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 first quarter ended March 31,
2020.
First Quarter Highlights
Net Sales increased 2.2% to $340.0MGAAP Gross
Margin decreased 120 bps to 36.0%Adjusted Gross Margin decreased 80
bps to 36.4%GAAP Operating Expenses increased $16.3M to $110.9M or
32.6% of net salesAdjusted Operating Expenses increased $8.9M to
$100.9M or 29.7% of net salesGAAP Operating Margin decreased 520
bps to 1.8% in the Office segmentGAAP Operating Margin decreased
480 bps to 11.0% in the Lifestyle segmentAdjusted EBITDA Margin
decreased 110 bps to 9.0% in the Office segmentAdjusted EBITDA
Margin decreased 400 bps to 15.3% in the Lifestyle segmentGAAP Net
Earnings decreased $7.1M to $10.9M or 3.2% of net salesAdjusted
EBITDA decreased $8.4M to $33.2M or 9.8% of net salesGAAP Diluted
EPS decreased $0.15 to $0.22Adjusted Diluted EPS decreased $0.01 to
$0.40This 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 Shareholders and Associates:
COVID-19 UpdateAs we write our first quarter
report, our hearts go out to all those whose lives, health and
well-being have been directly impacted by the COVID-19 pandemic.
And we honor those on the front lines of fighting this terrible
virus. While at times like these everything else can seem
irrelevant, we are proud of the small part we at Knoll and our
dealers play in supporting many of these front-line organizations
and the facilities in which they operate.
At Knoll, we are fortunate that only a small
handful of our employees have been directly impacted by the virus
and we can report that all have recovered. Furthermore, we are
pleased that our aggressive steps to protect the health and
well-being of our manufacturing and warehouse associates, including
temperature checks, altering the layout of certain processes within
our manufacturing operations to increase social distancing as well
as the use of face protection, gloves and increased cleaning and
sterilizing, have been well received and effective. As a result, we
have been able to largely continue to support clients in a broad
range of critical infrastructure and related areas. In addition, we
are proud that our Spinneybeck, KnollTextiles and HOLLY HUNT
operations have been able to pivot parts of their operations to
provide masks and other personal protective equipment for our
associates and local healthcare facilities.
First Quarter ResultsWe delivered a solid start
to 2020 with growth in orders and sales over the prior year. Had
the last two weeks of the quarter not been impacted by the closure
of our two plants in Italy, DatesWeiser in Buffalo, and the
temporary closure and subsequent reopening of our plant in
Pennsylvania, shipments would have been approximately $12.0 million
higher. Overall, we delivered $340.0 million of sales, up
2.2% from the prior year. Excluding Fully, which was acquired in
third quarter of 2019, Knoll, Inc. sales declined 3.3%. Adjusted
gross margin, driven by headwinds in our Lifestyle segment,
declined by 80 basis points. Adjusted operating expenses as a
percentage of sales increased sharply by 200 basis points, led by
Fully, our first Constellation sales meeting in three years as well
as increased provisions for uncollectable accounts. Adjusted EBITDA
declined by $8.4 million, to $33.2 million, versus the prior year
and adjusted EBITDA margin fell from 12.5% to 9.8%. Adjusted EPS of
$0.40 was down from $0.41 a year ago. The effective tax rate during
the first quarter of 2020 was (54.8)% down from 26.6% in the prior
year. The tax rate during the first quarter was positively
impacted by provisions within the Coronavirus Aid, Relief and
Economic Security (CARES) Act, reducing our income tax provision by
approximately $5.8 million.
Consolidated net sales growth of 2.2% was led by
our Office segment, which benefited from the strong performance of
Fully’s work-from-home e-commerce offerings. The Office segment
posted 7.0% sales growth over the prior year, but excluding Fully,
Office segment sales were down 2.0%. Office orders growth exceeded
sales growth in the first quarter and we built backlog heading into
the second quarter, led by the government vertical. We believe,
however, there will be increasing challenges in the coming quarter
in our clients’ abilities to accept and install all of the product
orders we have scheduled to produce as well as limitations in
manufacturing all the orders in our backlog given some of the
government-mandated plant closures in Italy and the US. And
while some clients are using this lull to complete already
commenced or committed projects, we believe others are starting to
defer earlier stage work which will likely impact us later this
year. Additionally, we are seeing significantly more requests to
rearrange scheduled ship dates as well as above average order
cancellations as clients reevaluate their facility decisions.
