 Strong work from home results and channel diversification help to mitigate workplace declines Implemented 50M of annualized operating expense reductions 164 million preferred stock issuance closed on July 21, 2020, enhancing liquidity and reducing debtEAST GREENVILLE, Pa., July 23, 2020 GLOBE NEWSWIRE -- Knoll, Inc. NYSE: KNL, a leading designer and manufacturer of furnishings, textiles and fine leathers for the workplace and home, today announced results for the second quarter ended June 30, 2020.Second Quarter Highlights Versus Prior YearNet Sales decreased 25.4 to 274.1M GAAP Gross Margin decreased 340 bps to 34.9 Adjusted Gross Margin decreased 310 bps to 35.2 GAAP Net Earnings decreased 31.2M to 9.6M or 3.5 of net sales Adjusted EBITDA decreased 22.8M to 25.6M or 9.3 of net sales GAAP Diluted EPS decreased 0.64 to 0.20 Adjusted Diluted EPS decreased 0.29 to 0.19 This release contains non-GAAP financial measures. Please refer to the Reconciliations of Non-GAAP Financial Measures section for reconciliations to the most directly comparable GAAP measure.To Our Fellow Shareholders:The second quarter of 2020 was unlike any quarter we have ever experienced. It was a true test of our people, culture, agility and strategy. In that context, we are pleased to report solidly profitable adjusted second quarter results as well as the progress we have made responding to the Covid-19 pandemic and its impact on our communities, our people and our clients. Our Covid Game Plan From the start of the pandemic, our focus was four-fold. First, keep our people around the world as safe as possible while maintaining as much of our operational capabilities as government mandates and safe working practices would allow. Second, protect our financial position, maximizing liquidity and scaling the business to ensure we remained profitable and cash flow positive. Third, lean into the marketplace challenges in front of us with the thought leadership and product support to help our workplace clients retrofit and reimagine their offices for return to work and work from home. And fourth, leverage our brand reputation, broad product offering, multichannel platform and marketing capabilities in the residential space in short, taking advantage of the pivot to work from home and the increased focus on residential life resulting from our working, schooling and exercising where we live.We believe that those businesses with a brand reputation like Knoll, founded on the belief that good design transcends rigid boundaries of where we live and work backed up by a broad and growing range of products and price points, with multiple physical and digital paths to market and lean agile cost structures will be the ultimate victors during this unique time.It is also an interesting moment where more fluid and affordable contemporary live-work brands like Muuto and Fully can thrive. For the past three years, as we rode the wave of resimercialization of the workplace in North America, we focused, with great success, on driving Muuto through our contract dealer channel. Earlier this month, we expanded Muutos reach through our own direct-to-consumer e-commerce channel at knoll.com, pairing the brands crossover designs with an expanded range of Knoll products for the home office as well as living and dining spaces with free shipping in 1-3 days. Both Fullys position and the Knoll Muuto initiative also enable us to take these brands direct-to-consumer ergonomic offerings to our corporate clients, providing their employees with online access to the right furniture for working from home. However the future plays out, we think we are uniquely positioned to succeed with our range of brands and price points.Keeping Our People Safe While Maintaining Our Operational Capabilities Today, across our manufacturing and distribution operations, we are 100 operational. What started with supply chain challenges in China eventually became plant shutdowns in Italy and then disruptions in North America. While our principal North American plants remained open, our HOLLY HUNT operations in Texas and Illinois were the most affected this quarter, as was DatesWeiser in Buffalo. Today, all of these facilities are back online, and we are working through a decent backlog in these businesses. Perhaps most impressive was our operations teams terrific work in completing the closure and sale of our Grand Rapids, MI facility while moving the operations to our plants in Muskegon, MI and East Greenville, PA during the pandemic. By implementing safe working practices, including masks, social distancing and temperature checks, we have been able, with a few exceptions, to keep our manufacturing associates safe and well.Our showrooms globally were also mostly closed during the second quarter. Our sales teams made extensive use of web conferencing, supporting clients, the design community and dealers with virtual rendering tools and material samples from our warehouses. Today, most of our principal showrooms and our Knoll Home Design shop in New York are back open, in many cases by appointment only. Our sales teams are also in the process of transitioning back to our offices where allowed by government mandates. The good news is that we can now accommodate client visits around the world, and we have seen a nice improvement in orders activity and mock-ups consistent with these reopenings.Maximizing Liquidity and Scaling Knoll to Ensure We Remain Profitable and Cash Flow Positive We took immediate action at the start of the pandemic to maximize our liquidity and protect our free cash flow. These steps included aggressive use of furloughs where we were unable to operate, salary freezes, suspension of 401k contributions and ultimately the elimination of approximately 400 positions across Knoll. Together with reductions in TE and other programmatic spending, we reduced our run rate costs by approximately 50 million. Additionally, to maximize liquidity, we reduced our dividend by 76, lowered planned CAPEX by approximately 20 million, worked with our landlords to defer rent payments and offered our dealers enhanced credit terms to maximize receivables. We also took advantage of CARES Act provisions, including payroll tax deferrals and the Employee Retention Credit, and Canada Emergency Wage Subsidies.While we were confident that these actions would have a meaningfully positive impact on our financial position, on June 23, 2020 we also announced an agreement to issue 164.0 million of convertible preferred stock to a subsidiary of Investindustrial VII L.P. This preferred stock carries a 4.5 dividend and an initial conversion price of 16.75, a 45 premium to our then thirty-trading day volume-weighted average price. With this additional capital, we have over 350.0 million in liquidity and our leverage ratio on a pro forma basis, utilizing the proceeds of this investment to reduce debt, would have been approximately 1.94:1 at the end of the second quarter, well below our 4.0:1 covenant that runs through the August 2024 expiration of our credit facility. This transaction closed on July 21, 2020, positioning us with a fortress balance sheet such that we are confident that we will continue to have the resources to execute our strategic plan in the face of an uncertain macroeconomic environment.Helping Our Clients Retrofit and Reimagine Their Offices for Return to Work and WFH We believe that the death-of-the-office story has been told many times over the years, and yet the workplace has always and always will play a pivotal role in how businesses organize their activities. Post 911 we were told that no one would work in skyscrapers again. Over the past few years, the common wisdom has been that we would operate out of co-working spaces and today, we hear that we are going to be working from home forever.Simply put, there is no alternative that can replace the mix of culture, connectivity, creativity and community that the office enables. We think Lucy Kellaways recent commentary in the Financial Times captures the importance of the office perfectly. She writes: The most important thing which should make the office less an employers white elephant than its biggest bargain is that it gives work its meaning...meaning comes largely from physical proximity to your colleagues. Without an office, she continues, it is hard to know how a company could ever create any sort of culture or any fellow feeling let alone loyalty.And we all know now from personal experience the limits of working from home, including the social isolation, breakdown of any worklife boundaries, physical discomfort and the exacerbation of social inequality. Its no wonder many of the surveys we have seen show the vast majority of office workers crave a return to the workplace.The workplace in a Covid-19 environment will no doubt be different, but it will still be there. Over the past three months our workplace sales, marketing, design and product development teams have quickly pivoted to engage with and support our clients, dealers and the architecture and design community, virtually leveraging investments we have made in digital visualization technologies and rapid product development. First, we have helped clients pivot to work from home solutions for their employees by offering special access to Fullys height adjustable tables, ergonomic chairs and accessories. Second, we have engaged with clients to retrofit their workplaces with screens and other products to support safe return to work tools and layouts. 