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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 25, 2005

Commission File Number 1-13873

STEELCASE INC.

(616) 247-2710

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

Securities registered pursuant to 12(g) of the Act: None

     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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

     As of April 27, 2005, the registrant had outstanding 64,181,028 shares of Class A Common Stock and 84,688,191 shares of Class B Common Stock. The aggregate market value of the Class A Common Stock held by non-affiliates of the registrant was $852,053,904 computed by reference to the closing price of the Class A Common Stock on August 27, 2004 as reported by the New York Stock Exchange. Although there is no quoted market for registrant’s Class B Common Stock, shares of Class B Common Stock may be converted at any time into an equal number of shares of Class A Common Stock. Using the closing price of the Class A Common Stock on August 27, 2004, as reported by the New York Stock Exchange as the basis of computation, the aggregate market value of the Class B Common Stock held by non-affiliates was $880,585,521.

DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the registrant’s definitive proxy statement for its 2005 Annual Meeting of Shareholders, to be held on June 23, 2005, are incorporated by reference in Part III of this Form 10-K.

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STEELCASE INC.

FORM 10-K

YEAR ENDED FEBRUARY 25, 2005

TABLE OF CONTENTS

PART I

      The following business overview is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this Annual Report on Form 10-K (“Report”). As used in this Report, unless otherwise expressly stated or the context otherwise requires, all references to “Steelcase,” “we,” “our,” “the Company” and similar references are to Steelcase Inc. and its consolidated subsidiaries. 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, Q1 2005 references the first quarter of fiscal 2005. All amounts are in millions, except per share data, data presented as a percentage or unless otherwise indicated.

NARRATIVE DESCRIPTION OF BUSINESS

      Steelcase is the world’s leading designer, marketer and manufacturer of office furniture and complimentary products and services, with 2005 revenue of approximately $2.6 billion. We were incorporated in 1912 as The Metal Office Furniture Company and changed our name to Steelcase in 1954. We became a publicly-traded company in 1998 and our stock is listed on the New York Stock Exchange.

      The Company’s mission is to provide knowledge, products and services that provide a better work experience for our customers. We expect to grow the business by focusing on new geographic and customer market segments while continuing to leverage our existing customer base, which we believe represents the largest installed base in the industry.

      Headquartered in Grand Rapids, Michigan, Steelcase is a global company with approximately 14,500 employees. We sell our products through various channels including independent dealers, company-owned dealers, direct sales to end-users and governmental units. Other channels are employed as appropriate to reach new customers and to serve existing customer segments more efficiently. We operate using a global network of manufacturing and assembly facilities to supply product to our various operating segments.

Our Products

      We are focused on providing knowledge, products and services that enable our customers to create work environments that help people in offices work more effectively while helping organizations utilize space more efficiently. We offer a broad range of products with a variety of aesthetic options and performance features, and at various price points that address the three core elements of a work environment: furniture, interior architecture and technology. Our reportable segments generally offer similar or complementary products under some or all of the categories listed below:

  Furniture

      Panel-based and freestanding furniture systems. Moveable and reconfigurable furniture components used to create individual workstations and complete work environments. Systems furniture provides visual and acoustical privacy, accommodates power and data cabling, and supports technology and other worktools.

      Storage. Lateral and vertical files, cabinets, bins and shelves, carts, file pedestals and towers.

      Seating. High-performance, ergonomic, executive, guest, lounge, team, health care, stackable and general use chairs.

      Tables. Conference, training, personal and café tables.

      Textiles and surface materials. Upholstery, wallcovering, drapery, panel fabrics, hand-tufted rugs, architectural panels, shades and screens and surface imaging.

      Desks and Suites. Wood and non-wood desks, credenzas and casegoods.

      Worktools. Computer support, technology management, information management products and portable whiteboards.

      Interior architecture. Full and partial height walls and doors with a variety of surface materials, raised floors and modular post and beam products.

      Lighting. Task, ambient and accent lighting with energy efficient and user control features.

      Infrastructure. Infrastructure products, such as modular communications, data and power cabling.

      Appliances. Group communication tools, such as interactive and static whiteboards, image capturing devices and web-based interactive space-scheduling devices.

Reportable Segments

      We operate on a worldwide basis within three reportable segments: North America, the Steelcase Design Partnership (“SDP”) and International, plus an “Other” category. Additional information about our reportable segments, including financial information about geographic areas, is contained in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 15 to the consolidated financial statements.

      Our North America segment serves customers mainly through independent and owned dealers in over 330 locations in the United States and Canada. Each of our dealers maintains their own sales force which is complemented by our sales representatives who work closely with the dealers throughout the sales process. No single independent dealer accounted for more than 4.6% of our segment revenue for 2005. The five largest independent dealers collectively accounted for approximately 12.2% of our segment revenue.

      We do not believe our business is dependent on any single dealer, the loss of which would have a material effect upon our business. However, temporary disruption of dealer coverage within a specific local market due to financial failure or the inability to smoothly transition ownership could temporarily have an adverse impact on our business within the affected market. From time to time, we obtain a controlling interest in dealers that are undergoing an ownership transition. It is typically our intent to sell these dealerships as soon as it is practical.

      Our offerings in the North America segment include furniture, architecture, and technology products, as described above, under the Steelcase and Turnstone brands. In 2005, the North America segment accounted for $1,439.4 or 55.1% of our total revenue and had approximately 7,500 employees, approximately 5,900 of which are manufacturing employees.

      The North America office furniture markets are highly competitive, with a number of competitors offering similar categories of product. In these markets, companies compete on price, delivery and relationships with customers, architects and designers. Our most significant competitors in the United States are Haworth, Inc., Herman Miller, Inc., HNI Corporation, Kimball International, and Knoll, Inc. Together with Steelcase, these companies represent approximately 60% of the United States office furniture market.

      The SDP segment is comprised of five brands focused on higher end design furniture products and niche applications. Each brand has its own competitors which are generally focused on a small group of specialized products. DesignTex is focused on surface materials including textiles, wall covering, hand-tufted rugs, shades, screens and surface imaging. Details designs and markets ergonomic tools and accessories for the workplace. Brayton, Vecta, and Metro each provide different furniture products, including solutions for lobby and reception areas, conference rooms, private offices, health care and learning environments. The SDP segment markets and sells its products through many of the same dealers as the North America segment. In 2005, the SDP segment accounted for $322.2, or 12.3% of our total revenue and had approximately 1,300 employees, approximately 600 of which are manufacturing employees.

      Our International segment serves customers outside of the United States and Canada under the Steelcase and SDP brands. The International office furniture market is highly competitive and fragmented. We compete with many different local or regional manufacturers in many different markets. In most cases, these competitors focus their strengths on selected product categories. The International segment has its most significant presence in Europe where we have the leading market share. The International segment serves customers through independent and company-owned dealers in about 490 locations. In certain geographic markets the segment sells directly to customers. In 2005, our International segment accounted for $590.5, or 22.6% of our total revenue and had approximately 3,500 employees, approximately 1,400 of which are manufacturing employees.

      The Other category currently includes our PolyVision, IDEO and Financial Services subsidiaries and unallocated corporate expenses.

      PolyVision Corporation designs and manufactures visual communications products, such as static and electronic whiteboards. The majority of PolyVision’s revenue relates to static whiteboards in the primary and secondary education markets. PolyVision primarily sells to general contractors through a direct bid process. PolyVision’s remaining revenues are generated from electronic whiteboards sold through our North America dealer network and other audio-visual resellers.

