What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-07-26 compared with 2021-07-27 · 381 added, 372 removed, 248 unchanged (75% of the section changed)

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Executive Overview

Herman Miller’s purpose statement is design for the good of humankind.

At present, most customers come to the Company for furnishing interior environments in corporate offices, healthcare settings, higher education institutions and residential spaces.

The Company's primary products include furniture systems, seating, storage, freestanding furniture, healthcare environment products, casegoods, textiles and related technologies and services.

More than 100 years of innovative business practices and a commitment to social responsibility have established Herman Miller as a recognized global company.

The Company trades on the Nasdaq Global Select Market under the symbol MLHR.

Subsequent to the end of fiscal 2021, the Company finalized the acquisition of Knoll, Inc.

MillerKnoll is a collective of dynamic brands that comes together to design the world we live in.

From the spaces we make that help us live and work better, to how we manufacture our products, to the ways we solve challenges facing our customers and global community, design is our tool for creating positive impact.

Our optimism leads us as we redefine modern for the 21st century, shaping a future that’s more sustainable, caring, and beautiful for all people and our planet.

In July 2021, the Company finalized the acquisition of Knoll, Inc.

(“Knoll”) in a cash and stock transaction valued at approximately $1.8 billion.

This combination brings together two pioneering and iconic brands to create MillerKnoll, one of the largest and most influential modern design companies in the world.

Together we will transform our industry and redefine modern design.

With a broader portfolio, global footprint, and advanced digital capabilities, our combined company will be poised to innovate and design the future for all the places where life happens.

Herman Miller's products are sold internationally through controlled subsidiaries or branches in various countries including the United Kingdom, Denmark, Canada, Japan, Mexico, Australia, Singapore, China, Hong Kong, India and Brazil.

The Company's products are offered elsewhere in the world primarily through independent dealerships or joint ventures with customers in over 100 countries.

On November 1, 2021, Herman Miller, Inc.

changed its name to MillerKnoll, Inc., and the company began trading on the Nasdaq Global Select Market under the symbol MLKN.

MillerKnoll's products are sold internationally through controlled subsidiaries or branches in various countries including the United Kingdom, Denmark, Italy, France, the Netherlands, Canada, Japan, Mexico, Australia, Singapore, China, Hong Kong, India, and Brazil.

The Company’s products are sold in over 100 countries primarily through independent contract furniture dealers, direct customer sales, owned and independent retailers, direct-mail catalogs, and the Company’s eCommerce platforms.

The Company is globally positioned in terms of manufacturing operations.

In the United States, manufacturing operations are located in Michigan, Georgia, Wisconsin and North Carolina.

In Europe, the Company's manufacturing presence is located in the United Kingdom.

Manufacturing operations globally also include facilities located in China, Brazil and India.

The Company manufactures products using a system of lean manufacturing techniques collectively referred to as the Herman Miller Performance System (HMPS).

For its contract furniture business, Herman Miller strives to maintain efficiencies and cost savings by minimizing the amount of inventory on hand.

In North America, manufacturing operations are in Connecticut, Illinois, Georgia, New York, North Carolina, Michigan, Pennsylvania, Texas, and Wisconsin in the United States, as well as Toronto and Mexico City.

In Europe, the Company's manufacturing presence is in the United Kingdom and Italy.

Manufacturing operations globally also include facilities located in Brazil, Mexico, China, and India.

The Company manufactures products using a system of lean manufacturing techniques collectively referred to as the MillerKnoll Performance System (MKPS).

For its contract furniture business, MillerKnoll strives to maintain efficiencies and cost savings by minimizing the amount of inventory on hand.

Accordingly, production is order-driven with direct materials and components purchased as needed to meet demand.

The standard manufacturing lead time for the majority of our products is 10 to 20 days.

These factors result in a high rate of inventory turns related to our manufactured inventories.

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As a result of this strategy, the Company's manufacturing operations are largely assembly-based .

A key element of the Company's growth strategy is to scale the Retail business through the Company's Design Within Reach (DWR), HAY and Herman Miller retail operations.

The Retail business provides a channel to bring Herman Miller's iconic and design-centric products to retail customers, along with other proprietary and third-party products, with a focus on design.

The Company continues to transform its Retail business through the DWR retail studio footprint, which will be complemented by a continued focus on improving margins through the development of exclusive product designs and leveraging additional sales in DWR's contract, catalog and digital channels, as well as the HAY brand, which was launched in North America in fiscal 2019.

23 2021 Annual Report

A key element of the Company's growth strategy is to scale the Global Retail business through the Company's Design Within Reach ("DWR"), HAY, and Herman Miller retail operations.

The Global Retail business provides a channel to bring MillerKnoll's iconic and design-centric products to retail customers, along with other proprietary and third-party products, with a focus on modern design.

The Company continues to transform its Global Retail business through store expansion & fleet optimization, which will be complemented by continued focus on assortment expansion (including proprietary and exclusive products), the launch of new eCommerce sites and ongoing digital optimization of existing eCommerce sites and marketing programs.

The Company is comprised of various operating segments as defined by generally accepted accounting principles in the United States (U.S.

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The Company has identified the following segments:

• North America Contract — Includes the operations associated with the design, manufacture, and sale of furniture and textile products for work-related settings, including office, education and healthcare environments, throughout the United States and Canada.

The business associated with the Company's owned contract furniture dealers is also included in the North America Contract segment.

In addition to the Herman Miller brand, this segment includes the operations associated with the design, manufacture and sale of high-craft furniture products and textiles, including Geiger wood products, Maharam textiles, Nemschoff, and naughtone.

• International Contract — Includes the operations associated with the design, manufacture and sale of furniture products, primarily for work-related settings in EMEA, Latin America, and Asia-Pacific.

• Retail — Includes the operations associated with the sale of modern design furnishings and accessories to third-party retail distributors, as well as direct to consumer sales through eCommerce, direct mailing catalogs and Herman Miller, DWR and HAY stores and studios.

• Americas Contract — Includes the operations associated with the design, manufacture, and sale of furniture and textile products for work-related settings, including office, healthcare, and educational environments, throughout North America and South America.

In addition to the Herman Miller brand, naughtone brand, and the DWR Contract business, this segment includes the operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, and Herman Miller Healthcare.

• International Contract — Includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings in Europe, the Middle East and Africa ("MEA") and Asia-Pacific including products from Colebrook Bosson Saunders (“CBS”), naughtone, and HAY.

• Global Retail — Includes the operations associated with the sale of modern design furnishings and accessories direct to consumer sales through eCommerce, DWR stores and outlets, Herman Miller stores, and HAY stores, as well as to third-party retailers.

• Knoll — Includes the global operations associated with the design, manufacture, and sale of furniture products within the legacy Knoll brands, which includes Knoll, Datesweiser, Edelman Leather, Fully, Holly Hunt, KnollTextiles, Muuto, and Spinneybeck|FilzFelt.

The Company also reports a corporate category consisting primarily of unallocated corporate expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative, and acquisition-related costs.

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The Company relies on the following core strengths in delivering solutions to customers:

• Portfolio of Leading Brands and Products - Herman Miller is a globally-recognized, design brand known for working with some of the most well-known and respected designers in the world.

Over the years, it has evolved into Herman Miller Group, a family of brands that collectively offers a variety of products for environments where people live, learn, work, heal and play.

Within the industries in which the Company operates, Herman Miller, DWR, Geiger, Maharam, POSH, Nemschoff, Colebrook Bosson Saunders ("CBS"), HAY, Maars Living Walls and naughtone are acknowledged as leading brands that inspire architects and designers to create their best design solutions.

This portfolio has enabled Herman Miller to connect with new audiences, channels, geographies and product categories.

Leveraging the collective brand equity of the Herman Miller Group across the lines of business is an important element of the Company's business strategy.

• Portfolio of Leading Brands and Products - MillerKnoll is a collective of globally recognized design brands known for working with some of the most well-known and respected designers in the world.

Combined, the Company represents over 100 years of design research and exploration in service of humanity.

Within the industries in which the Company operates, Herman Miller and Knoll, along with Colebrook Bosson Saunders, DatesWeiser, Design Within Reach, Edelman Leather, Fully, Geiger, HAY, Holly Hunt, Maars Living Walls, Maharam, Muuto, naughtone, and Spinneybeck|FilzFelt are acknowledged as leading brands that inspire architects and designers to create their best design solutions.

This portfolio has enabled MillerKnoll to connect with new audiences, channels, geographies, and product categories.

Leveraging the collective brand equity of MillerKnoll across the lines of business is an important element of the Company's business strategy.

• Problem-Solving Design and Innovation - The Company is committed to developing research-based functionality and aesthetically innovative new products and has a history of doing so, in collaboration with a global network of leading independent designers.

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• Operational Excellence - The Company was among the first in the industry to embrace the concepts of lean manufacturing.

HMPS provides the foundation for all the Company's manufacturing operations.

MKPS provides the foundation for all the Company's manufacturing operations.

The Company is committed to continuously improving both product quality and production and operational efficiency.

The Company has extended this lean process work to its non-manufacturing processes as well as externally to its manufacturing supply chain and distribution channel.

The Company believes these concepts hold significant promise for further gains in reliability, quality, and efficiency.

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and Subsidiaries 24

• Omni-Channel Reach - The Company has built a multi-channel distribution capability that it considers unique.

Through contract furniture dealers, direct customer sales, retail stores and studios, eCommerce, catalogs, and independent retailers, the Company serves contract and residential customers across a range of channels and geographies.

• Omni-ChannelReach - The Company has built a multi-channel distribution capability that it considers unique.

Through contract furniture dealers, direct customer sales, retail stores and studios, eCommerce, and independent retailers, the Company serves contract and residential customers across a range of channels and geographies.

• Global Scale - In addition to its global omni-channel distribution capability, the Company has a global network of designers, suppliers, manufacturing operations, and research and development centers that position the Company to serve contract and residential customers globally.

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The Company's products and services are sold through the following distribution channels:

• Independent and Owned Contract Furniture Dealers - Most of the Company's product sales are made to a network of independently owned and operated contract furniture dealerships doing business in many countries around the world.

