Steelcase Inc (SCS) 2004 Q1 法說會逐字稿

Good day and welcome to Steelcase's First Quarter Earnings Conference Call.

As a reminder, today's conference call is being recorded.

For opening remarks and introductions, I would like to turn the conference call over to Mr. Terry Lenhardt, Vice President, Corporate Strategy & Investor Relations.

You may begin.

Thank you John and good morning, everyone.

Thank you for joining us.

I am pleased to join the recap of our first quarter results for fiscal year 2004.

Here with me today are Jim Hackett, our President and Chief Executive Officer, Mark Mossing, Vice President and Corporate Controller, and Jim Keane, our Chief Financial Officer.

You should have received and hopefully have read our first quarter earnings release dated Monday, June 23rd, 2003, which crossed the wires yesterday afternoon.

That same release is posted to and is now accessible on our web site.

This conference call is being live web cast.

A replay will be available at the Investor Relation section of www.steelcase.com shortly after this event concludes.

In addition to our prepared remarks today, we'll respond to questions from investors and analysts.

At this time, we are incorporating, by reference, into this conference call and in the subsequent transcript the text of our Safe Harbor Statement as incorporated in last night's release.

Certain statements may within the release and during this conference call constitute forward-looking statements.

There are risks associated with the use of this information for investment decision-making purposes.

For more details on these risk please refer to last night's release and form 8-K, the company's form 10-K for the year ended February 28th, 2003, and our other filings with the Securities and Exchange Commission.

Finally, the web cast of this call is a copyrighted production of Steelcase, Inc..

Any reproduction, publication or rebroadcast without the express written permission of Steelcase is prohibited.

Copy right 2003, Steelcase, Inc.

Now with those formalities out of the way, I'll turn the call over to our president and CEO, Jim Hackett.

Jim?

Terry ,thank you and good morning to all on the call.

My comments on this call center around some key events that took place in the last few weeks.

These become evidence of our progress and support cautiously optimistic attitude of our prospects.

The last quarter's performance was expected, and while we knew that what would transpire, we don't want to ever get comfortable with bad news.

We believe that the economic challenges are a fact of life, and while we've worked extremely hard to shake the company's cost structure to these new realities, we also worked hard to be true to the notions of innovation.

Steelcase needed to focus on its cost structure, and we have.

That journey, though, won't end in the next quarter or the next year.

This is a consciousness that I can commit pervades our thinking daily.

Rare, however, is the progress of a company solely on its ability just to reduce cost.

We know this is important, but we believe we need to ensure that innovation maintains its place in the company's charter.

So it's with that insight that we're pleased that this year's trade show, NeoCon, showed that Steelcase, Inc. achieved an industry high nine awards at this year's show.

Innovation is being associated with us as customers confirm from their assessments of our industry.

And I suspect that the most common reaction when clients view our science is, gee, I never expected that to come from a furniture company!

An example would be the Leap technology.

As you know, we recently demonstrated this at our NeoCon show and it's actually defining the new standards for ergonomic automotive seating.

To be clear, this is not a product that Steelcase is producing.

It is licensing the technology to that industry.

And you know it's plausible that the auto industry could have chosen other well-known seating inspirations, but it chose Leap.

We see this further being extracted in other seating products that will populate other industries, still in transportation.

Why, you might ask?

I believe it's because of the application of Steelcase seating science.

Further product work continues on the next generation of office seating to take advantage of our continued science.

Over two and a half years ago, we demonstrated an advanced idea with IBM called Blue Space.

Its inspiration was the coming of a wireless based environment, and Steelcase's contribution to this research was its insight into how wireless will further adjust work environments, the practices and products.

Now wireless is hitting the mainstream, and is likely to further alter how customers use their offices, and expectedly to spur demand.

Our Pathways technology was further incorporated some of these insights.

This product won an award at NeoCon.

Lastly on the product front, we speculated a number of years ago that there would be an enhancement of spaces devoted to teams.

