Knoll Reports Third Quarter Results

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| Source: Knoll, Inc.

EAST GREENVILLE, Pa., Oct. 23, 2017 (GLOBE NEWSWIRE) -- Knoll, Inc. (NYSE:KNL), a leading designer and manufacturer of furnishings, textiles and fine leathers for the workplace and home, today announced results for the third quarter ended September 30, 2017. Net sales were $291.3 million for the third quarter of 2017, a decrease of 0.3%, from the third quarter of 2016. Operating profit was $30.1 million for the third quarter of 2017, a decrease of 14.4%, from the third quarter of 2016. Net income for the third quarter of 2017 was $19.1 million, a decrease of 11.5%, when compared to the third quarter of 2016. Diluted earnings per share was $0.39 and $0.44 for the third quarter of 2017 and 2016, respectively.

"The third quarter was an important inflection point as sales stabilized and we returned to double digit levels of profitability," commented Andrew Cogan, Knoll President and CEO. "For the first time, sales of our newer workplace models and related products exceeded those of our legacy systems. Coupled with continued growth in our residential and Specialty businesses, the initiatives we have taken over the past year to increase our market penetration and Office sales, position us well for a return to growth."

Third Quarter Results

Third quarter 2017 financial results highlights are as follows:

Dollars in Millions, Except Per Share Data Three Months Ended September 30, Percent
  2017 2016 Change
Net Sales $291.3  $292.1  (0.3)%
Gross Profit 106.6  112.8  (5.5)%
Gross Profit % 36.6% 38.6% (5.2)%
Operating Expenses 76.5  77.6  (1.4)%
Operating Profit 30.1  35.2  (14.4)%
Operating Profit % 10.3% 12.1% (14.9)%
Net Income Attributable to Knoll, Inc. Stockholders 19.1  21.6  (11.5)%
Diluted Earnings Per Share $0.39  $0.44  (11.4)%

Net sales were $291.3 million for the third quarter of 2017, a decrease of 0.3%, from the third quarter of 2016. Net sales for the Office segment were $181.2 million during the third quarter of 2017, a decrease of 2.5%, when compared to the third quarter of 2016. The decrease in Office sales compared to the third quarter of 2016 was due primarily to a decline in government sales, while Office commercial sales were flat. Net sales for the Studio segment were $83.2 million during the third quarter of 2017, an increase of 4.2%, when compared to the third quarter of 2016. Increased sales at Holly Hunt and the incremental sales from DatesWeiser were partially offset by a decrease in contract shipments at KnollStudio. Net sales for the Coverings segment were $26.9 million during the third quarter of 2017, an increase of 1.5%, when compared to the third quarter of 2016. The increase in Coverings was driven primarily by higher volume in the Spinneybeck | FilzFelt and Edelman businesses, partially offset by volume declines in KnollTextiles.

Gross profit for the third quarter of 2017 was $106.6 million, a decrease of $6.2 million, or 5.5%, when compared to the third quarter of 2016. Gross margin decreased from 38.6% in the third quarter of 2016 to 36.6% in the third quarter of 2017. This decrease was driven primarily by accelerated commodity inflation, foreign exchange headwinds, and unfavorable mix related to the ramp up of newer product platforms. These declines were partially offset by continuous improvement and lean initiatives.

Total operating expenses were $76.5 million for the third quarter of 2017, or 26.3% of net sales, compared to $77.6 million, or 26.6% of net sales, for the third quarter of 2016. The decrease was due primarily to lower incentive compensation from decreased profitability.

The tax rate for the third quarter of 2017 was 29.9%, down from 34.9% in the third quarter of 2016. The decrease in the tax rate was related primarily to the reversal of a valuation allowance against certain foreign jurisdiction deferred tax assets. The tax rate was also affected by the mix of pretax income and the varying effective tax rates in the countries and states in which we operate.

Capital expenditures for the third quarter of 2017 totaled $8.7 million compared to $10.4 million in the third quarter of 2016. During the third quarter of 2017, the Company paid a quarterly dividend of $7.3 million, or $0.15 per share, compared to a quarterly dividend of $7.2 million, or $0.15 per share, in the third quarter of 2016.

Business Segment Results

The Company manages its business through its reportable segments: Office, Studio, and Coverings. All unallocated expenses are included within Corporate.

The Office segment includes a complete range of workplace products that address diverse workplace planning paradigms. These products include: systems furniture, seating, storage, tables, desks and KnollExtra® accessories as well as the international sales of our North American Office products.

The Studio segment includes KnollStudio®, HOLLY HUNT®, Knoll Europe and DatesWeiser. KnollStudio products include iconic seating, lounge furniture, side, cafe and dining chairs as well as conference, training and dining and occasional tables. HOLLY HUNT® is known for high quality residential furniture, lighting, rugs, textiles and leathers. In 2016, HOLLY HUNT® acquired Vladimir Kagan Design Group, a renowned collection of modern luxury furnishings. Knoll Europe, which distributes both KnollStudio and Knoll Office products, manufactures and sells products to customers primarily in Europe. DatesWeiser, known for its sophisticated meeting and conference tables and credenzas, sets a standard for design, quality and technology integration.

The Coverings segment includes KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather. These businesses provide a wide range of customers with high-quality fabrics, felt, leather and related architectural products.

In 2016, the Company revised its segment presentation to segregate Corporate costs. The Company believes this facilitates improved communication as we report segment results and better aligns with how we view and operate the Company. Corporate costs represent the portion of unallocated expenses relating to shared services and general corporate functions including, but not limited to, legal expenses, acquisition expenses, certain finance, human resources, administrative and executive expenses and other expenses that are not directly attributable to an operating segment. Dedicated, direct selling, general and administrative expenses of the segments continue to be included within segment operating profit. Management regularly reviews the costs included in the Corporate function, and believes disclosing such information provides more visibility and transparency of how the chief operating decision maker reviews the results for the Company.

