Exhibit 99.1
STEELCASE REPORTS PROFITABLE GROWTH FOR FOURTH QUARTER AND FISCAL YEAR 2006
GRAND RAPIDS, Mich., March 29 /PRNewswire-FirstCall/ -- Steelcase Inc.
(NYSE: SCS) today announced fourth quarter and fiscal year 2006 financial
results. Steelcase reported fiscal 2006 revenue of $2.9 billion, a 9.8 percent
increase compared to $2.6 billion last year. Fiscal 2006 revenue included $49.2
million from services, $20.6 million from acquisitions and $(13.7) million from
currency effects, compared with the prior year.
Steelcase reported net income of $50.8 million, or $0.34 per share in fiscal
2006 compared with a net income of $12.7 million, or $0.09 per share in the
prior year. Restructuring and other charges in fiscal 2006 totaled a net $23.0
million after-tax. Charges were primarily related to facility rationalizations
in the company's North America and International business segments.
"We substantially improved our profit in 2006 and are pleased to report a
second consecutive year of solid revenue growth," said James P. Hackett,
president and CEO. "As our performance indicates, we are focused on giving
customers what they value and leveraging our global network, while continuing
our work to achieve world class process excellence."
Operating income of $85.5 million compares with $18.2 million in the prior
year. Operating income includes $35.9 million of restructuring charges in the
current year compared to $13.4 million of restructuring charges in the prior
year. Operating income excluding restructuring charges was $121.4 million and
compares with $31.6 million in the prior year.
Cost of sales, which does not include restructuring charges, improved 1.9
percentage points to 69.3 percent of sales from 71.2 percent of sales in the
prior year. This improvement reflects benefits from improved pricing yield,
higher revenue and prior restructuring. Some of the operating improvement in the
year was offset by disruption costs associated with ongoing restructuring
activities. Gross margins of 29.6 percent in fiscal 2006 improved from 28.5
percent in fiscal 2005.
Operating expenses, which exclude restructuring charges, were $758.1
million, or 26.4 percent of sales compared to 27.6 percent of sales in the prior
year. This improvement reflects ongoing cost control and higher sales volume.
Operating expenses increased $35.8 million year over year and included higher
variable compensation expenses, increased sales and marketing costs in North
America, and the effect of acquisitions.
The company's effective tax rate for the full year was 36.0 percent, lower
than previously estimated. The tax rate was reduced because of higher than
expected permanent differences between book income and taxable income. In the
long run, the company expects its effective tax rate to be approximately 37
percent.
Steelcase increased the total of cash and short-term investments by $76
million to $424 million at the end of fiscal 2006. The company reduced debt by
$62 million, to a year-end balance of $264 million. Total cash exceeds total
debt by $160 million.
The company has $250 million in outstanding term notes due in November 2006.
Since the maturity date of these notes is within a year, this debt has been
classified as a current liability. Steelcase expects to replace this debt with
new term debt prior to maturity. The company reduced property, plant and
equipment by keeping capital expenditures lower than depreciation and disposals
of fixed assets.
"We made significant progress in a number of important areas during the year
and all three of our business segments were profitable before restructuring
charges for the year," said James P. Keane, chief financial officer.
As announced yesterday, the Steelcase Board of Directors declared a dividend
of $0.10 per share payable to shareholders of record as of April 7, 2006. This
represents an increase of 11 percent from $0.09 per share paid in the third
quarter and an increase of 67 percent from $0.06 per share paid in the prior
year.
Fourth Quarter Results
Steelcase reported revenue of $739.3 million for its fourth quarter. Revenue
increased 7.0 percent compared to $691.0 million in the prior year quarter.
Current year sales included $14.2 million in service revenue, $7.4 million from
acquisitions and $(18.5) million from currency effects, compared with the prior
year.
Steelcase reported net income of $11.2 million, or $0.08 per share for the
fourth quarter of fiscal 2006, consistent with company estimates of $0.07 to
$0.12 per share. This compares to $1.0 million, or $0.01 per share in the same
quarter of the prior year. As a result of the reduction in the full year tax
rate to 36.0 percent, the fourth quarter tax rate fell to 27.7 percent, which
had the effect of increasing net income by $1.3 million.
Reported results include net restructuring charges of $5.2 million after-tax
related to asset impairments and facility rationalization in the company's North
America and International segments. The company had previously estimated that
restructuring charges and credits in the fourth quarter would largely offset
each other. Net restructuring charges were $3.2 million after-tax in the prior
year quarter.
