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 March 31, 2008

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  ¨

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

Large accelerated filer  x,    Accelerated filer  ¨ ,    Non-accelerated filer  ¨,    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

As of May 7, 2008, there were 48,412,506 of the Registrant’s common stock, par value $0.01 per share, outstanding.

KNOLL, INC.

TABLE OF CONTENTS FOR FORM 10-Q

		Page
Item
PART I — FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007	5
	Notes to the Condensed Consolidated Financial Statements	6
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
3.	Quantitative and Qualitative Disclosures about Market Risk	17
4.	Controls and Procedures	18
PART II — OTHER INFORMATION
1.	Legal Proceedings	19
1A.	Risk Factors	19
2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
6.	Exhibits	20
Signatures		21

2

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

KNOLL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and per share data)

	March 31, 2008		December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,484	$	17,975
Customer receivables, net		143,518		137,001
Inventories		100,085		92,087
Deferred income taxes		8,279		8,690
Prepaid and other current assets		6,265		7,691
Total current assets		272,631		263,444
Property, plant, and equipment, net		140,258		143,643
Goodwill, net		74,784		75,590
Intangible assets, net		226,417		226,777
Other non-trade receivables		4,535		4,800
Other noncurrent assets		3,081		3,188
Total Assets	$	721,706	$	717,442
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	140	$	136
Accounts payable		84,316		83,107
Income taxes payable		2,132		3,539
Other current liabilities		81,175		90,209
Total current liabilities		167,763		176,991
Long-term debt		373,113		368,440
Deferred income taxes		53,041		50,815
Postretirement benefits other than pensions		22,067		21,752
Pension liability		13,278		10,885
International retirement obligation		5,026		5,305
Other noncurrent liabilities		8,088		8,533
Total liabilities		642,376		642,721
Stockholders’ equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; 48,906,015 issued and outstanding (net of 9,378,871 treasury shares) in 2008 and 49,287,143 shares issued and outstanding (net of 8,906,705 treasury shares) in 2007		489		493
Additional paid-in-capital		—		—
Retained earnings		52,603		45,255
Accumulated other comprehensive income		26,238		28,973
Total stockholders’ equity		79,330		74,721
Total Liabilities and Stockholders’ Equity	$	721,706	$	717,442

See accompanying notes to the condensed consolidated financial statements

3

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(dollars in thousands, except share and per share data)

	Three Months Ended March 31,
	2008		2007
Sales	$	267,808	$	247,947
Cost of sales		177,485		163,419
Gross profit		90,323		84,528
Selling, general, and administrative expenses		58,422		53,748
Operating Income		31,901		30,780
Interest expense		4,934		6,492
Other expense, net		195		376
Income before income tax expense		26,772		23,912
Income tax expense		9,494		9,084
Net Income	$	17,278	$	14,828
Net earnings per share
Basic	$	0.36	$	0.31
Diluted	$	0.36	$	0.30
Dividends per share	$	0.12	$	0.11
Weighted-average shares outstanding:
Basic		47,725,944		47,729,863
Diluted		47,905,879		49,105,744

See accompanying notes to the condensed consolidated financial statements.

4

KNOLL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)

	Three Months Ended March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	17,278		$	14,828
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		4,980			4,785
Amortization of intangible assets		549			346
Unrealized foreign currency (loss) gain		(73	)		81
Stock based compensation		1,914			866
Other non-cash items		(3	)		62
Changes in assets and liabilities:
Customer receivables		(6,920	)		4,832
Inventories		(8,261	)		(5,882	)
Accounts payable		901			(3,720	)
Current and deferred income taxes		1,370			(7,922	)
Other current assets		1,326			3,059
Other current liabilities		(8,547	)		(11,019	)
Other noncurrent assets and liabilities		1,692			1,724
Cash provided by operating activities		6,206			2,040
CASH FLOWS FOR INVESTING ACTIVITIES
Capital expenditures		(2,386	)		(3,002	)
Cash used in investing activities		(2,386	)		(3,002	)
CASH FLOWS FOR FINANCING ACTIVITIES
Proceeds from revolving credit facilities, net		4,661			7,000
Repayment of long-term debt		—			(720	)
Payment of dividends		(5,746	)		(5,272	)
Proceeds from the issuance of common stock		29			12,229
Purchase of common stock for treasury		(5,977	)		(13,491	)
Tax benefit from the exercise of stock options		—			5,331
Cash (used in) provided by financing activities		(7,033	)		5,077
Effect of exchange rate changes on cash and cash equivalents		(278	)		132
(Decrease)/Increase in cash and cash equivalents		(3,491	)		4,247
Cash and cash equivalents at beginning of period		17,975			16,038
Cash and cash equivalents at end of period	$	14,484		$	20,285

See accompanying notes to the condensed consolidated financial statements

5

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Knoll, Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet of the Company, as of December 31, 2007, was derived from the Company’s audited consolidated balance sheet as of that date. All other consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of normal recurring nature. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2007.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB No. 87, 88, 106, and 132(R) (“SFAS 158”). SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively, “postretirement benefit plans”) to recognize the funded status of their postretirement benefit plans in the statement of financial position, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position, and provide additional disclosures. On December 31, 2006, the Company adopted the recognition and disclosure provision of SFAS 158. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statements of financial position is effective for the Company for the fiscal year ended December 31, 2008.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements. SFAS 157 is effective for certain balance sheet items in financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, and for all other balance sheet items in financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted the applicable provisions of SFAS 157 as of January 1, 2008, as required. The Company is currently determining the impact of the remaining provisions of SFAS 157.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of SFAS No. 115” (“SFAS 159”), which permits an entity to choose to measure many financial instruments and certain other items at fair value. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 is effective as of the beginning of each reporting entity’s first fiscal year that begins after November 15, 2007. We have adopted SFAS 159 as of January 1, 2008, as required. The adoption of SFAS 159 did not have a material impact on our consolidated financial statements.

6

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In December 2007, the FASB issued SFAS No. 141 (revised), “Business Combinations” (“SFAS 141(R)”), which is intended to improve reporting by creating greater consistency in the accounting and financial reporting of business combinations. SFAS 141(R) requires that the acquiring entity in a business combination recognize all (and only) the assets and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information that they need to evaluate and understand the nature and financial effect of the business combination. In addition, SFAS 141(R) impacts the accounting for transaction and restructuring costs. SFAS 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.

