S.

So we expect another solid year in fiscal 2016 and we are committed to improving our competitiveness in EMEA. From there, we will turn it over for questions.

Hi guys. This is Bobby actually filling in for Budd.

Thanks for taking my questions and congrats on continued progress there in EMEA this quarter.

Thanks, Bobby.

Thank you.

First up, it seems like there has been a shift in the industry back and forth between small and large project, with this quarter shifting back towards the large projects. Can you maybe talk at a high level of how that shift impacts the sales force and whether or not they have to go to market differently for each different type of project?

That's a good question, Bobby. As I think about that for minute, I don't know that it affects our sales force goes to market.

I think the larger the projects, the longer they been in our system, the more interaction we have had with the customers over a longer period of time. So let's say that time it takes between the initial discussions and the placement of the order can be longer.

But I don't know that it impacts significantly how the sales force goes to market.

The only think I maybe would add to that is that in larger projects like when I visited recently, more and more we are finding that these large projects also involve either construction of a new building or a significant redesign or reengineering of an existing building and therefore there is a little bit more complexity involved in the larger projects and that also relates to some of these patterns we have seen with lead times, because there is more things that can cause a project to be delayed. And I will contrast that with maybe midsize projects or project we might have seen years ago, they were more, what we call, restacks, which is people really aren't changing the building very much.

They are just changing the layout of furniture. There we have more things under our direct control and more visibility into lead times and schedules.

So that could change it, but it really doesn't change all that much the way the sales people interact with customers. We treat midsized customers and large customers largely the same.

And all these projects start with a period where we work with the client to help them identify what's right for them as they look to the future and we will continue to do that with projects, large or small.

We do tend to work more directly with large customers and therefore the small to medium-size projects tend to be more dealer-led. But even there, I wouldn't draw an absolute conclusion that it's one or the other.

Okay. I appreciate that.

That's helpful. And then maybe just two modeling questions, a follow-up real quick.

On the $39 million in currency impact, Dave can you offer a little help for those of us that build our models by the segments? A rough estimate of how that will fall out on a segment basis?

Yes. The bulk of it in EMEA.

There is a little bit in the U.S. for the Canadian currency and a little bit in Asia, because PolyVision has -- I am sorry, a little bit in the other category because PolyVision has a European exposure and Asia has some obvious currency effects.

But the bulk of it is in the EMEA segment and if you didn't read the fine print in the webcast slide, we used a 1.05 Euro to U.S. dollar assumption in our forecast.

All right. That's what I have in my model.

So I appreciate that. And then lastly, when we look at the growth investments here for North America and think about how those will play out over the year, how should we ramp those in our models?

Should we have them ramping towards the back half of the year or evenly spread out over the four quarters?

Well I am not going to give you a quarter-by-quarter, but I will give you a little color on what we see. If you look at the industry data, the growth rates for calendar 2014 were stronger in the back half of the year than in the first half of the year.

So if you just think of it in what we are going to lap as we go through fiscal 2016 or calendar 2015 for the large part, you would expect growth rates to be a little bit easier or face easier comps in the first half of the year and a little tougher in the back half of the year. But that's about all I will give you.

Bobby, are you talking about the revenue impact or the actual spending on the growth initiatives?

Yes. I was looking for the spending on the $30 million to $40 million and how should we think about if the spending is going to be heavier in the first half or the spending will be heavier in the second half of the year?

I would say, they would be fairly steady with a slight increase toward the back half of the year.

Okay. Perfect.

That's helpful. That's what I was looking for.

Thank you for taking my questions and the best of luck going forward.

All right. Thank you.

Hi. Good morning, everyone and congrats on a nice quarter.

Just on the order number in the Americas, you said that was impacted from push outs and that some of the backlog will ship in 2Q instead of 1Q. And just thinking about that, is it really a matter mostly of these large project coming back as a bigger percentage of the business and pushing things out?

Or might there be something else going on? And what do you think the order number might have looked like if those project did fall in the first quarter?

