After a year that included new management, restructuring, divestments and plant closures, Steelcase Inc. reported net income of $20.4 million on $2.44 billion of revenue for fiscal 2011, versus a $13.6 million loss on $2.29 billion in income for the year prior.
More than half the net income, $10.4 million, came in the fourth quarter, where Steelcase (NYSE:SCS) reported $622.9 million in revenue, up $71 million from the prior period.
Steelcase took charges of $43 million from deconsolidations and approximately $6 million related to unfavorable currency translation effects.
"In our North America and International segments, organic revenue growth averaged over 24 percent and was broad-based across product categories and regions," said James P. Hackett, president and CEO. "The operating leverage achieved on the incremental sales continues to demonstrate our earnings power. "
Current quarter adjusted operating included a gain from the IDEO ownership transition of $9 million (net of incremental variable compensation expense), offset by a $4 million impairment charge related to an asset held for sale and $4 million of incremental variable compensation expense associated with a gain on sale of a Steelcase facility in Canada which was recorded as a restructuring item.
Cost of sales improved to 70.0 percent of revenue in the current quarter compared with 71.3 percent in the prior year. Higher absorption of fixed costs associated with the revenue growth in the quarter and benefits from previous restructuring activities were partially offset by higher commodity costs and the impact of deconsolidating IDEO.
Last quarter, Steelcase put Jim Keane in charge of the Steelcase brand across the Americas and EMEA (Europe, the Middle East and Africa); Jim Mitchell, Steelcase president, now reports to Keane; Steve Hayes left to become VP sales at Watson Furniture Group - after 22 years at Steelcase (he was director of global client collaboration and GM of Asian Sales). Steelcase sold a Canadian plant for $25 million on Nov. 30 (and closed Texas and Michigan plants and layed off 750) and spun off its 550-employee IDEO design unit (it's headed by John Ravich in Palo Alto, CA) in a management buy-out.
Operating expenses in the fourth quarter were $160.5 million compared with $168.4 million in the prior year which included the favorable impacts of variable life COLI income. Current quarter expenses decreased due to the IDEO ownership transition, though Steelcase says the current quarter results include an impairment charge related to an asset held for sale.
Steelcase also gained $4.9 million in the current quarter from the sale of an idle facility, as well as variable life company owned life insurance, or COLI. (These are policies held on top managers by Steelcase, a common practice among large corporations, with the policies recorded as assets as an additional source of corporate liquidity.) For the year, COLI income totaled $33.1 million.
Orders grew by more than 20 percent in the North America and International segments in the fourth quarter, compared to the prior year. The company expects first quarter fiscal 2012 revenue to reflect typical seasonal patterns and be in the range of $575 to $600 million. First quarter of fiscal 2011 included $35 million of revenue from IDEO, which won't be there for 2012.
Steelcase expects $10 million of higher commodity costs compared to the prior year and about $4 million of incremental interest expense from senior notes Steelcase issued in February. Steelcase says its reported net loss of $0.08 per share in the first quarter of fiscal 2011 included an $11.4 million charge resulting from healthcare reform legislation specifically related to the Medicare Part D Subsidy.
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