KNOLL INC (Form: 10-Q, Received: 08/09/2016 16:24:17)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2016



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

For the transition period from to

Commission File No. 001-12907

KNOLL, INC.



A Delaware Corporation		I.R.S. Employer No. 13-3873847

1235 Water Street

East Greenville, PA 18041

Telephone Number (215) 679-7991

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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 definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x ,	Accelerated filer o ,	Non-accelerated filer o ,	Smaller reporting company o

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

As of August 5, 2016 , there were 49,113,671 shares (including 1,042,129 non-voting restricted shares) of the Registrant’s common stock, par value $0.01 per share, outstanding.

KNOLL, INC.

TABLE OF CONTENTS FOR FORM 10-Q



Item		Page

PART I — FINANCIAL INFORMATION

1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2016 and 2015	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	5
	Notes to the Condensed Consolidated Financial Statements	6

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

3.	Quantitative and Qualitative Disclosures about Market Risk	22

4.	Controls and Procedures	23

PART II — OTHER INFORMATION

1.	Legal Proceedings	24

1A.	Risk Factors	24

2.	Unregistered Sales of Equity Securities and The Use of Proceeds	24

6.	Exhibits	25

Signatures		26

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and per share data)



	June 30, 2016			December 31, 2015
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	3,548		$	4,192
Customer receivables, net of allowance for doubtful accounts of $9,197 and $7,919, respectively	99,383			116,532
Inventories, net	146,475			140,798
Deferred income taxes	20,398			20,485
Prepaid and other current assets	29,541			26,765
Total current assets	299,345			308,772
Property, plant, and equipment, net	179,872			172,142
Goodwill	128,142			127,671
Intangible assets, net	238,565			240,169
Other non-trade receivables	1,966			2,254
Other noncurrent assets	1,110			2,795
Total assets	$	849,000		$	853,803
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	10,000		$	10,000
Accounts payable	80,289			89,552
Other current liabilities	105,626			116,488
Total current liabilities	195,915			216,040
Long-term debt	198,051			209,718
Deferred income taxes	77,945			75,959
Postretirement benefits other than pensions	6,379			6,294
Pension liability	61,992			63,441
Other noncurrent liabilities	20,784			26,877
Total liabilities	561,066			598,329
Commitments and contingent liabilities
Equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; 64,690,526 shares issued and 49,092,583 shares outstanding (including 1,050,462 non-voting restricted shares and net of 15,597,943 treasury shares) at June 30, 2016 and 64,603,344 shares issued and 48,822,013 shares outstanding (including 993,934 non-voting restricted shares and net of 15,781,331 treasury shares) at December 31, 2015	491			488
Additional paid-in capital	50,635			47,165
Retained earnings	268,573			244,947
Accumulated other comprehensive loss	(31,974		)	(37,318		)
Total Knoll, Inc. stockholders' equity	287,725			255,282
Noncontrolling interests	209			192
Total equity	287,934			255,474
Total liabilities and equity	$	849,000		$	853,803

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(dollars in thousands, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Sales	$	294,700		$	268,622		$	579,329		$	535,120
Cost of sales	180,636			167,431			357,501			338,620
Gross profit	114,064			101,191			221,828			196,500
Selling, general, and administrative expenses	80,590			72,936			156,505			145,946
Operating profit	33,474			28,255			65,323			50,554
Interest expense	1,307			1,851			2,861			3,736
Other expense (income), net	185			200			2,789			(6,957		)
Income before income tax expense	31,982			26,204			59,673			53,775
Income tax expense	10,678			8,982			21,100			19,118
Net earnings	21,304			17,222			38,573			34,657
Net earnings (loss) attributable to noncontrolling interests	6			(17		)	17			(25		)
Net earnings attributable to Knoll, Inc. stockholders	$	21,298		$	17,239		$	38,556		$	34,682

Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	0.44		$	0.36		$	0.80		$	0.73
Diluted	$	0.44		$	0.36		$	0.79		$	0.72

Dividends per share	$	0.15		$	0.12		$	0.30		$	0.24

Weighted-average number of common shares outstanding:
Basic	48,018,733			47,760,961			47,961,661			47,705,222
Diluted	48,664,318			48,509,546			48,588,725			48,445,060

Net earnings	$	21,304		$	17,222		$	38,573		$	34,657
Other comprehensive income (loss):
Pension and other postretirement liability adjustment, net of tax	(136		)	1,382			(272		)	2,764
Foreign currency translation adjustment	1,566			118			5,616			(12,881		)
Total other comprehensive income (loss), net of tax	1,430			1,500			5,344			(10,117		)
Total comprehensive income	22,734			18,722			43,917			24,540
Comprehensive income (loss) attributable to noncontrolling interests	6			(17		)	17			(25		)
Comprehensive income attributable to Knoll, Inc. stockholders	$	22,728		$	18,739		$	43,900		$	24,565

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)



	Six Months Ended June 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	38,573		$	34,657
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation	9,248			8,776
Amortization expense (including deferred financing fees)	1,977			1,951
Stock-based compensation	4,592			3,574
Inventory obsolescence	1,423			864
Unrealized foreign currency losses (gains)	1,605			(6,818		)
Bad debt and customer credits	1,282			384
Loss on disposal of property, plant and equipment	1			227
Changes in assets and liabilities:
Customer receivables	16,216			8,864
Inventories	(6,410		)	(5,945		)
Accounts payable	(10,109		)	(36,399		)
Current and deferred income taxes	527			(11,437		)
Other current assets	(2,675		)	(1,765		)
Other current liabilities	(9,787		)	3,192
Other noncurrent assets and liabilities	(786		)	7,317
Cash provided by operating activities	45,677			7,442
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net	(15,057		)	(12,670		)
Cash used in investing activities	(15,057		)	(12,670		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from credit facility	173,500			170,000
Repayment of credit facility	(185,500		)	(154,000		)
Payment of dividends	(14,727		)	(11,502		)
Proceeds from the issuance of common stock	2,120			4,421
Purchase of common stock for treasury	(3,903		)	(6,067		)
Contingent purchase price payment	(5,000		)	(5,000		)
Tax benefit from the exercise of stock options and vesting of equity awards	662			979
Cash used in financing activities	(32,848		)	(1,169		)
Effect of exchange rate changes on cash and cash equivalents	1,584			(2,282		)
Net decrease in cash and cash equivalents	(644		)	(8,679		)
Cash and cash equivalents at beginning of period	4,192			19,021
Cash and cash equivalents at end of period	$	3,548		$	10,342

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet of the Company, as of December 31, 2015 , was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All significant intercompany balances and transactions have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2015 .

New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition , and most industry-specific guidance throughout the Accounting Standards Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company has not yet selected a transition method and is currently evaluating the impact of the amended guidance on the consolidated financial position, results of operations and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03 - Interest—Imputation of Interest (Subtopic 835-30) . This ASU simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of the debt liability, which is consistent with the treatment of debt discounts. The new guidance should be applied on a retrospective basis, and upon transition, an entity is required to comply with the applicable disclosures necessary for a change in accounting principle. This ASU is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. The Company reclassified deferred financing fees of $1.9 million and $2.3 million from other noncurrent assets to long-term debt as of June 30, 2016 and December 31, 2015, respectively.

In July 2015, the FASB issued ASU 2015-11 - Inventory (Topic 330) , which amends existing guidance for measuring inventories. This amendment will require the Company to measure inventories recorded using the first-in, first-out method at the lower of cost and net realizable value. This amendment does not change the methodology for measuring inventories recorded using the last-in, first-out method. This amendment will be effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the impact of the adoption of this ASU to have a material impact on its consolidated financial position, results of operations and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . The amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the impact of the adoption of this ASU to have a material impact on its consolidated financial position.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting , which amends Accounting Standards Codification Topic 718, Compensation – Stock Compensation . ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The Company does not expect the impact of the adoption of this ASU to have a material impact on its consolidated financial statements.

NOTE 2. INVENTORIES

Information regarding the Company's inventories is as follows (in thousands):



	June 30, 2016		December 31, 2015
Raw materials	$	61,448	$	58,412
Work-in-process	7,777		7,470
Finished goods	77,250		74,916
	$	146,475	$	140,798

Inventory reserves for obsolescence and other estimated losses were $ 9.5 million and $8.3 million at June 30, 2016 and December 31, 2015 , respectively, and have been included in the amounts above.