      IDEO Inc. provides product design and innovation services to companies in a variety of industries including computers, communications, healthcare, and manufacturing among others.

      Steelcase Financial Services Inc. provides leasing services to North America and SDP customers and selected financing services to our dealers.

      Approximately 85% of corporate expenses for shared services are charged to the operating segments as part of a corporate allocation. Unallocated expenses are reported within the Other category.

      In 2005, the Other category accounted for $261.7, or 10.0% of our total revenue.

      Our largest direct sale customer accounted for approximately 1.3% of our consolidated revenue and our five largest direct sell customers accounted for approximately 4.6% of consolidated revenue. However, these percentages do not include revenue from various government agencies and other entities purchasing under our General Services Administration contract, which in the aggregate accounted for approximately 2.4% of our consolidated revenue. We do not believe our business is dependent on any single or small number of end-use customers, the loss of which would have a material adverse effect upon our business.

      No single independent dealer accounted for more than 2.9% of our consolidated revenue for 2005. The five largest independent dealers collectively accounted for approximately 7.7% of our consolidated revenue. See Note 14 to the consolidated financial statements for additional information.

Global Manufacturing and Supply Chain

      Historically, each of our segments, and in some cases, brands within segments, had their own dedicated manufacturing facilities. In many cases, these plants were highly vertically integrated which helped us maintain control over our make-to-order system. We invested in automation which improved labor productivity but also resulted in a relatively capital intensive operation with significant work in process inventories because of a batch and queue approach.

      Over the last several years, we have been migrating to a different industrial model based on lean principles which emphasize continuous one-piece flow and discourages batch and queue. Moving to this approach has reduced the capital needs of the business, reduced inventories, and reduced the amount of floor space we need to produce product.

      The migration to lean manufacturing along with the industry downturn created significant excess manufacturing capacity which we have started to eliminate over the last few years. In 2000, we had approximately 17.7 million square feet of manufacturing facilities worldwide. During fiscal years 2001 to 2004, we have undergone significant restructuring driven by the need to reduce our excess capacity in response to lower industry demand. At the end of 2005 we had reduced our square footage dedicated to manufacturing by 5.9 million square feet to 11.8 million square feet, and recently announced plans to further reduce square footage to 9.2 million square feet over the next two years. We currently manufacture our products in 30 principal locations throughout the world. See Item 2: Properties for additional information regarding real estate held for sale and idle property. We will continue to examine opportunities to consolidate manufacturing and distribution operations and dispose of assets that represent excess capacity.

      The increased breadth of our product line over the last 10 years has increased the number of manufacturing stock keeping units (“SKUs”), which has increased the complexity and cost of many of our manufacturing operations. The Company has launched an initiative to streamline our product offerings and increase sales volume per SKU to reduce complexity in our industrial system.

      The next step in creating a more flexible industrial model is to move away from facilities dedicated to manufacturing for a single or limited number of geographic locations, and towards a global network of manufacturing, assembly and logistics operations and a global network of integrated suppliers that can serve customer needs across multiple brands and geographies. In 2005, we centralized our global manufacturing under a single organization to help achieve this goal. This change had no impact on how our operating results are reviewed by our chief operating decision maker.

      Our physical distribution system in North America and Europe utilizes both our company-owned trucking fleet and commercial transport and delivery services. In North America, we are in the process of establishing a number of regional distribution centers throughout the United States to reduce freight cost and improve service to customers and dealers.

      The Company’s manufacturing materials are available from a significant number of sources within North America, Europe and Asia. To date, we have not experienced difficulties obtaining raw materials, which include steel and other metals, lumber, paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers and upholstery filling material. These raw materials are not unique to the industry nor are they rare. Steel and certain other commodity prices have significantly increased over the past 18 months due to changes in global supply and demand. Although raw steel prices have moderated in recent months, they are still approximately twice as high as 18 months ago. There is

some risk that these changes could lead to future supply interruptions although we do not expect nor have we experienced any such interruptions to date. See Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of raw materials prices.

Research, Design and Development

      Steelcase’s extensive research— a combination of user observations, feedback sessions and sophisticated network analysis— has helped the Company develop unique expertise in helping people work more effectively. We team up with other innovators— leading universities, think tanks and knowledge leaders— to expand and deepen our understanding of how people work. We also collaborate with IDEO, our subsidiary that provides design and innovation services worldwide. IDEO has won over 100 Industrial Design Excellence Awards (sponsored by Business Week magazine), 12 of which were for projects with Steelcase or SDP.

      Understanding patterns of work enables us to identify and anticipate user needs. Our design teams develop prototypical solutions to address these needs. These solutions are sometimes single products and/or enhancements to existing products, and are sometimes integrated architecture, furniture and technology solutions. Design work is organizationally distributed across our major businesses and can involve outside design services.

      Our marketing team evaluates product concepts using several criteria, including financial return metrics, and chooses which products will be developed and launched. Next, designers work closely with our engineers and outside suppliers to co-develop products and processes that lead to more efficient manufacturing while incorporating innovative user features. Products are tested for performance, quality and compliance with applicable standards and regulations.

      Exclusive of royalty payments, we have invested $137.2 in research, design and development activities over the past three years. Royalties are sometimes paid to outside designers of our products as the products are sold and are not included in the research, design and development costs since they are variable based on product sales. The Company continues to invest approximately two percent of its revenue in research and development each year. See Note 2 to the consolidated financial statements for more information regarding research, design and development costs.

Intellectual Property

      Steelcase’s commitment to research and development has resulted in its being awarded more design and utility patents than any other manufacturer in its industry. Currently, Steelcase holds approximately 650 active U.S. design and utility patents for current and anticipated products, and approximately 850 patents in other countries. The average remaining life of the utility patents in our United States portfolio is approximately 11 years.

      We occasionally enter into license agreements under which we pay a royalty to third parties for the use of patented products, designs or process technology. We have also registered various trademarks and service marks in the United States and other countries. Collectively, we hold registrations for approximately 150 United States and 1,350 foreign trademarks. We have established a global network of intellectual property licenses with our affiliates. We also selectively license our intellectual property to third parties as a revenue source. For example, our Leap® seating technology has been licensed for use in automotive and aircraft seating, and we are pursuing other licensing opportunities for this technology.

      We do not believe that any material part of our business is dependent on the continued availability of any one or all of our patents or trademarks, or that our business would be materially adversely affected by the loss of any, except the “Brayton,” “DesignTex,” “Details,” “Leap,” “Metro,” “PolyVision,” “Steelcase,” “Turnstone,” “Vecta” and “Werndl” trademarks.

Working Capital

      Our receivables are primarily from our dealers, and to a lesser degree, direct sell customers. Payment terms vary by country and region. The terms of our North America and SDP segments, and certain markets within the International segment, encourage prompt payment by offering a discount. Other International markets have, by market convention, longer payment terms. We are not aware of any special or unusual practices or conditions related to working capital items, including accounts receivable, inventory and accounts payable, which are significant to understanding our business or the industry at large.

Backlog

      Our products are generally manufactured and shipped within four to six weeks following receipt of order; therefore, we do not view the amount of backlog at any particular time as a meaningful indicator of longer-term shipments.

Environmental Matters

      We are subject to a variety of federal, state, local and foreign laws and regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment (“Environmental Laws”). Subject to the matter noted below, and under Item 3, Legal Proceedings, we believe our operations are in substantial compliance with all Environmental Laws. We do not believe that existing Environmental Laws and regulations have had or will have any material effects upon the capital expenditures, earnings or competitive position of the Company.

