What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-12 compared with 2022-04-06 · 208 added, 363 removed, 159 unchanged (78% of the section changed)

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The following is management's discussion and analysis of certain significant factors that affected the Company's financial condition, earnings and cash flows during the periods included in the accompanying Condensed Consolidated Financial Statements and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended May 28, 2022.

References to “Notes” are to the Notes to Condensed Consolidated Financial Statements.

References to “Notes” are to the footnotes included in the accompanying Condensed Consolidated Financial Statements.

Business Overview

The Company researches, designs, manufactures, sells, and distributes furnishings and accessories, 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 through independent contract office furniture dealers as well as the following channels:

direct customer sales, independent retailers, owned retail studios and stores, direct-mail catalogs, architects and designers and the Company's eCommerce platforms.

The following is a summary of results for the three months ended February 26, 2022:

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

The following is a summary of results for the three months ended September 3, 2022:

• Net sales were $1,078.8 million and orders were $1,013.1 million, representing an increase of 36.6% and 10.5%, respectively, when compared to the same quarter of the prior year.

The increase in net sales was driven by the consolidation of Knoll results, as well as growth across each of our segments, as compared to the same quarter of the prior year.

On an organic basis, which excludes the impact of acquisitions, divestitures and foreign currency translation, net sales were $709.7 million (*) and orders were $742.9 million (*) , representing an increase of 20.3% (*) and 31.5% (*) , respectively, when compared to the same quarter of the prior year.

The increase in net sales was driven by the consolidation of Knoll results for the full quarter, as compared to a portion of the quarter in the prior year, the impact of the additional week in the first quarter of the current year, as well as growth within the Americas Contract and International Contract & Specialty segments.

On an organic basis, which excludes the impact of acquisitions, the extra week in the period, dealer divestitures and foreign currency translation, net sales were $883.7 million (*) and orders were $812.8 million, representing an increase of 12.3% and decrease of 11.0% , respectively, when compared to the same quarter of the prior year.

• Gross margin was 34.5% as compared to 35.2% for the same quarter of the prior year.

In the current year, this included the negative impact of charges totaling $1.7 million related to the initial purchase accounting effects of the Company's acquisition of Knoll.

The decrease in gross margin was also driven by the impact of rising commodity prices, particularly steel, and other inflationary pressures, including labor and transportation.

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

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

This contributed to the year-over-year gross margin decline.

We expect to see our second and third quarter price increases begin to flow through our fourth quarter results, which will help offset some of these inflationary pressures.

• Operating expenses increased by $134.5 million or 76.5% as compared to the same quarter of the prior year.

Operating expenses in the current quarter included $7.1 million of transaction and integration related costs associated with the Knoll acquisition and $6.3 million (*) of charges related to the purchase accounting amortization effects of the merger.

Operating expenses increased primarily due to the inclusion of Knoll adjusted operating expenses of $100.1 million and additional variable selling expenses as a result of increased sales in the current year.

Operating expenses were reduced by $2.0 million (*) of gain recorded on the divestiture of the owned dealership in Toronto, Canada during the quarter.

The decrease in gross margin was driven primarily by higher commodity costs and other inflationary pressures, offset in part by the benefit from recently implemented price increases.

This decrease was offset in part by the prior year negative impact of charges totaling $6.3 million related to the initial purchase accounting effects of the Company's acquisition of Knoll.

• Operating expenses decreased by $9.0 million or 2.7% as compared to the same quarter of the prior year.

The decrease was driven primarily by the decrease in Knoll acquisition and integration costs, which decreased $64.3 million from the prior year and the decrease in amortization of purchased intangibles related to the Knoll acquisition of $19.7 million.

These decreases were offset in part by the consolidation of Knoll results for the full quarter, which contributed to an increase in operating expense of approximately $50 million.

The impact of the additional week in the current year period contributed an additional $13 million.

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

At the close of the third quarter, we had implemented $45 million in run rate savings and we remain confident in our ability to deliver $120 million in cost synergies within three years of closing.

At the close of the first quarter, we had implemented approximately $80 million in annualized run rate savings, and we remain confident in our ability to deliver an additional $40 million in cost synergies by July of 2024.

• The effective tax rate was 18.8% compared to 15.3% for the same quarter of the prior year.

• Diluted earnings per share was $0.16, a 77.1% decrease as compared to the prior year.

Excluding transaction and integration related costs, the amortization of purchased intangible assets and the impact of a gain on divestiture of an owned dealership, adjusted diluted earnings per share was $0.28 (*) , a 56.9% (*) decrease as compared to prior year adjusted diluted earnings per share.

