4.23.12 | East Greenville, PA | Knoll, Inc. (NYSE: KNL) today announced results for the first quarter ended March 31, 2012. Net sales were $196.7 million for the quarter, a decrease of 11.0% from first quarter of 2011. Operating profit for the quarter was $15.5 million, a decrease of 25.8% when compared with $20.9 million in the first quarter of 2011. Net income for the first quarter of 2012 was $7.3 million, a decrease of 20.7% when compared with the first quarter of 2011. Earnings per share was $0.15 for the quarter compared to $0.20 per share in the prior year.

"As we had expected, the sales decline that we experienced in the first quarter of 2012 was a continuation of the trends that we saw in the fourth quarter of 2011," commented Andrew Cogan, CEO. "Lowered levels of government sales combined with significantly reduced purchases from a single financial services client drove our top-line decline. Outside of these two areas, commercial sales actually grew year over year. We believe that the worst of these declines are now behind us and are encouraged that improving fundamentals in terms of growing service sector employment, improving Architectural Billing data and our own internal indicators are supportive of a more positive back half outlook. Additionally, the integration of our recent Richard Schultz Design and FilzFelt acquisitions, plus the launch of our ReGeneration chair, should help drive growth in the latter half of the year."

Net sales for the quarter were $196.7 million, a decrease of $24.2 million, or 11.0%, from the first quarter of 2011. Net sales for the Office segment were $138.3 million during the first quarter of 2012, a decrease of $23.4 million, or 14.5% when compared with the first quarter of 2011. Net sales for the Studio segment were $33.2 million, a decrease of $2.5 million, or 7.0%, when compared with the first quarter of 2011. Net sales for the Coverings segment were $25.2 million, an increase of $1.7 million, or 7.2%, when compared with the first quarter of 2011.

Gross profit for the first quarter of 2012 was $63.1 million, a decrease of $5.3 million, or 7.7%, when compared with the same period in 2011. First quarter 2012 gross margin (gross profit as a percentage of net sales) increased to 32.1% from 31.0% in the same quarter of 2011. The increase in gross margin from the first quarter of 2011 resulted from previously implemented price increases and favorable customer mix.

Operating expenses for the first quarter of 2012 were $47.6 million, or 24.2% of sales, compared to $47.0 million, or 21.3% of sales, for the first quarter of 2011. The modest increase in operating expenses during the first quarter of 2012 was in large part due to costs associated with growth initiative programs and infrastructure upgrades offset by reduced incentive compensation.

Our operating profit for the first quarter of 2012 was $15.5 million, a decrease of $5.4 million, or 25.8%, when compared to the same period in 2011. Operating profit for the Office segment was $6.9 million in the first quarter of 2012, a decrease of $4.5 million, or 39.5% when compared with the first quarter of 2011. Operating profit for the Studio segment was $4.0 million, a decrease of $1.4 million, or 25.9% when compared with the first quarter of 2011. Operating profit for the Coverings segment was $4.5 million, a decrease of $0.1 million, or 2.2% when compared to the first quarter of 2011.

During the first quarter of 2012, other expense included $1.8 million of realized and unrealized foreign exchange losses, $0.5 million related to the write-off of deferred financing fees, offset by $0.1 million of miscellaneous income. During the first quarter of 2012 we renegotiated a new $450.0 million revolving credit facility which runs through February 2017. Other expense for the first quarter of 2011 included $1.8 million of realized and unrealized foreign exchange losses, $1.0 million of miscellaneous expense related to a negative judicial ruling, offset by $0.5 million of miscellaneous income.

The mix of pretax income and the varying effective tax rates in the countries in which we operate directly affects our consolidated effective tax rate. The effective tax rate was 38.2% for the quarter, as compared to 36.8% for the same period last year.

Net income for the first quarter 2012 was $7.3 million, or $0.15 diluted earnings per share, as compared to $9.2 million, or $0.20 per share, for the same quarter in 2011.

Cash used in operations during the first quarter 2012 was $13.5 million, compared with cash used in operations of $16.8 million the year before. Capital expenditures for the period totaled $3.0 million compared to $2.0 million in the comparable period for 2011. During the first quarter of 2012 the Company borrowed net $16.0 million of debt and paid a quarterly dividend of $4.7 million, or $0.10 per share, compared to a net repayment of debt of $3.0 million and a quarterly dividend of $2.8 million, or $0.06 per share, in the first quarter of 2011.

"Our new $450.0 million all revolver bank facility negotiated this quarter will give us the flexibility we need through 2017 to fund both our growth and improved operational initiatives without worrying about future bank regulatory requirements and a higher interest rate environment," commented Barry L. McCabe, EVP & CFO.

The full text of Knoll's 1Q12 earnings release, including all tables, and a replay of the company's Apr. 23 conference call, including slides, is available at www.knoll.com; go to "About Knoll" and click on "Investor Relations". In addition, an audio replay of the conference call will be available through Apr. 30 by dialing 888 286-8010. International replay: 617 801-6888 (Passcode: 38179773).