UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
November 10, 2004
Via U.S. Mail and Facsimile
Patrick A. Milberger, Esq.
Senior Vice President
Knoll, Inc.
1235 Water Street
East Greenville, PA 18041
Re: Knoll, Inc.
First Amendment to Registration Statement on Form S-1
File No. 333-118901
Filed October 22, 2004
Dear Mr. Milberger:
We have reviewed your filing and have the following comments.
Please
note that we have limited our review to transactional matters.
Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is to
assist
you in your compliance with the applicable disclosure requirements
and to enhance the overall disclosure in your filing. We look
forward to working with you in these respects. We welcome any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note your responses to comments 2-4 in your October 22
letter.
We remind you that we may have additional comments based on this
information.
Prospectus summary, page 1
2. It appears to us that you should balance your disclosures
related
to debt reductions during the period 2001 to 2003 to also disclose
the increase in debt during 2004. In addition, we were unable to
reconcile the amount of the debt reduction you disclose with the
disclosures under Selected Financial Data.
3. We reiterate portions of prior comments 5 and 10. Your summary
is
lengthy and focuses substantially on positive aspects of your
strengths and strategies with little notice given to potentially
negative or risky factors. For example, you repeat paragraphs of
positive information that are contained in your Business section,
but
only cross-reference a single relevant risk factor. You discuss
your
recent results and the fact that your industry has suffered a
sales
decline, but you do not discuss your historical results to
illustrate
how your company has been affected by this decline. Please review
and revise your summary to present relevant balancing information
with equal prominence to the favorable information you include.
Risk factors, page 10
4. The following risk factor discussions appear generic or
repetitive, or appear to be speculative at this time:
* Our product sales are tied to macroeconomic factors ... page 10
o Note also that this risk is unclear because you state that the
industry appears to be recovering from economic factors at this
time.
* Because we face significant competition ... page 10
* Our strategy to achieve growth ... page 10
* We may not be able to manage our business ... page 11
o Note also that this risk is unclear because you state that you
have
employment agreemenst with key executives and you are not aware of
any planned departures.
* An interruption of manufacturing operations ... page 14
o This disclosure does not clearly express the risk that your
manufacturing operations would be interrupted. It only discusses
the
consequences of an interruption and is therefore somewhat
speculative.
* We may incur expenses for product defects ... page 15
o This disclosure does not express the risk that your liability
for
product defects would exceed your insurance coverage or the risk
that
you would have a large number of defective products. It only
discusses the consequences to you if either of these hypothetical
circumstances came to pass and is therefore somewhat speculative.
* Changes in regulatory requirements and industry standards ...
page
15
* Economic, political and other risks ... page 15
o To give readers a more meaningful sense of this risk, please
briefly describe where you do business internationally.
* We may not be able to pay dividends ... page 18
o It is unclear why a failure to pay dividends is a factor that
makes
this offering speculative or risky.
Please revise them to clearly and succinctly describe the risk, or
relocate these disclosures to another part of the prospectus.
5. Please review and revise your risk factors to avoid generic
conclusions that the risk would have a material adverse effect on
your business.
We are highly leveraged, and ..., page 12
6. Please state clearly the maximum amount of additional debt you
can
incur.
Management`s discussion and analysis of financial condition, page
24
Overview, page 24
7. We note your responses to prior comments 19 and 22. Based on
the
significant impact that raw material price increases had on
interim
results, it appears to us that in your Overview you should address
the risks of additional price increases of raw materials and the
pricing pressures you face, including your expectations regarding
the
impact of current trends.
Critical accounting policies, page 25
8. We note your revised disclosures in response to prior comment
16.
Under SFAS 142, the approach and assumptions used in testing
goodwill
and trademarks, an indefinite-lived intangible asset, for
impairment
should not be the same. Please revise your disclosures to discuss
the method and specific assumptions used to evaluate whether
trademarks are impaired. Refer to paragraphs 17, 23-25 and B62-
B66
of SFAS 142 for guidance.
Results of operations, page 31
9. We repeat comment 17 from our October 8 letter. Expand your
MD&A
to provide context for the reader to understand each change in
results in the current period versus the prior period. Provide a
context within which a reader can discern the importance of each
reason for each material change in a line item. For example,
please
discuss why your sales increased in the most recent quarter, why
your
office systems sales decreased, why your seating sales increased,
etc.
Liquidity and capital resources, page 33
10. We note your response to prior comment 25. Please revise your
disclosures to provide a comprehensive discussion of your
liquidity
position as of September 30, 2004. Please refer to Item 303(B)(1)
of
Regulation S-K.