• Independent Contract Furniture Dealers - Most of the Company's product sales are made to a network of independently owned and operated contract furniture dealerships doing business in many countries around the world.

These dealers purchase the Company's products and distribute them to end customers.

Many of these dealers also offer furniture-related services, including product installation.

• Direct Contract Sales - The Company also sells products and services directly to end customers without an intermediary (e.g., sales to the US federal government).

• Direct Contract Sales - The Company sells products and services directly to end customers without an intermediary (e.g., sales to the U.S.

federal government).

In most of these instances, the Company contracts separately with a dealer or third-party installation company to provide sales-related services.

• Retail Studios - At the end of fiscal 2021 the Retail business unit included 45 retail studios (including 35 operating under the DWR brand, 4 under the HAY brand, 5 Herman Miller stores and a multi-brand Chicago store).

This business also operates 3 outlet studios.

The retail and outlet studios are located in metropolitan areas throughout North America.

• eCommerce - The Company sells products through its online stores, in which products are available for sale via the Company's website, hermanmiller.com, global eCommerce platforms, as well as through the dwr.com and us.hay.com online stores.

These sites complement our existing methods of distribution and extend the Company's brand to new customers.

• Direct-Mail Catalogs - The Company’s Retail business unit utilizes a direct-mail catalog program through its DWR subsidiary.

A regular schedule of catalog mailings is maintained throughout the fiscal year and these serve as a key driver of sales across each of DWR’s channels, including retail studios and eCommerce websites.

• Wholesale - Certain of the Company's products are sold on a wholesale basis to third-party retailers located in various markets around the world.

• eCommerce - The Company sells products in its portfolio of brands across the globe, through localized Herman Miller, Knoll, DWR, HAY and Fully websites.

These sites complement the Company’s existing methods of distribution and extend the Company's brands' reach for new and existing customers and clients.

• Wholesale – Through both the Global Retail and Knoll segments, certain of the Company's products are sold on a wholesale basis to third-party retailers located in various markets around the world.

• Retail Locations - As of May 28, 2022, the Company operated 70 retail studios (including 35 operating under the DWR brand, 7 under the HAY brand, 22 Herman Miller stores, 2 Muuto stores, 3 Knoll stores and a multi-brand Chicago store).

The business also operates 3 outlet studios.

Challenges Ahead

Like all businesses, the Company is faced with a host of challenges and risks.

The Company believes its core strengths and values, which provide the foundation for its strategic direction, have well prepared the Company to respond to the inevitable challenges it will face in the future.

The Company believes its core strengths and values, which provide the foundation for its strategic direction, have prepared the Company to respond to the inevitable challenges it will face in the future.

While the Company is confident in its direction, it acknowledges the risks specific to our business and industry.

Refer to Item 1A for discussion of certain of these risk factors and Item 7A for disclosures of market risk.

25 2021 Annual Report

Areas of Strategic Focus

Despite a number of risks and challenges, the Company believes it is well positioned to successfully pursue its purpose of design for the good of humankind.

As our business and industry continue to evolve, we are constantly focused on staying ahead of the curve.

With the composition of the office floor plate moving toward a broader variety of furnishings, a greater desire for customization from our customers, new technologies, and trends towards urbanization and more seamless transactions in the retail world, we have centered our overall value creation strategy on four key priorities.

Unlock the Power of One Herman Miller

Coming together as a family of complementary brands will help achieve our goals of more actively moving into the consumer marketplace, growing globally and making it easier to do business with us.

We strive to become more agile, invest in responsive innovation, simplify our go-to-market strategy and continue to lead in product innovation across all our businesses globally.

Our strategy is designed to harness the full potential of MillerKnoll while driving growth across all business segments, geographies, and customer groups and creating value for all our stakeholders.

We will capitalize on global trends including hybrid and flexible work, consumers’ focus on investing in their homes, a focus on health and well-being, and an expectation of corporate social responsibility.

Our strategy includes five key focus areas:

Bring MillerKnoll to Life

We are following a detailed and deliberate plan to bring the best of all our brands together to create MillerKnoll, enabling us to achieve our purpose of design for the good of humankind as we remake modern for the 21st century.

Our priorities include establishing and building the MillerKnoll culture;

delivering on our synergy commitments of $100 million in annual run-rate savings by the end of year two post-acquisition and $120 million in run-rate savings by the end of year three;

successfully executing our integration plans and initiatives;

cultivating and enabling a strong global dealer network;

and establishing worldwide supply chain and manufacturing capabilities to effectively serve our customers across all our channels.

Build a Customer-Centric, Digitally Enabled Business Model

Building a customer centric and digitally enabled business model is at the forefront of our goal to become easier to do business with us.

We will leverage our deep understanding of customer journeys to deliver inspired products and a frictionless customer experience.

Along with strengthening the core technology backbone, we will also drive step-change in data, analytics, marketing and brand capabilities.

Building a customer-centric and digitally enabled business model is foundational to bringing MillerKnoll to life and encompasses both our internal technology foundation and our digital go-to-market capabilities.

Our goals include integrating our MillerKnoll systems and processes, shifting to a simpler systems architecture, serving our customers around the world through global eCommerce capabilities, harnessing data to enable our teams to make effective and timely decisions, and accelerating global automation and manufacturing 4.0 initiatives to improve the employee experience and increase accuracy, quality, and performance.

With the launch of our MillerKnoll dealer network in North America, we expanded access to our proprietary end-to-end digital solution that makes it easier for our dealers to respond to customer requests faster with differentiated solutions, and we’re looking forward to bringing this to our international cross-selling dealers later this year.

Accelerate Profitable Growth

There are identified opportunities for growth ahead in each of our business segments.

We believe we are the only company in our industry with access to meaningful contract and residential growth opportunities on a global scale.

At the same time, with our ongoing focus on operational excellence and specific profit improvement initiatives, we are focused on continuous improvement of our cost structure.

Reinforce Our Commitment to Our People, Planet, Communities

With a legacy of corporate social responsibility that is deeply ingrained in our culture, we will reinforce our commitment to our people, planet and communities in a more integrated and deliberate way than ever before.

We will focus on building, developing and retaining world-class talent, shaping an inclusive and diverse workforce and elevating our Better World commitment.

Doing so will enable us to create value for our shareholders, customers and employees, as well as for the broader communities and environment in which we operate.

We believe there is opportunity for meaningful growth in each of our business segments and MillerKnoll is uniquely positioned to capitalize on these opportunities given the breadth of our Contract and Global Retail businesses and product portfolios, global reach, and omni-channel distribution and fulfillment capabilities.

To capitalize on the opportunity ahead, we will seek to lead the industry in product innovation and design excellence;

fortify the flagship Knoll and Herman Miller brands while nurturing and growing each of the brands within MillerKnoll;

position the Americas Contract business to lead;

drive outsized growth in International Contract;

and continue transforming our Global Retail business.

Attract, Develop, and Retain World-Class Talent

In creating MillerKnoll, we created the most talented team in the industry.

We are committed to nurturing this distinct competitive advantage and will create a premiere employee experience while continuing to invest in our people so they can do their best work every day.

Our priorities include enabling a seamless MillerKnoll employee experience via a global Human Resources technology platform ;

delivering an externally competitive and internally equitable compensation and benefits program;

growing internal capabilities through development opportunities for all career levels;

and investing to make MillerKnoll an employer of choice around the world.

Reinforce Our Commitment to Our People, Our Planet, and Our Communities

Our legacy of corporate social responsibility is deeply ingrained in our culture and is shared across all our brands.

We will continue to reinforce our commitment to our people, planet, and communities in integrated and deliberate ways.

We intend to hold ourselves accountable for forward progress against our diversity, equity, and inclusion initiatives, building on the foundation of the 10 DEI actions we announced in 2020;

progress on our 2030 sustainability goals, which we introduced in April 2022;

be a force for good in our communities worldwide;

and elevate our Better World commitments by developing common metrics and regularly sharing our progress internally and externally.

The Company believes its strategy continues to respond well to current and future realities in its markets.

The Company's strategic priorities are aimed at creating a sustainable and diverse revenue model that puts the customer at the center of everything we do and leverages enabling digital capabilities to fully realize that vision.

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Business Overview

The following is a summary of the significant events and items impacting the Company's operations for the year ended May 28, 2022:

• The Company entered into strategic agreements during the fiscal year, including agreements for (i) the acquisition of Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman Miller common stock for each outstanding share of Knoll common stock and (ii) the acquisition of all of the outstanding shares of Knoll's preferred stock for approximately $253 million in cash in the aggregate.

This transaction was finalized subsequent to the end of the fiscal year.

• Net sales were $2,465.1 million, representing a decrease of 0.9% when compared to the prior year.

The decrease in net sales was driven primarily by decreased sales volumes in the North America Contract segment, partially offset by increased demand with the Retail segment, the impact the acquisition of HAY and naughtone;

and incremental list price increases, net of contract price discounting.

On an organic basis, net sales were $2,345.3 million(*), representing a decrease of 5.7% when compared to the prior year.

• On July 19, 2021, the Company completed the acquisition of Knoll, Inc.

(“Knoll"), a leader in the design, manufacture, marketing, and sale of high-end furniture products and accessories for workplace and residential markets.

The acquisition date fair value of the consideration transferred for Knoll was approximately $1,887.3 million, which was comprised of cash of $1,176.6 million and $710.7 million of Knoll stock that was converted into Company awards.

The Company funded the acquisition through cash on-hand and debt proceeds.

The Company ended the fiscal year with total debt of $1,427.9 million.

The Company has included the financial results of Knoll in the consolidated financial statements from the date of acquisition.

• Net sales were $3,946.0 million, representing an increase of 60.1% when compared to the prior year.

The increase in net sales was driven primarily by the consolidation of Knoll results from the date of acquisition of July 19, 2021, as well as from growth in the Americas Contract, Global Retail and International Contract segments.

On an organic basis, net sales were $2,799.3 million(*), representing an increase of 13.6% when compared to the prior year.