The tables below present the Company’s segment information with Corporate costs excluded from operating segment results. Prior year amounts have been recast to conform to the current presentation:

  Three Months Ended September 30,
Net Sales (in thousands) 2017 2016
Office $181,168  $185,764 
Studio 83,186  79,829 
Coverings 26,902  26,504 
Total Net Sales $291,256  $292,097 


  Three Months Ended September 30,
Operating Profit (in thousands) 2017 2016
Office $15,546  $20,390 
Studio 12,370  13,372 
Coverings 6,252  6,295 
Corporate (4,043) (4,854)
Total Operating Profit $30,125  $35,203 


Cautionary Statement Regarding Forward-Looking Information

This presentation 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 expectations with respect to leverage. 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 exchange rates, transportation costs, demand for high quality, well designed furniture solutions, changes in the competitive marketplace, changes in trends in the market for furniture or coverings, the financial strength and stability of our suppliers, customers and dealers, access to capital, our success in designing and implementing our new enterprise resource planning system, our ability to successfully integrate acquired businesses, and other risks identified in Knoll's Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission, as well as other cautionary statements that are made from time-to-time in Knoll's public communications. Many of these factors are outside of Knoll's control.

Contacts

Investors:

Charles Rayfield
Senior Vice President and Chief Financial Officer
Tel 215 679-1703
crayfield@knoll.com

Media:

David E. Bright
Senior Vice President, Communications
Tel 212 343-4135
dbright@knoll.com

Conference Call Information

Knoll will host a conference call on Tuesday, October 24, 2017 at 10:00 A.M. ET 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 “Discover Knoll” and click on “Investor Relations.”

The conference call may also be accessed by dialing:

North America (844) 778-4138
   
International (661) 378-9550
   
Passcode  995 28033

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 31, 2017 by dialing (855) 859-2056. International replay: (404) 537-3406 (Passcode: 995 28033).

About Knoll

Knoll, Inc. is a constellation of design-driven brands and people, working together with our clients to create inspired modern interiors. Our internationally recognized portfolio includes furniture, textiles, leathers, accessories, and architectural and acoustical elements brands. These brands - Knoll Office, KnollStudio, KnollTextiles, KnollExtra, Spinneybeck | FilzFelt, Edelman Leather, HOLLY HUNT, and DatesWeiser - reflect our commitment to modern design that meets the diverse requirements of high performance workplaces and luxury interiors. A recipient of the National Design Award for Corporate and Institutional Achievement from the Smithsonian`s Cooper-Hewitt, National Design Museum, Knoll, Inc. is aligned with the U.S. Green Building Council and the Canadian Green Building Council and can help organizations achieve the Leadership in Energy and Environmental Design (LEED) workplace certification. Knoll, Inc. is the founding sponsor of the World Monuments Fund Modernism at Risk program.


 
KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)
 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
Net sales $291,256  $292,097  $816,770  $871,426 
Cost of sales 184,646  179,296  514,528  536,797 
Gross profit 106,610  112,801  302,242  334,629 
Selling, general, and administrative expenses 76,485  77,598  224,703  234,103 
Restructuring charges     2,150   
Operating profit 30,125  35,203  75,389  100,526 
Interest expense 1,991  1,296  5,521  4,157 
Other expense, net 815  681  1,251  3,470 
Income before income tax expense 27,319  33,226  68,617  92,899 
Income tax expense 8,158  11,608  21,104  32,229 
Net earnings 19,161  21,618  47,513  60,670 
Net earnings attributable to noncontrolling interests 29  11  43  28 
Net earnings attributable to Knoll, Inc. stockholders $19,132  $21,607  $47,470  $60,642 
         
Earnings per share attributable to Knoll, Inc. stockholders:        
Basic $0.39  $0.45  $0.98  $1.26 
Diluted $0.39  $0.44  $0.96  $1.24 
         
Weighted-average shares outstanding:        
Basic 48,468,480  48,053,836  48,406,659  48,000,386 
Diluted 48,979,182  48,845,553  49,167,856  48,765,607 


 
KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)
 
  September 30, 2017 December 31, 2016
  (Unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents $5,833  $9,854 
Customer receivables, net 91,890  84,425 
Inventories, net 149,026  142,072 
Prepaid and other current assets 35,860  40,457 
Total current assets 282,609  276,808 
Property, plant, and equipment, net 209,566  197,084 
Goodwill and intangible assets, net 381,561  383,261 
Other non-current assets 1,456  1,460 
Total assets $875,192  $858,613 
LIABILITIES AND EQUITY    
Current liabilities:    
Current maturities of long-term debt $10,000  $10,000 
Accounts payable 103,573  97,518 
Other current liabilities 101,644  114,855 
Total current liabilities 215,217  222,373 
Long-term debt 208,882  208,383 
Other non-current liabilities 110,984  118,388 
Total liabilities 535,083  549,144 
Total equity 340,109  309,469 
Total liabilities and equity $875,192  $858,613 


 
KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)
 
  Nine Months Ended September 30,
  2017 2016
     
Net earnings $47,513  $60,670 
Cash provided by operating activities 59,404  95,662 
Cash used in investing activities (29,433) (33,831)
Cash used in financing activities (38,994) (55,602)
Effect of exchange rate changes on cash and cash equivalents 5,002  766 
Net increase (decrease) in cash and cash equivalents (4,021) 6,995 
Cash and cash equivalents at beginning of period 9,854  4,192 
Cash and cash equivalents at end of period $5,833  $11,187