Knoll reported rocketing first quarter results, and one of the minority to have double digit sales growth accompanied by an even higher growth in net income. The company said that growth resulted from increased volume in both North America and Europe. A significant portion of the increased sales volume was attributable to sales of office systems, which grew $49.0 million, or 34.5%. As a percentage of sales, gross profit was 40.2% for the first quarter compared to 39.0% for the first quarter of 1999 and operating income was 19.7% for the first quarter of 2000 compared to 17.3% for the first quarter of 1999. Both gross profit and operating income in the first quarter of 2000 benefited from increased volume and the Company’s continued focus on cost control. We have seen some promising sales growth in other companies. But, any growth in the past quarters for most in this industry has been accompanied by flat or negative net income growth reflecting significant discounting (commonly referred to as price pressure). Knoll, on the other hand, has increased its profit margins.
In connection with the merger that was consummated on November 4, 1999, the Company incurred $533.0 million of debt under a new senior credit agreement with higher interest rates than those under the credit agreement replaced thereby. Such debt resulted in significantly higher outstanding debt balances during the first quarter of 2000 compared to the first quarter of 1999, which was the principal cause of the $8.3 million increase in interest expense in the first quarter of 2000 compared to the first quarter of 1999. As of March 31, 2000, the Company had an aggregate of $167.4 million available for borrowing under its U.S. and European revolving credit facilities. The Company’s backlog of unfilled orders was $192.4 million at March 31, 2000 and $161.7 million at March 31, 1999.
From officeinsightTM
