Steelcase Inc. (NYSE: SCS) today reported second quarter revenue of
$818.8 million and net income of $55.5 million, or diluted earnings
of $0.47 per share, which included $15.6 million of pre-tax
restructuring costs related to previously announced workforce
reductions. Excluding those charges, net of related income
tax benefits, adjusted earnings were $0.55 per share. In the
prior year, Steelcase reported $998.0 million of revenue and net
income of $60.5 million, or diluted earnings of $0.50 per share.
Revenue decreased 18 percent in the second quarter compared to
the prior year. Revenue in the quarter benefited from a
strong beginning backlog of customer orders, which exceeded the
prior year by 11 percent due to pandemic-related restrictions on
manufacturing and delivery activities during the first
quarter. Revenue declined 15 percent in the Americas and 18
percent in EMEA compared to the prior year. Revenue in the
Other category declined 41 percent, or 29 percent on an organic
basis after adjusting for the impact of the PolyVision divestiture
in February 2020 and currency translation effects.
Orders (adjusted for the impact of the PolyVision divestiture
and currency translation effects) declined 32 percent in the second
quarter compared to the prior year, declining by 37 percent in
June, 34 percent in July and 22 percent in August. For the
quarter, orders declined 35 percent in the Americas, 22 percent in
EMEA and 25 percent in the Other category compared to the prior
year. In the Americas, the monthly year-over-year order
declines improved through the quarter, as orders stabilized
compared to more typical seasonality in the prior year, and project
business and orders from smaller customers reflected lower declines
than the overall average. In EMEA, performance varied
significantly by geographic market based on the stage of the
pandemic locally, and orders included a $19 million project in the
education sector that is expected to ship in the third
quarter. The Other category included an order decline of 18
percent in Asia Pacific, which included growth of 5 percent in
China, compared to the prior year.
Revenue
and order decline by segment |
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Q2 2021
vs. Q2 2020 |
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RevenueDecline |
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Organic RevenueDecline |
|
Organic OrderDecline |
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Americas |
15 |
% |
|
15 |
% |
|
35 |
% |
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|
EMEA |
18 |
% |
|
20 |
% |
|
22 |
% |
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|
Other category |
41 |
% |
|
29 |
% |
|
25 |
% |
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|
Steelcase Inc. |
18 |
% |
|
17 |
% |
|
32 |
% |
|
|
"I want to thank the employees of Steelcase for their
resilience, sacrifice and hard work to fulfill our customer
commitments and drive better than expected second quarter
profitability as we worked through our backlog of orders and
contained our costs," said Jim Keane, president and CEO. "Our
year-over-year order decline rates have moderated for four
consecutive months, but the continued high level of COVID cases in
the Americas has delayed our customers' return to the office and
suppressed demand levels. In EMEA and Asia Pacific, our order
patterns have improved and our opportunity pipelines are increasing
as many workers have returned to the office in those markets."
Second quarter operating income of $88.6 million included $15.6
million of restructuring costs related to the previously announced
workforce reductions. Adjusted operating income of $104.2
million represented an increase of $18.9 million compared to
operating income of $85.3 million in the prior year. The
increase was driven by significant cost reduction actions
implemented across all segments, which more than offset the impact
of lower revenue. The Americas reported operating income of
$94.6 million, and adjusted operating income of $110.2 million
(17.4 percent of revenue), compared to operating income of $90.3
million (12.2 percent of revenue) in the prior year. EMEA
reported an operating loss of $3.5 million compared to an operating
loss of $5.5 million in the prior year. The Other category
reported operating income of $1.1 million compared to $8.9 million
in the prior year, which included $2.6 million from PolyVision.
Gross margin of 32.9 percent in the second quarter represented a
50 basis point decline compared to the prior year, with an 80 basis
point decline attributable to restructuring costs. Gross
margin improved in the Americas and declined in EMEA and the Other
category. On a consolidated basis, the results were driven by
the impact of the lower revenue and restructuring costs, partially
offset by lower overhead costs including temporary reductions in
pay for salaried employees, pricing benefits and lower variable
compensation expense.
Operating expenses of $172.3 million in the second quarter
represented a decrease of $75.9 million compared to the prior
year. The decrease was primarily driven by an approximately
$32 million reduction in discretionary spending, approximately $22
million of lower employee costs primarily related to temporary
reductions in pay across most of the company's global salaried
workforce and $9.2 million of lower variable compensation
expense.
The restructuring costs relate to the workforce reductions
announced on September 1, 2020, which the company estimates will
result in savings of approximately $10 million per quarter.
The company expects to record a total of approximately $26 million
of restructuring costs related to the actions, of which $15.6
million was recorded during the second quarter and the remainder is
expected to be recorded in the third quarter. The company has
restored most of its salaried workers to their full base pay, which
it estimates will result in approximately $20 million of additional
costs in the third quarter as compared to the second quarter.