This insight led to our initiation of investment in laser-based technology for intelligent white boards.

That further led us to acquire Polyvision.

At NeoCon, we introduced to our industry the Polyvision LTX board and it garnered a gold for technology products.

This product is an exceptional proof statement of our effort to improve team based environment and to create a concept we call our architectural scale computing.

You'll be seeing more of this technology in higher education environments, which incidentally have continued to encourage construction and have been a relief from some of the downward pressures on our industry.

We were happy to escort the industry analysts and many of you and other interested parties through our showroom last Monday night.

And as we suggested in that session, we believe the company is well positioned for a recovery with these new product notions and ideas.

While these events continue to confirm our strategic path, there's more to be done.

We spend an equal to greater amount of time on ensuring that our customers have an operationally exceptional experience in buying Steelcase.

Our target is trying to make this effort perfect.

Last week we hit a milestone with the first order entered into our North American enterprise using our SAP-inspired system.

This has tremendous benefits for our future, and I'm happy to report that progress.

Again, I think this is excellent evidence of positioning our company for strong performance beyond the downturn.

This is a system change that essentially transforms a 30-year-old legacy system.

And to be able to acknowledge its implementation during one of the worst downturns in our industry, it's a huge credit to the employees of Steelcase, who've kept their head down and got this project done.

Last week we also heard that our efforts to secure the large order for the new headquarters of the federal --FAA were successful.

This was a very difficult experience, which underscores an inane concept on our industry of allowing prisoners to add some partial value to source products to compete with the private sector for public projects.

I'm not sure if you've read about it, but if you get a chance to do a search on 'google' around prison industries and Steelcase, you'll find the topic interesting.

Rarely if at all have we discussed this issue in this form, but be aware that we and others in our industry continue to labor for reform.

I'm gratified by the efforts of our Congressmen Ehlers and Hoekstra who've tirelessly represented manufacturers here in west Michigan, and senator Shelby of Alabama who got quite active in the FAA order.

We initially won it fair and square, and now it's been confirmed as so.

An additional benefit is that this order will be started to be built in the in the second quarter, which will add to already improved numbers that you'll hear from Jim Keane.

And then to those who have wondered about our core strategy of the links between furniture and architecture and technology, know that our best thinking will be used in this new FAA head quarter project.

Which we believe helped define why Steelcase was chosen as the best value.

I will close these comments by implying that I amongst other CEO's in this industry and business in general and probably those of who you track developments believe that our economy has a good chance now to improve.

That the fundamentals are now falling in place for this to happen, and while it's true that many challenges do persist, we're fundamentally a great business who does business with the who's who of global corporations.

Our brand promises attractive as companies do want to help make their workers more effective.

And while there's a preponderance during the down it downturn of attention towards gaining efficiencies, we're confident that value will always mean a great deal.

So in that way, we're expecting that Steelcase will continue to be judged the best value, allowing it to be the best company in this industry.

Now I'd like to turn it over to Jim Keane, our Chief Financial Officer, who will get into detail about the tough first quarter.

It's certainly one we had expected and have factored into our year where we expect to earn a positive return.

Jim.

Thank you, Jim.

Yesterday we reported a first quarter loss of $13 million or 9 cents per share.

That's in line with the estimates we previously provided for the quarter.

Revenue for our first quarter was $572 million.

That's also in the $570 million to $590 million range we estimated last time.

As we said last time, we entered the first quarter with weak backlog, particularly in North America.

North America orders strengthened during the quarter.

However, because many of those orders scheduled to ship in the second quarter, our backlog increased inside of our sales.

These orders will help us increase sales in the second quarter.

I'll talk about some of the factors affecting our profitability in the first quarter, and let me start by reminding you that we have revised our reporting format in the earnings release as well as the material in this Conference Call in accordance with Regulation G. We will no longer talk about Steelcase Inc.

Earnings before non-recurring items, except in very specific situations, and we don't have any of those situations this quarter.