Net restructuring charges in the fourth quarter include a $6.7 million
after-tax asset impairment charge to adjust the book value of properties held
for sale to the current estimate of market value, partially offset by a $2.4
million after-tax gain on the sale of real estate.
Cost of sales improved 1.2 percentage points to 70.3 percent of sales in the
fourth quarter compared to the prior year, primarily from improved pricing
yield, benefits from prior restructuring, and higher revenue. Gross margins of
28.6 percent in the fourth quarter were up from 28.2 percent in the prior year
quarter.
Steelcase reduced operating expenses to 27.0 percent of sales from 27.7
percent of sales in the prior year. This improvement was related to continued
cost control and leverage from higher sales volume.
Other income and expense included a $4.0 million net pre-tax gain on
currency and interest rate derivatives.
Outlook
Orders through the first few weeks of fiscal 2007 are stronger than the
prior year. The company expects first quarter revenue to be 7 to 11 percent
higher than the prior year quarter.
Steelcase expects to report earnings for the first quarter of fiscal year
2007 between $0.10 and $0.15 per share, including restructuring charges of less
than $5 million after-tax. The company reported earnings of $0.05 per share in
the first quarter of the prior year, including after-tax restructuring charges
of $6.8 million.
Consistent with its historical practices, the company is not providing full
year revenue or earnings estimates for fiscal year 2007. However, it is
estimating full year after-tax restructuring charges of $10 to $15 million for
fiscal year 2007, including the amounts estimated above for the first quarter.
Mr. Hackett concluded, "The company's strategies are keeping our core
businesses healthy and growing, and building our capability to win with smaller
customers, in healthcare, and in emerging markets. Our mission to provide a
better work experience for our customers and dealers remains central to our
strategies. There is plenty of opportunity to improve our performance in fiscal
2007."
Webcast
Steelcase will discuss fourth quarter and 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.
Business Segment Results
(in millions)
Fourth Quarter Year-To-Date
Three Months Ended Twelve Months Ended
--------------------------------------- ---------------------------------------
Feb. 24, Feb. 25, % Inc. Feb. 24, Feb. 25, % Inc.
2006 2005 (Dec) 2006 2005 (Dec)
----------- ----------- ----------- ----------- ----------- -----------
Revenue
North America (1) $ 413.7 $ 376.9 9.8% $ 1,628.0 $ 1,439.4 13.1%
Steelcase Design
Partnership(2) 85.3 88.1 (3.2)% 340.8 322.2 5.8%
International (3) 179.3 168.9 6.2% 644.5 590.5 9.1%
Other (4) 61.0 57.1 6.8% 255.6 261.7 (2.3)%
----------- ----------- ----------- -----------
Consolidated Revenue $ 739.3 $ 691.0 7.0% $ 2,868.9 $ 2,613.8 9.8%
=========== =========== =========== ===========
Operating Income
North America $ 13.5 $ (0.8) $ 67.6 $ 5.5
Steelcase Design
Partnership 8.7 7.4 34.9 26.2
International (1.2) (0.1) (1.3) (5.4)
Other (8.7) (6.2) (15.7) (8.1)
----------- ----------- ----------- -----------
Consolidated Operating Income $ 12.3 $ 0.3 $ 85.5 $ 18.2
=========== =========== =========== ===========
Operating Income Percent 1.7% 0.0% 1.7% 3.0% 0.7% 2.3%
Pre-Tax Restructuring Charges Included in Business Segment Results
(in millions)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
North America $ 4.7 58.0% $ 0.6 13.0%
Steelcase Design Partnership - 0.0% - 0.0%
International 3.2 39.5% 4.0 87.0%
Other 0.2 2.5% - 0.0%
--------- --------- --------- ---------
Consolidated Charges $ 8.1 100.0% $ 4.6 100.0%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
North America $ 19.6 54.6% $ 8.8 65.7%
Steelcase Design Partnership - 0.0% - 0.0%
International 14.3 39.8% 3.2 23.9%
Other 2.0 5.6% 1.4 10.4%
--------- --------- --------- ---------
Consolidated Charges $ 35.9 100.0% $ 13.4 100.0%
========= ========= ========= =========
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 category includes Steelcase Financial Services, PolyVision and
