Raj Mehan James Patrick Hackett - Chief Executive Officer, President, Director and Member of Executive Committee David C. Sylvester - Chief Financial Officer and Senior Vice President Terry Lenhardt

Budd Bugatch - Raymond James & Associates, Inc., Research Division David S. MacGregor - Longbow Research LLC Matthew S. McCall - BB&T Capital Markets, Research Division Todd A. Schwartzman - Sidoti & Company, LLC

Good day, everyone, and welcome to Steelcase Second Quarter Fiscal 2013 Conference Call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Raj, Mr. Raj Mehan, Director of Investor Relations. Please begin.

Thank you, Darrell. Good morning, everyone. Thanks for joining us for the recap of our second quarter financial results. Here with me today are Jim Hackett, our President and Chief Executive Officer; Dave Sylvester, our Chief Financial Officer; Mark Mossing, Corporate Controller and Chief Accounting Officer; and Terry Lenhardt, Vice President Finance for the Americas and EMEA segments. Our second quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast, and 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. In addition to our prepared remarks, we'll respond to questions from investors and analysts. Our discussion today will include references to non-GAAP financial measures. These measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors. And reconciliations to the most comparable GAAP measures are included in the earnings release and webcast slides. At this time, we are incorporating by reference into this conference call and subsequent transcript the text of our Safe Harbor Statement included in yesterday's release. Certain statements made within the release and during this conference call constitute forward-looking statements. There are risks associated with the use of this information for investment decision-making purposes. For more details on these risks, please refer to yesterday's release and Form 8-K, the company's 10-K for the year ended February 24, 2012, and our other filings with the SEC. This webcast is a copyrighted production of Steelcase Inc. And just a quick reminder, that we're hosting an Analyst Day here at our headquarters on October 2. And it's never too late to sign up. It will be a full day which brings our strategy to life, with discussions with many business leaders. And you'll get to see some new products as well. So if you're interested, please reach out to me after the call. And with those formalities out of the way, I'll turn the call over to our President and CEO, Jim Hackett.