For example, we incurred severance charges relating to restructuring activity in the quarter.

We recognized gains on the sale of real estate and leases, but we had similar gains and similar charges within the last two years, so we will no longer refer to those as non-recurring.

Now, we also realize that it's useful to investors to be able to compare financial performance in this quarter to other quarters, and to understand the many factors underlying our economics.

So we will provide a great deal of information related to gains sand losses and other factors, an we'll leave it up to you to use that information as you wish.

I'll go through some details for the next few minutes.

We incurred $5.3 million in pre-tax severance charges in the North American segment relating to previously announced reductions.

We incurred $2 million of similar pre-tax charges in the other category where they're included in operating expenses.

We incurred pre-tax severance and restructuring charges of $7.5 million in the international segment.

Of this charge, $6.3 million related to disposal of assets as a result of a restructuring of our Brazil operation.

This $6.3 million charge includes $4.1 million of currency translation losses, which accumulated over many years.

In accordance with GAAP, we previously recorded these unrealized losses as a reduction in shareholders' equity through the accumulated other comprehensive income line.

Now that we are disposing of the underlying assets, we record the loss through the P& L and there is no effect on the shareholders' equity.

We also recognized a pre-tax gain of $2.7 million on the sale of leases and a $3.1 million gain on the sale of real estate in California.

These two amounts are shown as part of non-operating items.

The sale of the Tucson land and building, a portion of which was recognized last year, is now complete.

The total of the items I've described is a net charge of $9 million pre-tax, or about $5.6 million after tax.

Aside from those items, overall gross margins and operating expenses were close to expectations.

Head count decreased by more than 350 positions during the quarter, excluding acquisitions, we've reduced head count by 43%, more than 10,000 positions over the last 10 quarters.

Next I'll talk about the balance sheet and cash flow.

We had negative cash flow in the quarter, a net loss of $13 million was more than offset by our continued control of capital spending.

CAPEX was $14 million in the quarter, $21 million less than depreciation.

So that's the source of cash.

We also generated cash by selling leases and the Tucson property.

The negative cash flow is, therefore, explained primarily by an increase in working capital.

Receivables and inventories increased and payables decreased.

I'll touch on each of those.

Receivables increased $32 million in the quarter, about $16 million of the increase relates to currency translation effects in Euro denominated receivables in our international business.

Basically as the Euro strengthened against the dollar, the dollar values of our receivables increase.

There's no true cash flow effect of that, but it does show up in the cash flow statement.

The remaining increase in receivables is explained by business mix shift as well as stronger sales in May than in February.

Receivable balances are largely a function of shipments in the last month of the quarter.

Inventories also increased almost entirely because of currency translation effects.

Current liabilities were lower.

We typically see a reduction in the first quarter as we make annual contributions for the retirement and profit-sharing plan and other benefit plans.

We had $330 million of debt outstanding at the end of the quarter.

Our current credit rating from Standard & Poor's is BBB.

Moody's has our debt rated at BAAA3 but has us under review for possible downgrade.

I'll take a moment to update you on the progress on renewing our base facility, which provides us for access to additional liquidity.

We currently have an un-drawn $200 million facility that we plan to terminate before July 31st, since we put a new facility in place.

We have selected Bank One and Bank of America as our lead banks for the new unsecured facility.

We are targeting a facility of $225 million to $275 million.

To date, we have received bank commitments well in excess of this target range, so we are significantly oversubscribed.

We're very pleased with the level of support we've seen from our banks.

We are in the process of scaling back these commitments to within the target range.

We are finalizing the agreement language and expect to have the transaction completed shortly.

Now I'll discuss the operating results for each of our segments.

We no longer report financial services as a separate segment because after the lease sales, they are no longer a material part of our business.

They are now included in the "other" category.

The business segments are now North America, Steelcase Design Partnership and International.

In North America, sales were $296 million in the quarter, down 24% from the prior year and down nearly 50% from two years ago.

This was truly a tough quarter for North America.