NOTE 3: INVENTORIES

Inventories, net consist of:

	March 31, 2008		December 31, 2007
	(in thousands)
Raw Materials	$	49,559	$	45,043
Work-in-Process		9,265		8,208
Finished Goods		41,261		38,836
	$	100,085	$	92,087

Inventory reserves for obsolescence and other estimated losses were $7.0 million and $6.9 million at March 31, 2008 and December 31, 2007, respectively.

NOTE 4: INCOME TAXES

As of March 31, 2008, the Company had unrecognized tax benefits of approximately $3.0 million. The entire amount of the unrecognized tax benefits would affect the effective tax rate if recognized. For the quarter ended March 31, 2008, the Company increased its unrecognized tax benefit amount by approximately $0.2 million for items relating to 2008 tax positions.

Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense. At March 31, 2008, the Company had accrued $0.6 million for the potential payment of interest and penalties.

Included in the balance of unrecognized tax benefits at March 31, 2008 is approximately $0.6 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. This amount represents a potential decrease in unrecognized tax benefits comprised of items related to expiring statutes in federal and state jurisdictions.

As of March 31, 2008, the Company is subject to U.S. Federal income tax examinations for the tax years 2004 through 2007, and to non-U.S. income tax examinations for the tax years 2000 to 2007. In addition, the Company is subject to state and local income tax examinations for the tax years 2000 through 2007.

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provisions for the three months ended March 31, 2008 and 2007 were based on the estimated effective tax rates applicable for the full years ending December 31, 2008 and 2007, after giving effect to items specifically related to the interim periods. The Company’s effective tax rate was 35.5% for the three months ended March 31, 2008 and 38% for the three months ended March 31, 2007. The Company’s effective tax rate is affected by the mix of pretax income and the different effective tax rates of the tax jurisdictions in which it operates.

7

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 5: DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments, to reduce its exposure to adverse fluctuations in foreign currency exchange and interest rates.

On September 30, 2006, the Company entered into two interest rate cap agreements which set a maximum interest rate on a notional amount and utilize LIBOR as a variable-rate reference. Under these agreements, the Company paid a total premium of approximately $204 thousand for a cap rate of 6.00% on $200 million of the Company’s borrowings under the credit facility. The Company has elected not to apply hedge accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to these agreements. As such, the change in fair value of the contracts is reported in earnings in the period the value of the contract changes as a component of other income (expense). The interest rate cap agreements mature on September 30, 2008.

As of March 31, 2008, the fair value of the Company’s derivative instruments included in current assets is zero.

The change in the fair values of the Company’s derivative instruments and the adjustment to interest expense are summarized as follows:

	Three months ended March 31,
	(in thousands)
	2008		2007
Interest income	$	—	$	—
Other expense		—		(55	)
Pre-tax other comprehensive loss		—		—
Aggregate net (expense) benefit	$	—	$	(55	)

The Company will continue to review its exposure to interest rate fluctuations and evaluate whether it should manage such exposure through derivative transactions.

Foreign Currency Contracts

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 short-term operating receivables of a Canadian subsidiary that are payable by the U.S. operations. The terms of these contracts are generally less than a year. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the remaining change in fair value is recorded as a component of other income (expense).

As of March 31, 2008, the Company had no outstanding foreign currency contracts but did enter into a short-term forward contract in March with a valuation date of March 31, 2008 and a settlement date on April 1, 2008 the cost of which was approximately $1.3 million.

In January 2007, the Company entered into a one-month short-term forward contract, having a valuation date as of the end of the month. The contract settled on February 1, 2007 at a cost of approximately $611 thousand. As of March 31, 2007, the Company had no outstanding foreign currency contracts.

8

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 6: CONTINGENT LIABILITIES AND COMMITMENTS

The Company is currently involved in matters of litigation, 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 consolidated financial position, results of operations, or cash flows.

At March 31, 2008, the Company employed a total of 4,158 people. Approximately 15.1% of the employees are represented by unions. The Grand Rapids, Michigan plant is the only unionized plant within the U.S and has an agreement with the Carpenters Union, Local 1615, of the United Brotherhood of Carpenters and Joiners of America, Affiliate of the Carpenters Industrial Council, covering approximately 436 hourly employees. The Collective Bargaining Agreement expires August 27, 2011. Certain workers in the facilities in Italy are also represented by unions.

The Company offers a warranty for all of its products. The specific terms and conditions of those warranties vary depending upon the product sold. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company’s liability include historical product-failure experience and estimated repair costs for identified matters for each specific product category. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Adjustments to recorded reserves for pre-existing warranties are not material for each period presented.

Changes in the warranty reserves for periods indicated are as follows:

	Three months ended
	March 31, 2008			March 31, 2007
	(in thousands)
Balance at beginning of period	$	10,078		$	7,436
Provision for warranty claims		2,936			2,490
Warranty claims paid		(2,329	)		(2,043	)
Balance at end of period	$	10,685		$	7,883

NOTE 7: PENSIONS AND OTHER POSTRETIREMENT BENEFITS

The following tables summarize the costs of the Company’s employee pension and post-retirement plans for the periods indicated.

	Pension Benefits						Other Benefits
	Three months ended						Three months ended
	March 31, 2008			March 31, 2007			March 31, 2008			March 31, 2007
	(in thousands)
Service cost	$	2,408		$	2,545		$	103		$	162
Interest cost		2,107			1,816			367			417
Expected return on plan assets		(2,209	)		(1,776	)		—			—
Amortization of prior service cost		19			19			(336	)		(336	)
Recognized actuarial loss		3			173			170			263
Net periodic benefit cost	$	2,328		$	2,777		$	304		$	506

9

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 8: STOCK PLANS

As of March 31, 2008, the Company sponsors two stock incentive plans with approximately 2,393,645 shares available for grant. Prior to January 1, 2006, the Company accounted for its stock incentive plan in accordance with APB 25, “Accounting for Stock Issued to Employees”, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock Based Compensation, and no stock-based employee compensation was reflected in net income in respect of options granted under the existing plans at that time. Effective January 1, 2006 the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, using the modified-prospective-transition method for those unvested options granted after the Company’s initial public offering. The prospective method will be applied to those unvested options issued prior to the Company’s initial public offering that have historically been accounted for under the minimum value method. Such options continue to be accounted for under the provisions of APB 25.

As a result of adopting Statement 123(R), the Company’s income before taxes and net income after taxes for the period ended March 31, 2008, is $0.3 million and $0.2 million lower, respectively, than if it had continued to account for share-based compensation under SFAS No 123 and APB Opinion No. 25. Due to the immateriality of the compensation expense charged, basic and diluted earnings per share were unaffected by the adoption of Statement 123(R).

