Knoll, Inc.
Q1 2015 Earnings Call Transcript

Published: 20 Apr 2015

[Operator:]

Good morning, everyone and welcome to Knoll, Inc. First Quarter 2015 Conference Call. This call is being recorded. This call is also being webcast. Presentation slides accompany the webcast. In addition, this call may offer statements that are forward-looking. These forward-looking statements are based largely on the Company’s expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company’s control. Actual results could differ materially from the forward-looking statements as a result of many factors including the factors and risks identified and described in Knoll’s annual report on Form 10-K and its other filings with the Securities & Exchange Commission. The call today will also include references to non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP financial measures are included in the presentation slides that accompany the webcast. Now let me turn it over to Andrew Cogan, the CEO of Knoll.

[Andrew Cogan:]

Thank you. Good morning everybody. We are very pleased with the strong results to start 2015 that we’ve reported this morning. Across the board, each of our segments delivered year-over-year growth and margin expansion as our investments in new products and expanded market coverage combined with initiatives to improve margin continue to come together. On double digit organic growth, we delivered just north of 27% contribution margins as the combination of better fixed cost absorption, improved prices, favorable FX and mix all helped drive a 300 basis-point improvement in our year-over-year operating margin. Given the lumpy nature of our business, we do not expect to continue at this pace throughout the year. However, we’re still confident that we can meet or exceed our goal of delivering better than industry growth combined with at least 100 to 200 basis-point of operating margin expansion. We are executing well against our multiyear plans and have continued to demonstrate that we can build a high design, high margin residential business, both organically and through disciplined acquisitions, while also driving growth and improve margins in our core Office segment. We have the talent, commitment, brands, resources and dealer partners that are dedicated to helping clients and their architects and designers create inspired work places and homes around the world. Our markets are growing; our product offering continues to get stronger; and we have a deep pipeline of continued innovation to take advantage of changes in the workplace and nature of work that will help drive growth in the years ahead. Our supply chain is becoming more efficient and headwinds that have more specifically hurt us like decreasing government sales or weakening U.S. dollar, have either been neutralized as in the case of government sales which have stabilized or become strong tailwinds as with the strengthening of the U.S. dollar relative to the Canadian dollar and the euro. It is a good environment for Knoll. Looking at our performance by segment, I’m particularly pleased and appreciative of the hard work improvement that our associates across our Office business have delivered. Here on 22 million of growth, we generated just over 6 million of adjusted OP improvements or just under 29% contribution margin with adjusted operating margins increasing from last year’s trough of 0.8% to 4.3%. Growth was driven by the breadth of our systems offering as well as renewed momentum in seating and recent introductions in the ergonomics area. Benefits of our 2014 list price increase and a mix of small, of more small to medium sized projects drove better prices which combined with favorable FX and investments in our supply chain transformation all contributed to better gross margins. Earlier in the quarter, we did not have the same magnitude of FX benefit that we ended the quarter with and we are still operating less and efficiently from an overtime and transportation stand point. So, I believe we can and will deliver better margin as we move into Q2. To get our overall Knoll, Inc. operating margins into the solid double-digits and beyond, we need to drive Office operating our margins up 200 basis points a year. At the end of the quarter, we began shipping our new Remix chair which is competitively priced and delivers a unique combination of the best of a high performance technical chair with the aesthetic face of a more familiar upholstered chair. Based on a comparable level of dealer launch participation to what we saw with generation, I am confident we have a hit in our hands. Our pool of businesses is up as our customer mark-ups. We have some good sized project opportunities that have either been awarded or in a decision phase that should impact the back half of the year while in the near term, the mix looks continue to be more heavily weighted towards opportunities below $1 million. In our Studio segment which includes an extra month of Holly Hunt sales compared to last year, sales grew 25% or 11% organically. Both contracts and consumer channels grew. We had a record February KnollStudio Classics sales and web visitors to knoll.com continue to set new records. Operating margins expanded by 190 basis points to just under a 13%; its favorable FX and better absorption helped margins. In Europe, both our residential and corporate channels grew but we do expect currency headwinds to more than offset Europe’s growth in constant currency for the balance of the year. While this may pressure top line growth in the Studio segments, on a net basis, we benefit from a cost of sales standpoint at both Holy Hunt and KnollStudio in North America from a weaker euro. We have an exciting product pipeline that we began to roll out last week at Salone del Mobile Milan and we’ll continue through NeoCon in June and these are products with great beauty and meaningful revenue potential. Holy Hunt continues to be nicely accretive even as we ramp up investment in new showrooms and expanded products. Since acquiring Holy Hunt, we have added or significantly expanded showrooms in Dallas, London, Houston and Washington DC. These new spaces are performing well, as is virtually every single product category that Holy Hunt offers. This is a dynamic and exciting business with strong leadership team that benefits in the recovery and higher-end real estate and contract growth. First quarter margins in our Coverings segment popped by 200 basis points to 21.3% as the benefit of a stronger dollar combined with last year’s restructuring actions to deliver strong contribution margin on mid single digit growth. I’m particularly encouraged to see signs of a top line turn at KnollTextiles and excited about the prospects for our 2015 introductions, as well as some new product categories we are moving into here. If FX rates stay where they are, we should see continued margin improvement in our Coverings business. Now let me turn the call over to Craig to elaborate on our first quarter performance. Craig?