Thank you, Raj, and good morning, everyone. This has been a strong quarter for Steelcase, and as I've shared on some previous calls, we're at a point in our business where the customers we serve have a significant bias towards 3 things: first, they're making important investments in their facilities. Recall that I've mentioned that many companies we serve expanded into Asia in the last decade and now they're addressing the legacy offices in other parts of the world; second, buying the principles where our research has been focused for over a decade, in other words, there were more questions than applause about whether the market would place value on since -- insights that we had, but that direction is now being validated; and third, there's a rapidly adopting worker mobility as a business model advantage. In other words, we're not likely to return to the static models we saw in offices as recently as 5 years ago. And we're building off these trends, and they're represented in our earnings release. We performed extremely well in the Americas segment, and we also saw growth in EMEA. Our people get a shout out often by me in these calls but they're far from the cheerleading, and I want to make sure that a point is made to you that they make a huge difference in our performance. I'm really happy with what our folks have been able to accomplish. They've had tremendous focus, and they work really hard on translating these insights into practical applications in the market. I want to especially congratulate the team from the Americas, led by its president, Jim Keane, on achieving 12% operating income margin this quarter. This is the highest level in recent years. And on achieving double-digit organic growth for the eighth consecutive quarter. I've spent more time in the markets over the past 6 months than I did in the 3 previous years. And it's because I can now focus more on the customers versus our own internal restructuring. I'm seeing plenty of evidence that our story is resonating very well with our clients. Just as we started laying the track for this era of success a decade ago, we're quite active in our thinking about the next decade. Now you know I won't share the thinking in full detail at this point, but I want to say 3 things here as well; first, I think the world, despite all of its challenges, has the ability to leverage innovation to help make economic progress. I follow some of the big thinkers in technology, and they're united around the idea of having exponential forces upon exponential forces. In other words, the power of computing, which is riding Moore's Law is making the study and execution of medicine innovate on a similar curve. The exponential force of computing on the exponential change in medicine and science. Well this bodes well for our industry and for us, as we know spaces, not just in the health care that I use as an example, will have to be altered. The key is to be a leader in helping paint a picture of those spaces so that the human element is a top priority in the explosion of its capability. Steelcase finds itself in the center of that dialogue in interpretation for our customers. Second, I think that once the U.S. presidential election is settled, we finally will have a moment of cooperation and expansion in the U.S. And this will help Europe settle down too. Asia is already destined to grow even with its momentary pause and it needs the 2 big Western economies to do well all. So -- all the interested -- excuse me, let me restate that, it needs the 2 big Western economies to do well also. That means that all of the interests in the world tend to be aligned around this need to get economic growth. And third, Steelcase has been quite active in developing new products. A global industrial footprint, a lean-shared service model that scales well, and that comes side-by-side with innovations in our sales organization and dealer structures. All this puts us in a great spot now to capitalize on some forward economic expansion. And my time in the market confirms that our dealer network in North America continues to play a key role in the service of our customers. We will have the opportunity to say thank you in person to that group as we prepare for a big conference here in Grand Rapids next week. It's always energizing to bring our field and dealer salespeople together to talk more about our collective future. It's a reflection of the global nature of our business that we're also including a number of our European dealers in this event for the first time. And it connects well with our 100th anniversary as a company. It's going to be a nice week. We have reason to thank them for their support too, because as expected, we saw the notable growth in the EMEA segment this quarter. The European dealers have had to adjust to the demand challenges persisting in that region. Steelcase also recognizes the continuing uncertainty, and we continue to look for ways to improve the fitness of our business model in Europe. And the dealer conference is just one item on a busy calendar of fall events that represent specific elements of our strategy. And we're going to give these dealers a sneak preview of products that we'll be launching in the coming year. And that's why Raj invited you to come in October because we want to give the Investor Day folks in early October a similar preview of some of our new ideas. On next week, you might see a press release about the next step in our exploration of mobile work and its implications. We've been working with the Marriott hotel chain to prototype collaborative work environments in hotel conference centers. We think there is potential here to expand the definition of our purpose, to help create great experiences wherever work happens. And last week, we opened a new showroom in Guangzhou, China. This is the third WorkLife Center in our China network, joins Shanghai and Beijing, and it illustrates our larger effort to establish our brand in the next tier of cities in China, where there's a good mix of global organizations and local companies. By November, we will have opened our manufacturing facility in India, which you know is the other nation in that region that is a pillar of our long-term strategy to grow our business in Asia Pacific. So in summary, this was a strong quarter. And that tells us we're headed in the right direction, with some exciting opportunities on the horizon. Our short-term outlook, as you saw in the release, is a product of some caution about the European economy along with what we know is the unusual seasonality in the Americas that was driven by very strong project activity in recent quarters. All in all though, I want to get this across, we're feeling good, and I hope to see many of you here in October. With that, I'll turn it over to Dave Sylvester, who will provide a lot more color on my comments. David C. Sylvester: Thank you, Jim. I will start with a few high-level comments about the second quarter results and balance sheet, provide some additional color and commentary around our order patterns and outlook for the third quarter of fiscal 2013. And then we'll move to your questions. Overall, we reported organic revenue growth of 10% and adjusted earnings, excluding restructuring costs of $0.25 per share, both of which compared favorably to company estimates. For the Americas, the 12.1% adjusted operating income represents the highest quarterly operating income on record for this segment, and we believe that we are continuing to gain market share in the U.S. based on our analysis of monthly data reported by BIFMA. The second quarter results were fueled by large project activity that drove revenue much higher than typical seasonality when compared sequentially to the first quarter. As it relates to EMEA, we were relatively pleased with their results this quarter as the adjusted operating loss was less than expected and represented a significant improvement compared to the second quarter of the prior year and the first quarter of this fiscal year. The double-digit organic revenue growth in the quarter was fueled by a strong beginning backlog as current quarter orders in constant currency only grew 2% compared to last year. Given the level of our year-to-date operating losses and broader economic uncertainty in Europe, we remain committed to improving our business model across the region. Within the Other category, we did experience sequential improvement in operating results across each of the businesses during the second quarter but not to the level we expected. Designtex performed the best during the quarter, benefiting from high single-digit year-over-year order growth, while at the other end of the spectrum, PolyVision remains in recession. Regarding Asia, business activity has softened recently relative to our expectations we believe as a result of broader economic uncertainty. We remain committed to our strategy in this region, as our view of longer-term growth prospects remains unchanged. Adjusted operating income at the consolidated level of $50.5 million or 6.8% of sales represented a year-over-year improvement of $12.8 million or 140 basis points relative to sales. The improvement was driven largely by the 10% organic revenue growth in the quarter, which included improved price yield compared to the prior year, although there were other impacts that deserve a mention. First, we experienced a higher mix of large project business globally, which was somewhat offset by a lower mix of Federal Government business in the U.S. And second, we had higher spending on sales, product development and other initiatives in the Americas and Asia Pacific, net of lower spending in EMEA. As it relates to our global commodity costs, we experienced modest year-over-year deflation. On a sequential quarter basis second quarter adjusted operating income more than doubled, increasing by $26 million compared to the first quarter. Higher volume, which reflected much higher than normal seasonality compared to the first quarter was the biggest driver. But the sequential comparison of adjusted operating income was also impacted by higher net saving in the second quarter related to our North America plant consolidations, and lower operating expenses in the second quarter before consideration of higher variable compensation linked to our improved performance. Restructuring costs in the quarter were in line with our expectations. Regarding the timing of remaining restructuring costs and related benefits applicable to the North America consolidation plans, we continue to estimate total restructuring costs for these specific actions will approximate $40 million. And we expect the remaining restructuring costs of approximately $4 million to be incurred over the balance of fiscal 