What changed in this filing

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Item 1A. Risk Factors

2022-07-26 compared with 2021-07-27 · 92 added, 99 removed, 155 unchanged (55% of the section changed)

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The risks and uncertainties described below are not the only ones we face;

others, either unforeseen or currently deemed not material, may also have a negative impact on our Company.

others, either unforeseen or currently deemed not material, may

also have a negative impact on our Company.

If any of the following occurs, our business, operating results, cash flows, and financial condition could be materially adversely affected.

Business and Acquisition Related Risks

Business and Knoll Acquisition Related Risks

We may not be successful in implementing and managing our growth strategy.

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Through this strategy, we are focused on taking advantage of the changing composition of the office floor plate, the greater desire for customization from our customers, new technologies, and trends towards urbanization and working from home.

To that end, we intend to grow in certain targeted ways.

First, we will unlock the power of One Herman Miller by building an agile, collaborative, globally-connected organization fit for continuous evolution.

This will also include simplifying and tailoring our go-to-market approach, as well as continuing to lead in product innovation across all businesses.

Second, we intend to build a customer-centric, digitally enabled business model by leveraging our deep understanding of customer journeys to deliver inspired products and frictionless customer experiences.

Inclusive of this will be to drive step-change in our data, analytics, marketing, and brand capabilities, as well as to strengthen our core technology backbone.

Third, we intend to accelerate profitable growth by strengthening and evolving our core contract business, driving outsized growth in our international business and expanding our retail business.

Finally, we believe it is a business imperative to reinforce our commitment to our people, planet and communities in a more integrated way than ever before.

Beyond simply being the right thing to do, we are confident that elevating our focus on positive social and environmental business practices will beneficially impact our customers and enhance returns for our shareholders over the long term.

Refer to the "Executive Overview" section within Item 7 for further discussion of our areas of strategic focus.

While we have confidence that our strategic plan reflects opportunities that are appropriate and achievable, and that we have anticipated and will manage the associated risks, there is the possibility that the strategy may not deliver the projected results due to inadequate execution, incorrect assumptions, sub-optimal resource allocation, or changing customer requirements.

To meet these goals, we believe we will be required to continually invest in the research, design and development of new products and services, and there is no assurance that such investments will have commercially successful results.

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To meet our goals, we believe we will be required to continually invest in the research, design, and development of new products and services, and there is no assurance that such investments will have commercially successful results.

Certain growth opportunities may require us to invest in acquisitions, alliances, and the startup of new business ventures.

These investments, if available, may not perform according to plan and may involve the assumption of business, operational, or other risks that are new to our business.

Future efforts to expand our business within developing economies, particularly within China and India, may expose us to the effects of political and economic instability.

Such instability may impact our ability to compete for business.

Future efforts to expand our business within developbtability may impact our ability to compete for business.

It may also put the availability and/or value of our capital investments within these regions at risk.

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Pursuing our strategic plan in new and adjacent markets, as well as within developing economies, will require us to find effective new channels of distribution.

There is no assurance that we can develop or otherwise identify these channels of distribution.

We may be unable to successfully integrate our businesses and Knoll and realize the anticipated benefits of the acquisition of Knoll.

The success of the acquisition of Knoll will depend, in part, on our ability to successfully combine and integrate the businesses of Herman Miller and Knoll, which previously operated as independent public companies, and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies, from the acquisition, in a manner that does not materially disrupt existing customer, payer, dealer, supplier, employee and other stakeholder relations nor result in decreased revenues due to losses of, or decreases in orders by, customers and payers.

There is no assurance that we can identify or otherwise develop these channels of distribution.

We may be unable to successfully integrate Knoll into our business and realize the anticipated benefits of the acquisition of Knoll.

The success of the acquisition of Knoll will depend, in part, on our ability to successfully combine and integrate the businesses of Herman Miller and Knoll, and realize the anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies from the acquisition.

The success of the acquisition also will depend on the Company doing so in a manner that does not materially disrupt existing customer, payer, dealer, supplier, employee and other stakeholder relations nor result in decreased revenues due to losses of, or decreases in orders by, customers and payers.

If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common stock may decline.

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• unforeseen expenses, costs, liabilities or delays associated with the acquisition or the integration.

Many of these factors will be outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues or synergies and diversion of management’s time and energy, which could materially affect Herman Miller’s financial position, results of operations and cash flows.

