-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+Dp683HpuiyNOM8N3XIJ72mB5ocfU1f3SXhiphM+3gYA5UphWJRXsw7TTgAIxAo a+4lASGm7RmHO/ZaWn2f8Q== 0000950130-01-503820.txt : 20010814 0000950130-01-503820.hdr.sgml : 20010814 ACCESSION NUMBER: 0000950130-01-503820 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNOLL INC CENTRAL INDEX KEY: 0001011570 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FURNITURE & FIXTURES [2590] IRS NUMBER: 133873847 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12907 FILM NUMBER: 1707189 BUSINESS ADDRESS: STREET 1: 1235 WATER ST CITY: EAST GREENVILLE STATE: PA ZIP: 18041 BUSINESS PHONE: 2156797991 MAIL ADDRESS: STREET 1: 1235 WATER STREET CITY: EAST GREENVILLE STATE: PA ZIP: 18041 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File No. 001-12907 KNOLL, INC. A Delaware Corporation I.R.S. Employer No. 13-3873847 1235 Water Street East Greenville, PA 18041 Telephone Number (215) 679-7991 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of August 6, 2001, there were 23,188,829 shares of the Registrant's common stock, par value $0.01 per share, outstanding. KNOLL, INC. TABLE OF CONTENTS FOR FORM 10-Q Item Page - ---- ---- PART I -- FINANCIAL INFORMATION 1. Condensed Consolidated Financial Statements (Unaudited): Condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000........................................... 3 Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2001 and 2000..................... 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000.................................... 5 Notes to the Condensed Consolidated Financial Statements............. 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................ 8 3. Quantitative and Qualitative Disclosures about Market Risk............... 10 PART II -- OTHER INFORMATION 2. Changes in Securities and Use of Proceeds................................ 11 6. Exhibits and Reports on Form 8-K......................................... 11 Signatures ................................................................. 12 2 PART I -- FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) - ---------------------------------------------------------------- KNOLL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars In Thousands, Except Per Share Data)
June 30, 2001 December 31, 2000 ------------- ----------------- ASSETS Current assets: Cash and cash equivalents .................................... $ 26,787 $ 22,339 Customer receivables, net .................................... 120,878 132,183 Inventories .................................................. 71,500 79,203 Deferred income taxes ........................................ 18,076 22,236 Prepaid and other current assets ............................. 6,256 7,421 --------- --------- Total current assets .................................... 243,497 263,382 Property, plant and equipment .................................... 302,018 298,828 Accumulated depreciation ......................................... (129,213) (119,199) --------- --------- Property, plant and equipment, net ...................... 172,805 179,629 Intangible assets ................................................ 280,450 280,724 Accumulated amortization ......................................... (38,950) (34,845) --------- --------- Intangible assets, net .................................. 241,500 245,879 Other noncurrent assets .......................................... 5,986 6,240 --------- --------- Total Assets ............................................ $ 663,788 $ 695,130 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt ......................... $ 43,750 $ 31,250 Accounts payable ............................................. 75,887 85,795 Income taxes payable ......................................... 3,974 5,668 Other current liabilities .................................... 82,271 107,991 --------- --------- Total current liabilities ............................... 205,882 230,704 Dividend payable ................................................. -- 220,339 Long-term debt ................................................... 561,488 394,505 Deferred income taxes ............................................ 23,863 24,675 Other noncurrent liabilities ..................................... 32,978 29,282 --------- --------- Total liabilities ....................................... 824,211 899,505 --------- --------- Stockholders' deficit: Common stock, $0.01 par value; 100,000,000 shares authorized; 23,189,829 shares issued and outstanding (net of 16,300 treasury shares) in 2001 and 23,193,629 shares issued and outstanding (net of 12,500 treasury shares) in 2000 ........................................... 232 232 Additional paid-in-capital ................................... 3,464 3,591 Unearned stock grant compensation ............................ -- (2) Retained deficit ............................................. (149,777) (195,379) Accumulated other comprehensive loss ......................... (14,342) (12,817) --------- --------- Total stockholders' deficit ............................. (160,423) (204,375) --------- --------- Total Liabilities and Stockholders' Deficit ............. $ 663,788 $ 695,130 ========= =========
See accompanying notes. 3 KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands)
Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Sales .............................. $261,102 $315,374 $514,227 $584,208 Cost of sales ...................... 155,805 182,937 308,198 343,588 -------- -------- -------- -------- Gross profit ....................... 105,297 132,437 206,029 240,620 Selling, general and administrative expenses ........................ 53,237 61,753 103,889 116,970 -------- -------- -------- -------- Operating income ................... 52,060 70,684 102,140 123,650 Interest expense ................... 10,864 11,718 23,021 24,195 Other income (expense), net ........ (1,571) 1,126 (1,615) 1,562 -------- -------- -------- -------- Income before income tax expense ... 39,625 60,092 77,504 101,017 Income tax expense ................. 16,135 24,174 31,902 40,933 -------- -------- -------- -------- Net income ......................... $ 23,490 $ 35,918 $ 45,602 $ 60,084 ======== ======== ======== ========
