Exhibit 99.1
STEELCASE REPORTS THIRD QUARTER RESULTS
- NET INCOME UP 72%; INTERNATIONAL SEGMENT REVENUE UP 19% -
GRAND RAPIDS, Mich., Dec. 18 /PRNewswire-FirstCall/ -- Steelcase Inc. (NYSE:
SCS) today reported revenue totaling $802.0 million for its third quarter of
fiscal 2007. Revenue increased 6.8 percent compared to $750.7 million in the
prior year quarter driven by strong growth of 19.2 percent in the International
segment.
As compared to the prior year, third quarter revenue included $9.9 million
from currency translation and $9.8 from acquisitions. These items had the net
effect of increasing revenue by 2.6 percent.
Steelcase reported net income of $32.8 million, or $0.22 per share for the
third quarter of fiscal 2007 driven by better than expected operating and
non-operating performance. This compares to net income of $19.1 million, or
$0.13 per share in the same quarter last year. The reported results for the
current quarter were higher than company estimates of $0.14 to $0.19 per share.
Included in third quarter results were net restructuring charges totaling
$(3.6) million after-tax, in line with company expectations. The charges
primarily related to facility rationalization in the company's North America
segment. Net restructuring charges were $(4.6) million after-tax in the prior
year quarter.
"We are particularly pleased to recognize our International segment this
quarter," said James P. Hackett, president and CEO. "The strength of its
performance is not only a significant factor in the company's increased revenue
but also signals the potential impact this segment can have moving forward."
Cost of sales was reduced by 90 basis points to 68.5 percent in the third
quarter, driven by a 290 basis point improvement in the International segment
and a 170 basis point improvement in the North America segment. Volume was a key
contributor to International's improved cost of sales while improved pricing
yield and the benefits of prior restructuring actions contributed to the
improvements in North America. Some of these improvements were offset by
unfavorable shifts in business mix within the Steelcase Design Partnership
segment.
Gross margin, which includes restructuring costs, was 30.8 percent in the
third quarter and improved 100 basis points from 29.8 percent in the same
quarter last year.
Operating expenses as a percent of revenue increased to 25.8 percent from
25.2 percent in the prior year. Higher variable compensation expense and
investments in growth initiatives contributed to the increase.
Reported operating income of $40.5 million, or 5.0 percent of revenue,
improved from $32.7 million, or 4.4 percent of revenue in the prior year.
Operating income without restructuring charges was $46.2 million, or 5.7 percent
of revenue in the current quarter compared to $40.0 million, or 5.4 percent of
revenue in the prior year.
Other income, net increased by $11.3 million driven primarily by higher
interest income and a gain on the completion of a dealer ownership transition.
The company has reduced its year-to-date effective tax rate to 36.4%. As a
result, the effective tax rate for the quarter decreased to 33.5%.
Cash decreased to $525.0 million from $707.0 million at the end of the
previous quarter reflecting $250.0 million of cash used to redeem term notes
scheduled to mature in November 2006. Net of the redemption payment, total cash
and cash equivalents increased by $68.0 million. Debt at the end of the quarter
was $256.1 million. As part of its share repurchase authorization, Steelcase
repurchased 592,000 shares in the third quarter at a total cost of $9.7 million.
Year to date, net income almost doubled to $77.6 million from $39.6 million
for the same period last year.
"Our third quarter earnings per share is at its highest point in six years,
which sustains our enthusiasm over the company's performance," said David C.
Sylvester, chief financial officer. "These results would not be possible without
the passion for continual improvement exemplified by all of our employees. Our
balance sheet continues to strengthen and we will continue to focus intently on
expense control and revenue growth."
Outlook
Steelcase expects fourth quarter revenue to increase 4 to 8 percent over the
prior year quarter. International order rates remained strong throughout the
third quarter. North America orders rates improved from unseasonably low levels
in August and backlog rebounded by the end of the quarter.
