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Knoll’s 3rd quarter profit down 30%

Wednesday 16 October 2013

Knoll, Inc. today announced results for the third quarter ended September 30, 2013. Net sales were $216.9 million for the quarter, a decrease of 1.3% from the third quarter 2012. Operating profit was $17.1 million a decrease of 27.2% from the third quarter 2012. The decrease in operating profit during the third quarter of 2013 was mainly the result of the increased spending associated with our announced programs of strategic investments and initiatives to achieve our longer-term revenue and margin objectives. Net income was $8.6 million during the third quarter of 2013 compared to $12.2 million during the third quarter 2012. Diluted earnings per share for the third quarter of 2013 was $0.18 compared to $0.26 in the prior year. During the third quarter of 2013 non-cash charges relating to foreign exchange losses decreased earnings approximately $0.03 per share.
"We continued to execute against our multi-year strategic plan designed to drive revenue growth and margin improvement across our varied segments," commented Andrew Cogan, CEO.
"While our Office segment remains pressured by significant declines in our Federal government business, our results in the quarter do demonstrate the traction we are gaining in our Studio and Coverings segments," he added.
Net sales for the quarter were $216.9 million, a decrease of $2.9 million, or 1.3%, over the third quarter of 2012. Sequentially sales increased by $2.6 million when compared with second quarter of 2013. Net sales for the Office segment were $150.5 million during the third quarter of 2013, a decrease of $9.5 million, or 5.9%, when compared with the third quarter of 2012. Sales to governmental agencies continued to decline on a year-over-year basis which drove the overall decline in sales in the Office segment. Net sales for the Studio segment were $37.7 million, an increase of $4.7 million, or 14.2%, when compared with the third quarter of 2012. During the third quarter of 2013 the Studio segment experienced double digit growth in Europe and single digit growth in North America. Net sales for the Coverings segment were $28.7 million, a increase of $2.0 million, or 7.5%, when compared with the third quarter of 2012. Both our textiles and leather subsidiaries experienced growth during the quarter.
Gross profit for the third quarter of 2013 was $72.3 million, a decrease of $1.9 million, or 2.6%, over the same period in 2012. Gross profit as a percentage of net sales decreased 40 basis points to 33.4% in the third quarter of 2013 from 33.8% in the same quarter of 2012. This decrease in gross profit as a percentage of sales largely resulted from lower absorption of our fixed costs as a result of the lower sales and pricing pressures in the Office segment. Continuous improvement projects in our factories helped to offset some of this decline. Sequentially gross profit as a percentage of net sales increased 80 basis points when compared with the second quarter of 2013.
Operating profit for the third quarter of 2013 was $17.1 million, a decrease of $6.4 million, or 27.2%, when compared to the same period in 2012. Sequentially operating profit increased by $4.7 million and operating margins expanded 210 basis points when compared with the second quarter of 2013. Operating profit for the Office segment was $5.7 million in the third quarter of 2013, a decrease of $7.3 million, or 56.2%, when compared with the third quarter of 2012. This decrease in operating profit was mainly the result of increased operating expenses associated with our strategic investments and initiatives and our lower sales. Operating profit for the Studio segment was $5.3 million, an increase of $0.1 million, or 1.9%, when compared with the third quarter of 2012. Operating profit for the Coverings segment was $6.1 million, a increase of $0.8 million, or 15.1%, when compared to the third quarter of 2012.

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