The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation.

	Three months ended
	March 31, 2008			March 31, 2007
	(in thousands, except per share data)
Net income—as reported	$	17,278		$	14,828
Add:
Stock-based employee compensation expense included in reported net income		1,255			1,156
Deduct:
Total stock-based employee compensation expense determined under fair value based method, net of related tax effects		(1,328	)		(1,274	)
As adjusted net income	$	17,205		$	14,710
Earnings per share:
Basic-as reported	$	.36		$	.31
Diluted-as reported	$	.36		$	.30
Basic-as adjusted	$	.36		$	.31
Diluted-as adjusted	$	.36		$	.30

10

KNOLL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 9: OTHER COMPREHENSIVE INCOME

Comprehensive income (loss) consists of net earnings, plus other comprehensive income which includes pension liability adjustments and foreign currency translation adjustments. Comprehensive income was approximately $14.5 million and $15.6 million for the three months ended March 31, 2008 and March 31, 2007, respectively. The following presents the components of “Accumulated Other Comprehensive Income (Loss)” for the period indicated, net of tax (in thousands).

Three months ended:	Beginning Balance			Before-Tax Amount			Tax Benefit (Expense)		Net-of-Tax Amount			Ending Balance
March 31, 2008
Pension Funded Status Adjustment	$	(1,285	)	$	—		$	—	$	—		$	(1,285	)
Foreign currency translation adjustment		30,258			(2,735	)				(2,735	)		27,523
Accumulated other comprehensive (loss) income, net of tax	$	28,973		$	(2,735	)	$	—	$	(2,735	)	$	26,238

NOTE 10: COMMON STOCK AND EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the additional dilution for all shares and potential shares issued under the stock incentive plans.

	Three months ended
	March 31, 2008	March 31, 2007
Weighted average shares of common stock outstanding—basic	47,726	47,730
Potentially dilutive shares resulting from stock plans	180	1,376
Weighted average common shares—diluted	47,906	49,106
Antidilutive options not included in the weighted average common shares-diluted	2,791	475

Common stock activity for the three months ended March 31, 2008 and 2007 included the repurchase of approximately 472,166 shares for $6.0 million and 584,766 shares for $13.5 million, respectively. For the three months ended March 31, 2008 and 2007 common stock activity also included the issuance of 522,989 shares for $29,000 and 1,401,410 shares for $12.2 million, respectively, under the Company’s stock incentive plans.

On February 11, 2008, one-third of the restricted share awards granted in December 2004 and one-fifth of restricted share awards granted in February 2007 vested based on the achievement of certain operating profit targets. 195,782 of these shares were forfeited by the holders of the restricted shares to cover applicable taxes paid on their behalf by the Company. These shares were sold to treasury for approximately $2.6 million. These amounts are included in the total repurchases and issuances noted above.

NOTE 11: SUBSEQUENT EVENT

On April 3, 2008 the Company announced a restructuring plan that is expected to be reflected in the second quarter. The costs of the restructuring plan total approximately $3.3 million and include expenses relating to job eliminations, and product pruning.

11

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.

Overview

In spite of a challenging macro-economic environment, the first quarter of 2008 proved to be another successful quarter of growth. We continued to generate growth in operating profit, net income and earnings per share. Earnings per share grew 20% from $0.30 in the first quarter of 2007 to $0.36 in 2008. The increasing diversity of our client base, product lines and sales geographies are all contributing to our continued strong performance. Net sales increased 8.0% from the first quarter of 2007. Specialty products and international sales experienced the largest growth during the quarter. Specialty products include the additional sales generated from the acquisition of Edelman Leather completed in the fourth quarter of 2007.

Gross profit for the first quarter of 2008 was $90.3 million, an increase of $5.8 million, or 6.9%, over the same period in 2007. Gross margin decreased to 33.7% from 34.1% in the same quarter of 2007. The decrease from the first quarter of 2007 largely resulted from foreign exchange pressures. During the quarter, we were able to mitigate some of these pressures through price realization, continuous improvement in our factories and our global sourcing efforts.

Operating income for the first quarter of 2008 increased $1.1 million, or 3.6%, from the first quarter of 2007. Operating expenses increased from $53.7 million in the first quarter of 2007 to $58.4 million in 2008. This increase in operating expenses was mainly attributable to the addition of Edelman Leather, which we acquired in the fourth quarter of 2007.

Our effective tax rate for the quarter decreased from 38.0% in the first quarter of 2007 to 35.5% in the same period of 2008. The decrease in the effective tax rate is largely due to the mix of pretax income in the countries we operate and lower statutory tax rates.

During the quarter we used cash from operations of $6.2 million and net borrowings of $4.7 million to invest in working capital, pay a quarterly dividend of $5.7 million and repurchase 472,166 shares. We also invested $2.4 million in capital expenditures. During the quarter we also benefited from lower borrowing costs as interest expense decreased to $4.9 million from $6.5 million during the first quarter of 2007.

Looking forward we face continued macroeconomic challenges including negative employment trends in the service sector, foreign exchange pressures, and a worsening inflation outlook. In order to address these challenges we have decided to take action in the second quarter by announcing a restructuring plan. These measures together with other spending reductions not directly associated with the restructuring program could potentially save the Company approximately $10.0 million annually.

Critical Accounting Policies

The preparation of the 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 of certain assets, liabilities, revenues and expenses and the disclosure of certain contingent assets and liabilities. 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, 2007.

12

Results of Operations

Comparison of First Quarter Ended March 31, 2008 to First Quarter Ended March 31, 2007

	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
Consolidated Statement of Operations Data (in thousands):
Net Sales	$	267,808		$	247,947
Gross Profit		90,323			84,528
Operating Income		31,901			30,780
Interest Expense		4,934			6,492
Other Expense, net		195			376
Income Tax Expense		9,494			9,084
Net Income	$	17,278		$	14,828
Statistical and Other Data:
Sales Growth From Comparable Prior Year		8.0	%		13.7	%
Gross Profit Margin		33.7	%		34.1	%
Backlog	$	204,403		$	193,544

Sales

Sales for the first quarter of 2008 were $267.8 million, an increase of $19.9 million, or 8.0%, from sales of $247.9 million for the same period in the prior year. Our Specialty products experienced the strongest growth during the quarter and we continue to see our international business grow at a greater pace than North America. Approximately $4.6 million of the sales increase is due to previously implemented price increases.

At March 31, 2008, our sales backlog was $204.4 million, an increase of $10.9 million, or 5.6%, from our sales backlog of $193.5 million as of March 31, 2007.

