Knoll, Inc. Delivers Strong Third Quarter Results

Sales, Gross Profit, Operating Profit, Net Income, EPS and Backlog All Grow By Double Digits. EPS Grows 40.5%. 


EAST GREENVILLE, Pa., Oct. 16  /PRNewswire-FirstCall/ -- Knoll, Inc. (NYSE: KNL) today announced results for the third quarter ended September 30, 2008.  Net sales were $283.5 million for the quarter, an increase of 11.6% from third quarter 2007.  Operating income was $41.1 million, or 14.5% of net sales, an increase of 19.8% from the third quarter 2007, and net income was $24.1 million, an increase of 31.0% over the third quarter 2007. Diluted earnings per share was $0.52 compared to $0.37 diluted earnings per share in the prior year, an increase of 40.5%.

"We had a very strong quarter," commented Andrew Cogan, CEO. "Our focus on high design content businesses together with a rigorous, proactive and environmentally responsible business philosophy continued to produce industry leading levels of profitability."

"We realize that we could be in for a bumpy ride ahead but are confident that with our strong balance sheet, talented associates and committed dealers that we will be able to handle whatever comes at us."

  Third Quarter Results

  Third quarter 2008 financial results highlights follow:


  Dollars in Millions Except Per
   Share Data                          Three Months Ended        Percent
                                   9/30/08           9/30/07     Change

  Net Sales                     $    283.5        $    254.0     11.6 %
  Gross Profit                       104.2              88.2     18.1 %
  Operating Expenses                  63.1              54.0     16.9 %
  Operating Income                    41.1              34.3     19.8 %
  Net Income                          24.1              18.4     31.0 %
  Earnings Per Share - Diluted         .52               .37     40.5 %
  Backlog                            203.1             169.8     19.6 %



Net sales for the quarter were $283.5 million, an increase of $29.5 million, or 11.6%, over the third quarter of 2007.  Once again our International businesses and Specialty products experienced the strongest growth in the quarter followed by our Complimentary products.  During the third quarter of 2008, net sales also benefited from a price increase implemented in February of 2008.

Backlog of unfilled orders at September 30, 2008 was $203.1 million as compared to $169.8 million at September 30, 2007.

Gross profit for the third quarter of 2008 was $104.2 million, an increase of $16.0 million, or 18.1%, over the same period in 2007.  Gross margin increased to 36.8% from 34.7% in the same quarter of 2007 and sequentially increased from 34.6% in the second quarter of 2008. The increase from the third quarter of 2007 largely resulted from improved price realization and favorable product mix.  Increased volumes also allowed for better absorption of our fixed costs.

Operating expenses for the quarter were $63.1 million, or 22.3% of sales, compared to $54.0 million, or 21.3% of sales, for the third quarter of 2007.  The increase in operating expense dollars during the third quarter of 2008 was in large part due to the inclusion of Edelman Leather, which was acquired during the fourth quarter of 2007.  Increased commissions on our higher sales also contributed to the increase.

Our operating income as a percentage of sales for the third quarter of 2008 increased by 100 basis points to 14.5% of sales from 13.5% of sales in the same period in the prior year.

Interest expense in the third quarter of 2008 decreased $1.9 million over the third quarter 2007 due to lower average interest rates on our revolving credit facility.  Other income for the third quarter 2008 was $2.1 million.  Other income includes $2.0 million of gains from foreign currency transactions.  Other expense for the third quarter 2007 was approximately $0.8 million and consisted of $1.0 million of losses from foreign currency transactions offset by other income.

Our effective tax rate was 39.0% for the quarter, as compared to 33.9 % for the same period last year.  The increase in the effective tax rate is largely due to the mix of pretax income in the countries in which we operate.  The third quarter of 2007 also included a reduction in our contingent tax reserve which resulted in a lower effective tax rate.  Net income for the third quarter 2008 was $24.1 million, or $0.52 diluted earnings per share, as compared to $18.4 million, or $0.37 diluted earnings per share, for the same quarter in 2007.

Cash generated from operations during the third quarter 2008 was $50.3 million, compared to $27.4 million in the same period of 2007.  Capital expenditures for the third quarter 2008 totaled $3.2 million compared to $3.8 million for 2007. We repaid $21.0 million of debt during the third quarter of 2008 compared to $20.0 million during 2007.  We repurchased approximately $14.4 million of stock during the third quarter of 2008 compared to a minimal amount during the third quarter of 2007.  We also paid a quarterly dividend of $5.6 million, or $0.12 per share, in the third quarter of 2008 compared to $5.3 million, or $0.11 per share, in the third quarter of 2007.

"We believe our strong operating performance, strong balance sheet with ample liquidity, and track record of managing the business in both good and bad economic environments, will allow us to navigate through today's uncertain economic times," commented Barry McCabe, CFO.

