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Steelcase Reports Second Quarter Results



Steelcase Reports Second Quarter Results

Americas Continues Organic Revenue Growth and Generates Strong Operating
Income Margin

GRAND RAPIDS, Mich., Sept. 18, 2013 (GLOBE NEWSWIRE) -- Steelcase Inc.
(NYSE:SCS) today reported second quarter revenue of $757.6 million and net
income of $27.6 million, or $0.22 per share, including restructuring costs of
approximately $0.02 per share. Earnings per share were consistent with company
expectations despite revenue falling short in EMEA and Asia Pacific.  
Steelcase reported $744.9 million of revenue and earnings of $0.23 per share
in the second quarter of the prior year, including restructuring costs of
approximately $0.02 per share.  

Organic revenue growth over the prior year was modest after adjusting for $5.2
million of favorable currency translation effects and a favorable impact of
$4.2 million from dealer acquisitions, net of a divestiture. The Americas
organic revenue growth was 4 percent compared to the prior year and reflected
a favorable business mix. EMEA experienced a 13 percent organic revenue
decline which compared to significant revenue growth in the prior
year. Revenue continued to include a higher than normal mix of project
business from some of the company's largest corporate customers.

Current quarter operating income of $52.0 million compares to operating income
of $46.8 million in the prior year. Excluding restructuring costs, second
quarter adjusted operating income of $55.3 million compares with $50.5 million
in the prior year. Exceptionally strong adjusted operating income in the
Americas was partially offset by adjusted operating losses in EMEA and Asia
Pacific.

"We have tremendous confidence in our global strategy, yet our consolidated
results continue to be negatively impacted by the economic crisis in Western
Europe," said James P. Hackett, CEO. "The Americas outperformed our
expectations with an operating income margin of 14%, the highest result for
any of our segments in the last decade. In contrast, our EMEA results reflect
a significant operating loss, despite the great work of our resident teams to
position our business for the eventual economic recovery in Western Europe."

Cost of sales improved 110 basis points to 67.8 percent of revenue in the
current quarter compared to 68.9 percent in the prior year. This improvement
was driven primarily by favorable business mix and net benefits from pricing
adjustments and recent restructuring actions in the Americas.

Operating expenses in the second quarter were $188.9 million compared with
$181.0 million in the prior year. The increase was largely due to the impact
of recent acquisitions, unfavorable currency translation effects, an
environmental reserve adjustment and spending on marketing and other
initiatives compared to the prior year.

An investment loss of $1.8 million in the current quarter compares to an
investment gain of $1.3 million in the prior year. The decline was primarily
due to losses in the cash surrender value of variable life company-owned life
insurance (COLI) in the current quarter versus gains in the prior year.

Other income, net of $0.6 million in the current quarter decreased by $1.1
million compared to the prior year primarily due to higher foreign currency
losses in the current period.

Income tax expense of $18.7 million in the current quarter reflects an
estimated effective tax rate for the full fiscal year of approximately 40% and
included $1.0 of net discrete tax benefits.

Cash, short-term investments and the cash surrender value of variable life
COLI totaled $285 million and total debt was $288 million at the end of the
second quarter.

The Board of Directors today declared a cash dividend of $0.10 per share, to
be paid on or before October 11, 2013 to shareholders of record as of
September 30, 2013.

"Our global competitiveness continues to be negatively impacted by the cost
structures within our EMEA segment, which has generated adjusted operating
losses of $18.9 million during the first half of this fiscal year," said David
C. Sylvester, senior vice president and CFO.  "Therefore, we expect to work
with our EMEA teams to initiate procedures in the next 30 to 60 days with
employee representatives in the countries involved regarding potential
projects aimed at safeguarding our competitiveness."

Outlook

In the Americas, second quarter order growth approximated 10% compared to the
prior year and customer order backlog at the end of the second quarter
increased approximately 19% compared to the prior year. EMEA second quarter
orders declined by approximately 12% compared to the prior year. The company
expects third quarter fiscal 2014 revenue to be in the range of $755 to $780
million. This estimate includes an assumption of approximately $4 million from
favorable currency translation effects compared to the prior year, as well as
a $2 million negative impact from a divestiture. Adjusting for these impacts,
the company projects third quarter organic revenue growth in the range of 4 to
7 percent over the prior year. The company reported revenue of $727.2 million
in the third quarter of fiscal 2013.   