2013. We continue to estimate annualized savings of approximately $30 million to $35 million once these actions are completed and local supply chains have been established. As we discussed on recent calls, we have intentionally slowed down the production moves given the high level of demand we have been experiencing. The consequence however, is that we are incurring higher levels of redundant costs as we start up operations in Mexico, prepare other receiving plants for production moves and cautiously move our assembly lines. During the second quarter, benefits realized of approximately $6 million were reduced by approximately $3 million of additional freight costs linked to existing supply chains, startup costs in Mexico and redundant manufacturing processes during the product transition periods. We expect the benefits to improve and the redundant costs to reduce, increasing the net year-over-year savings to approximately $4 million in the third quarter, and improving from there through the end of fiscal 2013 and into mid-fiscal 2014. In addition, we initiated plans during the second quarter to integrate PolyVision's global technology business into the Steelcase Education Solutions group. The combined organization will support the needs of students and teachers from kindergarten through graduate school, bringing together furniture like Verb and the Node chair, designed exclusively for education spaces, with educational technology solutions like eno and fuse currently manufactured under the PolyVision name. The integration of these 2 units is expected to strengthen our performance and establish the Steelcase Education Solutions group as the leading provider of furniture and technology solutions within the education space. PolyVision's sales, marketing, product development and other technology-related functions will be integrated into the Steelcase organization, enabling greater leverage of sales, marketing and distribution to grow this portfolio. We expect to incur approximately $5 million of restructuring costs over the next 2 to 3 quarters related to this plan, and we estimate annualized savings compared to current run rates will approximate $7 million once the integration is completed. The results of the Steelcase Education Solutions group are included within the Americas segment and beginning in the third quarter, the PolyVision technology business will be reported in the Americas and EMEA segments. PolyVision's surfaces business, which manufactures e3 environmental ceramic steel for white boards and other applications, will remain under the PolyVision brand name, continue to operate as a separate business unit and be reported in the Other category. As we have done in the past, we expect to provide historical reclassification of our segment information as supplemental information on the Steelcase website. One quick comment on income tax expense in the quarter, the 35% effective tax rate was favorable relative to the 37% estimate we provided last quarter, primarily due to a favorable tax ruling relative to an uncertain tax position, which enabled the reversal of a related reserve. Moving to the balance sheet and cash flow, we generated $66 million of cash from operations during the second quarter. Capital expenditures totaled $16 million, and we used $5 million to fund 2 small dealer acquisitions in France. For all of fiscal 2013, we now expect capital expenditures to approximate $70 million to $80 million, or approximately $5 million lower than our previous estimate. We returned approximately $19 million to shareholders in the second quarter, $11.4 million from the payment of a cash dividend of $0.09 per share and $7.6 million from repurchasing approximately 908,000 shares. I also want to draw your attention to a matter, which we highlighted on the condensed consolidated balance sheet in the earnings release. During the second quarter, we identified errors which resulted in an overstatement of net deferred tax assets totaling $12.5 million and which related to periods prior to fiscal 2010. The impact on retained earnings and deferred income taxes is not considered material, and these errors have no impact on the consolidated statements of operations or cash flows for the fiscal years ended in 2010, 2011 or 2012, or the 3 months ended May 25, 2012. Accordingly, we expect to correct for these immaterial prior-period errors in future filings, providing detailed footnote disclosure regarding the corrections. But we do not expect to amend any prior-period Form 10-K or 10-Qs. As a result of making these corrections, we will also correct other out-of-period tax errors recorded in prior periods, even though they are otherwise considered immaterial. Accordingly, we expect to increase income tax expense in fiscal 2012 by $1 million, reduce income tax expense in fiscal 2011 by $4.1 million and increase income tax expense by $2 million in fiscal 2010, impacting net income and retained earnings by identical amounts in each respective year. As a result of these errors, we expect to conclude there was a material weakness in our internal controls as of the end of the second quarter, relating to accounting for income taxes. Remediation of the internal control deficiency is expected to be completed within the next 6 to 9 months. As it relates to our order patterns, I will start with the Americas, where we experienced year-over-year order growth in the second quarter of approximately 8% or approximately 6% when adjusted for the estimated pull-forward effect from a May 2011 price adjustment. While second quarter order growth fell within our range of expectations, orders were somewhat front-loaded, which helped to drive our second quarter revenue above our forecasted range. Customer order backlog for the Americas ended the quarter up approximately 4% compared to the prior year, and continues to include a higher mix of project business. Much of the increase in ending backlog was generated by our Latin America region. Across quote types, project business reflected a double-digit percentage growth rate in the Americas while continuing business and orders from our marketing programs were relatively flat when adjusted for the prior-year pull-forward effect previously mentioned. Vertical market order growth rates in the Americas were the strongest in the manufacturing, insurance and Information Technology sectors while Financial Services and Federal Government posted notable declines again this quarter. Elsewhere, health care grew modestly and the energy and education sectors posted small year-over-year declines. Within our product categories and brands, order growth rates in the Americas were fairly broad-based, with notable strength in technology and seeding. And across our geographic regions, second quarter order growth was fairly broad-based but led by our Latin America and Western regions. Only a few markets posted year-over-year declines. Switching to EMEA, order patterns in constant currency continued to reflect a mixed bag, but grew by approximately 2% in total compared to the prior year. We experienced very strong order growth in France and high single-digit percentage growth rates in northern Europe and in the export markets of eastern, central and southern parts of Europe, Middle East and Africa as a group. Orders in Germany declined significantly compared to a strong prior year and Spain declined modestly. Customer order backlog for EMEA was down approximately 8% at the end of the quarter compared to the prior year, as orders during the second quarter included a relatively high mix of project business, which shipped during the quarter. Within the Other category, Designtex grew orders by a high single-digit percentage rate in the second quarter. At PolyVision, orders declined modestly on an organic basis compared to the prior year. Lastly, Asia orders reflected the softening I mentioned earlier and were down by a double-digit percentage compared to a very strong quarter last year. However, on a 2-year stack basis, second quarter orders in Asia have still grown by a double-digit percentage. Nevertheless, because our investments in future growth have remained steady in Asia and volume has recently softened relative to our expectations, we posted an operating loss in the region again this quarter following profitability during fiscal 2012. Turning to the third quarter, our outlook is somewhat inconsistent with normal seasonal patterns but not entirely surprising given the strength of the second quarter. We expect to report revenue between $710 million and $735 million, including approximately $4 million from the French dealer acquisitions. This compares to $719 million in the first quarter of fiscal 2012. Currency assumptions included in our revenue estimate represent a $12 million negative effect on the year-over-year comparison, and a $5 million negative effect on the sequential quarter comparison. After giving effect to these items, we estimate organic revenue growth in the third quarter will approximate 0% to 3% compared to the prior year. Sequentially, the third quarter revenue estimate translates to an organic decline of between 1% and 4%. We expect the mix of business from some of our largest corporate customers in the Americas as well as project business in general, across EMEA and Asia Pacific to remain relatively high and thus continue to negatively impact our gross margin and operating income in the third quarter. And we expect the costs associated with our dealer conference and new product introductions, which Jim referenced earlier, to increase our operating expenses somewhat compared to the second quarter. As it relates to our North American plant consolidations, we expect savings to improve and startup and other related costs to reduce compared to the second quarter. In addition, our third quarter earnings estimate anticipates year-over-year improvements in price yield associated with pricing action taken in prior years as well as additional yield from our recent price adjustment in April. With respect to commodity costs, our earnings estimate contemplates relatively flat commodity costs whether compared sequentially to the second quarter or versus the prior year. Finally, our third quarter earnings estimate contemplates an effective tax rate of approximately 35%. As a result of these factors, we expect to report third quarter earnings within a range of $0.16 to $0.20 per share, including restructuring costs of approximately $0.03 per share associated with the manufacturing consolidations in North America and the restructuring of PolyVision. This compares to $0.17 per share in the third quarter of the prior year, which included restructuring costs of approximately $0.02 per share. From there, we will turn it over for questions.