See accompanying notes. 4 KNOLL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
Six Months Ended June 30, ---------------------------- 2001 2000 ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................... $ 45,602 $ 60,084 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization .......................... 18,348 18,024 Other noncash items .................................... 2,348 118 Changes in assets and liabilities: Customer receivables ............................... 11,123 12,539 Inventories ........................................ 7,391 (3,438) Accounts payable ................................... (9,687) 10,256 Current and deferred income taxes .................. 2,767 8,553 Other current assets and liabilities ............... (25,624) 7,002 Other noncurrent assets and liabilities ............ 1,534 (3,135) --------- -------- Cash provided by operating activities ........................ 53,802 110,003 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ......................................... (8,144) (8,119) Proceeds from sale of assets ................................. 57 92 --------- -------- Cash used in investing activities ............................ (8,087) (8,027) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from (repayment of) revolving credit facilities, net ........................................... 192,000 (91,718) Repayment of long-term debt .................................. (12,500) (7,500) Payment of dividend .......................................... (220,339) -- Purchase of common stock ..................................... (128) (162) Payment of recapitalization costs ............................ -- (230) --------- -------- Cash used in financing activities ............................ (40,967) (99,610) --------- -------- Effect of exchange rate changes on cash and cash equivalents ............................................... (300) (957) --------- -------- Increase in cash and cash equivalents ........................ 4,448 1,409 Cash and cash equivalents at beginning of period ............. 22,339 10,785 --------- -------- Cash and cash equivalents at end of period ................... $ 26,787 $ 12,194 ========= ========
See accompanying notes. 5 KNOLL, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the "Company" or "Knoll") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation are reflected in the condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2000 is derived from the Company's 2000 audited balance sheet. The unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2000. The results of operations for the three months and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year ending December 31, 2001 or other future periods. 2. Dividend On December 20, 2000, the Company's Board of Directors declared a special cash dividend of $9.50 per share of common stock, or $220.3 million in the aggregate, payable on January 5, 2001 to stockholders of record as of the close of business on December 20, 2000. The payment of the dividend on January 5, 2001 was funded with borrowings under the Company's senior revolving credit facility. 3. Derivative Instruments and Hedging Activities The Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"), on January 1, 2001. The adoption of SFAS 133 did not have a material effect on the earnings or financial position of the Company. On the date a derivative instrument is entered into, the Company designates the derivative as (i) a fair value hedge, (ii) a cash flow hedge, (iii) a hedge of a net investment in a foreign operation or (iv) a risk management instrument not eligible for hedge accounting. The Company recognizes all derivatives on the balance sheet at fair value. All derivatives in which the Company was engaged as of January 1, 2001 and June 30, 2001 and during the six months then ended, which include interest rate collar agreements and foreign currency forward exchange contracts, were classified as risk management instruments not eligible for hedge accounting. Changes in the fair value of derivatives classified as risk management instruments not eligible for hedge accounting are reported in earnings in the period the value of the contract changes. The net amount paid or received upon quarterly settlements for interest rate collar agreements and the net gain or loss incurred upon settlement of foreign currency forward exchange contracts are recorded as an adjustment to interest expense and cost of sales, respectively, while the remaining change in fair value is recorded as a component of other income (expense). The Company uses interest rate collar agreements to manage its exposure to fluctuations in interest rates on its variable rate debt. At December 31, 2000, the Company had three interest rate collar agreements outstanding with an aggregate notional principal amount of $135.0 million, related weighted average maximum and minimum rates of 10.00% and 5.64%, respectively, and a termination date of February 2003. In February 2001, the Company negotiated modifications to these agreements that increased the aggregate notional principal amount to $200.0 million, decreased the weighted average minimum rate to 5.12% and extended the termination date to February 2004. The aggregate fair value of such interest rate collar agreements as of June 30, 2001 was $3.1 million, which 6 was recorded as a liability in the Company's condensed consolidated balance sheet. The aggregate net loss related to these agreements was $0.1 million and $3.1 million for the three months and six months ended June 30, 2001, respectively, and was recorded as a component of other expense. From time to time, the Company enters into foreign currency forward exchange contracts and foreign currency option contracts to manage its exposure to foreign exchange rates associated with purchases of inventory from foreign suppliers. The terms of these contracts are generally less than a year. The aggregate fair value as of June 30, 2001 as well as the aggregate net gain for the six months ended June 30, 2001 related to the Company's foreign currency forward exchange contracts was not material. 