Exhibit 99.1
STEELCASE DELIVERS STRONG EARNINGS GROWTH IN FIRST QUARTER
GRAND RAPIDS, Mich., June 26 /PRNewswire-FirstCall/ -- Steelcase Inc. (NYSE:
SCS) today reported revenue totaling $727.3 million for its first quarter of
fiscal 2007. Revenue increased 7.6 percent compared to $676.0 million in the
prior year. First quarter revenue includes $5.4 million from acquisitions and
$(4.8) million from currency translation effects, compared to the prior year.
Steelcase reported net income of $18.2 million, or $0.12 per share, for the
first quarter of fiscal 2007, consistent with company estimates. This compares
to net income of $6.7 million, or $0.05 per share, in the prior year.
First quarter results include restructuring charges of $(2.7) million
after-tax. Charges were primarily related to facility rationalizations in the
company's International and North America segments. Prior year restructuring
charges totaled $(6.8) million after-tax.
"We see plenty of evidence that our company's positive momentum is
continuing," said James P. Hackett, president and CEO. "In addition to our solid
first-quarter performance, we successfully launched the Nurture healthcare brand
and won six product awards at NeoCon."
Cost of sales, which does not include restructuring charges, was 69.2
percent in the first quarter, similar to the prior year. Improved pricing yield
and the benefits of prior restructuring actions helped offset higher material
costs and lower margins in certain product categories.
Gross margin was 30.3 as a percent of sales compared to 29.5 percent last
year. The improvement was driven by lower restructuring costs.
Steelcase reduced operating expenses as a percent of sales to 26.4 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 was $28.0 million, or 3.9 percent of revenue, and
includes pre-tax restructuring charges of $(4.3) million. Operating income
without restructuring charges was $32.3 million, or 4.4 percent of revenue,
compared to $26.0 million, or 3.8 percent of revenue, in the prior year.
Other income was $4.9 million compared with $0.8 million in the prior year.
The increase is primarily a result of higher interest income and gains on
currency derivatives.
Total cash and cash equivalents were $386.3 million at the end of the first
quarter, down from $423.8 million at the end of fiscal 2006 due to normal
seasonal disbursements associated with bonus payments and retirement plan
contributions. Total debt was $255.3 million compared to $264.0 million at the
end of fiscal 2006.
"The year is off to a good start with revenue and income consistent with our
estimates. Over the next few quarters we will be implementing the final stages
of the North America restructuring plan, and we will be working to improve gross
margin performance in some specific areas," said James P. Keane, chief financial
officer.
Outlook
Steelcase expects second quarter revenue to be 10 to 14 percent higher than
the prior year, based on strong order patterns and backlog. North America order
rates strengthened in April and May and remained strong in early June.
The company anticipates continued material inflation in various commodities
such as steel, particleboard and fuel and expects improved pricing yield to
largely offset the higher costs.
The company expects to report earnings between $0.13 and $0.18 per share in
the second quarter, including restructuring charges of $(3) to $(7) million
after-tax. The company reported earnings of $0.09 per share in the second
quarter of the prior year which included $(6.1) million of restructuring charges
after-tax.
Mr. Hackett concluded, "Even as steady growth fuels our optimism, we
continue to focus on being even better at delivering great customer experiences,
reaching new markets and developing a world-class global supply chain. We need
to successfully execute these strategies to sustain the positive trends we're
experiencing."
Business Segment Results
(in millions)
First Quarter
Three Months Ended
--------------------------------------
May 26, May 27, % Inc.