[Operator Instructions] First question is from Budd Bugatch of Raymond James. Budd Bugatch - Raymond James & Associates, Inc., Research Division: A couple -- well, I understand the realignment. That's something I didn't quite expect. Does this also mean some organizational realignment and when will the restatements or the reclassifications be available? David C. Sylvester: I'll start with when the reclassifications will be available and maybe Jim can comment on the organizational changes, which are already in effect. We will very likely put out a posting to our website in November, which will highlight for you last year by quarter, as well as the first half of this year, the impact of moving the technology business out of the Other category and into the Americas and EMEA. And we will also very likely provide fiscal '11 in total and how the year was affected by segment. Budd Bugatch - Raymond James & Associates, Inc., Research Division: And what's the approximate revenue impact on an annual basis? So I can move out of other into the other? David C. Sylvester: Roughly $30 million, Budd. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Okay. When you went through the orders, David, just help me understand what's going on in the Americas. It looks like the orders were strongest in Latin America. Is that what I heard? And the backlog -- you gave backlog year-over-year. Can you do it sequentially as well, how the backlog compares in the segments year-over-year sequentially? David C. Sylvester: I'll see if Terry has that data. Let me try to cover your other questions. So on the orders for the quarter, we made 2 comments. One was that they were a little bit more front-end loaded in the quarter, which helped our revenue. And the other was that we had very strong order growth in Latin America and the Western region also did well. A very few regions declined but Latin America was a standout and more back-end related on the quarters. And therefore, they were a big driver of the backlog growth compared to last year. Sequentially on the backlog, I'm not sure we have that at our fingertips. If we do, Terry can comment on it or we can call you back.