Steelcase expects to report earnings between $0.14 and $0.19 per share in
the fourth quarter and estimates after-tax restructuring charges of $(2) to $(4)
million in the fourth quarter. The earnings estimate includes a projected net
income impact of $0.02 per share related to the anticipated extension of the
U.S. Research tax credit. The company reported earnings of $0.06 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, "We are demonstrating that changes to our industrial
model have enabled us to sustain and improve profits despite moderating growth.
We expect to build on this momentum as we intensify our attention on growth
initiatives within our newly re-defined organizational units."
Business Segment Results
(in millions)
Third Quarter Year-To-Date
Three Months Ended Nine Months Ended
------------------------- -------------------------
Nov. 24, Nov. 25, Nov. 24, Nov. 25,
2006 2005 % Inc. 2006 2005 % Inc.
---------- ---------- ---------- ---------- ---------- ----------
Revenue
North America (1) $ 434.9 $ 433.0 0.4% $ 1,305.8 $ 1,214.3 7.5%
International (2) 199.6 167.4 19.2% 526.0 465.2 13.1%
Steelcase Design
Partnership(3) 95.3 86.8 9.8% 270.1 255.5 5.7%
Other (4) 72.2 63.5 13.7% 217.1 194.6 11.6%
---------- ---------- ---------- ----------
Consolidated
Revenue $ 802.0 $ 750.7 6.8% $ 2,319.0 $ 2,129.6 8.9%
========== ========== ========== ==========
Operating Income
North America $ 21.4 $ 19.5 $ 79.6 $ 54.1
International 15.8 6.6 20.0 (0.1)
Steelcase Design
Partnership 9.5 10.0 25.0 26.2
Other (6.2) (3.4) (13.7) (7.0)
---------- ---------- ---------- ----------
Consolidated
Operating Incom $ 40.5 $ 32.7 $ 110.9 $ 73.2
========== ========== ========== ==========
Operating Income
Percent 5.0% 4.4% 0.6% 4.8% 3.4% 1.4%
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) International business segment includes all manufacturing and sales
operations outside the U.S. and Canada.
(3) Steelcase Design Partnership business segment includes Brayton, The
Designtex Group, Details, Metro and Vecta.
(4) Other includes Steelcase Financial Services, PolyVision, IDEO
subsidiaries, other ventures and unallocated corporate expenses.
Non-GAAP Financial Measures
Steelcase Inc.
Three Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 802.0 100.0% $ 750.7 100.0%
Cost of sales 549.2 68.5 521.1 69.4
Restructuring costs 5.5 0.7 5.9 0.8
---------- ---------- ---------- ----------
Gross margin 247.3 30.8 223.7 29.8
Operating expenses 206.6 25.8 189.6 25.2
Restructuring costs 0.2 -- 1.4 0.2
---------- ---------- ---------- ----------
Operating income $ 40.5 5.0% $ 32.7 4.4%
========== ========== ========== ==========
Gross Margin, as reported $ 247.3 30.8% $ 223.7 29.8%
Restructuring Charges 5.5 0.7 5.9 0.8
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 252.8 31.5% $ 229.6 30.6%
========== ========== ========== ==========
Operating Income, as reported $ 40.5 5.0% $ 32.7 4.4%
Restructuring Charges 5.7 0.7 7.3 1.0
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 46.2 5.7% $ 40.0 5.4%
========== ========== ========== ==========
Nine Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 2,319.0 100.0% $ 2,129.6 100.0%
Cost of sales 1,593.2 68.7 1,469.8 69.0
Restructuring costs 14.1 0.6 22.2 1.1
---------- ---------- ---------- ----------
Gross margin 711.7 30.7 637.6 29.9
Operating expenses 600.5 25.9 558.8 26.2
Restructuring costs 0.3 -- 5.6 0.3
---------- ---------- ---------- ----------
Operating income $ 110.9 4.8% $ 73.2 3.4%
========== ========== ========== ==========
Gross Margin, as reported $ 711.7 30.7% $ 637.6 29.9%
Restructuring Charges 14.1 0.6 22.2 1.1
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 725.8 31.3% $ 659.8 31.0%
========== ========== ========== ==========
