A Solid Quarter Ignites Steelcase

December 23, 2004
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GRAND RAPIDS — After boosting revenues and profits in the most recent quarter, Steelcase Inc. expects to subsequently score a solid sales gain in the present period, although further restructuring charges will erode earnings.

With a strong backlog in orders, Steelcase expects to record a 20 percent year-to-year sales increase during the fourth quarter that ends Feb. 28, a traditionally slow period for office furniture makers.

Sales during the quarter should rival the $674.1 million of the recently ended three-month period and quarterly net income should about break even because of an expected $3 million to $6 million after-tax restructuring charge.

Steelcase expects to report a profit for the full 2005 fiscal year, a period that has seen the office furniture industry steadily rebound from its three-year downturn.

“The momentum of the recovery continues to build,” Steelcase President and Chief Executive Officer Jim Hackett said during a Dec. 17 conference call with brokerage analysts to discuss third-quarter results.

“I have to admit optimism given what I am seeing,” he said.

Steelcase this month reported revenue of $674.1 million for the third quarter that ended Nov. 26, up 9.7 percent from the $614.5 million in the same period a year earlier. Revenues included $19.8 million from dealers acquired during the year, $11.2 million from the favorable translation of foreign currency, and $9.6 million generated through a surcharge to offset high steel prices.

Quarterly net income totaled $10.1 million, or 7 cents per share, which includes an after-tax restructuring charge of $1.2 million and a $6.5 million deduction for tax reserves. The results easily beat Wall Street expectations of 4 cents per share and compare with a net loss of $9.5 million, or 6 cents per share, a year ago.

Hackett credited the improved bottom-line result to ongoing restructuring and cost-cutting efforts that include “enthusiastically” pursuing a global supply chain and continued implementation of lean manufacturing. He promised improved financial performance in the next year.

Like its competitors, Steelcase has been impacted by high steel prices and the rising costs of other raw materials. The company is implementing an annual 4.5 percent list price increase in the North American division and many of its Steelcase Design Partnership units effective in January.

The rising raw materials costs, Hackett said, are now “just a matter of business today.”

“We just have to deal with it, and the organization is,” he said.

Year to date, Steelcase’s revenue was $1.92 billion, up 7.9 percent from the $1.78 billion during the first nine months of the previous fiscal year.

Yearly net income through the quarter totaled $11.7 million, or 8 cents per share. That compares with a net loss of $4.8 million during the same period a year earlier.    

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