NOTE 3. INCOME TAXES

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provisions for the three months ended June 30, 2016 and 2015 were based on the estimated effective tax rates applicable for the full years ending December 31, 2016 and 2015 , which includes items specifically related to the interim periods. The Company’s effective tax rate was 35.4% and 35.6% for the six months ended June 30, 2016 and 2015 , respectively. The decrease in the Company's effective tax rate for the six months ended June 30, 2016 was a result of the geographic mix of pretax income and the varying effective tax rates in the countries and states in which the Company operates, and a favorable income tax examination ruling received from a non-U.S. income tax jurisdiction.

As of June 30, 2016 and December 31, 2015 , the Company had unrecognized tax benefits of approximately $1.2 million and $4.4 million , respectively. These unrecognized tax benefit amounts would affect the effective tax rate if recognized. During the six months ended June 30, 2016, the Company paid approximately $3.2 million of certain tax liabilities as a result of filing amended returns. As of June 30, 2016 , the Company is subject to U.S. Federal income tax examinations for the tax years 2012 through 2015, and to non-U.S. income tax examinations for the tax years 2009 through 2015. In addition, the Company is subject to state and local income tax examinations for the tax years 2011 through 2015.

NOTE 4. CONTINGENT LIABILITIES AND COMMITMENTS

Litigation

The Company is currently involved in matters of litigation, including environmental contingencies, arising in the ordinary course of business. The Company accrues for such matters when expenditures are probable and reasonably estimable. Based upon information presently known, management is of the opinion that such litigation, either individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Warranty

The Company provides for estimated product warranty expenses when related products are sold and are included within other current liabilities. Because warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, future warranty claims may differ from the amounts provided.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Changes in the warranty reserve are as follows (in thousands):



Balance, December 31, 2015	$	8,513
Provision for warranty claims	3,448
Warranty claims paid	(3,219		)
Foreign currency translation adjustment	38
Balance, June 30, 2016	$	8,780

NOTE 5. INDEBTEDNESS

The Company's long-term debt is summarized as follows (in thousands):



	June 30, 2016		December 31, 2015
Balance of revolving credit facility	$	30,000	$	37,000
Balance of term loan	180,000		185,000
Total long-term debt	210,000		222,000
Less: Current maturities of long-term debt	10,000		10,000
Less: Deferred financing fees, net	1,949		2,282
Long-term debt	$	198,051	$	209,718

NOTE 6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2016 (in thousands):



	Foreign Currency Translation Adjustment			Pension and Other Post-Retirement Liability Adjustment			Total
Balance, as of December 31, 2015	$	(14,486	)	$	(22,832	)	$	(37,318	)
Other comprehensive income before reclassifications	5,616			—			5,616
Amounts reclassified from accumulated other comprehensive income	—			(272		)	(272		)
Net current-period other comprehensive income (loss)	5,616			(272		)	5,344
Balance, as of June 30, 2016	$	(8,870	)	$	(23,104	)	$	(31,974	)

The following reclassifications were made from accumulated other comprehensive income (loss) to the condensed consolidated statements of operations and other comprehensive income (in thousands):



	Three Months Ended						Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Amortization of pension and other post-retirement liability adjustments
Prior service credits ⁽¹⁾	$	(280	)	$	(72	)	$	(560	)	$	(144	)
Actuarial losses ⁽¹⁾	61			2,258			122			4,516
Total before tax	(219		)	2,186			(438		)	4,372
Tax expense (benefit)	83			(804		)	166			(1,608		)
Net of tax	$	(136	)	$	1,382		$	(272	)	$	2,764

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension costs. See Note 7 for additional information.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. PENSION AND OTHER POSTRETIREMENT BENEFITS

The following table sets forth the components of the net periodic benefit cost for the Company's pension and other postretirement benefit plans (in thousands):



	Pension Benefits						Other Benefits
	Three Months Ended June 30,						Three Months Ended June 30,
	2016			2015			2016			2015
Service cost	$	468		$	1,887		$	—		$	4
Interest cost	2,416			3,114			49			80
Expected return on plan assets	(3,612		)	(3,655		)	—			—
Amortization of prior service credit	—			—			(280		)	(72		)
Recognized actuarial loss (gain)	123			2,166			(62		)	92
Net periodic benefit (income) cost	$	(605	)	$	3,512		$	(293	)	$	104

For the three months ended June 30, 2016 , $0.3 million of pension income was recognized in cost of sales and $0.3 million was recognized in selling, general, and administrative expenses. For the three months ended June 30, 2015 , $2.0 million of pension expense was incurred in cost of sales and $1.5 million was incurred in selling, general, and administrative expenses.



	Pension Benefits						Other Benefits
	Six Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Service cost	$	936		$	3,774		$	—		$	8
Interest cost	4,832			6,228			98			160
Expected return on plan assets	(7,224		)	(7,310		)	—			—
Amortization of prior service credit	—			—			(560		)	(144		)
Recognized actuarial loss (gain)	246			4,332			(124		)	184
Net periodic benefit (income) cost	$	(1,210	)	$	7,024		$	(586	)	$	208

For the six months ended June 30, 2016 , $0.6 million of pension income was recognized in cost of sales and $0.6 million was recognized in selling, general, and administrative expenses. For the six months ended June 30, 2015 , $4.0 million of pension expense was incurred in cost of sales and $3.0 million was incurred in selling, general, and administrative expenses.

During 2016, the Company expects to contribute $8.0 million and $2.0 million in discretionary contributions to the union and nonunion pension plans, respectively.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. COMMON STOCK AND EARNINGS PER SHARE

Basic earnings per share excludes the dilutive effect of common shares that could potentially be issued due to the exercise of stock options and unvested restricted stock and restricted stock units, and is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share includes the effect of shares and potential shares and units issued under the stock incentive plans. The following table sets forth the reconciliation from basic to dilutive average common shares (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Numerator:
Net earnings attributable to Knoll, Inc. stockholders	$	21,298	$	17,239	$	38,556	$	34,682

Denominator:
Denominator for basic earnings per share - weighted-average shares	48,019		47,761		47,962		47,705
Effect of dilutive securities:
Potentially dilutive shares resulting from stock plans	645		749		627		740
Denominator for diluted earnings per share - weighted-average shares	48,664		48,510		48,589		48,445
Antidilutive equity awards not included in weighted-average common shares—diluted	—		—		—		—

Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	0.44	$	0.36	$	0.80	$	0.73
Diluted	$	0.44	$	0.36	$	0.79	$	0.72

NOTE 9. EQUITY

The following table shows the change in equity attributable to Knoll, Inc. stockholders and noncontrolling interests during the six months ended June 30, 2016 (in thousands):



	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Knoll, Inc. Stockholders' Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2015	$	488		$	47,165		$	244,947		$	(37,318	)	$	255,282		$	192	$	255,474
Net earnings	—			—			38,556			—			38,556			17		38,573
Other comprehensive income	—			—			—			5,344			5,344			—		5,344
Shares issued for consideration:
Exercise of stock options (165,000 shares)	2			2,070			—			—			2,072			—		2,072
Income tax effect from the exercise of stock options and vesting of equity awards	—			662			—			—			662			—		662
Shares issued under stock incentive plan (297,632)	3			(3		)	—			—			—			—		—
Shares issued to Board of Directors in lieu of cash (2,182 shares)	—			50			—			—			50			—		50
Stock-based compensation	—			4,592			—			—			4,592			—		4,592
Cash dividend ($0.30 per share)	—			—			(14,930		)	—			(14,930		)	—		(14,930		)
Purchase of common stock (188,169 shares)	(2		)	(3,901		)	—			—			(3,903		)	—		(3,903		)
Balance at June 30, 2016	$	491		$	50,635		$	268,573		$	(31,974	)	$	287,725		$	209	$	287,934

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments

The carrying value of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short maturities.

