Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 06, 2018 | |
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 | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 49,418,920 | |
Restricted stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 713,264 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 7,317 | $ 2,203 |
Customer receivables, net of allowance for doubtful accounts of $4,372 and $4,039, respectively | 110,814 | 86,687 |
Inventories | 170,420 | 144,945 |
Prepaid expenses | 19,360 | 29,272 |
Other current assets | 14,730 | 15,163 |
Total current assets | 322,641 | 278,270 |
Property, plant, and equipment, net | 203,781 | 200,630 |
Goodwill | 323,085 | 142,113 |
Intangible assets, net | 358,710 | 238,581 |
Other noncurrent assets | 4,071 | 1,447 |
Total assets | 1,212,288 | 861,041 |
Current liabilities: | ||
Current maturities of long-term debt | 17,242 | 10,000 |
Accounts payable | 118,272 | 108,922 |
Income taxes payable | 1,862 | 13 |
Other current liabilities | 114,321 | 104,145 |
Total current liabilities | 251,697 | 223,080 |
Long-term debt | 463,075 | 181,048 |
Deferred income taxes | 85,644 | 54,671 |
Pension liability | 2,861 | 21,671 |
Other noncurrent liabilities | 23,955 | 21,842 |
Total liabilities | 827,232 | 502,312 |
Commitments and contingent liabilities | ||
Equity: | ||
Common stock, $0.01 par value; 200,000,000 shares authorized; 65,765,633 shares issued and 49,410,705 shares outstanding (including 715,752 non-voting restricted shares and net of 16,354,928 treasury shares) at September 30, 2018 and 65,460,014 shares issued and 49,339,552 shares outstanding (including 841,610 non-voting restricted shares and net of 16,120,462 treasury shares) at December 31, 2017 | 495 | 493 |
Additional paid-in capital | 56,848 | 54,455 |
Retained earnings | 379,900 | 347,304 |
Accumulated other comprehensive loss | (52,445) | (43,774) |
Total Knoll, Inc. stockholders’ equity | 384,798 | 358,478 |
Noncontrolling interests | 258 | 251 |
Total equity | 385,056 | 358,729 |
Total liabilities and equity | $ 1,212,288 | $ 861,041 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 4,372 | $ 4,039 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 65,765,633 | 65,460,014 |
Common stock, shares outstanding (in shares) | 49,410,705 | 49,339,552 |
Non-vesting restricted shares (in shares) | 715,752 | 841,610 |
Treasury shares (in shares) | 16,354,928 | 16,120,462 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Total Sales | $ 327,737 | $ 291,256 | $ 947,647 | $ 816,770 |
Cost of sales | 204,943 | 184,646 | 597,855 | 514,528 |
Gross profit | 122,794 | 106,610 | 349,792 | 302,242 |
Selling, general, and administrative expenses | 88,674 | 78,883 | 267,036 | 231,897 |
Restructuring charges | 1,200 | 0 | 2,564 | 2,150 |
Operating profit | 32,920 | 27,727 | 80,192 | 68,195 |
Pension settlement charge | 628 | 0 | 5,236 | 0 |
Interest expense | 5,032 | 1,991 | 15,812 | 5,521 |
Other income, net | (227) | (1,583) | (7,021) | (5,943) |
Income before income tax expense | 27,487 | 27,319 | 66,165 | 68,617 |
Income tax expense | 7,164 | 8,158 | 17,452 | 21,104 |
Net earnings | 20,323 | 19,161 | 48,713 | 47,513 |
Net earnings attributable to noncontrolling interests | 0 | 29 | 7 | 43 |
Net earnings attributable to Knoll, Inc. stockholders | $ 20,323 | $ 19,132 | $ 48,706 | $ 47,470 |
Net earnings per common share attributable to Knoll, Inc. stockholders: | ||||
Basic (in dollars per share) | $ 0.42 | $ 0.39 | $ 1 | $ 0.98 |
Diluted (in dollars per share) | 0.41 | 0.39 | 0.99 | 0.96 |
Dividends per share (in dollars per share) | $ 0.15 | $ 0.15 | $ 0.45 | $ 0.45 |
Weighted-average number of common shares outstanding: | ||||
Basic (in shares) | 48,694,438 | 48,468,480 | 48,641,595 | 48,406,659 |
Diluted (in shares) | 49,231,376 | 48,979,182 | 49,189,592 | 49,167,856 |
Other comprehensive income (loss) : | ||||
Unrealized gain on interest rate swap, net of tax | $ 911 | $ 0 | $ 1,964 | $ 0 |
Pension and other post-employment liability adjustment, net of tax | 1,182 | (139) | 9,062 | (414) |
Foreign currency translation adjustment | (4,649) | 5,876 | (10,949) | 8,676 |
Foreign currency translation adjustment on long term intercompany notes | 3,094 | 0 | (2,498) | 0 |
Total other comprehensive income (loss), net of tax | 538 | 5,737 | (2,421) | 8,262 |
Total comprehensive income | 20,861 | 24,898 | 46,292 | 55,775 |
Comprehensive income attributable to noncontrolling interests | 0 | 29 | 7 | 43 |
Comprehensive income attributable to Knoll, Inc. stockholders | $ 20,861 | $ 24,869 | $ 46,285 | $ 55,732 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net earnings | $ 48,713 | $ 47,513 |
Adjustments to reconcile net earnings to cash provided by operating activities: | ||
Depreciation | 19,021 | 16,137 |
Amortization expense (including deferred financing fees) | 7,088 | 2,966 |
Loss on extinguishment of debt | 1,445 | 0 |
Change in fair value of acquisition related contingent consideration | (350) | 0 |
Provision for inventory obsolescence | 1,660 | 1,436 |
Loss on disposal of property, plant and equipment | 32 | 83 |
Unrealized foreign currency losses | 375 | 1,370 |
Stock-based compensation | 6,738 | 7,314 |
Bad debt and customer claims | (589) | (1,403) |
Changes in assets and liabilities: | ||
Customer receivables | (14,706) | (5,789) |
Inventories | (16,174) | (7,611) |
Prepaid and other current assets | 16,551 | 5,491 |
Accounts payable | 6,171 | 9,502 |
Current and deferred income taxes | (4,815) | (1,388) |
Other current liabilities | 711 | (7,250) |
Other noncurrent assets and liabilities | (8,076) | (8,967) |
Cash provided by operating activities | 63,795 | 59,404 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (21,349) | (29,433) |
Purchase of businesses, net of cash acquired | (307,983) | 0 |
Cash used in investing activities | (329,332) | (29,433) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from revolving credit facility | 409,000 | 304,000 |
Repayment of revolving credit facility | (287,500) | (296,500) |
Proceeds from term loan | 395,136 | 0 |
Repayment of term loan | (224,149) | (7,500) |
Payment of financing fees | (4,578) | 0 |
Payment of fees related to debt extinguishment | (1,023) | 0 |
Payment of dividends | (22,727) | (23,000) |
Proceeds from the issuance of common stock | 51 | 576 |
Purchase of common stock for treasury | (4,393) | (10,570) |
Contingent purchase price payment | 0 | (6,000) |
Cash provided by (used in) financing activities | 259,817 | (38,994) |
Effect of exchange rate changes on cash and cash equivalents | 10,834 | 5,002 |
Net increase (decrease) in cash and cash equivalents | 5,114 | (4,021) |
Cash and cash equivalents at beginning of period | 2,203 | 9,854 |
Cash and cash equivalents at end of period | $ 7,317 | $ 5,833 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
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 with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the three and nine month periods ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 . The condensed consolidated balance sheet of the Company, as of December 31, 2017 , has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 . New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers ”, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. The standard provides a five step model to be applied to all contracts with customers, with an underlying principle that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company adopted the standard as of January 1, 2018. The Company has completed its assessment of the impact of the new standard and adopted the new standard for all open contracts as of January 1, 2018 using the modified retrospective transition method, and applied the guidance to report new disclosures surrounding the Company’s recognition of revenue. The adoption of the new standard did not have a material impact on the financial position of the Company, the results of its operations or its cash flows as of and for the three and nine months ended September 30, 2018 , and the Company’s internal controls over financial reporting. There was no cumulative effect of adopting the standard at the date of initial application in retained earnings. The Company’s revenue recognition accounting policy has been updated for the new standard. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The amount of consideration received and revenue recognized varies with changes in returns, rebates, cash sales incentives and other allowances offered to customers based on the Company’s experience. The new standard further requires quantitative and qualitative disclosures about the Company’s contracts with customers which have been included within this Form 10-Q. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance in ASC 840, Leases. ASC 842 will be effective for the Company on January 1, 2019, and the Company will adopt the standard using the modified retrospective approach. While the Company continues to evaluate the provisions of ASC 842 to determine its impact, the primary effect of adopting the new standard will be to record assets and liabilities on the balance sheet for most leases including operating leases. Lessees will classify leases as either finance or operating leases and lessors classify all leases as sales-type, direct financing or operating leases. The statement of operations presentation and expense recognition for lessees for finance leases is similar to that of capital leases under Accounting Standards Codification (“ASC”) 840 with separate interest and amortization expense with higher periodic expense in the earlier periods of a lease. For operating leases, the statement of operations presentation and expense recognition is similar to that of operating leases under ASC 840 with single lease cost recognized on a straight-line basis. During the third quarter of 2018, the Company made progress on implementing the new standard which included surveying the Company’s businesses, assessing the Company’s portfolio of leases and compiling a central repository of active leases. The Company evaluated key policy elections and considerations under the standard which the Company will utilize to develop an internal policy to address the new standard requirements. Additionally, the Company selected a lease accounting software solution to support the new reporting requirements and started implementation of the software. While the Company continues to assess the impact on its accounting policies, internal control processes and related disclosures required under the new guidance, the Company expects to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. The Company does not believe the standard will materially affect its consolidated net earnings. These conclusions may change as the Company continues to evaluate the new standard or if there are any changes in the Company’s lease portfolio. In July 2018, the FASB issued clarifying guidance to the topic in ASUs No. 2018-11 and No. 2018-10, which defined several practical expedients for adoption and clarified new accounting methodologies. The Company is anticipating that it will elect the available practical expedients, including the transition option, upon adoption on January 1, 2019. In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This amendment is effective for fiscal years beginning after December 15, 2019 and will be effective for the Company on January 1, 2020. The Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) . The new standard requires the service cost component of net periodic benefit cost to be presented in the same income statement line as other employee compensation costs arising from services rendered during the period and the other components of net periodic benefit cost to be presented separately from the income statement lines that include service cost and outside of any subtotal of operating income. The Company adopted the new standard for the period beginning January 1, 2018, resulting in no change in presentation of the service cost component of net periodic benefit cost, which has historically been reported in selling, general and administrative expenses along with other employee compensation costs. The retrospective adoption resulted in a change in presentation of the other components of net periodic benefit cost for the year ended December 31, 2017, and interim periods therein, by reclassifying net periodic benefit income of $2.4 million and $7.2 million for the three and nine months ended September 30, 2017, respectively, from Selling, general and administrative expenses to Other income, net. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) . The new standard is intended to better align a company’s risk management strategies and financial reporting for hedging relationships. Under the new guidance, more hedging strategies will be eligible for hedge accounting and the application of hedge accounting is simplified. In addition, the new guidance amends presentation and disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including the interim periods within those years. The Company early adopted the standard as of January 1, 2018. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The new standard will allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“Tax Act”). The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statements users. However, because the amendment only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including the interim periods within those years. The Company early adopted the standard effective January 1, 2018 and reclassified $6.3 million from accumulated other comprehensive income to retained earnings related to the Company’s pension liability. In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) which incorporates the provision of SAB 118 into the accounting standards codification. The Security and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provides guidance regarding situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, the Company has made reasonable estimate of the effects on its existing deferred tax balances and one-time transition tax including impact of the assertion to repatriate foreign earnings. The ultimate impact of the Tax Act may differ from this estimate, possibly materially, due to change in interpretations and assumptions, and guidance that may be issued and actions the Company may take in response to the Tax Act. The estimated provision impact of the Tax Act, as disclosed in the Company’s annual report on Form 10-K, is anticipated to change as data becomes available through the tax return preparation process allowing more accurate scheduling of the deferred tax assets and liabilities primarily related to depreciable assets, inventory, employee compensation and commissions. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, which is expected to be in the fourth quarter of 2018 in accordance with SAB 118 standards. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock compensation (Topic 718) which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers . The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company does not plan to early adopt this ASU and the Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement. For public companies the ASU removes disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The ASU adds the disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019 including interim periods within that fiscal year. Early adoption is permitted. The Company does not plan to early adopt this ASU and the Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20). The ASU removes the requirements to disclose: amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage-point change in assumed health care cost trend rates. The ASU requires disclosure of the explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments in the update are effective for all entities for fiscal years beginning after December 15, 2020 including interim periods within that fiscal year. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company does not plan to early adopt this ASU and Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE Disaggregation of Revenue The majority of the Company’s revenue presented as “Sales” in the Condensed Consolidated Statements of Operations and Comprehensive Income is the result of contracts with customers for the sale of the Company’s products. All other sources of revenue are not material to the Company’s results of operations. The other sources of revenue include installation revenue and royalty revenue. The Company’s net sales by product category were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Office Segment Office Systems $ 111,239 $ 109,195 $ 318,717 $ 303,902 Seating 29,694 33,056 93,122 85,911 Files and Storage 23,940 22,956 67,232 62,089 Ancillary 24,631 18,380 64,537 38,044 Other 8,178 8,721 26,439 22,959 Total Office Segment $ 197,682 $ 192,308 $ 570,047 $ 512,905 Lifestyle Segment Studio 101,374 72,046 293,748 221,435 Coverings 28,681 26,902 83,852 82,430 Total Lifestyle Segment $ 130,055 $ 98,948 $ 377,600 $ 303,865 Total Sales $ 327,737 $ 291,256 $ 947,647 $ 816,770 Contract Balances The Company has contract assets consisting of Customer receivables in the Condensed Consolidated Balance Sheets which represent the amount of consideration the Company expects to be entitled to in exchange for the goods or services rendered to its customers. When the Company receives deposits, the recognition of revenue is deferred and results in the recognition of a contract liability (Customer deposits) presented as a component of Other Current Liabilities in the Condensed Consolidated Balance Sheets. Subsequent recognition of revenue and the satisfaction of the contract liability is typically less than one year as the Company’s standard contract is less than one year. As of September 30, 2018 and December 31, 2017, the contract liability related to customer deposits was $40.6 million and $30.5 million , respectively. Revenues recognized during the third quarter and first nine months of 2018, that were included in the contract liability at the beginning of the current quarter and current year were $29.0 million and $85.0 million , respectively. Performance Obligations The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. This occurs when the control of the goods and services have been transferred to the customer. Accordingly, revenue for sale of goods is generally recognized upon shipment or delivery depending on the shipping terms of the underlying contract. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Amounts billed to customers for shipping and handling activities to fulfill the Company’s promise to transfer the goods are included in Sales, and costs incurred by the Company for the delivery of goods are classified as Cost of sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. Sales tax, value added tax, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company generally offers assurance-type warranties for its products. The specific terms and conditions of those warranties vary by the product. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the warranty liability include historical product-failure experience and estimated repair costs for identified matters. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Practical Expedients Elected Incremental Costs of Obtaining a Contract - The Company has elected the practical expedient permitted in ASC 340-40-25-4, which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if the amortization period will be less than one year. Significant Financing Component - The Company has elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if a contract has a duration of one year or less. As the Company’s contracts are typically less than one year in length, consideration will not be adjusted. The Company’s contracts include a standard payment term of 30 days, consequently there is no significant financing component within its contracts. |
ACQUISITION
ACQUISITION | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
ACQUISITION | ACQUISITION On January 25, 2018, the Company acquired one hundred percent ( 100% ) of the shares of Muuto Holding ApS and MIE4 Holding 5 ApS, which collectively hold substantially all the business operations of Muuto ApS (“Muuto”). Muuto’s affordable luxury products span commercial and residential applications, adding scale and diversity to the Company’s business. The aggregate purchase price for the acquisition was $307.8 million , net of $7.6 million of cash acquired and subject to certain customary adjustments. The Company recorded the acquisition of Muuto using the acquisition method of accounting and recognized the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. The results of operations of Muuto have been included in the Company’s Lifestyle segment beginning January 25, 2018. The Company funded the acquisition with borrowings from the Amended Credit Agreement as well as cash on hand. See Note 10 for information on the Company’s borrowings. The Company recorded acquisition costs of $1.6 million within selling, general, and administrative expenses in its Consolidated Statement of Operations and Comprehensive Income, during the nine months ended September 30, 2018 . The amount of sales and net loss that resulted from the acquisition and attributable to Knoll, Inc. stockholders included in the Condensed Consolidated Statements of Operations and Comprehensive Income during the three and nine month periods ended September 30, 2018 were as follows (in thousands): Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Sales $ 22,537 $ 58,728 Net loss attributable to Knoll, Inc. stockholders $ (87 ) $ (2,192 ) The following table summarizes the preliminary fair values assigned to the assets acquired and liabilities assumed and resulting goodwill. These values are not yet finalized and are subject to change, which could be significant. The amounts recognized will be finalized as the information necessary to complete the analyses is obtained, but no later than one year from the acquisition date (“the measurement period”). Recognized amounts of identifiable assets and liabilities as of the January 25, 2018 acquisition date (in thousands): Amounts Recognized as of Acquisition Date Cash $ 7,605 Customer receivables 8,832 Inventory 10,956 Other current assets 453 Property, plant, and equipment, net 1,266 Intangible assets 135,600 Other non-current assets 296 Total assets acquired $ 165,008 Accounts payable 3,418 Other current liabilities 4,592 Deferred income taxes 34,259 Other noncurrent liabilities 1,659 Total liabilities assumed $ 43,928 Net assets acquired $ 121,080 Purchase price $ 315,313 Less: Fair value of acquired identifiable assets and liabilities 121,080 Goodwill $ 194,233 These above amounts are reflective of adjustments made during the nine months ending September 30, 2018, which include an inventory valuation adjustment of $4.0 million , a $3.4 million adjustment for future payments that are considered compensation for post-combination service, a $4.5 million adjustment to the long-term deferred tax liability, a $4.3 million adjustment for the valuation of identifiable intangible assets and various other adjustments. The following table summarizes the estimated fair value of Muuto’s identifiable intangible assets and their estimated useful lives (in thousands): Fair Value as of January 25, 2018 Estimated Useful Life (in years) Indefinite-lived intangible assets: Trade name $ 66,000 Indefinite Finite-lived intangible assets: Wholesale customer relationships 35,800 15 Contract customer relationships 25,000 9 Copyrights & designs 7,500 7 Non-competition agreements 1,300 3 $ 135,600 The preliminary purchase price of Muuto has been allocated to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition date fair values. The excess of the purchase price over the net tangible and intangible assets is recorded to goodwill. Goodwill is not deductible for tax purposes. The preliminary allocation of purchase price is based upon a valuation undertaken by the Company and is subject to change during the measurement period. The initial accounting for the acquisition of Muuto is incomplete pending final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed. Unaudited pro forma information for the Company for the nine months ended September 30, 2018 and 2017 as if the acquisition had occurred January 1, 2017 is as follows (in thousands): Nine Months Ended September 30, 2018 2017 Pro forma sales $ 951,795 $ 863,725 Pro forma net earnings attributable to Knoll, Inc. stockholders $ 53,693 $ 47,282 The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or the future consolidated results of operations of the Company. The pro forma financial information presented above has been derived from the historical condensed consolidated financial statements of the Company and from the historical consolidated financial statements of Muuto. The pro forma financial information presented above include adjustments for: (1) incremental amortization expense related to fair value adjustments to identifiable intangible assets, (2) incremental interest expense for outstanding borrowings to reflect the terms of the Amended Credit Agreement, (3) nonrecurring items, (4) the tax effect of the above adjustments. The pro forma information presented for the nine months ended September 30, 2018 includes adjustments for future payments that are considered compensation for post combination service of $2.3 million , loss on debt extinguishment of $1.4 million , acquisition costs of $1.6 million , acquisition related inventory valuation of $0.9 million , incremental interest expense of $0.9 million , and incremental amortization of intangibles of $0.1 million . The income tax impact of these adjustments for the nine months ended September 30, 2018 was $1.1 million . The pro forma information presented for the nine months ended September 30, 2017 includes adjustments for amortization of intangibles of $5.0 million , future payments that are considered compensation for post combination service of $2.6 million , loss on debt extinguishment of $1.4 million , interest expense of $2.9 million , and acquisition related inventory valuation of $0.9 million . The income tax impact of these adjustments for the nine months ended September 30, 2017 was $3.8 million . The pro forma financial information does not include adjustments for potential future cost savings. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Information regarding the Company’s inventories is as follows (in thousands): September 30, 2018 December 31, 2017 Raw materials $ 64,525 $ 58,725 Work-in-process 7,925 6,943 Finished goods 97,970 79,277 $ 170,420 $ 144,945 |