[Craig Spray:]

Thank you, Andrew. In the first quarter, sales increased 16.1% and net earnings increased 123.1% on a year-over-year basis. Organically, sales increased 12.7% with all segments providing year-over-year sales growth. Operating margins increased across all segments as price increases, favorable foreign exchange and better utilization of our fixed cost footprint were realized. It is important to note, the acquisition Holly Hunt annualized in February 2015. Office segment sales were up 14.8%. Adjusted operating profit improved from 0.8% to 4.3% as price increases were realized; we continued to experience foreign exchange tailwinds as the U.S. dollar strengthened and we benefited from better utilization of our fixed cost footprint. In the Studio segment, sales were up 25.4% versus prior year or 11.4% on an organic basis. While Holy Hunt was up primarily due to the annualization of the February acquisition date, we were also up appreciably on a comparable basis. Additionally, both Europe and North America Studio were up double digits. Notably sales growth in Europe was achieved irrespective of the degradation of the euro and British pound to U.S. dollar. Adjusted operating profit improved from 10.9% to 12.8% as profit from incremental sales more than offset incremental operating expense from the additional or significantly expanded Holy Hunt showrooms. The Coverings segment grew 4% year-over-year. Operating profit for the segment grew by 15.1% as compared to the same quarter in the prior year as the segment benefited from price increases and reduced operating expenses as a percentage of sales. Over the quarter, gross margin was 35.8%, 240 basis points higher than prior year. Actual and adjusted operating margin was 8.4%, 300 basis points better than the adjusted operating margin a year ago. Actual operating margin for the first quarter of 2014 was 4.9%. At a consolidated level, total operating expenses were $73 million, $8.9 million higher than a year ago. This variance is primarily due to increased commission incentive accruals and higher sales and profit, as well as the additional month of operating expense from Holly Hunt and the previously announced non-cash pension expense. Interest expense for the quarter was $1.9 million compared to $1.7 million a year ago. The increase in interest expense is due to the increased debt associated with the February 2014 acquisition of Holly Hunt and working capital needs. Other income was $7.2 million, up from $2.5 million a year ago, driven by foreign exchange gains due to the devaluation of the Canadian dollar. We now expect to achieve significant foreign exchange gains or losses in other income in the future, as we set out the majority of our outstanding receivable with our Canadian subsidiary during the quarter. The tax rate for the first quarter of 2015 was 36.8% as compared to 35.4% from the first quarter of 2014. Our tax rate is the result of pretax income and the varying effective tax rates in the countries and states in which we operate. Net earnings for the first quarter of 2015 were $17.4 million compared to $7.8 million for the same period of 2014. Diluted earnings per share was $0.36 for the quarter, up 125% from $0.16 a year ago. Historically, Knoll is a net borrower of cash in the first quarter. In the first quarter of 2015, the cash demands increased as the targeted earn-out at Holly Hunt was fully achieved; there were incremental management and sales incentive payouts due to 2014 performance and incremental working capital is required as we continue to grow the business. Specifically, working capital needs included increased inventory as we opened new Holly Hunt showrooms and as we added strategic in-stock inventory to improve our Quickship programs and certain offerings. Accounts payable has been reduced from year end as we paid for capital expenditures; inventory and ERP related expenses related to the fourth quarter of 2014. As a result, our leverage ratio was 2.55 as of the first quarter of 2015, up slightly from 2.41 as of year-end. Cash used in operating activities was $26.1 million for the first quarter of 2015, compared to cash provided by operating activities of $12.9 million a year ago. Cash used in investing activities for the first quarter of 2015 was $4.9 million for capital expenditures. Cash used in investing activities for the first quarter of 2014 was $101.5 million, which includes the purchase of Holly Hunt for $93.3 million and capital expenditures of $7.8 million. Cash provided by financing activities was $29.7 million and $85.7 million for the first quarter of 2015 and 2014 respectively. Payments for dividends were $5.7 million in both the first quarter of 2015 and 2014. Stock repurchases were 6.1 million for the first quarter of 2015 compared to 3.7 million a year ago. We will now take any questions.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Budd Bugatch of Raymond James. Please proceed.

