[KNOLL LOGO]
1235 Water Street
East Greenville, PA 18041
Tel 215-679-7991
Press Release
Knoll, Inc. Reports 2004 Fourth Quarter and Full Year Results
Net Sales, Net Income and EPS Grew in Fourth Quarter;
Year-End Backlog Increases 14.5% Over Prior Year
EAST GREENVILLE, PA, February 9, 2005 -- Knoll, Inc., (NYSE: KNL) today
announced results for the fourth quarter and year ended December 31, 2004. Net
sales were $192.8 million for the quarter, an increase of 7.7% from fourth
quarter 2003. Net sales for the year also grew 1.3%. Gross margin for the
quarter was 35.7% while net income was $9.9 million or $0.20 per share. These
amounts do not include pretax charges of $3.8 million associated with the public
offering of 12,702,150 shares of common stock on December 17, 2004.
Andrew Cogan, Chief Executive Officer, stated, "We have now experienced three
consecutive quarters of increasing year over year sales growth. As expected, as
the industry recovery gains traction, our sales are now growing faster than the
industry."
"We are seeing good gains in our seating, storage and specialty businesses and
our systems business is growing again. Importantly, this growth is now resulting
in quarterly year over year operating profit and earnings per share growth as
well," he added.
Fourth Quarter 2004 Financial Results
Fourth quarter 2004 financial results highlights follow:
(Results exclusive of pretax charges of $3.8 million associated with public
offering)
Dollars in Millions Three Months Ended
Except Per Share Data ------------------- Percent
12/31/04 12/31/03 Change
-------- -------- ----------
Net Sales $ 192.8 $ 179.0 7.7%
Gross Margin 68.8 61.4 12.1%
Operating Expenses 44.4 39.3 13.0%
Operating Income 24.4 22.1 10.4%
Net Income 9.9 9.3 6.5%
Earnings Per Share - Diluted .20 .19 5.3%
Backlog 122.5 107.0 14.5%
The company's net sales for fourth quarter 2004 were $192.8 million, an increase
of $13.8 million or 7.7% over fourth quarter 2003. Backlog of unfilled orders at
December 31, 2004 increased $15.5 million or 14.5% versus the prior year.
Gross margin for fourth quarter 2004 was $68.8 million, an increase of $7.4
million or 12.1%, over fourth quarter 2003. As a percentage of sales, gross
margin increased to 35.7% for fourth quarter 2004 from 34.3% for fourth quarter
2003. These increases resulted from better absorption of overhead on the
incremental volume coupled with the company's ability to offset steel and fuel
inflation through improved pricing and a continued focus on global sourcing
initiatives and continuous improvement efforts.
Operating expenses for fourth quarter 2004 totaled $44.4 million, or 23.0% of
sales, compared to $39.3 million, or 22.0% of sales for fourth quarter 2003.
These increases resulted from greater marketing and product development spending
in preparation for 2005 product introductions. In addition, strong year-end
bookings performance by the sales force triggered approximately $2.6 million in
additional sales compensation. These amounts are exclusive of pretax charges
totaling $3.8 million associated with the public offering of 12,702,150 shares
of common stock on December 17, 2004.
Operating income for fourth quarter 2004 was $24.4 million, an increase of $2.3
million, or 10.4%, from operating income of $22.1 million for fourth quarter
2003. As a percentage of sales, operating income increased to 12.7% for fourth
quarter 2004 from 12.3% for fourth quarter 2003.
Net income for fourth quarter 2004 was $9.9 million, or $.20 per share, as
compared to $9.3 million or $.19 per share, for fourth quarter 2003. Fourth
quarter 2003 net income benefited from gains on interest rate collars and
favorable exchange rate variances as compared to fourth quarter 2004. These
gains favorably impacted fourth quarter 2003 earnings by $.04 per share.
Cash flow from operations for the fourth quarter totaled $24.6 million, compared
to $15.1 million for the same period last year. Over $33 million of debt was
paid down in the quarter, $20 million from operations and $13 million from the
proceeds received from the exercise of stock options in the quarter.
Barry McCabe, Knoll's CFO noted " We are very pleased with the significant
operating cash flow that we generated in the fourth quarter and with the
progress that was made on reducing our debt."