Many of these factors will be outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of expected revenues or synergies and diversion of management’s time and energy, which could materially affect MillerKnoll’s financial position, results of operations and cash flows.

The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized on a timely basis, if at all.

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The indebtedness incurred in connection with the acquisition of Knoll contains various covenants that impose restrictions on us and certain of our subsidiaries that may affect their ability to operate their businesses.

The indebtedness incurred in connection with the merger and preferred stock purchase contains various affirmative and negative covenants that, subject to certain significant exceptions, restrict the ability of us and certain of our subsidiaries to, among other things, incur liens on our property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any other person or sell or convey certain of its assets to any one person, among other things.

In addition, the definitive documentation governing such indebtedness contains a financial maintenance covenant that will require us to maintain a certain leverage ratio at the end of each fiscal quarter.

Our and our subsidiaries’ ability to comply with these provisions may be affected by events beyond our control.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations under such indebtedness.

In connection with the acquisition of Knoll, we incurred significant additional indebtedness, which could adversely affect Herman Miller, including by decreasing our business flexibility, and will increase our interest expense.

The consolidated long-term debt of Herman Miller as of May 29, 2021 was $ 274.9 million.

Our long-term debt as of July 27, 2021, after giving effect to the acquisition and the incurrence and extinguishment of indebtedness in connection therewith, is approximately $1.3 billion.

We have substantially increased our indebtedness in comparison to that of Herman Miller on a recent historical basis, which could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing our interest expense.

In connection with the acquisition of Knoll, we incurred significant additional indebtedness, which has increased our interest expense and could adversely affect us, including by decreasing our business flexibility.

The consolidated long-term debt of MillerKnoll as of May 28, 2022 was $1.38 billion.

As a result of our acquisition of Knoll, we substantially increased our indebtedness, which has increased our interest expense and could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions.

We have also incurred various costs and expenses associated with such indebtedness.

The amount of cash required to pay interest on our increased indebtedness levels and thus the demands on our cash resources will be greater than the amount of cash flows previously required to service our indebtedness.

The increased levels of indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages for Herman Miller relative to other companies with lower debt levels.

The increased levels of indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes and may create competitive disadvantages for MillerKnoll relative to other companies with lower debt levels.

If we do not achieve the expected benefits and cost savings from the acquisition, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.

The indebtedness incurred in connection with the acquisition of Knoll contains various covenants that impose restrictions on us that may affect our ability to operate our business.

These include both affirmative and negative covenants that, subject to certain significant exceptions, restrict the ability of us and certain of our subsidiaries to, among other things, incur liens on our property, incur additional indebtedness, enter into sale and lease-back transactions, make loans, advances, or other investments, make non-ordinary course asset sales, declare or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any other person or sell or convey certain assets to any one person.

Our ability to comply with these provisions may be affected by events beyond our control.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations under such indebtedness.

In addition, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions, or other general corporate requirements.

Our ability to arrange additional financing will depend on, among other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control.

We cannot assure you that it will be able to obtain additional financing on terms acceptable to us or at all.

Uncertainties associated with the acquisition of Knoll may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company following completion of the acquisition.

Herman Miller is dependent on the experience and industry knowledge of its officers and other key employees to execute its business plans.

Our success will depend in part upon our ability to retain certain key management personnel and employees.

Current and prospective employees of Herman Miller may experience uncertainty about their roles, which may have an adverse effect on our ability to attract or retain key management and other key personnel.

Accordingly, no assurance can be given that we will be able to attract or retain key management personnel and other key employees to the same extent that Herman Miller and Knoll have previously been able to attract or retain their own employees.

We have incurred and expect to continue to incur significant costs in connection with the acquisition of Knoll, which may be in excess of those we anticipate.

We have incurred and expect to continue to incur a number of non-recurring fees and costs associated with negotiating and completing the transactions, combining the operations of Herman Miller and Knoll and achieving desired synergies.

These fees and costs have been, and will continue to be, substantial.

The substantial majority of non-recurring expenses will consist of transaction costs related to the merger and include, among others, the preferred

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stock purchase, employee retention costs, fees paid to financial, legal, strategic and accounting advisors, severance and benefit costs, proxy solicitation costs and filing fees.

We will also incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs.

We will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses.

There is no assurance we will be able to obtain such additional financing on terms acceptable to us or at all.

Uncertainties associated with the acquisition of Knoll may cause a loss of management personnel and other key employees.