Office adjusted EBITDA margins declined by 110 basis points from
10.1% to 9.0% and adjusted EBITDA was down by $1.0 million,
primarily due to mix shift within the segment.
Lifestyle segment sales declined by 5.3% as
continued double-digit growth at Muuto was offset by challenging
year-over-year comparisons in our KnollStudio workplace sales, and
residential weakness at HOLLY HUNT and Knoll Europe where we had to
close design center showrooms, and many of our European residential
dealers shuttered in March as well. These will be areas of
continued headwind for the foreseeable future, and were a factor in
the 400 bps decline in Lifestyle adjusted EBITDA margins due to
backlog that we were unable to deliver at the end of the
quarter.
In celebration of Earth Day 2020 and our
commitment to reduce our carbon footprint, we were pleased to
announce that we completed the conversion of our North American
manufacturing and distribution operations and facilities, including
KnollStudio, KnollTextiles and DatesWeiser to 100% green renewable
electrical power produced by sources such as wind or low impact
hydro power. In addition, our East Greenville, PA manufacturing
site now utilizes 100% green renewable and green-sourced natural
gas. Renewable energy eliminates fossil-fuel based greenhouse gas
(GHG) emissions or air pollutants. This transition will reduce the
need for over 55,000 megawatt hours of carbon based emissions going
forward.
Responding to a Changing LandscapeWe recognize
these are far from normal times. The disruption the pandemic has
wrought has clearly been felt across our constellation of brands.
While our major North American plants remain operational, we have
had to close manufacturing operations in Italy and in Buffalo, NY.
Select HOLLY HUNT locations and suppliers are also closed, although
all our warehouse and logistics operations including HOLLY HUNT,
Muuto, Spinneybeck, KnollTextiles, Edelman Leather and Fully are up
and running. We are impressed by the ingenuity all our sales teams
have brought to our client and dealer engagements. Whether it is
through virtual tours of our flagship Fulton Market Chicago space,
on-line mockup presentations using our latest 3D rendering tools,
video conferencing presentations, assorted webinars, including the
k.talks series, a weekly virtual series of webcasts by Knoll about
the changing dynamics of work today available on our website, and
extensive custom product engagements as our clients respond to
changing workplace conditions, our teams remain busy and
engaged.
Our Office orders funnel continues to be above
prior year levels, but we are aware this may be a lagging
indicator. Physical mockups understandably are down by half, but we
still see many client engagements moving forward and have had many
virtual presentations result in impressive wins. As a later cycle
business on the Office side, we are cognizant that we are probably
a quarter or more from the eye of the storm; while on the shorter
cycle residential side, the closing of our HOLLY HUNT showrooms and
Knoll Shops in New York and Los Angeles have had a more direct
impact on our business. One area in which we are seeing
exceptionally strong growth is our work-from-home e-commerce
business by Fully. Sales in March at Fully set an all-time record,
and we are working hard to push supply to keep up with demand.
Actions to Ensure Profitability and LiquidityIt
is fair to say at this early stage it is simply impossible to draw
conclusions of what the full year will look like. That said, the
team at Knoll has, for better or worse, extensive experience in
managing Knoll through significant periods of economic upheaval,
crisis and uncertainty. We know that the keys to coming out
stronger are aggressive actions to control spending and maximize
free cash flow and liquidity while protecting any essential
investments that will drive faster uptake as the crisis abates. The
other thing we have learned through these crises is the more
diversified the enterprise is, the better we will weather any
storm. And that is certainly true at Knoll, where we are
significantly less reliant on any single business, client segment
or channel than we were in the past 20 years.
