MILLERKNOLL, INC. 10-K

Item 8 Financial Statements and Supplementary Data MillerKnoll, Inc. Consolidated Statements of Comprehensive Income Year Ended (In millions, except per share data) May 28, 2022 May 29, 2021 May 30, 2020 Net sales $ 3,946.0 $ 2,465.1 $ 2,486.6 Cost of sales 2,593.3 1,514.0 1,575.4 Gross margin 1,352.7 951.1 911.2 Operating expenses: Selling, general and administrative 1,204.2 643.8 643.3 Impairment charges — — 205.4 Restructuring expenses — 2.7 26.4 Design and research 108.7 72.1 74.0 Total operating expenses 1,312.9 718.6 949.1 Operating earnings (loss) 39.8 232.5 ( 37.9 ) Gain on consolidation of equity method investments — — 36.2 Interest expense 37.8 13.9 12.5 Interest and other investment income ( 1.6 ) ( 2.1 ) ( 2.3 ) Other expense (income), net 12.2 ( 7.6 ) 1.0 (Loss) earnings before income taxes and equity income ( 8.6 ) 228.3 ( 12.9 ) Income tax expense 11.1 48.3 6.1 Equity earnings from nonconsolidated affiliates, net of tax — 0.3 5.0 Net (loss) earnings ( 19.7 ) 180.3 ( 14.0 ) Net earnings (loss) attributable to redeemable noncontrolling interests 7.4 5.7 ( 5.3 ) Net (loss) earnings attributable to MillerKnoll, Inc. $ ( 27.1 ) $ 174.6 $ ( 8.7 ) (Loss) earnings per share — basic $ ( 0.37 ) $ 2.96 $ ( 0.15 ) (Loss) earnings per share — diluted ( 0.37 ) 2.94 ( 0.15 ) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ( 90.0 ) 52.1 ( 7.7 ) Pension and post-retirement liability adjustments 13.5 8.8 ( 14.2 ) Unrealized gains (losses) on interest rate swap agreement 34.5 8.1 ( 18.0 ) Unrealized holding (losses) gains on securities — ( 0.1 ) 0.1 Total other comprehensive (loss) income, net of tax ( 42.0 ) 68.9 ( 39.8 ) Comprehensive (loss) income ( 61.7 ) 249.2 ( 53.8 ) Comprehensive income (loss) attributable to redeemable noncontrolling interests 4.4 5.7 ( 5.3 ) Comprehensive (loss) income attributable to MillerKnoll, Inc. $ ( 66.1 ) $ 243.5 $ ( 48.5 ) 48 MillerKnoll, Inc. Consolidated Balance Sheets (In millions, except share and per share data) May 28, 2022 May 29, 2021 ASSETS Current Assets: Cash and cash equivalents $ 230.3 $ 396.4 Short-term investments — 7.7 Accounts receivable, net of allowances of $ 12.2 and $ 5.5 348.9 204.7 Unbilled accounts receivable 32.0 16.4 Inventories, net 587.3 228.6 Prepaid expenses 112.1 45.1 Other current assets 7.3 7.6 Total current assets 1,317.9 906.5 Property and equipment, net of accumulated depreciation of $ 928.2 and $ 832.5 581.5 327.2 Right of use assets 425.8 214.7 Goodwill 1,226.2 364.2 Indefinite-lived intangibles 501.0 97.6 Other amortizable intangibles, net of accumulated amortization of $ 134.7 and $ 68.6 362.4 105.2 Other noncurrent assets 99.2 61.4 Total Assets $ 4,514.0 $ 2,076.8 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 355.1 $ 178.4 Short-term borrowings and current portion of long-term debt 29.3 2.2 Accrued compensation and benefits 128.6 90.2 Short-term lease liability 79.9 44.8 Accrued warranty 18.8 14.5 Customer deposits 125.3 43.1 Other accrued liabilities 140.4 103.3 Total current liabilities 877.4 476.5 Long-term debt 1,379.2 274.9 Pension and post-retirement benefits 25.0 34.5 Lease liabilities 398.2 221.1 Other liabilities 300.2 132.3 Total Liabilities 2,980.0 1,139.3 Redeemable noncontrolling interests 106.9 77.0 Stockholders' Equity: Preferred stock, no par value ( 10,000,000 shares authorized, no ne issued) — — Common stock, $ 0.20 par value ( 240,000,000 shares authorized, 75,824,241 and 59,029,165 shares issued and outstanding in 2022 and 2021, respectively) 15.2 11.8 Additional paid-in capital 825.7 94.7 Retained earnings 693.3 819.3 Accumulated other comprehensive loss ( 107.1 ) ( 65.1 ) Deferred compensation plan — ( 0.2 ) Total Stockholders' Equity 1,427.1 860.5 Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity $ 4,514.0 $ 2,076.8 49 MillerKnoll, Inc. Consolidated Statements of Stockholders' Equity Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Deferred Compensation Plan MillerKnoll, Inc. Stockholders' Equity (In millions, except share and per share data) Shares Amount June 1, 2019 58,794,148 $ 11.7 $ 89.8 $ 721.7 $ ( 94.2 ) $ ( 0.8 ) $ 728.2 Net loss — — — ( 8.7 ) — — ( 8.7 ) Other comprehensive loss — — — — ( 39.8 ) — ( 39.8 ) Stock-based compensation expense — — 2.7 — — — 2.7 Exercise of stock options 423,815 0.2 13.3 — — — 13.5 Restricted and performance stock units released 138,590 — 0.2 — — — 0.2 Employee stock purchase plan issuances 70,145 — 2.1 — — — 2.1 Repurchase and retirement of common stock ( 641,192 ) ( 0.1 ) ( 26.5 ) — — — ( 26.6 ) Directors' fees 7,769 — 0.3 — — — 0.3 Deferred compensation plan — — ( 0.3 ) — — 0.5 0.2 Dividends declared ($ 0.63 per share) — — — ( 37.5 ) — — ( 37.5 ) Cumulative effect of accounting changes — — — 17.8 — — 17.8 May 30, 2020 58,793,275 $ 11.8 $ 81.6 $ 693.3 $ ( 134.0 ) $ ( 0.3 ) $ 652.4 Net earnings — — — 174.6 — — 174.6 Other comprehensive income — — — — 68.9 — 68.9 Stock-based compensation expense — — 9.0 — — — 9.0 Exercise of stock options 86,238 — 2.6 — — — 2.6 Restricted and performance stock units released 114,103 — 0.2 — — — 0.2 Employee stock purchase plan issuances 71,468 — 2.1 — — — 2.1 Repurchase and retirement of common stock ( 38,932 ) — ( 0.9 ) — — — ( 0.9 ) Directors' fees 3,013 — 0.1 — — — 0.1 Deferred compensation plan — — — — — 0.1 0.1 Dividends declared ($ 0.56 per share) — — — ( 33.4 ) — — ( 33.4 ) Redemption value adjustment — — — ( 15.0 ) — — ( 15.0 ) Other — — — ( 0.2 ) — — ( 0.2 ) May 29, 2021 59,029,165 $ 11.8 $ 94.7 $ 819.3 $ ( 65.1 ) $ ( 0.2 ) $ 860.5 Net loss — — — ( 27.1 ) — — ( 27.1 ) Other comprehensive loss — — — — ( 42.0 ) — ( 42.0 ) Stock-based compensation expense — — 31.4 — — — 31.4 Restricted stock issuance 611,452 0.1 ( 0.1 ) — — — — Exercise of stock options 116,178 0.1 3.3 — — — 3.4 Restricted and performance stock units released 503,687 0.1 ( 0.1 ) — — — — Employee stock purchase plan issuances 87,562 — 2.8 — — — 2.8 Repurchase and retirement of common stock ( 390,979 ) ( 0.1 ) ( 16.1 ) — — — ( 16.2 ) Directors' fees direct issuance 23,255 — 0.9 — — — 0.9 Director's fees deferred restricted stock units — — 0.6 — — — 0.6 Deferred compensation plan — — — — — 0.2 0.2 Shares issued for the Acquisition of Knoll 15,843,921 3.2 685.1 — — — 688.3 Pre-combination expense from Knoll rollover — — 22.4 — — — 22.4 NCI Adjustment — — 0.5 — — — 0.5 NCI Valuation — — — ( 41.6 ) — — ( 41.6 ) Restricted stock units dividend reinvestment — — 0.3 ( 0.3 ) — — — Dividends declared ($ 0.75 per share) — — — ( 57.0 ) — — ( 57.0 ) May 28, 2022 75,824,241 $ 15.2 $ 825.7 $ 693.3 $ ( 107.1 ) $ — $ 1,427.1 50 MillerKnoll, Inc. Consolidated Statements of Cash Flows Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Cash Flows from Operating Activities: Net (loss) earnings $ ( 19.7 ) $ 180.3 $ ( 14.0 ) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation expense 112.0 72.0 68.1 Amortization expense 78.6 15.2 11.4 Earnings (loss) from nonconsolidated affiliates net of dividends received 0.8 ( 0.4 ) ( 4.8 ) Gain on consolidation of equity method investments — — ( 36.2 ) (Gain) loss on sales of property and dealers ( 1.0 ) — — Deferred taxes ( 21.7 ) 7.1 ( 25.1 ) Pension contributions ( 5.0 ) ( 5.4 ) ( 0.9 ) Pension and post-retirement expenses ( 4.1 ) 3.0 1.6 Impairment charges 15.5 — 205.4 Loss on extinguishment of debt 13.4 — — Restructuring expenses — 2.7 26.4 Stock-based compensation 31.4 9.0 2.7 Decrease (increase) in long-term assets ( 1.6 ) 1.2 ( 4.7 ) Increase in long-term liabilities ( 2.1 ) 16.0 5.8 Changes in current assets and liabilities: Decrease (increase) in accounts receivable & unbilled accounts receivable ( 92.4 ) ( 14.8 ) 68.6 Decrease (increase) in inventories ( 166.4 ) ( 10.4 ) 5.5 Increase in prepaid expenses and other ( 39.6 ) ( 3.9 ) ( 2.2 ) Increase (decrease) in accounts payable 51.5 43.2 ( 59.5 ) Increase (decrease) in accrued liabilities 47.2 15.1 ( 32.0 ) Other, net ( 8.7 ) 2.4 5.7 Net Cash (Used in) Provided by Operating Activities ( 11.9 ) 332.3 221.8 Cash Flows from Investing Activities: Marketable securities purchases — ( 5.9 ) ( 3.1 ) Marketable securities sales 7.7 5.3 5.0 Capital expenditures ( 94.7 ) ( 59.8 ) ( 69.0 ) Proceeds from sales of property and dealers 2.8 14.0 0.2 Acquisitions, net of cash received ( 1,088.5 ) — ( 111.2 ) Equity investment in non-controlled entities — — ( 3.3 ) Other, net 0.3 ( 13.5 ) 13.3 Net Cash Used in Investing Activities ( 1,172.4 ) ( 59.9 ) ( 168.1 ) Cash Flows from Financing Activities: Proceeds from issuance of debt, net of discounts 1,007.0 — 50.0 Payments of deferred financing costs ( 9.3 ) — — Repayments of long-term debt ( 63.1 ) ( 50.0 ) — Proceeds from credit facility 1,026.5 — 265.0 Repayments of credit facility ( 838.5 ) ( 265.0 ) — Payment of make whole premium on debt ( 13.4 ) — — Dividends paid ( 54.5 ) ( 34.5 ) ( 36.4 ) Common stock issued 7.5 5.0 15.6 Common stock repurchased and retired ( 16.2 ) ( 0.9 ) ( 26.6 ) Distribution to noncontrolling interest ( 6.8 ) — — Purchase of redeemable noncontrolling interests — — ( 20.3 ) Other, net 0.7 ( 2.3 ) ( 3.3 ) Net Cash Provided by (Used in) Financing Activities 1,039.9 ( 347.7 ) 244.0 Effect of exchange rate changes on cash and cash equivalents ( 21.7 ) 17.7 ( 2.9 ) Net (Decrease) Increase In Cash and Cash Equivalents ( 166.1 ) ( 57.6 ) 294.8 Cash and cash equivalents, Beginning of Year 396.4 454.0 159.2 Cash and Cash Equivalents, End of Year $ 230.3 $ 396.4 $ 454.0 51 Other Cash Flow Information Interest paid $ 28.8 $ 12.5 $ 11.4 Income taxes paid, net of cash received $ 36.9 $ 15.8 $ 39.6 52 Notes to the Consolidated Financial Statements Note 1 Significant Accounting and Reporting Policies 54 Note 2 Revenue from Contracts with Customers 64 Note 3 Acquisitions and Divestitures 67 Note 4 Inventories 71 Note 5 Investments in Nonconsolidated Affiliates 71 Note 6 Short-Term Borrowings and Long-Term Debt 72 Note 7 Leases 74 Note 8 Employee Benefit Plans 75 Note 9 Common Stock and Per Share Information 79 Note 10 Stock-Based Compensation 79 Note 11 Income Taxes 84 Note 12 Fair Value 88 Note 13 Commitments and Contingencies 94 Note 14 Operating Segments 95 Note 15 Accumulated Other Comprehensive Loss 99 Note 16 Restructuring Expenses 99 Note 17 Variable Interest Entities 102 Note 18 Quarterly Financial Data (Unaudited) 102 53 1. Significant Accounting and Reporting Policies The following is a summary of significant accounting and reporting policies not reflected elsewhere in the accompanying financial statements. Principles of Consolidation The Consolidated Financial Statements include the accounts of MillerKnoll, Inc. and its controlled domestic and foreign subsidiaries. The consolidated entities are collectively referred to as “the Company.” All intercompany accounts and transactions have been eliminated in the Consolidated Financial Statements. Description of Business The Company researches, designs, manufactures, sells and distributes interior furnishings for use in various environments including office, healthcare, educational and residential settings and provides related services that support companies all over the world. The Company's products are sold primarily through independent contract office furniture dealers, retail studios, the Company's eCommerce platforms, direct-mail catalogs, as well as direct customer sales and independent retailers. On July 19, 2021 the Company acquired Knoll, Inc. ("Knoll") (See Note 3. "Acquisitions and Divestitures"). Knoll is a leading global manufacturer of commercial and residential furniture, accessories, lighting, and coverings. The Company has included the financial results of Knoll in the consolidated financial statements from the date of acquisition. On October 11, 2021, the Company's shareholders approved an amendment to our Restated Articles of Incorporation to change our corporate name from Herman Miller, Inc. to MillerKnoll, Inc. On November 1, 2021, the change in corporate name and ticker symbol to MLKN became effective. MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. A global leader in design, MillerKnoll includes Herman Miller® and Knoll®, as well as Colebrook Bosson Saunders®, DatesWeiser®, Design Within Reach®, Edelman® Leather, Fully®, Geiger®, HAY®, Holly Hunt®, KnollTextiles®, Maars® Living Walls, Maharam®, Muuto®, naughtone®, and Spinneybeck®|FilzFelt®. Combined, MillerKnoll represents over 100 years of design research and exploration in service of humanity. The Company is united by a belief in design as a tool to create positive impact and shape a more sustainable, caring, and beautiful future for all people and the planet. Fiscal Year The Company's fiscal year ends on the Saturday closest to May 31. The fiscal years ended May 28, 2022, May 29, 2021, and May 30, 2020 contained 52 weeks . Foreign Currency Translation The functional currency for most of the foreign subsidiaries is their local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the United States dollar using fiscal year-end exchange rates and translating revenue and expense accounts using average exchange rates for the period are reflected as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets. The financial statement impact of gains and losses resulting from remeasuring foreign currency transactions into the appropriate functional currency resulted in a net loss of $ 3.3 million, net gain of $ 0.8 million, and a net loss of $ 1.1 million for the fiscal years ended May 28, 2022, May 29, 2021, and May 30, 2020, respectively. These amounts are included in Other expense (income), net in the Consolidated Statements of Comprehensive Income. Cash Equivalents The Company holds cash equivalents as part of its cash management function. Cash equivalents include money market funds and time deposit investments with original maturities of less than three months. The carrying value of cash equivalents, which approximates fair value, totaled $ 43.1 million an d $ 229.8 million as of May 28, 2022 and May 29, 2021 , respectively. All cash equivalents are high-credit quality financial instruments and the amount of credit exposure to any one financial institution or instrument is limited. Marketable Securities The Company previously maintained a portfolio of marketable securities primarily comprised of mutual funds. These investments were liquidated during the year resulting in a cash in-flow of approximately $ 7.7 million. 54 Allowances for Credit Losses Allowances for credit losses related to accounts are managed at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date. In estimating probable losses, we review accounts based on known customer exposures, historical credit experience, and specific identification of other potentially uncollectible accounts. An accounts receivable balance is considered past due when payment is not received within the stated terms. Accounts that are considered to have higher credit risk are reviewed using information available about the debtor, such as financial statements, news reports and published credit ratings. General information regarding industry trends, the economic environment is also used. We arrive at an estimated loss for specific concerns and estimate an additional amount for the remainder of trade balances based on historical trends and other factors previously referenced. Balances are written off against the reserve once the Company determines the probability of collection to be remote. The Company generally does not require collateral or other security on trade accounts receivable. Subsequent recoveries, if any, are credited to bad debt expense when received. Concentrations of Credit Risk The Company's trade receivables are primarily due from independent dealers who, in turn, carry receivables from their customers. The Company monitors and manages the credit risk associated with individual dealers and direct customers where applicable. Dealers are responsible for assessing and assuming credit risk of their customers and may require their customers to provide deposits, letters of credit or other credit enhancement measures. Some sales contracts are structured such that the customer payment or obligation is direct to the Company. In those cases, the Company may assume the credit risk. Whether from dealers or customers, the Company's trade credit exposures are not concentrated with any particular entity. Inventories Prior to the fourth quarter of 2022, certain inventories within the United States were recorded at cost (not in excess of net realizable value) as determined by the last-in, first-out method (“LIFO”). Inventory valued under the LIFO method represented approximately 9 % of consolidated inventories. During the fourth quarter of 2022, we changed our method of costing for these inventories from LIFO to the first-in, first-out (“FIFO”) method. This change in accounting principle is preferable because FIFO more closely resembles the physical flow of inventory being used in production and the change conforms all of the Company's consolidated inventory to be on either the FIFO or weighted average methods of accounting, including the newly acquired Knoll, Inc. inventory. The cumulative effect of the change was recorded in the opening June 1, 2019 retained earnings, which resulted in a net increase to total stockholders’ equity of $ 9.0 million. It also increased May 29, 2021 inventories, tax payable and deferred tax liabilities by $ 15.0 million, $ 1.1 million, and $ 3.0 million, respectively. The impact of this change in accounting principle on the Consolidated Financial Statements for each period presented is further explained in the Change in Accounting Principle section below. Inventories are valued at the lower of cost or net realizable value and include material, labor and overhead. The Company establishes reserves for excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions, however inventory cannot be subsequently written back up, since the reserve establishes a new (lower) cost basis. Further information on the Company's recorded inventory balances can be found in Note 4 of the Consolidated Financial Statements. Goodwill and Indefinite-lived Intangible Assets The changes in the carrying amount of goodwill, by reporting segment, are as follows: 55 (In millions) Americas Contract International Contract Global Retail Knoll Total Balance as of May 30, 2020 Goodwill $ 193.2 $ 31.6 $ 79.0 $ — $ 303.8 Acquisition of HAY and naughtone 35.0 53.6 80.0 — 168.6 Foreign currency translation adjustments — ( 0.7 ) ( 0.2 ) — ( 0.9 ) Impairment loss ( 36.7 ) — ( 88.8 ) — ( 125.5 ) Net goodwill as of May 30, 2020 $ 191.5 $ 84.5 $ 70.0 $ — $ 346.0 Balance as of May 29, 2021 Goodwill $ 228.2 $ 84.5 $ 158.8 $ — $ 471.5 Foreign currency translation adjustments 5.7 6.8 5.7 — 18.2 Accumulated impairment losses ( 36.7 ) — ( 88.8 ) — ( 125.5 ) Net goodwill as of May 29, 2021 $ 197.2 $ 91.3 $ 75.7 $ — $ 364.2 Balance as of May 28, 2022 Goodwill $ 233.9 $ 91.3 $ 164.5 $ — $ 489.7 Sale of owned dealer ( 0.3 ) — — — ( 0.3 ) Acquisition of Knoll — — — 903.5 903.5 Foreign currency translation adjustments ( 5.2 ) ( 8.8 ) ( 7.3 ) ( 19.9 ) ( 41.2 ) Accumulated impairment losses ( 36.7 ) — ( 88.8 ) — ( 125.5 ) Balance as of May 28, 2022 $ 191.7 $ 82.5 $ 68.4 $ 883.6 $ 1,226.2 Other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following: (In millions) Indefinite-lived Intangible Assets Balance at May 30, 2020 $ 92.8 Foreign currency translation adjustments 4.8 Balance at May 29, 2021 $ 97.6 Foreign currency translation adjustments ( 14.6 ) Acquisition of Knoll 418.0 Balance at May 28, 2022 $ 501.0 Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value. 