Steelcase FY 1Q18 Earnings Call Notes

Jim Keane – President and Chief Executive Officer

Significant decline in large projects, but don’t see evidence of broader slowdown

“Our analysis of our orders reveals a significant decline in large projects and large customers, which is consistent with remarks of another public company in our industry. Yet we don’t see any evidence of a broader slowdown in the economy and our day-to-day orders did not see new declines this quarter. It’s possible ongoing questions about tax reform and tariffs may be causing some companies to pause before starting new projects. On the other hand, our conversations with the A&D community suggest that they are very busy and they are often a leading indicator of demand for our products. That gives us reason to believe this is a short-term blip although we feel better if we saw stronger growth in our pipeline for future project opportunities.”

Shift from cubicles to open seating

“Another consideration is the ongoing shift in large customer demand from legacy private office in cubical applications and towards more open-benching, share desking, and ancillary applications. We saw higher rate of the year-over-year decline in our legacy product lines during Q1 and faster growth in new products aimed at the new applications”

We’re fairly confident this isn’t macro

“I’d say first of all compared to previous times when we see orders fall like this, we can almost always in those previous times point to something going on in the economy and it’s more difficult this time. There is no question that if we look at core economic drivers around business capital spending overall and job growth and CEO confidence, these are the factors you have heard us talk about before Matt and those aren’t doing badly. I mean maybe they are off their peaks a little bit like CEO confidence was very strong just after the election and has come down a little bit since then, but it’s not bad. General state of the economy maybe is off a little bit in some sectors, but it’s not bad. So, compared to other softenings that we saw, where we did wonder if it’s related to the economy, at this time I don’t feel that. So, that gives me little bit more confidence that we are not feeling about something that’s quite so macr”

We are hearing some anecdotal stories of hesitation

“So, then as we think about it, we say well, what’s going on in our industry, what’s going on with our customers. It could be that some are just pausing, hesitating and we have some anecdotal stories around that. The customers are waiting to see what happens with healthcare reform for example. So, if you are in the healthcare industry, you might be curious about what’s going to happen as that gets unveiled and how does that shape your investments. If you are interested in growing and you need to hire workers in the U.S. you might be interested in immigration reform and how that might affect your business and whether you can invest in new facilities for that. If you are interested in spending some of your repatriated cash, you are interested in tax reform and how repatriation might play a role there as that could affect investments you might make in facility. So, we have heard anecdotal stories like that. Again, I can’t put my finger in any one of those factors and say that too, but we know those factors are out there.”

Could also be a shift away from old ways of working

“At the same time, even more micro related to our industry is this shift from the old ways of working in the legacy spaces people have to these new ways of working. And it could be also anecdotally we have evidence of this that some customers are saying, you know what I am going to slowdown my rate of reinvestment in the model that I have and prepare for a shift to this new model. And if that’s true, we would see pretty much what we are seeing. So, if that’s the case what you would expect to see is the reduction in demand for similar legacy business even as new projects are showing up in A&D firms and maybe we haven’t seen them yet, but they are out there. So that’s hypothesis we have and that could be what’s going on.”

Open floor plans also create the need for some quiet spaces

“as people move towards open plan there is also a counterforce which is that people are seeking privacy and they are seeking spaces they can create that are flexible as well as reconfigurable that can create rooms for people to – in which they meet or places where people can kind of get away and concentrate for a bit. And so we are seeing at the same time the shift away from the legacy towards more open mobile reconfigurable furniture. ”

Steelcase 4Q17 Earnings Call Notes

Steelcase’s (SCS) CEO James Keane on Q4 2017 Results

Decline in demand for traditional private offices and cubicles

“In the Americas, our project business remains strong with project order growth of 17% in the quarter compared to the prior year. Day-to-day business continues to be considerably softer likely because of the ongoing decline in demand for traditional private offices and open plan cubicles. Customers are shifting can use solutions like our Ology height-adjustable desk inline which delivered strong growth again this quarter.”

