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2010 annual report
01 + knoll
the cubicle era is over Today’s office is a wasteland. It saps vitality, blocks talent, and frustrates accomplishment. It is the daily scene of unfulfilled intentions and failed effort. The need to shift seamlessly from one task and one type of work to another—from focused endeavors to both shared and team work—has over the past decade become the drumbeat of certain high-tech and creative companies as they reorganized themselves into a more team-oriented office lay out. What these early adaptors and other change-focused organizations share is the belief that cross-disciplinary interaction is the key to innovation.
contents VERSATILITY
03
SIMPLICITY
09
GROUP INDIVIDUALISM
05
TO THE SHAREHOLDERS
11
PERSONALIZATION
07
FINANCIAL SELECTIVE DATA
13
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other companies are building
products
we are building spaces
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as endless as the imagination Antenna Workspaces combines artistic inventions with functional efficiencey, solving practical workplace needs. In striving to find the right form to provide a multitude of options, Masamichi Udagawa and Sigi Moeslinger created a simple structure and then set out to explore its transformations to maximize use and flexibility with a minimum of parts.
storage can be used to define space link desks for l-shape or u-shape setups
desk-mounted storage
private / focus wall-mounted storage
collaborative
quiet space
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the producer no more long walks down the hallway
the planner
the creative the executive
as small as possible, and as big as necessary
shared space Suggests connections and boundaries between diverse work areas and establishes a new way to shape space, simplifying transitions between individual and group work.
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historically we ’ ve developed products that serve the need of the individual . Today the individual is the group.
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ideas are shared. identity is owned.
team ideation It’s time for a setup working as a collaborative workspace in the open plan and as a techsavvy meeting room table to support the work done by teams.
safe space for ideas to flow ...out of the woodwork.
a successful team is made of many Is
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and here don’t worry there’s personal storage too opportunities exist here
and here
and so on... the office is yet another canvas Antenna creates work environments that respond to the needs of today’s dynamic workplace and go beyond the traditional boundaries of open plan, private office and collaborative areas. Antenna serves those who view the entire office as a canvas to support a variety of work modes throughout the day. We are introducing a tactile palette of surfaces not typically associated with the workplace.
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wood? laminate? glass? take your pick.
combining beauty with function
internal wiring (it clears up space)
big table
A collaborative work setting that can support groups of any size in open plan environments, closed rooms and meeting areas.
Our textiles offer harmonizing materials and enhance character in any architectural setting. It’s essential to maintain one’s personal space within a group environment. People want to stand out and fit in at work. We believe a creative workspace is the key to a dynamic team.
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The structure was inspired by an elevated highway: the horizontal rail runs above the upside-down U-shaped vertical structure of the legs. The horizontal rail can extend independently of the legs. Similarly, the legs can get wider to support different desk depths, independent from the rail. The V-shaped cradle is the most efficient way to connect the rail and legs. In addition, the rail is a square tube that is rotated 45 degrees to give it a diamond shape, providing the most efficient connection not only to the legs, but also to other rails that run perpendicularly to support other things, such as storage, and making it easier to grab from the bottom and sides.
a modern concept
open space Together, these seemingly delicate legs and cantilevered surfaces create a quintessentially modern composition of floating planes and crisp details.
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diamond-shaped steel rail supports 1-inch thick slabs of wood, laminate or glass
elegant 1-inch square tube steel legs eliminates the use of environmentally damaging PVCs
interchangable desk legs
ranging from the more standard desk to long expansive desks
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dear fellow shareholder
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In 1938 Hans and Florence Knoll founded our company with the simple belief that design could make a difference. That it could help create more modern, productive and beautiful work and home environments. By bringing great modern designs to the market, they inspired the entire architectural community and played a pivotal role in the creation of the interior design profession. They also firmly believed that good design was good business and that a business dedicated to the creation of great designs could also be a self sustaining and highly profitable enterprise. Today, it is that same mission that drives all of us at Knoll. I think our performance in 2010 demonstrates that we did a pretty good job. In the face of a rapid decline in industry demand that made the 2001 – 2003 downturn look modest in comparison, we actively scaled our cost structure and protected our indus- how did we do it ? try leading operating margins. We took actions to protect our balance sheet, We gained market share overall as including reducing our debt and improving our working capital performance. well as in each of our major product
andrew cogan Chairman of the Board Chief Executive Officer
categories. And perhaps most importantly we began to inspire a whole new generation of architects, designers and clients with some of the most award winning and exciting new designs in our history. The accolades that we received were numerous. Our new Antenna Workspaces won the Best in Innovation of NeoCon® 2010, beating out new designs by some of the historical leaders in that space and, in November. Knoll’s Generation chair is a perfect example of answering the kinds of questions iGens pose. The chair has got marketing chops simply because it recognizes that people, especially young people, have very different workstyles.” In closing, let me add that we expect any improvement in demand in 2011 to occur during the second half of 2011. We start the decade with the strong conviction that Knoll could not be in a better position to succeed and generate strong results from our new products and an eventual recovery in industry demand. On behalf of all the associates at Knoll let me personally thank you for your continued interest and ownership in our Company.
