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Knoll reports Q1 2014 results

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American professional furniture maker Knoll announced results for the first quarter ended March 31, 2014.

Net sales were $229.3 million for the quarter, an increase of 14.3% from first quarter of 2013.
Organically, excluding the impact of HOLLY HUNT®, sales increased 5.7% when compared with first quarter of 2013.

Gross profit for the first quarter of 2014 was $76.5 million, an increase of $12.9 million, or 20.3%, when compared with the same period in 2013.

During the first quarter 2014 gross margin (gross profit as a percentage of net sales) increased to 33.3% from 31.7% in the same quarter of 2013. The increase in gross margin from the first quarter of 2013 mainly resulted from favourable product mix, volume, and foreign exchange favourability. These gains were partially offset by price deterioration in the Office Segment.

Operating expenses for the first quarter of 2014 were $64.7 million, or 28.2% of sales, compared to $53.3 million, or 26.6% of sales, for the first quarter of 2013. The increase in operating expenses during the first quarter of 2014 was in large part due to the addition of the operating expenses from HOLLY HUNT® as well as costs associated with a multi day training event that occurred during first quarter of 2014 in conjunction with our 75th anniversary.

During the first quarter of 2014 and 2013, other (income) expense included $2.5 million and $1.3 million of foreign exchange gains, respectively.

Operating profit for the quarter was $11.8 million, an increase of 14.6% when compared with $10.3 million in the first quarter of 2013.
Adjusted operating profit for the first quarter of 2014 was $12.4 million (excluding acquisition related expenses of $0.6 million).

The effective tax rate was 35.3% for the quarter, as compared to 39.8% for the same period last year.

Net income for the first quarter of 2014 was $8.2 million, an increase of 34.4% when compared with the first quarter of 2013. Diluted earnings per share was $0.17 for the quarter compared to $0.13 per share in the prior year. Adjusted earnings per share (mostly acquisition related expenses) was $0.18 for the first quarter of 2014.

Cash provided by operations during the first quarter of 2014 was $14.0 million compared to cash used in operations of $4.1 million during the first quarter of 2013.

Capital expenditures for the period totalled $7.8 million compared to $6.6 million in the comparable period for 2013.

During the first quarter of 2014, Knoll paid a quarterly dividend of $5.7 million, or $0.12 per share, compared to a quarterly dividend of $5.6 million, or $0.12 per share, in the first quarter of 2013.

Knoll Q1 2014 results

“We are pleased to kick off 2014 with growth in sales, margins and operating profits,” commented Andrew Cogan, CEO. “In what is seasonally our weakest quarter, organic sales growth exceeded the industry, and operating profits and margins expanded.

I believe we have turned the corner and that the combination of improving market conditions, diminished government headwinds, the success of strategic investments in our businesses to grow our top and bottom lines and most recently the acquisition of HOLLY HUNT®, bode well for the balance of 2014 and beyond,” he added.

“This quarter we successfully completed the acquisition of HOLLY HUNT®.  Despite increasing our outstanding debt by $95.0 million we remain comfortably in compliance with our bank covenants and still have over $175.0 million available under our revolving credit facility”, commented Craig B. Spray, SVP & CFO.

Segment results

Net sales for the Office segment were $146.1 million during the first quarter of 2014, an increase of $8.6 million, or 6.3%, when compared with the first quarter of 2013.

Increased sales from commercial clients in North America drove the increase in Office segment sales during the first quarter of 2014 when compared with the same period in the prior year. This increase in commercial sales was partially offset by modestly lower government sales.

Operating profit for the Office segment was $1.1 million in the first quarter of 2014, a decrease of $0.9 million, or 45.0% when compared with the first quarter of 2013. The decrease in operating profit in the Office Segment was mainly due to price deterioration and the costs associated with Knoll’s multi-day training event.

Net sales for the Studio segment were $55.7 million, an increase of $17.3 million, or 45.0%, when compared with the first quarter of 2013.

The increase in sales in the Studio segment was the result of the acquisition of HOLLY HUNT® during the first quarter of 2014. Excluding HOLLY HUNT®, sales were flat in the Studio segment during the first quarter of 2014.

Operating profit for the Studio segment was $5.5 million, an increase of $1.4 million, or 34.1% when compared with the first quarter of 2013. Excluding the acquisition expenses of $0.6 million, adjusted operating profit for the Studio segment was $6.1 million, an increase of $2.0 million, or 48.8%, when compared with the first quarter of 2013.

The increase in operating profit in the Studio segment during the first quarter of 2014 was the result of the acquisition of HOLLY HUNT®  and improved sales and profits in Europe.

Net sales for the Coverings segment were $27.5 million, an increase of $2.8 million, or 11.3%, when compared with the first quarter of 2013. Both Knoll’s leather and textiles businesses experienced growth during the quarter.

Operating profit for the Coverings segment was $5.3 million, an increase of $1.1 million, or 26.2% when compared to the first quarter of 2013. During the first quarter of 2014, operating profit increased across all Knoll’s in the Coverings segment as incremental investment spending began to moderate.

Knoll Q1 2014 segment results
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