EAST GREENVILLE, Pa., April 15, 2011- Knoll, Inc. (NYSE: KNL) today announced results for the first quarter ended March 31, 2011. Net sales were $220.9 million for the quarter, an increase of 26.0% from first quarter of 2010. Operating profit for the quarter was $20.9 million, compared with $9.4 million in the first quarter of 2010.
Excluding restructuring charges of $0.5 million, adjusted operating profit was $21.4 million for the first quarter of 2011, or 9.7% of net sales, an increase of 64.6% when compared to adjusted operating profit for the first quarter of 2010. Net income for the first quarter of 2011 was $9.2 million, an increase of 318.2% when compared with the first quarter of 2010. Earnings per share was $0.20 for the quarter compared to $0.05 per share in the prior year. Adjusted earnings per share was $0.10 for the first quarter of 2010.
"Our positive momentum in the marketplace continued as we moved into 2011," commented Andrew Cogan, CEO. "The combination of improved economic conditions and our investments in innovative new designs drove double digit top line growth and year-over-year margin expansion which helped to more than double our EPS. We have an exciting program of new product introductions for our upcoming NeoCon 2011 trade show which continues to support our strategic focus on design-driven businesses and product categories."
Adjusted earnings per share and adjusted operating profit are non-GAAP financial measures and are calculated by excluding from earnings per share and operating profit items webelieve to be infrequent or not indicative of our operating performance. For a reconciliation of adjusted earnings per share and adjusted operating profit to earnings per share and operating profit, respectively, see "Reconciliation of Non-GAAP Financial Measures" below.
Net sales for the quarter were $220.9 million, an increase of $45.6 million, or 26.0%, from the first quarter of 2010. Sales increased double digits across all product categories with the largest gains occurring in office systems. Backlog of unfilled orders at March 31, 2011, was $171.9 million, an increase of $33.0 million, or 23.8%, compared to unfilled orders of $138.9 million at March 31, 2010.
Gross profit for the first quarter of 2011 was $68.4 million, an increase of $11.7 million, or 20.6%, when compared with the same period in 2010. First quarter 2011 gross margin (gross profit as a percentage of net sales) decreased to 31.0% from 32.3% in the same quarter of 2010. The decrease from the first quarter of 2010 resulted from price deterioration, transportation inflation, and raw material inflation. The strengthening of the Canadian dollar and Euro also negatively affected our gross margin.
Operating expenses for the first quarter of 2011 were $47.0 million, or 21.3% of sales, compared to $43.6 million, or 24.9% of sales, for the first quarter of 2010. The increase in operating expenses during the first quarter of 2011 was in large part due to increased sales commissions and incentive compensation associated with our higher sales volumes. These increases accounted for $2.7 million of the increase in operating expenses from the first quarter of 2010 to the first quarter of 2011.
Our operating profit for the first quarter of 2011 was $20.9 million, an increase of $11.5 million, or 122.3%, when compared with the same period in 2010. Operating profit as a percent of net sales was 9.5%. Operating profit for the first quarter of 2011 includes restructuring charges of $0.5 million. Excluding those restructuring charges, operating profit would have been $21.4 million, or 9.7% of net sales. When compared with the prior year, adjusted operating margin (operating profit as a percentage of net sales) for the first quarter of 2011 increased from 7.4% to 9.7%. For a reconciliation of adjusted operating profit to GAAP operating profit, see "Reconciliation of Non-GAAP Financial Measures" below.
During the first quarter of 2011, other expense included $1.8 million of foreign exchange losses, $1.0 million of miscellaneous expense related to a negative judicial ruling, offset by $0.5 million of income. Other expense for the first quarter of 2010 included $1.5 million of foreign exchange losses offset by $0.1 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 36.8% for the quarter, as compared to 42.3% for the same period last year.
Cash used in operations during the first quarter 2011 was $16.8 million, compared with cash provided by operations of $11.5 million the year before. Capital expenditures for the period totaled $2.0 million compared to $1.3 million in the comparable period for 2010. During the first quarter of 2011 the Company repaid $3.0 million of debt and purchased $12.4 million of common stock using stock option proceeds. The Company also paid a quarterly dividend of $2.8 million, or $0.06 per share, in the first quarter of 2011 compared to $0.9 million, or $0.02 per share, in the first quarter of 2010.
"We have now seen three consecutive quarters of strong orders and sales growth across all our product categories with systems showing the greatest improvement this quarter. Since systems has lagged the other categories in the recovery and declined the most during this recession, this improvement bodes particularly well for us because of our strong systems position," stated Barry L. McCabe, EVP & CFO.
Since 1938, Knoll has been recognized internationally for creating workplace and residential furnishings that inspire, evolve and endure. Today, our commitment to modern design, our understanding of the workplace and our dedication to sustainable design has yielded a unique portfolio of products that respond and adapt to changing needs. Knoll is aligned with the U.S. Green Building Council and the Canadian Green Building Council and can help companies achieve Leadership in Energy and Environmental Design LEED(R) workplace certification. Knoll is the founding sponsor of the World Monuments Fund Modernism at Risk program.
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