Knoll
1235 Water Street
East Greenville, PA 18041
Tel 215 679-7991
Press Release
Knoll, Inc. Reports First Quarter 2005 Results
Sales Increase 16.8% From PY, Operating Profits Up 47.8%
EAST GREENVILLE, PA, April 26, 2005 -- Knoll, Inc., (NYSE: KNL) today announced
results for the first quarter ended March 31, 2005. Net sales were $179.1
million for the quarter, an increase of 16.8% from first quarter 2004. Operating
income was $17.0 million, an increase of 47.8% from the first quarter 2004,
while net income was $6.9 million, an increase of 32.7% over 2004, or $0.13 per
share compared to $0.11 per share in the prior year.
Andrew Cogan, Chief Executive Officer, stated, "We are pleased with our strong
start to 2005. The first quarter of the year marked our fourth consecutive
quarter of year over year sales growth. Our investments in broadening and
strengthening our product offerings are gaining traction with architects and
designers, customers and dealers and as a result our sales are growing faster
than the industry."
"In spite of significant inflation in our material and transportation costs, we
were still able to deliver improved profits and margins. This strong performance
is attributable directly to the tireless efforts of our associate owners
company-wide and their commitment to continuous improvement in our operations."
First Quarter 2005 Financial Results
Dollars in Millions Except Per Share Data Three Months Ended
---------------------- Percent
3/31/05 3/31/04 Change
--------- --------- ---------
Net Sales $ 179.1 $ 153.3 16.8 %
Gross Margin 58.1 47.1 23.4 %
Operating Expenses 41.1 35.6 15.5 %
Operating Income 17.0 11.5 47.8 %
Net Income 6.9 5.2 32.7 %
Earnings Per Share - Diluted .13 .11 18.2 %
Backlog 117.2 111.8 4.8 %
The Company's $25.8 million increase in net sales for first quarter 2005 was the
result of growth in all product categories coupled with approximately $2.0
million of additional revenues realized from recently implemented price
increases. Backlog of unfilled orders at March 31, 2005 increased $5.4 million
an increase of 4.8% over the prior year.
Gross margin for first quarter 2005 was $58.1 million, an increase of $11.0
million or 23.4%, over first quarter 2004. As a percentage of sales, gross
margin increased to 32.4% for first quarter 2005 from 30.7% for first quarter
2004. These increases resulted from better absorption of overhead on the
incremental volume, improved pricing, and cost savings realized from ongoing
global sourcing initiatives and continuous improvement programs. These increases
were offset by approximately $5.4 million of material and transportation
inflation plus $1.7 million of unfavorable exchange rate impact.
Operating expenses for first quarter 2005 totaled $41.1 million, or 22.9% of
sales, compared to $35.6 million, or 23.2% of sales for first quarter 2004.
These increases resulted from greater marketing spending in preparation for 2005
product introductions as well as additional sales compensation and incentive
costs as a result of our higher sales and strong profit performance.
Additionally, costs incurred to comply with the requirements of operating as a
public company also negatively impacted first quarter expenses.
Operating income for first quarter 2005 was $17.0 million, an increase of $5.5
million, or 47.8%, from operating income of $11.5 million for first quarter
2004. As a percentage of sales, operating income increased to 9.5% for first
quarter 2005 from 7.5% for first quarter 2004.
Net income for first quarter 2005 was $6.9 million, or $.13 per share, as
compared to $5.2 million or $.11 per share, for first quarter 2004. First
quarter 2005 effective tax rate benefited from the mix of pretax income and the
varying effective tax rates in the countries in which we operate. In addition,
2005 net income was negatively impacted by increased interest expense as a
result of higher interest rates. Lastly, first quarter 2004 net income benefited
by $.01 per share from gains on interest rate hedge agreements and favorable
exchange rate variances as compared to first quarter 2005.
Cash flow from operations for the first quarter totaled $13.3 million, compared
to $3.5 million for the same period last year. $18 million of debt was paid down
in the quarter, $7 million from operations and $11 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 first quarter and with the progress
we made in reducing our debt. Our long term debt is now $51 million lower than
it was after we closed our new bank facility just six months ago in September
2004."
The Company stated that it expects second quarter 2005 revenue to be in the $190
to $197 million range, an increase of 6 - 10 % from the second quarter of 2004.
Earnings per share estimates for the second quarter 2005 are between $.18 and
$.20.
Conference Call Information
As announced on April 14, 2005, Knoll will host a conference call on Wednesday,
April 27, 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 800 706-7745
International 617 614-3472
Passcode 45667070
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.
Contacts
Investors: Barry L. 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
KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
---------------------------
2005 2004
----------- -----------
(Unaudited) (Unaudited)
----------- -----------
Sales $ 179,129 $ 153,324
Cost of sales 121,040 106,263
----------- -----------
Gross profit 58,089 47,061
Selling, general, and administrative
expenses 41,070 35,548
----------- -----------
Operating income 17,019 11,513
Interest expense 6,087 3,732
Other income, net 514 1,418
----------- -----------
Income before income tax expense 11,446 9,199
Income tax expense 4,595 3,973
----------- -----------
Net income $ 6,851 $ 5,226
----------- -----------
Earnings per share:
Basic $ .14 $ .11
Diluted $ .13 $ .11
Weighted-average shares outstanding:
Basic 49,888,640 46,314,236
Diluted 51,904,940 47,977,344
KNOLL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
March 31, December 31,
2005 2004
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 10,393 $ 9,052
Customer receivables, net 93,075 92,452
Inventories 49,685 49,586
Prepaid and other current assets 22,007 22,126
----------- -------------
Total current assets 175,160 173,216
Property, plant, and equipment, net 148,136 150,992
Intangible assets, net 237,125 237,382
Other noncurrent assets 9,233 8,641
----------- -------------
Total Assets $ 569,654 $ 570,231
----------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 107 $ 108
Accounts payable 55,059 46,075
Other current liabilities 53,125 64,375
----------- -------------
Total current liabilities 108,291 110,558
Long-term debt 374,748 392,750
Other noncurrent liabilities 89,728 88,268
----------- -------------
Total liabilities 572,767 591,576
----------- -------------
Stockholders' deficit (3,113) (21,345)
----------- -------------
Total Liabilities and Stockholders' Deficit $ 569,654 $ 570,231
----------- -------------
KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
2005 2004
----------- -----------
(Unaudited)
Net income $ 6,851 $ 5,226
----------- -----------
Cash Flows provided by Operating Activities 13,314 3,477
Cash Flows used in Investing Activities (2,118) (1,449)
Cash Flows used in Financing Activities (9,691) (2,364)
Effect of exchange rate changes
on cash and cash equivalents (164) 129
----------- -----------
Increase (decrease) in cash
and cash equivalents 1,341 (207)
Cash and cash equivalents
at beginning of period 9,052 11,517
----------- -----------
Cash and cash equivalents at end of period $ 10,393 $ 11,310
----------- -----------