UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2020~~March 31, 2021


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

For the transition period from to

Commission File No. 001-12907


KNOLL, INC.

Exact name of registrant as specified in its charter


Delaware						13-3873847
State or other jurisdiction of incorporation or organization						I.R.S. Employer Identification No.


1235 Water Street
East Greenville	PA	18041
Address of principal executive offices		Zip Code

(215) 679-7991

Registrant’s telephone number, including are code

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

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.01 per share

KNL

New York Stock Exchange

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☒

As of ~~November 4, 2020,~~May 6, 2021, there were ~~50,682,053~~50,812,680 shares (including ~~1,542,698~~1,424,739 restricted shares) of the Registrant’s common stock, par value $0.01 per share, outstanding.

KNOLL, INC.

TABLE OF CONTENTS FOR FORM 10-Q


Item	Item		Page	Item		Page

PART I — FINANCIAL INFORMATION	PART I — FINANCIAL INFORMATION			PART I — FINANCIAL INFORMATION

1.	1.	Condensed Consolidated Financial Statements:		1.	Condensed Consolidated Financial Statements:
		Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3		Condensed Consolidated Balance Sheets as of March 31, 202 1 and December 31, 2020	3
		Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2020 and 2019	4		Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2021 and 2020	4
		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	5		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	5
		Notes to the Condensed Consolidated Financial Statements	6		Notes to the Condensed Consolidated Financial Statements	6

2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	3.	Quantitative and Qualitative Disclosures about Market Risk	31	3.	Quantitative and Qualitative Disclosures about Market Risk	24

4.	4.	Controls and Procedures	32	4.	Controls and Procedures	25

PART II — OTHER INFORMATION	PART II — OTHER INFORMATION			PART II — OTHER INFORMATION

1.	1.	Legal Proceedings	33	1.	Legal Proceedings	26

1A.	1A.	Risk Factors	33	1A.	Risk Factors	26

2.	2.	Unregistered Sales of Equity Securities and The Use of Proceeds	34	2.	Unregistered Sales of Equity Securities and The Use of Proceeds	28

6.	6.	Exhibits	35	6.	Exhibits	29

Signatures	Signatures		36	Signatures		30

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions, except per share data)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	14.5	$	8.5	Cash and cash equivalents	$	10.8	$	37.3
Customer receivables, net	Customer receivables, net	91.7		107.4		Customer receivables, net	77.6		83.4
Inventories	Inventories	205.4		195.9		Inventories	206.5		193.1

Prepaid expenses and other current assets		44.9		28.8
Prepaid expenses						Prepaid expenses	12.3		13.7
Other current assets						Other current assets	40.8		37.3

Total current assets	Total current assets	356.5		340.6		Total current assets	348.0		364.8
Property, plant, and equipment, net	Property, plant, and equipment, net	227.6		239.0		Property, plant, and equipment, net	236.9		237.1
Goodwill	Goodwill	340.3		332.1		Goodwill	341.1		349.8
Intangible assets, net	Intangible assets, net	346.6		348.2		Intangible assets, net	340.1		347.9
Right-of-use lease assets	Right-of-use lease assets	116.2		94.4		Right-of-use lease assets	181.8		150.0
Other non-current assets	Other non-current assets	2.4		3.6		Other non-current assets	3.4		3.5
Total assets	Total assets	$	1,389.6	$	1,357.9	Total assets	$	1,451.3	$	1,453.1
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY	LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY					LIABILITIES, CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt	Current maturities of long-term debt	$	14.5	$	17.1	Current maturities of long-term debt	$	14.5	$	14.6
Accounts payable	Accounts payable	91.2		131.9		Accounts payable	103.7		101.1
Current portion of lease liability	Current portion of lease liability	26.8		20.7		Current portion of lease liability	29.8		27.2

Other current liabilities	Other current liabilities	124.6		120.3		Other current liabilities	128.0		113.5
Total current liabilities	Total current liabilities	257.1		290.0		Total current liabilities	276.0		256.4
Long-term debt, net	Long-term debt, net	294.0		428.9		Long-term debt, net	269.3		295.2
Deferred income taxes	Deferred income taxes	80.2		87.5		Deferred income taxes	96.0		93.9

Pension liability	Pension liability	30.4		22.0		Pension liability	15.2		24.2
Lease liability	Lease liability	107.7		87.0		Lease liability	173.1		141.2
Other non-current liabilities	Other non-current liabilities	29.3		14.9		Other non-current liabilities	18.3		29.3
Total liabilities	Total liabilities	798.7		930.3		Total liabilities	847.9		840.2
Commitments and contingent liabilities (Note 9)	Commitments and contingent liabilities (Note 9)					Commitments and contingent liabilities (Note 9)	0		0
Convertible preferred stock, $1.00 par value; authorized 10,000,000 shares; issued and outstanding 165,423 shares		163.1		0
Convertible preferred stock, $1.00 par value; authorized 10,000,000 shares; issued and outstanding 169,165 shares						Convertible preferred stock, $1.00 par value; authorized 10,000,000 shares; issued and outstanding 169,165 shares	166.9		165.1
Shareholders’ equity: (shares in thousands)	Shareholders’ equity: (shares in thousands)					Shareholders’ equity: (shares in thousands)
Common stock,$0.01 par value; 200,000 shares authorized; 67,436 and 66,296 shares issued, respectively, 50,703 and 49,775 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of restricted shares		0.5		0.5
Common stock,$0.01 par value; 200,000 shares authorized; 67,918 and 67,458 shares issued, respectively, 50,813 and 50,645 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of non voting restricted shares						Common stock,$0.01 par value; 200,000 shares authorized; 67,918 and 67,458 shares issued, respectively, 50,813 and 50,645 shares outstanding, respectively, net, at all periods, of treasury shares and inclusive of non voting restricted shares	0.5		0.5
Additional paid-in capital	Additional paid-in capital	71.5		66.8		Additional paid-in capital	75.2		75.4
Retained earnings	Retained earnings	423.2		429.7		Retained earnings	410.9		417.7
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(67.4)		(69.4)		Accumulated other comprehensive loss	(50.1)		(45.8)
Total shareholders’ equity	Total shareholders’ equity	427.8		427.6		Total shareholders’ equity	436.5		447.8
Total liabilities, convertible preferred stock and shareholders’ equity	Total liabilities, convertible preferred stock and shareholders’ equity	$	1,389.6	$	1,357.9	Total liabilities, convertible preferred stock and shareholders’ equity	$	1,451.3	$	1,453.1

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(in millions, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Sales	Sales	$	309.4	$	356.5	$	923.5	$	1,056.6	Sales		$	264.2	$	340.0
Cost of sales	Cost of sales	196.0		216.1		592.1		651.7		Cost of sales		168.5		217.7
Gross profit	Gross profit	113.4		140.4		331.4		404.9		Gross profit		95.7		122.3
Selling, general, and administrative expenses	Selling, general, and administrative expenses	90.8		103.6		278.8		304.9		Selling, general, and administrative expenses		89.8		103.3
Loss on fair value remeasurement of contingent consideration		0		0		12.4		0

Restructuring charges	Restructuring charges	3.3		0.1		19.5		0.2		Restructuring charges		3.6		7.6

Operating profit	Operating profit	19.3		36.7		20.7		99.8		Operating profit		2.3		11.4
Interest expense	Interest expense	4.1		5.5		13.6		16.2		Interest expense		3.0		4.9
Loss on extinguishment of debt		0.2		0.4		0.2		0.4

Pension settlement charges	Pension settlement charges	1.3		9.8		2.8		10.4		Pension settlement charges		1.6		0.7
Other (income) expense, net	Other (income) expense, net	(0.5)		(2.5)		(1.3)		(4.1)		Other (income) expense, net		(0.6)		(1.2)
Income before income tax expense		14.2		23.5		5.4		76.9
Income (loss) before income tax expense										Income (loss) before income tax expense		(1.7)		7.0
Income tax expense (benefit)	Income tax expense (benefit)	7.2		6.0		(2.9)		19.8		Income tax expense (benefit)		0.2		(3.9)
Net earnings		7.0		17.5		8.3		57.1
Net earnings (loss)										Net earnings (loss)		(1.9)		10.9
Less: Net earnings attributable to Preferred stockholders	Less: Net earnings attributable to Preferred stockholders	(1.4)		0		(1.4)		0		Less: Net earnings attributable to Preferred stockholders		(1.9)		0
Net earnings available to common stockholders		$	5.6	$	17.5	$	6.9	$	57.1
Net earnings (loss) attributable to common stockholders										Net earnings (loss) attributable to common stockholders		$	(3.8)	$	10.9

Net earnings per share:
Net earnings (loss) per share:										Net earnings (loss) per share:
Basic	Basic	$	0.11	$	0.36	$	0.14	$	1.17	Basic		$	(0.08)	$	0.22
Diluted	Diluted	$	0.11	$	0.35	$	0.14	$	1.16	Diluted		$	(0.08)	$	0.22

Weighted-average common shares outstanding: (in thousands)	Weighted-average common shares outstanding: (in thousands)									Weighted-average common shares outstanding: (in thousands)
Basic	Basic	49,112		48,873		49,057		48,835		Basic		49,264		48,973
Diluted	Diluted	49,441		49,574		49,485		49,360		Diluted		49,264		49,708

Net earnings		$	7.0	$	17.5	$	8.3	$	57.1
Net earnings (loss)										Net earnings (loss)		$	(1.9)	$	10.9
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on cash flow hedge, net of amounts reclassified into earnings	Unrealized gains (losses) on cash flow hedge, net of amounts reclassified into earnings	1.2		(0.4)		(3.0)		(4.7)		Unrealized gains (losses) on cash flow hedge, net of amounts reclassified into earnings		1.1		(4.6)
Pension and other post-employment liability adjustments	Pension and other post-employment liability adjustments	3.1		(2.5)		(4.5)		(2.0)		Pension and other post-employment liability adjustments		7.2		(8.4)
Foreign currency translation adjustments	Foreign currency translation adjustments	5.4		(4.0)		0		(1.7)		Foreign currency translation adjustments		(3.8)		(9.3)
Foreign currency translation adjustments on long-term intercompany notes	Foreign currency translation adjustments on long-term intercompany notes	7.5		(7.1)		9.5		(9.2)		Foreign currency translation adjustments on long-term intercompany notes		(8.8)		(1.6)
Total other comprehensive income (loss), net	Total other comprehensive income (loss), net	17.2		(14.0)		2.0		(17.6)		Total other comprehensive income (loss), net		(4.3)		(23.9)
Total comprehensive income		$	24.2	$	3.5	$	10.3	$	39.5
Total comprehensive income (loss)										Total comprehensive income (loss)		$	(6.2)	$	(13.0)

See accompanying notes to the condensed consolidated financial statements.

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings		$	8.3	$	57.1
Adjustments to reconcile net earnings to cash provided by operating activities:
Net earnings (loss)						Net earnings (loss)	$	(1.9)	$	10.9
Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities:						Adjustments to reconcile net earnings (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	32.6		28.0		Depreciation and amortization	10.7		11.1

Deferred income tax benefit		(5.6)		0
Amortization of debt issuance costs and loss on extinguishment of debt		0.9		1.2
Stock-based compensation						Stock-based compensation	4.2		1.6
Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	0.6		(6.3)
Amortization of debt issuance costs						Amortization of debt issuance costs	0.2		0.2
Non-cash restructuring charges						Non-cash restructuring charges	0.9		0.3
Pension settlement charges						Pension settlement charges	1.6		0.7

Pension settlement charges		2.8		10.4
Inventory obsolescence		2.2		1.7
Gain on disposal of property, plant and equipment		(1.1)		0
Unrealized foreign currency (gains) losses		(0.2)		1.3
Stock-based compensation		8.8		7.7
Loss on fair value remeasurement of contingent consideration		12.4		0

Bad debt and customer claims		1.2		0.7

Other non-cash items	Other non-cash items	(1.5)		0.2		Other non-cash items	0.3		1.1
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Customer receivables	Customer receivables	14.0		8.1		Customer receivables	5.4		(9.4)
Inventories	Inventories	(11.9)		(17.6)		Inventories	(15.1)		(10.2)
Prepaid expenses and other assets	Prepaid expenses and other assets	7.1		0.9		Prepaid expenses and other assets	(3.2)		(0.8)
Accounts payable	Accounts payable	(38.6)		(5.0)		Accounts payable	3.8		(6.8)

Other liabilities	Other liabilities	(12.0)		3.4		Other liabilities	7.1		(8.8)
Cash provided by operating activities		19.4		98.1
Cash provided by (used in) operating activities						Cash provided by (used in) operating activities	14.6		(16.4)
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	Purchases of property and equipment	(28.1)		(32.4)		Purchases of property and equipment	(8.9)		(10.7)
Purchase of business, net of cash acquired		0		(30.9)
Proceeds from sales of property and equipment		12.3		0

Other, net	Other, net	0.3		0		Other, net	(0.2)		0.4
Cash used in investing activities	Cash used in investing activities	(15.5)		(63.3)		Cash used in investing activities	(9.1)		(10.3)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving credit facility	Proceeds from revolving credit facility	340.5		350.5		Proceeds from revolving credit facility	92.0		219.5
Repayment of revolving credit facility	Repayment of revolving credit facility	(420.0)		(336.5)		Repayment of revolving credit facility	(112.0)		(53.5)

Repayment of term loans	Repayment of term loans	(62.2)		(12.8)		Repayment of term loans	(3.6)		(4.2)
Capitalized debt issuance costs		(0.3)		(1.4)

Payment of dividends	Payment of dividends	(13.9)		(24.5)		Payment of dividends	(3.6)		(8.9)
Proceeds from the issuance of preferred stock, net		161.8		0

Payments of withholding taxes related to net share settlements of equity awards	Payments of withholding taxes related to net share settlements of equity awards	(4.0)		(3.3)		Payments of withholding taxes related to net share settlements of equity awards	(4.3)		(3.8)

Other						Other	(0.1)		0
Cash provided by (used in) financing activities	Cash provided by (used in) financing activities	1.9		(28.0)		Cash provided by (used in) financing activities	(31.6)		149.1
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	0.2		(0.1)		Effect of exchange rate changes on cash and cash equivalents	(0.4)		(0.3)
Net increase in cash and cash equivalents		6.0		6.7
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	(26.5)		122.1
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	8.5		1.6		Cash and cash equivalents at beginning of period	37.3		8.5
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	14.5	$	8.3	Cash and cash equivalents at end of period	$	10.8	$	130.6

See accompanying notes to the condensed consolidated financial statements.

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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 GAAP 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~~ months ended ~~September 30, 2020,~~March 31, 2021, are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2020.~~

The condensed consolidated balance sheet of the Company, as of December 31, 2019, 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 GAAP for complete financial statements.2021.

Certain reclassifications have been made to prior year balances to conform to current year presentation in the condensed consolidated statement of cash flows.

During the fourth quarter of 2019, the Company aligned the consolidation of certain of its foreign subsidiaries in the consolidated financial statements which previously included results on a one-month reporting lag. The Company has determined that the effect of this change is not material to the condensed consolidated financial statements for the prior periods presented and therefore has not presented retrospective application of this change.

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, ~~2019.~~2020.

