Knoll, Inc. (NYSE: KNL), a constellation of design-driven brands
and people, working together with clients in person and digitally
to create inspired modern interiors for workplaces and homes, today
announced financial results for the third quarter ended
September 30, 2020.
Third Quarter
Highlights Versus Prior Year
Net Sales decreased 13.2% to $309.4M Gross
Margin decreased 280 bps to 36.6%GAAP Operating Expenses decreased
$9.6M to $94.1M or 30.4% of net salesAdjusted Operating Expenses
decreased $12.2M to $88.5M or 28.6% of net salesGAAP Net Earnings
decreased $10.5M to $7.0 or 2.2% of net salesAdjusted EBITDA
decreased $15.1M to $37.3M or 12.1% of net salesGAAP Diluted EPS
decreased $0.24 to $0.11Adjusted Diluted EPS decreased $0.32 to
$0.23This release contains non-GAAP financial measures. Please
refer to the Reconciliations of Non-GAAP Financial Measures section
for reconciliations to the most directly comparable GAAP
measure.
To Our Fellow Shareholders:
We hope this finds you and yours safe and well.
In these unusual times, we want to start by thanking all Knoll
associates for their dedication to the design community, our
clients and our dealer partners. Across the Knoll constellation our
associates have continued to keep our plants and warehouses
operating, have reopened our showrooms where allowed by government
regulations, and have found new and innovative ways to connect
digitally and in person with the design community, commercial
clients and residential consumers. All of this, while implementing
safe and smart working practices and looking out for the well-being
of their colleagues. We are so appreciative of the passion and
effort everyone continues to bring to the challenges we all
face.
Solid Financial Results
Our e-commerce business grew 434% in the third
quarter compared to the prior year, and higher margin residential
sales, comprising approximately a third of our business - up from a
fifth a year ago, grew a total of 39%. Knoll, Inc. sales of $309.4
million declined 13.2% in the third quarter, driven primarily by a
decline in Office sales of approximately 25%. Total shipments
during the quarter benefited from elevated backlog levels heading
into the period, and we were pleased that we saw a sequential
improvement in incoming order activity from the very depressed
levels we experienced in the second quarter. Nonetheless, orders
are still tracking below current shipment levels. With the false
starts and delayed return to the workplace for most of our
corporate clients, we continue to see a significant number of new
office projects being delayed, even in cases where the buildings
have been completed and we’ve been awarded the furnishings. In
addition, demand for short term planning enhancements, including
screens and other products for social distancing, has been
modest.
Gross margin in the quarter of 36.6%, while up
sequentially versus the second quarter, was down 280bps versus the
prior year. Benefits from favorable mix and the closing of our
Grand Rapids, Michigan plant were offset by under absorption of our
remaining fixed costs. Adjusted operating expenses came in at 28.6%
of sales, roughly in line on a percentage basis with the prior
year’s results. This reflects the benefit of reduced travel and
entertainment expenses, lower levels of discretionary spending and
reduced incentive accruals. On a sequential basis, operating
expenses also reflect the partial restoration of incentive expenses
as well as increased digital marketing spending. Going forward, our
near-term goal remains to hold adjusted operating expenses at or
below 30% of sales. Adjusted EBITDA margins of 12.1% for the
quarter, while down 260bps from prior year, were up 280bps
sequentially. As we finish fiscal year 2020, we continue to expect
to experience negative deleveraging in the 25-30% range. Adjusted
EPS for the quarter of $0.23 reflects the impact of a higher than
normal tax rate. On a year to date basis, we realized a normalized
tax rate of approximately 16%.
After the closing of the $164 million
convertible preferred offering, and the use of proceeds to pay down
$50 million of term loan debt and $110 million of revolver, we
finished the quarter with net debt of $303 million, and net debt
leverage of 2.1x adjusted EBITDA. This is well below the 4.0x
covenant. At the end of the third quarter, we had liquidity of over
$350 million, leaving us in an excellent position to execute on our
growth initiatives and take advantage of acquisition opportunities
that may become available, subject to certain debt covenants.
