Exhibit 99.1
Steelcase Reports Fourth Quarter and Full Fiscal Year 2004 Results
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--March 29, 2004--Steelcase
Inc. (NYSE:SCS) today reported revenue totaling $563.4 million for its
fourth quarter ended Feb. 27, 2004. Revenue for this 13-week quarter
was 9.7 percent less than the prior year 14-week quarter. Excluding
the impact of the extra week, revenue declined by 2.7 percent. Also,
fourth quarter revenue benefited by $12.1 million versus the prior
year from favorable currency translation effects in the company's
International segment. Fourth quarter revenues were below the
company's previous estimates.
Two of the company's segments showed year-on-year revenue
increases in the quarter, adjusting for the extra week in the fourth
quarter of fiscal 2003. On this basis, International sales were up
10.5 percent compared to the prior year, with a modest 1.0 percent
increase over the prior year without the currency translation benefit.
Adjusting for the extra week, Steelcase Design Partnership sales
increased 2.6 percent versus the prior year - the first year-on-year
increase for that segment since the fourth quarter of fiscal 2001 -
while revenues for the North America segment declined 8.9 percent in
the same period.
Steelcase reported a net loss of $(18.4) million, or $(0.13) per
share for the fourth quarter of fiscal 2004. The net loss before
cumulative effect of accounting change related to FIN 46,
"Consolidation of Variable Interest Entities," was $(14.2) million, or
$(0.10) per share, in line with the company's prior estimate of
$(0.06) to $(0.11) per share. Reported results include the effect of
lower revenues, continued pricing pressure and ongoing inefficiencies
related to plant consolidations. In the previous year, Steelcase
reported net income of $17.6 million, or $0.12 per share, driven
primarily by a gain from the sale of real estate and a curtailment
gain on post-retirement benefits.
Reported results reflect after-tax restructuring and other charges
of $(13.0) million, primarily related to the North America and
International segments. These charges were less than anticipated
because severance costs that were originally expected in the fourth
quarter, related to previously announced plant consolidations, are now
expected to be booked in fiscal 2005. The company benefited from
favorable tax liability adjustments totaling $15.9 million after-tax.
These adjustments, which were higher than anticipated, related to a
recently completed tax audit and to the year-end reconciliation of the
tax provision and related liability. The total of these charges and
tax adjustments resulted in a net after-tax gain of $2.9 million,
compared to the company's previous estimate of $(3) to $(8) million in
after-tax charges.
During the quarter, the company adopted FIN 46, which required the
company to capitalize leases related to the company aircraft. The rule
change had no impact on cash flow, but had the effect of increasing
fixed assets by $41.3 million and debt by $48.0 million. The pre-tax
difference of $6.7 million resulted in a $4.2 million after-tax charge
which was reflected as a cumulative effect of accounting change.
Unrelated to FIN 46, the company also consolidated the balance
sheets of eight dealers due to a change in the nature of the company's
control of these dealerships. The company's investments in these
dealerships were previously reported using the equity method. This
consolidation had no effect on total shareholders' equity, but did
increase total assets and total liabilities by approximately $11
million. There was no effect on revenue or net income (loss) in the
fourth quarter.
Fiscal Year 2004 Results
The company reported fiscal 2004 revenue of $2.35 billion. Revenue
for this 52-week year was 7.3 percent less than the prior 53-week
year. Excluding the impact of the extra week, revenue declined by 5.6
percent. Fiscal 2004 revenue benefited by $77.1 million versus the
prior year from favorable currency translation effects in the
International segment.
Steelcase reported a net loss of $(23.2) million, or $(0.16) per
share in fiscal 2004 compared with a net loss of $(266.1) million, or
$(1.80) per share in the prior year. The net loss from continuing
operations was $(41.4) million or $(0.28) per share in fiscal 2004
compared to $(40.9) million or $(0.28) per share in fiscal 2003.
Restructuring and other charges in fiscal 2004 totaled $(45.4)
million pre-tax. This includes $(40.6) million charged to cost of
sales and $(9.1) million charged to operating expenses. The company
also recorded $4.3 million of gains in non-operating income. The
charges were primarily for severance and asset impairments related to
workforce reductions and the company's ongoing facility
rationalization and consolidation initiatives. The non-operating gains
were primarily generated from real estate and leased asset sales.
Steelcase increased cash and cash equivalents to $262 million at
the end of fiscal 2004, more than doubling the $129 million at the end
of fiscal 2003. Debt outstanding was $354 million, including $48
million related to the effect of implementing FIN 46, as previously
mentioned.