MillerKnoll is dependent on the experience and industry knowledge of its officers and other key employees to execute its business plans.

Our success will depend in part upon our ability to retain certain key management personnel and employees, including those who joined us as part of the Knoll acquisition.

Our employees may experience uncertainty about their roles in light of the acquisition and our strategic plan, which may have an adverse effect on our ability to attract or retain key management and other key personnel.

We have incurred and may continue to incur significant costs in connection with the integration of Knoll, which may be in excess of those we anticipate.

We have incurred and expect to continue to incur a number of non-recurring fees and costs associated with combining the operations of Herman Miller and Knoll and achieving desired synergies.

These costs and expenses include those related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs.

Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Herman Miller.

Macroeconomic and Workplace Trends Related Risks

Adverse economic and industry conditions could have a negative impact on our business, results of operations and financial condition.

Customer demand within the contract office furniture and retail furnishings industries is affected by various macro-economic factors;

general corporate profitability, service sector employment levels, new office construction rates and existing office vacancy rates are among the most influential factors.

Customer demand within the contract office furniture and retail furnishings industries is affected by various macroeconomic factors with general corporate profitability, service sector employment levels, new office construction rates, and existing office vacancy rates being among the most influential factors.

History has shown that declines in these measures can have an adverse effect on overall office furniture demand.

Additionally, factors and changes specific to our industry, such as developments in technology, governmental standards and regulations, and health and safety issues, can influence demand.

There are current and future economic and industry conditions that could adversely affect our business, operating results, or financial condition.

Other macroeconomic developments, such as the United Kingdom referendum on European Union membership (commonly known as Brexit) could negatively affect the Company's ability to conduct business in those geographies.

The Company is monitoring the resolution of various trade policy negotiations between the U.S.

and key trading partners as well as the post-Brexit impact on the U.K.

and European Union.

These negotiations create uncertainty in key markets, which, if unresolved in the near term, could negatively impact customer demand.

Furthermore, concerns exist relating to potential tariffs and customs regulations and the potential for short term logistics disruption as any such changes are implemented.

This will impact both the Company's suppliers and customers, including distributors, and could result in product delays and inventory issues.

Further uncertainty in the marketplace also brings risk to accounts receivable and could result in delays in collection and greater bad debt expense.

There also remains a risk for the value of the British Pound and/or the Euro to further deteriorate, reducing the purchasing power of customers in these regions and potentially undermining the financial health of the Company's suppliers and customers in other parts of the world.

The markets in which we operate are highly competitive and we may not be successful in winning new business.

We are one of several companies competing for new business within the office furniture industry.

Many of our competitors offer similar categories of products, including office seating, systems and freestanding office furniture, casegoods, storage as well as residential, education and healthcare furniture solutions.

Although we believe that our innovative product design, functionality, quality, depth of knowledge, and strong network of distribution partners differentiate us in the marketplace, increased market pricing pressure could make it difficult for us to win new business with certain customers and within certain market segments at acceptable profit margins.

Many of our competitors offer similar categories of products, including office seating, systems and freestanding office furniture, casegoods, storage products, as well as residential, education and healthcare furniture solutions.

Although we believe that our innovative product design, functionality, quality, depth of knowledge, and strong network of distribution partners differentiate us in the marketplace, increased market pricing pressure and other factors could make it difficult for us to win new business with certain customers and within certain market segments at acceptable profit margins.

The retail furnishings market is highly competitive.

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Some of our competitors have significantly greater financial, marketing and other resources than we possess.

This may result in our competitors being quicker at the following:

adapting to changes, devoting greater resources to the marketing and sale of their products, generating greater national brand recognition, or adopting more aggressive pricing and promotional

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policies, including free shipping offers.

This may result in these competitors being quicker at important metrics such as adapting to changes, devoting greater resources to the marketing and sale of their products, generating greater national brand recognition, or adopting more aggressive pricing and promotional policies, including free shipping offers.

In addition, increased catalog mailings and/or digital marketing campaigns by our competitors may adversely affect response rates to our own marketing efforts.

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We have significant manufacturing and sales operations in the United Kingdom, which represents our largest marketplace outside the United States.

We also have manufacturing operations in China, India, and Brazil.

Additionally, our products are sold internationally through controlled subsidiaries or branches in Canada, Denmark, Korea, Mexico, Australia, China (including Hong Kong), India and Brazil.