Well, the order growth rate will look the same if they fell in the first quarter, because it's just a shipment date, right.

Yes. So the orders we were referring to are the orders we received in the fourth quarter that then turned into revenues as they shipped in the first or second quarter.

So the orders would have been the same. It's just the timing of shipments that we are expecting.

And beyond that, we have asked ourselves the same question. We have identified certain things like this reemergence of the large projects.

We know they have certain characteristics that causes lead times to be longer. We also watch carefully the rise and fall of the largest customers, large customers, et cetera and we have explored other theories that could have led to this pattern emerging of a longer order to ship cycle.

But a lot of those theories haven't panned out as we have dug into details to try to prove any of those theories to ourselves. We haven't found any kind of really clear other answer.

So the easiest one for us to talk about today is this one and the rest of it is kind of blurry. There might be something else going on.

But we just have to be honest, we haven't found the pattern yet.

Okay and do think there are any weather-related impacts, particularly in February in the Northeast?

We thought of that one too.

It could be but we certainly haven't been able to prove that out.

And last year we had quite significant weather-related issues during the same quarter. So we don't think weather is really a factor in the year-over-year.

Okay and in the slide deck, I noticed they had Turnstone led some of the demand this quarter. Does that tell you anything about the types of projects or anything about the overall economy that Turnstone to be leading demand right now?

I don't know that it tells us anything. What we are seeing Turnstone be effective in is not only with small customers but within larger customers as well.

And the growth is coming through our dealer. So it's not being -- and we were growing nicely through the web with Turnstone.

But if you looked at the absolute dollars associated with the growth in Turnstone, most of it is coming through our dealers, which can be both small and large customers.

We have a guy running that business now, Brian Shapland who has quite a number of roles at Steelcase, but hasn't run a business before and has been running Turnstone for a while and I have got to say, I am just delighted with the progress I am seeing Brian and that team make together to breathe new life, new energy into that brand and find a stronger connection with the customer. So I think a lot of the things that are happening internally are a big reason why that brand is doing as well as it is right now.

What is interesting, Josh, is even within large companies, there are groups of functions or groups or teams that want to behave like small companies and they are attracted to the Turnstone product as well.

Okay. That's interesting.

Just because you know, I had thought Turnstone was mostly associated with this increase in small to medium-sized projects. So it is interesting to hear that some of these larger projects and larger businesses taking part in that as well.

And then just last for me, could you touch on the raw material costs? Where do you see them headed, particularly for steel and resins?

Yes. So total, we still see inflation.

It is modest inflation. In total, we still see it, when we look across everything including our wage base and healthcare costs, aluminum, et cetera.

But we are seeing reduced steel prices. We are seeing the same thing.

So you would expect that from us. We are seeing fuel prices come down, which we know will have an impact on some of our raw material component purchases as well.

But in total, we still see modest inflation for the next year.

If you look at that, on the steel piece, I know the largest visibility in the market is for the coil steel, but we do buy a bunch of sheet metal, stamped metal and those prices haven't fallen as much of coil.

Yes. Our sourcing team is on it.

All right. Any price increases in the market that might help offset some of that modest inflation?

Yes. We did announce a price increase back, I think, in January, a modest price increase, effective for various markets around the world, low single-digit on average.

That went into effect in January?

It's an April date, I think.

Yes. And the effect of it actually rolls forward because we have a number of customer contracts that has each of them with their own negotiated terms in terms of how and when price increases are incorporated.

So the current price increase starts a new cycle. But we still have price increases from a year ago and even three years ago that continue to roll in.

So we think that we are doing a good job of making sure we keep our price increases in line with inflationary factors that Dave mentioned before.

Okay. I appreciate the color.

Thanks and good luck going forward.

Thanks Josh.

Hi, everyone. I wanted to get your take on the pricing environment from a competitive standpoint.

I know you have mentioned that in the Americas at least the environment has improved. I wonder if you could elaborate a bit on that?

There is not really anything to elaborate on, Todd. It has been relatively consistent.

