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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒	~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
		For the fiscal year ended December 31, 2020
December 31, 2019
OR
OR
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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 Number)

1235 Water Street

East Greenville, PA 18041

(215) 679-7991

(Address, including zip code, and telephone number including area code of principal executive offices)

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

Title of each class		~~Name of exchange on which registered~~	~~Trading Symbol~~			Trading Symbol			Name of exchange on which registered
Common Stock, par value $0.01 per share		~~New York Stock Exchange~~	~~KNL~~			KNL			New York Stock Exchange

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

Indicate by check mark if the issuer is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act.) Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

AsIndicate ofby ~~June 30,~~check ~~2019,~~mark whether the ~~aggregate~~registrant ~~market~~has ~~value~~filed ofa ~~the~~report ~~registrant~~on and attestation to its management's ~~common~~assessment ~~stock~~of ~~held~~the byeffectiveness ~~non-affiliates~~of its internal control over financial reporting under Section 404(b) of the ~~registrant~~Sarbanes-Oxley ~~was~~Act ~~approximately~~(15 ~~$1,128,501,610~~U.S.C ~~based~~7262(b)) onby the ~~closing~~registered ~~sale~~public ~~price~~accounting asfirm ~~reported~~that onprepared ~~the~~or ~~New~~issued ~~York~~its ~~Stock~~audit ~~Exchange~~report. ☒

As of ~~February~~June 1930, 2020, ~~there~~the ~~were~~aggregate ~~49,804,496~~market ~~shares~~value ~~(including~~of ~~742,559~~the ~~shares~~registrant's ofcommon ~~non-voting~~stock ~~restricted~~held ~~shares)~~by non-affiliates of the ~~Registrant's~~registrant ~~common~~was ~~stock~~approximately $610,708,407 ~~par~~based ~~value~~on ~~$0.01~~the ~~per~~closing ~~share,~~sale ~~outstanding~~price as reported on the New York Stock Exchange.

As of February 26, 2021, there were 50,806,377 shares (including 1,427,239 shares of non-voting restricted shares) of the Registrant's common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its ~~2020~~2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this report on Form 10-K to the extent stated therein.

TABLE OF CONTENTS

Item		~~Page~~	Page
PART I
1.	~~Business~~	3Business	3
1A.	~~Risk Factors~~	12Risk Factors	16
1B.	~~Unresolved Staff Comments~~	20Unresolved Staff Comments	24
2.	~~Properties~~	21Properties	25
3.	~~Legal Proceedings~~	21Legal Proceedings	25
4.	~~Mine Safety Disclosures~~	21Mine Safety Disclosures	25
PART II
5.	~~Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~	22Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
6.	Selected Financial Data	24
7.		Management's Discussion and Analysis of Financial Condition and Results of Operations	28
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
7A.		Quantitative and Qualitative Disclosures about Market Risk	40
7A.	Quantitative and Qualitative Disclosures about Market Risk	35
8.		Financial Statements	41
8.	Financial Statements	36
9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	84
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	77
9A.		Controls and Procedures	84
9A.	Controls and Procedures	77
9B.		Other Information	86
9B.	Other Information	79
PART III
PART III
10.		Directors, Executive Officers and Corporate Governance	86
10.	Directors, Executive Officers and Corporate Governance	79
11.		Executive Compensation	86
11.	Executive Compensation	79
12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
13.		Certain Relationships and Related Transactions, and Director Independence	86
13.	Certain Relationships and Related Transactions, and Director Independence	79
14.		Principal Accounting Fees and Services	86
14.	Principal Accounting Fees and Services	79
PART IV
PART IV
15.		Exhibits and Financial Statement Schedules	87
15.	Exhibits and Financial Statement Schedules	80
16.		Form 10-K Summary	90
16.	Form 10-K Summary	83
Signatures			91
Signatures		84

PART I

ITEM 1. BUSINESS

General

Knoll, Inc. (“Knoll,” the “Company,” “we,” “us,” “our”) is a leading global manufacturer of commercial and residential furniture, accessories, lighting and coverings, including textiles, felt and leather. Our constellation of design-driven brands coupled with our perspectives on space planning allow our clients to create inspired modern interiors. Simply stated, we provide the furnishings to bring the beauty and benefits of modern design to the way wepeople live and work. Our businesses represent a diversified portfolio that responds to evolving trends and performs throughout business cycles, sharing reputations for high-quality and sophistication. To the architects and designers we work with, to our clients in the commercial, education, healthcare, hospitality and government sectors, and to the many consumers we reach, Knoll represents a commitment to innovative solutions and an unmatched heritage of modern design.

How people live and work is constantly being reshaped by changing technology and lifestyle trends. Our founders, Hans and Florence Knoll, believed in the power of design to enhance people’s lives. Since our founding over 80 years ago, Knoll has been featured in creative, inspiring workplace and residential settings, won a place in iconic settings and in museums worldwide, ~~earning~~and earned numerous design honors and awards. Today, we have an unsurpassed collection of classic products to introduce, and reintroduce, as well as groundbreaking new designs. We leverage strong relationships with contemporary furniture and industrial designers, and a reputation that attracts talented new designers.

We focus on two distinct ~~“to-the-trade” specifier~~ markets, ~~workplace~~commercial and residential. ~~Workplace,~~We ~~the~~target ~~largest~~commercial ~~portion~~workplace ofclients through our ~~business,~~direct sales force that is ~~where~~focused weon ~~see~~furnishing ~~strategic~~offices ~~opportunities~~by ~~through~~working ~~the~~with ~~expansion~~independent ofdealers, ~~underpenetrated~~designers, ~~categories~~architects, and ~~ancillary markets~~decorators. AtWe serve residential consumers directly and through “to the ~~same~~trade” ~~time~~specifiers including designers and architects, inthrough our online marketspace, retail shops and showrooms. In the residential market, the fastest growing area of our business, we are expanding further into the digital space through our brand websites, and into consumer and decorator channels worldwide, leveraging our experience with products that cross-over between the office and the home. WeIn ~~reach~~commercial ~~customers~~workplace, ~~primarily~~the ~~through~~largest aportion ~~broad network~~ of ~~independent~~our ~~dealers and distribution partners~~business, ~~our~~we ~~direct~~see ~~sales~~strategic ~~force,~~opportunities ~~our~~through ~~showrooms,~~the ~~home~~expansion ~~design~~of ~~shops~~under-penetrated categories and ~~our~~ancillary ~~online presence~~markets.

We manage our business through our reportable segments: Office and Lifestyle. All unallocated costs are included within Corporate.

The Office segment addresses diverse workplace planning paradigms in domestic and international markets, creating high-quality performing spaces with open plan and private furniture, architectural elements, collaborative and ergonomic seating and modular storage. Product categories include: office systems furniture, seating, storage, tables, desks and KnollExtra® accessories. The Office segment includes DatesWeiser®, known for signature spaces with refined and flexible conference furniture platforms that set a standard of design, quality and technology integration, as well as Fully®, which offers standing desks, high-performance adjustable height desks, ergonomic chairs and accessories principally for individual home offices and small businesses.

The Lifestyle segment includes KnollStudio®, HOLLY HUNT®, KnollTextiles®, Spinneybeck® | Filzfelt®, Edelman® Leather and Muuto®. KnollStudio products, which are distributed primarily in North America, Europe, the Middle East and Asia, include iconic seating, lounge furniture, side, café and dining chairs as well as conference, training, dining and occasional tables, lighting, rugs, textiles, high-quality fabrics, felt, leather and related architectural products. ~~The~~Many ~~Lifestyle~~of ~~segment~~these products ~~represent~~cross-over anbetween ~~important~~residential ~~part~~settings ofand ~~our~~the workplace ~~business~~.

The Corporate function represents ~~the accumulation of~~ unallocated costs ~~relating~~related to shared services and general corporate activities including, but not limited to, legal expenses, acquisition expenses, certain finance, human resources, administrative and executive expenses and other expenses that are not directly attributable to an operating segment. Dedicated, direct selling, general and administrative expenses of the segments are included within segment operating profit. As we continue to grow both organically and through acquisitions, the central support of the Corporate function will evolve and grow as well.

For further information regarding our segments see the section below and Note 2122 in the accompanying financial statements.

Strategy

We draw on our constellation of businesses and brands to provide products and designs that meet the needs of our customers. Our offerings range from our classic signature pieces to our ancillary products which include the Rockwell Unscripted® collection by The Rockwell Group, the vast product portfolio of Muuto and the products of our most recent acquisition of Fully; from dramatic textiles, to Filzfelt architectural products for acoustical control. We solve a variety of needs for each customer, and our goal for each engagement is to maximize the opportunity from the start. To that end, we deploy strategic programs to better synchronize our office and lifestyle teams and resources to deliver a single compelling customer experience. We also continue to invest in technology for our dealer partners to make it easier to do business with Knoll.

The global outbreak of the coronavirus disease 2019 (“COVID-19”) has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. During 2020, we experienced a significant decline in our commercial sales volume as a result of a large portion of the North American and European workforce shifting from working in offices to remote working environments. Our commercial clients have delayed or postponed orders, and new order generation during 2020 was significantly lower than pre-pandemic levels. In addition, we have experienced temporary closures of certain facilities. At many of our facilities, we have been experiencing reduced productivity and increased employee absences. As a result of the COVID-19 pandemic and the measures taken to prevent the spread of the disease or to address its effect, a significant number of our employees are working from home, and we have altered our manufacturing operations to allow for appropriate social distancing, hygiene, cleaning, and disinfecting. In our supply chain, we have experienced isolated instances of suppliers temporarily closing their operations, delaying order fulfillment or limiting their production, and we are utilizing alternative supply arrangements as needed.

Like us, many of our clients have been significantly impacted by the COVID-19 pandemic. A significant portion of the overall global workforce is, and has been for the majority of 2020, working remotely. COVID-19 continues to cause delays in the ability for companies to bring people back to the office and, when people are able to return, the workplace will likely be different from the workplaces that existed prior to the pandemic. This massive and sudden shift to remote work has had a significant impact on our commercial business and the commercial furniture industry as a whole. The duration, permanency and overall magnitude of these impacts on the workplace are still unknown.

Further, the shifts in “where” and “how” people work have also created opportunities for other parts of our business. Our “work-from-home” and residential businesses have experienced some positive opportunities in 2020. As people spent more time in their homes, and have been limited in travel and other recreational options, we have seen increases in the residential and direct-to-consumer parts of our business. Our previous diversification strategies away from office and into the lifestyle side of our business enabled us to better take advantage of these opportunities.

Strategy

Whether a commercial or residential end user, we solve a variety of needs for each customer. We draw on our constellation of businesses and brands to provide products and designs that meet the needs of our customers. Our offerings range from classic signature pieces to ancillary products like the Rockwell Unscripted® collection by The Rockwell Group, the vast product portfolio of Muuto and the products offered through the digital space of Fully; to dramatic textiles, and Filzfelt architectural products for acoustical control. Our goal for each engagement is to maximize the opportunity from the start. To that end, we deploy strategic programs to better synchronize our office and lifestyle teams and resources to deliver a single compelling customer experience. We continue to invest in technology, from enhancing our e-commerce platforms to technology for our dealer partners to make it easier to do business with Knoll.

Our residential and e-commerce businesses experienced significant growth during 2020, most notably through our e-commerce channels and work-from-home product offerings. As the pandemic caused much of the world economy to adapt to working in remote environments, we believe there has been a paradigm shift in how people will work going forward. Rather than being in an office setting five days a week, there is ample evidence to suggest a more hybrid approach to working, where employees will work both remotely and from an office during the work week. We believe the work-from-home market will continue to grow and be a permanent component of the total market going forward. For this reason, we continue to invest in technology and infrastructure to support our digital and residential businesses.

Our commercially oriented businesses experienced significant decline during 2020 due to the economic environment caused by the pandemic. As a response, we initiated cost reduction initiatives that involved temporary and permanent reductions in our workforce, discretionary spending reductions and other measures. We will continue to exercise discipline in our spending habits, especially in our workplace businesses.

Our growth strategy also focuses on specific international markets where we can significantly build our share, such as Canada, Mexico, Europe, Asia, the Middle East, and selected under-penetrated areas across the globe where there is a concentration of discerning clients.

Office Segment

Maximizing the sales growth and profitability of Office, our largest segment, has been a continuing priority. With respect to growth in our Office segment, a variety of initiatives will contribute to making this growth possible: broadening our Workplace products portfolio; enhancing sales coverage strategically, including a focus on global accounts; and capturing a greater share of our ~~dealer~~dealers's ancillary sales. At the same time, we aim to increase profitability through operational improvements and investments in our infrastructure. The acquisition of Fully in August 2019 provides the Office segment with a high-quality, cost-effective complement to our portfolio of office solutions, while also broadening our consumer work from home market through an e-commerce platform. Our lean manufacturing initiative, combined with continued modernization of our facilities, is allowing us to progressively deliver on this goal.

The commercial market has shifted dramatically in the last decade and we believe that shift will accelerate as a result of the COVID-19 pandemic. AsClients are looking at an entire ecosystem of workplace locations, from office to home, to address hybrid workstyles, and Knoll has the portfolio to support any mode or place of work. Within the office, clients ~~are~~continue ~~readdressing~~to flex the relationship between individual and collaborative, shared spaces,. ~~they~~The ~~are~~office ~~reducing~~itself ~~the~~is ~~footprint~~continuing ofto ~~individual~~migrate ~~workstations~~toward ~~and~~becoming ~~investing~~a more "we" space than a "me" space, dedicated to collaboration, both in ~~more~~person ~~ancillary~~and ~~furniture.~~with ~~Knoll~~colleagues isworking ~~committed~~remotely. The imperative to ~~maintaining~~create ~~our~~offices ~~leadership~~that draw workers in ~~open~~will ~~floor-plan~~only ~~workspaces~~increase ~~and~~as ~~private~~the ~~offices,~~flexibility ~~while~~as ~~inventing~~to where and ~~innovating~~when ~~new~~one ~~ways~~works evolves. This bodes well long-term for ~~people~~a todesign-driven ~~work~~brand like Knoll with a robust collaborative and ancillary product breadth. Our constellation of businesses positions us well to deliver in the evolving work environment, where people choose how and where they work throughout the day, as the traditional boundaries between residential and workplace products blur, and the importance of a total environment outshines any one particular element.

We are looking beyond traditional office product categories - systems, task seating and storage - to furniture for shared spaces and the in-between spaces where people meet. We believe that our success in our traditional office products gives us an advantage throughout the workplace ecosystem. As we design new products suited to these more flexible or hybrid spaces, we are also responding to demands at different price points with different materials and finishes. Our Rockwell Unscripted™ collection, including architecturally inspired Creative Wall®, ~~continued to receive enthusiastic recognition at the 2019 Knoll Design Days trade show for addressing the idea of a hospitality work experience. Rockwell Unscripted~~ brings a sense of theater and play to the workplace, putting people at the center of the work life experience and creating a warm and welcoming place where people want to be. Rockwell Unscripted Creative Wall has been successful in allowing clients to delineate space in the open environment, creating spaces for teams or individuals to focus and work. In 2020, we also introduced an innovative line of meeting tables, Islands Collection by Knoll, that supports the ever-increasing demand for hybrid meeting spaces. Our ~~breath~~breadth of height-adjustable tables, including k.TM Stand, k.TM bench, Tone® and Antenna® Telescope® continue to receive national industry recognition for its straightforward and adaptable concept that delivers a clean, compact workstation solution with intuitive adjustments and people centered design.

With the evolution from individual workstations to collaborative spaces and ancillary products, Knoll is not only expanding the breadth of our offerings through our constellation of brands but also strengthening our presence in the marketplace. We are continuing to partner with our dealers to ensure our customers understand that Knoll provides not just systems or workstations and work chairs but rather a complete family of complementary ancillary products. Together, we are meeting the demands of our customers while ~~capturing~~attempting to capture more of their total spend and elevating the profitability of our engagements.

This approach has served as a catalyst for dealers to invest in their spaces. Their showrooms are becoming extensions of our own, offering not just product showcases but places to find new integrated workplace solutions from all of Knoll. Dealers help people to understand workplace needs and planning capabilities, and Knoll is providing more of the training and education that helps them add value and increase their profits when they sell Knoll.

~~Our~~In ~~principal~~January ~~Knoll~~2020, ~~Office~~the ~~product~~Company ~~lines,~~announced ~~described~~its ~~below,~~plan ~~include~~to ~~systems~~consolidate ~~furniture,~~its ~~seating,~~manufacturing ~~storage,~~footprint ~~tables~~in North America, ~~desks~~resulting ~~and~~in ~~KnollExtra~~the ~~ergonomic~~closure ~~accessories.~~of ~~The~~the ~~Office~~Grand ~~segment~~Rapids, ~~comprised~~Michigan ~~approximately~~manufacturing 61facility.2% The closure was part of ~~our~~an ~~sales~~initiative into ~~2019,~~better ~~60.1%~~optimize ofthe ~~our~~Company’s ~~sales~~North inAmerican ~~2018~~manufacturing operations. In June 2020, ~~and~~the ~~63.8%~~Company ofcompleted ~~our~~the ~~sales~~sale inof ~~2017~~that facility.

Our principal Knoll Office product lines, described below, include systems furniture, seating, storage, tables, desks and KnollExtra ergonomic accessories. The Office segment comprised approximately 62.7% of our sales in 2020, 61.2% of our sales in 2019, and 60.1% of our sales in 2018.

Systems Furniture

Our office systems furniture encompasses a range of architect and designer-oriented products at different price levels, with a variety of planning models and product features. Systems furniture comprises integrated panels or table desks, work surfaces and storage units, power and data systems, and lighting. Many of these components can be moved, re-configured and re-used to create flexible, space-efficient work environments, tailored to each organization's business objectives with wide range of laminates, paints, veneers and textiles. Knoll systems can adapt to virtually any office environment, from team spaces to private executive offices. Through product line enhancements for clients to add to their installations, and through integration with other Knoll lines, we maximize the long-term value of their investment in Knoll.

Knoll systems furniture product lines include these panel, spine, technology wall and desk-based planning models:

•Rockwell Unscripted ®

•Antenna® Workspaces, including the new Antenna Power Beam

•AutoStrada®

•Currents®

•Dividends Horizon®

•Reff® Profiles

Seating

We constantly research and assess the general office seating market and offer a range of work chairs that are diverse in scale, aesthetic and performance, and enhances Knoll’s reputation for ergonomics and value. The result is an increasingly innovative, versatile seating collection consistent with the Knoll brand.

Clients evaluate work chairs based on ergonomics, aesthetics, comfort, quality and affordability ~~- all Knoll strengths~~. We offer market leading, high quality office chairs at a range of price points, performance levels and materials.

Our principal seating product lines include:

•LIFE®

•Generation by Knoll®

•MultiGeneration by Knoll®

•ReGeneration by Knoll®

•Remix™

•Ollo™

Files and Storage

Our files and storage products, featuring the ~~Template®~~Anchor©, Calibre®, Series 2™2TM and ~~Quion~~Quoin® product lines, are designed with unique features to maximize storage capabilities and personalization throughout the workplace. Our core files and storage products consist of lateral files, mobile pedestals and other storage units, bookcases and overhead cabinets.

The range of files and storage augments our product ~~offering~~offerings, allowing clients to address all of their office furniture needs with us, especially in competitive bid situations where Knoll systems, seating, tables and desks have been specified. The breadth of the product line also enables our dealers to offer stand-alone products to businesses that have smaller storage requirements. Files and storage are available in a wide range of sizes, configurations and colors, which can be integrated with other manufacturers' stand-alone furniture. In addition, some elements of the product line can be configured as freestanding furniture in private offices or open-plan environments.

Our principal storage product lines include:

•Anchor™

•Calibre®

•Series 2™

•Template®

•Rockwell Unscripted®

•~~Quion~~Quoin®

Desks and Tables

We offer collections of adjustable tables as well as meeting, conference, training, dining, stand-alone and table desks.

Our Tone™, Upstart® and Antenna® Simple Tables and Rockwell Unscripted® product lines include adjustable, work, meeting, conference and training tables. Tone, a comprehensive collection of height-adjustable tables compatible with the Dividends Horizon, Antenna Workspaces, and Reff Profiles systems. Tone features a wide range of support and adjustment options that integrate seamlessly with Knoll open plan, private office and activity spaces furniture, or are used independently to create flexible work areas. We also introduced Hipso, a height-adjustable desk targeted to the work-from-home consumer. In addition, we expanded the Reff Profiles product line with a series of meeting tables, and introduced the Islands Collection by Knoll. Our k. bench and k. stand products offer height-adjustable tables, which are easy to specify, assemble and use, offer an expanded price point option for today's office needs.

DatesWeiser

Our Office segment includes DatesWeiser which produces refined and flexible high-end contemporary conference furniture product platforms, including HiGHLiNE®, that feature a broad range of finishes across wood, metal, glass and stone. DatesWeiser's customers tend to be within the elite professional services markets. DatesWeiser's product offerings specialize in solutions to meet the needs of business interiors.

Fully

Our Office segment includes Fully which focuses on a human-centered approach to ~~the~~work ~~workplace~~ with ~~adjustable~~products ~~height tables, seating and accessories~~ designed to create a healthy, and supportive ~~workplace~~work environment. Fully, a certified B Corp, offers ~~standing desks,~~ high-performance adjustable height desks, tables, ergonomic ~~chairs~~seating and accessories principally for individual home offices and small businesses. Fully is a direct-to-consumer, ~~office~~ furniture and lifestyle brand that addresses the small business and consumer markets through anits e-commerce platform.

KnollExtra®

KnollExtra offers accessories that complement Knoll office furniture products, including technology support accessories, desktop organizational tools, lighting and storage. KnollExtra integrates technology comfortably into the workplace, with flat panel monitor supports and central processing unit holders that deliver adjustability and save space. The Sapper Monitor Arm Collection, designed by renowned industrial designer Richard Sapper, offers a clean, modern solution to technology challenges in the modern workplace; the collection is now in the permanent collection of New York's Museum of Modern Art. KnollExtra also includes marker boards, free-standing and mounted LED lighting and other technology support for the changing workplace.

Lifestyle Segment

The Lifestyle segment includes KnollStudio, HOLLY HUNT, Muuto, KnollTextiles, Spinneybeck | Filzfelt, and Edelman Leather. KnollStudio® products, which are distributed primarily in North America and Europe, include iconic seating, lounge furniture, side, café and dining chairs as well as conference, training, dining and occasional tables. HOLLY HUNT is known for high quality residential furniture, lighting, rugs, textiles and leathers. In addition, HOLLY HUNT also includes Vladimir Kagan Design Group, a renowned collection of modern luxury furnishings. The KnollTextiles, Spinneybeck | FilzFelt, and Edelman Leather businesses provide a wide range of customers with high-quality fabrics, felt, leather and related architectural products. Muuto ~~rounds~~offers ~~out the Lifestyle segment with its~~ ancillary products and affordable luxury residential furnishings, which includes seating, lounge furniture, dining and occasional tables, lighting and accessories. These ~~various~~ offerings allow the Lifestyle segment to provide products for an all-encompassing “resimercial”, high performance workplaces, as well as furnish a range of living spaces from uber to affordable-luxury living spaces.

KnollStudio

Drawing upon Knoll's iconic heritage, KnollStudio elevates residential and commercial environments with inspiring classic and ~~iconic~~contemporary designs that embody quality and craftsmanship.

For over eighty years, Knoll has worked with celebrated architects and designers from around the world, including Ludwig Mies van der Rohe, Marcel Breuer, Harry Bertoia, Eero Saarinen, Isamu Noguchi, Warren Platner, Frank Gehry, Maya Lin and Richard Schultz, among others. Many of their designs have remained in production since their initial launch, while others have been mined from the archives and re-imagined in recent years for a contemporary audience.

Today, KnollStudio works with today's most innovative thinkers worldwide to bring exceptional modern design to the home and office, collaborating with groundbreaking contemporary designers and architects including David Adjaye, Edward Barber, Mark Krusin, Piero Lissoni, Marc Newson and Jay Osgerby, to create future classics for residential and commercial markets. Signature KnollStudio designs display elevated detailing, artistry and comfort, across price points, and often draw designers and customers into the larger Knoll constellation of brands. Moving forward, KnollStudio has a multi-year strategy to build its classics portfolio by mining its archive and adding new finishes, as well as to grow its contemporary collections for both home and office with innovative designs by the new voices of today.

Our principal KnollStudio product lines include seating, storage, lounge furniture, side, café and dining chairs as well as conference, dining, training and occasional tables. While KnollStudio designs represent different viewpoints and eras, they all embrace a Modernist aesthetic. As a result, designers can integrate our ensemble of products into harmonious and inspiring settings furnished entirely with Knoll products.

6With the trend towards residentially-inspired workplaces, KnollStudio products have gained cross-over appeal between residential and workplace. In North America, the workplace ancillary sales team continues to expand its reach, with a focus on corporate projects, hotels and restaurants, as well as government and educational institutions. To grow its residential channel, KnollStudio has expanded its audience in recent years through a to-the-trade showroom in New York City's Decoration & Design building, branded flagship Knoll Home Design Shops in New York City and Los Angeles, as well as the knoll.com website, which reach retail consumers and designers alike. Additionally, the company continues to invest in the Knoll Space retail sales program, which brings consumers the best of Knoll furnishings for their home and home office, through approximately 50 specialty retailers and e-tailers throughout the United States and Canada.

With the trend towards residentially-inspired workplaces, KnollStudio products have gained cross-over appeal between residential and workplace. In North America, the workplace ancillary sales team continues to expand in size and reach, with a focus on corporate projects, hotels and restaurants, as well as government and educational institutions. To grow its residential channel, KnollStudio has expanded its audience in recent years through a to-the-trade showroom in New York City's Decoration & Design building, branded flagship Knoll Home Design Shops in New York City and Los Angeles, as well as the knoll.com website, which reach retail consumers and designers alike. Additionally, the company continues to invest in the Knoll Space retail sales program, which brings consumers the best of Knoll furnishings for their home and home office, through approximately 50 specialty retailers and e-tailers throughout the United States and Canada.

In addition to our presence in North America, KnollStudio is represented by showrooms in Paris, London and Milan and through our exclusive network of retailers throughout Europe and Asia. Our presence in the European market pursues the Company’s objective of offering design, innovation, functional excellence and quality, and extending our reach into all markets through an intensive network of selected dealers.

HOLLY HUNT

~~Known~~For ~~for~~almost a40 ~~look~~years, ~~that~~HOLLY isHUNT ~~consistently~~has atbeen the ~~forefront~~preeminent ofleader ~~style~~in ~~and~~the ~~quality~~to-the-trade, ~~our~~high-end, ~~HOLLY~~luxury ~~HUNT~~home ~~showrooms~~furnishings ~~and~~sector. ~~collections~~At ~~lead~~HOLLY ~~the~~HUNT ~~industry~~we indesign, ~~luxury~~produce, ~~home~~represent ~~furnishings. The~~and ~~company~~showcase ~~designs,~~the ~~produces~~highest ~~and~~caliber ~~showcases high-quality,~~ custom design pieces for the most exquisite interior ~~spaces and~~ properties around the ~~globe~~world, including indoor and outdoor furniture, lighting, rugs, wall covering, textiles, leathers, art and accessories. As ~~both~~the aforemost ~~premier~~to-the-trade provider and distributor of home luxury furnishings, HOLLY HUNT ’s strategy continues to ~~expand~~ optimize the seamless integration of our ~~reach~~digital ~~into~~capabilities ~~the~~with ~~high-end,~~our "network of brick and mortar showrooms to offer a state-of-the-~~trade"~~art, ~~residential~~omnichannel ~~marketplace.~~specifying ~~Our~~and ~~strategy~~purchasing ~~continues~~experience toso ~~focus~~designers onand ~~premium~~architects ~~product~~can ~~category~~engage ~~expansion~~with the brand whenever and ~~optimizing~~however they choose. We continue to evolve our leading product categories and best-in-class client and operational service levels across domestic, international and digital trade channels through the highest quality designs, service and showroom settings. There are currently fourteen HOLLY HUNT-owned showrooms in the USUnited States and London, along with partner showrooms in major markets, and an expanding international presence.

KnollTextiles

~~Our Lifestyle segment includes~~ KnollTextiles, is renowned for enriching spaces with color, pattern and textures. In addition to a direct sales force, KnollTextiles distributes its products through a showroom in New York City's Decoration & Design building, Knoll consumer retail spaces in New York City and Los Angeles and through the knolltextiles.com website. KnollTextiles products appeal to contract, hospitality, education and residential clients and we offer a full range of products in the Modernist tradition from upholstery and drapery to wall coverings and healthcare curtains including some of the industry's most technically advanced materials. Our KT Collection of upholstery marries classic modern design for everyday use, in a range of high-performance patterns and textures. Against the backdrop of the rich and storied work of Florence Knoll, KnollTextiles combines beauty and function, producing fresh perspectives for contemporary interiors.

Spinneybeck | FilzFelt

~~Our Lifestyle segment includes~~ Spinneybeck | FilzFelt ~~which~~ has expanded from being exclusively a supplier of raw material to a provider of leather, felt, plaster, cork and wood finished products that enhance the architectural and acoustic experience of commercial, education and hospitality settings. The same trends that have been transforming Knoll Office workspaces have created new opportunities for architectural and acoustic products that offer flexible space division and sound control. Spinneybeck and FilzFelt have evolved, respectively, from an upholstery leather company and 100% wool felt provider ~~that meets the demand for new and renewable materials~~ to a comprehensive natural materials resource. This approach provides specifiers and clients with architectural and acoustic solutions that leverage the opportunity for more large-scale orders. Our full Spinneybeck | Filzfelt assortment includes upholstery and wall coverings, modular acoustic wall tiles and panels, ceiling baffles and screens.

acoustic solutions that leverage the opportunity for more large-scale orders. Our full Spinneybeck | Filzfelt assortment includes upholstery and wall coverings, modular acoustic wall tiles and panels, ceiling baffles and screens.

Edelman Leather

Our Lifestyle segment includes Edelman Leather which offers beautiful, natural leathers for the global design community. Edelman is a "to-the-trade" supplier and goes to market by leveraging ~~eight~~seven branded showrooms and sales representation around the world. Edelman successfully expanded beyond leather coverings, byand ~~offering~~now ~~rug~~offers ~~furnishings~~architectural ~~through~~products ~~its~~for ~~distribution~~floor ~~partner~~and ~~Ruckstuhl.~~wall ~~Edelman~~application, isas ~~also~~well ~~developing~~as ~~new~~a ~~leather~~collection ~~coverings~~of ~~for~~accent ~~the~~pieces ~~hospitality~~including ~~business~~area rugs, ~~offering~~and ~~quality~~small ~~within~~furnishings ~~the~~(mirror, ~~financial~~ottomans, ~~constraints~~and oftables). ~~today’s~~Edelman ~~hotels~~also has distribution reach into hospitality, contract furnishing, and ~~restaurants~~aviation market segments.

Muuto

The acquisition of Muuto in January 2018 added a resimercial, design-driven provider of affordable luxury furniture, lighting and accessories for the workplace and home to our Lifestyle segment. Muuto is rooted in Scandinavian design traditions characterized by enduring aesthetics, functionality, craftsmanship and an honest expression. Muuto products pair seamlessly with the range of modern Knoll designs, offering an expanded breadth and depth of affordable luxury products with forward-looking ideas to reflect today's work and lifestyles, and particular appeal to a younger generation of architects, designers and clients seeking a homier, more relaxed aesthetic.

Muuto's principal furniture product lines include:

•Outline Series

•Nerd Series

•The Dots Series

•Fiber Chairs

•Visu Chairs

The Lifestyle segment represented approximately 3837.83% of our sales in ~~2019~~2020, 3938.98% of our sales in ~~2018~~2019, and 3639.29% of our sales in ~~2017~~2018.

Product Design and Development

Our design philosophy and modern perspective reflects a historical commitment to partnering with preeminent industrial designers and architects to commercialize products that meet evolving workplace and residential needs. By combining designers' creative vision with our commitment to innovative materials and technologically advanced processes, we continue to cultivate brand loyalty among target clients. Our enviable history of nurturing the design process fosters strong, lasting relationships that attract the world's leading designers. In addition, these collaborations are consistent with our commitment to a lean organization and incentive-based compensation, by utilizing a variable royalty-based fee as opposed to the fixed costs typically associated with a larger in-house design staff.

Our broad range of workplace research, which explores the connection between workspace design and human behavior, health and performance, and the quality of the user experience, drives our workplace product development initiatives. Recent research initiatives include a study of ~~acoustics in the workplace as well as a~~ new ~~way~~ways to think about ~~space,~~the ~~referred~~post toCovid-19 aspandemic ~~Immersive Planning~~workplace, ~~and~~referred ~~contributed~~ to ~~the~~as ~~development~~"The ofThriving ~~Rockwell Unscripted~~Workplace".

In addition, our Office and Lifestyle segments product development relies upon a New Product Commercialization Process to ensure quality and consistency of our methodology, reducing product development cycle time without sacrificing quality objectives. We use Pro/ENGINEER® solids modeling tools and rapid prototyping technology to compress development cycles and to improve responsiveness to special requests for customized solutions. Working closely with the designers during the early phases of development provides critical focus to yield the most viable products, balancing innovative modern design with practical function. Cross-functional teams are employed for all major development efforts with dedicated leaders who facilitate a seamless flow into manufacturing while aggressively managing cost and schedule opportunities. Increasingly, total environmental impact is factored into product material and manufacturing process decisions.

Sales and Distribution

We generate workplace sales with our direct sales force and through a network of independent dealers, who jointly market and sell our products. We generally rely on these independent dealers to also provide a variety of important specification, installation and after-market services to our clients. Our dealers generally operate under short-term (one to three year), non-exclusive agreements. Our residential sales products are sold by our own internal sales force through a network of retail shops and showrooms, as well as through a network of independent retailers and e-commerce platforms.

Our workplace clients are typically Fortune 1000 companies, governmental agencies and other medium-to-large sized organizations in a variety of industries including financial, legal, technology, entertainment, accounting, education, government, healthcare and hospitality. Our direct sales force and independent dealers in North America work in close partnership with clients and design professionals to specify distinctive work environments. Our direct sales representatives, in conjunction with the independent dealers, sell to and call directly on key clients. Our independent dealers also call on many other medium and small sized clients to provide seamless sales support and client service.

8We have aligned our sales force to target strategic areas of opportunity to include global accounts, healthcare, higher education, government and others. We have also placed sales representatives and technical specialists into certain dealerships to support programs such as Knoll Essentials, which is described below. Additionally, we have provided specification tools to our dealers and sellers that enable them to share with our clients real time visual simulations and renderings from our complete product offerings.

WeIn ~~have~~addition ~~aligned~~to ~~our~~coordinating sales ~~force~~efforts towith ~~target~~the ~~strategic~~sales ~~areas~~representatives, ofour ~~opportunity~~dealers togenerally ~~include~~handle ~~global~~project ~~accounts~~management, ~~healthcare,~~installation ~~higher~~and ~~education~~maintenance ~~and~~for ~~others.~~client Weaccounts ~~have~~after ~~also~~the ~~placed~~initial ~~sales~~product ~~representatives~~selection and ~~technical~~sale. ~~specialists~~Although ~~into~~many ~~certain~~of these dealerships toalso ~~support~~carry ~~programs~~products ~~such~~of asother ~~Knoll Essentials~~manufacturers, ~~which~~they ishave ~~described~~agreed ~~below.~~not Weto ~~expanded~~act ~~our~~as ~~sales~~dealers ~~force~~for toour ~~cover~~principal adirect ~~more~~competitors. ~~dispersed~~We ~~market~~have ~~which~~not ~~has~~experienced ~~shifted~~significant todealer ~~include~~turnover. ~~increased~~Our ~~small~~dealers' substantial commitment to ~~mid-size~~understanding ~~projects~~our product lines, and ~~fewer~~their ~~large~~strong ~~projects.~~relationships ~~Additionally~~with us, weserve ~~have~~to ~~provided~~discourage ~~specification~~dealers ~~tools~~from tochanging ~~our~~vendor ~~dealers~~affiliations. ~~and~~We ~~sellers~~are ~~that~~not ~~enable~~significantly ~~them~~dependent toon ~~share~~any ~~with~~one ~~our~~dealer, ~~clients~~the ~~real~~largest ~~time~~of ~~visual~~which ~~simulations~~accounted for approximately 6.4%, 6.5%, and ~~renderings~~4.8%, ~~from~~of our ~~complete~~total ~~product~~North ~~offerings~~American sales in 2020, 2019, and 2018, respectively.

