Knoll (KNL) 10-Q 10 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 09, 2016
Document Information [Line Items]
Entity Registrant Name	KNOLL INC
Entity Central Index Key	1,011,570
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		49,061,283
Restricted stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		1,050,497

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 5,348	$ 4,192
Customer receivables, net of allowance for doubtful accounts of $8,196 and $7,919, respectively	108,237	116,532
Inventories, net	148,251	140,798
Deferred income taxes	20,399	20,485
Prepaid and other current assets	19,102	26,765
Total current assets	301,337	308,772
Property, plant, and equipment, net	175,533	172,142
Goodwill	128,174	127,671
Intangible assets, net	239,347	240,169
Other non-trade receivables	2,126	2,254
Other noncurrent assets	948	2,795
Total assets	847,465	853,803
Current liabilities:
Current maturities of long-term debt	10,000	10,000
Accounts payable	90,944	89,552
Income taxes payable	160	1,580
Other current liabilities	99,460	114,908
Total current liabilities	200,564	216,040
Long-term debt	209,884	209,718
Deferred income taxes	77,875	75,959
Postretirement benefits other than pensions	5,748	6,294
Pension liability	62,936	63,441
Other current liabilities	20,213	26,877
Total liabilities	$ 577,220	$ 598,329
Commitments and contingent liabilities
Equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; 64,659,498 shares issued and 49,046,789 shares outstanding (including 1,071,285 non-voting restricted shares and net of 15,612,709 treasury shares) at March 31, 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	$ 490	$ 488
Additional paid-in capital	47,938	47,165
Retained earnings	254,745	244,947
Accumulated other comprehensive loss	(33,131)	(37,318)
Total Knoll, Inc. stockholders' equity	270,042	255,282
Noncontrolling interests	203	192
Total equity	270,245	255,474
Total liabilities and equity	$ 847,465	$ 853,803

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowance for Doubtful Accounts Receivable	$ 8,196	$ 7,919
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	64,659,498	64,603,344
Common stock, shares outstanding	49,046,789	48,822,013
Non-vesting restricted shares	1,071,285	993,934
Treasury Stock, Shares	15,612,709	15,781,331

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Statement [Abstract]
Sales	$ 284,629	$ 266,498
Cost of sales	176,865	171,189
Gross profit	107,764	95,309
Selling, general, and administrative expenses	75,915	73,010
Operating profit	31,849	22,299
Interest expense	1,554	1,885
Other expense (income), net	2,604	(7,157)
Income before income tax expense	27,691	27,571
Income tax expense	10,421	10,136
Net earnings	17,270	17,435
Net earnings (loss) attributable to noncontrolling interests	11	(8)
Net earnings attributable to Knoll, Inc. stockholders	$ 17,259	$ 17,443
Net earnings per common share attributable to Knoll, Inc. stockholders:
Basic (in dollars per share)	$ 0.36	$ 0.37
Diluted (in dollars per share)	0.36	0.36
Dividends per share (in dollars per share)	$ 0.15	$ 0.12
Weighted-average number of common shares outstanding:
Basic (in shares)	47,904,593	47,647,961
Diluted (in shares)	48,570,895	48,353,047
Other comprehensive income (loss):
Pension and other postretirement liability adjustment, net of tax	$ 138	$ 1,382
Foreign currency translation adjustment	4,049	(12,999)
Total other comprehensive income (loss), net of tax	4,187	(11,617)
Comprehensive income attributable to Knoll, Inc. stockholders	21,457	5,818
Comprehensive income (loss) attributable to noncontrolling interests	11	(8)
Comprehensive income attributable to Knoll, Inc. stockholders	$ 21,446	$ 5,826