PENSION AND OTHER POST-EMPLOYME
PENSION AND OTHER POST-EMPLOYMENT BENEFITS | 9 Months Ended |
Sep. 30, 2018 | |
Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract] | |
PENSION AND OTHER POST-EMPLOYMENT BENEFITS | PENSION AND OTHER POST-EMPLOYMENT BENEFITS The following tables set forth the components of the net periodic benefit cost (income) for the Company’s pension and other post-employment benefit plans (in thousands): Pension Benefits Other Benefits Three Months Ended September 30, Three Months Ended September 30, 2018 2017 2018 2017 Interest cost $ 2,612 $ 2,390 $ 30 $ 43 Expected return on plan assets (3,997 ) (4,615 ) — — Amortization of prior service credit — — (182 ) (371 ) Recognized actuarial loss (gain) 73 154 (18 ) 1 Pension settlement charge (1) 628 — — — Net periodic benefit income $ (684 ) $ (2,071 ) $ (170 ) $ (327 ) (1) The pension settlement charge was related to cash payments from lump sum elections. Pension Benefits Other Benefits Nine Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Interest cost $ 7,620 $ 7,170 $ 90 $ 129 Expected return on plan assets (13,209 ) (13,845 ) — — Amortization of prior service credit — — (546 ) (1,113 ) Recognized actuarial loss (gain) 805 462 (54 ) 3 Pension settlement charge (2) 5,236 — — — Net periodic benefit cost (income) $ 452 $ (6,213 ) $ (510 ) $ (981 ) (2) The pension settlement charge was related to the purchase of annuities for certain pension plan retirees as well as cash payments from lump sum elections. As of September 30, 2018, in connection with the pension settlements, the Company remeasured its pension plans and recorded a $6.4 million reduction to the pension liability. This reduction was primarily driven by a change in the weighted average discount rates used to measure the liabilities. There was no change to the weighted average expected long-term rate of return on plan assets. During the three and nine months ended September 30, 2018, the Company made a voluntary contribution to the tax-qualified U.S. pension plan for Union Employees of $7.9 million . The Company does not expect to make any additional contributions in 2018. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2018 | |
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 approximate carrying value due to their short maturities and are classified as Level 1. 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 September 30, 2018 Fair Value as of December 31, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Interest rate swap $ — $ 2,655 $ — $ 2,655 $ — $ — $ — $ — Liabilities: Contingent purchase price payment - DatesWeiser $ — $ — $ 750 $ 750 $ — $ — $ 1,100 $ 1,100 Interest Rate Swap The Company’s interest rate swap has a maturity of five years and is with a counterparty with a credit rating of A- according to S&P and Fitch. The fair value of the interest rate swap agreement is based on observable prices as quoted for receiving the variable one month London Interbank Offered Rates (LIBOR) and paying fixed interest rates and therefore were classified as Level 2. Contingent Payment Pursuant to the agreement governing the acquisition of DatesWeiser, the Company may be required to make annual contingent purchase price payments. The payouts are based upon DatesWeiser reaching an annual net sales target, for each year through 2020. The Company classifies this as a Level 3 measurement and is required to remeasure this liability at fair value on a recurring basis. Excluding the initial recognition of the liability for the contingent purchase price payments and payments made to reduce the liability, changes in the fair value will 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 September 30, 2018 or December 31, 2017 . |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company is exposed to interest rate risks related to its business operations. To reduce the interest rate risk the Company uses derivative instruments, including interest rate swap contracts. The Company does not use derivatives for speculative trading purposes. Cash flow hedge To offset the variability of cash flows in interest payments associated with a portion of the Company’s variable rate debt, the Company entered into an interest rate swap contract in January 2018 which is designated as a cash flow hedge. The interest rate swap hedges one month LIBOR which effectively converts a portion of the variable-rate debt to a fixed interest rate. The interest rate swap effective date is December 31, 2018 and the maturity date is January 23, 2023. As of September 30, 2018 , the Company’s interest rate swap agreement had a notional amount of $300.0 million that hedges certain long-term debt obligations. The contract has a fixed rate of 2.63% . The following table illustrates the location and fair value of the Company’s interest rate swap at September 30, 2018 and December 31, 2017 (in thousands): Derivatives September 30, 2018 December 31, 2017 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments Interest rate swap Other assets $ 2,655 n/a $ — Total derivatives designated as hedging instruments $ 2,655 $ — As of September 30, 2018 , there was no hedge ineffectiveness associated with the Company’s interest rate swap and no portion of the cash flow hedge was excluded from the assessment of effectiveness. The Company will defer any effective portion of the cash flow hedge to accumulated other comprehensive income and will reclassify into earnings when the transaction occurs. The interest rate swap had no effect on the Consolidated Statement of Operations for the three and nine months ended September 30, 2018 . The Company does not expect any material reclassifications from accumulated other comprehensive income into earnings over the next 12 months. |
GOODWILL AND INTANGIBLES ASSETS
GOODWILL AND INTANGIBLES ASSETS, NET | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | GOODWILL AND OTHER INTANGIBLE ASSETS, NET Information regarding the Company’s other intangible assets are as follows (in thousands): September 30, 2018 December 31, 2017 Gross Accumulated Net Gross Accumulated Net Indefinite-lived intangible assets: Tradenames $ 287,073 $ — $ 287,073 $ 225,600 $ — $ 225,600 Finite-lived intangible assets: Customer relationships 79,266 (16,195 ) 63,071 22,497 (11,575 ) 10,922 Copyrights & design 7,022 (975 ) 6,047 — — — Various 13,314 (10,795 ) 2,519 12,088 (10,029 ) 2,059 Total $ 386,675 $ (27,965 ) $ 358,710 $ 260,185 $ (21,604 ) $ 238,581 The Company’s amortization expense, which is recorded on a straight-line basis, related to finite-lived intangible assets was $2.2 million and $6.3 million for the three and nine months ended September 30, 2018 and $0.8 million and $1.6 million for the three and nine months ended September 30, 2017, respectively. The expected amortization expense based on the finite-lived intangible assets as of September 30, 2018 are as follows (in thousands): Estimated Amortization Remainder of 2018 $ 2,249 2019 8,959 2020 8,886 2021 8,369 2022 8,044 The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands): Office Lifestyle Segment Total Balance as of December 31, 2017 $ 36,220 $ 105,893 $ 142,113 Foreign currency translation adjustment (210 ) (13,326 ) (13,536 ) Goodwill acquired — 194,508 194,508 Balance as of September 30, 2018 $ 36,010 $ 287,075 $ 323,085 |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 9 Months Ended |
Sep. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
OTHER CURRENT LIABILITIES | OTHER CURRENT LIABILITIES Information regarding the Company’s other current liabilities are as follows (in thousands): September 30, 2018 December 31, 2017 Accrued employee compensation $ 36,231 $ 41,144 Customer deposits 40,687 30,484 Warranty 9,598 9,174 Contingent payout 750 1,100 Other 27,055 22,243 Other current liabilities $ 114,321 $ 104,145 |
INDEBTEDNESS
INDEBTEDNESS | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
INDEBTEDNESS | INDEBTEDNESS The Company’s long-term debt is summarized as follows (in thousands): September 30, 2018 December 31, 2017 Balance of revolving credit facility $ 148,500 $ 27,000 Balance of term loan 336,211 165,000 Total debt 484,711 192,000 Less: current maturities of long-term debt 17,242 10,000 Less: deferred financing fees 4,394 952 Long-term debt, net $ 463,075 $ 181,048 On January 23, 2018, the Company completed an amendment to its existing credit facility, dated May 20, 2014 (the “Existing Credit Agreement”), whereby the Existing Credit Agreement was amended and restated in its entirety by the Third Amended and Restated Credit Agreement, among the Company and certain foreign subsidiaries of the Company, as borrowers, and certain domestic and foreign subsidiaries of the Company, as guarantors, (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a $750.0 million credit facility that matures in five years, consisting of a revolving commitment in the amount of $400.0 million , which may be available in U.S. dollars, Euro, British Pound and other foreign currencies, a U.S. term loan commitment in the amount of $250.0 million and a multicurrency term loan commitment in the amount of €81.7 million . The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility or incur incremental term loans by up to the greater of $250.0 million or 90% of the EBITDA of the Company and its subsidiaries for the four fiscal quarters prior to such increase or additional loan, subject to the satisfaction of certain terms and conditions. The proceeds of the credit facility were used to (1) consummate the Muuto acquisition and, (2) refinance certain indebtedness and will also be used, among other things, for general corporate and operational purposes. Borrowings under the revolving credit facility may be repaid at any time, but no later than the maturity date on January 23, 2023 . The Company retains the right to terminate or reduce the size of the revolving credit facility at any time. Borrowings under the term loan facilities amortize in equal quarterly installments equaling 5% per annum, with the remaining borrowings due on the maturity date. Interest on the revolving credit and term loans will accrue, at the Company’s election, at (i) the Eurocurrency Rate (as defined in the Amended Credit Agreement), plus additional percentage points based on the Company’s leverage ratio or (ii) the Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by Bank of America, N.A., (b) the Federal Reserve System’s federal funds rate, plus .50% or (c) the Eurocurrency Rate, plus 1.00% ; Base Rate is defined in detail in the Amended Credit Agreement), plus additional percentage points based on the Company’s leverage ratio. The Amended Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio (or under certain circumstances, a maximum specified net