Whenever, Wherever as the Pendulum Swings
The solid results we delivered in the third
quarter are a powerful validation of the strategy we have been
executing for some time now to diversify our sources of revenue in
both consumer and professional markets. We are well on the way to
creating a true omnichannel enterprise that has the physical and
digital footprint to support clients whenever, wherever and however
they want to interact with us.
Our range of fluid brands spans from work from
home, including Fully and Knoll+Muuto, to residential lifestyle
brands like HOLLY HUNT, KnollStudio and Muuto to more mainstream
workplace, including Knoll Office, KnollTextiles and
Spinneybeck/FilzFelt. We can leverage the breadth of our product
portfolio across channels where and when that makes sense, taking
advantage of whichever market opportunity may be the healthiest and
most fruitful. Whether online, in our own New York and Los Angeles
retail shops, at to-the-trade showrooms in high end design centers
or through more traditional residential retailers and contract
furniture dealers and showrooms, our distribution strategy offers
customers the flexibility to access us easily on their own
terms.
As a result, we have been able to continue to
pivot to take advantage of the rapid shift to work from home while
simultaneously benefiting from the investments consumers are making
in their residences as furnishings continue to move up the
discretionary ladder as we all spend more time at home. Combined
with our lean and nimble cost structure, in the third quarter we
were able to solidly outperform pure play Office markets and
deliver double digit adjusted EBITDA margins.
Of course, the flip side of these positive
tailwinds is the headwinds that Covid-19 has caused for office
demand. In the foreseeable future, we expect corporate office
demand to be meaningfully depressed. Our sober assessment is that
we are looking at a BIFMA market post-Covid that is approximately
20% smaller than pre-pandemic conditions as companies make do with
fewer workers and work from home settles in as a more permanent
piece of the workplace pie. Based on some of the commercial real
estate data we have seen, we do not believe that demand for office
space will improve meaningfully until late 2022, and we expect
demand to fall as much as 30-40% in the interim as clients remain
hesitant to return to the workplace until they are confident that
they can keep their employees safe; that seems to translate to the
introduction of a vaccine along with other measures like wearing
masks and social distancing.
Over the long term, no doubt, the office will
remain an indispensable part of the workplace ecosystem and we
should see a nice bump when businesses do return to the office. But
that landscape will be a synthesis that includes a more permanent
work from home component in an overall environment that continues
to elevate the importance of a well-designed home. The workplace
itself will likely be more a “we” space than a “me” space as, at
the crux, it becomes a space for collaboration, both in person and
with colleagues working remotely. The pressure to create workplaces
that draw workers in will only increase as the options of where
people can work also grows. All this bodes well for a design-driven
brand like Knoll with a robust collaborative and ancillary product
capability.
That said, this evolving marketplace creates
both challenges and opportunities for Knoll. As a result, we are
taking multiple actions to ensure our success no matter the exact
scenario that comes to fruition.
Scale Office Fixed and Variable Costs
To begin, we are continuing to aggressively
attack costs in the Office business. The restructuring we announced
last week builds on similar actions earlier this year to reduce our
fixed manufacturing footprint by 20+% and drive out redundant costs
across our businesses. In 2021, we will further consolidate
warehouse locations to reduce costs and improve e-commerce
capabilities; exit smaller leased facilities and, where it improves
margins and leverages core capabilities, in-source products from
third party vendors.
Our restructuring actions also include closing
showrooms in certain markets where we have dealer partners with
strong displays; consolidating our sales leadership; expanding the
geographic reach of our Workplace regional managers; scaling our
selling teams to the reality of local demand and driving
efficiencies between ourselves and our dealers. We will also be
leveraging our virtual and digital rendering and selling tools to
improve sales force productivity.
The costs associated with these actions are
estimated to be approximately $10.0 million and will be incurred
beginning in the fourth quarter and carry through 2021. The annual
savings are estimated to be approximately $23.0 million. These
actions, combined with the actions taken earlier in the year, are
expected to yield annual savings of just under $50.0 million.