In addition to coordinating sales efforts with the sales representatives, our dealers generally handle project management, installation and maintenance for client accounts after the initial product selection and sale. Although many of these dealerships also carry products of other manufacturers, they have agreed not to act as dealers for our principal direct competitors. We have not experienced significant dealer turnover. Our dealers' substantial commitment to understanding our product lines, and their strong relationships with us, serve to discourage dealers from changing vendor affiliations. We are not significantly dependent on any one dealer, the largest of which accounted for approximately 6.5%, 4.8%, and 4.6%, of our North American sales in 2019, 2018, and 2017, respectively.

As part of our commitment to building relationships with our dealers, we offer the Knoll Essentials program. Knoll Essentials is a catalog program developed in response to dealer requests for a consolidated, user-friendly selling tool for day-to-day systems, seating, storage, and accessory products. The Knoll Essentials program includes dealer incentives to sell our products. We also employ a dedicated team of dealer sales representatives to work with our dealerships.

Sales to U.S. and state and local government agencies, respectively, aggregated approximately 45.5% and 76.14%, respectively, of our consolidated sales in ~~2019~~2020. The U.S. government typically can terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract.

Our residential sales are sold through a global network of showrooms, e-commerce websites, retail stores and independent dealers. Our clients range from “to the trade” professionals, such as interior designers, to individual consumers. With the acquisition of Fully in August 2019, we significantly expanded our e-commerce presence. Certain of our Knoll and Muuto seating and accessory products are sold through fully.com as a compliment to the height-adjustable desk, storage, seating and other work-from-home and small business offerings from Fully. During 2020, we launched our "ready-to-ship" Knoll + Muuto Work from Home e-commerce portfolio at knoll.com, including work from home, living and dining furniture as well as lighting and accessories, bringing the trademark design, comfort and performance of both brands to consumers. We intend to continue to invest in the development of our digital platforms.

Our products and knowledgeable sales force have generated strong brand recognition and loyalty among architects, designers and corporate facility managers, all of whom are key decision-makers in the furniture purchasing process. Our strong relationships with architects and design professionals help us stay abreast of key workplace and residential furniture trends and position us to better meet the changing needs of clients.

Manufacturing and Operations

Our global supply chain manufactures and assembles products to specific customer orders and operates all facilities under a philosophy of continuous improvement and lean manufacturing. Our Office ~~segment~~and isLifestyle segments are supported by operational and administrative facilities in Canada, ~~Italy,~~the ~~Michigan,~~United ~~Oregon~~States and ~~Pennsylvania~~Europe. ~~The~~Our ~~Lifestyle~~Office ~~Segment~~segment, iswith ~~supported~~the byexception ~~sites~~of Fully, produces the majority of its saleable products in ~~Connecticut,~~our ~~Illinois,~~manufacturing ~~Italy,~~facilities ~~New~~based ~~York~~in the United States, ~~Pennsylvania~~Canada and Europe, ~~Denmark~~with the remaining components and ~~Texas~~products being produced by third party contract manufacturers. InThe ~~addition,~~Lifestyle wesegment ~~utilize~~and ~~many~~Fully use various third parties to ~~produce~~manufacture a ~~variety~~large portion, or all, of ~~our~~its ~~Office~~saleable products and ~~Lifestyle designs~~components.

We continue to look for ways to ensure that our manufacturing capabilities match our supply chain strategy providing the most value for Knoll. The root of our continuous improvement efforts lies in the philosophy of lean manufacturing that drives operations. As part of this philosophy, we partner with suppliers who can facilitate efficient and often just-in-time deliveries, allowing us to manage our raw materials inventory. We also utilize “Kaizen” work groups in the plants to develop best practices to minimize scrap, time and material waste at all stages of the manufacturing process. The involvement of employees at all levels ensures an organizational commitment to lean and efficient manufacturing operations. These projects ~~improved~~improve customer responsiveness, quality and significantly improve productivity.

In January 2020, we announced that we ~~will~~would consolidate our manufacturing footprint in North America, resulting in the closure of our Grand Rapids, Michigan manufacturing facility. We ~~have~~ elected to undergo this restructuring in order to reduce our structural costs and better optimize our North American manufacturing footprint and supply chain. During 2020, substantially all manufacturing activities performed in our Grand Rapids, Michigan facility were migrated to our other North American facilities. See Note 2215, ~~Subsequent~~Restructuring ~~Events~~and Other Cost Reduction Initiatives, of Notes to the Consolidated Financial Statements for further information.

Raw Materials and Suppliers

In addition to the continued focus on enhancing the efficiency of the manufacturing operations, we also seek to reduce costs through our global sourcing effort. We have capitalized on raw material and component cost savings available through lower cost global suppliers. This broader view of potential sources of supply has enhanced our leverage with domestic supply sources, and we have been able to reduce cycle times by extracting improvements from all levels throughout the supply chain.

9The purchasing function in North America is centralized at the East Greenville, Pennsylvania facility for Office, KnollStudio North America, and Textiles. This centralization, and the close relationships with our primary suppliers, has enhanced our ability to realize purchasing economies of scale and implement “just-in-time” inventory practices. Steel, lumber, paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers, upholstery filling material, aluminum extrusions and castings are used in our manufacturing process. The purchasing function for Office and KnollStudio Europe is based in Italy; Muuto is based in Denmark; Holly Hunt is based in Illinois; Edelman is based in Connecticut; Fully is based in Oregon; Spinneybeck and DatesWeiser are based in New York.

The purchasing function in North America is centralized at the East Greenville facility for Office, KnollStudio North America, and Textiles. This centralization, and the close relationships with our primary suppliers, has enhanced our ability to realize purchasing economies of scale and implement “just-in-time” inventory practices. Steel, lumber, paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers, upholstery filling material, aluminum extrusions and castings are used in our manufacturing process. The purchasing function for KnollStudio Europe is based in Italy, Muuto is based in Denmark, Holly Hunt is based in Illinois, Edelman is based in Connecticut, Spinneybeck and DatesWeiser are based in New York. Both domestic and overseas suppliers of these materials are selected based upon a variety of factors, with the price and quality of the materials and the supplier's ability to meet delivery requirements being primary factors in such selection. We do not generally enter into long-term supply contracts and, as a result, we can be vulnerable to fluctuations in the prices for these materials. No supplier is the only available source for a particular component or raw material. However, because of the specialization involved with some of our components, it can take a significant amount of time, money and effort to move to an alternate source.

Backlog

As of December 31, ~~2019~~2020 and ~~2018~~2019, the company's backlog of unfilled orders was $~~249~~192.69 million and $249.76 million, respectively. We expect that substantially all the orders comprising the backlog at December 31, ~~2019~~2020, will be filled during the next fiscal year. Many orders received by the Company are reflected in the backlog for only a short period while other orders specify delayed shipments and are carried in our backlog for up to one year. Accordingly, the amount of the backlog at any particular time does not necessarily indicate the level of net sales for a particular succeeding period.

Competition

The markets in which we compete are highly competitive. WeIn the commercial sector we compete on the basis of (i) product design, including performance, ergonomic and aesthetic features; (ii) product quality and durability; (iii) relationships with clients, architects and designers; (iv) strength of dealer and distributor network; (v) on-time delivery and service performance; (vi) commitment to environmental standards by offering products that help clients achieve LEED® (Leadership in Energy and Environmental Design) certified facilities and minimize environmental impact; and (vii) price. We estimate that our share of the North American workplace market in ~~2019~~2020 and ~~2018~~2019 was 7.8% and 7.58%, respectively.

Some of our workplace competitors, especially those in North America, are larger and have significantly greater financial, marketing, manufacturing and technical resources than us. Our most significant competitors in primary markets are Herman Miller, Inc., Steelcase, Inc., Haworth, Inc. and, to a lesser extent, Teknion Corporation and Allsteel, Inc., an operating unit of HNI Corporation. These competitors have a substantial volume of furniture installed at businesses throughout North America, providing a continual source of demand for further products and enhancements. Moreover, the products of these competitors have strong acceptance in the marketplace. For Muuto, we also compete against smaller open-line brands that can be sold through our own dealers. Despite our competitors' strength in the marketplace, we believe that we have been able to compete successfully in the markets to date.

Competition in the residential sector is much more fragmented than in the workplace market. Our Lifestyle businesses serve the mid-to high-end of the market, but compete against many companies, none of which has a dominant market share.

Patents and Trademarks

We consider securing and protecting our intellectual property rights to be important to the business. We own approximately 5962 active U.S. utility patents on various components used in our products and systems and approximately ~~184~~192 active U.S. design patents. We also own approximately ~~494~~416 patents and design rights in various foreign countries. The scope and duration of our patent protection varies throughout the world by jurisdiction and by individual product. In particular, patents for individual products extend for varying periods of time according to the date a patent application is filed, the date a patent is granted and the term of patent protection available in the jurisdiction granting the patent (generally 20 years from the date of filing in the U.S., for example). We believe that the duration of the applicable patents we are granted is adequate relative to the expected lives of our products. We own approximately ~~106~~114 trademark registrations in the U.S., including registrations to the following trademarks, as well as related stylized depictions of the Knoll word mark: Knoll®, KnollExtra®, Knoll Luxe®, KnollStudio®, KnollTextiles®, Good Design Is Good Business®, Antenna®, Calibre®, Currents®, Dividends®, Edelman® Leather, Modern Always®, Pixel®, Reff®, Sapper XYZ®, Spinneybeck® Leather, Toboggan®, Generation by Knoll®, Regeneration by Knoll®, MultiGeneration by Knoll®, Remix®, Rockwell Unscripted®, HighLine®, HOLLY HUNT®, GREAT OUTDOORS A HOLLY HUNT COLLECTION®, VLADIMIR KAGAN®, MUUTO® and FULLY®.

We also own approximately ~~338~~304 trademarks and copyrights registered in foreign countries. The scope and duration of our trademark protection varies throughout the world, with some countries protecting trademarks only as long as the mark is used, and others requiring registration of the mark and the payment of registration ~~(generally ten years from the date of filing in the U~~.~~S.,~~ ~~for example). In order to protect the indefinite duration, we make filings to continue registration of our trademarks.~~

10In October 2004, we received registered trademark protection in the United States for five iconic furniture designs by Ludwig Mies van der Rohe-the Barcelona Chair, the Barcelona Stool, the Barcelona Couch, the Barcelona Table and the Flat Bar Brno Chair. In 2019, we received similar registered trademark protection for the iconic Eero Saarinen design for the Womb Chair. This protection recognizes the renown of these designs and reflects our commitment to ensuring that when architects, furniture retailers, businesses and individuals purchase one of these Ludwig Mies van der Rohe or Eero Saarinen designs, they are acquiring the authentic product, manufactured in accordance with the designer's historic specifications. Barcelona® is a registered trademark in the U.S., Canada and European Community owned by Knoll, Inc. Womb® is registered trademark in the U.S. and Canada owned by Knoll, Inc.

In October 2004, we received registered trademark protection in the United States for five iconic furniture designs by Ludwig Mies van der Rohe-the Barcelona Chair, the Barcelona Stool, the Barcelona Couch, the Barcelona Table and the Flat Bar Brno Chair. In 2019, we received similar registered trademark protection for the iconic Eero Saarinen design for the Womb Chair. This protection recognizes the renown of these designs and reflects our commitment to ensuring that when architects, furniture retailers, businesses and individuals purchase a Ludwig Mies van der Rohe design, they are acquiring the authentic product, manufactured in accordance with the designer's historic specifications. Barcelona® is a registered trademark in the U.S., Canada and European Community owned by Knoll, Inc.12

Environmental Matters

We believe that we are substantially in compliance with all applicable laws and regulations for the protection of the environment and the health and safety of our employees based upon existing facts presently known to us. Compliance with federal, state, local and foreign environmental laws and regulations relating to the discharge of substances into the environment, the disposal of hazardous wastes and other related activities has had and will continue to have an impact on our operations, but has, since 1990, been accomplished without having a material adverse effect on our operations. There can be no assurance that such laws and regulations will not change in the future or that we will not incur significant costs as a result of such laws and regulations. We have trained staff responsible for monitoring compliance with environmental, health and safety requirements. Our goal is to reduce and, wherever possible, eliminate the creation of hazardous waste in our manufacturing processes. While it is difficult to estimate the timing and ultimate costs to be incurred due to uncertainties about the status of laws, regulations and technology, based on information currently known to management, we do not expect environmental costs or contingencies to have a material adverse effect on our consolidated financial position, results of operations, competitive position, or cash flows. The operation of manufacturing plants entails risks in these areas, however, and we cannot be certain that we will not incur material costs or liabilities in the future which could adversely affect our operations.

We have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response Compensation and Liability Act, or “CERCLA,” for remediation costs associated with waste disposal sites previously used by us. CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or the legality of disposal and, under certain circumstances, liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages for harm to natural resources. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. We reserve amounts for such matters when expenditures are probable and reasonably estimable.

~~Employees~~Human Capital Management

AsWe ofare ~~December 31, 2019, we employed~~ a ~~total~~constellation of ~~3,734~~design-focused ~~people,~~businesses ~~consisting~~with oftalented ~~1,891~~associates ~~hourly~~who ~~and~~are ~~1,833~~passionate ~~salaried~~about ~~employees.~~our ~~The Grand Rapids~~products, ~~Michigan~~brands ~~plant is the only unionized plant within North America~~ and ~~has~~customers. anWe ~~agreement~~realize ~~with the Carpenters Union~~that, ~~Local~~along ~~1615,~~with ofour ~~the~~brands ~~United Brotherhood of Carpenters~~ and ~~Joiners of America~~products, ~~Affiliate~~our ofpeople ~~the~~are ~~Carpenters~~our ~~Industrial~~most ~~Council~~important ~~(the~~assets. ~~“Union”)~~Accordingly, ~~covering~~we ~~approximately~~are ~~187~~focused ~~hourly employees or 5.0% of the Company's labor force. The Collective Bargaining Agreement was entered into~~ on ~~May~~attracting ~~1, 2018~~ and ~~expires~~retaining ~~in April 2022. We expect~~ the ~~agreement~~most totalented ~~terminate~~group ~~as during the second quarter~~ of ~~2020~~associates ~~due~~ to ~~the~~help ~~previously~~deliver ~~announced closure of the Grand Rapids, Michigan facility announced in January 2020. From time to time, there have been unsuccessful efforts to unionize at~~ our ~~other~~strategy ~~North~~and ~~American~~create ~~locations.~~value Wefor ~~believe that relations with~~ our ~~employees are good~~stakeholders. ~~Nonetheless, it is possible that our employees may continue attempts to unionize. Certain workers in the facilities in Italy are also represented by unions.~~

Diversity and Inclusion

At Knoll, our differences contribute to our success. We are committed to diversity, equity and inclusion and creating opportunities for people who come from diverse cultural and ethnic backgrounds, gender identities, people with disabilities, and building on our leadership in LGBTQ+ equality. We believe that embracing diverse perspectives contributes to an inclusive workplace and strengthens the communities where we live and work. Knoll supports a continuous dialogue that promotes teamwork and differences.

We continue to build diversity, equity, and inclusion into our culture by focusing on:

•An ongoing commitment to educate ourselves and build a cultural competency

•Recruiting, retaining, and promoting diverse talent with action plans to drive better results in this area

•Accountability to establish appropriate metrics to hold ourselves accountable to our objectives

We made significant progress in our initiatives in 2020. We created and launched our Knoll, Inc. Diversity & Inclusion Council; an Employee Resource Group sponsored by our Chairman and Chief Executive Officer, President and COO Knoll Workplace and our SVP Human Resources. This Council of 15 members represents locations, functions and business segments across the organization and has identified initiatives in each of the 3 areas listed above. We are particularly proud of our establishment of the Knoll Diversity Advancement Design Scholarship for Black Students to support diversity advancements in our industry. We look forward to the first group of 5 scholarships being awarded this spring. Our Chairman and CEO also joined more than 1,300 CEOs who have pledged to take action to advance diversity and inclusion in the workplace through the CEO Action for Diversity and InclusionTM Pledge. Our work with Habitat for Humanity got under way this year as well which we believe aligns to our organizational values in many ways and notably supports making progress towards diversity equity and inclusion in our communities. This commitment to Habitat is one that supports giving by offering our consumers an ability to donate during the checkout process where their contribution is then matched dollar for dollar up to an annual commitment of $100,000. We have also committed to support four home builds in our communities per year both financially and through the help of our company volunteers.

Talent Development

We are committed to providing the development opportunities associates need to ensure Knoll has the talent to move forward. Our company-wide mentor program is available to all associates who wish to grow in their careers and build their internal networks. Regular talent and critical position reviews highlight associates to target for leadership development as we seek to build our internal talent pipeline. Our Knoll Leadership Program runs every other year for a new group of high potentials. Additionally, we provide a broader group of leaders with opportunities to grow through experiential learning as well as management fundamentals classes. All leadership development is rooted in the competencies and values laid out in our Leadership Success Profile. Learning resources and asynchronous options are available through our company intranet to further support development and create development opportunities for all associates.

Compensation

Our policy is to competitively compensate all employees for their contributions to Knoll, Inc. and to appropriately reward and motivate employees to deliver our business goals. We do this, in part, by closely monitoring and benchmarking compensation matters and working to ensure that our programs provide our associates with the right features to provide for their families and prepare for retirement. We provide competitive health and welfare benefits and retirement savings plans (401k), with matching employer contributions and profit sharing features. Retention of our talent is exceedingly important and drives how we design our programs. We closely monitor turnover statistics annually. Our voluntary turnover inclusive of retirements only averages 8%.

Health and Safety

Knoll’s health and safety programs are designed using the ISO 45001 global standards to address associate engagement, risk reduction, and measurable continuous improvement. Our programs strive to comply with all federal, state, provincial and local safety regulations, codes and standards. Knoll requires each of its locations to perform regular safety compliance audits to ensure proper safety policies, program procedures, industrial hygiene and training are in place. In addition, Knoll utilizes leading indicators to assess the health and safety performance of its operations, including near miss reporting, risk reduction, and behavior-based safety observations. Knoll recognizes that improvement of these leading indicators has led to a drastic reduction in workplace injury and severity. Lagging indicators include the OSHA Total Recordable Case Incident Rate ("TCIR") and the Day Away Case Rate ("DACR") based upon the number of incidents per 100 employees (or per 200,000 work hours). In 2020, Knoll Office had a TCIR of 0.65, a DACR of 0.05; a decrease of 26% and 83% from 2019, respectively. Our East Greenville, PA site is recognized by the U.S. Occupational Safety & Health Administration’s Voluntary Protection Program (VPP) for its low injury rates, employee engagement and training programs. We are proud of this recognition, as out of approximately 8 million workplaces in the U.S., only approximately 1,300 have earned VPP Star recognition.

COVID-19 Pandemic Response

In addition to our standard health and safety programs, this year we quickly responded to support our associates and to keep them safe and healthy during the COVID-19 pandemic. We took the following actions:

•We made COVID safety our first priority. Contact tracing, temperature checks, mask requirements, social distancing, signage and accommodations at each site per state and or local ordinances were implemented to ensure the safest work sites possible. We have managed through this time with very minimal positive cases and we've been overly cautious in our actions to limit exposure in the workplace.

•We supported flexibility in every way possible. We encouraged flexible schedules, shift changes as needed and a positive work-life balance. We have pivoted to meet the changing needs of our associates and our businesses.

•We provided resources. We have provided a constant stream of health, safety and wellness resources and reminders to our associates to help them manage the changes of our current “normal”. We encouraged open dialogue between associates and their Managers to assist people with solutions for their unique challenges. We coordinated commuter stipends for urban commuters and helped to create and communicate work from home furniture offerings at a generous discount to support our remote workforce.

•We escalated our communications processes. We updated associates frequently and consistently. Email, a new company Intranet, flyers, video monitor communications in the plants, a new online collaborative network group to support working parents, and company-wide town hall meetings have been used to keep associates up to date.

•We paid our associate bonus program four months early and our associates working in the plants received an additional amount specifically to thank them for their dedication during this challenging time.

Employee Data

As of December 31, 2020, we employed a total of 3,082 people, consisting of 1,588 hourly and 1,494 salaried employees. Certain employees in our Italian facilities are represented by unions.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are made available free of charge through the “Investor Relations” section of our website at www.knoll.com, as soon as practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission.

1115

ITEM 1A. RISK FACTORS

RISK FACTORS

Risks Related to our Business

The COVID-19 pandemic has adversely affected and is expected to continue to pose risks to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact on us, as well as our customers and suppliers.

We face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic. COVID-19 spread across the globe during 2020 and continues to impact economic activity worldwide. The COVID-19 pandemic and measures implemented to prevent its spread or address its effects have caused disruption and volatility in the global capital markets, and have resulted in a global slowdown in economic activity. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Although our production facilities have remained substantially operational, these measures have resulted in attenuating activity, including required temporary closures of certain of our facilities and the closure of many showrooms and our retail locations. The duration of these measures is unknown, may be extended and additional measures may be imposed.

Our clients and potential clients have also been significantly impacted by the COVID-19 pandemic. A significant portion of the overall global workforce is working remotely. COVID-19 continues to cause delays in the ability for companies to bring people back to the office and, when people are able to return, the office will likely be different from the offices that existed prior to the pandemic. This massive and sudden shift to remote work has had a significant impact on our office business and the contract office furniture industry as a whole. The duration, permanency and overall magnitude of these impacts are still unknown.

Effects of COVID-19 and other similar outbreaks on the company include, but are not limited to, the following:

•Reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate operating results, and reduced business and consumer spending, which may adversely affect our results of operations by reducing our sales, margins and/or net income as a result of a slowdown in customer orders or order cancellations. In addition, volatility in the financial markets could increase the cost of capital and/or limit its availability.

•Actions from government mandates to corporate decisions that impact the ability of or decision to occupy offices could have the effect of dampening demand for our office/workplace products.

•Economic uncertainty as a result of COVID-19 and other similar outbreaks could make it difficult for our dealers, customers, suppliers and the Company to accurately forecast and plan future business activities.

•The potential to weaken the financial position of some of our customers. If circumstances surrounding our customers’ financial capabilities were to deteriorate, write-downs or write-offs of our customer receivables could negatively affect our operating results and, if large, could have a material adverse effect on our business, financial condition, results of operations and cash flow.

•Subsequent disruptions in our operations and our supply chain could occur.

To the extent the COVID-19 pandemic or other similar outbreaks adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this section. The ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the severity and duration of the pandemic and the related impact on the global economy, which are uncertain and cannot be predicted at this time.

Our efforts to diversify our sources of revenue may not be effective and may expose us to new risks.

Historically, the majority of our revenues were derived from the sales of office systems in North America. We have pursued a strategy to diversify our sources of revenue and reduce our dependence on North American office system sales by, for example, growing our seating, international, ancillary and lifestyle businesses. While we believe that this strategy enables us to better maintain and grow our sales and profitability during cyclical ups and downs in the industry, there can be no assurance that this diversification strategy will be effective in achieving these goals. Our diversification strategy involves the continued expansion of our lifestyle businesses, and business growth internationally, which may expose us to business risks that we have not experienced. We also may incur significant costs in pursuing our diversification strategy, and those costs may not be fully offset by increased revenues associated with new business lines.

Our product sales are tied to corporate spending and service-sector employment, which are outside of our control. Our sales and/or growth in sales would be adversely affected by a recessionary economy characterized by decreased corporate spending and service-sector employment.

Our sales are significantly impacted by the level of corporate spending primarily in North America, which, in turn, is a function of the general economic environment. In a recessionary economy, business confidence, service-sector employment, corporate cash flows and residential and non-residential commercial construction decrease, which typically leads to a decrease in demand for furniture and our other products. In addition, a recessionary economy may also result in saturation of the market by “just new” used office systems, leading to a decrease in demand for new office environments. Sales of office systems, which have historically accounted for almost half of our revenues, represent longer term and higher cost investments for our clients. As a result, sales of office systems are more severely impacted by decreases in corporate spending than sales of seating, ancillary products, coverings, studio products, and demand for office systems typically takes longer to respond to an economic recovery.

Geopolitical uncertainties, terrorist attacks, acts of war, international public health emergencies, natural disasters, increases in energy and other costs or combinations of such and other factors that are outside of our control could at any time have a significant effect on the economy, and, therefore, our business. The occurrence of any of these or similar events in the future could result in downward pressure on the economy, which we would expect to cause demand for our products to decline and competitive pricing pressures to increase.

Weakness in the economy or uncertainty in the financial markets may adversely affect our results of operations and financial condition, as well as the financial soundness of our customers and suppliers.

Weakness in the economy or uncertainty in the financial markets may inhibit our ability to access capital and could be restricted at a time when we would like, or need, to access financial markets. In addition, interest rate fluctuations, financial market volatility or credit market disruptions may negatively affect our customers' and our suppliers' abilities to obtain credit to finance their businesses on acceptable terms. As a result, our customers' needs and abilities to purchase our products or services may decrease, and our suppliers may increase their prices, reduce their output or change their terms of sale. If our customers' or suppliers' operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms on us. Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, may adversely affect our earnings and cash flow.

We may have difficulty increasing or maintaining our prices as a result of price competition, which could lower our profit margins. Our competitors may develop new product designs that give them an advantage over us in making future sales.

We compete with our competitors on the basis of, among other things, price and product design. Since our competitors offer products that are similar to ours, we face significant price competition from our competitors, particularly in the Office segment. This price competition impacts our ability to implement price increases or, in some cases, maintain prices, which could lower our profit margins.

Additionally, our competitors may develop new product designs that achieve a high level of customer acceptance, which could give them a competitive advantage over us in making future sales.

Our efforts to introduce new products that meet customer and workplace requirements may not be successful, which could limit our sales growth or cause our sales to decline.

To keep pace with workplace trends, such as changes in workplace design and increases in the use of technology, and with evolving regulatory and industry requirements, including environmental, health, safety and similar standards for the workplace and for product performance, we must periodically introduce new products. The introduction of new products requires the coordination of the design, manufacturing and marketing of such products, which may be affected by factors beyond our control. The design and engineering of certain of our new products can take up to a year or more and further time may be required to achieve client acceptance. In addition, we may face difficulties in introducing new products if we cannot successfully align ourselves with independent architects and designers who are able to design, in a timely manner, high-quality products consistent with our image. Accordingly, the launch of any particular product may be later or less successful than originally anticipated by us. Difficulties or delays in introducing new products or lack of customer acceptance of new products could limit our sales growth or cause our sales to decline.

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We may not be able to manage our business effectively if we are unable to retain our experienced management team or recruit other key personnel.

The success of our business is highly dependent upon our ability to attract and retain qualified employees and upon the ability of our senior management and other key employees to implement our business strategy. We believe there are only a limited number of qualified executives in the industry in which we compete. The loss of the services of key members of our management team could harm our efforts to successfully implement our business strategy.

We are dependent on the pricing and availability of raw materials and components, and price increases and unavailability of raw materials and components could lower sales, increase our cost of goods sold and reduce our profits and margins.

We require substantial amounts of raw materials, which we purchase from outside sources. Steel, plastics, wood-related materials, and leather are the main raw materials used in our products. The prices and availability of raw materials are subject to change or curtailment due to, among other things, the supply of, and demand for, such raw materials, changes in laws or regulations, including duties and tariffs, suppliers' allocations to other purchasers, interruptions in production by raw materials or component parts suppliers, changes in currency exchange rates and worldwide price levels. We can be significantly impacted by price increases in these raw materials.

Although no supplier is the only available source for a particular component or raw material, some of our products and components are extremely specialized and, therefore, it can take a significant amount of time and money to move from one supply source to another. Any failure to obtain raw materials and components on a timely basis, or any significant delays or interruptions in the supply of raw materials or components, could prevent us from being able to produce products ordered by our clients in a timely fashion, which could have a negative impact on our reputation and our dealership network, and could cause our sales to decline.

We are affected by the cost of energy and increases in energy prices could reduce our margins and profits.

The profitability of our operations is sensitive to the cost of energy through our transportation costs, the cost of petroleum-based materials, like plastics, and the cost of operating our manufacturing facilities. Energy costs have been volatile in recent years due to changes in global supply and demand. Although we have been successful in countering energy price increases, primarily through our global sourcing initiatives and continuous improvement programs, we have not been able to offset these costs entirely.

We rely upon independent furniture dealers, and a loss of a significant number of dealers could affect our business, financial condition and results of operations.

We rely on a network of independent dealers for the joint marketing of our products to small and mid-sized accounts, and to assist us in the marketing of our products to large accounts, particularly in the Office segment. We also rely upon these dealers to provide a variety of important specification, installation and after-market services to our clients. Our dealers operate, generally, under short-term, non-exclusive agreements. There is nothing to prevent our dealers from terminating their relationships with us at the end of contract terms. In addition, individual dealers may not continue to be viable and profitable and may suffer from the lack of available credit. While we are not significantly dependent on any single dealer, our largest dealer accounted for 6.54% of our North American sales in ~~2019~~2020; if dealers go out of business or are restructured, we may suffer losses as they may not be able to pay us for products previously delivered to them. The loss of a dealer relationship could also negatively affect our ability to maintain market share in the affected geographic market and to compete for and service clients in that market until a new dealer relationship is established. Establishing a viable dealer in a market can take a significant amount of time and resources. The loss or termination of a significant dealer or a significant number of dealer relationships could cause significant difficulties for us in marketing and distributing our products, resulting in a decline in our sales.

Currently, one of our largest clients is the U.S. government, a relationship that is subject to uncertain future funding levels and federal procurement laws and requires restrictive contract terms; any of these factors could curtail current or future business.

For the year ended December 31, ~~2019~~2020, we derived approximately 45.5% and 76.14% of our revenue from sales to U.S. and state and local government agencies, respectively. Our ability to compete successfully for and retain business with the U.S. government is highly dependent on cost-effective performance and compliance with complex procurement laws. Historically, federal procurement laws required government agencies to purchase furniture products from Federal Prison Industries, Incorporated. If these or similar laws were re-instituted, it would make it more difficult for us to sell our furniture to agencies and departments of the U.S. government.

In addition, the U.S. government typically can terminate or modify its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract. A termination arising out of our default could expose us to liability and impede our ability to compete in the future for contracts and orders. Furthermore, if we were found to have committed fraud or certain criminal offenses, we could be suspended or debarred from all further government contracting.

Given the significance of our governmental business, we are sensitive to decreases in governmental spending. Federal, state and local government budgets have experienced deficits recently and are under significant pressure to reduce spending. These spending pressures have resulted in, and may continue to result in, decreased furniture spending, which has negatively impacted (and may continue to negatively impact) our governmental sales.

~~Our~~If ~~global~~we ~~operations~~fail ~~may~~to beprotect ~~adversely~~the ~~affected~~integrity byand ~~political~~security ~~events,~~of ~~domestic~~our orinformation ~~international~~technology ~~hostilities,~~systems ~~international~~and ~~health~~confidential ~~emergencies~~information, orit ~~complications~~could ~~due~~adversely toaffect ~~natural,~~our ~~nuclear or other disasters~~business.

~~The~~We ~~ongoing~~rely ~~coronavirus~~upon ~~outbreak~~information ~~emanating~~technology ~~from~~networks ~~China~~and atsystems ~~the~~to ~~beginning~~process, transmit and store electronic information, and to manage numerous aspects of ~~2020~~our ~~has~~business ~~resulted~~and provide information to management. We also receive certain customer-specific data, including credit card information, in ~~increased~~connection ~~travel~~with ~~restrictions~~orders placed through our various businesses, including our e-commerce websites and ~~extended~~our ~~shutdown~~retail stores. The secure operation of ~~certain~~these ~~businesses~~information intechnology systems, and the ~~region~~processing and maintenance of this information, is critical to our business operations and strategy. ~~This~~These orsystems ~~any~~are vulnerable to, among other ~~governmental~~things, ~~developments~~damage orand ~~health~~interruption ~~concerns~~from inpower ~~China~~loss or ~~other~~natural ~~countries~~disasters, incomputer ~~which~~system weand ~~operate~~network ~~could~~failures, ~~result~~loss inof ~~social~~telecommunications orservices, ~~economic~~physical ~~instability.~~and ~~These~~electronic ~~uncertainties~~loss ~~could~~of data, security breaches, hackers and employee misuse. We have, and may in the future, face unauthorized attempts by hackers seeking to harm us or, as a ~~material~~result ~~adverse~~of ~~effect~~industrial onespionage, to penetrate our ~~business~~network security and gain access to our systems, steal intellectual or other proprietary data, including adesign, ~~potential~~sales ~~supply~~or ~~chain~~personally ~~impact~~identifiable information, introduce malicious software or interrupt our internal systems, manufacturing or distribution. Though we attempt to prevent and detect these incidents, we may not be successful. Any disruption of our information technology systems, or access to or disclosure of information stored in or transmitted by our ~~results~~systems, could result in legal claims and damages, loss of intellectual property or other proprietary information (including customer data), disrupt operations, result in competitive disadvantage and ~~financial~~damage ~~data~~our reputation, which could adversely affect our business and results of operations.

~~Our~~In ~~efforts~~addition, states and the federal government are increasingly enacting laws and regulations to ~~diversify~~protect consumers against identity theft. Also, as our ~~sources~~business expands globally, we are subject to data privacy and other similar laws in various foreign jurisdictions. If we are the target of ~~revenue~~a ~~may~~cybersecurity ~~not~~attack resulting in unauthorized disclosure of our customer data, we may be ~~effective~~required to undertake costly notification procedures. Compliance with these laws will likely increase the costs of doing business. Further, if we fail to implement appropriate safeguards or to detect and ~~may~~provide ~~expose~~prompt usnotice of unauthorized access as required by some of these laws, we could be subject to ~~new~~potential ~~risks~~claims for damages and other remedies, which could harm our business.

~~Historically,~~We ~~the~~are ~~majority~~in ~~of our revenues were derived from~~ the ~~sales~~process of ~~office~~implementing ~~systems in North America. We have pursued~~ a ~~strategy~~new toenterprise ~~diversify~~resource ~~our~~planning ~~sources of revenue and reduce our dependence on North American office~~ system ~~sales by~~, ~~for example, growing our seating, international, ancillary~~ and ~~lifestyle~~problems ~~businesses.~~with ~~While we believe that this strategy enables us to better maintain and grow our sales and profitability during cyclical ups and downs in~~ the ~~industry,~~design ~~there~~or ~~can~~implementation beof ~~no assurance that~~ this ~~diversification~~system ~~strategy~~could ~~will~~interfere bewith ~~effective in achieving these goals. Our diversification strategy involves the continued expansion of~~ our ~~lifestyle businesses, and~~ business ~~growth internationally, which may expose us to business risks that we have not experienced. We also may incur significant costs in pursuing our diversification strategy,~~ and ~~those costs may not be fully offset by increased revenues associated with new business lines~~operations.