• Gross margin was 34.3% as compared to 38.6% in the prior year.

The increase in gross margin was driven primarily by favorable channel and product mix combined with incremental list price increases, partially offset by lower overhead leverage due to decreased volumes as well as an increase in commodity market prices.

• Operating expenses decreased by $230.5 million or 24.3% as compared to the prior year.

Operating expenses in the prior year included non-cash impairment charges of $205 million.

In the current year, operating expenses included acquisition and integration charges of $11.0 million, and restructuring costs of $2.7 million.

Restructuring costs related mainly to severance and outplacement benefits associated with workforce reductions and profit improvement initiatives implemented during the previous year.

• The effective tax rate was 21.2% for fiscal 2021 compared to negative 44.9% for the prior year.

Excluding the impact of adjustments related to restructuring and other special charges recorded, a portion of which were not deductible for tax purposes, the effective tax rate for the prior year was 19.9%(*).

This rate reflected both provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.

• Diluted earnings per share for the full year totaled $2.92 compared to a loss per share of $0.15 last year.

On an adjusted basis, diluted earnings per share tot aled $3.05(*) i n fiscal 2021 compared to $2.61(*) in fiscal 2020, behind the strength of improved gross margins and well-managed operating expenses.

The change in gross margin was primarily driven by inflationary pressures on commodities, freight, and production costs;

increased labor costs;

and charges related to the purchase accounting effects of the Company's acquisition of Knoll.

The decrease in margin was offset in part by price increases implemented at various points throughout the fiscal year.

• Operating expenses increased by $594.3 million or 82.7% as compared to the prior year.

Operating expenses in fiscal year 2022 included $125 million of transaction and integration related costs associated with the Knoll acquisition and $51 million of charges related to the amortization of purchased intangible assets in the acquisition.

After excluding the impact of purchase accounting amortization and the transaction and integration related costs, the addition of Knoll increased operating expenses by $348.4 million.

• The integration of the Knoll acquisition continues to progress as planned.

We made good progress implementing cost synergies throughout the fiscal year, having achieved total annualized run-rate savings of $66 million by the end of the fourth quarter.

This has us on track to deliver against our stated goal of achieving annualized cost synergies of $120 million within three years of closing.

• The effective tax rate was (130.1)% for fiscal 2022 compared to 21.2% for the prior year.

• Diluted earnings per share for the full year totaled a loss per share of $0.37 compared to an earnings per share of $2.94 last year.

On an adjusted basis(*), diluted earnings per share totaled $1.92 in fiscal 2022 compared to $3.07 in fiscal 2021.

• The Company declared cash dividends of $0.75 per share compared to $0.56 per share in the prior year.

The following summary includes the Company's view on the economic environment in which it operates:

• The Company's Retail segment supports a range of furniture categories aimed at the home environment.

Several of these categories, including Home Office, Upholstery, Outdoor, Storage, and Accessories, saw a ramp-up in demand during the first three quarters of fiscal 2021 and this continued into the fourth quarter of fiscal 2021.

• The disruption from the COVID-19 pandemic has adversely impacted our fiscal 2021 results as contract furniture industry order trends, as reported by the Business and Institutional Furniture Manufacturers Herman Miller, Inc.

and Subsidiaries 25 Association ("BIFMA"), have highlighted near-term demand pressures from the slowdown in economic activity from the pandemic in our North America Contract segment.

Our International Contract segment has also been impacted, although many of the markets internationally have shown signs of faster economic recovery.

27 2021 Annual Report

• 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.

• The Company's Global Retail segment supports a range of furniture categories aimed at the home environment.

Several of these categories, including Seating and Dining, Upholstery, Storage, Gaming, and Accessories saw a ramp-up in sales during fiscal 2022.

The workspace category experienced a decline in sales volume within the Global Retail segment, driven by shifting consumer spending patterns.

• While customer demand was strong across segments throughout fiscal 2022, the Company’s results were impacted by global supply chain and labor shortages as well as inflationary pressures, especially steel, freight, fuel costs, and production labor.

The Company took a variety of actions to offset the impact of these pressures, including price increases, supplier diversification, shifting production across manufacturing facilities, and hiring and retention initiatives to increase production staffing.

These actions have helped mitigate some of the impact of these pressures.

As of May 28, 2022 lead times on the majority of new orders have returned to near normal levels and staffing levels have stabilized.

The Company is continuing to carefully monitor these macroeconomic indicators and will respond accordingly as circumstances warrant.

• The Company is monitoring the ongoing war in Ukraine.

The Company stopped fulfilling orders in Russia and Belarus in compliance with economic sanctions from the United States, European Union, and the United Kingdom.

• The Company continues to navigate the impact of global tariffs.

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The price of steel unfavorably impacted consolidated gross margin in the fourth quarter of fiscal 2022.

However, ongoing cost reduction initiatives and a planned price increase in the first quarter of fiscal 2022 will help offset these pressures over time.

However, ongoing cost reduction initiatives and price increases are expected to help offset these pressures over time.

The remaining sections of Item 7 include additional analysis of the fiscal year ended May 28, 2022, including discussion of significant variances compared to the prior year period.

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The Company continues to respond to the challenges brought about by the COVID-19 pandemic.

Workplace restrictions are regionally applied based on the recommendations of local government and health authorities.

While demand for the Company's products and services, particularly in the Contract channel of the business, has been adversely impacted, our multi-channel go-to-market approach has enabled us to serve customers where, and how, they need to be served.

In addition, the investments we’ve made in people, technology, and products have positioned us well to capitalize on emerging opportunities as our customers' needs have changed throughout the COVID-19 crisis.

This has allowed for our Retail business to take advantage of the unanticipated emerging work-from-home trend as well as "home is my castle" trends as consumers are focusing on and upgrading their broader home environments .

Demand for certain of the Company's products and services, particularly in the Contract channel of the business, has been negatively impacted.

We believe the investments we’ve made in people, technology, and products have positioned us well to capitalize on emerging opportunities as our customers' needs have changed throughout the COVID-19 pandemic.

This has allowed our Retail business to take advantage of companies moving towards hybrid working arrangements as well as "home is my castle" trends as consumers are focusing on and upgrading their broader home environments.

Despite this, the duration of the pandemic, supply chain constraints, future demand for our products, and related impacts remain difficult to estimate.

Employee Safety and Health

The health and well-being of employees remains top of mind.

We are taking a regional approach to restrictions based on active COVID-19 case levels and local health authority recommendations.

Contact tracing is active in all regions to help track and control the spread of the virus.

We also continue to employ a variety of other safety measures including domestic and international travel restrictions, extensive cleaning protocols, temperature and health screenings, personal protective equipment, and visitor safety guidelines.

We will be working with our employees around the globe to understand vaccine distribution and create time for every employee to be vaccinated if they wish to do so.

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and Subsidiaries 28

The health and well-being of our employees remains top of mind.

We continue to take a regional approach to restrictions based on active COVID-19 case levels and recommendations from local health authorities.

Where needed, we employ a variety of other safety measures including domestic and international travel restrictions, extensive cleaning protocols, temperature and health screenings, personal protective equipment, and visitor safety guidelines that align with current recommendations.

We continue to encourage vaccinations with our employees.

Federal Contractor Vaccine Mandate

On September 9, 2021, President Biden signed Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors (Order).

The Order directs various executive departments and agencies to contractually obligate federal contractors and their subcontractors to comply with certain workplace safety standards concerning COVID-19.

To implement the Order, the Safer Federal Workforce Task Force issued its COVID-19 Workplace Safety Guidance for federal contractors on September 24, 2021.

Through a series of subsequent orders and memoranda, the Federal Acquisition Regulation Council and other federal agencies published their own instructions for implementation of the Order by federal contractors and their subcontractors.

In December 2021, a federal court in Georgia enjoined requirements of the Order.

Since then, other courts have entered similar injunctions.

As such, the Order was not in effect as of the end of fiscal 2022.

MillerKnoll is a party to numerous federal government contracts.

We took prompt and appropriate steps in preparation for compliance with the Order and are actively monitoring the status of the pending litigation related to the Order, as well as the impact of such challenges on our obligations under the mandate.

Customer Focus

The digital investments we’ve made allowed us to pivot quickly and capitalize on a new set of opportunities when our customers’ purchasing behaviors changed.

These investments include reimagined Design Within Reach and Herman Miller websites, a Work from Home landing page on Herman Miller’s website, a Work from Home online assessment tool, and new digital platforms that are creating greater efficiencies for contract and dealer audiences.

The latest in a series of innovative solutions designed to accelerate growth in the Contract business is Herman Miller Professional – a digital ecosystem designed to meet customer demand for a simple and efficient design and product specification solution.

Herman Miller Professional will deliver seamless online experiences to small- and medium sized businesses, a segment that has historically been underserved by the traditional contract furniture model, while also helping our dealers capture new clients and revenue.

Businesses will be able to design their spaces with product from the Herman Miller family of brands, leverage an online quoting and purchasing process to complete their order, and select from several delivery options, including white glove service where appropriate.

Our first Herman Miller retail seating concept stores are open in Los Angeles, New York Hudson Yards, Tokyo, Austin, Chicago Fulton Market, Century City Los Angeles and Greenwich, CT.

In the early days, these stores have exceeded our initial revenue and operating profit expectations as we seek to educate customers about the health benefits of ergonomic seating.

We remain uniquely positioned to serve our customers through multiple channels with the most comprehensive portfolio of products in the industry.

As our customers develop their post-pandemic work plans, there is a notable shift to work being done from a number of places, with the office as a destination – a place where employees want to be rather than are required to be.

Herman Miller Group is ready to capture the many opportunities caused by this shift as our commercial customers rethink their real estate portfolios, redesign their workplaces, and seek to provide healthy and productive home work environments.

We remain uniquely positioned to serve our customers through multiple channels with a comprehensive portfolio of products.

As our customers develop their post-pandemic work plans, there is a notable shift to work being done from a number of places.

We are an advocate that work can happen anywhere.