Lean into Growing e-commerce Business and Digital
initiatives
Next, we will be leaning more heavily into our
e-commerce businesses. This means continuing to expand work from
home offerings available on-line for both our corporate clients and
the many consumers in North America – something like 65 million in
the U.S. alone – and Europe working from home as well as
complementary residential facing opportunities. In the third
quarter, e-commerce represented approximately 10% of our sales, up
from 2% a year ago thanks to both our own organic investments in
Knoll+Muuto work from home offerings, the Fully acquisition and
custom online codes and home office packages we have developed for
our corporate clients.
While we are obviously pleased with the 434%
growth in total e-commerce sales, we recognize that we are just at
the beginning of this secular trend. With Fully now well stocked,
we will be increasing our fourth quarter Fully digital marketing
spend to drive incremental growth and are investing in growing
their European e-commerce efforts as well. We will also continue to
add new consumer friendly shopping features at knoll.com like
easy-to-specify product bundles and new flexible payment options.
We think that the work from home market will double again over the
next couple of years even as total office sales drag and we are
exceptionally well positioned with both a digitally native and
established range of brands here. Through increased digital
marketing investments, web site improvements and expanded product
offerings targeting the home office market, we expect that we can
build an over $200 million e-commerce business at margins well in
excess of our corporate workplace business.
Drive Residential Growth
Lastly, we will leverage our physical and
growing digital capabilities to drive growth in our residential
businesses. At the end of September, we launched the most
significant overhaul of our hollyhunt.com web presence and online
capability since we acquired this business in 2014. Hollyhunt.com
is not only inspirational and on brand but also serves as a
tremendous business tool for trade interior designers, decorators
and their clients that work with HOLLY HUNT. The site extends our
singular showroom platform and curated multi-brand collection into
the digital space in a way that allows us to scale this business
beyond anything we have done to date. It offers clients and
specifiers unprecedented ease of doing business and can grow in
ways that we believe could bring real innovation into a
traditionally staid to-the-trade market. There are few competitors
with the scale to make the kinds of digital and physical
investments we think will drive HOLLY HUNT in the years ahead.
Similarly, we have introduced digital
technologies in our Knoll shops in New York and Los Angeles,
locations that are not only driving local growth but also are
helping us work remotely with designers and clients in other
geographies. It is critical that we continue to leverage these
bricks and mortar selling investments on a broader scale. In tandem
with our growing success digitally and our relationships with
residential dealers and e-tailers in Europe and, to a lesser extent
Asia, we are also focusing on expanding the breadth of our Muuto
and KnollStudio residential offerings into under-penetrated home
categories with meaningful growth potential. In 2021 we expect to
take advantage of favorable short term retail opportunities to
launch a flagship Muuto direct to consumer pop-up that would
supplement Muuto's e-commerce efforts in North America.
Actions to Support more Inclusive and Diverse
communities
As we build on our founding ethos that modern
design has a powerful role to play in improving the quality of the
way we live and work, we are also reaffirming our commitment to
leverage the power of design to build a fairer world and shape a
Knoll more reflective of our communities. I am proud to have joined
more than 1300 CEOs in signing the CEO Action for Diversity and
Inclusion Pledge. While words and pledges are good to state
intention and values, we were pleased to back this up with actions
as well. Working with Scholarship America which administers our
Knoll Employee Scholarship program, we have created the Knoll
Diversity Advancement Scholarships for Black Students which will
award five $10,000 scholarships annually to Black high school
students to pursue design-related disciplines over the course of
their study at 2- and 4-year colleges. Our industry needs to become
more diverse and we hope this helps to pave the way.
Last week, we reiterated our commitment to meet
a Board diversity representation goal of 30% by May 2021. In that
regard, we are thrilled to have added Jeffrey Henderson to the
Knoll Board. Jeffrey comes to Knoll with a background in
engineering and design, having played creative and innovation roles
at Cole Haan and Nike. Today, he is the Founder and Creative
Director of his own Harlem, New York-based design firm AndThem. We
look forward to Jeffrey’s contributions on multiple fronts as we
build a more diverse Knoll.