      In June 2002, the United States Environmental Protection Agency (“EPA”) and Michigan Department of Environmental Quality (“MDEQ”) conducted an inspection of the energy centers and other air emission sources at the Steelcase facilities in Kentwood and Grand Rapids, Michigan. Following the inspection, the EPA requested stack testing, which showed anomalous results for sulfur dioxide. Additional testing confirmed that a supplier providing coal not meeting Steelcase’s purchase specifications caused the anomalous results. To avoid future occurrences, Steelcase has changed the process for testing coal prior to its use by the Company and will be adding continuous emissions monitoring equipment. Although the MDEQ has concurred informally with our assessment of the cause of the anomalous results and our changes in coal testing and emissions monitoring, it is still possible that MDEQ or EPA could issue a notice of violation and seek penalties or other costs. Potential penalties or costs cannot be estimated at this time.

      Under certain Environmental Laws, Steelcase could be held liable, without regard to fault, for the costs of remediation associated with our existing or historical operations. We could also be held responsible for third-party property and personal injury claims or for violations of Environmental Laws relating to contamination. Steelcase is a party to, or otherwise involved in, legal proceedings relating to several contaminated properties being investigated and remediated under Environmental Laws. Based on our information regarding the nature and volume of wastes allegedly disposed of or released at these properties, the number of other financially viable potentially responsible parties and the total estimated cleanup costs, we do not believe that the costs to us associated with these properties will be material, either individually or in the aggregate. The Company has established reserves we believe are adequate to cover our anticipated remediation costs. However, certain events could cause actual costs or losses to vary from the established reserves. These events include, but are not limited to: a change in governmental regulations and/or cleanup standards or requirements; undiscovered information regarding the nature and volume of wastes allegedly disposed of or released at these properties; and other factors increasing the cost of remediation or the loss of other potentially responsible parties that are financially capable of contributing towards cleanup costs.

Employees

      As of February 25, 2005, Steelcase had approximately 14,500 workers, including approximately 8,100 hourly, 5,600 salaried employees and 800 temporary workers. Approximately 440 employees in the United States are covered by collective bargaining agreements. Internationally, a significant number of employees are covered by workers’ councils that operate to promote the interests of workers. Management believes that we continue to maintain strong relations with our employees.

Available Information

      We file annual reports, quarterly reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including Steelcase, that file electronically with the SEC.

      We also make available free of charge through our Internet website, http://www.steelcase.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports, as soon as reasonably practicable after we electronically file such reports with or furnish them to the SEC. In addition, the Company’s governance guidelines and the charters for the Audit, Compensation, and Nominating and Corporate Governance Committees are available free of charge through our website or by writing to Investor Relations, PO Box 1967, Grand Rapids, Michigan 49501-1967.

      The Company adopted a code of ethics, known as the Steelcase Inc. Code of Ethics for Chief Executive and Senior Financial Officers, which applies to our chief executive officer, chief financial officer, controller and other persons performing similar functions. In addition, the Company adopted the Steelcase Inc. Code of Business Conduct, which applies to all directors and employees worldwide. These codes, including future amendments, are available free of charge through our website or by writing to Investor Relations, PO Box 1967, Grand Rapids, Michigan 49501-1967. We will also post on our website any waiver under the codes granted to any of our directors or executive officers. As of the date of this report, no waivers have been granted.

      We are not including the information contained on our website as a part of, or incorporating it by reference into, this Report.

      The Company, including subsidiaries, has operations at locations throughout the United States and around the world. None of our owned properties are mortgaged or are held subject to any significant encumbrance. We believe our facilities are in good operating condition and that, at present, are in excess of that needed to meet current volume needs and future increases. The Company is currently reducing its owned properties to a more appropriate level. Our corporate headquarters is

located in Grand Rapids, Michigan. Our owned and leased principal manufacturing and distribution locations are as follows:

      In addition to the facilities included in the table above, we have six idle facilities. We are currently holding for sale three of these facilities that are no longer in use, but are actively marketed. These assets are reported as real estate held for sale included in Other Current Assets on our Consolidated Balance Sheets. The remaining three idle facilities consist of manufacturing and office space. These facilities do not qualify as real estate held for sale since we do not expect to sell the space within the next twelve months or are not currently marketing the space. In March of 2005, we announced plans to close three additional manufacturing facilities which will become idle over the next two years. See Note 5 of our consolidated financial statements for further information on property.

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

      In July 2004, the California South Coast Air Quality Management District (“SCAQMD”) issued a Notice of Violation in connection with the transfer of Steelcase’s California operations from Tustin to City of Industry (“COI”). As a part of the operations transfer, certain environmental emission permits were transferred from the Tustin facility to COI with the intent that Tustin be left with sufficient emission credits to conduct its wind-up operations. The Tustin facility was obligated to submit quarterly reconciliations showing that the combined operations of Tustin and COI met the overall permit limits. Although Tustin facility personnel submitted the reconciliations showing that overall permit limits had been met, the final reconciliation was submitted several days late due to an administrative oversight. Because of the late submission, the SCAQMD views the Tustin emissions as exceeding applicable limits. Potential penalties, costs or assessments have not yet been sought and cannot be estimated at this time.

      In addition to the energy center issues noted under Environmental Matters, an additional issue was identified during the stack testing at the Grand Rapids energy center, when the diameter of the exhaust stack was questioned. The interior diameter of the stack was measured and found to be wider than the diameter specified in the permit. On April 24, 2003, MDEQ issued a letter of violation based on the non-compliant stack diameter. Steelcase conducted emission modeling, which confirmed that the larger diameter does not effect emissions. The MDEQ has indicated that it will not seek any penalty or other costs under the notice of violation.

      For a description of other matters relating to our compliance with applicable environmental laws, rules and regulations, see Environmental Matters in Item 1 of this Report.

      None.

      Executive officers include:

      Mark A. Baker has been Senior Vice President, Global Operations Officer since September 2004. Mr. Baker served as Senior Vice President, Operations from November 2001 to September 2004. Mr. Baker served as Vice President, Manufacturing Operations from March to November 2001. From 1999 to 2001, Mr. Baker served as Vice President, Marketing.

      Jon D. Botsford has been Senior Vice President, Secretary and Chief Legal Officer since June 2000. Mr. Botsford served as Senior Vice President, General Counsel and Secretary from 1999 to 2000.

      Mark T. Greiner has been Senior Vice President, WorkSpace Futures since November 2002. Mr. Greiner was Senior Vice President, Research & Development, Concepts and Ventures from 2001 to 2002. From 1999 to 2001, Mr. Greiner held the position of Senior Vice President, Global E-Business and Chief Information Officer.

      James P. Hackett has been President, Chief Executive Officer and Director of the Company since December 1994. Mr. Hackett also serves as a Board Member to Northwestern Mutual Life Insurance Company and Fifth Third Bancorp.

      Nancy W. Hickey has been Senior Vice President, Chief Administrative Officer since November 2001. Ms. Hickey served as Senior Vice President, Global Human Resources from March to November 2001. From 1999 to 2001, Ms. Hickey served as Vice President, Human Resources.

      James P. Keane has been Senior Vice President, Chief Financial Officer since April 2001. Mr. Keane served as Senior Vice President, Finance and Corporate Strategy from February to April 2001. From 1999 to 2001, Mr. Keane served as Senior Vice President, Corporate Strategy, Research and Development.