Operating Income, as reported $ 110.9 4.8% $ 73.2 3.4%
Restructuring Charges 14.4 0.6 27.8 1.4
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 125.3 5.4% $ 101.0 4.8%
========== ========== ========== ==========
North America
Three Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 434.9 100.0% $ 433.0 100.0%
Cost of sales 308.0 70.8 314.0 72.5
Restructuring costs 5.2 1.2 4.0 0.9
---------- ---------- ---------- ----------
Gross margin 121.7 28.0 115.0 26.6
Operating expenses 100.3 23.1 95.5 22.1
---------- ---------- ---------- ----------
Operating income $ 21.4 4.9% $ 19.5 4.5%
========== ========== ========== ==========
Gross Margin, as reported $ 121.7 28.0% $ 115.0 26.6%
Restructuring Charges 5.2 1.2 4.0 0.9
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 126.9 29.2% $ 119.0 27.5%
========== ========== ========== ==========
Operating Income, as reported $ 21.4 4.9% $ 19.5 4.5%
Restructuring Charges 5.2 1.2 4.0 0.9
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 26.6 6.1% $ 23.5 5.4%
========== ========== ========== ==========
Nine Months Ended
----------------------- -----------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 1,305.8 100.0% $ 1,214.3 100.0%
Cost of sales 926.5 71.0 873.9 72.0
Restructuring costs 10.8 0.8 14.9 1.2
---------- ---------- ---------- ----------
Gross margin 368.5 28.2 325.5 26.8
Operating expenses 288.9 22.1 271.4 22.3
---------- ---------- ---------- ----------
Operating income $ 79.6 6.1% $ 54.1 4.5%
========== ========== ========== ==========
Gross Margin, as reported $ 368.5 28.2% $ 325.5 26.8%
Restructuring Charges 10.8 0.8 14.9 1.2
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 379.3 29.0% $ 340.4 28.0%
========== ========== ========== ==========
Operating Income, as reported $ 79.6 6.1% $ 54.1 4.5%
Restructuring Charges 10.8 0.8 14.9 1.2
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 90.4 6.9% $ 69.0 5.7%
========== ========== ========== ==========
International
Three Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 199.6 100.0% $ 167.4 100.0%
Cost of sales 131.2 65.7 114.8 68.6
Restructuring costs 0.3 0.2 -- --
---------- ---------- ---------- ----------
Gross margin 68.1 34.1 52.6 31.4
Operating expenses 52.2 26.1 44.6 26.7
Restructuring costs 0.1 0.1 1.4 0.8
---------- ---------- ---------- ----------
Operating income $ 15.8 7.9% $ 6.6 3.9%
========== ========== ========== ==========
Gross Margin, as reported $ 68.1 34.1% $ 52.6 31.4%
Restructuring Charges 0.3 0.2 -- --
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 68.4 34.3% $ 52.6 31.4%
========== ========== ========== ==========
Operating Income, as reported $ 15.8 7.9% $ 6.6 3.9%
Restructuring Charges 0.4 0.3 1.4 0.8
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 16.2 8.2% $ 8.0 4.7%
========== ========== ========== ==========
Nine Months Ended
---------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- ------------------------
Revenue $ 526.0 100.0% $ 465.2 100.0%
Cost of sales 352.0 66.9 320.0 68.8
Restructuring costs 3.3 0.6 5.3 1.1
---------- ---------- ---------- ----------
Gross margin 170.7 32.5 139.9 30.1
Operating expenses 150.6 28.7 134.2 28.9
Restructuring costs 0.1 -- 5.8 1.2
---------- ---------- ---------- ----------
Operating income (loss) $ 20.0 3.8% $ (0.1) 0.0%
========== ========== ========== ==========
Gross Margin, as reported $ 170.7 32.5% $ 139.9 30.1%
Restructuring Charges 3.3 0.6 5.3 1.1
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 174.0 33.1% $ 145.2 31.2%
========== ========== ========== ==========
Operating Income (Loss), as reported$ 20.0 3.8% $ (0.1) 0.0%
Restructuring Charges 3.4 0.6 11.1 2.3
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 23.4 4.4% $ 11.0 2.3%