Segment Reorganization

Effective as of the beginning of the first quarter of 2021, the Company implemented a segment reorganization in order to more closely align its segment reporting with its current operating structure (the “Segment Reorganization”). The Company’s new reportable segments are: Workplace and Lifestyle.

The Workplace reportable segment is comprised of the operations of the Workplace operating segment, which, following the Segment Reorganization, reflects the reassignment of the Spinneybeck and KnollTextiles businesses from the Lifestyle segment, as well as the reassignment of the Europe Office business from the legacy Office segment to the Lifestyle segment. The Lifestyle reportable segment is an aggregation of the Holly Hunt, Muuto, KnollStudio North America and Europe operating segments. All prior comparative periods presented have been recast to conform to these changes. See Note 16 for additional information about the Company’s segments.

Use of Estimates

U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.

Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations.

~~Credit Losses~~

Subsequent to January 1, 2020, accounts receivable are recorded at amortized cost less an allowance for expected credit losses. The Company maintains an allowance for credit losses for the expected failure or inability of its customers to make required payments. The Company recognizes the allowance for expected credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.

Management analyzes receivables based on the credit quality indicators and shared risk characteristics of dealers and other customers. Management stratifies the dealer population generally by the level of their purchase activity, mainly recurring purchasers compared to non-recurring purchasers, as well as the financial strength of the dealer. Management also stratifies receivables based on government and corporate purchasers with common risk characteristics. Management considers multiple factors, including payment history, frequency of purchases and financial strength of the purchaser to determine the reserve needed.

~~Accounting Standards Adopted~~

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or other reference rate expected to be discontinued due to reference rate reform. The amendments in this ASU are effective immediately and may be applied to impacted contracts and hedges prospectively through December 31, 2022. The adoption of the ASU had no impact on the Company’s condensed consolidated financial statements for the periods ended September 30, 2020.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement~~ (Topic 820), which amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying and adding certain disclosures. The Company adopted ASU 2018-13 as of January 1, 2020. The adoption of this ASU did not have a significant impact on the Company’s condensed consolidated financial statements or disclosures.

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

NOTE 2. REVENUE

Disaggregation of Revenue

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

The Company’s sales by ~~product category~~commercial and residential customers were as follows (in millions):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Office Segment
Office Systems $ 84.7 $ 111.2 $ 268.6 $ 332.3
Seating 25.7 32.3 77.4 97.8
Files and Storage 18.4 26.0 64.3 78.9
Ancillary 52.2 36.6 147.1 92.5
Other 12.2 13.0 32.5 43.0
Total Office Segment 193.2 219.1 589.9 644.5
Lifestyle Segment
Studio 96.4 108.7 267.4 323.5
Coverings 19.8 28.7 66.2 88.6
Total Lifestyle Segment 116.2 137.4 333.6 412.1
Total Sales $ 309.4 $ 356.5 $ 923.5 $ 1,056.6


	Three Months Ended March 31,
		2021		2020
Workplace Segment
Commercial		$	123.1	$	211.4
Residential		27.3		16.1
Total Workplace Segment		150.4		227.5
Lifestyle Segment
Commercial		38.0		58.2
Residential		75.8		54.3
Total Lifestyle Segment		113.8		112.5
Total Sales		$	264.2	$	340.0

Contract Balances

The Company’s contract assets consist of trade receivables, the balances of which are included in Customer receivables, net in the Condensed Consolidated Balance Sheets. These amounts represent the amount of consideration the Company expects to be entitled to in exchange for the goods delivered to its customers.

When the Company receives deposits, the recognition of revenue is generally deferred and results in the recognition of a contract liability (Customer deposits), which is included in Other current liabilities in the Condensed Consolidated Balance Sheets. Subsequent recognition of revenue and discharge of the contract liability typically occurs within a year of a deposit receipt, as the Company’s standard contract is less than one year. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the contract liability related to customer deposits was ~~$35.1~~$44.1 million and ~~$32.5~~$33.8 million, respectively. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company recognized revenues that were included in the contract liability at the beginning of the respective year of ~~$28.8~~$19.8 million and ~~$29.0~~$19.0 million, respectively.

Allowance for Doubtful Accounts

The following table sets forth the changes in the Company’s allowance for doubtful accounts for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 (in millions):


Balance at December 31, ~~2019~~2020	$	~~4.0~~4.9
Provision for doubtful accounts	~~0.6~~0
Write-offs, net of recoveries and other	~~0.2~~ (0.1)
Balance at March 31, ~~2020~~2021	$	4.8
~~Provision for doubtful accounts~~	~~0.4~~
~~Write-offs, net of recoveries and other~~	~~0.1~~
~~Balance at June 30, 2020~~	$	~~5.3~~
~~Provision for doubtful accounts~~	$	~~0.2~~
~~Write-offs, net of recoveries and other~~	$	~~(0.3)~~
~~Balance at September 30, 2020~~	$	~~5.2~~

NOTE 3. INVENTORIES

Inventories consisted of the following as of the dates presented (in millions):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Raw materials	Raw materials	$	55.9	$	58.7	Raw materials	$	52.8	$	49.3
Work-in-process	Work-in-process	7.8		8.1		Work-in-process	7.6		6.7
Finished goods	Finished goods	141.7		129.1		Finished goods	146.1		137.1
		$	205.4	$	195.9		$	206.5	$	193.1

NOTE 4. PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The following tables set forth the components of the net periodic benefit cost (credit) for the Company’s pension and other post-employment benefit plans (in millions):

Pension Benefits Other Benefits
Three Months Ended September 30, Three Months Ended September 30,
2020 2019 2020 2019
Interest cost $ 1.2 $ 2.5 $ 0 $ (0.1)
Expected return on plan assets (2.5) (3.9) 0 0
Amortization of prior service credit 0 0 0 (0.1)
Recognized actuarial loss 0.4 0.1 0 0
Pension settlement charge (1)
1.3 9.8 0 0
Net periodic benefit cost (credit) $ 0.4 $ 8.5 $ 0 $ (0.2)


											Pension Benefits				Other Benefits
		Pension Benefits				Other Benefits					Three Months Ended March 31,				Three Months Ended March 31,
		Nine Months Ended September 30,				Nine Months Ended September 30,					2021		2020		2021		2020
		2020		2019		2020		2019
Interest cost	Interest cost	$	4.3	$	7.4	$	0.1	$	0.1	Interest cost	$	1.1	$	1.5	$	0.1	$	0
Expected return on plan assets	Expected return on plan assets	(7.8)		(11.9)		0		0		Expected return on plan assets	(2.3)		(2.7)		0		0
Amortization of prior service credit	Amortization of prior service credit	0		0		(0.2)		(0.5)		Amortization of prior service credit	0		0		(0.1)		0
Recognized actuarial loss	Recognized actuarial loss	1.0		0.4		0		0		Recognized actuarial loss	0.4		0.3		0		0
Pension settlement charge (1)	Pension settlement charge (1)	2.8		10.4		0		0		Pension settlement charge (1)	1.6		0.7		0		0
Net periodic benefit cost (credit)	Net periodic benefit cost (credit)	$	0.3	$	6.3	$	(0.1)	$	(0.4)	Net periodic benefit cost (credit)	$	0.8	$	(0.2)	$	0	$	0

(1) The pension settlement charge was related to payments for lump sum elections.

During the third quarter of 2020, the Company changed the weighted average expected long-term rate of return on plan assets from 6.40% to 5.75%. The decrease was due to a change in expectations of future interest rates and inflation.

NOTE 5. FAIR VALUE MEASUREMENTS

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

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

Recurring Fair Value Measurements

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


		Fair Value as of September 30, 2020								Fair Value as of December 31, 2019									Fair Value as of March 31, 2021								Fair Value as of December 31, 2020
Liabilities:	Liabilities:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Liabilities:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest rate swap	Interest rate swap	$	0	$	10.6	$	0	$	10.6	$	0	$	6.6	$	0	$	6.6	Interest rate swap	$	0	$	7.6	$	0	$	7.6	$	0	$	9.0	$	0	$	9.0
Contingent consideration obligations (1)	Contingent consideration obligations (1)	0		0		14.4		14.4		0		0		2.0		2.0		Contingent consideration obligations (1)	0		0		13.4		13.4		0		0		14.5		14.5

(1) In connection with the Company’s acquisition of FHI LLC (“Fully”) in August 2019, the Company is contingently liable to make additional payments in the form of consideration based upon the achievement of certain performance targets. ~~The~~As of March 31, 2021, the maximum remaining amount of contingent consideration that could be earned through 2023 is ~~$15.0~~$13.8 million (see Notes 4 and 11 to the Company’s ~~2019~~2020 Annual Report on Form 10-K for additional information on the Fully acquisition, the valuation of the related contingent consideration and the accounting treatment applied to any changes thereof).

Interest Rate Swap

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

Contingent Consideration Obligations

The fair value measurement of the Company’s contingent consideration obligations is based on significant, unobservable inputs for which little or no market data exists, and thus represents a Level 3 measurement. The contingent consideration obligations are revalued each reporting period, with changes in fair value recognized in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations. The valuation inputs utilized to estimate the fair value of the contingent consideration obligations as of ~~September 30, 2020,~~March 31, 2021, included a discount rate of 2.5% ~~and projections related to~~, Fully’s net sales and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the three months ended March 31, 2021, and projections related to Fully’s net sales and EBITDA for each of the calendar years ~~2020~~2021 through 2023.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the ~~$12.4~~$1.1 million change in the fair value of the Company’s contingent consideration obligations was ~~primarily~~ due to ~~changes in expectations related to~~ the ~~achievement~~cash settlement of approximately $1.2 million of those obligations and the applicable performance targets. The emergent and seemingly durable shift to a significant “Work-from-home” (“WFH”) paradigm, catalyzed in large measure by movement and business operation restrictions imposed by various state and local governments during the second quarterpassage of ~~2020, aligns well with Fully’s WFH product portfolio and e-commerce capabilities.~~time. As of ~~September 30, 2020, $1.2~~March 31, 2021, $11.1 million of the contingent consideration obligation is classified as current and is included in Other current liabilities, while the remaining ~~$13.2~~$2.3 million is included in Other non-current liabilities on the condensed consolidated balance sheets.

~~Non-Recurring Fair Value Measurements~~

~~The Company did not have any non-recurring fair value measurements during the three and nine months ended September 30, 2020.~~

Assets Measured at Fair Value on a Nonrecurring Basis

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


	Estimated Fair Value (Level 3) at measurement date		Impairment recognized during the period ended (1)
March 31, 2021
Operating lease right-of-use (“ROU”) assets	$	1.8	$	0.6
Leasehold Improvements	0		0.3

(1)See Note 10 for additional information on asset impairments.

NOTE 6. DERIVATIVE INSTRUMENTS

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

Cash flow hedge

In January 2018, the Company entered into an interest rate swap contract, which is designated as a cash flow hedge of the forecasted interest payments associated with a portion of the Company’s variable rate debt. The interest rate swap hedges one-month LIBOR, which effectively converts a portion of the variable rate debt to a fixed interest rate. The interest rate swap effective date was December 31, 2018, matures January 23, 2023 and carries a fixed rate of 2.63%. As of ~~September 30, 2020,~~March 31, 2021, the interest rate swap has a notional amount of ~~$250.0~~$200.0 million, which decreases over time by $50 million increments.

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


Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	Balance Sheet Location	September 30, 2020		December 31, 2019		Derivatives designated as hedging instruments	Balance Sheet Location	March 31, 2021		December 31, 2020
Derivative liabilities:	Derivative liabilities:						Derivative liabilities:

Interest rate swap	Interest rate swap	Other current liabilities	$	5.3	$	2.6	Interest rate swap	Other current liabilities	$	4.7	$	5.1
Interest rate swap	Interest rate swap	Other non-current liabilities	5.3		4.0		Interest rate swap	Other non-current liabilities	2.9		3.9
Total derivative liabilities	Total derivative liabilities		$	10.6	$	6.6	Total derivative liabilities		$	7.6	$	9.0

The fair value of the swap recorded in Accumulated Other Comprehensive Loss (“AOCL”) may be recognized in the Condensed Consolidated Statement of Operations if certain terms of the agreement change, are modified or if the loan is extinguished. As of ~~September 30, 2020,~~March 31, 2021, there was no hedge ineffectiveness associated with the Company’s interest rate swap and no portion of the cash flow hedge is excluded from the assessment of effectiveness. The Company reclassified ~~$1.6 million and $3.5~~$1.3 million from AOCL to interest expense within the Condensed Consolidated ~~Statements~~Statement of Operations during the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021. Based on the forward interest rate curve in place as of ~~September 30, 2020,~~March 31, 2021, the Company expects to reclassify approximately ~~$5.3~~$4.7 million of unrealized losses related to its cash flow hedge from AOCL into earnings in the next twelve months.

NOTE 7. OTHER CURRENT LIABILITIES

Other current liabilities are comprised of the following (in millions):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020

Customer deposits	Customer deposits	$	35.1	$	32.5	Customer deposits	$	44.1	$	33.8
Accrued employee compensation	Accrued employee compensation	31.1		37.4		Accrued employee compensation	21.8		25.8
Current portion of contingent consideration						Current portion of contingent consideration	11.1		1.2
Warranty	Warranty	10.8		10.1		Warranty	10.3		10.5

Other	Other	47.6		40.3		Other	40.7		42.2
Other current liabilities	Other current liabilities	$	124.6	$	120.3	Other current liabilities	$	128.0	$	113.5

NOTE 8. INDEBTEDNESS

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

September 30, 2020 December 31, 2019
Revolving credit facility $ 59.0 $ 138.5
U.S. term loans 199.0 228.1
Multi-currency term loans 54.2 83.7
Total long-term debt 312.2 450.3
Less: Current maturities of long-term debt 14.5 17.1
Less: Unamortized debt issuance costs 3.7 4.3
Long-term debt, net $ 294.0 $ 428.9


	March 31, 2021		December 31, 2020
Revolving credit facility	$	41.0	$	61.0
U.S. term loans	193.3		196.2
Multi-currency term loans	52.7		56.0
Total long-term debt	287.0		313.2
Less: Current maturities of long-term debt	14.5		14.6
Less: Unamortized debt issuance costs	3.2		3.4
Long-term debt, net	$	269.3	$	295.2

Credit Facility

The commitments and available borrowing capacity under the revolving credit facility (the “Revolver”) were as follows as of the dates presented (in millions):

Commitments Outstanding Borrowings Letters of Credit Outstanding Borrowing Capacity
September 30, 2020 $ 400.0 $ 59.0 $ 5.1 $ 335.9
December 31, 2019 $ 400.0 $ 138.5 $ 5.1 $ 256.4


	Commitments		Outstanding Borrowings		Letters of Credit Outstanding		Borrowing Capacity (1)
March 31, 2021	$	400.0	$	41.0	$	5.1	$	353.9
December 31, 2020	$	400.0	$	61.0	$	5.1	$	333.9

~~On August 21, 2020,~~(1) The Company's actual borrowing availability under the ~~Company entered into the Second Amendment to the Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), dated~~Revolver as of ~~January 23, 2018, as previously amended~~March 31, 2021 is constrained by certain financial covenants.