To engage our associates and customers in these
efforts we also announced a partnership with Habitat for Humanity.
This includes consumer participation at check-out at the Shop at
knoll.com, a matching donation from Knoll and volunteer activity in
select local communities on housing builds as soon as they resume.
These initiatives build on climate, renewable energy and cultural
support work, including the World Monuments Fund/Knoll Prize, that
are already a part of our corporate social responsibility
agenda.
In closing, there is much to be proud of in the
results we have reported and the strategies that will guide us
forward. There may be those who are daunted by the challenges posed
by the pandemic, particularly in the office space, but we believe,
if anything, that the pandemic has helped to accelerate long term
trends that we were already building a Knoll to take head on. Now
we just have to pivot harder and faster, but the opportunity is
there, the pieces are in place and we can see the excitement in our
teams.
Andrew B. Cogan |
|
Charles W. Rayfield |
Chairman and Chief Executive Officer |
|
Senior Vice President and Chief Financial Officer |
Business Segment Results
The Company has two reportable segments: Office
and Lifestyle. The Office reportable segment is comprised of the
operations of the Office operating segment. The Lifestyle
reportable segment is an aggregation of the Lifestyle, Europe, and
Muuto operating segments. 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 accessories
as well as the international sales of our Office products. The
Office segment includes DatesWeiser and Fully. DatesWeiser is known
for its sophisticated meeting and conference tables and credenzas,
sets a standard of design, quality and technology integration.
Fully is an ecommerce furniture brand selling height-adjustable
desks, ergonomic chairs and accessories principally for individual
home offices and small businesses.
The Lifestyle segment includes KnollStudio®,
HOLLY HUNT®, 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. 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. 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.
The tables below present the Company’s segment
information with Corporate costs excluded from operating segment
results.
|
Three Months Ended September 30, |
Net sales (in
millions) |
2020 |
|
2019 |
Office |
$ |
193.2 |
|
|
$ |
219.1 |
|
Lifestyle |
116.2 |
|
|
137.4 |
|
Total net sales |
$ |
309.4 |
|
|
$ |
356.5 |
|
|
|
|
|
|
Three Months Ended September 30, |
Operating profit (in
millions) |
2020 |
|
2019 |
Office |
$ |
5.4 |
|
|
$ |
18.3 |
|
Lifestyle |
16.0 |
|
|
25.0 |
|
Corporate |
(2.1 |
) |
|
(6.6 |
) |
Total operating profit |
$ |
19.3 |
|
|
$ |
36.7 |
|
|
|
|
|
|
Three Months Ended September 30, |
Adjusted
EBITDA(1) (in
millions) |
2020 |
|
2019 |
Office |
$ |
16.7 |
|
|
$ |
26.3 |
|
Lifestyle |
20.5 |
|
|
30.0 |
|
Corporate |
0.1 |
|
|
(3.9 |
) |
Total adjusted EBITDA |
$ |
37.3 |
|
|
$ |
52.4 |
|
(1) See Reconciliation of Non-GAAP Financial
Measures below.
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 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 non-GAAP measures presented are utilized by
management to evaluate the Company's business performance and
profitability by excluding certain items that may not be indicative
of our recurring core business operating results. The Company
believes that these measures provide additional clarity for
investors by excluding specific expenses in an effort to show
comparable business operating results for the periods
presented.