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

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table represents the assets and liabilities, measured at fair value on a recurring basis and the basis for that measurement (in thousands):



	Fair Value as of June 30, 2016								Fair Value as of December 31, 2015
Liabilities:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Contingent purchase price payment	$	—	$	—	$	6,000	$	6,000	$	—	$	—	$	11,000	$	11,000

Pursuant to the agreement governing the acquisition of HOLLY HUNT®, the Company may be required to make annual contingent purchase price payments. The payouts are based upon HOLLY HUNT® reaching an annual net sales target, for each year through 2016, and are paid out on or around February 20 of the following calendar year. The Company classifies this as a Level 3 measurement and is required to remeasure this liability at fair value on a recurring basis. The fair value of such contingent purchase price payments, totaling $16.0 million , was determined at the time of acquisition based upon net sales projections for HOLLY HUNT® for 2014, 2015, and 2016. The Company paid $5.0 million of the remaining $11.0 million contingent purchase price in the six months ended June 30, 2016 as a result of HOLLY HUNT® achieving the 2015 net sales projections. Excluding the initial recognition of the liability for the contingent purchase price payments and payments made to reduce the liability, any further changes in the fair value would be included within selling, general and administrative expenses.

There were no additional assets or liabilities recorded at fair value on a recurring basis as of June 30, 2016 or December 31, 2015 .

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. SEGMENT INFORMATION

The following information below categorizes certain financial information into the Company's reportable segments for the three and six months ended June 30, 2016 and 2015 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
SALES
Office	$	179,270	$	160,877	$	364,626	$	328,600
Studio	88,650		77,863		160,156		148,057
Coverings	26,780		29,882		54,547		58,463
Knoll, Inc.	$	294,700	$	268,622	$	579,329	$	535,120
INTERSEGMENT SALES ⁽¹⁾
Office	$	488	$	415	$	1,069	$	901
Studio	1,753		1,706		3,058		3,086
Coverings	2,008		1,317		4,255		3,242
Knoll, Inc.	$	4,249	$	3,438	$	8,382	$	7,229
OPERATING PROFIT
Office	$	13,597	$	9,099	$	30,193	$	16,345
Studio	14,067		12,079		23,110		21,031
Coverings	5,810		7,077		12,020		13,178
Knoll, Inc. ⁽²⁾	$	33,474	$	28,255	$	65,323	$	50,554

_______________________________________________________________________________

(1) Intersegment sales are presented on a cost-plus basis which takes into consideration the effect of transfer prices between legal entities.

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

ITEM 2. 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 unaudited condensed consolidated financial statements.

Forward-looking Statements

This Quarterly report on Form 10-Q contains forward-looking statements, principally in the sections entitled “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-Q 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,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry and publicly announced plans for increased capital and investment spending to achieve our long-term revenue and profitability growth goals, and our expectations with respect to 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 Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2015 ; 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 and commodity 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; 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-Q are expressly qualified in their entirety by the foregoing cautionary statements. Except as required under the Federal securities laws and 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 furnishings and accessories, textiles, fine leathers, and designer felt for the workplace and home. Our commitment to innovation and modern design has yielded a comprehensive portfolio of products and a brand recognized for high quality and a sophisticated image. Our products are targeted at the middle to upper end of the market and are sold primarily in North America and Europe through a direct sales force and a broad network of independent dealers, showrooms, retailers and websites.

During the last decade we have diversified our sources of revenue among our varying operating segments and we believe over the long run our diversification efforts and strategy will continue to result in a more profitable and less cyclical enterprise. At the same time, we have continued to focus on growing and improving the operating performance of our Office segment. Recent introductions of complementary products like adjustable tables, seating and ergonomic accessories have driven our recent growth in the Office business.

As the workplace continues to evolve and the traditional boundaries between residential and contract blur, we believe our unique combination of office furnishings, KnollStudio® design classics and lounge designs, Spinneybeck | FilzFelt architectural materials and our broad range of Edelman® Leather and KnollTextiles® coverings materials helps us both capture more of our clients' total spend, and improves our profitability.

The changing balance between the allocation of office space between the individual and the group is creating opportunities outside the traditional workstation market. We are also seeing clients incrementally investing in more adjustable and high performance options. This can increase the average selling price of an individual space and, coupled with an increased focus on well-being, also creates opportunities to innovate with new types of products.

We continue to increase our footprint in the residential market through our strategy of showroom expansion, and use this foundation as a platform for growth. HOLLY HUNT®, together with residential opportunities domestically and internationally, gives us exposure to a sophisticated clientèle that is pleased to invest in the finest in modern design.

Results of Operations

Comparison of Consolidated Results for the Three Months Ended June 30, 2016 and 2015



	Three Months Ended June 30,						2016 vs. 2015
	2016			2015			$ Change			% Change
	(Dollars in thousands, except per share data)
Net Sales	$	294,700		$	268,622		$	26,078		9.7	%
Gross profit	114,064			101,191			12,873			12.7	%
Selling, general, and administrative expenses	80,590			72,936			7,654			10.5	%
Operating profit	33,474			28,255			5,219			18.5	%
Interest expense	1,307			1,851			(544		)	(29.4	)%
Other expense, net	185			200			(15		)	(7.5	)%
Income tax expense	10,678			8,982			1,696			18.9	%
Net earnings	21,304			17,222			4,082			23.7	%
Net earnings attributable to Knoll, Inc. stockholders	21,298			17,239			4,059			23.5	%
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	0.44		$	0.36		$	0.08		22.2	%
Diluted	$	0.44		$	0.36		$	0.08		22.2	%
Statistical Data
Gross profit %	38.7		%	37.7		%
Operating profit %	11.4		%	10.5		%
Selling, general, and administrative expenses %	27.3		%	27.2		%

Net Sales

Net sales for the three months ended June 30, 2016 were $294.7 million , an increase of $26.1 million , or 9.7% , from sales of $268.6 million for the three months ended June 30, 2015 . The increase in sales was largely due to an $18.4 million increase in our Office segment sales, where we experienced growth in our core office systems as well as in our recently introduced complementary products, such as adjustable tables and storage products. Our Studio segment sales also increased 13.9% from the same period in the prior year, due primarily to strong sales growth in Europe and KnollStudio North America.

Gross Profit

Gross profit for the three months ended June 30, 2016 was $114.1 million , an increase of $12.9 million , or 12.7% , from gross profit of $101.2 million for the three months ended June 30, 2015 . As a percentage of sales, gross profit increased from 37.7% for the three months ended June 30, 2015 to 38.7% for the three months ended June 30, 2016 . This improvement was driven mainly by the Office segment, where operating efficiencies and improved fixed-cost leverage from higher volumes were favorable.

Operating Profit

Operating profit for the three months ended June 30, 2016 was $33.5 million , an increase of $5.2 million , or 18.5% , from operating profit of $28.3 million for the three months ended June 30, 2015 . The increase in operating profit was driven primarily by the Office segment resulting from higher volume as well as cost improvement benefits. Operating profit as a percentage of sales increased from 10.5% in the three months ended June 30, 2015 to 11.4% in the three months ended June 30, 2016 .

Selling, general, and administrative expenses for the three months ended June 30, 2016 were $80.6 million , or 27.3% of sales, compared to $72.9 million , or 27.2% of sales, for the three months ended June 30, 2015 . The increase in operating expenses was primarily related to expanded sales and marketing investments as well as higher incentive accruals related to increased profitability.

Interest Expense

Interest expense for the three months ended June 30, 2016 was $1.3 million , a decrease of $0.6 million from interest expense of $1.9 million for the three months ended June 30, 2015 . The decrease in interest expense was due primarily to lower outstanding debt balances. During the three months ended June 30, 2016 and 2015 , our weighted average interest rates were approximately 1.9% and 2.1%, respectively.

Other Expense, net

Other expense for the three months ended June 30, 2016 was $0.2 million compared to other expense for the three months ended June 30, 2015 of $0.2 million . Other expense for the three months ended June 30, 2016 and 2015 was primarily related to foreign exchange losses that resulted from the revaluation of intercompany balances between our Canadian and U.S. entities.

Income Tax Expense

Our effective tax rate was 33.0% for the three months ended June 30, 2016 , compared to 34.3% for the three months ended June 30, 2015 . The decrease in our effective tax rate for the three months ended June 30, 2016 was a result of the geographic mix of pretax income and the varying effective tax rates in the countries and states in which we operate, and a favorable income tax examination ruling received from a non-U.S. income tax jurisdiction.

Comparison of Consolidated Results for the Six Months Ended June 30, 2016 and 2015



	Six Months Ended June 30,						2016 vs. 2015
	2016			2015			$ Change			% Change
	(Dollars in thousands, except per share data)
Net Sales	$	579,329		$	535,120		$	44,209		8.3	%
Gross profit	221,828			196,500			25,328			12.9	%
Selling, general, and administrative expenses	156,505			145,946			10,559			7.2	%
Operating profit	65,323			50,554			14,769			29.2	%
Interest expense	2,861			3,736			(875		)	(23.4	)%
Other expense (income), net	2,789			(6,957		)	9,746			(140.1	)%
Income tax expense	21,100			19,118			1,982			10.4	%
Net earnings	38,573			34,657			3,916			11.3	%
Net earnings attributable to Knoll, Inc. stockholders	38,556			34,682			3,874			11.2	%
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic	$	0.80		$	0.73		$	0.07		9.6	%
Diluted	$	0.79		$	0.72		$	0.07		9.7	%
Statistical Data
Gross profit %	38.3		%	36.7		%
Operating profit %	11.3		%	9.4		%
Selling, general, and administrative expenses %	27.0		%	27.3		%

Net Sales

Net sales for the six months ended June 30, 2016 were $579.3 million , an increase of $44.2 million , or 8.3% , from sales of $535.1 million for the six months ended June 30, 2015 . The increase in sales was largely due to a $36.0 million increase in our Office segment sales where we experienced growth in our core office systems as well as in our recently introduced complementary products, like adjustable tables and storage products. Our Studio segment sales also increased 8.2% from the same period in the prior year, as all of our Studio segment businesses continued to grow.

Gross Profit

Gross profit for the six months ended June 30, 2016 was $221.8 million , an increase of $25.3 million , or 12.9% , from gross profit of $196.5 million for the six months ended June 30, 2015 . As a percentage of sales, gross profit increased from 36.7% for the six months ended June 30, 2015 to 38.3% for the six months ended June 30, 2016 . The increase in gross profit as a percent of sales was driven primarily by the Office segment, where operating efficiencies resulting from our supply chain initiatives, capital investments and an improved fixed-cost basis that allowed us to leverage higher volumes to produce strong margin improvement.

Operating Profit

Operating profit for the six months ended June 30, 2016 was $65.3 million , an increase of $14.8 million , or 29.2% , from operating profit of $50.6 million for the six months ended June 30, 2015 . The increase in operating profit was driven primarily by the Office segment resulting from higher volume as well as cost improvement benefits. Operating profit as a percentage of sales increased from 9.4% in the six months ended June 30, 2015 to 11.3% in the six months ended June 30, 2016 .

Selling, general, and administrative expenses for the six months ended June 30, 2016 were $156.5 million , or 27.0% of sales, compared to $145.9 million , or 27.3% of sales, for the six months ended June 30, 2015 . The increase in operating expenses was related to increased costs from marketing investments, additional headcount, and higher incentive accruals related to increased profitability.

Interest Expense

Interest expense for the six months ended June 30, 2016 was $2.9 million , a decrease of $0.8 million from interest expense of $3.7 million for the six months ended June 30, 2015 . The decrease in interest expense was due primarily to lower outstanding debt balances. During both the six months ended June 30, 2016 and 2015 , our weighted average interest rates were approximately 2.1%.

Other Expense (Income), net

Other expense for the six months ended June 30, 2016 was $2.8 million compared to other income for the six months ended June 30, 2015 of $7.0 million . Other expense for the six months ended June 30, 2016 was primarily related to foreign exchange losses that resulted from the revaluation of intercompany balances between our Canadian and U.S. entities. The gain in the six months ended June 30, 2015 was due to the settlement of an outstanding receivable with our Canadian subsidiary.

Income Tax Expense

Our effective tax rate was 35.4% for the six months ended June 30, 2016 , compared to 35.6% for the six months ended June 30, 2015 . The decrease in our effective tax rate for the six months ended June 30, 2016 was a result of the geographic mix of pretax income and the varying effective tax rates in the countries and states in which we operate, and a favorable income tax examination ruling received from a non-U.S. income tax jurisdiction.

Segment Reporting

We manage our business through three reporting segments: (1) Office (2) Studio and (3) Coverings. The Office segment includes systems, seating, storage, tables, desks and KnollExtra® ergonomic accessories as well as the international sales of our North American Office products. The Studio segment includes our KnollStudio® division, the Company's European subsidiaries which primarily sell KnollStudio products and Holly Hunt Enterprises, Inc. The KnollStudio portfolio includes a range of lounge seating, side, café and dining chairs, barstools as well as conference, dining and occasional tables. Known for style and quality, HOLLY HUNT® produces and showcases custom made product including indoor and outdoor furniture, lighting, rugs, textiles and leathers. The Coverings segment includes KnollTextiles®, Spinneybeck | FilzFelt, and Edelman® Leather. These businesses serve a wide range of customers offering high-quality textiles, felt, and leather.

Comparison of Segment Results for the Three Months Ended June 30, 2016 and 2015



	Three Months Ended June 30,				2016 vs. 2015
	2016		2015		$ Change			% Change
	(Dollars in thousands)
SALES
Office	$	179,270	$	160,877	$	18,393		11.4	%
Studio	88,650		77,863		10,787			13.9	%
Coverings	26,780		29,882		(3,102		)	(10.4	)%
Knoll, Inc.	$	294,700	$	268,622	$	26,078		9.7	%
OPERATING PROFIT
Office	$	13,597	$	9,099	$	4,498		49.4	%
Studio	14,067		12,079		1,988			16.5	%
Coverings	5,810		7,077		(1,267		)	(17.9	)%
Knoll, Inc. ⁽¹⁾	$	33,474	$	28,255	$	5,219		18.5	%

_______________________________________________________________________________

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

Office

Net sales for the Office segment for the three months ended June 30, 2016 were $179.3 million , an increase of $18.4 million , or 11.4% , when compared with the three months ended June 30, 2015 . The increase in the Office segment was led by continued growth in our core systems portfolio, as well as increases in complementary products. Operating profit for the Office segment in the three months ended June 30, 2016 was $13.6 million , an increase of $4.5 million , or 49.4% , when compared with the three months ended June 30, 2015 . The increase in operating profit was mainly the result of higher volume as well as cost improvement benefits from continued efficiency initiatives.

Studio

Net sales for the Studio segment for the three months ended June 30, 2016 were $88.6 million, an increase of $10.7 million, or 13.9% , when compared with the three months ended June 30, 2015 . The increase in the Studio segment was led by Europe and KnollStudio in North America, however, all of our Studio segment businesses continued to grow in the three months ended June 30, 2016 . Operating profit for the Studio segment in the three months ended June 30, 2016 was $14.1 million , an increase of $2.0 million , or 16.5% , when compared with the three months ended June 30, 2015 . The increase in operating profit was driven by increased sales volume, foreign exchange benefits and cost improvement efficiencies.

Coverings

Net sales for the Coverings segment for the three months ended June 30, 2016 were $26.8 million , a decrease of $3.1 million , or 10.4% , when compared with the three months ended June 30, 2015 . Continued year-over-year growth in Spinneybeck | FilzFelt sales was offset by weakness at KnollTextiles and Edelman. Operating profit for the Coverings segment in the three months ended June 30, 2016 was $5.8 million , a decrease of $1.3 million , or 17.9% , when compared with the three months ended June 30, 2015 .

Comparison of Segment Results for the Six Months Ended June 30, 2016 and 2015



	Six Months Ended June 30,				2016 vs. 2015
	2016		2015		$ Change			% Change
	(Dollars in thousands)
SALES
Office	$	364,626	$	328,600	$	36,026		11.0	%
Studio	160,156		148,057		12,099			8.2	%
Coverings	54,547		58,463		(3,916		)	(6.7	)%
Knoll, Inc.	$	579,329	$	535,120	$	44,209		8.3	%
OPERATING PROFIT
Office	$	30,193	$	16,345	$	13,848		84.7	%
Studio	23,110		21,031		2,079			9.9	%
Coverings	12,020		13,178		(1,158		)	(8.8	)%
Knoll, Inc. ⁽¹⁾	$	65,323	$	50,554	$	14,769		29.2	%

_______________________________________________________________________________

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

Office

Net sales for the Office segment for the six months ended June 30, 2016 were $364.6 million , an increase of $36.0 million , or 11.0% , when compared with the six months ended June 30, 2015 . The increase in the Office segment was led by complementary products including our height-adjustable tables and storage products, as well as solid growth in our core Office systems portfolio. Operating profit for the Office segment in the six months ended June 30, 2016 was $30.2 million , an increase of $13.8 million , or 84.7% , when compared with the six months ended June 30, 2015 . The increase in operating profit was mainly the result of higher volume as well as cost improvement benefits from continued efficiency initiatives.