      Michael I. Love has been President and Chief Executive Officer, Steelcase Design Partnership since May 2000. Mr. Love was President of Vecta, a division of Steelcase, from 1994 to 2000.

      Frank H. Merlotti, Jr. has been President, Steelcase North America since September 2002. From 1999 to 2002, Mr. Merlotti was President and Chief Executive Officer of G&T Industries, a manufacturer and distributor of fabricated foam and soft-surface materials.

      James G. Mitchell has been President, Steelcase International since June 2004. Mr. Mitchell served as Managing Director, United Kingdom, from 2003 to June 2004. From 1999 to 2003, Mr. Mitchell was President of Steelcase Canada.

PART II

      The Class A Common Stock of Steelcase Inc. is listed on the New York Stock Exchange under the symbol “SCS”. Our Class B Common Stock is neither registered under the Securities Act of 1933 nor publicly traded. See Note 10 to the consolidated financial statements for further discussion of our common stock. As of April 27, 2005, we had outstanding 148,869,219 shares of common stock with 10,656 shareholders of record. Of these amounts, 64,181,028 shares are Class A Common Stock with 10,520 shareholders of record and 84,688,191 shares are Class B Common Stock with 136 shareholders of record.

      The declaration of dividends is subject to the discretion of the Board and to compliance with applicable law. Dividends in 2005 and 2004 were declared and paid quarterly. The amount and timing of future dividends depends upon our results of operations, financial condition, cash requirements, future business prospects, general business conditions and other factors that the Board may deem relevant at the time.

      The Board of Directors has authorized share repurchases of up to 11 million shares. We did not repurchase any common shares during 2005, 2004, or 2003. Approximately 3.8 million shares remain available for repurchase under the program and we have no outstanding share repurchase commitments. Since the inception of our repurchase program, 7.2 million shares have been repurchased for $112.7 million.

      See Item 12 of this Report for information on our equity compensation plans.

      The following review of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included within this Form 10-K.

Financial Summary

Results of Operations

Restatement of Financial Statements

      The Company has completed a review of its lease accounting policies and is correcting its method of accounting for certain leases by restating financial statements for 2004 and 2003. The restatement increased net loss by $0.6 and $0.7 in 2004 and 2003, respectively, and reduced retained earnings by $2.1 at February 22, 2002 from $1,320.6 to $1,318.5. The restatement had no impact on revenue or operating cash flows and, due to rounding, had no impact on earnings per share. The Company considers these restatement adjustments to be immaterial.

      The Company initiated its review of its lease accounting in response to a public letter published by the Chief Accountant of the SEC on February 7, 2005. The correction involves recording expense for leases with escalating rents on a straight-line basis over the lease term, rather than as payable. The Company’s Audit Committee, meeting on March 24, 2005, concurred with management’s recommendation that the Company should restate the financial statements.

      In addition, the Company’s investments in auction rate securities of $80.0 have been reclassified in the Company’s Consolidated Balance Sheet as short-term investments for 2004. Previously, these investments were classified as cash and cash equivalents. This reclassification also resulted in changes to the Company’s 2004 and 2003 Consolidated Statements of Cash Flows.

      See Note 3 to the Consolidated Financial Statements for a summary of the effects of these changes on our Consolidated Balance Sheets as of February 27, 2004, as well as on our Consolidated Statements of Operations and Cash Flows for 2004 and 2003.

Overview

      Steelcase returned to profitability in 2005.

      After experiencing a three-year sales decline in the global office furniture industry, the industry has begun to show signs of sustained recovery in the past year. In calendar year 2004, the industry grew by approximately 5% in the United States according to the Business and Institutional Furniture Manufacturer’s Association International.

      Our revenue increased 11.4% in 2005 compared to 2004 following a decline of 7.3% from 2003 to 2004. As compared to 2004, revenue benefited by $80.1 from dealers consolidated in 2005 and $41.3 from favorable currency translation effects in our International segment.

      Operating income improved $92.6 in 2005 primarily due to lower restructuring charges, the benefits realized from lean initiatives and prior restructuring activities. These improvements were partially offset by increases in commodity prices, increases in variable compensation expense, and disruptions from current year plant consolidations.

      Other income (expense), net, improved $5.3 in 2005 primarily due to interest income, gains on dealer transitions, and joint venture income. See further detail of the items in Other income (expense), net, in Note 12.

      We recorded net pre-tax operating charges for restructuring items totaling $13.4 in 2005, as compared to $53.5 in 2004, and $61.2 in 2003. The net charges in 2005 consisted of severance and asset impairment costs associated with consolidation of our North America wood plants and process outsourcing activities in International. See further discussion and detail of all these items in the Segment Disclosure analysis below and in Notes 15 and 17 to the consolidated financial statements.

      During Q2 2004, we sold substantially all of the net assets of our marine hardware and accessories business with the operating results of this business segregated as discontinued operations for all periods presented. See further discussion and detail in Note 16 to the consolidated financial statements.

      The cumulative effect of accounting change in 2004 represents the net after-tax charge related to our adoption of FIN 46(R), Consolidation of Variable Interest Entities. See further discussion and

detail in Note 2 to the consolidated financial statements. The cumulative effect of accounting change in 2003 represents the net after-tax charge related to our adoption of SFAS No. 142, Goodwill and Other Intangible Assets. See Note 7 to the consolidated financial statements for more information regarding goodwill and other intangible assets.

      As mentioned in Note 2 to the consolidated financial statements, the consolidation of two North America dealers and nine International dealers had no material effect on our 2005 net income.

Interest Expense; Other Income (Expense), Net; and Income Taxes

      The majority of the Company’s debt over the past several years related to term notes with fixed interest rates. Interest expense increased in 2005 primarily due to $2.9 in additional interest expense from the consolidation of debt from variable interest entities. Interest on our term notes has been stable since 2003 because the interest rates are fixed.

      Interest income increased in 2005 primarily due to higher cash and investment balances and higher interest rates.

      In 2005, we recorded a gain on dealer transitions which represented an equity return related to a previous International dealer transition and a recovery on dealer transition financing that was previously reserved. Losses on dealer transitions in prior years relate to uncollectible funds loaned to or invested in dealers to finance ownership changes. The majority of the loss recorded in 2004 related to an International dealer transition investment originally made in 1999. We took over full ownership of this dealer during 2004 and reduced the carrying value of the investment to the net book value of the underlying tangible assets, which approximated its fair value. During 2003, we recognized losses on dealer transitions primarily related to two International dealers that were significantly affected by the office furniture recession in their markets. Losses on dealer transitions do not include write-offs of receivables that have arisen as a result of product sales. Charges for write-offs associated with trade receivables from these affiliates are recorded as operating expenses.

      We carefully monitor the financial condition of dealers in ownership transition. Most of the dealers that have transition financing from Steelcase have successfully reduced costs and taken other steps to manage through the downturn. However, we have established reserves for certain dealers facing difficult financial challenges. We believe our reserves adequately reflect the credit risk associated with these dealers. If these dealers experience additional financial challenges, the likelihood of losses would increase and we would record additional charges or reserves, as necessary.

      During 2004, we recorded a gain on disposal of property and equipment primarily related to property sold in the United Kingdom for net cash proceeds of $11.5 and a pre-tax non-operating gain of $7.0. This facility was idle for about three years as a result of prior restructuring activities. The gain

in 2003 was primarily related to the sale of our Tustin, California manufacturing facility following the relocation of the operations to a smaller, more efficient facility. We received net cash proceeds of $35.7 and recorded a gain of $15.1 on the Tustin facility sale.