Gross Profit and Operating Income

Gross profit for the first quarter of 2008 was $90.3 million, an increase of $5.8 million, or 6.9%, from gross profit of $84.5 million for the first quarter ended March 31, 2007. Operating income for the first quarter of 2008 was $31.9 million, an increase of $1.1 million, or 3.6%, from operating income of $30.8 million for the first quarter of 2007. As a percentage of sales, gross profit decreased to 33.7% for the first quarter of 2008 from 34.1% for the first quarter of 2007. Operating income as a percentage of sales decreased to 11.9% in the first quarter of 2008 from 12.4% over the same period of 2007.

The decrease from the first quarter of 2007 largely resulted from foreign exchange pressures. During the quarter, we were able to mitigate some of these pressures through price realization, continuous improvement in our factories, and our global sourcing efforts.

We continue to experience unprecedented levels of inflation as a result of escalating oil prices, increasing commodity costs and the weakening US dollar. Increasing costs of raw materials such as steel and increasing transportation costs in particular will continue to pressure our gross margins.

Operating expenses for the first quarter 2008 were $58.4 million, or 21.8% of sales, compared to $53.7 million, or 21.7% of sales, for the first quarter 2007. The increase in operating expenses during the first quarter of 2008 was largely due to the acquisition of Edelman Leather, which was completed in the fourth quarter of 2007.

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Interest Expense

Interest expense for the quarter ended March 31, 2008 was $4.9 million, a decrease of $1.6 million from the same period in 2007. The decrease is due to lower average interest rates. The weighted average interest rate for the first quarter of 2008 was 5.0%. The weighted average interest rate for the same period of 2007 was 7.2%.

Other Expense, net

Other expense for the first quarter of 2008 was $0.2 million. Other expense for the first quarter of 2007 was $0.4 million. The decrease from the first quarter 2007 was primarily due to foreign exchange gains and losses on currency.

Income Tax Expense

The effective tax rate was 35.5% for the quarter, as compared to 38% for the same period last year. The decrease in the effective tax rate is largely due to the mix of pretax income in the countries in which we operate and lower statutory tax rates.

Liquidity and Capital Resources

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

	March 31, 2008			March 31, 2007
	(in thousands)
Cash provided by operating activities	$	6,206		$	2,040
Capital expenditures		2,386			3,002
Net cash used in investing activities		2,386			3,002
Purchase of common stock		5,977			13,491
Net borrowings of debt		4,661			6,280
Payment of dividend		5,746			5,272
Net proceeds from issuance of stock		29			12,229
Net cash (used in) provided by financing activities		(7,033	)		5,077

Historically, we have carried significant amounts of debt, and cash generated by operating activities has been used to fund working capital, capital expenditures, repurchase shares and scheduled payments of principal and interest under our debt. Our capital expenditures are typically for new product tooling and manufacturing equipment. These capital expenditures support new products and continuous improvements in our manufacturing processes.

We use our revolving credit facility in the ordinary course of business to fund our working capital needs, and at times make significant borrowings and repayments under the revolving facility depending on our cash needs and availability at such time.

Year to date net cash provided by operations was $6.2 million, of which $24.6 million was provided by net income plus non-cash amortizations and stock-based compensation, offset by $18.4 million of changes in working capital and non-current assets and liabilities. Due to our higher sales and increased production demands at quarter end, inventories increased by approximately $8.3 million and liabilities decreased by approximately $8.5 million primarily due to employee compensation and income tax payments. Cash provided by operating activities was $2.0 million in the first quarter of 2007.

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For the first quarter of 2008, we used available cash, including the $6.2 million of net cash from operating activities, and $4.7 of net borrowings, to fund $2.4 million in capital expenditures, repurchase $6.0 million of common stock for treasury, fund a dividend payment to shareholders totaling $5.7 million and fund working capital. For the first quarter of 2007, we used available cash from financing activities, including $12.2 million of proceeds from the issuance of common stock and $6.3 million of net borrowings, to fund $3.0 million in capital expenditures, repurchase $13.5 million of common stock for treasury, fund a dividend payment to shareholders totaling $5.3 million and fund working capital.

Cash used in investing activities was $2.4 million for the first quarter of 2008 and $3.0 million for the same period in 2007. Fluctuations in cash used in investing activities are primarily attributable to the levels of capital expenditures.

We are currently in compliance with all of the covenants and conditions under our credit facility. We believe that existing cash balances and internally generated cash flows, together with borrowings available under our revolving credit facility, will be sufficient to fund normal working capital needs, capital spending requirements, debt service requirements and dividend payments for at least the next twelve months. In addition, we believe that we will have adequate funds available to meet long-term cash requirements and that we will be able to comply with the covenants under the credit facility. Future principal debt payments may be paid out of cash flows from operations, from future refinancing of our debt or from equity issuances. However, our ability to make scheduled payments of principal, to pay interest on or to refinance our indebtedness, to satisfy our other debt obligations and to pay dividends to stockholders will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

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, nor have we ever had, 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.

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Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, principally in the sections entitled “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, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “possible”, “potential”, “predict”, “project”, or other similar words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: the risks described under Item 1A and Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2007; changes in the financial stability of our clients or the overall economic environment, resulting in decreased corporate spending and service sector employment; changes in relationships with clients; the mix of products sold and of clients purchasing our products; the success of new technology initiatives; changes in business strategies and decisions; competition from our competitors; our ability to recruit and retain an experienced management team; changes in raw material prices and availability; restrictions on government spending resulting in fewer sales to one of our largest customers; our debt restrictions on spending; our ability to protect our patents, copyrights and trademarks; our reliance on furniture dealers to produce sales; lawsuits arising from patents, copyrights and trademark infringements; violations of environmental laws and regulations; potential labor disruptions; adequacy of our insurance policies; the availability of future capital; and currency rate fluctuations. The factors identified above are believed to be important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material adverse effects on us. All forward-looking statements included in this Form 10-Q are expressly qualified in their entirety by the foregoing cautionary statements. Except as required under the Federal securities laws and rules regulations of the SEC, we undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

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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, 2007. During the first three months of 2008, there was no substantive change in our market risk except for the items noted below. This discussion should be read in conjunction with Part II, Item 7A, of our Annual Report on Form 10-K for the year ended December 31, 2007.

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 related interest rate hedge agreements. 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 material and transportation costs. Our largest raw material costs are for steel and plastics. Steel is the primary raw material used in the manufacture of our products. The prices of plastic, another significant raw material used in the manufacture of our products, are sensitive to the cost of oil, which has increased significantly in recent history. We continue to work to attempt to offset these price changes in raw materials and transportation through our global sourcing initiatives, cost improvements and product price increases.