"We continued to strengthen our balance sheet this quarter," said
James Keane, chief financial officer. "We have the highest cash
balance since Steelcase became a public company."
"We knew this past year would be a time to focus on restructuring
and cost reduction," said Jim Hackett, president and chief executive
officer. "We made substantial progress on the reinvention of many
aspects of our industrial system and, at the same time, continued to
invest in our future."
Outlook
Order rates in North America have strengthened in March, in line
with seasonal patterns. For the first quarter of fiscal 2005,
Steelcase expects revenues to be slightly higher than in the fourth
quarter of fiscal 2004, and compared to the same period in the prior
year. This would be the first quarterly year-on-year sales increase
for the company in three years. This estimate does not take into
account the newly consolidated dealerships discussed earlier, which
will add approximately $15 to $25 million of revenue per quarter, with
no corresponding impact on net income.
The company anticipates a first quarter after-tax loss in the
range of $(0.09) to $(0.14) per share. Included in this estimate are
restructuring charges in the range of $(3) to $(6) million after-tax
and a $(2) to $(3) million after-tax impact of rising steel prices.
To offset the impact of these price increases, Steelcase recently
announced a temporary surcharge on customer orders placed after April
25, 2004. The surcharge is not expected to materially affect first
quarter revenue.
Fiscal 2005 revenue, excluding revenue from newly consolidated
dealers, is expected to be higher than in fiscal 2004, but lower than
originally estimated. Second-half revenue is expected to be stronger
than the first half of the year. After the first quarter, which is
discussed above, quarterly revenue is expected to be approximately at
the level needed to break even before restructuring charges. For the
year, the company expects to report a net loss, including
restructuring costs that are estimated at $(10) to $(15) million
after-tax. The net loss is expected to be a significant improvement
over fiscal 2004. Rising steel costs and continued pricing pressure
are expected to negatively impact variable margins early in the year,
while previously announced manufacturing consolidation will reduce
fixed costs later in the year.
Mr. Hackett concluded, "I'm extremely proud of Steelcase
employees, who have continued to focus on improving profitability in a
challenging economic climate, and I'm pleased that we're now seeing
indications that the recession in our industry is abating and we see
modest revenue improvement in the coming year. We have strategies in
place to grow revenue regardless of when the industry rebounds. We are
targeting key market segments and launching new products at NeoCon
that will expand our ability to help customers address workplace
effectiveness and efficiency."
Webcast
Steelcase will webcast its conference call reviewing fourth
quarter and full year fiscal 2004 financial results on Tuesday, March
30, at 11:00 a.m. EDT. Links to the webcast are available at
www.steelcase.com. Accompanying 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 April 30, 2004.
Reconciliation of Revenue
(in millions)
Three Months Ended Twelve Months Ended
----------------------- ---------------------------
Feb 27, Feb 28, Percent Feb 27, Feb 28, Percent
Steelcase Inc. 2004 2003 Change 2004 2003 Change
- ------------------ ------- ------- ------- --------- --------- -------
Revenue, as
reported (1) $563.4 $623.8 (9.7)% $2,345.6 $2,529.9 (7.3)%
Less: adjustment
for extra week -- (44.6) -- (44.6)
------- ------- --------- ---------
Revenue, as
adjusted $563.4 $579.2 (2.7)% $2,345.6 $2,485.3 (5.6)%
======= ======= ========= =========
(1) Revenue, as reported includes the benefit of favorable currency
translation in the International segment of $12.1 million for the
fourth quarter of fiscal 2004 and $77.1 million for fiscal 2004
compared to the same periods of fiscal 2003.