      Miscellaneous, net includes items such as gains and losses on foreign exchange and gains and losses on the sale of venture investments.

      In 2005, we recorded an $8.2 reduction in a specific tax reserve. The tax reserve was originally recorded in response to a fiscal 1997 tax calculation that was later rejected by the IRS. At the time of the rejection, we recorded a reserve for the total amount of the deduction while we challenged the IRS’s decision. During Q3 2005, the Tax Court ruled favorably on a similar case related to another company. Because we believed this precedent supported our position, we reduced the original reserve by $6.5. During Q4 2005, the IRS agreed to settle the claim and the tax reserve was adjusted by an additional $1.7.

      We calculated our tax expense for 2005 using a 30% rate and then adjusted it for the $8.2 favorable reserve reduction. We expect our long-term effective tax rate to remain between 37% and 38%.

Segment Disclosure

      See more information regarding segments in Part I Item 1 and Note 15 of the consolidated financial statements included with this Report.

North America

      North America was profitable in 2005 on higher revenue and improved gross profit margins. Performance improved due to lower restructuring charges in the period and benefits realized from prior restructuring actions.

      Revenue increased 12.4% in 2005 following a decline in 2004 of 14.5%. 2005 revenue growth was primarily supported by sales to large customers which grew in excess of 25% from 2004. Additionally, Turnstone brand sales of moderately priced products increased over 35% in 2005. Revenue also included $57.0 from the dealers newly consolidated in 2005.

      Cost of sales as a percentage of revenue improved 1.1 percentage points in 2005. Improved overhead absorption, continued implementation of lean manufacturing principles, along with other operational improvements more than offset the negative impacts of rising commodity prices, increased variable compensation and other expenses. Disruption caused by the rationalization of two manufacturing plants also negatively impacted gross profit throughout much of 2005, particularly in the second half of the year.

      In the first quarter of fiscal 2005, we implemented a steel surcharge in North America to cover the rising price of steel. The impact of the increased steel costs, net of increased revenue, reduced gross margins by 1.1% of sales.

      Restructuring costs reported separately from cost of sales in 2005 related to the consolidation of our furniture manufacturing facilities. These costs included $6.3 in severance costs for workforce reductions and $4.0 for asset impairments partially offset by a curtailment gain of $2.5 for post-retirement medical benefits. Restructuring items included within 2004 and 2003 cost of sales primarily consisted of severance costs for workforce reductions and asset impairment charges.

      In 2006, we expect to continue to reduce excess capacity resulting from the implementation of lean manufacturing principles and other operational improvements. We announced additional restructuring activities in March 2005. The estimated net pre-tax restructuring charges of $25 to $30 over the next two years related to these activities consist of net costs of employee terminations, the impairment of certain fixed assets and the cost of relocating production lines. As part of these consolidation efforts, we expect to reduce excess manufacturing space by approximately 2.6 million square feet over the next two years. Once this two-year project is complete, we expect annual pretax savings of approximately $35 to $45.

      The improvement in operating expenses as a percentage of revenue in 2005 compared to 2004 was primarily a result of continued cost control and higher volume. The improvement was partially offset by an increase in variable compensation expense of $33.0 and $17.4 from the dealers newly consolidated in 2005.

      Restructuring charges that are separate components of operating expenses in 2005, 2004, and 2003 represented severance costs for workforce reductions, net of curtailment gains.

      We maintain loss reserves related to dealer trade receivables, and we closely monitor the financial condition of our dealers. We have processes that allow us to monitor and react quickly to changes in the credit quality of our dealers. We believe our reserves adequately reflect the credit risks associated with the dealer trade receivables. However, if our dealers are not able to reduce costs and take other necessary steps during an industry downturn, the likelihood of losses would increase and additional charges or reserves would be necessary.

Steelcase Design Partnership

      SDP improved profitability significantly in 2005. Revenue for the SDP segment increased 16.9% in 2005 following a decline of 5.4% in 2004. Each of the brands within SDP reported significant sales growth for the year, and growth was strong across most different product categories.

      SDP has the highest margins among all of our segments. Gross margins as a percent of revenue improved to 38.0% in 2005 compared to 37.2% in 2004 primarily due to the spread of fixed costs over a higher volume of sales and favorable product mix. Margins were also improved due to continued cost containment efforts, partially offset by higher commodity costs.

      Operating expenses as a percent of revenue decreased during 2005 primarily due to higher volume and continued cost control partially offset by higher variable compensation expenses and increased product development and showroom spending. Restructuring costs related to operating

expenses in 2004 included $0.7 for lease impairments and $0.2 of severance charges for workforce reductions.

International

      International operating results significantly improved in 2005 with a $22.1 reduction in operating loss. The improved results were driven by lower restructuring costs and improved cost of goods sold.

      Revenue increased 9.5% in 2005 due to $41.3 from favorable currency translation effects and $23.1 from dealers consolidated in 2005. In 2004, revenue increased 11.0% due to the benefit of $77.1 from favorable currency translation effects. International revenue is closely linked to economic conditions in France, Germany, Spain and the United Kingdom and to a lesser extent, other Western European countries. The International segment saw shipment declines in many of these markets in the current year. Fourth quarter revenues and order patterns seem to suggest that the economic environment is stabilizing in these markets as we enter 2006. Eastern and Central European, Latin American and Asia Pacific export markets posted modest growth in 2005 compared to varied results in 2004.

      Gross margins as a percent of revenue improved to 30.4% in 2005 from 25.1% in 2004 primarily due to lower restructuring costs and benefits from prior restructuring activities. The 2004 restructuring costs primarily related to the closure or consolidation of manufacturing facilities, including workforce reductions. Restructuring costs in 2003 primarily related to charges for workforce reductions and business exit costs.

      Operating expenses in absolute terms increased in 2005, primarily due to $12.6 of currency translation effects and $11.6 related to dealer consolidations. Restructuring costs related to operating expenses in 2005, 2004 and 2003 primarily consisted of charges related to workforce reductions and business exit costs.

      Economic conditions in certain countries continue to put profitability pressure on some of our dealers. We continue to monitor the financial condition of dealers for changes in credit quality but 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.

Other

      Our Other category includes our PolyVision, IDEO, and Financial Services subsidiaries, and unallocated corporate expenses. The reduction in operating loss in 2005 was due to several factors including:

      Approximately 85% of corporate expenses representing shared services are charged to the operating segments as part of a corporate allocation. The unallocated portion of these expenses is considered general corporate costs and is reported within the Other category. Revenue and costs of exploring new business opportunities within new market niches or areas related to, but not part of, our core business activities are considered ventures, and are reported in the Other category.

      Restructuring costs included in 2005 operating results included a PolyVision lease impairment and workforce reductions. Restructuring costs in 2004 and 2003 primarily related to workforce reductions.

      Over the past two years, our Financial Services subsidiary has implemented a new strategy in which we originate leases for customers and earn an origination fee on that service. We use a third party to provide lease funding. As a result, we no longer have credit or residual risk related to those leases. Additionally, we sold a substantial portion of our old leasing portfolio during 2003 and 2004. As a result, our overall credit exposure to our underlying net investment in these older leases has decreased. We have processes that allow us to monitor and react quickly to changes in the credit quality of our lease customers. The overall credit quality of our portfolio improved during 2005 and our risk of exposure decreased as customers became more financially stable and as balances declined with normal lease payments. We reduced some previously established credit reserves by $4.7 in 2005 due to the improved performance on specific leases. We closely monitor our receivable exposure and the overall financial condition of the dealers in North America to whom we extend working capital financing. Although we believe reserves are adequate in total, deterioration in the financial stability of larger customers and dealers would likely require us to record additional charges and reserves.