Steelcase expects to report earnings between $0.23 to $0.27 per share for the
third quarter of fiscal 2014, including restructuring costs of approximately
$0.01 per share. In addition, this estimate includes higher operating expenses
as compared to the second quarter of fiscal 2014 and an estimated effective
income tax rate of approximately 40%. Steelcase reported earnings of $0.19 per
share in the third quarter of fiscal 2013, including restructuring costs of
approximately $0.03 per share.

"In the Americas, we continue to see strong customer reaction to our solutions
and this is contributing to that segment's momentum going into the third
quarter," Mr. Hackett said.  "While the EMEA region continues to be challenged
by the ongoing economic crisis, it is an important long-term market for our
global customers and, thus, a critical component of our company's future
success."

Business Segment Results
(in millions)
                                                                         
                     (Unaudited)                  (Unaudited)            
                     Three Months Ended           Six Months Ended       
                     August 23, August 24, %      August 23, August 24, %
                     2013       2012       Change 2013       2012       Change
                                                                         
Revenue                                                                  
Americas (1)          $ 558.7    $ 539.8   3.5 %   $ 1,037.5  $ 1,019.0 1.8 %
EMEA (2)              132.4      140.0     (5.4)%  259.1      269.2     (3.8)%
Other (3)             66.5       65.1      2.2 %   128.1      131.9     (2.9)%
Consolidated revenue  $ 757.6    $ 744.9   1.7 %   $ 1,424.7  $ 1,420.1 0.3 %
                                                                         
Operating income                                                         
(loss)
Americas              $ 78.3     $ 57.4            $ 117.0    $ 91.9     
EMEA                  (15.1)     (4.4)             (25.4)     (13.2)     
Other                 1.1        2.2               3.0        2.8        
Corporate (4)         (12.3)     (8.4)             (22.2)     (15.4)     
Consolidated          $ 52.0     $ 46.8            $ 72.4     $ 66.1     
operating income
                                                                         
Operating income     6.9%       6.3%              5.1%       4.7%        
percent
                                                                         
Revenue Mix                                                              
Americas (1)         73.7%      72.5%             72.8%      71.8%       
EMEA (2)             17.5%      18.8%             18.2%      18.9%       
Other (3)            8.8%       8.7%              9.0%       9.3%        

Business Segment Footnotes

As of November 23, 2012, we realigned portions of our reportable segments for
financial reporting purposes as a result of the integration of the PolyVision
global technology business into the Steelcase Education Solutions group. Prior
to this change, the PolyVision global technology business was combined with
the PolyVision surfaces business and was reported collectively as PolyVision
in the Other category along with Asia Pacific and Designtex. As a result of
these changes, the results of the PolyVision technology business are now
reported in the Americas and EMEA segments. The PolyVision surfaces business
remains in the Other category. Similarly, amounts in the prior years'
financial statements have been reclassified to conform to the new segment
presentation.

 1. The Americas segment serves customers in the U.S., Canada and Latin
    America with a portfolio of integrated architecture, furniture and
    technology products marketed to corporate, government, healthcare,
    education and retail customers through the Steelcase, Coalesse, Details,
    Nurture by Steelcase and Turnstone brands.
 2. The EMEA segment serves customers in Europe, the Middle East and Africa
    primarily under the Steelcase and Coalesse brands, with an emphasis on
    freestanding furniture systems, storage and seating solutions.
 3. The Other category includes Asia Pacific, Designtex and PolyVision.
 4. Corporate expenses include unallocated portions of shared services
    functions such as information technology, human resources, finance,
    executive, corporate facilities, legal and research.

YEAR OVER YEAR ORGANIC REVENUE GROWTH (DECLINE) BY SEGMENT
Q2 2014 vs. Q2 2013
                        Steelcase Inc.    Americas    EMEA         Other
                                                                   category
                                                                    
Q2 2013 revenue          $ 744.9           $ 539.8     $ 140.0      $ 65.1
Divestiture              (2.0)             —           (2.0)        —
Currency translation     5.2               (0.8)       6.4          (0.4)
effects*
 Q2 2013 revenue,        748.1             539.0       144.4        64.7
adjusted
                                                                    
Q2 2014 revenue          757.6             558.7       132.4        66.5
Dealer acquisitions      (6.2)             —           (6.2)        —
 Q2 2014 revenue,        751.4             558.7       126.2        66.5
adjusted
Organic growth           $ 3.3             $ 19.7      $ (18.2)     $ 1.8
(decline) $
Organic growth           0%               4%          (13)%        3%
(decline) %
                                                                    
* Currency translation effects represent the estimated net effect of
translating Q2 2013 foreign currency revenues using the average exchange rates
during Q2 2014.
                                                                    