We are engaged in a multi-year implementation of a new global enterprise resource planning system (ERP). The ERP is designed to accurately maintain the company's books and records and provide information to the company's management team important to the operation of the business. The company's ERP has required, and will continue to require, the investment of significant human and financial resources. We may not be able to successfully implement the ERP without experiencing delays, increased costs and other difficulties. If we are unable to successfully design and implement the new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted.

We operate with leverage, and a significant amount of cash will be required to service our indebtedness. Restrictions imposed by the terms of our indebtedness may limit our operating and financial flexibility.

As of December 31, ~~2019~~2020, we had total consolidated outstanding debt of approximately $~~450~~318.3 million under our credit facility, inclusive of outstanding letters of credit of $5.1 million. If we were to borrow the maximum available to us under our Credit Facility, as constrained by the applicable leverage ratio covenant, we would have total consolidated outstanding debt of approximately $469.5 million.

On January 22, 2018, we amended and extended our existing credit facility ("Existing Credit Facility"), dated May 20, 2014, with a new $750.0 million credit facility maturing in January 2023, consisting of a revolving commitment in the amount of $400.0 million, a U.S. term loan commitment in the amount of $250.0 million, and a multi-currency term loan commitment in the amount of €81.7 million. The ~~Amended~~high ~~Credit~~level ~~Agreement ("Amended Credit Agreement") also includes an option to increase the size~~ of ~~the~~our ~~credit~~indebtedness ~~facility~~could orhave ~~incur~~important ~~incremental~~consequences ~~term loans by up~~ to anholders ~~additional $250.0 million, subject to the satisfaction~~ of ~~certain~~our ~~terms~~common ~~and conditions. On August 26~~stock, ~~2019,~~given we entered into a first amendment to the Third Amended and Restated Credit Agreement (the "Credit Agreement Amendment"), which, among other things, extends the maturity of the credit facility from January 2023 to August 2024, and reduces both the applicable rate applied to outstanding borrowings and the commitment fee rate applied to the unutilized balance under the Revolver. The Amended Credit Agreement is described in more detail in "Capital Resources and Liquidity" under Item 7 as well as in Note 13, Indebtedness, to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.that:

At December 31, 2019, if we were to borrow the maximum available to us under our Credit Facility, we would have total consolidated outstanding debt of approximately $706.7 million. The high level of our indebtedness could have important consequences to holders of our common stock, given that:

•a substantial portion of our cash flow from operations must be dedicated to fund scheduled payments of principal and debt service and will not be available for other purposes;

•our ability to obtain additional debt financing in the future for working capital, capital expenditures, research and development or acquisitions may be limited by the terms of our credit facility; and

•the terms of our credit facility also impose other operating and financial restrictions on us, which could limit our flexibility in reacting to changes in our industry or in economic conditions generally.

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Our ~~Amended~~credit ~~Credit~~agreement ~~Agreement~~ prevents us and our subsidiaries from incurring any additional indebtedness other than (i) borrowings under our existing credit facility; (ii) certain types of indebtedness that may be incurred subject to aggregate dollar limitations identified in the credit facility, including, without limitation, purchase money indebtedness and capital lease obligations, indebtedness incurred in connection with a permitted acquisition, and loans obtained through an expansion of the facility, all of which cannot exceed $250.0 million at any time, and (iii) other types of indebtedness that are not limited to specific dollar limitations, such as indebtedness incurred in the ordinary course of business and unsecured, subordinated indebtedness. The aggregate amount of indebtedness that we may incur pursuant to these exceptions is further limited by the financial covenants in our credit facility and, therefore, will depend on our future results of operations and cannot be determined at this time. As a result of the financial covenants, our capacity under our credit facility could be reduced if our trailing consolidated EBITDA (as defined by our credit agreement) declines due to deteriorating market conditions or poor performance. Furthermore, although we may incur unlimited amounts of certain types of indebtedness, subject to compliance with these financial covenants, the amount of indebtedness that we may be able to incur will depend on the terms on which such types of debt financing are available to us, if available at all.

As a result of the foregoing, we may be prevented from engaging in transactions that might further our growth strategy or otherwise be considered beneficial to us. A breach of any of the covenants in our credit facility could result in a default thereunder. If payments to the lenders under our credit facility were to be accelerated, our assets could be insufficient to repay in full the indebtedness under our credit facility and our other liabilities. Any such acceleration could also result in a foreclosure on all or substantially all of our subsidiaries' assets, which would have a negative impact on the value of our common stock and jeopardize our ability to continue as a going concern.

The credit agreement is described in more detail in "Liquidity and Capital Resources" included in Item 7 and in Note 13, Indebtedness, to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K, included elsewhere herein.

We may require additional capital in the future, which may not be available or may be available only on unfavorable terms.

Our capital requirements depend on many factors, including capital improvements, tooling, information technology upgrades and new product development. To the extent that our existing capital is insufficient to meet these requirements and cover any losses, we may need to raise additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. Equity financings could result in dilution to our stockholders, and the securities may have rights, preferences and privileges that are senior to those of our common stock. If our need for capital arises because of significant losses, the occurrence of these losses may make it more difficult for us to raise the necessary capital.

We are affected by the cost of energy and increases in energy prices could reduce our margins and profits.

An inability to protect our intellectual property could have a significant impact on our business.

We attempt to protect our intellectual property rights, both in the United States and in foreign countries, through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, copyright, patent and other laws concerning proprietary rights, our intellectual property rights do not generally receive the same degree of protection in foreign countries as they do in the United States. In some parts of the world, we have limited protections, if any, for our intellectual property. Our ability to compete effectively with our competitors depends, to a significant extent, on our ability to maintain the proprietary nature of our intellectual property. The degree of protection offered by the claims of the various patents, copyrights, trademarks and service marks may not be broad enough to provide significant proprietary protection or competitive advantages to us, and patents, copyrights, trademarks or service marks may not be issued on our pending or contemplated applications. In addition, not all of our products are covered by patents or similar intellectual property protections. It is also possible that our patents, copyrights, trademarks and service marks may be challenged, invalidated, canceled, narrowed or circumvented.

In the past, certain of our products have been copied and sold by others. We try to enforce our intellectual property rights, but we have to make choices about where and how we pursue enforcement and where we seek and maintain intellectual property protection. In many cases, the cost of enforcing our rights is substantial, and we may determine that the costs of enforcement outweigh the potential benefits. If we are unable to maintain the proprietary nature of our intellectual property with respect to our significant current or proposed products, our competitors may be able to sell copies of our products, which could adversely affect our ability to sell our original products and could also result in competitive pricing pressures, which may negatively affect our profitability.

If third parties claim that we infringe upon their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue an infringing product.

We face the risk of claims that we have infringed upon third parties' intellectual property rights. Companies operating in our industry routinely seek patent protection for their product designs, and many of our principal competitors have large patent portfolios. Prior to launching major new products in our key markets, we normally evaluate existing intellectual property rights. However, our competitors may have filed for patent protection which is not, at the time of our evaluation, a matter of public knowledge. Our efforts to identify and avoid infringing upon third parties' intellectual property rights may not be successful. Any claims of patent or other intellectual property infringement, even those without merit, could (i) be expensive and time consuming to defend; (ii) cause us to cease making, licensing or using products that incorporate the challenged intellectual property; (iii) require us to redesign, reengineer, or rebrand our products or packaging, if feasible; or (iv) require us to enter into royalty or licensing agreements in order to obtain the right to use a third party's intellectual property.

We could be required to incur substantial costs to comply with environmental requirements. Violations of, and liabilities under, environmental laws and regulations may increase our costs or require us to change our business practices.

Our past and present ownership and operation of manufacturing plants are subject to extensive and changing federal, state, local and foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. As a result, we are involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters and could become subject to fines or penalties related thereto. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, for remediation costs associated with waste disposal sites previously used by us. In general, CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or the legality of disposal and, under certain circumstances, liability may be joint and several, resulting in one party being held responsible for the entire obligation. Liability may also include damages for harm to natural resources. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. We reserve amounts for such matters when expenditures are probable and reasonably estimable.

We are subject to potential labor disruptions, which could have a significant impact on our business.

Certain of our employees located in Grand Rapids, Michigan and Italy are represented by unions. The collective bargaining agreement for our Grand Rapids location expires April 26, 2022. However, we expect this agreement to terminate earlier in connection with our previously announced closure of the Grand Rapids manufacturing operations. We have also had attempts to unionize our other North American manufacturing locations, which to date have been unsuccessful. We have experienced a number of brief work stoppages at our facilities in Italy as a result of national and local issues. While we believe that we have good relations with our workforce, we may experience work stoppages or other labor problems in the future, and further unionization efforts may be successful. Any prolonged work stoppage could have an adverse effect on our reputation, our vendor relations and our dealership network. Moreover, because substantially all of our products are manufactured to order, we do not carry finished goods inventory that could mitigate the effects of a prolonged work stoppage.

Product defects could adversely affect our results of operations.

Our customers may encounter product defects that could potentially arise in the course of our development of new products or due to manufacturing problems. If product defects do arise, we could incur product warranty costs, product liability costs and costs associated with recalling and repairing defective products. While we maintain a reserve for our product warranty costs based on estimates of the costs that may be incurred under the warranties on all of our products, our actual warranty costs may exceed this reserve, resulting in a need to increase the amounts accrued for warranty costs. We also maintain product liability and other insurance coverage that we believe to be generally in accordance with industry practices, but our insurance coverage does not extend to field visits to repair, retrofit or replace defective products, or to product recalls. As a result, our insurance coverage may not be adequate to protect us fully against substantial claims and costs that may arise from product defects, particularly if we have a large number of defective products that we must repair, retrofit, replace or recall. Sales of our products could be adversely affected by excessive warranty claims, product recalls and adverse perceptions of product quality. As a result of these factors, product defects could have a material adverse effect on our results of operations.

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We may be vulnerable to the effects of currency exchange rate fluctuations, which could increase our expenses.

We primarily sell our products and report our financial results in U.S. dollars, but we generate some of our revenues and pay some of our expenses, including interest on euro denominated debt, in other currencies. Paying our expenses in other currencies can result in a significant increase or decrease in the amount of those expenses in U.S. dollar terms, which affects our profits.

In the future, any foreign currency appreciation relative to the U.S. dollar would increase our expenses that are denominated in that currency. Additionally, as we report currency in the U.S. dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Canadian dollar, the Euro, and the Danish Krone. Approximately 1725.6% of our revenues in ~~2019~~2020 and 2730.03% of our cost of goods sold in ~~2019~~2020 were denominated in currencies other than the U.S. dollar. From time to time, we review our foreign currency exposure and evaluate whether we should hedge our exposure.

Pension costs or funding requirements could increase at a higher-than-anticipated rate.

We administer a defined benefit pension plan, which holds significant amounts of equity securities. Changes in interest rates or other plan assumptions or in the market value of plan assets could affect the funded status of our pension plan. This could cause volatility in our benefits costs which could increase future funding requirements of our pension plan and have a negative impact on our results of operations, financial condition and cash flows. Our future funding obligations also are affected by the Pension Protection Act of 2006 (“PPA”), which established certain required funding targets. Volatility in the economic environment and/or a decline in the equity markets could cause the value of investment assets held by our pension plan to decline. As a result, we could be required to increase the amount of our cash contributions to our pension plan in order to meet the funding level requirements of the PPA.

If we fail to protect the integrity and security of our information technology systems and confidential information, it could adversely affect our business.

We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage numerous aspects of our business and provide information to management. We also receive certain customer-specific data, including credit card information, in connection with orders placed through our various businesses, including our e-commerce websites and our retail stores. The secure operation of these information technology systems, and the processing and maintenance of this information, is critical to our business operations and strategy. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches, hackers and employee misuse. We may face unauthorized attempts by hackers seeking to harm us or, as a result of industrial espionage, to penetrate our network security and gain access to our systems, steal intellectual or other proprietary data, including design, sales or personally identifiable information, introduce malicious software or interrupt our internal systems, manufacturing or distribution. Though we attempt to prevent and detect these incidents, we may not be successful. Any disruption of our information technology systems, or access to or disclosure of information stored in or transmitted by our systems, could result in legal claims and damages, loss of intellectual property or other proprietary information (including customer data), disrupt operations, result in competitive disadvantage and damage our reputation, which could adversely affect our business and results of operations.

In addition, states and the federal government are increasingly enacting laws and regulations to protect consumers against identity theft. Also, as our business expands globally, we are subject to data privacy and other similar laws in various foreign jurisdictions. If we are the target of a cybersecurity attack resulting in unauthorized disclosure of our customer data, we may be required to undertake costly notification procedures. Compliance with these laws will likely increase the costs of doing business. Further, if we fail to implement appropriate safeguards or to detect and provide prompt notice of unauthorized access as required by some of these laws, we could be subject to potential claims for damages and other remedies, which could harm our business.

We are in the process of implementing a new enterprise resource planning system, and problems with the design or implementation of this system could interfere with our business and operations.

We may not be able to successfully integrate acquired businesses, which may result in an inability to realize the anticipated benefits of our acquisitions.

One of our key operating strategies is to selectively pursue acquisitions. We have made a number of acquisitions in the past and we expect that a portion of our future growth may come from such transactions. We evaluate potential acquisitions on an ongoing basis. However, we may not be able to identify suitable acquisition candidates at prices we consider attractive. Further, our ability to successfully integrate acquired businesses could be negatively impaired because of difficulties, costs and delays that may include:

•Negative impacts on employee morale and performance as a result of job changes and reassignments;

• Unforeseen difficulties, costs or complications in integrating the companies' operations, which could lead to us not achieving the synergies we anticipate;

•Unanticipated incompatibility of systems and operating methods;

• Resolving possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures;

•The diversion of management's attention from ongoing business concerns and other strategic opportunities;

•Unforeseen difficulties in operating acquired business in parallel with similar businesses that we operated previously;

•Unforeseen difficulties in operating businesses we have not operated before;

•Unanticipated difficulty of integrating multiple acquired businesses simultaneously;

•The retention of key employees and management of acquired businesses;

•The coordination of geographically separate organizations;

•The coordination and consolidation of ongoing and future research and development efforts; and

•Possible tax costs or inefficiencies associated with integrating the operations of a combined company.

In connection with any acquisition that we make, there may be liabilities that we fail to discover or that we inadequately assess. Acquired entities may not operate profitably or result in improved operating performance. Additionally, we may not realize anticipated synergies. If our acquisitions perform poorly, our business and financial results could be adversely affected.

Tax matters, including the changes in corporate tax rates, disagreements with taxing authorities and imposing of new taxes could impact our results of operations and financial condition.

Our effective tax rates, and tax payments, could be affected by numerous factors, including but not limited to entry into new geographies, changes to our existing business and operations, acquisitions, changes in our stock price, changes in our deferred tax assets and liabilities and the related valuation, and changes in relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations.

We need to comply with new, evolving or revised tax laws and regulations. The enactment of or increases in tariffs, or other changes in application or interpretation of The Tax Cuts and Jobs Act of 2017, or on specific products that we sell or with which our products compete, may have an adverse effect on our business or on results of operations.

Any attempt by the Administration to withdraw from or materially modify international trade agreements could adversely affect our business, financial condition and results of operations.

A significant portion of our business activities are conducted in foreign countries, including Canada and Mexico. The United States, Canada and Mexico have repealed and replaced NAFTA with the United States-Mexico-Canada Agreement ("USMCA") which could adversely affect our business. If the Administration takes action to withdraw from or materially modify certain other international trade agreements, our business, financial condition and results of operations could be adversely affected.

The implementation of tariffs and export controls on our products may have a material impact on our business.

Our global business operations and supply chain could be disrupted by any additional tariffs imposed on our products. In 2019, the U.S. Trade Representative imposed additional duties, ranging from 15% to 25% on a variety of goods imported from China. As a result of operational changes, the tariffs did not have, nor do we expect the increase in these tariffs to have, a significant impact on our business, supply chain, operations or financial results. However, if the United States increases the amount of these tariffs or adds additional items to the list of products subject to tariff, tariffs could materially adversely affect our business, financial results and operations.

Risks Related to Our Common Stock

Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company.

Provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our amended and restated certificate of incorporation authorizes our board of directors to issue up to 10,000,000 shares of “blank check” preferred stock. We issued 164,000 shares of Series A Preferred Stock under this authority in July 2020. Without stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us. In addition, our amended and restated certificate of incorporation provides for a staggered board of directors, whereby directors serve for three-year terms, with approximately one-third of the directors coming up for reelection each year. Having a staggered board will make it more difficult for a third party to obtain control of our board of directors through a proxy contest, which may be a necessary step in an acquisition of us that is not favored by our board of directors.

We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203, “interested stockholder” means, generally, someone owning 15% or more of our outstanding voting stock or an affiliate of ours that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203, including pre-approval by our board of directors. Our recent sale of 164,000 shares of Series A Preferred Stock to Furniture Investments S.à.r.l., which is majority owned by Investindustrial VII LP, was pre-approved by our board of directors under Section 203. Upon any change in control, the lenders under our credit facility would have the right to require us to repay all of our outstanding obligations under the facility.

Our stock price may be volatile, and your investment in our common stock could suffer a decline in value.

There has been significant volatility in the market price and trading volume of equity securities, which may be unrelated to the financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. You may not be able to resell your shares at or above the price at which you purchased them due to fluctuations in the market price of our common stock caused by changes in our operating performance or prospects and other factors. Some specific factors that may have a significant effect on our common stock market price include:

• actual or anticipated fluctuations in our operating results or future prospects, including actual or perceived fluctuations in the demand for our products;

•our announcements or our competitors' announcements of new products;

•the public's reaction to our press releases, our other public announcements and our filings with the SEC;

•strategic actions by us or our competitors, such as acquisitions, joint ventures, strategic investments, or restructurings;

•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•changes in accounting standards, policies, guidance, interpretations or principles;

•changes in our growth rates or our competitors' growth rates;

•our inability to raise additional capital;

• conditions of our industry as a result of changes in financial markets or general economic conditions, including those resulting from war, incidents of terrorism and responses to such events;

•global pandemics like the COVID-19 pandemic;

•trading volumes in Knoll common stock;

•sales of common stock by us or members of our management team; and

• changes in stock market analyst recommendations or earnings estimates regarding our common stock, other comparable companies or our industry generally.

Our corporate documents provide, subject to certain exceptions, that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Amended and Restated Bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our Amended and Restated Bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find this provision in our Amended and Restated Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Issuance of our common stock in connection with the conversion of our outstanding convertible preferred stock (which ranks senior to our common stock) would cause substantial dilution that may not be reflected in the trading price of our common stock

In June 2020, we sold 164,000 shares of Series A Preferred Stock to Furniture Investments S.à r.l., which is majority owned by Investindustrial VII LP. The Series A Preferred Stock is convertible at any time into shares of our common stock at an initial conversion price of $16.75 per share, subject to certain anti-dilution adjustments. At any time after July 21, 2022, we may elect to convert all or a portion of the Series A Preferred Stock into our common stock if the volume weighted average price of our shares of common stock exceeds $29.3125 (subject to certain adjustments) for at least 20 trading days in any period of 30 consecutive trading days. Further, holders of Series A Preferred Stock are entitled to a cumulative dividend at a rate of 4.5% per annum, which is paid quarterly in arrears, and we may elect, in our sole discretion, to pay dividends on the Series A Preferred Stock in cash or as a dividend in-kind (additional shares of Series A Preferred Stock having value equal to the amount of accrued dividends) until June 30, 2022, after which we must pay the dividends in cash. As a result, upon a conversion of the Series A Preferred Stock, large amounts of our common stock would be issued, which would cause substantial dilution to holders of our common stock that may not be reflected in the trading price of our common stock. The Series A Preferred Stock ranks senior to our common stock with respect to dividend rights and rights on the distribution of our assets upon any liquidation, dissolution or winding up of our affairs.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

2024

Table of Contents

ITEM 2. PROPERTIES

We operate over 4.2 million square feet of facilities, including manufacturing plants, warehouses and sales offices. Of these facilities, we own approximately 21.59 million square feet and lease approximately 12.63 million square feet. The location, square footage, and use of the facilities as of December 31, ~~2019~~2020 are shown below.

Owned Locations

~~SquareFootage (in thousands)~~

SquareFootage (in thousands)

~~Use~~

~~Reportable Segment~~

Use

Reportable Segment

East Greenville, Pennsylvania

~~735~~

735

~~Corporate Headquarters, Manufacturing, Warehouses, and Administration~~

~~Office and Lifestyle~~

Corporate Headquarters, Manufacturing, Warehouses, and Administration

Office and Lifestyle

Grand Rapids, Michigan (1)

607

Manufacturing, Distribution, and Administration

Office

Toronto, Canada

386

Manufacturing, Distribution, Warehouses, and Administration

Office

Toronto, Canada

386

Manufacturing, Distribution, Warehouses, and Administration

Office

Muskegon, Michigan

367

Manufacturing and Administration

Office

Muskegon, Michigan

367

Manufacturing and Administration

Office

Foligno, Italy

259

Manufacturing, Distribution, Warehouses, and Administration

Office and Lifestyle

Foligno, Italy

259

Manufacturing, Distribution, Warehouses, and Administration

Office and Lifestyle

Graffignana, Italy

108

Manufacturing, Distribution, Warehouses, and Administration

Office

Graffignana, Italy

108

Manufacturing, Distribution, Warehouses, and Administration

Office

Paris, France

Sales Offices

Office and Lifestyle

Paris, France

Sales Offices

Office and Lifestyle

Leased Locations

~~SquareFootage (in thousands)~~

SquareFootage (in thousands)

~~Use~~

~~Reportable Segment~~

Use

Reportable Segment

Miscellaneous Showrooms

~~470~~

556

~~Sales Offices~~

~~Office and Lifestyle~~

Sales Offices

Office and Lifestyle

Allentown, Pennsylvania

~~290~~

290

~~Warehouse, Distribution~~

~~Office and Lifestyle~~

Warehouse, Distribution

Office and Lifestyle

LeGrange Highlands, Illinois

210

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

Ringsted, Denmark

274

Warehouse, Distribution (Muuto, Inc.)

Lifestyle

Muskegon, Michigan

105

Manufacturing

Office

LeGrange Highlands, Illinois

210

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

Toronto, Canada

102

Manufacturing, Warehouses, Distribution and Administration

Office

Portland & Gresham, Oregon

192

Warehouse, Distribution and Administration (Fully)

Office

Buffalo, New York

Manufacturing and Administration (DatesWeiser)

Lifestyle

Kentwood, Michigan

158

Mixing Center, Distribution

Office

Portland, Oregon

Warehouse, Distribution and Administration (Fully)

Office

Buffalo, New York

128

Manufacturing and Administration (DatesWeiser)

Office

Rossville, Maryland

Warehouse, Distribution (Fully)

Office

Quakertown, Pennsylvania

114

Warehouse, Distribution

Lifestyle

New Milford, Connecticut

Manufacturing and Administration (Edelman Leather)

Lifestyle

Toronto, Canada

102

Manufacturing, Warehouses, Distribution and Administration

Office

Getzville, New York

Manufacturing and Administration (Spinneybeck)

Office and Lifestyle

Rossville, Maryland

Warehouse, Distribution (Fully)

Office

East Greenville, Pennsylvania

Warehouse, Distribution

Lifestyle

New Milford, Connecticut

Manufacturing and Administration (Edelman Leather)

Lifestyle

Dallas, Texas

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

New York, New York

Administration

Knoll, Inc.

Chicago, Illinois

Administration (Holly Hunt Enterprises)

Lifestyle

Getzville, New York

Manufacturing and Administration (Spinneybeck)

Office and Lifestyle

Copenhagen, Denmark

Administration (Muuto, Inc.)

Lifestyle

Dallas, Texas

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

Clifton, New Jersey

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

Chicago, Illinois

Administration (Holly Hunt Enterprises)

Lifestyle

Copenhagen, Denmark

Administration (Muuto, Inc.)

Lifestyle

Clifton, New Jersey

Warehouse, Distribution (Holly Hunt Enterprises)

Lifestyle

(1) See Note 22, Subsequent Events, of Notes to the Consolidated Financial Statements.

We believe that our plants and other facilities are sufficient for our needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are subject to litigation or other legal proceedings arising in the ordinary course of business. Based upon information currently known to us, we believe the outcome of such proceedings will not have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

2125

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information ~~and Dividend Policy~~

Our common stock has been listed on the New York Stock Exchange (“NYSE”) since December 14, 2004, the date of our initial public offering, under the symbol “KNL.” As of December 31, ~~2019~~2020, there were approximately ~~382~~353 stockholders of record of our common stock.

Performance Graph

The following line graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor's 500 Stock Index and with the cumulative total return of a peer group of companies selected by us for the period commencing on December 31, ~~2014~~2016 and ending on December 31, ~~2019~~2020. Our share price at the beginning of the measurement period is $2118.1780 per share. The graph and table assume that $100 was invested on December 31, ~~2014~~2016 in each of our common stock, the stock of our peer group, and the S&P 500 Index, and that all dividends were reinvested. Our peer group is made up of ~~six~~five publicly-held companies, Herman Miller, Inc., Steelcase, Inc., HNI Corp, Kimball International Inc., ~~Interface Inc.,~~ and ~~Movado~~Interface ~~Group~~ Inc.. The stock performance on the graph below does not necessarily indicate future price performance.

$100 invested on 12/31/14 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.


	12/16	12/17	12/18	12/19	12/20
Knoll, Inc.	215.52	183.01	134.76	212.47	126.18
S&P 500	128.93	159.40	171.11	166.81	173.97
Peer Group	199.28	195.98	152.45	237.02	203.66

_______________________________________________________________________________

	12/14	12/15	12/16	12/17	12/18	12/19
Knoll, Inc.	100.00	141.44	215.52	183.01	134.76	212.47
S&P 500	100.00	123.37	128.93	159.40	171.11	166.81
Peer Group	100.00	170.15	224.32	232.10	193.60	263.13

* The performance graph and the related chart should not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, unless we specifically incorporate the performance graph by reference therein.

Issuer Purchases of Equity Securities

The following is a summary of share repurchase activity during the three months ended December 31, ~~2019~~2020.

On August 17, 2005, our board of directors approved a stock repurchase program (the “Options Proceeds Program”), whereby they authorized us to purchase shares of our common stock in the open market using the cash proceeds received by us upon exercise of outstanding options.

On February 2, 2006, our board of directors approved an additional stock repurchase program, pursuant to which we are authorized to purchase up to $50.0 million of our common stock in the open market, through privately negotiated transactions, or otherwise. On February 4, 2008, our board of directors expanded this previously authorized $50.0 million stock repurchase program by an additional $50.0 million.

Period	TotalNumber ofSharesPurchased	AveragePrice PaidPer Share		Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs	Maximum Dollar Valueof Shares that May Yetbe Purchased Under thePlans or Programs(1)
October 1, 2019 - October 31, 2019	—	$	—	—	$	32,352,413
November 1, 2019 - November 30, 2019	—	$	—	—	$	32,352,413
December 1, 2019 - December 31, 2019	—			—	$	32,352,413
Total	—			—

During the three months ended December 31, 2020, the Company repurchased 21,419 shares of its common stock, all of which represent repurchase of shares in exchange for the Company's settlement of employee payroll tax obligations related to equity award settlements, as summarized in the table below:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
October 1, 2020 - October 31, 2020	19,427	$	13.03	—	$	32,352,413
November 1, 2020 - November 30, 2020	—	$	—	—	$	32,352,413
December 1, 2020 - December 31, 2020	1,992	$	14.71	—	$	32,352,413
Total	21,419			—

_______________________________________________________________________________

(1) There is no limit on the number or value of shares that may be purchased by us under the Options Proceeds Program. Under our $50.0 million stock repurchase program, which was expanded by an additional $50.0 million in February 2008, we are only authorized to spend an aggregate of $100.0 million on stock repurchases. Amounts in this column represent the amounts that remain available under the $100.0 million stock repurchase program as of the end of the period indicated. There is no scheduled expiration date for the Option Proceeds Program or the $100.0 million stock repurchase program, but our Board of Directors may terminate either program in the future.

2327

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this Form 10-K. The selected consolidated financial data for the years ended December 31, 2017, 2018 and 2019 and as of December 31, 2018 and 2019 are derived from our audited financial statements included elsewhere in this Form 10-K. The selected consolidated financial data for the years ended December 31, 2015 and 2016 and as of December 31, 2015, 2016 and 2017 are derived from our audited financial statements not included in this Form 10-K.

	Consolidated Statements of Operations and Comprehensive Income Data
	Years Ended December 31,
	(dollars in millions, except per share data)
	2015		2016		2017		2018		2019
Sales	$	1,104.4	$	1,164.3	$	1,132.9	$	1,302.3	$	1,428.1
Net earnings	65.9		82.1		80.2		73.3		67.5
Per Share Data:
Earnings per share:
Basic	1.38		1.71		1.66		1.51		1.38
Diluted	1.36		1.68		1.63		1.49		1.36
Cash dividends declared per share:	0.51		0.60		0.60		0.60		0.66

	Consolidated Balance Sheet Data:
	As of December 31,
	2015		2016		2017		2018		2019
	(in millions)
Working capital	$	92.7	$	54.4	$	55.2	$	58.8	$	50.6
Total assets	853.8		858.6		861.0		1,226.9		1,357.9
Total long-term debt, including current portion	219.7		218.4		191.0		461.1		446.0
Total liabilities	598.3		549.1		502.3		840.4		930.3
Total equity	255.5		309.4		358.7		386.5		427.6

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of operations provides an account of our financial performance and financial condition that should be read in conjunction with the accompanying audited consolidated financial statements.

Forward-looking Statements

This annual report on Form 10-K contains forward-looking statements, principally in the sections entitled “Business,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures About Market Risk.” Statements and financial discussion and analysis contained in this Form 10-K that are not historical facts are forward-looking statements. These statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as “"anticipate,”" “"if," "believe,”" ~~“could~~"plan,”", “"goals," "estimate,”" “"expect,”" “"forecast,”" “"intend,”" “"may,”" ~~“possible~~"could,”" ~~“potential~~"should,”" ~~“predict~~"will,”" ~~“project,”~~and or other similar ~~words, phrases or~~ expressions. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry, our ~~publicly announced~~ plans for ~~increased~~reduced capital and ~~investment~~operating ~~spending~~expenditures toand ~~achieve~~enhanced liquidity measures, our ~~long-term~~integration ~~revenue~~of acquired businesses, our supply chain and ~~profitability~~manufacturing ~~growth~~footprint ~~goals~~optimization plans, our ~~integration~~expectations with respect to the impact of ~~acquired~~the ~~businesses~~COVID-19 pandemic and changes in the way companies implement "return to work", "work from home" and remote work strategies, and our expectations with respect to the payment of future dividends and leverage. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: the risks described in Item 1A and in Item 7A of this annual report on Form 10-K; the ultimate duration and severity of the COVID-19 pandemic, changes in the financial stability of our clients or the overall economic environment, resulting in decreased corporate spending and service sector employment; changes in relationships with clients; the mix of products sold and of clients purchasing our products; the success of new technology initiatives; changes in business strategies and decisions; competition from our competitors; our ability to recruit and retain an experienced management team; changes in raw material prices and availability; restrictions on government spending resulting in fewer sales to the U.S. government, one of our largest customers; our debt restrictions on spending; our ability to protect our patents, copyrights and trademarks; our reliance on furniture dealers to produce sales; lawsuits arising from patents, copyrights and trademark infringements; violations of environmental laws and regulations; potential labor disruptions; adequacy of our insurance policies; the availability of future capital and the cost of borrowing; the overall strength and stability of our dealers, suppliers, and customers; access to necessary capital; our ability to successfully integrate acquired businesses; the success of our design and implementation of a new enterprise resource planning system; and currency rate fluctuations. The factors identified above are believed to be important factors but not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material adverse effects on us. All forward-looking statements included in this Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements. Except as required under the Federal securities laws and the rules and regulations of the SEC, we undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

Overview

We design, manufacture, market and sell high-end commercial and residential furniture, accessories, textiles, fine leathers and designer felt for the workplace and residential markets, as well as modern outdoor furniture. We work with clients to create inspired modern interiors. Our design-driven businesses share a reputation for high-quality and sophistication offering a diversified product portfolio that endures throughout evolving trends. Our products are targeted at the middle to upper-end of the market where we reach customers primarily through a broad network of independent dealers and distribution partners, our direct sales force, our showrooms, and our online presence.

COVID-19

The global outbreak of the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. It has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The ultimate extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to manufacture and ship product in the expected timeframe, will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.

During 2020, we experienced a significant decline in our commercial sales volume as a result of a large portion of the North American and European workforce shifting from working in offices to remote working environments. Our commercial clients have delayed or postponed orders, and new order generation was significantly lower than pre-pandemic levels during 2020. In addition, we have experienced the temporary closures of certain facilities. At many of our facilities, we have been experiencing reduced productivity and increased employee absences. As a result of the COVID-19 pandemic and the measures taken to prevent the spread of the disease or to address its effect, a significant number of our employees are working from home, and we have altered our manufacturing operations to allow for appropriate social distancing, hygiene, cleaning, and disinfecting. In our supply chain, we have experienced isolated instances of suppliers temporarily closing their operations, delaying order fulfillment or limiting their production, and we are utilizing alternative supply arrangements as needed.

We have taken steps to address the impacts the COVID-19 pandemic has on the Company in the following ways:

•we amended certain leases to defer rent payments for facilities that we were unable to use during mandated “shelter in place” orders;

•we changed payment terms to customers to offer longer payment terms and larger discounts for prompt payment;

•we furloughed certain employees and executed reductions in force during May and October 2020 to better align staffing with the activity level of the business in an effort to maintain operating margins;

•we implemented a wage freeze and suspended employer 401(k) match contributions, as well as reduced discretionary spending, to maximize liquidity and lower operating expenses;

•we identified five showrooms that we plan to close in cities with a strong independent dealer presence;

•we reduced our quarterly dividend from $0.17 per share in the first quarter of 2020 to $0.04 per share for the second quarter of 2020 and $0.06 per share for the third and fourth quarters of 2020, and

•we entered into an agreement to issue 4.5% cumulative, convertible preferred stock which closed on July 21, 2020, the proceeds from which were used primarily to reduce debt and thereby increasing our liquidity and reducing our net debt leverage.

We believe that we will emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the duration and severity of this global pandemic or its ultimate impact on the global economy and our business and results. Given our financial strength, we expect to be able to maintain adequate liquidity as we manage through the current environment. We will continue to actively monitor the potential impacts of COVID-19 and related events on our industry, the financial markets and the overall economy. In response to the current market environment, we will continue to expand our e-commerce presence, increasing the accessibility of our products to consumers and will continue to expand our work from home offerings.

Business Highlights

During the last decade we have diversified our sources of revenue among our varying operating segments. Over the last ~~two~~three years, our efforts to diversify have included the acquisition of Fully in August 2019, a Portland, Oregon based e-commerce ~~based~~ company servicing the small business and consumer home office market, the acquisition of Muuto in January 2018, a Danish-based global commercial furniture design and distribution company, and multiple organic product development and design projects that have enhanced our portfolio and client offerings. We expect to continue to develop our acquired businesses and expand organically, be acquisitive on an opportunistic basis, ~~and~~ continue our efforts to improve ~~the~~ profitability ofand continue our ~~Office~~efforts ~~segment~~to build our digital presence. We believe we are well positioned to continue to build on these initiatives and to benefit from future workstyles that will include a greater mix of work from home options and the ~~trend~~need for new layouts to ~~more~~facilitate social ~~and~~distancing ~~hospitality-based~~requirements in the workplaces. The greater mix of work from home has led to a shift in the ~~coming~~mix ~~years~~of our revenue to residential end customers, which now represents approximately one-third of our total revenue, up from one-fifth in the prior year period.