4. Adjustments to Stock Options In February 2001, the Stock Option Committee of the Board of Directors approved certain adjustments to outstanding stock options in response to dilution created by the special cash dividend paid on January 5, 2001. The adjustments included increasing the number of shares of common stock under option from 3,706,445 to 4,383,968, lowering the range of exercise prices from $15.93 - $33.13 to $13.47 - - $28.01 and increasing the number of options available for future grants from 1,076,584 to 1,273,382. All vesting and term provisions of each award remain unchanged. No compensation expense was recognized in connection with the adjustments since (i) the adjustments were executed in response to an equity restructuring and (ii) the modifications to the awards did not increase the aggregate intrinsic value of each award and did not reduce the per share ratio of the exercise price to the market value. 5. Inventories June 30, 2001 December 31, 2000 ------------- ----------------- (In Thousands) Raw materials ...................... $41,698 $50,626 Work in process .................... 8,036 8,633 Finished goods ..................... 21,766 19,944 ------- ------- Inventories ........................ $71,500 $79,203 ======= ======= 6. Comprehensive Income For the three months ended June 30, 2001 and 2000, total comprehensive income amounted to $25.2 million and $33.7 million, respectively. Total comprehensive income for the six months ended June 30, 2001 and 2000 was $44.1 million and $56.7 million, respectively. 7. Recently Issued Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") approved the issuance of Statements of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142, "Goodwill and Other Intangibles" ("SFAS 142"). SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations and changes the criteria to recognize intangible assets apart from goodwill. SFAS 142 prescribes that goodwill and certain other intangible assets should no longer be amortized to earnings, but instead should be reviewed for impairment on at least an annual basis. With respect to intangible assets recorded as of June 30, 2001, the Company is required to adopt SFAS 141 and SFAS 142 on January 1, 2002. Knoll has not yet determined what the effect of these statements will be on the earnings and financial position of the Company. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations ----------------------------------------------------------------------- The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto and in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2000. Overview 2001 is shaping up to be the most challenging year the United States office furniture industry has faced in the last thirty years. A reduction in business confidence, corporate profitability and white-collar employment growth in response to a general softening in the economy in North America have directly affected sales of office furniture. The economic slowdown in North America has led to a significant reduction in sales volume in 2001 compared to 2000 and an extremely competitive pricing environment within the industry. Despite the current economic slowdown, the Company continues to invest aggressively in the development of new products and other sales and marketing initiatives designed to gain market share. At NeoCon 2001, a contract furniture trade show held annually in June, the Company introduced many new products, including the A3(TM) office system, the Crinion Collection(TM) and two seating offerings, as well as enhancements to each of its existing office system product lines. The Company also continues to pursue and implement technological initiatives designed to streamline its order entry process and provide customers with readily accessible product information tailored specifically to their individual demands. The Company believes that its continued focus on the above initiatives will enable Knoll to be well positioned to meet the needs of its customers as macroeconomic conditions improve. Results of Operations Comparison of Second Quarter and Six Months Ended June 30, 2001 to Second Quarter and Six Months Ended June 30, 2000 Sales. Sales for the second quarter of 2001 were $261.1 million, a decrease of 17.2%, or $54.3 million, from the Company's highest ever quarterly sales of $315.4 million achieved in the second quarter of 2000. Sales for the six months ended June 30, 2001 were $514.2 million, a decrease of 12.0%, or $70.0 million, from sales of $584.2 million for the same period of 2000. Sales in the second quarter and six months of 2001 were down primarily as a result of decreased volume attributable to the economic slowdown. The decreases in the Company's second quarter and six month 2001 sales were also due, to a lesser extent, to competitive pricing pressures that have been experienced in connection with the economic slowdown. The Company believes that current economic conditions will persist through the remainder of 2001, and therefore expects to experience a decline in sales for the full year of 2001 as compared to 2000. Gross Profit and Operating Income. In anticipation of lower sales volume in the second quarter and six months of 2001, the Company took steps intended to prevent significant deterioration