Exhibit 99.1
Steelcase Reports Second Quarter Fiscal 2004 Results;
Strong Sequential Quarter Revenue Growth in North America
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Sept. 24, 2003--Steelcase
Inc. (NYSE:SCS) today reported revenue from continuing operations for
its second quarter totaled $612.1 million, an increase of 10 percent
over first quarter revenue of $555.6 million, and a 5 percent decrease
compared with $644.2 million in the same quarter last year. Driven by
strong sales in North America, these results were in line with company
estimates. The year-on-year sales decrease is net of a $16.1 million
favorable currency translation effect in the International segment.
Currency translation did not materially affect the sequential quarter
comparison. Revenue for the quarter and prior period comparisons
excludes the recently divested Attwood marine business, now treated as
a discontinued operation.
Steelcase reported net income of $18.1 million, or $0.12 per share
for the second quarter. These results compare with a net loss of
$(7.3) million, or $(0.05) per diluted share, in the second quarter of
fiscal 2003.
In the quarter, the company sold its Attwood Corporation marine
hardware and accessories business and results reflect a $31.9 million
pre-tax gain related to the divestiture. Reported results also include
pre-tax restructuring and related asset impairment charges of $(4.9)
million for International and $(2.5) million for North America, a $7.0
million pre-tax non-operating gain on the sale of real estate, and a
pre-tax non-operating charge of $(6.1) million related to a dealer
transition. The total of all these items is a net gain of $25.4
million pre-tax, or $16.0 million after-tax.
"We returned to profitability this quarter on the strength of
improved sales and operating profits in the North America segment,"
said James P. Keane, chief financial officer. "In addition, we
strengthened our balance sheet through the sale of Attwood, and
continued control over capital expenditures. We increased cash
balances to $173 million and lowered debt to $316 million during the
quarter."
"This performance gives us confidence we will achieve our targets
for the year," said James P. Hackett, president and chief executive
officer. "We made significant progress on our ongoing restructuring
actions and we strengthened our liquidity position. Our efforts to
improve our cost structure combined with a focus on customer service,
innovation and operational excellence are preparing us for growth."
Outlook
"We are seeing some signs that business capital spending is
finally beginning to recover in the United States," said Mr. Keane.
"Although we believe increased spending on office furniture will
generally lag other categories, we are expecting a modest increase in
second half shipments, including projects we have already won.
International markets are not yet showing the same signs of
improvement in overall economic indicators."
The company expects third quarter sales from continuing operations
to be flat to slightly up from second quarter levels. North America
order rates increased slightly in the second quarter versus the first
quarter, and have been volatile in the early weeks of the third
quarter.
Third quarter earnings are expected to be just above breakeven,
including $(5.0) to $(7.0) million of pre-tax restructuring charges,
and the impact of labor and overhead inefficiencies related to ongoing
plant consolidation activities. The company expects to be profitable
for fiscal year 2004.
Mr. Hackett concluded, "We are delivering innovative solutions in
new and existing markets that together with the operational
initiatives implemented and underway, will provide Steelcase with
significant opportunity for growth and profitability as the economy
recovers."
Webcast
Steelcase will webcast its conference call reviewing second
quarter fiscal 2004 financial results on Thursday, September 25, 2003
at 11:00 a.m. EDT. Links to the webcast are available at
www.steelcase.com. Accompanying webcast presentation slides will be
available on the company's website shortly before the start of the
webcast. A replay of the webcast can be accessed on the site after the
call.
Business Segment Results
(in millions)
Second Quarter Sequential Quarters
Three Months Ended Three Months Ended
------------------ ------------------
Aug 29, Aug 23, % Inc Aug 29, May 30, % Inc
2003 2002 (Dec) 2003 2003 (Dec)
---- ---- ----- ---- ---- -----
Revenue
North America (1) $346.0 $377.7 (8.4)% $346.0 $296.2 16.8%
Steelcase Design
Partnership (2) 73.4 75.1 (2.3)% 73.4 67.0 9.6%
International (3) 120.5 117.3 2.7 % 120.5 129.8 (7.2)%
Other (4) (6) 72.2 74.1 (2.5)% 72.2 62.6 15.3%
---- ---- ---- ----
Consolidated
Revenue $612.1 $644.2 (5.0)% $612.1 $555.6 10.2%
====== ====== ====== ======
Operating Income(5)
North America $3.4 $(2.8) $3.4 $(19.3)
Steelcase Design
Partnership 4.6 5.1 4.6 2.9
International (11.2) (4.9) (11.2) (5.2)
Other(6) 1.4 (10.2) 1.4 (3.7)
--- ------ --- -----
Consolidated
Operating Loss $(1.8) $(12.8) $(1.8) $(25.3)
====== ======= ====== =======
Operating Margin
Percent (0.3)% (2.0)% (0.3)% (4.6)%
Second Quarter
Six Months Ended
----------------
Aug 29, Aug 23, % Inc
2003 2002 (Dec)
---- ---- -----
Revenue
North America (1) $642.2 $768.7 (16.5)%
Steelcase Design Partnership (2) 140.4 143.8 (2.4)%
International (3) 250.3 224.9 11.3%
Other (4) (6) 134.8 133.1 1.3%
----- -----
Consolidated Revenue $1,167.7 $1,270.5 (8.1)%
======== ========
Operating Income(5)
North America $(15.9) $(9.1)
Steelcase Design Partnership 7.5 8.7
International (16.4) (14.7)
Other(6) (2.3) (14.8)
----- ------
Consolidated Operating Loss $(27.1) $(29.9)
======= =======
Operating Margin Percent (2.3)% (2.4)%
Business Segment Footnotes
(1) North America business segment includes the company's
Steelcase and Turnstone brands and consolidated dealers in the
U.S. and Canada.