We'll have to call you back, but sequentially, it's usually down from the first quarter to the second quarter as we have some shipments related to higher seasonality for education. But we don't have the exact numbers sequentially. Budd Bugatch - Raymond James & Associates, Inc., Research Division: Okay, if you could do that, that would I'd be grateful. David C. Sylvester: But do you want Jim to comment about the organizational changes?

But I'd like to help you understand that. Can you rephrase that so that I understand what you're looking at? Budd Bugatch - Raymond James & Associates, Inc., Research Division: Well, if you're moving some part of the PolyVision out of Other into the Americas and EMEA, I would take it that organizational responsibilities have also changed. Is that a fair assumption or...

No. So what's really been wonderful is the kind of -- the adjacency of our education focus and the PolyVision were under one group executive. And they stay that way in the next phase. So there's kind of the ability to -- the parts of PolyVision that enable the education growth and expansion fit really well. The parts of PolyVision that are standalone, kind of tech pieces that fold into our tech operations are existing -- people have been already involved. And mostly on the back end support and service. So essentially, this all kind of roots up under Jim Keane, and that doesn't change, and then there's a group executive under Jim that's handling the market-facing responsibilities and that still stays the same.

Next question is from David MacGregor of Longbow Research. David S. MacGregor - Longbow Research LLC: I guess I'm trying to understand within the project business, just how competitive that has become and if you can talk a little bit about discounting trends or just competitive dynamics. It seems like every quarter, there's a discussion about how project business growth and the project business is having an adverse impact on the mix. I'm just wondering how that's changing over time.

This is Terry. There's 2 parts to that. First is about pricing. One way to look at it is price adjustments. And we're capturing about the expected yield that we typically get on the price adjustment from last year and the one we had in the spring. So that's ramping right on track. As far as the project business, it's always competitive and has been competitive, but we haven't seen anything that's unusual. It's the mix of the project business versus continuing that's causing our discounts to be higher because obviously, projects are more highly discounted. David S. MacGregor - Longbow Research LLC: Can you elaborate on that mix?