The Company's products are offered in Canada, Europe, the Middle East, Africa, Latin America and the Asia/Pacific region primarily through dealers.

The transitional exit of the U.K.

from European Union membership (commonly known as “Brexit”) could disrupt and create uncertainty with respect to our business in that region, including by affecting our relationships with current and future customers, suppliers, employees, and other of our business relationships.

Furthermore, concerns exist relating to potential tariffs and customs regulations and the potential for short term logistics disruption as any such changes are implemented.

This will impact both our suppliers and customers, including distributors, and could result in product delays and inventory issues.

Further uncertainty in the marketplace also brings risk to accounts receivable and could result in delays in collection and greater bad debt expense.

We also have manufacturing operations in China, India, Italy, Canada, Mexico and Brazil.

Additionally, our products are sold internationally through controlled subsidiaries or branches in Canada, Denmark, Italy, Korea, Mexico, Australia, China (including Hong Kong), India, Brazil, and other European countries.

The Company's products are offered in Canada, Europe, the Middle East, Africa, Latin America and the Asia/Pacific region primarily through dealers and retail channels.

Doing business internationally exposes us to certain risks, many of which are beyond our control and could potentially impact our ability to design, develop, manufacture, or sell products in certain countries.

These factors could include, but would not necessarily be limited to:

• Political, social and economic conditions

These factors include, without limitation, political, social, and economic conditions;

global trade conflicts and trade policies;

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protection of intellectual property;

• Changes in foreign currency exchange rates

and changes in foreign currency exchange rates.

In some countries, the currencies in which we import and export products can differ.

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and international monetary policies may have an adverse impact on results of operations and financial condition.

In connection with the ongoing war between Russia and Ukraine, the U.S.

government has imposed enhanced export controls on certain products and sanctions on certain industry sectors and parties in Russia.

MillerKnoll is not fulfilling any existing orders or accepting new orders from Russia or Belarus at this time.

As a safety measure, we have also stopped taking new

orders and fulfilling orders in Ukraine.

This region represents a small portion of our International Contract business, and we do not rely on any material goods from suppliers in these regions.

While we do not have manufacturing facilities or offices in the region, we have historically sold products to two dealers in Ukraine, two in Russia, and two in Belarus.

Fiscal year 2022 and 2021 annualized revenues from these countries were approximately $6.4 million and $5.7 million, respectively.

Further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect our business and/or our supply chain, business partners or customers in the broader region.

The continued conflict in that region, as well as the current and additional international sanctions against Russia, are likely to further increase the cost of various supplies, particularly for petroleum based products.

The impact from this conflict, as well as the international sanctions, cannot be predicted or anticipated with any reasonable degree of certainty, including the impact on the Company.

A sustained downturn in the economy could adversely impact our access to capital.

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Disease outbreaks, such as the COVID-19 pandemic, could have an adverse impact on the Company's operations and financial results.

From time to time, various disease outbreaks may adversely impact our business, consolidated results of operations and financial condition, such as the current COVID-19 pandemic which has had such an adverse impact.

From time to time, various disease outbreaks may adversely impact our business, consolidated results of operations and financial condition, such as the ongoing COVID-19 pandemic, which has had such an adverse impact.

The Company has global manufacturing facilities, suppliers, dealers and customers.

Therefore, COVID-19, as well as measures taken

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by governmental authorities and other organizations and individuals to limit the spread of this virus, may interfere with the ability of our employees, suppliers and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of our business.

In addition, the COVID-19 pandemic has caused a significant percentage of the traditional office workforce to work away from their office location.

Therefore, COVID-19, as well as measures taken by governmental authorities and other organizations and individuals to limit the spread of this virus, may continue to interfere to varying degrees with the ability of our employees, suppliers and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of our business.

In addition, the COVID-19 pandemic has caused a significant percentage of the traditional office workforce to work away from their office location and the extent to which this will become a more permanent trend is uncertain.

It is reasonable to assume, at least in the near-term, that this will have an adverse impact on the demand for office furniture and related products.

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government on various products imported from certain countries, as well as countering tariffs on the export of U.S.

goods, has and will likely continue to adversely impact the cost of certain of our raw materials and finished goods as well as products that we export to other countries.

goods, has had, and will likely continue to have, an adverse impact on our business, including as a result of increased costs for certain of our raw materials and increasing the costs for certain products that we export to other countries.

Accordingly, these tariffs and the possibility of broader trade conflicts stemming from the tariffs could negatively impact our business in the future.