“The strength of our second quarter results and the recent
improvements in demand patterns in EMEA and Asia Pacific influenced
our decision to restore salaries for most of our global workforce,”
said Dave Sylvester, senior vice president and CFO. “While we
have seen some recent improvement in the rate of decline in our
year-over-year order patterns in the Americas, day-to-day business
and project pipelines remain depressed due to the ongoing economic
uncertainty and the high number of customers deferring their return
to the office. Accordingly, we decided to make more permanent
changes to our cost structure through workforce reductions, which
will lower our annualized costs by approximately $40 million."
Investment income of $0.2 million in the second quarter
represented a decrease of $1.3 million compared to the prior year
due to lower market interest rates. Other income, net
decreased by $1.2 million compared to the prior year, due primarily
to lower income from unconsolidated affiliates.
The company recorded income tax expense of $27.3 million in the
second quarter, which represented an effective tax rate of
approximately 33 percent. In the prior year, income tax
expense was $21.6 million and represented an effective tax rate of
approximately 26 percent.
Total liquidity, comprised of cash, cash equivalents and the
cash surrender value of company-owned life insurance, aggregated to
$683.7 million.
Total debt was $483.3 million at the end of the second
quarter. During the quarter, the company repaid all
outstanding borrowings under its global credit facility.
“Our strong earnings and working capital management drove a 22
percent increase in cash flow from operations and we reduced our
capital expenditures by approximately 50 percent compared to the
prior year,” said Dave Sylvester. “Based on the strength of
our cash generation during the quarter, we chose to repay all of
the $245 million in remaining borrowings under our credit facility
which we had drawn as a precaution earlier in the year. We
ended the quarter with $684 million of liquidity which supports our
ability to stay invested in new solutions to drive growth in the
changing workplace.”
The Board of Directors has declared a quarterly cash dividend of
$0.10 per share, to be paid on or before October 15, 2020, to
shareholders of record as of October 2, 2020.
Outlook
At the end of the second quarter, the company’s backlog of
customer orders was $577 million, or 8 percent lower than the prior
year. Going into the third quarter, orders declined an
average of 38 percent during the first three weeks of September
compared to the prior year, including declines of 41 percent in the
Americas, 27 percent in EMEA, and 37 percent in the Other
category. As a result, the company expects third quarter
fiscal 2021 revenue to be in the range of $690 to $725
million. The company reported revenue of $955.2 million in
the third quarter of fiscal 2020. Adjusted for the
divestiture of PolyVision and currency translation effects, the
projected revenue range translates to an expected organic decline
of 24 to 27 percent compared to the third quarter of fiscal
2020. The year-over-year comparison also reflects the impact
of the timing of the U.S. Thanksgiving holiday which will fall in
the third quarter of fiscal 2021 compared to the fourth quarter of
fiscal 2020.
The company expects to report diluted earnings per share of
between $0.07 to $0.13 for the third quarter of fiscal 2021.
This estimate includes $0.05 per share of estimated restructuring
costs, net of tax related to the previously announced
actions. Adjusted for the estimated restructuring costs, the
company expects to report adjusted earnings of between $0.12 to
$0.18 per share. The estimate also reflects: (1) projected
operating expenses of between $180 million to $185 million, (2)
projected interest expense, net of investment income and other
income, net of approximately $5 million and (3) an expected
effective tax rate of approximately 25 percent (or approximately 30
percent when adjusted for the estimated restructuring costs and the
related tax benefit). Steelcase reported diluted earnings per
share of $0.46 in the third quarter of fiscal 2020.
“As the number of COVID cases declined in Asia Pacific and EMEA,
we saw a strong return to the office in those regions as companies
utilize the workplace to drive higher productivity, increase
collaboration and promote their culture," said Jim Keane. “As
progress is being made in the U.S. relative to the pandemic, we
expect to see momentum build to bring employees back to work which
will drive improved demand for our solutions to provide a better
experience.”