The following table reconciles Operating
Expenses to Adjusted Operating Expenses for the periods
indicated.
|
Three Months Ended September 30, |
|
2020 |
|
2019 |
|
($ in millions) |
|
|
|
|
Operating expenses |
$ |
94.1 |
|
|
$ |
103.7 |
|
Less: |
|
|
|
Acquisition related amortization |
2.4 |
|
|
2.1 |
|
Restructuring charges(1) |
3.3 |
|
|
0.1 |
|
Acquisition related expenses |
— |
|
|
0.3 |
|
Debt refinancing fees |
— |
|
|
0.5 |
|
Adjusted operating
expenses |
$ |
88.4 |
|
|
$ |
100.7 |
|
Net Sales |
$ |
309.4 |
|
|
$ |
356.5 |
|
Operating Expenses as a
Percentage of Net Sales |
30.4 |
% |
|
29.1 |
% |
Adjusted Operating Expenses as
a Percentage of Net Sales |
28.6 |
% |
|
28.2 |
% |
(1) Restructuring charges during the third quarter of 2020 were
related primarily to expenses to execute previously announced
actions to close the Company's Grand Rapids manufacturing plant and
severance costs for the Covid-19 related workforce reduction.
The following tables reconcile Operating Profit
to Adjusted EBITDA by business segment for the periods
indicated.
|
Three Months Ended September 30, 2020 |
|
Office |
|
Lifestyle |
|
Corporate |
|
Knoll, Inc. |
|
($ in millions) |
|
|
|
|
|
|
|
|
Operating profit (loss) |
5.4 |
|
|
16.0 |
|
|
(2.1 |
) |
|
$ |
19.3 |
|
Add back: |
|
|
|
|
|
|
|
Restructuring charges(1) |
2.1 |
|
|
— |
|
|
1.2 |
|
|
3.3 |
|
Depreciation and amortization |
6.3 |
|
|
4.1 |
|
|
0.1 |
|
|
10.5 |
|
Stock compensation |
2.2 |
|
|
0.6 |
|
|
1.0 |
|
|
3.8 |
|
Other income items |
0.7 |
|
|
(0.2 |
) |
|
(0.1 |
) |
|
0.4 |
|
Adjusted EBITDA (loss) |
$ |
16.7 |
|
|
$ |
20.5 |
|
|
$ |
0.1 |
|
|
$ |
37.3 |
|
Net sales |
$ |
193.2 |
|
|
$ |
116.2 |
|
|
— |
|
|
$ |
309.4 |
|
Operating profit % |
2.8 |
% |
|
13.8 |
% |
|
N/A |
|
|
6.2 |
% |
Adjusted EBITDA % |
8.6 |
% |
|
17.6 |
% |
|
N/A |
|
|
12.1 |
% |
(1) Restructuring charges during the third quarter of 2020 were
related primarily to expenses to execute previously announced
actions to close the Company's Grand Rapids manufacturing plant and
severance costs for Covid-19 related workforce reduction.
|
Three Months Ended September 30,
2019 |
|
Office |
|
Lifestyle |
|
Corporate |
|
Knoll, Inc. |
|
($ in millions) |
|
|
|
|
|
|
|
|
Operating profit (loss) |
$ |
18.3 |
|
|
$ |
25.0 |
|
|
$ |
(6.6 |
) |
|
$ |
36.7 |
|
Add back: |
|
|
|
|
|
|
|
Acquisition related expenses |
— |
|
|
— |
|
|
0.3 |
|
|
0.3 |
|
Restructuring charges |
0.1 |
|
|
— |
|
|
0.5 |
|
|
0.6 |
|
Depreciation and amortization |
6.3 |
|
|
3.4 |
|
|
0.1 |
|
|
9.8 |
|
Stock compensation |
0.6 |
|
|
1.1 |
|
|
1.4 |
|
|
3.1 |
|
Other income items |
1.0 |
|
|
0.5 |
|
|
0.4 |
|
|
1.9 |
|
Adjusted EBITDA (loss) |
$ |
26.3 |
|
|
$ |
30.0 |
|
|
$ |
(3.9 |
) |
|
$ |
52.4 |
|
Net sales |
$ |
219.1 |
|
|
$ |
137.4 |
|
|
0 |
|
|
$ |
356.5 |
|
Operating profit % |
8.4 |
% |
|
18.2 |
% |
|
N/A |
|
|
10.3 |
% |
Adjusted EBITDA % |
12.0 |
% |
|
21.8 |
% |
|
N/A |
|
|
14.7 |
% |
The following table reconciles Net Earnings to Adjusted EBITDA
for the periods indicated.