The tariffs on imports, most notably imports from China, also impacted the cost of steel in both fiscal year 2020 and fiscal 2021, a key commodity that we consume in producing products.

Given the significance of steel costs to our direct materials costs, we are closely monitoring escalating trade tensions between the U.S.

The tariffs on imports, most notably imports from China, has impacted the cost of steel, a key commodity that we consume in producing products.

Given the significance of steel costs to our direct materials costs, we closely monitor trade tensions between the U.S.

The potential impact to our direct material costs due to tariffs on Chinese imports is somewhat limited, however, as purchases of direct materials (mainly component parts and products manufactured by third parties) from China represented an estimated 3% of our consolidated cost of sales for fiscal 2022.

Going forward, continued or increased tariffs could negatively impact our gross margin and operating performance.

forward, continued or increased tariffs could negatively impact our gross margin and operating performance.

These factors also have the potential to significantly impact global trade and economic conditions in many of the regions where we do business.

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Disruptions in this flow of delivery may have a negative impact on our business, results of operations, and financial condition.

In the fourth quarter of 2021, the price of steel was impacted by shortages and disruptions in the steel industry as a result of the COVID-19 pandemic.

In fiscal year 2022, the price of steel was impacted by shortages and disruptions in the steel industry as a result of the COVID-19 pandemic.

These disruptions have not had a significant impact on our ability to manufacture and supply products to our customers, but they have negatively impacted the cost of procuring such materials.

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The costs of certain manufacturing materials used in our operations are sensitive to shifts in commodity market prices, including the impact of the U.S.

and retaliatory tariffs previously noted.

and retaliatory tariffs.

In particular, the costs of steel, plastic, aluminum components, and particleboard are sensitive to the market prices of commodities such as raw steel, aluminum, crude oil, lumber, and resins.

Increases in the market prices of these commodities, such as what we experienced in fiscal 2019 for steel, may have an adverse impact on our profitability if we are unable to offset them with strategic sourcing, continuous improvement initiatives or increased prices to our customers.

Increases in the market prices of these commodities due to the recent ban on Russian oil imports as a result of the current war between Russia and Ukraine may have an adverse impact on our profitability if we are unable to offset them with strategic sourcing, continuous improvement initiatives or increased prices to our customers.

Disruptions within our dealer network could adversely affect our business.

Our ability to manage existing relationships within our network of independent dealers is crucial to our ongoing success.

Although the loss of any single dealer would not have a material adverse effect on the overall business, our

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business within a given market could be negatively impacted by disruptions in our dealer network caused by the termination of commercial working relationships, ownership transitions, or dealer financial difficulties.

Although the loss of any single dealer would not have a material adverse effect on the overall business, our business within a given market could be negatively impacted by disruptions in our dealer network caused by the termination of commercial working relationships, ownership transitions, or dealer financial difficulties.

If dealers go out of business or restructure, we may suffer losses because they may not be able to pay for products already delivered to them.

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Those activities increase our financial exposure.

A continued shortage of qualified labor could negatively affect our business and materially reduce earnings.

We have experienced shortages of qualified labor across our operations.

Outside suppliers that we rely on have also experienced shortages of qualified labor.

The future success of our operations depends on our ability, and the ability of third parties on which we rely, to identify, recruit, develop and retain qualified and talented individuals in order to supply and deliver our products.

Any shortage of qualified labor could have a negative impact on our business.

Employee recruitment, development and retention efforts that we or such third parties undertake may not be successful, which could result in a shortage of qualified individuals in future periods.

Any such shortage could decrease our ability to effectively produce and meet customer demand.

Such a shortage would also likely lead to higher wages for employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in our results of operations.

In the current operating environment, we are experiencing a shortage of qualified labor in certain geographies, particularly with plant production workers, resulting in increased costs from certain temporary wage actions, such as hiring and referral bonus programs.

A continuation of such shortages for a prolonged period of time could have a material adverse effect on our operating results.

Financial Related Risks

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however, we retain the insurable risk at an aggregate level.

Therefore unforeseen or catastrophic losses in excess of our insured limits could have a material adverse effect on the Company’s financial condition and operating results.

Therefore unforeseen or catastrophic losses in excess of our insured limits could have a material adverse

effect on the Company’s financial condition and operating results.

See Note 1 of the Consolidated Financial Statements for information regarding the Company’s retention level.