The year over year change in the effective tax rate for the three months ended September 3, 2022 resulted from the current year quarter reporting pre-tax book income with favorable foreign tax credit impacts in the United States and the same quarter of the prior year reporting pre-tax book loss with non-deductible discrete compensation and acquisition costs in connection with the Knoll acquisition.

• Diluted earnings per share was $0.34 as compared to loss per share of $0.92 in the prior year.

Excluding integration related costs, restructuring costs, and the amortization of purchased intangible assets, adjusted diluted earnings per share was $0.44 (*) , a 12.0% (*) decrease as compared to prior year adjusted diluted earnings per share.

(*) Non-GAAP measurements;

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

• The Company has continued to experience operational challenges within its production facilities and supply networks.

Broad-based shortages of production labor and rising material and freight expenses negatively impacted net sales and gross margins during the quarter.

We estimate these disruptions adversely impacted net sales by approximately $34 million during the quarter.

The Company has implemented a range of countermeasures to combat these pressures and began to see improvement in production and shipment levels in the second half of the quarter.

• The Company's financial performance is sensitive to changes in certain input costs, including steel and steel component parts.

The market price of steel in the third quarter of fiscal 2022 was higher than the same period of the prior year and negatively impacted consolidated results on a year-over-year basis.

The price of steel has decreased over the past six months with the current price still above the prior year cost.

Ongoing cost reduction initiatives and price increases implemented in the first three quarters of fiscal 2022 have begun to help offset these pressures.

The impact of recent price increases is expected to continue to offset these inflationary pressures in future quarters.

• Following industry-wide declines in order volume within the North America contract furniture industry, we experienced a rebound in activity in the first three quarters of the current fiscal year driven by the implementation of initial return-to-office plans for many businesses.

In addition, demand levels in the contract business outside North America continued to improve in the quarter relative to prior year levels.

• Overall demand levels within the Company's Global Retail business segment showed continued strength in the first three quarters of this fiscal year.

The remaining sections within Item 2 include additional analysis of the three and nine months ended February 26, 2022, including discussion of significant variances compared to the prior year periods.

COVID-19 Update

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

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

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

In addition, the Company's ability to timely fulfill orders across all channels continues to be challenged by supply chain constraints.

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

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

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

Employee Safety and Health

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

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

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

We continue to encourage vaccinations with our employees.

Federal Contractor Vaccine Mandate

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

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

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

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

The Order and subsequent guidance by the federal government are facing legal challenges in federal courts.

MillerKnoll is a party to numerous federal government contracts.

We are actively monitoring instructions and guidance issued by the federal government regarding implementation of the Order as well as the impact of any pending legal challenges on our obligations under the mandate.

Customer Focus

MillerKnoll, Inc.

and Subsidiaries 29

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

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

We are an advocate that work happens everywhere.

The office is not going away;

rather, it is a re-imagined purposeful space.

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

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

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

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

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

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

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

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

Manufacturing and Retail Operations

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

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

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

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

Further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect our supply chain.

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

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

Ongoing cost reduction initiatives and recent price increase actions have begun to offset these cost pressures, and the benefit from these initiatives is expected to continue to offset these pressures over time.

• During the quarter the Company saw the impact of economic uncertainty in many of the geographies and markets in which we operate.

The Company believes that our first quarter financial results reflect how strong performance in different segments of our business helps to mitigate softness in others, and how our global reach and operations continue to provide opportunities for growth, even when certain segments of the business are experiencing pressure.

• The Americas Contract segment in the first quarter reported new orders of $511.3 million, which was an increase of 3.2% from the prior year, but down 17.2% on an organic basis.

This decline in year-over-year orders on an organic basis was driven by increased order volume in the prior year from pandemic related pent-up demand as well as the impact of customer concern about the global economic environment and delays in projects.

• The International Contract and Specialty segment had net sales in the first quarter totaled $272.5 million, an increase of 63.1% from the year-ago period on a reported basis and up 30.0% organically.

New orders in this segment totaled $252.4 million, representing a year-over-year increase of 30.8% on a reported basis and up 0.8% organically.

From a market demand perspective, we saw strong order growth in India, South Korea and the Middle East, partially offset by softer demand in China and Central and Eastern Europe.

• The results this quarter within our our Global Retail segment reflect a decrease in customer demand versus the same period last year.

New orders for this segment of $249.4 million were 9.3% higher than last year on a reported basis, and down 7.7% organically.