The office is not going away;

rather, it is a re-imagined purposeful space.

We are taking a human-centered, people first approach to space.

We are uniquely equipped with the expertise to help customers build healthy and inspirational spaces in their offices and home.

We are committed to inclusive design and believe that a hybrid environment can deliver inclusive, flexible experiences.

Our focus and digital investments in our retail business continue to pay off as we meet customers where they are looking to do business with us.

We have begun to offer products from MillerKnoll brands across multiple websites.

Investments in our retail

operations and systems are making it easier for customers to do business with us, we are introducing new and enhanced eCommerce sites globally, and social media and email marketing continue to drive conversion.

We also are continuing to invest in brick-and-mortar retail spaces that allow our customers to experience our products firsthand.

Our global fleet of stores, studios, and showrooms continues to be a strong customer acquisition tool, bringing new customers to our brands around the world.

Manufacturing and Retail Operations

Manufacturing facilities continue to operate at near-normal capacity with enhanced safety precautions.

All retail studios and stores are open in some capacity;

with some open to the public and some open in limited capacity.

All facilities operate within the context of and are subject to local guidance from government and health authorities and we will continue to adjust to ensure we are acting in accordance with these guidelines.

Current labor and supply chain constraints have put pressure on the ability of our manufacturing operations to increase capacity as order volume has increased;

however, we are making strong progress towards returning to previous lead times and reliability across MillerKnoll.

Following new guidance from the CDC, our U.S.-based operations recently lifted all COVID-19 restrictions due to low community levels of spread.

We are carefully monitoring and adapting to local guidance from government and health authorities in other regions around the world and will continue to adapt as conditions evolve.

Cost Reductions

In fiscal 2020, the Company implemented a range of actions aimed at temporarily reducing costs and preserving liquidity.

In fiscal 2021, the Company, together with its Board of Directors, made the decision to move forward with several restorative actions.

In fiscal 2020, in response to the COVID-19 pandemic, the Company implemented a range of actions aimed at temporarily reducing costs and maintaining liquidity.

These actions included voluntary and involuntary workforce reductions, a 10% reduction in cash compensation for a majority of the Company's salaried workforce and an additional 15% salary deferral of the Company's executive leadership team.

Additionally the Company temporarily suspended the quarterly dividend payout and certain employer-paid retirement contributions, compensation increases and cash incentive bonus programs.

In fiscal 2021, the Company made the decision to move forward with several restorative actions.

This included eliminating the 10% reduction in compensation, the introduction of a modified bonus program and re-establishing a quarterly cash dividend program.

In addition, the Company has reinstated the previously suspended employer-paid retirement plan contributions in the fourth quarter of fiscal 2021, and has also elected to make a catch-up contribution for the employer-paid retirement plan contributions that were suspended for a majority of fiscal 2021.

Despite these various reinstatements, the Company continues to tightly control operating expenses in the face of lingering economic uncertainty.

In addition, the Company reinstated the previously suspended employer-paid retirement plan contributions in the fourth quarter of fiscal 2021, and elected to make a catch-up contribution for the employer-paid retirement plan contributions that were suspended for a majority of fiscal 2021.

The Company will continue to evaluate further ways to manage costs in line with business performance.

Change in Accounting Principle

In the fourth quarter of fiscal 2022, we elected to change our method of accounting for the cost of certain inventories within our Americas segment from the last-in, first-out method (“LIFO”) to first-in, first-out method (“FIFO”).

With this change there are no longer any inventories accounted for under the LIFO method.

We have retrospectively adjusted the Consolidated Financial Statements for all periods presented to reflect this change.

See Note 1, Significant Accounting and Reporting Policies for the impact this retrospective change in the method of valuing inventories made on the Consolidated Balance Sheets for the periods presented.

Reconciliation of Non-GAAP Financial Measures

This report contains references to Organic net sales, Adjusted earnings per share - diluted, and adjusted effective tax rate which are non-GAAP financial measures.

Organic Growth (Decline) represents the change in reported Net sales, excluding currency translation effects and the impact of acquisitions.

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from adjustments related to purchase accounting adjustments related to the HAY and naughtone investments, impairment charges, restructuring expenses and other special charges or gains, including related taxes.

Restructuring expenses include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with an early retirement program.

Special charges include certain costs arising as a direct result of COVID-19, and retroactive payments related to reinstated employee benefits.

Retroactive payments related to reinstated employee benefits were an adjustment to Earnings per Share in fourth quarter, but not for the full year.

Adjusted effective tax rate reflects both provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.

Herman Miller, Inc.

and Subsidiaries 29

The Company believes presenting Organic net sales and Adjusted earnings per share - diluted is useful for investors as it provides financial information on a more comparative basis for the periods presented by excluding items that are not representative of the ongoing operations of the Company.

Organic net sales and Adjusted earnings per share - diluted are not measurements of our financial performance under GAAP and should not be considered as alternatives to the related GAAP measurement.

These non-GAAP measurements have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

This presentation contains non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies.

These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement.

These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items.

We compensate for these limitations by providing prominence of our GAAP results and using the non-GAAP financial measures only as a supplement.

We compensate for these limitations by providing equal prominence of our GAAP results.

Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included within this presentation.

The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented.

The non-GAAP financial measures referenced within this presentation include:

Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), and Organic Growth (Decline).

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of purchased intangibles, acquisition and integration charges, debt extinguishment charges, restructuring expenses, other special charges or gains and the related tax effect of these adjustments.

These adjustments are described further below.

Adjusted Operating Earnings (Loss) represents reported operating earnings plus acquisition and integration charges, amortization of purchased intangibles, restructuring expenses and other special charges or gains.

These adjustments are described further below.

Organic Growth represents the change in sales and orders, excluding currency translation effects and the impact of acquisitions and divestitures.

• Amortization of purchased intangibles:

Includes expenses associated with the amortization of inventory step-up and amortization of acquisition related intangibles acquired as part of the Knoll acquisition.

The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure.

We exclude the impact of the amortization of purchased intangibles, including the fair value adjustment to inventory, as such non-cash amounts were significantly impacted by the size of the Knoll acquisition.

Furthermore, we believe that this adjustment enables better comparison of our results as Amortization of Purchased Intangibles will not recur in future periods once such intangible assets have been fully amortized.

Any future acquisitions may result in the amortization of additional intangible assets.

Although we exclude the Amortization of Purchased Intangibles in these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

• Acquisition and integration charges:

Includes costs related directly to the Knoll acquisition including legal, accounting and other professional fees as well as integration-related costs.

Integration-related costs include severance, accelerated stock-based compensation expenses, asset impairment charges, and other cost reduction efforts or reorganization initiatives.

• Debt extinguishment charges:

Includes expenses associated with the extinguishment of debt as part of financing the Knoll acquisition.

We excluded these items from our non-GAAP measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.

• Gain on sale of dealer:

Includes the gain recorded on the divestiture of an owned dealership.

• Legal settlement gain:

Includes the gain recorded on the settlement of a legal matter in fiscal 2021.

• Restructuring expenses:

Include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with an early retirement program.

• Special charges:

Includes certain costs arising as a direct result of the COVID-19 pandemic, and retroactive payments related to reinstated employee benefits made in the prior year.

Retroactive payments related to reinstated employee benefits were an adjustment to Operating Earnings and Earnings Per Share in the fourth quarter of fiscal 2021, but not for the full year.

• Tax related items:

We excluded the income tax benefit/provision effect of the tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.

Tables below summarize select financial information, for the periods indicated, related to each of the Company’s reportable segments.

The Americas Contract segment includes the operations associated with the design, manufacture, and sale of furniture products for work-related settings, including office, education, and healthcare environments, throughout the United States, Canada and Latin America.

Americas Contract also includes the operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, naughtone and Herman Miller Healthcare products.

The International Contract segment includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in the European, Middle East and Asia-Pacific geographic regions.

The Global Retail segment includes the global operations associated with the sale of modern design furnishings and accessories to third party retail distributors, as well as direct to consumer sales through eCommerce and Design Within Reach, HAY, and Herman Miller retail stores and studios.

The Knoll segment includes the global operations associated with the design, manufacture, and sale of furniture products within the Knoll constellation of brands.

Corporate costs represent unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs.

The following table reconciles net sales to organic net sales for the years ended as indicated below (in millions):

May 29, 2021 May 30, 2020

North America International Retail Total North America International Retail Total

Americas Contract International Contract Global Retail Knoll Intersegment Elimination Total

Net sales, as reported $ 1,444.9 $ 483.2 $ 856.8 $ 1,188.5 $ (27.4) $ 3,946.0

% change from PY (25.3)% 33.1% 56.1% (0.9)%

Proforma Adjustments

% change from PY 11.0 % 21.0 % 12.1 % N/A N/A 60.1 %

Acquisitions — — — (1,188.5) 27.4 (1,161.1)

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Organic net sales $ 1,443.9 $ 491.6 $ 863.8 $ — $ — $ 2,799.3

% change from PY (26.1)% 11.8% 56.0% (5.7)%

% change from PY 11.1 % 23.1 % 13.0 % N/A N/A 13.6 %

Americas Contract International Contract Global Retail Knoll Intersegment Elimination Total

Net sales, as reported $ 1,301.3 $ 399.5 $ 764.3 $ — $ — $ 2,465.1

Acquisitions — — — — — —

Dealer Divestitures (1.9) — — — — (1.9)

Organic net sales $ 1,299.4 $ 399.5 $ 764.3 $ — $ — $ 2,463.2

(1) Currency translation effects represent the estimated net impact of translating current period sales using the average exchange rates applicable to the comparable prior year period

1 unchanged sentence

May 28, 2022 May 29, 2021

Earning (Loss) per Share - Diluted $ 2.92 $ (0.15)

Gain on consolidation of equity method investments — (0.63)

Gain on legal settlement, after tax (0.06) —

Special charges, after tax 0.02 0.15

Impairment charges, after tax — 2.90

Acquisition and integration charges, after tax 0.15 —

Restructuring expenses, after tax 0.02 0.34

(Loss) Earnings per Share - Diluted $ (0.37) $ 2.94

Amortization of purchased intangibles 0.87 —

Acquisition and integration charges 1.71 0.17

Special Charges (0.01) 0.02

Restructuring Charges — 0.03

Debt extinguishment 0.18 —

Gain on legal settlement — (0.08)

Gain on sale of dealer (0.03) —

Tax impact on adjustments (0.43) (0.01)

Adjusted Earnings per Share - Diluted $ 1.92 $ 3.07

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted 73,160,212 59,389,598

The adjustments above are net of tax.