Well, if you look at the growth of our orders, the 8% growth in the second quarter, almost all of that was generated by project mix in the Americas, projects -- orders. David S. MacGregor - Longbow Research LLC: And that...

And that supports my opening comments that you see the movement in the market is about these spaces are out of date, and so people are making commitments to transform the spaces. It also kind of says that the continuing business, which represent some of the old world perspective is going to give way. If you had a priority in a corporation to spend, you're going to give way to the new -- so it actually is very logical based on the way we saw the customers evolving. David S. MacGregor - Longbow Research LLC: When you talk about pricing carrying over from previous years versus pricing initiatives that have been announced and pursued in the most recent year, can you quantify that for us in terms of how much of your price yield is kind of carryover from prior years versus what you're seeing today. David C. Sylvester: We really can't, David. This is Dave. It's pretty tricky to try to isolate. So we've just been highlighting that, if our growth is definitely includes a pricing benefit but to quantify it for purposes of communicating externally is -- we're just not able to get a high-enough level of confidence in that number to do it. It's -- the issue is, did you increase the price by how much and you discounted it back by how much -- by every single deal that we've done. And the way the industry works on price increases with long-term agreements with large customers, it rolls in over future periods. And you're sometimes moving them off of historical price lists to more recent price lists, and the new price list isn't even affecting them yet. So it's quite complicated. But we know and we have -- we know that it's benefiting our numbers. We have internal estimates that suggest it's meaningful and that's why we've been highlighting it. David S. MacGregor - Longbow Research LLC: Okay. And then finally, just if you could talk about the dealer network, just don't hear you talk about this very often but you got a big meeeting coming up right now, so maybe we could talk a little bit about this. What's changing within your dealer network in terms of the number of dealers, their investment in their salespeople and their way to go to market? Geographic representation, the mix of business that the dealers are generating? Can you just elaborate a little bit on that please?

Well, I would start with the abstract way out and say, the great thing about the dealer network is this is an idea that from the beginnings of the company, they weren't 100 years old but they're close, maybe 10 years after we started dealers started to be a big part of the strategy. And as the company's evolved, what's really been powerful is to have these entrepreneurs on the edge of your -- the closest touch point to the customer where a lot of the innovation happens to have independent business owners making that translation very agile, very committed in their communities. And I say that with a lot of sincerity because it really does matter in the business model. The second thing is, is that over time, what's happened is there are scale advantages versus years ago when we didn't have the technology or the logistic models that we did, a very fragmented dealer network -- lots of operations inside markets, lots of different separately owned operations, was good for the business. It's now -- you trade off scale opportunities in terms of their back-end cost with how many kind of customer facing different dealers you have. So the signs of that is debated in our industry because some of our competitors have open line distribution. We have a very committed dealer segment, and we -- and our market share is the highest. So we're really committed to this approach. If you look forward, a lot of our investment right now is helping them on platforms to have an -- have the advantage with technology and some other things to expand the customer facing and customer contact aspect of their business. Think of it like a hub-and-spoke structure. I don't want to be too liberal about that because it's -- because they're independently owned. It's a framework for thinking about how they relate in a scale-based way with lots of investment in the core kind of activities that are done and then more, fragmented kind of sales expressions outside of that. And so in some markets, we've evolved that idea, and this is a little bit what I was hinting about in my comments is that between that and our sales redesign, we think it's one reason that some of the analysts are writing so what is it in the Steelcase formula that's showing some of the share gain. I think it is the combination of the product, the sales redesign and then the dealer redesign that we've done. So... David S. MacGregor - Longbow Research LLC: I think I was just trying to get a sense of whether the dealers are playing defense right now in kind of a tough economic environment or whether they're playing offense?

Well -- a lot of your peers talk to them, and so you get a range of opinions about that. But I would tell you in all my travels as I've referenced, they're doing -- they're growing very well right now. It's just -- this -- that part of the business has never been extraordinary margins for them. So the return on investment is pretty good because they use more leverage than manufacturers do. And so they're very healthy. We normally have a range of issues and cycles and you can ask Dave or Mark about bad debt. It's not -- there's no problems there. So that's a good indicator for us that things are going well. Even as we stare into Europe, where there's more challenges on the top line, the dealers are relatively healthy.