So, let us highlight the steps we have taken
immediately to adjust our business for the pandemic and anticipated
economic fallout. On the spending side, we froze all but a small
handful of open positions across Knoll. We have suspended certain
retirement contributions and cancelled mid-year salary increases
that were planned. Additionally, we suspended all cash bonus
accruals for both our senior and broader management team. This will
result in cash compensation reductions of 10% to 50% for our top
leaders.
We also conducted a business by business review
of all spending and made significant adjustments. Some spending
reductions were easy, such as travel; others involved more
difficult choices and prioritization including delayed product
launches and other investments. In geographies where we were unable
to operate a particular business, like at DatesWeiser in Buffalo or
in Italy, we made the difficult decision to furlough the majority
of associates in these businesses. Today, approximately 15% of our
global workforce is on furlough while we continue to provide these
associates healthcare benefits. On a full year basis,
including the variable impact of lower sales-related compensation,
these reductions in the current year should save us upwards of
$65.0 million versus prior year. And we continue to monitor
incoming demand to make further spending adjustments as
required.
On the liquidity front we have also taken
important steps to ensure we have ample cash and revolver
availability to manage through this crisis. First, we ended the
quarter with $130 million of cash on our balance sheet, and still
have just under $100 million of untapped revolver availability. Our
credit facility does not mature until August of 2024 and we have
minimal mandatory quarterly amortization payments on our term loans
of approximately $17.0 million annually. From a leverage
standpoint, we were levered 3.2:1 at the end of the first quarter.
Assuming all cash on hand was used to pay down outstanding debt,
our leverage ratio would have been 2.6:1. These are well below our
4.0:1 covenant at the end of the first quarter, which steps down to
3.75:1 in the second quarter of 2020.
Additionally, we took other important steps to
shore up our liquidity;
- We have cut our full year planned CAPEX spending by $20.0
million.
- To benefit our dealers and our cash flow this quarter we
initiated special credit terms, which we believe will incent our
dealers to take advantage of favorable cash discount terms. And we
have been facilitating education sessions for our dealers to
familiarize them with the Small Business Administration loans and
relevant provisions of the CARES Act.
- Our Board of Directors has agreed to take the remainder of
their 2020 cash compensation in shares.
- In the spirit of shared sacrifice amongst stakeholders, our
Board of Directors has decided to reduce our dividend by
approximately 75% to $0.04 per quarter. This represents an annual
cash savings of $26.0 million. We will continue to review our
dividend policy quarterly and adjust appropriately to protect our
key initiatives, financial flexibility and staffing levels.
- As part of our plan to consolidate and improve the efficiency
of our manufacturing operations, we have a tentative agreement to
sell our Grand Rapids building for approximately $13.0 million; we
anticipate closing late in the second quarter while maintaining the
use of this facility as we complete our plant consolidation, which
has understandably been set back three to six months when we
suspended equipment moves in March.
- We have reached out to our landlords to discuss rent abatements
and concessions in buildings we are not able to access during
shelter-in-place orders and stay-at-home orders.
- Lastly, we are evaluating many of the CARES Act provisions and
government programs in both the US, Canada and globally to help
Knoll and our dealers manage through the pandemic and it's economic
impact.
We believe in total these are meaningful actions
to ensure we continue to have all the liquidity we anticipate
needing to manage Knoll through the coming quarters.
Business OutlookBut more than playing defense
we are energized by the actions we can and are taking to emerge as
a more vital partner to our clients and dealers, a better place to
work and a stronger business. This involves several key activities
as we anticipate what the post-crisis environment will look like
and reallocating resources towards incipient client needs and new
ways of living, working and acquiring our designs.
This has begun immediately with co-creation
efforts with our clients to help them prepare their workplaces to
bring their employees safely back to work in the months ahead.
Whether it is retrofittable partitions for more open benches,
higher panels or bleach cleanable textiles and easily disinfected
materials and surfaces, we have already offered up extensive
product solutions and planning ideas for safe work that allow for
appropriate physical distance where required.
We can even envision a return to more
traditional panel designs and private offices which we are easily
able to provide. And even if we settle out with a more permanent
mix of at home and in the office work and that space is more spread
out, the net usage of our products could even increase,
particularly if we see businesses spreading out more across less
dense locations.
That is another reason why, after seeing the
explosive growth in Fully’s work from home solutions, that we have
decided to fast track the development of a much broader and deeper
range of Knoll work from home product solutions and e-commerce
channels along with accelerating Muuto’s significant e-commerce
potential in North America. We look forward to sharing the progress
on these initiatives in the coming quarters.
In closing, one thing we are more convinced of
than ever is that all this time doing video conferencing and
working outside of our offices will only make the desire for the
social and cultural benefits of a physical workplace all the
stronger. Whether it is about fostering teamwork, innovation or
culture there is nothing like a well-designed workplace to create
the kind of environment where people can do their best work
together. And all this time at home should generate lots of areas
domestically that are ripe for a better home office and a more
comfortable or beautiful living and dining space, all of which our
timeless designs are perfectly suited to address. Stay safe.
Onward.
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 March 31, |
|
Net sales (in
millions) |
|
2020 |
|
2019 |
|
Office |
|
$ |
216.4 |
|
|
|
$ |
202.2 |
|
|
|
Lifestyle |
|
123.6 |
|
|
|
130.6 |
|
|
|
Total net sales |
|
$ |
340.0 |
|
|
|
$ |
332.8 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Operating profit (in
millions) |
|
2020 |
|
2019 |
|
Office |
|
$ |
3.9 |
|
|
|
$ |
14.1 |
|
|
|
Lifestyle |
|
13.6 |
|
|
|
20.7 |
|
|
|
Corporate |
|
(6.1 |
) |
|
|
(5.6 |
) |
|
|
Total operating profit |
|
$ |
11.4 |
|
|
|
$ |
29.2 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Adjusted EBITDA(1) (in
millions) |
|
2020 |
|
2019 |
|
Office |
|
$ |
19.5 |
|
|
|
$ |
20.5 |
|
|
|
Lifestyle |
|
18.9 |
|
|
|
25.2 |
|
|
|
Corporate |
|
(5.2 |
) |
|
|
(4.1 |
) |
|
|
Total adjusted EBITDA |
|
$ |
33.2 |
|
|
|
$ |
41.6 |
|
|
|
(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 reported Net
Sales Growth to Organic Net Sales Growth.
Three
Months EndedMarch 31, 2020 |
Net Sales Growth |
|
Acquisition Impact |
|
Organic NetSales Growth |
|
Office Segment |
|
7.0 |
% |
|
(9.0 |
)% |
|
(2.0 |
)% |
|
Lifestyle Segment |
|
(5.3 |
)% |
|
— |
% |
|
(5.3 |
)% |
|
Total Knoll Inc. |
|
2.2 |
% |
|
(5.5 |
)% |
|
(3.3 |
)% |
|
The following table reconciles Gross Profit and
Margin to Adjusted Gross Profit and Margin for the periods
indicated.
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
2019 |
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Gross profit |
|
$ |
122.3 |
|
|
$ |
123.8 |
|
|
Add back: |
|
|
|
|
|
Product discontinuation charges(1) |
|
0.7 |
|
|
— |
|
|
Restructuring charges(2) |
|
0.6 |
|
|
— |
|
|
Adjusted gross profit |
|
$ |
123.6 |
|
|
$ |
123.8 |
|
|
Net Sales |
|
$ |
340.0 |
|
|
$ |
332.8 |
|
|
Gross Profit % |
|
36.0 |
% |
|
37.2 |
% |
|
Adjusted Gross Profit % |
|
36.4 |
% |
|
37.2 |
% |
|
(1) Product discontinuation charges related primarily to the
write-off of remaining inventory for the Morrison and Chadwick
product lines.(2) Restructuring charges were related to accelerated
depreciation associated with the closure of the Company's Grand
Rapids manufacturing plant.
The following table reconciles Operating
Expenses to Adjusted Operating Expenses for the periods
indicated.