At March 31, 2021, borrowings under the ~~First Amendment to the Third Amended and Restated Credit Agreement, dated as~~Revolver are comprised of August 26, 2019 (together, as amended, the “Credit Agreement”). The Credit Agreement Amendment, among other things, relaxed certain requirements or constraints under which affirmative covenants related to net leverage ratios are determined. In connection with the closing of the Credit Agreement Amendment, a covenant was added requiring the Company to make partial prepayments of term-loan principal in the amount of $50.0 million, all of which were made as of September 30, 2020.

~~The Company incurred approximately $0.3~~$41.0 million of ~~debt issuance costs in connection with the Credit Agreement Amendment, which were capitalized and will be amortized over the remaining term~~loans at a LIBOR rate of the Credit Facility. In connection with the prepayment of the $50.0 million in term-loan principal, the Company recorded a non-cash charge of approximately $0.2 million for loss on extinguishment of debt.

1.61%. At ~~September 30,~~December 31, 2020, borrowings under the Revolver ~~include $59.0~~were comprised of $61.0 million ~~at a LIBOR rate~~ of ~~1.90%. At December 31, 2019, borrowings under the Revolver included $10.0 million at a base rate of 5.25% and $128.5 million~~loans at a weighted-average LIBOR rate of ~~3.27%~~1.65%. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, letters of credit issued under the Revolver incurred interest at the rate of ~~1.75%~~1.50%, while commitments fees on the undrawn portion of the Revolver were charged at a rate of 0.225%.

At March 31, 2021, the U.S. term loan (“USTL”) and multi-currency term loan (“MCTL”) incurred interest at 1.61% and 1.50%, respectively.

At ~~September 30,~~December 31, 2020, the U.S. term loan and multi-currency term loan incurred interest at ~~1.90% and 1.75%, respectively. At December 31, 2019, the U.S. term loan and multi-currency term loan incurred interest at 3.30%~~1.65% and 1.50%, respectively. The Eurocurrency rates used for the U.S. dollar-denominated term loan and the Euro-denominated term loan are one-month LIBOR and one-month or three-month Euribor, respectively. ~~Borrowings under~~Quarterly principal amortization payments on the ~~term loan facilities amortize~~USTL and MCTL are required in ~~equal quarterly installments,~~the approximate fixed amounts of $2.8 million and €0.7 million, respectively, with the remaining balance due upon maturity.

NOTE 9. CONTINGENT LIABILITIES AND COMMITMENTS

Litigation

The Company is currently involved in matters of litigation and legal proceedings, 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, which are included in Other current liabilities, when related products are sold. 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 accrued.

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

Balance, December 31, ~~2019~~2020

~~10.1~~10.5

Provision for warranty claims

~~5.9~~0.8

Warranty claims settled

~~(5.2)~~(1.0)

Balance, ~~September 30, 2020~~March 31, 2021

~~10.8~~10.3

Warranty expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 was ~~$1.9~~$0.8 million and ~~$5.9 million, respectively. Warranty expense for the three and nine months ended September 30, 2019 was $2.1 million and $6.7~~$2.0 million, respectively.

NOTE 10. RESTRUCTURING AND OTHER COST REDUCTION INITIATIVES

~~In January~~During 2020, the Company announced its plan to consolidate its manufacturing footprint in North America, resulting in the closure of the Grand Rapids, Michigan manufacturing facility (“Grand Rapids”). The closure was part of an initiativemanagement approved and implemented several restructuring actions and other cost reduction initiatives to optimize the Company’s North American manufacturing ~~operations. In June~~and supply chain operations, as well as eliminate certain corporate costs. As of March 31, 2021, all of the workforce reductions announced under these prior year actions have been completed. The facilities-related cost reduction measures initiated during the second half of 2020 are expected to be completed by the end of 2021.

During the first quarter of 2021, the Company ~~sold~~executed on its ~~Grand Rapids land and building assets for $12.9 million and received cash proceeds~~previously disclosed plans to close or vacate 5 of its domestic showrooms. In connection therewith, the Company recognized non-cash asset impairment charges of approximately ~~$12.2~~$0.9 million ~~net of transaction costs~~related to certain ROU assets and ~~customary closing adjustments. The~~leasehold improvements. In addition, the Company ~~recognized a gain~~expanded on ~~sale of approximately $1.2 million, which is netted against Restructuring charges on the accompanying condensed consolidated statement of operations. Concurrent~~its previously disclosed cost reduction actions with the ~~sale,~~commencement of various workforce reductions during the ~~Company entered into a sale-leaseback arrangement under which the Company is leasing various zoned premises within the facility for various terms, none~~first quarter of 2021, some of which ~~extend beyond August 2021,~~have been implemented and ~~the majority~~all of ~~which expire through December 2020.~~

As of September 30, 2020, substantially all production has been migrated from Grand Rapids to the Company’s other North America facilities. Other restructuring actions the Company has taken during 2020 relate to supply chain optimization, which are expected to be completed by the end of ~~2021. The Company’s existing manufacturing operations~~the third quarter of 2021, depending upon local legal requirements. These workforce reductions have occurred or will occur across all geographies in ~~East Greenville, Pennsylvania; Muskegon, Michigan; and Toronto, Ontario (Canada) are not otherwise impacted by the restructuring plan.~~

~~In addition to the restructuring actions noted above, under~~ which ~~approximately 70 positions were eliminated on a net basis,~~ the Company ~~has executed certain other cost reduction initiatives~~operates, and will result in ~~response to the current economic environment resulting from COVID-19. These actions include~~ the elimination of approximately ~~290~~50 additional positions ~~resulting~~to those reported in ~~an aggregate workforce reduction of approximately 10% since December 31, 2019.~~2020. The positions impacted are primarily within the Workplace segment.

On October 6, 2020, management approved plans to further reduce the Company’s operating expenses in response to the economic challenges and uncertainty from the COVID-19 pandemic and its impact on the Company’s business. As part of this restructuring, the Company expects to reduce its workforce by approximately 200 positions and close 5 of its North American Office showrooms. In connection with these actions, the Company estimates that it will incur approximately $10.0 million of cash charges, comprised of separation payments and other employee termination expenses of approximately $5.0 million, and facilities-related charges of approximately $5.0 million. The ~~Company expects the plan to be fully executed by the end of the first quarter of 2021.~~

~~Between the restructuring actions and other initiatives noted above, the~~ Company expects to incur ~~total~~additional charges of approximately ~~$37.1~~$2.8 million, comprised of severance and other one-time termination benefits, facilities-related charges and other associated ~~costs.~~costs during the remainder of 2021. The Company anticipates making cash payments totaling approximately ~~$31.6 million, approximately $4.0 million of which will be paid subsequent to 2020.~~$5.8 million.

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company recognized total restructuring charges of ~~$22.1~~$3.6 million, attributable to the ~~Office~~Workplace and Lifestyle segments in the amounts of ~~$16.7~~$2.2 million and ~~$0.7~~$0.2 million, respectively, and to Corporate in the amount of ~~$4.7~~$1.2 million. ~~The~~During the three months ended March 31, 2020, the Company recognized total restructuring charges ~~have been recognized between operating expenses~~of $8.2 million, attributable to the Workplace and ~~Cost of sales~~Lifestyle segments in the amounts of ~~$20.7~~$7.9 million and ~~$1.4~~$0.3 million, respectively, on the accompanying condensed consolidated statement of operations. The restructuring charge of $1.4 million included in Cost of sales represents accelerated depreciation and other non-cash items related to abandoned equipment and inventory write-downs, which is not reflected in the table below.respectively.

Changes in restructuring obligations during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 are summarized as follows:


		North America Operations Optimization		Workforce Reduction and Other Cost Initiatives		Total			North America Operations Optimization		Workforce Reduction and Other Cost Initiatives		Total
Balance as of December 31, 2019		$	0	$	0.2	$	0.2
Balance as of December 31, 2020								Balance as of December 31, 2020	$	0.1	$	2.0	$	2.1
Provisions and accruals	Provisions and accruals	12.6		8.1		20.7		Provisions and accruals	0.8		1.9		2.7
Cash payments	Cash payments	(12.2)		(8.0)		(20.2)		Cash payments	(0.6)		(1.2)		(1.8)

Balance as of September 30, 2020		$	0.4	$	0.3	$	0.7
Balance as of March 31, 2021								Balance as of March 31, 2021	$	0.3	$	2.7	$	3.0

The restructuring reserve is classified as current and is included in Other current liabilities on the condensed consolidated balance sheets. All but an immaterial component of the reserve is expected to be utilized (settled in cash) during ~~2020.~~2021.

1211

NOTE 11. EQUITY

The following table summarizes the components of shareholders’ equity and the changes therein during the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and (in millions, except share information):

Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total Equity
Balance at December 31, 2019 $ 0.5 $ 66.8 $ 429.7 $ (69.4) $ 427.6
Net earnings — — 10.9 — 10.9
Other comprehensive loss — — — (23.9) (23.9)
Stock-based compensation, net — 1.6 — — 1.6
Dividends declared ($0.17 per share) — — (8.5) — (8.5)
Purchase of common stock (154,012 shares) — (4.0) — — (4.0)
Balance at March 31, 2020 $ 0.5 $ 64.4 $ 432.1 $ (93.3) $ 403.7
Net loss — — (9.6) — (9.6)
Other comprehensive income — — — 8.7 8.7
Stock-based compensation, net — 3.3 — — 3.3
Dividends declared ($0.04 per share) — — (1.4) — (1.4)
Purchase of common stock (3,130 shares) — — — — —
Balance at June 30, 2020 $ 0.5 $ 67.7 $ 421.1 $ (84.6) $ 404.7
Net earnings — — 7.0 — 7.0
Other comprehensive income — — — 17.2 17.2
Stock-based compensation, net — 3.8 — — 3.8
Dividends declared on preferred stock (1)
— — (1.4) — (1.4)
Dividends declared on common stock ($0.06 per share) — — (3.5) — (3.5)
Purchase of common stock (3,631 shares) — — — — —
Balance at September 30, 2020 $ 0.5 $ 71.5 $ 423.2 $ (67.4) $ 427.8


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at December 31, 2020	$	0.5	$	75.4	$	417.7	$	(45.8)	$	447.8
Net loss	—		—		(1.9)		—		(1.9)
Other comprehensive loss	—		—		—		(4.3)		(4.3)
Stock-based compensation, net (1)	—		4.2		—		—		4.2
Dividends declared on preferred stock (2)	—		0		(1.8)		—		(1.8)
Dividends declared on common stock ($0.06 per share)	—		—		(3.1)		—		(3.1)
Purchase of common stock (277,043 shares)	—		(4.4)		—		—		(4.4)

Balance at March 31, 2021	$	0.5	$	75.2	$	410.9	$	(50.1)	$	436.5

(1) Effective February 12, 2021, the Company amended the terms of market-based restricted stock units (“MBRSUs”) granted in February 2018 by (i) eliminating the third year of the contractual three-year performance period and (ii) reducing by 50% the number of shares that were earned on the basis of the resultant two-year performance period. The modified MBRSUs were revalued at fair market value on the modification date, which resulted in an incremental cost of $0.7 million during the first quarter of 2021. The change in equity during the first quarter of 2021 attributable to stock-based compensation, net, reflects this modification.

(2)The Company exercised its payable in kind (“PIK”) dividend option in connection with the dividend paid on ~~September 30, 2020.~~

March 31, 2021.

The following table summarizes the change in the number of shares of common stock outstanding during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 (table in thousands and is inclusive of restricted shares):


Shares outstanding as of December 31, 2020						50,645
Shares issued under stock incentive plans, net of awards surrendered to pay applicable taxes						168

Shares outstanding as of March 31, 2021						50,813

The following table summarizes the components of shareholders’ equity and the changes therein during the three months ended March 31, 2020 (in millions, except share information):


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance at December 31, 2019	$	0.5	$	66.8	$	429.7	$	(69.4)	$	427.6
Net earnings	—		—		10.9		—		10.9
Other comprehensive loss	—		—		—		(23.9)		(23.9)
Stock-based compensation, net	—		1.6		—		—		1.6
Dividends declared ($0.17 per share)	—		—		(8.5)		—		(8.5)
Purchase of common stock (154,012 shares)	—		(4.0)		—		—		(4.0)

Balance at March 31, 2020	$	0.5	$	64.4	$	432.1	$	(93.3)	$	403.7

The following table summarizes the change in the number of shares of common stock outstanding during the three months ended March 31, 2020 (table in thousands and is inclusive of restricted shares):


Shares outstanding as of December 31, 2019						49,775
Shares issued under stock incentive plans, net of awards surrendered to pay applicable taxes						~~928~~874

Shares outstanding as of ~~September 30,~~March 31, 2020						~~50,703~~

~~The following table summarizes the components of shareholders’ equity and the changes therein during the three and nine months ended September 30, 2019 (in millions, except share information):~~

Common
Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Knoll, Inc.
Stockholders' Equity Noncontrolling Interests Total Equity
Balance at December 31, 2018 $ 0.5 $ 58.8 $ 395.4 $ (68.4) $ 386.3 $ 0.2 $ 386.5
Net earnings — — 18.0 — 18.0 — 18.0
Other comprehensive loss — — — (3.6) (3.6) — (3.6)
Stock-based compensation, net — 2.2 — — 2.2 — 2.2
Dividends declared ($0.15 per share) — — (7.5) — (7.5) — (7.5)
Purchase of common stock (141,738 shares) — (3.0) — — (3.0) — (3.0)
Other — 0.4 — — 0.4 (0.2) 0.2
Balance at March 31, 2019 $ 0.5 $ 58.4 $ 405.9 $ (72.0) $ 392.8 $ 0 $ 392.8
Net earnings — — 21.7 — 21.7 — 21.7
Stock-based compensation, net of forfeitures — 2.4 — — 2.4 — 2.4
Cash dividend ($0.17 per share) — — (8.6) — (8.6) — (8.6)
Other — 0.1 — — 0.1 — 0.1
Balance at June 30, 2019 $ 0.5 $ 60.9 $ 419.0 $ (72.0) $ 408.4 $ 0 $ 408.4
Net earnings — — 17.5 — 17.5 — $ 17.5
Other comprehensive (loss) income — — — (14.0) (14.0) — (14.0)
Stock-based compensation, net of forfeitures — 3.1 — — 3.1 — 3.1
Cash dividend ($0.17 per share) — — (8.6) — (8.6) — (8.6)
Purchase of common stock — (0.3) — — (0.3) — (0.3)
Balance at September 30, 2019 $ 0.5 $ 63.7 $ 427.9 $ (86.0) $ 406.1 $ 0 $ 406.1

The following table summarizes the change in the number of shares of common stock outstanding during the nine months ended September 30, 2019 (table in thousands and is inclusive of restricted shares):


~~Shares outstanding as of December 31, 2018~~						~~49,431~~
~~Shares issued under stock incentive plans, net of awards surrendered to pay applicable taxes~~						~~344~~

~~Shares outstanding as of September 30, 2019~~						~~49,775~~50,649

~~NOTE 12. PREFERRED STOCK~~

On July 21 2020, the Company closed on an Investment Agreement (the “Investment Agreement”) entered into on June 22, 2020, with Furniture Investments Acquisitions S.C.S., a common limited partnership (~~société en commandite simple~~) (the “Buyer”), relating to the issuance and sale to the Buyer of 164,000 shares of the Company’s Series A Convertible Preferred Stock, par value $1.00 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $164.0 million (the “Issuance”). The Issuance resulted in net cash proceeds of $161.8 million after transaction costs.

