Knoll Reports Continued 2018 Momentum With Strong 2nd Quarter Results


  • Sales increase 20.3% with 12.5% organic growth excluding Muuto acquisition
  • Margin expansion with EPS growth of 4% and Adjusted EPS growth of 40%
  • Rapid deleveraging with leverage one quarter post Muuto acquisition already below 3:1

EAST GREENVILLE, Pa., July 30, 2018 (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 second quarter ended June 30, 2018. Net sales were $323.4 million for the second quarter of 2018, an increase of 20.3%, from the second quarter of 2017. Operating profit was $24.8 million for the second quarter of 2018, an increase of 25.1%, from the second quarter of 2017. Adjusted operating profit for the second quarter of 2018 was $30.6 million, an increase of 35.4%, from the second quarter of 2017. Net income for the second quarter of 2018 was $13.1 million, an increase of 1.5%, when compared to the second quarter of 2017. Adjusted net income for the second quarter of 2018 was $20.8 million, an increase of 41.3%, when compared to the second quarter of 2017. Adjusted EBITDA was $42.1 million, an increase of 30.4% when compared to $32.3 million in the second quarter of 2017. Diluted earnings per share was $0.27 and $0.26 for the second quarter of 2018 and 2017, respectively. Adjusted diluted earnings per share was $0.42 and $0.30 for the second quarter of 2018 and 2017, respectively. Beginning with this second quarter 2018 earnings release, the Company has revised its definition of Adjusted Operating Expense, Adjusted Operating Profit, Adjusted Operating Profit Margin, Adjusted EBITDA, Adjusted Net Earnings and Adjusted Diluted Earnings Per Share, to exclude acquisition related amortization and the corresponding tax benefits. Further details are contained below within the ‘Reconciliation of Non-GAAP Financial Measures’ section.

“The bold actions we’ve taken from the recent acquisition of Muuto, the launch of new platforms like Rockwell Unscripted and the reorganization and expansion of our selling capacity have enabled us to respond to changing design trends and allocation of space within the workplace, penetrate faster growing ancillary categories and accelerate our top line growth. Coupled with initiatives to increase the share of revenue from our high design, high margin global Lifestyle businesses which now represent over 40% of our revenues, we are building a unique constellation of design driven brands with durable competitive advantages and superior profitability,” commented Andrew B. Cogan, Knoll Chairman, President and CEO.

“This quarter the benefit of these initiatives combined with efforts by our supply chain team to offset continued inflationary pressures led to 100bps of Adjusted EBITDA margin expansion and Adjusted EPS growth of 40%. Looking ahead to the balance of the year we expect to continue to grow our business, expand our margins and delever our balance sheet,” added Mr. Cogan.

Second Quarter Results

Second quarter 2018 financial results highlights are as follows:

 Dollars in Millions, Except Per Share Data Three Months Ended June 30, Percent
  2018 2017 Change
 Net Sales $323.4  $268.7  20.3 %
 Gross Profit 119.3  100.0  19.3 %
 Gross Profit % 36.9% 37.2% (0.8)%
 Acquisition related inventory adjustment 0.9    100.0 %
 Adjusted Gross Profit (1) 120.2  100.0  20.2 %
 Adjusted Gross Profit % (1) 37.2% 37.2%  %
 Operating Expenses 94.5  80.1  17.9 %
 Operating Profit 24.8  19.9  25.1 %
 Operating Profit % 7.7% 7.4% 4.1 %
 Acquisition related expenses 4.1  0.6  544.8 %
 Restructuring Charges 0.8  2.2  (61.0)%
 Adjusted Operating Expenses (1) 89.6  77.3  15.9 %
 Adjusted Operating Profit (1) 30.6  22.7  35.4 %
 Adjusted Operating Profit % (1) 9.5% 8.4% 13.1 %
 Net Earnings Attributable to Knoll Inc. Stockholders 13.1  12.9  1.5 %
 Pension Settlement 4.6    100.0 %
 Adjusted Net Earnings(1) 20.8  14.7  41.3 %
 Adjusted EBITDA (1) 42.1  32.3  30.4 %
 Adjusted EBITDA % (1) 13.0% 12.0% 8.3 %
 Diluted Earnings Per Share $0.27  $0.26  3.8 %
 Adjusted Diluted Earnings Per Share (1) $0.42  $0.30  40.0 %

   (1) See Reconciliation of Non-GAAP Financial Measures below.