                                                                    
PROJECTED ORGANIC REVENUE GROWTH
Q3 2014 vs. Q3 2013
                        Steelcase Inc.                              
                                                                    
Q3 2013 revenue          $ 727                                      
Divestiture              (2)                                        
Currency translation     4                                          
effects*
 Q3 2013 revenue,        729                                        
adjusted
                                                                    
Q3 2014 revenue,        755 - 780                                   
projected
Dealer acquisitions      —                                          
 Q3 2014 projected      755 - 780                                   
revenue, adjusted
Organic growth $        $ 26 - 51                                   
Organic growth %        4% - 7%                                     
                                                                    
* Currency translation effects represent the estimated net effect of
translating Q3 2013 foreign currency revenues using the exchange rate at the
end of Q2 2014.
                                                                    

Steelcase                                                                     
Inc.
              (Unaudited)                       (Unaudited)
              Three Months Ended                Six Months Ended
              August 23, 2013   August 24, 2012 August 23, 2013   August 24, 2012
                                                                              
Revenue        $ 757.6  100.0%   $ 744.9 100.0%  $ 1,424.7 100.0%  $ 1,420.1 100.0%
Cost of sales  513.4    67.8     513.4   68.9    970.6     68.1    987.5     69.5
Restructuring  (0.1)    —        3.4     0.5     0.1       —       8.5       0.6
costs
Gross profit   244.3    32.2     228.1   30.6    454.0     31.9    424.1     29.9
Operating      188.9    24.9     181.0   24.3    374.0     26.3    357.7     25.2
expenses
Restructuring  3.4      0.4      0.3     —       7.6       0.5     0.3       —
costs
Operating      $ 52.0   6.9%     $ 46.8  6.3%    $ 72.4    5.1%    $ 66.1    4.7%
income
Interest
expense,
investment     (5.7)    (0.8)    (1.6)   (0.2)   (8.3)     (0.6)   (1.2)     (0.1)
income and
other income,
net
Income before
income tax     46.3     6.1      45.2    6.1     64.1      4.5     64.9      4.6
expense
Income tax     18.7     2.5      15.7    2.1     23.3      1.6     22.2      1.6
expense
Net income     $ 27.6   3.6%     $ 29.5  4.0%    $ 40.8    2.9%    $ 42.7    3.0%
                                                                              
Operating      $ 52.0   6.9%     $ 46.8  6.3%    $ 72.4    5.1%    $ 66.1    4.7%
income
Add:
restructuring  3.3      0.4      3.7     0.5     7.7       0.5     8.8       0.6
costs
Adjusted
operating      $ 55.3   7.3%     $ 50.5  6.8%    $ 80.1    5.6%    $ 74.9    5.3%
income
                                                                              
                                                                              
Americas                                                                      
              (Unaudited)                       (Unaudited)
              Three Months Ended                Six Months Ended
              August 23, 2013   August 24, 2012 August 23, 2013   August 24, 2012
                                                                              
Revenue        $ 558.7  100.0%   $ 539.8 100.0%  $ 1,037.5 100.0%  $ 1,019.0 100.0%
Cost of sales  366.6    65.6     369.2   68.4    690.1     66.5    702.9     69.0
Restructuring  (0.1)    —        3.4     0.7     0.1       —       8.2       0.8
costs
Gross profit   192.2    34.4     167.2   30.9    347.3     33.5    307.9     30.2
Operating      113.8    20.4     109.8   20.3    229.2     22.1    216.0     21.2
expenses
Restructuring  0.1      —        —       —       1.1       0.1     —         —
costs
Operating      $ 78.3   14.0%    $ 57.4  10.6%   $ 117.0   11.3%   $ 91.9    9.0%
income
Add:
restructuring  —        —        3.4     0.7     1.2       0.1     8.2       0.8
costs
Adjusted
operating      $ 78.3   14.0%    $ 60.8  11.3%   $ 118.2   11.4%   $ 100.1   9.8%
income
                                                                              
                                                                              
EMEA                                                                          
              (Unaudited)                       (Unaudited)
              Three Months Ended                Six Months Ended
              August 23, 2013   August 24, 2012 August 23, 2013   August 24, 2012
                                                                              
