Steelcase Inc. Reports Improved First Quarter Results, FY 2000 Net Income Up 5%, Sales Up 2.9%
Business Wire - June 18, 1999 08:39
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--June 18, 1999--Steelcase Inc. (NYSE:SCS) today announced financial results for its first quarter ended May 28, 1999.
Net income for the first quarter of fiscal year 2000 was $56.7 million, or $0.37 per share, an increase of 5.0% over prior year first quarter net income of $54.0 million, or $0.35 per share. Consolidated net sales for the first quarter were $691.8 million, a 2.9% increase from $672.3 million in the first quarter of 1999. Pro forma worldwide net sales (including the Company's unconsolidated European joint venture) increased 5.8% to $840.1 million for the first quarter compared to $794.1 million for the same period a year ago.
"We're pleased that we can share improved quarterly results on the heels of our most successful NeoCon ever, where we launched a new seating technology. Coupled with the finalization of the Steelcase Strafor acquisition, this shows that we are on track with our long-term goals," said James P. Hackett, President and Chief Executive Officer.
"New product innovation and recognizing synergies afforded by our recent strategic acquisitions continue to be top priorities as we move forward. We believe these strategic initiatives will be the engine for a new wave of growth and profitability for Steelcase," said Mr. Hackett. "New products, like Leap, the new standard by which all chairs will be compared, and this year's introduction of our expanded Pathways-based product portfolio, represents our ongoing commitment to helping people work more effectively. These transforming innovations are gaining acceptance and momentum in the market."
"We are very satisfied with the fact that we ended the quarter with stronger results in sales and net income," said Alwyn Rougier-Chapman, Chief Financial Officer and Treasurer. "Gross profit margins for the quarter improved significantly as compared to the fourth quarter of the prior year, but still fall short of levels experienced in the first half of fiscal year 1999. While we're pleased with the product mix and cost containment efforts around our business, with continued pressures on pricing and ongoing investments in our North American production system, it will be a challenge to maintain first quarter margin levels for the balance of the year."
SEGMENT PERFORMANCE
Three Months Ended
May 28, May 29, % Inc
1999 1998 (Dec)
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Net Sales (in Millions)
Domestic - U.S. only $603.0 $583.3 3.4%
International & Canada 52.9 53.8 (1.7)%
Services & Other Businesses 35.9 35.2 2.0%
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Consolidated Net Sales $691.8 $672.3 2.9%
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Steelcase Strafor 148.3 121.8 21.8%
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Pro Forma Worldwide Net Sales $840.1 $794.1 5.8%
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Segment Performance Highlights:
First quarter domestic net sales reflect some recent improvement in demand, continued strengthening of new products and the impact of the JM Lynne acquisition. Regarding demand, the industry reflects some caution as evidenced by BIFMA's recent revision to calendar year 1999 U.S. growth estimates, which now range from 1% to 3%. While the Company is targeting organic growth in excess of that range, management remains cautious due to preliminary customer feedback that seems to indicate that fourth quarter demand could be impacted by Y2K concerns. The Company's Wood, Design Partnership, Revest and Turnstone operations as a group continued to generate strong growth for the quarter. Sales contracted solely by dealers, the Company's primary U.S. distribution channel, performed consistently with overall industry levels in the first quarter. Large account business continues to lag prior year levels and therefore has a notable impact on overall U.S. performance and, in particular, the steel furniture operations.
Steelcase Strafor's net sales were up 21.8% in the first quarter versus the same period a year ago, fueled largely by the Werndl acquisition announced in the fourth quarter of last year. The balance of Steelcase Strafor, which was relatively flat in total with the first quarter of the prior year, reflects softening sales across France and the United Kingdom offset by increasing volumes across most other countries.
As announced on April 22, 1999, the Company closed its acquisition of the remaining 50% equity interest of Steelcase Strafor. The acquisition was effective as of March 31, 1999 and has been accounted for pursuant to the purchase method of accounting in the accompanying balance sheet as of May 28, 1999. However, the accompanying statement of income for the three months ended May 28, 1999 does not reflect any impact of the acquisition due to the effective date of the transaction and the fact that Steelcase Strafor is on a calendar year-end and thus the Company accounts for the results of Europe on a two month lag basis. For further information regarding the acquisition, the consolidated financial statements of Steelcase Strafor S.A. and subsidiaries, and certain pro forma financial information related to the acquisition, reference should be made to the Company's amended Form 8-K filed June 16, 1999.
About Steelcase
Steelcase is the world's preeminent designer and manufacturer of products used to create high-performance work environments.
Founded in Grand Rapids, Michigan in 1912, Steelcase Inc. helps individuals and the organizations that employ them around the world to work more effectively. The company has led the office furniture industry in sales every year since 1974 with a product portfolio that includes furniture, furniture systems, seating, storage, interior architectural, technology and lighting products and related products and services.
