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Steelcase Inc. Reports Operating Results (10-Q)

October 05, 2009 | About:
10qk

10qk

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Steelcase Inc. (SCS) filed Quarterly Report for the period ended 2009-08-28.

Steelcase Inc. is a designer and manufacturer of products used to create high-performance work environments. Its product portfolio includes furniture systems seating storage desks casegoods interior architectural products technology products and related products and services. The company reports two geographic furniture segments: North America and International. Steelcase Inc. has a market cap of $763.92 million; its shares were traded at around $5.75 with and P/S ratio of 0.24. The dividend yield of Steelcase Inc. stocks is 2.78%.

Highlight of Business Operations:

We recorded Q2 2010 net income of $0 compared to net income of $31.4 in Q2 2009 and year-to-date 2010 net income of $0 compared to $53.6 in the same period in 2009. The Q2 2010 and year-to-date 2010 deteriorations were primarily driven by lower volume, which was partially offset by benefits from prior restructuring activities and other cost reduction efforts, lower variable compensation expense, lower commodity costs, and a significant increase in cash surrender value of our company-

Our revenue decreased $323.7 or 35.9% in Q2 2010 compared to Q2 2009. Q2 2010 revenue was negatively impacted by approximately $23 from currency translation effects and $5 of sales related to divestitures compared to Q2 2009. Year-to-date 2010 revenue decreased $593.7 or 34.6% compared to the same period in 2009. Year-to-date 2010 revenue was negatively impacted by approximately $63 from currency translation effects and $16 of sales related to divestitures compared to the same period in 2009. The global economic slowdown and turmoil in the capital markets had the effect of significantly decreasing the demand for office furniture. Q2 2010 and year-to-date 2010 revenue declines were broad-based, significantly affecting almost all our geographies, vertical markets and product categories. We expect the effects of the global economic slowdown to continue to impact the demand for office furniture across all of our segments through the remainder of 2010. However, percentage declines compared to the prior year are expected to moderate in the coming quarters, as we entered this downturn beginning in Q3 2009.

Cost of sales increased to 69.8% of revenue in Q2 2010, a 90 basis point deterioration compared to Q2 2009. We estimate that the majority of the Q2 2010 deterioration was due to lower fixed cost absorption related to lower volume, which had the effect of increasing cost of sales as a percent of revenue compared to Q2 2009. The Q2 2010 deterioration in cost of sales was partially mitigated by benefits from prior restructuring activities and other cost reduction efforts, lower commodity costs of approximately $15, an increase in cash surrender value of COLI of $8, a reduction of $8 in variable compensation expense, and temporary reductions in employee salaries and retirement benefits of $5.

Year-to-date 2010 cost of sales increased to 70.3% of revenue, a 210 basis point deterioration compared to the same period in 2009. We estimate that the majority of the year-to-date 2010 deterioration was due to lower fixed cost absorption related to lower volume, which had the effect of increasing cost of sales as a percent of revenue compared to the same period in 2009. The year-to-date 2010 deterioration in cost of sales was partially mitigated by benefits from prior restructuring activities and other cost reduction efforts, lower commodity costs of approximately $21, an increase in cash surrender value of COLI of $17, a reduction of $14 in variable compensation expense, and temporary reductions in employee salaries and retirement benefits of $10.

Operating expenses decreased by $66.9 in Q2 2010 compared to Q2 2009. The Q2 2010 decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, a reduction of $21 in variable compensation expense, an increase in cash surrender value of COLI of $6, temporary reductions in employee salaries and retirement benefits of $5, and favorable currency translation effects of approximately $5. Q2 2010 operating expenses increased as a percent of revenue due to reduced volume leverage.

Operating expenses decreased by $126.6 year-to-date in 2010 compared to the same period in 2009. The year-to-date 2010 decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, a reduction of $36 in variable compensation expense, favorable currency translation effects of approximately $14, an increase in cash surrender value of COLI of $12, and temporary reductions in employee salaries and retirement benefits of $10. Year-to-date 2010 operating expenses increased as a percent of revenue due to reduced volume leverage.

Read the The complete ReportSCS is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC.

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10qk
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