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Full Year Results
2004 financial results highlights follow:
(Results exclusive of pretax charges of $4.4 million associated with public
offering and $2.5 million related to the write-off of deferred financing fees as
the company entered into a new credit agreement on September 30, 2004)
Dollars in Millions Three Months Ended
Except Per Share Data ------------------- Percent
12/31/04 12/31/03 Change
-------- -------- ----------
Net Sales $ 706.4 $ 697.2 1.3%
Gross Margin 241.0 236.3 2.0%
Operating Expenses 165.3 149.7 10.4%
Operating Income 75.8 86.6 -12.5%
Net Income 32.1 36.3 -11.6%
Earnings Per Share - Diluted .66 .75 -12.0%
Backlog 122.5 107.0 14.5%
For the year, net sales totaled $706.4 million, an increase of $9.2 million or
1.3% from 2003 net sales of $697.2 million. The second half of 2004 experienced
net sales growth of 5.2%; this was preceded by a decline in net sales of 2.8%
during the first half of the year.
Gross margins increased slightly to 34.1% in 2004 from 33.9% in 2003. The
company offset the effect of significant steel and fuel inflation through higher
realized prices and an ongoing focus on global sourcing and continuous
improvement efforts. Operating expenses, exclusive of $4.4 million associated
with the public offering increased $15.6 million in 2004 as compared to 2003. As
a percent of sales, operating expenses were 23.4% in 2004 and 21.5% in 2003,
reflecting the effect of higher expenditures in product development and
marketing relating to new product and growth initiatives along with increased
sales compensation relating to strong bookings performance particularly in the
fourth quarter. The company generated net income before public offering expenses
and the write-off of deferred financing fees of $32.1 million or $.66 per
diluted share in 2004, a decrease from $36.3 million or $.75 per diluted share
in 2003.
Annual cash generated from operations in 2004 was $60.7 million compared to
$79.0 million the year before. Capital expenditures for the year totaled $13.1
million compared to $9.7 million for 2003. Excluding amounts borrowed in
connection with its September 30, 2004 refinancing, the company paid down $63.0
million of its debt in 2004 and $71.3 million in 2003.
Mr. Cogan commented, " 2004 was an important turning point for Knoll. Thanks to
the successful efforts and hard work of all our associates and dealer partners,
we increasingly grew our top line and by the fourth quarter outperformed the
industry. We maintained our industry leading operating margins while making the
increased investments in sales,
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marketing and product development to position us for a year of growth in 2005.
In December we became a public company."
The company stated that it expects first quarter 2005 revenue to be in the $170
to $175 million range, an increase of 11 - 14 % from the first quarter of 2004.
Earnings per share estimates for the first quarter 2005 are between $.10 and
$.12.
The company added that on February 2, 2005, its Board of Directors declared a
quarterly cash dividend of $.05 per share payable on March 30, 2005, to
stockholders of record on March 16, 2005.
Reconciliation of Non-GAAP Financial Measures
Three Twelve
Months Months
Dollars in Millions Ended Ended
-------- --------
12/31/04 12/31/04
-------- --------
Operating Expenses $ 48.2 $ 169.7
Less:
Charges associated with public offering 3.8 4.4
--------- ---------
Adjusted Operating Expenses $ 44.4 $ 165.3
========= =========
Operating Income $ 20.6 71.4
Add:
Charges associated with public offering 3.8 4.4
--------- ---------
Adjusted Operating Income $ 24.4 $ 75.8
========= =========
Net Income $ 6.8 $ 26.8
Add:
Charges associated with public offering
(net of income taxes of $0.7) 3.1 3.7
Write-off of deferred financing fees
(net of income taxes of $0.9) - 1.6
--------- ---------
Adjusted Net Income $ 9.9 $ 32.1
========= =========
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Conference Call Information
As announced on January 24, 2005, Knoll will host a conference call on Thursday,
February 10, 2005 at 10:00 A.M. EST to discuss its financial results, quarterly
highlights and business outlook.
The call will include slides; participants are encouraged to listen to and view
the presentation via webcast at http://www.knoll.com; go to "About Knoll" and
click on "Investor Relations".