Liquidity and Capital Resources

Liquidity

      The following table summarizes our statement of cash flows:

      During 2005, we increased cash and cash equivalents by $34.4 to a balance of $216.6 as of February 25, 2005, our highest level of cash since 1998. These funds and our short-term investments, 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. The increase in cash and cash equivalents was due to a number of factors. Operating activities generated cash from net income plus depreciation and amortization which is added back to net income. Depreciation and amortization continue to be much higher than current levels of capital expenditures. Financing activities used cash to pay down debt and to pay dividends.

      Cash and cash equivalents include $24.4 invested in a money market fund, the use of which is restricted as collateral primarily for our accrued liability related to our workers’ compensation program. If this restricted cash is needed for liquidity purposes, we can replace the collateral for our workers’ compensation program with a letter of credit and have full access to the proceeds of the money market fund.

      During 2005, we reclassified our investments in auction rate securities from cash and cash equivalents to short-term investments. Auction rate securities classified as short-term investments were $131.4 and $80.0 as of February 25, 2005 and February 27, 2004, respectively. These investments are typically held for approximately 30 days, and all investments held at year-end were converted to cash by March 29, 2005. Because auction rate securities are no longer classified as cash, acquisitions of investments in these securities are a use of cash from investing activities and liquidations of these securities are a source of cash from investing activities. Notes 2 and 3 to the Consolidated Financial Statements provide more information regarding this reclassification.

      We look at various scenarios for cash planning purposes. In one possible scenario—a substantial and rapid increase in revenue in a short period of time—we anticipate we would likely experience a corresponding rapid increase in accounts receivables and inventories. This rapid increase in required working capital would represent a significant use of cash. We retain sufficient cash balances to respond to working capital needs driven by a rapid increase in revenue.

      Significant uses of cash in Q1 2006 include approximately $51.0 in debt repayments and an annual payment of $36.3 related to 2005 variable compensation.

Cash provided by operating activities

      Cash flow provided by operating activities was sufficient to fund our capital expenditure needs for 2005 and we expect this trend to continue.

      The year-to-year change in cash generated from operating activities was primarily due to improvements in year-over-year income from continuing operations. Additionally, Other, net, decreased primarily due to current year restructuring payments, lower charges related to dealer transitions and fixed asset impairments and disposals.

      Most of the change in cash generated from operating activities from 2003 to 2004 was due to a reduction in net loss, a gain on sale of net assets of discontinued operations in 2004, a cumulative effect of accounting change in 2003, and changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by lower revenue, lower manufacturing volume, and implementation of lean manufacturing principles.

Cash provided by (used in) investing activities

      We used cash in investing activities in 2005 primarily for the net acquisition of short-term investments in auction rate securities (see Note 2) and capital expenditures. We continue to closely scrutinize capital spending to ensure we are making the right investments to sustain the business and to preserve our ability to introduce innovative, new products. In 2005, capital expenditures were less than half of depreciation, which represented a source of cash.

      In 2004 and 2003, we generated cash from investing activities primarily from the sale of leased and fixed assets and the sale of our Attwood facility in 2004. The sale of leased assets was primarily due to the new lease funding strategy implemented by our Financial Services subsidiary in 2004. In preparation for its new strategy, Financial Services sold a large portion of its lease portfolio in 2003 and continued to sell a portion of the remaining leased assets during 2004 and 2005. Under its new strategy, Financial Services continues to originate leases for customers, but uses a third party to provide lease funding. A significant amount of the cash generated from these activities was used to increase our short-term investment portfolio.

      Proceeds from the disposal of fixed assets in 2005 and 2004 were primarily from the sale of domestic and international manufacturing facilities and related equipment.

      We have significantly reduced our capital expenditures in the past three years to limit new projects to those that meet key economic metrics and deliver short payback cost savings or support critical strategic initiatives such as product development. At the end of 2005, our committed capital expenditures totaled $19.5 and related primarily to the purchase of a new corporate aircraft which will replace a corporate aircraft that we currently own in Q1 2006. In 2006, we expect to receive proceeds of approximately $15 from the sale of the corporate aircraft that we currently own.

Cash used in financing activities

      We used cash in financing activities in 2005 primarily to pay down debt and to pay common stock dividends to our shareholders. We paid common stock dividends of $0.24 per share in 2005, 2004 and 2003. The dividend declared by the Board of Directors was $0.06 per share in each quarter of 2005, 2004, and 2003.

      We issued common stock in 2005 for proceeds of $4.1 related to the exercise of employee stock options. See Note 11 of the consolidated financial statements for further discussion regarding the Company’s stock-based incentive plans.

      The Board of Directors has authorized share repurchases of up to 11 million shares. We did not repurchase any common shares during 2005, 2004 or 2003. Approximately 3.8 million shares remain available for repurchase under the program and we have no outstanding share repurchase commitments. Since the inception of our repurchase program, 7.2 million shares have been repurchased for $112.7 million.

Capital Resources

Off-Balance Sheet Arrangements

      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. Due to the contingent nature of guarantees, the full value of the guarantees are not recorded on our consolidated balance sheets; however, we have reserves recorded to cover potential losses. See Note 14 to the consolidated financial statements for more information regarding financial instruments, concentrations of credit risk, commitments, guarantees and contingencies.

Contractual Obligations

      Our contractual obligations as of February 25, 2005 are as follows:

      Total consolidated debt as of February 25, 2005 was $325.7. The $28.3 decrease in total debt from 2004 was driven by debt repayments. Our debt to capital ratio was 21.4% at year-end. Of our total debt, $249.5 is in the form of term notes due November 2006. We are currently considering various options regarding the maturity of the term notes, one of which is to have a replacement facility in place before the senior notes expire. Additionally, we have notes payable due at various times through 2007. We expect to pay the amounts due on the notes as they expire.

      Of the $67.6 of debt payments due in 2005 (as presented in the contractual obligations table above), $9.6 relates to foreign currency notes payable and revolving credit facility obligations. Of the remaining $58.0 balance related to United States dollar notes payable obligations, we expect to repay $51.0 as it becomes due in Q1 2006.

      The Company has commitments related to certain sales offices, showrooms, and equipment under non-cancelable operating leases that expire at various dates through 2020. Minimum payments for operating leases having initial or remaining non-cancelable terms in excess of one year are presented in the contractual obligation table above.

      Committed capital expenditures represent obligations we have related to property, plant and equipment purchases. See more detail under the Cash provided by (used in) investing activities section.

      We define purchase obligations as non-cancelable signed contracts to purchase goods or services beyond the needs of meeting current backlog or production.

      Other long-term liabilities represent contribution and benefit payments expected to be made for our defined contribution, deferred compensation, pension and post-retirement benefit plans. It should be noted our obligations related to post-retirement benefit plans are not contractual and the plans could be amended at the discretion of the Compensation Committee of the Board of Directors. We limited our disclosure of contributions and benefit payments to 10 years as information beyond this time period was not available. See Note 9 to the consolidated financial statements for further discussion regarding these plans.