The Series A Preferred Stock will rank senior to the Company’s common stock, par value $0.01 per share (the “Common Stock”), with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock will have a liquidation preference of $1,000 per share. Holders of the Series A Preferred Stock will be entitled to a cumulative dividend at the rate of 4.5% per annum, payable quarterly in arrears. The Company may elect, at its sole discretion, to pay dividends in cash or as a dividend in-kind with additional shares of Series A Preferred Stock having value equal to the amount of accrued dividends until the two year anniversary of the Closing Date, after which the Company must pay dividends in cash.

The Series A Preferred Stock will be convertible at the option of the holders thereof at any time into shares of Common Stock at an initial conversion price of $16.75 per share of Series A Preferred Stock, subject to certain anti-dilution adjustments.

At any time after the two-year anniversary of the Closing Date, if the volume weighted-average price of the Common Stock exceeds $29.3125 per share (subject to adjustment in certain cases) for at least 20 trading days in any period of 30 consecutive trading days, the Company may elect to convert all or a portion of the Series A Preferred Stock into shares of Common Stock.

Holders of the Series A Preferred Stock will be entitled to vote as a single class with the holders of the Common Stock on an as-converted basis. Holders of the Series A Preferred Stock will be entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the rights, preferences, privileges or voting power of the Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock and increases or decreases in the number of authorized shares or issuances of shares of Series A Preferred Stock after the Closing Date.

At any time on or after the sixth anniversary of the Closing Date, the Company may redeem, in whole or, from time to time, in part, the shares of Series A Preferred Stock for a redemption price equal to: (i) the sum of (x) the liquidation preference thereof, plus (y) all accrued and unpaid dividends, multiplied by (ii) (A) 110% if the redemption occurs at any time on or after the sixth anniversary of the Closing Date and prior to the seventh anniversary of the Closing Date, (B) 105% if the redemption occurs at any time on or after the seventh anniversary of the Closing Date and prior to the eighth anniversary of the Closing Date, and (C) 100% if the redemption occurs at any time on or after the eighth anniversary of the Closing Date.

Upon certain change of control events involving the Company, the holders of the Series A Preferred Stock may either (i) convert their shares of Series A Preferred Stock into Common Stock at the then-current conversion price or (ii) cause the Company to redeem their shares of Series A Preferred Stock. Additionally, upon certain change of control events involving the Company, the Company may elect to redeem the Series A Preferred Stock. If the holders of the Series A Preferred Stock elect to have their shares of Series A Preferred Stock redeemed, or if the Company elects to redeem the Series A Preferred Stock, in each case, in connection with a change of control, the redemption price per share will be an amount in cash equal to 100% of the sum of the liquidation preference thereof and all accrued but unpaid dividends, plus a premium if such change of control occurs on or before the seventh anniversary of the Closing Date, plus, (i) if the redemption date is prior to the sixth anniversary of the Closing Date, all dividends that would have accrued on such share from the change of control redemption date to the sixth anniversary of the Closing Date, or (ii) if the redemption date is on or after the sixth anniversary of the Closing Date and prior to the seventh anniversary of the Closing Date, all dividends that would have accrued on such share from the change of control redemption date to the seventh anniversary of the Closing Date. As the redemption feature is not solely within the control of the Company, the Series A Preferred Stock does not qualify as permanent equity and has been classified as mezzanine, or temporary, equity.

If the Company proposes to issue equity securities of any kind, then, until the earlier of (i) the first date on which the 50% Beneficial Ownership Requirement as described in the investment agreement is no longer satisfied and (ii) the irrevocable waiver by the Buyer of its designation rights, subject to certain exceptions, the Company will be required to offer the Buyer the opportunity to purchase a portion of such proposed issuance equal to (i) the number of shares of Series A Preferred Stock, on an as-converted basis, and/or shares of Common Stock issued upon conversion of such Series A Preferred Stock then beneficially owned by the Buyer, divided by (ii) the total number of shares of Common Stock and Series A Preferred Stock then outstanding, on an as-converted basis.

~~Registration Rights~~

The Buyer and its affiliates will have certain customary registration rights with respect to shares of Common Stock held by the Buyer, including any Common Stock issued upon any future conversion of the Series A Preferred Stock, pursuant to the terms of a Registration Rights Agreement.

1512

NOTE 12. PREFERRED STOCK

The following table presents a roll-forward of the Company’s preferred stock for the three months ended March 31, 2021 (in millions, except shares, which are in thousands):


	Shares	Par		Additional Paid in Capital		Total
Balance at December 31, 2020	167	$	0.2	$	164.9	$	165.1

Dividends declared and paid in kind	2	0		1.8		1.8
Balance at March 31, 2021	169	$	0.2	$	166.7	$	166.9

NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in AOCL by component for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (in millions):


		Unrealized gains (losses) on Interest Rate Swaps		Foreign Currency Translation Adjustment		Foreign Currency Translation Adjustment on Long-term Intercompany Notes		Pension and Other Post-Employment Liability Adjustment		Total			Unrealized gains (losses) on Interest Rate Swaps		Foreign Currency Translation Adjustment		Foreign Currency Translation Adjustment on Long-term Intercompany Notes		Pension and Other Post-Employment Liability Adjustment		Total
Balance as of December 31, 2019		$	(4.8)	$	(15.6)	$	(13.0)	$	(36.0)	$	(69.4)
Balance as of December 31, 2020												Balance as of December 31, 2020	$	(6.7)	$	(7.9)	$	5.0	$	(36.2)	$	(45.8)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(7.6)		0		9.5		(9.6)		(7.7)		Other comprehensive income (loss) before reclassifications	0.1		(3.8)		(8.8)		7.8		(4.7)
Amounts reclassified from AOCL	Amounts reclassified from AOCL	3.5		0		0		3.6		7.1		Amounts reclassified from AOCL	1.3		0		0		1.9		3.2
Net current period other comprehensive income (loss) before income tax	Net current period other comprehensive income (loss) before income tax	(4.1)		0		9.5		(6.0)		(0.6)		Net current period other comprehensive income (loss) before income tax	1.4		(3.8)		(8.8)		9.7		(1.5)
Income tax benefit		1.1		0		0		1.5		2.6
Income tax expense												Income tax expense	(0.3)		0		0		(2.5)		(2.8)
Other comprehensive income (loss)	Other comprehensive income (loss)	(3.0)		0		9.5		(4.5)		2.0		Other comprehensive income (loss)	1.1		(3.8)		(8.8)		7.2		(4.3)
Balance as of September 30, 2020		$	(7.8)	$	(15.6)	$	(3.5)	$	(40.5)	$	(67.4)
Balance as of March 31, 2021												Balance as of March 31, 2021	$	(5.6)	$	(11.7)	$	(3.8)	$	(29.0)	$	(50.1)

The following pension and other post-employment benefit reclassifications were made from AOCL to the Condensed Consolidated Statements of Operations and Other Comprehensive Income (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Amortization of pension and other post-employment liability adjustments	Amortization of pension and other post-employment liability adjustments									Amortization of pension and other post-employment liability adjustments
Prior service credits (1)	Prior service credits (1)	$	0	$	(0.1)	$	(0.2)	$	(0.5)	Prior service credits (1)		$	(0.1)	$	0
Actuarial losses (1)	Actuarial losses (1)	0.4		0.1		1.0		0.4		Actuarial losses (1)		0.4		0.3
Pension settlement charge	Pension settlement charge	1.3		9.8		2.8		10.4		Pension settlement charge		1.6		0.7
Total before tax	Total before tax	1.7		9.8		3.6		10.3		Total before tax		1.9		1.0
Tax benefit		(0.4)		(2.7)		(0.9)		(2.7)
Income tax expense										Income tax expense		(0.4)		(0.2)
Net of tax	Net of tax	$	1.3	$	7.1	$	2.7	$	7.6	Net of tax		$	1.5	$	0.8

(1) These AOCL 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 4 for additional information.

The following table summarizes the unrealized gains (losses) on derivative instruments, including the impact of components reclassified into net income from AOCL, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Unrealized gain (loss) on derivative instruments	Unrealized gain (loss) on derivative instruments	$	0	$	(0.9)	$	(7.6)	$	(6.9)	Unrealized gain (loss) on derivative instruments		$	0.1	$	(6.8)
Loss on derivatives reclassified into income	Loss on derivatives reclassified into income	1.6		0.3		3.5		0.5		Loss on derivatives reclassified into income		1.3		0.6
Total before tax	Total before tax	1.6		(0.6)		(4.1)		(6.4)		Total before tax		1.4		(6.2)
Tax (expense) benefit	Tax (expense) benefit	(0.4)		0.2		1.1		1.7		Tax (expense) benefit		(0.3)		1.6
Net of tax	Net of tax	$	1.2	$	(0.4)	$	(3.0)	$	(4.7)	Net of tax		$	1.1	$	(4.6)

NOTE 14. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income applicable to common stockholders for the period by the weighted-average number of shares of common stock outstanding during the same period. The Company’s Series A Preferred Stock shares are considered participating securities, as these securities have non-forfeitable rights to participating dividends (as defined in the Investment Agreement) if and to the extent that the Company pays any participating dividends, and thus require the two-class method of computing EPS. Under the two-class method, all earnings (distributed and undistributed) are allocated between the common shares and the participating securities. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, there were no undistributed earnings allocated to the participating securities.

Diluted EPS is similarly computed, but includes the weighted-average dilutive effect, if any, of all outstanding potentially dilutive securities. Diluted EPS is calculated under the treasury stock method for equity awards issued under the Company’s stock compensation plans, and under both the two-class and if-converted methods for the Series A Preferred Stock, with the more dilutive amount reported. Potentially dilutive securities having an anti-dilutive effect are excluded from the calculation.

The following table sets forth the computation of basic and diluted EPS for the periods presented (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
Numerator:	Numerator:									Numerator:
Net earnings		$	7.0	$	17.5	$	8.3	$	57.1
Net earnings (loss)										Net earnings (loss)		$	(1.9)	$	10.9
Less: Preferred stock dividends	Less: Preferred stock dividends	(1.4)		0		(1.4)		0		Less: Preferred stock dividends		(1.9)		0
Net earnings available to common stockholders (Basic and Diluted)		$	5.6	$	17.5	$	6.9��	$	57.1
Net earnings (loss) attributable to common stockholders (Basic and Diluted)										Net earnings (loss) attributable to common stockholders (Basic and Diluted)		$	(3.8)	$	10.9

Denominator: (shares in thousands)	Denominator: (shares in thousands)									Denominator: (shares in thousands)
Denominator for basic EPS - weighted-average shares	Denominator for basic EPS - weighted-average shares	49,112		48,873		49,057		48,835		Denominator for basic EPS - weighted-average shares		49,264		48,973

Potentially dilutive shares resulting from stock plans (1)	Potentially dilutive shares resulting from stock plans (1)	329		701		428		525		Potentially dilutive shares resulting from stock plans (1)		0		735
Denominator for diluted EPS - weighted-average shares	Denominator for diluted EPS - weighted-average shares	49,441		49,574		49,485		49,360		Denominator for diluted EPS - weighted-average shares		49,264		49,708

Net earnings per share:
Net earnings (loss) per share:										Net earnings (loss) per share:
Basic	Basic	$	0.11	$	0.36	$	0.14	$	1.17	Basic		$	(0.08)	$	0.22
Diluted	Diluted	$	0.11	$	0.35	$	0.14	$	1.16	Diluted		$	(0.08)	$	0.22

(1) For the three months ~~and nine months~~ ended ~~September 30, 2020,~~March 31, 2021, approximately ~~8.0~~10.6 million ~~and 2.9 million, respectively,~~ of potentially dilutive securities, including common shares issuable upon assumed conversion of the Series A Preferred Stock, and outstanding equity awards granted under stock compensation plans, had the effect of being anti-dilutive and were excluded from the computation of diluted EPS. Of ~~these~~this aggregate ~~exclusions, 0.4~~exclusion, approximately 0.6 million ~~in both periods~~ represents options to purchase common stock and unvested shares of restricted stock or restricted stock ~~units, while~~units. For the ~~remaining balance represents common shares issuable upon~~three months ended March 31, 2020, approximately 0.1 million stock options had the ~~assumed conversion~~effect of being anti-dilutive and were excluded from the ~~Series A Preferred Stock.~~

computation of diluted EPS.

NOTE 15. INCOME TAXES

The Company develops interim income tax provisions based on estimates of the effective tax rates expected to apply per tax domicile for the current annual reporting period. These estimates are reevaluated each quarter and updated as necessary. The tax effects of any discrete items are recorded in the period in which they occur and are excluded from the interim estimates of the effective annual rates.

On March 27, 2020, the U.S. federal government enacted tax legislation under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) in response to the economic impacts of the spread of COVID-19. The CARES Act provides, among other things, relief to corporate taxpayers by permitting additional carryback allowances for net operating losses (“NOLs”) incurred for periods beginning after January 1, 2017 and before January 1, 2021. The CARES Act also provides changes to the limitations on interest expense deductibility for tax years beginning in 2019 and 2020.

~~The~~For the three months ended March 31, 2021 and 2020, the Company recognized income tax expense at an effective rate of negative 8.8% and an income tax ~~expense (benefit)~~benefit at an effective rate of negative 54.6%, respectively. The negative effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2020 at~~March 31, 2021, was primarily resultant from discrete items recorded in the period related to share-based payment arrangements, while the negative effective ~~rates of 50.7% and (53.0)%, respectively, and income tax expense~~benefit rate for the three ~~and nine~~ months ended ~~September 30, 2019 at effective rates of 25.4% and 25.7%, respectively. Changes in the effective rates at which a tax benefit or expense~~March 31, 2020, was ~~recognized for the three and nine months ended September 30, 2020 and 2019, were~~ primarily ~~driven by period over period decreases in pretax book income and the impact of the provisions of the CARES Act (specifically,~~resultant from the rate differential onapplied to the carryback of NOLs to tax years ~~where~~when the U.S. federal income tax rate was 35.0%, compared to the ~~current~~21.0% rate ~~of 21.0%). Changes~~applicable to all periods included in these condensed consolidated financial statements.

Period over period changes in the ~~impact of COVID-19 on~~effective rates at which a tax expense or benefit was recognized were primarily driven by the ~~Company’s operations during the fourth quarter of 2020 could result in revisions to the estimated tax benefit related to the provisions~~impact of the CARES Act ~~incorporated into its estimated annualized effective tax rate tax for 2020.~~and the significant restructuring costs incurred during the first quarter of 2020, neither of which applied to the same degree during the first quarter of 2021. Additional factors impacting the change in rates include ~~vesting~~timing and quantity of equity ~~awards, discrete significant restructuring costs,~~award vesting transactions and changes in the relative taxable income in the countries and states in which the Company operates.

NOTE 16. SEGMENT INFORMATION

~~The Company has 2 reportable segments: Office and Lifestyle. The Office reportable segment is~~Following the Segment Reorganization (see Note 1), the Company’s operations are comprised of the ~~operations of the Office operating segment.~~ Workplace and Lifestyle segments.

