Exhibit 99.1
STEELCASE REPORTS DOUBLE DIGIT SALES AND EARNINGS GROWTH IN THIRD QUARTER
- North America Revenue Up 17 Percent Over Prior Year -
GRAND RAPIDS, Mich., Dec. 16 /PRNewswire-FirstCall/ -- Steelcase Inc. (NYSE:
SCS) today reported revenue totaling $750.7 million for its third quarter of
fiscal 2006. Revenue increased 11.4 percent compared to $674.1 million in the
prior year quarter driven by strong growth of 17.4 percent in the North America
segment.
As compared to the prior year, third quarter revenue included $12.8 million
from services, $8.4 million from acquisitions and a $(6.0) million impact from
currency translation. These items had the net effect of increasing revenue by
2.3 percent.
Steelcase reported net income of $19.1 million, or $0.13 per share for the
third quarter of fiscal 2006, consistent with company estimates of $0.10 to
$0.15 per share. This compares to net income of $10.1 million, or $0.07 per
share in the same quarter last year. Prior year net income included the benefit
of a $6.5 million tax reserve reduction.
Included in third quarter results were net restructuring charges totaling
$(4.6) million after-tax primarily related to facility rationalization in the
company's North America and International segments. Net restructuring charges
were $(1.2) million after-tax in the prior year quarter.
"We are pleased to deliver sales and profit growth in all three of our
business segments for the third quarter," said James P. Hackett, president and
CEO. "We significantly improved our results even as we worked through the many
challenges associated with making changes to our business model. These changes
will reduce complexity and cost, improve customer value and satisfaction, and
create a platform for strong, profitable growth."
The company's cost of sales improved by 2.5 points to 69.4 percent in the
third quarter, driven by a 4.0 percentage point improvement in the North America
segment. Improved pricing yield, leverage from higher sales volume, lower
overhead spending and gains in labor productivity all contributed to the
improvement in North America. This improvement was partially offset by
disruption and inefficiencies associated with ongoing facility consolidations
and higher energy costs. The International segment improved cost of sales by 2.1
percentage points, driven by the benefits from prior restructuring actions and
leverage from higher sales volume.
Despite higher restructuring costs, gross margin of 29.8 percent in the
third quarter improved 1.9 percentage points from 27.9 percent in the same
quarter last year. Excluding restructuring charges, gross margin improved by 2.5
percentage points.
Steelcase reduced operating expenses as a percent of revenue to 25.2 percent
from 27.0 percent in the prior year. This improvement was related to continued
cost control and leverage from higher sales volume.
Reported operating income of $32.7 million, or 4.4 percent of revenue,
improved significantly from $6.2 million, or 0.9 percent of revenue in the prior
year. Operating income without restructuring charges was $40.0 million, or 5.3
percent of revenue in the current quarter compared to $7.9 million, or 1.2
percent of revenue in the prior year.
The company increased total cash and cash equivalents by $44.5 million to
$331.6 million and reduced debt by $5.7 million to $268.1 million, compared to
the second quarter. As part of its outstanding share repurchase authorization,
Steelcase repurchased 250,000 shares in the third quarter at an average price of
$13.75 per share.
Year to date, the company reported net income of $39.6 million compared to
$11.7 million for the same period last year.
"The hard work of our employees all over the world is very evident in the
improved financial results across all our business segments this quarter," said
James P. Keane, chief financial officer. "North America had strong sales growth
and gross margin improvement, the Steelcase Design Partnership achieved its
highest operating income performance in over four years, and International
returned to profitability."
Outlook
As the company enters the fourth quarter, backlog and orders remain strong
in North America and business is strengthening in several International markets.
Steelcase expects fourth quarter revenue to follow normal seasonal patterns and
decline slightly from the third quarter. On a year over year basis, revenue is
expected to be 4 to 8 percent higher than the very strong prior year quarter.
Steelcase expects to report earnings between $0.07 and $0.12 per share in
the fourth quarter. Estimated restructuring charges and credits are expected to
largely offset each other in the fourth quarter. The company reported earnings
of $0.01 per share in the fourth quarter of the prior year.
The company has updated its three-year plan and continues to target gross
margins of 35 percent, operating expenses of 25 percent and operating income of
10 percent of revenue.