Interest Rate Risk

We have variable rate debt obligations that are denominated in U.S. dollars. A change in interest rates impacts the interest incurred and cash paid on our variable rate debt obligations. The annualized weighted average rate for the first quarter of 2008 was 5.0%. The annualized weighted average rate for the same period of 2007 was 7.2%.

We sometimes use interest rate hedge agreements for other than trading purposes in order to manage our exposure to fluctuations in interest rates on our variable-rate debt. Our current agreements effectively convert $200.0 million of our variable-rate debt to a fixed-rate basis, utilizing the three-month London Interbank Offered Rate, or LIBOR, as a floating rate reference. Fluctuations in LIBOR affect both our net financial instrument position and the amount of cash to be paid or received by us, if any, under these agreements.

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 European 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 we report currency in 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 and the Euro. Approximately 15.5% of our revenues for the first quarter 2008 and 12.6% in the same period for 2007, and 39.4% of our cost of goods sold for the first quarter of 2008 and 38.0 % in the same period of 2007, were denominated in currencies other than the U.S. dollar. Foreign currency exchange rate fluctuations resulted in a $323 thousand loss in the first quarter of 2008 and a $549 thousand loss in the first quarter of 2007.

From time to time, we enter into foreign currency forward exchange contracts and foreign currency option contracts for other than trading purposes in order to manage our exposure to foreign exchange rates associated with short-term operating receivables of a Canadian subsidiary that are payable by our U.S. operations. The terms of these contracts are generally less than a year. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. As of March 31, 2008, the Company had no outstanding foreign currency contracts but did enter into a short-term forward contract in March with a valuation date of March 31, 2008 and a settlement date on April 1, 2008, the cost of which was approximately $1.3 million. In January 2007, we entered into a one-month short-term forward contract, having a valuation date as of the end of the month. The contract settled on February 1, 2007 at the cost of approximately $611 thousand. As of March 31, 2007, the Company had no outstanding foreign currency contracts.

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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 (March 31, 2008) (“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. Our principal executive officer and principal financial officer also conducted an evaluation of our internal control over financial reporting (“Internal Control”) to determine whether any changes in Internal Control occurred during the quarter ended March 31, 2008 that have materially affected or which are reasonably likely to materially affect Internal Control. Based on that evaluation, there has been no such change during the quarter ended March 31, 2008.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the first quarter of 2008, there were no new material legal proceedings or changes in the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

ITEM 1A. RISK FACTORS

During the first quarter of 2008, there were no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

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

Repurchases of Equity Securities

The following is a summary of share repurchase activity during the three months ended March 31, 2008.

On August 17, 2005, our board of directors approved a stock repurchase program (the “Options Proceeds Program”), whereby it 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 to purchase shares of our common stock.

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.

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, 2008 – January 31, 2008	28,089		15.90	28,089	(2)	17,460,956
February 1, 2008 – February 29, 2008	195,782	(3)	13.32	—		67,460,956
March 1, 2008 – March 31, 2008	248,295	(4)	11.76	248,295	(4)	64,538,447
Total	472,166			276,384

(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 $50.0 million in February of 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.

(2) These shares were purchased under the Options Proceeds Program.

(3) On February 11, 2008, 520,337 shares of outstanding restricted stock vested. Concurrently with the vesting, these 195,782 shares were forfeited by holders of the vested restricted shares to cover applicable taxes paid on their behalf by the Company.

(4) These shares were purchased under our $50.0 million stock repurchase program, which was expanded by $50.0 million in February 2008.

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ITEM 6. EXHIBITS

Exhibit Number	Description
10.1	Employment Agreement, dated as of March 3, 2008, between Knoll, Inc. and Lynn M. Utter.
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.
32.1	Certification of Chief Executive 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.
32.2	Certification of 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.

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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: May 12, 2008
By:	/s/ Andrew B. Cogan
	Andrew B. Cogan
	Chief Executive Officer
Date: May 12, 2008
By:	/s/ Barry L. McCabe
	Barry L. McCabe
	Chief Financial Officer

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement is dated as of March 3, 2008, and is entered into between Knoll, Inc., a Delaware corporation (the “Company”), and Lynn M. Utter (“Executive”).

WHEREAS, Executive and the Company desire to embody in this Agreement the terms and conditions of Executive’s employment by the Company.

NOW, THEREFORE, the parties hereby agree:

ARTICLE I

Employment, Duties and Responsibilities

1.01. Employment. The Company shall employ Executive as President and Chief Operating Officer of Knoll North America as of March 3, 2008. Executive hereby accepts such employment. Executive agrees to devote her full business time and efforts to promote the interests of the Company.

1.02. Duties and Responsibilities. Executive shall have such duties and responsibilities as are customarily associated with such position and as are assigned to the Executive from time to time by the Company’s Chief Executive Officer (the “CEO”). Executive shall in any event perform such additional services, without the receipt of additional compensation, with respect to the Company’s subsidiaries as are assigned from time to time by the CEO or the Company’s Board of Directors (the “Board”).

ARTICLE II

Term

2.01. Term. (a) The term of this Agreement (the “Term”) shall commence on March 3, 2008, and shall continue until December 31, 2009; provided, however, that the term of the Executive’s employment shall be automatically extended without further action of either party for successive additional periods of one year, unless written notice of either party’s intention not to extend has been given to the other party at least sixty (60) days prior to the expiration of the then effective term.

(b) Executive represents and warrants to the Company that to the best of her knowledge, neither the execution and delivery of this Agreement nor the performance of her duties hereunder violates or will violate the provisions of any other agreement to which she is a party or by which she is bound.

ARTICLE III

Compensation and Expenses

3.01. Salary, Bonuses and Benefits. As compensation and consideration for the performance by Executive of her obligations under this Agreement, Executive shall be entitled to the following (subject, in each case, to the provisions of Article V hereof):

(a) The Company shall pay Executive a base salary (“Base Salary”) during the Term, payable in accordance with the normal payment procedures of the Company and subject to such withholdings and other normal employee deductions as may be required by law, at the rate of not less than $400,000 per annum.