      The contractual obligations table above is current as of February 25, 2005. The amounts of these obligations could change materially over time as new contracts or obligations are initiated and existing contracts or obligations are terminated or modified.

      Our total liquidity facilities as of February 25, 2005 were:

      At February 25, 2005, we had no borrowings against our $250.0 3-year global committed bank facility. Our obligations under this facility are unsecured and unsubordinated. The Company may, at its option, and subject to customary conditions, request to increase the aggregate commitment by up to $100.0 by obtaining at least one commitment from one or more lenders. This facility and certain of our other financing and lease facilities require us to satisfy financial covenants including a minimum net worth covenant, a maximum debt ratio covenant, a minimum interest coverage ratio covenant and an asset coverage ratio covenant. In October 2003, Moody’s Investor Services lowered its rating on the Company to Ba1, thus activating the asset ratio covenant. Although we have $372.3 of available capacity, our maximum debt ratio covenant would limit additional borrowings to approximately $122.6 as of February 25, 2005. As of February 25, 2005, we were in compliance with all covenants under this facility and our other financing and lease facilities. The amounts available to us under the various uncommitted lines are subject to change or cancellation by the banks at any time. Our long-term debt rating is BBB- from Standard & Poor’s and Ba1 from Moody’s Investor Service.

      On October 13, 2004, we filed a universal shelf registration statement with the Securities and Exchange Commission that will allow the Company to offer various types of securities from time to time in the future. The shelf registration statement includes a primary component of up to $200.0 of debt securities and a secondary component of up to 7.5 million shares of Class A common stock.

Critical accounting policies

      Management’s Discussion and Analysis of Results of Operations and Financial Condition is based upon our consolidated financial statements and accompanying notes. The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Although these estimates are based on historical data and management’s knowledge of current events and actions it may undertake in the future, actual results may differ from the estimates if different conditions occur. The accounting policies that typically involve a higher degree of judgment, estimates and complexity are listed and explained below. These policies were discussed with the Audit Committee and affect all segments of the Company.

      Goodwill represents the difference between the purchase price and the related underlying tangible and identifiable intangible net asset values resulting from business acquisitions. Annually, or if conditions indicate an earlier review is necessary, the carrying value of the reporting unit is compared to an estimate of its fair value. As discussed in Note 2 to the consolidated financial statements, if the estimated fair value is less than the carrying value, goodwill is impaired and will be written down to its estimated fair value. Goodwill is assigned to and the fair value is tested at the reporting unit level.

We evaluate goodwill using five reporting units — North America, SDP, International, PolyVision and IDEO. As of February 25, 2005, we had $210.2 of goodwill recorded on our balance sheet as follows:

      During Q4 2005, we performed our annual impairment assessment of goodwill in our reporting units consistent with the prior year. In testing for potential impairment, we measured the estimated fair value of our reporting units using a combination of two methods based upon a discounted cash flow valuation (“DCF”) and a market value approach (“MVA”). The first method used a 100% weighting factor based on DCF while the second valuation was based upon 50% of DCF and 50% of MVA. In either case, we concluded no impairment existed in any reporting unit.

      The DCF analysis was based on the present value of projected cash flows and a residual value and used the following assumptions:

      The MVA used a set of four comparable companies to derive a range of market multiples for the last twelve months’ revenue and earnings before interest, taxes, depreciation and amortization. The MVA was not calculated for PolyVision or IDEO as there is no comparable market data available to make these calculations meaningful.

      As of the valuation date, the enterprise value available for goodwill determined by each method described above is in excess of the underlying reported value of the goodwill as follows:

      For each reporting unit, this excess is primarily driven by the residual value of future years. Thus, increasing the discount rate from 11.5% to 12.5%, leaving all other assumptions unchanged, would reduce the excess amounts above to the following amounts:

      We also perform impairment analyses on our other intangible assets not subject to amortization using an income approach based on the cash flows attributable to the related products. These intangible assets primarily consist of trademarks within the PolyVision reporting unit. As of the valuation date, the fair value exceeded the book value by approximately $3.6. A 5% decrease in projected revenue would result in a reduction of the excess fair value by $1.8. A 1% increase in the discount rate would result in a reduction of the excess fair value by $2.5.

      For our intangible assets subject to amortization and our other long-lived assets including property, plant and equipment, an impairment analysis is performed at least annually. In accordance with SFAS No. 144, an impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and its carrying amount exceeds its fair value. In testing for impairment, we first determined if the asset was recoverable. We then compared the undiscounted cash flows over the asset’s remaining life to the carrying value.

      See Note 2, Note 5 and Note 7 to the consolidated financial statements for more information regarding goodwill, other intangible assets and property, plant and equipment.

      The determination of the obligation and expense for pension and other post-retirement benefits is dependent on the selection of certain actuarial assumptions used in calculating such amounts. These assumptions include, among others, the discount rate, expected long-term rate of return on plan assets and rates of increase in compensation and health care costs. These assumptions are reviewed and updated annually based on relevant external and internal factors and information, including but not limited to, long-term expected fund returns, expenses paid from the fund, rates of termination, medical inflation, technology and quality care changes, regulatory requirements, plan changes and governmental coverage changes. See Note 9 to the consolidated financial statements for more information regarding employee benefit plan obligations including a sensitivity analysis.

      The allowance for credit losses related to accounts receivable, investments in leases and notes receivable is maintained at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date. In estimating probable losses, we review accounts that are past due, non-performing, or in bankruptcy. We also review accounts that may have higher credit risk using information available about the customer or dealer, such as financial statements, news reports, and published credit ratings. We also use general information regarding industry trends, the general economic environment and information gathered through our network of field based employees. Using an estimate of current fair market value of the collateral and other credit enhancements, such as third party guarantees, we arrive at an estimated loss for specific accounts and estimate an additional amount for the remainder of the trade balance based on historical trends.

Our projection of credit losses is based on estimates, and as a result we cannot predict with certainty the amount of such losses. Changes in economic conditions, the risk characteristics and composition of the portfolio, bankruptcy laws or regulatory policies and other factors could impact our actual and projected credit losses and the related allowance for possible credit losses. If we had made different assumptions about probable credit losses, our financial position and results of operations could have differed. Uncollectible receivable balances are written off when we determine that the balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance when received. See further discussion regarding concentrations of credit risk in Note 14 of the consolidated financial statements.

      Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

      The Company has operating loss carryforwards of $334.8 and tax credit carryforwards of $27.7 available in certain jurisdictions to reduce future taxable income. Future tax benefits for these carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. We estimate a tax savings from the operating loss carryforwards before valuation allowance of $125.6, but we have recorded a valuation allowance of $26.0 which reduces our estimated tax savings to $99.6. Additionally, we have recorded a valuation allowance of $4.3 against our tax credit carryforwards which reduces our estimated tax savings to $23.4. It is considered more likely than not that a benefit of $123.0 will be realized on these carryforwards. This determination is based on the expectation that related operations will be sufficiently profitable or various tax, business and other planning strategies will enable us to utilize the carryforwards. To the extent that available evidence raises doubt about the realization of a deferred income tax asset, a valuation allowance is established. We cannot be assured that we will be able to realize these future tax benefits or that future valuation allowances will not be required. A 10% decrease in the expected amount of benefit to be realized on the carryforwards would result in a decrease in net income of approximately $12.3.