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. The test for impairment requires the Company to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. We estimated the fair value of the reporting units using a discounted cash flow analysis and reconciled the sum of the fair values of the reporting units to total market capitalization of the Company, plus a control premium. The control premium represents an estimate associated with obtaining control of the Company in an acquisition. The discounted cash flow analysis used the present value of projected cash flows and a residual value. The Company employs a market-based approach in selecting the discount rates used in our analysis. The discount rates selected represent market rates of return equal to what the Company believes a reasonable investor would expect to achieve on investments of similar size to the Company's reporting units. The Company believes the discount rates selected in the 56 quantitative assessment are appropriate in that, in all cases, they meet or exceed the estimated weighted average cost of capital for our business as a whole. The results of the impairment test are sensitive to changes in the discount rates and changes in the discount rate may result in future impairment. Intangible assets with indefinite useful lives are not subject to amortization and are evaluated annually for impairment, or more frequently, when events or changes in circumstances indicate that the fair value of an intangible asset may not be recoverable. The Company utilizes the relief from royalty methodology to test for impairment. The primary assumptions for the relief from royalty method include forecasted revenue growth rates, royalty rates and discount rates. The Company measures and records an impairment loss for the excess of the carrying value of the asset over its fair value. In fiscal 2022, the Company performed qualitative assessments in testing indefinite-lived intangible assets for impairment for all assets except the HAY trade name for which a quantitative assessment was performed. The carrying value of the Company's HAY trade name indefinite-lived intangible asset was $ 38.9 million as of March 31, 2022. The calculated fair value of the HAY trade name was $ 54.8 million which represents an excess fair value of $ 15.9 million or 41.0 %. Based on the assessments performed, the Company concluded it to be more likely than not that that the estimated fair values for indefinite-lived intangibles are greater than their respective carrying values. In completing our annual indef inite-lived trade name impairment test, the HAY fair value was estimated using a relief-from-royalty approach, applying mar ket participant discount rate of 16.5 % developed using a weighted average cost of capital analysis, a royalty rate of 2.5 % and a long-term growth rate of 3.0 %. The table below summarizes the carrying values as of May 28, 2022, for each of the Company’s indefinite-lived trade names: (In millions) Trade name Carrying Value Maharam $ 16.5 DWR 31.5 HAY 38.0 naughtone 5.8 Knoll Product 173.0 Knoll Channel 99.0 Muuto 88.2 Holly Hunt 26.0 Spinneybeck 23.0 Total $ 501.0 During fiscal 2020, the Company recognized $ 205.4 million of impairment charges related to goodwill, indefinite-lived intangible assets and long-lived assets. These charges are included in "Impairment charges" within the Consolidated Statements of Comprehensive Income. Property, Equipment and Depreciation Property and equipment are stated at cost. The cost is depreciated over the estimated useful lives of the assets using the straight-line method. Estimated useful lives range from 3 to 10 years for machinery and equipment and do not exceed 40 years for buildings. Leasehold improvements are depreciated over the lesser of the lease term or the useful life of the asset. The Company capitalizes certain costs incurred in connection with the development, testing and installation of software for internal use and cloud computing arrangements. Software for internal use is included in property and equipment and is depreciated over an estimated useful life not exceeding 10 years. Depreciation and amortization expense is included in the Consolidated Statements of Comprehensive Income in the Cost of sales, Selling, general and administrative and Design and research line items. The following table summarizes our property as of the dates indicated: 57 (In millions) May 28, 2022 May 29, 2021 Land and improvements $ 54.4 $ 25.2 Buildings and improvements 377.2 286.1 Machinery and equipment 1,027.0 820.8 Construction in progress 51.1 27.6 Accumulated depreciation ( 928.2 ) ( 832.5 ) Property and equipment, net $ 581.5 $ 327.2 As of the end of fiscal 2022, outstanding commitments for future capital purchases approximated $ 53.6 million. Other Long-Lived Assets The Company reviews the carrying value of long–lived assets for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset or asset group are compared to the carrying value of the asset or asset group. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the carrying value of the assets exceeds their fair value. Amortizable intangible assets within Other amortizable intangibles, net in the Consolidated Balance Sheets consist primarily of patents, trademarks and customer relationships. The customer relationships intangible asset is comprised of relationships with customers, specifiers, networks, dealers and distributors. Refer to the following table for the combined gross carrying value and accumulated amortization for these amortizable intangibles. May 28, 2022 (In millions) Patent and Trademarks Customer Relationships Designs and Patterns Backlog Other Total Gross carrying value $ 57.9 $ 355.8 $ 42.0 $ 29.8 $ 11.6 $ 497.1 Accumulated amortization 24.7 66.0 5.9 29.8 8.3 134.7 Net $ 33.2 $ 289.8 $ 36.1 $ — $ 3.3 $ 362.4 May 29, 2021 Patent and Trademarks Customer Relationships Designs and Patterns Backlog Other Total Gross carrying value $ 45.5 $ 113.0 $ 3.10 $ 2.80 $ 9.4 $ 173.8 Accumulated amortization 18.9 39.6 3.10 2.80 4.2 68.6 Net $ 26.6 $ 73.4 $ — $ — $ 5.2 $ 105.2 The Company amortizes these assets over their remaining useful lives using the straight-line method over periods ranging from less than 1 year to 20 years, or on an accelerated basis, to reflect the expected realization of the economic benefits. It is estimated that the weighted-average remaining useful life of the patents and trademarks is approximately 6.7 and the weighted-average remaining useful life of the customer relationships is 10.5 years . Estimated amortization expense on existing amortizable intangible assets as of May 28, 2022, for each of the succeeding five fiscal years, is as follows: (In millions) 2023 $ 39.7 2024 38.6 2025 38.4 2026 38.4 2027 38.2 Self-Insurance The Company is partially self-insured for general liability, workers' compensation and certain employee health and dental benefits under insurance arrangements that provide for third-party coverage of claims exceeding the Company's loss retention levels. The Company's health benefit and auto liability retention levels do not include an aggregate stop loss policy. The Company's retention levels designated within significant insurance arrangements as of May 28, 2022 , ar e as follows: 58 (In millions) Retention Level (per occurrence) General liability $ 1.00 Auto liability $ 1.00 Workers' compensation $ 0.75 Health benefit $ 0.50 The Company accrues for its self-insurance arrangements, as well as reserves for health, prescription drugs, and dental benefit exposures based on actuarial estimates, which are recorded in Other liabilities in the Consolidated Balance Sheets. The value of the liability as of May 28, 2022 and May 29, 2021 was $ 14.7 million and $ 12.3 million, respectively. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical costs, payment lag times and changes in actual experience could cause these estimates to change. The general, auto, and workers' compensation liabilities are managed through the Company's wholly-owned insurance captive. Research, Development and Other Related Costs Research, development, pre-production and start-up costs are expensed as incurred. Research and development ("R&D") costs consist of expenditures incurred during the course of planned research and investigation aimed at discovery of new knowledge useful in developing new products or processes. R&D costs also include the enhancement of existing products or production processes and the implementation of such through design, testing of product alternatives or construction of prototypes. R&D costs included in Design and research expense in the accompanying Consolidated Statements of Comprehensive Income are $ 71.1 million, $ 50.8 million and $ 54.3 million, in fiscal 2022, 2021, and 2020, respectively. Royalty payments made to designers of the Company's products as the products are sold are variable costs based on product sales. These expenses totaled $ 37.6 million , $ 21.3 million and $ 19.7 million in fiscal years 2022, 2021 and 2020 respectively. They are included in Design and research expense in the accompanying Consolidated Statements of Comprehensive Income . Customer Payments and Incentives We offer various sales incentive programs to our customers, such as rebates and discounts. Programs such as rebates and discounts are adjustments to the selling price and are therefore characterized as a reduction to net sales. Revenue Recognition The Company recognizes revenue when performance obligations, based on the terms of customer contracts, are satisfied. This happens when control of goods and services based on the contract have been conveyed to the customer. Revenue for the sale of products is recognized at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. Revenue for services is recognized over time as the services are provided. The method of revenue recognition may vary, depending on the type of contract with the customer, as noted in the section "Disaggregated Revenue" in Note 2 of the Consolidated Financial Statements. The Company's contracts with customers include master agreements and certain other forms of contracts, which do not reach the level of a performance obligation until a purchase order is received from a customer. At the point in time that a purchase order under a contract is received by the Company, the collective group of documents represent an enforceable contract between the Company and the customer. While certain customer contracts may have a duration of greater than a year, all purchase orders are less than a year in duration. As of May 28, 2022, all unfulfilled performance obligations are expected to be fulfilled in the next twelve months. Variable consideration exists within certain contracts that the Company has with customers. When variable consideration is present in a contract with a customer, the Company estimates the amount that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. These estimates are primarily related to rebate programs which involve estimating future sales amounts and rebate percentages to use in the determination of transaction price. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Adjustments to net sales from changes in variable consideration related to performance obligations completed in previous periods are not material to the Company's financial statements. Also, the Company has no contracts with significant financing components. 59 The Company accounts for shipping and handling activities as fulfillment activities and these costs are accrued within Cost of sales at the same time revenue is recognized. The Company does not record revenue for sales tax, value added tax or other taxes that are collected on behalf of government entities. The Company’s revenue is recorded net of these taxes as they are passed through to the relevant government entities. The Company has recognized incremental costs to obtain a contract as an expense when incurred as the amortization period is less than one year. The Company has not adjusted the amount of consideration to be received for any significant financing components as the Company’s contracts have a duration of one year or less. Leases The Company accounts for leases in accordance with ASC Topic 842, Leases, (“ASC 842”). For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company records right-of use ("ROU") assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments. As none of the Company’s leases provide an implicit discount rate, the Company uses an estimated incremental borrowing rate at the lease commencement date in determining the present value of the lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, location of the lease, and the Company’s credit risk relative to risk-free market rates. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. Leases, and any leasehold improvements, are depreciated over the expected lease term. Additionally, certain leases include renewal or termination options, which can be exercised at the Company’s discretion. Lease terms include the noncancelable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods. The Company’s leases do not contain any residual value guarantees or material restrictive covenants. Variable lease costs associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease costs are presented as Operating expenses in the Company’s Consolidated Statements of Comprehensive Income in the same line item as the expense arising from fixed lease payments for operating leases. The Company determines if an arrangement is a lease at contract inception. Arrangements that are leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. If leased assets have leasehold improvements, the depreciable life of those leasehold improvements are limited by the expected lease term. ROU assets for operating leases are subject to the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment. The Company monitors for events or changes in circumstances that require a reassessment of a lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss. Cost of Sales The Company includes material, labor and overhead in cost of sales. Included within these categories are items such as freight charges, warehousing costs, internal transfer costs and other costs of its distribution network. Selling, General and Administrative The Company includes costs not directly related to the manufacturing of its products in the Selling, general and administrative line item within the Consolidated Statements of Comprehensive Income. Included in these expenses are items such as compensation expense, rental expense, warranty expense and travel and entertainment expense. Income Taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and 60 liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The Company's annual effective tax rate is based on income, statutory tax rates and tax planning strategies available in the various jurisdictions the Company operates. Complex tax laws can be subject to different interpretations by the Company and the respective government authorities. Significant judgment is required in evaluating tax positions and determining our tax expense. Tax positions are reviewed quarterly and tax assets and liabilities are adjusted as new information becomes available. In evaluating the Company's ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all positive and negative evidence. These assumptions require significant judgment about forecasts of future taxable income. Stock-Based Compensation The Company has several stock-based compensation plans, which are described in Note 10 of the Consolidated Financial Statements. Our policy is to expense stock-based compensation using the fair-value based method of accounting for all awards granted. Earnings per Share Basic earnings per share (EPS) excludes the dilutive effect of common shares that could potentially be issued, due to the exercise of stock options or the vesting of restricted shares and is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted-averag e number of shares outstanding, plus all dilutive shares that could potentially be issued. When in a loss position, basic and diluted EPS use the same weighted-average number of shares outstanding. Refe r to Note 9 of the Consolidated Financial Statements for further information regarding the computation of EPS. Comprehensive Income Comprehensive income consists of net earnings, foreign currency translation adjustments, unrealized holding gains on securities, unrealized gains on interest rate swap agreement and pension and post-retirement liability adjustments. Refer to Note 15 of the Consolid ated Financial Statements fo r further information regarding comprehensive income. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value The Company classifies and discloses its fair value measurements in one of the following three categories: • Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges. • Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. Financial instrument values are determined using prices for recently traded financial instruments with similar underlying terms and direct or indirect observational inputs, such as interest rates and yield curves at commonly quoted intervals. • Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market activity. Values are determined using significant unobservable inputs or valuation techniques. See Note 12 of the Consolidated Financial Statements for the required fair value disclosures. Derivatives and Hedging The Company calculates the fair value of financial instruments using quoted market prices whenever available. The Company utilizes derivatives to manage exposures to foreign currency exchange rates and interest rate risk. The fair values of all derivatives are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of these instruments are reported within Other expense (income), net in the Consolidated Statements of Comprehensive Income, or Accumulated other comprehensive loss within the Consolidated Balance Sheets, depending on the use of the derivative and whether it qualifies for hedge accounting treatment. 