(b) Subject to the approval of the Company’s Board of Directors and the terms of the Knoll, Inc. Stock Option Grant Policy, Executive will receive 100,000 restricted shares and stock options to purchase 100,000 shares of Knoll, Inc. common stock under the Company’s Stock Incentive Plans. Consistent with the Company’s Stock Option Grant Policy, these grants will be submitted to the Knoll Stock Option Committee at a meeting scheduled after the commencement of Executive’s employment by the Company and the grants would become effective the third trading day after the next public announcement of quarterly financial results after such meeting. The Company expects that the grant date will be April 21, 2008. Consistent with the Company’s Stock Option Grant Policy, the stock options would have an exercise price equal to the closing price of the Company’s common stock on the New York Stock Exchange on the grant date. The stock options and restricted shares will vest equally over 5 years and be evidenced by the Company’s standard stock option and restricted share agreements to be signed by the Executive and the Company.

(c) Executive shall participate during the Term in such pension, life insurance, health, disability and major medical insurance plans, and in such other employee benefit plans and programs, for the benefit of the employees of the Company, as may be maintained from time to time during the Term, in each case to the extent and in the manner available to other executive officers of the Company and subject to the terms and provisions of such plans or programs.

(d) Executive shall participate annually during the Term in the Knoll annual incentive program. Executive shall receive a guaranteed bonus for 2008 of $400,000. After 2008, payout under Knoll annual incentive program is discretionary based on the Company meeting goals set by the Board, which goals may include, without limitation, specific individual goals and/or corporate performance parameters such as revenue, profit, balance sheet and cash management objectives. All bonuses under the annual incentive program, including the 2008 guaranteed bonus, are payable in the month of February following the year in which they are earned and are contingent upon Executive’s employment by Knoll at the time of payment.

(e) Executive shall be entitled to twenty (20) vacation days for the remainder of 2008 and each calendar year thereafter until the termination of this Agreement. Vacation days must be used by the Executive in accordance with Company policy. Executive will be entitled to additional vacation days once she accrues more than twenty (20) days under the Knoll vacation accrual schedule.

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(f) During and after the Term, the Company agrees that if Executive is made a party, or compelled to testify or otherwise participate in, any action, suit or proceeding, (a “Proceeding”), by reason of the fact that she is or was a director or officer of the Company or any of its subsidiaries, the Executive shall be indemnified by the Company to the fullest extent permitted by Section 145 of the Delaware General Corporation Law or authorized by the Company’s certificate of incorporation or bylaws or resolutions of the Company’s Board against all cost, expense, liability and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if she has ceased to be a director or officer of the Company or subsidiary, for the period of any applicable statute of limitations or, if longer, for the period in which any such Proceeding which commenced within the period of any such statute of limitations is pending. The Company shall advance to the Executive all reasonable costs and expenses incurred by her in connection with a Proceeding within 20 days after receipt by the Company of a written request for such advance. Such request shall include an itemized list of the costs and expenses and an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that, pursuant to applicable law, she is not entitled to be indemnified against such costs and expenses. During the Term (and thereafter for the period of any applicable statute of limitations), the Company agrees to purchase from a reputable insurance company, and maintain, a directors’ and officers’ liability insurance policy covering the Executive, in amounts reasonably determined by the Board to be appropriate for directors and officers of the Company given the Company’s business, securities, operations and financial condition.

3.02. Expenses. The Company will reimburse Executive for reasonable business-related expenses incurred by her in connection with the performance of her duties hereunder during the Term, subject, however, to the Company’s policies relating to business-related expenses as in effect from time to time during the Term.

3.03. Relocation Expenses; Travel Expenses. The Company will reimburse Executive for up to $100,000 in relocation expenses pursuant to the Knoll Relocation Guidelines and all such relocation expenses will be grossed up for tax purposes. In order to comply with Internal Revenue Code Section 409A, all such expenses must be incurred on or before December 31, 2008 and submitted by Executive to the Company on or before February 15, 2009. Exhibit A attached hereto sets forth a non-exclusive list of permitted expenses. Additionally, beginning on the date of this Agreement through August 31, 2008, the Company will reimburse Executive for reasonable personal travel expenses such as costs for hotels in Pennsylvania and travel between Pennsylvania and Denver, Colorado.

ARTICLE IV

Exclusivity, Etc.

4.01. Exclusivity. Executive agrees to perform her duties, responsibilities and obligations hereunder efficiently and to the best of her ability. Executive agrees that she will devote her entire working time, care and attention and best efforts to such duties, responsibilities and obligations throughout the Term. Executive also agrees that she will not engage in any other business activities, pursued for gain, profit or other pecuniary advantage, that are competitive with the activities of the Company, except as permitted in Section 4.02 below. Executive agrees that all of her activities as an employee of the Company shall be in conformity with all policies, rules and regulations and directions of the Company.

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4.02. Other Business Ventures. Executive agrees that, so long as she is employed by the Company, she will not own, directly or indirectly, any controlling or substantial stock or other beneficial interest in any business enterprise which is engaged in, or competitive with, any business engaged in by the Company, any of its subsidiaries, or any of its affiliates involved in the office furniture business (“Affiliates”). Notwithstanding the foregoing, Executive may own, directly or indirectly, up to 1% of the outstanding capital stock of any business having a class of capital stock which is traded on any national stock exchange or in the over-the-counter market.

4.03. Confidentiality; Non-competition. (a) Executive agrees that she will not, at any time during or after the Term, make use of or divulge to any other person, firm or corporation any trade or business secret, any information pertaining to any business process, method or means, customer lists, details of contracts with or requirements of customers, any information pertaining to accounting methods, practices and procedures, financial records or financial condition, computer systems and software, sales or marketing plans, acquisition plans or candidates, Intellectual Property, as hereinafter defined, of the Company or any other subsidiaries or Affiliates, or any other written information treated as confidential or as a trade secret by the Company or any of its subsidiaries or Affiliates, which she may have learned or acquired in connection with her employment (collectively, “Confidential information”). Executive’s obligation under this Section 4.03(a) shall not apply to any information which (i) is known publicly; (ii) is in the public domain or hereafter enters the public domain without the fault of Executive; (iii) is known to Executive prior to her receipt of such information from the Company or any predecessor of the Company with which she was employed, as evidenced by written records of Executive or (iv) is hereafter disclosed to Executive by a third party which, to Executive’s knowledge, is not under an obligation of confidence to the Company. Executive agrees not to remove from the premises of the Company, except as an employee of the Company in pursuit of the business of the Company or except as specifically permitted in writing by the Company, any notes, memoranda, papers, documents, correspondence or writing (which shall include information recorded or stored in writing, on magnetic tape or disc, or otherwise stored for reproduction, whether by mechanical or electronic means and whether or not such reproduction will result in a permanent record being made) containing or reflecting any Confidential Information (“Documents”). Executive recognizes that all such Documents, whether developed by her or by someone else, will be the sole and exclusive property of the Company. Upon termination of her employment hereunder, Executive shall forthwith deliver to the Company all such Confidential Information, including without limitation all Documents, correspondence, and any other property held by her or under her control in relation to the business or affairs of the Company, and no copy of any Confidential Information shall be retained by her.