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
2019 |
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Operating expenses |
|
$ |
110.9 |
|
|
$ |
94.6 |
|
|
Less: |
|
|
|
|
|
Acquisition related expenses |
|
— |
|
|
0.4 |
|
|
Acquisition related amortization |
|
2.4 |
|
|
2.1 |
|
|
Restructuring charges(1) |
|
7.6 |
|
|
0.1 |
|
|
Adjusted operating
expenses |
|
$ |
100.9 |
|
|
$ |
92.0 |
|
|
Net Sales |
|
$ |
340.0 |
|
|
$ |
332.8 |
|
|
Operating Expenses as a
Percentage of Net Sales |
|
32.6 |
% |
|
28.4 |
% |
|
Adjusted Operating Expenses as
a Percentage of Net Sales |
|
29.7 |
% |
|
27.7 |
% |
|
(1) Restructuring charges during the first quarter of 2020 were
related primarily to expenses to execute previously announced
actions to close the Company's Grand Rapids manufacturing plant, as
well as the completion of a warehousing location move in the
Lifestyle segment.
The following tables reconcile Operating Profit
to Adjusted EBITDA by business segment for the periods
indicated.
|
|
Three Months
Ended March 31, 2020 |
|
|
Office |
|
Lifestyle |
|
Corporate |
|
Knoll, Inc. |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
$ |
3.9 |
|
|
$ |
13.6 |
|
|
$ |
(6.1 |
) |
|
$ |
11.4 |
|
Add back: |
|
|
|
|
|
|
|
|
Product discontinuation charges(1) |
|
0.7 |
|
|
— |
|
|
— |
|
|
0.7 |
|
Restructuring charges(2) |
|
6.9 |
|
|
0.7 |
|
|
— |
|
|
7.6 |
|
Depreciation and amortization |
|
7.2 |
|
|
3.8 |
|
|
0.1 |
|
|
11.1 |
|
Stock compensation |
|
0.2 |
|
|
0.7 |
|
|
0.7 |
|
|
1.6 |
|
Other income items |
|
0.7 |
|
|
— |
|
|
0.1 |
|
|
0.8 |
|
Adjusted EBITDA (loss) |
|
$ |
19.6 |
|
|
$ |
18.8 |
|
|
$ |
(5.2 |
) |
|
$ |
33.2 |
|
Net sales |
|
$ |
216.4 |
|
|
$ |
123.6 |
|
|
— |
|
|
$ |
340.0 |
|
Operating profit % |
|
1.8 |
% |
|
11.0 |
% |
|
|
N/A |
|
|
3.4 |
% |
Adjusted EBITDA % |
|
9.0 |
% |
|
15.3 |
% |
|
|
N/A |
|
|
9.8 |
% |
(1) Product discontinuation charges related primarily to the
write-off of remaining inventory for the Morrison and Chadwick
product lines.
(2) Restructuring charges during the first
quarter of 2020 were related primarily to expenses to execute
previously announced actions to close the Company's Grand Rapids
manufacturing plant, as well as the completion of a warehousing
location move in the Lifestyle segment. Accelerated depreciation
restructuring charges of $0.6M are shown above within "Depreciation
and amortization".