The ~~Lifestyle reportable segment is an aggregation of the Lifestyle, Europe, and Muuto operating segments. All unallocated expenses are included within Corporate.~~

~~The Office~~Workplace segment includes a complete range of ~~workplace~~ products that address diverse workplace planning paradigms in North ~~America and Europe.~~America. These products include: office systems furniture, seating, storage, tables (conference, training), desks (fixed and height-adjustable), textiles, high-quality fabrics, felt, leather and KnollExtra® accessories. The ~~Office~~businesses comprising the Workplace segment ~~includes DatesWeiser~~TM ~~and Fully®. DatesWeiser~~TM~~, known for its sophisticated meeting and conference tables and credenzas, sets~~serve a ~~standard~~broad range of ~~design, quality and technology integration. Fully is an e-commerce furniture brand selling height-adjustable desks, ergonomic chairs and accessories principally for individual home offices~~customers, from geographically diverse global accounts to consumers and small ~~businesses.~~businesses, and do so through various physical and digital interfaces, including a direct sales force, Company and dealer showrooms, and multiple e-commerce platforms.

The Lifestyle segment ~~includes KnollStudio®, HOLLY HUNT®, Muuto®, KnollTextiles®, Spinneybeck® (including Filzfelt®), and Edelman® Leather. Lifestyle products,~~product offerings, which are distributed globally, include iconic seating, lounge furniture, side, café and dining chairs, ~~as well as conference, training,~~ dining and occasional tables, lighting, rugs, ~~textiles, high-quality fabrics, felt,~~ leather and related architectural products. The businesses comprising the Lifestyle segment serve affordable luxury and high-end luxury markets that often blur the distinction between commercial and residential spaces, but understand and appreciate the impact that furnishings borne out of exceptional design and made with high-quality, innovative materials can have on their respective environments. Lifestyle products are sold through a global network of showrooms, e-commerce websites, retail stores, independent dealers and a direct sales force.

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 ofinto how the chief operating decision maker reviews the results for the Company.

1815

The ~~tables below present~~following table summarizes segment operating results for the ~~Company’s segment information with Corporate costs excluded from reporting segment~~periods presented. Segment results for the three months ended March 31, 2020, have been restated to conform to current year presentation (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019				2021		2020
SALES(1)	SALES(1)									SALES(1)
Office		$	193.2	$	219.1	$	589.9	$	644.5
Lifestyle		116.2		137.4		333.6		412.1

Knoll, Inc.		$	309.4	$	356.5	$	923.5	$	1,056.6
INTERSEGMENT SALES (1)
Office		$	0	$	0.6	$	0.4	$	1.5
Workplace										Workplace		$	150.4	$	227.5
Lifestyle	Lifestyle	2.2		2.2		6.7		7.2		Lifestyle		113.8		112.5

Knoll, Inc.	Knoll, Inc.	$	2.2	$	2.8	$	7.1	$	8.7	Knoll, Inc.		$	264.2	$	340.0

OPERATING PROFIT	OPERATING PROFIT									OPERATING PROFIT
Office		$	5.4	$	18.3	$	10.1	$	46.8
Workplace										Workplace		$	(3.6)	$	9.3
Lifestyle	Lifestyle	16.0		25.0		38.7		71.3		Lifestyle		12.8		8.2
Corporate	Corporate	(2.1)		(6.6)		(28.1)		(18.3)		Corporate		(6.9)		(6.1)
Knoll, Inc.	Knoll, Inc.	$	19.3	$	36.7	$	20.7	$	99.8	Knoll, Inc.		$	2.3	$	11.4

(1) Sales presented above are to external customers only. Intersegment sales ~~are presented on a cost-plus basis, which takes into consideration~~were not material during any of the ~~effect of transfer prices between legal entities.~~periods presented.

~~The changes~~Changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2021, are as follows (in millions):

Office
Segment Lifestyle Segment Total
Balance as of December 31, 2019 $ 54.3 $ 277.8 $ 332.1
Foreign currency translation adjustment (0.1) 8.3 8.2
Balance as of September 30, 2020 $ 54.2 $ 286.1 $ 340.3


	Workplace		Lifestyle		Total
Balance as of January 1, 2021	$	100.7	$	249.1	$	349.8
Foreign currency translation adjustment	0.1		(8.8)		(8.7)

Balance as of March 31, 2021	$	100.8	$	240.3	$	341.1

In connection with the Segment Reorganization, certain of the Company’s reporting units have changed in composition, and goodwill was reallocated between such reporting units using a relative fair value approach. Accordingly, the Company performed interim goodwill impairment tests in the first quarter of 2021. Based on the results of the tests performed, the Company determined that the fair value of each reporting unit, as reorganized, exceeded its respective carrying amount in each case.

The fair values of the reorganized reporting units as of January 1, 2021, were estimated using similar economic forecasts and assumptions as those used in the testing performed as of October 1, 2020, updated primarily for changes in discount rates. Management judgment is required in the determination of each assumption used in valuation models, and actual results could differ from the estimates. The Company will continue to evaluate goodwill for impairment at least annually as of October 1, and more frequently whenever there are indicators of potential impairment.

NOTE 17. SUBSEQUENT EVENT

On April 19, 2021, Knoll, Inc. (the “Company”) and Herman Miller, Inc. (“Herman Miller”) announced the entry into an Agreement and Plan of Merger, dated April 19, 2021 (the “Merger Agreement”), by and among the Company, Herman Miller and Heat Merger Sub, Inc., a wholly owned subsidiary of Herman Miller (“Merger Sub”). The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly-owned subsidiary of Herman Miller.

At the effective time of the merger, each share of Knoll, Inc. common stock outstanding immediately prior to the effective time will be automatically converted into the right to receive $11.00 in cash and 0.32 shares of Herman Miller common stock. Additionally, all unvested restricted stock, performance-based restricted stock units (“PBRSUs”) and MBRSUs will be exchanged for awards to be settled in Herman Miller common stock based on the Equity Award Exchange Ratio (as defined in the Merger Agreement). Certain of the PBRSUs and all of the MBRSUs will be modified to set the performance measurement to be achieved at 100% and to continue to vest based solely on the respective service period.

In connection with the closing of the transaction, Herman Miller will purchase all of the outstanding shares of Knoll Inc.’s preferred stock from Investindustrial VII L.P. (“Investindustrial”) for a fixed cash consideration of $253 million, representing an equivalent price of $25.06 for each underlying share of Knoll, Inc. common stock. Investindustrial has entered into a voting agreement to vote in favor of the transaction at the special meeting of Knoll shareholders to be held in connection with the transaction.

The transaction is expected to close by the end of the third quarter of 2021, subject to the approval by Knoll and Herman Miller shareholders, the receipt of required regulatory approvals and the satisfaction of closing conditions.

The Merger Agreement contains certain termination rights for the Company and Herman Miller. Upon termination of the Merger Agreement under specified circumstances, such as the Company’s acceptance of a superior proposal or the Company’s Board of Directors’ withdrawal of its recommendation regarding the planned transaction, or failure to obtain the necessary approval from the Company’s shareholders, the Company may be required to pay Herman Miller a termination fee as high as $43.0 million. Likewise, should the stockholders of Herman Miller fail to approve the transaction, or otherwise if Herman Miller is not able to complete the transaction (as described in the 8-K filed on April 22, 2021), Herman Miller would be required to pay a termination fee to the Company.

1917

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Forward-looking Statements

This quarterly report on Form 10-Q contains forward-looking statements, principally in the sections entitled “Business,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures About Market Risk.” Statements and financial discussion and analysis contained in this Form 10-Q that are not historical facts are forward-looking statements. These statements discuss goals, intentions and expectations as to future ~~trends, plans, events,~~financial position, results of operations, ~~or financial condition, or state other information relating to us, based on our current beliefs~~revenue and profit levels, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as ~~assumptions made by us and information currently available to us. Forward-looking~~ statements ~~generally will be accompanied by~~that include words such as ~~“anticipate,” “if,” “believe,” “plan,” “goals,” “estimate,” “expect,” “intend,” “forecast,” “intend,” “may,” “could,” “should,” “will,”~~"anticipate," "if," "believe," "plan,", "goals," "estimate," "expect," "forecast," "intend," "may," "could," "should," "will," and other similar ~~expressions.~~expressions are forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry, our plans for reduced capital and operating expenditures and enhanced liquidity measures, our integration of acquired businesses, our supply chain and manufacturing footprint optimization plans, our expectations with respect to changes in the way companies implement ~~“work~~"return to work", "work from ~~home”~~home" and remote work strategies, and our expectations with respect to the payment of future dividends and leverage. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. Except as required under the Federal securities laws and the rules and regulations of the SEC, we do not undertake a duty to update such forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include corporate spending and service-sector employment, price competition, acceptance of our new products, the pricing and availability of raw materials and components, foreign currency exchange, transportation costs, demand for high quality, well designed furniture and interior solutions, changes in the competitive marketplace, changes in the trends ofin the market for furniture ~~and~~or coverings, and the way and places where people work, the financial strength and stability of our suppliers, customers and dealers, access to capital, our success in designing and implementing our new enterprise resource planning system, our ability to successfully integrate acquired businesses, our supply chain optimization initiatives, the uncertainty and ultimate economic impact of the COVID-19 pandemic and other risks identified in our annual report on Form 10-K, and other filings with the SEC. Many of these factors are outside of our control.

Overview

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

COVID-19

The global outbreak of the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. It has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. As a result, a large portion of the U.S. and global work forces have been operating in remote, out-of-office locations. This has caused disruptions in the demand and distribution of our products to commercial end clients, which are predominately sold in the U.S. While we expect improvement in the commercial business relative to fiscal year 2020 and early 2021, commensurate with the U.S. and global work forces returning to office-based working locations, it is difficult to tell when and if commercial demand will return to pre-pandemic levels. The ultimate extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to manufacture and ship product in the expected timeframe, will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.

During 2020, we have experienced the temporary closures of certain facilities. At many of our facilities, we have been experiencing reduced productivity and increased employee absences, which we expect to continue as COVID-19 continues to spread and impact populations where our facilities are located.As a result of the COVID-19 pandemic and the measures taken to prevent the spread of the disease or to address its effect, a significant number of our employees are working from home, and we have altered our manufacturing operations to allow for appropriate social distancing, hygiene, cleaning, and disinfecting. In our supply chain, we have experienced isolated instances of suppliers temporarily closing their operations, delaying order fulfillment or limiting their production, and we are utilizing alternative supply arrangements as needed.

~~We have taken~~took steps to address the impacts the COVID-19 pandemic ~~has~~had on the Company inand to allow the ~~following ways:~~

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

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

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

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

•~~we identified in October 2020 five showrooms that we plan to close in cities with a strong independent dealer presence;~~

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

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

~~Following these actions, we continue to believe that we will~~ emerge from these events well positioned for long-term growth, though we cannot reasonably estimate the ultimate duration and severity of this global pandemic or its ultimate impact on the global economy and our business results. Some of these actions were to resize our employee base, implement a wage freeze and ~~results. Given our financial strength,~~reduction of discretionary spending to maximize liquidity. In the first quarter of 2021, we implemented plans to close five US-based showrooms.

We expect to be able to maintain adequate liquidity as we manage through the current environment. We will continue to actively monitor the potential impacts of COVID-19 and related events on our industry, the financial markets and the overall

economy. In response to the current market environment, we will continue to expand our e-commerce presence, increasing the accessibility of our products to consumers and will continue to expand our work from home offerings.

Business Highlights

~~During the last decade~~On April 19, 2021, we ~~have diversified our sources of revenue among our varying operating segments. Over the last two years, our efforts to diversify have included~~jointly announced the acquisition of ~~Fully in August 2019, a Portland, Oregon based e-commerce company servicing~~Knoll by Herman Miller. The transaction is expected to close by the ~~small business~~end of the third quarter, and ~~consumer home office market, the acquisition of Muuto in January 2018, a Danish-based global commercial furniture design~~is subject to shareholder and distribution company, and multiple organic product development and design projects that have enhanced our portfolio and client offerings. We expect to continue to develop our acquired businesses and expand organically, be acquisitive on an opportunistic basis, continue our efforts to improve profitability and continue our efforts to build our digital presence. We believe we are well positioned to continue to build on these initiatives and to benefit from future workstyles that will include a greater mix of work from home options and the need for new layouts to facilitate social distancing requirements in the workplaces. The greater mix of work from home has led to a shift in our mix of revenue to residential, which now represents approximately one-third from one-fifth in the prior year period.regulatory approvals.

~~Our efforts to diversify our sources of revenue among our operating segments has not detracted from our continued focus on improving the operating performance of our Office segment.~~ We announced a restructuring plan in January 2020 involving a reduction of our fixed cost footprint that will occur over the next two years and will yield significant savings on an annualized ~~basis as we near the end of 2021.~~basis. A significant component of the plan involved the closure and sale of our Grand Rapids, Michigan facility, which was completed at the end of the second quarter of 2020. Additionally, in 2020 we executed further reductions in force of approximately 20% of our ~~US workforce and plan to close~~global workforce. During the fourth quarter of 2020, we announced the closure of five USNorth American showrooms ~~by the end of~~which we completed during the first quarter of 2021. During the first quarter of 2021, we executed further reductions in force at our manufacturing location in Toronto, Canada. The lean initiatives that were executed ~~in 2019,~~over the past several years, as well as the cost cutting initiatives described above, have helped to temper the margin ~~reductions due to~~impacts from reduced sales volume ~~as a result~~because of the current economic environment.

We are looking beyond the traditional office product categories of systems, task seating and storage, to furniture that supports activity areas and the in-between spaces where people meet. Additionally, we believe that our success in traditional office products gives us an advantage throughout the workplace. The commercial market has decreased with people working remotely, and we expect that trend to continue into 2021. While we can’t know how long the decline will last, we believe the decline will extend into 2021. Over the long term, the office will remain an indispensable part of the workplace ecosystem and we anticipate an increase in demand when businesses do return to the office. However, the business landscape will be a dynamic that includes a more permanent work from home component in an overall environment that continues to elevate the importance of a well-designed home. Our Rockwell Unscripted collection, as well as Muuto offerings, encompass every product category ranging from seating and lounge to architectural walls and storage. These offerings address the needs of organizations that seek alternatives to the traditional workspace, and are substantially additive to our current product portfolio. The acquisition of Fully broadens our outreach to small business and consumer markets through an e-commerce platform. In July 2020, the Company launched “Knoll + Muuto Work from Home” furniture, lighting and accessories through its existing knoll.com website, which responds to the need for good design for today’s work from home lifestyle. Consumers can now shop online for work from home products that bring the trademark design, comfort and performance of the Knoll and Muuto brands to their doorsteps. We aim to increase profitability with these product initiatives, operational improvements we have discussed, and investments in our physical and technological infrastructure.

We can leverage the breadth of our product portfolio across channels where and when that makes sense, taking advantage of whichever market opportunity may be the healthiest and most fruitful. Whether online, in our own New York and

Los Angeles retail shops, at to-the-trade showrooms in high end design centers or through more traditional residential retailers and contract furniture dealers and showrooms, our distribution strategy offers customers the flexibility to access our product solutions easily on their own terms. As a result, we have been able to take advantage of the rapid shift to work from home while simultaneously benefiting from the investments consumers are making in their residences, as furnishings become a larger percentage of consumer discretionary spending.