Contractual obligations, page 35
11. Please revise the totals in your tabular presentation so that
they are accurate. None of the totals appears to be accurate.
Business, page 39
12. In connection with your response to comment 31 in your October
22
letter, please disclose the market share that you believe you have
in
the context of your statement that you are a "leading" designer
and
manufacturer of office furniture products. This appears to be the
only concrete measure by which you have made this determination.
It
is unclear why items such as design excellence, a collaborative
culture, and lean, agile operating structures would necessarily
render you "leading," from an investor`s point of view, in your
industry.
13. Please discuss in more detail the increasing materials prices
trend you are facing.
14. We note your response to prior comment 34. We believe that
since
you have identified risks in obtaining raw materials that relate
to
the fact that you obtain them from overseas, you must identify the
primary countries from which you procure these materials so that
investors can assess the magnitude of this risk. If instead you
believe that the ability to source materials from various
locations
worldwide makes the fact that you obtain materials from overseas
an
immaterial risk, then you should delete that risk factor.
Management, page 56
15. Please name all the directorships that members of management
hold
in other public companies. For example, please add disclosure
about
the positions Mssrs. Kruse and Lee hold with the Polypore Inc.
family
of companies.
Underwriting, page 78
16. Please add to the document your response to comment 44 in your
October 22 letter.
Knoll, Inc. consolidated financial statements for the year ended
December 31, 2003
11. Contingent liabilities and commitments
17. We note your response to prior comments 56 and 57 and your
revised disclosures. For legal claims and environmental matters,
we
note that you do not "expect" them to have a material adverse
effect
on your financial position, results of operations, or cash flows.
Please tell us whether your use of the phrase "do not expect" is
an
expression of your personal opinion regarding the merits of the
claims against you or an expression of the probability of a
material
adverse effect. Please clarify your disclosure regarding whether
management believes these claims and matters are remote,
reasonably
possible, or probable. Furthermore, please confirm to us that
reasonably possible losses in excess of amounts already recognized
for lawsuits, claims or proceedings, and environmental matters,
individually and in the aggregate, are not material. Otherwise,
please include the required disclosures under SFAS 5 and SAB Topic
5:Y.
18. We note your response to prior comment 58. Please revise your
disclosures in the annual and interim financial statements to
provide
the information required by paragraph 14.b. of FIN 45, or disclose
that changes in reserves to pre-existing warranties were not
material
in each period.
19. Segment and geographic region information
19. We note your response to prior comment 62. Please confirm to
us
that operating income by geographic location is not available and
is
not provided to your CODM.
20. We note your response to prior comment 63. Paragraph 36 of
SFAS
131 states that the information required by paragraph 37 of SFAS
131
applies to all enterprises subject to SFAS 131, including those
that
have one reportable segment. It continues to appear to us that
office systems, seating, files and storage, desks, and casegoods
are
different product lines that require separate sales disclosure
regardless of whether you operate your business by product line.
Knoll, Inc. consolidated financial statements for the nine months
ended September 30, 2004
Note 9. Stock plans
21. We note your responses to prior comments 61 and 64. Please
tell
us the following information regarding your determination of the
fair
value of your common stock as of December 31, 2003, March 31, 2004
and June 30, 2004:
* Why the fair value of your common stock declined in 2003 and
2004.
* The material assumptions used in the market and income
approaches.
Please confirm that these assumptions are consistent with the
assumptions used to estimate whether goodwill was impaired. If
different assumptions were used, please advise as to the
differences
and explain why it was reasonable to use different assumptions.
* The anticipated offering price or range.
* Whether Murray Devine & Co., Inc. performed a valuation as of
September 30, 2004. If they did, tell us the estimated fair value
of
your common stock on that date, and tell us if the valuation was
performed using the same approaches and assumptions that were
previously used. If different approaches and/or assumptions were
used, explain the reasons for the differences.
Closing comments
As appropriate, please amend your registration statement in
response
to these comments. You may wish to provide us with marked copies
of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy
of the disclosure in the filings reviewed by the staff to be
certain
that they have provided all information investors require for an
informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in connection with our review of your filing
or
in response to our comments on your filing.
We will consider a written request for acceleration of the
effective
date of the registration statement as a confirmation of the fact
that
those requesting acceleration are aware of their respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Tracey Houser at (202) 824-1989 or Anne McConnell
at
(202) 942-1795 if you have questions regarding comments on the
financial statements and related matters. Please contact Amanda
Gordon at (202) 942-1945 with any other questions.
Sincerely,
Pamela Long
Assistant Director
cc: Michael A. Schwartz, Esq., Willkie Farr & Gallagher LLP
Knoll, Inc.
October 8, 2004
Page 8