secured leverage ratio), and (ii) covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, engage in sale-leaseback transactions, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates and sell stock or assets. Repayments under the Amended Credit Agreement can be accelerated by the lenders upon the occurrence of certain events of default, including, without limitation, a failure to pay any principal, interest or other amounts in respect of loans when due, breach by the Company (or its subsidiaries) of any of the covenants or representations contained in the Amended Credit Agreement or related loan documents, failure of the Company (or its material subsidiaries) to pay any amounts owed with respect to other significant indebtedness of the Company or such subsidiary, or a bankruptcy event with respect to the Company or any of its material subsidiaries. The indebtedness incurred under the Amended Credit Agreement is secured by substantially all of the Company’s tangible and intangible assets, including, without limitation, the Company’s intellectual property. The Company’s direct and indirect wholly-owned domestic subsidiaries have also guaranteed the obligations of the Company and the foreign borrowers under the Amended Credit Agreement and pledged substantially all of their tangible and intangible assets as security for their obligations under such guarantee. Certain of the Company’s wholly-owned foreign subsidiaries have guaranteed the obligations of the foreign borrowers under the Amended Credit Agreement and pledged certain of their assets as security for their obligations under such guarantee. The aggregate maturities of long-term debt are as follows: Future minimum debt payments 2018 $ 4,356 2019 17,239 2020 17,239 2021 17,239 2022 17,239 Thereafter 411,399 Total $ 484,711 Deferred Financing Fees In conjunction with the issuance of the Amended Credit Agreement, the Company incurred $4.5 million in debt issuance costs, which are being deferred and amortized over the term of the Amended Credit Agreement. In conjunction with terminating the Company’s Existing Credit Agreement, $0.4 million in unamortized debt issuance costs and $1.0 million of third party fees related to debt extinguishment were written-off as a loss on extinguishment of debt during the nine months ended September 30, 2018 . The loss on extinguishment of debt was recorded as interest expense, net on the accompanying statements of operations and comprehensive loss. |
CONTINGENT LIABILITIES AND COMM
CONTINGENT LIABILITIES AND COMMITMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENT LIABILITIES AND COMMITMENTS | 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, 2017 $ 9,174 Provision for warranty claims 5,457 Warranties claims paid (5,668 ) Warranties acquired through business combinations 611 Foreign currency translation adjustment 24 Balance, September 30, 2018 $ 9,598 Warranty expense for the three and nine months ended September 30, 2018 was $1.6 million and $5.5 million , respectively. Warranty expense for the three and nine months ended September 30, 2017 was $1.7 million and $4.6 million , respectively. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
EQUITY | EQUITY The following table shows the change in equity attributable to Knoll, Inc. stockholders and noncontrolling interests during the nine months ended September 30, 2018 (in thousands): Common Additional Retained Accumulated Total Noncontrolling Interests Total Equity Balance at December 31, 2017 $ 493 $ 54,455 $ 347,304 $ (43,774 ) $ 358,478 $ 251 $ 358,729 Adoption of ASU 2018-02 — — 6,250 (6,250 ) — — — Net earnings — — 48,706 — 48,706 7 48,713 Other comprehensive income — — — (2,421 ) (2,421 ) — (2,421 ) Shares issued for consideration: Shares issued under stock incentive plan 4 (2 ) — — 2 — 2 Shares issued to Board of Directors in lieu of cash — 50 — — 50 — 50 Stock-based compensation, net of forfeitures — 6,738 — — 6,738 — 6,738 Cash dividend ($0.15 per share) — — (22,360 ) — (22,360 ) — (22,360 ) Purchase of common stock (2 ) (4,393 ) — — (4,395 ) — (4,395 ) Balance at September 30, 2018 $ 495 $ 56,848 $ 379,900 $ (52,445 ) $ 384,798 $ 258 $ 385,056 The following table demonstrates the change in the number of shares of common stock outstanding during the nine months ended September 30, 2018 (excludes non-voting restricted shares): Shares outstanding as of December 31, 2017 48,497,942 Shares issued under stock incentive plan, net of awards surrendered to pay applicable taxes 194,641 Shares issued to Board of Directors in lieu of cash 2,370 Shares outstanding at September 30, 2018 48,694,953 |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in accumulated other comprehensive income (loss) net of tax by component for the nine months ended September 30, 2018 (in thousands): Unrealized gains (losses) on Interest Rate Swaps Foreign Pension and Total Balance, as of December 31, 2017 $ — $ (5,487 ) $ (38,287 ) $ (43,774 ) Adoption of ASU 2018-02 — — (6,250 ) (6,250 ) Other comprehensive income before reclassifications 1,964 (13,447 ) 5,036 (6,447 ) Amounts reclassified from accumulated other comprehensive loss — — 4,026 4,026 Net current-period other comprehensive income 1,964 (13,447 ) 9,062 (2,421 ) Balance, as of September 30, 2018 $ 1,964 $ (18,934 ) $ (35,475 ) $ (52,445 ) 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 Nine Months Ended September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017 Amortization of pension and other post-employment liability adjustments Prior service credits (1) $ (182 ) $ (371 ) $ (546 ) $ (1,113 ) Actuarial losses (1) 55 155 751 465 Loss recognized during settlement 628 — 5,236 — Total before tax 501 (216 ) 5,441 (648 ) Tax (benefit) expense (158 ) 77 (1,415 ) 234 Net of tax $ 343 $ (139 ) $ 4,026 $ (414 ) (1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension costs, and are included in Other income, net within the Condensed Consolidated Statements of Operations and Comprehensive Income. See Note 5 for additional information. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 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 vesting of unvested restricted stock and restricted stock units, and is computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. At September 30, 2018 and 2017 , the Company had stock options, restricted stock and restricted stock units, which could potentially dilute basic earnings per share in the future. The following table sets forth the reconciliation from basic to dilutive average common shares (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Numerator: Net earnings attributable to Knoll, Inc. stockholders $ 20,323 $ 19,132 $ 48,706 $ 47,470 Denominator: Basic earnings per share - weighted-average shares 48,694 48,468 48,642 48,407 Effect of dilutive securities: Potentially dilutive shares resulting from stock plans 537 511 548 761 Diluted earnings per share - weighted-average shares 49,231 48,979 49,190 49,168 Antidilutive equity awards not included in weighted-average common shares—diluted 1 34 — 15 Net earnings per common share attributable to Knoll, Inc. stockholders: Basic $ 0.42 $ 0.39 $ 1.00 $ 0.98 Diluted $ 0.41 $ 0.39 $ 0.99 $ 0.96 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
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 September 30, 2018 and 2017 were based on the estimated effective tax rates applicable for the full years ending December 31, 2018 and 2017 and includes items specifically related to the interim periods. The Company’s effective tax rate was 26.4% and 30.8% for the nine months ended September 30, 2018 and 2017 , respectively. The decrease in the Company’s effective tax rate for the nine months ended September 30, 2018 was primarily due to domestic tax rate reduction implemented by the Tax Act legislation in December 2017. The Company’s geographic mix of pretax income and the varying effective tax rates in the countries and states in which the Company operates also impacts its effective tax rate. As of both September 30, 2018 and December 31, 2017 , the Company had unrecognized tax benefits of approximately $0.9 million in both periods, respectively. These unrecognized tax benefit amounts would affect the effective tax rate if recognized. As of September 30, 2018 , the Company is subject to U.S. Federal Income Tax examination for the tax years 2007 through 2017, and to non-U.S. income tax examination for the tax years 2010 through 2017. In addition, the Company is subject to state and local income tax examinations for the tax years 2007 through 2017. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company manages its business through its reportable segments: Office and Lifestyle. The Office segment includes a complete range of workplace products that address diverse workplace planning paradigms in North America and Europe. These products include: systems furniture, seating, storage, tables, desks and KnollExtra® accessories. The Lifestyle segment includes KnollStudio®, HOLLY HUNT®, DatesWeiser, Muuto, KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather. KnollStudio products, which are distributed in North America and Europe, include iconic seating, lounge furniture, side, cafe and dining chairs as well as conference, training and dining and occasional tables. HOLLY HUNT® is known for high quality residential furniture, lighting, rugs, textiles and leathers. In addition, HOLLY HUNT® also includes Vladimir Kagan Design Group, a renowned collection of modern luxury furnishings. DatesWeiser, known for its sophisticated meeting and conference tables and credenzas, sets a standard for design, quality and technology integration. The KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather businesses provide a wide range of customers with high-quality fabrics, felt, leather and related architectural products. The acquisition of Muuto rounds out the Lifestyle segment with its ancillary products and affordable luxury furnishings to make the Lifestyle segment an all encompassing “resimercial”, high performance workplace, from uber-luxury living spaces to affordable luxury residential living. Effective January 1, 2018, the Company revised its segment presentation by aggregating the former Studio and Coverings segments with Muuto to create the Lifestyle segment. Additionally, the Office segment now includes the office business in Europe which was historically reported in Studio. The Company believes this revised presentation better aligns the segments with how management views and operates the Company. As a result of this change in segment reporting, the Company retrospectively revised prior period results, by segment, to conform to current period presentation. Corporate costs include unallocated costs relating to shared services and general corporate activities such as legal expenses, acquisition expenses, certain finance, human resources, administrative and executive expenses and other expenses that are not directly attributable to an operating segment. Dedicated, direct selling, general and administrative expenses, of the segments are included within segment operating profit. Management regularly reviews the costs included in the Corporate function and believes disclosing such information provides more visibility and transparency of how the chief operating decision maker reviews the results for the Company. The tables below present the Company’s reportable segment information with Corporate costs excluded from segment results. Prior year amounts have been recast to conform to the current presentation (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 SALES Office $ 197,682 $ 192,308 $ 570,047 $ 512,905 Lifestyle 130,055 98,948 377,600 303,865 Knoll, Inc. $ 327,737 $ 291,256 $ 947,647 $ 816,770 INTERSEGMENT SALES (1) Office $ 449 $ 332 $ 1,458 $ 1,056 Lifestyle 2,566 2,830 7,970 8,021 Knoll, Inc. $ 3,015 $ 3,162 $ 9,428 $ 9,077 OPERATING PROFIT Office (2) $ 15,894 $ 15,802 $ 35,076 $ 29,441 Lifestyle 22,294 17,578 63,435 56,574 Corporate (3) (5,268 ) (5,653 ) (18,319 ) (17,820 ) Knoll, Inc. (4) $ 32,920 $ 27,727 $ 80,192 $ 68,195 _______________________________________________________________________________ (1) Intersegment sales are presented on a cost-plus basis which takes into consideration the effect of transfer prices between legal entities. (2) Knoll recorded restructuring charges of $1.2 million and $2.6 million during the three and nine months ended September 30, 2018 and $2.2 million of restructuring charges for the nine months ended September 30, 2017 within the Office segment related to an organizational realignment that will result in greater operating efficiency and control in 2018 and related to headcount rationalization and modernization of equipment in the Office segment in 2017. (3) Knoll recorded acquisition costs of $0.1 million and $1.6 million related to the acquisition of Muuto within the Corporate segment during the three and nine months ended September 30, 2018 . (4) The Company does not allocate interest expense or other income, net to the reportable segments. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