IDEO subsidiaries, other ventures and unallocated corporate expenses
Non-GAAP Financial Measures
Consolidated Gross Margin, excluding Restructuring Charges
(in millions, % of revenue)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Gross Margin, as reported $ 211.7 28.6% $ 194.9 28.2%
Restructuring Charges 8.0 1.1% 1.7 0.3%
--------- --------- --------- ---------
Gross Margin, excluding
Restructuring charges $ 219.7 29.7% $ 196.6 28.5%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Gross Margin, as reported $ 849.3 29.6% $ 745.7 28.5%
Restructuring Charges 30.2 1.1% 8.2 0.3%
--------- --------- --------- ---------
Gross Margin, excluding
Restructuring charges $ 879.5 30.7% $ 753.9 28.8%
========= ========= ========= =========
Consolidated Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 12.3 1.7% $ 0.3 0.0%
Restructuring Charges 8.1 1.1% 4.6 0.7%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 20.4 2.8% $ 4.9 0.7%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 85.5 3.0% $ 18.2 0.7%
Restructuring Charges 35.9 1.2% 13.4 0.5%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 121.4 4.2% $ 31.6 1.2%
========= ========= ========= =========
North America Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 13.5 3.3% $ (0.8) (0.2)%
Restructuring Charges 4.7 1.1% 0.6 0.1%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 18.2 4.4% $ (0.2) (0.1)%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 67.6 4.2% $ 5.5 0.4%
Restructuring Charges 19.6 1.2% 8.8 0.6%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 87.2 5.4% $ 14.3 1.0%
========= ========= ========= =========
SDP Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 8.7 10.2% $ 7.4 8.4%
Restructuring Charges - 0.0% - 0.0%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 8.7 10.2% $ 7.4 8.4%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ 34.9 10.2% $ 26.2 8.1%
Restructuring Charges - 0.0% 0.0 0.0%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 34.9 10.2% $ 26.2 8.1%
========= ========= ========= =========
International Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
Fourth Quarter
Three Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ (1.2) (0.7)% $ (0.1) (0.1)%
Restructuring Charges 3.2 1.8% 4.0 2.4%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 2.0 1.1% $ 3.9 2.3%
========= ========= ========= =========
Year-To-Date
Twelve Months Ended
----------------------------------------------
Feb. 24, 2006 Feb. 25, 2005
--------------------- ---------------------
Operating Income, as reported $ (1.3) (0.2)% $ (5.4) (0.9)%
Restructuring Charges 14.3 2.2% 3.2 0.5%
--------- --------- --------- ---------
Operating Income, excluding
Restructuring charges $ 13.0 2.0% $ (2.2) (0.4)%
========= ========= ========= =========
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: fourth quarter and twelve months year-to-date gross margin, excluding
restructuring costs for the current and prior year in dollars and as a
percentage of net revenue; fourth quarter and twelve months operating income,
excluding restructuring cost, for the current and prior in dollars and as a
percentage of revenue; and fourth quarter and twelve months year-to-date
operating income by business segment, 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 tax or environmental laws, rules or regulations; (4) changes in
generally accepted accounting principles; (5) major disruptions at our key
facilities or in the supply of any key raw materials, components or finished
goods; (6) competitive pricing pressure; (7) pricing changes by the company, its
competitors or suppliers, including fluctuations in raw material and component
costs; (8) currency fluctuations; (9) 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); (10) 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; (11) the success of
the company's investment in certain ventures; (12) 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; (13) possible acquisitions or
divestitures by the company; (14) changes in business strategies and decisions;
and (15) 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 13,000 employees worldwide.