This organic decline is attributed to a shift in consumer spending away from home-related investments toward post-pandemic travel and leisure and, more recently, growing concern over the macro-economic environment.

In response, the Global Retail segment has taken actions to manage spending and investments to mitigate the impact of these pressures and to invest in growth opportunities, such as eCommerce, trade programs and digital tools.

The Company's fiscal year is the 52 or 53 week period ending on the Saturday closest to May 31.

The fiscal year ended May 28, 2022 ("fiscal 2022") was a 52 week period while the fiscal year ending June 3, 2023 ("fiscal 2023") will be a 53 week period.

The first quarter of fiscal 2022 contained 13 weeks, and the first quarter of fiscal 2023 contained 14 weeks.

This is a factor that should be considered when comparing the Company's first quarter financial results to the prior year period.

The remaining sections within Item 2 include additional analysis of the three months ended September 3, 2022, including discussion of significant variances compared to the prior year periods.

Reconciliation of Non-GAAP Financial Measures

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

Adjusted Earnings per Share and Organic Sales Growth (Decline).

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

Adjusted Earnings per Share and Organic Growth (Decline).

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

These adjustments are described further below.

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

Acquisition and Integration Charges:

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

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

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

• Amortization of Purchased Intangibles:

Includes expenses associated with the fair value adjustment to inventory and amortization of acquisition related intangibles acquired as part of the Knoll acquisition.

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

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

We exclude the impact of the

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

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

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

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

Debt Restructuring Charges:

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

• Acquisition and Integration Charges:

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

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

• Debt Extinguishment Charges:

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

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

Gain on Sale of Dealer:

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

Legal settlement Gain:

Includes the gain recorded on the settlement of a legal matter in the prior year.

Restructuring expenses:

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

• Restructuring charges:

Includes actions involving targeted workforce reductions.

• Special charges:

Includes certain costs arising as a direct result of our response to the COVID-19 pandemic, incurred in the prior year.

Include certain costs arising as a direct result of COVID-19 pandemic..

• Tax Related Items:

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

MillerKnoll, Inc.

and Subsidiaries 31

The following tables reconcile net sales to organic net sales for the periods ended as indicated below:

Three Months Ended

February 26, 2022

Americas International Retail Knoll Intersegment Elimination Total

September 3, 2022

Americas International & Specialty Retail Total

Net Sales, as reported $ 537.4 $ 272.5 $ 268.9 $ 1,078.8

% change from PY 25.6 % 25.9 % 5.5 % N/A N/A 74.3 %

% change from PY 40.9 % 63.1 % 11.4 % 36.6 %

Acquisitions (77.2) (55.5) (31.1) (163.8)

Currency Translation Effects (1)

1.3 11.8 8.3 21.4

Impact of Extra Week in FY23 (27.4) (11.6) (13.7) (52.7)

Net Sales, organic $ 434.1 $ 217.2 $ 232.4 $ 883.7

% change from PY 25.9 % 30.1 % 7.4 % N/A N/A 20.3 %

% change from PY 14.7 % 30.0 % (3.7) % 12.3 %

Three Months Ended

February 27, 2021

Americas International Retail Knoll Intersegment Elimination Total

August 28, 2021

Americas International & Specialty Retail Total

Net Sales, as reported $ 381.3 $ 167.1 $ 241.3 $ 789.7

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

Nine Months Ended

February 26, 2022

Americas International Retail Knoll Intersegment Elimination Total

Net Sales, as reported $ 1,052.0 $ 347.4 $ 635.4 $ 829.5 $ (18.8) $ 2,845.5

% change from PY 4.4 % 18.4 % 17.2 % N/A N/A 54.3 %

Acquisitions — — — (829.5) 18.8 (810.7)

The following tables reconcile orders as reported to organic orders for the periods ended as indicated below:

Three Months Ended

September 3, 2022

Americas International and Specialty Retail Total

Orders, as reported $ 511.3 $ 252.4 $ 249.4 $ 1,013.1

% change from PY 3.2 % 30.8 % 9.3 % 10.5 %

Acquisition (80.3) (57.5) (32.3) (170.1)

Currency Translation Effects (1)

Net Sales, organic $ 1,050.6 $ 346.7 $ 637.7 $ — $ — $ 2,035.0

% change from PY 4.3 % 18.1 % 17.6 % N/A N/A 10.4 %

Nine Months Ended

February 27, 2021

Americas International Retail Knoll Intersegment Elimination Total

Net Sales, as reported $ 1,008.0 $ 293.5 $ 542.1 $ — $ — $ 1,843.6

0.8 9.9 5.8 16.5

Impact of Extra Week in FY23 (24.0) (10.3) (12.4) (46.7)

