18.12.2005: Meldung: Steelcase Inc.: Third Quarter Report

Steelcase Reports Double Digit Sales and Earnings Growth in Third Quarter
Friday December 16, 7:38 am ET
- North America Revenue Up 17 Percent Over Prior Year -

GRAND RAPIDS, Mich., Dec. 16 / Steelcase Inc. today reported revenue totaling $750.7 million for its third quarter of fiscal 2006. Revenue increased 11.4 percent compared to $674.1 million in the prior year quarter driven by strong growth of 17.4 percent in the North America segment.

As compared to the prior year, third quarter revenue included $12.8 million from services, $8.4 million from acquisitions and a $(6.0) million impact from currency translation. These items had the net effect of increasing revenue by 2.3 percent.

Steelcase reported net income of $19.1 million, or $0.13 per share for the third quarter of fiscal 2006, consistent with company estimates of $0.10 to $0.15 per share. This compares to net income of $10.1 million, or $0.07 per share in the same quarter last year. Prior year net income included the benefit of a $6.5 million tax reserve reduction.

Included in third quarter results were net restructuring charges totaling $(4.6) million after-tax primarily related to facility rationalization in the company"s North America and International segments. Net restructuring charges were $(1.2) million after-tax in the prior year quarter.

"We are pleased to deliver sales and profit growth in all three of our business segments for the third quarter," said James P. Hackett, president and CEO. "We significantly improved our results even as we worked through the many challenges associated with making changes to our business model. These changes will reduce complexity and cost, improve customer value and satisfaction, and create a platform for strong, profitable growth."

The company"s cost of sales improved by 2.5 points to 69.4 percent in the third quarter, driven by a 4.0 percentage point improvement in the North America segment. Improved pricing yield, leverage from higher sales volume, lower overhead spending and gains in labor productivity all contributed to the improvement in North America. This improvement was partially offset by disruption and inefficiencies associated with ongoing facility consolidations and higher energy costs. The International segment improved cost of sales by 2.1 percentage points, driven by the benefits from prior restructuring actions and leverage from higher sales volume.

Despite higher restructuring costs, gross margin of 29.8 percent in the third quarter improved 1.9 percentage points from 27.9 percent in the same quarter last year. Excluding restructuring charges, gross margin improved by 2.5 percentage points.

Steelcase reduced operating expenses as a percent of revenue to 25.2 percent from 27.0 percent in the prior year. This improvement was related to continued cost control and leverage from higher sales volume.

Reported operating income of $32.7 million, or 4.4 percent of revenue, improved significantly from $6.2 million, or 0.9 percent of revenue in the prior year. Operating income without restructuring charges was $40.0 million, or 5.3 percent of revenue in the current quarter compared to $7.9 million, or 1.2 percent of revenue in the prior year.

The company increased total cash and cash equivalents by $44.5 million to $331.6 million and reduced debt by $5.7 million to $268.1 million, compared to the second quarter. As part of its outstanding share repurchase authorization, Steelcase repurchased 250,000 shares in the third quarter at an average price of $13.75 per share.

Year to date, the company reported net income of $39.6 million compared to $11.7 million for the same period last year.

"The hard work of our employees all over the world is very evident in the improved financial results across all our business segments this quarter," said James P. Keane, chief financial officer. "North America had strong sales growth and gross margin improvement, the Steelcase Design Partnership achieved its highest operating income performance in over four years, and International returned to profitability."


As the company enters the fourth quarter, backlog and orders remain strong in North America and business is strengthening in several International markets. Steelcase expects fourth quarter revenue to follow normal seasonal patterns and decline slightly from the third quarter. On a year over year basis, revenue is expected to be 4 to 8 percent higher than the very strong prior year quarter.

Steelcase expects to report earnings between $0.07 and $0.12 per share in the fourth quarter. Estimated restructuring charges and credits are expected to largely offset each other in the fourth quarter. The company reported earnings of $0.01 per share in the fourth quarter of the prior year.

The company has updated its three-year plan and continues to target gross margins of 35 percent, operating expenses of 25 percent and operating income of 10 percent of revenue.

Mr. Hackett concluded, "Our focus is on making steady progress towards our long-term profitability goals and maintaining our strong balance sheet. From this solid foundation, we will invest to accelerate innovation-based growth in our core markets and to expand our business model to capture opportunities in adjacent markets."

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 - News) serves customers through a network of more than 800 independent dealers and approximately 14,000 employees worldwide. Fiscal 2005 revenue was $2.6 billion. Learn more at http://www.steelcase.com .

Source: Steelcase Inc.
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