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

Similarly, we have introduced digital technologies in our Knoll shops in New York and Los Angeles, locations that are not only driving local growth but also are helping us work remotely with designers and clients in other geographies. It is critical that we continue to leverage these bricks and mortar selling investments on a broader scale. In tandem with our growing success digitally and our relationships with residential dealers and electronic retailers in Europe and Asia, we are also focusing on expanding the breadth of our Muuto and KnollStudio residential offerings into under-penetrated home categories with meaningful growth potential. Our e-commerce sales represent 10% of our total sales in the third quarter of 2020 up from 2% for the same period a year ago due to our organic investments in Knoll+Muuto and the Fully acquisition.

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

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

Results of Operations

Comparison of Consolidated Results for the Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		Three Months Ended September 30,						Change						Three Months Ended March 31,						Change
		2020			2019			$		%				2021			2020			$		%
		(Dollars in millions, except per share data)											(Dollars in millions, except per share data)
Net Sales	Net Sales	$	309.4		$	356.5		$	(47.1)	(13.2)	%	Net Sales		$	264.2		$	340.0		$	(75.8)	(22.3)	%
Gross profit	Gross profit	113.4			140.4			(27.0)		(19.3)	%	Gross profit		95.7			122.3			(26.6)		(21.8)	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	90.8			103.6			(12.8)		(12.4)	%	Selling, general, and administrative expenses		89.8			103.3			(13.5)		(13.4)	%

Restructuring charges	Restructuring charges	3.3			0.1			3.2		3,200.0	%	Restructuring charges		3.6			7.6			(4.0)		(52.6)	%
Operating profit	Operating profit	19.3			36.7			(17.4)		(47.4)	%	Operating profit		2.3			11.4			(9.1)		(93.7)	%
Interest expense	Interest expense	4.1			5.5			(1.4)		(25.3)	%	Interest expense		3.0			4.9			(1.9)		(39.4)	%
Loss on extinguishment of debt		0.2			0.4			(0.2)		(57.4)	%

Pension settlement charge	Pension settlement charge	1.3			9.8			(8.5)		(87.1)	%	Pension settlement charge		1.6			0.7			0.9		138.6	%
Other (income) expense, net	Other (income) expense, net	(0.5)			(2.5)			2.0		(81.5)	%	Other (income) expense, net		(0.6)			(1.2)			0.6		(77.2)	%
Income tax expense	Income tax expense	7.2			6.0			1.2		20.8	%	Income tax expense		0.2			(3.9)			4.1		(103.9)	%
Net earnings	Net earnings	7.0			17.5			(10.5)		(60.0)	%	Net earnings		(1.9)			10.9			(12.8)		(105.0)	%

Net earnings per share:	Net earnings per share:											Net earnings per share:
Basic	Basic	$	0.11		$	0.36		$	(0.25)	(69.4)	%	Basic		$	(0.08)		$	0.22		$	(0.30)	(136.4)	%
Diluted	Diluted	$	0.11		$	0.35		$	(0.24)	(68.6)	%	Diluted		$	(0.08)		$	0.22		$	(0.30)	(136.4)	%
Statistical Data	Statistical Data											Statistical Data
Gross profit %	Gross profit %	36.7		%	39.4		%					Gross profit %		36.2		%	36.0		%
Operating profit (loss) %	Operating profit (loss) %	6.2		%	10.3		%					Operating profit (loss) %		0.9		%	3.4		%
Selling, general, and administrative expenses %	Selling, general, and administrative expenses %	29.3		%	29.1		%					Selling, general, and administrative expenses %		34.0		%	30.4		%

Net Sales

Net sales for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$309.4~~$264.2 million, a decrease of ~~$47.1~~$75.8 million, or ~~13.2%~~22.3%, from sales of ~~$356.5~~$340.0 million for the three months ended ~~September 30, 2019.~~March 31, 2020. Net sales decreased primarily due to a decline in volume ~~related to~~in the ~~impacts on the market demand from COVID-19,~~Workplace segment, partially offset by strong demand in our ~~work from home and e-commerce business, as well as an increase in residential sales.~~Lifestyle businesses.

Gross Profit

Gross profit for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$113.4~~$95.7 million, a decrease of ~~$27.0~~$26.6 million, or ~~19.3%~~21.8%, from gross profit of ~~$140.4~~$122.3 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease for the three months ended ~~September 30, 2020~~March 31, 2021 was due primarily to ~~unfavorable fixed cost leverage in our manufacturing facilities from decreased volume absorption.~~reduced sales volume.

Operating Profit

Operating profit for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$19.3~~$2.3 million, a decrease of ~~$17.4~~$9.1 million, or ~~47.4%~~93.7%, from operating profit of ~~$36.7~~$11.4 million for the three months ended ~~September 30, 2019.~~March 31, 2020. Operating profit as a percentage of sales decreased from ~~10.3%~~3.4% for the three months ended ~~September 30, 2019~~March 31, 2020 to ~~6.2%~~0.9% for the three months ended ~~September 30, 2020,~~March 31, 2021, primarily as a result of the gross profit decline, partially offset by a reduction in operating expenses primarily driven by reduced employee-related expenses as a result of workforce reduction actions taken in 2020 and discretionary spending.

Selling, general, and administrative expenses for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$90.8~~$89.8 million, or ~~29.3%~~34.0% of sales, a decrease of ~~$12.8~~$13.5 million from ~~$103.6~~$103.3 million, or ~~29.1%~~30.4% of sales, for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease was due primarily to reduced employment costs including workforce reduction actions ~~and lower benefit costs, combined with~~taken in 2020, as well as reduced discretionary ~~spending, partially offset by the inclusion of Fully.~~spending.

Restructuring charges in the three months ended ~~September 30, 2020~~March 31, 2021 were primarily related to expenses associated with the Company’s previously announced plans to close its Grand Rapids, Michigan manufacturing plant and consolidate operations into its remaining North American manufacturing plants, as well as workforce reductions resulting from COVID-19 market ~~conditions.~~conditions, expenses associated with showroom closures in North America, and costs related to our North American supply chain optimization.

Interest Expense

Interest expense for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$4.1~~$3.0 million, a decrease of ~~$1.4~~$1.9 million from interest expense of ~~$5.5~~$4.9 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease was due primarily to lower average debt balances resulting from the repayment of revolver and term loan borrowings following the issuance of preferred stock, and lower average interest rates during the ~~third~~first quarter of ~~2020~~2021 from the prior year period. During the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ our weighted average interest rate was approximately ~~3.4%~~3.2% and 3.9%, respectively.

Pension Settlement Charge

Pension settlement charges for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$1.3~~$1.6 million, ~~a decrease~~an increase of ~~$8.5~~$0.9 million from ~~$9.8~~$0.7 million for the three months ended ~~September 30, 2019.~~March 31, 2020. Pension settlement charges resulted from ~~the purchase of annuities in connection with the termination and funding of the pension plan for our bargaining unit associates during the third quarter of 2019, and~~ cash payments of lump sum elections for each of the three month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Other (Income) Expense, net

During the three months ended ~~September 30, 2020,~~March 31, 2021, other income was ~~$0.5~~$0.6 million compared to ~~$2.5~~$1.2 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease in other income was due primarily to a reduction of foreign exchange transaction gains and pension income.

Income Tax Expense

On March 27, 2020, the U.S. government enacted tax legislation under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in response to the economic impacts of the spread of COVID-19. The CARES Act provides, among other things, relief to corporate taxpayers by permitting additional carryback allowances for net operating losses (“NOLs”) incurred for periods beginning after January 1, 2017 and before January 1, 2021. The CARES Act also provides changes to the limitation on interest expense deductibility for tax years beginning in 2019 and 2020.

~~The Company recognized income tax expense for~~For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~at an effective rate of 50.7%, compared to~~the Company recognized income tax expense at an effective rate of ~~25.4%~~negative 8.8% and an income tax benefit at an effective rate of negative 54.6%, respectively. The negative effective tax rate for the three months ended ~~September 30, 2019. The change~~March 31, 2021, was due primarily from discrete items recorded in the period related to share-based payment arrangements, while the negative effective benefit rate ~~at which income tax expense was recognized~~ for the three months ended ~~September 30,~~March 31, 2020, ~~compared to the same period in 2019~~ was due primarily ~~driven by the period over period decrease in pretax book income and the impact of the CARES Act (specifically,~~from the rate differential onapplied to the carryback of NOLs to tax years ~~where~~when the U.S. federal income tax rate was 35.0%, compared to the ~~current~~21.0% rate applicable to all periods included in these condensed consolidated financial statements.

Period over period changes in the effective rate at which a tax expense or benefit was recognized were primarily driven by the impact of ~~21.0%).~~the CARES Act and the significant restructuring costs incurred during the first quarter of 2020, neither of which applied to the same degree during the first quarter of 2021. Additional factors impacting the change in rates include ~~vesting~~timing and quantity of equity ~~awards, discrete significant restructuring costs,~~award vesting transactions and changes in the relative taxable income in the countries and states in which the Company operates.

~~Comparison of Consolidated Results for the Nine Months Ended September 30, 2020 and 2019~~

Nine Months Ended September 30, Change
2020 2019 $ %
(Dollars in millions, except per share data)
Net Sales $ 923.5 $ 1,056.6 $ (133.1) (12.6) %
Gross profit 331.4 404.9 (73.5) (18.2) %
Selling, general, and administrative expenses 278.8 304.9 (26.1) (8.5) %
Loss on fair value remeasurement of contingent consideration 12.4 — 12.4 100.0 %
Restructuring charges 19.5 0.2 19.3 8,671.2 %
Operating profit 20.7 99.8 (79.1) (79.3) %
Interest expense 13.6 16.2 (2.6) (16.0) %
Loss on extinguishment of debt 0.2 0.4 (0.2) (57.4) %
Pension settlement charges 2.8 10.4 (7.6) (73.6) %
Other income, net (1.3) (4.1) 2.8 (68.6) %
Income tax expense (benefit) (2.9) 19.8 (22.7) (114.7) %
Net earnings 8.3 57.1 (48.8) (85.5) %
Net earnings per share:
Basic $ 0.14 $ 1.17 $ (1.03) (88.0) %
Diluted $ 0.14 $ 1.16 $ (1.02) (87.9) %
Statistical Data
Gross profit % 35.9 % 38.3 %
Operating profit % 2.2 % 9.4 %
Selling, general, and administrative expenses % 30.2 % 28.9 %

~~Net Sales~~

Net sales for the nine months ended September 30, 2020 were $923.5 million, a decrease of $133.1 million, or 12.6%, from sales of $1,056.6 million for the nine months ended September 30, 2019. Net sales for the Company decreased primarily due to a significant decline in volume related to the impacts on market demand from COVID-19, partially offset by the inclusion of Fully’s work-from-home e-commerce offering which experienced strong demand, as well as strong e-commerce and residential demand.

~~Gross Profit~~

Gross profit for the nine months ended September 30, 2020 was $331.4 million, a decrease of $73.5 million, or 18.2%, from gross profit of $404.9 million for the nine months ended September 30, 2019. The decrease for the nine months ended September 30, 2020 was due primarily to unfavorable fixed cost leverage in our manufacturing facilities from decreased volume absorption, partially offset by positive net price realization.

~~Operating Profit~~

Operating profit for the nine months ended September 30, 2020 was $20.7 million, a decrease of $79.1 million, or 79.3%, from operating profit of $99.8 million for the nine months ended September 30, 2019. Operating profit as a percentage of sales decreased from 9.4% for the nine months ended September 30, 2019 to 2.2% for the nine months ended September 30, 2020, primarily as a result of the gross profit decline and restructuring charges associated with the Company’s closure of its Grand Rapids, Michigan manufacturing plant and consolidation of operations into its remaining North American manufacturing plants, a $12.4 million contingent consideration remeasurement charge related to Fully and restructuring costs associated with workforce reduction, partially offset by the reduction in selling, general, and administrative expenses.

Selling, general, and administrative expenses for the nine months ended September 30, 2020 were $278.8 million, or 30.2% of sales, a decrease of $26.1 million from $304.9 million, or 28.9% of sales, for the nine months ended September 30, 2019. The decrease was due primarily to reduced employment costs including workforce reduction actions, lower volume-based compensation, and lower benefit costs, combined with reduced discretionary spending partially offset by the inclusion of Fully.

Restructuring charges in the nine months ended September 30, 2020 were primarily related to expenses associated with the Company’s closure of its Grand Rapids, Michigan manufacturing plant and consolidation of operations into its remaining North American manufacturing plants, as well as workforce reductions resulting from COVID-19 market conditions.

During the nine months ended September 30, 2020, the Company remeasured its contingent consideration related to the acquisition of Fully given an expected continued increase in work from home sales, and recorded a $12.4 million charge.

~~Interest Expense~~

Interest expense for the nine months ended September 30, 2020 was $13.6 million, a decrease of $2.6 million from interest expense of $16.2 million for the nine months ended September 30, 2019. The decrease was due primarily to lower average interest rates and average debt balances resulting from the repayment of revolver and term loan borrowings following the issuance of preferred stock during the third quarter of 2020. During the nine months ended September 30, 2020 and 2019, our weighted average interest rate was approximately 3.3% and 4.0%, respectively.

~~Pension Settlement Charges~~

~~Pension settlement charges for the nine months ended September 30, 2020 was $2.8 million, an decrease of $7.6 million from $10.4 million for the nine months ended September 30, 2019.~~ ~~Pension settleme~~nt charges resulted from the purchase of annuities in connection with the termination and funding of the pension plan for our bargaining unit associates during the third quarter of 2019 and cash payments of lump sum elections for each of the nine month periods ended September 30, 2020 ~~and 2019.~~

~~Other Income, net~~

During the nine months ended September 30, 2020 and 2019, other income was $1.3 million and $4.1 million, respectively. The decrease in other income was due primarily related to a reduction of pension income.

~~Income Tax Expense~~

The Company recognized an income tax benefit for the nine months ended September 30, 2020 at an effective rate of 53.0%, compared to income tax expense at an effective rate of 25.7% for the nine months ended September 30, 2019. The change in the effective rate at which a tax benefit or expense was recognized for the nine months ended September 30, 2020 and 2019, was primarily driven by the period over period decrease in pretax book income and the impact of the CARES Act (specifically, the rate differential on the carryback of NOLs to years where the U.S. federal income tax rate was 35.0%, compared to the current rate of 21.0%).Changes in the impact of COVID-19 on the Company’s operations during the second half of 2020 could result in revisions to the estimated tax benefit related to the provisions of the CARES Act incorporated into its estimated annualized effective tax rate for 2020. Additional factors impacting the change in rates include vesting of equity awards, discrete significant restructuring costs, and changes in the relative taxable income in the countries and states in which the Company operates.

2620

Segment Reporting

Following the Segment Reorganization (see Note 1 to the condensed consolidated financial statements), the Company’s operations are comprised of the Workplace and Lifestyle segments.

The ~~Company has two reportable segments: Office and Lifestyle.~~

The businesses comprising the Lifestyle segment serve affordable luxury and high-end luxury markets that often blur the distinction between commercial and residential spaces, but understand and appreciate the impact that furnishings borne out of exceptional design and made with high-quality, innovative materials can have on their respective environments. Lifestyle products are sold through a global network of showrooms, e-commerce websites, retail stores, independent dealers and a direct sales force.