(2) Steelcase Design Partnership (SDP) business segment
includes Brayton, The Designtex Group, Details, Metro and
Vecta.
(3) International business segment includes all manufacturing and
sales operations outside the U.S. and Canada.
(4) Other includes Steelcase Financial Services, PolyVision and
IDEO subsidiaries, other ventures and unallocated corporate
expenses. Steelcase Financial Services was a reporting segment
in fiscal 2003 and is now included in Other because revenue
and assets fall below the threshold required for segment
reporting.
(5) Operating income percent comparisons are not provided because
they are not meaningful.
(6) For the second quarter and in prior period comparisons, the
divested Attwood marine business is treated as a discontinued
operation. Attwood revenue was $14.9 million and operating
income was $2.2 million in Q2 FY04. In fiscal 2003,
Attwood revenue was $57.0 million and operating income was
$8.0 million.
About Steelcase Inc.
Steelcase Inc., a Fortune 500 company, helps individuals and
organizations around the world to work more effectively by providing
knowledge, products and services that enable customers and their
consultants to create work environments that integrate architecture,
furniture and technology. Founded in 1912 and headquartered in Grand
Rapids, Michigan, the company has led the global office furniture
industry in sales every year since 1974. Its product portfolio
includes interior architectural products, furniture systems,
technology products, seating, lighting, storage and related products
and services. Fiscal 2003 revenue was approximately $2.6 billion.
Steelcase Inc. and its subsidiaries have dealers in more than 900
locations, manufacturing facilities in over 50 locations and
approximately 16,000 employees around the world. The company's Class A
Common Stock trades on the NYSE under the symbol SCS.
Forward-looking Statements
From time to time, in written reports and oral statements, the
company discusses its expectations regarding future performance. For
example, certain portions of this release contain various
"forward-looking statements." Such statements involve certain risks
and uncertainties that could cause actual results to vary. The
company's performance may differ materially from that contemplated by
forward-looking statements for a variety of reasons, including, but
not limited to: competitive and general economic
conditions/uncertainty domestically and internationally; delayed or
lost sales and other impacts related to acts of terrorism, acts of war
or governmental action; changes in domestic or international laws,
rules and regulations, including the impact of changed environmental
laws, rules or regulations; major disruptions at our key facilities or
in the supply of any key raw materials; competitive pricing pressure;
pricing changes by the company or its competitors; currency
fluctuations; changes in customer demand and order patterns; changes
in the financial stability of customers or dealers (including changes
in their ability to pay amounts owed to the company); changes in
relationships with customers, suppliers, employees and dealers;
product (sales) mix; 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; the ability of the company to effectively
cull products; possible acquisitions or divestitures by the company;
the company's ability to reduce costs, including ramp-up costs
associated with new products and to improve margins on new products;
the impact of workforce reductions (including elimination of temporary
workers, hourly layoffs, early retirement programs and salaried
workforce reductions); the company's ability to successfully integrate
acquired businesses, initiate and manage alliances and increased
global sourcing, transition production of products or components from
one of its manufacturing facilities to another or to third parties as
a result of production rationalization, implement technology
initiatives and migrate to a less vertically integrated manufacturing
model; changes in business strategies and decisions; and other risks
detailed in the company's Form 10-K for the year ended February 28,
2003 and other filings with the Securities and Exchange Commission.
Steelcase undertakes no obligation to update, amend, or clarify
forward-looking statements, whether as a result of new information,
future events, or otherwise.