Revenue        $ 132.4  100.0%   $ 140.0 100.0%  $ 259.1   100.0%  $ 269.2   100.0%
Cost of sales  101.9    77.0     102.6   73.3    195.9     75.6    198.6     73.8
Restructuring  —        —        —       —       —         —       0.3       0.1
costs
Gross profit   30.5     23.0     37.4    26.7    63.2      24.4    70.3      26.1
Operating      42.3     31.9     41.8    29.8    82.1      31.7    83.5      31.0
expenses
Restructuring  3.3      2.5      —       —       6.5       2.5     —         —
costs
Operating      $ (15.1) (11.4)%  $ (4.4) (3.1)%  $ (25.4)  (9.8)%  $ (13.2)  (4.9)%
loss
Add:
restructuring  3.3      2.5      —       —       6.5       2.5     0.3       0.1
costs
Adjusted
operating      $ (11.8) (8.9)%   $ (4.4) (3.1)%  $ (18.9)  (7.3)%  $ (12.9)  (4.8)%
loss
                                                                              
                                                                              
Other                                                                         
              (Unaudited)                       (Unaudited)
              Three Months Ended                Six Months Ended
              August 23, 2013   August 24, 2012 August 23, 2013   August 24, 2012
                                                                              
Revenue        $ 66.5   100.0%   $ 65.1  100.0%  $ 128.1   100.0%  $ 131.9   100.0%
Cost of sales  44.9     67.5     41.6    63.9    84.6      66.1    86.0      65.2
Restructuring  —        —        —       —       —         —       —         —
costs
Gross profit   21.6     32.5     23.5    36.1    43.5      33.9    45.9      34.8
Operating      20.5     30.9     21.0    32.3    40.5      31.6    42.8      32.4
expenses
Restructuring  —        —        0.3     0.4     —         —       0.3       0.3
costs
Operating      $ 1.1    1.6%     $ 2.2   3.4%    $ 3.0     2.3%    $ 2.8     2.1%
income
Add:
restructuring  —        —        0.3     0.4     —         —       0.3       0.3
costs
Adjusted
operating      $ 1.1    1.6%     $ 2.5   3.8%    $ 3.0     2.3%    $ 3.1     2.4%
income
                                                                              
                                                                              
Corporate                                                                     
              (Unaudited)                       (Unaudited)
              Three Months Ended                Six Months Ended
              August 23, 2013   August 24, 2012 August 23, 2013   August 24, 2012
                                                                              
Operating      $ (12.3)          $ (8.4)         $ (22.2)          $ (15.4)   
loss
Add:
restructuring  —                 —               —                 —          
costs
Adjusted
operating      $ (12.3)          $ (8.4)         $ (22.2)          $ (15.4)   
loss
                                                                              

Webcast

Steelcase will discuss second quarter results and business outlook on a
conference call and webcast at 11:00 a.m. Eastern time tomorrow. Links to the
webcast are available at ir.steelcase.com. Related presentation slides will be
available on the company's website shortly after this press release is issued.

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 statements of income, balance sheets or statements
of cash flow 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: (1) organic revenue growth (decline), which represents the change in
revenue excluding currency translation effects and the impacts of acquisitions
and divestitures; and (2) adjusted operating income (loss), which represents
operating income (loss), excluding restructuring costs and goodwill impairment
charges. 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; changes in raw materials and commodity
costs; 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.

For over 100 years, Steelcase Inc. has helped create great experiences for the
world's leading organizations - wherever work happens. Steelcase and our
family of brands - including Steelcase®, Coalesse®, Details®, Designtex®,
Nurture®, PolyVision® and Turnstone® - offer a comprehensive portfolio of
furnishings, products and services designed to unlock human promise and
support social, economic and environmental sustainability. We are globally
accessible through a network of channels, including approximately 670 dealers.
Steelcase is a global, industry-leading and publicly traded company with
fiscal 2013 revenue of $2.9 billion.

STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in millions, except per share data)
                                                                     
                                   Three Months Ended    Six Months Ended
                                   August 23, August 24, August 23, August 24,
                                   2013       2012       2013       2012
Revenue                             $ 757.6    $ 744.9    $ 1,424.7  $ 1,420.1
Cost of sales                       513.4      513.4      970.6      987.5
Restructuring costs (benefits)      (0.1)      3.4        0.1        8.5
Gross profit                        244.3      228.1      454.0      424.1
Operating expenses                  188.9      181.0      374.0      357.7
Restructuring costs                 3.4        0.3        7.6        0.3
Operating income                    52.0       46.8       72.4       66.1
Interest expense                    (4.5)      (4.6)      (8.9)      (9.1)
Investment income (loss)            (1.8)      1.3        (1.2)      2.4
Other income, net                   0.6        1.7        1.8        5.5
Income before income tax expense    46.3       45.2       64.1       64.9
Income tax expense                  18.7       15.7       23.3       22.2
Net income                          $ 27.6     $ 29.5     $ 40.8     $ 42.7
                                                                     