Comparison of Segment Results for the Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		Three Months Ended September 30,				Change						Three Months Ended March 31,				Change
		2020		2019		$		%				2021		2020		$		%
		(Dollars in millions)									(Dollars in millions)
SALES	SALES									SALES
Office		$	193.2	$	219.1	$	(25.9)	(11.8)	%
Workplace										Workplace		$	150.4	$	227.5	$	(77.1)	(33.9)	%
Lifestyle	Lifestyle	116.2		137.4		(21.2)		(15.5)	%	Lifestyle		113.8		112.5		1.3		1.1	%
Knoll, Inc.	Knoll, Inc.	$	309.4	$	356.5	$	(47.1)	(13.2)	%	Knoll, Inc.		$	264.2	$	340.0	$	(75.8)	(22.3)	%
OPERATING PROFIT	OPERATING PROFIT									OPERATING PROFIT
Office		$	5.4	$	18.3	$	(12.9)	(63.7)	%
Workplace										Workplace		$	(3.6)	$	9.3	$	(12.9)	(138.5)	%
Lifestyle	Lifestyle	16.0		25.0		(9.0)		(35.9)	%	Lifestyle		12.8		8.2		4.6		55.8	%
Corporate	Corporate	(2.1)		(6.6)		4.5		(68.2)	%	Corporate		(6.9)		(6.1)		(0.8)		13.1	%
Knoll, Inc.	Knoll, Inc.	$	19.3	$	36.7	$	(17.4)	(47.3)	%	Knoll, Inc.		$	2.3	$	11.4	$	(9.1)	(72.6)	%

~~Office~~Workplace

Net sales for the ~~Office~~Workplace segment for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$193.2~~$150.4 million, a decrease of ~~$25.9~~$77.1 million, or ~~11.8%~~33.9%, when compared with the three months ended ~~September 30, 2019.~~March 31, 2020. This decrease was driven primarily by a significant decline in volume related to the impacts on the market demand from COVID-19, partially offset strong growth in the Company’s work-from-home e-commerce offerings. Operating ~~profit~~loss for the ~~Office~~Workplace segment in the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$5.4~~$3.6 million, a decrease of $12.9 million, or ~~63.7%~~138.5%, from ~~$18.3~~operating profit of $9.3 million when compared with the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease was due primarily to unfavorable fixed cost leverage in our manufacturing facilities from decreased volume absorption, and restructuring charges related to ~~our previously announced plans to close our Grand Rapids, Michigan manufacturing plant and consolidate operations within our remaining North American manufacturing plants.~~workforce reductions as a result of COVID-19. These costs were partially offset by reduced operating expenses primarily related to lower ~~volume-based compensation, employee-related costs and~~ discretionary spending.

Lifestyle

Net sales for the Lifestyle segment for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$116.2~~$113.8 million, ~~a decrease~~an increase of ~~$21.2~~$1.3 million, or ~~15.5%~~1.1%, when compared with the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~decrease~~increase was driven primarily by ~~a significant decline~~higher residential sales and the favorable impact of changes in ~~volume related to the impacts on commercial market demand from COVID-19,~~foreign exchange rates, partially offset by ~~higher demand for e-commerce and residential products.~~reduced sales to commercial end customers. Operating profit for the Lifestyle segment in the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$16.0~~$12.8 million, ~~a decrease~~an increase of ~~$9.0~~$4.6 million, or ~~35.9%~~55.8%, from ~~$25.0~~$8.2 million when compared with the three months ended ~~September 30, 2019.~~March 31, 2020. The ~~decrease~~increase in Operating profit was due primarily to ~~unfavorable fixed cost leverage from~~increased volume, decreased ~~volume, partially offset by reduced operating expenses primarily related to lower volume-based compensation,~~ employee-related costs and reduced discretionary spending.

Corporate

Corporate costs for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$2.1~~$6.9 million, ~~a decrease~~an increase of ~~$4.5~~$0.8 million, when compared with the three months ended September 30, 2019. The decrease is due primarily to reduced employee-related expenses, including a $1.0 million reduction of payroll taxes as a result of an Employee Retention Credit received through the CARES Act, and discretionary spending.

~~Comparison of Segment Results for the Nine Months Ended September 30, 2020 and 2019~~

Nine Months Ended September 30, Change
2020 2019 $ %
(Dollars in millions)
SALES
Office $ 589.9 $ 644.5 $ (54.6) (8.5) %
Lifestyle 333.6 412.1 (78.5) (19.1) %
Knoll, Inc. $ 923.5 $ 1,056.6 $ (133.1) (12.6) %
OPERATING PROFIT
Office $ 10.1 $ 46.8 $ (36.7) (75.9) %
Lifestyle 38.7 71.3 (32.6) (45.6) %
Corporate (28.1) (18.3) (9.8) 61.2 %
Knoll, Inc. $ 20.7 $ 99.8 $ (79.1) (79.3) %

~~Office~~

Net sales for the Office segment for the nine months ended September 30, 2020 were $589.9 million, a decrease of $54.6 million, or 8.5%, when compared with the nine months ended September 30, 2019. The decrease was driven primarily by a significant decline in volume related to the impacts on the market demand from COVID-19, partially offset by the inclusion of Fully’s work-from-home e-commerce offering, which experienced strong demand. Operating profit for the Office segment in the nine months ended September 30, 2020 was $10.1 million, a decrease of $36.7 million, or 75.9%, from $46.8 million when compared with the nine months ended September 30, 2019. The decrease was due primarily to restructuring charges related to our previously announced plans to close our Grand Rapids, Michigan manufacturing plant and consolidate operations within our remaining North American manufacturing plants, and unfavorable fixed cost leverage in our manufacturing facilities from decreased volume absorption. These costs were partially offset by reduced operating expenses primarily related to lower volume-based compensation, employee-related costs and discretionary spending.

~~Lifestyle~~

Net sales for the Lifestyle segment for the nine months ended September 30, 2020 were $333.6 million, a decrease of $78.5 million, or 19.1%, when compared with the nine months ended September 30, 2019. The decrease was due to the government-mandated closures during the second quarter of 2020 as well as decreased demand and volume related to the impacts on the market demand from COVID-19, partially offset by strong e-commerce and residential demand. Operating profit for the Lifestyle segment in the nine months ended September 30, 2020 was $38.7 million, a decrease of $32.6 million, or 45.6%, from $71.3 million when compared with the nine months ended September 30, 2019. The decrease in Operating profit was due primarily to unfavorable fixed cost leverage from decreased volume, partially offset by reduced operating expenses primarily related to lower volume-based compensation, employee-related costs and discretionary spending.

~~Corporate~~

~~Corporate costs for the nine months ended September 30, 2020 were $28.1 million, an increase of $9.8 million, when compared with the nine months ended September 30, 2019.~~March 31, 2020. The increase is due primarily to the ~~$12.4 million charge for~~modification of stock compensation awards and the ~~remeasurement~~execution of ~~contingent consideration related~~plans to ~~the Fully acquisition, and workforce reduction charges related to COVID-19,~~exit five North American showrooms, partially offset by ~~reduced employee-related and discretionary spending.~~employee retention credits that were subsidized by the federal government.

2821

Liquidity and Capital Resources

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


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
		(in millions)					(in millions)
Cash provided by operating activities	Cash provided by operating activities	$	19.4	$	98.1	Cash provided by operating activities	$	14.6	$	(16.4)
Purchases of property and equipment, net	Purchases of property and equipment, net	(28.1)		(32.4)		Purchases of property and equipment, net	(8.9)		(10.7)
Purchase of business, net of cash acquired		—		(30.9)
Proceeds from sales of property and equipment		12.3		—

Cash used in investing activities	Cash used in investing activities	(15.5)		(63.3)		Cash used in investing activities	(9.1)		(10.3)
Proceeds from revolving credit facilities	Proceeds from revolving credit facilities	340.5		350.5		Proceeds from revolving credit facilities	92.0		219.5
Repayment of revolving credit facilities	Repayment of revolving credit facilities	(420.0)		(336.5)		Repayment of revolving credit facilities	(112.0)		(53.5)

Repayment of term loans	Repayment of term loans	(62.2)		(12.8)		Repayment of term loans	(3.6)		(4.2)
Payment of dividends	Payment of dividends	(13.9)		(24.5)		Payment of dividends	(3.6)		(8.9)
Purchase of common stock for treasury	Purchase of common stock for treasury	(4.0)		(3.3)		Purchase of common stock for treasury	(4.3)		(3.8)

Proceeds from issuance of preferred stock, net		161.8		—

Cash provided by (used in) financing activities	Cash provided by (used in) financing activities	1.9		(28.0)		Cash provided by (used in) financing activities	(31.6)		149.1

We have historically funded our business through cash generated from operations, supplemented by debt borrowings. Available cash is primarily used for our working capital needs, ongoing operations, capital expenditures, the payment of quarterly dividends, and the repurchase of shares. Our capital expenditures are primarily related to investments in the improvement of our operating efficiency, innovation and modernization, expanding our e-commerce capabilities, showroom investment, new product tooling, manufacturing equipment and technology infrastructure. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we made aggregate dividend payments of ~~$0.27~~$0.06 per common share, returning ~~$13.9~~$3.6 million of cash to our common ~~shareholders, which includes the payment of $0.6 million of accrued dividends on share-based awards that vested during the period.~~shareholders.

Cash provided by operating activities was ~~$19.4~~$14.6 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$98.1~~cash used in operations of $(16.4) million for the prior year period. Cash provided by operating activities during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was due primarily to ~~$60.0~~$16.6 million combined of net earnings and non-cash charges, primarily comprised of depreciation and amortization of ~~$31.7~~$10.7 million, ~~a $12.4 million loss on the fair value measurement of contingent consideration and $8.8~~$4.2 million of stock-based ~~compensation.~~compensation, and $1.6 million of pension settlement charges. These cash earnings were partially offset by ~~$40.6~~a net loss of $1.9 million, $2.0 million of unfavorable changes in working capital, driven by ~~a decrease in Accounts payable and other liabilities and~~ an increase in ~~inventory,~~Inventory, partially offset by a decrease in Customer ~~receivables.~~receivables and an increase in other liabilities. For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, cash ~~provided by~~used in operating activities consisted of ~~$108.3~~$10.9 million of net earnings and $8.7 million of various non-cash charges, including ~~$28.0~~$11.1 million of depreciation, ~~$10.4~~a $6.3 million deferred income tax benefit, $1.6 million of stock-based compensation and $0.7 million of pension settlement charges, ~~and $7.7 million of stock-based compensation,~~ partially offset by ~~$10.2~~$36.0 million of unfavorable changes in working ~~capital.~~capital driven by increases in Inventory and Customer receivables.

Cash used in investing activities in the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ was ~~$15.5~~$9.1 million and ~~$63.3~~$10.3 million, respectively. Capital expenditures were ~~$28.1~~$8.9 million and ~~$32.4~~$10.7 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively,~~respectively. Capital expenditures were primarily related to investments in digital and information technology resources, distribution and showroom ~~investments, operating expenditures from~~initiatives, continuous improvement and maintenance activities and ~~investments in lean initiatives, and our continued commitment to optimizing our information technology infrastructure.~~ ~~During June 2020, the Company sold its Grand Rapids manufacturing building and received net cash proceeds of $12.3 million.~~ new product development.

Cash ~~flow~~ used in ~~investing~~financing activities was $31.6 million for the ~~nine~~three months ended ~~September 30, 2019 includes the purchase of Fully for $30.9 million, net of~~March 31, 2021, compared to cash ~~acquired, in August 2019.~~

~~Cash~~ provided by financing activities ~~was $1.9~~of $149.1 million for the ~~nine~~three months ended ~~September 30, 2020, compared to cash used in financing activities of $28.0 million for~~March 31, 2020. For the ~~nine~~three months ended ~~September 30, 2019. During July~~March 31, 2021 and March 31, 2020, we ~~issued 164,000 shares of preferred stock and received net cash proceeds of $161.8 million, which were primarily~~ used to repay $50.0 million of term loan debt, and the remainder to repay outstanding borrowings on the revolving line of credit. For the nine months ended September 30, 2020 and September 30, 2019, we used $4.0$4.3 million and ~~$3.3~~$3.8 million, respectively, for share repurchases due to tax remittances related to vested employee share-based equity awards, and used ~~$13.9~~$3.6 million and ~~$24.5~~$8.9 million of cash, respectively, to fund dividend payments to our shareholders. During ~~2020,~~ the ~~Board of Directors reduced the dividend per share from $0.17 paid in the first quarter to $0.04 paid in the second quarter and $0.06 paid in the third quarter. During the nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we repaid ~~$62.2~~$3.6 million of our outstanding term loans and had net repayments under our revolving credit facility of ~~$79.5~~$20.0 million. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we repaid ~~$12.8~~$4.2 million of our outstanding term loans and had net borrowings under our revolving credit facility of ~~$14.0~~$166.0 million.

At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had the following resources available to us to support our business (in millions):


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Cash	Cash	$	14.5	$	8.5	Cash	$	10.8	$	37.3
Availability under revolving credit facility		$	335.9	$	256.4
Unborrowed under revolving credit facility						Unborrowed under revolving credit facility	$	353.9	$	333.9

We are currently in compliance with all of the covenants and conditions under our Amended Credit Agreement. We believe that existing cash balances and internally generated cash flows, together with borrowings available under our credit facility (as constrained by the applicable financial ratio covenants to which we are subject), will be sufficient to fund working capital needs, capital spending requirements, debt service requirements and dividend payments for at least the next twelve months. ~~During June 2020, we executed an agreement to issue $164 million of convertible preferred stock, which closed in July 2020, the net proceeds from which were used to reduce debt.~~ Future debt payments may be paid out of cash flows from operations, from future refinancing of our debt or from equity issuances. Our ability to make scheduled payments of principal, pay interest on or to refinance our indebtedness, satisfy our other debt obligations and to pay dividends to stockholders will depend upon our future operating performance, which is affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

We use our credit facility in the ordinary course of business to fund our working capital needs and, at times, make significant borrowings and repayments under the facility depending on our cash needs and availability at such time. Borrowings under the credit facility may be repaid at any time, but no later than August 2024. See Note 13 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further information regarding this facility.

Environmental Matters

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

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the reported amounts and disclosures in the condensed consolidated financial statements. Actual results may differ from such estimates. On an ongoing basis, we review our accounting policies and procedures. A more detailed review of our critical accounting policies is contained in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

3023

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provided a discussion of our market risk in Part II, Item 7A, of our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. There have been no substantive changes in our market risk described in our Annual Report on Form 10-K except for the items noted below. During the normal course of business, we are routinely subjected to market risk associated with interest rate movements and foreign currency exchange rate movements. Interest rate risk arises from our debt obligations and foreign currency exchange rate risk arises from our non-U.S. operations and purchases of inventory from foreign suppliers.

We also have risk in our exposure to certain materials and transportation costs. Steel, leather, wood products and plastics are all used in our products. For the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we estimated that materials inflation was approximately $0.7 million and transportation inflation was approximately $2.1 million compared to the three months ended March 31, 2020. During the three months ended March 31, 2020, we estimated that materials deflation was approximately $1.6 million, mostly offset by increases in tariffs, and transportation inflation was approximately $0.3 million compared to the nine months ended September 30, 2020. During the nine months ended September 30, 2019, we estimated that materials inflation was approximately $4.5$0.7 million and transportation ~~inflation was approximately $3.3 million,~~costs were flat, respectively. We continue to work to offset price increases in raw materials and transportation through our global sourcing initiatives, cost improvements and price increases to our products.