of profits as a percentage of sales by aggressively managing certain discretionary and factory costs. As a percentage of sales, gross profit was 40.3% and 40.1% for the second quarter and six months ended June 30, 2001, respectively, and 42.0% and 41.2% for the second quarter and six months ended June 30, 2000, respectively. Operating income as a percentage of sales was 19.9% for both the second quarter and six months ended June 30, 2001 and 22.4% and 21.2% for the second quarter and six months ended June 30, 2000, respectively. The decreases in the gross profit and operating income percentages from 2000 to 2001 are due primarily to lower sales volume allowing less absorption of fixed overhead costs in the second quarter and six months ended June 30, 2001 compared to the same periods of 2000. As economic conditions are not expected to improve through the remainder of this year, the Company expects to continue with its efforts to aggressively manage certain discretionary and factory costs. Interest Expense. Despite higher outstanding debt balances in the second quarter and six months ended June 30, 2001 compared to the same periods of 2000, the Company's interest expense decreased $0.8 million quarter-over-quarter and $1.2 million six months-over-six months as a result of lower interest rates on variable-rate debt during 2001. Interest rates incurred for borrowings under the Company's credit facilities during the second quarter and six months ended June 30, 2001 were more favorable due to the improvement of the Company's leverage ratio since December 31, 1999 and lower short-term borrowing rates in response to actions taken by the United States Federal Reserve to lower the federal funds rate in 2001. 8 Income Tax Expense. The Company's effective tax rate is directly affected by changes in consolidated pretax income and the mix of pretax income and varying effective tax rates attributable to the countries in which it operates. The mix of pretax income was primarily responsible for the change in the effective tax rate to 40.7% for the second quarter of 2001 from 40.2% for the second quarter of 2000 and to 41.2% for the six months ended June 30, 2001 from 40.5% for the same period of 2000. Liquidity and Capital Resources During the six months ended June 30, 2001, the Company generated cash flow from operations of $53.8 million. Cash provided by operations resulted primarily from earnings before depreciation, amortization and other noncash charges offset by cash used for working capital purposes. A substantial portion of cash used for working capital purposes related to the payment, in the first quarter of 2001, of December 31, 2000 accruals of employee costs associated with year 2000 performance. The $53.8 million of cash flow provided by operations in addition to $192.0 million of net borrowings under the senior revolving credit facility were used during the six months ended June 30, 2001 to fund capital expenditures of $8.1 million, repay $12.5 million of debt under the term loan facility and fund the payment of a special cash dividend totaling $220.3 million, or $9.50 per share of common stock. Such dividend was declared by the Company on December 20, 2000 and was payable on January 5, 2001 to stockholders of record as of the close of business on December 20, 2000. As of June 30, 2001, the Company had an aggregate of $124.0 million available for borrowing under its U.S. and European revolving credit facilities. The Company believes that existing cash balances and internally generated cash flows, together with borrowings available under its revolving credit facilities, will be sufficient to fund normal working capital needs, capital spending requirements and debt service requirements for at least the next twelve months. The Company's debt instruments contain certain covenants that, among other things, limit the Company's ability to incur additional indebtedness, pay dividends and purchase Company stock as well as require the Company to maintain certain financial ratios. Recently Issued Accounting Pronouncements In June 2001, the FASB approved the issuance of SFAS 141 and SFAS 142. SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations and changes the criteria to recognize intangible assets apart from goodwill. SFAS 142 prescribes that goodwill and certain other intangible assets should no longer be amortized to earnings, but instead should be reviewed for impairment on at least an annual basis. With respect to intangible assets recorded as of June 30, 2001, the Company is required to adopt SFAS 141 and SFAS 142 on January 1, 2002. Knoll has not yet determined what the effect of these statements will be on the earnings and financial position of the Company. Statement Regarding Forward-Looking Disclosure Certain portions of this Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that represent the Company's expectations or beliefs concerning future events. Forward-looking statements relate to future operations, strategies, financial results or other developments and are not based on historical information. In particular, statements using verbs such as "anticipates," "believes," "estimates," "expects" or words of similar meaning generally involve forward-looking statements. Although the Company believes the expectations reflected in these forward-looking statements are based upon reasonable assumptions, no assurance can be given that Knoll will attain these expectations or that any deviations will not be material. Readers of this Form 10-Q are cautioned not to unduly rely on any forward-looking statements. The Company cautions that its forward-looking statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, without limitation, the impact of the continuing downturn in the North American economy generally and in the high-technology industry; further fluctuations in industry revenues driven by a variety