Steelcase Inc. (www.steelcase.com) and its subsidiaries and joint ventures have more than 50 manufacturing plants and 20,000 employees in 15 countries.
Portions of this earnings release include "forward looking statements", involving uncertainties and risks that could cause actual results to vary from stated expectations, particularly those with respect to future growth, profitability, gross margins and operating expense ratios and the impact of new products on sales growth. The Company's performance may differ materially from that contemplated by such statements for a variety of reasons, including, but not limited to competitive and general economic conditions, changes in customer order patterns, the success of new products and their impact on the Company's manufacturing processes, the ability to integrate acquired businesses, the impact on the Company's business due to internal systems or the systems of suppliers, key customers, dealers and third parties adversely affected by year 2000 issues and other risks detailed in the Company's form 10-K for the year ended February 26, 1999 and other filings with the Securities and Exchange Commission.
STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in millions, except per share data)
Three Months Ended
May 28, May 29,
1999 1998
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Net sales $691.8 $672.3
Cost of sales 438.4 419.1
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Gross profit 253.4 253.2
Selling, general & administrative
expenses 170.7 174.9
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Operating income 82.7 78.3
Other income, net 4.4 3.7
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Income before provision for income
taxes and equity in net income of
joint ventures and dealer transitions 87.1 82.0
Provision for income taxes 32.7 31.3
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Income before equity in net income
of joint ventures and dealer
transitions 54.4 50.7
Equity in net income of joint
ventures and dealer transitions 2.3 3.3
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Net income $ 56.7 $ 54.0
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Per Share Data:
Earnings per share (basic & diluted) $ 0.37 $ 0.35
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Dividends paid $ 0.11 $ 0.10
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Weighted Average Shares Outstanding -
Basic 153.6 153.7
Diluted 153.8 154.0
STEELCASE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
May 28, Feb. 26,
1999 1999
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Assets
Current assets:
Cash and cash equivalents $ 47.7 $ 67.5
Accounts receivable, net 539.1 348.9
Notes receivable and leased assets 209.1 140.4
Inventories 141.7 96.5
Other current assets 116.0 84.1
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Total current assets 1,053.6 737.4
Property and equipment, net 880.0 739.0
Notes receivable and leased assets 182.8 209.1
Joint ventures and dealer transitions 50.5 210.4
Goodwill and other intangible assets, net 405.3 99.6
Other assets 203.7 187.0
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Total assets $2,775.9 $2,182.5
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Liabilities & Shareholders' Equity
Current liabilities:
Accounts and notes payable $ 251.9 $ 102.1
Accrued expenses:
Employee compensation 132.0 92.8
Employee benefit plan obligations 42.5 51.8
Short-term borrowings and current
portion of long-term debt 239.2 --
Other 255.9 200.1
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Total current liabilities 921.5 446.8
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Long-term liabilities:
Long-term debt 56.6 --
Employee benefit plan obligations 222.2 222.8
Other long-term liabilities 46.3 12.9
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Total long-term liabilities 325.1 235.7
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Total liabilities 1,246.6 682.5
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Shareholders' equity:
Common stock 375.7 379.4
Accumulated other comprehensive income (21.8) (15.0)
Retained earnings 1,175.4 1,135.6
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Total shareholders' equity 1,529.3 1,500.0
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Total liabilities and
shareholders' equity $2,775.9 $2,182.5
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STEELCASE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Three Months Ended
May 28, May 29,
1999 1998
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Operating Activities
Net income $56.7 $54.0
Depreciation and amortization 26.0 24.2
Changes in current assets and
liabilities, net of corporate
acquisitions (85.7) (16.7)
Other, net 15.8 5.9
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Net cash provided by operating
activities 12.8 67.4
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Investing Activities
Capital expenditures (33.3) (38.4)
Corporate acquisitions, net of cash
acquired (177.8) --
Other, net (1.9) 0.9
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Net cash used in investing
activities (213.0) (37.5)
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Financing Activities
Proceeds from issuance of long-term
debt 41.0 --
Short-term borrowings, net 160.0 --
Common stock issuance -- 24.8
Common stock repurchase (3.7) --
Dividends paid (16.9) (15.4)
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Net cash provided by financing
activities 180.4 9.4
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Net increase (decrease) in cash
and cash equivalents (19.8) 39.3
Cash and cash equivalents,
beginning of period 67.5 103.1
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Cash and cash equivalents, end
of period $47.7 $142.4
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CONTACT: Steelcase Inc., Grand Rapids
Investor Contact:
Gary Malburg, 616/247-2200
Media Contact:
Allan Smith, 616/698-1405 |
