Knoll Reports Third Quarter 2013 Results

GlobeNewswire Europe

EAST GREENVILLE, PA, October 16, 2013 -- Knoll, Inc. (KNL) today announced results for the third quarter ended September 30, 2013. Net sales were $216.9 million for the quarter, a decrease of 1.3% from the third quarter 2012. Operating profit was $17.1 million a decrease of 27.2% from the third quarter 2012. The decrease in operating profit during the third quarter of 2013 was mainly the result of  the increased spending associated with our announced programs of strategic investments and initiatives to achieve our longer-term revenue and margin objectives.  Net income was $8.6 million during the third quarter of 2013 compared to $12.2 million during the third quarter 2012. Diluted earnings per share for the third quarter of 2013 was $0.18 compared to $0.26 in the prior year.  During the third quarter of 2013 non-cash charges relating to foreign exchange losses decreased earnings approximately $0.03 per share.

"We continued to execute against our multi-year strategic plan designed to drive revenue growth and margin improvement  across our varied segments," commented Andrew Cogan, CEO.

"While our Office segment remains pressured by significant declines in our Federal government business, our results in the quarter do demonstrate the traction we are gaining in our Studio and Coverings segments," he added.

Third Quarter Results

Third quarter 2013 financial results highlights follow:

Dollars in Millions Except Per Share Data Three Months Ended Percent
9/30/2013 9/30/2012 Change
Net Sales $ 216.9 $ 219.8 (1.3 )%
Gross Profit 72.3 74.2 (2.6 )%
Gross Profit % 33.4 % 33.8 % (1.2 )%
Operating Expenses 55.3 50.7 9.1 %
Operating Profit 17.1 23.5 (27.2 )%
Operating Profit % 7.9 % 10.7 % (26.2 )%
Net Income 8.6 12.2 (29.5 )%
Earnings Per Share 0.18 0.26 (30.8 )%

Net sales for the quarter were $216.9 million, a decrease of $2.9 million, or 1.3%, over the third quarter of 2012. Sequentially sales increased by $2.6 million when compared with second quarter of 2013.  Net sales for the Office segment were $150.5 million during the third quarter of 2013, a decrease of $9.5 million, or 5.9%, when compared with the third quarter of 2012. Sales to governmental agencies continued to decline on a year-over-year basis which drove the overall decline in sales in the Office segment. Net sales for the Studio segment were $37.7 million, an increase of $4.7 million, or 14.2%, when compared with the third quarter of 2012. During the third quarter of 2013 the Studio segment experienced double digit growth in Europe and single digit growth in North America. Net sales for the Coverings segment were $28.7 million, a increase of $2.0 million, or 7.5%, when compared with the third quarter of 2012. Both our textiles and leather subsidiaries experienced growth during the quarter.

Gross profit for the third quarter of 2013 was $72.3 million, a decrease of $1.9 million, or 2.6%, over the same period in 2012. Gross profit as a percentage of net sales decreased 40 basis points to 33.4% in the third quarter of 2013 from 33.8% in the same quarter of 2012. This decrease in gross profit as a percentage of sales  largely resulted from lower absorption of our fixed costs as a result of the lower sales and pricing pressures in the Office segment.  Continuous improvement projects in our factories helped to offset some of this decline.  Sequentially gross profit as a percentage of net sales increased 80 basis points when compared with the second quarter of 2013. 

Operating expenses for the quarter were $55.3 million, or 25.5% of net sales, compared to $50.7 million, or 23.1% of net sales, for the third quarter of 2012. The increase in operating expenses during the third quarter of 2013 was primarily due to our previously announced strategic initiatives partially offset by lowered levels of incentive accruals.

Operating profit for the third quarter of 2013 was $17.1 million, a decrease of $6.4 million, or 27.2%, when compared to the same period in 2012.  Sequentially operating profit increased by $4.7 million and operating margins expanded 210 basis points when compared with the second quarter of 2013.  Operating profit for the Office segment was $5.7 million in the third quarter of 2013, a decrease of $7.3 million, or 56.2%, when compared with the third quarter of 2012.  This decrease in operating profit  was mainly the result of increased operating expenses associated with our strategic investments and initiatives and our lower sales. Operating profit for the Studio segment was $5.3 million, an increase of $0.1 million, or 1.9%, when compared with the third quarter of 2012. Operating profit for the Coverings segment was $6.1 million, a increase of $0.8 million, or 15.1%, when compared to the third quarter of 2012.

Interest expense decreased $0.2 million when compared with the third quarter 2012 as a result of our lower outstanding debt.  Other expense (income), net for the third quarter of 2013 consisted of expense of $2.2 million primarily related to foreign exchange losses. Other expense (income), net for the third quarter 2012 consisted of expense of $2.9 million primarily related to foreign exchange losses offset by $0.1 million of miscellaneous income.

The effective tax rate was 35.9% for the quarter, as compared to 36.1% for the same period last year. The decrease in our effective tax rate was due in large part to the mix of pretax income and the varying effective tax rates in the countries in which we operate. Net income for the third quarter 2013 was $8.6 million, or $0.18 diluted earnings per share, as compared to $12.2 million, or $0.26 diluted earnings per share, for the same quarter in 2012.

Cash generated from operations during the third quarter 2013 was $15.3 million, compared to $22.6 million in the same period of 2012. Capital expenditures for the third quarter 2013 totaled $3.3 million compared to $3.6 million for 2012. We repaid $5.0 million of debt during the third quarter of 2013, compared to $15.0 million during the third quarter of 2012. We also paid a quarterly dividend of $5.6 million, or $0.12 per share, in the third quarter of 2013 and 2012.

