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Steelcase Reports Second Quarter Results

Steelcase expects to report earnings between $0.16 and $0.20 per share for the third quarter of fiscal 2013, including restructuring costs of approximately $0.03 per share. Steelcase reported earnings of $0.17 per share in the third quarter of fiscal 2012, including restructuring costs of approximately $0.02 per share.

"The third quarter outlook is somewhat inconsistent with normal seasonal patterns, but not entirely surprising given the strong project business we have experienced in recent quarters," Mr. Hackett said. "While we continue to watch the macroeconomic environment closely, we remain encouraged by our recent gains in U.S. market share and the growing need for many of our customers to modernize their work environments."
Business Segment Results
(in millions)
             
  (Unaudited)   (Unaudited)  
  Three Months Ended   Six Months Ended  
  August 24, August 26, % August 24, August 26, %
  2012 2011  Change 2012 2011 Change
             
Revenue            
Americas (1)  $ 531.9  $ 485.7 9.5 %  $ 1,006.5  $ 894.2 12.6 %
EMEA (2)  138.6  133.8 3.6 %  266.1  287.7 (7.5)%
Other (3)  74.4  81.0 (8.1)%  147.5  158.0 (6.6)%
Consolidated revenue  $ 744.9  $ 700.5 6.3 %  $ 1,420.1  $ 1,339.9 6.0 %
             
Operating income (loss)            
Americas  $ 60.7  $ 42.8    $ 98.4  $ 63.9  
EMEA  (3.4)  (13.8)    (11.4)  (13.9)  
Other  (2.1)  0.9    (5.5)  3.5  
Corporate (4)  (8.4)  (4.5)    (15.4)  (13.1)  
Consolidated operating income  $ 46.8  $ 25.4    $ 66.1  $ 40.4  
             
Operating income percent 6.3 % 3.6 %   4.7 % 3.0 %  
             
Revenue Mix            
Americas (1) 71.4 % 69.3 %   70.9 % 66.7 %  
EMEA (2) 18.6 % 19.1 %   18.7 % 21.5 %  
Other (3) 10.0 % 11.6 %   10.4 % 11.8 %  

Business Segment Footnotes
  1. The Americas segment serves customers in the U.S., Canada and Latin America with a portfolio of integrated architecture, furniture and technology products marketed to corporate, government, healthcare, education and retail customers through the Steelcase, Coalesse, Turnstone, Details and Nurture by Steelcase brands.
  2. The EMEA segment serves customers in Europe, the Middle East and Africa primarily under the Steelcase brand, with an emphasis on freestanding furniture systems, storage and seating solutions.
  3. The Other category includes Asia Pacific, PolyVision and Designtex.
  4. Corporate expenses include unallocated portions of executive and shared services functions such as information technology, human resources, finance, legal, research and development and corporate facilities.
YEAR OVER YEAR ORGANIC REVENUE GROWTH BY SEGMENT
Q2 2013 vs. Q2 2012        
  Steelcase Inc. Americas EMEA Other category
         
Q2 2012 revenue  $ 700.5  $ 485.7  $ 133.8  $ 81.0
Divestiture  (4.5)  --   --   (4.5)
Currency translation effects*  (16.9)  (1.2)  (15.8)  0.1
Q2 2012 revenue, adjusted  679.1  484.5  118.0  76.6
         
Q2 2013 revenue  744.9  531.9  138.6  74.4
Dealer acquisitions  (1.0)  --   (1.0)  -- 
Q2 2013 revenue, adjusted  743.9  531.9  137.6  74.4
Organic growth (decline) $  $ 64.8  $ 47.4  $ 19.6  $ (2.2)
Organic growth (decline) % 10 % 10 % 17 % (3)%
         
* Currency translation effects represent the estimated net effect of translating Q2 2012 foreign currency revenues using the average exchange rates during Q2 2013.
         