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 with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the three and nine month periods ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 . The condensed consolidated balance sheet of the Company, as of December 31, 2017 , has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017 . |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers ”, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. The standard provides a five step model to be applied to all contracts with customers, with an underlying principle that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company adopted the standard as of January 1, 2018. The Company has completed its assessment of the impact of the new standard and adopted the new standard for all open contracts as of January 1, 2018 using the modified retrospective transition method, and applied the guidance to report new disclosures surrounding the Company’s recognition of revenue. The adoption of the new standard did not have a material impact on the financial position of the Company, the results of its operations or its cash flows as of and for the three and nine months ended September 30, 2018 , and the Company’s internal controls over financial reporting. There was no cumulative effect of adopting the standard at the date of initial application in retained earnings. The Company’s revenue recognition accounting policy has been updated for the new standard. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The amount of consideration received and revenue recognized varies with changes in returns, rebates, cash sales incentives and other allowances offered to customers based on the Company’s experience. The new standard further requires quantitative and qualitative disclosures about the Company’s contracts with customers which have been included within this Form 10-Q. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance in ASC 840, Leases. ASC 842 will be effective for the Company on January 1, 2019, and the Company will adopt the standard using the modified retrospective approach. While the Company continues to evaluate the provisions of ASC 842 to determine its impact, the primary effect of adopting the new standard will be to record assets and liabilities on the balance sheet for most leases including operating leases. Lessees will classify leases as either finance or operating leases and lessors classify all leases as sales-type, direct financing or operating leases. The statement of operations presentation and expense recognition for lessees for finance leases is similar to that of capital leases under Accounting Standards Codification (“ASC”) 840 with separate interest and amortization expense with higher periodic expense in the earlier periods of a lease. For operating leases, the statement of operations presentation and expense recognition is similar to that of operating leases under ASC 840 with single lease cost recognized on a straight-line basis. During the third quarter of 2018, the Company made progress on implementing the new standard which included surveying the Company’s businesses, assessing the Company’s portfolio of leases and compiling a central repository of active leases. The Company evaluated key policy elections and considerations under the standard which the Company will utilize to develop an internal policy to address the new standard requirements. Additionally, the Company selected a lease accounting software solution to support the new reporting requirements and started implementation of the software. While the Company continues to assess the impact on its accounting policies, internal control processes and related disclosures required under the new guidance, the Company expects to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. The Company does not believe the standard will materially affect its consolidated net earnings. These conclusions may change as the Company continues to evaluate the new standard or if there are any changes in the Company’s lease portfolio. In July 2018, the FASB issued clarifying guidance to the topic in ASUs No. 2018-11 and No. 2018-10, which defined several practical expedients for adoption and clarified new accounting methodologies. The Company is anticipating that it will elect the available practical expedients, including the transition option, upon adoption on January 1, 2019. In September 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the incurred loss impairment methodology for measuring and recognizing credit losses with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This amendment is effective for fiscal years beginning after December 15, 2019 and will be effective for the Company on January 1, 2020. The Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) . The new standard requires the service cost component of net periodic benefit cost to be presented in the same income statement line as other employee compensation costs arising from services rendered during the period and the other components of net periodic benefit cost to be presented separately from the income statement lines that include service cost and outside of any subtotal of operating income. The Company adopted the new standard for the period beginning January 1, 2018, resulting in no change in presentation of the service cost component of net periodic benefit cost, which has historically been reported in selling, general and administrative expenses along with other employee compensation costs. The retrospective adoption resulted in a change in presentation of the other components of net periodic benefit cost for the year ended December 31, 2017, and interim periods therein, by reclassifying net periodic benefit income of $2.4 million and $7.2 million for the three and nine months ended September 30, 2017, respectively, from Selling, general and administrative expenses to Other income, net. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) . The new standard is intended to better align a company’s risk management strategies and financial reporting for hedging relationships. Under the new guidance, more hedging strategies will be eligible for hedge accounting and the application of hedge accounting is simplified. In addition, the new guidance amends presentation and disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including the interim periods within those years. The Company early adopted the standard as of January 1, 2018. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The new standard will allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“Tax Act”). The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statements users. However, because the amendment only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including the interim periods within those years. The Company early adopted the standard effective January 1, 2018 and reclassified $6.3 million from accumulated other comprehensive income to retained earnings related to the Company’s pension liability. In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) which incorporates the provision of SAB 118 into the accounting standards codification. The Security and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provides guidance regarding situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, the Company has made reasonable estimate of the effects on its existing deferred tax balances and one-time transition tax including impact of the assertion to repatriate foreign earnings. The ultimate impact of the Tax Act may differ from this estimate, possibly materially, due to change in interpretations and assumptions, and guidance that may be issued and actions the Company may take in response to the Tax Act. The estimated provision impact of the Tax Act, as disclosed in the Company’s annual report on Form 10-K, is anticipated to change as data becomes available through the tax return preparation process allowing more accurate scheduling of the deferred tax assets and liabilities primarily related to depreciable assets, inventory, employee compensation and commissions. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, which is expected to be in the fourth quarter of 2018 in accordance with SAB 118 standards. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock compensation (Topic 718) which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers . The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company does not plan to early adopt this ASU and the Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement. For public companies the ASU removes disclosure requirements for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The ASU modifies the disclosure requirements for investments in certain entities that calculate net asset value and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The ASU adds the disclosure requirement for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019 including interim periods within that fiscal year. Early adoption is permitted. The Company does not plan to early adopt this ASU and the Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20). The ASU removes the requirements to disclose: amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer, related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, and the effects of a one-percentage-point change in assumed health care cost trend rates. The ASU requires disclosure of the explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments in the update are effective for all entities for fiscal years beginning after December 15, 2020 including interim periods within that fiscal year. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company does not plan to early adopt this ASU and Company does not believe there will be a material impact to the financial statements as a result of adopting this ASU. |
Revenue from Contract with Customer | Performance Obligations The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. This occurs when the control of the goods and services have been transferred to the customer. Accordingly, revenue for sale of goods is generally recognized upon shipment or delivery depending on the shipping terms of the underlying contract. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Amounts billed to customers for shipping and handling activities to fulfill the Company’s promise to transfer the goods are included in Sales, and costs incurred by the Company for the delivery of goods are classified as Cost of sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. Sales tax, value added tax, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company generally offers assurance-type warranties for its products. The specific terms and conditions of those warranties vary by the product. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the warranty liability include historical product-failure experience and estimated repair costs for identified matters. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Practical Expedients Elected Incremental Costs of Obtaining a Contract - The Company has elected the practical expedient permitted in ASC 340-40-25-4, which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if the amortization period will be less than one year. Significant Financing Component - The Company has elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if a contract has a duration of one year or less. As the Company’s contracts are typically less than one year in length, consideration will not be adjusted. The Company’s contracts include a standard payment term of 30 days, consequently there is no significant financing component within its contracts. Contract Balances The Company has contract assets consisting of Customer receivables in the Condensed Consolidated Balance Sheets which represent the amount of consideration the Company expects to be entitled to in exchange for the goods or services rendered to its customers. When the Company receives deposits, the recognition of revenue is deferred and results in the recognition of a contract liability (Customer deposits) presented as a component of Other Current Liabilities in the Condensed Consolidated Balance Sheets. Subsequent recognition of revenue and the satisfaction of the contract liability is typically less than one year as the Company’s standard contract is less than one year. |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Net Sales by Product Category | The Company’s net sales by product category were as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Office Segment Office Systems $ 111,239 $ 109,195 $ 318,717 $ 303,902 Seating 29,694 33,056 93,122 85,911 Files and Storage 23,940 22,956 67,232 62,089 Ancillary 24,631 18,380 64,537 38,044 Other 8,178 8,721 26,439 22,959 Total Office Segment $ 197,682 $ 192,308 $ 570,047 $ 512,905 Lifestyle Segment Studio 101,374 72,046 293,748 221,435 Coverings 28,681 26,902 83,852 82,430 Total Lifestyle Segment $ 130,055 $ 98,948 $ 377,600 $ 303,865 Total Sales $ 327,737 $ 291,256 $ 947,647 $ 816,770 |