Orders, organic $ 407.8 $ 194.5 $ 210.5 $ 812.8

% change from PY (17.2) % 0.8 % (7.7) % (11.0) %

Three Months Ended

August 28, 2021

Americas International and Specialty Retail Total

Orders, as reported $ 495.4 $ 193.0 $ 228.1 $ 916.5

Dealer Divestitures (2.9) — — (2.9)

Net Sales, organic $ 1,007.6 $ 293.5 $ 542.1 $ — $ — $ 1,843.2

Orders, organic $ 492.5 $ 193.0 $ 228.1 $ 913.6

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

The following table reconciles earnings per share - diluted to adjusted earnings per share - diluted for the three and nine months ended:

Three Months Ended Nine Months Ended

February 26, 2022 February 27, 2021 February 26, 2022 February 27, 2021

The following table reconciles earnings per share - diluted to adjusted earnings per share - diluted for the periods ended as indicated below:

Three Months Ended

September 3, 2022 August 28, 2021

Earnings (Loss) per Share - Diluted $ 0.34 $ (0.92)

Non-comparable items:

Gain on legal settlement, after tax — (0.05) — (0.05)

Gain on sale of dealer (0.02) — (0.02) —

Special charges, after tax — — — 0.01

Amortization of purchased intangibles, after tax 0.08 — 0.59 —

Acquisition and integration charges, after tax 0.06 — 1.29 —

Debt extinguishment, after tax — — 0.14 —

Restructuring expenses, after tax — — — 0.02

Amortization of purchased intangibles 0.08 0.49

Acquisition and integration charges 0.06 1.05

Restructuring charges 0.01 —

Special charges — (0.01)

Debt extinguishment — 0.20

Tax impact on adjustments (0.05) (0.31)

Adjusted Earnings per Share - Diluted $ 0.44 $ 0.50

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted 76,266,966 66,302,214

The adjustments above are net of tax.

For the three and nine months ended February 26, 2022, the tax impact of the adjustments were $0.06 and $0.55.

For the three and nine months ended February 27, 2021, the tax impact of the adjustments was immaterial.

Analysis of Results for Three and Nine Months

The following table presents certain key highlights from the results of operations for the three and nine months ended:

Three Months Ended Nine Months Ended

(In millions, except share data) February 26, 2022 February 27, 2021 % Change February 26, 2022 February 27, 2021 % Change

Analysis of Results for Three Months

The following table presents certain key highlights from the results of operations for the three months ended:

Three Months Ended

(In millions, except share data) September 3, 2022 August 28, 2021 % Change

Net sales $ 1,078.8 $ 789.7 36.6 %

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Earnings (loss) before income taxes and equity income 33.7 (70.6) 147.7 %

Income tax (benefit) expense 2.7 13.0 (79.2) % (11.5) 49.9 (123.0) %

Equity (loss) income from nonconsolidated affiliates, net of tax — (0.3) 100.0 % — 0.1 (100.0) %

Income tax expense (benefit) 6.3 (10.7) 158.9 %

Equity income from nonconsolidated affiliates, net of tax — 0.1 (100.0) %

Net earnings (loss) 27.4 (59.8) 145.8 %

Net earnings attributable to redeemable noncontrolling interests 1.8 1.8 N/A 5.7 3.8 N/A

Net earnings attributable to redeemable noncontrolling interests 1.6 1.6 —

Net earnings (loss) attributable to MillerKnoll, Inc.

$ 25.8 $ (61.4) 142.0 %

Earnings (Loss) per share — diluted $ 0.16 $ 0.70 (77.1) % $ (0.72) $ 2.80 (125.7) %

Earnings (loss) per share — basic $ 0.34 $ (0.92) 137.0 %

Orders $ 1,013.1 $ 916.5 10.5 %

Backlog $ 868.6 $ 835.9 3.9 %

MillerKnoll, Inc.

and Subsidiaries 33

The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive (Loss) Income as a percentage of net sales, for the three and nine months ended:

Three Months Ended Nine Months Ended

February 26, 2022 February 27, 2021 February 26, 2022 February 27, 2021

The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive (Loss) Income as a percentage of net sales, for the three months ended:

Three Months Ended

September 3, 2022 August 28, 2021

Net sales 100.0 % 100.0 %

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Income tax expense (benefit) 0.6 (1.4)

Equity (loss) from nonconsolidated affiliates, net of tax — (0.1) — —

Equity income from nonconsolidated affiliates, net of tax — —

Net earnings (loss) 2.5 (7.6)

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Net earnings (loss) attributable to MillerKnoll, Inc.

