Good day, everyone, and welcome to Steelcase's Third Quarter Fiscal 2020 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 Mr. Mike O'Meara, Director of Investor Relations, Financial Planning and Analysis. Michael O'Meara: Thank you, Shannon. Good morning, everyone. Thank you for joining us for the recap of our third quarter fiscal 2020 financial results. Here with me today are Jim Keane, our President and Chief Executive Officer; and Dave Sylvester, our Senior Vice President and Chief Financial Officer. Our third quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast, and this webcast is a copyrighted production of Steelcase Inc. A replay of this webcast will be posted to ir.steelcase.com later today. Our discussion today may include references to non-GAAP financial measures and forward-looking statements. Reconciliations to the most comparable GAAP measures and details regarding the risks associated with the use of forward-looking statements are included in our earnings release, and we are incorporating by reference into this conference call the text of our Safe Harbor statement included in the release. Following our prepared remarks, we will respond to questions from investors and analysts. I'll now turn the call over to our President and Chief Executive Officer, Jim Keane. James P. Keane: Thanks, Mike, and good morning, everyone. Our third quarter results exceeded our expectations for revenue, gross margin and operating expense. Our earnings per share growth of 48% or 28% on an adjusted basis, follows a very strong second quarter and brings our year-to-date adjusted earnings per share growth, to 22%. We drove revenue growth of 6% on top of a strong prior year when we grew 13% organically. This quarter's growth was better than we were expecting in part because of favorable shift and timing that Dave will discuss in more detail. Our orders grew 4% on top of the 10% growth in Q3 last year. We improved our operating margin by 290 basis points. It's been a great performance in the Americas and EMEA. EMEA delivered over $6 million of operating income this quarter and we are profitable in EMEA on a year-to-date basis. We expect EMEA to be profitable in the fourth quarter and for the full year. Reaching profitability in EMEA has been a key priority for us and we're proud to have accomplished it in this business environment. In the Americas, our 8% revenue growth this quarter stacks on top of the 12% organic growth in the same period last year. Our win rates remain stable, and our pipeline for the next couple of quarters shows continued opportunity for growth. Our gross margin improvement was driven by our sales teams and dealers successfully passing along price increases for the inflationary costs we experienced last year, as well as great performance by our operations team. I visited many of our Americas factories over the past few weeks in part to review the progress we are making across a number of dimensions, including cost reductions. Our manufacturing and distribution teams continue to discover new ways to simplify processes and capture efficiencies. And we expect to continue investing in their ideas. Our acquisitions continued to contribute to our overall growth as they have collectively grown about 10% on a year-to-date basis. At AMQ we're making a few changes to prepare for the next level of growth. For example, we have integrated AMQ operations into the Steelcase organization and are making investments to expand capacity and capture scale benefits. We are also expanding the leadership team to bring added focus to both product development and market development. At Smith System, Jim Stelter has joined us President. Jim has many years of experience in the K-12 furniture industry, and was previously an executive here at Steelcase. So we know him well. Jim brings a passion for winning and a talent for building long lasting relationships. This leadership transition was expected to happen as it's been a little over a year since our acquisition of Smith. During the third quarter, we held regional dealer meetings in the Americas and EMEA. These conferences allow us to go deep with our dealers regarding new products and capabilities, to share process improvements and to strengthen our relationships. This time we heard the combination of new Steelcase products, acquisitions and marketing partners is giving them the range of products they need to compete. And our marketplace technology is making it easier to specify an order across a wide range of options. Dealers were optimistic about next year's growth potential as they remain busy in responding to customer inquiries. I want to comment for just a moment about two other recent announcements. We are pleased to be included this month on Newsweek's list of the Nation's Most Responsible Companies, which is a reflection of the work we've been doing around ESG, environmental sustainability, social innovation and governance. The principles behind this work have been part of how we've worked at Steelcase for more than 100 years. Secondly, on behalf of our Chairman, Rob Pew and the Board of Directors, I'm pleased to welcome Trina Smelter to our Board. Tina is an active executive in the food industry with expertise in brand marketing, analytics and innovation. We look forward to the additional perspective she will bring to our Board. Our results through the first three quarters have been better than we targeted at the beginning of the year. With our outlook for the fourth quarter remain solid, we expect our full year EPS to finish between $1.41 and $1.45 per share, which is well above the $1.20 to $1.35 targets we established at the beginning of the year. Now I'll turn it over to Dave. David C. Sylvester: Thank you, Jim. And good morning, everyone. My comments today will include highlights related to our third quarter results and cash flow, plus a few remarks about our outlook for the fourth quarter and full fiscal year. As Jim just mentioned, we had a very strong third quarter, growing revenue by 6% on an organic basis, which builds on top of