Forward-looking Statements

      From time to time, in written reports and oral statements, the company discusses its expectations regarding future events. These forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to vary. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: (1) competitive and general economic conditions and uncertainty domestically and internationally; (2) delayed or lost sales and other impacts related to acts of terrorism, acts of war or governmental action; (3) changes in domestic or international laws, rules and regulations, including the impact of changed environmental laws, rules or regulations; (4) major disruptions at our key facilities or in the supply of any key raw materials, components or finished goods; (5) competitive pricing pressure; (6) pricing changes by the company, its competitors or suppliers; (7) currency fluctuations; (8) changes in: (a) customer demand and order patterns; (b) financial stability of customers, dealers (including changes in their ability to pay for product and services, dealer financing and other amounts owed to the company) or suppliers; (c) relationships with customers, suppliers, employees and dealers; and (d) the mix of products sold and of customers purchasing (including large project business); (9) 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; (10) the success of the company’s investment in certain ventures; (11) the company’s ability to successfully: (a) implement

list price increases; (b) reduce its costs, including actions such as global supply chain management, workforce reduction, facility rationalization, disposition of excess assets (including real estate) at more than book value and/or related impairments, production consolidation, reduction of business complexity and culling products; (c) implement technology initiatives; (d) integrate acquired businesses; (e) migrate to a less vertically integrated manufacturing model; (f) implement lean manufacturing principles; (g) initiate and manage alliances; and (h) manage consolidated dealers; (11) possible acquisitions or divestitures by the company; (12) changes in business strategies and decisions; and (13) other risks detailed in this and other filings with the Securities and Exchange Commission. The factors identified above are believed to be important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material adverse effects on the company. All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. Steelcase undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

Recently Issued Accounting Standards

      There have not been any new accounting standards that are expected to have a significant impact on the Company in the near term.

      The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which we are exposed include foreign exchange risk, interest rate risk and equity price risk.

Foreign Exchange Risk

      Operating in international markets involves exposure to the possibility of volatile movements in foreign exchange rates. These exposures may impact future earnings and/or cash flows. Revenue from foreign locations (primarily Europe and Canada) represented approximately 25% and 26% of our consolidated revenue in 2005 and 2004, respectively. We actively manage the foreign currency exposures that are associated with committed foreign currency purchases and sales created in the normal course of business at the local entity level. Exposures that cannot be naturally offset within a local entity to an immaterial amount are hedged with foreign currency derivatives. We also have a significant amount of foreign currency net asset exposures. In February 2005 and March 2005, we entered into a series of forward contracts to hedge our net investment in Canada to reduce the risk of exposure to changes in exchange rates. The notional amount of these contracts was 45 million Canadian dollars in February 2005 and 25 million Canadian dollars in March 2005.

      Changes in foreign exchange rates that had the largest impact on translating our international operating profit for 2005 related to the euro and the Canadian dollar versus the U.S. dollar. We estimate that a 10% devaluation of the U.S. dollar against the local currencies would have increased our operating income by approximately $1.1 in 2005 and increased our loss in 2004 by approximately $2.0, assuming no changes other than the exchange rate itself. However, this quantitative measure has inherent limitations. The sensitivity analysis disregards the possibility that rates can move in opposite directions and that gains from one currency may or may not be offset by losses from another currency.

      The translation of the assets and liabilities of our International subsidiaries is made using the foreign exchange rates as of the end of the year. Translation adjustments are not included in determining net income but are disclosed and accumulated in Other Comprehensive Income within shareholders’ equity until sale or substantially complete liquidation of the net investment in the International subsidiary takes place. In certain markets, the Company could recognize a significant gain or loss related to unrealized cumulative translation adjustments if we were to exit the market and

liquidate our net investment. As of February 25, 2005, the net foreign currency translation adjustments reduced shareholders’ equity by $26.4.

      Foreign exchange gains and losses reflect transaction gains and losses. Transaction gains and losses arise from monetary assets and liabilities denominated in currencies other than a business unit’s functional currency. For 2005, transaction gains and losses were immaterial.

Interest Rate Risk

      We are exposed to interest rate risk primarily on our notes receivable, investments in company owned life insurance, short-term borrowings and long-term debt. Substantially all of our interest rates on our term borrowings were fixed during 2004; thus our interest rate risk was minimized. A portion of our company owned life insurance is invested in fixed income securities. The valuation of these securities is sensitive to changes in market interest rates. We estimate that a 1% change in interest rates would not have had a material impact on our results of operations for 2005 or 2004.

      See Notes 2 and 14 of the consolidated financial statements for further discussion of interest rate swaps and derivative instruments. See Note 6 in the consolidated financial statements for further discussion of our investments in company owned life insurance.

Equity Price Risk

      We are exposed to equity price risk from the markets in the United States primarily on our investments in company owned life insurance. We estimate that a 10% adverse change in the broader United States equity markets would have reduced our operating income by approximately $4.0 in 2005 and increased our operating loss by approximately $2.0 in 2004. This quantitative measure has inherent limitations since not all of our equity investments are in similar asset classes. In addition, the investment managers actively manage certain equity investments and their results could be better or worse than the broader United States equity markets returns.

      See Note 6 in the consolidated financial statements for further discussion of our investments in company owned life insurance.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      Management is responsible for establishing and maintaining effective internal control over financial reporting of the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

      The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.

      Management assessed the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that the Company’s system of internal control over financial reporting was effective as of February 25, 2005.

      BDO Seidman, LLP, the independent registered certified public accounting firm that audited our financial statements included in this Form 10-K, has also audited our management’s assessment of the effectiveness of the Company’s internal control over financial reporting, as stated in their report which is included herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

STEELCASE INC.

GRAND RAPIDS, MICHIGAN

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Steelcase Inc. maintained effective internal control over financial reporting as of February 25, 2005, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Steelcase Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Steelcase Inc. maintained effective internal control over financial reporting as of February 25, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also in our opinion, Steelcase Inc. maintained, in all material respects, effective internal control over financial reporting as of February 25, 2005, based on the COSO criteria.

      We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Steelcase Inc. as of February 25, 2005 and February 27, 2004, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended February 25, 2005 and our report dated March 31, 2005 expressed an unqualified opinion.

BDO SEIDMAN, LLP

Grand Rapids, Michigan

March 31, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

STEELCASE INC.

GRAND RAPIDS, MICHIGAN

      We have audited the accompanying consolidated balance sheets of Steelcase Inc. as of February 25, 2005 and February 27, 2004 and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended February 25, 2005. Our audits also included the financial statement schedule for the three years in the period ended February 25, 2005 as listed in Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.

      As discussed in Note 3 to the consolidated financial statements, the fiscal 2004 and 2003 consolidated financial statements have been restated for the impact of certain lease accounting issues and the reclassification of auction rate securities.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Steelcase Inc. at February 25, 2005 and February 27, 2004 and the results of their operations and their cash flows for each of the three years in the period ended February 25, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein.

      As discussed in Note 2, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, in the year ended February 28, 2003. As discussed in Note 2, the Company adopted FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, in the year ended February 27, 2004.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Steelcase Inc.’s internal control over financial reporting as of February 25, 2005, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 31, 2005 expressed an unqualified opinion thereon.

BDO SEIDMAN, LLP

Grand Rapids, Michigan

March 31, 2005

STEELCASE INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

See accompanying notes to the consolidated financial statements.

STEELCASE INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

See accompanying notes to the consolidated financial statements.

STEELCASE INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(in millions, except share data)

See accompanying notes to the consolidated financial statements.

STEELCASE INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in millions)