Net sales were $323.4 million for the second quarter of 2018, an increase of 20.3%, from the second quarter of 2017. Net sales for the Office segment were $190.8 million during the second quarter of 2018, an increase of 17.3%, when compared with the second quarter of 2017. The increase in the Office segment was a result of strong growth in commercial sales in both North America and Europe. Newer workplace platforms and ancillary products drove sales growth while legacy system sales were flat. Net sales for the Lifestyle segment were $132.6 million during the second quarter of 2018, an increase of 25.0%, when compared with the second quarter of 2017, while organic sales grew 5.2%. This increase was primarily driven by the inclusion of three months of sales from Muuto as well as increased volume in our contract markets.

Gross profit for the second quarter of 2018 was $119.3 million, an increase of $19.3 million, or 19.3%, when compared with the second quarter of 2017. During the second quarter of 2018, gross margin decreased to 36.9% from 37.2% in the second quarter of 2017. Adjusted gross margin for both the second quarter of 2018 and 2017 was 37.2%. Adjusted gross profit in the second quarter of 2018 excluded an inventory fair value adjustment of $0.9 million related to the acquisition of Muuto. Margins were consistent with the prior year primarily due to the Office segment, where higher volume and a favorable shift of mix towards new product platforms offset unfavorable commodity and transportation inflation.

Operating expenses were $94.5 million for the second quarter of 2018, or 29.2% of net sales, compared to $80.1 million, or 29.8% of net sales, for the second quarter of 2017. Operating expenses in the second quarter of 2018 included acquisition related expenses of $4.1 million, which was comprised of amortization of intangibles of $2.1 million, retention agreements for key employees of $1.5 million, as well as other customary acquisition related expenses of $0.5 million. Operating expenses also included restructuring charges of $0.8 million. The restructuring charges were related to an organizational realignment within the sales and customer service functions that will result in greater operational efficiency and control of $0.3 million as well as supply chain optimization expenses of $0.5 million. Excluding these items, adjusted operating expenses were $89.6 million for the second quarter of 2018, or 27.7% of net sales compared to $77.3 million for the second quarter of 2017. The increase in adjusted operating expenses was related primarily to incremental operating expenses from Muuto, incentive compensation due to increased profitability, and the expansion of our sales force.

During the second quarter of 2018, interest expense was $5.3 million, an increase of $3.4 million when compared to the second quarter of 2017. This increase was due primarily to additional debt as a result of the Muuto acquisition and higher interest rates.

During the second quarter of 2018, other expense was $1.8 million compared to other income of $2.2 million for the second quarter of 2017. Other expense is primarily related to foreign exchange gains and losses and net periodic benefit income from the Company's pension and other post-employment benefit plans in both 2018 and 2017. In accordance with the adoption of ASU 2017-07, which was effective for the Company on January 1, 2018, the Company reclassified the net periodic benefit income recognized on the Company's pension and other post-employment benefit plans from selling, general, and administrative expense to other income for all periods presented. The pension settlement charge of $4.6 million was related to the purchase of annuities for certain pension plan retirees as well as cash payments from lump sum elections.

Net earnings for the second quarter of 2018 was $13.1 million, or $0.27 diluted earnings per share, compared to $12.9 million, or $0.26 diluted earnings per share, for the second quarter of 2017. Excluding the impact of the acquisition related inventory adjustment, acquisition related expenses, restructuring charges and the pension settlement charge, adjusted net earnings for the second quarter of 2018 was $20.8 million, or $0.42 adjusted diluted earnings per share, compared to $14.7 million, or $0.30 adjusted diluted earnings per share for the second quarter of 2017.