New workspaces

“We also believe our customers are looking for more than just trending offices, customers are trying to grow, but the job market is tight so they can’t just hire more people. They need to more fully engage their existing workforce and we know the workplace is strongly correlated with engagement. They want offices that up practically support creativity and innovation by helping their people do their best work. This would be genesis of our recently announced alliance with Microsoft. We’re going to be working together on a couple of fronts to solve the customer issues about how to integrate space and technology to unlock creativity and productivity of people. ”

Thoughts on international environment

“And if you go market-by-market I tell you that Middle East where we’re still feeling the pressures of oil prices. We have some of the larger countries in Western Europe where election concerns and issues in their own countries might be a factor. In the UK, yes our business has struggled and part of it has been because of Brexit, part of it is also things that we’ve addressed that were issues internally before. And I would say that some of the issues that we’re faced we’re hearing about in Western Europe might be related to things going out of the U.S. So there’s concern about exported balances and so on that any time there’s a destruction and a cause for people to lose confidence, we can see that show up in order pattern. So I can speculate that there might have been a factor there related to political and economic and stability, I can’t prove it, I can’t give you any examples for example of any particular customers who chose to pull back, I have many stories like that, which would give me more confidence that we were hearing specific like that. So we’re not hearing that, but we have – we wonder about the same thing you’re wondering about.”

David Sylvester

Growth overall but declines in some verticals

“Turning to vertical markets in the Americas, we experienced growth in six of the 10 vertical markets we track including five with double digit percentage growth rates. This growth was dampened by declines in the technical professional, education, healthcare and information technology sectors some of which reported strong order growth in the fourth quarter of the prior year.”

year over year strength

“Since June, we have talked about the year-over-year strength we were seeing in our pipeline of project activity in the Americas, which continues to reflect meaningful growth compared to this time last year as well as sequentially compared to the third quarter.”

Steelcase FY 2Q17 Earnings Call Notes

Steelcase’s (SCS) CEO James Keane on Q2 2017 Results

Stronger orders

“The good news for the Americas is that we had stronger orders in August and those have continued through the first three weeks of September. We are in the midst of annual dealer meetings and they have been quite enthusiastic about the new products we launched earlier this year. Orders for those products are gaining momentum and are doing better than we estimated. Dealers are also responding positively to the work we’ve done to address growing demand for informal spaces including better merchandising of our ancillary portfolio. At a broader level, our backlog of high confidence opportunities in the Americas has strengthened for the second half of the year. So, we’re expected to grow our topline third quarter.”

Not seeing anything that looks like a recession

“Yes, so, we’ve seen recessions before in our industry and they are characterized by significant and sustained drops in order patterns. And that’s not really what we’re seeing this time. And they are usually also characterized by economic news that’s somewhat profound. So, whether it was the banking crisis or it was the drop in the NASDAQ back in 2001, you can usually point to some external factor that’s profound and say there’s a connection there. Sometimes there’s a lag between when you see it and when we see our orders, but we’re not really seeing that kind of connection now.”

For the most part people see an economy stuck in neutral

“I was in Washington last week meeting with CEOs of a lot of our customers at a kind of a general CEO conference. And I had a lot of discussions about how people are seeing the economy. And the way I’d characterize it is that there’s a lot of uncertainty, but for the most part people see it as an economy that is stuck in neutral, just a very slow growth or no growth economy in the United States.”

It doesn’t feel like an economy that’s poised to grow quickly

“We all know what the Fed did this week. It is clear that they have an interest in raising interest rates, but decided not to again based on the economic news that they are seeing. So, I think everybody is looking at it the same way. It just doesn’t feel like it’s an economy that’s poised to grow quickly. But on the other hand there is not really anything that’s pushing it down. ”

David Sylvester

Performance in verticals

“From a vertical market perspective, some of the largest declines were in sectors that had strong double-digit percentage growth in the prior year; for example, federal government, financial services, technical professional and insurance services, or in sectors where you might expect a significant decline because of known headwinds like energy. But we also saw a significant decline in the information technology sector which was closer to flat in the second quarter of the prior year.”