As we said last time, orders spiked downward in mid January during the uncertain period preceding the war in Iraq.

Orders recovered somewhat after the war began, but remained volatile while production continued to slightly out pace incoming orders.

We saw we would eventually work our backlog levels down to levels that would hurt efficiency.

Rather than cut back hours, we decided to shut down all non-selling functions for one week in April to rebuild the backlog.

We believe that orders would continue to improve and we didn't want to take any permanent actions that would reduce our ability to respond.

After the April shutdown week, orders did improve and so did shipments, but many of the April and May orders were scheduled for second quarter shipment.

As the result, backlog increased more than 20% during the quarter.

So we had a tough first quarter, but we believe we are well positioned for the second quarter.

North America gross margins continue to track lower than historical levels because of the under absorption of fixed overhead related to excess plant capacity and inefficiencies resulting from plant consolidation activities and from operating individual plants at less than half of their capacity.

We continue to implement plans to reduce capacity.

For example, in this quarter, we announced plans to consolidate panel production to our plant in Athens, Alabama.

This will be completed by year-end.

Gross margins include worker's compensation costs, which continue to track at higher levels than we've seen in prior years.

Operating expenses continued to decline, but are higher as a percent of sales, and again that's a function of sales volume.

The reduction in operating expenses is the result of all the actions we've taken this year.

We have been careful to protect spending on projects important to our future, as Jim Hackett said earlier.

Both gross margins and operating expenses reflect a total of about $5 million in pre-tax savings from the one-week shutdown.

That is not a permanent reduction in the cost structure of North America.

North America results include $5.3 million in severance cost in the period.

Of this charge, about $2.9 million was in cost of goods sold and the rest in operating expenses.

STP sales were $67 million in the quarter, a slight decrease compared to the prior year, and a small increase versus the fourth quarter if you adjust for the extra week in that quarter.

Order rates are stable.

STP order (inaudible) don't always follow the North America pattern.

STP didn't experience the first quarter decline and it appears they are less likely to see a corresponding rebound in the second quarter.

STP return to profitability this quarter as gross margins improved to 38% versus 36% in the fourth quarter.

There were no severance or restructuring costs related to STP.

International sales were $130 million in the quarter, a 21% increase compared with the prior year and a small increase compared to the fourth quarter if you adjust for the extra week in that quarter.

However, most of this year on year increase is due to the strengthening of the Euro versus the dollar rather than increases in shipments.

International order rates are showing signs of weakness in certain markets.

International reported an operating loss of $5.2 million in the quarter.

Results included $7.5 million of restructuring charges.

About $7.3 million of this charge was in cost of goods sold, and the rest was in operating expenses.

Without these charges, international would have been profitable in the quarter.

I talked about these international restructuring charges in my earlier comments.

I'll just add we're changing our business model in Brazil.

We will continue to serve customers in that market but are reducing directing customers to manufacturing activities.

International gross margins continue to be under pressure because of (inaudible) option.

Operating expenses have declined in total, but the degree of reduction is masked by changes in exchange rates.

Operating expenses have improved significantly as a percent of sales, and that ratio is not affected by Euro versus dollar exchange rates.

Now I'll review our order trends and outlook for the next few quarters for Steelcase, Inc.

Orders in North America strengthened from January through early March.

Although orders remain volatile from week to week in March, April and May, the rolling average showed a slight upward trend.

In recent weeks, orders have continued to increase gradually.

Discussions with our field salespeople and dealers seem to support a gradual upward trend in orders through the second quarter.

This is consistent with recent increases in broader economic metrics.

So, we are finally seeing signs that a recovery may be under way, at least in North America.

SDP order rates are not showing the same growth trends, but SDP also didn't see the same declines as the North America segment.

SDP is not as linked to business capital spending because orders are less project-related.

International order rates are showing signs of weakness in certain markets, as I mentioned earlier.

We are estimating second quarter sales to be up about 10% from the first quarter, and that increase is driven by North America.