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(b) Executive acknowledges and agrees that the Company owns all writings, trade names, trademarks, service marks, copyrights, database rights, domain name rights and other intellectual property and material registered or registrable or otherwise protected or protectable under state, federal or foreign patent, trademark, copyright or similar laws, including, without limitation, analytics, software, programs and models owned, developed or utilized by or on behalf of the Company or any of its subsidiaries or Affiliates in connection with its business (collectively “Intellectual Property”). Executive further agrees that she shall not at any time assert, and hereby waives, any claim of right against the Company or any of its subsidiaries, Affiliates or licensees with respect to the Intellectual Property.

(c) Upon any termination of Executive’s employment with the Company, the Executive shall not, for a period of one year from the date of such termination, directly or indirectly, whether as an employee, consultant, independent contractor, partner, joint venture or otherwise, (i) engage in any business activities which are competitive with any substantial type or kind of business activity conducted by the Company or any of its subsidiaries or Affiliates at the time of such termination (provided that Executive may own, directly or indirectly, up to 1% of the outstanding capital stock of any business having a class of capital stock which is traded on any national stock exchange, interdealer quotation system or in the over-the-counter market); (ii) solicit or induce, or in any manner attempt to solicit or induce, any person employed by, or as agent of, the Company or any of its subsidiaries or Affiliates to terminate such person’s contract of employment or agency, as the case may be, with the Company or any of its subsidiaries or Affiliates or (iii) divert, or attempt to divert, any person, concern, or entity from doing business with the Company or any of its subsidiaries or Affiliates, nor will she attempt to induce any such person, concern or entity to cease being a customer or supplier of the Company or any of its subsidiaries or Affiliates.

(d) Executive agrees that, at any time and from time to time during and after the Term, she will execute any and all documents which the Company may deem reasonably necessary or appropriate to effectuate the provisions of this Section 4.03. Additionally, Executive will at all times comply with Knoll, Inc.’s standard policies and procedures for employees including, without limitation, the Knoll, Inc. Insider Trading Policy, the Knoll, Inc. Code of Ethics and the Knoll, Inc. Foreign Corrupt Practices Act Policy and agrees to execute and deliver each of these documents to the Company.

4.04. Equitable Relief. Executive and the Company agree that the restrictions, prohibitions and other provisions of Article IV of this Agreement are reasonable, fair, and equitable in scope, terms, and duration, are necessary to protect the legitimate business interests of the Company and are a material inducement to the Company to enter into this Agreement. The Company and the Executive recognize that the services to be rendered under this Agreement by the Executive are special, unique and of extraordinary character, and that in the event of the breach by the Executive of the terms and conditions of this Agreement or if the Executive, without the prior consent of the Board, shall leave her employment for any reason and take any action in violation of this Article IV, the Company will be entitled to institute and prosecute proceedings in any court of competent jurisdiction referred to in Section 4.05 below, to enjoin the Executive from breaching the provisions of Article IV. In such action, the Company will not be required to plead or prove irreparable harm or lack of an adequate remedy at law. Nothing contained in this Article IV shall be construed to prevent the Company from seeking such other remedy in arbitration in case of any breach of this Agreement by the Executive, as the Company may elect.

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4.05. Submission to Jurisdiction. Any proceeding or action must be commenced in the federal courts, or in the absence of federal jurisdiction in state court, in either case in Philadelphia, Pennsylvania. The Executive and the Company irrevocably and unconditionally submit to the jurisdiction of such courts and agree to take any and all future action necessary to submit to the jurisdiction of such courts. The Executive and the Company irrevocably waive any objection that they now have or hereafter may have to the laying of venue of any suit, action or proceeding brought in any court and further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment against the Executive or the Company in any such suit shall be conclusive and may be enforced in other jurisdictions by suit on the judgment, a certified or true copy or which shall be conclusive evidence of the fact and the account of any liability of the Executive or the Company therein described, or by appropriate proceedings under an applicable treaty or otherwise.

ARTICLE V

Termination

5.01. Termination by the Company. The Company shall have the right to terminate Executive’s employment at any time, with or without “Cause”. For purposes of this Agreement, “Cause” shall mean (i) Executive’s failure, neglect, or refusal to perform her duties which failure, neglect or refusal is not corrected by Executive within 30 days of her receipt of written notice from the Company of such failure, neglect or refusal, (ii) conduct by the Executive that has the effect of injuring the reputation or business of the Company or its affiliates, as determined by the Company; (iii) Executive’s continued or repeated absence from the Company, unless such absence is approved or excused; (iv) Executive’s use of illegal drugs or significant violations of the Company’s policies and procedures, as determined by the Company; (v) Executive’s conviction for the commission of a misdemeanor involving moral turpitude or a felony or any plea by Executive of guilty or “nolo contendere” to the charge of a misdemeanor involving moral turpitude or a felony; (vi) the Company’s reasonable suspicion of the Executive’s commission of an act of fraud, misappropriation or embezzlement against the Company or any of its affiliates, employees, customers or suppliers; or (vii) conduct substantially disloyal to the Company, as determined by the Company.

5.02. Death. In the event Executive dies during the Term, her employment shall automatically terminate effective on the date of her death and no further amounts will be paid to Executive or her personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

5.03. Disability. In the event that Executive shall suffer a disability which shall have prevented her from performing satisfactorily her obligations hereunder for a period of at least 90 consecutive days, or 180 nonconsecutive days within any 365 day period, the Company shall have the right to terminate Executive’s employment for “Disability,” such termination to be effective upon the giving of notice thereof to Executive in accordance with Section 6.02 hereof.

