Exhibit 99.1
Steelcase Reports Third Quarter Fiscal 2004
Results; Revenue and Earnings In Line With Company Estimates
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Dec. 18, 2003--Steelcase
Inc. (NYSE:SCS) today reported revenue for its third quarter totaled
$614.5 million, consistent with second quarter revenue of $612.1
million and in line with company expectations. Third quarter revenue
benefited by $21.7 million from favorable currency translation in the
company's International segment when compared to revenue of $635.6
million in the same quarter last year. Currency translation did not
materially affect the sequential quarter comparison.
Steelcase reported a net loss of $(9.5) million, or $(0.06) per
share for the third quarter and was in line with company estimates.
These results compare with a net loss of $(31.1) million, or $(0.21)
per diluted share, in the third quarter of fiscal 2003.
Reported results reflect pre-tax restructuring charges of $(2.9)
million for North America, $(2.4) million for International and $(0.7)
million for Steelcase Design Partnership. The company also incurred
charges of $(3.1) million in the other category, which includes a
$(2.4) million non-operating charge related to a dealer transition.
The total of all these items is $(9.1) million pre-tax, or $(5.7)
million after-tax.
"We've been steadfast throughout this year in focusing on three
priorities: driving complexity out of our business, reducing variable
costs throughout the supply chain and preparing for growth," said
James P. Hackett, president and chief executive officer. "We still
have some work to do, and in the current challenging market
environment, our teams are working hard to balance investments in new
revenue opportunities with the need to improve our short-term
profitability."
"We continued to strengthen our balance sheet this quarter," said
James P. Keane, chief financial officer. "We increased cash balances
to $201 million, the highest quarterly level since we became a public
company in 1998. At the same time, we reduced debt to $308 million,
the lowest level in over four years."
Outlook
The company estimates that fourth quarter revenue will be down 3
to 5 percent from third quarter levels reflecting seasonal patterns.
Order rates have softened across the company in the first few weeks of
the fourth quarter, consistent with this outlook.
The company expects to report a fourth quarter loss, before
cumulative effect of accounting change, of $(0.06) to $(0.11) per
share, primarily because of lower volume compared to the third
quarter. Included in this estimate is approximately $(3) to $(8)
million of net after-tax charges. The company anticipates that
significant restructuring charges in North America and International
will be largely offset by favorable income tax liability adjustments.
In addition, the company expects the Financial Accounting
Standards Board (FASB) will require implementation in the fourth
quarter of certain aspects of their proposed Financial Interpretation
Number (FIN) 46 related to accounting for variable interest entities.
As a result, the company expects to incur a fourth quarter after-tax,
non-cash charge of approximately $(0.03) per share, which will be
reported separately as a cumulative effect of accounting change. Other
aspects of FIN 46, which could affect consolidation of certain
dealers, are still being discussed by the FASB.
The company has planned fiscal 2005 using a 5 percent revenue
growth assumption, a $(15) to $(20) million estimate for pre-tax
restructuring charges, and estimated earnings of $0.05 to $0.10 per
share. These estimates are highly sensitive to volume assumptions and
many other factors.
The company expects the charges associated with the current,
multi-year, operational restructuring effort will continue through
fiscal year 2005. Other current initiatives such as lean manufacturing
and strategic sourcing will continue beyond that point, and are key to
improving profitability, but are less likely to lead to significant
charges. The three-year plan targets a longer-term gross margin of
approximately 35 percent and operating income of 10 percent of net
sales, assuming modest top-line growth.
Webcast
Steelcase will webcast its conference call reviewing third quarter
fiscal 2004 financial results on Friday, December 19, 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 through January
19, 2004.