1.2 7.0 (1.8) 9.0

The following charts present graphically the primary drivers of the year-over-year change in net sales for the three and nine months ended February 26, 2022.

The following charts present graphically the primary drivers of the year-over-year change in net sales for the three months ended September 3, 2022.

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

Net sales increased $439 million or 74.3% in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021.

Net sales increased $289 million or 36.6% in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022.

The following items contributed to the change:

• Increase of $328.2 million due to the acquisition of Knoll.

• Incremental list price increases, net of price discounting, of approximately $16 million.

• Increase of $161 million due to the Knoll acquisition that was completed on July 19, 2021 of the prior year, net of a decrease in sales related to the divestiture of an owned dealership in the prior year.

• Increased sales volumes within the International Contract & Specialty and Americas Contract segments contributed to sales growth in the quarter by approximately $54 million and $7 million, respectively.

The International Contract & Specialty and Americas Contract segments' growth was driven, in part, by a strong backlog of orders coming into the first quarter.

• The additional week during the first quarter of the current year contributed to approximately $53 million of the net sales increase.

• Incremental price increases, net of price discounting drove an increase in net sales of approximately $51 million.

• Decreased sales volume within the Global Retail segment offset these increases by approximately $15 million.

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

• Increased sales volumes within the Global Retail, International Contract, and Americas Contract segments contributed to sales growth in the quarter.

We believe that sales growth in the International and Americas Contract segments' was

driven by the implementation of customers return to office plans and investments in their workspaces.

Growth within the Global Retail segment was driven by actions taken to increase sales channels, brands, price points and overall assortment available to customers.

• Sales growth within each of the segments experienced constraints from the impact of global supply chain and labor supply disruptions in the quarter.

These disruptions are estimated to have adversely impacted net sales by approximately $34 million during the quarter.

Net sales increased $1,001.9 million or 54.3% in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021.

The following items led to the change:

• Increase of $810.7 million due to the acquisition of Knoll.

• Incremental list price increases, net of price discounting, of approximately $20 million.

• Increased sales volume within the Global Retail segment of approximately $85 million, driven by investments made to strengthen operational foundations, efforts to drive new customer acquisition, and actions to increase sales channels, brands, price points, and overall assortment available for customers.

• Increased sales volume within the International Contract segment of approximately $57 million, which was driven by growth from both local customers and global corporate accounts.

• Increased sales volume within the Americas Contract segment of approximately $29 million, driven by continued improvement in the demand environment as organizations accelerated their return to the workplace.

Gross margin was 32.7% in the third quarter of fiscal 2022 as compared to 39.1% in the third quarter of fiscal 2021.

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

• Cost pressures from commodities, freight, and product distribution costs had a negative impact on gross margin of approximately 390 basis points.

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

• Amortization of purchased intangibles related to the Knoll acquisition had a negative impact on gross margin of approximately 20 basis points.

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

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

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

• Price increases helped offset some of these pressures by an estimated 90 basis points.

Gross margin was 33.9% for the nine months ended February 26, 2022 as compared to 39.3% for the same period of the prior fiscal year.

Gross margin was 34.5% in the first quarter of fiscal 2023 as compared to 35.2% in the first quarter of fiscal 2022.

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

• Cost pressures from commodities, freight and product distribution costs had a negative impact on gross margin of approximately 370 basis points.

• Increased labor costs, including the impact of benefits reinstated at the end of the last fiscal year, had a negative impact on margin of approximately 80 basis points.

• Amortization of purchased intangibles related to the Knoll acquisition has a negative impact on gross margin of approximately 50 basis points.

• Price increases helped offset some of these pressures by approximately 70 basis points.

• Increased labor costs had a negative impact on margin of approximately 70 basis points.

• Price increases offset by discounting helped offset some of these pressures by approximately 330 basis points.

• The impact of amortization of purchased intangibles related to the Knoll acquisition recorded in the prior year that did not occur in the current period had a favorable impact on gross margin of approximately 60 basis points.

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

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

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

MillerKnoll, Inc.

and Subsidiaries 35

Operating Expenses

The following charts present graphically the primary drivers of the year-over-year change in operating expenses for the three and nine months ended February 26, 2022.