the 13% organic growth we posted in Q3 of the prior year. And we delivered earnings growth of nearly 50% or close to 30% after adjusting for the impact of a pension charge in the prior year. The strength of our recent performance provides solid evidence that our growth strategies are resonating with customers and influencers. And our fitness initiatives are enabling strong improvements in our profitability, while staying invested in growth initiatives at the same time. Relative to the estimates we provided in September, third quarter revenue of $955 million was $10 million higher than the top end of our guidance, and the $0.46 of earnings per share exceeded our estimated range by $0.09. For revenue, the 8% organic growth in the Americas was stronger than we estimated and the better than expected performance was driven by several factors, including improved shipment timing in Q3, which may have been influenced by the timing of thanksgiving and compares favorably to the extended delivery dates we had experienced during the first half of the year, favorable pricing benefits associated with our list price adjustments and the related migration of customer contract pricing and stronger than expected revenue from our own dealer and direct business channels. Beyond the Americas, our revenue in EMEA, Asia Pacific and elsewhere was largely consistent with our estimates. For earnings, we exceeded the top end of our range by $0.09 due to the revenue strength I just reviewed, plus we had favorable gross margins and lower operating expenses, and other income net and income tax expense were also favorable compared to our estimates. For gross margin, our sales organizations around the world have done a terrific job migrating clients to more current price lists, which contributed to the better than expected price realization in the quarter. In addition, our global operations team delivered stronger than expected performance in the Americas and EMEA across the areas of labor management, logistics and cost reductions. And lastly, our business mix in the third quarter was a little better than we estimated. Lower than expected operating expenses also played a role in our favorable performance in the quarter as our employees continued to drive fitness improvements across the business plus some project spending didn't materialize as quickly as we estimated. Across the segments, the Americas drove much of our better than expected earnings performance, but EMEA results were also better than we expected. As you can see, our teams delivered strong performance through a concerted effort across many areas of the business again this quarter. Diving a little deeper into the year-over-year comparisons, we grew revenue by $54 million or 6% in the quarter, with $57 million coming from 8% organic growth in the Americas and 6% organic growth in the other category, partially offset by the inorganic items of an acquisition benefit an unfavorable currency translation, which netted to a $3 million unfavorable impact. The organic growth of 6% stacks on top of a strong prior year, which again grew by 13% on an organic basis compared to the previous year, and includes benefits from our growth initiatives and pricing actions. The year-over-year comparison is also impacted by the favorable shipment timing I mentioned earlier, which included benefits from the timing of Thanksgiving, as the holiday fell into the first week of Q4 this fiscal year, compared to the last week of Q3 in fiscal 2019. For earnings the $0.46 in the quarter compares to adjusted EPS of $0.36 in the prior year, which excludes the impact of the pension charge. The year-over-year comparison also reflects previously disclosed items in the prior year, like the favorable adjustments to income taxes and customer incentives and the initial purchase accounting effects related to Orangebox, as well as current year items like the higher interest costs related to our higher level of debt. Our operating income of $75 million in the quarter represented 7.9% of revenue, and was significantly higher than the prior year. The year-over-year improvement totaled $30 million or approximately $22 million, adjusted for the effects of the pension charge, which represents very strong operating leverage or contribution margin related to the organic revenue growth. Beyond the absorption benefits related to our fixed costs, the strong operating leverage also included improved pricing, lower commodity costs, and the benefits from cost reduction and fitness initiatives partially offset by unfavorable business mix and investments to support growth initiatives. After facing significant inflation for much of fiscal 2019, which pushed us to take multiple pricing actions, commodity cost pressures have abated, while at the same time the benefits of our pricing actions are kicking in more fully. We expect these pricing benefits to continue into Q4 and into the first half of next year, but at lower levels as we are now lapping initial pricing benefits in the prior year. And on cost production and fitness, we supported increased investments in sales, marketing, product development and a few other areas of our business, while delivering an improvement in our operating expense leverage in the quarter, demonstrating the significance of our fitness efforts. Across the segments, we were very pleased with the 10.8% operating margin in the Americas, which brings the year-to-date performance to 9.8%. In EMEA the $6.3 million of operating income in the quarter marked the $7 million improvement compared to the prior year, which more than offset the operating loss we recorded in the first half of the current year, and was driven by a 350 basis point improvement in gross margin. Our EMEA team has made tremendous progress driving the improvements to-date. And they continue to identify opportunities and strategies, which we believe support our longer term target of reaching a mid-single digit operating margin in the region. With a solid outlook for Q4 on top of the positive year-to-date results, we are optimistic