Mr. Hackett concluded, "Our focus is on making steady progress towards our
long-term profitability goals and maintaining our strong balance sheet. From
this solid foundation, we will invest to accelerate innovation-based growth in
our core markets and to expand our business model to capture opportunities in
adjacent markets."
Business Segment Results
(in millions)
Third Quarter Third Quarter
Three Months Ended Nine Months Ended
----------------------------------- ----------------------------------
Nov. 25, Nov. 26, % Inc Nov. 25, Nov. 26, % Inc
2005 2004 (Dec) 2005 2004 (Dec)
--------- --------- --------- --------- --------- ---------
Revenue
North America (1) $ 433.0 $ 368.8 17.4% $ 1,214.3 $ 1,062.5 14.3%
Steelcase Design
Partnership (2) 86.8 83.0 4.6% 255.5 234.1 9.1%
International (3) 167.4 155.5 7.7% 465.2 421.6 10.3%
Other (4) 63.5 66.8 (4.9)% 194.6 204.6 (4.9)%
--------- --------- --------- ---------
Consolidated
Revenue $ 750.7 $ 674.1 11.4% $ 2,129.6 $ 1,922.8 10.8%
========= ========= ========= =========
Operating Income
North America $ 19.5 $ 2.6 $ 54.1 $ 6.3
Steelcase Design
Partnership 10.0 7.7 26.2 18.8
International 6.6 (1.0) (0.1) (5.3)
Other (3.4) (3.1) (7.0) (1.9)
--------- --------- --------- ---------
Consolidated
Operating Income $ 32.7 $ 6.2 $ 73.2 $ 17.9
========= ========= ========= =========
Operating Income
Percent 4.4% 0.9% 3.5 pts. 3.4% 0.9% 2.5 pts.
Pre-Tax Restructuring Charges Included in Business Segment Results
(in millions)
Third Quarter Third Quarter
Three Months Ended Nine Months Ended
------------------- -------------------
Nov. 25, Nov. 26, Nov. 25, Nov. 26,
2005 2004 2005 2004
-------- -------- -------- --------
North America $ 4.0 $ 0.8 14.9 8.2
Steelcase Design
Partnership - - - -
International 1.4 0.3 11.1 (0.8)
Other 1.9 0.6 1.8 1.4
-------- -------- -------- --------
Consolidated
Charges $ 7.3 $ 1.7 $ 27.8 $ 8.8
======== ======== ======== ========
Business Segment Footnotes
(1) North America business segment includes the company's Steelcase and
Turnstone brands, consolidated dealers in the U.S. and Canada, and services
(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
Non-GAAP Financial Measures
Gross Margin, excluding Restructuring Charges
(in millions, % of revenue)
Third Quarter Third Quarter
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
Nov. 25, 2005 Nov. 26, 2004 Nov. 25, 2005 Nov. 26, 2004
------------------- ------------------- ------------------- -------------------
Gross Margin,
as reported $ 223.7 29.8% $ 188.3 27.9% $ 637.6 29.9% $ 550.8 28.6%
Restructuring
Charges 5.9 0.8% 1.4 0.2% 22.2 1.1% 6.5 0.4%
-------- -------- -------- -------- -------- -------- -------- --------
Gross Margin,
excluding
Restructuring
Charges $ 229.6 30.6% $ 189.7 28.1% $ 659.8 31.0% $ 557.3 29.0%
======== ======== ======== ======== ======== ======== ======== ========
Operating Income, excluding Restructuring Charges
(in millions; % of revenue)
Third Quarter Third Quarter
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
Nov. 25, 2005 Nov. 26, 2004 Nov. 25, 2005 Nov. 26, 2004
------------------- ------------------- ------------------- -------------------
Operating Income,
as reported $ 32.7 4.4% $ 6.2 0.9% $ 73.2 3.4% $ 17.9 0.9%
Restructuring
Charges 7.3 0.9% 1.7 0.3% 27.8 1.3% 8.8 0.5%
-------- -------- -------- -------- -------- -------- -------- --------
Operating Income,
excluding
Restructuring
Charges $ 40.0 5.3% $ 7.9 1.2% $ 101.0 4.7% $ 26.7 1.4%
======== ======== ======== ======== ======== ======== ======== ========
Webcast
Steelcase will discuss third quarter fiscal 2006 results and business
outlook on a conference call and webcast at 11:00 a.m. EST today. Links to the
webcast are available at http://www.steelcase.com/ir. Supporting presentation
slides will be available on the company's website shortly before the start of
the webcast.