Three Months Ended Three Months Ended
----------------------- -----------------------
Feb 27, Feb 28, Feb 27, Feb 28,
2004 2003 2004 2003
(13 (14 Percent (13 (13 Percent
weeks) weeks) Change weeks) weeks) Change
------- ------- ------- ------- ------- -------
North America $301.8 $356.6 (15.4)% $301.8 $331.1 (8.9)%
Steelcase Design
Partnership 64.9 68.1 (4.7) 64.9 63.2 2.6
International 140.7 137.1 2.6 140.7 127.3 10.5
Other 56.0 62.0 (9.7) 56.0 57.6 (2.7)
------- ------- ------- ------- ------- -------
Consolidated Revenue $563.4 $623.8 (9.7)% $563.4 $579.2 (2.7)%
======= ======= ======= ======= ======= =======
Twelve Months Ended Twelve Months Ended
--------------------------- ---------------------------
Feb 27, Feb 28, Feb 27, Feb 28,
2004 2003 2004 2003
(52 (53 Percent (52 (52 Percent
weeks) weeks) Change weeks) weeks) Change
--------- --------- ------- --------- --------- -------
North America $1,280.4 $1,497.9 (14.5)% $1,280.4 $1,472.4 (13.0)%
Steelcase
Design
Partnership 275.6 291.2 (5.4) 275.6 286.3 (3.7)
International 539.2 485.9 11.0 539.2 476.1 13.3
Other 250.4 254.9 (1.8) 250.4 250.5 --
--------- --------- ------- --------- --------- -------
Consolidated
Revenue $2,345.6 $2,529.9 (7.3)% $2,345.6 $2,485.3 (5.6)%
========= ========= ======= ========= ========= =======
Three Months Ended Twelve Months Ended
----------------------- -----------------------
Feb 27, Feb 28, Percent Feb 27, Feb 28, Percent
International Segment 2004 2003 Change 2004 2003 Change
- --------------------- ------- ------- ------- ------- ------- -------
Revenue, as reported $140.7 $137.1 2.6% $539.2 $485.9 11.0%
Less: adjustment for
extra week -- (9.8) -- (9.8)
------- ------- ------- -------
Subtotal 140.7 127.3 10.5% 539.2 476.1 13.3%
Less: adjustment to
restate fiscal 2004
revenue at fiscal
2003 foreign
currency rates (12.1) -- (77.1) --
------- ------- ------- -------
Total $128.6 $127.3 1.0% $462.1 $476.1 (2.9)%
======= ======= ======= =======
Selected (Charges) and Gains
(in millions)
Three Months Ended Twelve Months Ended
-------------------- -------------------
Feb 27, Feb 28, Feb 27, Feb 28,
2004 2003 2004 2003
---------- --------- ------- ----------
Operating:
North America $(13.4) $11.5 $(24.1) $(20.4)
Steelcase Design Partnership (0.4) (0.7) (1.1) (1.4)
International (7.1) (9.7) (21.9) (17.8)
Other 0.1 (1.0) (2.6) (11.0)
---------- --------- ------- ----------
Sub-total (20.8) 0.1 (49.7) (50.6)
Non-operating -- 23.6 4.3 17.0
---------- --------- ------- ----------
Total, pre-tax (20.8) 23.7 (45.4) (33.6)
---------- --------- ------- ----------
Total, after-tax (13.0) 14.8 (28.4) (21.0)
Other - tax adjustments (2) 15.9 -- 5.3 --
---------- --------- ------- ----------
Total, after-tax $2.9 $14.8 $(23.1) $(21.0)
========== ========= ======= ==========
(2) The company recorded taxes at a 37.5 percent effective tax rate in
the first three quarters of fiscal 2004. Year-end tax provision
adjustments resulted in an actual tax rate of 55 percent for fiscal
2004. The $10.6 million impact of the year-end adjustments does not
affect the comparison to fiscal 2003.
Business Segment Results
(in millions)
Fourth Quarter Sequential Quarters
Three Months Ended Three Months Ended
------------------------ -----------------------
Feb 27, Feb 28, % Inc Feb 27, Nov 28, % Inc
2004 2003 (Dec) 2004 2003 (Dec)
------- ------- ------- ------- ------- -------
Revenue
North America (1) $301.8 $356.6 (15.4)% $301.8 $336.4 (10.3)%
Steelcase Design
Partnership (2) 64.9 68.1 (4.7)% 64.9 70.3 (7.7)%
International (3) 140.7 137.1 2.6 % 140.7 148.2 (5.1)%
Other (4) (6) 56.0 62.0 (9.7)% 56.0 59.6 (6.0)%
------ ------ ------ ------
Consolidated
Revenue $563.4 $623.8 (9.7)% $563.4 $614.5 (8.3)%
====== ====== ====== ======
Operating Income(5)
North America $(28.7) $ 18.1 $(28.7) $ (2.3)
Steelcase Design
Partnership 2.3 (1.4) 2.3 3.0
International (9.5) (5.7) (9.5) (1.6)
Other (6) (4.5) (5.9) (4.5) (5.1)
------ ------ ------ ------
Consolidated
Operating Loss $(40.4) $ 5.1 $(40.4) $ (6.0)
======= ====== ======= =======
Operating Margin
Percent (7.2)% 0.8% (7.2)% (1.0)%
Year-to-Date
Twelve Months Ended
----------------------------------
Feb 27, Feb 28, % Inc
2004 2003 (Dec)
--------- --------- -------
Revenue
North America (1) $ 1,280.4 $ 1,497.9 (14.5)%
Steelcase Design Partnership (2) 275.6 291.2 (5.4)%
International (3) 539.2 485.9 11.0%
Other (4) (6) 250.4 254.9 (1.8)%
--------- ---------
Consolidated Revenue $ 2,345.6 $ 2,529.9 (7.3)%
Operating Income (5)
North America $ (46.9) $ (19.1)
Steelcase Design Partnership 12.8 14.5
International (27.5) (27.1)
Other (6) (11.9) (29.4)
---------- ----------
Consolidated Operating Loss $ (73.5) $ (61.1)
========== ==========
Operating Margin Percent (3.1)% (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) Prior periods have been restated to remove from continuing
operations the Attwood marine business that was divested.