|
|
Three Months
Ended March 31, 2019 |
|
|
Office |
|
Lifestyle |
|
Corporate |
|
Knoll, Inc. |
|
|
($ in millions) |
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
$ |
14.1 |
|
|
$ |
20.7 |
|
|
$ |
(5.6 |
) |
|
$ |
29.2 |
|
Add back: |
|
|
|
|
|
|
|
|
Acquisition related expenses(1) |
|
— |
|
|
0.4 |
|
|
— |
|
|
0.4 |
|
Restructuring charges(2) |
|
0.1 |
|
|
— |
|
|
— |
|
|
0.1 |
|
Depreciation and amortization |
|
5.0 |
|
|
3.4 |
|
|
0.1 |
|
|
8.5 |
|
Stock compensation |
|
0.4 |
|
|
0.7 |
|
|
1.0 |
|
|
2.1 |
|
Other income items |
|
0.9 |
|
|
— |
|
|
0.4 |
|
|
1.3 |
|
Adjusted EBITDA (loss) |
|
$ |
20.5 |
|
|
$ |
25.2 |
|
|
$ |
(4.1 |
) |
|
$ |
41.6 |
|
Net sales |
|
$ |
202.2 |
|
|
$ |
130.6 |
|
|
|
|
$ |
332.8 |
|
Operating profit % |
|
7.0 |
% |
|
15.8 |
% |
|
|
N/A |
|
|
8.8 |
% |
Adjusted EBITDA % |
|
10.1 |
% |
|
19.3 |
% |
|
|
N/A |
|
|
12.5 |
% |
(1) Acquisition related expenses includes retention agreements
for key employees and other acquisition related expenses for the
three months ended March 31, 2019. Amortization of acquired
intangible assets is shown above within "Depreciation and
amortization".(2) Restructuring charges related primarily to the
Company's footprint optimization initiatives.
The following table reconciles Net Earnings to Adjusted EBITDA
for the periods indicated.
|
|
Three Months
Ended March 31, |
|
|
|
2020 |
|
2019 |
|
|
|
($ in millions) |
|
|
|
|
|
|
|
Net earnings attributable to Knoll, Inc. stockholders |
|
$ |
10.9 |
|
|
$ |
18.0 |
|
|
Add back: |
|
|
|
|
|
Income tax expense |
|
(3.9 |
) |
|
6.5 |
|
|
Interest expense |
|
4.9 |
|
|
5.2 |
|
|
Depreciation and amortization |
|
11.1 |
|
|
8.5 |
|
|
Stock compensation |
|
1.6 |
|
|
2.1 |
|
|
Other non-cash items |
|
(0.4 |
) |
|
0.6 |
|
|
Product discontinuation charges(1) |
|
0.7 |
|
|
— |
|
|
Restructuring charges(2) |
|
7.6 |
|
|
0.1 |
|
|
Acquisition related expenses |
|
— |
|
|
0.4 |
|
|
Pension settlement charge(3) |
|
0.7 |
|
|
0.2 |
|
|
Adjusted EBITDA |
|
$ |
33.2 |
|
|
$ |
41.6 |
|
|
Net sales |
|
$ |
340.0 |
|
|
$ |
332.8 |
|
|
Net earnings % |
|
3.2 |
% |
|
5.4 |
% |
|
Adjusted EBITDA % |
|
9.8 |
% |
|
12.3 |
% |
|
(1) Product discontinuation charges related primarily to the
write-off of remaining inventory for the Morrison and Chadwick
product lines.(2) Restructuring charges during the first quarter of
2020 were related primarily to expenses to execute previously
announced actions to close the Company's Grand Rapids manufacturing
plant, as well as the completion of a warehousing location move in
the Lifestyle segment. Accelerated depreciation restructuring
charges of $0.6M are shown above within "Depreciation and
amortization".(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 March 31, |
|
|
|
2020 |
|
2019 |
|
Diluted earnings per share |
|
$ |
0.22 |
|
|
$ |
0.37 |
|
|
Add back: |
|
|
|
|
|
Product discontinuation charges(1) |
|
0.01 |
|
|
— |
|
|
Acquisition related amortization |
|
0.05 |
|
|
0.05 |
|
|
Restructuring charges(2) |
|
0.17 |
|
|
— |
|
|
Pension settlement charge(3) |
|
0.01 |
|
|
— |
|
|
Less: |
|
|
|
|
|
Tax effect of non-GAAP adjustments(4) |
|
0.06 |
|
|
0.01 |
|
|
Adjusted diluted earnings per
share |
|
$ |
0.40 |
|
|
$ |
0.41 |
|
|
(1) Product discontinuation charges related primarily to the
write-off of remaining inventory for the Morrison and Chadwick
product lines.(2) Restructuring charges during the first quarter of