ACQUISITION (Tables)
ACQUISITION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisition Pro Forma Information | Unaudited pro forma information for the Company for the nine months ended September 30, 2018 and 2017 as if the acquisition had occurred January 1, 2017 is as follows (in thousands): Nine Months Ended September 30, 2018 2017 Pro forma sales $ 951,795 $ 863,725 Pro forma net earnings attributable to Knoll, Inc. stockholders $ 53,693 $ 47,282 The amount of sales and net loss that resulted from the acquisition and attributable to Knoll, Inc. stockholders included in the Condensed Consolidated Statements of Operations and Comprehensive Income during the three and nine month periods ended September 30, 2018 were as follows (in thousands): Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Sales $ 22,537 $ 58,728 Net loss attributable to Knoll, Inc. stockholders $ (87 ) $ (2,192 ) |
Summary of Preliminary Fair Values Assigned to Assets Acquired and Liabilities Assumed | Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Sales $ 22,537 $ 58,728 Net loss attributable to Knoll, Inc. stockholders $ (87 ) $ (2,192 ) The following table summarizes the preliminary fair values assigned to the assets acquired and liabilities assumed and resulting goodwill. These values are not yet finalized and are subject to change, which could be significant. The amounts recognized will be finalized as the information necessary to complete the analyses is obtained, but no later than one year from the acquisition date (“the measurement period”). Recognized amounts of identifiable assets and liabilities as of the January 25, 2018 acquisition date (in thousands): Amounts Recognized as of Acquisition Date Cash $ 7,605 Customer receivables 8,832 Inventory 10,956 Other current assets 453 Property, plant, and equipment, net 1,266 Intangible assets 135,600 Other non-current assets 296 Total assets acquired $ 165,008 Accounts payable 3,418 Other current liabilities 4,592 Deferred income taxes 34,259 Other noncurrent liabilities 1,659 Total liabilities assumed $ 43,928 Net assets acquired $ 121,080 Purchase price $ 315,313 Less: Fair value of acquired identifiable assets and liabilities 121,080 Goodwill $ 194,233 |
Summary of Identifiable Intangible Assets and Their Estimated Useful Lives | The following table summarizes the estimated fair value of Muuto’s identifiable intangible assets and their estimated useful lives (in thousands): Fair Value as of January 25, 2018 Estimated Useful Life (in years) Indefinite-lived intangible assets: Trade name $ 66,000 Indefinite Finite-lived intangible assets: Wholesale customer relationships 35,800 15 Contract customer relationships 25,000 9 Copyrights & designs 7,500 7 Non-competition agreements 1,300 3 $ 135,600 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Information regarding the Company’s inventories is as follows (in thousands): September 30, 2018 December 31, 2017 Raw materials $ 64,525 $ 58,725 Work-in-process 7,925 6,943 Finished goods 97,970 79,277 $ 170,420 $ 144,945 |
PENSION AND OTHER POST-EMPLOY_2
PENSION AND OTHER POST-EMPLOYMENT BENEFITS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Pension and Other Postretirement Benefits Cost (Reversal of Cost) [Abstract] | |
Schedule of Components of the Net Periodic Benefit Income | The following tables set forth the components of the net periodic benefit cost (income) for the Company’s pension and other post-employment benefit plans (in thousands): Pension Benefits Other Benefits Three Months Ended September 30, Three Months Ended September 30, 2018 2017 2018 2017 Interest cost $ 2,612 $ 2,390 $ 30 $ 43 Expected return on plan assets (3,997 ) (4,615 ) — — Amortization of prior service credit — — (182 ) (371 ) Recognized actuarial loss (gain) 73 154 (18 ) 1 Pension settlement charge (1) 628 — — — Net periodic benefit income $ (684 ) $ (2,071 ) $ (170 ) $ (327 ) (1) The pension settlement charge was related to cash payments from lump sum elections. Pension Benefits Other Benefits Nine Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Interest cost $ 7,620 $ 7,170 $ 90 $ 129 Expected return on plan assets (13,209 ) (13,845 ) — — Amortization of prior service credit — — (546 ) (1,113 ) Recognized actuarial loss (gain) 805 462 (54 ) 3 Pension settlement charge (2) 5,236 — — — Net periodic benefit cost (income) $ 452 $ (6,213 ) $ (510 ) $ (981 ) (2) The pension settlement charge was related to the purchase of annuities for certain pension plan retirees as well as cash payments from lump sum elections. |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured 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 September 30, 2018 Fair Value as of December 31, 2017 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets: Interest rate swap $ — $ 2,655 $ — $ 2,655 $ — $ — $ — $ — Liabilities: Contingent purchase price payment - DatesWeiser $ — $ — $ 750 $ 750 $ — $ — $ 1,100 $ 1,100 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Liabilities at Fair Value | The following table illustrates the location and fair value of the Company’s interest rate swap at September 30, 2018 and December 31, 2017 (in thousands): Derivatives September 30, 2018 December 31, 2017 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Derivatives designated as hedging instruments Interest rate swap Other assets $ 2,655 n/a $ — Total derivatives designated as hedging instruments $ 2,655 $ — |
GOODWILL AND INTANGIBLES ASSE_2
GOODWILL AND INTANGIBLES ASSETS, NET (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Other Intangible Assets | Information regarding the Company’s other intangible assets are as follows (in thousands): September 30, 2018 December 31, 2017 Gross Accumulated Net Gross Accumulated Net Indefinite-lived intangible assets: Tradenames $ 287,073 $ — $ 287,073 $ 225,600 $ — $ 225,600 Finite-lived intangible assets: Customer relationships 79,266 (16,195 ) 63,071 22,497 (11,575 ) 10,922 Copyrights & design 7,022 (975 ) 6,047 — — — Various 13,314 (10,795 ) 2,519 12,088 (10,029 ) 2,059 Total $ 386,675 $ (27,965 ) $ 358,710 $ 260,185 $ (21,604 ) $ 238,581 |
Schedule of Expected Amortization of Finite-Lived Intangible Assets | The expected amortization expense based on the finite-lived intangible assets as of September 30, 2018 are as follows (in thousands): Estimated Amortization Remainder of 2018 $ 2,249 2019 8,959 2020 8,886 2021 8,369 2022 8,044 |
Schedule of Changes in the Carrying Amount of Goodwill | The changes in the carrying amount of goodwill by reportable segment are as follows (in thousands): Office Lifestyle Segment Total Balance as of December 31, 2017 $ 36,220 $ 105,893 $ 142,113 Foreign currency translation adjustment (210 ) (13,326 ) (13,536 ) Goodwill acquired — 194,508 194,508 Balance as of September 30, 2018 $ 36,010 $ 287,075 $ 323,085 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Other Current Liabilities | Information regarding the Company’s other current liabilities are as follows (in thousands): September 30, 2018 December 31, 2017 Accrued employee compensation $ 36,231 $ 41,144 Customer deposits 40,687 30,484 Warranty 9,598 9,174 Contingent payout 750 1,100 Other 27,055 22,243 Other current liabilities $ 114,321 $ 104,145 |
INDEBTEDNESS (Tables)
INDEBTEDNESS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Summary of Long-term Debt | The Company’s long-term debt is summarized as follows (in thousands): September 30, 2018 December 31, 2017 Balance of revolving credit facility $ 148,500 $ 27,000 Balance of term loan 336,211 165,000 Total debt 484,711 192,000 Less: current maturities of long-term debt 17,242 10,000 Less: deferred financing fees 4,394 952 Long-term debt, net $ 463,075 $ 181,048 |
Schedule of Maturities of Long-term Debt | The aggregate maturities of long-term debt are as follows: Future minimum debt payments 2018 $ 4,356 2019 17,239 2020 17,239 2021 17,239 2022 17,239 Thereafter 411,399 Total $ 484,711 |
CONTINGENT LIABILITIES AND CO_2
CONTINGENT LIABILITIES AND COMMITMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
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, 2017 $ 9,174 Provision for warranty claims 5,457 Warranties claims paid (5,668 ) Warranties acquired through business combinations 611 Foreign currency translation adjustment 24 Balance, September 30, 2018 $ 9,598 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Changes in Stockholders Equity and Noncontrolling Interest | The following table shows the change in equity attributable to Knoll, Inc. stockholders and noncontrolling interests during the nine months ended September 30, 2018 (in thousands): Common Additional Retained Accumulated Total Noncontrolling Interests Total Equity Balance at December 31, 2017 $ 493 $ 54,455 $ 347,304 $ (43,774 ) $ 358,478 $ 251 $ 358,729 Adoption of ASU 2018-02 — — 6,250 (6,250 ) — — — Net earnings — — 48,706 — 48,706 7 48,713 Other comprehensive income — — — (2,421 ) (2,421 ) — (2,421 ) Shares issued for consideration: Shares issued under stock incentive plan 4 (2 ) — — 2 — 2 Shares issued to Board of Directors in lieu of cash — 50 — — 50 — 50 Stock-based compensation, net of forfeitures — 6,738 — — 6,738 — 6,738 Cash dividend ($0.15 per share) — — (22,360 ) — (22,360 ) — (22,360 ) Purchase of common stock (2 ) (4,393 ) — — (4,395 ) — (4,395 ) Balance at September 30, 2018 $ 495 $ 56,848 $ 379,900 $ (52,445 ) $ 384,798 $ 258 $ 385,056 |
Summary of Stockholder Share Activity | The following table demonstrates the change in the number of shares of common stock outstanding during the nine months ended September 30, 2018 (excludes non-voting restricted shares): Shares outstanding as of December 31, 2017 48,497,942 Shares issued under stock incentive plan, net of awards surrendered to pay applicable taxes 194,641 Shares issued to Board of Directors in lieu of cash 2,370 Shares outstanding at September 30, 2018 48,694,953 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table summarizes the changes in accumulated other comprehensive income (loss) net of tax by component for the nine months ended September 30, 2018 (in thousands): Unrealized gains (losses) on Interest Rate Swaps Foreign Pension and Total Balance, as of December 31, 2017 $ — $ (5,487 ) $ (38,287 ) $ (43,774 ) Adoption of ASU 2018-02 — — (6,250 ) (6,250 ) Other comprehensive income before reclassifications 1,964 (13,447 ) 5,036 (6,447 ) Amounts reclassified from accumulated other comprehensive loss — — 4,026 4,026 Net current-period other comprehensive income 1,964 (13,447 ) 9,062 (2,421 ) Balance, as of September 30, 2018 $ 1,964 $ (18,934 ) $ (35,475 ) $ (52,445 ) |
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 Nine Months Ended September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017 Amortization of pension and other post-employment liability adjustments Prior service credits (1) $ (182 ) $ (371 ) $ (546 ) $ (1,113 ) Actuarial losses (1) 55 155 751 465 Loss recognized during settlement 628 — 5,236 — Total before tax 501 (216 ) 5,441 (648 ) Tax (benefit) expense (158 ) 77 (1,415 ) 234 Net of tax $ 343 $ (139 ) $ 4,026 $ (414 ) (1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension costs, and are included in Other income, net within the Condensed Consolidated Statements of Operations and Comprehensive Income. See Note 5 for additional information. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