Continue to closely monitor EMEA

“We continue to closely monitor the overall demand environment in EMEA as various headwinds continue to pressure consumer and business confidence raising concern that even a small shift in confidence could destabilize the already fragile environment.”

Notable decline in Germany

“Customer order backlog for EMEA ended the quarter down 7% compared to the prior year. The decline in orders during the current quarter was driven by continued weakness in the Middle East and Africa largely driven by low prices as well as the U.K. likely impacted by Brexit, but it’s also a market where we believe we should be doing better and have recently appointed new leadership. Germany also declined by a notable percentage compared to strength in the prior year. These declines were reduced by strong growth in Spain despite uncertainty related to recurring elections and France which is continuing to improve following the leadership changes we made a year ago.”

Larger project business has been coming back

“we’ve been talking about on the last several calls, more of the mid-sized projects or mid-size continuing orders has been okay or decent for the last three quarters. Larger project business has been an area of decline for us up until the most recent quarters. So, the current quarter that grew modestly versus a modest decline last year. And I think that’s linked to the improvement in the project pipeline that we started talking about in June.”

Steelcase FY 4Q16 Earnings Call Notes

Steelcase’s (SCS) CEO James Keane on Q4 2016 Results

Order patterns were weak in the US likely due to weak CEO confidence

“In the Americas, order patterns continued to weaken during the quarter and in fact we had a slight year-over-year organic decline. We believe some of this is related to an ongoing decline in CEO confidence which has a strong historical correlation with BIFMA order rates. I attended the recent Business Roundtable meeting in Washington along with many other CEOs across a range of industries and it’s clear there remains a general sense of uncertainty about both economic and political factors.”

CEO confidence may have ticked up

“The most recent data that I saw that I was referring to in my comments earlier would suggest that CEO confidence dropped quite a bit about a quarter ago and then it stabilized and ticked up slightly in this most recent quarter. And if you dive into the details behind that, CEOs are less confident as they look to the future about growth in employment and a little bit more confident about increases in capital expenditures. So I wouldn’t say it’s great news but at least it’s not falling, and you have kind of this mixed bag of detail underneath it”

One concern of CEOs is being able to attract the right talent to their business

“we know we’re already in a very competitive job market. One of the top issues that CEOs face is attracting the right talent to their businesses, and when that is a concern of CEOs, that’s usually also good news for the office furniture industry because that’s when people tend to make investments in their space so they can attract the kind of people they want. So we’re hopeful that we’ll continue to see that confidence rise.”

There’s economic uncertainty all over the world

“There’s economic uncertainty all over the world of course. The tragic incidents in Belgium this week only contributed to that level of uncertainty. You also have political uncertainty in many regions around the world including United States. And whenever there is uncertainty, CEOs have a hard time making longer-term decisions. So maybe that’s as much as I’ll say for now, unless you have additional questions on that.”

We are pleased with our performance in China

“I’ll talk about China. We’re very pleased as we said earlier with our performance in Asia in general and particularly our performance in India and China this past year. We’ve been giving a lot to make sure we’ve got the right products for the market. We have a manufacturing facility, as you probably know, in China that continues to grow in importance for us in the region. We have a very strong team of people that we’ve developed over the last several years.”

Evolution in China has been from Western to local companies

“And importantly, if I were to kind of think back on our evolution in China, as well as really the rest of Asia, at first we were serving a lot of companies that we know very well from Western markets, companies that might be headquartered in the Americas or headquartered in EMEA, and that has helped us get started and establish our brand and establish our footprint and do all the things we’ve done up till now. But one of the things we’ve been doing successfully in the last couple of years is making sure we are also focusing on locally headquartered companies, Chinese headquartered companies, and making sure that our products and our relationships are relevant to them, and we’re really pleased with that success.”

