Good design is good business. Florence Knoll

Transcription

1 Good design is good business. Florence Knoll

2 Knoll Today Andrew Cogan, CEO Barry McCabe, CFO

3 Disclaimer The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements are based on Management s current expectations and beliefs, as well as a number of assumptions concerning future events. These statements are subject to risks, uncertainties, assumptions and other important factors, many of which are outside Management s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. You are cautioned not to put undue reliance on such forward-looking statements because actual results may vary materially from those expressed or implied. All forwardlooking statements are based on information available to Management on this date and Knoll, Inc. assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

4 Legacy of Design Innovation > 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 Frank Gehry Eero Saarinen Marcel Breuer Harry Bertoia Florence Knoll

5 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 7.2% 12.9% 15.3% 17.6% Operating Margins Mid-High Mid-Low Budget (1) Based on calendar 2004 North America / U.S. publicly reported segments as a percent of 2004 BIFMA U.S. industry shipments.

6 Industry-Leading Margins Throughout Business Cycle 25% Knoll Herman Miller Steelcase 20% 15% Operating Margin 10% 5% 0% (5)% Source: Knoll financials and public financials. Operating profit excludes one-time charges.

7 Performance Since IPO > Objective: Top-Line Growth > Anticipated industry recovery has materialized and systems are beginning to outperform > We continued to expand our non-systems product offerings > We increased net sales 14.1% for the first nine months of 2005 versus 12.4% for BIFMA > Objective: Expand Gross Margin > Countering increased raw material and energy prices with price increases and continuous improvement and global sourcing initiatives > 33.7% YTD 2005 gross margin versus 33.5% YTD 2004 gross margin > Objective: Maintain Superior Operating Leverage > Expanded industry-leading operating margin to 11.5% for the first nine months of 2005 versus 9.9% for the first nine months of 2004 > Objective: Enhance EPS Growth Through Deleveraging > Reduced debt by $59.1 million, or 15%, in the first nine months of 2005 > Objective: Grow Annual Dividend > Doubled quarterly dividend to $0.10, effective Q4 2005

8 Improving Macroeconomic Environment % Change from Prior Year Non-Residential Construction 15% 10% 5% 0% (5)% (10)% (15)% (20)% J A J O J A J O J A J O J A J O J A J Source: Census Bureau Net Absorption (millions sq. ft.) 25,000,000 15,000,000 5,000,000 (5,000,000) (15,000,000) (25,000,000) (35,000,000) U.S. Office Absorption (45,000,000) Net Absorption Vacancy (%) Source: REIS Inc % Vacancy Thousands of Employees ($mm) 90,000 85,000 80,000 Service Sector Employment Source: US Bureau of Labor Statistics 1,050 1, Source: Gartner U.S. IT Spending 2000 Q Q Q Q Q Q Q Q Q Q Q Q E 2006E 2007E 2008E

9 Industry Rebounding with Strong Growth 2005 Forecast Still 24% Below 2000 Peak U.S. Office Furniture Shipments ($ bn) $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $ % 7.8% (0.9)% 14.1% (17.4)% 7.0% 6.4% 12.4% 6.6% (19.0)% 4.8% (4.3)% $9.4 $10.0 $11.5 $12.4 $12.2 $13.3 $11.0 $8.9 $8.5 $8.9 $10.1 $ F 2006F Source: BIFMA

10 Blue-Chip Customer Base is Buying Again Over $6.4 Billion of Installed Base Provides Platform for Recurring and Add-on Sales

11 Unique and Expanding Product Portfolio Specialty 17% Office Systems 57% Seating 10% Storage 7% Note: LTM as of September 30, Excludes European Sales and Tables / Desks.

12 Systems Started to Outperform in % 15% Systems Other 15.8% 15.0% Shipments (% Change) 10% 5% 0% (5)% (10)% 10.2% 7.6% (1.2)% 2.3% 6.2% (15)% (20)% (13.8)% (16.2)% (11.2)% (25)% (23.5)% (24.4)% H 2005 Source: BIFMA

13 Expand Our Market Opportunity > Target underpenetrated seating and storage for growth ($ in millions) 2004 Category Share (%) % $2,554 15% $390 25% $2,262 Category Share of Total Industry Shipments¹ Knoll Category Share 21% $1, % 3% 0 $69 $52 Office Systems Seating Storage Successful Track Record of Gaining Share: Systems 1996: 11% 2004: 15% (1) Percent of 2004 total industry shipments of $8.9 billion, as reported by BIFMA.

