For Knoll Inc., 2006 was a great year.

Knoll has a long history of design innovation by such famous designers as Frank Gehry, Eero Saarinen and Ludwig Mies van der Rohe, but its recent sales growth has been impressive in any era.

Annual sales jumped 14.4 percent from $707 million in 2004 to $808 million in 2005, then another 21.6 percent to $982 million. Operating profits grew at an even faster pace. In both 2005 and 2006 Knoll sales increases outpaced those of the industry as a whole, represented by the Business and Institutional Furniture Maufacturer's Assn.

"2006 was a great year for Knoll," said CEO Andrew Cogan in a statement earlier this year. "Not only did we expand our industry leading operating margins and deliver very strong double-digit growth in sales, operating profit, net income and EPS, but we also continued to build on the initiatives that have helped us generate above-industry growth for the past two years."

Knoll is headquartered in New York and has plants in Grand Rapids and Muskegon, Mich.; East Greenville, Pa.; Toronto, Ont., Canada; and Foligno and Graffagnana, Italy. The company employs about 3,600 people worldwide, and manufactures office systems, seating, desks, casegoods, file and storage cabinets, tables, lounge chairs, contract textiles and leathers, and computer support accessories.

Office furniture recovers

Overall, U.S. office furniture production was estimated to be $11.5 billion in 2007 and $12 billion in 2008, according to an economic forecast model developed by Global Insight on behalf of BIFMA.

There are several positive factors for the office furniture market as a whole. After steep declines in 2001 and 2002, non-residential construction has risen steadily. Employment in the service sector has risen steadily since 2000. And shipments of office furniture have increased steadily over the past three years after a serious contraction in 2001-2003.

Knoll targets the mid- to upper-end market. Office systems account for 57 percent of company sales, specialty category accounts for 16 percent, with seating, 11 percent, and storage, 8 percent. The company sees seating and storage having the greatest potential for growth, because Knoll's domestic market share is smaller in these areas.

Non-wood seating, storage, tables and casegoods account for 60 percent of BIFMA shipments, but these categories represent only 21 percent of Knoll's sales in North America. It is Knoll's goal to have half of its revenue come from non-office systems sources.

Strategies for growth

Knoll also sees greater international opportunities, as nearly all sales come from North America and western Europe.

Strategy for growth includes broadening seating, storage and casegoods product selection, leveraging the Knoll brand around the world, increasing the share of dealer sales, and expanding specialty products and distribution.

What's next? Knoll has stated that it expects to benefit from the continuing recovery of the entire industry. The company wants to increase revenue faster than the average for all BIFMA companies and continue to diversify its product and geographic mix. Increased sales will also come from the company's legacy of design innovation, its growth strategy and opportunities for further growth and margin expansion.

When 2007 is completed the company expects sales to be about $1.04 billion another strong increase.

"Looking ahead to the second half of the year, in spite of continued positive macro-economic fundamentals, we see orders growth flattening out as a combination of factors, including low vacancy rates and rapidly rising rents, dampen demand in certain key markets," said CEO Andrew Cogan in a mid-July statement.

"It is our belief that as we enter 2008 an increased supply of new office space coupled with designs we introduced at (June's) NeoCon trade show will rekindle growth in North America."

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