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Business Segment
Results |
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|
(in millions) |
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(Unaudited) |
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(Unaudited) |
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Three Months Ended |
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Six Months Ended |
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|
August 28, 2020 |
|
August 23, 2019 |
|
% Change |
|
August 28, 2020 |
|
August 23, 2019 |
|
% Change |
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Revenue |
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|
Americas (1) |
$ |
631.2 |
|
|
$ |
739.5 |
|
|
(14.6 |
)% |
|
$ |
965.1 |
|
|
$ |
1,315.8 |
|
|
(26.7 |
)% |
|
EMEA (2) |
125.9 |
|
|
154.2 |
|
|
(18.4 |
)% |
|
225.4 |
|
|
315.5 |
|
|
(28.6 |
)% |
|
Other (3) |
61.7 |
|
|
104.3 |
|
|
(40.8 |
)% |
|
111.1 |
|
|
191.0 |
|
|
(41.8 |
)% |
|
Consolidated revenue |
$ |
818.8 |
|
|
$ |
998.0 |
|
|
(18.0 |
)% |
|
$ |
1,301.6 |
|
|
$ |
1,822.3 |
|
|
(28.6 |
)% |
|
Operating income
(loss) |
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|
Americas |
$ |
94.6 |
|
|
$ |
90.3 |
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|
$ |
71.1 |
|
|
$ |
122.7 |
|
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|
EMEA |
(3.5 |
) |
|
(5.5 |
) |
|
|
|
|
(28.1 |
) |
|
(4.7 |
) |
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|
Other |
1.1 |
|
|
8.9 |
|
|
|
|
|
(0.5 |
) |
|
11.2 |
|
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|
Corporate (4) |
(3.6 |
) |
|
(8.4 |
) |
|
|
|
|
(6.2 |
) |
|
(16.3 |
) |
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|
Consolidated operating income |
$ |
88.6 |
|
|
$ |
85.3 |
|
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|
$ |
36.3 |
|
|
$ |
112.9 |
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Operating income
percent |
10.8 |
% |
|
8.5 |
% |
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|
|
2.8 |
% |
|
6.2 |
% |
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|
Revenue
mix |
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Americas |
|
77.1 |
% |
|
|
74.1 |
% |
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|
74.1 |
% |
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|
72.2 |
% |
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EMEA |
|
15.4 |
% |
|
|
15.5 |
% |
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|
17.3 |
% |
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|
17.3 |
% |
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Other |
|
7.5 |
% |
|
|
10.4 |
% |
|
|
|
|
|
8.6 |
% |
|
|
10.5 |
% |
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Business Segment Footnotes
- The Americas segment serves customers in the U.S., Canada, the
Caribbean Islands 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, Smith System, AMQ and
Orangebox brands.
- The EMEA segment serves customers in Europe, the Middle East
and Africa primarily under the Steelcase, Orangebox and Coalesse
brands, with an emphasis on freestanding furniture systems, storage
and seating solutions.
- The Other category includes Asia Pacific and Designtex.
In 2020, the Other category also included PolyVision, which was
sold in February 2020.
- Corporate costs include unallocated portions of shared service
functions, such as information technology, corporate facilities,
finance, human resources, research, legal and customer aviation,
plus deferred compensation expense and income or losses associated
with company-owned life insurance.
|
QUARTER
OVER QUARTER ORGANIC REVENUE DECLINE BY SEGMENT |
Q2 2021 vs. Q2
2020 |
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|
Steelcase Inc. |
|
Americas |
|
EMEA |
|
Other category |
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|
Q2 2020 revenue |
$ |
998.0 |
|
|
$ |
739.5 |
|
|
$ |
154.2 |
|
|
$ |
104.3 |
|
Divestiture |
(17.1 |
) |
|
— |
|
|
— |
|
|
(17.1 |
) |
Currency translation
effects* |
1.9 |
|
|
(0.6 |
) |
|
3.3 |
|
|
(0.8 |
) |
Q2 2020 revenue, adjusted |