2020 were related primarily to accelerated depreciation and
expenses to execute previously announced actions to close the
Company's Grand Rapids manufacturing plant, as well as the
completion of a warehousing location move in the Lifestyle
segment.(3) The Company incurred settlement charges in connection
with cash payments of lump sum elections related to the Company's
pension plan.(4) 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 March 31, 2020 |
|
Three Months Ended March 31, 2019 |
|
|
Office |
|
Lifestyle |
|
Knoll, Inc. |
|
Office |
|
Lifestyle |
|
Knoll, Inc. |
|
|
($ in millions) |
|
($ in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Workplace Sales |
|
$ |
216.4 |
|
|
$ |
68.2 |
|
|
$ |
284.6 |
|
|
$ |
202.2 |
|
|
$ |
68.3 |
|
|
$ |
270.5 |
|
Residential Sales |
|
— |
|
|
55.4 |
|
|
55.4 |
|
|
— |
|
|
62.3 |
|
|
62.3 |
|
Total Net Sales |
|
$ |
216.4 |
|
|
$ |
123.6 |
|
|
$ |
340.0 |
|
|
$ |
202.2 |
|
|
$ |
130.6 |
|
|
$ |
332.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workplace Growth vs Prior
Year |
|
7.0 |
% |
|
0.0 |
% |
|
5.2 |
% |
|
|
|
|
|
|
Residential Growth vs Prior
Year |
|
|
|
(11.1 |
)% |
|
(11.1 |
)% |
|
|
|
|
|
|
The following table reconciles Knoll, Inc. Debt
Leverage Ratio to Net Debt Leverage Ratio for the periods
indicated.
Three Months Ended
March 31, 2020 ($ in millions) |
|
Debt Leverage Ratio |
|
Additional Cash on Hand(3) |
|
Net Debt Leverage Ratio |
|
Outstanding Debt Level(1) |
|
$ |
600.3 |
|
$ |
(115.6 |
) |
|
$ |
484.7 |
|
|
|
|
|
|
|
|
|
LTM Net Earnings(2) |
|
$ |
62.4 |
|
|
|
$ |
62.4 |
|
LTM Adjustments |
|
|
|
|
|
|
|
Interest |
|
21.0 |
|
|
|
21.0 |
|
Taxes |
|
22.4 |
|
|
|
22.4 |
|
Depreciation and
Amortization |
|
33.8 |
|
|
|
33.8 |
|
Non-cash and other
items(3) |
|
48.5 |
|
|
|
48.5 |
|
LTM Adjusted EBITDA(2) |
|
$ |
188.1 |
|
|
|
$ |
188.1 |
|
|
|
|
|
|
|
|
|
Debt Leverage Ratio |
|
|
3.2x |
|
|
|
|
2.6x |
|
(1) Outstanding debt levels include outstanding
letters of credit and guarantee obligations. Per the terms of the
credit facility filed with the Securities and Exchange Commission
on January 25, 2018, and amended on August 26, 2019, cash up to
$15.0M reduces the outstanding debt level.(2) LTM adjusted EBITDA
is calculated in accordance with the Company's credit facility and
includes the impact of proforma LTM Net Earnings from the Fully
acquisition.(3) Additional cash on hand represents cash at the end
of the first quarter in excess of the $15.0 million allowable for
deduction from the outstanding debt level per the terms of the
Company's credit facility.(4) Non-cash and other items include, but
not limited to, product discontinuation charges, acquisition
related inventory adjustments, asset impairment charges,
restructuring charges, debt refinancing fees, acquisition related
expenses, stock-based compensation expenses, and unrealized gains
and losses on foreign exchange.
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, 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, 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, April 27, 2020 at 5:00 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 |
4796966 |
A replay of the Q&A conference call will be
available through May 4, 2020 by dialing (855) 859-2056 or (404)
537-3406 and entering passcode 4796966, as well as on the Company's
investor relations website through July 24, 2020.