about achieving our near-term targets of being profitable for the full year in the EMEA segment. For the other category, the operating income performance was negatively impacted by 70 basis points related to lease expense for a larger manufacturing facility to support our growth in China. We expect to begin occupying the new facility in fiscal year 2022. As it relates to orders in the quarter, the 4% order growth compares to a strong prior year which posted 10% order growth compared to fiscal 2018. Across the segments the Americas grew 2% on top of 14% growth in the prior year, EMEA grew 11% compared to a 6% decline in the prior year, and the other category posted 10% growth on top of 12% growth in the prior year. As a reminder, at the beginning of the year, we indicated that our organic revenue targets for fiscal 2020 anticipated higher growth rates in the first half of the year compared to the second half, based on how our order patterns and organic revenue growth accelerated during fiscal 2019. And thus far in the current year, our order and revenue patterns are largely consistent with those expectations. Moving to cash flow and the balance sheet, cash flow from operations was very strong in the third quarter, reaching $176 million and exceeding the prior year by more than $90 million. The year-over-year improvement was driven by the strong earnings growth in the quarter, plus the strength of our summer seasonality in the current year, which resulted in higher accounts receivable balances that were collected in the third quarter. We also benefited from timing related to estimated income tax payments, customer deposits, and other assets and liabilities, as well as targeted improvements in working capital. Capital expenditures were $17 million in the quarter bringing year-to-date spending to $49 million. We now expect the full year to total approximately $70 million to $80 million. We returned approximately $20 million to shareholders in the third quarter through the payment of a cash dividend of $0.145 per share and a modest level of share purchases. And yesterday, we announced the same level of dividend for the fourth quarter, which will be paid in January. Turning to the outlook for fiscal 2020 and the fourth quarter, for revenue, we expect our top line to approximate $3.7 billion for the full fiscal year, which compares to $3.4 billion in fiscal 2019 and reflects a growth rate that is in the middle of the targeted range of revenue growth we communicated in March. For earnings, we expect to report fiscal 2020 earnings between $1.41 to $1.45 per share, which compares to $1.05 or $1.20 of adjusted earnings per share in fiscal 2019. And is substantially higher than the targeted range of $1.20 to $1.35 we communicated in March. As it relates to the fourth quarter, our revenue estimate projects revenue to fall within a range of $905 million to $930 million, which compares to $912 million in the prior year, which grew 15% on an organic basis, compared to the previous year. This projection includes the positive impact of an extra week of shipments due to the timing of our year-end in fiscal 2020. It also includes estimated unfavorable currency translation effects, and the unfavorable timing effects of Thanksgiving falling in Q4, the current year, which we estimate will negatively impact the year-over-year comparison by $20 million or more. At the beginning of the fourth quarter, total backlog was up approximately 2%, compared to the prior year, while global orders were down modestly during the first three weeks of the quarter. From an earnings perspective, we expect to report $0.30 to $0.34 per share in the fourth quarter, which compares to $0.19 of earnings in the prior year, or $0.29 of adjusted earnings, after excluding the impact of charges related to the early retirement of debt. As you update your models for the fourth quarter, don't forget the extra week of shipments comes with an extra week of our cost structure. And therefore we expect to generate only a few pennies of additional earnings from this anomaly. In addition, recall the prior year included favorable tax adjustments, which lowered our effective tax rate in the quarter versus the 26%. effective tax rate we're now modeling for the current year. While we will provide more color in March regarding our targets for next fiscal year, I will share a few high level thoughts that we're taking into consideration as we finalize our plans for growth in fiscal 2021. Furniture industry growth through October of calendar 2019 in the Americas, as reported by Bismarck [ph] appears to be stronger than the slowing growth of capital spending over the same period, whether derived from macroeconomic data or from looking at capital expenditures across the S&P 500 or Fortune 800. This suggests that our industry share of capital spending may be gaining resiliency, as organizations continue to invest in their workspaces to help drive productivity and compete in the war for talent. For calendar year 2020 the U.S. Federal Reserve recently held interest rates steady and signaled borrowing costs are likely to remain unchanged indefinitely, with moderate economic growth and low unemployment expected to continue through next year's presidential election. Similarly Bismarck is projecting moderate industry growth of 2% in the Americas for calendar 2020. Overall sentiment from our sales leaders and dealers remains positive and our opportunity pipelines for the first six months of fiscal 2021 continue to reflect project growth for the Americas, EMEA and Asia Pacific. Lastly, we're pleased with our win rates in most regions around the world and believe our research and innovation is resonating with business leaders contemplating investments in their work environments. I share those points because many of the individual investor conversations centered around the economic uncertainties. And it's important to note that recent industry growth, and our performance has been quite good at the same time. From there, we'll turn it back to the operator for questions.