982.8 |
|
|
738.9 |
|
|
157.5 |
|
|
86.4 |
|
|
|
|
|
|
|
|
|
Q2 2021 revenue |
818.8 |
|
|
631.2 |
|
|
125.9 |
|
|
61.7 |
|
Organic decline $ |
$ |
(164.0 |
) |
|
$ |
(107.7 |
) |
|
$ |
(31.6 |
) |
|
$ |
(24.7 |
) |
Organic decline % |
(17 |
)% |
|
(15 |
)% |
|
(20 |
)% |
|
(29 |
)% |
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|
|
|
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|
* Currency
translation effects represent the estimated net effect of
translating Q2 2020 foreign currency revenues using the average
exchange rates during Q2 2021. |
PROJECTED
ORGANIC REVENUE DECLINE |
Q3 2021 vs. Q3 2020 |
|
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|
Steelcase Inc. |
|
|
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|
Q3 2020 revenue |
$ |
955.2 |
|
|
|
Divestiture |
(14.9 |
) |
|
|
Currency translation
effects* |
11.2 |
|
|
|
Q3 2020 revenue, adjusted |
951.5 |
|
|
|
|
|
|
|
Q3 2021 revenue,
projected |
$690 - $725 |
|
|
Organic decline $ |
($261) - ($227) |
|
|
Organic decline % |
(27%) - (24%) |
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|
|
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|
* Currency
translation effects represent the estimated net effect of
translating Q3 2020 foreign currency revenues using the exchange
rates at the end of Q2 2021. |
ADJUSTED
EARNINGS PER SHARE |
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|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
Diluted earnings per share |
$ |
0.47 |
|
|
$ |
0.50 |
|
|
$ |
0.15 |
|
|
$ |
0.65 |
|
Goodwill
impairment charge, per share |
— |
|
|
— |
|
|
0.15 |
|
|
— |
|
Restructuring
costs, per share |
0.13 |
|
|
— |
|
|
0.13 |
|
|
— |
|
Income tax effect
of restructuring costs, per share |
(0.05 |
) |
|
— |
|
|
(0.05 |
) |
|
— |
|
Adjusted earnings
per share |
$ |
0.55 |
|
|
$ |
0.50 |
|
|
$ |
0.38 |
|
|
$ |
0.65 |
|
PROJECTED
EARNINGS PER SHARE |
Q3 2021 |
|
|
|
|
|
|
|
|
Steelcase Inc. |
|
|
Diluted earnings
per share |
$0.07 - $0.13 |
|
|
|
Goodwill impairment charge, per share |
— |
|
|
|
Restructuring
costs, per share |
0.08 |
|
|
|
Income tax effect
of restructuring costs, per share |
(0.03 |
) |
|
|
Adjusted earnings
per share |
$0.12 - $0.18 |
|
|
|
Steelcase
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
|
Revenue |
$ |
818.8 |
|
|
100.0 |
% |
|
$ |
998.0 |
|
|
100.0 |
% |
|
$ |
1,301.6 |
|
|
100.0 |
% |
|
$ |
1,822.3 |
|
|
100.0 |
% |
|
Cost of sales |
542.3 |
|
|
66.3 |
|
|
664.5 |
|
|
66.6 |
|
|
902.4 |
|
|
69.4 |
|
|
1,230.4 |
|
|
67.5 |
|
|
Restructuring costs |
6.9 |
|
|
0.8 |
|
|
— |
|
|
— |
|
|
6.9 |
|
|
0.5 |
|
|
— |
|
|
— |
|
|
Gross profit |
269.6 |
|
|
32.9 |
|
|
333.5 |
|
|
33.4 |
|
|
392.3 |
|
|
30.1 |
|
|
591.9 |
|
|
32.5 |
|
|
Operating expenses |
172.3 |
|
|
21.0 |
|
|
248.2 |
|
|
24.9 |
|
|
329.7 |
|
|
25.3 |
|
|
479.0 |
|
|
26.3 |
|
|
Goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17.6 |
|
|
1.4 |
|
|
— |
|
|
— |
|
|
Restructuring costs |
8.7 |
|
|
1.1 |
|
|
— |
|
|
— |
|
|
8.7 |
|
|
0.6 |
|
|
— |
|
|
— |
|
|
Operating income |
$ |
88.6 |
|
|
10.8 |
% |
|
$ |
85.3 |
|
|
8.5 |
% |
|
$ |
36.3 |
|
|
2.8 |
% |
|
$ |
112.9 |
|
|
6.2 |
% |
|
Interest expense |
(6.8 |
) |
|
(0.8 |
) |
|
(6.7 |
) |
|
(0.7 |
) |
|
(14.1 |
) |
|
(1.1 |
) |
|
(13.4 |
) |
|
(0.7 |
) |
|
Investment income |
0.2 |
|
|
— |
|
|
1.5 |
|
|
0.2 |
|
|
1.0 |
|
|
0.1 |
|
|
2.5 |
|
|
0.1 |
|
|
Other income, net |
0.8 |
|
|
0.1 |
|
|
2.0 |
|
|
0.2 |
|
|
4.8 |
|
|
0.4 |
|
|
4.2 |
|
|
0.2 |
|
|
Income before income tax
expense |
82.8 |
|
|
10.1 |
|
|
82.1 |
|
|
8.2 |
|
|
28.0 |
|
|
2.2 |
|
|
106.2 |
|
|
5.8 |
|
|
Income tax expense |
27.3 |
|
|
3.3 |
|
|
21.6 |
|
|
2.1 |
|
|
10.6 |
|
|
0.9 |
|
|
27.9 |
|
|
1.5 |
|
|
Net income |
$ |
55.5 |
|
|
6.8 |
% |
|
$ |
60.5 |
|
|
6.1 |
% |
|
$ |
17.4 |
|
|
1.3 |
% |
|
$ |
78.3 |
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
$ |
88.6 |
|
|
10.8 |
% |
|
$ |
85.3 |
|
|
8.5 |
% |
|
$ |
36.3 |
|
|
2.8 |
% |
|
$ |
112.9 |
|
|
6.2 |
% |
|
Add: goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17.6 |
|
|
1.4 |
|
|
— |
|
|
— |
|
|
Add: restructuring costs |
