Steelcase (SCS)

Q3 2012 Earnings Call

December 22, 2011 11:00 am ET

Executives

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

Raj Mehan -

Unknown Executive -

Terry Lenhardt -

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

Analysts

Budd Bugatch - Raymond James & Associates, Inc., Research Division

Todd A. Schwartzman - Sidoti & Company, LLC

Leah Villalobos - Longbow Research LLC

Jeffrey Matthews - RAM Partners, L.P.

Matthew S. McCall - BB&T Capital Markets, Research Division

Presentation

Operator

Good day, everyone, and welcome to Steelcase's Third Quarter Fiscal 2012 Conference Call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Mr. Raj Mehan, Director of Investor Relations.

Raj Mehan

Thank you, Javon. Good morning, everyone, and happy holidays. Thank you for joining us for the recap of our third quarter fiscal year 2012 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 third quarter earnings release, which crossed the wires yesterday, is accessible on our website. This conference call is being webcast. Presentation slides that accompany this webcast are available on ir.steelcase.com, and a replay of this call will also be posted to the site later today. In addition to our prepared remarks, we will respond to questions from investors and analysts. Our discussion today will include references to non-GAAP financial measures. 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 of 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 press release and Form 8-K and the company's 10-K for the year ended February 25, 2011, and our other filings with the Securities and Exchange Commission. This webcast is copyrighted production of Steelcase Inc.

With those formalities out of the way, I'll turn the call over to our President and CEO, Jim Hackett.

James P. Hackett

Thank you, Raj, and good morning, and happy holidays to each of you and your families. Now this time of year, my family were often guessing with each other about what gifts will bring the most delight. And I know today in my house, the news of this quarter at Steelcase is a great reason to celebrate.

It was another very good quarter for us and we're on our way to a very good year as well. I think as you do your analysis, it will become increasingly clear that many of our targeted strategies and projects are producing concrete results. So more than metaphorically, that's a great present to our people who have worked so hard this year. Now Dave Sylvester will take you through the numbers in a few minutes. If you've seen our release, you know that 15% organic growth in the Americas is an extraordinary achievement on any measurement scale. In our order backlog, we just expect this segment to continue its momentum in the fourth quarter.

We're also very pleased with the work of our teams outside the Americas. We said on our previous call that we expected the EMEA or European, Middle East, Africa segment to return to profitability in the third quarter, and that's exactly what happened. Now Dave mentioned this in the last call, but it was clear to us that the vibe in the media about Europe was overshadowing our own projections of what we're seeing in real performance. We were encouraged by the normal seasonal boost this quarter even though this region is still a volatile mix of markets. We saw revenue growth in some countries while others are down and Spain is still in a deep recession.

But we're vigilant about the sovereign debt negotiations and their potential impact and we believe we're prepared to address any situation that might develop. In a situation like the one in Europe right now, our company is able to represent something special. And that's that our dealers and customers understand we're invested for the long term in that we have a sound financial position. And most importantly, we're continuing to focus on delivering outstanding service to our global customers.

And in that vein, our commitment to Asia continues to pay off. Now this segment performed very well again this quarter. I can't tell you how proud I am of the leadership team there because they've made substantial progress and they're building a great foundation for our future in Asia. I met with a team in India last month to assess progress in the region and work on our strategy and expansion of our capabilities. The region remains rich in opportunities and we're seeing tremendous potential from our global value proposition. And building on our original investment in these markets, we're beginning to see important new initiatives, including localizing our supply chain in India with an in-country manufacturing location and strengthening our dealer distribution in Tier 1 and Tier 2 cities in China.

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