The effective tax rate for the second quarter of 2018 was 26.0%, down from 35.7% in the second quarter of 2017. The decrease in the effective tax rate for the quarter was primarily due to the passage of the U.S. Tax Cuts and Jobs Act (“Tax Reform”) in 2017. The Company expects its full year effective tax rate will be between 25% and 26% for fiscal year 2018. The mix of pretax income and the varying effective tax rates in the countries and states in which we operate directly affects our consolidated effective tax rate.

Capital expenditures for the second quarter of 2018 totaled $7.6 million compared to $10.1 million in the second quarter of 2017. During the second quarter of 2018, the Company paid a quarterly dividend of $7.3 million, or $0.15 per share, and payment of accrued dividends on vested shares of $0.4 million, compared to payment of a quarterly dividend of $7.3 million, or $0.15 per share during the second quarter of 2017.

Company Appoints Ron Kass to Board of Directors

The Company also announced the appointment of Ron Kass to its Board of Directors, effective July 30. Mr. Kass is the President and CEO of Hunter Douglas, Inc., the North American operations of the world market leader in window coverings and a major manufacturer of architectural products. Prior, he served as President of the Company’s Design Products Group. Mr. Kass has also served as President and CEO of the Robert Allen Group, an international designer, marketer and manufacturer of home furnishings.

Mr. Cogan stated, "We are very pleased to welcome Ron to our Board, and expect to benefit from his strategic and operational expertise as we drive growth in the years ahead."

Mr. Kass holds an A.B. from Brown University and a M.B.A from Harvard Graduate School of Business Administration.

Business Segment Results

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

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

The Lifestyle segment includes KnollStudio®, HOLLY HUNT®, DatesWeiser, Muuto, KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather. KnollStudio products, which are distributed in North America and Europe, 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 addition, HOLLY HUNT® also includes Vladimir Kagan Design Group, a renowned collection of modern luxury furnishings. DatesWeiser, known for its sophisticated meeting and conference tables and credenzas, sets a standard for design, quality and technology integration. The KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather businesses provide a wide range of customers with high-quality fabrics, felt, leather and related architectural products. The acquisition of Muuto rounds out the Lifestyle segment with its ancillary products and  affordable luxury furnishings to make the Lifestyle segment an all-encompassing “resimercial”, high-performance workplace, from uber-luxury living spaces to affordable luxury residential living.

Effective January 1, 2018, the Company revised its segment presentation by aggregating the former Studio and Coverings segments with Muuto. Additionally, the Office segment now includes our office business in Europe which was historically reported in Studio. The Company believes this revised presentation better aligns the segments with how management views and operates 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 June 30,
Net sales (in thousands) 2018 2017
Office $190,747  $162,599 
Lifestyle 132,604  106,095 
Total net sales $323,351  $268,694 


  Three Months Ended June 30,
Operating profit (in thousands) 2018 2017
Office $10,316  $4,812 
Lifestyle 20,965  20,584 
Corporate (6,468) (5,566)
Total operating profit $24,813  $19,830 
     
  Three Months Ended June 30,
Adjusted EBITDA (in thousands) 2018 2017
Office $17,740  $12,931 
Lifestyle 28,045  22,902 
Corporate (3,708) (3,565)
Total adjusted EBITDA $42,077  $32,268 


Reconciliation of Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") in the statements of income, balance sheets, or statements of cash flow of the company. Pursuant to applicable reporting requirements, the company has provided reconciliations below of non-GAAP financial measures to the most directly comparable GAAP measure.

The non-GAAP financial measures presented within the Company's earnings release are Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Expense, Adjusted Operating Profit, Adjusted Operating Profit Margin, Adjusted Net Earnings, EBITDA, Adjusted EBITDA and Adjusted Diluted Earnings Per Share. These non-GAAP measures are not indicators of our financial performance under GAAP and should not be considered as an alternative to the applicable GAAP measure. These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating these non-GAAP measures, you should be aware that in the future we may incur expenses similar to the adjustments in this press release. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence to our GAAP results and using non-GAAP measures only as supplemental presentations.