For the twelve months ended May 29, 2021 and May 30, 2020, the tax impact of the adjustments were $0.01 and $0.62, respectively.

Herman Miller, Inc.

and Subsidiaries 30

Financial Results

5 unchanged sentences

Operating expenses 1,312.9 718.6 82.7 %

Operating earnings (loss) 230.6 (38.4) n/a

Gain on consolidation of equity method investments — 36.2 n/a

Operating earnings 39.8 232.5 (82.9) %

Other expenses, net 48.4 4.2 1,052.4 %

Earnings (loss) before income taxes and equity income 226.4 (13.4) n/a

Income tax expense 47.9 6.0 n/a

(Loss) earnings before income taxes and equity income (8.6) 228.3 (103.8) %

Income tax expense 11.1 48.3 (77.0) %

Equity income from nonconsolidated affiliates, net of tax — 0.3 (100.0) %

Net earnings (loss) 178.8 (14.4) n/a

Net earnings (loss) attributable to redeemable noncontrolling interests 5.7 (5.3) n/a

Net earnings (loss) attributable to Herman Miller, Inc.

$ 173.1 $ (9.1) n/a

Net (loss) earnings (19.7) 180.3 (110.9) %

Net earnings attributable to redeemable noncontrolling interests 7.4 5.7 29.8

Net (loss) earnings attributable to MillerKnoll, Inc.

$ (27.1) $ 174.6 (115.5) %

The following table presents, for the periods indicated, the components of the Company's Consolidated Statements of Comprehensive Income as a percentage of Net sales:

4 unchanged sentences

Operating expenses 33.3 29.2

Operating (loss) earnings 9.4 (1.5)

Gain on consolidation of equity method investments — 1.5

Operating earnings 1.0 9.4

Other expenses, net 1.2 0.2

Earnings (loss) before income taxes and equity income 9.2 (0.5)

(Loss) earnings before income taxes and equity income (0.2) 9.3

Income tax expense 0.3 2.0

Equity income from nonconsolidated affiliates, net of tax — —

Net earnings (loss) 7.3 (0.6)

Net earnings (loss) attributable to redeemable noncontrolling interests 0.2 (0.2)

Net earnings (loss) attributable to Herman Miller, Inc.

31 2021 Annual Report

Net (loss) earnings (0.5) 7.3

Net earnings attributable to redeemable noncontrolling interests 0.2 0.2

Net (loss) earnings attributable to MillerKnoll, Inc.

The following chart presents graphically the primary drivers of the year-over-year change in Net sales.

The amounts presented in the bar graph are expressed in millions and have been rounded.

Net sales decreased $21.5 million or 0.9% compared to the prior year fiscal period.

Net sales increased $1,480.9 million or 60.1% compared to the prior year fiscal period.

The following items primarily contributed to the change:

• Increased sales volumes within the Retail segment of approximately $201 million and the International segment of approximately $65 million.

• Increase of approximately $98 million due to the acquisitions of HAY and naughtone.

• Incremental list price increases, net of contract price discounting, of approximately $17 million.

• Foreign currency translation had a favorable impact on net sales of approximately $22 million.

• Decreased sales volumes within the North America segment of approximately $425 million, primarily due to the impact of the COVID-19 pandemic.

• Increase of $1,161.1 million due to the acquisition of Knoll.

• List price increases, net of incremental discounting, of approximately $55 million.

• Increased sales volume within the Americas Contract segment of approximately $101 million, driven by continued improvement in the demand environment as organizations accelerated their return to the workplace.

• Increased sales volume within the International Contract segment of approximately $100 million, which was driven by growth from both local customers and global corporate accounts.

• Increased sales volume within the Global Retail segment of approximately $78 million, driven by investments made to strengthen operational foundations, efforts to drive new customer acquisition, and actions to increase sales channels, brands, price points, and overall assortment available for customers.

• Foreign currency translation had a negative impact on Net sales of approximately $14 million.

Gross margin was 34.3% for fiscal 2022 as compared to 38.6% for fiscal 2021.

The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

• A favorable shift in channel mix increased gross margin by approximately 80 basis points.

• Product mix, material performance and ongoing profitability improvement efforts increased gross margin by approximately 140 basis points.

• Incremental list price increases, net of contract price discounting, increased gross margin by approximately 40 basis points.

• Lower overhead leverage decreased gross margin by approximately 70 basis points.

Herman Miller, Inc.

and Subsidiaries 32

• Cost pressures from commodities, freight, and product distribution costs had a negative impact on gross margin of approximately 330 basis points.

• Increased labor costs, including the impact of benefits reinstated at the end of the last fiscal year, had a negative impact on margin of approximately 70 basis points.

• Amortization of purchased intangibles related to the Knoll acquisition had a negative impact on gross margin of approximately 30 basis points.

• Price increases offset by discounting helped offset some of these pressures by approximately 90 basis points.

• Unfavorable channel and product mix contributed to the remaining decrease in gross margin.

In the prior year, our business benefited from a relatively high mix of office seating sales as individuals purchased products for home office use during the pandemic.

While we continue to realize strong demand for these products in our Retail segment, the mix of these products sold in the current fiscal year was not as high as in the comparable period.

Operating Expenses

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The amounts presented in the bar graph are expressed in millions and have been rounded.

Operating expenses decreased by $230.5 million or 24.3% compared to the prior year fiscal period.

Operating expenses increased by $594.3 million or 82.7% compared to the prior year fiscal period.

The following factors contributed to the change:

• The acquisition of HAY and naughtone increased Operating expenses by approximately $23 million and charges related to the Knoll acquisition increased current year Operating expenses by approximately $11 million.

• IT costs increased approximately $4 million driven primarily by increased investments within the Company's digital and eCommerce platforms.

• Non-cash charges of $205 million in the prior year for the impairment of goodwill, intangible assets and right of use assets related to Design Within Reach, Maharam, HAY and naughtone.

• Restructuring expenses decreased by approximately $24 million, primarily related to voluntary and involuntary reductions in the Company's North American and International workforces that were substantially completed in the prior year.

• Lower marketing and selling expenses of approximately $16 million primarily within the North America Contract segment due to lower sales volume.

• Travel costs were approximately $14 million low er due to decreased travel as a result of COVID-19.

• Lower warranty expense of approximately $9 million.

Decreased warranty costs were due to lower sales volumes and claims experience within the North America Contract segment.

• The acquisition of Knoll during the year had the following impact on operating expenses as compared to the prior year.

◦ $125 million of acquisition and integration related charges, which include severance and related charges for employee separations, asset impairment charges and professional fees, and other incremental third-party expenses directly related to the transaction and subsequent integration.

◦ $51 million of expenses related to the amortization of purchased intangibles from the Knoll acquisition.

◦ Knoll operating expenses, excluding integration related costs incurred by Knoll and amortization of purchased intangibles, contributed $349 million to the increase as compared to the prior year.

• Compensation and benefit costs increased approximately $26 million as compared to the prior year due primarily to the return of certain employee benefits and compensation that were temporarily suspended during portions of the prior year to mitigate the financial impacts of the COVID-19 pandemic as well as from increases in variable-based compensation.

• An increase of $18 million related to the expansion of physical store locations within the Global Retail segment.

• Increased spending in technology and digital tools across the segments, representing an increase of $15 million.

• Increased marketing and selling costs of approximately $10 million, driven by both the Global Retail and Americas segments.

Other Income/Expense

Net other expenses for fiscal 2021 was $4.2 million compared to $11.2 million in fiscal 2020.

The change was primarily the result of favorable legal settlements of approximately $4.3 million in fiscal 2021.

Net other expenses for fiscal 2022 were $48.4 million compared to $4.2 million in fiscal 2021.

Other income/expense in the twelve months ended May 28, 2022 included a loss on extinguishment of debt of approximately $13.4 million, which represented the premium on early debt redemption as well as an increase in interest expense of $23.8 million, related to higher levels of debt required to finance the acquisition of Knoll.

The impact of net foreign currency transaction losses resulted in an increase in expense of $4.1 million.

Each of these items contributed to the increased expense as compared to the same period in the prior year.

See Note 11 of the Consolidated Financial Statements for additional information.

33 2021 Annual Report

Operating Segments Results

The business is comprised of various operating segments as defined by generally accepted accounting principles in the United States.

The business is comprised of various operating segments as defined by U.S.

These operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions.

The segments identified by the Company include North America Contract, International Contract, Retail and Corporate.

The segments identified by the Company include Americas Contract, International Contract, Global Retail, and Knoll.

The Company also reports a “Corporate” category consisting primarily of unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs.

Effective as of May 30, 2021, the beginning of fiscal year 2022, the Company implemented an organizational change that resulted in a change in the reportable segments.

The Company has recast historical results to reflect this change.

For descriptions of each segment, refer to Note 14 of the Consolidated Financial Statements.

1 unchanged sentence

This is followed by a discussion of the Company's results, by segment.

Herman Miller, Inc.

and Subsidiaries 34

North America Contract ("North America")

Americas Contract ("Americas")

(Dollars in millions) Fiscal 2022 Fiscal 2021 Change

2 unchanged sentences

Gross margin % 29.1 % 34.5 % (5.4) %

Operating earnings 74.1 130.9 (56.8)

Operating earnings (loss) 44.5 93.6 (49.1)

Operating earnings % 3.1 % 7.2 % (4.1) %

Net sales decreased 25.3%, or 26.1% (*) on an organic basis, over the prior year due to:

• Decreased sales volumes within the North America segment of approximately $424.5 million, primarily due to the outbreak of COVID-19;

• Incremental list price increases, net of discounting, of approximately $7.9 million

• Approximately $10.6 million due to the acquisition of naughtone;

• The impact of foreign currency translation which increased sales by approximately $1.8 million.