2006 2005 (Dec)
---------- ---------- ----------
Revenue
North America (1) $ 407.4 $ 380.0 7.2%
Steelcase Design Partnership(2) 83.9 82.8 1.3%
International (3) 167.4 152.7 9.6%
Other (4) 68.6 60.5 13.4%
---------- ----------
Consolidated Revenue $ 727.3 $ 676.0 7.6%
========== ==========
Operating Income
North America $ 22.5 $ 14.1
Steelcase Design Partnership 6.7 8.0
International 4.6 (2.6)
Other (5.8) (4.3)
---------- ----------
Consolidated Operating Income $ 28.0 $ 15.2
========== ==========
Operating Income Percent 3.9% 2.2% 1.6%
Pre-Tax Restructuring Charges Included in Business Segment Results
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
North America $ 2.0 0.5% $ 5.9 1.6%
Steelcase Design Partnership 0.2 0.2% - 0.0%
International 2.1 1.3% 4.9 3.2%
Other - 0.0% - 0.0%
---------- ---------- ---------- ----------
Consolidated Charges $ 4.3 0.6% $ 10.8 1.6%
========== ========== ========== ==========
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, IDEO
subsidiaries, other ventures and unallocated corporate expenses.
Non-GAAP Financial Measures
Consolidated Gross Margin, excluding Restructuring Charges
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
Gross Margin, as reported $ 220.1 30.3% $ 199.9 29.5%
Restructuring Charges 4.1 0.5% 8.5 1.3%
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 224.2 30.8% $ 208.4 30.8%
========== ========== ========== ==========
Consolidated Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
Operating Income, as reported $ 28.0 3.9% $ 15.2 2.2%
Restructuring Charges 4.3 0.5% 10.8 1.6%
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 32.3 4.4% $ 26.0 3.8%
========== ========== ========== ==========
North America Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
Operating Income, as reported $ 22.5 5.5% $ 14.1 3.7%
Restructuring Charges 2.0 0.5% 5.9 1.6%
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 24.5 6.0% $ 20.0 5.3%
========== ========== ========== ==========
SDP Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
Operating Income, as reported $ 6.7 8.0% $ 8.0 9.7%
Restructuring Charges 0.2 0.2% - 0.0%
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 6.9 8.2% $ 8.0 9.7%
========== ========== ========== ==========
International Operating Income, excluding Restructuring Charges
(in millions, % of revenue)
First Quarter
Three Months Ended
--------------------------------------------------
May 26, 2006 May 27, 2005
----------------------- -----------------------
Operating Income (Loss), as reported $ 4.6 2.7% $ (2.6) -1.7%
Restructuring Charges 2.1 1.3% 4.9 3.2%
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 6.7 4.0% $ 2.3 1.5%
========== ========== ========== ==========
Webcast
Steelcase will discuss first quarter fiscal 2007 results and business
outlook on a conference call and webcast at 11:00 a.m. EDT today. Links to the
webcast are available at http://www.steelcase.com/ir . Related 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 operations, balance sheet or statement of cash
flow of the company. Pursuant to the requirements of Regulation G, the company
has provided reconciliation above of non-GAAP financial measures to the most
directly comparable GAAP financial measure.
The non-GAAP financial measures used within this earnings release are
consolidated gross margin excluding restructuring charges and consolidated
operating income excluding restructuring charges in dollars and as a percentage
of revenue for the current year and prior year, and operating income excluding
restructuring charges in dollars and as a percentage of revenue for the current
year and prior year by business segment. 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 and oral statements, the company discusses its
expectations regarding future events and its plans and objectives for future
operations. These forward-looking statements generally are 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 from the
company's expectations because of factors such as, but not limited to,
competitive and general economic conditions domestically and internationally;
acts of terrorism, war, governmental action, natural disasters and other Force
Majeure events; changes in the legal and regulatory environment; restructuring
activities; currency fluctuations; changes in customer demands; and the other
risks and contingencies detailed in the company's most recent Annual Report on
Form 10-K and its 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.