Maybe the seven year cycle is just an illusion

“three of us were kind of laughing at that is because we were circulating a piece internally here over the last few weeks by somebody outside the Company who wrote about how maybe the idea that the economy follows a certain cycle of seven years for example, you often hear that number thrown out, when you go back and you actually test it, it’s not so clear that it’s seven years. Sometimes it’s shorter, sometime it’s longer, and it’s always because of some factor. So maybe the whole idea of it being kind of an inevitable time-based cycle isn’t really as relevant as will we have another financial crisis, will we have a political crisis, will we have something else that could cause uncertainty and therefore growth to slow down.”

We were seeing a slowing down but now we are feeling some resurgence of confidence

“What we felt again is that we saw some signs of a slowing down in our industry over the last several quarters, particularly as we got into December and January, but now we are feeling some resurgence of confidence, at least a flattening out of that trend. So hopefully that was a moment and hopefully we’ll see some growth develop in the quarters to come.”

David C. Sylvester

Healthcare and education showed growth

“Across vertical markets in the Americas, we experienced strong order growth in healthcare and education sectors as well as our untracked sector which includes retail customers and other vertical markets not large enough to track separately. Collectively, orders from this untracked segment comprised approximately 20% of our total orders. Most of the remainder of the 10 tracked vertical markets declined compared to the fourth quarter of the prior year.”

Steelcase FY 3Q16 Earnings Call Notes

http://seekingalpha.com/insight/earnings-center/article/3771896-steelcases-scs-ceo-jim-keane-on-q3-2016-results-earnings-call-transcript

Steelcase’s (SCS) CEO Jim Keane on Q3 2016 Results

Saw reduction of revenue in Middle East

“we saw a reduction in revenue in the Middle East where many of our customers are directly affected by declining oil prices. At the same time, we saw growth in demand in Western Europe”

Dealing with business capital spending growth slowing

“In the Americas, we are dealing with two issues; first, business capital spending growth is slowing and our industry’s growth is also slowing; second, Steelcase is growing more slowly than the industry because of our customer mix and some product gaps we are working to address.”

Seeing orders from larger customers slow as is typical when the economy has slowed in the past

“Our orders grew faster than the industry in September, but by November, we were actually seeing year-over-year declines. It’s not across the board, in the past, when the economy has slowed, we’ve seen the largest customers are often the first to cut back and that’s what we’re seeing this quarter. We didn’t see the end of calendar year orders surge, we often see from some of our larger accounts. We’ve seen a reduction in large projects, both in terms of what we booked but also as we look into the pipeline of future opportunities. We also see less of our overall business coming from our larger customers than in the past. And orders from our larger customers were down in the quarter.”

Probably feeling the effect of a slowing economy earlier than others

“As we’ve discussed before, we probably have more of our business from large customers than the overall industry. So we are probably feeling the effect of the slowing economy a little earlier than others might. And in fact, our midsize project orders continue to grow at or above overall industry growth rates.”

We’re not sure if the slowdown in large customer business is foreshadowing further weakness

“Now, what’s going to happen next, we don’t know. Will that decline in large customer business is that just foretelling a decline that we’ll see across the entire industry? We’ve had recessions in the past, in the distant past that have been like that, but we’ve also had times in the past where we’ve seen this moment where you see one segment fall and then it comes back again. So, we can’t predict that exactly. But we’ve seen both occur in the past.”

What really changed in the most recent quarter was the drop in large projects

“In this most recent quarter, the thing that was most pronounced was the drop in the large customers, a decline in orders from large customers and a decline in large projects. And it’s not that they were doing great in the previous quarters, but we saw this decline. If you look at this year versus prior years, large customers were not dramatically up or down but the mid-size and smaller customers, you’re doing pretty well. What really changed in this past quarter was the drop in the large customer of large projects.”

Other CEOs are seeing the same thing

“I will also comment I am a member of various groups where CEOs come together and talk about what they see. And for these large customer CEOs,, some of the outlooks, for example, business roundtables, commentary recently about business capital spending, would confirm that are large customers are seeing this headwind. So, whether we look at our data or we look at economic data or we just listen to what other CEOs are saying, we’re seeing consistent concerns from that customer group about the economic outlook”

Dave Sylvester

Pleased with China

“While there remains a shadow of macroeconomic uncertainty in China, we are pleased with the traction our local sales teams continue to demonstrate.”