The Company uses Adjusted Diluted Earnings Per Share in evaluating the performance its business and profitability. This quarter, the Company revised the definition of Adjusted Diluted Earnings Per Share to exclude the diluted earnings per share impact of amortization related to the acquisitions of Edelman, Holly Hunt and Muuto and the corresponding tax benefit of the related acquisition expenses. The Company began excluding these items from the definition of Adjusted Diluted Earnings Per Share because with the acquisition of Muuto the acquisition amortization from one-time transactions became more significant and practical to exclude from the calculation. The company determined to exclude  the related amortization because such amounts are inconsistent in amount and frequency, and are significantly impacted by the timing and size of acquisitions. Additionally, we believed that these exclusions would provide additional clarity to help evaluate the performance of the Company’s business and profitability as well as provide easier comparability of pre- and post-acquisition operating results.

The following table reconciles Gross Profit to Adjusted Gross Profit for the periods indicated.

  Three Months Ended June 30,
  2018 2017
  ($ in millions)
     
Gross Profit $119.3  $100.0 
Add back:    
Acquisition related inventory adjustment 0.9   
Adjusted gross profit $120.2  $100.0 
Net sales $323.4  $268.7 
Gross profit % 36.9% 37.2%
Adjusted gross profit % 37.2% 37.2%

The following table reconciles Operating Expenses to Adjusted Operating Expenses for the periods indicated.

  Three Months Ended June 30,
  2018 2017
  ($ in millions)
     
Operating expenses $94.5  $80.1 
Less:    
Acquisition related expenses 4.1  0.6 
Restructuring charges 0.8  2.2 
Adjusted operating expenses $89.6  $77.3 

The following tables reconcile Operating Profit to Adjusted Operating Profit and Adjusted EBITDA by business segment for the periods indicated.

  Three Months Ended June 30, 2018
  Office Lifestyle Corporate Knoll, Inc.
  ($ in millions)
         
Operating profit (loss) $10.3  $21.0  $(6.5) $24.8 
Add back:        
Acquisition related inventory adjustment   0.9    0.9 
Acquisition related expenses(1)   3.6  0.5  4.1 
Restructuring charges 0.8      0.8 
Adjusted operating profit (loss) $11.1  $25.5  $(6.0) $30.6 
Add back:        
Depreciation and amortization(2) 5.0  1.4  0.2  6.6 
Stock compensation 0.2  0.5  1.4  2.1 
Other non-cash items 1.4  0.7  0.7  2.8 
Adjusted EBITDA (loss) $17.7  $28.1  $(3.7) $42.1 
Net sales $190.8  $132.6    $323.4 
Operating profit % 5.4% 15.8% N/A    7.7%
Adjusted operating profit % 5.8% 19.2% N/A    9.5%
Adjusted EBITDA % 9.3% 21.1% N/A    13.0%

(1) Acquisition related expenses includes amortization of intangible assets recognized in connection with business combinations of $2.1 million, in addition to retention agreements for key employees and other customary acquisition related expenses.
(2) Depreciation and amortization presented in this table excludes amortization of intangible assets recognized in connection with business combinations.  These amortization expenses have been added back as a part of Acquisition related expenses in the calculation of Adjusted Operating Profit (Loss), as noted above.

  Three Months Ended June 30, 2017
  Office Lifestyle Corporate Knoll, Inc.
  ($ in millions)
         
Operating profit (loss) $4.8  $20.6  $(5.5) $19.9 
Add back:        
Restructuring charges 2.2      2.2 
Acquisition related expenses(1)   0.6    0.6 
Adjusted operating profit (loss) $7.0  $21.2  $(5.5) $22.7 
Add back:        
Depreciation and amortization(2) 4.6  1.0  0.2  5.8 
Stock compensation 0.5  0.5  0.7  1.7 
Other non-cash items 0.9  0.2  1.0  2.1 
Adjusted EBITDA (loss) $13.0  $22.9  $(3.6) $32.3 
Net sales $162.6  $106.1  -    $268.7 
Operating profit % 3.0% 19.4% N/A    7.4%
Adjusted operating profit % 4.3% 20.0% N/A    8.4%
Adjusted EBITDA % 8.0% 21.6% N/A    12.0%

(1) Acquisition related expenses represents amortization of intangible assets recognized in connection with business combinations of $0.6 million.
(2) Depreciation and amortization presented in this table excludes amortization of intangible assets recognized in connection with business combinations.  These amortization expenses have been added back as a part of Acquisition related expenses in the calculation of Adjusted Operating Profit (Loss), as noted above.