[Budd Bugatch:]

A question for you -- a couple of questions; I am trying to understand and I want to make sure that it’s clear, the mechanism of foreign exchange, because I know there are bunch of moving parts there that affect them, all the segments. And you addressed I think the gross margin because I was a little surprised it seemed weaker than I thought it would have been with FX. But maybe you can help us understand where and how the mechanism of FX affects each of the segments and I don’t want it to be a long conversation, but maybe a quick point of view.

[Andrew Cogan:]

Sure, Budd. So, really it really affects in couple of ways. One, we have a significant amount of our capacity on the office side that sits in Canada. And that really drives a couple of things. That drives one, some of the margin that you talked about and that also is the primary driver of our other income as that receivable gets revalued in U.S. dollars. Secondly, we have in the Studio group; we have some sales and cost that’s in Europe. So that’s effective both top line and on the margin side, but we also buy a significant amount of our materials out of euro denominated currencies on the Studio side and in the Coverings side. And that’s really the drivers.

[Budd Bugatch:]

Okay, that explains it. I mean because I would have thought the euro issue would have been mostly translation but if you’re purchasing stuff in Coverings and Studio in euro denominated currencies and you get the benefit of the strong dollar on that. And Andrew, I think you did say that the FX impact on I guess the Office segment, particularly was a bit delayed as the FX headwinds increased during the quarter or did I misunderstand that?

[Andrew Cogan:]

No Budd, that’s correct. But also it was delayed because the euro weakened through the quarter as well. And when we get the euro benefit in leather, as you know the bulk of our inventory is in textiles and leathers. So, we have to work through some of the higher euro inventory before we start to get the benefit of what we’re purchasing at lower euro rates. So again, during the quarter and then I think over the course of the year, if the euro stays about where it is you will see continued improvement in the gross and operating margins of both the Coverings and Studio businesses.

[Budd Bugatch:]

Yes, that’s where I was going. Do we get gross margin improvement in all three segments now going into at least the second quarter if the currency rates stay where they are right now?

[Andrew Cogan:]

I would think so, Budd.

[Budd Bugatch:]

And you talked about the needed Office to be -- to really make the kind of goals that you set financially for the Company and yourself, 200 basis points better. How do we think about the Office segment margins ex currency, that’s I know currency does have an impact because of the Canadian manufacturing capability.

[Andrew Cogan:]

Well, I think I’d put it this way. The currency’s only going to help us; so, when you look at the improvement year-over-year, I believe currency was about a 100 basis-point improvement in gross margin was currency. Frankly in the first quarter, price was a bigger factor than currency in Office gross margin in the first quarter. So, I would expect a nice tailwind in terms of our gross margin expectation during the course of the year in the Office segment. But basically, last year our office margins -- operating margins in the office segment were about 400 basis points. We need to get those 400, 400 and something basis points. We need to get those over 600 basis points. And based on the mix of business we have, that should put all a double digit operating margins; get office to 600-650 basis points.

[Budd Bugatch:]

I understand that. I was really looking more longer term and I was thinking about that 200 basis-point delta for Office, so you get a sustainable double digit operating margin for the Company on a….

[Andrew Cogan:]

I think we’re very much headed in that direction, Budd. And I think, the exciting thing is as I look at the office margins through the quarter, we also, as I mentioned in my prepared remarks, we did have some inefficiencies at the start of the quarter. So, if I look at where we ended gross margin wise from where we started, we actually picked up a couple of 100 basis points of gross margin in the office business just through the quarter.