Net sales increased 11.0%, or 11.1% (*) on an organic basis, over the prior year due to:

• Increased sales volume of approximately $101 million, due primarily to increased demand as customers implemented return to workplace plans after reduced order volume during the COVID-19 pandemic;

• The favorable impact of price increases, net of incremental discounting, of approximately $42 million and the favorable impact of foreign currency translation which increased sales by approximately $1 million.

Operating earnings decreased $49.1 million, or 52.5%, over the prior year due to:

• Decreased gross margin of $167.2 million due to decreased sales volumes as well as a decrease in gross margin percentage of 170 basis points.

The decrease in gross margin percentage was due primarily to lower overhead and labor leverage offset in part by lower overhead spend;

• Decrease in operating expenses of $110.4 million.

This reduction was driven by lower marketing and selling expenses of approximately $15 million, lower travel costs of approximately $8 million, lower warranty costs of approximately $9 million and lower restructuring expenses of $14.9 million.

• Decreased gross margin of $28.1 million due to a decrease in gross margin percentage of 540 basis points, offset in part by increased sales volumes.

The decrease in gross margin percentage was due primarily to the impact of higher commodity, labor, freight, and product distribution costs;

• Increased operating expenses of $21.0 million driven primarily by increased marketing and selling expenses of approximately $2 million, increased product development expenses of approximately $5 million, increased compensation and benefit expenses of $7 million, and increased expense from digital and technology programs of approximately $9 million.

International Contract ("International")

6 unchanged sentences

Net sales increased 21.0%, or 23.1% (*) on an organic basis, over the prior year due to:

• Approximately $87 million due to the acquisition of HAY and naughtone

• Increased sales volumes within the International segment of approximately $64.9 million, primarily driven by growth within the Asia-Pacific and EMEA regions.

These regions benefited from a relatively early recovery to the COVID pandemic and associated return to the office.

• The impact of foreign currency translation which increased sales by approximately $19.6 million;

• Incremental discounting, net of list price increases, of approximately $5.6 million.

• Increased sales volume of approximately $100 million, driven by growth across all geographies within the segment;

partially offset by

• Incremental discounting, which reduced sales by $8 million, and the impact of foreign currency translation, which reduced sales by approximately $8 million.

The impact of discounting was driven by larger than average project sizes across the business, as well as increased sales volume, as a percentage of total mix, from geographies with generally higher levels of discounting.

Operating earnings increased $10.8 million, or 22.3%, compared to the prior year due to:

• Increased gross margin of $70.4 million due to the increase in sales explained above, and increased gross margin percentage of 220 basis points due primarily to favorable changes in channel and product mix.;

• Decreased operating expenses of $4.4 million driven primarily by the prior year non-cash charge of $23.2 million for the impairment of intangible assets related to HAY and naughtone.

This was offset in part by increased operating expenses related to the acquisition of Hay and naughtone.

35 2021 Annual Report

• Increased gross margin of $21.6 million due to the increase in sales explained above, offset in part by decreased gross margin percentage of 140 basis points due primarily to increased material, freight and distribution costs, increased levels of discounting, and the unfavorable impact from foreign currency translation;

• Increased operating expenses of $10.8 million driven primarily by increased compensation and benefit costs as well as increased costs associated with product development.

Global Retail

(Dollars in millions) Fiscal 2022 Fiscal 2021 Change

2 unchanged sentences

Gross margin % 43.5 % 48.0 % (4.5) %

Operating earnings 117.2 (148.3) 265.5

Operating earnings (loss) 96.2 143.0 (46.8)

Operating earnings % 11.2 % 18.7 % (7.5) %

Net sales increased 12.1% as reported and 13.0% (*) on an organic basis, over the prior year due to:

• Increased sales volumes of approximately $201.0 million which were driven by increased demand across multiple product categories, with the largest increase relating to workplace furnishings;

• Increased sales volumes of approximately $78 million which were driven primarily by broad growth across the brands and geographies within the segment;

• Incremental price increases, net of discounting, of approximately $21 million;

Operating earnings increased $265.5 million over the prior year due to:

• Increased gross margin of $135.3 million due to the increase in sales explained above, as well as an increased gross margin percentage of 740 basis points due primarily to changes in channel and product mix and the impact of incremental price increases;

• Decreased operating expenses of $130.2 million were driven primarily by non-cash charges recorded in the prior year of 139.0 million related to the impairment of goodwill, intangible assets and right of use assets held by DWR.

This was offset in part by increased investment in digital and eCommerce capabilities, the initial rollout of Herman Miller-branded seating stores, and increased variable selling expenses and incentives.

offset in part by

• The unfavorable impact of foreign currency translation, which decreased sales by approximately $7 million.

Operating earnings decreased $46.8 million over the prior year due to:

• Increased operating expenses of $53.2 million driven primarily by increased studio costs associated with the opening of new locations, increased compensation and benefit costs as certain compensation and benefits suspended in the prior year were returned and higher IT costs driven by increased investments within the Company's digital and eCommerce platforms;

offset in part by

• Increased gross margin of $6.4 million due to the increase in sales explained above, offset in part by a decreased gross margin percentage of 450 basis points due primarily to the unfavorable impact of increased freight and product distribution costs, pressure from increased product material costs and unfavorable changes in product mix.

(Dollars in millions) Fiscal 2022 Fiscal 2021 Change

Net sales $ 1,188.5 $ — $ 1,188.5

Gross margin 401.7 — 401.7

Gross margin % 33.8 % N/A N/A

Operating (loss) earnings (57.6) — (57.6)

Operating earnings % (4.8) % N/A N/A

The Company acquired Knoll on July 19, 2021 and has consolidated the financial results of Knoll from the acquisition date through the period ended May 28, 2022.

Knoll contributed $1,161.1 million (net of intersegment elimination) in sales for the year and $401.7 million of gross margin.

Knoll operating loss of $57.6 million for the fiscal year includes the following items:

• $63.4 million related to the impact of amortization of acquisition-related intangible assets;

• $60.3 million related to integration related costs, which include severance and related charges for employee separations and asset impairment charges.

Corporate unallocated expenses totaled $102.6 million for fiscal 2022, an increase of $50.0 million from fiscal 2021.

The increase was driven primarily by $11.0 million of acquisition and integration costs associated with the Knoll acquisition that was finalized subsequent to the close of fiscal 2021.

The increase was driven primarily by $57.6 million of integration and transaction costs related to the Knoll acquisition, compared to $11.0 million of integration and transaction costs recorded in the prior year.

(*) Non-GAAP measurements;

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(In millions) 2022 2021

Cash provided by (used in):

Cash (used in) provided by:

Operating activities $ (11.9) $ 332.3

4 unchanged sentences

Cash Flow — Operating Activities

Cash provided by operating activities in fiscal 2021 was $332.3 million compared to $221.8 million in the prior year.

The increase in cash generated from operations in the current year, compared to the prior year, was primarily due to:

• Prior year net earnings included a non-taxable non-cash gain on consolidation of an equity method investment of $36.2 million as well as a non-cash impact of $205.4 of impairment charges;

• Restructuring expenses of $2.7 million compared to $26.4 million in the prior year;

• An increase in current assets primarily driven by an increase in accounts receivable of $14.8 million in the current year compared to a decrease of $68.6 million in the prior year.

Cash used in operating activities in fiscal 2022 was $11.9 million, as compared to cash provided of $332.3 million in the prior year.

The change in cash from operating activities as compared to the prior year, was primarily due to:

• A decrease in net earnings of $201.7 million largely driven by acquisition and integration related charges of $124.5 million as well as cost pressures from commodities, labor, and freight and product distribution resulting in a lower gross margin percentage;

• An increase in current assets primarily driven by an increase in accounts receivable of $92.4 million in fiscal 2022 compared to an increase of $14.8 million in fiscal 2021.

The increase in accounts receivable is primarily due to timing and increase in sales at the end of fiscal 2022 compared to fiscal 2021;

Herman Miller, Inc.

and Subsidiaries 36

• An increase in current liabilities driven by the following:

◦ Increase in accounts payable of $43.2 million in the current year compared to a decrease of $59.5 million in the prior year which was a result of timing and greater production in fiscal 2021 compared to fiscal 2020 due to manufacturing shut downs in the prior year;

◦ Increase in accrued liabilities of $15.1 million in the current year compared to a decrease of $32.0 million in the prior year driven by increases in compensation in the current year offset by a decrease in accrued vacation.

• An increase of inventory of $166.4 million in fiscal 2022 compared to an increase of $10.4 million in fiscal 2021 due to increased order volumes from the end of fiscal 2021 as well as higher investments in retail inventories made in the current year due to extended supplier and delivery lead times;

• An increase in prepaid taxes of $21.6 million in fiscal 2022 driven by an expected tax benefit for the current year;

• An increase in accounts payable of $51.5 million in fiscal 2022 compared to an increase of $43.2 million in fiscal 2021 which was a result of timing and increased inventory purchases in fiscal 2022 compared to fiscal 2021.

The increases above were offset by an increase of depreciation and amortization in fiscal 2022 of $40.0 million and $63.4 million, respectively, primarily related to assets purchased as part of the Knoll acquisition as well as an increase in stock based compensation of $22.4 million.

The increase in stock based compensation included the impact of accelerated vesting for employee separations associated with the Knoll acquisition.

Cash Flow — Investing Activities

Cash used in investing activities in fiscal 2022 totaled $1,172.4 million compared to $59.9 million in the prior year.

The decrease in cash outflow in the current year, compared to the prior year, was primarily a result of the following:

• Prior year cash outflows of $111.2 million for the additional investments in naughtone and HAY;

• A decrease in capital expenditures of $9.2 million due to reduced spending as a result of COVID-19;

• Proceeds from the sale of the Company's manufacturing facility in China and the office facility in the United Kingdom in the current year of $14.0 million.

