ACQUISITION

On January 25, 2018, the Company acquired one hundred percent (100%) of the shares of Muuto Holding ApS and MIE4 Holding 5 ApS, which collectively hold substantially all the business operations of Muuto ApS (“Muuto”). Muuto’s affordable luxury products span commercial and residential applications, adding scale and diversity to the Company’s business. The aggregate purchase price for the acquisition was $303.7 million, net of $7.5 million of cash acquired and subject to certain customary adjustments. The Company recorded the acquisition of Muuto using the acquisition method of accounting and recognized the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. The results of operations of Muuto have been included in the Company’s Lifestyle segment beginning January 25, 2018. The Company funded the acquisition with borrowings from the Amended Credit Agreement as well as cash on hand. See Note 10 for information on the Company’s borrowings. The Company recorded acquisition costs in its Consolidated Statement of Operations and Comprehensive Income, within selling, general, and administrative expenses during the three months ended March 31, 2018 of $1.0 million.

The amount of sales and net earnings that resulted from the acquisition and attributable to Knoll, Inc. stockholders included in the Condensed Consolidated Statements of Operations and Comprehensive Income during the three months ended March 31, 2018 were as follows (in thousands):



Sales	$	15,186
Net loss attributable to Knoll, Inc. stockholders	$	(154	)

The following table summarizes the preliminary fair values assigned to the assets acquired and liabilities assumed as of the January 25, 2018 acquisition date (in thousands):



Cash	$	7,506
Customer receivables	8,717
Inventory	14,675
Other current assets	447
Property, plant, and equipment, net	1,250
Intangible assets	131,300
Other non-current assets	292
Accounts payable	3,374
Other current liabilities	12,244
Deferred income taxes	29,744
Other noncurrent liabilities	1,637
Fair value of acquired identifiable assets and liabilities	$	117,188

Purchase price	$	311,254
Less: Fair value of acquired identifiable assets and liabilities	117,188
Goodwill	$	194,066

The following table summarizes the estimated fair value of Muuto’s identifiable intangible assets and their estimated useful lives (in thousands):



	Fair Value as of January 25, 2018		Estimated Useful Life
Indefinite-lived intangible assets:
Trade name	$	65,000	Indefinite
Finite-lived intangible assets:
Wholesale customer relationships	33,000		15
Contract customer relationships	22,000		9
Copyrights & designs	10,000		7
Non-competition agreements	1,300		3
	$	131,300

The preliminary purchase price of Muuto has been allocated to the Company’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated acquisition date fair values. The excess of the purchase price over the net tangible and intangible assets is recorded to goodwill. Goodwill is not deductible for tax purposes. The preliminary allocation of purchase price is based upon a valuation undertaken by the Company with the assistance of an independent third party valuation service and is subject to change during the measurement period. The initial accounting for the acquisition of Muuto is incomplete pending final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed.

Unaudited pro forma information for the Company for the three month periods ended March 31, 2018 and 2017 as if the acquisition had occurred January 1, 2017 is as follows:



	Three Months Ended
	March 31, 2018		March 31, 2017
Pro forma sales	$	300,707	$	272,520
Pro forma net earnings attributable to Knoll, Inc. stockholders	$	17,626	$	15,911

The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or the future consolidated results of operations of the Company. The pro forma financial information presented above has been derived from the historical condensed consolidated financial statements of the Company and from the historical consolidated financial statements of Muuto.

The pro forma financial information presented above includes adjustment for: (1) incremental amortization expense related to fair value adjustments to identifiable intangible assets, (2) incremental interest expense for outstanding borrowings to reflect the terms of the Amended Credit Agreement, (3) nonrecurring items and (4) the tax effect of the above adjustments.

Nonrecurring adjustments related to acquisition costs and loss on debt extinguishment of $2.4 million were recorded during the three month period of March 31, 2018 were recorded in the Condensed Consolidated Statements of Operations. A pro forma adjustment was made to incorporate the effect of nonrecurring costs related to loss on debt extinguishment of $1.7 million during the period of March 31, 2017. Adjustments were made in the calculation of pro forma amounts to remove the effect of these nonrecurring items and related income taxes. The pro forma financial information does not include adjustments for potential future cost savings.