Our efforts to diversify our sources of revenue among our operating segments has not detracted from our continued focus on growing and improving the operating performance of our Office segment. The lean initiatives that were executed in 2019 29

25Our efforts to diversify our sources of revenue among our operating segments has not detracted from our continued focus on improving the operating performance of our Office segment. We announced a restructuring plan in January 2020 involving a reduction of our fixed cost footprint that will occur over the next two years and will yield significant savings on an annualized basis as we near the end of 2021. A significant component of the plan involved the closure and sale of our Grand Rapids, Michigan facility, which was completed at the end of the second quarter of 2020. Additionally, we executed further reductions in force of approximately 20% of our global workforce. The lean initiatives that were executed over the past several years, as well as the cost cutting initiatives described above, have helped to temper the margin impacts from reduced sales volume because of the current economic environment.

have contributed greatly to the improvements in gross margin, and we expect more positive contributions in this area as we move into 2020. In addition, we just announced a restructuring plan in January 2020 involving a reduction of our fixed cost footprint that will occur over the next two years and will yield significant savings on an annualized basis as we near the end of 2021. We are looking beyond the traditional office product categories of systems, task seating and storage, to furniture that supports activity areas and the in-between spaces where people meet. Additionally, we believe that our success in traditional office products gives us an advantage throughout the workplace. ~~Our~~The ~~Rockwell~~commercial ~~Unscripted~~market ~~collection,~~has asdecreased ~~well~~with aspeople ~~Muuto~~working ~~offerings~~remotely, ~~encompass~~and ~~every~~we ~~product~~expect ~~category~~that ~~ranging~~trend ~~from~~to ~~seating~~continue ~~and~~into ~~lounge~~2021. toWhile ~~architectural~~we ~~walls~~are ~~and~~unsure ~~storage.~~how ~~These~~long ~~offerings address~~ the ~~needs~~decline ofwill ~~organizations~~last, ~~that~~we ~~seek~~believe ~~alternatives~~the todecline ~~the~~will ~~traditional~~extend ~~workspace~~into ~~and~~2021. ~~are~~Over ~~substantially~~the ~~additive~~long toterm, ~~our~~the ~~current~~office ~~product~~will ~~portfolio.~~remain ~~The~~an ~~acquisition~~indispensable part of ~~Fully~~the inworkplace ~~August~~ecosystem ~~2019,~~and ~~provides~~we ~~the~~anticipate ~~Office~~an ~~segment~~increase ~~with~~in ~~high-quality,~~demand ~~cost~~when ~~effective~~businesses ~~complement~~do return to ~~our~~the ~~portfolio of~~ office. ~~solutions~~However, ~~while~~the ~~also broadening our outreach to small~~ business ~~and~~landscape ~~consumer~~will ~~markets~~be ~~through~~a andynamic ~~e-commerce~~that ~~platform. We~~includes ~~aim~~a tomore ~~increase~~permanent ~~profitability~~work ~~with~~from ~~these~~home ~~product~~component ~~initiatives,~~in ~~operational~~an ~~improvements~~overall weenvironment ~~have~~that ~~discussed,~~continues ~~and~~to ~~investments~~elevate inthe ~~our~~importance ~~physical~~of ~~and~~a ~~technological~~well-designed ~~infrastructure~~home.

WeEven ~~have~~prior ~~also~~to ~~remained~~the ~~committed~~COVID-19 topandemic, ~~building~~we abegan ~~more~~to ~~efficient~~develop ~~and~~our ~~responsive~~digital ~~customer~~offerings ~~centric~~to ~~service~~address ~~culture~~the ~~and~~changing ~~technology~~landscape ~~infrastructure~~of ~~across~~how ~~our~~individual ~~organization.~~consumers Inand ~~2019,~~small webusinesses ~~completed~~solve the ~~technology~~productivity ~~implementation~~and ergonomic needs of the ~~order~~home ~~management~~and ~~functions~~small asoffice. ~~part~~The acquisition of ~~our~~Fully ~~overall~~continues ~~enterprise~~to ~~resource~~broaden ~~planning~~our ~~strategy,~~outreach to consumer and ~~deployed~~small ~~front-~~business end, 3markets through a digitally native e-~~dimensional~~commerce ~~rendering~~platform. ~~tools~~Since ~~that~~the ~~our~~pandemic ~~clients~~began in March 2020 in the US, ~~dealers~~we ~~and~~have ~~design~~experienced ~~partners~~significant ~~can~~growth ~~use~~in tothe ~~efficiently~~work-from-home ~~visualize~~market. ~~and~~To ~~build~~take ~~out~~advantage ~~spaces~~of the growing work-from-home market, ~~and~~we ~~then~~launched ~~translate~~“Knoll ~~into~~+ anMuuto ~~order~~Work ~~instantaneously.~~from ~~These~~Home” furniture, lighting and ~~other~~accessories ~~investments~~through ~~have~~our ~~made~~existing ~~customer-facing~~knoll.com ~~touchpoints~~website ~~meaningfully~~in ~~easier~~July 2020, which responds to dothe ~~business~~need ~~with~~for ~~us.~~good ~~Our~~design ~~capital~~in ~~expenditures~~today’s ~~are~~work ~~reflective~~from ofhome ~~our~~lifestyle. ~~commitment~~Consumers tocan ~~improving~~now ~~efficiency~~shop ~~and~~online ~~expanding~~for ~~our~~work ~~product~~from ~~portfolio,~~home asproducts wethat ~~have~~bring ~~continued~~the trademark design, comfort and ~~expect~~performance toof ~~continue,~~the Knoll and Muuto brands to ~~invest~~their indoorsteps. ~~the~~We ~~business~~aim ~~through~~to ~~technology~~increase ~~infrastructure~~profitability ~~upgrades~~with these product initiatives, ~~continued~~operational ~~investments~~improvements inwe ~~our~~have ~~manufacturing~~discussed, ~~facilities~~and ~~focusing~~investments onin ~~lean~~our ~~initiatives,~~physical and ~~showroom~~technological ~~presence~~infrastructure.

We can leverage the breadth of our product portfolio across our multidimensional distribution channels where it is rational, taking advantage of whichever market opportunity may be the healthiest and most fruitful. Whether online, in our own New York and Los Angeles retail shops, at to-the-trade showrooms in high end design centers or through more traditional residential retailers and contract furniture dealers and showrooms, our distribution strategy offers customers the flexibility to access our product solutions easily on their own terms. As a result, we have been able to take advantage of the rapid shift to work from home while simultaneously benefiting from the investments consumers are making in their residences, as furnishings become a larger percentage of consumer discretionary spending.

We expect the work from home market and e-commerce channels to continue to grow significantly over the next year, and we are leveraging our physical and growing digital capabilities to drive growth in our residential businesses. In September 2020, we launched the most significant overhaul of our hollyhunt.com web presence and online capability since we acquired the business in 2014. The site extends our singular showroom platform and curated multi-brand collection into the digital space which offers clients and specifiers unprecedented ease of doing business and can grow in ways that we believe could bring real innovation into a traditionally staid to-the-trade market.

Similarly, we have introduced digital technologies in our Knoll shops in New York and Los Angeles, locations that are not only driving local growth but also are helping us work remotely with designers and clients in other geographies. It is critical that we continue to leverage these bricks and mortar selling investments on a broader scale. In tandem with our growing success digitally and our relationships with residential dealers and electronic retailers in Europe and Asia, we are also focusing on expanding the breadth of our Muuto and KnollStudio residential offerings into under-penetrated home categories with meaningful growth potential. Our e-commerce sales represent over 10% of our total sales in the fourth quarter of 2020, up from 3% for the same period a year ago due to our organic investments in Knoll+Muuto and the Fully acquisition.

We also remain committed to building a more efficient and responsive, customer-centric service culture and technology infrastructure across our organization. In 2019, we completed the technology implementation of the order management functions as part of our overall enterprise resource planning strategy, and deployed front-end, 3-dimensional rendering tools that our clients, dealers and design partners can use to efficiently visualize and build out spaces, and then translate into an order instantaneously. These and other investments have made customer-facing touchpoints meaningfully easier to do business with us. Our capital expenditures are reflective of our commitment to improving efficiency and expanding our product portfolio, as we have continued, and expect to continue, to invest in the business through technology

infrastructure upgrades, continued investments in our manufacturing facilities focusing on lean initiatives and showroom presence.

We are carefully evaluating the longer-term impacts of the COVID-19 pandemic in relation to our business. While we expect changes in the way our clients work and live, the details and extent of those changes are not knowable at this time. However, we are confident in our overall capabilities and our ability to evolve our own strategy as we participate in, and, in many cases, lead changes in our industry.

Results of Operations

Comparison of Consolidated Results for the Years Ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019

	~~Year Ended December 31,~~			Year Ended December 31,			~~2019 vs. 2018~~						2020 vs. 2019
	2019			2018			$ Change				% Change
				2020					2019				$ Change		% Change
	~~(Dollar in millions)~~			(Dollar in millions)
Net Sales	$	~~1,428.1~~		$	1,~~302~~236.34		$	~~125.8~~	$	1,428.1	~~9.7~~	%	$	(191.7)	(13.4)	%
Gross profit	~~549.0~~			~~481~~442.57			~~67.5~~		549.0		~~14.0~~	%	(106.3)		(19.4)	%
Selling, general, and administrative expenses	~~411.9~~			~~363~~375.74			~~48.2~~		411.9		~~13.3~~	%	(36.5)		(8.9)	%
Restructuring charges	~~0.8~~			225.69			~~(1.8~~		)0.8		~~(68.3~~	)%	25.1		3,023.9	%
Intangible asset impairment charge	6.5			—			6.5				100.0	%
Loss on fair value measurements				13.8					6.5				7.3		111.8	%
Operating profit	~~129.8~~			~~115~~27.26			~~14.6~~		129.8		~~12.6~~	%	(102.2)		(78.7)	%
Pension settlement charge	21.0			5.7			15.3				265.8	%
Pension settlement charges				4.8					21.0				(16.2)		(77.1)	%
Interest expense	21.7			20.9			0.8				4.0	%
Interest expense, net				17.4					21.7				(4.3)		(20.2)	%
Other expense (income), net	~~(3.8~~		)	(91.65)		)	~~5.8~~		(3.8)		~~(60.0~~	)%	2.3		(61.6)	%
Income tax expense	23.4			24.9			(1.5		)		(5.9	)%
Income tax expense (benefit)				(0.8)					23.4				(24.2)		(103.0)	%
Net earnings	~~67.5~~			737.37			~~(5.8~~		)67.5		~~(8.0~~	)%	(59.8)		(88.7)	%
Net earnings attributable to Knoll, Inc. stockholders	~~67.5~~			734.34			~~(5.8~~		)67.5		~~(8.0~~	)%	(63.1)		(93.5)	%
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	~~1.38~~		$	10.5109		$	~~(0.13~~	)$	1.38	~~(8.6~~	)%	$	(1.29)	(93.5)	%
Diluted	$	~~1.36~~		$	10.4909		$	~~(0.13~~	)$	1.36	~~(8.7~~	)%	$	(1.27)	(93.4)	%
Statistical Data
Gross profit %	~~38.4~~		%	3735.08		%			38.4		%
Operating profit %	~~9.1~~		%	82.82		%			9.1		%

Net Sales

Net sales for the year ended December 31, ~~2019~~2020 were $1,~~428~~236.14 million, ana ~~increase~~decrease of $~~125~~191.87 million, or 913.74%, from sales of $1,~~302~~428.31 million for the year ended December 31, ~~2018~~2019. Net sales for the ~~Office~~Company ~~segment~~decreased ~~were~~primarily ~~$873.8~~due ~~million~~to ~~during~~a ~~the~~significant ~~year~~decline ~~ended~~in ~~2019,~~volume anrelated ~~increase of $76.7 million, or 9.6% compared~~ to the ~~year~~impacts ~~ended~~on ~~2018.~~market ~~The~~demand ~~Office~~from ~~segment~~the ~~sales growth was primarily due to improved performance in height~~COVID-~~adjustable~~19 ~~tables~~pandemic, ~~newer~~partially ~~office~~offset ~~systems~~by ~~products,~~the ~~conference~~full ~~room~~year ~~solutions~~inclusion ~~and four months~~ of Fully’s ~~sales~~work-from-home ~~since~~e-commerce ~~acquisition.~~revenue, ~~Net~~which ~~sales~~was ~~for~~acquired ~~the~~in ~~Lifestyle~~August ~~segment were $554.3 million during the year ended~~ 2019, anas ~~increase~~well ofas ~~9.7%~~higher ~~compared with the year ended 2018. This increase was primarily driven by strong growth in cross~~e-~~over~~commerce ~~sales~~and ~~into~~residential ~~commercial workplace settings, particularly at Muuto~~demand.

Gross Profit

Gross profit for ~~2019~~2020 was $~~549~~442.07 million, ana ~~increase~~decrease of $67106.53 million, or 1419.04%, from gross profit of $~~481~~549.50 million in ~~2018~~2019. During the year ended ~~2019~~2020, gross margin ~~increased~~decreased to 3835.48% from 3738.04% in the year ended ~~2018~~2019. The ~~increase~~decrease in gross margin was ~~mainly~~due ~~driven~~primarily byto ~~continuous~~unfavorable ~~improvement~~fixed ~~activities,~~cost ~~net~~leverage ~~price~~from ~~realization~~decreased ~~and higher~~ volume absorption ~~of fixed costs~~, partially offset by ~~commodity~~positive ~~and~~net ~~transportation~~price ~~inflation as well as higher tariffs during the year~~realization.

Operating Profit

Operating profit for ~~2019~~2020 was $~~129~~27.86 million, ana ~~increase~~decrease of $14102.62 million, or 1278.67%, from operating profit of $~~115~~129.28 million for ~~2018~~2019. Operating profit as a percentage of sales ~~increased~~decreased from 89.81% in ~~2018~~2019 to 92.12% in ~~2019~~2020.

Operating expenses were $419.2 million for the year ended 2019, or 29.4% of net sales, compared to $366.3 million, or 28.1% of net sales, for the year ended 2018. The increase in operating expenses was related primarily to higher incentive-based compensation resulting from increased volume, strategic investments in sales force headcount, information technology infrastructure, and investments in our showrooms, as well as the inclusion of a partial-year of Fully results. Operating expenses also included $6.5 million of intangible asset impairment. 31

Operating expenses were $415.1 million for the year ended 2020, or 33.6% of net sales, compared to $419.2 million, or 29.4% of net sales, for the year ended 2019. The decrease in operating expenses was related primarily to a reduction of Selling, general and administrative expenses due to reduced employment costs including workforce reduction actions, lower volume-based compensation, and lower benefit costs, combined with reduced discretionary spending partially offset by the inclusion of Fully, restructuring charges associated with the Company’s closure of its Grand Rapids, Michigan manufacturing plant and consolidation of operations into its remaining North American manufacturing plants. Operating expenses also included a $12.4 million contingent consideration remeasurement charge related to Fully and a $1.4 million of intangible asset impairment in 2020, and $6.5 million of intangible asset impairment in 2019.

Pension Settlement Charge

In 2020, the Company incurred $4.8 million of pension settlement charges that resulted from cash payments of lump-sum elections. In 2019, the Company incurred of $21.0 million of pension settlement charges that primarily resulted from the purchase of annuities and lump -sum payouts in connection with the termination of the Company's pension plan for union employees. In addition, the Company incurred settlement charges resulting from cash payments of lump-sum elections related to the Company's pension plan for non-union employees. ~~In 2018, the Company incurred of $5.7 million of pension settlement charges related to the purchase of annuities for certain pension plan retirees as well as cash payments from lump sum elections.~~

Interest Expense

Interest expense for ~~2019~~2020 was $2117.74 million, ana ~~increase~~decrease of $04.83 million from $2021.97 million for ~~2018~~2019. The ~~increase~~decrease in interest expense was due primarily to ~~higher~~lower ~~weighted-~~average ~~interest~~debt ~~rates~~balances during ~~2019~~2020. During ~~2019~~2020 and ~~2018~~2019, the Company's weighted average interest rates were approximately 3.94% and 3.69%, respectively.

Other Income, net

Other income in ~~2019~~2020 was $31.85 million compared to $93.68 million in ~~2018~~2019. Other income decreased in ~~2019~~2020 primarily due to ~~foreign~~a ~~exchange~~reduction ~~losses~~ of ~~$1.5 million in 2019 compared to foreign exchange gains of $2.0 million in 2018, as well as reduced net periodic benefit income from the Company's~~ pension ~~and other post-employment benefit plans~~income.

Income Tax Expense (Benefit)

~~The~~On ~~effective~~March ~~tax rate for the year ended December 31~~27, ~~2019 was 25.8%~~2020, ~~compared~~the ~~to 25~~U.~~4% for 2018~~S. ~~The~~government ~~increase~~enacted ~~in our effective~~ tax ~~rate~~legislation ~~was~~under ~~primarily~~the ~~due~~Coronavirus toAid, ~~increases~~Relief, inand ~~domestic~~Economic ~~apportionment~~Security ~~percentages~~Act ~~to certain high-tax state jurisdictions~~ (CA“CARES ~~and~~Act”) ~~NY,~~in ~~primarily)~~response ~~and~~to the ~~change~~economic inimpacts of the ~~mix~~spread of ~~pre~~COVID-~~tax income between the U~~19.S. ~~and~~The ~~certain~~CARES ~~foreign~~Act ~~jurisdictions~~provides, inamong ~~which~~other wethings, ~~operate.~~relief ~~This~~to ~~increase~~corporate ~~was~~taxpayers ~~partially offset~~ by ~~return~~permitting toadditional ~~provision~~carryback ~~adjustments~~allowances ~~related~~for tonet ~~the~~operating ~~results~~losses of(“NOLs”) ~~examinations~~incurred offor ~~certain~~periods ofbeginning ~~our~~after ~~tax~~January ~~filings~~1, ~~from~~2017 ~~prior~~and ~~years.~~before ~~During~~January ~~2018~~1, we2021. ~~also~~The ~~recognized~~CARES aAct ~~one-time~~also ~~tax~~provides ~~benefit~~changes ofto ~~$1.7 million in connection with~~ the ~~completion~~limitation ofon ~~our~~interest ~~accounting~~expense deductibility for ~~the~~tax ~~provisional~~years ~~amounts~~beginning ~~recognized~~ in ~~December~~2019 ~~2017 related to The Tax Cuts~~ and ~~Jobs Act of 2017~~2020.

27The Company recognized an income tax benefit for the year ended December 31, 2020 at an effective rate of 10.7%, compared to income tax expense at an effective rate of 25.8% for 2019. The change in the effective rate at which a tax benefit or expense was recognized for 2020 and 2019, was primarily driven by the period over period decrease in pretax book income and the impact of the CARES Act (specifically, the rate differential on the carryback of NOLs to years where the U.S. federal income tax rate was 35.0%, compared to the current rate of 21.0%). Additional factors impacting the change in rates include vesting of equity awards, discrete significant restructuring costs, and changes in the relative taxable income in the countries and states in which the Company operates.

~~Comparison of Consolidated Results for the Years Ended December 31, 2018 and December 31, 2017~~ 32

	Year Ended December 31,						2018 vs. 2017
	2018			2017			$ Change			% Change
	(Dollar in millions)
Sales	$	1,302.3		$	1,132.9		$	169.4		15.0	%
Gross profit	481.5			414.6			66.9			16.1	%
Operating profit	115.2			80.5			34.7			43.1	%
Pension settlement charge	5.7			2.2			3.5			165.3	%
Interest expense	20.9			7.4			13.5			179.4	%
Other income, net	(9.6		)	(7.7		)	(1.9		)	24.7	%
Income tax expense (benefit)	24.9			(1.6		)	26.5			(1,656.0	)%
Net earnings	73.3			80.2			(6.9		)	(8.6	)%
Net earnings attributable to Knoll, Inc. stockholders	73.3			80.2			(6.9		)	(8.6	)%
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	1.51		$	1.66		$	(0.15	)	(9.0	)%
Diluted	$	1.49		$	1.63		$	(0.14	)	(8.6	)%
Statistical Data
Gross profit %	37.0		%	36.6		%
Operating profit %	8.8		%	7.1		%

Comparison of Consolidated Results for the Years Ended December 31, 2019 and December 31, 2018

See the Knoll, Inc. 2018 annual report on Form 10-K for discussion related to the 2018 versus 2017 comparison of consolidated results.


	Year Ended December 31,	2019 vs. 2018
		2019			2018			$ Change		% Change
		(Dollar in millions)
Sales		$	1,428.1		$	1,302.3		$	125.8	9.7	%
Gross profit		549.0			481.5			67.5		14.0	%
Selling, general, and administrative expenses		411.9			363.7			48.2		13.3	%
Restructuring charges		0.8			2.6			(1.8)		(68.3)	%
Intangible asset impairment charge		6.5			—			6.5		100.0	%
Operating profit		129.8			115.2			14.6		12.6	%
Pension settlement charge		21.0			5.7			15.3		265.8	%
Interest expense		21.7			20.9			0.8		4.0	%
Other income, net		(3.8)			(9.6)			5.8		(60.0)	%
Income tax expense		23.4			24.9			(1.5)		(5.9)	%
Net earnings		67.5			73.3			(5.8)		(8.0)	%
Net earnings attributable to Knoll, Inc. stockholders		67.5			73.3			(5.8)		(8.0)	%
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic		$	1.38		$	1.51		$	(0.13)	(8.6)	%
Diluted		$	1.36		$	1.49		$	(0.13)	(8.7)	%
Statistical Data
Gross profit %		38.4		%	37.0		%
Operating profit %		9.1		%	8.8		%

A discussion of our financial performance for the year ended December 31, 2019 compared to the year ended December 31, 2018 can be found under the same captions in Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 21, 2020.

Segment Reporting

The Company manages our business through our reportable segments: Office and Lifestyle. All unallocated expenses are included within Corporate. The Office segment includes a complete range of workplace products that address diverse workplace planning paradigms in North America and Europe, while the Lifestyle segment includes high quality residential furniture, ancillary products and affordable luxury furnishings for high performance workplaces, as well as uber-luxury living spaces to affordable-luxury residential living.

See Item 1 Business contained in this annual report on Form 10-K for further information regarding the business segments.

The comparisons of segment results found below present our segment information with Corporate costs excluded from operating segment results.

~~Comparison of Segment Results for the Years Ended December 31, 2019 and December 31, 2018~~33

	Year Ended December 31,						2019 vs. 2018
	2019			2018			$ Change			% Change
	(Dollar in millions)
SALES
Office	$	873.8		$	797.1		$	76.7		9.6	%
Lifestyle	554.3			505.2			49.1			9.7	%
Corporate	—			—			—			—	%
Knoll, Inc.	$	1,428.1		$	1,302.3		$	125.8		9.7	%
OPERATING PROFIT (1)
Office	$	64.2		$	49.5		$	14.7		29.7	%
Lifestyle	90.2			90.0			0.2			0.2	%
Corporate	(24.6		)	(24.3		)	(0.3		)	12.3	%
Knoll, Inc.	$	129.8		$	115.2		$	14.6		12.7	%

Comparison of Segment Results for the Years Ended December 31, 2020 and December 31, 2019


	Year Ended December 31,				2020 vs. 2019
	2020		2019		$ Change		% Change
	(Dollar in millions)
SALES
Office	$	775.7	$	873.8	$	(98.1)	(11.2)	%
Lifestyle	460.7		554.3		(93.6)		(16.9)	%
Corporate	—		—		—		—	%
Knoll, Inc.	$	1,236.4	$	1,428.1	$	(191.7)	(13.4)	%
OPERATING PROFIT (1)
Office	$	8.4	$	64.2	$	(55.8)	(86.9)	%
Lifestyle	56.9		90.2		(33.3)		(36.9)	%
Corporate	(37.7)		(24.6)		(13.1)		12.3	%
Knoll, Inc.	$	27.6	$	129.8	$	(102.2)	(78.7)	%

(1) The Company does not allocate interest expense or other (income) expense, net to the reportable segments.

Office

Net sales for the Office segment in ~~2019~~2020 were $~~873~~775.87 million, ana ~~increase~~decrease of $7698.71 million, or 911.62%, when compared with ~~2018~~2019. The ~~increase~~decrease inwas ~~the~~driven ~~Office~~primarily ~~segment~~by ~~was~~a ~~due~~significant todecline ~~improved~~in ~~performance~~volume inrelated ~~height-adjustable~~to ~~tables,~~the ~~newer~~impacts ~~office~~on ~~systems~~the ~~products~~market demand from COVID-19, ~~conference~~partially ~~room~~offset ~~solutions~~by ~~and~~the ~~four~~inclusion ~~months~~of a full year of Fully’s ~~sales~~work-from-home ~~since~~e-commerce ~~acquisition~~revenue. Fully was acquired in August 2019. Operating profit for the Office segment in ~~2019~~2020 was $648.24 million, ana ~~increase~~decrease of $1455.78 million, or 2986.79%, when compared with ~~2018~~2019. The ~~increase~~decrease inwas ~~operating~~due ~~profit~~primarily ~~for~~to ~~the~~lower ~~Office~~sales ~~segment~~from ~~was~~reduced ~~due~~volume, ~~primarily~~restructuring charges related to ~~increased~~our ~~sales~~previously ~~volume~~announced ~~and~~plans ~~continuous~~to ~~improvement~~close ~~initiatives,~~our ~~partially~~Grand ~~offset~~Rapids, byMichigan ~~commodity~~manufacturing plant and ~~transportation~~consolidate ~~inflation~~operations aswithin ~~well~~our asremaining ~~higher~~North ~~tariffs~~American ~~combined~~manufacturing ~~with~~plants, ~~strategic~~and ~~investments~~unfavorable fixed cost leverage in ~~sales~~our ~~force~~manufacturing ~~headcount,~~facilities ~~information~~from ~~technology~~decreased ~~infrastructure~~volume absorption. These costs were partially offset by reduced operating expenses primarily related to lower volume-based compensation, ~~and~~employee-related ~~investments~~costs infrom ~~our~~headcount ~~showrooms~~reduction ~~during~~actions ~~the~~and ~~year~~discretionary spending.

Lifestyle

Net sales for the Lifestyle segment in ~~2019~~2020 were $~~554~~460.37 million, ana ~~increase~~decrease of $4993.16 million, or 916.79%, when compared with ~~2018~~2019. This ~~increase~~decrease was ~~driven~~due byto ~~strong~~the ~~growth~~government-mandated inclosures ~~cross-over~~of ~~sales~~showroom ~~into~~and ~~commercial~~retail ~~workplace~~locations ~~settings~~during the second quarter of 2020, ~~particularly~~as atwell ~~Muuto~~as decreased volume resulting from the impacts on the market from COVID-19, partially offset by strong e-commerce and residential demand. Operating profit for the Lifestyle segment in ~~2019~~2020 was $9056.29 million, ana ~~increase~~decrease of $033.23 million, or 036.29%, when compared with ~~2018~~2019. The ~~increase~~decrease in operating profit for the Lifestyle segment was due primarily to ~~increased~~lower sales, unfavorable fixed cost leverage from decreased volume, ~~mostly~~partially offset by ~~the~~reduced ~~$6.5~~operating ~~million~~expenses ~~intangible~~primarily ~~asset~~related ~~impairment~~to ~~charge,~~lower ~~additional~~volume-based ~~investment~~compensation, ~~spending~~employee-related incosts ~~product~~from ~~launches~~headcount ~~and~~reduction ~~showrooms~~actions and ~~strategic~~discretionary ~~investments in sales-force headcount~~spending.

Corporate

Corporate costs in ~~2019~~2020 were $2437.67 million, an increase of $013.31 million, or 12.3%, when compared with ~~2018~~2019. The increase ~~was~~is ~~driven~~due byprimarily ~~costs~~to ~~incurred~~the in$12.4 ~~connection~~million ~~with~~charge ~~amending~~for ~~and~~the ~~extending~~remeasurement of contingent consideration related to the ~~Company's~~Fully ~~Amended~~acquisition, ~~Credit~~and ~~Facility~~workforce reduction charges related to COVID-19, partially offset by ~~lower~~reduced ~~acquisition~~employee-related costs from headcount reduction actions and discretionary spending.

~~Comparison of Segment Results for the Years Ended December 31, 2018 and December 31, 2017~~ 34

	Year Ended December 31,						2018 vs. 2017
	2018			2017			$ Change			% Change
	(Dollar in millions)
SALES
Office	$	797.1		$	733.3		$	63.8		8.7	%
Lifestyle	505.2			399.6			105.6			26.4	%
Corporate	—			—			—			—	%
Knoll, Inc.	$	1,302.3		$	1,132.9		$	169.4		15.0	%
OPERATING PROFIT (1)
Office	$	49.5		$	26.1		$	23.4		89.7	%
Lifestyle	90.0			78.5			11.5			14.6	%
Corporate	(24.3		)	(24.1		)	(0.2		)	15.1	%
Knoll, Inc.	$	115.2		$	80.5		$	34.7		43.1	%

Comparison of Segment Results for the Years Ended December 31, 2019 and December 31, 2018

(1) The Company does not allocate interest expense or other (income) expense, net to the reportable segments.


	Year Ended December 31,	2019 vs. 2018
		2019		2018		$ Change		% Change
		(Dollar in millions)
SALES
Office		$	873.8	$	797.1	$	76.7	9.6	%
Lifestyle		554.3		505.2		49.1		9.7	%
Corporate		—		—		—		—	%
Knoll, Inc.		$	1,428.1	$	1,302.3	$	125.8	9.7	%
OPERATING PROFIT (1)
Office		$	64.2	$	49.5	$	14.7	29.7	%
Lifestyle		90.2		90.0		0.2		0.2	%
Corporate		(24.6)		(24.3)		(0.3)		15.1	%
Knoll, Inc.		$	129.8	$	115.2	$	14.6	12.7	%

~~See~~(1)The ~~the~~Company ~~Knoll,~~does ~~Inc.~~not ~~2018~~allocate ~~annual~~interest ~~report~~expense onor ~~Form~~other ~~10-K~~(income) ~~for~~expense, ~~discussion~~net ~~related~~ to the ~~2018~~reportable ~~versus 2017 comparison of consolidated result~~segments.

29A discussion of our financial performance for the year ended December 31, 2019 compared to the year ended December 31, 2018 can be found under the same captions in Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 21, 2020.

Foreign and Domestic Operations

Our principal manufacturing operations and markets are in North America, and ~~we also have manufacturing operations and markets in~~ Europe. See Note 2122, Segments, of Notes to the Consolidated Financial Statements contained elsewhere herein for our sales to clients and net property, plant and equipment summarized by geographic areas. Sales are attributed to the geographic areas based on the origin of sale.

Liquidity and Capital Resources

The following table highlights certain key cash ~~flows~~flow and capital information pertinent to the discussion that follows:

	2019			2018			2017
				2020					2019		2018
	~~(in thousands)~~			(in thousands)
Cash provided by operating activities	$	~~138.2~~		$	~~108~~60.27		$	~~103.7~~	$	138.2	$	108.2
Capital expenditures, net	(49.9		)	(40.3		)	(40.6		)
Purchases of property and equipment				(43.3)					(49.9)		(40.3)
Purchase of businesses, net of cash acquired	~~(30.9~~		)	~~(308.0~~—		)	—		(30.9)		(308.0)
Cash used in investing activities	(80.7		)	(348.3		)	(40.6		)
Proceeds from sales of property and equipment				12.3					0.1		—
Purchase of common stock for treasury	(3.3		)	(4.4		)	(10.9		)
Cash used in investing activities				(30.9)					(80.7)		(348.3)
Proceeds from credit facilities	417.5			490.5			310.0
Payments of withholding taxes related to net share settlements of equity awards				(4.3)					(3.3)		(4.4)
Repayment of credit facilities	(413.5		)	(383.0		)	(338.0		)
Proceeds from revolving credit facilities				414.5					417.5		490.5
Proceeds from term loan	—			350.2			—
Repayment of revolving credit facilities				(492.0)					(413.5)		(383.0)
Repayment of term loans	(17.1		)	(177.9		)	—
Proceeds from term loans				—					—		350.2
Payment of dividends	(32.8		)	(30.0		)	(30.2		)
Repayment of term loans				(65.9)					(17.1)		(177.9)
Proceeds from issuance of common stock	—			—			0.6
Payment of dividends				(16.9)					(32.8)		(30.0)
Cash (used in) provided by financing activities	(50.7		)	239.8			(74.5		)
Proceeds from issuance of preferred stock, net				161.8					—		—
Cash (used in) provided by financing activities				(3.1)					(50.7)		239.8

As of the dates presented, we had the following sources of liquidity to support our business (in millions):

	~~December 31,~~		December 31,
	2019		2018
			2020		2019
Cash	$	~~8.5~~	$	137.63	$	8.5
Availability under revolving credit facility	256.4		260.3
Availability under revolving credit facility (1)			333.9		256.4

We(1)The ~~have~~Company's ~~historically~~actual ~~funded~~borrowing ~~our~~availability ~~business~~under ~~through cash generated from operations, supplemented by debt borrowings. Available cash is primarily used for our working capital needs, ongoing operations, capital expenditures,~~ the ~~payment~~Revolver ofas ~~quarterly dividends, and the repurchase~~ of ~~shares.~~December ~~Our investment in capital expenditures illustrates our commitment to improving our operating efficiency~~31, ~~innovation~~2020 ~~and~~is ~~modernization,~~constrained ~~showroom~~by ~~investment,~~certain ~~new~~financial ~~product tooling, manufacturing equipment and technology infrastructure~~covenants. ~~During 2019, we made annual dividend payments of $0.66 per share, returning $32.8 million of cash to our shareholders.~~

Cash provided by operating activities was $138.2 million, $108.2 million, and $103.7 million in 2019, 2018 and 2017, respectively. For the year ended December 31, 2019, cash provided by operating activities consisted primarily of $67.5 million of net income and $82.7 million of various non-cash charges, including $39.5 million of depreciation and amortization, $10.8 million of stock-based compensation, $21.0 million of pension settlement charges and $6.5 million intangible asset impairment. These favorable changes were partially offset by $12.0 million of unfavorable changes in assets and liabilities primarily driven by increased inventory as a result of ramping up inventory for our current order backlog and lower accrued expenses. For the year ended December 31, 2018, cash provided by operating activities consisted primarily of $73.3 million of net income and $61.4 million of various non-cash charges, including $35.3 million of depreciation and amortization, $9.2 million of stock-based compensation, $5.7 million pension settlement charges and a $4.8 million provision for deferred income taxes, offset in part by $26.5 million of unfavorable changes in assets and liabilities primarily driven by growth in accounts receivable and inventory as a result of growth in sales and ramping up inventory for our current order backlog.

~~Investing~~We ~~activities~~have ~~for~~historically ~~the~~funded ~~year~~our ~~ended~~business ~~December 31,~~through ~~2019~~cash ~~included~~generated ~~the~~from ~~purchase~~operations, ofsupplemented ~~Fully~~by ~~for~~debt ~~$30~~borrowings.9 ~~million,~~Available ~~net of~~ cash ~~acquired.~~is Inprimarily ~~addition, we~~ used ~~$49.9~~for ~~million~~our ofworking ~~cash for~~ capital ~~expenditures.~~needs, ~~During~~ongoing ~~2018~~operations, wecapital ~~used $308.0 million~~expenditures, ~~net~~the payment of ~~cash~~quarterly ~~acquired~~dividends, ~~for~~and the ~~purchase~~repurchase of ~~Muuto and $40~~shares.3 ~~million~~During of2020, ~~cash~~we ~~for~~made ~~capital~~annual ~~expenditures.~~dividend ~~The~~payments ~~capital expenditures are reflective~~ of ~~our~~$0.33 ~~commitment~~per ~~to enhance and modernize our sales~~share, ~~manufacturing~~returning ~~and information technology infrastructure~~$16.9 ~~Acquisitions~~million ~~are~~of ~~reflective~~cash ofto our ~~strategy~~shareholders. ofDividend ~~building~~payments ~~our~~declined ~~global~~from ~~capabilities~~$0.68 asper ashare ~~singular~~in ~~resource~~2019, ~~for~~or ~~high-design~~$32.8 ~~workplaces~~million ~~and~~in ~~homes~~cash.