         
YEAR OVER YEAR ORGANIC REVENUE GROWTH
YTD Q2 2013 vs. YTD Q2 2012        
  Steelcase Inc. Americas EMEA Other category
         
Year-to-date 2012 revenue  $ 1,339.9   $ 894.2  $ 287.7  $ 158.0
Divestiture  (8.6)  --   --   (8.6)
Currency translation effects*  (27.6)  (1.8)  (26.0)  0.2
Year-to-date 2012 revenue, adjusted  1,303.7  892.4  261.7  149.6
         
Year-to-date 2013 revenue  1,420.1  1,006.5  266.1  147.5
Dealer acquisitions  (11.5)  (10.5)  (1.0)  -- 
Year-to-date 2013 revenue, adjusted  1,408.6  996.0  265.1  147.5
Organic growth (decline) $  $ 104.9   $ 103.6  $ 3.4  $ (2.1)
Organic growth (decline) % 8 % 12 % 1 % (1)%
         
* Currency translation effects represent the estimated net effect of translating Q2 2012 and Q1 2012 foreign currency revenues using the average exchange rates during Q2 2013 and Q1 2013, respectively.
         
         
PROJECTED ORGANIC REVENUE GROWTH
Q3 2013 vs. Q3 2012        
  Steelcase Inc.      
         
Q3 2012 revenue  $ 719       
Divestiture  --       
Currency translation effects*  (12)      
Q3 2012 revenue, adjusted  707      
         
Q3 2013 revenue, projected 710 - 735      
Dealer acquisitions  (4)      
Q3 2013 projected revenue, adjusted 706 - 731      
Organic growth (decline) $  $ (1) - 24      
Organic growth (decline) % 0% - 3%      
         
* Currency translation effects represent the estimated net effect of translating Q3 2012 foreign currency revenues using the exchange rate at the end of Q2 2013.
 
STEELCASE INC.  
ADJUSTED EARNINGS PER SHARE  
  Q2 2013
Earnings per share $ 0.23
Restructuring costs per share, net of tax  0.02
Earnings per share, adjusted $ 0.25
                 
                 
Steelcase Inc.                
  (Unaudited) (Unaudited)
  Three Months Ended Six Months Ended
  August 24, 2012 August 26, 2011 August 24, 2012 August 26, 2011
                 
Revenue  $ 744.9 100.0 %  $ 700.5 100.0 %  $1,420.1 100.0 %  $1,339.9 100.0 %
Cost of sales  513.4 68.9 %  487.9 69.7 %  987.5 69.5 %  934.2 69.7 %
Restructuring costs  3.4 0.5 %  11.4 1.6 %  8.5 0.6 %  21.4 1.6 %
Gross profit  228.1 30.6 %  201.2 28.7 %  424.1 29.9 %  384.3 28.7 %
Operating expenses  181.0 24.3 %  174.9 25.0 %  357.7 25.2 %  343.1 25.6 %
Restructuring costs  0.3 -- %  0.9 0.1 %  0.3 -- %  0.8 0.1 %
Operating income  $ 46.8 6.3 %  $ 25.4 3.6 %  $ 66.1 4.7 %  $ 40.4 3.0 %
Interest expense, investment income and other income, net  (1.6) (0.2)%  (10.2) (1.4)%  (1.2) (0.1)%  (13.7) (1.0)%
Income before income tax expense  45.2 6.1 %  15.2 2.2 %  64.9 4.6 %  26.7 2.0 %
Income tax expense  15.7 2.1 %  3.3 0.5 %  22.2 1.6 %  7.3 0.6 %
Net income  $ 29.5 4.0 %  $ 11.9 1.7 %  $ 42.7 3.0 %  $ 19.4 1.4 %
                 
Operating income  $ 46.8 6.3 %  $ 25.4 3.6 %  $ 66.1 4.7 %  $ 40.4 3.0 %
Add: restructuring costs  3.7 0.5 %  12.3 1.8 %  8.8 0.6 %  22.2 1.7 %
Adjusted operating income  $ 50.5 6.8 %  $ 37.7 5.4 %  $ 74.9 5.3 %  $ 62.6 4.7 %
                 
                 
Americas                
  (Unaudited) (Unaudited)
  Three Months Ended Six Months Ended
  August 24, 2012 August 26, 2011 August 24, 2012 August 26, 2011
                 