The first half of the quarter was strong but then there was a steep fall off

“The first half of the quarter, five weeks in September and the first two weeks of October, were actually quite good and were stronger than we were expecting. In fact, I think they’ve commented that they averaged 7% growth, and so, in the first seven weeks of the quarter. And then in the last six weeks of the quarter, we saw a 9% decline. And really, it fell off suddenly and we believe that it was largely linked to not seeing the same level of year end business from some of our largest customers.”

Miscellaneous Earnings Call Notes 9.24.15

So many different factors affecting gross margins

H&M CFO

“There are so many different factors affecting our gross margins as we have been talking — it’s like 20, 25 different factors affecting the gross margin. And we don’t want to elaborate and go into each of these. We give you some major factors behind it those four, five macro factors that we have been talking about. But otherwise, we don’t want to elaborate what the gross margin is built up. And we understand that you’re keen to know but we respect we don’t want to give it away to our competitors. We don’t have any patterns. So we really want to speak that and have that information for us, only for us. Sorry.”

Children’s book market surpassed adult market for the first time ever

Scholastic CEO

“According to a study released this June by the Association of American Publishers, the children’s books segment exhibited the strongest growth among any segment in the trade category in 2014. The study also showed that the size of the children and young adult market surpassed the adult market for the first time, with children’s and YA selling at 843 million units to 746 million units for adults; although, adult books usually fetch a higher price per unit. This data supports the trends that we’re seeing ourselves in our engagements with schools and families; our belief that the strong market dynamics and focus on independent reading will continue to support company-wide growth.”

Book publisher monetizing NYC real estate

Scholastic CFO

“While the Company has no immediate need for cash, we understand that there’s substantial investor interest in our plans to monetize our real estate holdings in New York City. The Soho real estate market is vibrant and interest in our property from real estate investors, retail partners and traditional commercial mortgage lenders remain high. We expect to announce a plan by our second quarter earnings call in December. We’re beginning construction on the new retail site this November.”

Obviously benefit of strong dollar is lower costs elsewhere

Scholastic CEO

” We have a major effort within the Company to do global sourcing of our print product. Obviously, the positive side of the strong U.S. dollar is the lower costs elsewhere. So we’re shifting our printing to lower cost areas, particularly looking at India and other areas in Asia.”

Dry bulk fleet growing at 0-1% could balance supply/demand

Seanergy CEO

” a very high demolition rate is further reflecting ship supply. More specially, in 2015, the Capesize scrapping activity has exceeded 2013 and 2014 combined, which is almost 13 million deadweight tons year-to-date. The substantial reduction of the order book as well as the accelerated scrapping activity has finally led to negative fleet growth year-to-date in 2015. It is, therefore, expected that the net dry bulk fleet growth will be approximately zero to 1% in 2015, after growing only 4.4% in 2014. This is a record low as compared to the historical 10-year compounded fleet growth of 9% and more importantly, a historical seaborne trade growth on a compounded basis of 5.6% from 2004 until 2014. Based on these factors we believe that in the next three years, the market will likely lead to tonnage shortfall and a tightening utilization environment. As a result, we expect an upward trend in saturates and asset values.”

All about execution

Autozone CEO

“To execute at a high level, we have to consistently adhere to living the pledge. We cannot and will not take our eye of off execution. While we study the external environment and react where appropriate, we must stay committed to executing day-in and day-out on our game plan. Success will be achieved with an attention to detail and exceptional execution.”

Haven’t seen weakness in China, US on track

Steelcase: Jim Keane – President, Chief Executive Officer

“So far, we have seen no signs of weakness in our Chinese order patterns from our pipeline. The US market is on track to meet our initial growth expectations for the year because of both traditional drivers of demand and the continuing need for companies to update their spaces.”