15.6 |
|
|
1.9 |
|
|
— |
|
|
— |
|
|
15.6 |
|
|
1.1 |
|
|
— |
|
|
— |
|
|
Adjusted operating income |
$ |
104.2 |
|
|
12.7 |
% |
|
$ |
85.3 |
|
|
8.5 |
% |
|
$ |
69.5 |
|
|
5.3 |
% |
|
$ |
112.9 |
|
|
6.2 |
% |
|
Americas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
|
Revenue |
$ |
631.2 |
|
|
100.0 |
% |
|
$ |
739.5 |
|
|
100.0 |
% |
|
$ |
965.1 |
|
|
100.0 |
% |
|
$ |
1,315.8 |
|
|
100.0 |
% |
|
Cost of sales |
408.1 |
|
|
64.7 |
|
|
486.3 |
|
|
65.8 |
|
|
660.4 |
|
|
68.4 |
|
|
879.7 |
|
|
66.9 |
|
|
Restructuring costs |
6.9 |
|
|
1.0 |
|
|
— |
|
|
— |
|
|
6.9 |
|
|
0.7 |
|
|
— |
|
|
— |
|
|
Gross profit |
216.2 |
|
|
34.3 |
|
|
253.2 |
|
|
34.2 |
|
|
297.8 |
|
|
30.9 |
|
|
436.1 |
|
|
33.1 |
|
|
Operating expenses |
112.9 |
|
|
17.9 |
|
|
162.9 |
|
|
22.0 |
|
|
218.0 |
|
|
22.6 |
|
|
313.4 |
|
|
23.8 |
|
|
Goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Restructuring costs |
8.7 |
|
|
1.4 |
|
|
— |
|
|
— |
|
|
8.7 |
|
|
0.9 |
|
|
— |
|
|
— |
|
|
Operating income |
$ |
94.6 |
|
|
15.0 |
% |
|
$ |
90.3 |
|
|
12.2 |
% |
|
$ |
71.1 |
|
|
7.4 |
% |
|
$ |
122.7 |
|
|
9.3 |
% |
|
Add: goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Add: restructuring costs |
15.6 |
|
|
2.4 |
|
|
— |
|
|
— |
|
|
15.6 |
|
|
1.6 |
|
|
— |
|
|
— |
|
|
Adjusted operating income |
$ |
110.2 |
|
|
17.4 |
% |
|
$ |
90.3 |
|
|
12.2 |
% |
|
$ |
86.7 |
|
|
9.0 |
% |
|
$ |
122.7 |
|
|
9.3 |
% |
|
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
|
Revenue |
$ |
125.9 |
|
|
100.0 |
% |
|
$ |
154.2 |
|
|
100.0 |
% |
|
$ |
225.4 |
|
|
100.0 |
% |
|
$ |
315.5 |
|
|
100.0 |
% |
|
Cost of sales |
93.4 |
|
|
74.2 |
|
|
112.6 |
|
|
73.0 |
|
|
168.7 |
|
|
74.8 |
|
|
228.3 |
|
|
72.4 |
|
|
Restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Gross profit |
32.5 |
|
|
25.8 |
|
|
41.6 |
|
|
27.0 |
|
|
56.7 |
|
|
25.2 |
|
|
87.2 |
|
|
27.6 |
|
|
Operating expenses |
36.0 |
|
|
28.6 |
|
|
47.1 |
|
|
30.6 |
|
|
67.2 |
|
|
29.9 |
|
|
91.9 |
|
|
29.1 |
|
|
Goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17.6 |
|
|
7.8 |
|
|
— |
|
|
— |
|
|
Restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Operating loss |
$ |
(3.5 |
) |
|
(2.8 |
)% |
|
$ |
(5.5 |
) |
|
(3.6 |
)% |
|
$ |
(28.1 |
) |
|
(12.5 |
)% |
|
$ |
(4.7 |
) |
|
(1.5 |
)% |
|
Add: goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17.6 |
|
|
7.8 |
|
|
— |
|
|
— |
|
|
Add: restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Adjusted operating income
(loss) |
$ |
(3.5 |
) |
|
(2.8 |
)% |
|
$ |
(5.5 |
) |
|
(3.6 |
)% |
|
$ |
(10.5 |
) |
|
(4.7 |
)% |
|
$ |
(4.7 |
) |
|
(1.5 |
)% |
|
Other
category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
|
Revenue |
$ |
61.7 |
|
|
100.0 |
% |
|
$ |
104.3 |
|
|
100.0 |
% |
|
$ |
111.1 |
|
|
100.0 |
% |
|
$ |
191.0 |
|
|
100.0 |
% |
|
Cost of sales |
40.8 |
|
|
66.1 |
|
|
65.6 |
|
|
62.9 |
|
|
73.3 |
|
|
66.0 |
|
|
122.4 |
|
|
64.1 |
|
|
Restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Gross profit |
20.9 |
|
|
33.9 |
|
|
38.7 |
|
|
37.1 |
|
|
37.8 |
|
|
34.0 |
|
|
68.6 |
|
|
35.9 |
|
|
Operating expenses |
19.8 |
|
|
32.1 |
|
|
29.8 |
|
|
28.6 |
|
|
38.3 |
|
|
34.5 |
|
|
57.4 |
|
|
30.0 |
|
|
Goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Operating income (loss) |
$ |
1.1 |
|
|
1.8 |
% |
|
$ |
8.9 |
|
|
8.5 |
% |
|
$ |
(0.5 |
) |
|
(0.5 |
)% |
|
$ |
11.2 |
|
|
5.9 |
% |
|
Add: goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Add: restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Adjusted operating income
(loss) |
$ |
1.1 |
|
|
1.8 |
% |
|
$ |
8.9 |
|
|
8.5 |
% |
|
$ |
(0.5 |
) |
|
(0.5 |
)% |
|
$ |
11.2 |
|
|
5.9 |
% |
|
Corporate |
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
Operating loss |
$ |
(3.6 |
) |
|
$ |
(8.4 |
) |
|
$ |
(6.2 |
) |
|
$ |
(16.3 |
) |
Add: goodwill impairment
charge |
— |
|
|
— |
|
|
— |
|
|
— |
|
Add: restructuring costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted operating loss |
$ |
(3.6 |
) |
|
$ |
(8.4 |
) |
|
$ |
(6.2 |
) |
|
$ |
(16.3 |
) |
Webcast Steelcase will discuss second quarter
results and business outlook on a conference call at 8:30 a.m.
