knl-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-12907


KNOLL, INC.

Exact name of registrant as specified in its charter


Delaware						13-3873847
State or other jurisdiction of incorporation or organization						I.R.S. Employer Identification No.


1235 Water Street
East Greenville	PA	18041
Address of principal executive offices		Zip Code

(215) 679-7991

Registrant’s telephone number, including are code

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.01 per share

KNL

New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☒

As of May 6, 2021, there were 50,812,680 shares (including 1,424,739 restricted shares) of the Registrant’s common stock, par value $0.01 per share, outstanding.

KNOLL, INC.

TABLE OF CONTENTS FOR FORM 10-Q


Item		Page

PART I — FINANCIAL INFORMATION

1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of March 31, 202 1 and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	5
	Notes to the Condensed Consolidated Financial Statements	6

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	Quantitative and Qualitative Disclosures about Market Risk	24

4.	Controls and Procedures	25

PART II — OTHER INFORMATION

1.	Legal Proceedings	26

1A.	Risk Factors	26

2.	Unregistered Sales of Equity Securities and The Use of Proceeds	28

6.	Exhibits	29

Signatures		30

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions, except per share data)


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	10.8	$	37.3
Customer receivables, net	77.6		83.4
Inventories	206.5		193.1
Prepaid expenses	12.3		13.7
Other current assets	40.8		37.3

Total current assets	348.0		364.8
Property, plant, and equipment, net	236.9		237.1
Goodwill	341.1		349.8
Intangible assets, net	340.1		347.9
Right-of-use lease assets	181.8		150.0
Other non-current assets	3.4		3.5
Total assets	$	1,451.3	$	1,453.1
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	14.5	$	14.6
Accounts payable	103.7		101.1
Current portion of lease liability	29.8		27.2


Other current liabilities	128.0		113.5
Total current liabilities	276.0		256.4
Long-term debt, net	269.3		295.2
Deferred income taxes	96.0		93.9

Pension liability	15.2		24.2
Lease liability	173.1		141.2
Other non-current liabilities	18.3		29.3
Total liabilities	847.9		840.2
Commitments and contingent liabilities (Note 9)
Convertible preferred stock, $1.00 par value; authorized 10,000,000 shares; issued and outstanding 169,165 shares	166.9		165.1
Shareholders’ equity: (shares in thousands)
Common stock,$0.01 par value; 200,000 shares authorized; 67,918 and 67,458 shares issued, respectively, 50,813 and 50,645 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of non voting restricted shares	0.5		0.5
Additional paid-in capital	75.2		75.4
Retained earnings	410.9		417.7
Accumulated other comprehensive loss	(50.1)		(45.8)
Total shareholders’ equity	436.5		447.8
Total liabilities, convertible preferred stock and shareholders’ equity	$	1,451.3	$	1,453.1

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in millions, except per share data)


	Three Months Ended March 31,
		2021		2020
Sales		$	264.2	$	340.0
Cost of sales		168.5		217.7
Gross profit		95.7		122.3
Selling, general, and administrative expenses		89.8		103.3

Restructuring charges		3.6		7.6


Operating profit		2.3		11.4
Interest expense		3.0		4.9

Pension settlement charges		1.6		0.7
Other (income) expense, net		(0.6)		(1.2)
Income (loss) before income tax expense		(1.7)		7.0
Income tax expense (benefit)		0.2		(3.9)
Net earnings (loss)		(1.9)		10.9
Less: Net earnings attributable to Preferred stockholders		(1.9)		—
Net earnings (loss) attributable to common stockholders		$	(3.8)	$	10.9

Net earnings (loss) per share:
Basic		$	(0.08)	$	0.22
Diluted		$	(0.08)	$	0.22

Weighted-average common shares outstanding: (in thousands)
Basic		49,264		48,973
Diluted		49,264		49,708

Net earnings (loss)		$	(1.9)	$	10.9
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on cash flow hedge, net of amounts reclassified into earnings		1.1		(4.6)
Pension and other post-employment liability adjustments		7.2		(8.4)
Foreign currency translation adjustments		(3.8)		(9.3)
Foreign currency translation adjustments on long-term intercompany notes		(8.8)		(1.6)
Total other comprehensive income (loss), net		(4.3)		(23.9)
Total comprehensive income (loss)		$	(6.2)	$	(13.0)

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in millions)


	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)	$	(1.9)	$	10.9
Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	10.7		11.1

Stock-based compensation	4.2		1.6
Deferred income tax expense (benefit)	0.6		(6.3)
Amortization of debt issuance costs	0.2		0.2
Non-cash restructuring charges	0.9		0.3
Pension settlement charges	1.6		0.7






Other non-cash items	0.3		1.1
Changes in operating assets and liabilities:
Customer receivables	5.4		(9.4)
Inventories	(15.1)		(10.2)
Prepaid expenses and other assets	(3.2)		(0.8)
Accounts payable	3.8		(6.8)



