GRAND RAPIDS — Steelcase Inc. said Tuesday that reduced or halted operations at its global manufacturing and distribution centers because of the coronavirus will “temporarily, but significantly” affect the company’s ability to generate revenue in its current quarter.
The office furniture manufacturer said the coronavirus had affected operations in Michigan, California, Pennsylvania and Texas, as well as in France, India and Malaysia, according to a statement. It expects further effects in Spain and the U.K.
In Michigan, the company temporarily laid off “nearly all” of its hourly manufacturing and distribution employees in response to Gov. Gretchen Whitmer’s stay-home executive order that forced non-essential businesses to close. Steelcase said it will continue to pay the full cost of employee health insurance premiums during the shutdown.
In a move to lower people costs, the company temporarily cut all salaried employees’ base pay by 50 percent, although some lower-paid workers will see less of a reduction, while higher-paid employees will have higher cuts.
As well, the company lowered President and CEO Jim Keane’s base pay to $1 and cut executive base pay by 60 percent. The company’s board of directors is no longer taking a cash retainer.
“The company is taking these actions in an effort to avoid permanent headcount reductions so the company and its employees can come through this crisis together,” according to a statement.
In further moves to conserve capital, Steelcase eliminated travel and events, overtime, temporary labor and annual merit increases. The company also is scaling back project spending and delaying longer-term projects.
Steelcase said it was taking steps to manage its working capital in anticipation of inventory increases related to customers being unable to receive products because of COVID-19 related shutdowns.
“In the short run, we are confident the actions we are taking will protect our people and therefore our relationships with customers, dealers and suppliers,” Keane said in a statement. “These actions will also protect the company’s capital, so we can navigate through this crisis and emerge strong and ready to compete.”
As news of the coronavirus spread, Steelcase also began to maximize its liquidity, including drawing $250 million from a new revolving syndicated credit facility this month. The company also ended 2019 with total liquidity of $701 million, its highest level in more than a decade.
Steelcase detailed the cost savings and liquidity measures in an earnings release for the fourth quarter and full 2020 fiscal year, which ended Feb. 28.
For the 2020 fiscal year, Steelcase (NYSE: SCS) generated $3.7 billion in revenue and reported net income of $199.7 million, or earnings of $1.66 per diluted share. That compares to $3.4 billion of revenue, net income of $126 million, and earnings of $1.05 per diluted share for the 2019 fiscal year.
Executives will hold a conference call with brokerage analysts to discuss the fourth quarter and 2020 fiscal year results at 8:30 a.m. Wednesday.