The following charts present graphically the primary drivers of the year-over-year change in operating expenses for the three months ended September 3, 2022.

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

Operating expenses increased by $134.5 million or 76.5% in the third quarter of fiscal 2022 compared to the prior year period.

The following factors contributed to the change:

• The acquisition of Knoll in the first quarter had the following impact on Operating Expenses as compared to the prior year.

◦ $7 million of acquisition and integration charges, which include severance and related expenses for employee separations, asset impairment charges and professional fees, and other incremental third-party expenses directly related to the transaction and subsequent integration.

◦ $6 million of expenses related to the amortization of purchased intangibles from the Knoll acquisition.

◦ Knoll operating expenses in the quarter, excluding integration related costs incurred by Knoll and amortization of purchased intangibles, contributed $100 million to the increase as compared to the same quarter in the prior year.

• Increased marketing and selling costs of approximately $9 million, driven primarily from the Global Retail and Americas segments.

• Compensation and benefit costs increased approximately $6 million as compared to the same period in the prior year due to the return of certain employee benefits that were temporarily suspended during the first quarter of the prior year to mitigate the financial impacts of the COVID-19 pandemic.

• The increases noted above are partially offset by the realization of synergies associated with the integration of the Knoll acquisition.

Operating expenses increased by $483.7 million or 96.0% in the first nine months of fiscal 2022 compared to the prior year period.

Operating expenses decreased by $9 million or 2.7% in the first quarter of fiscal 2023 compared to the prior year period.

The following factors contributed to the change:

• The acquisition of Knoll during the quarter had the following impact on Operating Expenses as compared to the prior year.

◦ $117 million of acquisition and integration related charges, which include severance and related charges for employee separations, asset impairment charges and professional fees, and other incremental third-party expenses directly related to the transaction and subsequent integration.

◦ $44 million of expenses related to the amortization of purchased intangibles from the Knoll acquisition.

◦ Knoll operating expenses in the quarter, excluding integration related costs incurred by Knoll and amortization of purchased intangibles, contributed $248 million to the increase as compared to the same quarter in the prior year.

• Compensation and benefit costs increased approximately $17 million as compared to the same period in the prior year due to the return of certain employee benefits that were temporarily suspended during portions of the prior year to mitigate the financial impacts of the COVID-19 pandemic.

• Increased marketing and selling costs of approximately $23 million, driven by both the Global Retail and Americas segments.

• Increased spending in technology and digital tools across the segments, representing an increase of $12 million.

• An increase of $10 million related to the expansion of physical store locations within the Global Retail segment.

• The increases noted above are partially offset by the realization of synergies associated with the integration of the Knoll acquisition.

• The consolidation of Knoll results for the entirety of the first quarter of fiscal 2023 increased operating expenses by $50 million.

• The impact of an extra week in the first quarter of fiscal 2023 increased operating expenses by approximately $13 million.

• Compensation and benefit costs increased approximately $7 million due to increases in variable-based compensation.

• Increased spending in technology and digital tools across primarily the Americas and Retail segments totaled $12 million.

• Acquisition related integration and amortization expense decreased $84 million from the prior year period.

• Unfavorable foreign currency translation of approximately $5 million.

• The remaining change was primarily due to an increase in product development costs as well as increased studio and marketing costs primarily in the Retail segment.

Other Income/Expense

During the three months ended February 26, 2022, net other expense was $9.4 million, representing an increase of $10.9 million compared to the same period in the prior year.

The increase in expense as compared to the prior year was driven by increased interest expense of $6.6 million, related to higher levels of debt required to finance the acquisition of Knoll.

A pre-tax gain of $4.3 million related to a legal settlement that was included in the three month period ended February 27, 2021, also contributed to the increase as compared to the prior year.

During the nine months ended February 26, 2022, net other income/expense was $35.6 million, representing an increase of $33.4 million compared to the same period in the prior year.

Other income/expense in the nine months ended February 26, 2022 included a loss on extinguishment of debt of approximately $13.4 million, which represented the premium on early redemption as well as an increase in interest expense of $14.2 million, related to higher levels of debt required to finance the acquisition of Knoll.

The nine months ended February 27, 2021 included a pre-tax gain of $4.3 million related to a legal settlement.

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

During the three months ended September 3, 2022, net other expense was $17.1 million, representing a favorable change of $0.9 million compared to the same period in the prior year.

Other income/expense in the three months ended August 28, 2021 included a loss on extinguishment of debt of approximately $13.4 million, which represented the premium on early debt redemption.