About Steelcase Inc.
Steelcase Inc. 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 2004 revenue was
approximately $2.35 billion. Steelcase Inc. and its subsidiaries have
dealers in more than 900 locations, manufacturing facilities in over
50 locations and approximately 14,000 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 events. Statements
and financial discussion and analysis contained in this report that
are not historical facts are forward-looking statements. These
statements discuss goals, intentions and expectations as to future
trends, plans, events, results of operations or financial condition,
or state other information relating to the company, based on current
beliefs of management as well as assumptions made by, and information
currently available to, Steelcase. Forward-looking statements
generally will be accompanied by words such as "anticipate,"
"believe," "could," "estimate," "expect," "forecast," "intend," "may,"
"possible," "potential," "predict," "project," or other similar words,
phrases or expressions. Although Steelcase believes these
forward-looking statements are reasonable, they are based upon a
number of assumptions concerning future conditions, any or all of
which may ultimately prove to be inaccurate. Forward-looking
statements involve a number of risks and uncertainties that could
cause actual results to vary. Important factors that could cause
actual results to differ materially from the forward-looking
statements include, without limitation: competitive and general
economic conditions and 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, its competitors or suppliers; currency
fluctuations; changes in customer demand and order patterns; changes
in the financial stability of customers dealers (including changes in
their ability to pay for product and services, dealer financing and
other amounts owed to the company) or suppliers; 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 successfully reduce
its costs, including actions such as workforce reduction, facility
rationalization, disposition of excess assets (including real estate)
at more than book value and/or related impairments, production
consolidation, culling products and increased global sourcing; the
company's ability to successfully implement a surcharge relating to
cost increases in steel; implement technology initiatives; integrate
acquired businesses; migrate to a less vertically integrated model;
initiate and manage alliances; and manage consolidated dealers;
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. The factors
identified above are believed to be important factors (but not
necessarily all of the important factors) that could cause actual
results to differ materially from those expressed in any
forward-looking statement. Unpredictable or unknown factors could also
have material adverse effects on the company. All forward-looking
statements included in this report are expressly qualified in their
entirety by the foregoing cautionary statements. 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 Twelve Months Ended
------------------ -------------------
Feb. 27, Feb. 28, Feb. 27, Feb. 28,
2004 2003 2004 2003
--------- -------- --------- ---------
Revenue $563.4 $623.8 $2,345.6 $2,529.9
Cost of sales 408.6 429.8 1,688.0 1,785.3
Restructuring costs 20.2 5.8 42.3 16.5
--------- -------- --------- ---------
Gross profit 134.6 188.2 615.3 728.1
Operating expenses 170.7 178.4 677.6 744.5
Restructuring costs 4.3 4.7 11.2 44.7
--------- -------- --------- ---------
Operating income (loss) (40.4) 5.1 (73.5) (61.1)
Interest expense (4.6) (5.4) (18.5) (20.9)
Other income (expense), net (3.6) 25.9 -- 16.4
--------- -------- --------- ---------
Income (loss) from
continuing operations
before income tax benefit (48.6) 25.6 (92.0) (65.6)
Income tax (benefit) provision (34.7) 9.3 (50.6) (24.7)
--------- -------- --------- ---------
Income (loss) from
continuing operations (13.9) 16.3 (41.4) (40.9)
Discontinued operations, net (0.3) 1.3 22.4 4.7
--------- -------- --------- ---------