The conference call may also be accessed by dialing:
North America 800 638-4817
International 617 614-3943
Passcode 67617068
Headquartered in East Greenville, Pennsylvania, Knoll, a leading designer and
manufacturer of branded office furniture products and textiles, serves clients
worldwide. Our commitment to innovation and modern design has yielded a
comprehensive portfolio of products designed to provide enduring value and help
clients shape their workplaces with imagination and vision. The Knoll commitment
to high environmental standards is mandated by a comprehensive Environmental,
Health & Safety Management Plan.
Cautionary Statement Regarding Forward-Looking Information
This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements regarding Knoll,
Inc.'s expected future financial position, results of operations, cash flows,
business strategy, budgets, projected costs, capital expenditures, products,
competitive positions, growth opportunities, plans and objectives of management
for future operations, as well as statements that include words such as
"anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may,"
"could," "should," "will," and other similar expressions are forward-looking
statements. Such forward-looking statements are inherently uncertain, and
readers must recognize that actual results may differ materially from the
expectations of Knoll management. Knoll does not undertake a duty to update such
forward-looking statements. Factors that may cause actual results to differ
materially from those in the forward-looking statements include corporate
spending and service-sector employment, price competition, acceptance of Knoll's
new products, the pricing and availability of raw components, demand for high
quality, well designed office furniture solutions, changes in the competitive
marketplace, changes in the trends in the market for office furniture and other
risks identified on Knoll's Registration Statement on Form S-1 and other filings
with the Securities and Exchange Commission. Many of these factors are outside
of Knoll's control.
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Contacts
Investors: Barry M. McCabe
Senior Vice President and Chief Financial Officer
Tel 215 679-1301
bmccabe@knoll.com
Media: David Bright
Vice President, Communications
Tel 212 343-4135
dbright@knoll.com
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KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- ---------
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
Sales $ 192,804 $ 179,039 $ 706,390 $ 697,246
Cost of sales 124,030 117,670 465,379 460,911
--------- --------- --------- ---------
Gross profit 68,774 61,369 241,011 236,335
Selling, general, and
administrative expenses 48,205 39,309 169,706 149,739
--------- --------- --------- ---------
Operating income 20,569 22,060 71,305 86,596
Interest expense 6,219 5,004 19,452 20,229
Other expense, net (3,131) (321) (5,316) (2,473)
--------- --------- --------- ---------
Income before income tax expense 11,219 16,735 46,537 63,894
Income tax expense 4,465 7,457 19,793 27,545
--------- --------- --------- ---------
Net income $ 6,754 $ 9,278 $ 26,744 $ 36,349
--------- --------- --------- ---------
Earnings per share:
Basic $ .15 $ .20 $ .58 $ .78
Diluted $ .14 $ .19 $ .55 $ .75
Weighted-average shares outstanding:
Basic 46,510,194 46,307,976 46,353,253 46,317,530
Diluted 48,923,388 48,386,426 48,319,483 48,414,374
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KNOLL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
December 31, December 31,
2004 2003
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,052 $ 11,517
Customer receivables, net 92,452 91,271
Inventories 49,586 38,354
Prepaid and other current assets 18,604 20,040
--------- ---------
Total current assets 169,694 161,182
Property, plant, and equipment, net 150,992 154,653
Intangible assets, net 237,382 235,466
Other noncurrent assets 8,641 9,700
--------- ---------
Total Assets $ 566,709 $ 561,001
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 108 $ 81,340
Accounts payable 46,075 54,502
Other current liabilities 60,853 53,578
--------- ---------
Total current liabilities 107,036 189,420
Long-term debt 392,750 299,531
Other noncurrent liabilities 88,268 80,169
--------- ---------
Total liabilities 588,054 569,120
--------- ---------
Stockholders' deficit (21,345) (8,119)
--------- ---------
Total Liabilities and Stockholders' Deficit $ 566,709 $ 561,001
--------- ---------
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KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
----------------------------
2004 2003
----------- -----------
(Unaudited)
Net income $ 26,744 $ 36,349
-------- --------
Cash Flows provided by Operating Activities 60,728 78,975
Cash Flows used in Investing Activities (13,131) (10,117)
Cash Flows used in Financing Activities (51,953) (72,899)
Effect of exchange rate changes on cash and cash equivalents 1,891 2,685
-------- --------
Decrease in cash and cash equivalents (2,465) (1,356)
Cash and cash equivalents at beginning of year 11,517 12,873
-------- --------
Cash and cash equivalents at end of year $ 9,052 $ 11,517
-------- --------
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