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITES
Net earnings	$ 17,270	$ 17,435
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation	4,560	4,303
Amortization expense (including deferred financing fees)	989	962
Inventory obsolescence	647	397
Loss on disposal of property, plant and equipment	7	11
Unrealized foreign currency losses (gains)	1,262	(7,271)
Stock-based compensation	2,138	1,385
Bad debt and customer credits	91	476
Changes in assets and liabilities:
Customer receivables	8,570	(9,030)
Inventories	(7,348)	(6,104)
Accounts payable	1,299	(29,318)
Current income taxes	578	3,337
Other current assets	7,749	(1,229)
Other current liabilities	(16,393)	(5,334)
Other noncurrent assets and liabilities	(304)	3,925
Cash provided by (used in) operating activities	21,115	(26,055)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net	(7,017)	(4,864)
Cash used in investing activities	(7,017)	(4,864)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from credit facility	99,500	101,000
Repayment of credit facility	(99,500)	(59,000)
Payment of dividends	(7,196)	(5,729)
Proceeds from the issuance of common stock	399	3,826
Purchase of common stock for treasury	(1,902)	(6,067)
Contingent purchase price payment	(5,000)	(5,000)
Tax benefit from the exercise of stock options and vesting of equity awards	141	658
Cash (used in) provided by financing activities	(13,558)	29,688
Effect of exchange rate changes on cash and cash equivalents	616	(3,115)
Net increase (decrease) in cash and cash equivalents	1,156	(4,346)
Cash and cash equivalents at beginning of period	4,192	19,021
Supplemental disclosure of cash flow information:	$ 5,348	$ 14,675

BASIS OF PRESENTATION

BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION	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 $2.1 million and $2.3 million from other noncurrent assets to long-term debt as of March 31, 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 the Company on January 1, 2017. 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. 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 is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements.

INVENTORIES

INVENTORIES	3 Months Ended
	Mar. 31, 2015
Inventory Disclosure [Abstract]
INVENTORIES	INVENTORIES Information regarding the Company's inventories is as follows (in thousands): March 31, 2016 December 31, 2015 Raw materials $ 61,857 $ 58,412 Work-in-process 7,885 7,470 Finished goods 78,509 74,916 $ 148,251 $ 140,798 Inventory reserves for obsolescence and other estimated losses were $ 8.8 million and $8.3 million at March 31, 2016 and December 31, 2015 , respectively, and have been included in the amounts above.

INCOME TAXES

INCOME TAXES	3 Months Ended
	Mar. 31, 2016
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provisions for the three months ended March 31, 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 37.6% and 36.8% for the three months ended March 31, 2016 and 2015 , respectively. The change in the Company's effective tax rate for the three months ended March 31, 2016 was primarily 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. As of March 31, 2016 and December 31, 2015 , the Company had unrecognized tax benefits of approximately $4.1 million and $4.4 million , respectively. These unrecognized tax benefit amounts would affect the effective tax rate if recognized. As of March 31, 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.

CONTINGENT LIABILITIES AND COMM

CONTINGENT LIABILITIES AND COMMITMENTS	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
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. Changes in the warranty reserve are as follows (in thousands): Balance, December 31, 2015 $ 8,513 Provision for warranty claims 1,576 Warranty claims paid (1,508 ) Foreign currency translation adjustment 24 Balance, March 31, 2016 $ 8,605 Warranty expense for the three months ended March 31, 2016 and 2015 was $1.6 million and $1.7 million , respectively.

INDEBTEDNESS

INDEBTEDNESS	3 Months Ended
	Mar. 31, 2016
Debt Disclosure [Abstract]
INDEBTEDNESS	INDEBTEDNESS The Company's long-term debt is summarized as follows (in thousands): March 31, 2016 December 31, 2015 Balance of revolving credit facility $ 39,500 $ 37,000 Balance of term loan 182,500 185,000 Total long-term debt 222,000 222,000 Less: Current maturities of long-term debt 10,000 10,000 Less: Deferred financing fees, net 2,116 2,282 Long-term debt $ 209,884 $ 209,718