Our next question is from Matt McCall. Matthew S. McCall - BB&T Capital Markets, Research Division: So David, you talked about business model improvement in EMEA. Can you elaborate on that? How is that going to occur? What's the timing of any improvement? And is it going to be a similar situation to where you can call out some projected savings over time? Is that what you're talking about? David C. Sylvester: Well, Matt, I'm talking about what we've been referencing in the last 2 or 3 quarters, that we continue to focus on trying to drive higher levels of sales efficiency and optimization of various processes. We're looking for the right balance between regional and local. And we recognized with the state of the business right now that we need to continue to push on that. But we're not -- I'm not suggesting that we are planning or announcing any kind of significant action. Matthew S. McCall - BB&T Capital Markets, Research Division: Okay. You did talk about the expectations for North American restructuring savings to ramp a little bit more, I think you called out $3 million this quarter, $4 million next quarter and what was the progression before we annualize? We don't get any more benefit -- I apologize, I was writing, but I missed it. David C. Sylvester: I did not quantify the progression that we've annualized. Earlier in the year, I said I was comfortable with you guys thinking about net savings of $1 million, $2 million, $3 million, $4 million, of at least $1 million, $2 million, $3 million, $4 million in the first quarter -- in the four quarters of the fiscal year, but I kind of cautioned you away from the idea of $2 million, $4 million, $6 million, $8 million. So I was giving you a rough range of $10 million to $20 million for the full fiscal year and then improving sequentially throughout the year. We're still on that track. If anything, we're a tad ahead of the $1 million, $2 million, $3 million, $4 million, but the -- it's a big process for us to continue to move the assembly lines while demand is as high as it is. And we're just getting started now as we finalize our plans to begin moving the supply chains. So we -- we're confident that we'll continue to see improved net benefits but not necessarily at an accelerated rate. Matthew S. McCall - BB&T Capital Markets, Research Division: Okay. And then 2 other components here of the year-over-year earnings bridge. Your price cost recovery, what's the net -- I know you said you're assuming a flat cost environment. I think year-over-year and sequentially, but what's the -- versus FY '12, what can we look at as a whole for FY '13 as the price cost recovery? David C. Sylvester: Well, you've chased me around on that a couple of different times on previous calls and I'll again say the same thing, in very, very rough strokes, I think we helped you get a sense that a $20 million number, plus or minus $5 million on either side isn't a bad assumption for you to make in your year-over-year models for the full fiscal year. And again, that's -- I have to reiterate for potential customers that are listening into the call, that does not mean that we've taken price increases for which we had no inflation. We had significant inflation in the previous couple of years that significantly outpaced the pricing for I think 6 consecutive quarters. So pricing has caught up to inflation that has flattened out and that's why you see the year-over-year benefit. Matthew S. McCall - BB&T Capital Markets, Research Division: Right. And then on the incremental spending side, I didn't hear you, did you quantify the spending this quarter, and then what's the full year? I'm talking about the gross [ph] spending that you highlighted, I believe, last quarter. So what's the outlook there? And then as we look out into the next year, is this an incremental $20 million or whatever, are we going to see that number level off? David C. Sylvester: Well, for -- a couple of things. One, as I commented that sequentially, I thought we believe expenses will go up somewhat. So you can think of that as a few million. And on the year-over-year comparison, that -- our view on that is still the same and we called that out in the fourth quarter of last year that we believed outside of variable compensation and acquisition, and currency effects or other unusual items, that we believe operating expenses, again, before variable comp and acquisitions and the like, would increase in the neighborhood of $20 million or so. Matthew S. McCall - BB&T Capital Markets, Research Division: For the year? David C. Sylvester: For the year, and we believe we are moving toward that track. Matthew S. McCall - BB&T Capital Markets, Research Division: And then the outlook for next year, any comment there yet? David C. Sylvester: No, not yet. Matthew S. McCall - BB&T Capital Markets, Research Division: Okay. And I know I'm breaking the rules here, but when you talked about your share gains, were you specifically speaking to the core U.S. office? Was that the share -- the reference that you were making, the core U.S. office excluding the impact of government, health care, those type of things, just core U.S. office? David C. Sylvester: No, we're thinking -- we're describing that in total. Matthew S. McCall - BB&T Capital Markets, Research Division: Okay. Would you think the same thing from a core U.S. office perspective? David C. Sylvester: Yes, we think we've gained share in both buckets.