61 Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in Accumulated Other Comprehensive Loss, to the extent the hedges are effective, until the underlying transactions are recognized in the Consolidated Statements of Comprehensive Income. Derivatives not designated as hedging instruments are marked-to-market at the end of each period with the results included in Consolidated Statements of Comprehensive Income. See Note 12 of the Consolidated Financial Statements for further information regarding derivatives. Recently Adopted Accounting Standards On May 30, 2021, the Company adopted ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This update eliminates, adds and clarifies certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The eliminated disclosures include (a) the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. The adoption of this guidance did not have a material effect on our consolidated financial statements. On May 30, 2021, the Company adopted ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This update removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The update also adds guidance to reduce complexity in certain areas. The adoption of this guidance did not have a material impact on the Company's financial statements. Recently Issued Accounting Standards Not Yet Adopted The Company is currently evaluating the impact of adopting the following relevant standards issued by the FASB: Standard Description Effective Date 2021-10 Government Assistance This update requires disclosures to increase the transparency of transactions with governments accounted for by applying a grant or contribution accounting model by analogy, including the (1) types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity's financial statements. Early adoption is permitted. We are currently evaluating the effect the adoption of this ASU may have on our disclosures. May 29, 2022 All other issued and not yet effective accounting standards are not relevant to the Company. Change in Accounting Principle As described above, in the fourth quarter of 2022, we elected to change our method of accounting for certain inventories within the United States from LIFO to FIFO. The tables below summarize the fiscal year 2022 financial results as if we had stayed on LIFO for the current year. We have retrospectively adjusted the Consolidated Financial Statements for all periods presented to reflect this change. As a result of the retrospective adjustment for the change in accounting principle, certain amounts in our Consolidated Statements of Comprehensive Income for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 were adjusted as follows: 62 (In millions, except per share data) May 28, 2022 If Reported using LIFO Impact of change to FIFO As Reported using FIFO Cost of sales $ 2,603.9 $ ( 10.6 ) $ 2,593.3 (Loss) earnings before income taxes ( 19.2 ) 10.6 ( 8.6 ) Income tax expense 8.9 2.2 11.1 Net (loss) earnings ( 28.1 ) 8.4 ( 19.7 ) Net (loss) earnings attributable to MillerKnoll, Inc. ( 35.5 ) 8.4 ( 27.1 ) (Loss) earnings per share - basic ( 0.49 ) 0.12 ( 0.37 ) (Loss) earnings per share - diluted ( 0.49 ) 0.12 ( 0.37 ) (In millions, except per share data) May 29, 2021 May 30, 2020 As Reported Impact of change to FIFO As Adjusted As Reported Impact of change to FIFO As Adjusted Cost of sales $ 1,515.9 $ ( 1.9 ) $ 1,514.0 $ 1,575.9 $ ( 0.5 ) $ 1,575.4 Earnings (loss) before income taxes 226.4 1.9 228.3 ( 13.4 ) 0.5 ( 12.9 ) Income tax expense 47.9 0.4 48.3 6.0 0.1 6.1 Net earnings (loss) 178.8 1.5 180.3 ( 14.4 ) 0.4 ( 14.0 ) Net earnings (loss) attributable to MillerKnoll, Inc. 173.1 1.5 174.6 ( 9.1 ) 0.4 ( 8.7 ) Earnings (loss) per share - basic 2.94 0.02 2.96 ( 0.15 ) — ( 0.15 ) Earnings (loss) per share - diluted 2.92 0.02 2.94 ( 0.15 ) — ( 0.15 ) The Consolidated Balance Sheets as of May 28, 2022 and May 29, 2021 were adjusted as follows: (In millions) May 28, 2022 May 29, 2021 If Reported using LIFO Impact of change to FIFO As Reported using FIFO As Reported Impact of change to FIFO As Adjusted Inventories, net $ 561.7 $ 25.6 $ 587.3 $ 213.6 $ 15.0 $ 228.6 Other liabilities 293.9 6.3 300.2 128.2 4.1 132.3 Retained earnings 674.0 19.3 693.3 808.4 10.9 819.3 The Consolidated Statements of Cash Flows for the years ended May 28, 2022, May 29, 2021 and May 30, 2020 were adjusted as follows: (In millions) May 28, 2022 If Reported using LIFO Impact of change to FIFO As Reported using FIFO Net (loss) earnings $ ( 28.1 ) $ 8.4 $ ( 19.7 ) Adjustments to reconcile net earnings to net cash provided by operating activities: Deferred taxes ( 23.9 ) 2.2 ( 21.7 ) Changes in current assets and liabilities: (Decrease) increase in inventories ( 177.0 ) 10.6 ( 166.4 ) 63 (In millions) May 29, 2021 May 30, 2020 As Reported Impact of change to FIFO As Adjusted As Reported Impact of change to FIFO As Adjusted Net earnings (loss) $ 178.8 $ 1.5 $ 180.3 $ ( 14.4 ) $ 0.4 $ ( 14.0 ) Adjustments to reconcile net earnings to net cash provided by operating activities: Deferred taxes 6.7 0.4 7.1 ( 25.2 ) 0.1 ( 25.1 ) Changes in current assets and liabilities: (Decrease) increase in inventories ( 8.5 ) ( 1.9 ) ( 10.4 ) 6.0 ( 0.5 ) 5.5 Immaterial Correction of Error The Company’s previously issued financial statements have been revised to reclassify certain lease liabilities that were inappropriately presented within the Consolidated Balance Sheet as of May 29, 2021. As a result, $ 24.2 million was reclassified from Short-term lease liability to Lease liabilities on the Consolidated Balance Sheet as of May 29, 2021. The error had no impact on the Company's Consolidated Statements of Comprehensive Income (Loss), Cash Flows or Stockholders’ Equity. Management has evaluated the error and has determined, based on quantitative and qualitative factors, that it is not material to the May 29, 2021 Consolidated Balance Sheet. 2. Revenue from Contracts with Customers Disaggregated Revenue The Company’s revenue is comprised primarily of sales of products and installation services. Depending on the type of contract, the method of accounting and timing of revenue recognition may differ. Below, descriptions have been provided that summarize the Company’s different types of contracts and how revenue is recognized for each. • Single Performance Obligations - these contracts are transacted with customers and include only the product performance obligation. Most commonly, these contracts represent master agreements with independent third party dealers in which a purchase order represents the customer contract, point of sale transactions through the Retail segment, as well as customer purchase orders within the Americas Contract and Knoll segments. For contracts that include a single performance obligation, the Company records revenue at the point in time when title and risk of loss has transferred to the customer. • Multiple Performance Obligations - these contracts are transacted with customers and include more than one performance obligation; products, which are shipped to the customer by the Company, and installation and other services, which are primarily fulfilled by independent third-party dealers. For contracts that include multiple performance obligations, the Company records revenue for the product performance obligation at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. In most cases, the Company has concluded that it is the agent for the installation services performance obligation and as such, the revenue and costs of these services are recorded net within Net sales in the Company’s Consolidated Statements of Comprehensive Income. In certain instances, entities owned by the Company, rather than independent third-party dealers, perform installation and other services. In these cases, Service revenue is generated by the Company’s entities that provide installation services, and is recognized by the Company over time as the services are provided. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on relative standalone selling prices. • Other - these contracts are comprised mainly of alliance fee arrangements, whereby the Company earns revenue for allowing other furniture sellers access to its dealer distribution channel, as well as other miscellaneous selling arrangements. Revenue from alliance contracts are recorded at the point in time in which the sale is made by other furniture sellers through the Company’s sales channel. Revenue disaggregated by contract type has been provided in the table below: 64 Year Ended (In millions) May 28, 2022 May 29, 2021 Net sales: Single performance obligation Product revenue $ 3,660.1 $ 2,180.5 Multiple performance obligations Product revenue 265.3 265.8 Service revenue 8.6 9.6 Other 12.0 9.2 Total $ 3,946.0 $ 2,465.1 The Company internally reports and evaluates products based on the categories Workplace, Performance Seating, Lifestyle, and Other. A description of these categories is included below. The Workplace category includes products centered on creating highly functional and productive settings for both groups and individuals. This category focuses on the development of products, beyond seating, that define boundaries, support work, and enable productivity. The Performance Seating category includes products centered on seating ergonomics, productivity, and function across an evolving and diverse range of settings. This category focuses on the development of ergonomic seating solutions for specific use cases requiring more than basic utility. The Lifestyle category includes products focused on bringing spaces to life through beautiful yet functional products. This category focuses on the development of products that support a way of living, in thoughtful yet elevated ways. The products in this category help create emotive and visually appealing spaces via a portfolio that offers diversity in aesthetics, price, and performance. Revenue disaggregated by product type and segment has been provided in the table below: 65 Year Ended (In millions) May 28, 2022 May 29, 2021 Americas Contract: Workplace $ 797.9 $ 738.3 Performance Seating 366.8 307.8 Lifestyle 154.8 127.2 Other (1) 125.4 128.0 Total Americas Contract $ 1,444.9 $ 1,301.3 International Contract: Workplace $ 126.2 $ 106.3 Performance Seating 238.3 204.7 Lifestyle 108.2 82.4 Other (1) 10.5 6.1 Total International Contract $ 483.2 $ 399.5 Global Retail: Workplace $ 13.1 $ 10.5 Performance Seating 243.0 265.8 Lifestyle 598.8 486.6 Other (1) 1.9 1.4 Total Global Retail $ 856.8 $ 764.3 Knoll: Workplace $ 547.2 $ — Performance Seating 94.7 — Lifestyle 452.2 — Other (1) 94.4 — Total Knoll $ 1,188.5 $ — Intersegment Sales Elimination $ ( 27.4 ) — Total $ 3,946.0 $ 2,465.1 In the current year, certain products were reclassified primarily within the Performance Seating and Lifestyle categories based on management’s internal reporting of the performance of these product lines. The prior year period has been restated to reflect these changes. (1) "Other" primarily consists of uncategorized product sales and service sales. Refer to Note 14 of the Consolidated Financial Statements for further information related to our segments. Contract Assets and Contract Liabilities The Company records contract assets and contract liabilities related to its revenue generating activities. Contract assets include certain receivables from customers that are unconditional as all performance obligations with respect to the contract with the customer have been completed. These amounts represent trade receivables and they are recorded within Accounts receivable, net in the Consolidated Balance Sheets. Contract assets also include amounts that are conditional because certain performance obligations in contracts with customers are incomplete as of the balance sheet date. These contract assets generally arise due to contracts with customers that include multiple performance obligations, e.g., both the product that is shipped to the customer by the Company, as well as installation services provided by independent third-party dealers. For these contracts, the Company recognizes revenue upon satisfaction of the product performance obligation. These contract assets are included in Unbilled accounts receivable in the Consolidated Balance Sheets until all performance obligations in the contract with the customer have been satisfied. Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized. These customer deposits are included within Customer deposits in the Consolidated Balance Sheets. During the twelve months ended May 28, 2022, the Company 66 recognized net sales of $ 89.5 million rel ate d to customer deposits that were included in the balance sheet as of May 29, 2021. The Company assumed a contract liability of $ 55.5 million related to the acquisition of Knoll, Inc on July 19, 2021. 3. Acquisitions and Divestitures Knoll, Inc. On July 19, 2021, the Company completed its previously announced acquisition of Knoll, a leader in the design, manufacture, marketing, and sale of high-end furniture products and accessories for workplace and residential markets. The Company has included the financial results of Knoll in the consolidated financial statements from the date of acquisition. The transaction costs associated with the acquisition, which included financial advisory, legal, proxy filing, regulatory and financing fees, were approximately $ 30.0 million for the twelve months ended May 28, 2022 and were recorded in general and administrative expenses. Under the terms of the Agreement and Plan of Merger, each issued and outstanding share of Knoll common stock (excluding shares exercising dissenters rights, shares owned by Knoll as treasury stock, shares owned by the deal parties or their subsidiaries, or shares subject to Knoll restricted stock awards) was converted into a right to receive 0.32 shares of Herman Miller, Inc. (now MillerKnoll, Inc.) common stock and $ 11.00 in cash, without interest. The acquisition date fair value of the consideration transferred for Knoll was approximately $ 1,887.3 million, which consisted of the following (in millions, except share amounts): Knoll Shares Herman Miller, Inc (now MillerKnoll, Inc.) Shares Exchanged Fair Value Cash Consideration: Shares of Knoll Common Stock issued and outstanding at July 19, 2021 49,444,825 $ 543.9 Knoll equivalent shares for outstanding option awards, outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021 184,857 1.4 Total number of Knoll shares for cash consideration 49,629,682 Shares of Knoll Preferred Stock issued and outstanding at July 19, 2021 169,165 254.4 Consideration for payment to settle Knoll's outstanding debt 376.9 Share Consideration: Shares of Knoll Common Stock issued and outstanding at July 19, 2021 49,444,825 Knoll equivalent shares for outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021 74,857 Total number of Knoll shares for share consideration 49,519,682 15,843,921 688.3 Replacement Share-Based Awards: Outstanding awards of Knoll Restricted Stock and Performance units relating to Knoll Common Stock at July 19, 2021 22.4 Total acquisition date fair value of consideration transferred $ 1,887.3 The aggregate cash paid in connection with the Knoll acquisition was $ 1,176.6 million. MillerKnoll funded the acquisition through cash on-hand and debt proceeds, as described in Note 6. Short-Term Borrowings and Long-Term Debt. 67 Outstanding unvested restricted stock awards, performance stock awards, performance stock units, and restricted stock units with a preliminary estimated fair value of $ 53.4 million automatically converted into Company awards. Of the total fair value, $ 22.4 million was allocated to purchase consideration and $ 31.0 million was allocated to future services and will be expensed over the remaining service periods on a straight-line basis. Per the terms of the converted awards any qualifying termination within the twelve months subsequent to the acquisition will result in accelerated vesting and related recognition of expense. The transaction was accounted for as a business combination which requires that assets and liabilities assumed be recognized at their fair value as of the acquisition date. The following table summarizes the fair value of assets acquired and liabilities assumed as of the date of acquisition: (In millions) Fair Value Cash $ 88.0 Accounts receivable 82.3 Inventories 219.9 Other current assets 29.2 Property and equipment 296.5 Right-of-use assets 202.7 Intangible assets 756.6 Goodwill 903.5 Other noncurrent assets 25.1 Total assets acquired $ 2,603.8 Accounts payable 144.0 Other current liabilities 153.1 Lease liabilities 177.8 Other liabilities 241.6 Total liabilities assumed 716.5 Net Assets Acquired $ 1,887.3 The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. Goodwill is primarily attributed to the assembled workforce of Knoll and anticipated operational synergies. Goodwill related to the acquisition was recorded within the Knoll segment at $ 903.5 million. Goodwill arising from the acquisition is not expected to be deductible for tax reporting purposes. Certain measurement period adjustments were made during the twelve months ended May 28, 2022 to the preliminary fair values resulting in a net decrease to goodwill of $ 22.4 million primarily related to adjustments to the value of certain liabilities acquired and the fair value of intangible assets acquired. The allocation of purchase price was completed in the fourth quarter of fiscal year 2022. The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives and fair value, as determined by the Company as of the acquisition date: (In millions) Valuation Method Useful Life (years) Fair Value Backlog Multi-Period Excess Earnings Less than 1 Year $ 27.6 Trade name - indefinite lived Relief from Royalty Indefinite 418.0 Trade name - amortizing Relief from Royalty 5 - 10 Years 14.0 Designs Relief from Royalty 9 - 15 years 40.0 Customer Relationships Multi-Period Excess Earnings 2 - 15 years 257.0 Total $ 756.6 Revenue and Net Loss of Knoll included in the Company's Consolidated Statements of Comprehensive Income (Loss) from the acquisition date of July 19, 2021 through May 28, 2022 are as follows (in millions): Total Revenue $ 1,188.5 Net Loss $ ( 53.5 ) 68 Unaudited Pro Forma Results of Operations The results of Knoll's operations have been included in the Consolidated Financial Statements beginning on July 19, 2021. The following table provides pro forma results of operations for the twelve months ended May 28, 2022 and May 29, 2021, as if Knoll had been acquired as of May 31, 2020. The pro forma results include certain purchase accounting adjustments such as the estimated change in depreciation and amortization expense on the acquired tangible and intangible assets.The pro forma results also include the impact of incremental interest expense incurred to finance the merger. Transaction related costs, including debt extinguishment costs related to the transaction, have been eliminated from the pro forma amounts presented in both periods. Pro forma results do not include any anticipated cost savings from the integration of this acquisition. Accordingly, such amounts are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future. Twelve Months Ended (In millions) May 28, 2022 May 29, 2021 Net sales $ 4,100.2 $ 3,586.6 Net earnings attributable to MillerKnoll, Inc. $ 12.9 $ 115.8 naughtone On October 25, 2019 (“naughtone Acquisition Date”), the Company purchased the remaining 47.5 % equity voting interest in naughtone (Holdings) Limited and naughtone Manufacturing Ltd. (together “naughtone”). naughtone is an upscale, contemporary furniture manufacturer based in Harrogate, North Yorkshire, UK. The acquisition is intended to allow the Company to further promote growth and development of naughtone's ancillary product lines, and continue to support product innovation and sales growth. The Company previously accounted for its ownership interest in naughtone as an equity method investment. Upon increasing its ownership to 100 % on the naughtone Acquisition Date, the Company obtained a controlling financial interest and consolidated the operations of naughtone. Total consideration paid for naughtone on the naughtone Acquisition Date was $ 45.9 million, exclusive of naughtone cash on hand. The Company funded the acquisition with cash and cash equivalents. The allocation of the purchase price was finalized during the fourth quarter of fiscal 2020. The following table presents the allocation of purchase price related to acquired tangible assets: (In millions) Cash $ 5.1 Working capital, net of cash and inventory step-up 1.3 Net property and equipment 0.8 Net assets acquired $ 7.2 The purchase of the remaining equity interest in naughtone was considered to be an acquisition achieved in stages, whereby the previously held equity interest was remeasured as of the naughtone Acquisition Date. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including the price negotiated with the selling shareholder for the 47.5 % equity interest in naughtone, an income valuation model (discounted cash flow) and current trading multiples for comparable companies. Based on this analysis, the Company recognized a non-taxable gain of approximately $ 30.0 million on the remeasurement of the previously held equity method investment of $ 20.5 million in fiscal 2020. The net gain has been recognized in Gain on consolidation of equity method investments within the Consolidated Statements of Comprehensive Income. The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives and fair value, as determined by the Company at the naughtone Acquisition Date: (In millions) Valuation Method Useful Life (years) Fair Value Inventory Step-up Comparative Sales Approach 0.3 $ 0.2 Backlog Multi-Period Excess Earnings 0.3 0.8 Tradename Relief from Royalty Indefinite 8.5 Customer Relationships Multi-Period Excess Earnings 9.0 29.4 Total $ 38.9 Goodwill related to the acquisition was recorded within the America's Contract and International Contract segments for $ 35.0 million and $ 22.5 million, respectively. Subsequent to the acquisition, the Company recognized an impairment charge of 69 $ 2.5 million on the naughtone tradename in the fourth quarter of fiscal 2020 based on the results of the Company's annual indefinite-lived trade name impairment test. Nine United Denmark A/S On June 7, 2018, the Company acquired 33 % of the outstanding equity of Nine United Denmark A/S, d/b/a HAY and subsequently renamed to HAY ApS ("HAY”), a Copenhagen, Denmark-based, design leader in furniture and ancillary furnishings for residential and contract markets in Europe and Asia. The Company acquired its 33 % ownership interest in HAY for approximately $ 65.5 million in cash. The Company also acquired the rights to the HAY brand in North America under a long-term license agreement for approximately $ 4.8 million in cash. In the fiscal periods leading up to December 2, 2019 (“HAY Acquisition Date”), the date when the Company purchased an additional 34 % equity voting interest in HAY, this licensing agreement was recorded as a definite life intangible asset and was being amortized over its 15-year useful life. This asset was also recorded within Other amortizable intangibles, net within the Consolidated Balance Sheets as of May 30, 2020. On December 2, 2019, the Company obtained a controlling financial interest in HAY through the purchase of an additional 34 % equity voting interest. The completion of the acquisition was intended to allow the Company to further promote growth and development of HAY's ancillary product lines and continue to support product innovation and sales growth. The Company previously accounted for its ownership interest in HAY as an equity method investment, but upon increasing its ownership to 67 % on the HAY Acquisition Date, the Company consolidated the operations of HAY. Total consideration paid for HAY on the HAY Acquisition Date was $ 79.0 million, exclusive of HAY cash on hand. The Company funded the acquisition with cash and cash equivalents. The previously mentioned HAY long-term licensing agreement was deemed to be a contractual preexisting relationship. As a result of the business combination, the Company recorded this arrangement at its HAY Acquisition Date fair value, which resulted in an increase in goodwill of $ 10.0 million and a net gain of $ 5.9 million, which was recorded within Gain on consolidation of equity method investments within the Consolidated Statements of Comprehensive Income. The goodwill was recorded within the Company’s Global Retail segment. The Company is a party to options, that if exercised, would require it to purchase the remaining 33 % of the equity in HAY, at fair market value. This remaining redeemable noncontrolling interest in HAY is classified outside permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption amount. The allocation of the purchase price was finalized during the first quarter of fiscal 2021. The following table presents the allocation of purchase price related to acquired tangible assets: (In millions) Cash $ 12.1 Working capital, net of cash and inventory step-up 12.3 Net property and equipment 0.9 Other assets 3.9 Other liabilities ( 3.1 ) Net assets acquired $ 26.1 The purchase of the additional equity interest in HAY was considered to be an acquisition achieved in stages, whereby the previously held equity interest was remeasured as of the HAY Acquisition Date. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including the price negotiated with the selling shareholder for the 34 % equity interest in HAY, an income valuation model (discounted cash flow) and current trading multiples for comparable companies. Based on this analysis, the Company recognized a non-taxable gain of approximately $ 0.3 million on the remeasurement of the previously held equity method investment of $ 67.8 million in the third quarter of fiscal 2020. The net gain has been recognized in Gain on consolidation of equity method investments within the Consolidated Statements of Comprehensive Income. The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives and fair value, as determined by the Company at the HAY Acquisition Date: 70 71 (In millions) Valuation Method Useful Life (years) Fair Value Inventory Step-up Comparative Sales Approach 0.8 $ 3.4 Backlog Multi-Period Excess Earnings 0.3 1.7 Deferred Revenue Adjusted Fulfillment Cost Method 0.1 ( 2.2 ) Tradename Relief from Royalty Indefinite 60.0 Product Development Relief from Royalty 8.0 22.0 Customer Relationships Multi-Period Excess Earnings 9.0 34.0 Total $ 118.9 Goodwill related to the acquisition was recorded within the International Contract segment for $ 101.1 million and the Global Retail segment for $ 10.0 million. Subsequent to the acquisition, the goodwill recorded to the Global Retail segment was fully impaired in the fourth quarter of fiscal 2020 based on the results of the Company's annual goodwill impairment assessment. Additionally, the Company recognized an impairment charge of $ 20.7 million on the HAY tradename in the fourth quarter of fiscal 2020 based on the results of the Company's annual indefinite-lived trade name impairment test. Contract Furniture Dealership Divestiture On January 31, 2022, the Company completed the sale of a wholly-owned contract furniture dealership in Toronto, Canada for cash consideration of $ 2.8 million. A pre-tax gain of $ 2.0 million was recognized as a result of the sale within Selling, general and administrative within the Consolidated Statements of Comprehensive Income. 4. Inventories (In millions) May 28, 2022 May 29, 2021 Finished goods and work in process $ 441.6 $ 173.6 Raw materials 145.7 55.0 Total $ 587.3 $ 228.6 Inventories are primarily valued using the first-in first-out method. See Note 1, Significant Accounting and Reporting Policies for the impact a retrospective change in the method of valuing inventories made on the Consolidated Balance Sheets for the periods presented. 5. Investments in Nonconsolidated Affiliates The Company has certain investments in entities that are accounted for using the equity method (“nonconsolidated affiliates”). The investments are included in Other noncurrent assets in the Consolidated Balance Sheets and the equity earnings are included in Equity earnings from nonconsolidated affiliates, net of tax in the Consolidated Statements of Comprehensive Income. Refer to the tables below for the investment balances that are included in the Consolidated Balance Sheets and for the equity earnings that are included in the Consolidated Statements of Comprehensive Income. (In millions) May 28, 2022 May 29, 2021 Investments in nonconsolidated affiliates $ 9.9 $ 11.7 (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Equity earnings from nonconsolidated affiliates, net of tax $ — $ 0.3 $ 5.0 The Company had an ownership interest in two nonconsolidated affiliates at May 28, 2022. Refer to the Company's ownership percentages shown below: Ownership Interest May 28, 2022 May 29, 2021 Kvadrat Maharam Pty Limited 50.0 % 50.0 % Global Holdings Netherlands B.V. (Maars) 48.2 % 48.2 % Kvadrat Maharam The Kvadrat Maharam Pty Limited nonconsolidated affiliate is a distribution entity engaged in selling decorative upholstery, drapery and wall covering products. 72 In fiscal 2020 the Company agreed to fully divest its interest in Kvadrat Maharam Arabia DMCC, Kvadrat Maharam Turkey JSC and Danskina B.V for approximately $ 3 million. The divestitures were completed in the first half of fiscal 2021. Maars On August 31, 2018, the Company acquired 48.2 % of the outstanding equity of Global Holdings Netherlands B.V., which owns 100 % of Maars Holding B.V. ("Maars”), a Harderwijk, Netherlands-based worldwide leader in the design and manufacturing of interior wall solutions. The Company acquired its 48.2 % ownership interest in Maars for approximately $ 6.1 million in cash. The entity is accounted for using the equity method of accounting as the Company has significant influence, but not control, over the entity. As of the August 31, 2018 acquisition date, the Company's investment value in Maars was $ 3.1 million more than the Company's proportionate share of the underlying net assets. This amount represented the difference between the price that the Company paid to acquire 48.2 % of the outstanding equity and the carrying value of the net assets of Maars. Of this difference, $ 2.7 million is being amortized over the remaining useful lives of the assets, while $ 0.4 million is considered a permanent difference. At May 28, 2022, the Company's investment value in Maars is $ 2.2 million more than the Company's proportionate share of the underlying net assets, of which $ 1.8 million is being amortized over the remaining useful lives of the assets, while $ 0.4 million was considered a permanent basis difference. Transactions with Nonconsolidated Affiliates Sales to and purchases from nonconsolidated affiliates were as follows for the periods presented below: (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Sales to nonconsolidated affiliates $ 0.7 $ 1.0 $ 3.6 Purchases from nonconsolidated affiliates $ 0.6 $ 0.3 $ 5.0 Balances due to or due from nonconsolidated affiliates were as follows for the periods presented below: (In millions) May 28, 2022 May 29, 2021 Receivables from nonconsolidated affiliates $ 0.3 $ 0.2 Payables to nonconsolidated affiliates $ — $ 0.1 6. Short-Term Borrowings and Long-Term Debt Long-term debt consisted of the following obligations: (In millions) May 28, 2022 May 29, 2021 Debt securities, 4.95 %, due May 20, 2030 $ — $ 49.9 Syndicated revolving line of credit, due August 2024 — 225.0 Syndicated revolving line of credit, due July 2026 413.0 — Term Loan A, 2.5000 %, due July 2026 390.0 — Term Loan B, 2.7500 % due July 2028 621.8 — Supplier financing program 3.1 2.2 Total debt $ 1,427.9 $ 277.1 Less: Unamortized discount and issuance costs ( 19.4 ) — Less: Current debt ( 29.3 ) ( 2.2 ) Long-term debt $ 1,379.2 $ 274.9 In connection with the acquisition of Knoll, in July 2021, the Company entered into a credit agreement that provided for a syndicated revolving line of credit and two term loans. The revolving line of credit provides the Company with up to $ 725 million in revolving variable interest borrowing capacity that matures in July 2026, replacing the previous $ 500 million syndicated revolving line of credit. The term loans consist of a five-year senior secured term loan "A" facility with an aggregate principal amount of $ 400 million and a seven-year senior secured loan "B" facility with an aggregate principal amount of $ 625 million, the proceeds of which were used to finance a portion of the cash consideration for the acquisition of Knoll, for the repayment of certain debt of Knoll, and to pay fees, costs, and expenses related thereto. Both term loans have a LIBOR-based floating interest rate plus applicable margin. The credit agreement provides for the transition from LIBOR to SOFR, the 73 recommended risk-free reference rate of the Federal Reserve Board and Alternative Reference Rates Committee, as of the LIBOR Transition Date, as defined within the credit agreement. The credit agreement includes accommodations regarding the transition to SOFR. T he Company also repaid $ 64 million of private placement notes due May 20, 2030. A loss on extinguishment of debt of approximately $ 13.4 million was recognized as part of the repayment of the private placement notes, which represented the premium on early redemption. The Company made principal payments on term loan "A" and "B" during the year ended May 28, 2022 in the amount of $ 10.0 million and $ 3.1 million, respectively. Prior to July 2021, the Company's syndicated revolving line of credit provided the Company with up t o $ 500 million in revolving variable interest borrowing capacity and included 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 would bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated rates as outlined in the agreement. Interest was payable periodically throughout the period if borrowings were outstanding. The Company paid off the outstanding balance due on the syndicated revolving line of credit during the first quarter of 2022. In June 2020, the Company repaid the $ 265 million draw on its syndicated revolving line of credit that was taken as a precautionary measure in March 2020 to provide additional near-term liquidity given the uncertainty related to COVID-19. After the end of the quarter ended February 27, 2021, the Company repaid $ 50 million of private placement notes due March 1, 2021 with available cash on hand. Available borrowings under the syndicated revolving line of credit were as follows for the periods indicated: (In millions) May 28, 2022 May 29, 2021 Syndicated revolving line of credit borrowing capacity $ 725.0 $ 500.0 Less: Borrowings under the syndicated revolving line of credit 413.0 225.0 Less: Outstanding letters of credit 15.4 9.8 Available borrowings under the syndicated revolving line of credit $ 296.6 $ 265.2 The senior secured revolving credit facility restricts, without prior consent, the Company's borrowings, capital leases, investments, liens, mergers, consolidations, restricted payments, and the sale of certain assets. In addition, for the credit facility and Term Loan A, the Company has agreed to maintain a financial performance ratio, a maximum first lien secured net leverage ratio covenant which is measured by the ratio of first lien debt (less unrestricted cash) to trailing four quarter adjusted consolidated EBITDA (as defined in the credit agreement) and is required to be less than 4.25 :1 for the trailing four quarter periods ending November 21, 2021, and the three immediately succeeding fiscal quarters, then 4.00 :1 for the next four fiscal quarters, and 3.75 :1 at the end of each fiscal quarter thereafter, except that the Company may elect, under certain conditions, a step-up in the covenant level of 0.25 or 0.50 for the four subsequent trailing four quarter periods. Adjusted EBITDA is generally defined in the credit agreement as EBITDA adjusted by certain items which include non-cash share-based compensation, non-recurring restructuring costs and extraordinary items. At May 28, 2022 the Company was in compliance with these restrictions and performance ratios. On May 20, 2020, the Company entered into a third amendment to its existing Private Shelf Agreement, dated December 14, 2010, as amended (together with the third amendment, the "Agreement"), between the Company and PGIM, Inc. (formerly known as Prudential Investment Management, Inc.) and certain of its affiliates (collectively, “Prudential”). The Agreement provided for a $ 150.0 million revolving facility, which included $ 50.0 million of unsecured senior notes that were repaid on March 1, 2021 (the "Existing Notes") and an additional $ 50.0 million aggregate principal amount of unsecured senior notes issued on May 20, 2020 (the "2020 Notes"). The Notes and facility were paid off with the new revolver and term loans entered in connection with the acquisition of Knoll in July 2021. Annual maturities of debt for the five fiscal years subsequent to May 28, 2022 are as shown in the table below. (In millions) 2023 $ 29.4 2024 31.3 2025 41.2 2026 46.2 2027 689.3 Thereafter 590.5 Total $ 1,427.9 74 Supplier Financing Program The Company has an agreement with a third-party financial institution that allows certain participating suppliers the ability to finance payment obligations from the Company. Under this program, participating suppliers may finance payment obligations of the Company, prior to their scheduled due dates, at a discounted price to the third-party financial institution. The Company has lengthened the payment terms for certain suppliers that have chosen to participate in the program. As a result, certain amounts due to suppliers have payment terms that are longer than standard industry practice and as such, these amounts have been excluded from Accounts payable in the Consolidated Balance Sheets as the amounts have been accounted for by the Company as a current debt, within Short-term borrowings and current portion of long-term debt. 7. Leases The Company has leases for retail studios, showrooms, manufacturing facilities, warehouses and vehicles, which expire at various dates through 2042. Certain lease agreements include contingent rental payments based on per unit usage over a contractual amount and others include rental payments adjusted periodically for inflationary indexes. The Company's lease costs recognized in the Consolidated Statement of Income consist of the following: Year Ended Year Ended (In millions) May 28, 2022 May 29, 2021 Operating lease costs $ 89.4 $ 50.3 Short-term lease costs 10.4 3.2 Variable lease costs 10.3 8.3 Total $ 110.1 $ 61.8 Included in the Company's Right-of-use assets and Lease liabilities are variable lease costs, not included in the table above, for raw material purchases under certain supply arrangements that the Company has determined to meet the definition of a lease: Year Ended Year Ended May 28, 2022 May 29, 2021 Variable lease costs $ 95.6 $ 84.5 During the fourth quarter of fiscal 2020, the Company determined it was more likely than not that the fair value of certain right of use assets were below their carrying values and assessed these assets for impairment. As result of this assessment the Company recorded an impairment of $ 19.3 million in the Consolidated Statements of Comprehensive income. At May 28, 2022, the Company has no financing leases. The undiscounted annual future minimum lease payments related to the Company's right-of-use assets are summarized by fiscal year in the following table: (In millions) 2023 $ 95.8 2024 88.0 2025 78.7 2026 61.8 2027 50.6 Thereafter 160.4 Total lease payments* $ 535.3 Less interest 57.2 Present value of lease liabilities $ 478.1 *Lease payments exclude $ 9.8 million of legally binding minimum lease payments for leases signed but not yet commenced. 