========== ========== ========== ==========
Steelcase Design Partnership
Three Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 95.3 100.0% $ 86.8 100.0%
Cost of sales 61.8 64.8 53.7 61.9
---------- ---------- ---------- ----------
Gross margin 33.5 35.2 33.1 38.1
Operating expenses 23.9 25.1 23.1 26.6
Restructuring charges 0.1 0.1 -- --
---------- ---------- ---------- ----------
Operating income $ 9.5 10.0% $ 10.0 11.5%
========== ========== ========== ==========
Gross Margin, as reported $ 33.5 35.2% $ 33.1 38.1%
Restructuring Charges -- -- -- --
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 33.5 35.2% $ 33.1 38.1%
========== ========== ========== ==========
Operating Income, as reported $ 9.5 10.0% $ 10.0 11.5%
Restructuring Charges 0.1 0.1 -- --
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 9.6 10.1% $ 10.0 11.5%
========== ========== ========== ==========
Nine Months Ended
--------------------------------------------------
November 24, 2006 November 25, 2005
----------------------- -----------------------
Revenue $ 270.1 100.0% $ 255.5 100.0%
Cost of sales 171.8 63.6 157.9 61.8
---------- ---------- ---------- ----------
Gross margin 98.3 36.4 97.6 38.2
Operating expenses 73.1 27.0 71.4 27.9
Restructuring charges 0.2 0.1 -- --
---------- ---------- ---------- ----------
Operating income $ 25.0 9.3% $ 26.2 10.3%
========== ========== ========== ==========
Gross Margin, as reported $ 98.3 36.4% $ 97.6 38.2%
Restructuring Charges -- -- -- --
---------- ---------- ---------- ----------
Gross Margin, excluding
restructuring charges $ 98.3 36.4% $ 97.6 38.2%
========== ========== ========== ==========
Operating Income, as reported $ 25.0 9.3% $ 26.2 10.3%
Restructuring Charges 0.2 0.1 -- --
---------- ---------- ---------- ----------
Operating Income, excluding
restructuring charges $ 25.2 9.4% $ 26.2 10.3%
========== ========== ========== ==========
Webcast
Steelcase will discuss third quarter fiscal 2007 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 . 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 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 consolidated gross margin,
excluding restructuring costs for the current and prior year in dollars and as a
percent of 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 percent of revenue, on a consolidated basis and for each 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 INCOME (Unaudited)
(in millions, except per share data)
Three Months Ended Nine Months Ended
------------------------ ------------------------
Nov. 24, Nov. 25, Nov. 24, Nov. 25,
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenue $ 802.0 $ 750.7 $ 2,319.0 $ 2,129.6
Cost of sales 549.2 521.1 1,593.2 1,469.8
Restructuring costs 5.5 5.9 14.1 22.2
---------- ---------- ---------- ----------
Gross margin 247.3 223.7 711.7 637.6
Operating expenses 206.6 189.6 600.5 558.8
Restructuring costs 0.2 1.4 0.3 5.6
---------- ---------- ---------- ----------
Operating income 40.5 32.7 110.9 73.2
Interest expense (5.1) (4.2) (14.3) (13.8)
Other income, net 13.9 2.6 25.5 4.5
---------- ---------- ---------- ----------
Income before income taxes 49.3 31.1 122.1 63.9
Income tax expense 16.5 12.0 44.5 24.3
---------- ---------- ---------- ----------
Net income $ 32.8 $ 19.1 $ 77.6 $ 39.6
========== ========== ========== ==========
Basic and diluted per share data:
Earnings $ 0.22 $ 0.13 $ 0.52 $ 0.27
========== ========== ========== ==========
Dividends declared per common share $ 0.12 $ 0.09 $ 0.32 $ 0.24
========== ========== ========== ==========
Weighted average shares outstanding -
basic 148.1 148.3 148.9 148.2
========== ========== ========== ==========
Weighted average shares outstanding -
diluted 149.2 148.7 150.3 148.6
