Knoll, Inc. Investor Presentation Third Quarter Andrew Cogan, CEO Barry McCabe, EVP, CFO

Transcription

1 Knoll, Inc. Investor Presentation Third Quarter 2008 Andrew Cogan, CEO Barry McCabe, EVP, CFO

2 Disclaimer 2 The following information 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, goals and objectives of management for future operations, as well as statements that include words such as "anticipate," "if," "believe," "plan," "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, without limitation, corporate spending and service-sector employment, price competition, acceptance of Knoll s new products, the pricing and availability of raw material and components, foreign exchange pressures, 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 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.

3 Our Strategy Of Focusing On High Design Content Businesses Is Driving Our Results As We Celebrate 70 Years Of Design Leadership 3

4 Performance Remains Strong KNOLL, INC. 2ND QUARTER & YTD 2ND QUARTER JUNE, YEAR TO DATE SALES 292, , , ,036 % YEAR OVER YEAR GROWTH 7.5% 9.9% 7.8% 11.7% GROSS MARGIN 101,087 93, , , % 34.3% 34.2% 34.2% ADJ OPERATING PROFIT (1) 38,530 37,635 70,431 68, % 13.8% 12.6% 13.2% ADJ EARNINGS PER SHARE (1) $0.49 $0.37 $0.85 $0.68 % YEAR OVER YEAR GROWTH 32.4% 32.1% 25.0% 44.7% (1) Adjusted operating profit and adjusted EPS exclude certain non-recurring costs. For a reconciliation of these non-gaap measures to the comparable GAAP measure, see page 20. 4

5 For 70 Years, Knoll Has Used Modern Design to Connect People With Their Work, Their Lives and Their World A product portfolio by prominent, internationally acknowledged architects and designers Recognized as a design leader with a premier brand identity Products noted for their high quality and sophisticated aesthetics Ludwig Mies van der Rohe Hans and Florence Eero Saarinen Formway Design Frank Gehry Shelton Mindel 5

6 We Were One of the First Furniture Manufacturers to Demonstrate Leadership in Sustainability Environmental commitment that is well over two decades old One of the first furniture companies to achieve GREENGUARD certification across all products First furniture company to LEED train and certify all of our A&D specialists First furniture company to join the Chicago Climate Exchange (CCX) Walk the talk Gold LEED for Lubin Facility, LEED Certification for San Francisco and Philadelphia Showrooms 6

7 Premier Brand Identity Knoll Targets the Middle to Upper End of the Market Where Image, Performance and Customer Service are Key Differentiating Factors North America Market Share¹ High 8.5% 14.1% 17.5% 18.2% Price Range Mid-High Mid-Low Budget (1) Based on LTM March 31, 2008 North America or U.S. publicly reported segments as a percent of LTM March 31, 2008 BIFMA U.S. industry shipments. 7

8 Growth Strategy Leverage our leading Office System offerings to capture market share in underpenetrated seating, storage and casegoods categories. Drive high margin high growth Specialty businesses through expanded product offerings, distribution channels and sales and marketing programs. Increase International presence and results. Position Knoll as the supplier of choice for companies seeking to attract the next generation of office workers by creating dynamic workplaces that respond to emerging workstyles and trends. 8

9 We Still Have Significant Market Share Opportunity in Underpenetrated Categories % 27% Category Share of Total Industry Shipments¹ Knoll Category Share Category Share (%) % $3,082 17% $3,120 $2,377 $538 4% 3% $118 $81 +$300 M 11% $1,244 1% Office Systems Seating Storage Casegoods 1. Percent of LTM 12/31/07 industry shipments of $11.4 billion, as reported by BIFMA 2. As of LTM 12/31/07 $75m 9

10 Our Strategic Initiatives Continue To Build A Design Driven Portfolio That Is Significantly Less Dependent on NA Office Sales Significantly Decreased Exposure to Office Systems Category 80 % Sales YTD December 31, 2000 % Sales YTD December 31, 2007 % Sales YTD June 30, 2008 Strengthened and Expanded Complimentary Seating, Storage, and Casegood Offerings Aggressively Increased Specialty Sales, Distribution, and Marketing Efforts Acquired Edelman Leather our 5 th Specialty Business Category Share (%) % 53% 49% 12% 19% 19% 17% 13% 23% 7% 10% 12% 0 Office Systems Complimentary Specialty Europe/International 10