Manufacturing listed as strong sector, Info tech listed as weak

Steelcase: Dave Sylvester – Chief Financial Officer, Senior Vice President

“Across vertical markets in the Americas, order growth rates were highest in the manufacturing, financial services, and healthcare sectors, while order declines were most significant in the state and local government and energy sectors. Information technology, federal government and insurance also declined, but by modest percentages.”

Steelcase FY 1Q16 Earnings Call Notes

Longer time between orders and shipments because customers are taking on more ambitious changes in their work environments

“We have spoken before about how in the Americas, we are seeing a longer period between orders and shipments. As we expected, that pattern continued this quarter. We are getting a better sense of why this is happening. It is clear that customers are taking on more ambitious changes to their work environments instead of simply refreshing the existing design and these changes often involve more construction, even when they are only renovating an existing space.”

Construction issues unrelated to furniture. Also dealers can see they need to reserve capacity

“These customers place orders earlier than normal since their design is complete earlier and planned shipment dates of furniture are often delayed because of construction issues not involving furniture. There are other reasons as well. Today, we have better tools than in the past for our dealers to see our production capacity, and with demand increasing, they have every reason to place their orders early to reserve capacity in the system.”

Demand from middle markets has grown faster than large customers

“Our analysis of BIFMA data and our own order patterns suggest demand for midmarket customers may have grown faster than from the larger customers.”

Feeling good about North America,Europe and Middle East are question marks

“Overall, we are feeling good about how our Americas business is developing for the rest of this year. As for the European economy, questions remain of course about Greece and the impact of Russian sanctions. Our business in Eastern Europe has been affected by the political turmoil and our Middle East business is softer, because of lower oil prices.”

Seeing strength in export markets in Western Europe though

“However, we are also seeing signs of strength in export markets in Western Europe and our order patterns in many of those countries are reflecting that strength.”

Activity by vertical

“Across vertical markets in the Americas, orders grew in the federal government, insurance, financial services, technical professional, state and local government and manufacturing sectors, while information technology and healthcare declined modestly against the prior year.

Orders from the energy sector grew modestly in the first quarter following a significant decline in the previous quarter. We expect this sector to be challenged for the foreseeable future while oil prices remain depressed. Most energy sector construction projects that were well underway are being completed, but many future projects have been postponed and continue [ph] considerably.”

We are able to insource capabilities that we had previously outsourced

“In the Americas, we went through a shift towards outsourcing for a while. This is going back maybe 10 years now. While we were in a transition from the very vertically integrated model to the model we have today. Now, interestingly, and now that we have reached higher level of efficiency in our Americas footprint, we have been able to in-source some of the things that we had previously outsourced.”

Companies with 25-50m in revenue are leading the growth

“if you double-click and triple-click on some of the data, what you see is that the companies that are in the $25 million to $50 million of revenue size are the ones that are leading the growth and that suggest to us that it is possible that that demand is coming from smaller company, and with small company starting to come into the recovery.

That potential that we could be seeing, you know, an acceleration of the cyclical recovery, but I very intentionally use the word may in my quote, because we do not really know, but we like what we are seeing.”

We don’t think the competitive environment is any different than it has been

“The industry is always competitive and in the Americas that has always been true as long as I have been in these various roles. We have talked about that. There are some great manufacturers out there and we compete. I do not really feel it is being any different today than it ever was. There were some saber-rattling perhaps, but if you look at what is actually happening in the marketplace, we have not seen evidence of that.”

You win because of products and relationships. You lose on the same things, but people will tell you price

“you win, because you have got the right products, you have got the right relationships. When you lose, you might be told you lost because of price, but really you lost because you did not have the right relationships and the right products, so that is our philosophy on this.’

Harder to have price competition in an environment with a lot of small projects

” the idea of price competition probably becomes more acute when you have some very large projects that are defining the marketplace. That was maybe more true a couple of years ago than it is today. Today it is much more broadly balanced between projects continuing smaller business and so the idea that you are going to go out and try to change your market share dramatically by being very aggressive on a project – does not work as well when there are not many projects out there.”