Business Segment Results
(in millions)
Third Quarter Sequential Quarters
Three Months Ended Three Months Ended
------------------ ------------------
Nov 28, Nov 22, %Inc Nov 28, Aug 29, %Inc
2003 2002 (Dec) 2003 2003 (Dec)
---- ---- ----- ---- ---- -----
Revenue
North America(1) $336.4 $372.5 (9.7)% $336.4 $346.0 (2.8)%
Steelcase Design
Partnership(2) 70.3 79.3 (11.3)% 70.3 73.4 (4.2)%
International(3) 148.2 123.9 19.6% 148.2 120.5 23.0%
Other(4)(6) 59.6 59.9 (0.5)% 59.6 72.2 (17.5)%
---- ---- ---- ----
Consolidated
Revenue $614.5 $635.6 (3.3)% $614.5 $612.1 0.4%
====== ====== ====== ======
Operating Income(5)
North America $(2.3) $(28.1) $(2.3) $3.4
Steelcase Design
Partnership 3.0 7.2 3.0 4.6
International (1.6) (6.7) (1.6) (11.2)
Other(6) (5.1) (8.7) (5.1) 1.4
----- ----- ----- ---
Consolidated
Operating Loss $(6.0) $(36.3) $(6.0) $(1.8)
====== ======= ====== ======
Operating
Margin Percent (1.0)% (5.7)% (1.0)% (0.3)%
Third Quarter
Nine Months Ended
Nov 28, Nov 22, %Inc
2003 2002 (Dec)
---- ---- -----
Revenue
North America(1) $978.6 $1,141.2 (14.2)%
Steelcase Design Partnership(2) 210.7 223.1 (5.6)%
International(3) 398.5 348.8 14.2%
Other(4)(6) 194.4 193.0 0.7%
----- -----
Consolidated Revenue $1,782.2 $1,906.1 (6.5)%
======== ========
Operating Income(5)
North America $(18.2) $(37.2)
Steelcase Design Partnership 10.5 15.9
International (18.0) (21.4)
Other(6) (7.4) (23.5)
----- ------
Consolidated Operating Loss $(33.1) $(66.2)
======= =======
Operating Margin Percent (1.9)% (3.5)%
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) Prior periods have been restated to remove from continuing
operations the Attwood marine business that was divested.
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 15,000 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.
Certain portions of this release contain various "forward-looking
statements", including those relating to orders, revenues/shipments,
restructuring activities and charges, current initiatives to improve
profitability, income tax liability adjustments, earning/losses and
anticipated accounting changes, as well as other estimates and
expectations. 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, components or finished goods; 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 for product and services, dealer financing and
other amounts owed to the company); changes in relationships with
customers, suppliers, employees and dealers; the mix of products sold
and of customers purchasing (including large project business); 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 company's
ability to reduce its costs, including actions such as workforce
reduction, facility rationalization, asset and lease disposal
(impairments), production consolidation, culling products and
increased global sourcing; the company's ability to realize favorable
income tax adjustments, to successfully implement technology
initiatives, integrate acquired businesses, migrate to a less
vertically integrated model and initiate and manage alliances;
possible acquisitions or divestitures by the company; 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 Nine Months Ended
-------------------- -------------------
Nov. 28, Nov. 22, Nov. 28, Nov. 22,
2003 2002 2003 2002
- ----------------------------- ---------- --------- --------- ---------
Revenue $614.5 $635.6 $1,782.2 $1,906.1
Cost of sales 443.2 457.3 1,279.4 1,355.5
Restructuring costs 4.6 5.7 22.1 10.7
---------- --------- --------- ---------
Gross profit 166.7 172.6 480.7 539.9
Operating expenses 170.6 185.6 506.9 566.1
Restructuring costs 2.1 23.3 6.9 40.0
---------- --------- --------- ---------
Operating loss (6.0) (36.3) (33.1) (66.2)
Interest expense (4.0) (5.3) (13.9) (15.5)
Other income (expense), net (4.6) (8.2) 3.6 (9.5)
---------- --------- --------- ---------
Loss from continuing
operations before
income tax benefit (14.6) (49.8) (43.4) (91.2)
Income tax benefit (5.1) (18.0) (15.9) (34.0)
---------- --------- --------- ---------
Loss from continuing