Eastern time tomorrow.
Non-GAAP Financial MeasuresThis earnings
release contains 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 condensed consolidated
statements of income, balance sheets or statements of cash flows of
the company. Pursuant to the requirements of
Regulation G, the company has provided a reconciliation above
of the non-GAAP financial measures to the most directly comparable
GAAP financial measures.
The non-GAAP financial measures used within this earnings
release are: (1) adjusted earnings per share, which represents
earnings per share excluding goodwill impairment charges,
restructuring costs and related tax benefits; (2) organic
revenue decline, which represents the change in revenue excluding
the impacts of acquisitions and divestitures and estimated currency
translation effects; and (3) adjusted operating income (loss),
which represents operating income (loss) excluding goodwill
impairment charges and restructuring costs. 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.
Forward-looking Statements From time to time,
in written and oral statements, the company discusses its
expectations regarding future events and its plans and objectives
for future operations. These forward-looking statements discuss
goals, intentions and expectations as to future trends, plans,
events, results of operations or financial condition, or state
other information relating to us, based on current beliefs of
management as well as assumptions made by, and information
currently available to, the company. Forward-looking statements
generally are accompanied by words such as "anticipate," "believe,"
"could," "estimate," "expect," "forecast," "intend," "may,"
"possible," "potential," "predict," "project," "targets," or other
similar words, phrases or expressions. Although we believe these
forward-looking statements are reasonable, they are based upon a
number of assumptions concerning future conditions, any or all of
which may ultimately prove to be inaccurate. Forward-looking
statements involve a number of risks and uncertainties that could
cause actual results to vary from the company's expectations
because of factors such as, but not limited to, competitive and
general economic conditions domestically and internationally; acts
of terrorism, war, governmental action, natural disasters,
pandemics and other Force Majeure events; the COVID-19
pandemic and the actions taken by various governments and third
parties to combat the pandemic; changes in the legal and regulatory
environment; changes in raw material, commodity and other input
costs; currency fluctuations; changes in customer demand; and the
other risks and contingencies detailed in the company's most
recent Annual Report on Form 10-K and its other filings with the
Securities and Exchange Commission. Steelcase undertakes no
obligation to update, amend or clarify forward-looking statements,
whether as a result of new information, future events or
otherwise.
About Steelcase Inc.For over 108 years,
Steelcase Inc. has helped create great experiences for the world's
leading organizations, across industries. We demonstrate this
through our family of brands - including Steelcase®,
Coalesse®, Designtex®, Turnstone®, Smith System®, Orangebox® and
AMQ®. Together, they offer a comprehensive portfolio of
architecture, furniture and technology products and services
designed to unlock human promise and support social, economic and
environmental sustainability. We are globally accessible
through a network of channels, including approximately 800
Steelcase dealer locations. Steelcase is a global,
industry-leading and publicly traded company with fiscal 2020
revenue of $3.7 billion.