Steelcase 4Q14 Earnings Call Notes

We got off to a slow start with December orders, January was better

“We got off to a slow start with soft December orders in the Americas. January orders were much better but these orders won’t ship until Q1 or even Q2. Project business remained strong and we are seeing a shift back to larger projects and a strengthening in demand from our larger customers.”

Normal level of uncertainty in the US but no slowdown

“We have a normal level of uncertainty in the U.S. economy driven by the strong dollar and other factors that affect our customers. But we are not seeing signs of a broader slowdown in the Americas”

Orders pretty good in early March

“our win rate has been consistent and we haven’t seen any significant change in competitive dynamics. Orders have been pretty good in early March. Our pipeline of opportunities are strong and we would expect to see continued modest growth as we enter the new fiscal year.”

Largest projects growing most

“Regarding project business, the growth in orders was driven by large projects from some of our largest customers, which is different than the trend we saw over the last two quarters when many small to midsize projects drove the growth. Project orders as a percentage of total orders continued to increase in the Americas reaching 50% this quarter, which is meaningfully higher than our historical average.”

We believe we have seen the bottom of the recession in Western Europe

“EMEA order patterns remain choppy, but we continue to believe we have seen the bottom of the recession in Western Europe. Asia-Pacific orders grew nicely this quarter following a modest decline in the third quarter and growth in the second quarter, making it difficult to assess whether or not they maybe emerging out of the demand low we have been experiencing over the past couple of years. ”

Large projects more tied to construction. Midsize more tied to restacks

“I maybe would add to that is that in larger projects like when I visited recently, more and more we are finding that these large projects also involve either construction of a new building or a significant redesign or reengineering of an existing building and therefore there is a little bit more complexity involved in the larger projects and that also relates to some of these patterns we have seen with lead times, because there is more things that can cause a project to be delayed.

And I will contrast that with maybe midsize projects or project we might have seen years ago, they were more, what we call, restacks, which is people really aren’t changing the building very much. They are just changing the layout of furniture.”

Steelcase 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

US Furniture industry contracted in Q1

” Overall we expected a better quarter. Our Americas business missed our revenue expectations by $10 million to $15 million but our 6% organic growth still appears to have outpaced the U.S. furniture industry which seems to have contracted in March and April.”

Industry contraction was a surprise vs. expectations

“That industry contraction was also a surprise versus what we expected three months ago but now we know the overall U.S. economy had negative GDP growth in the first quarter of the calendar year so perhaps this makes sense in hindsight.”

EMEA business doing better

“Meanwhile our EMEA business exceeded our expectations. It’s very good news to see this business beginning to show some top line growth after our prolonged recession in the region”

Strong and weak sectors

“With respect to vertical markets in the Americas we experienced order growth in the technical professional, manufacturing and energy information technology and insurance services sectors while healthcare government, financial services and education declined against the prior year.”

going forward encouraged by the pipeline

“As I look out to the future we feel good about the kind of projects that are in the pipeline, the quality of the projects and I would also say that at NeoCon this past month the quality of the discussions we’re having with customers is very high. We had probably a higher percentage of — I can’t quantify, but high percentage of customers with [real] [ph] projects that are on the books that’s being planned for this year and next year was actually quite good.”

We were really surprised by what happened in Q1

“as you can tell we were surprised ourselves if you think about our projections from three months ago. we could feel momentum building. We were surprised that orders weren’t as strong in March and May. At first you wonder is there something going on in your own business but as you have seen more data now about the industry and data about the U.S. economy including even this week’s restatement of first quarter calendar year growth by the Commerce Department. We can maybe say okay there is something really going on in the economy, maybe it’s related to weather, maybe it’s related to other factors something that caused the interruption but it doesn’t change my perspective on the future. I still believe that this coming quarter and the rest of the year has a lot of positive signs in the U.S.”