Studio

Net sales for the Studio segment for the six months ended June 30, 2016 were $160.2 million , an increase of $12.1 million , or 8.2% , when compared with the six months ended June 30, 2015 . This increase was primarily driven by HOLLY HUNT, however, all of our Studio segment business continued to grow in the six months ended June 30, 2016 . Operating profit for the Studio segment in the six months ended June 30, 2016 was $23.1 million , an increase of $2.1 million , or 9.9% , when compared with the six months ended June 30, 2015 . The increase in operating profit was driven by increased sales volume, cost improvement efficiencies, increased net price realization and foreign exchange benefits.

Coverings

Net sales for the Coverings segment for the six months ended June 30, 2016 were $54.5 million , a decrease of $3.9 million , or 6.7% , when compared with the six months ended June 30, 2015 . Continued year-over-year growth in Spinneybeck | FilzFelt sales was offset by weakness at KnollTextiles and Edelman. Operating profit for the Coverings segment in the six months ended June 30, 2016 was $12.0 million , a decrease of $1.2 million , or 8.8% , when compared with the six months ended June 30, 2015 .

Liquidity and Capital Resources

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



	Six Months Ended June 30,
	2016			2015
	(in thousands)
Cash provided by operating activities	$	45,677		$	7,442
Cash used in investing activities	(15,057		)	(12,670		)
Cash used in financing activities	(32,848		)	(1,169		)
Effect of exchange rate changes on cash and cash equivalents	1,584			(2,282		)
Net decrease in cash and cash equivalents	(644		)	(8,679		)
Cash and cash equivalents at beginning of period	4,192			19,021
Cash and cash equivalents at end of period	3,548			10,342

We have historically funded our business through cash generated from operations, supplemented by debt borrowings. Available cash is primarily used for our working capital needs, capital expenditures, the payment of quarterly dividends, and the repurchase of shares. Our investment in capital expenditures shows our commitment to improving our operating efficiency, innovation and modernization, and includes leasehold improvements for our showrooms, new product tooling, manufacturing equipment and technology.

Cash provided by operating activities was $45.7 million for the six months ended June 30, 2016 compared to $7.4 million for the six months ended June 30, 2015 . For the six months ended June 30, 2016 , cash provided by operating activities consisted primarily of $58.7 million from net income and various non-cash charges, partially offset by $13.0 million of unfavorable changes in assets and liabilities. For the six months ended June 30, 2015 , cash provided by operating activities consisted of $43.6 million from net income and various non-cash charges, partially offset by $36.2 million of unfavorable changes in assets and liabilities. Working capital needs for the six months ended June 30, 2016 included inventory increases in the Office segment related to the introduction of complementary products, inventory increases in the Studio segment for the expansion of a HOLLY HUNT showroom, and to improve in-stock quick-ship programs on certain HOLLY HUNT offerings.

Cash used in investing activities was $15.1 million for the six months ended June 30, 2016 compared to $12.7 million for the six months ended June 30, 2015 . Cash used in investing activities consisted of capital expenditures for both the six months ended June 30, 2016 and 2015.

Cash used in financing activities was $32.8 million for the six months ended June 30, 2016 compared to $1.2 million for the six months ended June 30, 2015 . The increase in cash used in financing activities was the result of a $12.0 million net repayment of our revolving credit facilities in the six months ended June 30, 2016 compared to $16.0 million net proceeds from our revolving credit facilities in the six months ended June 30, 2015. Additionally, we made dividends payments of $14.7 million and $11.5 million in the six months ended June 30, 2016 and 2015, respectively. The increase in dividend payments was the result of increasing our quarterly dividends from $0.12 to $0.15 per share in the fourth quarter of 2015.

We use our credit facility in the ordinary course of business to fund our working capital needs and, at times, make significant borrowings and repayments under the facility depending on our cash needs and availability. As of June 30, 2016 and December 31, 2015, there was approximately $210.0 million and $222.0 million, respectively, outstanding under our credit facility. Borrowings under the credit facility may be repaid at any time, but no later than May 2019.

Our credit facility requires that we comply with two financial covenants, consolidated leverage ratio, defined as the ratio of total indebtedness to consolidated EBITDA (as defined in our credit agreement) and consolidated interest coverage ratio, defined as the ratio of our consolidated EBITDA (as defined in our credit agreement) to our consolidated interest expense. Our consolidated leverage ratio cannot exceed 4.0 to 1, and our consolidated interest coverage ratio must be a minimum of 3.0 to 1. We are also required to comply with various other affirmative and negative covenants including, without limitation, covenants that prevent or restrict 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.

We are currently in compliance with all of the covenants and conditions under our credit facility. We believe that existing cash balances and internally generated cash flows, together with borrowings available under our credit facility, will be sufficient to fund working capital needs, capital spending requirements, debt service requirements and dividend payments for at least the next twelve months. However, because of the financial covenants mentioned above, our capacity under our credit facility could be reduced if our trailing twelve month consolidated EBITDA (as defined by our credit agreement) declines significantly. Future debt payments may be paid out of cash flows from operations, from future refinancing of our debt or from equity issuances. Our ability to make scheduled payments of principal, pay interest on, or to refinance, our indebtedness, satisfy our other debt obligations and to pay dividends to stockholders will depend upon our future operating performance, which is affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

Reconciliation of Non-GAAP Financial Measures

This quarterly report on Form 10-Q contains certain non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We present non-GAAP measures because we consider them to be important supplemental measures of our performance and believe them to be useful to display ongoing results from operations distinct from items that are infrequent or not indicative of our operating performance. Pursuant to applicable reporting requirements, the Company has provided reconciliations below of non-GAAP financial measures to the most directly comparable GAAP measure.

The non-GAAP financial measures presented within this quarterly report on Form 10-Q are Last Twelve Months (“LTM”) Adjusted EBITDA. These non-GAAP measures are not indicators of our financial performance under GAAP and should not be considered as an alternative to the applicable GAAP measure. These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating these non-GAAP measures, you should be aware that in the future we may incur adjustments similar to those in this presentation. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results and using non-GAAP measures only as supplemental presentations.

The following table reconciles net earnings to adjusted EBITDA and computes our bank leverage calculations for the periods shown. The bank leverage calculation is in accordance with our Second Amended and Restated Credit Agreement dated May 20, 2014.



	June 30, 2015		September 30, 2015		December 31, 2015		March 31, 2016		June 30, 2016
	(in millions)
Debt Levels ⁽¹⁾	$	290.7	$	274.2	$	238.7	$	233.7	$	221.7
LTM Net Earnings	62.6		64.8		66.0		65.8		69.3
LTM Adjustments
Interest	6.8		6.6		6.1		6.2		6.2
Taxes	37.2		39.1		37.5		37.8		39.3
Depreciation and Amortization	21.1		21.2		21.3		21.3		21.3
Non-cash items and Other ⁽²⁾	3.3		6.0		12.5		21.9		22.4
LTM Adjusted EBITDA	$	131.0	$	137.7	$	143.4	$	153.0	$	158.5
Bank Leverage Calculation ⁽³⁾	2.22		1.99		1.67		1.53		1.40

(1) Outstanding debt levels include outstanding letters of credit and guarantee obligations. Excess cash over $15.0 million reduces outstanding debt per the terms of our credit facility, a copy of which was filed with the Securities and Exchange Commission on May 21, 2014.

(2) Non-cash items include, but are not limited to, an intangible asset impairment charge, a pension settlement and other postretirement benefit curtailment, stock-based compensation expenses, unrealized gains and losses on foreign exchange, and restructuring charges.

(3) Debt divided by LTM (Last Twelve Months) adjusted EBITDA, as calculated in accordance with our credit facility.

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.

Critical Accounting Policies

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the reported amounts and disclosures in the condensed consolidated financial statements. Actual results may differ from such estimates. On an ongoing basis, we review our accounting policies and procedures. A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, 2015 .