of macroeconomic factors, including white-collar employment levels, business confidence and corporate profitability and cash flows, as well as 9 by a variety of industry factors such as corporate reengineering and restructuring, technology demands, ergonomic, health and safety concerns and corporate relocations; competitive pricing within the contract office furniture industry; the Company's indebtedness, which requires a significant portion of the Company's cash flow from operations to be dedicated to debt service, making such cash flow unavailable for other purposes, and which could limit the Company's flexibility in reacting to changes in its industry or economic conditions generally; the highly competitive nature of the market in which the Company competes, including the introduction of new products, pricing changes by the Company's competitors and growth rates of the office systems category; risks associated with the Company's growth strategy, including the risk that the Company's introduction of new products will not achieve the same degree of success achieved historically by the Company's products; the Company's dependence on key personnel; the ability of the Company to maintain its relationships with its dealers; the Company's reliance on its patents and other intellectual property; environmental laws and regulations, including those that may be enacted in the future, that affect the ownership and operation of the Company's manufacturing plants; risks relating to potential labor disruptions; risks associated with conducting business via the Internet and the Company's ability to react appropriately and in a timely fashion to changing technologies and business models; and fluctuations in foreign currency exchange rates. Except as otherwise required by the federal securities laws, the Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this Form 10-Q to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Item 3. Quantitative and Qualitative Disclosures about Market Risk - ------------------------------------------------------------------- During the normal course of business, the Company is routinely subjected to market risk associated with interest rate movements and foreign currency exchange rate movements. Interest rate risk arises from the Company's debt obligations and related interest rate collar agreements. Foreign currency exchange rate risk arises from the Company's foreign operations and purchases of inventory from foreign suppliers. There have been no material changes in the carrying amounts or fair values of the Company's financial instruments or its exposure to market risk since December 31, 2000 except as described below. The Company had $497.3 million of variable rate debt outstanding at June 30, 2001, which is an increase of $179.5 million from December 31, 2000. Such increase is related to net borrowings of $192.0 million under the senior revolving credit facility, which includes borrowings to fund the payment of a special cash dividend totaling $220.3 million on January 5, 2001, offset by the repayment of $12.5 million of debt under the term loan facility. The fair value of the Company's variable rate debt continues to approximate its carrying amount. As previously disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2000, in February 2001, the Company negotiated modifications to its interest rate collar agreements that existed at December 31, 2000. Such modifications included increasing the aggregate notional principal amount from $135.0 million to $200.0 million, decreasing the weighted average minimum rate from 5.64% to 5.12% and extending the termination date from February 2003 to February 2004. The aggregate fair value of the modified agreements from the Company's perspective changed to ($3.1) million at June 30, 2001. This fair value has been recognized as a liability in the Company's condensed consolidated balance sheet as of June 30, 2001. In addition, the Company recognized an aggregate net loss related to the interest rate collar agreements of $0.1 million and $3.1 million as a component of other expense in the condensed consolidated statements of operations for the three months and six months ended June 30, 2001, respectively. 10 PART II -- OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds - -------------------------------------------------- Restrictions on Dividends The credit agreement governing the Company's credit facilities and the indenture relating to the Company's 10.875% Senior Subordinated Notes due 2006 contain certain covenants that, among other things, limit the Company's ability to purchase Knoll stock and pay dividends to its stockholders. On December 20, 2000, the Company's Board of Directors declared a special cash dividend of $9.50 per share of common stock (approximately $220.3 million in the aggregate) payable on January 5, 2001 to stockholders of record as of the close of business on December 20, 2000. Such dividend was in compliance with the covenants contained in the aforementioned debt agreements, as amended. Prior to December 20, 2000, the Company had never declared any dividends on its common stock. Any future determination to pay dividends will depend on the Company's results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by the Board of Directors. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- a. Exhibits: None. b. Current Reports on Form 8-K: The Company did not file any reports on Form 8-K during the three months ended June 30, 2001. 11 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. Date: August 13, 2001 By: /s/ Burton B. Staniar ---------------------------------- Burton B. Staniar Chairman of the Board Date: August 13, 2001 By: /s/ Barry L. McCabe ---------------------------------- Barry L. McCabe Senior Vice President, Treasurer and Controller (Principal Accounting Officer) 12 -----END PRIVACY-ENHANCED MESSAGE-----