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financial selective data
at year end
2010
2009
2008
2007
sales
$
850,683
780,033
1,120,147
1,055,814
982,152
cost of sales
$
645,530
510,590
725,078
690,639
663,115
gross profit
$
229,153
269,443
395,089
385,125
319,037
selling expenses
$
186,821
193,995
245,032
222,937
202,097
restructuring changes
$
8,875
11,959
operating income
$
51,457
63,489
145,142
142,188
116,940 23,717
4,625 —
2006
—
interest expense
$
19,440
13,862
16,269
24,598
other expense, net
$
4,369
(5,832)
3,679
(4,651)
income before income tax expense
$
56,781
43,795
132,802
112,939
93,964
income tax expense
$
21,093
16,442
47,890
41,496
58,633
net income
$
35,688
27,363
84,912
71,443
58,633
basic
$
0.92
0.60
1.82
1.48
1.18
diluted
$
0.92
0.60
1.82
1.45
1.14
cash dividends declared per share
$
0.36
0.16
0.46
0.45
0.41
45,806,722
45,403,401
46,570,272
48,239,189
49,606,677
45,920,143
45,413,770
46,694,340
49,248,902
51,238,088
741
per share data
earnings per share:
weighted average shares outstanding: basic
diluted
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marketing conditions and We remain in compliance with all our debt covproject activity enants. Maintaining a strong balance sheet and aggressively freeing up working capital continues to remain a top priority. This quarter illustrates that we are beginning to emerge from one of the worst declines in the history of our industry. We are encouraged by the double digit growth this quarter and particularly the 31.9% growth of our backlog. In addition, as we head into the fourth quarter all our leading indicators like client renderings, visits, mock-ups and special requests are up double digits. We are focused on delivering new product offerings like our award winning Antenna™ Workspaces that will position us as the supplier of choice for the next generation workplace. the third quarter of 2010 we experienced double digit growth an overview During fa l l / r i s e in sales, gross profit, operating profit, and net income. Net sales for the quarter were $202.1 million, an increase of 11.5% over the third quarter of 2009. The increase in sales occurred across all product categories and geographies. Europe posted the largest percentage growth during the quarter when compared with North America. Seating continues to outpace the growth of all our major product categories as our Generation by KnollŽ chair sales continue to increase. The third quarter of 2010 marked the first quarter in eleven quarters that we experienced growth in sales of our office systems product category. Systems continues to represent the largest percentage of our overall revenue. Our backlog of unfilled orders increased on a year over year basis by 31.9%. Diluted earnings per share in the third quarter of 2010 increased we are 7.7% to $0.14 per share when compared to $0.13 per share during the same period in the prior year. For the beginning quarter, gross margin decreased 40 basis points to 33.4% versus the comparable quarter of the prior year. The to emerge from one decrease in gross margin from the third quarter of 2009 largely resulted from price deterioration and unfavorof the worst able movements in foreign exchange. Material inflation also negatively impacted our gross margin on a year declines over year basis. Operating profit for the third quarter of 2010 was $19.1 million, an increase of 13.7% from in our the third quarter of 2009. Operating expenses for the third quarter of 2010 increased $3.8 million, or 8.5%, industry when compared to the prior year. Increased commissions and incentive compensation in conjunction with our higher sales volumes accounted for the majority of this increase.
01 + knoll
the cubicle era is over Today’s office is a wasteland. It saps vitality, blocks talent, and frustrates accomplishment. It is the daily scene of unfulfilled intentions and failed effort. The need to shift seamlessly from one task and one type of work to another—from focused endeavors to both shared and team work—has over the past decade become the drumbeat of certain high-tech and creative companies as they reorganized themselves into a more team-oriented office lay out. What these early adaptors and other change-focused organizations share is the belief that cross-disciplinary interaction is the key to innovation.
contents VERSATILITY
03
SIMPLICITY
09
GROUP INDIVIDUALISM
05
TO THE SHAREHOLDERS
11
PERSONALIZATION
07
FINANCIAL SELECTIVE DATA
13
knoll + 02
other companies are building
products
we are building spaces