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
-----------------------
May 26, May 27,
2006 2005
---------- ----------
Revenue $ 727.3 $ 676.0
Cost of sales 503.1 467.6
Restructuring costs 4.1 8.5
---------- ----------
Gross margin 220.1 199.9
Operating expenses 191.9 182.4
Restructuring costs 0.2 2.3
---------- ----------
Operating income 28.0 15.2
Interest expense (4.1) (5.2)
Other income, net 4.9 0.8
---------- ----------
Income before income taxes 28.8 10.8
Income tax expense 10.6 4.1
---------- ----------
Net income $ 18.2 $ 6.7
========== ==========
Basic and diluted per share data:
Earnings $ 0.12 $ 0.05
========== ==========
Dividends declared per common share $ 0.10 $ 0.06
========== ==========
Weighted average shares outstanding -
basic 149.3 148.2
========== ==========
Weighted average shares outstanding -
diluted 150.9 148.5
========== ==========
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
May 26, Feb. 24,
2006 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 386.3 $ 423.8
Accounts receivable, net 401.5 381.9
Inventories 159.3 147.9
Other current assets 174.8 174.5
------------ ------------
Total current assets 1,121.9 1,128.1
------------ ------------
Property and equipment, net 518.2 524.8
Company owned life insurance 197.0 196.6
Goodwill and other intangible assets, net 285.9 284.8
Other assets 207.9 210.2
------------ ------------
Total assets $ 2,330.9 $ 2,344.5
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 196.7 $ 189.6
Short-term borrowings and current
portion of long-term debt 253.8 261.8
Accrued expenses:
Employee compensation 98.8 127.9
Employee benefit plan obligations 21.8 34.1
Other 227.6 222.8
------------ ------------
Total current liabilities 798.7 836.2
============ ============
Long-term liabilities:
Long-term debt less current maturities 1.5 2.2
Employee benefit plan obligations 237.7 239.7
Other long-term liabilities 57.1 61.5
------------ ------------
Total long-term liabilities 296.3 303.4
------------ ------------
Total liabilities 1,095.0 1,139.6
------------ ------------
Shareholders' equity:
Common stock 319.2 309.9
Additional paid in capital 4.7 3.4
Accumulated other comprehensive loss (25.0) (39.1)
Deferred compensation - restricted stock - (3.1)
Retained earnings 937.0 933.8
------------ ------------
Total shareholders' equity 1,235.9 1,204.9
------------ ------------
Total liabilities and
shareholders' equity $ 2,330.9 $ 2,344.5
============ ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
Year Ended
-----------------------
May 26, May 25,
2006 2005
---------- ----------
OPERATING ACTIVITIES
Net income $ 18.2 $ 6.7
Depreciation and amortization 26.6 30.6
Excess tax benefit from exercise
of stock options and vesting
of restricted stock (2.2) -
Changes in operating assets
and liabilities, net (78.7) (67.7)
Other, net 6.3 (1.4)
---------- ----------
Net cash used in operating activities (29.8) (31.8)
---------- ----------
INVESTING ACTIVITIES
Capital expenditures (11.4) (18.3)
Short-term investments, net - 131.6
Net proceeds from repayment of leases 4.5 3.6
Proceeds from the disposal of fixed assets 3.6 2.2
Other, net (3.0) (3.5)
---------- ----------
Net cash provided (used in)
by investing activities (6.3) 115.6
---------- ----------
FINANCING ACTIVITIES
Repayments of long-term debt, net (4.8) (51.2)
Repayments (borrowings) of lines
of credit, net 0.5 (0.4)
Excess tax benefit from exercise
of stock options and vesting
of restricted stock 2.2 -
Dividends paid (15.0) (8.9)
Common stock issuance, net of repurchases 9.5 1.2
---------- ----------
Net cash used in financing activities (7.6) (59.3)
---------- ----------
Effect of exchange rate changes on cash
and cash equivalents 6.2 (3.1)
---------- ----------
Net increase (decrease) in cash
and cash equivalents (37.5) 21.4
Cash and cash equivalents, beginning of year 423.8 216.6
---------- ----------
Cash and cash equivalents, end of year $ 386.3 $ 238.0
========== ==========
SOURCE Steelcase Inc.
-0- 06/26/2006
/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: tferris@steelcase.com /
/Web site: http://www.steelcase.com
http://www.steelcase.com/ir /
(SCS)