ACCUMULATED OTHER COMPREHENSIVE

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	3 Months Ended
	Mar. 31, 2016
Equity [Abstract]
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2016 (in thousands): Foreign Pension and Total Balance, as of December 31, 2015 $ (14,486 ) $ (22,832 ) $ (37,318 ) Other comprehensive income before reclassifications 4,049 — 4,049 Amounts reclassified from accumulated other comprehensive income — 138 138 Net current-period other comprehensive income 4,049 138 4,187 Balance, as of March 31, 2016 $ (10,437 ) $ (22,694 ) $ (33,131 ) 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 March 31, 2016 March 31, 2015 Amortization of pension and other post-retirement liability adjustments Prior service credits (1) $ 280 $ 72 Actuarial losses (1) (61 ) (2,258 ) Total before tax 219 (2,186 ) Tax (expense) benefit (81 ) 804 Net of tax $ 138 $ (1,382 ) (1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension costs. See Note 7 for additional information.

PENSION AND OTHER POSTRETIREMEN

PENSION AND OTHER POSTRETIREMENT BENEFITS	3 Months Ended
	Mar. 31, 2016
Pension and Other Postretirement Benefit Expense [Abstract]
PENSION AND OTHER POSTRETIREMENT BENEFITS	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 March 31, Three Months Ended March 31, 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 March 31, 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 March 31, 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.

COMMON STOCK AND EARNINGS PER S

COMMON STOCK AND EARNINGS PER SHARE	3 Months Ended
	Mar. 31, 2016
Earnings Per Share [Abstract]
COMMON STOCK AND EARNINGS PER SHARE	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 March 31, 2016 2015 Numerator: Net earnings attributable to Knoll, Inc. stockholders $ 17,259 $ 17,443 Denominator: Denominator for basic earnings per shares - weighted-average shares 47,905 47,648 Effect of dilutive securities: Potentially dilutive shares resulting from stock plans 666 705 Denominator for diluted earnings per share - weighted-average shares 48,571 48,353 Antidilutive equity awards not included in weighted-average common shares—diluted — — Net earnings per common share attributable to Knoll, Inc. stockholders: Basic $ 0.36 $ 0.37 Diluted $ 0.36 $ 0.36

EQUITY

EQUITY	3 Months Ended
	Mar. 31, 2016
Equity [Abstract]
EQUITY	EQUITY The following table shows the change in equity attributable to Knoll, Inc. stockholders and noncontrolling interests during the three months ended March 31, 2016 (in thousands): Common Additional Retained Accumulated Total Noncontrolling Interests Total Equity Balance at December 31, 2015 $ 488 $ 47,165 $ 244,947 $ (37,318 ) $ 255,282 $ 192 $ 255,474 Net earnings — — 17,259 — 17,259 11 17,270 Other comprehensive income — — — 4,187 4,187 — 4,187 Shares issued for consideration: Exercise of stock options (33,583 shares) — 374 — — 374 — 374 Income tax effect from the exercise of stock options and vesting of equity awards — 141 — — 141 — 141 Shares issued under stock incentive plan (297,632) 3 (3 ) — — — — — Shares issued to Board of Directors in lieu of cash (1,154 shares) — 25 — — 25 — 25 Stock-based compensation — 2,138 — — 2,138 — 2,138 Cash dividend ($0.15 per share) — — (7,461 ) — (7,461 ) — (7,461 ) Purchase of common stock (104,261 shares) (1 ) (1,902 ) — — (1,903 ) — (1,903 ) Balance at March 31, 2016 $ 490 $ 47,938 $ 254,745 $ (33,131 ) $ 270,042 $ 203 $ 270,245

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS	3 Months Ended
	Mar. 31, 2016
Fair Value Disclosures [Abstract]
FAIR VALUE OF FINANCIAL INSTRUMENTS	FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments The fair values of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value due to their short maturities. The fair value of the Company’s long-term debt approximates its carrying 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 March 31, 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 three months ended March 31, 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 changes in the fair value would be included within selling, general and administrative expenses. There were no additional assets and/or liabilities recorded at fair value on a recurring basis as of March 31, 2016 or December 31, 2015 .