30Cash provided by operating activities was $60.7 million, $138.2 million, and $108.2 million in 2020, 2019 and 2018, respectively. For the year ended December 31, 2020, cash provided by operating activities consisted primarily of $7.7 million of net income and $82.8 million of various non-cash charges, including $43.3 million of depreciation and amortization, $12.9 million of stock-based compensation, $12.5 million from a loss on the fair value remeasurement of contingent consideration, $4.8 million of pension settlement charges, $4.3 million of deferred income tax expense and $3.7 million of inventory obsolescence. These cash earnings were partially offset by $29.8 million of unfavorable changes in working capital driven by a decrease in Accounts payable and other liabilities, partially offset by a decrease in Customer receivables.

~~During~~For the year ended December 31, 2019, wecash ~~entered~~provided ~~into~~by aoperating ~~first~~activities ~~amendment~~consisted toprimarily ~~the Third Amended and Restated Credit Agreement (the "Credit Agreement Amendment"), dated as~~ of ~~January 23, 2018 (together, as amended, the "Credit Agreement")~~$67.5 ~~Among~~million ~~other things, the Credit Agreement Amendment extends the maturity~~ of ~~the~~net ~~credit~~income ~~facility~~and ~~from January 2023 to August 2024~~$82.7 ~~Net~~million ~~borrowings~~of ~~under~~various ~~the~~non-cash ~~revolving~~charges, ~~credit~~including ~~facility (the "Revolver") governed by the Credit Agreement in 2019 were approximately~~ $438.05 million. ~~Payments~~of ondepreciation ~~the~~and ~~term~~amortization, ~~loan facility were~~ $1710.18 million inof ~~2019.~~stock-based ~~Additionally~~compensation, ~~we used~~ $3221.80 million of ~~cash~~pension tosettlement ~~fund~~charges ~~dividend~~and ~~payments,~~a $36.35 million tointangible ~~repurchase~~asset ~~shares~~impairment. ~~used~~These tocash ~~offset~~increases ~~the~~were ~~cost~~partially ofoffset ~~employee~~by ~~tax withholdings related to equity award settlements, and~~ $212.0 million toof ~~pay~~unfavorable ~~fees~~changes ~~related~~in toworking ~~the~~capital ~~Credit~~primarily ~~Agreement~~driven ~~Amendment,~~by ofincreased ~~which~~inventory ~~the majority of the fees were capitalized~~ and ~~will~~lower beaccrued ~~amortized over the term of the amended credit agreement~~expenses.

WeInvesting ~~use~~activities ~~our~~for ~~credit~~the ~~facility~~year inended ~~the~~December 31, ~~ordinary~~2020 ~~course~~included of$43.3 ~~business~~million toof ~~fund~~cash ~~our~~for ~~working~~ capital ~~needs~~expenditures and ~~investments~~$12.3 ~~and,~~million atof ~~times,~~cash ~~make~~received ~~significant~~from ~~borrowings and repayments under~~ the ~~facility~~sale ~~depending~~of on our ~~cash~~Grand ~~needs~~Rapids, ~~and~~Michigan ~~availability~~manufacturing ~~at such time~~facility. ~~Borrowings~~Investing ~~under~~activities ~~the~~for ~~Credit~~2019 ~~Agreement~~included ~~may~~$49.9 bemillion ~~repaid~~of atcapital ~~any time~~expenditures, ~~but~~and nothe ~~later~~purchase ~~than~~of atFully ~~maturity~~for ~~in August 2024~~$30.9 ~~As of December 31~~million, ~~2019,~~net weof ~~believe that existing~~ cash ~~balances~~acquired. ~~and~~Our ~~internally~~investment ~~generated~~in ~~cash~~capital ~~flows,~~expenditures ~~together~~illustrates ~~with~~our ~~the~~commitment ~~borrowing~~to ~~capacity~~improving ~~available under~~ our ~~credit~~operating ~~facility~~efficiency, ~~will~~expanded bedigital ~~sufficient~~ go-to-market ~~fund~~capabilities, ~~working~~innovation ~~capital~~and ~~needs~~modernization, ~~capital~~showroom ~~spending requirements~~investment, ~~debt~~new ~~service~~product ~~requirements~~tooling, ~~and~~manufacturing ~~dividend~~equipment ~~payments~~and ~~for~~technology ~~at least the next twelve months~~infrastructure. ~~Future~~The ~~debt~~acquisitions ~~payments~~are ~~may~~reflective beof ~~paid~~our ~~out~~strategy of ~~cash~~building ~~flows~~our ~~from~~global ~~operations,~~capabilities ~~from~~as ~~future~~a ~~refinancing~~singular ofresource ~~our~~for ~~debt~~high-design orworkplaces ~~from~~and ~~equity issuance~~homes.

In ~~January~~July ~~2018~~2020, we ~~amended~~issued ~~and~~164,000 ~~extended~~shares ~~what~~of ~~was~~preferred ~~then~~stock ~~our~~and ~~existing~~received ~~credit~~net ~~facility,~~cash ~~dated~~proceeds as of ~~May~~$161.8 20million, ~~2014,~~which ~~with~~were aprimarily ~~new~~used to repay $~~750~~50.0 million ~~credit~~of ~~facility~~term ~~scheduled~~loan debt, and to ~~mature~~repay inoutstanding ~~January~~borrowings ~~2023~~on (the ~~"Third~~revolving ~~Amended~~line ~~and~~of ~~Restated~~credit ~~Credit~~(the ~~Agreement~~"Revolver"). ~~Cash~~During ~~proceeds~~the ~~received~~year ~~during~~ended ~~2018~~December 31, ~~from~~2020, ~~the~~we ~~issuance~~entered ofinto ~~revolving~~the ~~and~~second ~~term~~amendment ~~loan~~(the ~~debt~~"Second ~~totaled~~Amendment") ~~approximately~~and ~~$841~~during ~~million~~2019, we entered into the ~~majority~~first ofamendment ~~which~~(the ~~was~~"First ~~issued~~Amendment") ~~under~~to the Third Amended and Restated Credit Agreement. ~~These~~dated ~~proceeds~~as ~~were~~of ~~used~~January 23, 2018 (together, as amended, the "Credit Agreement"). The Second Amendment, among other things, relaxed certain requirements or constraints under which affirmative covenants related to ~~finance~~net aleverage ~~portion~~ratios are determined. In connection with the closing of the ~~Muuto~~Second ~~acquisition~~Amendment, ~~and~~a ~~repay~~covenant was added requiring the ~~outstanding~~Company ~~term~~to make partial prepayments of term-loan ~~balances~~principal in the amount of $~~165~~50.0 million, ~~from~~all of which were made during the ~~predecessor~~third ~~credit~~quarter ~~facility~~of 2020. ~~Additionally,~~Net werepayments ~~used~~under ~~$30.0~~the ~~million~~Revolver ofgoverned ~~cash~~by tothe ~~fund~~Credit ~~dividend~~Agreement ~~payments,~~were approximately $477.45 million toin ~~repurchase~~2020. ~~shares~~Payments ~~used~~on ~~to offset~~ the ~~cost~~term ofloan ~~employee~~facility ~~tax~~were ~~withholdings~~$65.9 ~~related~~million toin ~~equity~~2020, ~~award~~which ~~settlements,~~included the $750.90 million topartial ~~fund~~prepayments adescribed ~~contribution~~above. toAdditionally, ~~the~~we ~~defined~~used ~~benefit~~$16.9 ~~union~~million ~~plan,~~of cash to fund dividend payments and $54.73 million to ~~pay~~repurchase ~~fees~~shares ~~related~~used to offset the ~~issuance~~cost of ~~debt~~employee ~~under~~tax ~~the~~withholdings ~~Third~~related ~~Amended~~to ~~and~~equity ~~Restated~~award ~~Credit Agreement~~vesting.

~~The~~During ~~Credit~~2019, ~~Agreement~~we ~~requires~~entered ~~that~~into wethe ~~comply~~First ~~with~~Amendment. ~~two~~Among ~~financial~~other ~~covenants;~~things, ~~(i)~~the ~~consolidated~~First ~~leverage~~Amendment ~~ratio,~~extended ~~defined~~the asmaturity of the ~~ratio~~credit offacility ~~total~~from ~~indebtedness~~January 2023 to ~~consolidated~~August ~~EBITDA~~2024. ~~(as~~Net ~~defined~~borrowings inunder the ~~Credit~~Revolver ~~Agreement)~~in ~~and~~2019 ~~(ii)~~were ~~consolidated~~approximately ~~interest~~$4.0 ~~coverage~~million. ~~ratio,~~Payments ~~defined~~on as the ~~ratio~~term ofloan ~~our~~facility ~~consolidated~~were ~~EBITDA~~$17.1 ~~(as~~million ~~defined~~ in ~~the~~2019. ~~Credit~~Additionally, ~~Agreement)~~we toused ~~our consolidated interest expense~~$32.8 ~~Our~~million ~~consolidated~~of ~~leverage~~cash ~~ratio~~to ~~cannot~~fund ~~exceed~~dividend 4payments, $3.003 million to 1,repurchase ~~which~~shares ~~steps~~used ~~down~~to ~~over~~offset ~~time~~the tocost ~~3.75~~of toemployee 1tax ~~starting~~withholdings ~~with~~related ~~the~~to ~~quarter~~equity ~~ending~~award ~~June 30~~vesting, ~~2020,~~ and ~~to 3~~$2.500 million to 1pay ~~starting~~fees ~~with~~related to the ~~quarter~~First ~~ending June 30~~Amendment, ~~2021,~~of ~~and~~ which ~~may~~the bemajority ~~increased~~of inthe ~~certain~~fees ~~circumstances.~~were ~~Our~~capitalized ~~consolidated~~and ~~interest~~are ~~coverage~~being ~~ratio~~amortized ~~must~~over bethe aterm ~~minimum~~ of ~~3.0~~the toamended 1Credit Agreement.

~~Because~~We ofuse ~~the~~our ~~financial~~credit ~~covenant~~facility ~~mentioned~~in ~~above,~~the ~~our~~ordinary ~~ability~~course toof ~~borrow~~business ~~the~~to ~~entire~~fund ~~capacity under~~ our ~~credit~~working ~~facility~~capital ~~could~~needs beand ~~reduced~~investments ifand, byat ~~borrowing~~times, ~~our~~make ~~leverage~~significant ~~ratio~~borrowings ~~would~~and ~~exceed~~repayments under the ~~covenant.~~facility Wedepending ~~are~~on ~~also~~our ~~required~~cash toneeds ~~comply~~and ~~with~~availability ~~various~~at ~~other~~such ~~affirmative~~time. ~~and~~Borrowings ~~negative~~under ~~covenants~~the ~~including,~~Credit ~~without~~Agreement ~~limitation,~~may ~~covenants~~be ~~that~~repaid ~~prevent~~at any time, ~~restrict~~but orno ~~limit~~later ~~the~~than ~~following:~~at ~~our~~maturity ~~ability~~in toAugust ~~pay~~2024. ~~dividends~~As of December 31, ~~engage~~2020, inwe ~~certain~~believe ~~mergers~~that orexisting ~~acquisitions,~~cash ~~make~~balances ~~certain~~and ~~investments~~internally orgenerated ~~loans~~cash flows, ~~incur~~together ~~future~~with ~~indebtedness,~~the ~~engage~~borrowing incapacity ~~sale-leaseback~~available ~~transactions~~under our credit facility, ~~alter~~will ~~our~~be ~~capital~~sufficient ~~structure~~to orfund ~~line~~working ofcapital ~~business~~needs, ~~prepay~~capital ~~subordinated~~spending ~~indebtedness~~requirements, ~~engage~~debt inservice ~~certain~~requirements ~~transactions~~and ~~with~~dividend ~~affiliates~~payments ~~and~~for ~~sell~~at ~~stock~~least orthe ~~assets~~next twelve months. AtFuture ~~December~~debt ~~31,~~payments ~~2019,~~may webe ~~were~~paid inout ~~compliance~~of ~~with~~cash ~~all~~flows ~~covenants~~from ~~applicable~~operations, tofrom future refinancing of our ~~credit~~debt ~~facility~~or from equity issuance.

31 In January 2018, we amended and extended what was then our existing credit facility, dated as of May 20, 2014, with a new $750.0 million credit facility scheduled to mature in January 2023 (the "Third Amended and Restated Credit Agreement"). Cash proceeds were received during 2018 from the issuance of revolving and term loan debt under the Third Amended and Restated Credit Agreement. These proceeds were used, among other things, to finance a portion of the Muuto acquisition and repay the outstanding term loan balances of $165.0 million from the predecessor credit facility.

The Credit Agreement requires that we comply with two financial covenants; (i) consolidated leverage ratio, defined as the ratio of total indebtedness to consolidated EBITDA (as defined in the Credit Agreement) and (ii) consolidated interest coverage ratio, defined as the ratio of our consolidated EBITDA (as defined in the Credit Agreement) to our consolidated interest expense. Our consolidated leverage ratio cannot exceed 4.0 to 1, which could become more restrictive under certain circumstances (as defined in the Credit Agreement). Our consolidated interest coverage ratio must be a minimum of 3.0 to 1.

Because of the financial covenant mentioned above, our ability to borrow the entire capacity under our credit facility could be reduced if by borrowing, our leverage ratio would exceed the covenant. We are also required to comply with various other affirmative and negative covenants including, without limitation, covenants that prevent, restrict or limit the following: our ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, engage in sale-leaseback transactions, alter our capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates and sell stock or assets. At December 31, 2020, we were in compliance with all covenants applicable to our credit facility.

Contractual Obligations

~~The~~We ~~following~~have ~~table~~contractual ~~summarizes~~obligations ~~our~~in ~~contractual~~the ~~cash~~form of monthly lease and interest payments and scheduled quarterly debt maturities (see Notes 9 and 13 of Notes to the Consolidated Financial Statements in Item 8 included elsewhere herein). We issue purchase obligations to vendors regularly to purchase equipment, inventory and supplies, the outstanding balance of which was $40.4 million as of December 31, ~~2019~~2020. (Of that balance, $36.6 million is due in ~~millions):~~the next twelve months. We have a $24.2 million underfunded pension liability that may be funded in the future depending on various factors including, among other factors, the actual return on plan assets and the life expectancies of the plan participants.

	Payments Due by Period
	Less than1 year		1 to 3years		3 to 5years		More than5 years		Total
Long-term debt (1)	$	23.9	$	61.0	$	423.5	$	—	$	508.4
Operating lease liabilities	26.0		43.5		31.8		27.8		129.1
Operating lease obligations (2)	0.6		9.1		12.0		41.5		63.2
Purchase commitments	29.1		5.5		—		—		34.6
Pension and other post-employment benefit plan obligations (3)	0.2		—		—		—		0.2
Other liabilities (4)	—		—		—		—		—
Total *	$	79.8	$	119.1	$	467.3	$	69.3	$	735.5

The following table summarizes our contractual cash obligations as of December 31, 2020 (in millions):

(1) Contractual obligations for long-term debt and short-term borrowings include principal and interest payments. Interest payments have been computed based on an estimated variable interest as of December 31, 2019. The estimated variable interest rate is based on the company's expected consolidated leverage ratio and the forecasted LIBOR rate for each period presented. The computation of interest, as included in the above table, is based on our Amended Credit Facility.


	Payments Due by Period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Long-term debt (1)	$	18.4	$	44.4	$	273.4	$	—	$	336.2
Operating lease liabilities	33.7		58.7		42.9		59.1		194.4
Operating lease obligations (2)	1.8		8.7		9.1		27.7		47.3
Purchase commitments	36.6		3.8		—		—		40.4
Pension and other post-employment benefit plan obligations (3)	0.3		—		—		—		0.3
Other liabilities (4)	—		—		—		—		—
Total *	$	90.8	$	115.6	$	325.4	$	86.8	$	618.6

(21)Contractual Asobligations offor ~~December~~long-term ~~31,~~debt ~~2019,~~and ~~the~~short-term ~~Company~~borrowings ~~has~~include ~~entered~~principal ~~into~~and ~~operating~~interest ~~leases~~payments. ~~for~~Interest ~~real~~payments ~~property~~have ~~that~~been ~~commence~~computed inbased ~~2020~~on ~~and~~an ~~2021~~estimated variable interest as of December 31, 2020. The ~~total~~estimated ~~contractual~~variable ~~lease~~interest ~~payments~~rate ofis ~~$63.2~~based ~~million~~on ~~associated~~the ~~with~~company's ~~these~~expected ~~leases,~~consolidated ~~which~~leverage ~~have~~ratio ~~not~~and ~~been~~the ~~recognized~~forecasted onLIBOR ~~the~~rate ~~consolidated~~for ~~balance~~each ~~sheet,~~period ~~have~~presented. ~~been~~The ~~included~~computation ~~above~~of ~~(see~~interest, ~~Note~~as 9included ~~for~~in ~~further~~the ~~details~~above ~~regarding~~table, is based on our ~~leases)~~Amended Credit Facility.

(32)As ~~Due~~of toDecember 31, 2020, the ~~uncertainty~~Company ofhas ~~future~~entered ~~cash~~into ~~outflows,~~operating ~~contributions~~leases tofor ~~the~~real ~~pension~~property that commence in 2021 and ~~other~~2022. ~~post-employment~~The ~~benefit~~total ~~plans~~contractual ~~subsequent~~lease topayments ~~2020~~of $47.3 million associated with these leases, which have not been ~~excluded~~recognized ~~from~~on the ~~table~~consolidated balance sheet, have been included above (see Note 9 for further details regarding our leases).

(43)Due ~~The maximum earn-out consideration related~~ to the ~~Fully~~uncertainty ~~acquisition~~of isfuture ~~$15.0~~cash ~~million.~~outflows, ~~The~~contributions ~~contingent~~to ~~earn-out~~the ~~consideration~~pension ~~is based on certain revenue~~ and ~~earnings~~other ~~before~~post-employment ~~interest,~~benefit ~~taxes,~~plans ~~depreciation~~subsequent ~~and amortization targets over the next four years. Due~~ to ~~the~~2021 ~~contingent nature of the payments, we~~ have ~~not~~been ~~included~~excluded ~~any~~from ~~earn-out payments in~~ the table above. ~~If these payments were to occur in full at the earliest time possible, $12.5 million would be paid in 1 to 3 three years, and the remaining $2.5 million would be paid in 3 to 5 years.~~

(4)The maximum earn-out consideration related to the Fully acquisition is $15.0 million. The contingent earn-out consideration is based on certain revenue and earnings before interest, taxes, depreciation and amortization targets over the next four years. Due to the contingent nature of the payments, we have not included any earn-out payments in the table above. If these payments were to occur in full at the earliest time possible, $12.5 million would be paid in 1 to 3 three years, and the remaining $2.5 million would be paid in 3 to 5 years.

* Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the table above.

Environmental Matters

Our past and present business operations and the past and present ownership and operation of manufacturing plants on real property are subject to extensive and changing federal, state, local and foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. As a result, we are involved from time-to-time in administrative and judicial proceedings and inquiries relating to environmental matters and could become subject to fines or penalties related thereto. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) for remediation costs associated with waste disposal sites that we previously used. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. We reserve amounts for such matters when expenditures are probable and reasonably estimable.

Off-Balance Sheet Arrangements

We do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange-traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

3237

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ from such estimates. We believe that the critical accounting policies that follow are those policies that require the most judgment, estimation and assumption in preparing our consolidated financial statements.

Goodwill and Intangible Assets

We record the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired as goodwill. Goodwill and intangible assets with indefinite lives are tested for impairment at least annually, as of October 1, and whenever events or circumstances occur indicating that a possible impairment may have been incurred. Intangible assets with finite lives are amortized over their useful lives.

We assess whether goodwill impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we elect not to perform a qualitative assessment, a quantitative assessment is performed to determine whether a goodwill impairment exists at the reporting unit.

We compare the fair value of each reporting unit to its carrying value and if the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, the difference is recorded as an impairment loss.

We estimate the fair value of its reporting units using a combination of the fair values derived from both the income approach and the market approach. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on our estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used to determine the present value of future cash flows is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business's ability to execute on the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

We assess whether indefinite-lived intangible assets impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, based on this qualitative assessment, we determine it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount or if we elect not to perform a qualitative assessment, a quantitative assessment is performed to determine whether an indefinite-lived intangible asset impairment exists. We test the indefinite-lived intangible assets for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess of the carrying value over the amount of fair value is recognized as an impairment. Any such impairment would be recognized in full in the reporting period in which it has been identified.

Based on the results of the annual impairment test as of October 1, ~~2019~~2020, we determined there were no indications of impairment for goodwill. We did identify an impairment of our ~~Edelman~~DatesWeiser tradename and recorded a $61.54 million impairment charge (see ~~Notes~~Note 7 and Note 11 to the Consolidated Financial Statements included elsewhere herein). We determined there were no indications of impairment in any of our other indefinite-lived intangible assets.

Our test for impairment of goodwill yielded fair value in excess of carrying value of approximately 7% and 5% for the Office and Muuto reporting units, respectively. The fair value of the Lifestyle reporting unit was substantially in excess of carrying value. Holding all other assumptions constant, an increase in the discount rate of 0.50% would result in an impairment of the Office and Muuto reporting units of approximately $1 million and $3 million, respectively. Holding all other assumptions constant, a decrease in the long-term revenue growth rate of 0.50% in the Office and Muuto reporting units would not result in an impairment.

Our test for impairment of indefinite-lived tradenames yielded fair value substantially in excess of carrying value for the Knoll tradename, yielded fair value in excess of carrying value of approximately 10% for the Muuto tradename, and yielded fair value approximately equal to carrying value for the Holly Hunt tradename. Holding all other assumptions constant, a decrease in the royalty rate of 0.50% would result in impairment of approximately $3 million for the Holly Hunt tradename, but would not result in an impairment to the Knoll or Muuto tradenames. Holding all other assumptions constant, an increase in the discount rate of 0.50% would result in an impairment of the Holly Hunt tradename of approximately $1 million. An increase in the discount rate of 0.50% for the Knoll and Muuto tradenames would not result in an impairment.

Pension and Other Post-Employment Benefits

We ~~sponsor~~sponsored two defined benefit pension plans, one of which has terminated and fully paid out benefits due to all participants, and the other is an ongoing plan. We also sponsor four other post-employment benefit plans (“OPEB”), one of which has terminated. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. Key factors include assumptions about the expected rates of return on plan assets, discount rates, mortality rates and health care cost trend rates. We consider market and regulatory conditions, including changes in investment returns and interest rates, in making these assumptions.

33We determine the expected long-term rate of return on plan assets based on aggregating the expected rates of return for each component of the plan's asset mix. We use historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption. The discount rate reflects the market rate for high-quality fixed income debt instruments as of our annual measurement date and is subject to change each year. Holding all other assumptions constant, a one-percentage-point increase or decrease in the assumed rate of return on plan assets would decrease or increase 2020 net periodic pension expense by approximately $1.7 million. Likewise, a one-percentage-point increase or decrease in the underlying yield curve spot rates used to develop the discount rate would increase or decrease 2020 net periodic pension income by approximately $0.1 million or $0.3 million, respectively.

We determine the expected long-term rate of return on plan assets based on aggregating the expected rates of return for each component of the plan's asset mix. We use historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption and generally does not change annually. The discount rate reflects the market rate for high-quality fixed income debt instruments as of our annual measurement date and is subject to change each year. Holding all other assumptions constant, a one-percentage-point increase or decrease in the assumed rate of return on plan assets would decrease or increase 2019 net periodic pension expense by approximately $1.9 million. Likewise, a one-percentage-point increase or decrease in the discount rate would increase or decrease 2019 net periodic pension expense by approximately $0.4 million or $0.1 million, respectively.

Unrecognized actuarial gains and losses are recognized over the expected remaining lifetime of the plan participants. Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to the obligations and from the difference between expected returns and actual returns on plan assets. These unrecognized gains and losses are systematically recognized as a change in future net periodic pension expense in accordance with the appropriate accounting guidance relating to defined benefit pension and OPEB plans.

We utilize a full yield curve approach in the estimation of this component by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

Key assumptions that we use in determining the amount of the obligation and expense recorded for OPEB, under the appropriate accounting guidance, include the assumed discount rate and the assumed rate of increases in future health care costs. In estimating the health care cost trend rate, we consider actual health care cost experience, future benefit structures, industry trends and advice from our actuaries. We assume that the relative increase in health care costs will generally trend downward over the next several years, reflecting assumed increases in efficiency and cost-containment initiatives in the health care system. For purposes of measuring the benefit obligation associated with the Company's OPEB plans as of December 31, ~~2019~~2020, as well as the assumed rate for ~~2020~~2021, a 6.3000% annual rate of increase in the per capita cost of covered health care benefits was assumed and an 87.4090% annual rate of increase in the per capita cost of covered prescription drug benefits was assumed. The rate was then assumed to decrease to an ultimate rate of 4.50% for 2027 and thereafter for both the medical plan and prescription drug plan ~~and thereafter for the~~ benefit ~~obligation~~obligations. Increasing the assumed health care cost trend by one-percentage-point in each year would increase the benefit obligation as of December 31, ~~2019~~2020 by a minimal amount and increase the aggregate of the service and interest cost components of net periodic benefit cost for ~~2019~~2020 by a minimal amount. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the benefit obligation as of December 31, ~~2019~~2020 by a minimal amount and decrease the aggregate of the service and interest cost components of net periodic benefit cost for ~~2019~~2020 by a minimal amount.

In accordance with the appropriate accounting guidance, we recognize in our consolidated balance sheet the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligation) of our defined benefit pension and OPEB plans. To record the unfunded status of our plans, we recorded an additional liability and an ~~asset and an~~ adjustment to accumulated other comprehensive income, net of tax.

The actuarial assumptions we use in determining our pension and OPEB retirement benefits may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may materially affect our financial position or results of operations.

3439

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the normal course of business, we are routinely subjected to market risk associated with interest rate movements and foreign currency exchange rate movements. Interest rate risk arises from our debt obligations. Foreign currency exchange rate risk arises from our non-U.S. operations and purchases of inventory from foreign suppliers.

We also have risk in our exposure to certain materials and transportation costs. Steel, leather, wood products and plastics are all used in our products. For the year ended December 31, ~~2019~~2020, we estimated that materials ~~inflation~~deflation was approximately $51.07 million and transportation inflation was approximately $2.1 million. During ~~2018~~2019, we estimated that materials and transportation inflation were approximately $65.90 million and $72.91 million, respectively. We continue to work to offset price increases in raw materials and transportation through our global sourcing initiatives, cost improvements and price increases tofor our products.

Interest Rate Risk

We have variable rate debt obligations that are denominated in U.S. dollars. A change in interest rates will impact the interest costs incurred and cash paid on the variable rate debt.

At December 31, ~~2019~~2020, we had $~~450~~313.32 million in principal of variable rate debt. We have entered into an interest rate swap agreement which fixes the interest rate for an initial notional amount of $~~300~~200 million of our variable rate debt which decreases over time by $50 million increments, matures in January 2023 and effectively fixes our interest rate at 2.63%. Our remaining variable rate debt of $~~150~~113.32 million is subject to changes in underlying interest rates, and, accordingly, our interest payments will fluctuate. During ~~2019~~2020, a 1% change in interest rates would result in a change in interest expense of approximately $1.51 million per year. As the notional amount of the swap decreases, each $50 million decrease in the notional amount would be exposed to interest rate fluctuations, and a one percent change in interest rates would change interest expense by an additional $0.5 million.

Foreign Currency Exchange Rate Risk

We manufacture our products in the United States, Canada and Italy, and sell our products primarily in those markets as well as in other European countries. Our foreign sales and certain expenses are transacted in foreign currencies. Our production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as our reporting currency is the U.S. ~~dollar~~Dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. ~~dollar~~Dollar. The principal foreign currencies in which we conduct business are the Canadian ~~dollar~~Dollar, Danish ~~krone~~Krone and the Euro. Approximately 1725.6% and 1817.16% of our revenues in ~~2019~~2020 and ~~2018~~2019, respectively, and 2730.03% and 2827.50% of our cost of goods sold in ~~2019~~2020 and ~~2018~~2019, respectively, were denominated in currencies other than the U.S. ~~dollar~~Dollar. Assuming a hypothetical adverse (weakening of the U.S. ~~dollar~~Dollar) and favorable (strengthening of the U.S. ~~dollar~~Dollar) change of 10% on the average foreign currency exchange rate for ~~2019~~2020, earnings before income taxes would have decreased or increased approximately $4.1.8 million. Foreign currency exchange rate fluctuations resulted in transaction losses of $1.58 million ~~of translation losses~~ and $21.05 million ~~of translation gains~~ for ~~2019~~2020 and ~~2018~~2019, respectively.

From time to time, we enter into foreign currency hedges to manage our exposure to foreign exchange rates. The terms of these contracts are typically less than a year. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the change in fair value of outstanding contracts is recorded as a component of other expense (income).

3540

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Knoll, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Knoll, Inc. (the Company) as of December 31, ~~2019~~2020 and ~~2018~~2019, the related consolidated statements of operations and comprehensive income, equity and cash flows for each of the three years in the period ended December 31, ~~2019~~2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2019~~2020 and ~~2018~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2019~~2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated ~~February~~March 211, ~~2020~~2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Defined Benefit Pension Obligation Description of the Matter At December 31, ~~2019~~2020, the Company’s projected benefit obligation related to its defined benefit plan was $~~203~~206.74 million and exceeded the fair value of pension plan assets of $~~181~~182.72 million, resulting in an unfunded defined benefit pension obligation of $2224.02 million. As explained in Note 2 to the consolidated financial statements, the measurement of the Company’s projected benefit obligation is dependent, in part, on the selection of certain actuarial assumptions.Auditing the projected benefit obligation was complex and required the involvement of actuarial specialists due to the highly judgmental nature of the assumptions (e.g., discount rates and mortality rates) used in the Company’s measurement process. These assumptions had a significant effect on the projected benefit obligation.

3641

How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of the projected benefit obligation. For example, we tested the Company's controls over management’s review of the significant assumptions utilized in the valuation, including the discount rates and mortality rates. To test the projected benefit obligation, we performed audit procedures that included, among others, evaluating the methodology used, the significant actuarial assumptions described above, and the underlying data used by the Company. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the projected benefit obligation from the prior year due to the change in interest cost, actuarial gains and losses, benefit payments, plan settlements and other activities. In addition, we involved our actuarial specialists to assist in evaluating management’s methodology for selecting the appropriate discount rates that reflect the maturity and duration of the expected benefit payments and applying those discount rates to the benefit payments used to measure the projected benefit obligation. As part of this assessment, we compared the projected benefit obligation cash flows to those in the prior year and compared the current-year benefits paid to the prior-year projected cash flows. To evaluate the mortality rates, we assessed whether the information is consistent with publicly available information, and whether any adjustments for entity-specific factors were applied. We also tested the completeness and accuracy of the underlying data, including the participant data used in the actuarial calculations.	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of the projected benefit obligation. For example, we tested the Company's controls over management’s review of the significant assumptions utilized in the valuation, including the discount rates and mortality rates. To test the projected benefit obligation, we performed audit procedures that included, among others, evaluating the methodology used, the significant actuarial assumptions described above, and the underlying data used by the Company. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the projected benefit obligation from the prior year due to the change in interest cost, actuarial gains and losses, benefit payments, settlements and other activities. In addition, we involved our actuarial specialists to assist in evaluating management’s methodology for selecting the appropriate discount rates that reflect the maturity and duration of the expected benefit payments and applying those discount rates to the benefit payments used to measure the projected benefit obligation. As part of this assessment, we compared the projected benefit obligation cash flows to those in the prior year and compared the current-year benefits paid to the prior-year projected cash flows. To evaluate the mortality rates, we assessed whether the information is consistent with publicly available information, and whether any adjustments for entity-specific factors were applied. We also tested the completeness and accuracy of the underlying data, including the participant data used in the actuarial calculations.
	~~Valuation of Goodwill and Other Indefinite-Lived Intangible Assets~~	Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
Description of the Matter	At December 31, 2019, the Company’s goodwill and other indefinite-lived intangible assets were $332.1 million and $277.6 million, respectively. As discussed in Note 2 to the consolidated financial statements, goodwill and other indefinite-lived intangible assets are either qualitatively tested and, when considered necessary, quantitatively tested, for impairment at least annually. The Company’s goodwill is tested for impairment at the reporting unit level. Auditing management’s annual quantitative goodwill and other indefinite-lived intangible assets impairment tests was complex and involved a high degree of subjectivity due to the significant estimation required in determining the fair value of the reporting units and the other indefinite-lived intangible assets. In particular, the fair value estimates were sensitive to significant assumptions such as discount rates, revenue growth rates, profit margins, royalty rates, and terminal growth rates, which are forward-looking and could be affected by future economic and market conditions.	At December 31, 2020, the Company’s goodwill and other indefinite-lived intangible assets were $349.8 million and $278.4 million, respectively. As discussed in Note 2 to the consolidated financial statements, goodwill and other indefinite-lived intangible assets are either qualitatively tested and, when considered necessary, quantitatively tested, for impairment at least annually. The Company’s goodwill is tested for impairment at the reporting unit level. Auditing management’s annual quantitative goodwill and other indefinite-lived intangible assets impairment tests was complex and involved a high degree of subjectivity due to the significant estimation required in determining the fair value of the reporting units and the other indefinite-lived intangible assets. In particular, the fair value estimates were sensitive to significant assumptions such as discount rates, revenue growth rates, profit margins, royalty rates, and terminal growth rates, which are forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s quantitative goodwill and other indefinite-lived intangible assets annual impairment tests. For example, we tested controls over management’s review of the valuation models, the significant assumptions described above, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the Company’s reporting units and other indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analyses. For example, we compared the significant assumptions used by management to current industry, market and economic trends, to historical results of the Company's business and other guideline companies within the same industry and to other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and other indefinite-lived intangible assets that would result from changes in the assumptions. We also involved internal valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company.	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s quantitative goodwill and other indefinite-lived intangible assets annual impairment tests. For example, we tested controls over management’s review of the valuation models, the significant assumptions described above, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the Company’s reporting units and other indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analyses. For example, we compared the significant assumptions used by management to current industry, market and economic trends, to historical results of the Company's business and other guideline companies within the same industry and to other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and other indefinite-lived intangible assets that would result from changes in the assumptions. We also involved internal valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 1996.