11 This Transformation Is Having A Significant Mix Impact On What Drives Our OP Results With The Effect Of Lowering Our Profit Dependence On NA Office Sales 2008 (as of 6/30/08) SALES GROSS PROFIT OPERATING PROFIT 34.2% 42.7% 46.2% NA Office NA Office NA Office Specialty and International Specialty and International Specialty and International 65.8% 57.3% 53.8% 2000 SALES GROSS PROFIT OPERATING PROFIT 18.9% 20.3% 15.8% 81.1% 79.7% 84.2% 11

12 Financial Performance 12

13 Industry-leading Margins Throughout Business Cycle 25% Knoll Herman Miller Steelcase 20% Operating Margin 15% 10% 5% (1) 13.2% 12.6% 4.9% 0% (5)% LTM June 2008 Source: Knoll financials and public financials (1) Knoll Operating margins excludes certain non-recurring costs. See reconciliation of Knoll adjusted operating profit to the comparable GAAP measure for the period 2004 through LTM June 2008 on page 20. No adjustments were made to operating margins for the periods prior to

14 Over the Course of Our Public Life We Have Established A Strong Track Record Knoll Has Reported 15 Consecutive Quarters Of Year Over Year EPS Growth % 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Adjus ted EPS Growth Year over Year 12/31/2004 6/30/ /31/2005 6/30/ /31/2006 6/30/ /31/2007 6/30/2008 (1) Adjusted EPS exclude certain non-recurring costs. For a reconciliation of these non-gaap measures to the comparable GAAP measure, see page

15 We Continue to Work Towards Our Mid-term Goal of Achieving 35% Gross Margins POSITIVES Pricing Realizing price and stabilizing discount Transporation Surcharge Global Sourcing Expanding opportunities Factory Initiatives Continuous improvement and consolidation NEUTRAL Foreign Exchange 35.0% 34.5% 34.0% 33.5% 33.0% 32.5% 34.1% 33.7% 32.5% NEGATIVES Fuel Costs Inflation 34.6% 33.7% 34.6% 32.0% 31.5% 31.0% Q108 GM as a % of Sales Q208

16 And to Our Goal of Achieving 15% Operating Margins 16.0% 14.0% 13.5% 13.2% Continue Leveraging Our SG&A 12.0% 10.0% 10.7% 11.6% 12.1% 11.9% Selectively invest in our support infrastructure 8.0% Where possible, keep costs variable 6.0% 4.0% Keep SG&A at 21-22% of sales 2.0% 0.0% Q108 Q208 Adjusted Operating Margins as a % of Sales (1) (1) Adjusted operating margins exclude certain non-recurring costs. For a reconciliation of adjusted operating profit to the comparable GAAP measure, see page 20. No adjustments were made to operating margins of

17 Use Our Balance Sheet and Cash Flows to Benefit our Shareholders Free Cash Flow (thousands) (1) Leverage Ratio (2) 4 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 $89,829 $82,312 $69,632 $48,564 $35, LTM 6/30/ months 2008 (1) Free Cash Flow is defined as Net Income plus depreciation and amortization and non-cash stock compensation less capital expenditures. For details of the free cash flow calculation, see page Diluted Weighted Average Shares (millions) (2) Leverage Ratio is calculated by dividing the outstanding debt by EBITDA. For details of the leverage ratio Debt Levels $316 calculation, $332 see page 22. $324 $375 $350 $357 $329 $140, $120, $100, $80, $60, $40, Cash Returned to Shareholders $ (thousands) (3) $128,627 $70,420 $31, $20, $15, /04 12/05 12/06 12/07 06/08 $ months 2008 (3) Cash returned to shareholders includes dividends paid and shares repurchased.