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. 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 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. 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 March 31, |
|
|
2020 |
|
2019 |
|
|
|
|
|
Net sales |
|
$ |
340.0 |
|
|
$ |
332.8 |
|
Cost of sales |
|
217.7 |
|
|
209.0 |
|
Gross profit |
|
122.3 |
|
|
123.8 |
|
Selling, general, and
administrative expenses |
|
103.3 |
|
|
94.5 |
|
Restructuring charges |
|
7.6 |
|
|
0.1 |
|
Operating profit |
|
11.4 |
|
|
29.2 |
|
Pension settlement charges |
|
0.7 |
|
|
0.2 |
|
Interest expense |
|
4.9 |
|
|
5.2 |
|
Other income, net |
|
(1.2 |
) |
|
(0.7 |
) |
Income before income tax
expense |
|
7.0 |
|
|
24.5 |
|
Income tax (benefit) expense |
|
(3.9 |
) |
|
6.5 |
|
Net earnings |
|
$ |
10.9 |
|
|
$ |
18.0 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
Basic |
|
$ |
0.22 |
|
|
$ |
0.37 |
|
Diluted |
|
$ |
0.22 |
|
|
$ |
0.37 |
|
|
|
|
|
|
Weighted-average shares
outstanding (in thousands): |
|
|
|
|
Basic |
|
48,973 |
|
|
48,775 |
|
Diluted |
|
49,708 |
|
|
49,190 |
|
KNOLL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in millions)
(Unaudited)
|
|
March 31, 2020 |
|
December 31, 2019 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
130.6 |
|
|
$ |
8.5 |
|
Customer receivables, net |
|
114.2 |
|
|
107.4 |
|
Inventories, net |
|
203.9 |
|
|
195.9 |
|
Prepaid and other current
assets |
|
41.8 |
|
|
28.8 |
|
Total current assets |
|
490.5 |
|
|
340.6 |
|
Property, plant, and equipment,
net |
|
224.9 |
|
|
239.0 |
|
Goodwill and intangible assets,
net |
|
671.4 |
|
|
680.3 |
|
Right-of-use lease assets |
|
107.7 |
|
|
94.4 |
|
Other non-current assets |
|
2.4 |
|
|
3.6 |
|
Total assets |
|
$ |
1,496.9 |
|
|
$ |
1,357.9 |
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Current maturities of long-term
debt |
|
$ |
17.0 |
|
|
$ |
17.1 |
|
Accounts payable |
|
122.3 |
|
|
131.9 |
|
Current portion of lease
liability |
|
24.9 |
|
|
20.7 |
|
Other current liabilities |
|
110.9 |
|
|
120.3 |
|
Total current liabilities |
|
275.1 |
|
|
290.0 |
|
Long-term debt |
|
589.3 |
|
|
428.9 |
|
Lease liability |
|
99.3 |
|
|
87.0 |
|
Other non-current
liabilities |
|
129.5 |
|
|
124.4 |
|
Total liabilities |
|
1,093.2 |
|
|
930.3 |
|
Total equity |
|
403.7 |
|
|
427.6 |
|
Total liabilities and equity |
|
$ |
1,496.9 |
|
|
$ |
1,357.9 |
|
KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Dollars in millions)
(Unaudited)
|
|
Three Months
Ended March 31, |
|
|
2020 |
|
2019 |
|
|
|
|
|
Net earnings |
|
$ |
10.9 |
|
|
$ |
18.0 |
|
Cash (used in) provided by
operating activities |
|
(16.4 |
) |
|
19.1 |
|
Cash used in investing
activities |
|
(10.3 |
) |
|
(9.2 |
) |
Cash provided by (used in)
financing activities |
|
149.1 |
|
|
(9.1 |
) |
Effect of exchange rate changes
on cash and cash equivalents |
|
(0.3 |
) |
|
— |
|
Increase in cash and cash
equivalents |
|
122.1 |
|
|
0.8 |
|
Cash and cash equivalents at
beginning of period |
|
8.5 |
|
|
1.6 |
|
Cash and cash equivalents at end
of period |
|
$ |
130.6 |
|
|
$ |
2.4 |
|
Knoll (NYSE:KNL)
Historical Stock Chart
From May 2024 to Jun 2024
Knoll (NYSE:KNL)
Historical Stock Chart
From Jun 2023 to Jun 2024