The increase in cash outflow in the current year, compared to the prior year, was primarily a result of the following:

• The acquisition of Knoll, which drove a cash outflow, net of cash acquired, of $1,088.5 million;

• Capital expenditures for the current year were $94.7 million as compared to $59.8 million in the prior year.

These increases were offset by a cash inflow of $7.7 million from the liquidation of previously held short-term investments, as well as proceeds of $2.8 million from the sale of an owned dealership during fiscal year 2022.

At the end of the fiscal 2022, there were outstanding commitments for capital purchases of $53.6 million.

The Company plans to fund these commitments with cash on hand and/or cash generated from operations.

The Company expects capital spending in fiscal 2022 to be between $140 million and $150 million, which will be primarily related to investments in the Company's facilities and equipment along with the inclusion of Knoll in fiscal year 2022.

The Company expects capital spending in fiscal 2023 to be between $150 million and $160 million, which will be primarily related to investments in the Company's facilities and equipment, investments to achieve costs synergies related to the Knoll acquisition, and investments associated with achieving the Company's sustainability goals.

Cash Flow — Financing Activities

Cash used in financing activities was $347.7 million in fiscal 2021 as compared to cash provided by financing activities of $244.0 million in fiscal 2020.

The items below represent the major factors driving the year-over-year increase in cash flow used in financing activities:

• During the first quarter of fiscal 2021 the Company paid down the $ 265.0 million draw on its syndicated revolving line of credit that was taken in the fourth quarter of fiscal 2020.

Additionally, in the fourth quarter of fiscal 2021, the Company repaid $50.0 million of private placement notes that were due March 1, 2021;

• Lower employer-benefit related stock issuances in the current year.

The Company issued $5.0 million in common stock related to these programs during the current fiscal year compared to $15.6 million in fiscal 2020;

offset in part by

• Common stock repurchased of $0.9 million in the current year compared to $26.6 million in the prior year;

• The prior year purchase of the remaining Herman Miller Consumer Holdings, Inc.

redeemable noncontrolling interests for $20.3 million.

Cash provided from financing activities was $1,039.9 million in fiscal 2022 as compared to cash used in financing activities of $347.7 million in fiscal 2021.

The increase in cash provided in the current year, compared to the prior year, was primarily due

to net borrowings of $1,007.0 million from the credit agreement the Company entered into during Q1 and proceeds of $1,026.5 million on the Company's credit facility.

These increases were offset by:

• Payments of $63.4 million related to the extinguishment of the Company's former debt agreement;

• Payments of $13.1 million related to the Company's term loans;

• Payments of $838.5 million on the Company's credit facility compared to $265.0 million in the prior year;

• Dividends paid of $54.5 million in the current year compared to $34.5 million in the prior year;

• Common stock repurchased of $16.2 million compared to $0.9 million in the prior year.

Sources of Liquidity

In addition to steps taken to protect its workforce and manage business operations, the Company has taken actions to safeguard its capital position in the current environment.

The Company is closely managing spending levels, capital investments, and working capital, and has temporarily suspended open market share repurchase activity as part of managing cash flows.

At the end of fiscal 2021, the Company had a well-positioned balance sheet and liquidity profile.

In addition to cash flows from operating activities, the Company has access to liquidity through credit facilities, cash and cash equivalents and short-term investments.

The Company is closely managing spending levels, capital investments, and working capital.

In the fourth quarter of fiscal 2020, we temporarily suspended open market share repurchase activity as part of managing cash flows associated with uncertainty caused by the pandemic.

Going forward, we are re-establishing our open market share repurchase program under our existing share repurchase authorization and may repurchase shares from time to time based on management’s evaluation of market conditions, share price and other factors.

At the end of fiscal 2022, the Company has access to liquidity through credit facilities, cash and cash equivalents and short-term investments.

These sources have been summarized below.

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Availability under revolving lines of credit 296.6 265.2

37 2021 Annual Report

Of the cash and cash equivalents noted above at the end of fiscal 2022, the Company had $218.5 million of cash and cash equivalents held outside the United States.

In addition, the Company had marketable securities of $7.7 million held by one of its international wholly-owned subsidiaries.

The Company’s syndicated revolving line of credit, which expires on August 28, 2024, provides the Company with up to $500 million in revolving variable interest borrowing capacity and includes an "accordion feature" allowing the Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing capacity of the facility by up to $250 million.

Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated rates as outlined in the agreement.

Interest is payable periodically throughout the period if borrowings are outstanding.

The Company’s revolving line of credit, which matures in July, 2026, provides the Company with up to $725 million in revolving variable interest borrowing capacity and allows the Company to borrow incremental amounts, at its option, subject to negotiated terms as outlined in the agreement.

Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, London Interbank Offered Rate ("LIBOR"), or negotiated terms as outlined in the agreement.

See Note 6 for information on the replacement of LIBOR with the Secured Overnight Financing Rate ("SOFR") in our credit agreement.

As of May 28, 2022, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $413.0 million with available borrowings against this facility of $296.6 million.

The subsidiary holding the Company's marketable securities is taxed as a United States taxpayer at the Company's election.

Consequently, for tax purposes, all United States tax impacts for this subsidiary have been recorded.

The Company intends to repatriate $111.1 million in cash held in certain foreign jurisdictions and as such has recorded a deferred tax liability related to foreign withholding taxes on these future dividends received in the U.S.

from foreign subsidiaries of $8.3 million.

The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S.

The Company believes that its financial resources are adequate to provide for its operations for at least the next 12 months and will allow it to manage the impact of COVID-19 on the Company's business operations for the foreseeable future.

The Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19 and the Knoll acquisition.

A significant portion of this cash was previously taxed under the U.S.

Tax Cut and Jobs Act (TCJA) one-time U.S.

tax liability on undistributed foreign earnings.

The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S., which was $331.3 million on May 28, 2022.

The Company believes that its financial resources will allow it to manage the impact of COVID-19 on business operations for the foreseeable future which could include materially reduced revenue and profits.

The Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19.

Contingencies

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The Company's fiscal year ends on the Saturday closest to May 31.

The fiscal years ended May 29, 2021, May 30, 2020 and June 1, 2019 contained 52 weeks.

The fiscal years ended May 28, 2022, May 29, 2021 and May 30, 2020 contained 52 weeks.

Contractual Obligations

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Purchase obligations 99.6 77.6 21.9 0.1 —

70.8 62.9 7.9 — —

Pension and other post employment benefit plans funding (2)

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Total $ 2,228.5 $ 256.8 $ 315.6 $ 896.1 $ 760.0

Herman Miller, Inc.

and Subsidiaries 38

(1) Includes the current portion of long-term debt.

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Actual cash outflows may differ significantly due to changes in borrowings or interest rates.

(2) Purchase obligations consist of non-cancelable purchase orders and commitments for goods, services, and capital assets.

(2) Pension plan funding commitments are known for a 12-month period for those plans that are funded;

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(4) Other contractual obligations primarily represent long-term commitments related to deferred and supplemental employee compensation benefits, and other post-employment benefits.

Other Future Obligations

The Company entered into strategic agreements during the fiscal year, including agreements for (i) the acquisition of Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman Miller common stock for each outstanding share of Knoll common stock and (ii) the acquisition of all of the outstanding shares of Knoll's preferred stock for approximately $253 million in cash in the aggregate.

This transaction was finalized subsequent to the end of the fiscal year.

The transaction was funded with a combination of new debt, as discussed in Note 19 of the Consolidated Financial Statements, and cash on our balance sheet.

Off-Balance Sheet Arrangements — Guarantees

We provide certain guarantees to third parties under various arrangements in the form of product warranties, loan guarantees, standby letters of credit, lease guarantees, performance bonds and indemnification provisions.

These arrangements are accounted for and disclosed in accordance with Accounting Standards Codification (ASC) Topic 460, "Guarantees" as described in Note 13 of the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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These policies and disclosures are reviewed at least annually with the Audit Committee of the Board of Directors.

The following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements.

We believe that of our significant accounting policies, which are described in Note 1 of our consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition contingencies.

We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

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The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets.

These estimates are reviewed with our advisors and can include, but are not limited to, future expected cash flows related to acquired customer relationships, trademarks and know-how/designs and require estimation of discount rates and royalty rates.

As such, our estimates of fair value are based upon reasonable assumptions but which are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates.

These estimates are reviewed with our advisors and can include, but are not limited to:

• future expected cash flows from acquired customer relationships and trade names,

• assumed royalty rates that could be payable if we did not own the trademarks, and

• discount rates

Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates.

During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

During 2020, management considered the acquisition of HAY a material acquisition.

There were no other material acquisitions during fiscal 2020 or 2021;

however, the acquisition of Knoll, which closed subsequent to year end is a material acquisition.

During fiscal 2022 and fiscal 2020, management considered the acquisition of Knoll and HAY material acquisitions, respectively.

There were no material acquisitions during fiscal 2021.

See Note 3 to the Consolidated Financial Statements for more information.

Goodwill and Indefinite-lived Intangibles

We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets each year as of March 31 or more frequently if events or changes in circumstances indicate an impairment maybe possible.

39 2021 Annual Report

consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived intangible assets is below the carrying amount.

We may consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived intangible assets is below the carrying amount.

We may also elect to bypass the qualitative assessment and perform a quantitative assessment.

To complete the impairment assessment the Company makes estimates about fair value by using a weighting of the income and the market approach.

When the Company performs a quantitative assessment, the Company makes estimates about fair value by using a weighting of the income and the market approach.

The income approach is based on projected discounted cash flows using a market participant discount rate.

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Certain business acquisitions have resulted in the recording of goodwill.

At May 29, 2021 and May 30, 2020, we had goodwill of $364.2 million and $346.0 million, respectively.

We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets as of March 31 or more frequently if events or changes in circumstances indicate that the asset might be impaired.

We may consider qualitative factors to assess if it is more likely than not that the fair value for goodwill is below the carrying amount, however, we may also elect to bypass the qualitative assessment and perform a quantitative assessment.