[Budd Bugatch:]

Including currency or…?

[Andrew Cogan:]

Including currency.

[Budd Bugatch:]

Okay.

[Andrew Cogan:]

Budd, let me try to make it -- I’m trying to make it a little simpler even. I really believe that Office is on a path this year to get to between 600 and 700 – 6% and 7% operating margins and then we ought to be able to pick up another 100 to 200 basis points as we move into 2016.

[Budd Bugatch:]

Terrific, that is terrific, that is very helpful. My last question and I’ll let others go, is I’m wondering where we were -- a little surprise was in receivables. And so either that gets a mix of business question if there was a lot of government business because I think those receivables had a longer tail or European receivables. Receivables seem to be a bit extended in the quarter or just the timing issue, so maybe you can address how that issue is…

[Andrew Cogan:]

Yes, it’s just a timing item. It depends on what mix of business, how that flows through the P&L when we sell some of those things especially in our international sales and when those actually manifest through the cash flow statement; that’s exactly right. But that’s just a timing item.

[Budd Bugatch:]

So they’re not government sales; I think government sales have a longer term because you have to wait till they’re actually installed and accepted, right?

[Andrew Cogan:]

They can be a little longer but that’s not what’s driving -- what you’re seeing in the financials right now.

[Budd Bugatch:]

Thank you very much. Congratulations and good luck on the next quarter and the longer term. And I’ll let others have a crack at it.

[Andrew Cogan:]

Thank you, Budd.

[Operator:]

The next question comes from the line of Josh Borstein of Longbow Research. Please proceed.

[Josh Borstein:]

Just a question from me; can you talk a little bit about the supply chain transformation investments in your warehouse consolidation program and where you are right now in that process?

[Andrew Cogan:]

Sure. The warehouse consolidation’s pretty much done; I think we’ve finished that at the middle of last year. So the first half of this year, we should be getting and we are getting some additional benefit from that program. I think that was a couple of million dollars a year in total. What we’re really starting to see is some of the supply chain transformation where we’ve consolidated production of our laminate tops into a single facility where we used to do those in multiple facilities and we put some state of the art highly automated equipment in. And that really, that equipment went in the fourth quarter of last year but it had some ramp up challenges. And we’ve really started to get that running well in the first quarter and again better towards the end of the first quarter than at the start of the first quarter. So that is a transformation that we’re now seeing start to provide some real benefit. So that would be an example of one thing that’s starting to help us.

[Josh Borstein:]

And I think last quarter you talked about 50 basis points to 100 basis points of margin disruptions from what was going on there and it sounds like some of that still was exiting the first quarter; is that right?

[Andrew Cogan:]

That’s correct, particularly in January and February; by March, we were running at the kind of normalized rate I would expect inclusive of those benefits and we would expect to see that rate now continue through the balance of the year.

[Josh Borstein:]

So, also all those disruptions like they are behind you now?

[Andrew Cogan:]

They are behind us.

[Josh Borstein:]

And what was the disruption if you had to quantify it in the first quarter, was it a similar amount to 4Q?

[Andrew Cogan:]

I think it was probably comparable. Again it was a lot of overtime, a lot of expedited freight. We’ve now worked through all that; the sites are running very well; our lead times are in a very good position. And I feel like we’re operating well now.

[Josh Borstein:]

And just to make sure I heard correctly what you said about the EBIT margins in Office, you think this year something on the order of 600 to 700 or 6% to 7% this year than another 200 basis points next year?

[Andrew Cogan:]

I think certainly that’s what we’re guiding for and I think with the additional help of some of these FX tailwinds, I think we feel more confident than not that those numbers are achievable.

[Josh Borstein:]

And just turning to Studio that segment, in terms of the top-line, organically you’re coming up against some difficult comps for the balance of the year. Given that and I think you talked about also some FX headwinds on the top-line, do you think that 12% to 13% growth run rate is sustainable on the organic basis?