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
Three Months Ended Six Months Ended
-------------------- -------------------
Aug. 29, Aug. 23, Aug. 29, Aug. 23,
2003 2002 2003 2002
---------- --------- --------- ---------
Revenue $612.1 $644.2 $1,167.7 $1,270.5
Cost of sales 437.1 451.7 836.2 898.0
Restructuring costs 7.3 1.6 17.5 5.2
---------- --------- --------- ---------
Gross profit 167.7 190.9 314.0 367.3
Operating expenses 169.4 191.4 336.3 380.7
Restructuring costs 0.1 12.3 4.8 16.5
---------- --------- --------- ---------
Operating loss (1.8) (12.8) (27.1) (29.9)
Interest expense (5.1) (5.2) (9.9) (10.3)
Other income (expense), net 1.7 3.5 8.2 (1.3)
---------- --------- --------- ---------
Loss from continuing
operations before income
tax benefit (5.2) (14.5) (28.8) (41.5)
Income tax benefit (2.0) (6.0) (10.8) (16.1)
---------- --------- --------- ---------
Loss from continuing
operations (3.2) (8.5) (18.0) (25.4)
Income from discontinued
operations, net of applicable
taxes 1.3 1.2 2.7 2.7
Gain on sale of net assets of
discontinued operations, net
of applicable taxes of $11.9 20.0 -- 20.0 --
---------- --------- --------- ---------
Income (loss) before
cumulative effect of
accounting change 18.1 (7.3) 4.7 (22.7)
Cumulative effect of
accounting change -- -- -- (229.9)
---------- --------- --------- ---------
Net income (loss) $18.1 $(7.3) $4.7 $(252.6)
========== ========= ========= =========
Basic and diluted per share
data:
Loss from continuing
operations $(0.02) $(0.06) $(0.12) $(0.17)
Income from discontinued
operations 0.14 0.01 0.15 0.02
Cumulative effect of
accounting change -- -- -- (1.56)
---------- --------- --------- ---------
Earnings (loss) $0.12 $(0.05) $0.03 $(1.71)
========== ========= ========= =========
Dividends declared per common
share $0.06 $0.06 $0.12 $0.12
========== ========= ========= =========
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
Aug. 29, Feb. 28,
2003 2003
------------ ----------
ASSETS
Current assets:
Cash and cash equivalents $ 172.6 $ 128.9
Accounts receivable, net 398.7 367.2
Notes receivable and leased assets, net 79.8 84.9
Inventories 121.0 129.8
Other current assets 116.1 103.3
------------ ----------
Total current assets 888.2 814.1
Property and equipment, net 713.0 774.0
Notes receivable and leased assets, net 110.0 125.9
Goodwill and other intangible assets, net 302.0 306.0
Other assets 314.7 322.2
------------ ----------
Total assets $2,327.9 $2,342.2
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 139.4 $ 145.4
Short-term borrowings and current portion
of long-term debt 29.8 30.0
Accrued expenses:
Employee compensation 76.3 90.9
Employee benefit plan obligations 30.7 39.6
Other 239.5 196.6
------------ ----------
Total current liabilities 515.7 502.5
------------ ----------
Long-term liabilities:
Long-term debt 286.2 294.2
Employee benefit plan obligations 233.2 237.8
Other long-term liabilities 41.4 52.6
------------ ----------
Total long-term liabilities 560.8 584.6
------------ ----------
Total liabilities 1,076.5 1,087.1
------------ ----------
Shareholders' equity:
Common stock 288.4 286.1
Accumulated other comprehensive loss (41.5 ) (50.1 )
Deferred compensation - restricted stock (1.6 ) --
Retained earnings 1,006.1 1,019.1
------------ ----------
Total shareholders' equity 1,251.4 1,255.1
------------ ----------
Total liabilities and
shareholders' equity $2,327.9 $2,342.2
------------ ----------
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Six Months Ended
Aug. 29, Aug. 23,
2003 2002
-------- ---------
OPERATING ACTIVITIES
Net income (loss) $ 4.7 $(252.6 )
Depreciation and amortization 71.9 76.7
Cumulative effect of accounting change --- 229.9
Gain on sale of discontinued operations (31.9 ) ---
Changes in operating assets and liabilities, net
of corporate acquisitions (28.5 ) (58.2 )
Other, net (17.9 ) 2.7
-------- ---------
Net cash used in operating activities (1.7 ) (1.5 )
-------- ---------
INVESTING ACTIVITIES
Capital expenditures (19.3 ) (44.7 )
Proceeds from the disposal of fixed assets 17.2 0.9
Net proceeds on sale of discontinued operations 46.9 ---
Proceeds from the sales of leased assets 39.8 178.0
Net (increase) decrease in notes receivable and
leased assets (16.2 ) 3.7
Other, net 3.2 17.1
-------- ---------
Net cash provided by investing activities 71.6 155.0
-------- ---------
FINANCING ACTIVITIES
Long-term debt issuances (repayments), net (9.4 ) (117.1 )
Short-term borrowings (repayments), net 0.3 (48.8 )
Common stock issuance 0.3 3.6
Dividends paid (17.7 ) (17.7 )
-------- ---------
Net cash used in financing activities (26.5 ) (180.0 )
-------- ---------
Effect of exchange rate changes on cash and cash
equivalents 0.3 1.3
-------- ---------
Net increase (decrease) in cash and cash
equivalents 43.7 (25.2 )
Cash and cash equivalents, beginning of period 128.9 69.4
-------- ---------
Cash and cash equivalents, end of period $172.6 $ 44.2
-------- ---------
CONTACT: Steelcase Inc.
Investor Contact:
Raj Mehan, 616-698-4734
Media Contact:
Lisa Kerr, 616-698-4487