The following table reconciles Net Earnings to EBITDA and Adjusted EBITDA for the periods indicated.

  Three Months Ended June 30,
  2018 2017
  ($ in millions)
Knoll Inc.    
Net earnings attributable to Knoll, Inc. stockholders $13.1  $12.9 
Add back:    
Income tax expense 4.6  7.2 
Interest expense 5.3  1.9 
Depreciation and amortization 8.7  6.4 
EBITDA $31.7  $28.4 
Add back:    
Stock compensation 2.1  1.7 
Acquisition related expenses 2.0   
Acquisition related inventory adjustment 0.9   
Restructuring charges 0.8  2.2 
Pension settlement charge 4.6   
Adjusted EBITDA $42.1  $32.3 
Net sales $323.4  $268.7 
Adjusted EBITDA % 13.0% 12.0%
       

The following table reconciles Net Earnings to Adjusted Net Earnings for the periods indicated.

  Three Months Ended June 30,
  2018 2017
  ($ in millions)
Knoll Inc.    
Net earnings attributable to Knoll, Inc. stockholders $13.1  $12.9 
Add back:    
Acquisition related inventory adjustment 0.9   
Acquisition related expenses 4.1  0.6 
Restructuring charges 0.8  2.2 
Pension settlement charge 4.6   
Less:    
Tax effect of non-GAAP adjustments(1) 2.7  1.0 
Adjusted net earnings $20.8  $14.7 

(1) Tax effect of non-GAAP adjustments was calculated using the Knoll, Inc. consolidated effective tax rate for the period.

The following tables reconcile Net Earnings to Adjusted Net Earnings by quarter for the periods indicated, presented for comparative purposes.

 Three Months Ended
 March 31,
2017
 June 30,
2017
 September 30,
2017
 December 31,
2017
 March 31,
2018
 ($ in millions)
Knoll Inc.         
Net earnings attributable to Knoll, Inc. stockholders$15.4  $12.9  $19.1  $32.7  $15.3 
Add back:         
Asset impairment charge      16.3   
Loss on extinguishment of debt        1.4 
Acquisition related expenses0.6  0.6  0.6  1.2  2.7 
Restructuring charges  2.2      0.5 
Pension settlement charge      2.2   
Less:         
Tax effect of non-GAAP adjustments(1)0.2  1.0  0.1  7.8  1.2 
Tax reform impact      26.6   
Adjusted net earnings$15.8  $14.7  $19.6  $18.0  $18.7 

(1) Tax effect of non-GAAP adjustments was calculated using the Knoll, Inc. consolidated effective tax rate for the period.

The following table reconciles Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the periods indicated.

  Three Months Ended June 30,
  2018 2017
Diluted earnings per share $0.27  $0.26 
Add back:    
Acquisition related inventory adjustment 0.02   
Acquisition related expenses 0.08  0.01 
Restructuring charges 0.02  0.04 
Pension settlement 0.09   
Less:    
Tax effect of non-GAAP adjustments(1) 0.06  0.01 
Adjusted diluted earnings per share $0.42  $0.30 
     

(1)
Tax effect of non-GAAP adjustments was calculated using the Knoll, Inc. consolidated effective tax rate for the period.

The following tables includes prior year Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share by quarter for the periods indicated, presented for comparative purposes.

  Three Months Ended
  March 31,
2017
 June 30,
2017
 September 30,
2017
 December 31,
2017
 March 31,
2018
Diluted earnings per share $0.31  $0.26  $0.39  $0.67  $0.31 
Add back:          
Asset impairment charge       0.33   
Pension settlement       0.04   
Loss on extinguishment of debt         0.03 
Acquisition related expenses       0.01  0.02 
Acquisition amortization 0.01  0.01  0.01  0.02  0.04 
Restructuring charges   0.04      0.01 
Less:          
Tax effect of non-GAAP adjustments(1)   0.01    0.16  0.03 
Tax reform impact       0.54   
Adjusted diluted earnings per share $0.32  $0.30  $0.40  $0.37  $0.38 

(1) Tax effect of non-GAAP adjustments was calculated using the Knoll, Inc. consolidated effective tax rate for the period.