I am not in weekly pricing discussions with our sales leaders. But I haven't heard any noise out of it that it's changing in any kind of significant way.

Yes. I would say, from everything I know, here and around the world, pricing -- we are in a competitive industry.

There is no question about it. And there is always interesting competitive dynamics happening in local regions.

But I wouldn't say there is anything at a meta level, a trend going one way or the other. We think it's been competitive.

It is competitive. It is likely to continue to be competitive.

And historically, where it's been most competitive is typically been in the federal government sector.

Yes. On the win rate, you had mentioned earlier that your win rate is still quite strong.

Can I get you to put some numbers to that? Just give us some kind of delta?

Maybe in recent quarters as well as year-over-year what that trend has been and again maybe any numbers you could offer up, if possible, would be of great help?

Todd, I am hesitant to put any kind of percentage on that. And the reason is, to be honest, I never entirely have confidence that all of our projects are entered into our database.

So our win rate seems very high in absolute percentage. But is that because we enter the wins and don't enter the losses?

I just don't have a high level of confidence that everything is entered in an entirely accurate way. Our win rates have improved, not necessarily year-over-year that they have improved, but more over the last three to five years, we feel like they have improved.

That's consistent with our market share gains. But I want to stay away from giving an absolute percentage.

Internally, we look at lots of different ways, both quantitatively but also qualitatively, for the reason that Dave says. And so we will look at win rates among non-customers where we have an opportunity to serve a customer we haven't served before.

Win rates on contracts, win rates on projects, win rates in different regions. And that's really what I am referring to.

We don't really add it all up into a total Inc. win rate.

I don't have a number like that. And as Dave said, even if we did, it would have some serious questions.

But if you listen to those conversations, if you sat in the room as I do in many cases, I talked with our sales leaders in all these regions, we are not feeling a dramatic shift. That's really the essence of your question.

Are you at the table about as much as you always are? Is there any reason to think that your participation rate, for lack of a better word, is dramatically different from what it's been?

I believe we are. We ask that question too, are we getting all the bets?

The places where we have the most visibility about that are in the larger projects with a larger customers. We are the market leader in the Americas.

We are the market leader in EMEA globally. And so we are, I am not going to sat we are always at the table, but it would be unusual for us not be at the table for a customer who is considering multiple suppliers.

And we have not seen any change in that.

Great. Thank you.

Okay. Thank you, Todd.

Hi, guys.

Hi, Peter.

Just a quick question. Going back to contribution margins.

You mentioned that you expect contribution margins in North America to be in the low 20% range. How does the investment spend impact that contribution margin, one way or the other?

Good question. It does impact the contribution margin, but not entirely.

So what we always do is give a contribution margin that includes what we need to invest to drive the current year sales growth. So that can be additional feed on the street, variable costs related to those sales, royalties, commissions, T&E, et cetera and any kind of incremental investment that's expected to have a near-term payback.

So the contribution margin that I quoted for the Americas of between 20% and 25% reflects the level of investment that we think we need to make to drive the revenue growth. When I quote $30 million to $40 million, it's implied that part of that is in or impacts the Americas contribution margin.

Got it. Okay.

And then your contribution margin in the U.S. this year was a little weaker than it has been.

Why was that?

For the full fiscal year?

Yes.

Yes. I would go back to the first quarter and highlight that, as that was really the only unusual period that we had in the Americas.

In the first quarter, we had relatively high warranty costs, distribution and logistics costs and a relatively high overhead spend. So it was the first quarter, I believe, in something more than 20 quarters where our cost of sales in the Americas was higher than the prior year.

And since then, our cost of sales in the Americas has been either flat or improved compared to the prior year.

Okay. Perfect.

That's really the only big driver.

Yes. Okay.

Thanks.

Well, I just want to thank everybody on the call again for your interest in Steelcase and your investments in Steelcase. We are pleased with the quarter and pleased with the year we have completed.

Looking forward to another great year ahead. So thank you all very much.