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 September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Numerator: Net earnings attributable to Knoll, Inc. stockholders $ 20,323 $ 19,132 $ 48,706 $ 47,470 Denominator: Basic earnings per share - weighted-average shares 48,694 48,468 48,642 48,407 Effect of dilutive securities: Potentially dilutive shares resulting from stock plans 537 511 548 761 Diluted earnings per share - weighted-average shares 49,231 48,979 49,190 49,168 Antidilutive equity awards not included in weighted-average common shares—diluted 1 34 — 15 Net earnings per common share attributable to Knoll, Inc. stockholders: Basic $ 0.42 $ 0.39 $ 1.00 $ 0.98 Diluted $ 0.41 $ 0.39 $ 0.99 $ 0.96 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information with Corporate Costs Excluded | The tables below present the Company’s reportable segment information with Corporate costs excluded from segment results. Prior year amounts have been recast to conform to the current presentation (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 SALES Office $ 197,682 $ 192,308 $ 570,047 $ 512,905 Lifestyle 130,055 98,948 377,600 303,865 Knoll, Inc. $ 327,737 $ 291,256 $ 947,647 $ 816,770 INTERSEGMENT SALES (1) Office $ 449 $ 332 $ 1,458 $ 1,056 Lifestyle 2,566 2,830 7,970 8,021 Knoll, Inc. $ 3,015 $ 3,162 $ 9,428 $ 9,077 OPERATING PROFIT Office (2) $ 15,894 $ 15,802 $ 35,076 $ 29,441 Lifestyle 22,294 17,578 63,435 56,574 Corporate (3) (5,268 ) (5,653 ) (18,319 ) (17,820 ) Knoll, Inc. (4) $ 32,920 $ 27,727 $ 80,192 $ 68,195 _______________________________________________________________________________ (1) Intersegment sales are presented on a cost-plus basis which takes into consideration the effect of transfer prices between legal entities. (2) Knoll recorded restructuring charges of $1.2 million and $2.6 million during the three and nine months ended September 30, 2018 and $2.2 million of restructuring charges for the nine months ended September 30, 2017 within the Office segment related to an organizational realignment that will result in greater operating efficiency and control in 2018 and related to headcount rationalization and modernization of equipment in the Office segment in 2017. (3) Knoll recorded acquisition costs of $0.1 million and $1.6 million related to the acquisition of Muuto within the Corporate segment during the three and nine months ended September 30, 2018 . (4) The Company does not allocate interest expense or other income, net to the reportable segments. |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Selling, general and administrative | $ (88,674) | $ (78,883) | $ (267,036) | $ (231,897) | |
Other income, net | (227) | (1,583) | (7,021) | (5,943) | |
Accumulated other comprehensive income | 52,445 | 52,445 | $ 43,774 | ||
Retained earnings | $ 379,900 | $ 379,900 | 347,304 | ||
ASU 2018-02 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Accumulated other comprehensive income | 6,300 | ||||
Retained earnings | $ 6,300 | ||||
ASU 2017-07 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Selling, general and administrative | 2,400 | 7,200 | |||
Other income, net | $ 2,400 | $ 4,800 |
REVENUE - Net Sales by Product
REVENUE - Net Sales by Product Category (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue from External Customer [Line Items] | ||||
Total Sales | $ 327,737 | $ 291,256 | $ 947,647 | $ 816,770 |
Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 197,682 | 192,308 | 570,047 | 512,905 |
Lifestyle Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 130,055 | 98,948 | 377,600 | 303,865 |
Office Systems | Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 111,239 | 109,195 | 318,717 | 303,902 |
Seating | Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 29,694 | 33,056 | 93,122 | 85,911 |
Files and Storage | Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 23,940 | 22,956 | 67,232 | 62,089 |
Ancillary | Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 24,631 | 18,380 | 64,537 | 38,044 |
Other | Office Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 8,178 | 8,721 | 26,439 | 22,959 |
Studio | Lifestyle Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | 101,374 | 72,046 | 293,748 | 221,435 |
Coverings | Lifestyle Segment | ||||
Revenue from External Customer [Line Items] | ||||
Total Sales | $ 28,681 | $ 26,902 | $ 83,852 | $ 82,430 |
REVENUE - Contract Balances (De
REVENUE - Contract Balances (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Revenue from Contract with Customer [Abstract] | |||
Contract liability, customer deposits | $ 40.6 | $ 40.6 | $ 30.5 |
Revenue recognized that was included in the contract liability balance | $ 29 | $ 85 |
ACQUISITION - Narrative (Detail
ACQUISITION - Narrative (Details) - USD ($) $ in Thousands | Jan. 25, 2018 | Sep. 30, 2018 | Sep. 30, 2017 |
Business Acquisition [Line Items] | |||
Aggregate purchase price | $ 307,983 | $ 0 | |
Muuto Acquisition | |||
Business Acquisition [Line Items] | |||
Percentage of voting interests acquired | 100.00% | ||
Aggregate purchase price | $ 307,800 | ||
Cash acquired from acquisition | $ 7,600 | ||
Muuto Acquisition | Selling, General and Administrative Expenses | |||
Business Acquisition [Line Items] | |||
Acquisition costs | $ 1,600 |
ACQUISITION - Sales and Net Los
ACQUISITION - Sales and Net Loss from Acquisition (Details) - Muuto Acquisition - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Business Acquisition [Line Items] | ||
Sales | $ 22,537 | $ 58,728 |
Net loss attributable to Knoll, Inc. stockholders | $ (87) | $ (2,192) |
ACQUISITION - Summary of Prelim
ACQUISITION - Summary of Preliminary Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Jan. 25, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 323,085 | $ 142,113 | |
Muuto Acquisition | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Cash | $ 7,605 | ||
Customer receivables | 8,832 | ||
Inventory | 10,956 | ||
Other current assets | 453 | ||
Property, plant, and equipment, net | 1,266 | ||
Intangible assets | 135,600 | ||
Other non-current assets | 296 | ||
Total assets acquired | 165,008 | ||
Accounts payable | 3,418 | ||
Other current liabilities | 4,592 | ||
Deferred income taxes | 34,259 | ||
Other noncurrent liabilities | 1,659 | ||
Total liabilities assumed | 43,928 | ||
Net assets acquired | 121,080 | ||
Purchase price | 315,313 | ||
Goodwill | $ 194,233 | ||
Measurement period adjustment, inventory valuation | 4,000 | ||
Measurement period adjustment, future compensation payments | 3,400 | ||
Measurement period adjustment, deferred tax liabilities, noncurrent | 4,500 | ||
Measurement period adjustment, valuation of intangibles | $ 4,300 |
ACQUISITION - Summary of Fair V
ACQUISITION - Summary of Fair Value of Identifiable Intangible Assets and Their Estimated Useful Lives (Details) - Muuto Acquisition $ in Thousands | Jan. 25, 2018USD ($) |
Finite Lived Intangible Asset [Abstract] | |
Finite-lived intangibles assets | $ 135,600 |
Wholesale customer relationships | |
Finite Lived Intangible Asset [Abstract] | |
Finite-lived intangibles assets | $ 35,800 |
Estimated Useful Life (in years) | 15 years |
Contract customer relationships | |
Finite Lived Intangible Asset [Abstract] | |
Finite-lived intangibles assets | $ 25,000 |
Estimated Useful Life (in years) | 9 years |
Copyrights & designs | |
Finite Lived Intangible Asset [Abstract] | |
Finite-lived intangibles assets | $ 7,500 |
Estimated Useful Life (in years) | 7 years |
Non-competition agreements | |
Finite Lived Intangible Asset [Abstract] | |
Finite-lived intangibles assets | $ 1,300 |
Estimated Useful Life (in years) | 3 years |
Trade name | |
Indefinite-lived intangible assets: | |
Indefinite-lived intangible assets | $ 66,000 |
ACQUISITION - Pro Forma Informa
ACQUISITION - Pro Forma Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Business Acquisition [Line Items] | ||||
Loss on extinguishment of debt | $ 1,445 | $ 0 | ||
Pro forma adjustment, inventory valuation | $ 204,943 | $ 184,646 | 597,855 | 514,528 |
Incremental interest expense | 5,032 | 1,991 | 15,812 | 5,521 |
Amortization of intangible assets | 2,200 | 800 | 6,300 | 1,600 |
Tax impact of nonrecurring adjustments | $ 7,164 | $ 8,158 | 17,452 | 21,104 |
Muuto Acquisition | ||||
Business Acquisition [Line Items] | ||||
Pro forma sales | 951,795 | 863,725 | ||
Pro forma net earnings attributable to Knoll, Inc. stockholders | 53,693 | 47,282 | ||
Incremental interest expense | 900 | 2,900 | ||
Amortization of intangible assets | 100 | 5,000 | ||
Tax impact of nonrecurring adjustments | 1,100 | 3,800 | ||
Muuto Acquisition | Acquisition-related Costs | ||||
Business Acquisition [Line Items] | ||||
Compensation for post combination service | 2,300 | 2,600 | ||
Loss on extinguishment of debt | 1,400 | 1,400 | ||
Pro forma adjustment, acquisition costs | 1,600 | |||
Muuto Acquisition | Fair Value Adjustment to Inventory | ||||
Business Acquisition [Line Items] | ||||
Pro forma adjustment, inventory valuation | $ 900 | $ 900 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 64,525 | $ 58,725 |
Work-in-process | 7,925 | 6,943 |
Finished goods | 97,970 | 79,277 |
Inventories, net | $ 170,420 | $ 144,945 |
PENSION AND OTHER POST-EMPLOY_3
PENSION AND OTHER POST-EMPLOYMENT BENEFITS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Change in Assumptions for Defined Benefit Plans | ||||
PENSIONS AND OTHER POSTRETIREMENT BENEFITS | ||||
Reduction to pension liability | $ (6,400) | $ (6,400) | ||
Pension Benefits | ||||
PENSIONS AND OTHER POSTRETIREMENT BENEFITS | ||||
Interest cost | 2,612 | $ 2,390 | 7,620 | $ 7,170 |
Expected return on plan assets | (3,997) | (4,615) | (13,209) | (13,845) |
Amortization of prior service credit | 0 | 0 | 0 | 0 |
Recognized actuarial loss (gain) | 73 | 154 | 805 | 462 |
Pension settlement charge | 628 | 0 | 5,236 | 0 |
Net periodic benefit cost (income) | (684) | (2,071) | 452 | (6,213) |
Other Benefits | ||||
PENSIONS AND OTHER POSTRETIREMENT BENEFITS | ||||
Interest cost | 30 | 43 | 90 | 129 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Amortization of prior service credit | (182) | (371) | (546) | (1,113) |
Recognized actuarial loss (gain) | (18) | 1 | (54) | 3 |
Pension settlement charge | 0 | 0 | 0 | 0 |
Net periodic benefit cost (income) | (170) | $ (327) | (510) | $ (981) |
Qualified Plan | ||||
PENSIONS AND OTHER POSTRETIREMENT BENEFITS | ||||
Voluntary contribution to U.S. pension plan for Union Employees | $ 7,900 | $ 7,900 |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Fair Value, Measurements, Recurring | DatesWeiser | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of contingent purchase price payment | $ 750 | $ 1,100 |
Fair Value, Measurements, Recurring | Level 1 | DatesWeiser | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of contingent purchase price payment | 0 | 0 |
Fair Value, Measurements, Recurring | Level 2 | DatesWeiser | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of contingent purchase price payment | 0 | 0 |
Fair Value, Measurements, Recurring | Level 3 | DatesWeiser | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of contingent purchase price payment | $ 750 | 1,100 |
Interest Rate Swap | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap maturity | 5 years | |
Interest Rate Swap | Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap | $ 2,655 | 0 |
Interest Rate Swap | Fair Value, Measurements, Recurring | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap | 0 | 0 |
Interest Rate Swap | Fair Value, Measurements, Recurring | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap | 2,655 | 0 |
Interest Rate Swap | Fair Value, Measurements, Recurring | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap | $ 0 | $ 0 |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Designated as Hedging Instrument | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate swap | $ 2,655 | $ 0 |
Interest Rate Swap | ||
Derivatives, Fair Value [Line Items] | ||
Aggregate notional amount | $ 300,000 | |
Contract rate | 2.63% | |
Interest Rate Swap | Designated as Hedging Instrument | Other assets | ||
Derivatives, Fair Value [Line Items] | ||
Interest rate swap | $ 2,655 | $ 0 |
GOODWILL AND INTANGIBLES ASSE_3
GOODWILL AND INTANGIBLES ASSETS, NET - Schedule of Other Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Finite-lived intangible assets: | |||||
Accumulated Amortization | $ (27,965) | $ (27,965) | $ (21,604) | ||
Total Intangible Assets | |||||