75 Supplemental cash flow and other lease information as of and for periods indicated, includes (dollars in millions): Year Ended Year Ended May 28, 2022 May 29, 2021 Weighted-average remaining lease term (in years) Operating leases 7.1 7 Weighted-average discount rate Operating leases 1.9 % 2.8 % Cash paid for amounts included in the measurement of lease liabilities Operating cash flow from operating leases $ 85.7 $ 45.3 ROU assets obtained in exchange for new operating lease liabilities Operating leases $ 89.1 $ 58.1 8. Employee Benefit Plans Pension Plan One of the Company's wholly owned foreign subsidiaries has a defined-benefit pension plan based upon an average final pay benefit calculation. The measurement date for this plan is the last day of the fiscal year and the plan is frozen to new participants. The Company acquired Knoll during fiscal year 2022. The Knoll subsidiary has one domestic defined-benefit pension plan covering eligible U.S. nonunion employees. The measurement date for this plan is the last day of the fiscal year and the plan is frozen to new participants. Benefit Obligations and Funded Status The following table presents, for the fiscal years noted, a summary of the changes in the projected benefit obligation, plan assets and funded status of the Company's pension plans: 76 Pension Benefits (In millions) 2022 2021 Domestic International Domestic International Change in benefit obligation: Benefit obligation at beginning of year $ — $ 140.9 $ — $ 126.5 Acquisition of Knoll 189.8 — — — Interest cost 3.9 2.4 — 2.2 Expected Administrative Expenses 0.5 — — — Loss related to settlement 1.0 — — — Foreign exchange impact — ( 14.1 ) — 18.6 Actuarial (gain) loss (1) ( 28.0 ) ( 21.9 ) — ( 2.9 ) Administrative expenses paid ( 0.5 ) — — — Benefits paid ( 4.2 ) ( 2.8 ) — ( 3.5 ) Benefits paid related to settlement ( 9.9 ) — — — Benefit obligation at end of year $ 152.6 $ 104.5 $ — $ 140.9 Change in plan assets: Fair value of plan assets at beginning of year $ — $ 109.9 $ — $ 88.1 Acquisition of Knoll 175.4 — — — Actual return on plan assets ( 16.8 ) ( 6.9 ) — 6.6 Foreign exchange impact — ( 11.8 ) — 13.7 Employer contributions — 5.0 — 5.0 Actual expenses paid ( 0.5 ) — — — Benefits paid ( 14.1 ) ( 2.7 ) — ( 3.5 ) Fair value of plan assets at end of year $ 144.0 $ 93.5 $ — $ 109.9 Funded status: Under-funded status at end of year $ ( 8.6 ) $ ( 11.0 ) $ — $ ( 31.0 ) Components of the amounts recognized in the Consolidated Balance Sheets: Current liabilities $ — $ — $ — $ — Non-current liabilities $ ( 8.6 ) $ ( 10.9 ) $ — $ ( 30.9 ) Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes: Prior service cost $ — $ 0.5 $ — $ 0.7 Unrecognized net actuarial (gain) loss ( 2.8 ) 41.4 — 61.8 Accumulated other comprehensive (gain) loss $ ( 2.8 ) $ 41.9 $ — $ 62.5 (1) In fiscal 2022 and 2021, the net actuarial (gain) loss includes amounts resulting from changes in actuarial assumptions utilized to calculate our benefit plan obligations such as the weighted-average discount rate. The accumulated benefit obligation for the Company's pension plans tota led $ 250.1 million and $ 135.5 million as of fiscal 2022 and fiscal 2021, respectively. The following table is a summary of the annual cost of the Company's pension plans: Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income (Loss): (In millions) 2022 2021 2020 Domestic International Domestic International Domestic International Interest cost $ 3.9 $ 2.4 $ — $ 2.2 $ — $ 2.4 Expected return on plan assets ( 7.3 ) ( 5.1 ) — ( 4.6 ) — ( 4.4 ) Amortization of prior service costs — 0.1 — 0.1 — 0.1 Expected Administrative Expenses 0.5 — — — — — Settlement & Curtailment ( 0.1 ) — — — — — Amortization of net (gain)/loss — 4.5 — 5.3 — 3.2 Net periodic benefit (income) cost $ ( 3.0 ) $ 1.9 $ — $ 3.0 $ — $ 1.3 77 Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss): (In millions) 2022 2021 Domestic International Domestic International Net actuarial (gain) loss $ ( 2.9 ) $ ( 10.0 ) $ — $ ( 4.9 ) Net amortization 0.1 ( 10.6 ) — 3.5 Total recognized in other comprehensive loss $ ( 2.8 ) $ ( 20.6 ) $ — $ ( 1.4 ) Actuarial Assumptions The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic benefit cost for the Company's pension plans are as follows: Weighted-average assumptions used in the determination of net periodic benefit cost: (Percentages) 2022 2021 2020 Domestic International Domestic International Domestic International Discount rate (1) varies 1.99 — 1.66 — 2.39 Compensation increase rate N/A 3.20 — 2.75 — 3.20 Expected return on plan assets 5.10 4.80 — 4.80 — 4.80 (1) Due to settlement activity during FYE 2022 in the domestic plan, there were four remeasurements as of 8/21/2021, 11/27/2021, 2/26/2022, and 5/28/2022. The discount rate for the benefit obligation at the beginning of each period is 2.90 %, 2.89 %, 3.00 %, and 3.52 %, respectively. The discount rate for the interest cost for each period is 2.27 %, 2.28 %, 2.48 %, and 3.10 %, respectively. Weighted-average assumptions used in the determination of the projected benefit obligations: Discount rate 4.40 3.33 — 1.99 — 1.66 Compensation increase rate N/A 4.45 — 3.20 — 2.75 The Company uses a full yield curve approach to estimate the interest component of net periodic benefit cost for pension benefits. This method applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Plan Assets and Investment Strategies The assets of the Company's employee benefit plans consist mainly of listed fixed income obligations and common/collective trusts. The Company's primary objective for invested pension plan assets is to provide for sufficient long-term growth and liquidity to satisfy all of its benefit obligations over time. Accordingly, the Company has developed an investment strategy that it believes maximizes the probability of meeting this overall objective. This strategy includes the development of a target investment allocation by asset category in order to provide guidelines for making investment decisions. This target allocation emphasizes the long-term characteristics of individual asset classes as well as the diversification among multiple asset classes. In developing its strategy, the Company considered the need to balance the varying risks associated with each asset class with the long-term nature of its benefit obligations. The Company's strategy moving forward will be to increase the level of fixed income investments as the funding status improves, thereby more closely matching the return on assets with the liabilities of the plans. The Company utilizes independent investment managers to assist with investment decisions within the overall guidelines of the investment strategy. The target asset allocation at the end of fiscal 2022 and asset categories for the Company's pension plans for fiscal 2022 and 2021 are as follows: 78 Targeted Asset Allocation Percentage Asset Category 2022 2021 Domestic International Domestic International Fixed income 46 % 33 % — % 31 % Common collective trusts 54 % 67 % — % 69 % Total 100 % 100 % — % 100 % Percentage of Plan Assets at Year End 2022 2021 Domestic International Domestic International Fixed income 45 % 36 % — % 32 % Common collective trusts 55 % 64 % — % 68 % Total 100 % 100 % — % 100 % Domestic (In millions) May 28, 2022 Asset Category Level 1 Level 2 Total Cash and cash equivalents $ 2.4 $ — $ 2.4 U.S. government securities — 10.3 10.3 Corporate bonds — 51.8 51.8 Common collective trusts-balanced — 79.5 79.5 Total $ 2.4 $ 141.6 $ 144.0 International (In millions) May 28, 2022 Asset Category Level 1 Level 2 Total Cash and cash equivalents $ 4.5 $ — $ 4.5 Foreign government obligations — 29.3 29.3 Common collective trusts-balanced — 59.7 59.7 Total $ 4.5 $ 89.0 $ 93.5 May 29, 2021 (In millions) Domestic Asset Category Level 1 Level 2 Total Cash and cash equivalents $ — $ — $ — Foreign government obligations — — — Common collective trusts-balanced — — — Total $ — $ — $ — May 29, 2021 (In millions) International Asset Category Level 1 Level 2 Total Cash and cash equivalents $ 0.7 $ — $ 0.7 Foreign government obligations — 34.2 34.2 Common collective trusts-balanced — 75.0 75.0 Total $ 0.7 $ 109.2 $ 109.9 Cash Flows The Company reviews pension funding requirements to determine the contribution to be made in the next year. Actual contributions will be dependent upon investment returns, changes in pension obligations and other economic and regulatory factors. During fiscal 2022 and fiscal 2021, the Company made total cash contributions of $ 5.0 million and $ 5.4 million, respectively, to its pension plans. 79 The Company expects to contribute approximately $ 11.9 million to its pension plans in fiscal 2023. The following represents a summary of the benefits expected to be paid by the plans in future fiscal years. These expected benefits were estimated based on the same actuarial valuation assumptions used to determine benefit obligations at May 28, 2022. (In millions) Pension Benefits Domestic International 2023 $ 11.1 $ 2.7 2024 $ 11.2 $ 2.8 2025 $ 11.3 $ 2.9 2026 $ 11.5 $ 2.9 2027 $ 11.3 $ 3.0 2028-2032 $ 50.4 $ 16.4 401(k) Plan and Core Contribution Substantially all of the Company’s domestic employees are eligible to participate in a defined contribution retirement plan, primarily the MillerKnoll Retirement Plan and the Knoll Retirement Savings Plan. Employees under the plan are eligible to begin participating on their date of hire. The Company contributes to the plans as matching contributions a certain percentage of the participant’s salary deferral, subject to certain limitations defined in the plan documents. A core contribution based on a set percentage of wages is also included for most participants of the plans. The Company’s other defined contribution retirement plans may provide for matching contributions, non-elective contributions and discretionary contributions as declared by management. During the fourth quarter of fiscal 2020, the Company elected to temporarily suspend the Company's core contribution and 401(k) matches in order to reduce costs and preserve liquidity. 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 2020. The expense recorded for the Company's 401(k) matching and core contributions wa s $ 36.3 million, $ 23.7 million and $ 22.2 million in fiscal years 2022, 2021 and 2020, respectively. 9. Common Stock and Per Share Information The following table reconciles the numerators and denominators used in the calculations of basic and diluted EPS for each of the last three fiscal years: (In millions, except shares) 2022 2021 2020 Numerator: Numerator for both basic and diluted EPS, Net (loss) earnings attributable to MillerKnoll, Inc. $ ( 27.1 ) $ 174.6 $ ( 8.7 ) Denominator: Denominator for basic EPS, weighted-average common shares outstanding 73,160,212 58,931,268 58,920,653 Potentially dilutive shares resulting from stock plans — 458,330 — Denominator for diluted EPS 73,160,212 59,389,598 58,920,653 Equity awar ds of 1,245,988 shares, 207,365 sha res and 360,462 shares of common stock were excluded from the denominator for the computation of diluted earnings per share for the fiscal years ended May 28, 2022, May 29, 2021 and May 30, 2020, respectively, because they were anti-dilutive. Common Stock The Company has a share repurchase plan authorized by the Board of Directors on January 16, 2019, which provides a share repurchase authorization of $ 250.0 million with no specified expiration date. The approximate dollar value of shares available for purchase under the plan at May 28, 2022 was $ 220.5 million. During fiscal year 2022, 2021, and 2020, shares repurchased under the repurchase plan totaled 390,010 , 38,931 , and 641,192 shares respectively. 10. Stock-Based Compensation 80 The Company utilizes stock-based compensation incentives as a component of its employee and non-employee director and officer compensation philosophy. Currently, these incentives consist principally of stock options, restricted stock units, performance stock units, deferred stock units, and restricted shares. At May 28, 2022, there were 8,164,945 shares authorized for issuance under active long-term incentive compensation plans: 7,182,670 shares authorized under the MillerKnoll, Inc. 2020 Long Term Incentive Plan (the "LTIP") and 982,275 shares authorized under the Knoll, Inc. 2021 Stock Incentive Plan, as amended. In addition, under the terms of the MillerKnoll, Inc. Employee Stock Purchase Plan (the "ESPP"), the Company has reserved 4 million shares for purchase by its domestic and certain international employees. For all stock-based compensation plans, the Company issues authorized but unissued shares to fulfill plan terms. Valuation and Expense Information The Company measures the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the date of grant. This compensation expense is recognized over the requisite service period, which includes any applicable performance period. Certain Company stock-based compensation awards contain provisions that allow for continued vesting into retirement. Stock-based awards are considered fully vested for expense attribution purposes when the employee's retention of the award is no longer contingent on providing subsequent service. The Company classifies pre-tax stock-based compensation expense primarily within Operating expenses in the Consolidated Statements of Comprehensive Income. Excluding fully vested and non-forfeitable deferred stock units described under "Deferred Compensation Plan" below, pre-tax compensation expense and the related income tax benefit for all types of stock-based programs were as follows for the periods indicated: (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Employee stock purchase program $ 0.5 $ 0.4 $ 0.3 Stock options 3.6 3.7 0.6 Restricted stock units 15.3 4.1 3.9 Performance share units 2.8 0.8 ( 2.1 ) Restricted stock awards 9.2 — — Total $ 31.4 $ 9.0 $ 2.7 Tax benefit $ 7.7 $ 2.0 $ 0.5 As of May 28, 2022, total pre-tax stock-based compensation cost not yet recognized related to non-vested awards was approximately $ 19.5 million. The weighted-average period over which this amount is expected to be recognized is 1.0 year. General terms, activity, and valuation methodology for each of the Company's stock-based compensation plans are as follows: Employee Stock Purchase Program Pursuant to the terms of the ESPP, eligible employees are permitted to purchase shares of our common stock at a price equal to 85 % of the closing price on the date of purchase, which coincides with the last trading day of each fiscal quarter. The ESPP is considered a liability award with estimated expense recognized over the three-month offering period which is subsequently adjusted to actual expense based on the fair value as of the date of purchase. Shares of common stock purchased under the ESPP were 87,562 , 71,468 , and 70,145 during the fiscal years ended 2022, 2021 and 2020 respectively. Stock Options The Company grants options to purchase the Company's stock to certain key employees and non-employee directors under its LTIP. Under the current award program, all options become exercisable between one year and three years from the date of grant and expire ten years from the date of grant. Most options are subject to graded vesting, and the related compensation expense is based on the fair value of the stock options on the date of grant using the Black-Scholes model and is recognized on a straight-line basis over the requisite service period. 81 In fiscal 2022, there were two stock option valuation dates. In fiscal 2021, there was one stock option valuation date, but two valuations. Therefore, the table below has been presented with the assumptions relevant to each valuation date. In fiscal 2020, there were no stock option grants awarded to employees or non-employee directors. The Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes model. In determining these values, the following weighted-average assumptions were used for the options granted during the fiscal years indicated: 2022 2021 2020 Risk-free interest rates (1) 0.47 % 0.23 %- 0.25 % N/A Expected term of options (2) 3.3 years 3.8 - 4.1 years N/A Expected volatility (3) 49.03 % 43 % - 44 % N/A Dividend yield (4) 1.64 % 1.99 % N/A Weighted-average grant-date fair value of stock options: Granted with exercise prices equal to the fair market value of the stock on the date of grant $ 13.87 -$ 14.36 $ 6.10 N/A Granted with exercise prices greater than the fair market value of the stock on the date of grant N/A $ 5.62 N/A (1) Represents term-matched, zero-coupon risk-free rate from the Treasury Constant Maturity yield curve, continuously compounded. (2) Represents historical settlement data, using midpoint scenario with 1-year grant date filter assumption for outstanding options. (3) The blended volatility approach was used. 90 % term-matched historical volatility from daily stock prices and 10 % weighted average implied volatility from the 90 days preceding the grant date. (4) Represents the quarterly dividend divided by the three-month average stock price as of July 9, 2021 and February 28, 2020, for 2022 and 2021, respectively. The following is a summary of stock option activity during fiscal 2022: Shares Under Option Weighted-Average Exercise Prices Aggregate Intrinsic Value (in millions) Weighted-Average Remaining Contractual Term (Years) Outstanding at May 29, 2021 1,673,372 $ 24.63 $ 38.8 8.6 Granted 189,179 45.71 Exercised ( 116,178 ) 26.91 Forfeited or expired ( 29,780 ) 22.94 Outstanding at May 28, 2022 1,716,593 26.83 10.4 7.69 Exercisable at end of period 624,606 $ 26.80 $ 3.4 6.90 The weighted-average remaining recognition period of the outstanding stock options at May 28, 2022 was 1.15 years. The total pre-tax intrinsic value of options exercised during fiscal 2022, 2021 and 2020 was $ 1.8 million, $ 0.5 million and $ 5.5 million, respectively. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company's closing stock price as of the end of the period presented, which would have been received by the option holders had all option holders exercised in-the-money options as of that date. Total cash received during fiscal 2022 from the exercise of stock options was approximately $ 3.1 million. Restricted Stock Units The Company grants time-based restricted stock units to certain key employees under its LTIP. Currently outstanding awards generally cliff-vest or vest ratably over a three-year service period. Prorated vesting occurs under certain circumstances and full or partial accelerated vesting occurs upon retirement. Awards granted in fiscal 2022 had a graded vesting schedule of 25 %, 25 %, and 50 % after the first, second, and third year, respectively. Each restricted stock unit represents one equivalent share of the Company's common stock to be issued, free of restrictions, after the vesting period. Compensation expense is based on the grant-date fair value and recognized on a straight-line basis over the requisite service period. Dividend reinvestment units are credited on the dividend payable date and vest with the underlying shares. The units do not entitle participants to the rights of holders of common stock, such as voting rights, until shares are issued after vesting. In conjunction with the acquisition of Knoll, Inc. on July 19, 2021, outstanding restricted stock unit awards previously granted under a Knoll stock compensation plan were automatically converted into MillerKnoll awards at the identified equity award exchange ratio, with each converted unit representing one equivalent share of the Company's common stock to be issued, free 82 of restrictions, after the vesting period. The awards generally cliff-vest after a three-year service period from the original date of grant. The converted units do not entitle participants to the rights of holders of common stock, such as voting rights, until shares are issued after vesting. Restricted stock units awarded under a Knoll stock compensation plan are entitled to dividend rights, and dividend equivalents are accrued on the dividend record date. Upon vesting of the underlying shares, accrued dividend equivalents are paid in cash. The following is a summary of restricted stock unit activity during fiscal 2022: Share Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value (in millions) Weighted-Average Remaining Contractual Term (Years) Outstanding at May 29, 2021 484,011 $ 30.84 $ 23.1 1.4 Granted 615,867 44.25 Forfeited ( 48,862 ) 37.84 Released ( 474,634 ) 39.72 Outstanding at May 28, 2022 576,382 $ 37.33 $ 17.8 1.1 The weighted-average remaining recognition period of the outstanding restricted stock units at May 28, 2022, was 1.3 years. The total market value of the units that vested during the twelve months ended May 28, 2022, was $ 19.9 million. This includes $ 11.8 million of shares from converted Knoll awards for which, due to change-of-control provisions, vesting was accelerated. In addition, $$ 0.3 million in accrued cash dividends were paid upon vesting the underlying shares of converted Knoll awards. The weighted-average grant-date fair value of restricted stock units granted during 2022, 2021, and 2020 was $ 44.25 , $ 26.71 and $ 44.70 , respectively. The intrinsic value presented above includes $ 0.1 million in accrued cash dividends on the underlying shares of outstanding converted Knoll restricted stock unit awards. Performance Stock Units The Company grants performance-based restricted stock units, commonly referred to as performance stock units to certain key employees under its LTIP that vest subject to the satisfaction of pre-established financial and non-financial metrics. Each performance stock unit represents one equivalent share of the Company's common stock. The number of shares of Company common stock ultimately issued in connection with these performance stock units will be determined based on attainment of the pre-established metrics over a defined three-year service period. For members of the executive leadership team, this calculation is adjusted by a relative total shareholder return modifier. Compensation expense is recognized over the requisite service period on a straight-line basis and based on the grant-date fair value. For certain awards incorporating a market condition, grant-date fair value is determined using a Monte Carlo simulation. For each tranche, fair value is determined on the date performance metrics are approved. Performance stock units awarded under the LTIP do not have dividend rights. In conjunction with the acquisition of Knoll, Inc. on July 19, 