This was offset by $11.1 million of higher interest expense in the current quarter resulting from higher levels of debt required to finance the acquisition of Knoll.

See Note 10 of the Condensed Consolidated Financial Statements for additional information.

MillerKnoll, Inc.

and Subsidiaries 37

Operating Segment Results

1 unchanged sentence

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

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

The segments identified by the Company are Americas Contract, International Contract & Specialty, and Global Retail.

Unallocated expenses are reported within the Corporate category.

For descriptions of each segment, refer to Note 15 of the Condensed Consolidated Financial Statements.

The charts below present the relative mix of Net Sales and Operating Earnings across each of the Company's segments during the three and nine month periods ended February 26, 2022.

The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments during the three month period ended September 3, 2022.

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

The amounts presented in the charts are in millions and have been rounded.

Americas Contract ("Americas")

Three Months Ended Nine Months Ended

(Dollars in millions) February 26, 2022 February 27, 2021 Change February 26, 2022 February 27, 2021 Change

Americas Contract

Three Months Ended

(Dollars in millions) September 3, 2022 August 28, 2021 Change

Net sales $ 537.4 $ 381.3 $ 156.1

3 unchanged sentences

Operating earnings % 3.8 % (2.8) % 6.6 %

For the three month comparative period, net sales increased $74.4 million, or 25.9% (*) on an organic basis, over the prior year period due to:

• Increased sales volumes within the segment of approximately $67 million, due primarily to increased demand as customers continued implementation of return to workplace plans after reduced order volume during the COVID-19 pandemic and

• The favorable impact of price increases, net of incremental discounting of approximately $8 million;

partially offset by

• The unfavorable impact of foreign currency translation which decreased sales by approximately $0.5 million and the impact of supply chain and internal manufacturing capacity disruption in the quarter, which impacted the ability to ship orders in the quarter.

For the nine month comparative period, net sales increased $44.0 million, or 4.3% (*) on an organic basis, over the prior year period due to:

• Increased sales volumes within the segment of approximately $29 million, due primarily to increased demand as customers implemented return to workplace plans after reduced order volume during the COVID-19 pandemic and;

• The favorable impact of price increases, net of incremental discounting of approximately $13 million and the favorable impact of foreign currency translation which increased sales by approximately $1.5 million.

For the three month comparative period, operating earnings decreased $11.9 million, or 81.5%, over the prior year period due to:

• Decreased gross margin of $3.4 million due to a decrease in gross margin percentage of 800 basis points, offset in part by increased sales volumes.

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

• Increased operating expenses of $8.5 million driven primarily by an increase in marketing and selling related expenses of approximately $3 million, increases in compensation and benefits related expenses of approximately $2 million, and increased expense from digital and technology programs of approximately $3 million.

For the nine month comparative period, operating earnings decreased $93.1 million, or 83.4%, over the prior year period due to:

• Decreased gross margin of $65.9 million due to a decrease in gross margin percentage of 770 basis points, offset in part by increased sales volumes.

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

• Increased operating expenses of $27.2 million driven primarily by $5 million of integration related severance expenses related to the Knoll acquisition, increased marketing and selling expenses of approximately $8 million, increased product development expenses of approximately $5 million, increased compensation and benefit expenses of $4 million, and increased expense from digital and technology programs of approximately $6 million.

For the three month comparative period, net sales increased 40.9%, or 14.7% (*) on an organic basis, over the prior year period due to:

• An increase in sales of $74 million due to impact of consolidating Knoll in the results for a full quarter, net of the decrease in sales related to the divestiture of an owned dealership in the prior year.

• Price increases, net of incremental discounting of $49 million;

• The positive impact of the additional sales from the extra week in the quarter of $27 million;

• Increased sales volumes within the segment of approximately $7 million, due primarily to the shipment of backlog that was built during the prior year;

partially offset by unfavorable foreign currency translation of approximately $1 million.

For the three month comparative period, operating earnings increased $31.0 million, or 292.5%, over the prior year period due to:

• Increased gross margin of $38 million due to sales volume increases described above, offset in part by decreased gross margin percentage of 110 basis points.

The decrease in gross margin percentage was due primarily to the impact of higher commodity, labor, freight and product distribution costs, which were mitigated in part by realization of price increase actions taken in the prior year;

offset in part by

• Increased operating expenses of $7 million driven primarily by:

◦ An increase of approximately $20 million from consolidating Knoll results for the entirety of the first quarter of fiscal 2023;

◦ An increase of approximately $6 million related to the additional week in the current period;

◦ An increase in compensation and benefits of approximately $3 million as well as increased spending in technology and digital tools of $2 million.

