EX-99.1 2 k072605b.txt PRESS RELEASE [Knoll Logo] Water Street East Greenville, PA 18041 Tel 215 679-7991 Press Release Knoll, Inc. Reports Double Digit Growth for the Second Quarter of 2005 EAST GREENVILLE, PA, July 26, 2005 -- Knoll, Inc., (NYSE: KNL) today announced results for the second quarter ended June 30, 2005. Net sales were $197.7 million for the quarter, an increase of 10.6% from second quarter 2004. Operating income was $24.1 million, an increase of 33.9% from the second quarter 2004, while net income was $11.4 million, an increase of 29.5% over 2004, or $0.22 per share compared to $0.18 per share in the prior year. Andrew Cogan, Chief Executive Officer, stated, "Our second quarter results speak to the unique power of our brand and continue to demonstrate our ability to execute and deliver superior results across a broad spectrum of metrics. We have been able to deliver above industry growth, improve our industry leading operating margins and reduce our debt, while simultaneously investing in new products and other initiatives to drive Knoll forward." "These results combined with our four Best of NeoCon awards, the OFDA Choice award for product lines and the Russel Wright award for The Marketing of Modernism that we received in June, all demonstrate that we are actively building on our design roots for the benefit of our customers, shareholders and associates. I want to thank and congratulate our associates and dealers on their performance this quarter. We are clearly excited about the momentum in our business as we move into the second half of the year." 2005 Financial Results Second quarter 2005 financial results highlights follow: Dollars in Millions Except Per Share Data Three Months Ended ------------------ Percent 6/30/05 6/30/04 Change ------- ------- ------- Net Sales $ 197.7 $ 178.8 10.6 % Gross Margin 68.2 62.2 9.6 % Operating Expenses 44.1 44.2 (0.2) % Operating Income 24.1 18.0 33.9 % Net Income 11.4 8.8 29.5 % Earnings Per Share - Diluted .22 .18 22.2 % Backlog 131.2 116.2 12.9 % The Company's net sales for the quarter were $197.7 million, reflecting year-over-year growth of 10.6%. Approximately $3.7 million is attributable to additional revenues realized from price increases with the remaining increase due to higher volume as the Company's growth initiatives take hold and industry growth continues. Backlog of unfilled orders at June 30, 2005 increased $15.0 million or 12.9% versus the prior year. Gross margin for the quarter was $68.2 million, an increase of $6.0 million or 9.6%, over the same period in 2004. As a percentage of sales, gross margin declined slightly to 34.5% from 34.8% in the same quarter of 2004 but grew sequentially from 32.4% in the first quarter 2005. The decrease from the second quarter of 2004 largely resulted from steel and fuel inflation. The sequential increase is due to better absorption of overhead on the higher volume coupled with the company's ability to partially offset steel and fuel inflation through improved pricing and a continued focus on global sourcing initiatives and continuous improvement efforts. Operating expenses for the quarter totaled $44.1 million, or 22.3% of sales, compared to $44.2 million, or 24.7% of sales for second quarter of 2004. Operating income for second quarter 2005 was $24.1 million, an increase of $6.1 million, or 33.9%, from operating income of $18.0 million for second quarter 2004. As a percentage of sales, operating income increased to 12.2% for second quarter 2005 from 10.1% for second quarter 2004. Net income for second quarter 2005 was $11.4 million, or $0.22 per share, as compared to $8.8 million or $0.18 per share, for the same quarter in 2004. Second 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. Second quarter 2005 net income was negatively impacted by increased interest expense as a result of higher interest rates. Cash flow from operations for the second quarter totaled $18.6 million, compared to $21.0 million for the same period last year. Over $19 million of debt was paid down in the quarter, $11 million from operations and $8 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 strengthening of our balance sheet. We have now paid down $37 million of debt this year and $70 million since we closed on our new bank facility in September 2004." Third Quarter Outlook Pursuant to the American Jobs Creation Act, the Company anticipates repatriating approximately $45 million of foreign earnings from its Canadian subsidiary. The Company expects to repatriate $20 million in the third quarter and $25 million in the fourth quarter. The anticipated repatriation will reduce the Company's inter-company balances and thereby reduce the exposure to Canadian exchange rate fluctuations as well as free-up cash for use in the United States. The Company estimates the negative tax impact of this transaction to approximate $3.6 million all which will be accrued in the third quarter. The Company stated that it expects third quarter 2005 revenue to be in the $197 - $203 million range, an increase of 9% - 12% from the third quarter of 2004. Earnings per share estimates for the third quarter 2005 are between $0.22 and $0.24 before the aforementioned repatriation. Conference Call Information As announced on July 12, 2005, Knoll will host a conference call on Wednesday, July 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 800 295-3991 International 617 614-3924 Passcode 39904044 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 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 KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ----------- ----------- Sales $ 197,726 $ 178,821 $ 376,855 $ 332,145 Cost of sales 129,539 116,647 250,579 222,910 ----------- ----------- ----------- ----------- Gross profit 68,187 62,174 126,276 109,235 Selling, general, and administrative expenses 44,092 44,149 85,162 79,697 ----------- ----------- ----------- ----------- Operating income 24,095 18,025 41,114 29,538 Interest expense 6,000 4,635 12,087 8,367 Other income, net 338 1,329 852 2,747 ----------- ----------- ----------- ----------- Income before income tax expense 18,433 14,719 29,879 23,918 Income tax expense 7,065 5,920 11,660 9,893 ----------- ----------- ----------- ----------- Net income $ 11,368 $ 8,799 $ 18,219 $ 14,025 ----------- ----------- ----------- ----------- Earnings per share: Basic $ .22 $ .19 $ .36 $ .30 Diluted $ .22 $ .18 $ .35 $ .29 Weighted-average shares outstanding: Basic 50,673,087 46,300,508 50,283,034 46,302,036 Diluted 52,374,156 47,966,190 52,141,719 48,118,485 KNOLL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) June 30, December 31, 2005 2004 -------------- -------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 11,573 $ 9,052 Customer receivables, net 94,091 92,452 Inventories 55,017 49,586 Prepaid and other current assets 26,348 22,126 -------------- -------------- Total current assets 187,029 173,216 Property, plant, and equipment, net 144,945 150,992 Intangible assets, net 236,725 237,382 Other noncurrent assets 7,480 8,641 -------------- -------------- Total Assets $ 576,179 $ 570,231 -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt $ 100 $ 108 Accounts payable 55,408 45,613 Other current liabilities 54,454 61,983 -------------- -------------- Total current liabilities 109,962 107,704 Long-term debt 355,695 392,750 Other noncurrent liabilities 93,547 91,122 -------------- -------------- Total liabilities 559,204 591,576 -------------- -------------- Stockholders' equity (deficit) 16,975 (21,345) -------------- -------------- Total Liabilities and Stockholders' Equity (Deficit) $ 576,179 $ 570,231 --------------- -------------- KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Six Months Ended June 30, ------------------------- 2005 2004 ------------ ----------- (Unaudited) (Unaudited) Net income $ 18,219 $ 14,025 ------------ ----------- Cash Flows provided by Operating Activities 31,937 24,542 Cash Flows used in Investing Activities (5,061) (3,376) Cash Flows used in Financing Activities (23,353) (19,402) Effect of exchange rate changes on cash and cash equivalents (1,002) (9) ------------ ----------- Increase in cash and cash equivalents 2,521 1,755 Cash and cash equivalents at beginning of period 9,052 11,517 Cash and cash equivalents at end of period $ 11,573 $ 13,272 ------------ -----------