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5.04. Compensation upon Termination. (a) In the event of termination of Executive’s employment by the Company (other than for Cause, death or Disability) during calendar years 2008 or 2009, the Company shall pay Executive an amount equal to 18 months of Executive’s Base Salary, payable in 18 equal monthly installments following the date of such termination. In the event of termination of Executive’s employment by the Company (other than for Cause, death or Disability) after December 31, 2009, or in the event of termination of Executive’s employment by the Company as a result of the Company’s failure to renew this Agreement, the Company shall pay Executive an amount equal to 12 months of Executive’s Base Salary, payable in twelve equal monthly installments following the date of such termination. Notwithstanding the foregoing, in order to comply with Internal Revenue Code Section 409A, the payout of all sums under this Section shall be as follows:

(i) The first six monthly installments shall be paid to Executive on the six-month anniversary of the date of Executive’s termination of employment;

(ii) The second six monthly installments shall be paid to Executive one installment each on the seventh, eighth, ninth, tenth, eleventh and twelve month anniversaries of the date of Executive’s termination of employment; and

(iii) For termination during calendar year 2008 and 2009 only, the third six monthly installments shall be paid to Executive one installment each on the thirteenth, fourteenth, fifteenth, sixteenth, seventeenth and eighteenth month anniversaries of the date of Executive’s termination of employment.

(b) Executive will not be entitled to any compensation whatsoever if she terminates her employment with the Company; provided, however, that if Executive terminates her employment because Andrew Cogan ceases to be employed as CEO between January 1, 2010 and December 31, 2015 and Executive is not appointed by the Board as his replacement, the Company shall pay Executive an amount equal to 12 months of Executive’s Base Salary, payable in twelve equal monthly installments following the date of such termination, provided, further, that Executive must provide written notice to the Company of her decision to terminate within 30 days after a new CEO is appointed and Executive must continue her employment for a period of at least 120 days following such written notice. This provision shall not apply to the appointment of an “interim” CEO or other temporary provision. Notwithstanding the foregoing, in order to comply with Internal Revenue Code Section 409A, the payout of all sums under this Section shall be as follows:

(i) The first six monthly installments shall be paid to Executive on the six-month anniversary of the date of Executive’s termination of employment;

(ii) The second six monthly installments shall be paid to Executive one installment each on the seventh, eighth, ninth, tenth, eleventh and twelve month anniversaries of the date of Executive’s termination of employment.

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(c) The Executive’s rights upon termination of employment with respect to stock options, restricted shares or other incentive awards shall be governed by the terms and conditions of any stock option agreements, restricted share agreements or as established by the Company with respect to such awards.

(d) Except as provided in this Section 5.04, Executive shall not be entitled to compensation as a result of any termination of her employment with the Company. All payments under Section 5.04 are contingent upon Executive’s execution of a release reasonably acceptable to the Company.

ARTICLE VI

Miscellaneous

6.01. Benefit of Agreement; Assignment; Beneficiary. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns, including, without limitation, any corporation or person which may acquire all or substantially all of the Company’s assets or business, or with or into which the Company may be consolidated or merged. This Agreement shall also inure to the benefit of, and be enforceable by, the Executive and her personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if she had continued to live, all such amounts shall be paid in accordance with the terms of this Agreement to the Executive’s beneficiary, devisee, legatee or other designee, or if there is no such designee, to the Executive’s estate.

6.02. Notices. Any notice required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered or if sent by telegram or telecopier or by registered or certified mail, postage prepaid, with return receipt requested, addressed: (a) in the case of the Company to: Knoll, Inc., Office of General Counsel, 1235 Water Street, East Greenville, Pennsylvania 18041, fax: (215) 679-1013, or to such other address and/or to the attention of such other person as the Company shall designate by written notice to Executive; and (b) in the case of Executive, to: Lynn M. Utter,                                         , or to such other address as Executive shall designate by written notice to the Company. Any notice given hereunder shall be deemed to have been given at the time of receipt thereof by the person to whom such notice is given.

6.03. Entire Agreement; Amendment. This Agreement contains the entire agreement of the parties hereto with respect to the terms and conditions of Executive’s employment during the term and supersedes any and all prior agreements and understandings, whether written or oral, between the parties hereto with respect to compensation due for services rendered hereunder, including that certain offer letter dated January 16, 2008. This Agreement may not be changed or modified except by an instrument in writing signed by both of the parties hereto.

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6.04. Waiver. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a continuing waiver or as a consent to or waiver of any subsequent breach hereof.

6.05. Headings. The Article and Section headings herein are for convenience of reference only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

6.06. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the Commonwealth of Pennsylvania without reference to the principles of conflict of laws.

6.07. Agreement to Take Actions. Each party hereto shall execute and deliver such documents, certificates, agreements and other instruments, and shall take such other actions, as may be reasonably necessary or desirable in order to perform her or its obligations under this Agreement or to effectuate the purposes hereof.

6.08. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

6.09. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision or provisions of this Agreement, which shall remain in full force and effect.

6.10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement effective as of the date first above written.

Knoll, Inc.
By:	/s/ Barry L. McCabe
Name:	Barry L. McCabe
Title:	Executive Vice President & CFO
	/s/ Lynn M. Utter
	Lynn M. Utter

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EXHIBIT A

RELOCATION EXPENSES

1. Expenses for moving personal property – the Company will pay the cost of moving Executive’s household furniture, personal property and the shipment of one automobile.

2. Expenses for purchasing a principle residence at the new location:

• Title Search & Issuance of Abstract Title

• State or Local Realty Transfer Taxes

• Attorney’s Fees

• Survey

• Miscellaneous Costs

• Recording Fees

• Mortgage Appraisal Fee

• Destination pre-purchase Appraisal

• Credit Report for Mortgage

• Mortgage Service Charge or Loan Origination Fee

• Buyer’s Mortgage Discount Points

• Travel costs related to house hunting trips for Executive and her family

3. Expenses for selling Executive’s residence:

• Mortgage Satisfaction Fee

• State or Local Sales or Realty Transfer Taxes

• Attorney’s Fees

• Survey Costs

• Up to $50,000 to cover a share of Executive’s Real Estate Broker’s Commissions.

Note: Expenses associated with purchase and sale of principle residences are not to exceed the standard charges for such services in the area.

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Andrew B. Cogan, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2008 of Knoll, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to material affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2008

/s/ Andrew B. Cogan

Andrew B. Cogan

Chief Executive Officer

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EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Barry L. McCabe, certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2008 of Knoll, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to material affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2008

/s/ Barry L. McCabe

Barry L. McCabe

Chief Financial Officer

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EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

In connection with the Quarterly Report on Form 10-Q of Knoll, Inc. (the “Company”) for the period ending March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Andrew B. Cogan, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:

a. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

b. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 12, 2008

/s/ Andrew B. Cogan

Andrew B. Cogan

Chief Executive Officer

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EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

In connection with the Quarterly Report on Form 10-Q of Knoll, Inc. (the “Company”) for the period ending March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Barry L. McCabe, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:

a. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

b. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 12, 2008

/s/ Barry L. McCabe

Barry L. McCabe

Chief Financial Officer

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