[Operator Instructions] Our first question comes from Stephen Ramsey with Thompson Research Group. Your line is open.

Hey good morning. This is actually Brian Biros on for Stephen. Thanks for taking my questions. I want to start with the revenue guide for down 2% to 5% organically on consolidated basis. Could you guys provide any color on how you're expecting that to play out by segment in Q4. David C. Sylvester: Brian, we typically have not provided color across the segments, and keep our guidance at a high level. You might look at last year's organic growth rates to get a sense of which categories we're doing, grew stronger in the fourth quarter versus the others.

Got it. Thought I'll try at least. I guess secondly on the lower commodity prices. I imagine most of that was steel but if there was any other commodities to call out that would be appreciated. And get some color on how they will be played out in the next year. They continued in Q4 and then as we lagged price increases in the next year, but many again further details will be appreciated. David C. Sylvester: Well, you nailed it. Steel is the biggest driver of the lower commodity costs. And what if you're familiar with the history of how we've layered in pricing actions to deal with the significant rise in steel prices and other commodity costs, we've taken I think three price increases in the last 18 months or so, to react to some of that heavy increasing commodity costs. And what we've seen is our pricing actions are rolling in as we move customer contracts to more recent price list. And at the same time, some of those commodity costs have started to increase as they have started to abate. So about two quarters ago, we started to finally feel the year-over-year benefit of the pricing actions and the commodity costs leveling off and starting to decline. And those were more significant last quarter and they were more significant this quarter, but and we expect that to continue for another quarter or two but at lower rates because we're starting to lap some of those changes in both commodity costs and our pricing actions in the prior year.

Got it. Thank you.

Thank you. Our next question comes from Greg Burns with Sidoti and Company. Your line is open.

Good morning. So I just want to focus first on Europe and kind of get a feel for what's been working there, driving the improve profitability and your view on the sustainability of the profit improvements there. You got the gross margin over 30% this quarter. So I just wanted to see I guess what has been working for you there and what your view on that segment going forward in terms of maintaining the strong performance we saw this quarter? Thanks. James P. Keane: Thanks, Greg. So -- this is Jim here. I think, across a variety of factors. So first of all, pricing just as it's been a benefit here has also been a benefit in EMEA. Secondly, mix, both mix of products, which we've been actively managing to make sure the portfolio price we are selling to customers gives us a good mix of possibility across these products and so as we've been doing that we've been improving the mix across categories. We're also seeing improved mix across customers, so really mix in both directions. We have new products that we are featuring now in Europe that have helped us with that mix, new product development and products that we're launching the last couple of years are starting to grow and be a larger percentage of our total that's helping. We're also taking a number of other actions that have been some of them implemented over the last couple quarters, some of them will be implemented over the next couple quarters. That should help us continue to see benefits in gross margin across sales efforts marketing efforts as well as operational performance and that's the last piece of this. Our operational performance is quite good. Actually in the last quarter or two, we've continue to see improvements in efficiency and quality on time delivery and the factories and we've been relatively busy so it's helped us also absorb overhead. So really I -- there isn't any one thing but I'm happy actually happier that it's across a broad spectrum of initiatives. And we're not done, so I expect to see us continue to improve profitability over the next year and out into the future.

Okay, thanks and then I wanted to ask about the pricing that you've put in over the last year or so now that obviously steel has come down fairly significantly, it's starting to become a tailwind for you. So I just wanted to get a feel for how sticky that pricing is, if there might be -- if you might have to give back maybe some pricing, now the commodities are coming in your favor. Are you seeing any pushback from your customers now from these price increases and/or maybe you would you be willing to roll back pricing to in return for your stronger top line growth? Thanks. James P. Keane: Thanks. So the -- I'll go back to the commodity pricing. First of all, because I think out of simplicity, we often take the largest factors and so we end up talking about things like steel, but there are lots of other commodities that we also purchase, plus there's other factors in our cost structure related to wage increases, which is has seen upward pressure in the Americas and really globally. Health care costs in the United States are also rising. So if you look at all of our costs taken together, while steel has been a benefit most recently, and really most recently versus where it was a year ago, we have other costs that continue to rise. And when we have customer -- conversations with our customers, we lay that out in more detail and we have that broad conversation about what's causing our costs to rise. We also continue to look for efficiencies. So we're always trying to find ways to offset those costs increases through efficiencies, so that we don't expect our customers to absorb a 100% of what is asked for in terms of price increases or cost increases by our suppliers. But when you get to the end of that, I would expect people will continue to see what we've always seen, which is a gradual annual price increase, nothing significant but something that reflects the just the ongoing moderate inflationary environment we're in. In terms of get backs and so on, I haven't seen any evidence that we need to do that. We feel like we're being kind of measured and fair and how we think about price increases, we expect to continue to do that.

Thanks.

Thank you. [Operator Instructions] And I'm currently showing no further questions at this time. I like to turn the call back over to Jim Keane for closing remarks. James P. Keane: Thanks. So again, we're very pleased to deliver another strong quarter and feel good that our growth strategies are working. We look forward to continuing to deliver value to our shareholders. On behalf of everyone here at Steelcase, I want to thank you for your interest in the company. I want to wish you a happy holiday and extend best wishes for the new year. Thank you for joining the call today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.