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provided a discussion of our market risk in Part II, Item 7A, of our Annual Report on Form 10-K for the year ended December 31, 2015 . There have been no substantive changes in our market risk described in our Annual Report on Form 10-K except for the items noted below. 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 and 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 six months ended June 30, 2016 , we estimated that materials deflation was approximately $0.7 million and transportation deflation was less than $0.1 million. During the six months ended June 30, 2015 , we estimated that materials and transportation inflation were approximately $1.6 million and $0.3 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 to 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. During both the six months ended June 30, 2016 and 2015 , our weighted average interest rates were approximately 2.1% .

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, 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 and the Euro. Approximately 11.6% and 11.5% of our revenues in the six months ended June 30, 2016 and 2015 , respectively, and 27.7% and 27.1% of our cost of goods sold in the six months ended June 30, 2016 and 2015 , respectively, were denominated in currencies other than the U.S. dollar. Foreign currency exchange rate fluctuations resulted in $3.1 million of translation losses and $7.0 million of translation gains for the six months ended June 30, 2016 and 2015 , respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. We, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report (March 31, 2016) ("Disclosure Controls"). Based upon the Disclosure Controls evaluation, our principal executive officer and principal financial officer have concluded that the Disclosure Controls are effective in reaching a reasonable level of assurance that (i) information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For the six months ended June 30, 2016 , there have been no new material legal proceedings or material changes in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 .

ITEM 1A. RISK FACTORS

For the six months ended June 30, 2016 , there have been no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 .

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND THE USE OF PROCEEDS

Repurchases of Equity Securities

The following is a summary of share repurchase activity during the three months ended June 30, 2016 .

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	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⁾
April 1, 2016 - April 30, 2016	23,550	⁽²⁾	$	22.95	16,023	⁽³⁾	$	32,352,413
May 1, 2016 - May 31, 2016	26,792		$	26.49	26,792	⁽³⁾	$	32,352,413
June 1, 2016 - June 30, 2016	33,566		$	25.07	33,566	⁽³⁾	$	32,352,413
Total	83,908				76,381

_______________________________________________________________________________

(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.

(2) In April 2016, 18,080 shares of outstanding restricted stock vested. Concurrently with the vesting, 7,527 shares were forfeited by the holders of the restricted shares to cover applicable taxes paid on the holders' behalf by the Company.

(3) These shares were purchased under the Options Proceeds Program.

ITEM 6. EXHIBITS



Exhibit Number		Description

10.1		Amended and Restated Employment Agreement, dated as of July 1, 2016, between Knoll, Inc. and Andrew B. Cogan
10.2		Summary of Craig B. Spray 2016 Compensation
10.3		Summary of Joseph T. Coppola 2016 Compensation
10.4		Summary of Benjamin A. Pardo 2016 Compensation
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following materials from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income for the three and six months ended June 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015, and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.*

* The Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



KNOLL, INC.
(Registrant)

Date:	August 9, 2016
		By:	/s/ Andrew B. Cogan
			Andrew B. Cogan
			Chief Executive Officer

Date:	August 9, 2016
		By:	/s/ Craig B. Spray
			Craig B. Spray
			Chief Financial Officer
			(Chief Accounting Officer)

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement is dated as of July 1, 2016, and is entered into between Knoll, Inc., a Delaware corporation (the “Company”), and Andrew

B. Cogan (“Executive”).

WHEREAS, Executive and the Company have entered into that certain Employment Agreement dated as of March 23, 2001 (as amended or modified from time to time prior to the date hereof, the “Existing Employment Agreement”); and

WHEREAS, the parties to the Existing Employment Agreement wish to amend and restate the Existing Employment Agreement to make certain amendments and modifications, all as more fully set forth herein.

NOW, THEREFORE, the parties hereby agree:

ARTICLE I

Employment, Duties and Responsibilities

1.01 Employment . The Company shall employ Executive as Chief Executive Officer of the Company. Executive hereby accepts such employment. Executive agrees to devote his full business time and efforts to promote the interests of the Company. Executive may serve on the board of directors of no more than two for-profit entities, excluding the Board.

1.02 Duties and Responsibilities . Executive shall have such duties and responsibilities as are customarily associated with such position and as are assigned to the Executive from time to time by the Company's Board of Directors (the “Board”). Executive shall in any event perform such additional services, without the receipt of additional compensation, with respect to the Company's subsidiaries as are assigned from time to time by the Board.

ARTICLE II

Term

2.01. Term . (a) The term of this Agreement (the “Term”) shall commence on July 1, 2016, and shall continue for a period of one year from such date; provided, however, that the term of the Executive's employment shall be automatically extended without further action of either party for successive additional periods of one year, unless written notice of either party's intention not to extend has been given to the other party at least sixty (60) days prior to the expiration of the then effective term.

(b) Executive represents and warrants to the Company that to the best of his knowledge, neither the execution and delivery of this Agreement nor the performance of his duties hereunder violates or will violate the provisions of any other agreement to which he is a party or by which he is bound.

EXHIBIT 10.1

ARTICLE III

Compensation and Expenses

3.01 Salary, Bonuses and Benefits . As compensation and consideration for the performance by Executive of his obligations under this Agreement, Executive shall be entitled to the following (subject, in each case, to the provisions of Article V hereof):

(a) The Company shall pay Executive a base salary (“Base Salary”) during the Term, payable in accordance with the normal payment procedures of the Company and subject to such withholdings and other normal employee deductions as may be required by law, at the rate of not less than $1,000,000 per annum. The Company agrees to review such compensation (for possible increases, not decreases) not less frequently than annually during the Term.

(b) Executive shall participate during the Term in such pension, life insurance, health, disability and major medical insurance plans, and in such other employee benefit plans and programs, for the benefit of the employees of the Company, as may be maintained from time to time during the Term, in each case to the extent and in the manner available to other executive officers of the Company and subject to the terms and provisions of such plans or programs. Executive confirms that he is aware that the Company or one of its affiliates may seek to obtain for their benefit “key man” insurance covering the Executive and Executive agrees to use his reasonable best efforts (without the incurrence of any unreimbursed out-of-pocket expenses) to cooperate in connection therewith.

(c) Executive shall participate during the Term in the Company’s annual discretionary non-equity management incentive plan, with a target annual bonus opportunity for each year during the Term of at least 100% of Executive's Base Salary at the time of the award, which shall be calculated on the basis of achievement of goals set by the Board, which goals may include, without limitation, specific individual goals and/or corporate performance parameters such as revenue, profit, balance sheet and cash management objectives. The Board shall establish the goals applicable to Executive in consultation with the Executive in advance of any fiscal year or other applicable period.

(d) Executive shall be entitled to a paid vacation, in accordance with Company policy (but not necessarily consecutive vacation weeks) during the Term.

(e) During and after the Term the Company agrees that if Executive is made a party, or compelled to testify or otherwise participate in, any action, suit or proceeding, (a “Proceeding”), by reason of the fact that he is or was a director or officer of the Company or any of its subsidiaries, the Executive shall be indemnified by the Company to the fullest extent permitted by Section 145 of the Delaware General Corporation Law or authorized by the Company's certificate of incorporation or bylaws or resolutions of the Company's Board against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director or officer of the Company or subsidiary, for the period of any applicable statute of limitations or, if longer, for the period in which any such Proceeding which commenced within

the period of any such statute of limitations is pending. The Company shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 days after receipt by the Company of a written request for such advance. Such request shall include an itemized list of the costs and expenses and an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that, pursuant to applicable law, he is not entitled to be indemnified against such costs and expenses. During the Term (and thereafter for the period of any applicable

EXHIBIT 10.1

statute of limitations), the Company agrees to purchase from a reputable insurance company, and maintain, a directors’ and officers’ liability insurance policy covering the Executive, in amounts reasonably determined by the Board to be appropriate for directors and officers of the Company given the Company's business, securities, operations and financial condition.

3.02 Expenses . The Company will reimburse Executive for reasonable business-related expenses incurred by him in connection with the performance of his duties hereunder during the Term, subject, however, to the Company's policies relating to business-related expenses as in effect from time to time during the Term.

3.03 Parachute Payments . If any payment or benefit received or to be received by Executive pursuant to this Agreement, Company’s equity agreements with Executive or otherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but for this Section, be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“Excise Tax”), then such Payments shall be either (A) provided in full or (B) provided at such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent tax counsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel”). For purposes of making the calculations required under this Section, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. The Company and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. If Payments are to be reduced to the Reduced Amount pursuant to this Section, such Payments shall be reduced in the order that would provide the Executive with the largest amount of after- tax proceeds (with such order, to the extent permitted by Code Sections 280G and 409A designated by the Executive, or otherwise determined by the Independent Tax Counsel).