Business Segment Results

The following information categorizes the Company`s results into its defined reporting segments.

The Office segment serves corporate, government, healthcare, retail and other customers in the United States and Canada providing a portfolio of office furnishing solutions including office systems, seating, storage, tables, desks and KnollExtra ® ergonomic accessories. The Office segment also includes international sales of our North American office products. The Studio segment includes KnollStudio®, Knoll Europe which sells primarily Knoll Studio products, and Richard Schultz® Design. The KnollStudio® portfolio includes a range of lounge seating; side, café and dining chairs; barstools; and conference, dining and occasional tables. The Coverings segment includes, KnollTextiles®, Spinneybeck®, Edelman® Leather, and FilzFelt(TM). These businesses serve a wide range of customers offering high quality textiles and leather.

Three Months Ended 
 September 30,
Net Sales (in millions) 2013 2012
Office $ 150.5 $ 160.0
Studio 37.7 33.0
Coverings 28.7 26.7
Total Net Sales $ 216.9 $ 219.8 (1)

Three Months Ended 
 September 30,
Operating Profit (in millions) 2013 2012
Office $ 5.7 $ 13.0
Studio 5.3 5.2
Coverings 6.1 5.3
Total Operating Profit $ 17.1 $ 23.5

 (1) - Results do not add due to rounding

Conference Call Information

Knoll will host a conference call on Wednesday, October 16, 2013 at 10:00 A.M. EST to discuss its financial results.

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            800 295-4740

International    617 614-3925

Passcode          52746240

A replay of the webcast can be viewed by visiting the Investor Relations section of the Knoll corporate website.

In addition, an audio replay of the conference call will be available through October 23, 2013 by dialing 888 286-8010. International replay: 617 801-6888 (Passcode:90277810).

About Knoll

Knoll is the recipient of the 2011 National Design Award for Corporate and Institutional Achievement from the Smithsonian`s Copper-Hewitt, National Design Museum. Since 1938, Knoll has been recognized internationally for creating workplace and residential furnishings that inspire, evolve and endure. Today, our commitment to modern design, our understanding of the workplace and our dedication to sustainable design has yielded a unique portfolio of products that respond and adapt to changing needs. Knoll is aligned with the U.S. Green Building Council and the Canadian Green Building Council and can help companies achieve Leadership in Energy and Environmental Design LEED workplace certification. Knoll is the founding sponsor of the World Monuments Fund Modernism at Risk program.

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, revenue and profit levels, 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,"  "goals," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry and our publicly announced plans for increased capital and investment spending to achieve our long-term revenue and profitability growth goals.  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 materials and components, foreign currency exchange, transportation costs, demand for high quality, well designed furniture solutions, changes in the competitive marketplace, changes in the trends in the market for furniture or coverings, the financial strength and stability of our suppliers, customers and dealers, access to capital, and other risks identified in Knoll`s annual report on Form 10-K, and other filings with the Securities and Exchange Commission. Many of these factors are outside of Knoll`s control.

Contacts

Investors:       

Craig B. Spray

Senior Vice President and Chief Financial Officer

Tel 215 679-1752

cspray@knoll.com

Media:            

David E. Bright

Senior 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 
 September 30,
Nine Months Ended 
 September 30,
2013 2012 2013 2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 216,898 $ 219,794 $ 631,796 $ 637,473
Cost of sales 144,559 145,578 425,949 425,798
Gross profit 72,339 74,216 205,847 211,675
Selling, general, and administrative expenses 55,288 50,694 166,094 151,899
Operating income 17,051 23,522 39,753 59,776
Interest expense 1,484 1,635 4,496 4,778
Other expense (income), net 2,224 2,786 (1,273 ) 3,723
Income before income tax expense 13,343 19,101 36,530 51,275
Income tax expense 4,793 6,904 14,018 18,766
Net income $ 8,550 $ 12,197 $ 22,512 $ 32,509
Earnings per share:
Basic $ 0.18 $ 0.26 $ 0.48 $ 0.70
Diluted $ 0.18 $ 0.26 $ 0.47 $ 0.69
Weighted-average shares outstanding:
Basic 46,915,660 46,667,359 46,882,362 46,595,066
Diluted 47,679,422 47,038,785 47,615,305 47,051,004

KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

September 30, 2013 December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 13,513 $ 29,956
Customer receivables, net 90,511 105,877
Inventories 94,102 98,195
Prepaid and other current assets 30,415 24,494
Total current assets 228,541 258,522
Property, plant, and equipment, net 133,281 124,838
Intangible assets, net 302,453 302,830
Other noncurrent assets 9,095 8,863
Total Assets $ 673,370 $ 695,053
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable 75,840 83,600
Other current liabilities 69,598 92,345
Total current liabilities 145,438 175,945
Long-term debt 183,000 193,000
Other noncurrent liabilities 144,275 138,008
Total liabilities 472,713 506,953
Stockholders` equity 200,657 188,100
Total Liabilities and Stockholders` Equity $ 673,370 $ 695,053

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Nine Months Ended 
 September 30,
2013 2012
(Unaudited) (Unaudited)
Net income 22,512 32,509
Cash Flows provided by Operating Activities 31,349 29,055
Cash Flows used in Investing Activities (20,761 ) (16,544 )
Cash Flows used in Financing Activities (27,150 ) (29,224 )
Effect of exchange rate changes on cash and cash equivalents 119 (860 )
(Decrease) increase in cash and cash equivalents (16,443 ) (17,573 )
Cash and cash equivalents at beginning of period 29,956 28,263
Cash and cash equivalents at end of period 13,513 10,690



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Source: Knoll, Inc. via Thomson Reuters ONE

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