SEGMENT INFORMATION

SEGMENT INFORMATION	3 Months Ended
	Mar. 31, 2016
Segment Reporting [Abstract]
SEGMENT INFORMATION	SEGMENT INFORMATION The following information below categorizes certain financial information into the Company's reportable segments for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, 2016 2015 SALES Office $ 185,356 $ 167,723 Studio 71,506 70,194 Coverings 27,767 28,581 Knoll, Inc. $ 284,629 $ 266,498 INTERSEGMENT SALES (1) Office $ 581 $ 486 Studio 1,305 1,380 Coverings 2,247 1,925 Knoll, Inc. $ 4,133 $ 3,791 OPERATING PROFIT Office $ 16,596 $ 7,246 Studio 9,043 8,952 Coverings 6,210 6,101 Knoll, Inc. (2) $ 31,849 $ 22,299 _______________________________________________________________________________ (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.

BASIS OF PRESENTATION BASIS OF

BASIS OF PRESENTATION BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
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	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 $2.1 million and $2.3 million from other noncurrent assets to long-term debt as of March 31, 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 the Company on January 1, 2017. 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. 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 is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements.

INVENTORIES (Tables)

INVENTORIES (Tables)	3 Months Ended
	Mar. 31, 2015
Inventory Disclosure [Abstract]
Schedule of inventories	Information regarding the Company's inventories is as follows (in thousands): March 31, 2016 December 31, 2015 Raw materials $ 61,857 $ 58,412 Work-in-process 7,885 7,470 Finished goods 78,509 74,916 $ 148,251 $ 140,798

CONTINGENT LIABILITIES AND CO19

CONTINGENT LIABILITIES AND COMMITMENTS (Tables)	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Schedule of changes in the warranty reserve	Changes in the warranty reserve are as follows (in thousands): Balance, December 31, 2015 $ 8,513 Provision for warranty claims 1,576 Warranty claims paid (1,508 ) Foreign currency translation adjustment 24 Balance, March 31, 2016 $ 8,605

INDEBTEDNESS (Tables)

INDEBTEDNESS (Tables)	3 Months Ended
	Mar. 31, 2016
Debt Disclosure [Abstract]
Schedule of long-term debt	The Company's long-term debt is summarized as follows (in thousands): March 31, 2016 December 31, 2015 Balance of revolving credit facility $ 39,500 $ 37,000 Balance of term loan 182,500 185,000 Total long-term debt 222,000 222,000 Less: Current maturities of long-term debt 10,000 10,000 Less: Deferred financing fees, net 2,116 2,282 Long-term debt $ 209,884 $ 209,718

ACCUMULATED OTHER COMPREHENSI21

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)	3 Months Ended
	Mar. 31, 2016
Equity [Abstract]
Schedule of Accumulated Other Comprehensive Income (Loss)	The following table summarizes the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2016 (in thousands): Foreign Pension and Total Balance, as of December 31, 2015 $ (14,486 ) $ (22,832 ) $ (37,318 ) Other comprehensive income before reclassifications 4,049 — 4,049 Amounts reclassified from accumulated other comprehensive income — 138 138 Net current-period other comprehensive income 4,049 138 4,187 Balance, as of March 31, 2016 $ (10,437 ) $ (22,694 ) $ (33,131 )
Reclassification out of Accumulated Other Comprehensive Income	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 March 31, 2016 March 31, 2015 Amortization of pension and other post-retirement liability adjustments Prior service credits (1) $ 280 $ 72 Actuarial losses (1) (61 ) (2,258 ) Total before tax 219 (2,186 ) Tax (expense) benefit (81 ) 804 Net of tax $ 138 $ (1,382 ) (1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension costs. See Note 7 for additional information.

