STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

The Company sponsors several stock compensation plans (collectively, the "Stock Compensation Plans") under which awards denominated or payable in shares, units or options to purchase shares of Knoll common stock may be granted to officers, certain other employees, directors and consultants of the Company. As of December 31, 2019, there were approximately 1.6 million shares authorized and available for issuance pursuant to the Stock Compensation Plans. Equity awards are granted under the Stock Compensation Plans based upon terms and conditions established by the Compensation Committee of the Company's Board of Directors (the "Committee").

Stock-based compensation expense recognized in earnings for the years ended December 31, 2019, 2018, and 2017 totaled $10.8 million ($8.0 million after-tax), $9.2 million ($6.9 million after-tax) and $9.6 million ($6.1 million after-tax) respectively, and is included within selling, general, and administrative expenses.

As of December 31, 2019, unrecognized compensation cost related to all unvested equity awards was $16.3 million , the vast majority of which relates to unvested restricted shares and restricted stock units. This expense is expected to be recognized over a weighted-average period of 1.7 years.

Restricted Shares

Restricted shares generally vest at the end of the three or four-year period following the grant date. Stock-based compensation cost is measured at grant date based on the fair value of the underlying awards on the grant date. Grantees of restricted shares are entitled to participate in dividends declared on the Company's outstanding common stock, the accumulated balance of which is paid or payable upon the vesting date of the underlying restricted shares.

The following table summarizes activity during 2019 with respect to restricted shares (shares in thousands):



	Restricted Shares		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2018	725		$	21.03
Granted	425		$	20.46
Forfeited	(20	)	$	21.13
Vested	(234	)	$	19.07
Outstanding at December 31, 2019	896		$	21.27

The fair value of restricted shares that vested during 2019, 2018 and 2017 was $5.0 million , $7.4 million, $9.5 million, respectively.

Restricted Stock Units

All of the Company's outstanding restricted stock units ("RSUs") are contingently issuable, as they are subject to either certain performance-based conditions ("PBRSUs") or a market-based condition related to relative total shareholder return ("MBRSUs"). The Committee determines the time period over which RSUs vest, as well as the vesting schedule per award, which is generally at the end of the three or four-year period following the grant date. PBRSUs have payouts that range from 0% to 150% of the target award. MBRSUs either payout at 100% or not at all. All RSUs settle in shares and are entitled to participate in dividends declared on the Company's outstanding common stock, the accumulated balance of which is paid or payable upon the vesting of the underlying RSUs. To the extent that performance or market conditions are not fully attained, the underlying RSUs are forfeited.

The estimated fair values of MBRSUs are initially determined on the grant date using a Monte Carlo simulation model. The Company's assumptions used as inputs into the valuation process are based on the expected life, which matches the applicable vesting period.

The following weighted-average assumptions were used as inputs into the valuation of the MBRSUs granted during the fiscal years indicated:



	2019			2018			2017
Weighted-average grant date fair value	$	14.75		$	13.87		$	10.63
Assumptions used to compute fair value :
Volatility	28.6		%	27.3		%	27.2		%
Risk free interest rate	2.5		%	2.3		%	1.6		%
Expected life	3 years			3 years			3 years
Expected dividend yield	2.9		%	2.8		%	2.6		%

The following table summarizes activity during 2019 with respect to RSUs (shares in thousands):



	PBRSUs		Weighted-Average Grant Date Fair Value		MBRSUs		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2018	405		$	20.92	270		$	12.46
Granted	335		$	20.40	114		$	14.75
Vested	(89	)	$	18.93	—		$	—
Forfeited	(57	)	$	19.44	(97	)	$	12.68
Outstanding at December 31, 2019	594		$	21.07	287		$	13.29

The fair value of RSUs that vested and settled in shares during 2019, 2018 and 2017 was $1.9 million, $1.4 million, and $9.9 million, respectively.

Stock Options

Stock options are granted with an exercise price equal to the market value of Knoll's common stock on the date of grant and have a maximum contractual term of ten years. The fair value of each option is initially measured on the grant date using the Black-Scholes option pricing model. The expected life is estimated based on the vesting period and expiration date of the award. Expected volatility is estimated based on the historical volatility of the Company's stock price over a period of time matching the expected life. The dividend yield is based on the Company's historical dividend record. The risk-free rate is based on the applicable U.S. Treasury Note rate.

The following table summarizes activity during 2019 with respect to stock options (shares in thousands):



	Shares under Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	20	$	22.59
Granted	90	20.44
Outstanding at December 31, 2019	110	$	20.83	8.1	$	0.1
Exercisable at December 31, 2019	20	$	22.59	3.6	$	0.1

The weighted-average grant-date fair value of options granted during the years ended December 31, 2019 and 2018 was $4.65 and $4.01 per option, respectively. There were no options awarded in 2017. The total intrinsic value of options exercised during the year ended December 31, 2017 was $0.2 million. No options were exercised during 2019 or 2018. The total grant-date fair value of options that vested during each of the years ended December 31, 2019 and 2017 was less than $0.1 million. There were no options that vested in 2018.