Gross Amount Total | 386,675 | 386,675 | 260,185 | ||
Net Amount | 358,710 | 358,710 | 238,581 | ||
Amortization related to finite-lived intangible assets | 2,200 | $ 800 | 6,300 | $ 1,600 | |
Customer relationships | |||||
Finite-lived intangible assets: | |||||
Gross Amount | 79,266 | 79,266 | 22,497 | ||
Accumulated Amortization | (16,195) | (16,195) | (11,575) | ||
Net Amount | 63,071 | 63,071 | 10,922 | ||
Copyrights & designs | |||||
Finite-lived intangible assets: | |||||
Gross Amount | 7,022 | 7,022 | 0 | ||
Accumulated Amortization | (975) | (975) | 0 | ||
Net Amount | 6,047 | 6,047 | 0 | ||
Various | |||||
Finite-lived intangible assets: | |||||
Gross Amount | 13,314 | 13,314 | 12,088 | ||
Accumulated Amortization | (10,795) | (10,795) | (10,029) | ||
Net Amount | 2,519 | 2,519 | 2,059 | ||
Tradenames | |||||
Indefinite-lived intangible assets: | |||||
Indefinite-lived intangible assets | $ 287,073 | $ 287,073 | $ 225,600 |
GOODWILL AND INTANGIBLES ASSE_4
GOODWILL AND INTANGIBLES ASSETS, NET - Schedule of Expected Amortization of Finite-Lived Intangible Assets (Details) $ in Thousands | Sep. 30, 2018USD ($) |
Estimated Amortization | |
Remainder of 2018 | $ 2,249 |
2,019 | 8,959 |
2,020 | 8,886 |
2,021 | 8,369 |
2,022 | $ 8,044 |
GOODWILL AND INTANGIBLES ASSE_5
GOODWILL AND INTANGIBLES ASSETS, NET - Changes in the Carrying Amount of Goodwill by Reportable Segment (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Goodwill [Roll Forward] | |
Balance at beginning of period | $ 142,113 |
Foreign currency translation adjustment | (13,536) |
Goodwill acquired | 194,508 |
Balance at end of period | 323,085 |
Office Segment | |
Goodwill [Roll Forward] | |
Balance at beginning of period | 36,220 |
Foreign currency translation adjustment | (210) |
Goodwill acquired | 0 |
Balance at end of period | 36,010 |
Lifestyle Segment | |
Goodwill [Roll Forward] | |
Balance at beginning of period | 105,893 |
Foreign currency translation adjustment | (13,326) |
Goodwill acquired | 194,508 |
Balance at end of period | $ 287,075 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Other Liabilities Disclosure [Abstract] | ||
Accrued employee compensation | $ 36,231 | $ 41,144 |
Customer deposits | 40,687 | 30,484 |
Warranty | 9,598 | 9,174 |
Contingent payout | 750 | 1,100 |
Other | 27,055 | 22,243 |
Other current liabilities | $ 114,321 | $ 104,145 |
INDEBTEDNESS - Schedule of Long
INDEBTEDNESS - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Long-term debt | ||
Total debt | $ 484,711 | $ 192,000 |
Less: current maturities of long-term debt | 17,242 | 10,000 |
Less: deferred financing fees | 4,394 | 952 |
Long-term debt, net | 463,075 | 181,048 |
Revolving credit facility | ||
Long-term debt | ||
Total debt | 148,500 | 27,000 |
Term loan | ||
Long-term debt | ||
Total debt | $ 336,211 | $ 165,000 |
INDEBTEDNESS - Narrative (Detai
INDEBTEDNESS - Narrative (Details) | Jan. 23, 2018USD ($) | Sep. 30, 2018USD ($) | Jan. 23, 2018EUR (€) |
Long-term debt | |||
Borrowing capacity available increase, percent of EBITDA | 90.00% | 90.00% | |
Debt issuance costs | $ 400,000 | ||
Write off of deferred debt issuance cost | $ 1,000,000 | ||
Amended Credit Agreement | |||
Long-term debt | |||
Credit facility borrowing capacity | $ 750,000,000 | ||
Term | 5 years | ||
Borrowing capacity available increase | $ 250,000,000 | ||
Debt issuance costs | $ 4,500,000 | ||
Amended Credit Agreement | Federal Funds Effective Swap Rate | |||
Long-term debt | |||
Basis spread on variable rate (as percent) | 0.50% | ||
Amended Credit Agreement | Eurodollar | |||
Long-term debt | |||
Basis spread on variable rate (as percent) | 1.00% | ||
Amended Credit Agreement | Credit Facility | |||
Long-term debt | |||
Credit facility borrowing capacity | $ 400,000,000 | ||
Amended Credit Agreement | Term loan | |||
Long-term debt | |||
Debt face amount | $ 250,000,000 | ||
Quarterly payment, percent annum | 5.00% | ||
Amended Credit Agreement | Multicurrency Term Loan | |||
Long-term debt | |||
Debt face amount | € | € 81,700,000 |
INDEBTEDNESS - Aggregate Maturi
INDEBTEDNESS - Aggregate Maturities of Long-term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
2,018 | $ 4,356 | |
2,019 | 17,239 | |
2,020 | 17,239 | |
2,021 | 17,239 | |
2,022 | 17,239 | |
Thereafter | 411,399 | |
Total | $ 484,711 | $ 192,000 |
CONTINGENT LIABILITIES AND CO_3
CONTINGENT LIABILITIES AND COMMITMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Changes in warranty reserve | ||||
Balance, December 31, 2017 | $ 9,174 | |||
Provision for warranty claims | $ 1,600 | $ 1,700 | 5,457 | $ 4,600 |
Warranties claims paid | (5,668) | |||
Warranties acquired through business combinations | 611 | |||
Foreign currency translation adjustment | 24 | |||
Balance, September 30, 2018 | $ 9,598 | $ 9,598 |
EQUITY - Schedule of Changes in
EQUITY - Schedule of Changes in Stockholders Equity and Noncontrolling Interest (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 01, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | $ 358,729 | $ 358,729 | |||
Net earnings | $ 20,323 | $ 19,161 | 48,713 | $ 47,513 | |
Other comprehensive income | 538 | $ 5,737 | (2,421) | $ 8,262 | |
Shares issued under stock incentive plan | 2 | ||||
Shares issued to Board of Directors in lieu of cash | 50 | ||||
Stock-based compensation, net of forfeitures | 6,738 | ||||
Cash dividend ($0.15 per share) | (22,360) | ||||
Purchase of common stock (in shares) | (4,395) | ||||
Ending Balance | 385,056 | $ 385,056 | |||
Cash dividend (in dollars per share) | $ 0.15 | ||||
Common Stock | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | 493 | $ 493 | |||
Shares issued under stock incentive plan | 4 | ||||
Purchase of common stock (in shares) | (2) | ||||
Ending Balance | 495 | 495 | |||
Additional Paid-In Capital | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | 54,455 | 54,455 | |||
Shares issued under stock incentive plan | (2) | ||||
Shares issued to Board of Directors in lieu of cash | 50 | ||||
Stock-based compensation, net of forfeitures | 6,738 | ||||
Purchase of common stock (in shares) | (4,393) | ||||
Ending Balance | 56,848 | 56,848 | |||
Retained Earnings | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | 347,304 | 347,304 | |||
Net earnings | 48,706 | ||||
Other comprehensive income | 0 | ||||
Cash dividend ($0.15 per share) | (22,360) | ||||
Ending Balance | 379,900 | 379,900 | |||
Accumulated Other Comprehensive (Loss) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | (43,774) | (43,774) | |||
Other comprehensive income | (2,421) | ||||
Ending Balance | (52,445) | (52,445) | |||
Total Knoll, Inc. Stockholders' Equity | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | 358,478 | 358,478 | |||
Net earnings | 48,706 | ||||
Other comprehensive income | (2,421) | ||||
Shares issued under stock incentive plan | 2 | ||||
Shares issued to Board of Directors in lieu of cash | 50 | ||||
Stock-based compensation, net of forfeitures | 6,738 | ||||
Cash dividend ($0.15 per share) | (22,360) | ||||
Purchase of common stock (in shares) | (4,395) | ||||
Ending Balance | 384,798 | 384,798 | |||
Noncontrolling Interests | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Beginning Balance | 251 | 251 | |||
Net earnings | 7 | ||||
Ending Balance | $ 258 | $ 258 | |||
ASU 2018-02 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Adoption of ASU 2018-02 | (6,250) | ||||
ASU 2018-02 | Retained Earnings | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Adoption of ASU 2018-02 | 6,250 | ||||
ASU 2018-02 | Accumulated Other Comprehensive (Loss) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Adoption of ASU 2018-02 | $ (6,250) |
EQUITY - Summary of Stockholder
EQUITY - Summary of Stockholder Share Activity (Details) | 9 Months Ended |
Sep. 30, 2018shares | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |
Shares outstanding as of December 31, 2017 | 48,497,942 |
Shares issued under stock incentive plan, net of awards surrendered to pay applicable taxes | 194,641 |
Shares issued to Board of Directors in lieu of cash | 2,370 |
Shares outstanding at September 30, 2018 | 48,694,953 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Summary of Changes by Component (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Sep. 30, 2018 |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning Balance | $ (43,774) | $ (43,774) |
Other comprehensive income before reclassifications | (6,447) | |
Amounts reclassified from accumulated other comprehensive loss | 4,026 | |
Net of tax | (2,421) | |
Ending Balance | (52,445) | |
Unrealized gains (losses) on Interest Rate Swaps | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning Balance | 0 | 0 |
Other comprehensive income before reclassifications | 1,964 | |
Amounts reclassified from accumulated other comprehensive loss | 0 | |
Net of tax | 1,964 | |
Ending Balance | 1,964 | |
Foreign Currency Translation Adjustment | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning Balance | (5,487) | (5,487) |
Other comprehensive income before reclassifications | (13,447) | |
Amounts reclassified from accumulated other comprehensive loss | 0 | |
Net of tax | (13,447) | |
Ending Balance | (18,934) | |
Pension and Other Post-Employment Liability Adjustment | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning Balance | (38,287) | (38,287) |
Other comprehensive income before reclassifications | 5,036 | |
Amounts reclassified from accumulated other comprehensive loss | 4,026 | |
Net of tax | 9,062 | |
Ending Balance | $ (35,475) | |
ASU 2018-02 | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Adoption of ASU 2018-02 | $ (6,250) |
ACCUMULATED OTHER COMPREHENSI_4
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Reclassifications (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Tax (benefit) expense | $ (7,164) | $ (8,158) | $ (17,452) | $ (21,104) |
Net of tax | 4,026 | |||
Reclassification out of Accumulated Other Comprehensive Income [Member] | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Prior service credits | (182) | (371) | (546) | (1,113) |
Actuarial losses | 55 | 155 | 751 | 465 |
Loss recognized during settlement | 628 | 0 | 5,236 | 0 |
Total before tax | 501 | (216) | 5,441 | (648) |
Tax (benefit) expense | (158) | 77 | (1,415) | 234 |
Net of tax | $ 343 | $ (139) | $ 4,026 | $ (414) |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Numerator: | ||||
Net earnings attributable to Knoll, Inc. stockholders | $ 20,323 | $ 19,132 | $ 48,706 | $ 47,470 |
Denominator: | ||||
Basic earnings per share - weighted-average shares (in shares) | 48,694,438 | 48,468,480 | 48,641,595 | 48,406,659 |
Potentially dilutive shares resulting from stock plans (in shares) | 537,000 | 511,000 | 548,000 | 761,000 |
Diluted earnings per share - weighted-average shares (in shares) | 49,231,376 | 48,979,182 | 49,189,592 | 49,167,856 |
Antidilutive equity awards not included in weighted-average common shares—diluted (in shares) | 1,000 | 34,000 | 0 | 15,000 |
Net earnings per common share attributable to Knoll, Inc. stockholders: | ||||
Basic (in dollars per share) | $ 0.42 | $ 0.39 | $ 1 | $ 0.98 |
Diluted (in dollars per share) | $ 0.41 | $ 0.39 | $ 0.99 | $ 0.96 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
Effective tax rate | 26.40% | 30.80% | |
Unrecognized tax benefits, which would reduce the effective tax rate if recognized | $ 0.9 | $ 0.9 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Financial information of segments | ||||
SALES | $ 327,737 | $ 291,256 | $ 947,647 | $ 816,770 |
OPERATING PROFIT | 32,920 | 27,727 | 80,192 | 68,195 |
Operating Segments | ||||
Financial information of segments | ||||
SALES | 327,737 | 291,256 | 947,647 | 816,770 |
INTERSEGMENT SALES | 3,015 | 3,162 | 9,428 | 9,077 |
Corporate | ||||
Financial information of segments | ||||
OPERATING PROFIT | (5,268) | (5,653) | (18,319) | (17,820) |
Acquisition costs | 100 | 1,600 | ||
Office | ||||
Financial information of segments | ||||
SALES | 197,682 | 192,308 | 570,047 | 512,905 |
Restructuring charges | 1,200 | 2,600 | 2,200 | |
Office | Operating Segments | ||||
Financial information of segments | ||||
SALES | 197,682 | 192,308 | 570,047 | 512,905 |
INTERSEGMENT SALES | 449 | 332 | 1,458 | 1,056 |
OPERATING PROFIT | 15,894 | 15,802 | 35,076 | 29,441 |
Lifestyle | Operating Segments | ||||
Financial information of segments | ||||
SALES | 130,055 | 98,948 | 377,600 | 303,865 |
INTERSEGMENT SALES | 2,566 | 2,830 | 7,970 | 8,021 |
OPERATING PROFIT | $ 22,294 | $ 17,578 | $ 63,435 | $ 56,574 |