Momentum in the Americas Expected to Continue in First Quarter
GRAND RAPIDS, Mich., March 22, 2012 (GLOBE NEWSWIRE) — Steelcase Inc. (NYSE:SCS) today reported fourth quarter revenue of $690.2 million and net income of $14.9 million, or $0.11 per share. Excluding restructuring costs, adjusted earnings were $0.14 per share. Revenue and earnings per share were within company estimates. Steelcase reported $622.9 million of revenue and earnings of $0.08 per share in the fourth quarter of the prior year.
Organic revenue growth in the fourth quarter was 10 percent after adjusting for the net favorable impact of $11 million associated with acquisitions and divestitures and approximately $3 million related to unfavorable currency translation effects. The Americas posted 13 percent organic growth over the prior year and EMEA grew organically by 4 percent. Revenue growth in the Americas was broad-based and included a higher mix of project revenue from some of the company’s largest corporate customers.
“The Americas had another great quarter, achieving double digit organic revenue growth for the sixth consecutive quarter,” said James P. Hackett, president and CEO. “Fourth quarter orders and backlog in the Americas remained strong and as a result, we expect the sales momentum to continue into the first quarter of fiscal 2013.”
Current quarter operating income of $18.5 million compares to $19.6 million in the prior year, which included a gain from the IDEO ownership transition of $9 million (net of incremental variable compensation expense). Excluding restructuring costs, fourth quarter adjusted operating income of $23.0 million compares with $26.7 million in the prior year. Benefits associated with the organic revenue growth in the quarter were offset in part by a higher mix of project revenue from some of the company’s largest corporate customers. The results also reflect higher spending on product development and other initiatives and start-up expenses and other costs associated with the consolidation of North American manufacturing facilities announced in January 2011.
Cost of sales was 70.0 percent of revenue in the current quarter, which was flat compared to the prior year. Higher absorption of fixed costs associated with the revenue growth in the quarter was offset by a shift in business mix and increases in inventory and warranty reserves. Initial benefits realized from the consolidation of manufacturing facilities in North America were offset by start-up and other costs associated with the production moves.
Operating expenses in the fourth quarter were $184.1 million compared with $160.5 million in the prior year, which included a gain of $13.2 million associated with the IDEO ownership transition offset in part by an asset impairment charge of $4.0 million. The remaining increase was largely due to increased spending on product development and other initiatives and the impact of a dealer acquisition, offset in part by lower variable compensation expenses.
Investment income increased $2.2 million in the current quarter compared to the prior year primarily due to variable life company-owned life insurance gains.
Income tax expense was favorably impacted by a number of discrete items which had the effect of lowering the effective tax rate for the quarter to approximately 28%.
The company repurchased 971 thousand shares at a cost of $6.7 million in the fourth quarter. The repurchases were made under a stock repurchase agreement which expired March 21, 2012. The company has $153 million of remaining availability under its existing share repurchase authorization.
Cash, short-term investments and the cash surrender value of variable life COLI totaled $304.3 million and total debt was $291.5 million at the end of the fourth quarter.
The company recently amended and restated its bank syndicated, revolving credit facility. The new agreement allows for borrowings of up to $125 million and includes less restrictive financial covenants compared to the prior facility.
The Board of Directors of Steelcase Inc. today declared a cash dividend of $0.09 per share, which is an increase of $0.03 per share or 50% compared to the dividend for the prior quarter, to be paid on or before April 11, 2012 to shareholders of record as of April 2, 2012.
“The results included a number of items which reduced our operating income this quarter,” said David C. Sylvester, senior vice president and CFO. “Year-end inventory adjustments, increases in warranty reserves in EMEA and costs associated with the production moves in North America totaled approximately $7.5 million. Plus, we accelerated a number of product development and other initiatives, resulting in a significantly higher level of operating expenses compared to previous quarters.”
Fiscal 2012 Results
For fiscal 2012, the company recorded $2.75 billion of revenue and net income of $56.7 million, or $0.43 per share, which compares to $2.44 billion of revenue and net income of $20.4 million, or $0.15 per share, in fiscal 2011. Organic revenue growth was 14 percent over the prior year.
Operating income of $97.1 million for fiscal 2012 compared to operating income of $51.5 million in fiscal 2011, which included $21 million associated with IDEO which was not consolidated during the current year. Current year results included $(30.5) million of restructuring costs compared to $(30.6) million in the prior year.
“Adjusted for the deconsolidation of IDEO, operating income for the fiscal year more than tripled compared to the prior year,” said Mr. Sylvester. “Overall organic growth of 14 percent was fueled by 19 percent organic growth in the Americas which we believe exceeded industry growth rates for the same period.”
Fourth quarter order growth in the Americas approximated 19 percent compared to the prior year, or approximately 13 percent when adjusted for the estimated pull-forward impact of a November 2010 price increase. The company expects first quarter fiscal 2013 revenue to be in the range of $665 to $690 million. This estimate includes an assumption of approximately $11 million from unfavorable currency translation effects compared to the prior year, as well as revenue from a dealer acquisition completed during the first quarter of fiscal 2012. The company reported revenue of $639.4 million in the first quarter of fiscal 2012, which included $4 million of revenue from a small division at PolyVision which has been divested. Adjusted for these impacts, the company projects first quarter organic revenue growth in the range of 5 to 9 percent over the prior year.
Steelcase expects to report earnings between $0.08 and $0.12 per share for the first quarter of fiscal 2013, including restructuring costs of approximately $0.02 per share. On a sequential basis, this estimate reflects the company’s expectation for a continued higher level of project revenue from some of its largest corporate customers, continuation of costs associated with the consolidation of manufacturing facilities and lower spending on product development and other initiatives. Steelcase reported earnings of $0.06 per share in the first quarter of fiscal 2012, including restructuring costs of approximately $0.05 per share.
“Steelcase celebrated its 100th anniversary last week, a milestone few companies have achieved,” Mr. Hackett said. “Our ideas and insights have fueled our global leadership of this industry, and we expect to build on that leadership next year and over the years to come.”
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