North America had a strong backlog as we entered the second quarter and order rates seem to be holding firm with a gradual upward trend.

If you do the math, you'll see the expected North America increase is nearly 20% versus the prior quarter.

So there's some risk there, and there's also a risk that in certain markets, our international business could soften more than we've assumed in this estimate.

We expect to report breakeven results in the second quarter including all charges.

You might have expected our profit outlook to be higher given the expected increase in sales.

I'll go through some of the assumptions behind the estimates to help you understand why we're only expecting breakeven results.

First, we are estimating international pre-tax restructuring charges of about $5 million in the quarter, so we would be estimating a profit if we weren't planning on these charges.

When we've talked about breakeven points, and when we've estimated earnings in the past, it's always been before considering these kinds of charges.

Second, we are moving into implementation phase of several plant consolidation projects in North America.

The extra labor to move equipment and so forth is expected to temporarily add fixed costs to our run rate and it, therefore, temporarily increases our breakeven point.

Third, we expect to see some loss deficiency in our North American operation as we implement the plant consolidation moves.

That would so often increase the cost of goods sold and the result to be temporary.

In fact, we expect to see improved efficiency once the moves are complete.

So if you adjust for those factors, we believe our breakeven point at the operating income level would be about $610 million in sales in the second quarter.

That's still a higher breakeven point than the fourth quarter for a couple reasons that may continue.

First, currency has an effect.

The international breakeven point continues to gradually decline in local currency and a stronger Euro has no material impact on breakeven from their perspective.

However, when we convert the international breakeven point to dollars, there is an impact.

We expect the Euro to be about 8% stronger in the second quarter than the average for the first quarter, so that increases our breakeven point about $10 million just because of the translation effect on international.

Second, there have been some modest increases in fixed costs that will probably continue.

We increased pay for our employees during the first quarter, and the cost of that will more fully show up in the second quarter.

We continue to see higher run rates of worker compensations cost, and that may continue for a while as well.

So we expect to breakeven in the second quarter after restructuring charges, and after all the other costs I've just described.

We expect to be profitable for the full year, including all gains and charges.

Therefore, we expect to be profitable enough in the second half to more than offset the loss in the first quarter.

To get there, orders and volumes have to continue to strengthen, and there's some risk there, particularly in our international segment.

We also have to fully capture the cost savings from the restructuring work we've been doing.

Most of these projects have a cash payback of less than one year, so they can still affect our fiscal 2004 results.

Now we'll turn it over for questions.

Thank you.

Ladies and gentlemen, the floor is now open for questions.

If you have any questions or comments, please press the number '1' followed by '4' on your touch-tone phone at this time.

Pressing 1-4 a second time will remove you from the queue should your question be answered.

Lastly, we do ask while posing your question that you please pick up your handset and switching on speakerphone for optimum sound quality.

Please hold while we poll for questions.

Our first question is coming from George Nason please state your affiliation, then pose your question.

I'm with Merrill Lynch.

Thank you.

James.

I have a couple questions for you.

Can you provide a little color on how you're approaching the compliance of the Sarbanes-Oxley Act?

I assume that the question is related to 404.

The first part of the Sarbanes-Oxley Act relates to certification, and we have a number of processes that we've had in place and processes we added to support the certification process.

We have sub-certifications, for example, we have monthly financial reviews where we discuss financial results and assumptions and reserves, and so we have a number of processes that support that.

As we move forward now, we're looking at section 404, and we are beginning implementation this summer of processes that will help us document and test our internal controls more completely in accordance to the guidelines being set forth by section 404.

What is your company doing?

Are they utilizing the big 4?

Is it for of an automated solution?

We expect that for the first part of the process, as we go through the planning and piloting of the process, so planning the project and then piloting a few key processes, that we will rely on an outside advisor, and right now we're in conversations with two outside public accounting firms, one of which will be chosen to help us with that process.

So we expect to be working on that this summer and into early fall.