Interest Rate Risk

At ~~September 30, 2020,~~March 31, 2021, we had ~~$312.2~~$287.0 million in principal of variable rate debt. We are party to an interest rate swap contract that effectively fixes the interest rate on an amount of our variable rate debt equal to the notional amount of the contract, which is currently ~~$250~~$200 million. The interest rate swap, which decreases in notional value over time by $50 million increments at the beginning of each calendar year, matures in January 2023 and carries a fixed rate of 2.63%. Our remaining variable rate debt of ~~$62.2~~$87.0 million is subject to changes in underlying interest rates, and, accordingly, our interest payments will fluctuate. During ~~2020,~~2021, a 1% change in interest rates would result in a change in interest expense of approximately ~~$0.6~~$0.9 million per year. As the notional amount of the swap decreases, each $50 million decrease in the notional amount would be exposed to interest rate fluctuations, and a one percent change in interest rates would change interest expense by an additional $0.5 million.

Foreign Currency Exchange Rate Risk

We manufacture our products in the United States, Canada and Italy, and sell our products primarily in those markets as well as in other countries. Our foreign sales and certain expenses are transacted in foreign currencies. Our production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as our reporting currency is the U.S. dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Canadian Dollar, the Euro, and the Danish Krone. Approximately ~~26.0%~~27.6% and ~~16.8%~~17.0% of our revenues in the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, and ~~30.6%~~30.9% and ~~26.8%~~25.2% of our cost of goods sold in the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, were denominated in currencies other than the U.S. dollar. Foreign currency exchange rate fluctuations from transaction and translation activity resulted in a net ~~loss~~gain of ~~$1.2 million and $1.1~~$0.3 million for each of the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, respectively.~~2020.

From time to time, we enter into foreign currency hedges to manage our exposure to foreign exchange rates. The terms of these contracts are typically one month or less. The net gain or loss upon settlement is recorded as a component of other income, net.

3124

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. We, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report ~~(September 30, 2020)~~(March 31, 2021) (“Disclosure Controls”). Based upon the Disclosure Controls evaluation, our principal executive officer and principal financial officer have concluded that the Disclosure Controls are effective in reaching a reasonable level of assurance that (i) information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. The Company implemented a new financial reporting system, Oracle Financial Consolidation and Close Cloud Service (EPM FCCS) as of August 31, 2020. As part of the implementation process, the company completed several iterations of period close in parallel utilizing the EPM FCCS to ensure the accuracy and integrity of the financial statements generated. As a result of the implementation, certain changes to the Company’s processes and procedures have occurred which resulted in changes to internal controls over financial reporting. Management has evaluated these changes, and ourOur aforementioned principal executive officer and principal financial officer have concluded that there were no ~~other~~ changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3225

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there have been no new material legal proceedings or material changes in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

ITEM 1A. RISK FACTORS

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there have been no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 except as follows:

Risks Relating to the Merger

The ~~COVID-19 pandemic has adversely affected and~~proposed merger (the “Merger”) of the Company with Herman Miller, Inc. is ~~expected~~subject to ~~continue~~certain closing conditions that, if not satisfied or waived, will result in the Merger not being completed, which may cause the market price of the Company’s common stock to ~~pose risks~~decline.

The Merger is subject to ~~our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.~~

~~As previously disclosed, we face risks related~~customary conditions to ~~outbreaks of infectious diseases,~~closing, including the ~~ongoing COVID-19 pandemic. COVID-19 has spread across~~receipt of required approvals of the ~~globe during 2020~~stockholders of the Company and Herman Miller. If any condition to the Merger is ~~impacting economic activity worldwide. The COVID-19 pandemic and measures implemented to prevent its spread~~not satisfied or, ~~address its effects have caused disruption and volatility in~~if permissible, waived, the ~~global capital markets, and have resulted in a global slowdown in economic activity.~~Merger will not be completed. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Although our production facilities have remained substantially operational, these measures have resulted in attenuating activity, including required temporary closures of certain of our facilitiesaddition, Herman Miller and the ~~closure~~Company may terminate the Merger Agreement in certain circumstances. If Herman Miller and the Company do not complete the Merger, the market price of ~~many showrooms~~the Company’s Common Stock may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the Merger will be completed. The Company will also be obligated to pay certain fees and ~~our retail locations. The duration of these measures~~expenses in connection with the Merger, whether or not the Merger is ~~unknown, may be extended and additional measures may be imposed.~~

completed. In addition, the ~~potential effects of COVID-19~~Company has diverted significant management resources in an effort to complete the Merger and ~~other similar outbreaks~~is subject to restrictions contained in the Merger Agreement on the ~~company include, but are~~conduct of its business. If the Merger is not ~~limited~~completed, the Company will have incurred significant costs, including the diversion of management resources, for which it will have received little or no benefit. Further, in specified circumstances, the Company may be required to pay to Herman Miller a termination fee of up to $43 million if the ~~following:~~Merger Agreement is terminated.

Whether or not the proposed Merger is completed, the announcement and pendency of the Merger could cause disruptions in the businesses of the Company and Herman Miller, which could have an adverse effect on our (and Herman Miller’s) business and financial results.

Whether or not the proposed Merger is completed, the announcement and pendency of the Merger could cause disruptions in the businesses of the Company and Herman Miller. Specifically:

•the announcement of the proposed Merger could have an adverse effect on the ability of the Company or Herman Miller to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom the Company or Herman Miller does business;

•~~Reduced consumer and investor confidence, instability in~~ the ~~credit and financial markets, volatile corporate~~announcement of the proposed Merger could have an adverse effect on the Company’s or Herman Miller’s operating results and ~~reduced~~ business generally;

•the proposed Merger could disrupt current plans and ~~consumer spending, which may adversely affect our results~~operations of ~~operations by reducing our sales, margins and/or net income~~the Company and Herman Miller and could result in potential difficulties in employee retention as a result of ~~a slowdown in customer orders or order cancellations. In addition, volatility in~~ the ~~financial markets could increase the cost of capital and/or limit its availability.~~Merger; and

•~~Actions from government mandates~~the outcome of any legal proceedings related to ~~corporate decisions that impact~~ the ~~ability~~proposed Merger could have an adverse effect on the business and financial results of ~~or decision to occupy offices will have~~ the ~~effect of dampening demand for our office/workplace products.~~Company and Herman Miller.

•The value of the Herman Miller common stock that the Company’s stockholders receive in the proposed Merger may be less than the value of such Herman Miller common stock when the proposed Merger was publicly announced.~~Economic uncertainty as a result~~

At the Effective Time of ~~COVID-19 is expected~~the Merger, each issued and outstanding share of the Company’s Common Stock (subject to ~~make it difficult~~certain exceptions) will be converted into the right to receive (i) $11.00 per share in cash, without interest and (ii) 0.32 shares of common stock of Herman Miller. The exchange ratio for ~~our dealers, customers, suppliers~~Herman Miller common stock to be issued in the Merger has been fixed in the Merger Agreement. The price of Herman Miller’s common stock will fluctuate until the Company’s stockholders receive their shares. Herman Miller and the Company are working to ~~accurately forecast~~complete the proposed Merger as quickly as possible. However, the time period between the stockholder votes on the proposed Merger and ~~plan future business activities.~~the completion of the Merger will depend upon the satisfaction or waiver of the conditions in the Merger Agreement, which could take longer than is currently expected by Herman Miller and the Company.

Herman Miller and the Company have agreed in the Merger Agreement to take certain actions to address certain potential antitrust issues, including potential sales, divestments, transfers or other transactions affecting Herman Miller’s business.

•The potential to weaken the financial position of some of our customers. If circumstances surrounding our customers’ financial capabilities were to deteriorate, write-downs or write-offs of our customer receivables could negatively affect our operating resultsHerman Miller and, if ~~large,~~requested by Herman Miller, the Company, have each agreed to take any and all actions and steps necessary to avoid or eliminate each impediment under any antitrust law that may be asserted by any governmental entity or private party and to otherwise satisfy any closing conditions relating to any antitrust law contained in the Merger Agreement so as to enable the consummation of the Merger and other transactions contemplated by the Merger Agreement as promptly as practicable, including (i) selling, divesting, holding separate, transferring, or otherwise taking any other action with respect to Herman Miller’s or any of its affiliates’ ability to own or operate any assets, properties, contracts, businesses or product lines of Herman Miller or any of its affiliates or any assets, properties, contracts, businesses or product lines of the Company or any of its affiliates (individually or collectively, “Remedial Actions”) and (ii) in the event that any permanent or preliminary injunction or other decree, order, judgment, award or temporary restraining order is entered or becomes reasonably foreseeable to be entered that would make consummation of the Merger and other transactions contemplated by the Merger Agreement unlawful or that would otherwise prevent or delay such transactions, taking any and all steps necessary to vacate, modify or suspend such order (provided that neither Herman Miller nor the Company will be required to commit to or effect any Remedial Action that is not conditioned upon the consummation of the Merger). However, Herman Miller will not be required to commit to or effect any Remedial Action if any or all such Remedial Actions, in the aggregate, would or would reasonably be expected to have a material adverse effect on the business, financial condition or operations of Herman Miller and its subsidiaries (including the Company and its subsidiaries) from and after the Effective Time (as defined in the Merger Agreement and calculated as if Herman Miller and its subsidiaries from and after the Effective Time were collectively the same size as the Company and its subsidiaries prior to the Effective Time). It is uncertain whether an such Remedial Actions may be necessary and whether any such actions could affect Herman Miller’s business and financial results after the proposed Merger is consummated.

Risks Relating to Herman Miller’s Operations After the Consummation of the Merger

Herman Miller’s failure to integrate the Company successfully and on a timely basis into Herman Miller’s operations could adversely impact Herman Miller’s business and financial results.

Herman Miller expects that the acquisition of the Company will result in certain synergies, business opportunities and strategic benefits. Herman Miller, however, may never realize these expected synergies, business opportunities and strategic benefits. If Herman Miller is not able to successfully integrate the Company’s operations on a timely basis, or is not able to implement its plans, forecasts and other expectations with respect to its business after completion of the Merger, Herman Miller’s expectations of future results of operations, including certain cost savings and synergies expected to result from the Merger, may not be met, which could have a material adverse effect on ~~our~~the business, financial condition and results of operations of Herman Miller.

The results of Herman Miller’s operations after the Merger may be affected by factors different from, or in addition to, those currently affecting the Company’s results of operations, and ~~cash flow.~~

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

•~~Volatility related to pension plan assets. While our plan assets are broadly diversified, there are inherent~~the market ~~risks associated with investments. We~~value of Herman Miller’s common stock may ~~need to make additional contributions to address an increase in obligations and/or a loss in plan assets as a result~~decrease after the closing date of the ~~combination~~Merger.

Upon completion of ~~declining market interest rates and/or past or future plan asset investment losses, which could adversely impact our financial position,~~the Merger, the holders of Company Common Stock will become holders of Herman Miller common stock. Herman Miller’s business differs from the Company’s business in certain respects, and the results of Herman Miller’s operations ~~and cash flows.~~

Toafter the ~~extent~~Merger may be affected by factors different from, or in addition to, those currently affecting the ~~COVID-19 pandemic adversely affects our business,~~ results of ~~operations, financial condition and cash flows, it may also heighten many~~the Company’s operations. The market value of the ~~other risks described in this section and~~shares of Herman Miller common stock that the Company’s stockholders receive in the ~~“Risk Factors” section of our Annual Report on Form 10-K for~~Merger could decrease following the fiscal year ended December 31, 2019. The ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the severity and durationclosing of the ~~pandemic and the related impact on the global economy, which are uncertain and cannot be predicted at this time.~~

Merger.

3327

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

Repurchases of Equity Securities

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

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

During the three months ended ~~September 30, 2020,~~March 31, 2021, the Company repurchased ~~3,631~~277,043 shares of its common stock, all of which represent repurchases of shares in exchange for the Company’s settlement of employee payroll tax obligations related to equity award settlements, as summarized in the table below:

Period Total
Number of
Shares
Purchased Average
Price Paid
Per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Maximum Dollar Value
of Shares that May Yet
be Purchased Under the
Plans or Programs (1)
July 1, 2020 - July 31, 2020 1,670 $ 11.51 — $ 32,352,413
August 1, 2020 - August 31, 2020 1,961

$ 11.71 — $ 32,352,413
September 1, 2020 - September 30, 2020 — $ — — $ 32,352,413
Total 3,631 —


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
January 1, 2021 - January 31, 2021	—	$	—	—	$	32,352,413
February 1, 2021 - February 28, 2021	277,043	$	15.78	—	$	32,352,413
March 1, 2021 - March 31, 2021	—	$	—	—	$	32,352,413
Total	277,043			—

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

3428

ITEM 6. EXHIBITS


Exhibit Number		Description

~~3.1~~2.1	(a)	~~Certificate~~Agreement and Plan of ~~Designation of~~Merger dated April 19, 2021 by and among Knoll, Inc. ~~with respect to the Series A Preferred Stock, dated July 20, 2020, filed with the Secretary of the State of Delaware~~Herman Miller Inc. and ~~effective July 20, 2020~~Heat Merger Subs, Inc
10.1	~~(b)~~	~~Investment Agreement, dated June 22, 2020, between Knoll Inc. and Furniture Investments S.a r.l.~~
~~10.2~~	(a)	~~Registration Rights Agreement, dated July 21, 2020 between~~ Knoll, Inc. ~~and Furniture Investments Acquisitions S.C.S.~~
~~10.3~~		Second Amendment to the Third Amended and Restated Credit Agreement, dated as of August 21, 2020, among the Company, certain foreign subsidiaries of the Company, as borrowers, certain domestic and foreign subsidiaries of the, as guarantors, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and each of the lenders party theretoManagement Continuity Plan
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2020 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ (iii) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.*
104		Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL information contained in Exhibit 101).

* Indicates documents filed herewith.

(a) - Incorporated by reference to Knoll, Inc.’s ~~current report~~Current Report on ~~form~~Form 8-K filed with the ~~Securities and Exchange~~ Commission on ~~July 23, 2020.~~April 22, 2021.

~~(b) - Incorporated by reference to Knoll, Inc.’s current report on form 8-K filed with the Securities and Exchange Commission on June 23, 2020.~~

3529

SIGNATURES

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


KNOLL, INC.
(Registrant)

Date:	~~November 6, 2020~~May 7, 2021
		By:	/s/ Andrew B. Cogan
			Andrew B. Cogan
			Chairman and Chief Executive Officer

Date:	~~November 6, 2020~~May 7, 2021
		By:	/s/ Charles W. Rayfield
			Charles W. Rayfield
			Chief Financial Officer
			(Principal Financial Officer)

3630


	Office Segment		Lifestyle Segment		Total
Balance as of December 31, 2019	$	54.3	$	277.8	$	332.1
Foreign currency translation adjustment	(0.1)		8.3		8.2

Balance as of September 30, 2020	$	54.2	$	286.1	$	340.3