2021, outstanding performance stock unit awards previously granted under a Knoll stock compensation plan were automatically converted into MillerKnoll awards with each converted unit representing one equivalent share of the Company's common stock. The number of common shares ultimately issued in connection with these performance stock units will be determined based on the attainment of a pre-established financial metric over a five-year service period ending December 31, 2023. The converted units do not entitle participants to the rights of holders of common stock, such as voting rights, until shares are issued after vesting. Performance stock units awarded under Knoll stock compensation plans are entitled to dividend rights, and dividend equivalents are accrued on the dividend record date. Upon vesting of the underlying shares, accrued dividend equivalents are paid in cash. The following is a summary of performance stock unit activity during fiscal 2022: Share Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value (in millions) Weighted-Average Remaining Contractual Term (Years) Outstanding at May 29, 2021 368,059 $ 41.54 $ 17.6 1.1 Granted 105,555 43.06 Forfeited ( 85,941 ) 36.71 Released ( 23,586 ) 47.13 Outstanding at May 28, 2022 364,087 $ 42.75 $ 11.3 0.9 The weighted-average remaining recognition period of the outstanding performance stock units at May 28, 2022, was 0.75 years. The total market value for shares that vested during the twelve months ended May 28, 2022, was 1.0 million. The 83 weighted-average grant-date fair value of performance stock units granted during fiscal 2022, 2021, and 2020 was $ 43.06 , $ 37.21 , and $ 45.71 , respectively. The intrinsic value presented above includes $ 0.1 million in accrued cash dividends on the underlying shares of outstanding converted Knoll performance stock unit awards. Restricted Stock Awards In conjunction with the acquisition of Knoll, Inc. on July 19, 2021, outstanding restricted stock awards previously granted under a Knoll stock compensation plan were automatically converted into MillerKnoll awards at the identified equity award exchange ratio with each converted unit then representing one equivalent share of the Company's common stock to be issued, free of restrictions, after the vesting period. The awards generally cliff-vest after a three-year service period from the original date of grant. The restricted stock awards do not entitle the employee to rights of holders of common stock, such as voting rights, until restrictions are released after vesting. The Company recognizes the related compensation expense on a straight-line basis over the requisite service period. Restricted stock awards granted under Knoll's stock compensation plans are entitled to dividend rights, and dividend equivalents are accrued on the dividend record date. Upon vesting of the underlying shares, accrued dividend equivalents are paid in cash. The following is a summary of restricted stock activity during fiscal 2022: Share Units Weighted-Average Grant-Date Fair Value Outstanding at May 29, 2021 — $ — Granted 751,907 44.36 Forfeited ( 140,455 ) 44.36 Released ( 391,463 ) 44.36 Outstanding at May 28, 2022 219,989 $ 44.36 The weighted-average remaining recognition period of the outstanding restricted stock award shares at May 28, 2022 was 1.1 years. The total market value for shares that vested during the twelve months ended May 28, 2022, was $ 16.3 million. This includes $ 13.3 million of converted Knoll awards for which, due to change-in-control provisions, vesting was accelerated. In addition, $ 0.3 million in accrued cash dividends were paid upon vesting the underlying shares of converted Knoll awards. The weighted-average grant-date fair value of restricted stock awards granted during fiscal 2022 was $ 44.36 per share. There were no restricted stock awards granted in fiscal 2021 or fiscal 2020. Accrued cash dividends on the underlying shares reported above for outstanding converted Knoll restricted stock awards total $ 0.4 million. Executive Deferred Compensation Plan The MillerKnoll, Inc. Executive Equalization Retirement Plan, as amended (the "Executive Equalization Plan"), is a supplemental deferred compensation plan that was made available for salary deferrals and Company contributions beginning in January 2008. The plan is available to a select group of management or highly compensated employees who are selected for participation by the Compensation Committee of the Board of Directors. The plan allows participants to defer up to 50 % of their base salary and up to 100 % of their incentive cash bonus. Company contributions to the plan “mirror” the amounts the Company would have contributed to the various qualified retirement plans had the employee's compensation not been above the IRS statutory ceiling ($ 305,000 in 2022). The Company does not guarantee a rate of return for amounts deferred pursuant to this plan. Instead, participants make investment elections for their deferrals and Company contributions which are subject to market conditions. Investment options are closely aligned to those available under the MillerKnoll Retirement Plan, except for the Company stock fund. Beginning in fiscal 2021, the Company stock fund was removed as an investment choice in the Executive Equalization Plan. At November 27, 2021, the Executive Equalization Plan's Company stock fund balance was zero. In accordance with the terms of the Executive Equalization Plan and the Director Plan described below, participant deferrals and Company contributions have been placed in a Rabbi trust. The assets in the Rabbi trust remain subject to the claims of creditors of the Company and are not the property of the participant. Investments in securities other than the Company's common stock are included within the Other assets line item, while the remaining investments in the Company's stock are included in the line item Deferred compensation plan in the Company's Consolidated Balance Sheets. A liability of the same amount is recorded on the Consolidated Balance Sheets within the Other liabilities line item. Realized and unrealized gains and losses for investment assets other than Company common stock are recognized within the Company's Consolidated Statements of Comprehensive Income in the Interest and other investment income line item. The associated changes to the liability are recorded as compensation expense within the Selling, general and administrative line item within the Company's Consolidated 84 Statements of Comprehensive Income. The net effect of any change to the asset and corresponding liability is offset and has no impact on net earnings in the Consolidated Statements of Comprehensive Income. Director Fees and Director Deferred Compensation Plan The Company's non-employee directors may elect to receive their director fees in one or more of the following forms: cash, deferred cash, unrestricted Company shares at the market value at the date of grant, stock options, or shares of common stock to be received on a deferred basis, as described below. Stock options granted as director compensation vest in 1 year, expire in 10 years, and have an exercise price equal to the fair market value of the Company's common stock on the date of grant. Beginning in January 2022, not less than 50 % of annual director fees must be paid in the form of Company equity. The Amended and Restated MillerKnoll, Inc, Director Deferred Compensation Plan (the "Director Plan") allows non-employee directors of the Company to defer all or a portion of their annual director fees in either a deferred cash account or, beginning in January 2022, a deferred stock account. In the deferred cash account, investment options are the same as those available under the MillerKnoll Retirement Plan, except for the Company stock fund. At the time(s) specified by the director for receipt of this deferred compensation, these deferred amounts will be paid to the director in cash. In the deferred stock account, deferred stock units are credited to the director with each unit representing one equivalent share of the Company's common stock to be issued after the deferral period. The deferred stock units are valued at the market price of the Company's common stock on the date of grant, and the value of the units credited are expensed on the date of grant. Each time a dividend is paid on the Company's common stock, the director is credited with dividend equivalent units. At the time(s) specified by the director for receipt of this deferred compensation, these deferred amounts will be paid to the director in shares of the Company's common stock. The units do not entitle the directors to the rights of holders of common stock, such as voting rights, until shares are issued. During fiscal year 2022, 15,664 deferred stock units were credited to directors pursuant to the Director Plan with a weighted-average grant date fair value of $ 37.34 per share. The total fair value of deferred stock units issued during fiscal year 2022 was $ 0.6 million. At May 28, 2022, there were 15,664 deferred stock units outstanding, all of which are vested, with an aggregate intrinsic value of $ 0.5 million. All amounts deferred by directors pursuant to the Director Plan are fully vested and nonforfeitable. The following amounts and types of Company equity were issued to non-employee directors during the fiscal years indicated: 2022 2021 2020 Shares of common stock 23,255 3,013 7,769 Shares through the prior deferred compensation program — — 1,045 Deferred stock units pursuant to the Director Plan 15,664 — — Stock options — — — 11. Income Taxes The components of (loss) earnings before income taxes are as follows: (In millions) 2022 2021 2020 Domestic $ ( 142.4 ) $ 135.1 $ ( 75.1 ) Foreign 133.8 93.2 62.2 Total $ ( 8.6 ) $ 228.3 $ ( 12.9 ) The provision (benefit) for income taxes consists of the following: 85 (In millions) 2022 2021 2020 Current: Domestic - Federal $ ( 3.8 ) $ 13.2 $ 12.0 Domestic - State 0.2 5.2 5.7 Foreign 38.1 22.8 13.3 34.5 41.2 31.0 Deferred: Domestic - Federal ( 12.2 ) 10.4 ( 16.7 ) Domestic - State ( 5.0 ) 1.4 ( 3.9 ) Foreign ( 6.2 ) ( 4.7 ) ( 4.3 ) ( 23.4 ) 7.1 ( 24.9 ) Total income tax provision $ 11.1 $ 48.3 $ 6.1 The following table represents a reconciliation of income taxes at the United States statutory rate of 21 % with the effective tax rate as follows: (In millions) 2022 2021 2020 Income taxes computed at the United States Statutory rate $ ( 1.8 ) $ 47.9 $ ( 2.7 ) Increase (decrease) in taxes resulting from: State and local income taxes, net of federal income tax benefit ( 4.0 ) 5.6 1.4 Non-deductible goodwill impairment — — 17.1 Gain on consolidation of equity method investments — — ( 5.5 ) Non-deductible officers' compensation 5.3 0.5 — Foreign-derived intangible income — ( 2.1 ) ( 1.4 ) Foreign-based company income 3.1 2.1 — Global intangible low-taxed income 15.2 7.9 5.9 Foreign statutory rate differences 4.1 2.6 0.7 Research and development incentives ( 4.8 ) ( 3.2 ) ( 4.4 ) Foreign offshore income claim ( 0.7 ) ( 0.7 ) ( 1.7 ) Foreign tax credit ( 8.8 ) ( 10.3 ) ( 5.8 ) Foreign withholding taxes and other miscellaneous foreign taxes 2.4 1.0 2.7 Change in valuation allowance against deferred tax assets 0.4 ( 2.1 ) 0.4 Other, net 0.7 ( 0.9 ) ( 0.6 ) Income tax expense $ 11.1 $ 48.3 $ 6.1 Effective tax rate ( 130.1 ) % 21.2 % ( 47.5 ) % 86 The tax effects and types of temporary differences that give rise to significant components of the deferred tax assets and liabilities at May 28, 2022 and May 29, 2021, are as follows: (In millions) 2022 2021 Deferred tax assets: Compensation-related accruals $ 15.3 $ 11.1 Accrued pension and post-retirement benefit obligations 7.1 9.2 Deferred revenue 6.9 5.5 Inventory related 10.0 — Other reserves and accruals 12.3 7.5 Warranty 17.8 14.1 State and local tax net operating loss carryforwards and credits 7.2 1.5 Federal net operating loss carryforward 3.6 1.1 Foreign tax net operating loss carryforwards and credits 15.9 8.9 Accrued step rent and tenant reimbursements 1.0 0.6 Interest rate swap — 3.5 Lease liability 109.0 57.0 Other 7.0 6.9 Subtotal 213.1 126.9 Valuation allowance ( 11.7 ) ( 8.9 ) Total $ 201.4 $ 118.0 Deferred tax liabilities: Book basis in property in excess of tax basis $ 72.3 $ 38.0 Intangible assets 206.8 46.5 Interest rate swap 8.0 — Inventory related — 0.4 Right of use lease assets 100.5 49.1 Withholding taxes on planned repatriation of foreign earnings 8.3 0.7 Other 2.8 2.9 Total $ 398.7 $ 137.6 The future tax benefits of net operating loss (NOL) carry-forwards and foreign tax credits are recognized to the extent that realization of these benefits is considered more likely than not. The Company bases this determination on the expectation that related operations will be sufficiently profitable or various tax planning strategies will enable the Company to utilize the NOL carry-forwards and/or foreign tax credits. To the extent that available evidence about the future raises doubt about the realization of these tax benefits, a valuation allowance is established. At May 28, 2022, the Company had state and local tax NOL carry-forwards of $ 104.0 million, the state tax benefit of which is $ 6.8 million, which have expiration periods from 1 year to an unlimited term. The Company also had state credits with a state tax benefit of $ 0.4 million, which expire in 3 to 5 years. For financial statement purposes, the NOL carry-forwards and state tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $ 0.8 million. At May 28, 2022, the Company had federal NOL carry-forwards of $ 17.2 million, the tax benefit of which is $ 3.6 million, which have expiration periods from 7 years to an unlimited term. For financial statement purposes, the NOL carry-forwards have been recognized as deferred tax assets. At May 28, 2022, the Company had federal deferred assets of $ 1.1 million, the tax benefit of which is $ 0.2 million, which is related to an investment in a foreign joint venture. For financial statement purposes, the assets have been recognized as deferred tax assets, subject to a valuation allowance of $ 0.2 million. At May 28, 2022, the Company had foreign net operating loss carry-forwards of $ 51.9 million, the tax benefit of which is $ 13.3 million, which have expiration periods from 6 years to an unlimited term. The Company also had foreign tax credits with a tax benefit of $ 2.6 million which have expiration periods from 9 to 11 years. For financial statement purposes, the NOL carry-forwards and foreign tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $ 10.1 million. At May 28, 2022, the Company had foreign deferred assets of $ 2.3 million, the tax benefit of which is $ 0.6 million, which is related to various deferred taxes in Canada and Ireland as well as buildings in the United Kingdom. For financial statement purposes, the assets have been recognized as deferred tax assets, subject to a valuation allowance of $ 0.6 million. 87 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. 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. Determination of the total amount of unrecognized deferred income tax on the remaining undistributed earnings of foreign subsidiaries is not practicable. The components of the Company's unrecognized tax benefits are as follows: (In millions) Balance at May 30, 2020 $ 1.9 Increases related to current year income tax positions 0.1 Increases related to prior year income tax positions 0.4 Decreases related to lapse of applicable statute of limitations ( 0.3 ) Balance at May 29, 2021 $ 2.1 Increases related to current year income tax positions — Increases related to prior year income tax positions 0.5 Decreases related to lapse of applicable statute of limitations ( 0.3 ) Balance at May 28, 2022 $ 2.3 The Company's effective tax rate would have been affected by the total amount of unrecognized tax benefits had this amount been recognized as a reduction to income tax expense. The Company recognizes interest and penalties related to unrecognized tax benefits through Income tax expense in its Consolidated Statements of Comprehensive Income. Interest and penalties and the related liability, which are excluded from the table above, were as follows for the periods indicated: (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Interest and penalty expense $ — $ 0.1 $ 0.1 Liability for interest and penalties $ 0.9 $ 0.9 $ 0.8 The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next 12 months as a result of new positions that may be taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected that any of the changes will be material to the Company's Consolidated Statements of Comprehensive Income. During the year, the return for fiscal year 2021 has been fully accepted by the Internal Revenue Service under the Compliance Assurance Process (CAP) and the Company is awaiting final closing documentation. For the majority of the remaining tax jurisdictions, the Company is no longer subject to state and local, or non-U.S. income tax examinations by tax authorities for fiscal years before 2019. 88 12. Fair Value The Company's financial instruments consist of cash equivalents, marketable securities, accounts and notes receivable, deferred compensation plan, accounts payable, debt, interest rate swaps, foreign currency exchange contracts, redeemable noncontrolling interests, indefinite-lived intangible assets and right of use assets. The Company's financial instruments, other than long-term debt, are recorded at fair value. The carrying value and fair value of the Company's long-term debt, including current maturities, is as follows for the periods indicated: (In millions) May 28, 2022 May 29, 2021 Carrying value $ 1,427.9 $ 277.1 Fair value $ 1,364.7 $ 284.8 The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in net earnings, which have not significantly changed in the current period: Cash and cash equivalents — The Company invests excess cash in short term investments in the form of money market funds, which are valued using net asset value ("NAV"). Mutual Funds-equity — The Company's equity securities primarily include equity mutual funds. The equity mutual fund investments are recorded at fair value using quoted prices for similar securities. Deferred compensation plan — The Company's deferred compensation plan primarily includes various domestic and international mutual funds that are recorded at fair value using quoted prices for similar securities. Foreign currency exchange contracts — The Company's foreign currency exchange contracts are valued using an approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts is based on month-end spot rates as adjusted by market-based current activity. These forward contracts are not designated as hedging instruments. The following table sets forth financial assets and liabilities measured at fair value through net income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of May 28, 2022 and May 29, 2021: (In millions) May 28, 2022 May 29, 2021 Financial Assets NAV Quoted Prices With Other Observable Inputs (Level 2) NAV Quoted Prices With Other Observable Inputs (Level 2) Cash equivalents: Money market funds $ 31.8 $ — $ 162.2 $ — Mutual funds - equity — — — 0.8 Foreign currency forward contracts — 0.4 — 1.6 Deferred compensation plan — 15.0 — 16.1 Total $ 31.8 $ 15.4 $ 162.2 $ 18.5 Financial Liabilities Foreign currency forward contracts $ — $ 1.0 $ — $ 0.1 Total $ — $ 1.0 $ — $ 0.1 In connection with the acquisition of Knoll, the Company acquired a contingent obligation related to Knoll's acquisition of Fully. During the third quarter of 2022 the Company paid the $ 10.0 million obligation in full. The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in other comprehensive income, which have not significantly changed in the current period: Mutual funds-fixed income — The Company's fixed-income securities primarily include fixed income mutual funds and government obligations. These investments are recorded at fair value using quoted prices for similar securities. 