ARTICLE IV

Exclusivity, Etc.

4.01 Exclusivity . Executive agrees to perform his duties, responsibilities and obligations hereunder efficiently and to the best of his ability. Executive agrees that he will devote his entire working time, care and attention and best efforts to such duties, responsibilities and obligations throughout the Term. Executive also agrees that he will not engage in any other business activities, pursued for gain, profit or other pecuniary advantage, that are competitive with the activities of the Company, except as permitted in Section 4.02 below. Executive agrees that all of his activities as an employee of the Company shall be in conformity with all policies, rules and regulations and directions of the Company not inconsistent with this Agreement.

EXHIBIT 10.1

4.02 Other Business Ventures . Executive agrees that, so long as he is employed by the Company, he will not own, directly or indirectly, any controlling or substantial stock or other beneficial interest in any business enterprise which is engaged in, or competitive with, any business engaged in by the Company, any of its subsidiaries, or its other affiliates (“Affiliates”). Notwithstanding the foregoing, Executive may own, directly or indirectly, up to 1% of the outstanding capital stock of any business having a class of capital stock which is traded on any national stock exchange or in the over-the-counter market.

4.03 Confidentiality; Non-competition . (a) Executive agrees that he will not, at any time during or after the Term, make use of or divulge to any other person, firm or corporation any trade or business secret, any information pertaining to any business process, method or means, customer lists, details of contracts with or requirements of customers, any information pertaining to accounting methods, practices and procedures, financial records or financial condition, computer systems and software, sales or marketing plans, acquisition plans or candidates, Intellectual Property (as hereinafter defined) of the Company or any of its subsidiaries or Affiliates, or any other written information treated as confidential or as a trade secret by the Company or any of its subsidiaries or Affiliates, which he may have learned or acquired in connection with his employment (collectively, “Confidential information”). Executive's obligation under this Section 4.03(a) shall not apply to any information which (i) is known publicly; (ii) is in the public domain or hereafter enters the public domain without the fault of Executive; (iii) is known to Executive prior to his receipt of such information from the Company or any predecessor of the Company with which he was employed, as evidenced by written records of Executive or (iv) is hereafter disclosed to Executive by a third party which, to Executive's knowledge, is not under an obligation of confidence to the Company. Executive agrees not to remove from the premises of the Company, except as an employee of the Company in pursuit of the business of the Company or except as specifically permitted in writing by the Company, any notes, memoranda, papers, documents, correspondence or writing (which shall include information recorded or stored in writing, on magnetic tape or disc, or otherwise stored for reproduction, whether by mechanical or electronic means and whether or not such reproduction will result in a permanent record being made) containing or reflecting any Confidential Information (“Documents”). Executive recognizes that all such Documents, whether developed by him or by someone else, will be the sole and exclusive property of the Company. Upon termination of his employment hereunder, Executive shall forthwith deliver to

the Company all such Confidential Information, including without limitation all Documents, correspondence, and any other property held by him or under his control in relation to the business or affairs of the Company, and no copy of any Confidential Information shall be retained by him.

(b) Executive acknowledges and agrees that the Company owns all writings, trade names, trademarks, service marks, copyrights, database rights, domain name rights and other intellectual property and material registered or registrable or otherwise protected or protectable under state, federal or foreign patent, trademark, copyright or similar laws, including, without limitation, analytics, software, programs and models owned, developed or utilized by or on behalf of the Company or any of its subsidiaries or Affiliates in connection with its business (collectively “Intellectual Property”). Executive further agrees that he shall not at any time assert, and hereby waives, any claim of right against the Company or any of its subsidiaries, Affiliates or licensees with respect to the Intellectual Property.

(c) Upon any termination of Executive's employment with the Company, the Executive shall not, for a period of two years from the date of such termination, directly or indirectly, whether as an employee, consultant, independent contractor, partner, joint venture or otherwise,

EXHIBIT 10.1

engage in any business activities which are competitive, to a material extent, with any substantial type or kind of business activities conducted by the Company or any of its subsidiaries or Affiliates at the time of such termination (provided that Executive may own, directly or indirectly, up to 1% of the outstanding capital stock of any business having a class of capital stock which is traded on any national stock exchange, interdealer quotation system or in the over-the-counter market); (ii) solicit or induce, or in any manner attempt to solicit or induce, any person employed by, or as agent of, the Company or any of its subsidiaries or Affiliates to terminate such person's contract of employment or agency, as the case may be, with the Company or any of its subsidiaries or Affiliates or (iii) divert, or attempt to divert, any person, concern, or entity from doing business with the Company or any of its subsidiaries or Affiliates, nor will he attempt to induce any such person, concern or entity to cease being a customer or supplier of the Company or any of its subsidiaries or Affiliates.

(d) Executive agrees that, at any time and from time to time during and after the Term, he will execute any and all documents which the Company may deem reasonably necessary or appropriate to effectuate the provisions of this Section 4.03.

4.04 Equitable Relief . Executive and the Company agree that the restrictions, prohibitions and other provisions of Article IV of this Agreement are reasonable, fair, and equitable in scope, terms, and duration, are necessary to protect the legitimate business interests of the Company and are a material inducement to the Company to enter into this Agreement. The Company and the Executive recognize that the services to be rendered under this Agreement by the Executive are special, unique and of extraordinary character, and that in the event of the breach by the Executive of the terms and conditions of this Agreement or if the Executive, without the prior consent of the Board, shall leave his employment for any reason and take any action in violation of this Article IV, the Company will be entitled to institute and prosecute proceedings in any court of competent jurisdiction referred to in Section 4.05 below, to enjoin

the Executive from breaching the provisions of Article IV. In such action, the Company will not be required to plead or prove irreparable harm or lack of an adequate remedy at law.

4.05 Submission to Jurisdiction . Any proceeding or action must be commenced in the federal courts, or in the absence of federal jurisdiction in state court, in either case in the County of New York. The Executive and the Company irrevocably and unconditionally submit to the jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of such courts. The Executive and the Company irrevocably waive any objection that they now have or hereafter may have to the laying of venue of any suit, action or proceeding brought in any such court and further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment against the Executive or the Company in any such suit shall be conclusive and may be enforced in other jurisdictions by suit on the judgment, a certified or true copy or which shall be conclusive evidence of the fact and the account of any liability of the Executive or the Company therein described, or by appropriate proceedings under an applicable treaty or otherwise.

ARTICLE V

Termination

5.01 Termination by the Company . The Company shall have the right to terminate Executive's employment at any time, with or without “Cause”. For purposes of this Agreement, “Cause” shall mean (i) the substantial and continued failure of Executive to perform material duties reasonably required of

EXHIBIT 10.1

Executive by the Board (it being understood that a failure to attain performance objectives shall not be treated as a failure to perform material duties for purpose of this clause (i)) for a period of not less than 30 consecutive days, provided notice in writing from the Board is given to Executive specifying in reasonable detail the circumstances constituting such substantial and continued failure, (ii) conduct substantially disloyal to the Company which conduct is identified in reasonable detail by notice in writing from the Board and which conduct, if susceptible of cure, is not remedied by Executive within 30 days of Executive's receipt of such notice, (iii) any act of fraud, embezzlement or misappropriation against the Company, or (iv) the conviction of Executive of a felony.

5.02 Death . In the event Executive dies during the Term, his employment shall automatically terminate effective on the date of his death.

5.03 Disability . In the event that Executive shall suffer a disability which shall have prevented him from performing satisfactorily his obligations hereunder for a period of at least 90 consecutive days, or 180 nonconsecutive days within any 365 day period, the Company shall have the right to terminate Executive's employment for “Disability,” such termination to be effective upon the giving of notice thereof to Executive in accordance with Section 6.03 hereof.