The following table includes Consolidated Net Sales and Organic Net Sales by quarter for the periods indicated, presented for comparative purposes.

         
  Three Months Ended June 30, 2018 Three months Ended
June 30, 2017
    ($ in millions)    
  Consolidated Net Sales Muuto Organic Net Sales Net Sales
        
Office$190.8    $190.8  $162.6 
Lifestyle132.6  21.0  111.6  106.1 
        
Total$323.4  $21.0  $302.4  $268.7 
        
Percent Change20.3%   12.5%  


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, our publicly announced plans for increased capital and investment spending to achieve our long-term revenue and profitability growth goals, our integration of acquired businesses, 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 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, our success in designing and implementing our new enterprise resource planning system, our ability to successfully integrate acquired businesses, our supply chain optimization initiatives 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:

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, July 31, 2018 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

Conference ID              2173806

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 August 7, 2018 by dialing (855) 859-2056. International replay: (404) 537-3406 (Conference ID: 2173806).

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, DatesWeiser and Muuto — 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 June 30, Six Months Ended June 30,
  2018 2017 2018 2017
         
Net sales $323,351  $268,694  $619,910  $525,514 
Cost of sales 204,064  168,736  392,912  329,882 
Gross profit 119,287  99,958  226,998  195,632 
Selling, general, and administrative expenses 93,637  77,976  178,862  153,014 
Restructuring charges 838  2,150  864  2,150 
Operating profit 24,812  19,832  47,272  40,468 
Pension settlement charge 4,608    4,608   
Interest expense 5,252  1,859  10,780  3,530 
Other (income) expense, net (2,792) (2,165) (6,794) (4,360)
Income before income tax expense 17,744  20,138  38,678  41,298 
Income tax expense 4,621  7,182  10,288  12,946 
Net earnings 13,123  12,956  28,390  28,352 
Net earnings (loss) attributable to noncontrolling interests (1) 22  7  14 
Net earnings attributable to Knoll, Inc. stockholders $13,124  $12,934  $28,383  $28,338 
         
Earnings per share attributable to Knoll, Inc. stockholders:        
Basic $0.27  $0.27  $0.58  $0.59 
Diluted $0.27  $0.26  $0.58  $0.57 
         
Weighted-average shares outstanding:        
Basic 48,672,144  48,464,605  48,614,733  48,375,241 
Diluted 49,131,106  49,376,506  49,137,528  49,294,525 
             


KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

  June 30, 2018 December 31, 2017
  (Unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents $1,359  $2,203 
Customer receivables, net 105,628  86,687 
Inventories, net 167,462  144,945 
Prepaid and other current assets 43,377  44,435 
Total current assets 317,826  278,270 
Property, plant, and equipment, net 201,387  200,630 
Goodwill and intangible assets, net 685,858  380,694 
Other non-current assets 2,846  1,447 
Total assets $1,207,917  $861,041 
LIABILITIES AND EQUITY    
Current liabilities:    
Current maturities of long-term debt $17,274  $10,000 
Accounts payable 116,645  108,922 
Other current liabilities 108,053  104,158 
Total current liabilities 241,972  223,080 
Long-term debt 474,132  181,048 
Other non-current liabilities 129,962  98,184 
Total liabilities 846,066  502,312 
Total equity 361,851  358,729 
Total liabilities and equity $1,207,917  $861,041 
 


KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

  Six Months Ended June 30,
  2018 2017
     
Net earnings $28,390  $28,352 
Cash provided by operating activities 33,773  32,238 
Cash used in investing activities (320,119) (20,756)
Cash used in financing activities 283,257  (16,748)
Effect of exchange rate changes on cash and cash equivalents 2,245  1,336 
Decrease in cash and cash equivalents (844) (3,930)
Cash and cash equivalents at beginning of period 2,203  9,854 
Cash and cash equivalents at end of period $1,359  $5,924