Steelcase Losses Are Less

December 19, 2003
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GRAND RAPIDS — Steelcase Inc. saw sales slide 3 percent for the most recent period, generating a $9.5 million loss that was in line with expectations and significantly less than a year ago.

The company anticipates posting another loss for the current fourth quarter of fiscal year 2004, before returning to profitability sometime during the following fiscal year as business picks up with the economic recovery and the effects of a pending major restructuring of the North American operations take hold.

Steelcase on Thursday afternoon reported third-quarter sales of $614.5 million, down 3.3 percent from the same period a year earlier.

The company’s $9.5 million, or 6 cents per share, net loss for the quarter that ended Nov. 28 compares with a net loss of $31.1 million, or 22 cents per share, in the same period a year ago. The quarterly loss includes after-tax charges of $5.7 million.

“We’ve been steadfast throughout this year in focusing on three priorities: driving complexity out of our business, reducing variable costs throughout the supply chain and preparing for growth,” Steelcase President and CEO James Hackett said. “We still have some work to do, and in the current challenging market environment, our teams are working hard to balance investments in new revenue opportunities with the need to improve our short-term profitability.”

On a year-to-date basis, Steelcase’s revenues of $1.78 billion are down 6.5 percent from the $1.90 billion recorded through the first nine months of the prior fiscal year. Year-to-date net losses of $4.8 million for FY 2004 compare with losses of $53.8 million at this point in the 2003 fiscal year.

In the current fourth quarter, Steelcase expects revenues to fall 3 percent to 5 percent sequentially from the third quarter and a loss of 6 cents to 11 cents per share, including after-tax charges of $3 million to $8 million. “Order rates,” the company stated in its quarterly financial release, “have softened across the company in the first few weeks of the fourth quarter, consistent with this outlook.”

Steelcase anticipates revenues growing 5 percent in the 2005 fiscal year that begins in March and estimates earnings of 5 cents to 10 cents per share, with pre-tax restructuring charges of $15 million to $20 million.

“The company expects the charges associated with the current, multi-year, operational restructuring effort will continue through fiscal year 2005,” Steelcase stated. “Other current initiatives such as lean manufacturing and strategic sourcing will continue beyond that point, and are key to improving profitability, but are less likely to lead to significant charges. The three-year plan targets a longer-term gross margin of approximately 35 percent and operating income of 10 percent of net sales, assuming modest top-line growth.”    

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