|
Three Months Ended September
30, |
|
2020 |
|
2019 |
|
($ in millions) |
|
|
|
|
Net earnings attributable to
Knoll, Inc. stockholders |
$ |
7.0 |
|
|
$ |
17.5 |
|
Add back: |
|
|
|
Income tax expense |
7.2 |
|
|
6.0 |
|
Interest expense(1) |
4.3 |
|
|
5.9 |
|
Depreciation and amortization |
10.5 |
|
|
9.8 |
|
Stock compensation |
3.8 |
|
|
3.1 |
|
Other non-cash items |
(0.1 |
) |
|
(0.6 |
) |
Restructuring charges(2) |
3.3 |
|
|
0.1 |
|
Acquisition related expenses |
— |
|
|
0.3 |
|
Debt refinancing fees |
— |
|
|
0.5 |
|
Pension settlement charge(3) |
1.3 |
|
|
9.8 |
|
Adjusted EBITDA |
$ |
37.3 |
|
|
$ |
52.4 |
|
Net sales |
$ |
309.4 |
|
|
$ |
356.5 |
|
Net earnings % |
2.3 |
% |
|
4.9 |
% |
Adjusted EBITDA % |
12.1 |
% |
|
13.2 |
% |
(1) Interest expense for the three months ended September 30,
2019 includes $0.4 million loss on extinguishment of
debt.(2)Restructuring charges during the third quarter of 2020 were
related primarily to expenses to execute previously announced
actions to close the Company's Grand Rapids manufacturing plant and
severance costs for Covid-19 related workforce reduction. (3)The
Company incurred settlement charges in connection with cash
payments of lump sum elections related to the Company's pension
plan.
The following table reconciles Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the periods indicated.
|
Three Months Ended September 30, |
|
|
2020 |
|
2019 |
|
|
|
|
|
|
Diluted earnings per
share |
$ |
0.11 |
|
$ |
0.35 |
|
Add back: |
|
|
|
|
Acquisition related expenses |
— |
|
0.01 |
|
Acquisition related amortization |
0.05 |
|
0.04 |
|
Restructuring charges(1) |
0.07 |
|
— |
|
Pension settlement charge(2) |
0.03 |
|
0.20 |
|
Debt refinancing fees |
— |
|
0.01 |
|
Loss on extinguishment of debt |
— |
|
0.01 |
|
Less: |
|
|
|
|
Tax effect of non-GAAP adjustments(3) |
0.03 |
|
0.07 |
|
Adjusted diluted earnings per
share |
$ |
0.23 |
|
$ |
0.55 |
|
(1) Restructuring charges during the third quarter of 2020 were
related primarily to expenses to execute previously announced
actions to close the Company's Grand Rapids manufacturing plant and
severance costs for Covid-19 related workforce reduction.(2) The
Company incurred settlement charges in connection with cash
payments of lump sum elections related to the Company's pension
plan.(3) Tax effect of non-GAAP adjustments was calculated using
the applicable blended statutory tax rate for the jurisdiction in
which the adjustment occurred.
The following table shows Workplace and Residential Sales by
segment for the periods indicated.