Each of the reporting units were reviewed for impairment using a qua ntitative assessment.

In performing the quantitative impairment test for fiscal year 2021, the Company determined that the fair value of its reporting units exceeded the carrying amount and, as such, these reporting units were not impaired.

In fiscal 2020, the Company recorded $125.5 million in goodwill impairment charges related to both the Retail and Maharam reportable segments.

The Company adopted and applied ASU No.

2017-04, "Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment" using the prospective method in fiscal 2020.

Refer to Note 1 of the Consolidated Financial Statements for further information regarding the adoption of ASU No.

To estimate the fair value of each reporting unit when performing quantitative testing, the Company utilizes a weighting of the income approach and the market method.

At May 28, 2022 and May 29, 2021, we had goodwill recorded within the Consolidated Balance Sheets of $1,226.2 million and $364.2 million, respectively.

Each of the reporting units were reviewed for impairment using a qualitative assessment as of March 31, 2022.

The Company elected to test each reporting unit qualitatively, as is permitted under ASU 2011-08, Intangibles-Goodwill and Other (Topic 350):

Testing Goodwill for Impairment, as the Company concluded it to be more likely than not that their estimated fair values are greater than their respective carrying values.

In fiscal 2020, the Company recorded $125.5 million in goodwill impairment charges related to both the Global Retail and Maharam reporting units.

No impairment charges were recorded in fiscal 2021 or 2022.

In years where a quantitative assessment is performed, the Company utilizes a weighting of the income approach and the market method to estimate the fair value of each reporting unit.

These approaches are based on a discounted cash flow analysis and observable comparable company information that use several inputs, including:

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Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate.

In completing the annual goodwill impairment test, the respective fair values were estimated using discount rates ranging from 12.0% to 14.0% and long-term growth rates ranging from 2.5% to 3.0%.

Herman Miller, Inc.

and Subsidiaries 40

Indefinite-lived Intangible Assets

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An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

During fiscal 2020, the Company adjusted the carrying value of all its tradenames to fair value, and as a result recognized $53.3 million in non-cash impairment charges on its indefinite-lived trade names.

In fiscal 2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets for impairment.

In performing this assessment, we estimate the fair value of these intangible assets using the relief-from-royalty method which requires assumptions related to:

• actual and forecasted revenue growth rates,

During fiscal 2020, the Company adjusted the carrying value of all its trade names to fair value, and as a result recognized $53.3 million in non-cash impairment charges on its indefinite-lived trade names.

No impairment charges were recorded in fiscal 2021 or 2022.

In fiscal 2022, the Company performed a qualitative assessment to test indefinite-lived intangible assets for impairment for all trade names with the exception of the Company's HAY trade name.

A quantitative assessment was p erformed for the HAY trade name to test the indefinite-lived intangible asset for impairment.

Through the performance of this assessment management determined that the fair value of the HAY indefinite-lived trade name was 41% above its carrying value.

In performing this quantitative assessment, we estimate the fair value of this intangible asset using the relief-from-royalty method which requires assumptions related to:

• forecasted revenue growth rates,

• assumed royalty rates that could be payable if we did not own the trademark, and

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If the estimated fair value of the indefinite-lived intangible asset is less than its carrying value, we would recognize an impairment charge.

In the table below, the Company has summarized the carrying values and fair values of each of the Company’s indefinite-lived trade names:

(In millions)

Trade name Segment Carrying Value Fair Value

Maharam North America Contract $ 16.5 $ 20.2

DWR Retail 31.5 92.8

HAY International Contract 43.1 43.8

naughtone International Contract 6.5 10.9

Total $ 97.6 $ 167.7

In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using discount rates ranging from 12.0% to 14.0%, royalty rates ranging from 2.00% to 3.00% and long-term growth rates ranging from 2.5% to 3.0%.

The Company’s estimates of the fair value of its HAY indefinite-lived intangible asset is sensitive to changes in the key assumptions above as well as projected financial performance.

Therefore, a sensitivity analysis was performed on certain key assumptions.

Keeping all other assumptions constant, a 10% decrease in forecasted revenue growth rates at May 29, 2021 would have the following effects on the fair value of the HAY trade name:

(In millions)

Trade name Segment 10% Decrease

HAY International Contract $ (4.3)

Keeping all other assumptions constant, a 100 basis point change in the discount rate at May 29,2021 would have the following effects on the fair value of the HAY trade name:

(In millions)

Trade name Segment 100 bps Increase 100 bps Decrease

HAY International Contract $ (3.9) $ 4.8

Keeping all other assumptions constant, a 50 basis point change in the royalty rate at May 29, 2021 would have the following effects on the fair value of the HAY trade name:

41 2021 Annual Report

(In millions)

Trade name Segment 50 bps Increase 50 bps Decrease

HAY International Contract $ 8.8 $ (8.7)

Keeping all other assumptions constant, a 50 basis point change in the long-term growth rate at May 29, 2021 would have the following effects on the fair value of the HAY trade name:

(In millions)

Trade name Segment 50 bps Increase 50 bps Decrease

HAY International Contract $ 1.7 $ (1.5)

If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record an impairment charge.

Long-lived Assets

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If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.

In fiscal 2022 the Company recorded a non-cash impairment charge of $15.5 million related to the discontinued use of a long-lived asset that was a direct result of integration activities associated with the Knoll acquisition.

No impairment charges were recorded in fiscal 2021 for long-lived assets.

During fiscal 2020, the Company adjusted the carrying value of certain right of use assets and other long-lived assets and recognized a non-cash impairment charge of $19.6 million.

The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but if actual results are not consistent with management's estimates and assumptions, a material impairment charge could occur, which could have a material adverse effect on our consolidated financial statements.

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Forward Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the Company itself.

Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” "likely,” “plans,” “projects,” "could," and “should,” variations of such words, and similar expressions identify such forward-looking statements.

These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence.

These risks include, without limitation:

• the success of our growth strategy, our success in initiatives aimed at achieving long-term profit optimization goals;

• statements regarding the acquisition of Knoll, including the anticipated benefits of the acquisition, the anticipated impact of the acquisition on the combined company’s business and future financial and operating results, and the expected amount and timing of synergies that might be realized from the acquisition;

• the effect of the acquisition of Knoll on our ability of Herman Miller to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom we do business, or on our operating results and business generally;

• risks that the acquisition of Knoll disrupts current plans and operations and the potential difficulties in employee retention as a result of the transaction;

• the outcome of any legal proceedings related to the acquisition of Knoll;

• our ability to successfully integrate Knoll’s operations;

Herman Miller, Inc.

and Subsidiaries 42

• our ability to implement our plans, forecasts and other expectations with respect to our business after the acquisition of Knoll and realize expected synergies;

• business disruptions following the acquisition of Knoll;

• the ability to realize the anticipated benefits of the acquisition of Knoll, including the possibility that the expected benefits from the transaction will not be realized within the expected time period;

• the amount of the costs, fees, expenses and charges related to the merger agreement, the preferred stock purchase agreement, and the transactions contemplated by each agreement;

• unknown liabilities;

• the impact of foreign currency exchange rate and interest rate fluctuations on Herman Miller’s or Knoll’s results;

• employment and general economic conditions;

• the pace of economic recovery in the U.S.

and in our International markets;

• the increase in white-collar employment, the willingness of customers to undertake capital expenditures;

• the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of raw materials;

• our reliance on a limited number of suppliers;

• our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, changes in future tax legislation or interpretation of current tax legislation;

• the ability to increase prices to absorb the additional costs of raw materials;

• changes in global tariff regulations;

• the financial strength of our and Knoll’s dealers and the financial strength of our and Knoll’s customers;

• our ability to locate new retail studios, negotiate favorable lease terms for new and existing locations and implement our studio portfolio transformation;

• our ability to attract and retain key executives and other qualified employees;

• our ability to continue to make product innovations;

• the success of newly-introduced products, our ability to serve all of our markets;

• possible acquisitions, divestitures or alliances;

• our ability to integrate and benefit from acquisitions and investments;

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements relate to future events and anticipated results of operations, business strategies, the anticipated benefits of our 2021 acquisition of Knoll, the anticipated impact of the acquisition on the combined Company’s business and future financial and operating results, the expected amount and timing of synergies from the acquisition, and other aspects of our operations or operating results.

These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import.

It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of

MillerKnoll or the price of MillerKnoll’s stock.

These forward-looking statements involve certain risks and uncertainties, many of which are beyond MillerKnoll’s control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to:

the impact of public health crises, such as pandemics (including COVID-19) and epidemics, and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets;

challenges related to supply chain disruptions and fluctuations in the cost of raw materials, labor, and other production inputs;

risks related to the additional debt incurred in connection with our acquisition of Knoll and our ability to comply with our debt covenants and obligations;

the risk that the anticipated benefits of the acquisition will be more costly to realize than expected;

the effect of the announcement of the acquisition on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom MillerKnoll does business, or on MillerKnoll’s operating results and business generally;

the ability to successfully integrate Knoll’s operations;

the ability of MillerKnoll to implement its plans, forecasts and other expectations with respect to MillerKnoll’s business after the completion of the acquisition and realize expected synergies;

business disruption following the acquisition;

general economic conditions;

the availability and pricing of raw materials;

the financial strength of our dealers and the financial strength of our customers;

the success of newly-introduced products;

the pace and level of government procurement;

• the outcome of pending litigation or governmental audits or investigations;

• political risk in the markets we serve;

• natural disasters, public health crises, disease outbreaks;

• other risks identified in our filings with the SEC.

Therefore, actual results and outcomes may materially differ from what we express or forecast.

Furthermore, Herman Miller, Inc.

undertakes no obligation to update, amend or clarify forward-looking statements.

43 2021 Annual Report

and the outcome of pending litigation or governmental audits or investigations.

For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to MillerKnoll’s periodic reports and other filings with the SEC, including the risk factors identified in this report.

The forward-looking statements included in this report are made only as of the date hereof.

MillerKnoll does not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

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 7. Management’s Discussion and Analysis