STEELCASE INC. |
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) |
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
August 28, 2020 |
|
August 23, 2019 |
|
August 28, 2020 |
|
August 23, 2019 |
|
Revenue |
$ |
818.8 |
|
|
|
$ |
998.0 |
|
|
|
$ |
1,301.6 |
|
|
|
$ |
1,822.3 |
|
|
|
Cost of sales |
542.3 |
|
|
|
664.5 |
|
|
|
902.4 |
|
|
|
1,230.4 |
|
|
|
Restructuring costs |
6.9 |
|
|
|
— |
|
|
|
6.9 |
|
|
|
— |
|
|
|
Gross profit |
269.6 |
|
|
|
333.5 |
|
|
|
392.3 |
|
|
|
591.9 |
|
|
|
Operating expenses |
172.3 |
|
|
|
248.2 |
|
|
|
329.7 |
|
|
|
479.0 |
|
|
|
Goodwill impairment
charge |
— |
|
|
|
— |
|
|
|
17.6 |
|
|
|
— |
|
|
|
Restructuring costs |
8.7 |
|
|
|
— |
|
|
|
8.7 |
|
|
|
— |
|
|
|
Operating income |
88.6 |
|
|
|
85.3 |
|
|
|
36.3 |
|
|
|
112.9 |
|
|
|
Interest expense |
(6.8 |
) |
|
|
(6.7 |
) |
|
|
(14.1 |
) |
|
|
(13.4 |
) |
|
|
Investment income |
0.2 |
|
|
|
1.5 |
|
|
|
1.0 |
|
|
|
2.5 |
|
|
|
Other income, net |
0.8 |
|
|
|
2.0 |
|
|
|
4.8 |
|
|
|
4.2 |
|
|
|
Income before income tax expense |
82.8 |
|
|
|
82.1 |
|
|
|
28.0 |
|
|
|
106.2 |
|
|
|
Income tax expense |
27.3 |
|
|
|
21.6 |
|
|
|
10.6 |
|
|
|
27.9 |
|
|
|
Net income |
$ |
55.5 |
|
|
|
$ |
60.5 |
|
|
|
$ |
17.4 |
|
|
|
$ |
78.3 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.47 |
|
|
|
$ |
0.50 |
|
|
|
$ |
0.15 |
|
|
|
$ |
0.65 |
|
|
|
Diluted |
$ |
0.47 |
|
|
|
$ |
0.50 |
|
|
|
$ |
0.15 |
|
|
|
$ |
0.65 |
|
|
|
Weighted average shares
outstanding - basic |
117.6 |
|
|
|
119.7 |
|
|
|
117.4 |
|
|
|
119.6 |
|
|
|
Weighted average shares
outstanding - diluted |
117.8 |
|
|
|
120.2 |
|
|
|
117.6 |
|
|
|
120.1 |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid
per common share |
$ |
0.100 |
|
|
|
$ |
0.145 |
|
|
|
$ |
0.170 |
|
|
|
$ |
0.290 |
|
|
|
STEELCASE INC. |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(in millions) |
|
|
|
|
|
|
|
August 28, 2020 |
|
February 28, 2020 |
|
ASSETS |
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
$ |
515.9 |
|
|
|
$ |
541.0 |
|
|
|
Accounts receivable |
329.0 |
|
|
|
381.8 |
|
|
|
Allowance for doubtful accounts |
(9.9 |
) |
|
|
(9.4 |
) |
|
|
Inventories |
217.5 |
|
|
|
215.0 |
|
|
|
Prepaid expenses |
23.6 |
|
|
|
21.6 |
|
|
|
Other current assets |
56.5 |
|
|
|
38.8 |
|
|
|
Total current
assets |
1,132.6 |
|
|
|
1,188.8 |
|
|
|
|
|
|
|
|
Property, plant
and equipment, net of accumulated depreciation of $1,024.0 and
$977.7 |
418.1 |
|
|
|
426.3 |
|
|
|
Company-owned life
insurance ("COLI") |
167.8 |
|
|
|
160.0 |
|
|
|
Deferred income
taxes |
110.0 |
|
|
|
124.6 |
|
|
|
Goodwill |
215.1 |
|
|
|
233.6 |
|
|
|
Other intangible
assets, net of accumulated amortization of $65.1 and $56.7 |
94.5 |
|
|
|
102.9 |
|
|
|
Investments in
unconsolidated affiliates |
54.0 |
|
|
|
52.3 |
|
|
|
Right-of-use
operating lease assets |
219.1 |
|
|
|
237.9 |
|
|
|
Other assets |
28.5 |
|
|
|
39.0 |
|
|
|
Total assets |
$ |
2,439.7 |
|
|
|
$ |
2,565.4 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
Current
liabilities: |
|
|
|
|
Accounts payable |
$ |
210.2 |
|
|
|
$ |
244.3 |
|
|
|
Short-term borrowings and current portion of long-term debt |
2.6 |
|
|
|
2.9 |
|
|
|
Current operating lease obligations |
42.8 |
|
|
|
43.1 |
|
|
|
Accrued expenses: |
|
|
|
|
Employee compensation |
93.2 |
|
|
|
191.7 |
|
|
|
Employee benefit plan obligations |
28.2 |
|
|
|
44.7 |
|
|
|
Accrued promotions |
28.6 |
|
|
|
35.3 |
|
|
|
Customer deposits |
104.0 |
|
|
|
28.6 |
|
|
|
Other |
110.4 |
|
|
|
100.3 |
|
|
|
Total current
liabilities |
620.0 |
|
|
|
690.9 |
|
|
|
|
|
|
|
|
Long-term
liabilities: |
|
|
|
|