PENSION AND OTHER POSTRETIREM22

PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables)	3 Months Ended
	Mar. 31, 2016
Pension and Other Postretirement Benefit Expense [Abstract]
Schedule of components of the net periodic benefit cost	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 March 31, Three Months Ended March 31, 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

COMMON STOCK AND EARNINGS PER23

COMMON STOCK AND EARNINGS PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2016
Earnings Per Share [Abstract]
Schedule of reconciliation of basic to dilutive average common shares	The following table sets forth the reconciliation from basic to dilutive average common shares (in thousands): Three Months Ended March 31, 2016 2015 Numerator: Net earnings attributable to Knoll, Inc. stockholders $ 17,259 $ 17,443 Denominator: Denominator for basic earnings per shares - weighted-average shares 47,905 47,648 Effect of dilutive securities: Potentially dilutive shares resulting from stock plans 666 705 Denominator for diluted earnings per share - weighted-average shares 48,571 48,353 Antidilutive equity awards not included in weighted-average common shares—diluted — — Net earnings per common share attributable to Knoll, Inc. stockholders: Basic $ 0.36 $ 0.37 Diluted $ 0.36 $ 0.36

EQUITY (Tables)

EQUITY (Tables)	3 Months Ended
	Mar. 31, 2016
Equity [Abstract]
Schedule of Stockholders Equity	The following table shows the change in equity attributable to Knoll, Inc. stockholders and noncontrolling interests during the three months ended March 31, 2016 (in thousands): Common Additional Retained Accumulated Total Noncontrolling Interests Total Equity Balance at December 31, 2015 $ 488 $ 47,165 $ 244,947 $ (37,318 ) $ 255,282 $ 192 $ 255,474 Net earnings — — 17,259 — 17,259 11 17,270 Other comprehensive income — — — 4,187 4,187 — 4,187 Shares issued for consideration: Exercise of stock options (33,583 shares) — 374 — — 374 — 374 Income tax effect from the exercise of stock options and vesting of equity awards — 141 — — 141 — 141 Shares issued under stock incentive plan (297,632) 3 (3 ) — — — — — Shares issued to Board of Directors in lieu of cash (1,154 shares) — 25 — — 25 — 25 Stock-based compensation — 2,138 — — 2,138 — 2,138 Cash dividend ($0.15 per share) — — (7,461 ) — (7,461 ) — (7,461 ) Purchase of common stock (104,261 shares) (1 ) (1,902 ) — — (1,903 ) — (1,903 ) Balance at March 31, 2016 $ 490 $ 47,938 $ 254,745 $ (33,131 ) $ 270,042 $ 203 $ 270,245

FAIR VALUE OF FINANCIAL INSTR25

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	3 Months Ended
	Mar. 31, 2016
Fair Value Disclosures [Abstract]
Schedule of indefinite lived intangible assets 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 March 31, 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

SEGMENT INFORMATION (Tables)

SEGMENT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2016
Segment Reporting [Abstract]
Schedule of certain financial information related to segments	The following information below categorizes certain financial information into the Company's reportable segments for the three months ended March 31, 2016 and 2015 (in thousands): Three Months Ended March 31, 2016 2015 SALES Office $ 185,356 $ 167,723 Studio 71,506 70,194 Coverings 27,767 28,581 Knoll, Inc. $ 284,629 $ 266,498 INTERSEGMENT SALES (1) Office $ 581 $ 486 Studio 1,305 1,380 Coverings 2,247 1,925 Knoll, Inc. $ 4,133 $ 3,791 OPERATING PROFIT Office $ 16,596 $ 7,246 Studio 9,043 8,952 Coverings 6,210 6,101 Knoll, Inc. (2) $ 31,849 $ 22,299 _______________________________________________________________________________ (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.