14 Our Strategy for Growth is Working and Builds on Our Core Strengths Broaden Seating, Storage and Casegoods Offering (+16% YTD) Continuous Improvement & Global Sourcing Design Legacy Leading Office Systems Increase Share of Dealer Sales (+100% YTD) Expand Specialty Products & Distribution (+22% YTD) 14

15 NeoCon 2005 Introductions AutoStrada Applied Wall Essentials Work Chairs KnollTextiles

16 Sales Momentum Continues 6 th Consecutive Quarter of Year-Over-Year Sales Growth $ % 16.8% $220 $ % 14.0% 15.4% ($mm) $200 $180 $160 $179 $181 $193 $179 $198 (% Chg. vs. PY) 12.0% 10.0% 8.0% 6.0% 7.7% 10.6% $ % 2.0% 1.0% 2.8% $120 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Sales Dollars 0.0% 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Sales Percent Change

17 Drivers of Profitable Growth Driver Opportunity Industry Dynamics > Positive macroeconomic environment for growth > Systems category outperforming Non-Systems Market Share Drives Drives Sales Topline Growth > Target share growth in seating and storage; 2-3 times BIFMA growth Specialty Business Expansion > New products > Expanded to 50 residential retail dealers Operating Leverage > Incremental sales have a significant impact on profitability (11.5% YTD 2005 operating margin compared to 9.9% YTD 2004 operating margin) Global Sourcing/ Continuous Improvement Drives Margins > Incremental global sourcing of up to $45 million > Cumulative savings through 2005 of over $10 million Financial Leverage > Track record operating with leverage > $567 million of debt paid down between 2000 and 3Q2005 > Future debt paydown will accelerate earnings growth

18 Knoll Continues to Deliver Results Despite Inflation Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended 9/30/05 9/30/04 9/30/05 9/30/04 Sales ($mm) Y-O-Y Growth 15.4% 2.7% 14.1% (0.9)% Gross Profit ($mm) Gross Margin 34.1% 34.7% 33.7% 33.5% EBIT ($mm) EBIT Margin 12.6% 11.7% 11.5% 9.9% Net Income ($mm) Adjusted EPS Net Sales ($mm) $1,500 EBIT Margin 25% Sales ($ mm) $1,000 $652 $811 $949 $1,164 $985 $985 $773 $697 $706 $779 19% 13% 12% 17% 18% 19% 20% 20% 16% 12% 10% 12% $500 6% $ LTM 0% LTM Note: 2004 and 2005 exclude extraordinary costs and items not indicative of operating performance such as stock based compensation, expenses associated with our IPO, write-off of deferred financing fees, and the impact of the Canadian dollar related to the remeasurement of our inter-company balances and taxes

19 Pricing and Global Sourcing Initiatives > Knoll is currently working to offset price increases in raw material and transportation through its global sourcing initiatives, cost improvements and price increases > Average across-the-board list price increases of 4% in May 2004 and May 2005 > As part of Knoll s continuous improvement philosophy, the Company partners with suppliers who can supply the facilities efficiently, often with just-in-time deliveries, allowing Knoll to reduce its raw materials inventory ($ millions) 4Q Q05 2Q05 3Q05 Price $2.9 $4.8 $2.0 $3.8 $3.7 Global Sourcing/ Continuous Improvements Material/Transportation Inflation (4.2) (16.1) (5.5) (5.2) (4.6) Foreign Exchange (2.1) (3.4) (1.7) (1.3) (1.9) Net Impact (0.1) 1.1 (2.0) (0.7) (1.0)

20 Cash Flows Enable Rapid Delevering Debt Outstanding Free Cash Flow Used for Debt Repayment $700 $ x $600 $567 $600 $500 $400 $548 $452 $381 $ x $500 $400 $379 $450 $508 ($mm) $ x 4.1x $ x (x) ($mm) $300 $283 $ x 2.4x 3.0x 3.4x 3.0x 2.0x $200 $185 $100 $100 $0 1/ / /2005 PF 0.0x $ /2005 PF Total Debt Total Debt / EBITDA Note: Leverage ratios exclude the impact of IPO costs Debt repayments exclude the impact of non-recurring dividends of $220 million in 2001 and $70 million in 2004.

21 Allocation of Free Cash Flow > Invest in focused initiatives to drive top-line growth > Continue to reduce debt > Pay dividends to shareholders > Recently announced intention to double per share dividend, effective in Q > Dividend yield of 2.5% based on stock price of $16.05 on October 27, 2005 > Use option proceeds to buy back shares and stabilize share count

22 Summary Ongoing Industry Recovery Legacy of Design Innovation Achievable Growth Strategy Out-Sized Value Creation Industry Leading Margins and Cash Flow