Steelcase Inc., a global producer of office furniture, yesterday reported that revenue for its third quarter ended November 22, 2002 totaled U.S. $646.7 million, a decrease of 11.6 percent compared with $731.4 million in the same quarter last fiscal year, and a sequential quarter decrease of 1.9 percent.
Acquisitions completed in the last 12 months contributed revenue of $36.3 million in the quarter. Revenue also included $18.5 million related to a dealer consolidation that occurred in the third quarter.
Steelcase reported a third quarter net loss of $31.1 million, or $0.21 per share, compared with net income of $4.9 million, or $0.03 per share, in the third quarter of fiscal 2002. Beginning in fiscal 2003, the company adopted SFAS 142 and third quarter reported net income benefited by approximately $2.2 million or, $0.01 per share as a result.
Net loss excluding non-recurring charges was $11.5 million, or $0.08 per share in the third quarter. This compares with net income of $7.2 million, or $0.05 per share excluding non-recurring charges in the third quarter last year. These results were consistent with the company's guidance of a net loss in the range of $(0.05) to $(0.10) per share, before non-recurring charges.
The company said results were adversely affected by unusually high after-tax charges associated with an increase in reserves for workers compensation costs, lease credit issues, and dealer transition financing, which in total were about $10 million higher than expected. Better-than-expected operating performance offset some of these charges.
"Our company completed previously announced cost reduction activities a quarter earlier than anticipated, resulting in a lower break-even point today and improved economics for the business in the future," said James P. Keane, chief financial officer. "We generated strong cash flow and strengthened our balance sheet by reducing debt to its lowest level in more than three years."
"The economy has still not seen any meaningful improvement in business capital spending, which is key to our industry's recovery," said Mr. Keane. "Within our industry, it is typical to see a seasonal reduction in fourth quarter shipments, although the amount varies from year to year. Our order and bid activity remains volatile, but appears to be confirming we will see a modest decrease in fourth quarter shipments versus the third quarter, even with an extra shipping week. We are taking steps across our businesses that will help us stimulate additional demand and compete aggressively to win new business."
The company said it has significantly reduced its break-even point, however, given lower anticipated volume in the fourth quarter, the company expects a loss, before non-recurring charges, in the range of $0.05 to $0.10 per share.
In the fourth quarter, the company estimates a net gain from non-recurring items in the range of $5 to $8 million after-tax. This includes a gain of approximately $13 million after-tax on the sale of real estate partially offset by restructuring and severance charges.
"Our corporate customers have significantly stalled their capital investments during this downturn," said James P. Hackett, president and CEO. "We look forward to our industry returning to positive growth after back to back years of unprecedented declines in demand. Our employees have successfully implemented significant operational, organizational and financial restructuring actions over the past two years."
He continued, "We've resized and reshaped our organization to capitalize on our knowledge of work and commercialize our innovation successfully. We are in process of launching new furniture, architecture, and technology products we believe will help us win more business. This launch includes additions to our Pathways portfolio and enhancements to two of our fastest growing systems furniture lines.
"Through the actions taken, we've added to our portfolio of solutions while positioning our company to return to profitability," concluded Mr. Hackett.
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