[Operator Instructions] Our next question is from Todd Schwartzman of Sidoti. Todd A. Schwartzman - Sidoti & Company, LLC: On those share gains, is it principally seating, would you say or is it across all product categories?

It's pretty much across categories. We're doing very well in seating, maybe a little bit more in seating, but it's across all categories generally. Todd A. Schwartzman - Sidoti & Company, LLC: If seating has picked up more than the others, is that largely an issue of low-hanging fruit, if you will?

How do you mean? Todd A. Schwartzman - Sidoti & Company, LLC: In -- well, in EMEA in particular, where maybe you're a little underexposed, have more growth opportunity there?

No, when we speak of the share growth, that's really the U.S. market. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. Jim, I know you spoke to and quantified the year-over-year change in backlog. But for the quarter, was there any pull-forward of business that you previously expected to ship in the third quarter pulled forward to Q2?

Not that we're aware of, that would be significant. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. So internally, based on your earnings model for Q3, it's pretty much status quo or has there been any change internally? If you could share that with us.

No significant changes internally. I mean, I would tell you that we're always targeting to grow more than 0% to 3%. So we -- relative to our internal expectations, we may have said a year ago, we would be a little bit off our growth target at 0% to 3%. But we -- we still feel pretty good in today's environment, the fact that we're grown, still growing. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. On the commercial side, is there any notable cancellations, deferrals of orders that you'd want to call out?

Terry sits in on the weekly pricing discussions so I'll defer to him, but I've not heard of any.

Nothing notable that we're seeing.

No, no. You'd be wrong to think that the market's drying up or changed quickly, that would not be accurate. Todd A. Schwartzman - Sidoti & Company, LLC: Are you hearing anything from your dealers, perhaps, on the corporate side, still, that customers are taking more of a wait-and-see approach until after the November election?

No. And that's -- I'm remote in Washington, D.C. today. And so I've been steeped in politics the last few days and it abounds here. But it's not the case in this kind of planning because you've got to go step back and think about the last decade of companies sitting in various states of economic either distress or expansion in Asia as I've talked about. And what happened in that 10 years is the spaces got out of date. And so I'm not suggesting that the nature of the debates in our presidential election and all the questions about the budget aren't having an effect. Let me confirm that I think times could be a lot better if we -- if a lot of that was settled. But it's interesting to me how our industry, and particularly these customers, have to keep moving forward because of what happened last decade. And so I have been saying publicly that we could have great economic growth if we could get the politics to settle down and there'd be an agenda that the country believes is going forward. And I know a lot of other business people are saying that as well. But it's interesting when I talk to my peers that are running other companies, it's relatively healthy in spite of it. In fact, you will hear this in all of the politics is that the GDP is not where it needs to be but it's not like we're in recession in a literal way right now. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. Fair enough. Final question... David C. Sylvester: Just to add to that I mean, I think a big driver of why you might be seeing us guide 0% to 3% is the fact that we've grown in the Americas for 8 consecutive quarters above double-digit. Mock-up activity is still strong, customer visits are still good. It's just we're up against 2 years of very tough -- very insignificant growth. Todd A. Schwartzman - Sidoti & Company, LLC: How far in advance does the customer typically schedule that visit and what's happened in -- quantitatively to that lead time in the last 3 to 6 months?

I just got into this because we use aircraft to fly customers in. So they were out more than 3 or 4 months in scheduling trips. And so the demand is very high. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. So your pipeline is as robust as it was 6 months ago, is that fair to assume?

If you used that indicator that I just said, yes. Todd A. Schwartzman - Sidoti & Company, LLC: Okay. In terms of R&D spend, has your timeline for the balance of this year, and even into fiscal '14, has there been any shift one way or the other?

You mean to accelerate or slow down? Todd A. Schwartzman - Sidoti & Company, LLC: Yes. Yes. Correct.

No.

Thank you. There are no further questions at this time. I'd like to turn the call over to Jim Hackett for any closing remarks.

I just want to thank everyone for your attention today. And again, I'm very proud of the company and its performance, and we're hopeful that the U.S. presidential election has a great resolution and the economy gets focused in the right direction. We're ready to deliver lots of goods to lots of customers. So thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect, have a wonderful day.