operations (9.5) (31.8) (27.5) (57.2)
Income from discontinued
operations, net of
applicable taxes -- 0.7 2.7 3.4
Gain on sale of net assets of
discontinued operations, net
of applicable taxes of $11.9 -- -- 20.0 --
---------- --------- --------- ---------
Income (loss) before
cumulative effect of
accounting change (9.5) (31.1) (4.8) (53.8)
Cumulative effect of
accounting change -- -- -- (229.9)
---------- --------- --------- ---------
Net income (loss) $(9.5) $(31.1) $(4.8) $(283.7)
========== ========= ========= =========
Basic and diluted per share
data:
Loss from continuing
operations $(0.06) $(0.22) $(0.18) $(0.38)
Income from discontinued
operations -- 0.01 0.15 0.02
Cumulative effect of
accounting change -- -- -- (1.56)
---------- --------- --------- ---------
Earnings (loss) $(0.06) $(0.21) $(0.03) $(1.92)
========== ========= ========= =========
Dividends declared per common
share $0.06 $0.06 $0.18 $0.18
========== ========= ========= =========
Weighted average shares
outstanding 147.9 147.6 147.8 147.5
========== ========= ========= =========
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
Nov. 28, Feb. 28,
2003 2003
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 201.1 $ 128.9
Accounts receivable, net 388.3 367.2
Notes receivable and leased assets, net 97.3 84.9
Inventories 118.0 129.8
Other current assets 113.6 103.3
----------- -----------
Total current assets 918.3 814.1
Property and equipment, net 697.9 774.0
Notes receivable and leased assets, net 94.4 125.9
Goodwill and other intangible assets, net 296.9 306.0
Other assets 296.3 322.2
----------- -----------
Total assets $ 2,303.8 $ 2,342.2
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 138.6 $ 145.4
Short-term borrowings and current portion
of long-term debt 29.4 30.0
Accrued expenses:
Employee compensation 74.8 90.9
Employee benefit plan obligations 34.7 39.6
Other 238.1 196.6
----------- -----------
Total current liabilities 515.6 502.5
----------- -----------
Long-term liabilities:
Long-term debt 278.9 294.2
Employee benefit plan obligations 235.4 237.8
Other long-term liabilities 42.6 52.6
----------- -----------
Total long-term liabilities 556.9 584.6
----------- -----------
Total liabilities 1,072.5 1,087.1
----------- -----------
Shareholders' equity:
Common stock 288.7 286.1
Accumulated other comprehensive loss (43.5) (50.1)
Deferred compensation - restricted stock (1.6) --
Retained earnings 987.7 1,019.1
----------- -----------
Total shareholders' equity 1,231.3 1,255.1
----------- -----------
Total liabilities and
shareholders' equity $ 2,303.8 $ 2,342.2
----------- -----------
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended
Nov. 28, Nov. 22,
2003 2002
-------- --------
OPERATING ACTIVITIES
Net loss $ (4.8) $(283.7)
Depreciation and amortization 106.8 115.9
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 (31.1) (12.0)
Other, net 15.9 5.5
-------- --------
Net cash provided by operating activities 54.9 55.6
-------- --------
INVESTING ACTIVITIES
Capital expenditures (29.8) (63.8)
Proceeds from the disposal of fixed assets 17.8 23.2
Net proceeds on sale of discontinued operations 47.9 --
Proceeds from the sales of leased assets 39.8 185.7
Net (increase) decrease in notes receivable and
leased assets (16.1) 20.4
Other, net (0.3) 14.3
-------- --------
Net cash provided by investing activities 59.3 179.8
-------- --------
FINANCING ACTIVITIES
Long-term debt issuances (repayments), net (14.9) (129.9)
Short-term borrowings (repayments), net (2.7) (101.5)
Common stock issuance 0.4 3.7
Dividends paid (26.6) (26.6)
-------- --------
Net cash used in financing activities (43.8) (254.3)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents 1.8 1.6
-------- --------
Net increase (decrease) in cash and cash
equivalents 72.2 (17.3)
Cash and cash equivalents, beginning of period 128.9 69.4
-------- --------
Cash and cash equivalents, end of period $ 201.1 $ 52.1
-------- --------
CONTACT: Steelcase Inc.
Investor Contact: Raj Mehan, 616-698-4734
Media Contact: Jeanine Hill, 616-291-8935