|
Three Months Ended September 30, 2020 |
|
Three Months Ended September 30, 2019 |
|
Office |
|
Lifestyle |
|
Knoll, Inc. |
|
Office |
|
Lifestyle |
|
Knoll, Inc. |
|
($ in millions) |
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Workplace Sales |
$ |
165.3 |
|
|
$ |
51.1 |
|
|
$ |
216.4 |
|
|
$ |
214.4 |
|
|
$ |
75.2 |
|
|
$ |
289.6 |
|
Residential Sales |
27.9 |
|
|
65.1 |
|
|
93.0 |
|
|
4.7 |
|
|
62.2 |
|
|
66.9 |
|
Total Net Sales |
$ |
193.2 |
|
|
$ |
116.2 |
|
|
$ |
309.4 |
|
|
$ |
219.1 |
|
|
$ |
137.4 |
|
|
$ |
356.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Workplace Growth vs Prior
Year |
(22.9 |
)% |
|
(32.0 |
)% |
|
(25.3 |
)% |
|
|
|
|
|
|
Residential Growth vs Prior
Year |
493.6 |
% |
|
4.7 |
% |
|
39.0 |
% |
|
|
|
|
|
|
Workplace Percentage of
Sales |
85.6 |
% |
|
44.0 |
% |
|
69.9 |
% |
|
97.9 |
% |
|
54.7 |
% |
|
81.2 |
% |
Residential Percentage of
Sales |
14.4 |
% |
|
56.0 |
% |
|
30.1 |
% |
|
2.1 |
% |
|
45.3 |
% |
|
18.8 |
% |
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 plans for reduced
capital and operating expenditures and enhanced liquidity measures,
our integration of acquired businesses, our supply chain and
manufacturing footprint optimization plans, our expectations with
respect to changes in the way companies implement "work from home"
and remote work strategies, and our expectations with respect to
the payment of future dividends and 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 and interior solutions, changes in the
competitive marketplace, changes in the trends in the market for
furniture or coverings, and the way and places where people work,
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, the uncertainty and ultimate
economic impact of the COVID-19 pandemic, 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
OfficerTel 215 679-1703crayfield@knoll.com
Media:
David E. BrightSenior Vice President,
CommunicationsTel 212 343-4135dbright@knoll.com
Q&A Conference Call
Information
Knoll will host a live question and answer
conference call on Monday, October 26, 2020 at 5:30 p.m. ET.
The conference call may also be accessed by
dialing:
North America |
|
(844) 778-4138 |
International |
|
(661) 378-9550 |
Q&A Conference ID |
|
3798723 |
A replay of the Q&A conference call will be
available through November 2, 2020 by dialing (855) 859-2056 or
(404) 537-3406 and entering passcode 3798723, as well as on the
Company's investor relations website through January 22, 2021.
About Knoll
Knoll, Inc. is a constellation of design-driven
brands and people, working together with our clients in person and
digitally to create inspired modern interiors. Our internationally
recognized portfolio includes furniture, textiles, leathers,
accessories, and architectural and acoustical elements. Our brands
— Knoll Office, KnollStudio, KnollTextiles, KnollExtra, Spinneybeck
| FilzFelt, Edelman Leather, HOLLY HUNT, DatesWeiser, Muuto, and
Fully — reflect our commitment to modern design that meets the
diverse requirements of high performance workplaces, work from home
settings and luxury residential 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. Our products can also help clients comply with the
International Living Future Institute to achieve Living Building
Challenge Certification, and with the International WELL Building
Institute to attain WELL Building 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
millions, except per share
data)(Unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Net sales |
$ |
309.4 |
|
|
$ |
356.5 |
|
|
$ |
923.5 |
|
|