Long-term debt less current maturities |
480.7 |
|
|
|
481.4 |
|
|
|
Employee benefit plan obligations |
143.0 |
|
|
|
148.3 |
|
|
|
Long-term operating lease obligations |
198.7 |
|
|
|
214.0 |
|
|
|
Other long-term liabilities |
49.2 |
|
|
|
60.4 |
|
|
|
Total long-term
liabilities |
871.6 |
|
|
|
904.1 |
|
|
|
Total
liabilities |
1,491.6 |
|
|
|
1,595.0 |
|
|
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
Additional paid-in capital |
1.7 |
|
|
|
28.4 |
|
|
|
Accumulated other comprehensive income (loss) |
(56.3 |
) |
|
|
(69.3 |
) |
|
|
Retained earnings |
1,002.7 |
|
|
|
1,011.3 |
|
|
|
Total
shareholders’ equity |
948.1 |
|
|
|
970.4 |
|
|
|
Total liabilities
and shareholders’ equity |
$ |
2,439.7 |
|
|
|
$ |
2,565.4 |
|
|
|
STEELCASE INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited) |
(in millions) |
|
|
|
|
|
Six Months Ended |
|
August 28, 2020 |
|
August 23, 2019 |
OPERATING
ACTIVITIES |
|
|
|
Net income |
$ |
17.4 |
|
|
|
$ |
78.3 |
|
|
Depreciation and
amortization |
43.3 |
|
|
|
41.4 |
|
|
Goodwill impairment
charge |
17.6 |
|
|
|
— |
|
|
Restructuring costs |
15.6 |
|
|
|
— |
|
|
Deferred income taxes |
18.0 |
|
|
|
2.9 |
|
|
Non-cash stock
compensation |
9.7 |
|
|
|
12.0 |
|
|
Equity in income of
unconsolidated affiliates |
(3.9 |
) |
|
|
(5.7 |
) |
|
Dividends received from
unconsolidated affiliates |
2.8 |
|
|
|
8.2 |
|
|
Other |
(12.5 |
) |
|
|
(0.8 |
) |
|
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
58.0 |
|
|
|
(82.2 |
) |
|
Inventories |
(0.2 |
) |
|
|
(20.5 |
) |
|
Other assets |
(10.8 |
) |
|
|
3.9 |
|
|
Accounts payable |
(36.5 |
) |
|
|
37.8 |
|
|
Employee compensation liabilities |
(120.8 |
) |
|
|
(46.1 |
) |
|
Employee benefit obligations |
(24.9 |
) |
|
|
(17.7 |
) |
|
Customer deposits |
74.3 |
|
|
|
7.4 |
|
|
Accrued expenses and other liabilities |
(2.2 |
) |
|
|
23.9 |
|
|
Net cash provided by operating
activities |
44.9 |
|
|
|
42.8 |
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
Capital expenditures |
(18.0 |
) |
|
|
(32.5 |
) |
|
Proceeds from disposal of
fixed assets |
7.1 |
|
|
|
1.0 |
|
|
Other |
4.9 |
|
|
|
1.9 |
|
|
Net cash used in investing
activities |
(6.0 |
) |
|
|
(29.6 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
Dividends paid |
(20.1 |
) |
|
|
(34.5 |
) |
|
Common stock repurchases |
(42.3 |
) |
|
|
(5.9 |
) |
|
Borrowings on lines of
credit |
250.0 |
|
|
|
— |
|
|
Repayments on lines of
credit |
(250.0 |
) |
|
|
— |
|
|
Other |
(1.4 |
) |
|
|
(2.3 |
) |
|
Net cash used in financing
activities |
(63.8 |
) |
|
|
(42.7 |
) |
|
Effect of exchange rate
changes on cash and cash equivalents |
0.2 |
|
|
|
(1.4 |
) |
|
Net decrease in cash, cash
equivalents and restricted cash |
(24.7 |
) |
|
|
(30.9 |
) |
|
Cash and cash equivalents and
restricted cash, beginning of period1 |
547.1 |
|
|
|
264.8 |
|
|
Cash and cash equivalents and
restricted cash, end of period2 |
$ |
522.4 |
|
|
|
$ |
233.9 |
|
|
(1) These amounts include restricted cash of $6.1 and $3.5 as of
February 28, 2020 and February 22, 2019,
respectively.
(2) These amounts include restricted cash of $6.5 and $4.8 as of
August 28, 2020 and August 23, 2019, respectively.
Restricted cash primarily represents funds held in escrow for
potential future workers’ compensation and product liability
claims. Restricted cash is included as part of Other assets
in the Condensed Consolidated Balance Sheets.
CONTACT: |
Investor Contact: |
|
Michael O'Meara |
|
Investor Relations |
|
(616) 246 - 4251 |
|
|
|
Media Contact: |
|
Katie Woodruff |
|
Corporate Communications |
|
(616) 915 - 8505 |
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