Fourth Quarter 2008 Outlook

The Company stated that it expects fourth quarter 2008 revenue to be in the range of $278 to $283 million.  Earnings per share estimates are between $0.44 and $0.47.

Conference Call Information

Knoll will host a conference call on Thursday, October 16, 2008 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      800 295-4740
  International      617 614-3925
  Passcode           71893699



A replay of the webcast can be viewed by visiting the Investor Relations section of the Knoll corporate website.

In addition, an audio replay of the conference call will be available through October 23, 2008 by dialing 888 286-8010. International replay: 617 801-6888 (Passcode: 31595761).

About Knoll

Since 1938, Knoll has been recognized internationally for creating workplace and residential furnishings that inspire, evolve and endure. Today, our commitment to modern design, our understanding of the workplace and our dedication to sustainable design has yielded a unique portfolio of products that respond and adapt to changing needs. Knoll is aligned with the U.S. Green Building Council and can help companies, healthcare organizations and educational institutions achieve Leadership in Energy and Environmental Design (LEED(R)) workplace certification. Knoll is the contract furniture industry's first member of the Chicago Climate Exchange (CCX(R)) and is the founding sponsor of the World Monuments Fund Modernism at Risk program.

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,"  "goals, " "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 materials and components, foreign currency exchange, transportation costs, demand for high quality, well designed office furniture solutions, changes in the competitive marketplace, changes in the trends in the market for office furniture, the financial strength and stability of our suppliers, customers and dealers, access to capital, 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.

                                   KNOLL, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Dollars in thousands, except per share data)

                                  Three Months             Nine Months
                                     Ended                    Ended
                                  September 30,            September 30,
                                2008        2007          2008        2007
                            (Unaudited) (Unaudited) (Unaudited) (Unaudited)

  Sales                      $283,517    $253,962    $843,861    $773,998
  Cost of sales               179,319     165,713     548,253     507,832

  Gross profit                104,198      88,249     295,608     266,166
  Selling, general, and
   administrative expenses     63,109      53,967     187,519     163,469

  Operating income             41,089      34,282     108,089     102,697
  Interest expense              3,766       5,629      12,663      18,584
  Other income (expense), net   2,137        (794)      1,878      (3,907)

  Income before income tax
   expense                     39,460      27,859      97,304      80,206
  Income tax expense           15,398       9,446      35,046      29,451

  Net income                  $24,062     $18,413     $62,258     $50,755

  Earnings per share:
  Basic                          $.52        $.38       $1.32       $1.05
  Diluted                        $.52        $.37       $1.32       $1.03
  Weighted-average shares
   outstanding:
  Basic                    46,291,785  48,568,698  47,014,263  48,250,009
  Diluted                  46,522,590  49,327,042  47,178,379  49,335,647



                                   KNOLL, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                   (Dollars in thousands, except per share data)

                                             September 30,   December 31,
                                                 2008            2007
                                              (Unaudited)
  ASSETS
  Current assets:
  Cash and cash equivalents                      $28,648      $17,975
  Customer receivables, net                      131,825      137,001
  Inventories                                    103,538       92,087
  Prepaid and other current assets                14,322       16,381

  Total current assets                           278,333      263,444
  Property, plant, and equipment, net            135,260      143,643
  Intangible assets, net                         299,057      302,367
  Other noncurrent assets                          6,661        7,988

  Total Assets                                  $719,311     $717,442


  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
  Current maturities of long-term debt              $140         $136
  Accounts payable                                82,062       83,107
  Other current liabilities                      118,167       93,748

  Total current liabilities                      200,369      176,991
  Long-term debt                                 342,299      368,440
  Other noncurrent liabilities                    92,897       97,290

  Total liabilities                              635,565      642,721

  Stockholders' equity                            83,746       74,721

  Total Liabilities and Stockholders' Equity    $719,311     $717,442



                                   KNOLL, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Dollars in thousands)

                                           Nine Months Ended September 30,
                                               2008             2007
                                           (Unaudited)      (Unaudited)

  Net income                                  $62,258          $50,755

  Cash Flows provided by Operating
   Activities                                  97,537           64,469

  Cash Flows used in Investing Activities      (9,803)         (10,705)

  Cash Flows used in Financing Activities     (75,471)         (53,262)

  Effect of exchange rate changes on cash
   and cash equivalents                        (1,590)           2,191

  Increase in cash and cash equivalents        10,673            2,693

  Cash and cash equivalents at beginning of
   period                                      17,975           16,038

  Cash and cash equivalents at end of
   period                                     $28,648          $18,731


DATASOURCE: Knoll, Inc.



CONTACT:  Investors: Barry L. McCabe, Executive Vice President and Chief

Financial Officer, [phone], ; Media: David E. Bright,

Senior Vice President, Communications, [phone], 



Web Site:  http://www.knoll.com/ 

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