Non-GAAP Financial Measures
This earnings release contains certain non-GAAP financial measures. A
"non-GAAP financial measure" is defined as a numerical measure of a company's
financial performance that excludes or includes amounts so as to be different
than the most directly comparable measure calculated and presented in accordance
with GAAP in the statement of income, balance sheet or statement of cash flows
of the company. Pursuant to the requirements of Regulation G, the company has
provided a reconciliation above of non-GAAP financial measures to the most
directly comparable GAAP financial measure.
The non-GAAP financial measures used within the company's earnings release
are: third quarter and nine months year-to-date gross margin, excluding
restructuring costs for the current and prior year in dollars and as a
percentage of net revenue; and third quarter and nine months year-to-date
operating income, excluding restructuring costs for the current and prior year
in dollars and as a percentage of revenue. These measures are presented because
management uses this information to monitor and evaluate financial results and
trends. Therefore, management believes this information is also useful for
investors.
Forward-looking Statements
From time to time, in written reports and oral statements, the company
discusses its expectations regarding future events. These 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. 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: (1) competitive and general economic
conditions and uncertainty domestically and internationally; (2) delayed or lost
sales and other impacts related to acts of terrorism, acts of war or
governmental action, acts of God and other Force Majeure events; (3) changes in
domestic or international laws, rules and regulations, including the impact of
changed environmental laws, rules or regulations; (4) major disruptions at our
key facilities or in the supply of any key raw materials, components or finished
goods; (5) competitive pricing pressure; (6) pricing changes by the company, its
competitors or suppliers, including fluctuations in raw material and component
costs; (7) currency fluctuations; (8) changes in: (a) customer demand and order
patterns; (b) 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; (c) relationships with customers,
suppliers, employees and dealers; and (d) the mix of products sold and of
customers purchasing (including large project business); (9) the success of new
product launches (including customer acceptance and product and delivery
performance), current product innovations, services and platform simplification,
and their impact on the company's manufacturing processes; (10) the success of
the company's investment in certain ventures; (11) the company's ability to
successfully: (a) implement list price increases and manage pricing yield; (b)
reduce its costs, including actions such as global supply chain management,
strategic outsourcing, workforce reduction, facility rationalization,
disposition of excess assets (including real estate) at more than book value,
production consolidation, reduction of business complexity and culling products;
(c) implement technology initiatives; (d) integrate acquired businesses; (e)
migrate to a less vertically integrated manufacturing model; (f) implement lean
manufacturing principles; (g) initiate and manage alliances; (h) resolve certain
contract-related contingent liabilities; (i) manage consolidated dealers; and
(j) implement distribution channel changes; (12) possible acquisitions or
divestitures by the company; (13) changes in business strategies and decisions;
and (14) other risks detailed in the company's Form 10-K for the year ended
February 25, 2005 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 release 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.
About Steelcase Inc.
Steelcase, the global leader in the office furniture industry, helps people
have a better work experience by providing products, services and insights into
the ways people work. The company designs and manufactures architecture,
furniture and technology products. Founded in 1912 and headquartered in Grand
Rapids, Michigan, Steelcase (NYSE: SCS) serves customers through a network of
more than 800 independent dealers and approximately 14,000 employees worldwide.
Fiscal 2005 revenue was $2.6 billion. Learn more at http://www.steelcase.com .