[Andrew Cogan:]

I don’t, I think that’s a little ambitious because remember we have -- in the Studio segment, we have Europe and that’s going to basically wipe out. I mean Europe is going to be a headwind and is going to eat into some of the growth that we’re getting in the other businesses. So, I don’t expect that kind of growth rate to continue. But what I do expect to continue is the margin improvement in that business. And I think in the past, we talk about shooting for 12% operating margins in that segment. I think again with some of the FX revaluing, we could easily do a 100 basis points to 200 basis points better there.

[Josh Borstein:]

And just…

[Andrew Cogan:]

It would be more modest in my revenue expectations given that FX headwind.

[Josh Borstein:]

And on the SG&A as a percent of sales that came better that I had anticipated. What could we expect going forward, either as a dollar amount or as a percent of sales?

[Andrew Cogan:]

Well, on the operating expense, we put a number of around 75 million out there; I think we’re pretty consistent around that number. Some quarters that are higher and some quarters that are lower.

[Josh Borstein:]

And just last for me Andrew, you made a comment, you didn’t expect something to continue, I am not sure what it was, maybe it was the 27% contribution margin. Was that right?

[Andrew Cogan:]

No, I don’t -- we had very strong top-line growth in the first quarter. I don’t expect that rate of growth to continue. I do expect the kind of contribution margins we’re seeing; I do expect those to continue.

[Operator:]

The next question comes from the line of Todd Schwartzman from Sidoti & Company. Thank you. Please proceed.

[Todd Schwartzman:]

Todd Schwartzman, Sidoti & Company. Hi guys. I wanted to just kind of get some sense of the contribution margin by segment. I think in absolute terms it kind of speaks for itself the disparity between the specialty businesses and office. But can you kind of breakdown the contribution margin by segment?

[Andrew Cogan:]

I think we covered it in our prepared remarks, Todd, but there wasn’t actually that much of a disparity. I think we talked about 26%, 27% across the business; Office was I think 28% or 29%; Studio was in the mid-20s. The one area that was very, very high was the Covering segment where we have like, something like 78% contribution margin. And that was where we’ve done as you know some restructuring towards the end of the year and where we got some benefit from that. So, it didn’t take a lot of incremental growth to get a lot of bottom-line impact. And let me just correct myself. Office contribution margin was 28%; Studio contribution margin was about 20%, so again not materially different.

[Todd Schwartzman:]

In terms of pricing, where are you at the realization of last year’s hike?

[Andrew Cogan:]

We had some good realization in the first quarter of the 2014 increase. And as you know we recently put in place a 2015 increase which we’ve not seen any price realization from yet. The biggest price realization driver has really more been mix in terms of project size. So, we’ve seen more growth in activity below $1 million and that tends to be more favorable from a price and margin standpoint.

[Todd Schwartzman:]

And part of that I suppose Andrew is that with that mix shift, discounting becomes less and less of an impact?

[Andrew Cogan:]

Exactly.

[Todd Schwartzman:]

You see that trend continuing for most if not all of ‘15?

[Andrew Cogan:]

I think continuing for the second quarter. As I look at the pipeline of activity, we have some larger projects that we’ve already been awarded and some larger projects that we’re competing on which would impact the back half more and may be a little more competitively discounted just given the nature of their size.

[Todd Schwartzman:]

And as far as the inventory delta going forward, how best to think about it, Holly Hunt, I guess the portion of the change represented by them is kind of already spoken and accounted for. But is there anything else on the product roll out side in particular that we should consider when trying to model inventory?

[Andrew Cogan:]

I think, we’re at a pretty good level right now and we can probably turn it a little better. But I think we’re at good place.

[Operator:]

[Operator Instructions]. The next question comes from the line of Rueben Garner of BB&T Capital Markets [ph]. Please proceed.

[Unidentified Analyst:]

In the Office segment, it looked like this was really strong quarter. I think it was the first time you guys just had double-digit growth rate on a two year basis in some kind. Can you talk about how much of that is new office picking -- new office construction picking up or how much is just general demand and maybe new products?

[Andrew Cogan:]

In general, I would say that we had some good size international projects which we talked about at the end of last year which continued to ship through the first quarter. So, in terms of mix that was helpful, geographically. In terms of product categories, again we were very encouraged with the response to our systems line up and particularly to the breadth of our systems line up. It’s not about a single solution; it’s about a range of solutions. And we saw appeal and client response at a variety of those -- within a variety of those products which was encouraging. I was also heartened to see our seating products gain some momentum. And that was encouraging to see on the heels of us launching Remix, which we have great expectations for, which began to ship at the end of the first quarter, all our dealers who have their samples by the end of this month and we’re very encouraged by both the dealer and client response to that innovative chair.

