21.9.2005: Meldung: Steelcase Inc.: Sales and Earnings Growth in Second Quarter

Steelcase Delivers Sales and Earnings Growth in Second Quarter
Monday September 19, 7:39 am ET
- Net Income Increases More Than 80 Percent Over Prior Year -

GRAND RAPIDS, Mich., Sept. 19 -- Steelcase Inc. today reported revenue totaling $702.9 million for its second quarter of fiscal 2006. Revenue increased 8.0 percent compared to $651.0 million in the prior year quarter. Second quarter revenue was lower than expected because a higher than expected percentage of incoming orders for North America are scheduled for shipment in the third quarter.

As compared to the prior year, second quarter revenue includes $11.0 million of service revenue and $3.8 million of revenue from acquisitions, partially offset by a $(6.0) million reserve for contract-related contingencies. These items had the net effect of increasing revenue by 1.4 percent compared to the prior year.

Steelcase reported net income of $13.8 million, or $0.09 per share for the second quarter of fiscal 2006, consistent with company estimates of $0.08 to $0.13 per share. This compares to net income of $7.3 million, or $0.05 per share in the same quarter of the prior year.

Included in second quarter results were net restructuring charges totaling $(6.1) million after-tax primarily related to facility rationalization in the company"s North America and International segments. Net restructuring charges were $(1.4) million after-tax in the prior year quarter.

"Steelcase"s second quarter results capped a solid start to 2006 with significantly improved first half revenue and profits," said James P. Hackett, president and CEO. "Steelcase employees everywhere have contributed to these improvements by focusing on our mission to provide customers with a better work experience and by their continued commitment to world-class process excellence."

Cost of sales improved 1.3 percentage points to 68.5 percent in the second quarter. The results include favorable inventory and property tax adjustments, partially offset by higher workers compensation costs and accelerated depreciation on certain assets, which had the net effect of improving cost of sales by 0.5 percentage points. Compared to the prior year quarter, North America had better yield from earlier list price adjustments. The improvement in pricing was partially offset by the reserve for contract-related contingencies. Some of the benefits from prior restructuring actions were offset by disruption costs associated with ongoing facility consolidations.

Despite higher restructuring costs in the current quarter, gross profit of 30.4 percent in the second quarter improved from 30.0 percent in the same quarter last year. Excluding these charges, gross profit improved by 1.3 percentage points.

Reported operating income was $25.3 million, or 3.6 percent of revenue, and includes restructuring charges of $9.7 million pre-tax. Operating income without restructuring charges was $35.0 million, or 5.0 percent of revenue in the current quarter compared to 2.9 percent of revenue in the prior year.

Total cash and cash equivalents increased by $49.1 million to $287.1 million at the end of the second quarter. The company"s debt balance of $273.8 million remains largely unchanged as compared to the first quarter.

"Solid sales growth and continued operational improvements helped us increase both net income and earnings per share by more than 80 percent," said James P. Keane, chief financial officer. "Operating income excluding restructuring charges was 5 percent of sales. We are pleased with the progress we are making toward our longer-term operating income target of 10 percent."


Steelcase expects third quarter sales to be 8 to 12 percent higher than the prior year driven by a strong backlog going into the third quarter. Order rates strengthened in August and remained strong in early September.

The company expects to report earnings between $0.10 and $0.15 per share in the third quarter, including restructuring charges of $2 to $5 million after-tax. These estimates reflect increased discounts because of a higher mix of large project business in current backlog, and increased costs of disruption as the company begins to relocate certain production lines as part of the previously announced North America restructuring project. These estimates also consider higher fuel prices, which are expected to reduce operating income by more than $2 million in the third quarter. The company does not anticipate any material direct financial impact from Hurricane Katrina in the third quarter.

The company has reduced its estimate of full year restructuring charges to $16 to $21 million after-tax, including the amounts incurred in the first half of fiscal 2006 and those estimated above for the third quarter.

Last week, the company announced an annual product list price adjustment in the U.S. and Canada. This adjustment considered inflationary pressures and sustained higher commodity costs for steel and other raw materials. Because the adjustment took into account steel inflation, the company also announced it will discontinue the temporary steel surcharge instituted in April 2004. Both of these actions will be effective January 16, 2006.

Mr. Hackett concluded, "Our international business is building momentum as we enter the second half of the year and will help drive improved profits in the third quarter."

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: second quarter and six months year-to-date gross profit, excluding restructuring costs for the current and prior year in dollars and as a percentage of net sales; and, second quarter and six months year-to-date operating income, excluding restructuring costs for the current and prior year in dollars and as a percentage of sales. 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.

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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