========== ========== ========== ==========
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
Nov. 24, Feb. 24,
2006 2006
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 525.0 $ 423.8
Accounts receivable, net 398.1 381.9
Inventories 159.7 147.9
Deferred income taxes 57.0 80.3
Other current assets 87.4 94.2
---------- ----------
Total current assets 1,227.2 1,128.1
---------- ----------
Property and equipment, net 476.6 524.8
Company owned life insurance 204.9 196.6
Deferred income taxes 162.7 154.6
Goodwill 216.1 211.1
Other intangible assets, net of
accumulated amortization 75.8 73.7
Other assets 59.8 55.6
---------- ----------
Total assets $ 2,423.1 $ 2,344.5
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 226.6 $ 189.6
Short-term borrowings and current
portion of long-term debt 6.0 261.8
Accrued expenses:
Employee compensation 134.8 127.9
Employee benefit plan obligations 30.1 34.1
Other 236.3 222.8
---------- ----------
Total current liabilities 633.8 836.2
---------- ----------
Long-term liabilities:
Long-term debt less current maturities 250.1 2.2
Employee benefit plan obligations 237.0 239.7
Other long-term liabilities 68.7 61.5
---------- ----------
Total long-term liabilities 555.8 303.4
---------- ----------
Total liabilities 1,189.6 1,139.6
---------- ----------
Shareholders' equity:
Common stock 290.3 309.9
Additional paid in capital 5.9 3.4
Accumulated other comprehensive loss (26.2) (39.1)
Deferred compensation - restricted stock - (3.1)
Retained earnings 963.5 933.8
---------- ----------
Total shareholders' equity 1,233.5 1,204.9
---------- ----------
Total liabilities and
shareholders' equity $ 2,423.1 $ 2,344.5
========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in millions)
Nine Months Ended
------------------------
Nov. 24, Nov. 25,
2006 2005
---------- ----------
(Unaudited)
OPERATING ACTIVITIES
Net income $ 77.6 $ 39.6
Depreciation and amortization 77.6 91.1
Deferred income taxes 23.7 5.3
Changes in operating assets and liabilities,
net of corporate acquisitions 9.8 (48.9)
Excess tax benefit from exercise of stock
options and vesting of restricted stock (2.2) -
Other, net 5.9 5.9
---------- ----------
Net cash provided by operating activities 192.4 93.0
---------- ----------
INVESTING ACTIVITIES
Capital expenditures (33.9) (54.0)
Short-term investments, liquidations - 131.6
Acquisitions, net of cash acquired (13.6) (6.2)
Net (increase) decrease in notes receivable 8.9 (2.3)
Proceeds from the disposal of fixed assets 8.1 23.8
Net proceeds from repayment of leases 7.8 13.6
Other, net 3.1 4.3
---------- ----------
Net cash (used in) provided by investing activities (19.6) 110.8
---------- ----------
FINANCING ACTIVITIES
Issuance of long-term debt, net 249.3 -
Repayments of long-term debt (251.9) (54.1)
Repayments of lines of credit, net (6.2) (2.7)
Dividends paid (47.9) (35.7)
Common stock issuances 11.5 3.9
Common stock repurchases (32.2) (3.4)
Excess tax benefit from exercise of stock
options and vesting of restricted stock 2.2 -
---------- ----------
Net cash used in financing activities (75.2) (92.0)
---------- ----------
Effect of exchange rate changes on cash
and cash equivalents 3.6 3.2
---------- ----------
Net increase in cash and cash equivalents 101.2 115.0
Cash and cash equivalents, beginning of period 423.8 216.6
---------- ----------
Cash and cash equivalents, end of period $ 525.0 $ 331.6
========== ==========
SOURCE Steelcase Inc.
-0- 12/18/2006
/CONTACT: Investor Contact: Raj Mehan, Investor Relations,
+1-616-698-4734, or Media Contact: Jeanine Holquist, Public Relations,
+1-616-698-3765, both of Steelcase Inc./
/First Call Analyst: /
/FCMN Contact: tferris@steelcase.com /
/Web site: http://www.steelcase.com
http://www.steelcase.com/ir /
(SCS)