$ |
1,056.6 |
|
Cost of sales |
196.0 |
|
|
216.1 |
|
|
592.1 |
|
|
651.7 |
|
Gross profit |
113.4 |
|
|
140.4 |
|
|
331.4 |
|
|
404.9 |
|
Selling, general, and
administrative expenses |
90.8 |
|
|
103.6 |
|
|
291.2 |
|
|
304.9 |
|
Restructuring charges |
3.3 |
|
|
0.1 |
|
|
19.5 |
|
|
0.2 |
|
Operating profit |
19.3 |
|
|
36.7 |
|
|
20.7 |
|
|
99.8 |
|
Loss on extinguishment of
debt |
0.2 |
|
|
0.4 |
|
|
0.2 |
|
|
0.4 |
|
Pension settlement charges |
1.3 |
|
|
9.8 |
|
|
2.8 |
|
|
10.4 |
|
Interest expense |
4.1 |
|
|
5.5 |
|
|
13.6 |
|
|
16.2 |
|
Other expense (income), net |
(0.5 |
) |
|
(2.5 |
) |
|
(1.3 |
) |
|
(4.1 |
) |
Income before income tax
expense |
14.2 |
|
|
23.5 |
|
|
5.4 |
|
|
76.9 |
|
Income tax (benefit) expense |
7.2 |
|
|
6.0 |
|
|
(2.9 |
) |
|
19.8 |
|
Net earnings |
$ |
7.0 |
|
|
$ |
17.5 |
|
|
$ |
8.3 |
|
|
$ |
57.1 |
|
Less: Net earnings attributable
to preferred stockholders |
1.4 |
|
|
— |
|
|
1.4 |
|
|
— |
|
Net earnings attributable to
Knoll, Inc. stockholders |
$ |
5.6 |
|
|
$ |
17.5 |
|
|
$ |
6.9 |
|
|
$ |
57.1 |
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.11 |
|
|
$ |
0.36 |
|
|
$ |
0.14 |
|
|
$ |
1.17 |
|
Diluted |
$ |
0.11 |
|
|
$ |
0.35 |
|
|
$ |
0.14 |
|
|
$ |
1.16 |
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding (in thousands): |
|
|
|
|
|
|
|
Basic |
49,112 |
|
|
48,873 |
|
|
49,057 |
|
|
48,835 |
|
Diluted |
49,441 |
|
|
49,574 |
|
|
49,485 |
|
|
49,360 |
|
KNOLL, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(Dollars in
millions)(Unaudited)
|
September 30, 2020 |
|
December 31, 2019 |
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
14.5 |
|
|
$ |
8.5 |
|
Customer receivables, net |
91.7 |
|
|
107.4 |
|
Inventories, net |
205.4 |
|
|
195.9 |
|
Prepaid and other current
assets |
44.9 |
|
|
28.8 |
|
Total current assets |
356.5 |
|
|
340.6 |
|
Property, plant, and equipment,
net |
227.6 |
|
|
239.0 |
|
Goodwill and intangible assets,
net |
686.9 |
|
|
680.3 |
|
Right-of-use lease assets |
116.2 |
|
|
94.4 |
|
Other non-current assets |
2.4 |
|
|
3.6 |
|
Total assets |
$ |
1,389.6 |
|
|
$ |
1,357.9 |
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK,
AND SHAREHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term
debt |
$ |
14.5 |
|
|
$ |
17.1 |
|
Accounts payable |
91.2 |
|
|
131.9 |
|
Current portion of lease
liability |
26.8 |
|
|
20.7 |
|
Other current liabilities |
124.6 |
|
|
120.3 |
|
Total current liabilities |
257.1 |
|
|
290.0 |
|
Long-term debt |
294.0 |
|
|
428.9 |
|
Lease liability |
107.7 |
|
|
87.0 |
|
Other non-current
liabilities |
139.9 |
|
|
124.4 |
|
Total liabilities |
798.7 |
|
|
930.3 |
|
Convertible preferred stock |
163.1 |
|
|
— |
|
Total equity |
427.8 |
|
|
427.6 |
|
Total liabilities, convertible
preferred stock and shareholders' equity |
$ |
1,389.6 |
|
|
$ |
1,357.9 |
|
KNOLL, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in
millions)(Unaudited)
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
|
|
|
Net earnings |
$ |
8.3 |
|
|
|
$ |
57.1 |
|
|
Cash provided by operating
activities |
19.4 |
|
|
|
98.1 |
|
|
Cash (used in) investing
activities |
(15.5 |
) |
|
|
(63.3 |
) |
|
Cash provided by (used in)
financing activities |
1.9 |
|
|
|
(28.0 |
) |
|
Effect of exchange rate changes
on cash and cash equivalents |
0.2 |
|
|
|
(0.1 |
) |
|
Increase in cash and cash
equivalents |
6.0 |
|
|
|
6.7 |
|
|
Cash and cash equivalents at
beginning of period |
8.5 |
|
|
|
1.6 |
|
|
Cash and cash equivalents at end
of period |
$ |
14.5 |
|
|
|
$ |
8.3 |
|
|
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