Revenue  $ 531.9 100.0 %  $ 485.7 100.0 %  $1,006.5 100.0 %  $ 894.2 100.0 %
Cost of sales  362.8 68.2 %  337.1 69.4 %  693.0 68.9 %  624.6 69.9 %
Restructuring costs  3.5 0.7 %  5.2 1.1 %  8.2 0.8 %  12.5 1.4 %
Gross profit  165.6 31.1 %  143.4 29.5 %  305.3 30.3 %  257.1 28.7 %
Operating expenses  104.9 19.7 %  100.6 20.7 %  206.9 20.5 %  193.2 21.6 %
Restructuring costs  --  -- %  --  -- %  --  -- %  --  -- %
Operating income  $ 60.7 11.4 %  $ 42.8 8.8 %  $ 98.4 9.8 %  $ 63.9 7.1 %
Add: restructuring costs  3.5 0.7 %  5.2 1.1 %  8.2 0.8 %  12.5 1.4 %
Adjusted operating income  $ 64.2 12.1 %  $ 48.0 9.9 %  $ 106.6 10.6 %  $ 76.4 8.5 %
                 
                 
EMEA                
  (Unaudited) (Unaudited)
  Three Months Ended Six Months Ended
  August 24, 2012 August 26, 2011 August 24, 2012 August 26, 2011
                 
Revenue  $ 138.6 100.0 %  $ 133.8 100.0 %  $ 266.1 100.0 %  $ 287.7 100.0 %
Cost of sales  101.6 73.3 %  97.4 72.8 %  196.3 73.8 %  206.2 71.7 %
Restructuring costs  (0.1) (0.1)%  5.1 3.8 %  0.3 0.1 %  7.8 2.7 %
Gross profit  37.1 26.8 %  31.3 23.4 %  69.5 26.1 %  73.7 25.6 %
Operating expenses  40.4 29.2 %  44.3 33.1 %  80.8 30.4 %  86.8 30.1 %
Restructuring costs  0.1 0.1 %  0.8 0.6 %  0.1 -- %  0.8 0.3 %
Operating loss  $ (3.4) (2.5)%  $ (13.8) (10.3)%  $ (11.4) (4.3)%  $ (13.9) (4.8)%
Add: restructuring costs  --  -- %  5.9 4.4 %  0.4 0.2 %  8.6 3.0 %
Adjusted operating income (loss)  $ (3.4) (2.5)%  $ (7.9) (5.9)%  $ (11.0) (4.1)%  $ (5.3) (1.8)%
                 
                 
Other                
  (Unaudited) (Unaudited)
  Three Months Ended Six Months Ended
  August 24, 2012 August 26, 2011 August 24, 2012 August 26, 2011
                 
Revenue  $ 74.4 100.0 %  $ 81.0 100.0 %  $ 147.5 100.0 %  $ 158.0 100.0 %
Cost of sales  49.0 65.9 %  53.4 65.9 %  98.2 66.6 %  103.4 65.4 %
Restructuring costs  --  -- %  1.1 1.4 %  --  -- %  1.1 0.7 %
Gross profit  25.4 34.1 %  26.5 32.7 %  49.3 33.4 %  53.5 33.9 %
Operating expenses  27.3 36.7 %  25.5 31.5 %  54.6 37.0 %  50.0 31.7 %
Restructuring costs  0.2 0.2 %  0.1 0.1 %  0.2 0.1 %  --  -- %
Operating income (loss)  $ (2.1) (2.8)%  $ 0.9 1.1 %  $ (5.5) (3.7)%  $ 3.5 2.2 %
Add: restructuring costs  0.2 0.2 %  1.2 1.5 %  0.2 0.1 %  1.1 0.7 %
Adjusted operating income (loss)  $ (1.9) (2.6)%  $ 2.1 2.6 %  $ (5.3) (3.6)%  $ 4.6 2.9 %
                 
                 
Corporate                
  (Unaudited) (Unaudited)
  Three Months Ended Six Months Ended
  August 24, 2012 August 26, 2011 August 24, 2012 August 26, 2011
                 
Operating loss  $ (8.4)    $ (4.5)    $ (15.4)    $ (13.1)  
Add: restructuring costs  --     --     --     --   
Adjusted operating loss  $ (8.4)    $ (4.5)    $ (15.4)    $ (13.1)  

Webcast

Steelcase will discuss second quarter results and business outlook on a conference call and webcast at 11:00 a.m. EDT tomorrow. Links to the webcast are available at ir.steelcase.com. Related presentation slides will be available on the company's website shortly after this press release is issued.

Non-GAAP Financial Measures

This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. Pursuant to the requirements of Regulation G, the company has provided a reconciliation above of non-GAAP financial measures to the most directly comparable GAAP financial measure.

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