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Steelcase Inc. Reports Operating Results (10-Q)

January 05, 2010 | About:
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10qk

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Steelcase Inc. (SCS) filed Quarterly Report for the period ended 2009-11-27.

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 $888.9 million; its shares were traded at around $6.69 with a P/E ratio of 669 and P/S ratio of 0.3. The dividend yield of Steelcase Inc. stocks is 2.4%.

Highlight of Business Operations:

We recorded Q3 2010 net income of $0 compared to net income of $0.4 in Q3 2009, and year-to-date 2010 net income of $0 compared to $54.0 in the same period in 2009. The quarter and year-to-date comparisons are significantly impacted by results from company-owned life insurance

Our revenue decreased $195.2 or 24.1% in Q3 2010 compared to Q3 2009. Q3 2010 revenue was positively impacted by approximately $16 from currency translation effects compared to Q3 2009. Year-to-date 2010 revenue decreased $789.1 or 31.2% compared to the same period in 2009. Year-to-date 2010 revenue was negatively impacted by approximately $47 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. Q3 2010 and year-to-date 2010 revenue declines were broad-based, significantly affecting almost all of 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 further moderate in Q4 2010, as we entered this downturn beginning in Q3 2009.

Cost of sales was 70.8% of revenue in Q3 2010, a 110 basis point improvement compared to Q3 2009. The improvement was due to benefits from prior restructuring activities and other cost reduction efforts, an increase in COLI income of $20, lower commodity costs of approximately $18, temporary reductions in employee salaries and retirement benefits of $5 and a reduction of $2 in variable compensation expense, all which more than offset lower absorption of fixed costs associated with the revenue decline and warranty and inventory reserve adjustments of $5 in Q3 2010.

Operating expenses decreased by $47.8 in Q3 2010 compared to Q3 2009. The decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, an increase in COLI income of $13, temporary reductions in employee salaries and retirement benefits of $5 and a reduction of $3 in variable compensation expense, partially offset by unfavorable currency translation effects of approximately $3. In addition, we recorded reductions in general accounts receivable reserves and accrued expenses of $2.

Year-to-date 2010 operating expenses decreased by $174.4 compared to the same period in 2009. The decrease was primarily due to benefits from prior restructuring activities and other cost reduction efforts, a reduction of $38 in variable compensation expense, an increase in COLI income of $25, temporary reductions in employee salaries and retirement benefits of $15 and favorable currency translation effects of approximately $10. Year-to-date 2010 operating expenses increased as a percent of revenue due to reduced volume leverage.

Within Miscellaneous, net, Q3 2010 and year-to-date 2010 results included $1.3 of demolition costs related to an idle facility. Year-to-date 2010 results also included $3.3 of net gains related to various non-operating investments partially offset by a $2.5 charge recorded in connection with the liquidation of an unconsolidated joint venture. Year-to-date 2009 results included $4.0 of gains related to various non-operating investments.

Read the The complete ReportSCS is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Paul Tudor Jones of The Tudor Group, Chuck Royce of ROYCE & ASSOCIATES.

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