And then after that pilot is completed, the idea is to train our people during that pilot phase so that our own people can continue that process as we roll it out across the other processes.

When do you feel like it will be rolled out across the entire company?

Mark, do you want to give an estimate of that?

I'd say we're going to have all the monitoring in place by early next fiscal year, first quarter, into second quarter.

OK.

Thank you very much.

Continued success down the road.

thank you.

Thank you.

Our next question is coming from Margaret Whelan.

Please state your affiliation, then pose your question.

Good morning, folks.

Morning, Margaret.

Margaret Whelan, UBS.

Couple of things.

First of all you indicated, Jim, that business seems to be accelerating a little bit.

Can you give us an idea of who's actually buying at the moment?

Yeah, I think, Margaret, that the interesting dynamic is as follows.

Our order rate moves along weekly at what we would call a dull level, and then we receive projects, and the projects are what are turning into some of the plus gains that we infer.

Historically, what happens is, when you return from a recession like this, it's the day to day business that will also pick up.

Day to day would be defined as companies who already have installed standards and now are adding to.

So we were optimistic about six months ago when we suggested that we're now starting to see the projects that had not been there for over a year on the horizon.

As a matter of fact, some of which we reported we've won, they don't ship yet, but having them out there and winning them was important.

Sure, in the pipeline.

Yeah.

And now what the renewal of the business needs is these day to day order trends to improve, and I would say to you now specifically to your question, the project business is what we've seen kind of lift our business.

But is there any particular customer type, is it the more traditional customers, you feel like you might be making some inroads in healthcare or education or are you gaining share?

Do you have any kind of feedback on that?

I would say as I suggested in my comments that higher ed (ph) turned out to be a nice reprieve from some of the pressures in our industry, so our business is up in healthcare and education.

And so, in fact, if you add the effect of the decline, the numbers are very dramatic.

But they would have to be huge to offset the core segment and they have not done that.

OK.

And then second set of questions for Jim Keane.

Can you just give us an update on your financial services business in the quarter and what the outlook will be for the rest of the year?

Yeah.

So financial services is part of the other group now.

In the quarter, the business was just slightly above breakeven net of some charges we took for reserves on the remaining lease portfolio, we continue to monitor as we've talked about before, we monitor on an ongoing basis the credit in that portfolio and we had a couple lease customers who had a decline in credit quality, and we increased our reserves as a result of that.

But we were breakeven net of those reserves.

Going forward, we expect to continue to have modest profitability in that segment as we move from the old model to the new model.

From a balance sheet perspective, we expect to see the value of the leases continue to decline as those leases just work themselves down over the next couple years.

Yeah.

And so it will be modestly profitable versus the $6 million loss -oh no I'm sorry, you made about 400,000 in 2003, is that it?

And it will be about the same or just a little better for 2004?

I wouldn't assume an increase very much.

Actually if you think about it, we have a lot less capital allocated to that business now, therefore, from an (inaudible) perspective its an improvement.

OK.

Thanks very much.

Thank you.

Our next question is coming from Budd Bugatch.

Please pose your affiliation, then pose your question.

Hi, this is Brian Gordon from Raymond James sitting in place for Bud who wasn't able to make it on the call.

If I get what you were saying in regards to the breakeven, if we exclude the currency impact, breakeven for the second quarter would be roughly $600 million versus $590 for the fourth quarter?

Yeah, if you -- I gave you a $610 million number before the currency.

So if you subtract the currency out, you would get the$600 million.

The remaining difference in the 600 and the 590 are due to the fixed costs, employee pay and increase in worker compensation costs.

I chose to talk about it at that level because that currency fluctuation may stay in place for a while.

OK.

Could you help us, though, if we kind of take away the currency effect, what sort of breakeven level could we expect by the end of the year?

Where could we be?

You said these costs are temporary, but what sort of a Q4 kind of a target do you think is possible?

I'm not going to try to quantify that too much other than to say that if you take ten out of 610 so you are back to 600, our breakeven will be lower as we exit this year because of a lot of the plat rationalization restructuring work that we're doing, not because of the kinds of fixed cost reductions we've done in the past.