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share data)
Three Months Ended Nine Months Ended
------------------------ ------------------------
Nov 25, Nov 26, Nov 25, Nov 26,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue $ 750.7 $ 674.1 $ 2,129.6 $ 1,922.8
Cost of sales 521.1 484.4 1,469.8 1,365.5
Restructuring costs 5.9 1.4 22.2 6.5
---------- ---------- ---------- ----------
Gross margin 223.7 188.3 637.6 550.8
Operating expenses 189.6 181.8 558.8 530.6
Restructuring costs 1.4 0.3 5.6 2.3
---------- ---------- ---------- ----------
Operating income 32.7 6.2 73.2 17.9
Interest expense (4.2) (5.3) (13.8) (16.1)
Other income, net 2.6 4.3 4.5 4.2
---------- ---------- ---------- ----------
Income from continuing
operations before income
tax expense 31.1 5.2 63.9 6.0
Income tax expense 12.0 (4.9) 24.3 (4.7)
---------- ---------- ---------- ----------
Income from continuing
operations 19.1 10.1 39.6 10.7
Income from discontinued
operations, net of applicable
income taxes - - - 1.0
---------- ---------- ---------- ----------
Net income $ 19.1 $ 10.1 $ 39.6 $ 11.7
========== ========== ========== ==========
Basic and diluted per share data:
Income from continuing
operations $ 0.13 $ 0.07 $ 0.27 $ 0.07
Income from discontinued
operations - - - 0.01
---------- ---------- ---------- ----------
Earnings $ 0.13 $ 0.07 $ 0.27 $ 0.08
========== ========== ========== ==========
Dividends declared per common
share $ 0.09 $ 0.06 $ 0.24 $ 0.18
========== ========== ========== ==========
Weighted average shares
outstanding 148.3 147.9 148.2 147.8
========== ========== ========== ==========
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
Nov. 25, Feb. 25,
2005 2005
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 331.6 $ 216.6
Short-term investments - 131.6
Accounts receivable, net 409.4 378.1
Inventories 153.3 132.9
Other current assets 206.1 198.6
---------- ----------
Total current assets 1,100.4 1,057.8
Property and equipment, net 540.7 606.0
Goodwill and other intangible assets, net 287.1 290.0
Other assets 397.2 410.9
---------- ----------
Total assets $ 2,325.4 $ 2,364.7
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 194.7 $ 175.9
Short-term borrowings and current
portion of long-term debt 265.5 67.6
Accrued expenses:
Employee compensation 107.2 123.3
Employee benefit plan obligations 30.1 31.7
Other 221.1 212.5
---------- ----------
Total current liabilities 818.6 611.0
---------- ----------
Long-term liabilities:
Long-term debt 2.6 258.1
Employee benefit plan obligations 248.4 249.7
Other long-term liabilities 60.0 49.3
---------- ----------
Total long-term liabilities 311.0 557.1
---------- ----------
Total liabilities 1,129.6 1,168.1
---------- ----------
Shareholders' equity:
Common stock 300.4 297.4
Additional paid in capital 2.8 1.3
Accumulated other comprehensive loss (41.7) (33.1)
Deferred compensation - restricted stock (3.7) (3.1)
Retained earnings 938.0 934.1
---------- ----------
Total shareholders' equity 1,195.8 1,196.6
---------- ----------
Total liabilities and shareholders'
equity $ 2,325.4 $ 2,364.7
========== ==========
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended
------------------------
Nov. 25, Nov. 26,
2005 2004
---------- ----------
OPERATING ACTIVITIES
Net income $ 39.6 $ 11.7
Depreciation and amortization 91.1 95.8
Changes in operating assets and liabilities,
net of corporate acquisitions (49.9) (67.8)
Other, net 12.2 (5.4)
---------- ----------
Net cash provided by operating activities 93.0 34.3
---------- ----------
INVESTING ACTIVITIES
Capital expenditures (54.0) (37.0)
Short-term investments, net 131.6 45.9
Proceeds from the disposal of fixed assets 23.8 16.4
Proceeds from repayments of lease fundings 13.6 26.4
Acquisitions, net of cash acquired (6.2) -
Other, net 2.0 15.6
---------- ----------
Net cash provided by investing activities 110.8 67.3
---------- ----------
FINANCING ACTIVITIES
Repayments of long-term debt, net (52.8) (4.2)
Repayments of lines of credit, net (4.0) (25.1)
Dividends paid (35.7) (26.7)
Common stock issuance, net of repurchases 0.5 3.2
---------- ----------
Net cash used in financing activities (92.0) (52.8)
---------- ----------
Effect of exchange rate changes on cash
and cash equivalents 3.2 6.8
---------- ----------
Net increase in cash and cash equivalents 115.0 55.6
Cash and cash equivalents, beginning of period 216.6 182.2
---------- ----------
Cash and cash equivalents, end of period $ 331.6 $ 237.8
========== ==========
SOURCE Steelcase Inc.
-0- 12/16/2005
/CONTACT: Investor Contact: Raj Mehan, Investor Relations,
+1-616-698-4734, Media Contact: Lisa Kerr, Communications, +1-616-698-4487,
both of Steelcase Inc./
/First Call Analyst: /
/FCMN Contact: rryerson@steelcase.com /
/Web site: http://www.steelcase.com /
(SCS)