[Unidentified Analyst:]

Okay. And the mid single digit growth rate, you guys talked about last quarter expecting for 2015. Has that changed at all with the big Q1 or are you still thinking that’s a good run rate?

[Andrew Cogan:]

I think that’s a realistic number for the industry and we would hope to do better than that.

[Unidentified Analyst:]

My next question is the gross margin line; I think it was about 250 basis points year-over-year increase. And I think you mentioned in Office that FX was about 100 basis points of the Office segment pick-up. Can you talk about the components of the gross margin increase? How much was price versus volume and maybe Holly Hunt for the Knoll as a whole?

[Andrew Cogan:]

I think the largest factors were price was helpful; the Holly Hunt mix was helpful; and then FX. In general, I would say that was the relative relationship of the drivers but we don’t really quantify each of them specifically.

[Unidentified Analyst:]

And then my last question is and the Coverings segment was the high EBIT margin I think you guys have had in some time. Can you talk about kind of the components that an maybe you guys had some initiatives, I guess it was a couple of years ago. Is that really that just starting to pay off or is there some FX and volume pick up and that’s turning things around and maybe what we can expect going forward. And I think I missed what you said earlier about your expectations for the rest of the year in Coverings?

[Andrew Cogan:]

Sure, I think, a couple of things in Coverings. First, if you look at the results by the segment, the operating expenses are pretty flat year-over-year. So even though we generated 4% top line gross, we did it on flat expenses; that’s really thanks to some of the restructuring efforts and investments we made in the fourth quarter in that business; they took some of our fixed cost down. So, we’re now seeing that we can get a higher yield on our incremental growth. It’s also the benefit of some of the sales and marketing events which we’ve made, now as you suggest starting to get seeded and aged a little bit. It’s the growing maturity of the sales force there; people now have a year or two under their belts. And it’s the strength of some of the recent product introductions that we’re doing, particularly in the textile area. So, in general, those would be the key factors. And on the gross margin side, the biggest driver there is really FX. And again I think we’re just beginning to see the FX impacts flow through that business. So, I’m again probably more sanguine going forward than I was at the start of the year in terms of where the Coverings margins could -- the EBIT margins could head over the course of the year.

[Operator:]

The next question comes from the line of Josh Borstein of Longbow Research. Please proceed.

[Josh Borstein:]

Just one follow-up for you Andrew, just a more qualitative question; what aspects of your business provide you with the sort -- the most optimism right now going forward and what aspects of the business continue to be challenging?

[Andrew Cogan:]

Well, I’m very heartened by the operational performance of the Office business in particular. I really think we’re starting to execute well on the plans and the benefit of some of our multiyear investments are starting to pan through and so we are seeing that flow through on the margin line. So, I’m very encouraged about that. I’m very encouraged on the Studio business about the breadth of the strategies we have. And I think growth will be a little bit challenged with the European -- euro headwind. Holly has been a home run. I continue to be impressed with her leadership team there and with the opportunities set to keep growing that business. But our own Studio business is doing very well. I mean Europe; we’re growing double digits on a constant currency basis. Our Studio business in North America is performing very well. And we have some very exciting meaningful product introductions that could mean 10 million plus of annual revenue. So, we’re doing good work there. And then, Coverings, I think we’ve turned the corner; we’re starting to grow the top line; and the discipline on the cost side has turned that around. So I have to say overall, I think the Company is operating well. And I’m excited about the pipeline of products we have. In terms of the challenges, this is a competitive market. As we do move into some larger projects in the back half, I don’t expect all the price benefit that we’ve had in the front half but I think we are well positioned and I think we’re competing well.

[Operator:]

I would now like to turn the call back over to Andrew Cogan for closing remarks.

[Andrew Cogan:]

Thank you. Thank you everybody again for joining us on today’s call. Our team is executing well against the solid strategy that we see continuing to resonate in today’s residential and office markets. And we’re hopeful we’ll see many of you this coming June in Chicago at NeoCon where we have a very exciting show plan. So take care everybody and thank you for your interest in Knoll.

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.