Other liabilities	7.1		(8.8)
Cash provided by (used in) operating activities	14.6		(16.4)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(8.9)		(10.7)


Other, net	(0.2)		0.4
Cash used in investing activities	(9.1)		(10.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility	92.0		219.5
Repayment of revolving credit facility	(112.0)		(53.5)

Repayment of term loans	(3.6)		(4.2)



Payment of dividends	(3.6)		(8.9)

Payments of withholding taxes related to net share settlements of equity awards	(4.3)		(3.8)

Other	(0.1)		—
Cash provided by (used in) financing activities	(31.6)		149.1
Effect of exchange rate changes on cash and cash equivalents	(0.4)		(0.3)
Net increase (decrease) in cash and cash equivalents	(26.5)		122.1
Cash and cash equivalents at beginning of period	37.3		8.5
Cash and cash equivalents at end of period	$	10.8	$	130.6

See accompanying notes to the condensed consolidated financial statements.

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and any partially-owned subsidiaries that the Company has the ability to control. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ended December 31, 2021.

Certain reclassifications have been made to prior year balances to conform to current year presentation in the condensed consolidated statement of cash flows.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Segment Reorganization

Effective as of the beginning of the first quarter of 2021, the Company implemented a segment reorganization in order to more closely align its segment reporting with its current operating structure (the “Segment Reorganization”). The Company’s new reportable segments are: Workplace and Lifestyle.

The Workplace reportable segment is comprised of the operations of the Workplace operating segment, which, following the Segment Reorganization, reflects the reassignment of the Spinneybeck and KnollTextiles businesses from the Lifestyle segment, as well as the reassignment of the Europe Office business from the legacy Office segment to the Lifestyle segment. The Lifestyle reportable segment is an aggregation of the Holly Hunt, Muuto, KnollStudio North America and Europe operating segments. All prior comparative periods presented have been recast to conform to these changes. See Note 16 for additional information about the Company’s segments.

Use of Estimates

U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.

Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations.

NOTE 2. REVENUE

Disaggregation of Revenue

The Company’s revenue presented as “Sales” in the Condensed Consolidated Statements of Operations and Comprehensive Income is derived from contracts with customers for the sale of the Company’s products.

The Company’s sales by commercial and residential customers were as follows (in millions):


	Three Months Ended March 31,
		2021		2020
Workplace Segment
Commercial		$	123.1	$	211.4
Residential		27.3		16.1
Total Workplace Segment		150.4		227.5
Lifestyle Segment
Commercial		38.0		58.2
Residential		75.8		54.3
Total Lifestyle Segment		113.8		112.5
Total Sales		$	264.2	$	340.0

Contract Balances

The Company’s contract assets consist of trade receivables, the balances of which are included in Customer receivables, net in the Condensed Consolidated Balance Sheets. These amounts represent the amount of consideration the Company expects to be entitled to in exchange for the goods delivered to its customers.

When the Company receives deposits, the recognition of revenue is generally deferred and results in the recognition of a contract liability (Customer deposits), which is included in Other current liabilities in the Condensed Consolidated Balance Sheets. Subsequent recognition of revenue and discharge of the contract liability typically occurs within a year of a deposit receipt, as the Company’s standard contract is less than one year. As of March 31, 2021 and December 31, 2020, the contract liability related to customer deposits was $44.1 million and $33.8 million, respectively. During the three months ended March 31, 2021 and 2020, the Company recognized revenues that were included in the contract liability at the beginning of the respective year of $19.8 million and $19.0 million, respectively.

Allowance for Doubtful Accounts

The following table sets forth the changes in the Company’s allowance for doubtful accounts for the three months ended March 31, 2021 (in millions):


Balance at December 31, 2020	$	4.9
Provision for doubtful accounts	—
Write-offs, net of recoveries and other	(0.1)
Balance at March 31, 2021	$	4.8

NOTE 3. INVENTORIES

Inventories consisted of the following as of the dates presented (in millions):


	March 31, 2021		December 31, 2020
Raw materials	$	52.8	$	49.3
Work-in-process	7.6		6.7
Finished goods	146.1		137.1
	$	206.5	$	193.1

NOTE 4. PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The following tables set forth the components of the net periodic benefit cost (credit) for the Company’s pension and other post-employment benefit plans (in millions):


	Pension Benefits				Other Benefits
	Three Months Ended March 31,				Three Months Ended March 31,
	2021		2020		2021		2020

Interest cost	$	1.1	$	1.5	$	0.1	$	—
Expected return on plan assets	(2.3)		(2.7)		—		—
Amortization of prior service credit	—		—		(0.1)		—
Recognized actuarial loss	0.4		0.3		—		—
Pension settlement charge (1)	1.6		0.7		—		—
Net periodic benefit cost (credit)	$	0.8	$	(0.2)	$	—	$	—

SEC Form 10-Q filed by Knoll, Inc.