Income (loss) before
cumulative effect of
accounting change (14.2) 17.6 (19.0) (36.2)
Cumulative effect of accounting
change (4.2) -- (4.2) (229.9)
--------- -------- --------- ---------
Net income (loss) $(18.4) $17.6 $(23.2) $(266.1)
========= ======== ========= =========
Basic and diluted per share data:
Income (loss) from continuing
operations $(0.10) $0.11 $(0.28) $(0.28)
Income and gain from
discontinued operations -- 0.01 0.15 0.04
Cumulative effect of
accounting change (0.03) -- (0.03) (1.56)
--------- -------- --------- ---------
Earnings (loss) $(0.13) $0.12 $(0.16) $(1.80)
========= ======== ========= =========
Dividends declared per common
share $0.06 $0.06 $0.24 $0.24
========= ======== ========= =========
Weighted average shares
outstanding 147.9 147.6 147.9 147.6
========= ======== ========= =========
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
Feb. 27, Feb. 28,
2004 2003
------------ ----------
ASSETS
Current assets:
Cash and cash equivalents $ 262.2 $ 128.9
Accounts receivable, net 362.2 367.2
Notes receivable and leased assets, net 76.8 84.9
Inventories 114.4 129.8
Other current assets 128.2 134.4
------------ ----------
Total current assets 943.8 845.2
Property and equipment, net 713.8 774.0
Notes receivable and leased assets, net 68.3 125.9
Goodwill and other intangible assets, net 298.3 306.0
Other assets 326.1 299.5
------------ ----------
Total assets $2,350.3 $2,350.6
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 161.8 $ 145.4
Short-term borrowings and current portion
of long-term debt 34.4 30.0
Accrued expenses:
Employee compensation 94.0 90.9
Employee benefit plan obligations 33.9 39.6
Other 219.1 205.0
------------ ----------
Total current liabilities 543.2 510.9
------------ ----------
Long-term liabilities:
Long-term debt 319.6 294.2
Employee benefit plan obligations 237.5 237.8
Other long-term liabilities 44.2 52.6
------------ ----------
Total long-term liabilities 601.3 584.6
------------ ----------
Total liabilities 1,144.5 1,095.5
------------ ----------
Shareholders' equity:
Common stock 289.8 286.1
Accumulated other comprehensive loss (43.0) (50.1)
Deferred compensation - restricted stock (1.4) --
Retained earnings 960.4 1,019.1
------------ ----------
Total shareholders' equity 1,205.8 1,255.1
------------ ----------
Total liabilities and
shareholders' equity $2,350.3 $2,350.6
------------ ----------
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Twelve Months Ended
Feb. 27, Feb. 28,
2004 2003
-------- ---------
OPERATING ACTIVITIES
Net income (loss) $ (23.2) $ (266.1)
Depreciation and amortization 141.4 157.0
Cumulative effect of accounting change 4.2 229.9
Gain on sale of discontinued operations (31.9) ---
Changes in operating assets and liabilities, net
of corporate acquisitions 2.0 (47.7)
Other, net (9.8) (31.3)
-------- ---------
Net cash provided by (used in) operating
activities 82.7 41.8
-------- ---------
INVESTING ACTIVITIES
Capital expenditures (43.0) (76.5)
Proceeds from the disposal of fixed assets 28.8 55.6
Net proceeds on sale of discontinued operations 47.9 ---
Proceeds from the sales of leased assets 48.8 302.0
Net decrease in notes receivable and leased assets 13.3 18.0
Other, net 8.4 17.4
-------- ---------
Net cash provided by investing activities 104.2 316.5
-------- ---------
FINANCING ACTIVITIES
Long-term debt issuances (repayments), net (23.1) (138.7)
Short-term borrowings (repayments), net 0.5 (131.2)
Common stock issuance 1.6 3.8
Dividends paid (35.5) (35.4)
-------- ---------
Net cash used in financing activities (56.5) (301.5)
-------- ---------
Effect of exchange rate changes on cash and cash
equivalents 2.9 2.7
-------- ---------
Net increase (decrease) in cash and cash
equivalents 133.3 59.5
Cash and cash equivalents, beginning of period 128.9 69.4
-------- ---------
Cash and cash equivalents, end of period $ 262.2 $ 128.9
-------- ---------
CONTACT: Steelcase Inc.
Investor Contact -
Raj Mehan, Investor Relations, 616-698-4734
OR
Media Contact -
Jeanine Hill, Communications, 616-698-3765