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We have a substantial amount of goodwill and indefinite-lived intangible assets, primarily trademarks, on our balance sheet.

We test the goodwill and intangible assets for impairment on an annual basis and when events occur or circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its carrying amount.

Fair value determinations require considerable judgment and are sensitive to inherent uncertainties and changes in estimates and assumptions regarding actual and forecasted revenue growth rates and operating margins and discount rates.

Declines in market conditions, a trend of weaker than anticipated financial performance for our reporting units or declines in projected revenue for our trademarks, a decline in our share price for a sustained period of time, an increase in the market-based weighted average cost of capital or a decrease in royalty rates, among other factors, are indicators that the carrying value of our goodwill or indefinite-life intangible assets may not be recoverable.

We test the goodwill and intangible assets for impairment both on an annual basis and when events occur or circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its carrying amount.

Declines in market conditions, a trend of weaker than anticipated financial performance for our reporting units, declines in projected revenue for our trademarks, a decline in our share price for a sustained period of time, an increase in the market-based weighted average cost of capital, or a decrease in royalty rates, among other factors, are indicators that the carrying value of our goodwill or indefinite-life intangible assets may not be recoverable.

We may be required to record a goodwill or intangible asset impairment charge that, if incurred, could have a material adverse effect on our financial statements.

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General Risks

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We are subject to risks and costs associated with protecting the integrity and security of our systems and confidential information.

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(1) an adverse impact on future financial results due to theft, destruction, loss misappropriation, or release of confidential data or intellectual property;

(2) operational or business delays resulting from the disruption of IT systems, and subsequent clean-up and mitigation activities;

(2) operational or business delays resulting from

the disruption of IT systems, and subsequent clean-up and mitigation activities;

and (3) negative publicity resulting in reputation or brand damage with customers, partners or industry peers.

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If we fail to implement appropriate safeguards or to detect and provide prompt notice of unauthorized access as required by some of these laws, we could be subject to potential fines, claims for damages and other remedies, which could harm our business.

Due to the political uncertainty and military actions involving Russia, Ukraine, and surrounding regions, we and the third parties upon which we rely may be vulnerable to a currently heightened risk of information technology breaches, computer malware, or other cyber-attacks, including attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products.

We are unable to control many of the factors affecting consumer spending.

Declines in consumer spending on furnishings could reduce demand for our products.

The operations of our Retail segment are sensitive to a number of factors that influence consumer spending, including general economic conditions, consumer disposable income, unemployment, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, and consumer confidence in future economic conditions.

The operations of our Global Retail segment are sensitive to a number of factors that influence consumer spending, including general economic conditions, consumer disposable income, unemployment, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, and consumer confidence in future economic conditions.

Adverse changes in these factors may reduce consumer demand for our products, resulting in reduced sales and profitability.

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These factors may harm our ability to increase the sales and profitability of our retail operations.

Approximately 32 percent of the sales within our Retail segment are transacted within our retail studios.

Approximately 33% of the sales within our Global Retail segment are transacted within our retail studios.

Additionally, we believe our retail studios have a direct influence on the volume of business transacted through other channels, including our consumer eCommerce and direct-mail catalog platforms, as many customers utilize these physical spaces to view and experience products prior to placing an order online or through the catalog call center.

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to open additional studios or close existing studios successfully will depend upon a number of factors beyond our control, including:

Our ability to open additional studios or close existing studios successfully will depend upon a number of factors beyond our control, including, without limitation:

• general economic conditions;

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• landlord financial stability.

We may incur significant increased costs and become subject to additional potential liabilities under environmental and other laws and regulations aimed at combating climate change.

We expect to incur significant costs as we work to implement our recently-announced 2030 sustainability goals, which include efforts to reduce our carbon footprint, design out waste, and source better materials.

We also believe it is likely that the increased focus by the U.S.

and other governmental authorities on climate change and other environmental matters will lead to enhanced regulation in these areas, which could also result in increased compliance costs and subject us to additional potential liabilities.

The extent of these costs and risks is difficult to predict and will depend in large part on the extent of new regulations and the ways in which those regulations are enforced.

We operate and have manufacturing facilities in multiple regions across the globe, and the impact of additional regulations in this area is likely to vary by region.

It is possible the costs we incur to comply with any such new regulations and implement our own sustainability goals could be material.

Increasing competition for highly skilled and talented workers could adversely affect our business.

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Item 1B Unresolved Staff Comments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors