SHARE-BASED COMPENSATION

The Steelcase Inc. Incentive Compensation Plan (the “Incentive Compensation Plan”) provides for the issuance of share-based compensation awards to employees and members of the Board of Directors. There are 25,000,000 shares of Class A Common Stock reserved for issuance under our Incentive Compensation Plan, with 11,317,414 and 12,751,324 shares remaining for future issuance under our Incentive Compensation Plan as of February 28, 2014 and February 22, 2013, respectively.

A variety of awards may be granted under the Incentive Compensation Plan including stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance shares, performance units, cash-based awards, phantom shares and other share-based awards. Outstanding awards under the Incentive Compensation Plan vest over a period of one, three or five years or at the time a participant becomes a qualified retiree. Stock options granted under the Incentive Compensation Plan may be either incentive stock options intended to qualify under Section 422 of the Code or non-qualified stock options not so intended. The Board may amend or terminate the Incentive Compensation Plan at its discretion subject to certain provisions as stipulated within the plan.

Share-based awards currently outstanding under the Incentive Compensation Plan are as follows:



Total Outstanding Awards	February 28, 2014
Performance units (1)	1,833,288
Restricted stock units	2,001,758
Total outstanding awards	3,835,046

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(1)	This amount includes the maximum number of shares that may be issued under outstanding performance unit awards; however, the actual number of shares which may be issued will be determined based on the satisfaction of certain criteria, and therefore may be significantly lower.

The share-based compensation awards outstanding as of February 28, 2014 consist of restricted stock units and performance units, and the majority of the outstanding awards are held by our executive officers.

In the event of a “change of control,” as defined in the Incentive Compensation Plan,


•	if at least six months have elapsed following the award date, any performance-based conditions imposed with respect to outstanding awards shall be deemed to be fully earned and a pro rata portion of each such outstanding award granted for all outstanding performance periods shall become payable in shares of Class A Common Stock; and


•	all restrictions imposed on restricted stock units that are not performance-based shall lapse.

Performance Units

Performance units have been granted only to our executive officers. These awards are earned after a three-year performance period and only if the performance criteria stated in the applicable award are achieved. After completion of the performance period, the number of performance units earned will be issued as shares of Class A Common Stock. The aggregate number of shares of Class A Common Stock that ultimately may be issued under performance units where the performance period has not been completed ranges from 0 to 1,833,288 shares as of February 28, 2014. The awards will be forfeited if a participant leaves the company for reasons other than retirement, disability or death or if the participant engages in any competition with us, as defined in the plan and determined by the Administrative Committee in its discretion.

A dividend equivalent is calculated based on the actual number of units earned at the end of the performance period, equal to the dividends that would have been payable on the earned units had they been held during the entire performance period as Class A Common Stock. At the end of the performance period, the dividend equivalents are paid in the form of cash or Class A Common Stock at the discretion of the Board of Directors.

Half of the performance units granted in 2014 can be earned based on our three-year average return on invested capital ("ROIC PSUs"), which is a performance condition. The number of shares that may be earned under the ROIC PSUs can range from 0% to 200% of the target amount. The ROIC PSUs are expensed and recorded in Additional paid-in capital on the Consolidated Balance Sheets over the performance periods based on the probability that the performance condition will be met. The expense recorded will be adjusted as the estimate of the total number of ROIC PSUs that will ultimately be earned changes. The weighted average grant date fair value per share of ROIC PSUs granted was $12.66. The fair value is equal to the closing price on the date of the grant.

The remaining half of the performance units granted in 2014 and all performance units granted in 2013 and 2012 can be earned based on achievement of certain total shareholder return results relative to a comparison group of companies ("TSR PSUs"), which is a market condition. The number of units that may be earned under the TSR PSUs can range from 0% to 200% of the target amount. The TSR PSUs are expensed and recorded in Additional paid-in capital on the Consolidated Balance Sheets over the performance periods. Based on actual performance results, the 2012 TSR PSUs were earned at 106.6% of the target level and 453,627 shares of Class A Common Stock were issued to participants in Q1 2015.

The fair values of the the TSR PSUs were calculated on their respective grant dates using the Monte Carlo simulation model, which resulted in a fair value of $5.7, $6.4 and $8.1 for years 2014, 2013 and 2012, respectively. The Monte Carlo simulation was computed using the following assumptions:



	2014 Awards		2013 Awards		2012 Awards
Three-year risk-free interest rate (1)	0.3	%	0.5	%	1.4	%
Expected term	3 years		3 years		3 years
Estimated volatility (2)	44.7	%	49.8	%	50.9	%

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(1)	Based on the U.S. Government bond benchmark on the grant date.


(2)	Represents the historical price volatility of the Company’s Class A Common Stock for the three-year period preceding the grant date.

The Monte Carlo simulation resulted in the following weighted-average grant date fair values:



Grant Date Fair Value per TSR PSU	Year Ended
Grant Date Fair Value per TSR PSU	February 28, 2014		February 22, 2013		February 24, 2012
Weighted-average grant date fair value per share of TSR PSUs granted during 2014, 2013 and 2012	$	15.50	$	11.92	$	16.57

The total performance units expense and associated tax benefit in 2014, 2013 and 2012 are as follows:



Performance Units	Year Ended
Performance Units	February 28, 2014		February 22, 2013		February 24, 2012
Expense	$	6.0	$	5.5	$	8.1
Tax benefit	2.3		3.0		1.2

The 2014 activity for performance units is as follows:



Maximum Number of Nonvested Units	Total		Weighted-Average Grant Date Fair Value per Unit
Nonvested as of February 22, 2013	1,932,030		$	13.96
Granted	839,448		14.08
Vested	(453,627	)	16.56
Forfeited	(87,100	)	13.02
Adjustments (1)	(397,463	)	16.56
Nonvested as of February 28, 2014	1,833,288		14.04

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(1)	Adjustments were due to the number of shares earned under the 2012 award at the end of the performance period being less than the maximum.

As of February 28, 2014, there was $2.4 of remaining unrecognized compensation cost related to nonvested performance units. That cost is expected to be recognized over a remaining weighted-average period of 1.7 years.

The total fair value of performance units vested was $6.7, $14.0 and $7.0 during 2014, 2013 and 2012, respectively.

Restricted Stock Units

Restricted stock units (“RSUs”) have restrictions on transfer which lapse one, three or five years (depending on the terms of the individual grant) after the date of grant, at which time RSUs are issued as unrestricted shares of Class A Common Stock. These awards are subject to forfeiture if a participant leaves the company for reasons other than retirement, disability, death or termination by us without cause prior to the vesting date. RSUs are expensed and recorded in Additional paid-in capital on the Consolidated Balance Sheets over the requisite service period based on the value of the shares on the grant date.



Grant Date Fair Value per Share	Year Ended
Grant Date Fair Value per Share	February 28, 2014		February 22, 2013		February 24, 2012
Weighted-average grant date fair value per share of RSUs granted during 2014, 2013 and 2012	$	13.46	$	9.66	$	9.64

The total RSUs expense and associated tax benefit in 2014, 2013 and 2012 is as follows:



Restricted Stock Units	Year Ended
Restricted Stock Units	February 28, 2014		February 22, 2013		February 24, 2012
Expense	$	10.3	$	3.8	$	3.2
Tax benefit	3.3		1.2		1.0

Holders of RSUs receive cash dividends equal to the dividends we declare and pay on our Class A Common Stock, which are included in Dividends paid on the Consolidated Statements of Cash Flows.

The 2014 activity for RSUs is as follows:



Nonvested Units	Total		Weighted-Average Grant Date Fair Value per Share
Nonvested as of February 22, 2013	1,221,227		$	9.42
Granted	1,097,941		13.46
Vested	(266,704	)	8.71
Forfeited	(50,706	)	10.42
Nonvested as of February 28, 2014	2,001,758		11.71

There was $8.8 of remaining unrecognized compensation cost related to RSUs as of February 28, 2014. That cost is expected to be recognized over a weighted-average period of 2.1 years.

The total fair value of restricted stock and RSUs vested was $4.2, $1.7 and $0.8 during 2014, 2013 and 2012, respectively.

Unrestricted Share Grants

Under the Incentive Compensation Plan, unrestricted shares may be issued to members of the Board of Directors as compensation for director’s fees, as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. We granted a total of 31,790, 43,238 and 38,888 unrestricted shares at a weighted average grant date fair value per share of $14.82, $9.62 and $8.39 during 2014, 2013 and 2012, respectively.