Fiscal 2006 revenue was $2.9 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 Twelve Months Ended
---------------------------- ----------------------------
Feb. 24, Feb. 25, Feb. 24, Feb. 25,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenue $ 739.3 $ 691.0 $ 2,868.9 $ 2,613.8
Cost of sales 519.6 494.4 1,989.4 1,859.9
Restructuring costs 8.0 1.7 30.2 8.2
------------ ------------ ------------ ------------
Gross margin 211.7 194.9 849.3 745.7
Operating expenses 199.3 191.7 758.1 722.3
Restructuring costs 0.1 2.9 5.7 5.2
------------ ------------ ------------ ------------
Operating income 12.3 0.3 85.5 18.2
Interest expense (4.3) (4.8) (18.1) (20.9)
Other income, net 7.5 3.5 12.0 7.7
------------ ------------ ------------ ------------
Income (loss) from continuing
operations before income tax
expense 15.5 (1.0) 79.4 5.0
Income tax expense (benefit) 4.3 (2.0) 28.6 (6.7)
------------ ------------ ------------ ------------
Income from continuing operations 11.2 1.0 50.8 11.7
Gain on sale of net assets of
discontinued operations, net of
income taxes - - - 1.0
------------ ------------ ------------ ------------
Net income $ 11.2 $ 1.0 $ 50.8 $ 12.7
============ ============ ============ ============
Basic and diluted per share data:
Income from continuing operations $ 0.08 $ 0.01 $ 0.34 $ 0.08
Income from discontinued operations - - - 0.01
------------ ------------ ------------ ------------
Earnings $ 0.08 $ 0.01 $ 0.34 $ 0.09
============ ============ ============ ============
Dividends declared per common share $ 0.09 $ 0.06 $ 0.33 $ 0.24
============ ============ ============ ============
Weighted average shares outstanding -
basic 148.5 148.0 148.3 147.9
============ ============ ============ ============
Weighted average shares outstanding -
diluted 149.1 148.4 148.7 148.2
============ ============ ============ ============
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
Feb. 24, Feb. 25,
2006 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 423.8 $ 216.6
Short-term investments 0 131.6
Accounts receivable, net 381.9 378.1
Inventories 147.9 132.9
Other current assets 172.1 198.1
------------ ------------
Total current assets 1,125.7 1,057.3
------------ ------------
Property and equipment, net 527.8 606.0
Goodwill and other intangible assets,
net 284.8 290.0
Other assets 409.1 411.3
------------ ------------
Total assets $ 2,347.4 $ 2,364.6
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 189.6 $ 175.9
Short-term borrowings and current
portion of long-term debt 261.8 67.6
Accrued expenses:
Employee compensation 125.7 123.3
Employee benefit plan obligations 34.3 31.7
Other 223.8 211
------------ ------------
Total current liabilities 835.2 609.5
------------ ------------
Long-term liabilities:
Long-term debt less current
maturities 2.2 258.1
Employee benefit plan obligations 247.6 249.7
Other long-term liabilities 57.3 50.7
------------ ------------
Total long-term liabilities 307.1 558.5
------------ ------------
Total liabilities 1,142.3 1,168.0
------------ ------------
Shareholders' equity:
Common stock 309.9 297.4
Additional paid in capital 3.4 1.3
Accumulated other comprehensive loss (40.8) (33.1)
Deferred compensation - restricted
stock (3.1) (3.1)
Retained earnings 935.7 934.1
------------ ------------
Total shareholders' equity 1,205.1 1,196.6
------------ ------------
Total liabilities and shareholders'
equity $ 2,347.4 $ 2,364.6
============ ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
Year Ended
----------------------------
Feb. 24, Feb. 25,
2006 2005
------------ ------------
OPERATING ACTIVITIES
Net income $ 50.8 $ 12.7
Depreciation and amortization 119.4 127.6
Changes in operating assets
and liabilities, net (9.3) (25.3)
Other, net 10.4 (0.3)
------------ ------------
Net cash provided by operating
activities 171.3 114.7
------------ ------------
INVESTING ACTIVITIES
Capital expenditures (71.9) (49.2)
Short-term investments, net 131.6 (51.4)
Net proceeds from repayment of
leases and notes receivable 33.0 47.4
Proceeds from sales of leased
assets - 4.7
Proceeds from the disposal of
fixed assets 39.1 19.8
Other, net 0.1 3.0
------------ ------------
Net cash provided (used in) by
investing activities 131.9 (25.7)
------------ ------------
FINANCING ACTIVITIES
Dividends paid (49.2) (35.6)
Repayments of long-term debt,
net (58.9) (14.4)
Line of credit borrowings
(repayments), net (2.3) (14.4)
Common stock issuance, net of
repurchases 8.8 4.1
------------ ------------
Net cash used in financing
activities (101.6) (60.3)
------------ ------------
Effect of exchange rate
changes on cash and cash
equivalents 5.6 5.7
------------ ------------
Net increase in cash and cash
equivalents 207.2 34.4
Cash and cash equivalents,
beginning of year 216.6 182.2
------------ ------------
Cash and cash equivalents, end
of year $ 423.8 $ 216.6
============ ============
Supplemental cash Flow
Information:
Income taxes paid $ 14.7 $ 16.2
============ ============
Interest Paid $ 16.9 $ 21.6
============ ============
SOURCE Steelcase Inc.
-0- 03/29/2006
/CONTACT: Investors: Raj Mehan, Investor Relations, +1-616-698-4734, or
Media: Lisa Kerr, Communications, +1-616-698-4487, both for Steelcase Inc./
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.steelcase.com /