It's more ongoing operational improvement work that will continue to reduce our breakeven.

Brian, I would add that that part of the cost improvement is a big part of our future that all the announcements in the industrial system rationalization that we've made are being implemented, and those economics were certain or we wouldn't have approved them, but a lot of them haven't flowed through the statement yet.

So as we get a better handle on that, we're going to report what that means.

I guess we're trying to sit here and take a look at what you guys could he earn given all the restructuring and everything.

Is there any way you could help us on what sort of contribution margin the company is moving towards with its production nationalization and so forth?

Yeah, the guidance we've given in the past on this is about a 50% contribution margin in total, and I would still use that number.

The contribution margin probably varies a little bit across different business segments and across different categories of business, project business versus ongoing business.

I'm not going to try to cut it that fine.

But roughly 50% has held up pretty well as we've gone through this downturn.

The other thing we will talk about as we become profitable is the impact of the bonus on contribution margin, so as we become profitable, we have a profit-sharing plan here that is the way bonuses are paid to our employees, and that will also reduce contribution margins profits return.

Assuming you guys are profitable on the reporting line for the year, how can we start thinking about that?

About the bonus?

Yeah, and its impact on profitability.

I don't have a way to explain that to you now, but I think what we'll do is as we go on to future quarters, we'll start being specific about profits, we'll give you some sense of what the cost of the bonuses in those quarters and some way of trying to build in what's the variable portion of the bonus.

OK.

That's fair enough.

Second question for you, would be any sort of color or comment you'd like to make on relative market share.

Granted, you know, the customer base that Steelcase serves is a little bit different from the industry, but it would look bad if you just used the BIFMA (ph) numbers, we don't have through May yet, but there would be a little bit of a difference between what you guys reported and what BIFMA is showing.

Brian, this is Terry Lenhardt.

As you just mentioned, BIFMA reported the last month was April.

If you look at the three months ending April, we feel that we've held sequentially our market share or maybe slightly increase but held sequentially in any event versus the previous three quarters, and we said that last quarter when we with were sitting here, well had held the gain from the previous quarter.

So the last two quarters on a sequential basis, we think we've held or gained share.

OK.

Well, thank you very much.

Thank you.

Once again, if there are any remaining questions or comments, please indicate now by pressing 1-4 on your touch-tone phone at this time.

Our next question is coming from Chris Hussey.

Please state your affiliation then pose your question.

Hi.

This is Olympia Mcnanny (ph) from Goldman Sachs talking in for Chris today.

Just a quick question I guess just relative to Herman Miller with their pre-announcement that they were coming out at the top end of their revenue range.

Just wondering if relative to Miller, you thought that there was any share loss.

We don't typically comment on share loss versus a particular customer or gain versus a -- competitor, story, (inaudible), but I'll just repeat what Terry said a minute ago.

Our share relative to the entire industry will stay within those percentages.

Our business is different than any particular competitor as well.

We have a large international business; we have SDP, so it's difficult to make those specific comparisons.

OK.

And just actually one more quick question.

I just didn't hear, what did you say your gross margins were for North America and international?

We'll look that up and give it to you right here.

While we're looking that up, do you have a third question, Olympia?

That's it.

When we find it -

Well, for North America for the quarter, excluding the non-recurring charges, it was about 22%.

And then the international was in the range of almost 30. 29.5.

Thank you.

There appear to be no further questions in the queue.

Do you have any closing comments that you'd like to finish with?

Yes.

It's Jim Hackett again.

Thank you for your attention today, and for those of you who were able to attend NeoCon, as I said in my earlier comments, we feel good about the foundation that's been established here in our recovery, and we look forward to reporting better results.

Thank you for your attention today.

Thank you, ladies and gentlemen.

This does conclude today's teleconference.

You may disconnect your phone lines at this time, and have a great day.

Thank you for your participation.