Earnings per share:                                                  
Basic                               $ 0.22     $ 0.23     $ 0.32     $ 0.33
Diluted                             $ 0.22     $ 0.23     $ 0.32     $ 0.33
Weighted average shares             125.9      127.1      126.2      127.9
outstanding - basic
Weighted average shares             127.8      127.7      128.1      128.4
outstanding - diluted
Dividends declared and paid per     $ 0.10     $ 0.09     $ 0.20     $ 0.18
common share
                                                                     

STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
                                                      (Unaudited)  
                                                      August 23,  February 22,
                                                      2013        2013
ASSETS
Current assets:                                                    
Cash and cash equivalents                              $ 127.8     $ 150.4
Short-term investments                                 43.4        100.5
Accounts receivable, net                               331.5       287.3
Inventories                                            154.5       137.5
Deferred income taxes                                  44.5        56.2
Other current assets                                   55.5        46.7
Total current assets                                   757.2       778.6
                                                                   
Property, plant and equipment, net                     361.7       353.2
Company-owned life insurance                           225.5       225.8
Deferred income taxes                                  109.7       101.7
Goodwill                                               120.6       121.4
Other intangible assets, net                           18.0        19.2
Other assets                                           95.0        89.7
Total assets                                           $ 1,687.7   $ 1,689.6
                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:                                               
Accounts payable                                       $ 227.1     $ 198.6
Short-term borrowings and current portion of           2.5         2.6
long-term debt
Accrued expenses                                                   
Employee compensation                                  112.0       129.4
Employee benefit plan obligations                      17.3        23.8
Other                                                  151.6       130.4
Total current liabilities                              510.5       484.8
                                                                   
Long-term liabilities:                                             
Long-term debt less current maturities                 285.2       286.4
Employee benefit plan obligations                      156.2       158.0
Other long-term liabilities                            75.4        92.4
Total long-term liabilities                            516.8       536.8
Total liabilities                                      1,027.3     1,021.6
                                                                   
Shareholders' equity:                                              
Common stock                                           —           —
Additional paid-in capital                             6.9         27.2
Accumulated other comprehensive loss                   (7.2)       (4.2)
Retained earnings                                      660.7       645.0
Total shareholders' equity                             660.4       668.0
Total liabilities and shareholders' equity             $ 1,687.7   $ 1,689.6
                                                                   

STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(in millions)
                                                                     
                                                         Six Months Ended
                                                         August 23, August 24,
                                                         2013       2012
OPERATING ACTIVITIES                                                 
Net income                                                $ 40.8     $ 42.7
Adjustments to reconcile net income to net cash provided             
by operating activities:
Depreciation and amortization                             28.9       27.4
Changes in cash surrender value of COLI                   0.3        (4.5)
Deferred income taxes                                     0.1        11.8
Non-cash stock compensation                               12.5       6.4
Changes in operating assets and liabilities, net of                  
acquisitions and divestiture:
Accounts receivable, inventories and accounts payable     (32.8)     (33.7)
Employee compensation liabilities                         (31.3)     (26.3)
Employee benefit obligations                              (12.2)     (8.6)
Other assets and liabilities                              4.5        6.5
Other                                                     6.3        7.5
Net cash provided by operating activities                 17.1       29.2
                                                                     
INVESTING ACTIVITIES                                                 
Capital expenditures                                      (36.4)     (25.8)
Proceeds from disposal of fixed assets                    1.6        14.1
Purchases of investments                                  (17.8)     (14.3)
Liquidations of investments                               74.5       41.7
Other                                                     (1.5)      (10.9)
Net cash provided by investing activities                 20.4       4.8
                                                                     
FINANCING ACTIVITIES                                                 
Dividends paid                                            (25.1)     (23.0)
Common stock repurchases                                  (31.8)     (19.4)
Other                                                     (2.3)      0.4
Net cash used in financing activities                     (59.2)     (42.0)
                                                                     
Effect of exchange rate changes on cash and cash          (0.9)      (0.9)
equivalents
                                                                     
Net decrease in cash and cash equivalents                 (22.6)     (8.9)
Cash and cash equivalents, beginning of period            150.4      112.1
Cash and cash equivalents, end of period                  $ 127.8    $ 103.2
                                                                     

CONTACT: Investor Contact:
         Raj Mehan
         Investor Relations
         (616) 246-4251

         Media Contact:
         Laura VanSlyke
         Corporate Communications
         (616) 247-2747

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