5.04 Compensation upon Termination . (a) In the event of termination of Executive's employment by the Company (other than for Death, Cause or Disability), or in the event of termination of Executive's employment by the Company as a result of the Company's failure to renew this Agreement, or in the event of a termination of Executive's employment by Executive

following a breach of a material provision of this Agreement by the Company, provided that the Executive has given advance written notice to the Company, identifying the basis for the breach in reasonable detail and, except in the event of a failure to pay Base Salary, giving the Company 30 days' opportunity to cure, the Company shall pay Executive an amount equal to the sum of (i) 200% of the Executive's then current Base Salary, payable in twenty-four equal monthly installments following the date of such termination, plus (ii) the average of the annual bonuses paid to Executive pursuant to Section 3.01(c) hereof for the two completed fiscal years of the Company that immediately preceded the fiscal year of the Executive’s termination of employment (“Termination Pay”), payable in twelve consecutive equal monthly installments following the date of such termination; provided, however, that in order to comply with Internal Revenue Code Section 409A, the payout of the Termination Pay shall be as follows:

(x) The first six monthly installments shall be paid to Executive on the six-month anniversary of the date of Executive’s termination of employment; and

(y) The next eighteen monthly installments (six in the case of the amount due in 5.04(a)(ii) above) shall be paid to Executive one installment each on the seventh through twenty-fourth (twelfth anniversary in the case of the amount due in Section 5.04(a)(ii) above) anniversaries of the date of Executive’s termination of employment.

(b) The Executive's rights upon termination of employment with respect to stock options, restricted stock or other incentive awards shall be governed by the terms and conditions of the applicable award agreements or as established by the Company with respect to such awards.

(c) If the Executive's employment is terminated under the circumstances described in Section 5.04(a), and if Executive elects to continue medical benefits under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), Company shall reimburse Executive for a portion of the applicable COBRA premium equal to the portion of the premium then paid by Company for Executive prior to

EXHIBIT 10.1

termination, for the time period commencing on the date of termination until the earlier of: (i) the date Executive obtains alternate full-time employment pursuant to which he is covered by a group health insurance plan; or (ii) the date the Executive is otherwise no longer eligible for COBRA continuation coverage. The amount of premiums paid by the Company during this period shall be treated as taxable income to the Executive if the provision of such benefits on a non-taxable basis would subject the Executive to tax on the benefits received under Section 105(h) of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder or if it would violate any other applicable laws.

(d) Except as provided in this Section 5.04, Executive shall not be entitled to compensation as a result of any termination of his employment with the Company.

ARTICLE VI

Miscellaneous

6.01 Mitigation; Offset . Executive shall not be required to mitigate damages resulting from his termination of employment and, during such time, the amounts payable to Executive

pursuant to Article V of this Agreement shall not be offset or reduced by any other compensation earned by Executive.

6.02 Benefit of Agreement; Assignment; Beneficiary . (a) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns, including, without limitation, any corporation or person which may acquire all or substantially all of the Company's assets or business, or with or into which the Company may be consolidated or merged. This Agreement shall also inure to the benefit of, and be enforceable by, the Executive and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if he had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to the Executive's beneficiary, devisee, legatee or other designee, or if there is no such designee, to the Executive's estate.

(b) The Company shall require any successor (whether direct or indirect, by operation of law, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

6.03 Notices . Any notice required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered or if sent by electronic mail or telecopier or by registered or certified mail, postage prepaid, with return receipt requested, addressed: (a) in the case of the Company to: Knoll, Inc., 1235 Water Street, East Greenville, PA 18041, Attention: General Counsel, fax: (215) 679-1013, or to such other address and/or to the attention of such other person as the Company shall designate by written notice to Executive; and (b) in the case of Executive, to such address as Executive shall designate by written notice to the Company from time to time, with a copy to . Any notice given hereunder shall be deemed to have been given at the time of receipt thereof by the person to whom such notice is given.

6.04 Entire Agreement; Amendment . This Agreement contains the entire agreement of the parties hereto with respect to the terms and conditions of Executive's employment during the term and supersedes any and all prior agreements and understandings (including, without limitation, the Existing

EXHIBIT 10.1

Employment Agreement), whether written or oral, between the parties hereto with respect to compensation due for services rendered hereunder. This Agreement may not be changed or modified except by an instrument in writing signed by both of the parties hereto.

6.05 Waiver . The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a continuing waiver or as a consent to or waiver of any subsequent breach hereof.

6.06 Headings . The Article and Section headings herein are for convenience of reference only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

6.07 Governing Law . This Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York without reference to the principles of conflict of laws.

6.08 Agreement to Take Actions . Each party hereto shall execute and deliver such documents, certificates, agreements and other instruments, and shall take such other actions, as may be reasonably necessary or desirable in order to perform his or its obligations under this Agreement or to effectuate the purposes hereof.

6.09 Survivorship . The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

6.10 Validity . The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision or provisions of this Agreement, which shall remain in full force and effect.

6.11 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

6.12 Section 409A . It is intended that the terms of this Agreement comply with Section 409A of the Code and related Treasury regulations (“Section 409A”) or an exemption therefrom, and the terms of this Agreement will be interpreted accordingly; provided, however, that the Company, the Company’s Affiliates, and their respective employees, officers, directors, agents and representatives (including, without limitation, legal counsel) will not have any liability to Executive with respect to any taxes, penalties, interest or other costs or expenses Executive or any related party may incur with respect to or as a result of Section 409A or for damages for failing to comply with Section 409A. Notwithstanding any provision to the contrary in this Agreement, with respect to any amounts under this Agreement that are determined to be deferred compensation for purposes of Section 409A and payable as a result of Executive’s termination of employment, Executive shall not be deemed to have terminated employment unless and until he has experienced a “separation from service” (as that term is used in Section 409A). Any reimbursements or in-kind benefits provided to or for the benefit of Executive that constitute deferred compensation for purposes of Section 409A shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(v). Accordingly, (a) all such reimbursements will be made not later than the last day of the calendar year after the calendar year in which the expenses were incurred, (b) any right to such reimbursements or in-kind benefits will not be subject to liquidation or exchange for another benefit, and (c) the amount of the expenses eligible for reimbursement, or the amount of any in-kind benefit provided, during any taxable year will not affect

EXHIBIT 10.1

the amount of expenses eligible for reimbursement, or the in-kind benefits provided, in any other taxable year. The Company shall have the authority to delay the payment of any amounts under this Agreement to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code; in such event, the payment(s) at issue may not be made before the date which is six (6) months after the date of Executive’s separation from service, or, if earlier, the date of death.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement effective as of the date first above written.

Knoll, Inc.


By:	/s/ Burton B. Staniar

Name: Burton B. Staniar

Title: Chairman

/s/ Andrew B. Cogan

Andrew B. Cogan

EXHIBIT 10.2

Summary of Craig B. Spray 2016 Compensation

Effective July 1, 2016, the Knoll, Inc. compensation committee approved an annual base salary of $342,000 for Craig B. Spray, with a bonus target of one hundred percent (100%) of his base salary. Mr. Spray is also entitled to participate in the benefit plans provided by Knoll that are generally available to Knoll employees.

EXHIBIT 10.3

Summary of Joseph T. Coppola 2016 Compensation

Effective July 1, 2016, the Knoll, Inc. compensation committee approved an annual base salary of $342,000 for Joseph T. Coppola, with a bonus target of one hundred percent (100%) of his base salary. Mr. Coppola is also entitled to participate in the benefit plans provided by Knoll that are generally available to Knoll employees.

EXHIBIT 10.4

Summary of Benjamin A. Pardo 2016 Compensation

Effective July 1, 2016, the Knoll, Inc. compensation committee approved an annual base salary of $301,000 for Benjamin A. Pardo, with a bonus target of $285,000. Mr. Pardo is also entitled to participate in the benefit plans provided by Knoll that are generally available to Knoll employees.

Exhibit 31.1

Certification of Chief Executive Officer

I, Andrew B. Cogan, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2016 of Knoll, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to material affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	August 9, 2016
	/s/ Andrew B. Cogan
	Andrew B. Cogan
	Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer

I, Craig B. Spray, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2016 of Knoll, Inc.;

(4) The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	August 9, 2016
	/s/ Craig B. Spray
	Craig B. Spray
	Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer

In connection with the Quarterly Report on Form 10-Q of Knoll, Inc. (the “Company”) for the period ended June 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Andrew B. Cogan, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:

a. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

b. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



August 9, 2016
/s/ Andrew B. Cogan
Andrew B. Cogan
Chief Executive Officer

Exhibit 32.2

Certification of Chief Financial Officer

In connection with the Quarterly Report on Form 10-Q of Knoll, Inc. (the “Company”) for the period ended June 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Craig B. Spray, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:

a. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

b. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



August 9, 2016
/s/ Craig B. Spray
Craig B. Spray
Chief Financial Officer