Philadelphia, Pennsylvania

~~February~~March 211, ~~2020~~2021

3742

KNOLL, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in millions, except per share data)

	December 31, 2019				December 31, 2018
			December 31,
ASSETS
			2020					2019
Current assets:
ASSETS
Cash and cash equivalents	$	8.5			$	1.6
Current assets:
Customer receivables, net of allowance for doubtful accounts of $4.0 and $3.7, respectively	107.4				120.2
Cash and cash equivalents			$	37.3				$	8.5
Inventories	195.9				170.5
Customer receivables, net			83.4					107.4
Prepaid expenses	17.2				25.6
Inventories			193.1					195.9
Other current assets	11.6				13.7
Prepaid expenses			13.7					17.2
Total current assets	340.6				331.6
Other current assets			37.3					11.6
Property, plant, and equipment, net	239.0				215.0
Total current assets			364.8					340.6
Goodwill	332.1				320.8
Property, plant, and equipment, net			237.1					239.0
Intangible assets, net	348.2				353.9
Goodwill			349.8					332.1
Right-of-use lease assets	94.4				—
Intangible assets, net			347.9					348.2
Other noncurrent assets	3.6				5.6
Right-of-use lease assets			150.0					94.4
Total Assets	$	1,357.9			$	1,226.9
Other non-current assets			3.5					3.6
LIABILITIES AND EQUITY
Total Assets			$	1,453.1				$	1,357.9
Current liabilities:
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt	17.1				17.2
Current liabilities:
Accounts payable	131.9				126.7
Current maturities of long-term debt			14.6					17.1
Current portion of lease liability	20.7				—
Accounts payable			101.1					131.9
Other current liabilities	120.3				128.9
Current portion of lease liability			27.2					20.7
Total current liabilities	290.0				272.8
Other current liabilities			113.5					120.3
Long-term debt	428.9				443.9
Total current liabilities			256.4					290.0
Deferred income taxes	87.5				86.5
Long-term debt			295.2					428.9
Lease liability	87.0				—
Deferred income taxes			93.9					87.5
Pension liability	22.0				13.9
Lease liability			141.2					87.0
Other noncurrent liabilities	14.9				23.3
Pension liability			24.2					22.0
Total liabilities	930.3				840.4
Other non-current liabilities			29.3					14.9
Commitments and contingencies (Note 14)
Total liabilities			840.2					930.3
Equity: (shares in thousands)
Commitments and contingent liabilities (Note 14)
Common stock, $0.01 par value; 200,000 shares authorized; 66,296 shares and 65,779 shares issued, respectively, and 49,775 and 49,431 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of non-voting restricted shares	0.5				0.5
Convertible preferred stock,$1.00 par value; authorized 10,000,000 shares; issued and outstanding 167,284 shares			165.1					—
Additional paid-in capital	66.8				58.8
Shareholders' Equity: (shares in thousands)
Retained earnings	429.7				395.4
Common stock, 0.01 par value; 200,000 shares authorized; 67,458 shares and 66,296 shares issued, respectively, and 50,645 and 49,775 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of non-voting restricted shares			0.5					0.5
Accumulated other comprehensive loss	(69.4		)		(68.4		)
Additional paid-in capital			75.4					66.8
Total Knoll, Inc. stockholders' equity	427.6				386.3
Retained earnings			417.7					429.7
Noncontrolling interests	—				0.2
Accumulated other comprehensive loss			(45.8)					(69.4)
Total equity	427.6				386.5
Total shareholders' equity			447.8					427.6
Total Liabilities and Equity	$	1,357.9			$	1,226.9
Total liabilities, convertible preferred stock and shareholders' equity			$	1,453.1				$	1,357.9

See accompanying notes to the consolidated financial statements.

3843

KNOLL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in millions, except per share data)

	~~Years ended December 31,~~		Years ended December 31,
	2019				2018			2017
			2020					2019			2018
Sales	$	~~1,428.1~~	$	1,236.4	$	~~1,302.3~~		$	1,~~132~~428.91		$	1,302.3
Cost of sales	~~879.1~~		793.7		~~820.8~~			~~718~~879.31			820.8
Gross profit	~~549.0~~		442.7		~~481.5~~			~~414~~549.60			481.5
Selling, general, and administrative expenses	~~411.9~~		375.4		~~363.7~~			~~315~~411.69			363.7
Restructuring charges	~~0.8~~		25.9		~~2.6~~			20.28			2.6
Write-off of property, plant, and equipment	—				—			16.3
Loss on fair value measurements			13.8					6.5			—
Intangible asset impairment charge	6.5				—			—
Operating profit			27.6					129.8			115.2
Operating profit	129.8				115.2			80.5
Pension settlement charges			4.8					21.0			5.7
Pension settlement charges	21.0				5.7			2.2
Interest expense, net			17.4					21.7			20.9
Interest expense	21.7				20.9			7.4
Other income, net			(1.5)					(3.8)			(9.6)
Other income, net	(3.8		)		(9.6		)	(7.7		)
Income before income tax expense (benefit)			6.9					90.9			98.2
Income before income tax expense (benefit)	90.9				98.2			78.6
Income tax expense (benefit)			(0.8)					23.4			24.9
Income tax expense (benefit)	23.4				24.9			(1.6		)
Net earnings			$	7.7				$	67.5		$	73.3
Net earnings	$	67.5			$	73.3		$	80.2
Less: Net earnings attributable to Preferred stockholders			(3.3)					—			—
Net earnings per share:
Net earnings available to common stockholders			$	4.4				$	67.5		$	73.3
Basic	$	1.38			$	1.51		$	1.66
Net earnings per share:
Diluted	$	1.36			$	1.49		$	1.63
Basic			$	0.09				$	1.38		$	1.51
Weighted-average common shares outstanding: (in thousands)
Diluted			$	0.09				$	1.36		$	1.49
Basic	48,846				48,657			48,423
Weighted-average common shares outstanding: (in thousands)
Diluted	49,457				49,218			49,160
Basic			49,077					48,846			48,657
Net earnings	$	67.5			$	73.3		$	80.2
Diluted			49,530					49,457			49,218
Other comprehensive income (loss), net of tax:
Net earnings			$	7.7				$	67.5		$	73.3
Unrealized loss on cash flow hedge	(3.6		)		(1.3		)	—
Other comprehensive income (loss), net of tax:
Pension and other post-employment liability adjustments, net of tax	4.3				2.6			(5.3		)
Unrealized loss on cash flow hedge, net of amounts reclassified into earnings			(1.9)					(3.6)			(1.3)
Foreign currency translation adjustments	3.2				(13.1		)	4.9
Pension and other post-employment liability adjustments, net of tax			(0.2)					4.3			2.6
Foreign currency translation adjustments on long term intercompany notes	(4.9		)		(8.1		)	—
Foreign currency translation adjustments			7.7					3.2			(13.1)
Total other comprehensive loss, net	(1.0		)		(19.9		)	(0.4		)
Foreign currency translation adjustments on long-term intercompany notes			18.0					(4.9)			(8.1)
Comprehensive income	$	66.5			$	53.4		$	79.8
Total other comprehensive income (loss), net			23.6					(1.0)			(19.9)
Total comprehensive income			$	31.3				$	66.5		$	53.4

See accompanying notes to the consolidated financial statements.

3944

KNOLL, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars in ~~thousands~~millions, except per share data)

	~~CommonStock~~		~~AdditionalPaid-InCapital~~CommonStock			~~RetainedEarnings~~		AdditionalPaid-InCapital		~~AccumulatedOtherComprehensive Loss~~			~~TotalKnoll, Inc.Stockholders' Equity~~RetainedEarnings			~~Noncontrolling Interests~~		AccumulatedOtherComprehensive Loss		~~Total Equity~~			TotalKnoll, Inc.Stockholders' Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2016	$	0.5	$	55.1		$	297.0			$	(43.4	)	$	309.2		$	0.2			$	309.4
Balance at December 31, 2017			$	0.5				$	54.5				$	347.3				$	(43.8)				$	358.5	$	0.2	$	358.7
Net earnings	—		—			~~80.2~~		—		—			8073.23			—		—		~~80.2~~			73.3		—		73.3
Other comprehensive loss	—		—			—				(0.4		)	(0.4		)	—				(0.4		)
Adoption of ASU 2018-02 (1)			—										4.7					(4.7)					—				—
Exercise of stock options	—		0.5			—				—			0.5			—				0.5
Other comprehensive loss			—					—					—					(19.9)					(19.9)		—		(19.9)
Stock-based compensation	—		~~9.8~~—			—		8.7		—			~~9.8~~—			—		—		~~9.8~~			8.7		—		8.7
Cash dividends ($0.60 per share)	—		—			(29.9		)		—			(29.9		)	—				(29.9		)
Dividends declared ($0.60 per share)			—					—					(29.9)					—					(29.9)		—		(29.9)
Purchase of common stock for treasury	—		(10.9		)	—				—			(10.9		)	—				(10.9		)
Purchase of common stock			—					(4.4)					—					—					(4.4)		—		(4.4)
Balance at December 31, 2017	$	0.5	$	54.5		$	347.3			$	(43.8	)	$	358.5		$	0.2			$	358.7
Balance at December 31, 2018			$	0.5				$	58.8				$	395.4				$	(68.4)				$	386.3	$	0.2	$	386.5
Net earnings	—		—			~~73.3~~		—		—			7367.35			—		—		~~73.3~~			67.5				67.5
Adoption of ASU 2018-02	—					4.7				(4.7		)	—							—
Other comprehensive loss			—					—					—					(1.0)					(1.0)		—		(1.0)
Other comprehensive loss	—		—			—				(19.9		)	(19.9		)	—				(19.9		)
Stock-based compensation			—					10.8					—					—					10.8		—		10.8
Stock-based compensation	—		8.7			—				—			8.7			—				8.7
Dividends declared ($0.66 per share)			—					—					(33.2)					—					(33.2)		—		(33.2)
Cash dividends ($0.60 per share)	—		—			(29.9		)		—			(29.9		)	—				(29.9		)
Purchase of common stock			—					(3.3)					—					—					(3.3)		—		(3.3)
Purchase of common stock for treasury	—		(4.4		)	—				—			(4.4		)	—				(4.4		)
Other			—					0.5					—					—					0.5		(0.2)		0.3
Balance at December 31, 2018	$	0.5	$	58.8		$	395.4			$	(68.4	)	$	386.3		$	0.2			$	386.5
Balance at December 31, 2019			$	0.5				$	66.8				$	429.7				$	(69.4)				$	427.6	$	—	$	427.6
Net earnings	—		—			~~67.5~~		—		—			677.57					—		~~67.5~~			7.7		—		7.7
Other comprehensive loss	—		—			—				(1.0		)	(1.0		)	—				(1.0		)
Other comprehensive income			—					—					—					23.6					23.6		—		23.6
Stock-based compensation	—		10.8			—				—			10.8			—				10.8
Stock-based compensation, net			—					12.9					—					—					12.9		—		12.9
Cash dividends ($0.66 per share)	—		—			(33.2		)		—			(33.2		)	—				(33.2		)
Dividends declared on preferred stock (2)			—					—					(3.3)					—					(3.3)		—		(3.3)
Purchase of common stock for treasury	—		(3.3		)	—				—			(3.3		)	—				(3.3		)
Dividends declared on common stock ($0.33 per share)			—					—					(16.4)					—					(16.4)		—		(16.4)
Other	—		0.5			—				—			0.5			(0.2		)		0.3
Purchase of common stock			—					(4.3)					—					—					(4.3)		—		(4.3)
Balance at December 31, 2019	$	0.5	$	66.8		$	429.7			$	(69.4	)	$	427.6		$	—			$	427.6
Balance at December 31, 2020			$	0.5				$	75.4				$	417.7				$	(45.8)				$	447.8	$	—	$	447.8

(1)Impact of the Tax Cuts and Jobs Act ("TCJA") of 2017 on AOCL

(2)The Company exercised its payable in kind ("PIK") option in connection with all dividends paid to the holders of the Series A Preferred Stock during 2020.

See accompanying notes to the consolidated financial statements.

4045

KNOLL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	~~67.5~~	$	7.7	$	~~73.3~~		$	8067.25		$	73.3
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation	29.6				25.5			22.7
Depreciation and amortization			43.3					38.5			34.2
Amortization expense (including debt issuance costs)	9.9				9.8			3.9
Amortization of debt issuance costs and loss on extinguishment of debt			1.1					1.4			2.5
Deferred income tax (benefit) expense	(1.3		)		4.8			(19.6		)
Deferred income tax expense (benefit)			4.3					(1.3)			4.8
Loss on extinguishment of debt	0.4				1.4			—
Pension settlement charges			4.8					21.0			5.7
Pension settlement charges	21.0				5.7			2.2
Loss (gain) on fair value remeasurement of contingent consideration			12.5					(0.8)			(0.3)
Inventory obsolescence	~~2.0~~		3.7		~~1.7~~			12.90			1.7
Unrealized foreign currency losses	~~2.0~~		0.3		~~0.5~~			12.30			0.5
Stock-based compensation	~~10.8~~		12.9		~~9.2~~			910.78			9.2
Intangible asset impairment charge	6.5				—			—
Intangible asset impairments			1.4					6.5			—
Non-cash write-off of property, plant and equipment	—				—			16.3
Other non-cash items			(1.5)					2.6			3.1
Other non-cash items	1.8				2.8			1.8
Changes in operating assets and liabilities, net of effects of acquisitions:
Changes in assets and liabilities, net of effects of acquisitions:
Customer receivables			23.2					13.0			(25.0)
Customer receivables	13.0				(25.0		)	(5.5		)
Inventories			0.3					(20.9)			(16.2)
Inventories	(20.9		)		(16.2		)	(4.0		)
Prepaid and other current assets			(20.5)					6.2			(3.5)
Prepaid and other current assets	6.2				(3.5		)	(3.4		)
Accounts payable			(30.5)					(1.4)			12.5
Accounts payable	(1.4		)		12.5			12.1
Other current liabilities			(2.3)					(8.9)			13.6
Other current liabilities	(8.9		)		13.6			(15.9		)
Other noncurrent assets and liabilities			—					—			(7.9)
Other noncurrent assets and liabilities	—				(7.9		)	—
Cash provided by operating activities			60.7					138.2			108.2
Cash provided by operating activities	138.2				108.2			103.7
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(43.3)					(49.9)			(40.3)
Capital expenditures	(49.9		)		(40.3		)	(40.6		)
Purchases of businesses, net of cash acquired			—					(30.9)			(308.0)
Purchase of businesses, net of cash acquired	(30.9		)		(308.0		)	—
Proceeds from sales of property and equipment			12.3					0.1			—
Proceeds from sales of assets	0.1				—			—
Other, net			0.1					—			—
Cash used in investing activities	~~(80.7~~		(30.9)		~~(348.3~~		)	(4080.67)		)	(348.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility	~~417.5~~		414.5		~~490.5~~			~~310~~417.05			490.5
Repayment of revolving credit facility	~~(413.5~~		(492.0)		~~(383.0~~		)	(~~338~~413.05)		)	(383.0)
Proceeds from term loans	—		—		~~350.2~~			—			350.2
Repayment of term loans	~~(17.1~~		(65.9)		~~(177.9~~		)	—(17.1)			(177.9)
Capitalized debt issuance costs	~~(1.5~~		(0.3)		~~(4.6~~		)	—(1.5)			(4.6)
Payment of fees related to debt extinguishment	—		—		~~(1.0~~		)	—			(1.0)
Payment of dividends	~~(32.8~~		(16.9)		~~(30.0~~		)	(3032.28)		)	(30.0)
Proceeds from the issuance of common stock	—				—			0.6
Proceeds from the issuance of preferred stock, net			161.8					—			—
Purchase of common stock for treasury	(3.3		)		(4.4		)	(10.9		)
Payments of withholding taxes related to net share settlements of equity awards			(4.3)					(3.3)			(4.4)
Contingent purchase price payment	—				—			(6.0		)
Cash (used in) provided by financing activities			(3.1)					(50.7)			239.8
Cash (used in) provided by financing activities	(50.7		)		239.8			(74.5		)
Effect of exchange rate changes on cash and cash equivalents			2.1					0.1			(0.3)
Effect of exchange rate changes on cash and cash equivalents	0.1				(0.3		)	3.7
Net increase (decrease) in cash and cash equivalents			28.8					6.9			(0.6)
Net increase (decrease) in cash and cash equivalents	6.9				(0.6		)	(7.7		)
Cash and cash equivalents at beginning of year			8.5					1.6			2.2
Cash and cash equivalents at beginning of year	1.6				2.2			9.9
Cash and cash equivalents at end of year			$	37.3				$	8.5		$	1.6
Cash and cash equivalents at end of year	$	8.5			$	1.6		$	2.2
Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized			$	16.3				$	20.3		$	18.3
Cash paid for interest, net of amounts capitalized	$	20.3			$	18.3		$	7.6
Cash paid for income taxes, net of refunds received			$	14.5				$	12.5		$	9.6
Cash paid for income taxes, net of refunds received	$	12.5			$	9.6		$	22.4

See accompanying notes to the consolidated financial statements.

4146

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Description of the Business

Knoll, Inc. and its subsidiaries (the “Company” or “Knoll”) are engaged in the design, manufacture, marketing and sale of high-end furniture products and accessories, for ~~both~~ workplace and residential markets~~, as well as modern outdoor furniture~~. The Company is also engaged in the sale of fine leather, textiles, and felt, focusing on the middle to high-end segments of the market. The Company primarily operates in the United States (“U.S.”), Canada and Europe, and sells its products through a broad network of independent dealers and distribution partners, a direct sales force, its showrooms, and its e-commerce platforms.

Basis of Presentation

The Company follows accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB establishes accounting principles generally accepted in the United States (“GAAP”). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants, which the Company is required to follow. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (“ASC”), which serves as a single source of authoritative non-SEC accounting and reporting standards to be applied by non-governmental entities. ~~Beginning in 2019, the Company began reporting all dollar amounts in millions. In certain circumstances, this change in rounding resulted in prior year disclosures being removed.~~ Certain prior period amounts in the ~~consolidated~~Consolidated ~~financial~~Statements ~~statements~~of Cash Flows, as well as in the ~~Notes thereto~~notes, have been reclassified to conform to the current year presentation.

During the fourth quarter of 2019, the Company aligned the consolidation of certain of ~~the~~its ~~Company’s~~ foreign subsidiaries in the consolidated financial statements, which previously included results on a one-month reporting lag. The Company believes that this change in accounting principle iswas preferable, as all of the ~~Company's~~its subsidiaries are now reported based on the same period-end, which improves overall financial reporting to investors by providing the most current information available. In accordance with applicable accounting literature, the elimination of a one -month reporting lag of a subsidiary is treated as a change in accounting principle and requires retrospective application. The Company has determined that the effect of this change is not material to the financial statements for all periods presented and therefore, the Company has not presented retrospective application of this change. The net impact of the elimination of the reporting lag of $0.6 million of loss for the month of December 2019 has been included within "Other income, net" on the Consolidated Statements of Operations and Comprehensive Income in the fourth quarter of 2019.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries and any partially-owned subsidiaries that the Company has the ability to control. Significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. 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 may differ from such 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly-liquid investments with maturities of three months or less at the date of purchase.

~~Revenue Recognition~~ 47

Revenue for the year ended December 31, 2017 was recognized under ASC 605, Revenue Recognition, when (i) persuasive evidence of an arrangement existed, (ii) delivery occurred or services were rendered, (iii) the price was fixed or determinable and (iv) collectability was reasonably assured.

ASC 606, Revenue from Contracts with Customers, was adopted for the fiscal year beginning January 1, 2018. Per the new standard, the Company determines revenue recognition by applying the following steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue as the performance obligations are satisfied.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

~~The~~Revenue ~~Company~~Recognition recognizes revenue when performance obligations under the terms of a contract with a customer are satisfied. The Company's primary performance obligation to its customers is the delivery of products. Control of the products sold typically transfers to the customer upon shipment or delivery depending on the shipping terms of the underlying contract.

In accordance with ASC 606, Revenue from Contracts with Customers, the Company determines revenue recognition by applying the following steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue as the performance obligations are satisfied.

The Company recognizes revenue when performance obligations under the terms of a contract with a customer are satisfied. The Company's primary performance obligation to its customers is the delivery of products. Control of the products sold typically transfers to the customer upon shipment or delivery, depending on the shipping terms of the underlying contract.

Each customer contract sets forth the transaction price for the products and services purchased under that arrangement. Some customer arrangements include variable consideration, such as volume rebates, some of which depend upon the customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company uses judgment to estimate the most likely amount of variable consideration at each reporting date. When estimating variable consideration, the Company applies judgment when considering the probability of whether a reversal of revenue could occur and only recognize revenue subject to this constraint.

The Company uses historical customer return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. Customer returns have historically not been significant. The Company may receive deposits from customers before revenue is recognized, thus resulting in the recognition of a contract liability (customer deposits).

Amounts billed to customers for shipping and handling of products are included in sales and the related costs incurred by the Company for shipping and handling are included in cost of sales. IfThe ~~shipping activities are performed after a customer obtains control of a product, the~~ Company applies a policy election to account for shipping and handling as an activity to fulfill the promise to transfer the product to the customer.

The Company applies an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

The Company has elected the practical expedient permitted in ASC 340-40-25-4, which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if the amortization period will be less than one year.

The Company has elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if a contract has a duration of one year or less. As the Company’s contracts are typically less than one year in length, consideration will not be adjusted. The Company’s contracts generally include a standard payment term of 30 days, consequently there is no significant financing component within its contracts.

Allowance for Doubtful Accounts

Accounts receivable are recorded net of an allowance for expected credit losses. The Company maintains an allowance for ~~doubtful~~credit ~~accounts~~losses for ~~losses~~the ~~associated~~expected ~~with~~failure ~~accounts~~or ~~receivable~~inability ~~balances~~of ~~that~~its ~~are~~customers ~~estimated~~ to bemake ~~uncollectible~~required payments. The ~~allowance~~Company isrecognizes ~~determined~~the ~~through~~allowance anfor ~~analysis~~expected ofcredit ~~the~~losses ~~aging~~at ofinception ~~accounts receivable~~ and ~~assessments~~reassesses ofquarterly ~~risk that are~~ based on ~~historical~~management’s ~~trends.~~expectation ~~The~~of ~~Company evaluates~~ the ~~past-due~~asset’s ~~status~~collectability. ofThe ~~its~~allowance ~~customer~~is ~~receivables~~ based on ~~the~~multiple ~~contractual~~factors ~~terms~~including ofhistorical ~~sale.~~experience Ifwith bad debts, the ~~financial~~credit ~~condition~~quality of the ~~Company's~~customer ~~customers were to deteriorate~~base, ~~additional~~the ~~allowances~~aging ~~may~~of besuch ~~required.~~receivables ~~Accounts~~and ~~receivable~~current ~~and~~macroeconomic ~~corresponding~~conditions, ~~allowance~~as ~~for~~well ~~doubtful~~as ~~accounts~~management’s ~~are~~expectations ~~written~~of ~~off~~conditions ~~when~~in the ~~Company~~future. ~~determines~~The ~~that~~Company’s ~~the~~allowance ~~likelihood~~for ofuncollectible ~~recovery~~accounts receivable is ~~remote~~based ~~and~~on ~~the~~management’s ~~Company~~assessment noof ~~longer~~the ~~intends~~collectability toof ~~expend~~assets ~~resources~~pooled totogether ~~attempt~~with ~~collection.~~similar risk characteristics.

~~The~~Management ~~following~~analyzes ~~table~~receivables ~~summarizes~~based on the ~~changes~~credit inquality indicators and shared risk characteristics of dealers and other customers. Management stratifies the ~~allowance~~dealer ~~for~~population ~~doubtful~~generally ~~accounts~~by ~~for~~the level of their purchase activity, mainly recurring purchasers compared to non-recurring purchasers, as well as the ~~periods~~financial ~~presented~~strength ~~(in~~of ~~millions):~~the dealer. Management also stratifies receivables based on government and corporate purchasers with common risk characteristics. Management considers multiple factors, including payment history, frequency of purchases and financial strength of the purchaser to determine the reserve needed.

Description	Balance atBeginningof Year		AdditionsCharged toExpenses (Income)			Charge-Offs			Other		Balance atEnd of Year
Allowance for doubtful accounts:
Year ended December 31, 2017	$	8.0	$	(2.2	)	$	(1.8	)	$	—	$	4.0
Year ended December 31, 2018	4.0		0.1			(0.4		)	—		3.7
Year ended December 31, 2019	3.7		0.9			(0.7		)	0.1		4.0

Inventories

Inventories are stated at the lower of cost or net realizable value and include material, labor and overhead. Cost is determined using the first-in, first-out method. The Company adjusts for inventory that it believes is impaired or obsolete. Obsolescence occurs as the result of several factors, including the discontinuance of a product line, changes in product material specifications, replacement products in the marketplace and other competitive influences.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

Inventories

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful lives are as follows:

Category	~~Useful Life (in years)~~	Useful Life (in years)
Leasehold improvements (1)	~~Various~~	Various
Buildings	~~35-60~~	35	—	60
Building improvements	~~5-25~~	5	—	25
Office equipment	~~3-10~~	3	—	10
Software	~~3-10~~	3	—	10
Machinery and equipment	~~4-12~~	4	—	15

(1) Leasehold improvements are amortized over the shorter of the economic life of the asset or the remaining lease term.

Maintenance and repairs are expensed as incurred. Interest on significant capital projects is capitalized during the construction period.

The Company reviews the carrying values of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on undiscounted estimated cash flows expected to result from its use and eventual disposition. The factors considered by the Company in performing this assessment include current operating results, business trends affecting the use of certain assets and other economic factors. In assessing the recoverability of the carrying value of property and equipment, the Company must make assumptions regarding future cash flows and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss for these assets.

Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives are tested for impairment at least annually, as of October 1, and more frequently whenever events or circumstances occur indicating that a possible impairment may have been incurred. Intangible assets with finite lives are amortized over their estimated useful lives.

Goodwill

The Company evaluates goodwill for impairment by way of qualitative and quantitative assessments. A qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed by determining the fair value of the Company's reporting units.

The Company estimates the fair value of its reporting units using a combination of the fair values derived from both the income approach and the market approach. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the businesses ability to execute on the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

4449

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

When performing a qualitative assessment, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of the reporting units are less than their respective carrying values. The Company ~~considered~~considers factors that would impact the reporting unit fair values as estimated by the market and income approaches ~~used~~compared into the last quantitative assessment. The Company ~~reviewed~~reviews current projections of cash flows and ~~compared~~compares ~~these~~the current projections to the projections included in the most recent quantitative assessment and ~~considered~~considers ~~the~~whether ~~fact~~any ~~that no~~ new significant competitors have entered the marketplace in the industry and ~~that~~if consumer demand for the industry’s products remains relatively constant, ifis ~~not~~ growing ~~slightly~~or declining. Also, the Company considers if economic factors during the year ~~did not~~ significantly ~~affect~~affected the discount rates that should be used for the valuation of ~~these~~the reporting units. The Company ~~concluded~~would ~~that~~conclude if events occurring since the last quantitative assessment ~~did not~~ have a significant impact on the fair value of each of ~~these reporting units. Therefore,~~ the ~~Company determined that it was not necessary to perform a quantitative goodwill impairment test for certain of these~~ reporting units ~~as the qualitative assessment indicated that it is not more than likely than not that the fair value of a reporting unit is less than its carrying amount~~.

~~The~~Intangible ~~Company~~Assets ~~assesses~~Other whether impairment of indefinite-lived intangible assets, namely tradenames, exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If based on this qualitative assessment, the Company determines it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether an indefinite-lived intangible asset impairment exists. The Company tests the indefinite-lived intangible assets for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess of the carrying value over the amount of fair value is recognized as an impairment. Any such impairment is recognized in the reporting period in which it has been identified.Goodwill

The Company assesses whether impairment of its indefinite-lived intangible assets, comprised of tradenames, exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If based on this qualitative assessment, the Company determines it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether an indefinite-lived intangible asset impairment exists.

The Company tests its indefinite-lived intangible assets for impairment by comparing the carrying values of the applicable tradenames to their estimated fair values. The estimated fair values are based on an income approach using the so-called "relief from royalty method", which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the benefits of the tradename asset. The cash flow projections used in this process involve several significant assumptions, including (i) current revenue projections of the related business operations, (ii) estimated royalty rates, (iii) after-tax benefit expected from ownership of the tradenames, and (iv) discount rates used to derive the estimated fair values. Any excess of carrying value over the respective estimated fair value is recognized as an impairment in the reporting period in which it's been identified.

Finite-lived intangible assets such as customer relationships, non-compete agreements, and licenses are amortized over their estimated useful lives. The Company reviews the carrying values of these assets for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on estimated undiscounted cash flows expected to result from its use and eventual disposition. The Company regularly evaluates the reasonableness of the useful lives of these assets.

Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases, (“ASC 842”). The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the customer has the right to control the use of the identified asset. The Company determines whether the contracts are considered an operating or finance lease. The Company does not currently have finance leases.

Operating leases are included in right-of-use (“ROU”) lease assets, current portion lease liability, and lease liabilities on the Consolidated Balance Sheets when the lease term exceeds one year. The lease liabilities are initially measured at the present value of the unpaid lease payments at the lease commencement date.

Key estimates and judgments include how the Company ~~determined~~determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

(1) ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As the majority of the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company uses the implicit rate when readily determinable.

(2) The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise.

(3) Lease payments included in the measurement of the lease liability comprise the following: fixed payments (including in-substance fixed payments), less any lease incentives paid or payable to the lessee, variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise price of the Company option to purchase the underlying asset if the Company is reasonably certain to exercise.50

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

(3)Lease payments included in the measurement of the lease liability comprise the following: fixed payments (including in-substance fixed payments), less any lease incentives paid or payable to the lessee, variable payments that depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise price of the Company option to purchase the underlying asset if the Company is reasonably certain to exercise.

The ROU asset is initially measured at cost, which comprises the initial measurement of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term and any unamortized initial direct costs. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as operating expenses in the Company’s Consolidated Statement of Operations and Comprehensive Income in the same line item as expense arising from fixed lease payments for operating leases.

ROU assets for operating leases are subject to the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment.

The Company monitors for events or changes in circumstances that require a reassessment of a lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

The Company has lease agreements which include lease and non-lease components, which are accounted for separately using a relative stand-alone price basis.

On January 1, 2019 the Company adopted ASC 842 using a modified retrospective transition method and elected the optional transition method as defined within Accounting Standards Update ("ASU") 2018-11. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (i.e. January 1, 2019). The Company has elected to adopt the package of transition practical expedients and, therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized. The Company did not elect the practical expedient to use hindsight for leases existing at the adoption date.

The Company has elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with these leases are recognized and presented in the same manner as for all other Company leases.

Additionally, the Company applies a portfolio approach to determine the discount rate (i.e. incremental borrowing rate for leases with similar characteristics). The Company applies the incremental borrowing rate generally based on the transactional currency of the lease and the lease term.

Business Combinations

The purchase price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. The results of operations of the acquired business are included in the Company's operating results from the date of acquisition.

Deferred Financing Fees

Financing fees that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the life of the underlying indebtedness. Deferred financing fees are presented in the Company's consolidated balance sheets as a direct reduction from long-term debt.

~~Research and Development Costs~~51

Research and development costs are expensed as incurred, and are included as a component of selling, general, and administrative expenses. Research and development expenses were $16.4 million for 2019, $20.1 million for 2018, and $19.2 million for 2017.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

Research and Development Costs

Research and development costs are expensed as incurred, and are included as a component of selling, general, and administrative expenses. Research and development expenses were $14.2 million for 2020, $16.4 million for 2019, and $20.1 million for 2018.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined and recognized based on the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases using the tax rates expected to be in effect when the temporary differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not some portion or all of the related tax benefit will not be realized. The need to establish valuation allowances against deferred tax assets is assessed quarterly. The Company's valuation allowances are primarily attributable to net operating loss ("NOL") carryforwards in certain foreign tax jurisdictions where the Company has incurred historical tax losses from operations and has determined that it is more likely than not these deferred tax assets will not be realized. The primary factors used to assess the likelihood of realization are reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not to be sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not to be sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement. For tax positions that are not more likely than not to be sustained upon audit, the Company does not recognize any portion of the benefit. If the more likely than not threshold is not met in the period for which a tax position is taken, the Company may subsequently recognize the benefit of that tax position if the tax matter is effectively settled, the statute of limitations expires, or if the more likely than not threshold is met in a subsequent period.

The Company recognizes income tax-related interest and penalties in income tax expense and accrues for interest and penalties in other noncurrent liabilities.

Fair Value of Financial Instruments

~~The~~GAAP ~~Company~~establishes ~~uses~~a three-level hierarchy that ranks the ~~following~~quality ~~valuation~~and ~~techniques~~reliability toof ~~measure~~information used in developing fair value ~~for~~estimates. ~~its~~The ~~financial~~three ~~assets~~levels of the fair value hierarchy, with Level 1 having the highest priority and ~~financial~~Level ~~liabilities~~3 having the lowest, are summarized as follows:


Level 1						Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2						Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3						Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company and its subsidiaries use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data and/or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.

Derivative ~~Instruments~~Instrument

The Company utilizes a derivative ~~instruments~~instrument to mitigate ~~volatility~~its ~~related~~exposure to interest ~~rates~~rate ~~on certain debt instruments~~volatility. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company recognizes ~~derivatives~~its derivative instrument as either ~~assets~~an asset or ~~liabilities~~liability inon the Consolidated Balance Sheets and measures ~~those~~it ~~instruments~~ at estimated fair value. Changes in the fair value of ~~those~~that ~~instruments~~instrument are ~~initially~~deferred ~~reported~~ in shareholders' equity as a component of Accumulated Other Comprehensive ~~Income~~Loss (~~Loss~~"AOCL"), ifas ~~they~~the ~~qualify~~derivative ~~for~~instrument, ~~hedge~~which ~~accounting~~is ~~and~~a ~~are~~cash ~~subsequently~~flow ~~recognized~~hedge, inqualifies ~~earnings~~for ~~when~~hedge ~~the hedged exposure affects earnings~~accounting. Derivatives qualify for hedge accounting if they are designated as hedge instruments and if the hedge is highly effective in achieving offsetting changes in the cash flows of the asset or liability hedged. Hedge effectiveness is assessed on a regular basis. ~~Changes~~For inall ~~fair~~periods ~~value of derivative instruments that do not qualify for hedge accounting are recognized immediately in current net earnings.~~

4752

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

presented herein, gains or losses deferred in AOCL are recognized in the results of operations in the same period in which the hedged items are recognized and on the same financial statement line item as the hedged items.

Commitments and Contingencies

The Company establishes reserves for the estimated cost of environmental, legal and other contingencies when such expenditures are probable and reasonably estimable. A significant amount of judgment is required to estimate and quantify the ultimate exposure in these matters. The Company engages outside experts as deemed necessary or appropriate to assist in the evaluation of exposure. From time to time, as information becomes available regarding changes in circumstances for ongoing issues as well as information regarding emerging issues, the potential liability is reassessed and reserve balances are adjusted as necessary. Revisions to the estimates of potential liability, and actual expenditures related to commitments and contingencies, could have a material impact on the results of operations or financial position.

Warranty

The Company generally offers an assurance-type warranty for its products. The specific terms and conditions of those warranties vary depending upon the product sold. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company's warranty liability include historical product-failure experience and estimated repair costs for identified matters. The Company regularly assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Concentration of Credit Risk

The Company's customer receivables are comprised primarily of amounts due from independent dealers and direct customers. The Company monitors and manages the credit risk associated with the individual dealers and direct customers. The independent dealers are responsible for assessing and assuming the credit risk of their customers and may require their customers to provide deposits or other credit enhancement measures. Historically, the Company has had a concentration of federal and local government receivables; however, they carry minimal credit risk.

Foreign Currency Translation

Results of foreign operations are translated into U.S. dollars using average exchange rates during the year, while assets and liabilities are translated into U.S. dollars using the exchange rates as of the balance sheet dates. The resulting translation adjustments are recorded in ~~accumulated other comprehensive income (loss)~~AOCL.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the consolidated statements of operations, within other income, net, in the year in which the gain or loss occurs.

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The Company recognizes compensation expense using the straight-line method over the vesting period. Compensation expense relating to restricted stock units subject to performance conditions is recognized if it is probable that the performance condition will be achieved. Forfeitures are recognized when they occur. Stock-based compensation for all types of awards is included in selling, general and administrative expenses in the Consolidated Statements of Operations.

The fair value of restricted stock and restricted stock units, excluding market-based restricted stock units, is based upon the closing market price of the Company's common stock on the date of grant.

