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Steelcase Reports Q2 Profit
Sep 24, 2004
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Business furniture manufacturer Steelcase Inc. reported revenue totaling U.S. $651 million for its second quarter ended Aug. 27, 2004. Revenue for this quarter increased 6.4 percent compared to $612.1 million in the prior year quarter and was up 8.9 percent sequentially from the first quarter of fiscal 2005. Revenue was in line with company estimates.

Revenue included $21.0 million of sales from dealers consolidated in fiscal 2005 and $8.3 million from the impact of the steel surcharge implemented in North America during the first quarter. The second quarter also benefited by $8.6 million from favorable currency translation effects in the company's International segment compared to last year.

Steelcase reported net income of $7.3 million, or $0.05 per share, for the second quarter of fiscal 2005, better than company estimates of breakeven to $(0.05) per share. This compares to a net loss from continuing operations of $(3.2) million, or $(0.02) per share in the same quarter of the prior year. Prior year net income of $18.1 million included a $21.3 million after-tax gain on discontinued operations related to the sale of Attwood, the company's former marine hardware and accessories business unit.

All business segments improved profitability in the quarter compared to the prior year. Steelcase reported net income of $1.6 million year-to-date. The company improved gross margins by 2.6 percentage points to 30.0 percent compared to 27.4 percent in the same quarter last year.

"I am pleased with the profitable growth the Steelcase team delivered this quarter," said James P. Hackett, president and CEO. "We are seeing benefits from our multi-year restructuring effort, improved productivity from lean manufacturing initiatives, and top-line growth from our larger customers and in key vertical markets."

Steelcase increased cash balances by $34.2 million and lowered debt by $2.2 million compared to the first quarter. Higher net income and improved net working capital performance generated operating cash flow in the second quarter.

In its outlook, the company stated that North American order rates continue to increase, but at a slower rate than the company experienced earlier in the year. This, it said, is consistent with indications that the U.S. economic recovery slowed during the summer; however, major international markets are not yet showing clear signs of meaningful recovery.

Steelcase expects third quarter revenue to be up 4 to 8 percent from the prior year, including approximately $25 million of revenue from the newly consolidated dealers and $8 million from the impact of the steel surcharge. On a sequential quarter basis, the company expects third-quarter revenue to be similar to the second quarter.

The company expects third-quarter performance to be negatively impacted by competitive price pressures and broad increases in raw materials prices.

Steelcase expects to report earnings between breakeven and $0.05 per share including anticipated restructuring charges of $(1) to $(3) million after-tax in the third quarter.

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