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Steelcase (SCS)

Q1 2013 Earnings Call

June 21, 2012 11:00 am ET


Raj Mehan

James P. Hackett - Chief Executive Officer, President, Director and Member of Executive Committee

David C. Sylvester - Chief Financial Officer and Senior Vice President

Terry Lenhardt


Chad Bolen

Jack C. Stimac - BB&T Capital Markets, Research Division

Joshua Borstein - Longbow Research LLC

Todd A. Schwartzman - Sidoti & Company, LLC


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Good day, everyone, and welcome to Steelcase's First Quarter Fiscal 2013 Conference Call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would like to turn the conference call over to Mr. Raj Mehan, Director of Investor Relations. Please go ahead.

Raj Mehan

Thank you, Stephanie. Good morning, everyone. Thank you for joining us for the recap of our first quarter financial results. Here with me today are Jim Hackett, our President and Chief Executive Officer; Dave Sylvester, our Chief Financial Officer; Mark Mossing, Corporate Controller and Chief Accounting Officer; and Terry Lenhardt, Vice President, Finance, for the Americas and EMEA segments.

Our first quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast, and presentation slides that accompany this webcast are available on And the replay of this call will also be posted to the site later today. In addition to our prepared remarks, we'll respond to questions from investors and analysts.

Our discussion today will also include references to non-GAAP financial measures. And these measures are presented because management uses this information to monitor and evaluate financial results and trends. Therefore, management believes this information is also useful for investors. Reconciliations to the most comparable GAAP measures are included in the earnings release and webcast slides. At this time, we're incorporating by reference into this conference call and subsequent transcript, the text our Safe Harbor Statement included in yesterday's release. Certain statements made within the release and during this conference call constitute forward-looking statements. There are risks associated with the use of this information for investment decision-making purposes.

For more details on these risks, please refer to yesterday's release and Form 8-K, the company's 10-K for the year ended February 24, 2012, and our other filings with the Securities and Exchange Commission. This webcast is a copyrighted production of Steelcase Inc.

Before I turn it over to our CEO, I just wanted to mention that Steelcase will be hosting an Analyst Day on Tuesday, October 2, with a full day's agenda at our global headquarters in Grand Rapids. You'll get the opportunity to meet with a wide array of business leaders and see our strategies in action. These strategies and our solutions address the forces of change businesses across the globe are facing. As well, we'll be revealing some new products that we're particularly excited about. We encourage all members of our audience to save that date on their calendars, and we'll be sending out official save-the-date notices in the coming weeks. With those formalities out of the way, I'll turn the call over to our President and CEO, Jim Hackett.

James P. Hackett

Thanks, Raj, and good morning to everyone. We're reporting today on another strong quarter for Steelcase, and one that was in line with our expectations overall. As you have seen in our earnings release, we performed extremely well in the Americas segment, and we fell short in the European segment and our Other category. The volatility in demand in Europe is not surprising, given the upheaval in the economy there. But there were also some timing factors at play that Dave will discuss in a few moments. And I wasn't pleased with the performance in the Other category. That's the segment that holds Asia and PolyVision and Designtex. And again, Dave will describe in more detail, that there were several factors that impacted these results that were just in the first quarter, and we expect improved results in the second quarter.

Now from a growth perspective, this was our ninth consecutive quarter of organic revenue growth on an Inc. or enterprise basis. And in the Americas segment, we've seen 7 straight quarters of double-digit growth. There is definitely growth from the directions set by our strategies and the operating income margin in the America, illustrates the power of our transformed business model and what we would say, is a diverse revenue base.

Now our first quarter call always comes on the heels of our trade show in Chicago called NeoCon. So it tends to be a focus of my comments. And this year, I thought the highlights of this show for our company, aligned especially well with the aspects of the strategy that I just mentioned. Let me point out 3 of those connections. First, is the response to a key vertical market for us in the education segment. Our education solutions team, which has just gotten started a few years ago, had a dedicated space in NeoCon this year, which is indicative of the ideas growing in the products now dedicated to this segment. Our research into what we're calling active learning translated this year into a new product portfolio called Verb. It's a table-based system that supports a variety of teaching and learning styles, and it pairs very well with that very successful node chair, that we introduced earlier. This product, Verb, won a Best of NeoCon Award, and it was one of 5 earned this year by our brands. Now this was initially targeted for the higher education market, but we think it can appeal and extend to high schools and certain corporate environments as well.

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