The fair value of market-based restricted stock units is estimated at the date of grant using a Monte Carlo simulation model, which requires management to make certain assumptions based on both historical and current data. These awards vest based upon the performance of the Company's stock price relative to a peer group. The assumptions included in the model include, but are not limited to, risk-free interest rate, expected volatility of the Company's and the peer group's stock prices, and dividend yield. The risk-free rate is based upon the applicable U.S. Treasury Note rate. Expected volatility is estimated based on the historical volatility of the Company's and peer group's stock prices. The dividend yield is based on the Company's historical data.

~~Pension and Other Post-Employment Benefits~~53

The Company sponsors two defined benefit pension plans, one of which was terminated during 2019, and four other post-employment benefit plans ("OPEB"), one of which was terminated during 2019. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. Key factors include assumptions about the expected rates of return on plan assets, discount rates, mortality rates and health care cost trend rates. The Company considers market and regulatory conditions, including changes in investment returns and interest rates, in making these assumptions.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

Pension and Other Post-Employment Benefits

The Company had sponsored two defined benefit pension plans, one of which was terminated during 2019, and four other post-employment benefit plans ("OPEB"), one of which was terminated during 2019. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. Key factors include assumptions about the expected rates of return on plan assets, discount rates, mortality rates and health care cost trend rates. The Company considers market and regulatory conditions, including changes in investment returns and interest rates, in making these assumptions.

The Company determines the expected long-term rate of return on plan assets based on aggregating the expected rates of return for each component of the plan's asset mix. The Company uses historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption. The discount rate reflects the market rate for high-quality fixed income debt instruments as of the Company's annual measurement date and is subject to change each year.

Unrecognized actuarial gains and losses are recognized over the expected remaining lifetime of the plan participants. Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to the obligations of the pension and OPEB plans, and from the difference between expected returns and actual returns on plan assets. These unrecognized gains and losses are systematically recognized as a change in future net periodic pension expense in accordance with the appropriate accounting guidance relating to defined benefit pension and OPEB plans.

Key assumptions used in determining the amount of the obligation and expense recorded for the OPEB plans include the assumed discount rate and the assumed rate of increases in future health care costs. In estimating the health care cost trend rate, the Company considers actual health care cost experience, future benefit structures, industry trends and advice from its actuaries. The Company assumes that the relative increase in health care costs will generally trend downward over the next several years, reflecting assumed increases in efficiency and cost-containment initiatives in the health care system.

In accordance with the appropriate accounting guidance, the Company has recognized the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligation) of the defined benefit pension and OPEB plans in the consolidated balance sheets. To record the unfunded status of the plans, the Company recorded an additional liability and an adjustment to accumulated other comprehensive loss, net of tax. Other changes in the benefit obligation including net actuarial loss (gain) and prior service cost (credit) are recognized in other comprehensive income.

The actuarial assumptions the Company used in determining the pension and OPEB retirement benefits may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. While the Company believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions could materially affect the financial position or results of operations.

Segment Information

The Company has two reportable segments: Office and Lifestyle. The Office reportable segment is comprised of the operations of the Office operating segment. The Lifestyle reportable segment is an aggregation of the Lifestyle, Europe Studio, and Muuto operating segments. All unallocated expenses are included within Corporate.

The Office reportable segment includes a complete range of workplace products that address diverse workplace planning paradigms. These products include: systems furniture, seating, storage, tables, desks and KnollExtra® accessories as well as the international sales of ~~our~~ North American Office products. The Office segment includes DatesWeiser and Fully. DatesWeiser, known for its sophisticated meeting and conference tables and credenzas, sets a standard of design, quality and technology integration. Fully is an e-commerce furniture brand selling height-adjustable desks, ergonomic chairs and accessories principally for individual home offices and small businesses.

The Lifestyle reportable segment aggregates three operating segments: Lifestyle, Europe Studio and Muuto. The Lifestyle reportable segment products, which are distributed in North America and Europe, include iconic seating, lounge furniture, side, café and dining chairs as well as conference, training, dining and occasional tables, lighting, rugs, textiles, high-quality fabrics, felt, leather and related architectural products.

During the first quarter of 2019, the Company changed the structure of its internal organization, resulting in a change to the composition of its reportable segments. DatesWeiser is now a component of the Office operating segment, as opposed to the Lifestyle operating segment. As a result of this change in segment reporting, the Company retrospectively revised prior period results, by segment, to conform to current period presentation.

Corporate costs include unallocated costs relating to shared services and general corporate activities such as legal expenses, acquisition expenses, certain finance, human resources, administrative and executive expenses and other expenses that are not directly attributable to an operating segment. Dedicated, direct selling, general and administrative expenses of the segments are included within segment operating profit. Management regularly reviews the costs included in the Corporate function and believes disclosing such information provides more visibility and transparency of how the chief operating decision maker reviews the results for the Company.

4954

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 will be effective for the Company as of January 1, 2020. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement. For public companies the ASU removes disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The ASU adds the disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019 including interim periods within that fiscal year. Early adoption is permitted. The Company does not believe there will be a material impact to the consolidated financial statements as a result of adopting this ASU.

Accounting Standards Adopted

In ~~February~~March ~~2016~~2020, the Financial Accounting Standards Board (“FASB”) issued ~~guidance~~Accounting ~~codified~~Standards inUpdate ~~ASC~~(“ASU”) ~~842~~2020-04, ~~Leases,~~Reference ~~which~~Rate ~~supersedes~~Reform (Topic 848): Facilitation of the ~~guidance~~Effects inof ~~ASC~~Reference ~~840~~Rate Reform on Financial Reporting, ~~Leases.~~which ~~ASC~~provides ~~842~~practical ~~was~~expedients ~~effective~~and exceptions for ~~the~~applying ~~Company~~U.S. onGAAP ~~January~~to 1contracts, ~~2019,~~hedging relationships and ~~the~~other ~~Company~~transactions ~~adopted~~affected ~~the~~by ~~standard~~reference ~~using~~rate ~~the~~reform ~~modified~~if ~~retrospective~~certain ~~approach~~criteria are met. The ~~Company~~amendments ~~recorded~~apply ~~lease~~to ~~liabilities~~contracts ofand ~~$119.3~~hedging ~~million,~~relationships ~~with~~that anreference ~~offsetting~~the ~~increase~~London Interbank Offered Rate (“LIBOR”) or other reference rate expected to ~~the~~be ~~right-of-use~~discontinued ~~assets~~due ofto ~~$101~~reference rate reform.7 ~~million,~~The ~~for~~amendments ~~all~~in ~~leases~~this ~~with~~ASU anare ~~initial~~effective ~~term~~immediately ofand ~~greater~~may ~~than~~be ~~twelve~~applied ~~months~~to ~~regardless~~impacted ofcontracts ~~their~~and ~~classification~~hedges asprospectively through December 31, 2022. The adoption of ~~January~~the 1ASU had no impact on the Company’s consolidated financial statements for the period ended December 31, ~~2019~~2020.

In August 2018, the FASB issued ~~clarifying~~ASU ~~guidance~~2018-13, toFair ~~the~~Value ~~topic~~Measurement in(Topic ~~ASUs~~820), ~~No.~~which ~~2018-10~~amends ~~and~~the ~~No.~~disclosure ~~2018-11,~~requirements ~~which~~for ~~clarified~~recurring ~~certain~~and ~~aspects~~nonrecurring offair ~~the~~value ~~new~~measurements ~~leases~~by ~~standard~~removing, modifying and ~~provided~~adding ancertain ~~optional transition method~~disclosures. The Company ~~has elected the package of practical expedients and~~ adopted ~~utilizing the optional transition method defined within~~ ASU 2018-1113 onas of January 1, ~~2019~~2020. The ~~Company did not elect the hindsight expedient. The~~ adoption of ~~the~~this ~~standard~~ASU did not ~~materially~~have ~~impact~~a ~~the~~significant ~~Consolidated~~impact ~~Statements~~on ofthe ~~Operations~~Company’s ~~and~~consolidated ~~Comprehensive~~financial ~~Income~~statements or ~~Cash Flows~~disclosures.

In June ~~2018~~2016, the FASB issued ASU ~~2018~~2016-0713, ~~Compensation~~ Financial Instruments - ~~Stock~~Credit ~~compensation~~ Losses (Topic ~~718~~326): ~~which~~Measurement ~~simplifies~~of ~~several~~Credit ~~aspects~~Losses ofon ~~the~~Financial ~~accounting~~Instruments. ~~for~~ASU ~~nonemployee share~~2016-~~based~~13 ~~payment~~replaces ~~transactions resulting from expanding~~ the ~~scope~~incurred ofloss ~~Topic~~impairment ~~718,~~methodology ~~Compensation-Stock Compensation, to include share-based payment transactions~~ for ~~acquiring~~measuring ~~goods~~ and ~~services~~recognizing ~~from~~credit ~~non-employees.~~losses ~~Some~~with ofa ~~the~~methodology ~~areas for simplification apply only to nonpublic entities. The amendments specify~~ that ~~Topic~~reflects ~~718~~expected ~~applies~~credit tolosses, ~~all share-based payment transactions in~~ which arequires ~~grantor~~consideration ~~acquires~~of ~~goods or services to be used or consumed in~~ a ~~grantor’s~~broader ~~own~~range ~~operations~~of byreasonable ~~issuing~~and ~~share-based~~supportable ~~payment~~information ~~awards. The amendments also clarify that Topic 718 does not apply~~ to ~~share-based~~inform ~~payments~~credit ~~used~~loss to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customersestimates. The ~~amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The~~ Company adopted ~~this~~ ASU ~~effective~~2016-13 as of January 1, ~~2019~~2020. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) which reduces the complexity of accounting for costs of implementing a cloud computing service arrangement and aligns the accounting for capitalizing implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the component of the hosting arrangement is ready for its intended use. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. The Company adopted the amendment prospectively as of October 1, 2019 and the adoption did not have a material impact on the Company’s consolidated financial statements.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

3. REVENUE

Disaggregation of Revenue

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

The Company’s sales by product category were as follows (in millions):

	~~Year Ended December 31,~~				Year Ended December 31,
	2019		2018			2017
								2020		2019		2018
Office Segment
Office Systems	$	~~449.4~~	$	~~439.2~~		$	~~422.7~~	$	359.1	$	449.4	$	439.2
Seating	~~131.2~~		~~131.0~~			~~118.4~~		101.0		131.2		131.0
Files and Storage	~~104.9~~		~~92.0~~			~~90.4~~		82.1		104.9		92.0
Ancillary	~~134.4~~		~~91.9~~			~~59.5~~		201.0		134.4		91.9
Other	~~53.9~~		~~43.0~~			~~42.3~~		32.5		53.9		43.0
Total Office Segment	$	~~873.8~~	$	~~797.1~~		$	~~733.3~~	$	775.7	$	873.8	$	797.1
Lifestyle Segment
Studio	~~439.9~~		~~395.2~~			~~290.6~~		374.8		439.9		395.2
Coverings	~~114.4~~		~~110.0~~			~~109.0~~		85.9		114.4		110.0
Total Lifestyle Segment	$	~~554.3~~	$	~~505.2~~		$	~~399.6~~	$	460.7	$	554.3	$	505.2
Total Sales	$	~~1,428.1~~	$	~~1,302.3~~		$	~~1,132.9~~	$	1,236.4	$	1,428.1	$	1,302.3

Contract Balances

The Company’s ~~has~~ contract assets ~~consisting~~consist of ~~Customer~~customer receivables inwhich are included on the Consolidated Balance Sheets. ~~which~~These amounts represent the amount of consideration the Company expects to be entitled to in exchange for the goods ordelivered ~~services rendered~~ to its customers.

When the Company receives deposits, the recognition of revenue is deferred and results in the recognition of a contract liability (Customer deposits) presented as a component of Other Current Liabilities in the Consolidated Balance Sheets. Subsequent recognition of revenue and the satisfaction of the contract liability is typically less than one year as the Company’s standard contract is less than one year. As of December 31, 2019 and December 31, 2018, the contract liability related to customer deposits was $32.5 million and $37.7 million, respectively. The Company recognized revenues that were included in the contract liability at the beginning of the 2019 and 2018 of $31.1 million and $30.5 million, respectively. In addition, the Company assumed a contract liability of $0.5 million related to a business combination during the year. 55

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020

When the Company receives deposits, the recognition of revenue is deferred and results in the recognition of a contract liability (Customer deposits) which is included in Other current liabilities on the 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 December 31, 2020 and 2019, the contract liability related to customer deposits was $33.8 million and $32.5 million, respectively. The Company recognized revenues that were included in the contract liability at the beginning of 2020 and 2019 of $31.9 million and $31.1 million, respectively.

Allowance for Doubtful Accounts

The following table summarizes the changes in the allowance for doubtful accounts for the periods presented (in millions):


	Balance at Beginning of Year	Provision	Charge-Offs	Other	Balance at End of Year

Year ended December 31, 2018	4.0	0.1	(0.4)	—	3.7
Year ended December 31, 2019	3.7	0.9	(0.7)	0.1	4.0
Year ended December 31, 2020	4.0	1.3	(0.5)	0.1	4.9

4. ACQUISITIONS

Fully

On August 20, 2019, the Company acquired FHI LLC (“Fully”), a Portland, Oregon-based e-commerce furniture brand with products targeting the home office and small business markets. The acquisition provides the Company access to new markets for current products, while simultaneously allowing it to leverage its existing distribution channels to expand its product offerings to include Fully’s portfolio of high-performance adjustable height desks, ergonomic chairs and accessories.

The aggregate purchase price ~~consists~~consisted of cash paid at closing of $30.9 million, net of cash acquired of $4.1 million, plus additional earn-out consideration should Fully achieve certain revenue and earnings targets associated with separate short-term and long-term earn-out periods of two and four years, respectively (together, the “Earn-Out Consideration”). The estimated fair value of the Earn-Out Consideration iswas $2.0 million as of the acquisition date (see Note 11 for further discussion). The acquisition was funded from cash on hand and borrowings under the Company’s Revolver. The Company recognized the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded to goodwill. ~~Adjustments~~Fully's tooperating ~~the initial accounting for the acquisition may occur if additional information is obtained that~~ results in a revision to the analysis of the facts and circumstances that existed as of the acquisition date, but no later than one year thereafter (the “Measurement Period”). The results of operations of Fully are reported in the Office segment and have been included in the consolidated results of operations from the acquisition date.

51Pro forma financial information has not been presented for the Fully acquisition as the impact to the Company's Consolidated Financial Statements was not material.

The following table summarizes the final estimates of the fair value and useful lives of the intangible assets acquired as of the August 20, 2019 Fully acquisition date (dollars in millions):


	Amount		Estimated useful Life (in years)
Tradenames	$	10.0	10
Customer relationships	1.0		5
Non-compete agreements	0.5		4
Goodwill	14.9		-

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

The pro forma financial information, has not been presented for the Fully acquisition as the financial impact of this acquisition is not considered material.

The following table summarizes the preliminary fair value and useful lives of the intangible assets acquired as of the acquisition date of Fully (dollars in millions):

	Fair Value as of August 20, 2019		Estimated useful Life (in years)
Tradenames	$	10.0	10
Customer relationships	1.0		5
Non-compete agreements	0.5		4
Goodwill	14.9		-

Muuto

On January 25, 2018, the Company acquired one hundred percent (100%) of the shares of Muuto Holding ApS and MIE4 Holding 5 ApS, which collectively held all the business operations of Muuto ApS (“Muuto”). Muuto’s affordable luxury products span commercial and residential applications, adding scale and diversity to the Company’s business. The aggregate purchase price for the acquisition was $307.7 million, net of $7.6 million of cash acquired. The Company recognized the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. The results of operations of Muuto have been included in the Company’s Lifestyle segment beginning January 25, 2018. The Company funded the acquisition with proceeds from debt issued under the Third Amended and Restated Credit Agreement, as well as cash on hand (see Note 13). The Company recorded acquisition and certain other costs ofincurred in connection with the acquisition totaling $5.1 million within selling, general, and administrative expenses in its Consolidated Statement of Operations and Comprehensive Income, ~~during~~for the ~~twelve~~year ~~months~~ ended December 31, 2018.

The following table summarizes the fair values assigned to the assets acquired and liabilities assumed of Muuto and the resulting goodwill as of the January 25, 2018 acquisition date (in millions):


	Amount
Cash	$	7.6
Customer receivables	8.6
Inventory	11.1
Other current assets	0.4
Property, plant, and equipment, net	1.3
Intangible assets	135.6
Other non-current assets	0.3
Total assets acquired	$	164.9
Accounts payable	3.4
Other current liabilities	10.6
Deferred income taxes	29.9
Total liabilities assumed	$	43.9
Net assets acquired	$	121.0

Purchase price	$	315.3
Less: Fair value of acquired identifiable assets and liabilities	121.0
Goodwill	$	194.3

The excess of the purchase price over the net tangible and intangible assets is recorded to goodwill and primarily reflects the assembled workforce and expected synergies. Goodwill is not deductible for tax purposes.

5257

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

The following table summarizes the ~~estimated~~final estimates of the fair value ofand ~~Muuto’s~~useful ~~identifiable~~lives of the intangible assets ~~and~~acquired ~~their~~as ~~estimated~~of ~~useful~~the ~~lives~~January 25, 2018 Muuto acquisition date (dollars in millions):

	Fair Value as of January 25, 2018				Estimated Useful Life (in years)
			Amount			Estimated Useful Life (in years)
Indefinite-lived intangible assets:
Trade name	$	~~66.0~~	$	66.0	~~Indefinite~~	Indefinite
Finite-lived intangible assets:
Wholesale customer relationships	~~35.8~~		35.8		15	15
Contract customer relationships	~~25.0~~		25.0		9	9
Copyrights & designs	~~7.5~~		7.5		7	7
Non-competition agreements	~~1.3~~		1.3		3	3
Total intangible assets	$	~~135.6~~	$	135.6

The following table presents unaudited pro forma information for the ~~periods~~period presented as if the acquisition of Muuto had occurred as of January 1, 2017 (in millions):

	~~Year Ended December 31,~~		Year Ended December 31,
	~~2018~~		2018		~~2017~~
Pro forma sales	$	~~1,306.4~~	$	1,306.4	$	~~1,203.2~~
Pro forma net earnings attributable to Knoll, Inc. stockholders	$	~~79.0~~	$	79.0	$	~~77.9~~

The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or ~~the~~of ~~future consolidated~~ results ofthat ~~operations~~may ofoccur in the ~~Company~~future. The pro forma financial information presented above has been derived from the historical consolidated financial statements of the Company and from the historical consolidated financial statements of Muuto.

The pro forma financial information presented above include adjustments for: (1) incremental amortization expense related to fair value adjustments to identifiable intangible assets, (2) incremental interest expense for outstanding borrowings to reflect the terms of the ~~Amended~~amended Credit Agreement, (3) nonrecurring items, (4) the tax effect of the above adjustments.

The pro forma information presented for the ~~twelve~~year ~~months~~ ended December 31, 2018 excludes expenses for future payments that are considered compensation for post combination service of $3.2 million, loss on debt extinguishment of $1.4 million, acquisition costs of $1.9 million, and acquisition-related inventory step-up valuation adjustment of $0.9 million, and includes incremental interest expense of $0.1 million and incremental amortization of intangibles of $0.8 million. The income tax impact of these adjustments for the ~~twelve~~year ~~months~~ ended December 31, 2018 was $1.3 million. The pro forma information presented for the twelve months ended December 31, 2017 includes incremental amortization of intangibles of $6.6 million, acquisition costs of $1.9 million, future payments that are considered compensation for post combination service of $3.5 million, incremental amortization of deferred financing fees of $1.2 million, incremental interest expense of $1.7 million, and an acquisition-related inventory step-up valuation adjustment of $0.9 million. The income tax impact of these adjustments for the twelve months ended December 31, 2017 was $4.6 million.

5. INVENTORIES

~~Information~~Inventories ~~regarding~~consisted of the ~~Company's~~following ~~inventories~~as isof asthe ~~follows~~dates presented (in millions):

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
Raw materials	$	~~58.7~~	$	49.3	$	~~65.2~~	$	58.7
Work-in-process	~~8.1~~		6.7		~~8.3~~		8.1
Finished goods	~~129.1~~		137.1		~~97.0~~		129.1
	$	~~195.9~~	$	193.1	$	~~170.5~~	$	195.9

5358

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

6. PROPERTY, PLANT, AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following as of the dates presented (in millions):

	~~December 31,~~		December 31,
	2019				2018
			2020					2019
Land	$	~~16.0~~	$	12.9	$	~~12.0~~		$	16.0
Leasehold improvements	~~62.9~~		67.9		~~59.6~~			62.9
Buildings	~~71.9~~		55.8		~~68.9~~			71.9
Office equipment	~~27.2~~		33.3		~~19.5~~			27.2
Software	~~71.2~~		74.3		~~43.4~~			71.2
Machinery and equipment	~~236.4~~		230.7		~~237.2~~			236.4
Construction-in-progress	~~35.0~~		39.3		~~52.7~~			35.0
Property, plant and equipment	~~520.6~~		514.2		~~493.3~~			520.6
Accumulated depreciation	~~(281.6~~		(277.1)		~~(278.3~~		)	(281.6)
Property, plant, and equipment, net	$	~~239.0~~	$	237.1	$	~~215.0~~		$	239.0

~~During~~Depreciation ~~2019~~expense on property, plant and equipment was $32.2 million, $29.6 million and $25.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. During 2020, 2019 and ~~2017~~2018, the Company capitalized interest of approximately $0.5 million, $0.85 million and $0.8 million, respectively.

During the fourth quarter of 2017, the Company completed a global design review of the next phases of its enterprise resource planning ("ERP") system implementation. Through this review, the Company identified certain software items that were no longer useful to the future phases of the ERP system. As a result, the Company recorded a $16.3 million write-off of capitalized software costs in 2017.

7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

~~The~~During ~~following~~the ~~table~~fourth ~~summarizes~~quarter of 2020, the ~~carrying~~Company ~~amount~~performed its annual assessment of impairment to goodwill byallocated ~~reportable~~to ~~segment~~its asreporting ofunits. ~~the~~The ~~dates~~Company ~~presented~~has four reporting units: Office, asLifestyle, ~~well~~Muuto asand ~~the~~Europe ~~changes~~Studio. toNo goodwill ~~during~~is allocated to Europe Studio. Given the ~~years~~significant ~~ended~~impact ~~December~~the 31COVID-19 pandemic had on the Company's market capitalization, ~~2019~~profitability and ~~2018~~demand ~~(in~~for ~~millions):~~certain components of its product portfolio, the Company elected to perform quantitative impairment tests of goodwill on all three of the reporting units to which goodwill is allocated.

	OfficeSegment			Lifestyle Segment			Total
Balance as of December 31, 2017	$	39.7		$	102.4		$	142.1
Foreign currency translation adjustment	(0.6		)	(15.3		)	(15.9		)
Goodwill recognized in connection with the Muuto acquisition	—			194.6			194.6
Balance as of December 31, 2018	39.1			281.7			320.8
Foreign currency translation adjustment	0.3			(3.9		)	(3.6		)
Goodwill recognized in connection with the Fully acquisition	14.9			—			14.9
Balance as of December 31, 2019	$	54.3		$	277.8		$	332.1

A considerable amount of management judgement and assumptions are required in performing these impairments tests, particularly as it relates to future cash flow streams derived from revenue and after-tax operating income projections through the terminal year, as well as the discount and long-term growth rates used to value those cash flow streams and develop the terminal values. While the Company believes the judgements and assumptions to be reasonable, different assumptions could change the estimated fair values per reporting unit, resulting in different outcomes from those reached in connection with the impairment tests noted above.

~~The~~Based ~~Company~~on ~~did~~the ~~not~~results ~~record~~of ~~any~~the ~~goodwill~~tests performed, there was no indication of impairment ~~charges~~to the goodwill allocated to any of the reporting units, as the estimated fair value exceeded the respective carrying amount in ~~2019~~each case, ~~2018~~as orsummarized ~~2017.~~ in the table below:


	October 1, 2020
Reporting Unit	Amount of Goodwill Allocated		Excess Fair Value
Office	$	58.4	<	10%
Lifestyle	98.8		>	20%
Muuto	183.1		<	5%

The Company is unable to predict future impacts of the COVID-19 pandemic, how long conditions related to the pandemic will persist, what additional restrictions might be placed on the private sector by federal, state and local governments in the U.S. and abroad, when herd immunity will be reached in the applicable geographies in which the Company operates or sells its products or what the future of the workplace will really look like over the relevant timeframe. Any action on the part of government (at all levels, in all geographies) that requires or encourages people to stay home, continue the practice of social distancing or avoid large indoor gatherings is likely to have some negative impact on demand for certain components of the Company's product portfolio. The Company will continue to monitor changes in the macro

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

environment and test more frequently if those changes indicate that goodwill might be impaired.

The following table summarizes the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2020 and 2019 (in millions):


	Office Segment		Lifestyle Segment		Total



Balance as of December 31, 2018	$	39.1	$	281.7	$	320.8
Foreign currency translation adjustment	0.3		(3.9)		(3.6)
Goodwill recognized in connection with the Fully acquisition	14.9		—		14.9
Balance as of December 31, 2019	54.3		277.8		332.1
Foreign currency translation adjustment	0.2		17.5		17.7
Balance as of December 31, 2020	$	54.5	$	295.3	$	349.8

The Company did not record any goodwill impairment charges during 2020, 2019 or 2018.

Intangible Assets

~~Information~~The ~~regarding~~components ~~the~~of ~~Company's other~~ intangible assets, isnet are as follows (in millions):

	December 31, 2019									December 31, 2018
			December 31, 2020														December 31, 2019
	~~GrossAmount~~		GrossAmount		~~AccumulatedAmortization~~			~~NetAmount~~AccumulatedAmortization		~~GrossAmount~~		NetAmount		~~AccumulatedAmortization~~			~~NetAmount~~GrossAmount		AccumulatedAmortization		NetAmount
Indefinite-lived intangible assets:
Tradenames	$	~~277.6~~	$	278.4	$	—		$	~~277.6~~—	$	~~285.5~~	$	278.4	$	—		$	~~285~~277.56	$	—	$	277.6
Finite-lived intangible assets:
Customer relationships	~~78.9~~		84.2		~~(25.0~~		)	53(32.9)		~~78.4~~		51.3		~~(18.4~~		)	6078.09		(25.0)		53.9
Various	~~30.9~~		36.2		~~(14.2~~		)	16(18.70)		~~20.5~~		18.2		~~(12.1~~		)	830.49		(14.2)		16.7
Total	$	~~387.4~~	$	398.8	$	~~(39.2~~	)	$	~~348~~(50.29)	$	~~384.4~~	$	347.9	$	~~(30.5~~	)	$	~~353~~387.94	$	(39.2)	$	348.2

~~Based~~During on the ~~result~~fourth ofquarter ~~the annual impairment test~~ of ~~indefinite-lived intangible assets as of October 1~~2020, ~~2019,~~ the Company ~~determined~~performed ~~that~~its ~~the~~annual ~~Edelman~~assessment ~~Leather tradename was impaired, as the estimated fair value~~ of ~~the~~impairment ~~Edelman~~to ~~Leather tradename was less than~~ its ~~respective carrying amount.~~tradename ~~The~~intangible ~~decline~~assets inwith ~~the~~indefinite fair value of the Edelman tradename was primarily the result of weaker than expected revenue performance in late 2019, a corresponding reduction of future revenue expectations and a reduction of the royalty rate used for valuation purposeslives. ~~The~~In ~~revenue~~connection ~~reductions were primarily a result of lower sales of luxury products~~therewith, ~~an aging of Edelman showrooms, and~~ the ~~inability~~Company toelected ~~replace private aviation customers with a comparable revenue stream. The Edelman Leather tradename was estimated~~ to beperform ~~fully~~quantitative ~~impaired,~~valuations ~~resulting in a non-cash pre-tax impairment charge~~ of ~~$6.5~~its ~~million~~principal during the fourth quarter of 2019. This fair value measurement fell within Level 3 of the fair value hierarchy as described in Note 2. Edelman Leather is included within the Company's Lifestyle Segment. There were no impairments of indefinite-lived ~~intangible~~tradenames, ~~assets~~including ~~during~~Knoll, ~~2018~~Holly orHunt ~~2017~~and Muuto.

Based on the results of the tests performed, there was no indication of impairment to any of the tradenames noted above, as the estimated fair value exceeded the respective carrying amount in each case, as summarized in the table below:

Amortization expense related to finite-lived intangible assets was $8.9 million, $8.9 million, and $3.3 million for the years ended December 31, 2019, 2018, and 2017, respectively. The estimated future amortization expense of finite-lived intangible assets as of December 31, 2019 is as follows (in millions):


	October 1, 2020
Tradename	Carrying Amount		Excess Fair Value
Knoll	$	187.8			>	25%
Holly Hunt	$	23.5			<	1%
Muuto	$	62.1	10	%	to	20%

Year	Amount
2020	$	9.6
2021	9.1
2022	8.8
2023	8.7
2024	7.1

Pursuant to additional quantitative tests performed on the balance of the indefinite-lived intangibles, the Company determined that the DatesWeiser tradename was impaired, as its estimated fair value was less than its carrying amount of $2.3 million. Using the relief-from-royalty method, under which assumed royalty and discount rates of 1.5% and 13.0%, respectively, were employed, the Company concluded that the DatesWeiser tradename had an estimated fair value of $0.9 million, to which it was written down. The resultant non-cash impairment charge of $1.4 million, included in Loss on fair value measurements on the Consolidated Statements of Operations and Comprehensive Income, is reflected in the Office Segment operating results for 2020 (see Note 22).

The decline in the fair value of the DatesWeiser tradename was primarily attributable to certain negative trends within the Office Segment's traditional markets brought about by the COVID-19 pandemic. DatesWeiser's product portfolio, comprised of high-end conference furniture deployed on-premise, experienced significant order and revenue declines during the second half of 2020. The negative trends noted above, which remain largely in place as of the end of 2020, also prompted the Company to reclassify the DatesWeiser tradename to finite-lived, which will be amortized over its newly estimated useful life of seven years.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020

During the fourth quarter of 2019, the Company performed its annual assessment of impairment to its tradename intangible assets with indefinite lives. The Company determined that the Edelman Leather tradename was fully impaired. Accordingly, the Edelman tradename was written-off completely, resulting in a non-cash impairment charge of $6.5 million, included in Loss on fair value measurements on the Consolidated Statements of Operations and Comprehensive Income. Edelman is reflected in the Lifestyle Segment operating results for 2019 (see Note 22). The decline in the fair value of the Edelman tradename was primarily attributable to weaker than expected revenue during the latter part of 2019, a corresponding reduction in future revenue expectations and a reduction in the royalty rate used for valuation purposes. The revenue reductions were primarily a result of lower sales of luxury products, an aging of Edelman showrooms, and the inability to replace private aviation customers with a comparable revenue stream.

There were no impairments of indefinite-lived intangible assets during 2018.

Amortization expense related to finite-lived intangible assets was $11.1 million, $8.9 million, and $8.9 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, the estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows (in millions):


Year Ending December 31,	Amount
2021	$	10.3
2022	10.0
2023	9.8
2024	8.2
2025	6.9

8. OTHER CURRENT LIABILITIES

~~Information~~Other ~~regarding the Company's other~~ current liabilities isare ascomprised ~~follows~~of the following (in millions):

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
Accrued employee compensation	$	~~37.4~~	$	25.8	$	~~40.6~~	$	37.4
Customer deposits	~~32.5~~		33.8		~~37.7~~		32.5
Warranty	~~10.1~~		10.5		~~9.6~~		10.1
Other	~~40.3~~		43.4		~~41.0~~		40.3
Other current liabilities	$	~~120.3~~	$	113.5	$	~~128.9~~	$	120.3

5561

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

9. LEASES

The Company has commitments under operating leases for certain machinery and equipment, as well as manufacturing, warehousing, showroom and other facilities used in its operations. The Company has no finance leases. Excluding short-term leases, the Company’s leases have initial terms ranging from 1 to 16 years, most of which include options the Company may exercise to extend or renew the lease for 1.0 to 6 years, and some of which include options to terminate the leases with ~~notice~~notification periods of up to 1 year. Certain lease agreements contain provisions for future rent increases. Payments due under lease contracts are fixed.

~~The Company recognized rent expense for 2018 and 2017 of $32.1 million and $28.9 million, respectively.~~ Lease cost recognized in the consolidated statements of operations for 2020 and 2019 is summarized as follows (in millions):

	Year Ended December 31, 2019
				Year ended December 31,
Lease cost:
				2020		2019
Operating lease cost	$	28.6
Lease cost:
Short-term lease cost	3.3
Operating lease cost				$	33.0	$	28.6
Sublease income	(0.2		)
Short-term lease cost				4.2		3.3
Total lease cost	$	31.7
Sublease income				(0.2)		(0.2)
Total lease cost				$	37.0	$	31.7

~~Other~~The ~~lease~~Company ~~information~~recognized asrent expense of ~~and~~$32.1 million for the year ended December 31, ~~2019 includes (dollars in millions):~~2018.

	December 31, 2019
Weighted-average remaining lease term (in years)
Operating leases	5.9
Weighted-average discount rate
Operating leases	4.9		%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	29.0
ROU assets obtained in exchange for new operating lease liabilities:
Operating leases	$	15.8

Other lease information as of and for the years ended December 31, includes (dollars in millions):

As of December 31, 2019, the Company has entered into operating leases that have not yet commenced, for which it will recognize ROU assets and lease liabilities of approximately $43.6 million. These leases will commence in 2020 and 2021 with lease terms of 7 years to 12 years.


	2020			2019
Weighted-average remaining lease term (in years)
Operating leases	7.2			5.9
Weighted-average discount rate
Operating leases	3.8		%	4.9		%

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	30.4		$	29.0
ROU assets obtained in exchange for new operating lease liabilities:
Operating leases	$	80.3		$	15.8

As of December 31, ~~2019~~2020, maturities of the Company's operating lease liabilities are as follows (in millions):

2020	$	26.0
2021			$	33.7
2021	23.2
2022			30.8
2022	20.3
2023			27.9
2023	17.4
2024			24.5
2024	14.4
2025			18.4
Thereafter	~~27.8~~		59.1
Total lease payments	~~129.1~~		194.4
Less imputed interest	~~(21.4~~		(26.0)
Present value of lease liability	$	~~107.7~~	$	168.4

~~Future~~As ~~minimum~~of ~~rental~~December ~~payments~~31, ~~under~~2020, ~~operating~~the ~~leases~~Company ~~(net~~has ofentered ~~sublease~~into ~~amounts)~~operating leases that ~~were~~have ~~required~~not toyet becommenced, ~~disclosed~~for ~~prior~~which toit ~~the~~will ~~adoption~~recognize ofROU ~~the~~assets ~~new~~and lease ~~standard~~liabilities as of ~~December~~approximately ~~31,~~$37.9 ~~2018~~million. ~~were~~These asleases ~~follows~~will (commence in ~~millions):~~2021 with lease terms of 3 years to 11 years.

5662

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

	Future Minimum Rental Payments
2019	$	26.4
2020	23.8
2021	19.1
2022	17.2
2023	15.1
Thereafter	38.8
Total	$	140.4

10. PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The Company ~~has~~had two domestic defined benefit pension plans and four plans providing for other post-employment benefits, including two medical and two life insurance coverage plans. One of the pension plans and one each of the medical and life insurance coverage plans covered eligible U.S. nonunion employees while the other pension plan and one each of the medical and life insurance coverage plans covered eligible U.S. union employees. The Company uses a December 31 measurement date for all of these plans.