BASIS OF PRESENTATION BASIS O27

BASIS OF PRESENTATION BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Less: Deferred financing fees, net	$ 2,116	$ 2,282

INVENTORIES (Details)

INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 61,857	$ 58,412
Work-in-process	7,885	7,470
Finished goods	78,509	74,916
Inventories, net	148,251	140,798
Inventory reserves for obsolescence and other estimated losses	$ 8,800	$ 8,300

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Percent	37.60%	36.80%
Unrecognized tax benefits, which would reduce the effective tax rate if recognized	$ 4.1		$ 4.4

CONTINGENT LIABILITIES AND CO30

CONTINGENT LIABILITIES AND COMMITMENTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Product Warranty Expense	$ 1,576	$ 1,700
Changes in warranty reserve
Balance, December 31, 2015	8,513
Warranty claims paid	(1,508)
Foreign currency translation adjustment	24
Balance, March 31, 2016	$ 8,605

INDEBTEDNESS (Details)

INDEBTEDNESS (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Long-term debt
Long-term debt	$ 222,000	$ 222,000
Less: Current maturities of long-term debt	10,000	10,000
Less: Deferred financing fees, net	2,116	2,282
Long-term debt	209,884	209,718
Balance of revolving credit facility
Long-term debt
Long-term debt	39,500	37,000
Term Loan
Long-term debt
Long-term debt	$ 182,500	$ 185,000

ACCUMULATED OTHER COMPREHENSI32

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance	$ (37,318)
Other comprehensive income before reclassifications	4,049
Amounts reclassified from accumulated other comprehensive income	138
Net current-period other comprehensive income	4,187
Balance	(33,131)
Foreign Currency Translation Adjustment
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance	(14,486)
Other comprehensive income before reclassifications	4,049
Amounts reclassified from accumulated other comprehensive income	0
Net current-period other comprehensive income	4,049
Balance	(10,437)
Pension and Other Post-Retirement Liability Adjustment
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]
Balance	(22,832)
Other comprehensive income before reclassifications	0
Amounts reclassified from accumulated other comprehensive income	138
Net current-period other comprehensive income	138
Balance	$ (22,694)

ACCUMULATED OTHER COMPREHENSI33

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Tax (expense) benefit	$ (10,421)	$ (10,136)
Net of tax	17,270
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Prior service credits	280	72
Actuarial losses	(61)	(2,258)
Total before tax	219	(2,186)
Tax (expense) benefit	(81)	804
Net of tax	$ 138	$ (1,382)

PENSION AND OTHER POSTRETIREM34

PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Pension Benefits
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Service cost	$ 468	$ 1,887
Interest cost	2,416	3,114
Expected return on plan assets	(3,612)	(3,655)
Amortization of prior service credit	0	0
Recognized actuarial loss (gain)	123	2,166
Net periodic benefit (income) cost	(605)	3,512
Pension Benefits | Cost of sales
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Net periodic benefit (income) cost	300	2,000
Pension Benefits | Selling, General and Administrative Expenses
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Net periodic benefit (income) cost	300	1,500
Other Benefits
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Service cost	0	4
Interest cost	49	80
Expected return on plan assets	0	0
Amortization of prior service credit	(280)	(72)
Recognized actuarial loss (gain)	(62)	92
Net periodic benefit (income) cost	$ (293)	$ 104

COMMON STOCK AND EARNINGS PER35

COMMON STOCK AND EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Net earnings attributable to Knoll, Inc. stockholders	$ 17,259	$ 17,443
Weighted-average shares of common stock outstanding—basic (in shares)	47,904,593	47,647,961
Potentially dilutive shares resulting from stock plans (in shares)	666,000	705,000
Weighted-average common shares—diluted (in shares)	48,570,895	48,353,047
Antidilutive equity awards not included in weighted-average common shares—diluted (in shares)	0	0
Basic (in dollars per share)	$ 0.36	$ 0.37
Diluted (in dollars per share)	$ 0.36	$ 0.36

EQUITY (Details)

EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	$ 255,474
Net earnings	17,270
Other comprehensive income	4,187	$ (11,617)
Exercise of stock options (33,583 shares)	374
Income tax effect from the exercise of stock options and vesting of equity awards	141
Shares issued under stock incentive plan	0
Shares issued to Board of Directors in lieu of cash (1,154 shares)	25
Stock-based compensation (117,500 shares)	2,138
Cash dividend ($0.15 per share)	(7,461)
Purchase of common stock (12,569 shares)	(1,903)
Balance	$ 270,245
Exercise of stock options (in shares)	33,583
Shares issued to Board of Directors in lieu of cash (in shares)	1,154
Stock-based compensation (in shares)	0
Cash dividend (in dollars per share)	$ 0.15
Purchase of common stock (in shares)	104,261
Sales to clients attributed to the geographic areas based on the origin of sale
Sales	$ 284,629	$ 266,498
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	488
Shares issued under stock incentive plan	3
Purchase of common stock (12,569 shares)	(1)
Balance	490
Additional Paid-In Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	47,165
Exercise of stock options (33,583 shares)	374
Income tax effect from the exercise of stock options and vesting of equity awards	141
Shares issued under stock incentive plan	(3)
Shares issued to Board of Directors in lieu of cash (1,154 shares)	25
Stock-based compensation (117,500 shares)	2,138
Purchase of common stock (12,569 shares)	(1,902)
Balance	47,938
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	244,947
Net earnings	17,259
Cash dividend ($0.15 per share)	(7,461)
Balance	254,745
Accumulated Other Comprehensive Income (Loss)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	(37,318)
Other comprehensive income	4,187
Balance	(33,131)
Total Knoll, Inc. Stockholders' Equity
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	255,282
Net earnings	17,259
Other comprehensive income	4,187
Exercise of stock options (33,583 shares)	374
Income tax effect from the exercise of stock options and vesting of equity awards	141
Shares issued under stock incentive plan	0
Shares issued to Board of Directors in lieu of cash (1,154 shares)	25
Stock-based compensation (117,500 shares)	2,138
Cash dividend ($0.15 per share)	(7,461)
Purchase of common stock (12,569 shares)	(1,903)
Balance	270,042
Noncontrolling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance	192
Net earnings	11
Other comprehensive income	0
Exercise of stock options (33,583 shares)	0
Income tax effect from the exercise of stock options and vesting of equity awards	0
Shares issued under stock incentive plan	0
Shares issued to Board of Directors in lieu of cash (1,154 shares)	0
Stock-based compensation (117,500 shares)	0
Cash dividend ($0.15 per share)	0
Purchase of common stock (12,569 shares)	0
Balance	$ 203

FAIR VALUE OF FINANCIAL INSTR37

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Payments to Acquire Businesses	$ 5,000	$ 5,000
Fair Value, Measurements, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration, Fair Value Disclosure	6,000		$ 11,000	$ 16,000
Fair Value, Measurements, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration, Fair Value Disclosure	$ 6,000		$ 11,000

SEGMENT INFORMATION (Details)

SEGMENT INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Financial information of segments
NET SALES	$ 284,629	$ 266,498
OPERATING PROFIT	31,849	22,299
Operating Segments
Financial information of segments
NET SALES	284,629	266,498
INTERSEGMENT SALES	4,133	3,791
Office | Operating Segments
Financial information of segments
NET SALES	185,356	167,723
INTERSEGMENT SALES	581	486
OPERATING PROFIT	16,596	7,246
Studio | Operating Segments
Financial information of segments
NET SALES	71,506	70,194
INTERSEGMENT SALES	1,305	1,380
OPERATING PROFIT	9,043	8,952
Coverings | Operating Segments
Financial information of segments
NET SALES	27,767	28,581
INTERSEGMENT SALES	2,247	1,925
OPERATING PROFIT	$ 6,210	$ 6,101