89 Interest rate swap agreements — The value of the Company's interest rate swap agreements is determined using a market approach based on rates obtained from active markets. The interest rate swap agreements are designated as cash flow hedging instruments. The following table sets forth financial assets and liabilities measured at fair value through other comprehensive income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of May 28, 2022 and May 29, 2021. (In millions) May 28, 2022 May 29, 2021 Financial Assets Balance Sheet Location Quoted Prices with Other Observable Inputs (Level 2) Quoted Prices with Other Observable Inputs (Level 2) Mutual funds - fixed income Short-term investments $ — $ 6.9 Interest rate swap agreement Other noncurrent assets 31.9 — Total $ 31.9 $ 6.9 Financial Liabilities Interest rate swap agreement Other liabilities $ — $ 14.4 Total $ — $ 14.4 During the third quarter of 2022, the fixed income mutual funds and equity mutual funds were dissolved and converted to cash. The following is a summary of the carrying and market values of the Company's fixed income mutual funds and equity mutual funds as of May 29, 2021: May 29, 2021 (In millions) Cost Unrealized Gain/(Loss) Market Value Mutual funds - fixed income $ 6.9 $ — $ 6.9 Mutual funds - equity 0.5 0.3 0.8 Total $ 7.4 $ 0.3 $ 7.7 The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in the Consolidated Statements of Comprehensive Income within Other (income) expense, net. The Company views its equity and fixed income mutual funds as available for use in its current operations. Accordingly, the investments are recorded within Current Assets within the Consolidated Balance Sheets. The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in the Consolidated Statements of Comprehensive Income within Other expense (income), net. The Company reviews its investment portfolio for any unrealized losses that would be deemed other-than-temporary and requires the recognition of an impairment loss in earnings. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than its cost, the Company's intent to hold the investment, and whether it is more likely than not that the Company will be required to sell the investment before recovery of the cost basis. The Company also considers the type of security, related industry and sector performance, and published investment ratings. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If conditions within individual markets, industry segments, or macro-economic environments deteriorate, the Company could incur future impairments. The Company views its equity and fixed income mutual funds as available for use in its current operations. Accordingly, the investments are recorded within Current Assets within the Consolidated Balance Sheets. Derivative Instruments and Hedging Activities Foreign Currency Forward Contracts The Company transacts business in various foreign currencies and has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. Under this program, the Company's strategy is to have increases or decreases in our foreign currency exposures offset by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses. These foreign currency exposures typically arise from net liability or asset exposures in non-functional currencies on the 90 balance sheets of our foreign subsidiaries. These foreign currency forward contracts generally settle within 30 days and are not used for trading purposes. These forward contracts are not designated as hedging instruments. Accordingly, we record the fair value of these contracts as of the end of the reporting period in the Consolidated Balance Sheets with changes in fair value recorded within the Consolidated Statements of Comprehensive Income. The balance sheet classification for the fair values of these forward contracts is to Other current assets for unrealized gains and to Other accrued liabilities for unrealized losses. The Consolidated Statements of Comprehensive Income classification for the fair values of these forward contracts is to Other expense (income), net, for both realized and unrealized gains and losses. The notional amounts of the forward contracts held to purchase and sell U.S. dollars in exchange for other major international currencies were $ 54.1 million and $ 61.9 million as of May 28, 2022 and May 29, 2021, respectively. The notional amounts of the foreign currency forward contracts held to purchase and sell British pound sterling in exchange for other major international currencies were £ 43.1 million and £ 44.5 million as of May 28, 2022 and May 29, 2021, respectively . The Company also has other forward contracts related to other currency pairs at varying notional amounts. Interest Rate Swaps The Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall cost of borrowing. The Company's interest rate swap agreements were entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $ 150.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted indebtedness anticipated to be borrowed on the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 1.949 % fixed interest rate plus applicable margin under the agreement as of the forward start date. See Note 6 for information on the replacement of LIBOR with SOFR in our credit agreement. In June 2017, the Company entered into an additional interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $ 75.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387 % fixed interest rate plus applicable margin under the agreement as of the forward start date. In January 2022, the Company entered into a third interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $ 575 million with a forward start date of January 31, 2022 and a maturity date of January 29, 2027. The interest rate swap locked in the Company’s interest rate on the forecasted outstanding borrowings of $ 575 million at 1.689 % exclusive of the credit spread on the variable rate debt. The Company effectively will convert LIBOR-based floating interest rate plus applicable margin indebtedness to a 1.689 % fixed interest rate plus applicable margin under the agreement as of the forward start date. The interest rate swaps were designated cash flow hedges at inception and the facts and circumstances of the hedged relationship remains consistent with the initial quantitative effectiveness assessment in that the hedged instruments remain an effective accounting hedge as of May 28, 2022. Since a designated derivative meets hedge accounting criteria, the fair value of the hedge is recorded in the Consolidated Statements of Stockholders’ Equity as a component of Accumulated other comprehensive loss, net of tax. The ineffective portion of the change in fair value of the derivatives is immediately recognized in earnings. The interest rate swap agreements are assessed for hedge effectiveness on a quarterly basis. (In millions) Notional Amount Forward Start Date Termination Date Effective Fixed Interest Rate September 2016 Interest Rate Swap $ 150.0 January 3, 2018 January 3, 2028 1.949 % June 2017 Interest Rate Swap $ 75.0 January 3, 2018 January 3, 2028 2.387 % January 2022 Interest Rate Swap $ 575.0 January 31, 2022 January 29, 2027 1.689 % 91 The swaps above effectively converted indebtedness anticipated to be borrowed on the Company's revolving line of credit up to the notional amounts from a LIBOR-based floating interest rate plus applicable margins to an effective fixed rate plus applicable margin under the agreements as of the forward start date. For fiscal 2022, 2021 and 2020, there were no gains or losses recognized against earnings for hedge ineffectiveness. 92 Effects of Derivatives on the Financial Statements The effects of non-designated derivatives on the consolidated financial statements were as follows for the fiscal years ended 2022 and 2021 (amounts presented exclude any income tax effects ): (In millions) Balance Sheet Location May 28, 2022 May 29, 2021 Non-designated derivatives: (1) Foreign currency forward contracts Current assets: Other current assets $ 0.4 $ 1.6 Foreign currency forward contracts Current liabilities: Other accrued liabilities $ 1.0 $ 0.1 (1) Designated derivative and their balance sheet locations are located in above table within financial assets and liabilities measured at fair value. Fiscal Year (In millions) Statement of Comprehensive Income Location May 28, 2022 May 29, 2021 May 30, 2020 (Loss) gain recognized on foreign currency forward contracts Other expense (income), net $ 3.3 $ 0.8 $ ( 1.1 ) The gain/(loss) recorded, net of income taxes, in Other comprehensive loss for the effective portion of designated derivatives was as follows for the periods presented below: Fiscal Year (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Interest rate swap $ 41.4 $ 12.6 $ ( 17.2 ) Reclassified from Accumulated other comprehensive loss into earnings within Interest expense for the fiscal years ended 2022, 2021, and 2020 were gains of $ 6.9 million and $ 4.5 million and of $ 0.8 million, respectively. Pre-tax gains expected to be reclassified from Accumulated other comprehensive loss into earnings during the next twelve months are $ 4.6 million. The amount of gain, net of tax, expected to be reclassified out of Accumulated other comprehensive loss into earnings during the next twelve months is $ 3.5 million. Redeemable Noncontrolling Interests Redeemable noncontrolling interests are reported on the Consolidated Balance Sheets in mezzanine equity in Redeemable noncontrolling interests. These financial instruments represent a level 3 fair value measurement. On December 2, 2019, the Company purchased an additional 34 % equity voting interest in HAY. Upon increasing its ownership to 67 %, the Company obtained a controlling financial interest and consolidated the financial results of HAY. Additionally, the Company is a party to options, that if exercised, would require it to purchase the remaining 33 % of the equity in HAY, at fair market value. This remaining redeemable noncontrolling interest in HAY is classified outside permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption amount. The Company recognizes changes to the redemption value of redeemable noncontrolling interests as they occur and adjusts the carrying value to equal the redemption value at the end of each reporting period. The redemption amounts have been estimated based on the fair value of the subsidiary, determined using discounted cash flow methods. This represents a level 3 fair value measurement. Changes in the Company's redeemable noncontrolling interest in HAY for the year ended May 28, 2022 are as follows: (In millions) May 28, 2022 Beginning Balance $ 77.0 Dividend attributable to redeemable noncontrolling interests ( 6.3 ) Redemption value adjustment 41.6 Net income attributable to redeemable noncontrolling interests 7.4 Foreign currency translation adjustments ( 12.8 ) Ending Balance $ 106.9 Other The following table summarizes the valuation of our assets measured at fair value on a non-recurring basis as of May 28, 2022: 93 (In millions) May 28, 2022 Assets: Level 3 Indefinite-lived intangible assets $ 501.0 Based on the quantitative impairment assessment performed in fiscal year 2020, the carrying value certain indefinite-lived intangible assets exceeded their fair value, resulting in an impairment charge of $ 53.3 million. There were no impairment charges in fiscal 2021 or 2022. See Note 1 to the Consolidated Financial Statements for additional information. 94 13. Commitments and Contingencies Product Warranties The Company provides coverage to the end-user for parts and labor on products sold under its warranty policy and for other product-related matters. The specific terms, conditions, and length of those warranties vary depending upon the product sold. The Company does not sell or otherwise issue warranties or warranty extensions as stand-alone products. Reserves have been established for various costs associated with the Company's warranty program. General warranty reserves are based on historical claims experience and other currently available information and are periodically adjusted for business levels and other factors. Specific reserves are established once an issue is identified with the amounts for such reserves based on the estimated cost of correction. The Company provides an assurance-type warranty that ensures that products will function as intended. As such, the Company's estimated warranty obligation is accounted for as a liability and is recorded within current and long-term liabilities within the Consolidated Balance Sheets. Changes in the warranty reserve for the stated periods were as follows: Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Accrual Balance — beginning $ 60.1 $ 59.2 $ 53.1 Accrual for warranty matters 16.6 12.8 23.7 Settlements and adjustments ( 18.6 ) ( 11.9 ) ( 17.6 ) Acquired through business acquisition 15.1 — — Accrual Balance — ending $ 73.2 $ 60.1 $ 59.2 Guarantees The Company is periodically required to provide performance bonds to do business with certain customers. These arrangements are common in the industry and generally have terms ranging between one year and three years . The bonds are required to provide assurance to customers that the products and services they have purchased will be installed and/or provided properly and without damage to their facilities. The bonds are provided by various bonding agencies. However, the Company is ultimately liable for claims that may occur against them. As of May 28, 2022, the Company had a maximum financial exposure related to performance bonds of approximately $ 6.4 million. The Company has no history of claims, nor is it aware of circumstances that would require it to pay, under any of these arrangements. The Company also believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, no liability h as been recorded in respect to these bonds as of either May 28, 2022 or May 29, 2021. The Company has entered into standby letter of credit arrangements for purposes of protecting various insurance companies and lessors against default on insurance premium and lease payments. As of May 28, 2022, the Company had a maximum financial exposure from these standby letters of credit totaling approximately $ 15.4 million, all of which is considered usage against the Company's revolving line of credit. The Company has no history of claims, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, no liability has been recorded as of May 28, 2022 and May 29, 2021. Contingencies The Company is also involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such proceedings and litigation currently pending will not have a material adverse effect, if any, on the Company's Consolidated Financial Statements. As of the end of fiscal 2022, outstanding commitments for future purchase obligations approximated $ 99.6 million. 95 14. Operating Segments 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 restated historical results to reflect this change. Below is a summary of the change in reportable segments. • The activities related to the manufacture and sale of furniture products direct to consumers and to third-party retailers that previously resided within the International Contract segment moved to the Global Retail segment. • The operations associated with the design, manufacture and sale of furniture products for work-related settings in Latin America moved from the International Contract segment to the North America Contract segment to form a new Americas Contract segment. • Operations of the DWR Contract business, a division of DWR that sells design furnishings and accessories for use in work-related settings, moved into the Americas Contract segment. The Company's reportable segments now consist of Americas Contract, International Contract, Global Retail, and Knoll. Intersegment sales are eliminated within each segment, with the exception of sales to and from the Knoll segment, which are presented as intersegment eliminations. Due to the change in reportable segments, the Company reviewed each of the new reporting units for impairment and concluded it to be more likely than not that their estimated fair values are greater than their respective carrying values. The Americas Contract segment 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 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, Herman Miller Healthcare, naughtone and Herman Miller Collection products. The International Contract segment 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 ("EMEA") and Asia-Pacific. The Global Retail segment includes operations associated with the sale of modern design furnishings and accessories to third party retailers, as well as direct to consumer sales through eCommerce, direct-mail catalogs, DWR studios and HAY stores. The Knoll segment includes the global operations associated with the design, manufacture, and sale of furniture products within the Knoll constellation of brands. 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. Management regularly reviews corporate costs and believes disclosing such information provides more visibility and transparency regarding how the chief operating decision maker reviews results of the Company. The accounting policies of the operating segments are the same as those of the Company. Subsequent to the end of fiscal 2022, the Company implemented an organizational change that will result in a change in our reportable segments. Beginning in the first quarter of fiscal 2023, the Company will recast the historical results in reflection of the change. Below is a summary of the change: • The reportable segments will now consist of three segments: Americas Contract, International Contract & Specialty and Global Retail. • The activities related to the manufacture and sale of furniture products direct to consumers and third-party retailers for the Knoll, Muuto and Fully brands that currently reside within the Knoll segment will move to the Global Retail segment. • The activities related to the manufacture and sale of furniture products for work-related settings in the Americas for the Knoll, Muuto and Datesweiser brands that currently reside within the Knoll segment will move to the Americas Contract segment. • The activities related to the manufacture and sale of furniture products for work-related settings in geographies other than the Americas for the Knoll and Muuto brands that currently reside within the Knoll segment will move to the International Contract & Specialty segment. 96 • The activities related to manufacture and sale of products for the Maharam brand will move from the Americas Contract segment to the International Contract & Specialty segment, along with the activities of the Holly Hunt, Spinneybeck, Knoll Textiles and Edelman brands, which currently reside within the Knoll segment. 97 The performance of the operating segments is evaluated by the Company's management using various financial measures. The following is a summary of certain key financial measures for the years indicated: Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Net sales: Americas Contract $ 1,444.9 $ 1,301.3 $ 1,744.3 International Contract 483.2 399.5 345.9 Global Retail 856.8 764.3 396.4 Knoll 1,188.5 — — Intersegment Elimination ( 27.4 ) — — Total $ 3,946.0 $ 2,465.1 $ 2,486.6 Depreciation and amortization: Americas Contract $ 57.5 $ 56.4 $ 49.6 International Contract 13.2 11.2 10.4 Global Retail 16.7 19.6 18.8 Knoll 103.2 — — Corporate — — 0.7 Total $ 190.6 $ 87.2 $ 79.5 Operating earnings (loss): Americas Contract $ 44.5 $ 93.6 $ 162.6 International Contract 59.3 48.5 ( 0.4 ) Global Retail 96.2 143.0 ( 160.7 ) Knoll ( 57.6 ) — — Corporate ( 102.6 ) ( 52.6 ) ( 39.4 ) Total $ 39.8 $ 232.5 $ ( 37.9 ) Capital expenditures: Americas Contract $ 43.3 $ 45.5 $ 55.2 International Contract 8.9 9.1 6.2 Global Retail 19.5 5.2 7.6 Knoll 23.0 — — Total $ 94.7 $ 59.8 $ 69.0 Goodwill: Americas Contract $ 191.7 $ 197.2 $ 191.5 International Contract 82.5 91.3 84.5 Global Retail 68.4 75.7 70.0 Knoll 883.6 — — Total $ 1,226.2 $ 364.2 $ 346.0 Many of the Company's assets, including manufacturing, office and showroom facilities, support multiple segments. For that reason, it is impractical to disclose asset information on a segment basis. The accounting policies of the operating segments are the same as those of the Company. Additionally, the Company employs a methodology for allocating corporate costs and assets with the underlying objective of this methodology being to allocate corporate costs according to the relative usage of the underlying resources and to allocate corporate assets according to the relative expected benefit. The majority of the allocations for corporate expenses are based on relative net sales. However, certain corporate costs, generally considered the result of isolated business decisions, are not subject to allocation and are evaluated separately from the rest of the regular ongoing business operations. 