Prior to 2017, the Company froze all of the defined benefit plans thereby eliminating the accrual of future benefits and closed entry to new participants. During 2019, the union pension plan paid lump sum distributions to certain participants and purchased annuities from an insurance company to cover the benefits available to employees who did not elect a lump sum payment, and the Company terminated the plan. The remaining balance of union pension plan assets of $2.0 million was transferred to the Company's U.S. retirement savings plan. There were no assets or liabilities of the union pension plan remaining at December 31, 2019. Also during 2019, the Company terminated the medical OPEB plan for nonunion employees.

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019

The following table sets forth a reconciliation of the related benefit obligation and plan assets related to the benefits provided by the Company (in millions):

	~~Pension Benefits~~		Pension Benefits					~~Other Benefits~~					Other Benefits
	2019				2018			2019			2018
			2020					2019					2020		2019
Change in projected benefit obligation:
Projected benefit obligation at beginning of the period	$	~~243.6~~	$	203.7	$	~~295.6~~		$	3243.6		$	~~3.8~~	$	3.9	$	3.6
Expected administrative expenses	~~1.7~~		0.8		~~0.9~~			—1.7			—		—		—
Interest cost	~~9.0~~		5.5		~~10.2~~			09.10			~~0.1~~		0.1		0.1
Participant contributions	—		—		—			~~0.1~~—			~~0.2~~		—		0.1
Actuarial loss (gain)	40.5				(26.4		)	0.3			—
Actuarial loss			20.2					40.5					0.3		0.3
Benefits paid	~~(6.6~~		(4.5)		~~(7.1~~		)	(06.26)		)	~~(0.5~~		(0.1)		(0.2)
Benefits paid related to settlement	~~(79.6~~		(18.4)		~~(29.5~~		)	—(79.6)			—		—		—
(Gain) loss related to settlement	(2.9		)		0.9			—			—
Gain related to settlement			(0.4)					(2.9)					—		—
Administrative expenses paid	~~(2.0~~		(0.5)		~~(1.0~~		)	—(2.0)			—		—		—
Projected benefit obligation at end of the period	~~203.7~~		206.4		~~243.6~~			3203.97			~~3.6~~		4.2		3.9
Accumulated benefit obligation at end of the period	~~203.7~~		206.4		~~243.6~~			—203.7			—		—		—
Change in fair value of plan assets:
Fair value of plan assets at beginning of the period	~~233.9~~		181.7		~~273.9~~			—233.9			—		—		—
Actual return on plan assets	~~38.0~~		23.9		~~(10.3~~		)	—38.0			—		—		—
Employer contributions	—		—		~~7.9~~			~~0.1~~—			~~0.3~~		0.1		0.1
Transfer to U.S. retirement savings plan	~~(2.0~~		)—		—			—(2.0)			—		—		—
Participant contributions	—		—		—			~~0.1~~—			~~0.2~~		—		0.1
Actual expenses paid	~~(2.0~~		(0.5)		~~(1.0~~		)	—(2.0)			—		—		—
Benefits paid	~~(6.6~~		(4.5)		~~(7.1~~		)	(06.26)		)	~~(0.5~~		(0.1)		(0.2)
Benefits paid related to settlement	~~(79.6~~		(18.4)		~~(29.5~~		)	—(79.6)			—		—		—
Fair value of plan assets at the end of period	~~181.7~~		182.2		~~233.9~~			—181.7			—		—		—
Funded status (underfunded)	$	~~(22.0~~	)$	(24.2)	$	~~(9.7~~	)	$	(322.90)	)	$	~~(3.6~~	)$	(4.2)	$	(3.9)

~~The~~Significant ~~actuarial~~changes ~~gain~~ in ~~2018~~the ~~was~~pension ~~primarily~~projected ~~driven~~benefit byobligation anfor ~~approximately~~the 70year ~~basis~~ended ~~point~~2020 ~~increase~~include ina ~~the~~$17.2 million ~~discount~~actuarial ~~rates,~~loss ~~which~~attributable ~~lowered~~to the ~~value~~change ofin ~~the~~discount ~~projected~~rate ~~benefit~~from ~~obligation~~3.34% ~~The~~to ~~actuarial~~2.68%, ~~loss~~a in$4.4 million ~~2019~~actuarial ~~was~~loss ~~primarily~~attributable ~~due~~ to anlump ~~approximately~~sum ~~110~~conversion ~~basis~~assumption ~~point~~changes, ~~decrease~~and ina ~~the~~$1.7 million ~~discount~~actuarial ~~rate~~gain ~~used~~due to ~~value~~ the ~~projected~~update ~~benefit~~to ~~obligation.~~the ~~Additionally,~~generational ~~each~~mortality ~~year~~projection ~~the~~scale ~~plans~~to ~~experienced~~reflect ~~other~~the ~~sources~~most ofrecently ~~gains~~published ~~and~~scale ~~losses~~adjusted ~~due~~for toa ~~other~~‘Slow ~~changes~~Recovery’ inimprovement ~~assumptions~~scale ~~and~~due ~~demographic~~to ~~data~~COVID-19.

~~Assumptions~~Similarly, ~~used~~significant changes in ~~computing~~ the pension projected benefit obligation asfor ofthe ~~December~~year ended 2019 include a $32.0 31million actuarial loss attributable to the decrease in discount rate, ~~2019~~an ~~and~~$8.2 million ~~2018~~actuarial ~~were~~loss asattributable ~~follows:~~to lump sum

	Pension Benefits			Other Benefits
	2019		2018	2019	2018
Discount rate	3.34	%	4.37% - 4.46%	2.02% - 3.15%	3.30% - 4.32%
Rate of compensation increase	N/A		N/A	N/A	N/A

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

~~The~~conversion ~~following~~assumption ~~table~~changes, ~~presents~~and ~~the~~a ~~fair~~$0.6 million ~~value~~actuarial ofgain due to the ~~Company's~~update ~~pension~~to ~~plan~~the ~~investments~~generational asmortality ofprojection ~~December 31,~~scale ~~2019~~to ~~and~~reflect ~~2018~~the ~~(in~~most ~~millions):~~recently published.

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Short-term investments	$	4.6	$	—	$	—	$	4.6
U.S. government securities	—		19.8		—		19.8
Corporate bonds	—		57.9		—		57.9
Total investments in the fair value hierarchy	4.6		77.7		—		82.3
Investments measured at net asset value	—		—		—		99.4
Total investments at fair value	$	4.6	$	77.7	$	—	$	181.7
	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Short-term investments	$	7.5	$	—	$	—	$	7.5
U.S. government securities	—		37.2		—		37.2
Corporate bonds	—		71.6		—		71.6
Certificates of deposit	—		1.5		—		1.5
Asset-backed securities	—		3.8		—		3.8
Total investments in the fair value hierarchy	7.5		114.1		—		121.6
Investments measured at net asset value	—		—		—		112.3
Total investments at fair value	$	7.5	$	114.1	$	—	$	233.9

Assumptions used in computing the benefit obligation as of December 31, 2020 and 2019 were as follows:


	Pension Benefits				Other Benefits
	2020		2019		2020	2019
Discount rate	2.68	%	3.34	%	0.40% - 2.35%	2.02% -3.15%

Rate of compensation increase	N/A		N/A		N/A	N/A

The following table presents the fair value of the Company's pension plan investments as of December 31, 2020 and 2019 (in millions):


	As of December 31, 2020
	Level 1		Level 2		Level 3		Total
Short-term investments	$	7.5	$	—	$	—	$	7.5
U.S. government securities	—		14.0		—		14.0
Corporate bonds	—		63.8		—		63.8
Total investments in the fair value hierarchy	7.5		77.8		—		85.3
Investments measured at net asset value	—		—		—		96.9
Total investments at fair value	$	7.5	$	77.8	$	—	$	182.2

	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Short-term investments	$	4.6	$	—	$	—	$	4.6
U.S. government securities	—		19.8		—		19.8
Corporate bonds	—		57.9		—		57.9
Total investments in the fair value hierarchy	4.6		77.7		—		82.3
Investments measured at net asset value	—		—		—		99.4
Total investments at fair value	$	4.6	$	77.7	$	—	$	181.7

Short-term investments are primarily held in registered short-term investment vehicles which are valued using a market approach based on quoted market prices of similar instruments.

U.S. government securities, and corporate bonds, ~~certificates of deposit and asset-backed securities~~ are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported observable trades for identical or comparable instruments.

Investments in ~~commingled~~comingled, common investment trust funds are carried at net asset value ("NAV") as a practical expedient to estimate fair value. The NAV is the total value of the fund divided by the number of shares outstanding. Adjustments to NAV, if any, are determined based on evaluation of data provided by fund managers, including valuation of the underlying investments derived using inputs such as cost, operating results, discounted future cash flows and market-based comparable data. In accordance with ASC 820-10, investments that are measured at NAV practical expedient are not classified in the fair value hierarchy; however, their fair value amounts are presented in these tables to permit reconciliation of the fair value hierarchy to the total plan assets disclosed in this footnote. Termination of investing in the common collective trust requires a 30-day notice period.

See Note 2 of the consolidated financial statements for the description of the levels of the fair value hierarchy.

5964

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

The following table sets forth the consolidated balance sheets presentation for components relating to the Company's pension and OPEB plans (in millions):

	~~Pension Benefits~~		Pension Benefits					~~Other Benefits~~					Other Benefits
	2019				2018			2019			2018
			2020					2019					2020		2019
Amounts recognized in the consolidated balance sheets consist of:
Other noncurrent assets	$	—			$	4.2		$	—		$	—
Other current liabilities			$	—				$	—				$	(0.3)	$	(0.3)
Other current liabilities	—				—			(0.3		)	(0.3		)
Pension Liability			(24.2)					(22.0)					—		—
Pension Liability	(22.0		)		(13.9		)	—			—
Other noncurrent liabilities			—					—					(3.9)		(3.6)
Other noncurrent liabilities	—				—			(3.6		)	(3.3		)
Net amount recognized			$	(24.2)				$	(22.0)				$	(4.2)	$	(3.9)
Net amount recognized	$	(22.0	)		$	(9.7	)	$	(3.9	)	$	(3.6	)
Amounts recognized in accumulated other comprehensive income (loss) before taxes:
Amounts recognized in accumulated other comprehensive income (loss) before taxes:
Net actuarial loss			$	49.0				$	49.2				$	1.5	$	1.1
Net actuarial loss	$	49.2			$	55.9		$	1.1		$	1.1
Prior service (credit)			—					—					(1.4)		(1.5)
Prior service (credit)	—				—			(1.5		)	(2.6		)
Net amount recognized			$	49.0				$	49.2				$	0.1	$	(0.4)
Net amount recognized	$	49.2			$	55.9		$	(0.4	)	$	(1.5	)

The following table sets forth changes in the benefit obligation before income taxes recognized in other comprehensive income for the Company's pension and OPEB plans (in millions):

	~~Pension Benefits~~		Pension Benefits					~~Other Benefits~~					Other Benefits
	2019				2018			2019			2018
			2020					2019					2020		2019
Net actuarial loss	$	~~15.1~~	$	6.0	$	~~2.4~~		$	015.31		$	—	$	0.3	$	0.3
Amortization of:
Prior service credit	—		—		—			~~0.7~~—			~~0.7~~		0.2		0.7
Actuarial (loss) gain	~~(0.8~~		(1.4)		~~(1.0~~		)	(0.18)		)	~~0.1~~		—		(0.1)
(Loss) gain recognized related to settlement	~~(21.0~~		(4.8)		~~(5.7~~		)	0(21.20)			—		—		0.2
Total recognized in OCI	$	~~(6.7~~	)$	(0.2)	$	~~(4.3~~	)	$	1(6.17)		$	~~0.8~~	$	0.5	$	1.1

The following table sets forth the components of the net periodic benefit cost (income) of the Company's pension and OPEB plans (in millions):

	~~Pension Benefits~~		Pension Benefits								~~Other Benefits~~							Other Benefits
	2019				2018			2017			2019				2018			2017
			2020					2019					2018					2020			2019		2018
Expected administrative expenses	$	~~1.7~~	$	0.8	$	~~0.9~~		$	01.7		$	—	$	0.9	$	—		$	—		$	—	$	—
Interest cost	~~9.0~~		5.5		~~10.2~~			9.40			~~0.1~~		10.2		~~0.1~~			0.21			0.1		0.1
Expected return on plan assets	~~(15.5~~		(10.2)		~~(17.6~~		)	(1815.45)		)	—		(17.6)		—			—			—		—
Amortization of prior service credit	—		—		—			—			~~(0.7~~		)—		~~(0.7~~		)	(10.52)		)	(0.7)		(0.7)
Recognized actuarial loss (gain)	~~0.8~~		1.4		~~1.0~~			0.78			~~0.1~~		1.0		~~(0.1~~		)	—			0.1		(0.1)
Settlement-related expense (1)	~~21.0~~		4.8		~~5.7~~			221.20			~~(0.2~~		)5.7		—			—			(0.2)		—
Net periodic benefit cost (income)	$	~~17.0~~	$	2.3	$	~~0.2~~		$	(517.40	)	$	~~(0.7~~	)$	0.2	$	~~(0.7~~	)	$	(10.31)	)	$	(0.7)	$	(0.7)

(1)The Pension settlement charge for 2020 is related to cash payments for lump sum elections. The pension settlement charge for 2019 is comprised of two components. First, the Union Pension Plan terminated in 2019. As a result of the plan termination the plan settled all participant benefits, which triggered a settlement charge of $14.5 million in 2019. Second, the Nonunion Plan executed a lump sum window for both retirees and terminated vested participants. The lump sums paid to Nonunion participants caused a settlement charge of $6.6 million in 2019. The pension settlement charge for 2018 related to the purchase of annuities for certain plan retirees as well as cash payments for lump sum elections. ~~The pension settlement charge for 2017 related to lump sum elections made by employees affected by the restructuring activities in the second quarter of 2017.~~

6065

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

Assumptions used to determine net periodic benefit cost for the years ended December 31, ~~2019~~2020, ~~2018~~2019, and ~~2017~~2018 were as follows:

	~~Pension Benefits~~	Pension Benefits					~~Other Benefits~~					Other Benefits
	2019	2018			2017		2019	2018	2017
		2020					2019			2018		2020	2019	2018
Discount rate	~~4.37% - 4.46%~~	3.~~70 - 3.77%~~34		%	~~3.80 - 4.25%~~		34.3037% - 4.3246%	~~2.48 - 3.66%~~	~~2.35 - 4.20%~~	3.70% - 3.77%		2.02% - 3.15%	3.30% - 4.32%	2.48% - 3.66%
Expected return on plan assets	~~4.60% - 7.10%~~	76.1040	%	%	~~7.10~~	%	~~N/A~~4.60% - 7.10%	~~N/A~~	~~N/A~~	7.10	%	N/A	N/A	N/A
Rate of compensation increase	~~N/A~~	N/A			~~N/A~~		N/A	~~N/A~~	~~N/A~~	N/A		N/A	N/A	N/A

The expected long-term rate of return on assets is based on management's expectations of long-term average rates of return to be earned on the investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plan assets are invested.

For purposes of measuring the benefit obligation associated with the Company's OPEB plans as of December 31, ~~2019~~2020, as well as the assumed rate for ~~2019~~2020, the following rates were assumed to affect the per capita costs of the following covered benefits:

	~~Benefit obligation~~		Benefit obligation			~~Net periodic benefit cost~~					Net periodic benefit cost
	2019			2027 and thereafter		2019			2027 and thereafter
			2020					2027 and thereafter			2020		2027 and thereafter
Healthcare	~~6.30~~	%	6.00	~~4.50~~	%	~~6.50~~	%	4.50	~~4.50~~	%	6.30	%	4.50	%
Prescription drug	~~8.40~~	%	7.90	~~4.50~~	%	~~9.00~~	%	4.50	~~4.50~~	%	8.40	%	4.50	%

The Company's pension plans' weighted-average asset allocations by asset category as of December 31, ~~2019~~2020 and ~~2018~~2019, were as follows:

	~~Plan Assets atDecember 31,~~		Plan Assets atDecember 31,
	2019			2018
			2020			2019
Asset Category:
Fixed income funds	46	%	45	52	%	46	%
Return seeking (growth assets) funds	54	%	55	48	%	54	%
Total	~~100~~	%	100	~~100~~	%	100	%

The Company's nonunion pension plan investment policy includes an asset mix based on the Company's risk posture. The investment policy follows a glide path approach that shifts a higher portfolio weighting to assets with interest rate sensitive characteristics, similar to those used for liability measurement, as the funded status increases. The investment policy states a target allocation based on the plan's funded status of approximately 54% return seeking investments (growth assets) and 46% liability hedging investments (fixed income). Inclusion of the fixed income assets is to hedge risk associated with the plan's liabilities along with providing potential growth through income. These assets should primarily invest in fixed income instruments of the U.S. Treasury and government agencies and investment-grade corporate bonds. The return seeking investments (growth assets) can consist of broadly diversified domestic equity, international equity, fixed income, alternative investments, commodities, and real estate assets. The purpose of these assets is to provide the opportunity for capital appreciation, income, and the ability to diversify investments. A mix of mutual funds, exchange traded funds, and separate accounts are used as the plan's investment vehicles with clearly stated investment objectives and guidelines, as well as offer competitive long-term results.

6166

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

The Company expects to contribute $0.23 million to its OPEB plans in ~~2020~~2021. Currently, no contributions are expected in ~~2020~~2021 for the Company's nonunion pension plan. Estimated future benefit payments under the pension and OPEB plans are as follows (in millions):

	~~Pension Benefits~~		Pension Benefits		~~Other Benefits~~		Other Benefits
2020	$	13.0			$	0.2
2021			$	12.9			$	0.3
2021	13.3				0.3
2022			12.9				0.3
2022	13.4				0.3
2023			12.7				0.3
2023	13.0				0.3
2024			12.6				0.3
2024	12.9				0.3
2025			12.6				0.3
2025 - 2029	59.7				1.3
2026 - 2030			56.2				1.3

The Company also sponsors 401(k) retirement savings plans for all U.S. associates. Under the 401(k) retirement savings plans, participants may defer a portion of their earnings up to the annual contribution limits established by the Internal Revenue Service, and the Company matches a portion of the participant's deferral up to a maximum of 3% of the participant's salary. The Company also may make profit-sharing contributions based on the Company's financial performance. The Company's total expense under the 401(k) plans for U.S. employees was $41.36 million for ~~2019~~2020, $34.93 million for ~~2018~~2019 and $53.59 million for ~~2017~~2018. During 2020, the Company suspended employer 401(k) match contributions, which resulted in a reduction of expense. Employees of the Canadian, Belgium, Denmark and United Kingdom operations also participate in defined contribution pension plans sponsored by the Company. The Company's expense related to these plans for ~~2019~~2020, ~~2018~~2019, and ~~2017~~2018 was $1.82 million, $1.78 million, and $1.07 million, respectively.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of the Company’s cash and cash equivalents, classified as Level 1 within the fair value hierarchy, approximate carrying value due to their short maturities.

The fair value of the Company’s long-term debt, classified as Level 2 within the fair value hierarchy, approximates its carrying value, as it is variable rate debt and the terms are comparable to market terms as of the balance sheet dates.

Recurring Fair Value Measurements

The Company measures certain financial liabilities at fair value on a recurring basis. The following table summarizes the valuation of those liabilities as of the dates presented (in millions):

	Fair Value as of December 31, 2019												Fair Value as of December 31, 2018
			Fair Value as of December 31, 2020																Fair Value as of December 31, 2019
Description:	~~Level 1~~		Level 1		~~Level 2~~		Level 32		~~Total~~		Level 3		~~Level 1~~		~~Level 2~~Total		~~Level 3~~		Level 1		~~Total~~		Level 2		Level 3		Total
Interest rate swap	$	—	$	—	$	~~6.6~~	$	—9.0	$	~~6.6~~	$	—	$	—	$	19.70	$	—	$	—	$	~~1.7~~	$	6.6	$	—	$	6.6
Contingent consideration - Fully	—				—		2.0		2.0				—		—		—				—
Contingent consideration obligations (1)			—				—				14.5				14.5				—				—		2.0		$	2.0
Contingent consideration - DatesWeiser	—				—		—		—				—		—		0.8				0.8

(1)In connection with the acquisition of Fully in August 2019, the Company is contingently liable to make additional payments in the form of consideration based upon the achievement of certain performance targets. The maximum amount of contingent consideration that could be earned through 2023 is $15.0 million.

Interest Rate Swap

The fair value of the interest rate swap is based on observable prices as quoted for receiving the variable one-month London Interbank Offered Rates (LIBOR) and paying fixed interest rates and therefore is classified as Level 2 within the fair value hierarchy.

Contingent Consideration ~~- Fully~~Obligation

~~Earn-Out~~The ~~Consideration~~fair ~~payments~~value upmeasurement toof ~~$5.0~~the ~~million~~Company’s ~~may~~contingent beconsideration ~~required~~obligations ifis ~~Fully achieves~~based ~~certain~~on ~~annual~~significant, ~~targets~~unobservable ~~related~~inputs tofor ~~net~~which ~~sales~~little ~~and~~or ~~earnings~~no ~~before~~market ~~interest,~~data ~~taxes~~exists, ~~depreciation~~ and ~~amortization~~thus ~~(EBITDA)~~represents ~~for~~a ~~each~~Level of3 ~~the~~measurement. ~~calendar~~The ~~years~~contingent ~~2020~~consideration ~~through~~obligations ~~2023.~~are Inrevalued ~~addition,~~each ~~the~~reporting ~~Company~~period, ~~may~~with bechanges ~~required~~in tofair ~~pay~~value uprecognized toin ~~$10.0~~the ~~million~~consolidated ifstatements ~~Fully~~of ~~achieves~~operations. aThe ~~certain~~valuation ~~cumulative~~inputs ~~EBITDA~~utilized ~~target~~to ~~for~~estimate ~~calendar~~the ~~years 2020~~fair ~~and~~value ~~2021.~~of ~~The~~the ~~Company~~contingent ~~classifies~~consideration ~~these~~obligations as ~~Level~~of 3December ~~measurements~~31, ~~and~~2020, ~~was~~included ~~required~~a todiscount ~~measure~~rate ~~these~~of ~~liabilities at fair value~~2.5%, ~~The~~Fully's ~~estimated~~net ~~fair~~sales ~~value~~and ofearnings ~~the~~before ~~Earn-Out~~interest, ~~Consideration~~taxes, ofdepreciation ~~$2.0~~and ~~million~~amortization ~~was~~(“EBITDA”) ~~determined~~for ~~as of~~ the ~~acquisition~~year ~~date~~ended ~~using~~December ~~net~~31, ~~sales~~2020, and ~~EBITDA~~ projections ~~for~~related to Fully ~~through~~'s ~~2023,~~net sales and aEBITDA ~~discount~~for ~~rate~~each of ~~3.7%. Any~~the ~~change~~calendar inyears ~~fair~~2021 ~~value~~through ~~will be included within Selling, general and administrative expenses~~2023.

~~Contingent Consideration - DatesWeiser~~67

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

~~Pursuant~~For to the ~~agreement~~year ~~governing~~ended December 31, 2020, the ~~acquisition~~$12.5 million ofchange ~~DatesWeiser,~~in the ~~Company~~fair ~~was~~value ~~required~~of tothe ~~make annual~~Company’s contingent ~~purchase~~consideration ~~price~~obligations ~~payments.~~was ~~The~~primarily ~~payouts~~due ~~were~~to ~~based~~changes ~~upon~~in ~~DatesWeiser reaching~~expectations anrelated ~~annual~~to ~~net~~the ~~sales~~achievement ~~target,~~of ~~for~~the ~~each~~applicable ~~year~~performance ~~through 2020~~targets. The ~~Company~~emergent ~~classifies~~and ~~this~~seemingly asdurable ashift ~~Level~~to 3a ~~measurement~~significant ~~and~~“Work-from-home” ~~was~~(“WFH”) ~~required~~paradigm, tocatalyzed ~~remeasure~~in ~~this~~large ~~liability~~measure atby ~~fair~~restrictions ~~value~~placed on abusiness ~~recurring~~operations ~~basis.~~and ~~The~~movement ~~fair~~generally ~~value~~by ofstate ~~such~~and ~~contingent~~local ~~purchase~~governments ~~price~~throughout ~~payments~~2020, ~~totaling~~aligns ~~$1.1~~well ~~million,~~with ~~was~~Fully’s ~~determined~~WFH atproduct ~~the~~portfolio ~~time of acquisition based upon net sales projections for DatesWeiser through 2020~~ and ae-commerce ~~discount rate of 10%~~capabilities. As of December 31, ~~2019~~2020, ~~the~~$1.2 million ~~Company~~of ~~remeasured~~ the ~~fair~~contingent ~~value~~consideration ofobligation ~~the~~is ~~liability~~classified ~~and~~as ~~determined~~current ~~that~~and it is ~~unlikely~~included ~~that~~in ~~DatesWeiser~~Other ~~will~~current ~~meet~~liabilities, ~~any~~while of the remaining ~~future targets related to the agreement. The Company recorded reductions in fair value of~~ $013.8 3 million ~~and~~is ~~$0.4~~included ~~million within Selling, general and administrative expense during 2019 and 2018, respectively. There were no changes~~ in ~~the fair~~Other ~~value~~non-current ~~during~~liabilities ~~2017.~~on ~~The maximum amount of possible future contingent payments under~~ the ~~agreement~~consolidated asbalance ~~of December 31, 2019 is $4~~sheets.~~0 million.~~

There were no additional assets and/or liabilities recorded at fair value on a recurring basis as of December 31, ~~2019~~2020 or ~~2018~~2019.

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the impairment ~~loss~~losses on assets that were measured at estimated fair value on a nonrecurring basis (in millions):

	Level 3 Fair Value as of December 31,
			Estimated Fair Value (Level 3) at measurement date (2)				Impairment recognized during the year ended (1)
	2019		2018		Impairment/Loss
December 31, 2020
Assets:
Tradename - DatesWeiser			$	0.9			$	1.4
Tradename - Edelman Leather (1)	$	—	$	6.5	$	6.5
December 31, 2019
Tradename - Edelman Leather			—				6.5

(1) See Note 7 for additional information on impairments to tradenames.

~~Other~~(2)The ~~than~~estimated ~~the~~ fair ~~value~~values ~~measurements~~of ~~applied to~~ the ~~Edelman~~impaired ~~Leather~~assets ~~tradename,~~were ~~the~~based ~~Company~~on ~~did~~significant ~~not~~inputs ~~have~~that ~~any~~were ~~non-recurring~~not ~~fair~~observable ~~value~~in ~~measurements~~the asmarket ofand ~~December 31,~~are ~~2019~~considered orto ~~2018~~be ~~and~~Level ~~for~~3 ~~the~~inputs ~~years~~(see ~~then~~Note ~~ended~~2).

Other than the fair value measurements applied to the DatesWeiser and Edelman tradenames, the Company did not have any non-recurring fair value measurements during 2020, 2019 or 2018.

12. DERIVATIVE INSTRUMENTS

The Company is exposed to certain market risks, including the effect of changes in interest rates on future payments to be made on its variable rate debt. The Company utilizes a derivative instrument to mitigate its financial exposure to interest rate volatility. The derivative instrument, which is placed with a financial institution that the Company believes to be of acceptable credit risk, takes the form of an interest rate swap. The Company does not use derivatives for speculative trading purposes.

Cash flow hedge

In January 2018, the Company entered into an interest rate swap contract, which is designated as a cash flow hedge of the forecasted interest payments associated with a portion of the Company's variable rate debt. The interest rate swap hedges one-month LIBOR, which effectively converts a portion of the variable rate debt to a fixed interest rate. The interest rate swap was effective as of December 31, 2018, matures January 23, 2023 and carries a fixed rate of 2.63%. As of December 31, ~~2019~~2020, the interest rate swap has a notional amount of $~~250~~200.0 million, which decreases over time by $50 million increments as follows:

Period	~~Notional Amount (in millions)~~	Notional Amount (in millions)
December 31, 2019 - December 30, 2020	$250
December 31, 2020 - December 30, 2021		$200
December 31, 2020 - December 30, 2021	$200
December 31, 2021- December 29, 2022		$150
December 31, 2021- December 29, 2022	$150
December 30, 2022 - January 23, 2023		$100
December 30, 2022 - January 23, 2023	$100

The following table summarizes the fair value of the Company’s derivative instrument, as well as the location of this instrument on the Consolidated Balance Sheets as of the dates presented (in millions):

6368

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

			~~December 31,~~				December 31,
Derivatives designated as hedging instruments	~~Balance Sheet Location~~	Balance Sheet Location	~~2019~~		~~2018~~		2020		2019
Derivative liabilities:
Interest rate swap	~~Other current liabilities~~	Other current liabilities	$	~~2.6~~	$	~~0.3~~	$	5.1	$	2.6
Interest rate swap	~~Other noncurrent liabilities~~	Other noncurrent liabilities	~~4.0~~		~~1.4~~		3.9		4.0
Total derivative liabilities			$	~~6.6~~	$	~~1.7~~	$	9.0	$	6.6

The fair value of the swap recorded in Accumulated Other Comprehensive Loss ("AOCL") may be recognized in the Consolidated Statement of Operations if certain terms of the agreement change, are modified or if the loan is extinguished. As of December 31, ~~2019~~2020, there was no hedge ineffectiveness associated with the Company’s interest rate swap and no portion of the cash flow hedge is excluded from the assessment of effectiveness. The Company reclassified $15.1 million from AOCL to interest expense within the Consolidated Statement of Operations during the year ended December 31, ~~2019~~2020. ~~The~~Based ~~Company~~on ~~expects~~the toforward ~~reclassify~~interest inrate ~~the~~curve ~~next~~in ~~twelve~~place ~~months~~as ~~a loss~~ of ~~approximately~~December 31, ~~$2.6~~2020, ~~million~~the ~~from~~Company ~~AOCL~~expects ~~into~~to ~~earnings,~~reclassify asan aadditional ~~component~~$5.1 million of ~~interest~~unrealized ~~expense,~~losses related to ~~the~~its ~~Company's~~cash ~~interest~~flow ~~rate~~hedge ~~swap~~from ~~based~~AOCL oninto ~~the~~earnings ~~borrowing~~over ~~rates~~the atnext ~~December 31,~~twelve ~~2019~~months.

13. INDEBTEDNESS

The following table summarizes the Company's long-term debt as of the dates presented (in millions):

	~~December 31,~~					December 31,
	2019			2018
			Maturities			2020		2019
Revolving credit facility	$	~~138.5~~	August 2024	$	~~134.5~~	$	61.0	$	138.5
U.S. term loan	~~228.1~~		2021 - 2024	~~240.6~~		196.2		228.1
Multi-currency term loans	~~83.7~~		2021 - 2024	~~90.2~~		56.0		83.7
Total long-term debt	~~450.3~~			~~465.3~~		313.2		450.3
Less: Current maturities of long-term debt	~~17.1~~			~~17.2~~		14.6		17.1
Less: Unamortized debt issuance costs	~~4.3~~			~~4.2~~		3.4		4.3
Long-term debt, net	$	~~428.9~~		$	~~443.9~~	$	295.2	$	428.9

Credit Facility

On August 2621, ~~2019~~2020, the Company entered into athe ~~first~~Second ~~amendment~~Amendment to the Third Amended and Restated Credit Agreement (the "Credit Agreement Amendment"), dated as of January 23, 2018, as previously amended by the First Amendment to the Third Amended and Restated Credit Agreement, dated as of August 26, 2019 (together, as amended, the "Credit Agreement"). The Credit Agreement Amendment, among other things, ~~extends~~relaxed ~~the~~certain ~~maturity~~requirements ofor ~~the~~constraints ~~credit~~under ~~facility~~which ~~from~~affirmative ~~January~~covenants ~~2023~~related to ~~August~~net ~~2024,~~leverage ~~and~~ratios ~~reduces~~are ~~both~~determined. In connection with the ~~applicable~~closing ~~rate~~of ~~applied~~the toCredit ~~outstanding~~Agreement ~~borrowings~~Amendment, ~~and~~a ~~the~~covenant ~~commitment~~was ~~fee~~added ~~rate~~requiring ~~applied~~the Company to ~~the~~make ~~unutilized~~partial ~~balance~~prepayments ~~under~~of term-loan principal in the ~~revolving~~amount ~~credit~~of ~~facility~~$50.0 million, (all of which were made during the ~~"Revolver")~~third quarter of 2020.

Borrowings under the revolving credit facility (the "Revolver") and the term loan facilities bear interest, at the Company’s election, at either (i) the Eurocurrency Rate (as defined in the Credit Agreement), plus a spread based on the Company’s leverage ratio or (ii) the Base Rate (as defined in the Credit Agreement), which is a fluctuating rate equal to the highest of (a) the prime rate announced from time-to-time by Bank of America, (b) the Federal Reserve System’s federal funds rate, plus 0.50% and (c) the Eurocurrency Rate, plus 1.00%.

Indebtedness incurred under the credit facility is secured by substantially all of the Company’s tangible and intangible assets, including, without limitation, the Company’s intellectual property. The Company’s direct and indirect wholly-owned domestic subsidiaries have also guaranteed the obligations of the Company and the foreign borrowers under the Credit Agreement and pledged substantially all of their tangible and intangible assets as security for their obligations under such guarantee. Certain of the Company’s wholly-owned foreign subsidiaries have guaranteed the obligations of the foreign borrowers under the Credit Agreement and pledged certain of their assets as security for their obligations under such guarantee.

Repayments under the Credit Agreement can be accelerated by the lenders upon the occurrence of certain events of default, including, without limitation, a failure to pay any principal, interest or other amounts in respect of loans when due, breach by the Company (or its subsidiaries) of any of the covenants or representations contained in the Credit Agreement or related loan documents, failure of the Company (or its material subsidiaries) to pay any amounts owed with respect to other significant indebtedness of the Company or such subsidiary, or a bankruptcy event with respect to the Company or any of its material subsidiaries.69

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2019~~2020

~~The~~Repayments under the Credit Agreement ~~requires~~can be accelerated by the ~~Company~~lenders toupon ~~comply~~the ~~with~~occurrence ~~various~~of ~~affirmative~~certain ~~and~~events ~~negative~~of ~~covenants~~default, including, without limitation, ~~(i)~~a ~~covenants~~failure to ~~maintain~~pay aany ~~minimum~~principal, ~~specified~~ interest ~~coverage~~or ~~ratio~~other ~~and~~amounts ~~maximum~~in ~~specified~~respect ~~net~~of ~~leverage~~loans ~~ratio~~when ~~(or under certain circumstances~~due, abreach ~~maximum~~by ~~specified~~the ~~net~~Company ~~secured~~(or ~~leverage~~its ~~ratio~~subsidiaries), ~~and~~of ~~(ii)~~any ~~covenants~~of ~~that~~the ~~prevent~~covenants or ~~restrict~~representations ~~the~~contained ~~Company’s ability to pay dividends, engage~~ in ~~certain~~the ~~mergers~~Credit orAgreement ~~acquisitions, make certain investments~~ or ~~loans,~~related ~~incur~~loan ~~future indebtedness~~documents, ~~engage~~failure inof ~~sale-leaseback~~the ~~transactions,~~Company ~~alter~~(or its ~~capital~~material ~~structure~~subsidiaries) orto ~~line~~pay ofany ~~business,~~amounts ~~prepay~~owed ~~subordinated~~with ~~indebtedness,~~respect ~~engage~~to inother ~~certain~~significant ~~transactions~~indebtedness ~~with~~of ~~affiliates~~the ~~and~~Company ~~sell stock~~ or ~~assets.~~such ~~At December 31~~subsidiary, ~~2019,~~or ~~the~~a ~~Company~~bankruptcy ~~was~~event inwith ~~compliance~~respect ~~with~~to ~~all~~the ~~covenants~~Company ~~applicable~~or toany of its ~~credit~~material ~~facility~~subsidiaries.

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including, without l

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