18 Allocation of Free Cash Flow Invest in Focused Initiatives to Drive Top-line Growth and Improve Margins Complementary acquisitions New and enhanced products Look at factory machinery and equipment for efficiencies and cost improvements Pay Dividends to Shareholders Share Repurchase (10.1 million shares since December 2004) Target x Debt / EBITDA 18

19 Thank You 19

20 Reconciliation of Non-GAAP Results Six Months Ended 6/30/08 Six Months Ended 6/30/07 FY 2007 FY 2006 FY 2005 FY 2004 Operating Profit ($mm) $ 67.0 $ 68.4 $ $ $ 92.8 $ 71.3 Add back: Restructuring charges Public offering expenses Adjusted Operating Profit $ 70.4 $ 68.4 $ $ $ 93.6 $ 75.7 Net Sales $ $ $ 1,055.8 $ $ $ Adjusted Operating Margin 12.6% 13.2% 13.5% 12.1% 11.6% 10.7% Earnings per Share (Diluted) $ 0.80 $ 0.66 $ 1.45 $ 1.14 $ 0.68 $ 0.55 Add back: Restructuring charges Public offering expenses Write-off of deferred financing fees Taxes related to repatriation of foreign earnings Adjusted Earnings per Share $ 0.85 $ 0.68 $ 1.47 $ 1.17 $ 0.80 $ 0.66 Three Months Ended 6/30/08 Three Months Ended 6/30/07 Three Months Ended 3/31/08 Three Months Ended 3/31/07 Operating Profit ($mm) $ 35.1 $ 37.6 $ 31.9 $ 30.8 Add back: Restructuring charges Adjusted Operating Profit $ 38.5 $ 37.6 $ 31.9 $ 30.8 Net Sales $ $ $ $ Adjusted Operating Margin 13.2% 13.8% 11.9% 12.4% Earnings per Share (Diluted) $ 0.44 $ 0.35 $ 0.36 $ 0.30 Add back: Restructuring charges Write-off of deferred financing fees Adjusted Earnings per Share $ 0.49 $ 0.37 $ 0.36 $

21 Reconciliation of Non-GAAP Results Q404 Q105 Q205 Q305 Q405 Q106 Q206 Earnings per Share - Diluted $ 0.14 $ 0.13 $ 0.22 $ 0.15 $ 0.18 $ 0.19 $ 0.28 Add back: IPO expense Write-off of deferred financing fees Restructuring charges Taxes related to repatriation of foreign earnings Adjusted Earnings per Share - Diluted $ 0.20 $ 0.13 $ 0.22 $ 0.21 $ 0.24 $ 0.20 $ 0.28 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Earnings per Share - Diluted $ 0.31 $ 0.37 $ 0.30 $ 0.35 $ 0.37 $ 0.42 $ 0.36 $ 0.44 Add back: Public offering expenses Write-off of deferred financing fees Restructuring charges Adjusted Earnings per Share - Diluted $ 0.33 $ 0.37 $ 0.30 $ 0.37 $ 0.37 $ 0.42 $ 0.36 $

22 Free Cash Flow Leverage Ratio LTM 6/30/08 Net Income $ 26,744 $ 35,909 $ 58,633 $ 71,443 $ 77,296 Add: Depreciation 20,080 18,721 19,194 19,655 19,596 Amortization 1, ,604 2,002 Stock compensation expense 167 4,052 4,504 5,902 6,967 Less: (in thousands) Capital expenditures (13,131) (10,744) (13,362) (16,292) (16,032) Free Cash Flow $ 35,552 $ 48,564 $ 69,632 $ 82,312 $ 89,829 12/31/04 12/31/05 12/31/06 12/31/2007 6/30/2008 Debt Levels $ $ $ $ $ LTM Net Income ($mm) $ 26.7 $ 35.9 $ 58.7 $ 71.4 $ 75.4 LTM Adjustments Interest Taxes Depreciation and Amortization Non-cash items(1) (2) 8.6(2) LTM EBITDA $ 87.7 $ $ $ $ Leverage Ratio (1) Non cash items include stock compensation expense, unrealized gains/losses on derivatives and the write-off of deferred financing fees (2) Includes an annualized proforma EBITDA for Edelman Leather, which was acquired on October 1,