98 The Company's product offerings consist primarily of office furniture systems, seating, freestanding furniture, storage and casegoods. These product offerings are marketed, distributed and managed primarily as a group of similar products on an overall portfolio basis. The following is a summary of net sales estimated by product category for the years indicated: Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Net sales: Workplace $ 1,484.4 $ 855.1 $ 1,135.8 Performance Seating 942.8 778.3 637.0 Lifestyle 1,314.0 696.2 546.6 Other (1) 232.2 135.5 167.2 Restructuring ( 27.4 ) — — Total $ 3,946.0 $ 2,465.1 $ 2,486.6 (1) “Other” primarily consists of uncategorized product sales and service sales. In fiscal year 2022 certain products were reclassified primarily from the Performance Seating to the Lifestyle category, to align with a change in management’s internal reporting and management of the products. Prior year periods have been restated to reflect these changes, for comparability. Sales by geographic area are based on the location of the customer. Long-lived assets consist of long-term assets of the Company, excluding financial instruments, deferred tax assets and long-term intangibles. The following is a summary of geographic information for the years indicated. Individual foreign country information is not provided as none of the individual foreign countries in which the Company operates are considered material for separate disclosure based on quantitative and qualitative considerations. Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Net sales: United States $ 2,818.4 $ 1,728.9 $ 1,795.8 International 1,127.6 736.2 690.8 Total $ 3,946.0 $ 2,465.1 $ 2,486.6 Long-lived assets: United States $ 531.2 $ 311.1 $ 306.7 International 144.9 70.6 59.6 Total $ 676.1 $ 381.7 $ 366.3 The Company approximates that no single dealer accounted for more than 2% of the Company's net sales in the fiscal year ended May 28, 2022. The Company estimates that the largest single end-user customer accounted for $ 114.4 million, $ 113 million and $ 122.9 million of the Company's net sales in fiscal 2022, 2021 and 2020, respectively. This represents approximately 3 % of the Company's net sales in fiscal 2022 and 5 % in 2021 and 2020. The Company's ten largest customers in the aggregate accounted for approximately 11 % of net sales in fiscal 2022 and 17 % of net sales in fiscal 2021 and 18 % of net sales in fiscal 2020. Approximately 2 % of the Company's employees are covered by collective bargaining agreements. 99 15. Accumulated Other Comprehensive Loss The following table provides an analysis of the changes in accumulated other comprehensive loss for the years indicated: Year Ended (In millions) May 28, 2022 May 29, 2021 May 30, 2020 Cumulative translation adjustments at beginning of period $ ( 3.9 ) $ ( 56.0 ) $ ( 48.3 ) Other comprehensive (loss) income ( 90.0 ) 52.1 ( 7.7 ) Balance at end of period ( 93.9 ) ( 3.9 ) ( 56.0 ) Pension and other post-retirement benefit plans at beginning of period ( 50.4 ) ( 59.2 ) ( 45.0 ) Other comprehensive income (loss) before reclassifications (net of tax of ($ .02 ), ($ .03 ), and $ 3.5 ) 13.5 5.3 ( 16.9 ) Reclassification from accumulated other comprehensive income - Other, net 4.4 5.5 3.3 Tax expense ( 4.4 ) ( 2.0 ) ( 0.6 ) Net reclassifications — 3.5 2.7 Net current period other comprehensive income (loss) 13.5 8.8 ( 14.2 ) Balance at end of period ( 36.9 ) ( 50.4 ) ( 59.2 ) Interest rate swap agreement at beginning of period ( 10.8 ) ( 18.9 ) ( 0.9 ) Other comprehensive income (loss) before reclassifications (net of tax of ($ 11.6 ), ($ 2.6 ), and $ 5.8 ) 41.4 12.6 ( 17.2 ) Reclassification from accumulated other comprehensive income - Other, net ( 6.9 ) ( 4.5 ) ( 0.8 ) Net reclassifications ( 6.9 ) ( 4.5 ) ( 0.8 ) Net current period other comprehensive income (loss) 34.5 8.1 ( 18.0 ) Balance at end of period 23.7 ( 10.8 ) ( 18.9 ) Unrealized holding gains on securities at beginning of period — 0.1 — Cumulative effect of accounting change — — — Other comprehensive (loss) income before reclassifications — ( 0.1 ) 0.1 Balance at end of period — — 0.1 Total Accumulated other comprehensive loss $ ( 107.1 ) $ ( 65.1 ) $ ( 134.0 ) 16. Restructuring and Integration Expense As part of restructuring and integration activities, the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs as well as other direct separation benefit costs. Severance and employee benefit costs primarily relate to cash severance and non-cash severance, including accelerated equity award compensation expense. The Company also incurs expenses that are an integral component of, and directly attribute to, its restructuring and integration activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include integration implementation costs that relate primarily to professional fees and non-cash losses incurred on debt extinguishment. The expense associated with integration initiatives are included in Selling, General, and Administrative and the expense associated with restructuring activities are included in Restructuring expense in the Consolidated Statements of Comprehensive Income. Non-cash costs related to debt extinguishment in the financing of the transaction is recorded in Other expense (income), net in the Consolidated Statements of Comprehensive Income. Knoll Integration: Following the acquisition of Knoll, the Company announced a multi-year program (the "Knoll Integration") designed to reduce costs and integrate and optimize the combined organization. The Company currently expects that the Knoll Integration will result in pre-tax costs of approximately $ 100 million to $ 120 million, comprised of the following categories: 100 • Severance and employee benefit costs associated with plans to integrate the Company's operating structure, resulting in workforce reductions. These costs will primarily include: severance and employee benefits (cash severance and non-cash severance, including accelerated stock-compensation award expense and other termination benefits). • Exit and disposal activities include those incurred as a direct result of integration activities, primarily including contract and lease terminations and asset impairment charges. • Other integration costs include professional fees and other incremental third-party expenses, including a loss on extinguishment of debt associated with financing of the acquisition. For the year ended May 28, 2022, the Company incurred $ 107.9 million of costs related to the Knoll Integration including: $ 51.1 million of severance and employee benefit costs, $ 15.5 million of non-cash asset impairments, $ 13.4 million of non-cash costs related to debt-extinguishment in the financing of the transaction, and $ 27.9 million of other integration costs. The following table provides an analysis of the changes in liability balance for Knoll Integration costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and exit and disposal activities) for the fiscal year ended May 28, 2022: (In millions) Severance and Employee Benefit Exit and Disposal Activities Total May 29, 2021 $ — $ — $ — Integration Costs 51.1 15.5 66.6 Amounts Paid ( 35.2 ) — ( 35.2 ) Non-cash costs ( 14.5 ) ( 15.5 ) ( 30.0 ) May 28, 2022 $ 1.4 $ — $ 1.4 The Company paid a substantial portion of the liability for the Knoll Integration in fiscal year 2022. The following is a summary of integration expenses by segment for the period indicated: Twelve Months Ended (In millions) May 28, 2022 May 29, 2021 Americas Contract $ 5.1 $ — International Contract 1.1 — Retail 0.5 — Knoll 60.3 — Corporate 40.9 — Total $ 107.9 $ — Restructuring Activities: During the fourth quarter of fiscal 2018, the Company announced a facilities consolidation plan related to its International Contract segment. This impacted certain office and manufacturing facilities in the United Kingdom and C hina. The plan was expected to generate c ost savings of approximately $ 3 million. To date, the Company recognized restructuring and impairment expenses of $ 5.9 million, with a net credit of $ 1.9 million recognized in fiscal 2021 and the remainder in fiscal 2020, 2019, and 2018. These expenses related to the facilities consolidation plan, comprised primarily of an asset impairment recorded against an office building in the United Kingdom that was vacated and the consolidation of the Company's manufacturing facilities in China. No future restructuring costs related to the plan are expected as the plan is substantially complete. The office building and related assets in China were sold in the first quarter of fiscal 2021, resulting in a gain of approximately $ 3.4 million. T he office building and related assets in the United Kingdom were sold in the second quarter of fiscal 2021, resulting in a nominal gain. Both of these gains are included within Restructuring expense in the Consolidated Statements of Comprehensive Income. In the second quarter of fiscal 2020, the Americas Contract segment initiated restructuring discussions with labor unions related to its Healthcare operation in Wisconsin. To date, the Company has recorded approximately $ 3.1 million in pre-tax restructuring expense related to this plan, with a net credit of $ 0.1 million recognized in fiscal 2021 and the remainder in fiscal 2020. The plan is complete and no future costs related to this plan are expected. 101 In the second quarter of fiscal 2020, the Company initiated a reorganization of the Global Sales and Product teams. The reorganization activities occurred primarily in the North America business with additional costs incurred internationally. To date, the Company has recorded a total of $ 2.6 million in pre-tax restructuring expense related to this plan. The reorganization is complete and no future costs related to this plan are expected. In the third quarter of fiscal 2020, the Company announced a reorganization of the Global Retail segment's leadership team. The Company recognized pre-tax severance and employee related restructuring expense of $ 2.2 million related to the plan. No material future restructuring costs related to the plan are expected as the plan is substantially complete. The following table provides an analysis of the changes in the restructuring costs reserve for the above plans for the fiscal years ended May 29, 2021 and May 28, 2022: (In millions) Severance and Employee-Related Exit or Disposal Activities Total May 30, 2020 $ 5.9 $ 0.8 $ 6.7 Restructuring Costs ( 1.7 ) ( 2.0 ) ( 3.7 ) Amounts Paid ( 3.3 ) ( 0.1 ) ( 3.4 ) Other* — 1.9 $ 1.9 May 29, 2021 $ 0.9 $ 0.6 $ 1.5 Restructuring Costs — — — Amounts Paid ( 0.5 ) — ( 0.5 ) Other* — — — May 28, 2022 $ 0.4 $ 0.6 $ 1.0 *This represents the gains on the sales of office buildings and related assets in China and the United Kingdom offset by other non-cash charges. The gains and other non-cash charges were recorded as restructuring cost, but do not impact the restructuring reserve. In the fourth quarter of fiscal 2020, the Company announced a restructuring plan (“May 2020 restructuring plan") to substantially reduce expenses in response to the impact of the COVID-19 pandemic and related restrictions. These activities included voluntary and involuntary reductions in its North American and international workforces. Combined, these actions resulted in the elimination of approximately 400 full-time positions throughout the Company in various businesses and functions. As the result of these actions, the Company projects an annualized expense reduction of approximately $ 40 million. To date, the Company incurred severance and related charges of $ 18.7 million with $ 3.4 million recognized in fiscal 2021 and the remainder in fiscal 2020. No material future restructuring costs related to the plan are expected. The following table provides an analysis of the changes in the restructuring cost reserve for the May 2020 restructuring plan for the fiscal year ended May 28, 2022: (In millions) Severance and Employee-Related Beginning Balance $ 1.0 Restructuring Costs — Amounts Paid ( 0.8 ) Ending Balance $ 0.2 102 During fiscal 2022, the Company incurred no restructuring costs separate from the Knoll Integration costs discussed above. The following is a summary of restructuring expenses by segment for the fiscal years indicated: Year Ended (In millions) May 28, 2022 May 29, 2021 America's Contract $ — $ 3.8 International Contract — ( 1.1 ) Global Retail — — Knoll — — Total $ — $ 2.7 17. Variable Interest Entities During the year ended May 28, 2022, the Company entered into long-term notes receivable with certain of its third-party owned dealers that are deemed to be variable interests in variable interest entities. The carrying value of these long-term notes receivable was $ 1.2 million as of May 28, 2022 and represents the Company’s maximum exposure to loss. The Company is not deemed to be the primary beneficiary for any of these variable interest entities as each dealer controls the activities that most significantly impact the entity’s economic performance, including sales, marketing, and operations. The Company previously held a long-term note receivable with a third-party dealer that was deemed to be a variable interest in a variable interest entity. The carrying value of this long-term note receivable was $ 1.2 million as of May 29, 2021 and was paid in full during the quarter ended August 28, 2021. 18. Quarterly Financial Data (Unaudited) Set forth below is a summary of the quarterly operating results on a consolidated basis for the years ended May 28, 2022, May 29, 2021, and May 30, 2020. (In millions, except per share data) (1) First Quarter (2) Second Quarter (2) Third Quarter (2) Fourth Quarter (2) 2022 Net sales $ 789.7 $ 1,026.3 $ 1,029.5 $ 1,100.5 Gross margin 277.7 353.0 339.5 382.5 Net earnings attributable to MillerKnoll, Inc. ( 61.3 ) ( 1.7 ) 14.4 21.5 Earnings per share-basic ( 0.92 ) ( 0.02 ) 0.19 0.28 Earnings per share-diluted ( 0.92 ) ( 0.02 ) 0.19 0.28 2021 Net sales $ 626.8 $ 626.3 $ 590.5 $ 621.5 Gross margin 249.8 244.4 230.8 226.1 Net earnings attributable to MillerKnoll, Inc. 72.8 51.4 41.5 8.9 Earnings per share-basic 1.24 0.87 0.70 0.15 Earnings per share-diluted 1.23 0.86 0.70 0.15 2020 Net sales $ 670.9 $ 674.2 $ 665.7 $ 475.7 Gross margin 246.2 255.7 243.5 165.9 Net earnings attributable to MillerKnoll, Inc. 48.3 78.7 37.9 ( 173.6 ) Earnings per share-basic 0.82 1.33 0.64 ( 2.94 ) Earnings per share-diluted 0.81 1.32 0.64 ( 2.94 ) (1) Effective May 30, 2021, 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"), which were our only operations that were using the LIFO cost method. All prior periods presented have been retrospectively adjusted to apply the effects of the change. (2) For some line items, the sum of the quarters does not equal the annual balance reflected in the Consolidated Statements of Comprehensive Income due to rounding associated with the calculations on an individual quarter basis. 103 Management's Report on Internal Control over Financial Reporting To the Board of Directors and Stockholders of MillerKnoll, Inc. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f). The internal control over financial reporting at MillerKnoll, Inc. is designed to provide reasonable assurance to our stakeholders that the financial statements of the Company fairly represent its financial condition and results of operations. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect all misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of May 28, 2022, based on the original framework in Internal Control — Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management believes the Company's internal control over financial reporting was effective as of May 28, 2022. KPMG LLP has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included herein. /s/ Andrea R. Owen Andrea R. Owen Chief Executive Officer /s/ Jeffrey M. Stutz Jeffrey M. Stutz Chief Financial Officer 104 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors MillerKnoll, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of MillerKnoll, Inc. and subsidiaries (the Company) as of May 28, 2022 and May 29, 2021, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended May 28, 2022, and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of May 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 28, 2022 and May 29, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended May 28, 2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 28, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company has elected to change its method of accounting for the cost of certain inventories from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method as of June 1, 2019. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 105 expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of acquired intangible assets - Knoll acquisition As discussed in Note 3 to the consolidated financial statements, the Company completed the acquisition of Knoll, Inc. on July 19, 2021, for total consideration of $1,887.3 million. Accordingly, the assets acquired and liabilities assumed were recognized based on their acquisition date fair values, including identified intangible assets of $756.6 million. The Company primarily used valuation techniques under the income approach to determine the fair value of the identified intangible assets. We identified the evaluation of the fair value of certain trade name and customer relationship intangible assets acquired in the Knoll acquisition as a critical audit matter because of the significant judgments made by management to estimate the fair values and the sensitivity of the calculated fair values to possible changes in the significant assumptions. Additionally, the audit effort associated with the evaluation of the fair value of these certain acquired intangible assets required specialized skills and knowledge. Specifically, subjective and challenging auditor judgment was required to evaluate the following significant assumptions: Trade names • Forecasted revenue growth rates • Estimated royalty rates • Discount rates Customer relationships • Forecasted revenue growth rates • Forecasted operating margins • Discount rates The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation process, including controls over the development and selection of significant assumptions related to the valuation of these certain intangible assets. We evaluated the reasonableness of management’s forecasted revenue growth rates and operating margins by comparing the forecasts to historical revenue growth rates and operating margins, as well as external competitor and industry data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s royalty rates by comparing the selected royalty rates to the forecasted operating margins of the Knoll entities and publicly available data for comparable licensing agreements • evaluating the Company’s discount rates by comparing the Company’s inputs to the discount rates to publicly available data for comparable entities. 106 /s/ KPMG LLP We have served as the Company’s auditor since 2019. Chicago, Illinois July 26, 2022 107 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None