These increases in operating expenses were offset by lower amortization and integration charges related to the Knoll acquisition as compared to the prior year of approximately $17 million as well as decreased marketing and selling expenses.

(*) Non-GAAP measurements;

see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

MillerKnoll, Inc.

and Subsidiaries 39

International Contract ("International")

Three Months Ended Nine Months Ended

(Dollars in millions) February 26, 2022 February 27, 2021 Change February 26, 2022 February 27, 2021 Change

International Contract & Specialty

Three Months Ended

(Dollars in millions) September 3, 2022 August 28, 2021 Change

Net sales $ 272.5 $ 167.1 $ 105.4

3 unchanged sentences

Operating earnings % 10.2 % 3.9 % 6.3 %

For the three month comparative period, net sales increased $25.4 million, or 30.1% (*) on an organic basis, over the prior year period due to:

• Increased sales volume of approximately $27 million, driven by growth across all geographies and brands within the segment and net price increases, net of incremental discounting of $3 million;

partially offset by

• The unfavorable impact of foreign currency translation which decreased sales by approximately $4 million.

For the nine month comparative period, net sales increased $53.9 million, or 18.1% (*) on an organic basis, over the prior year period due to:

• Increased sales volume of approximately $57 million, driven by growth across all geographies within the segment and the favorable impact of foreign currency translation which increased sales by approximately $1 million;

For the three month comparative period, net sales increased 63.1%, or 30.0% (*) on an organic basis, over the prior year period due to:

• An increase in sales of $56 million due to the Knoll acquisition that was completed on July 19, 2021.

The increase represents the impact of consolidating Knoll results for the entirety of the first quarter of fiscal 2023.

• Increased sales volume of approximately $54 million, and

• The positive impact of the additional sales from the 14th week in the quarter of $12 million;

partially offset by

• Price increases, net of incremental discounting, which reduced sales by $4 million.

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

• Unfavorable foreign currency translation of approximately $12 million, and

• The negative impact of incremental discounting, net of incremental price increases of approximately $4 million.

For the three month comparative period, operating earnings increased $21.3 million, or 322.7%, over the prior year period due to:

• Increased gross margin of $4.5 million due to the increase in sales explained above, offset in part by decreased gross margin percentage of 340 basis points due primarily to increased material, freight and distribution costs, unfavorable impact from foreign currency translation, and the impact of unfavorable product mix;

• Increased operating expenses of approximately $3.0 million driven primarily by increased marketing and selling related expenses.

For the nine month comparative period, operating earnings increased $0.7 million, or 1.7%, over the prior year period due to:

• Increased gross margin of $12.0 million due to the increase in sales explained above, offset in part by decreased gross margin percentage of 190 basis points due primarily to unfavorable changes in channel and product mix as well as increased freight and distribution costs;

• Increased operating expenses of approximately $11.3 million driven primarily by increased compensation and benefit costs as well as increased costs associated with product development, technology and digital related activities.

• Increased gross margin of $46 million due to the increase in sales explained above, as well as the increased gross margin percentage of 140 basis points due primarily to the leverage of fixed costs on higher sales volume.

• Increased operating expenses of approximately $25 million driven primarily from consolidating Knoll results for the entirety of the first quarter of fiscal 2023, the impact of the additional week in the current period as compared to the prior year, and increased compensation and benefit costs, partially offset by the impact of foreign currency translation.

(*) Non-GAAP measurements;

1 unchanged sentence

Global Retail

Three Months Ended Nine Months Ended

(Dollars in millions) February 26, 2022 February 27, 2021 Change February 26, 2022 February 27, 2021 Change

Three Months Ended

(Dollars in millions) September 3, 2022 August 28, 2021 Change

Net sales $ 268.9 $ 241.3 $ 27.6

3 unchanged sentences

Operating earnings % 6.6 % 10.9 % (4.3) %

For the three month comparative period, net sales increased $11.0 million, or 7.4% (*) on an organic basis, over the prior year period due to:

• Increased sales volumes of approximately $9 million which were driven primarily by increased demand within the DWR, International, and Global HAY businesses;

• Incremental list price increases, net of discounting, of approximately $5 million;

For the three month comparative period, net sales increased 11.4%, and decreased 3.7% (*) on an organic basis, over the prior year period due to:

• An increase in sales of $31 million due to the Knoll acquisition that was completed on July 19, 2021.

The increase represents the impact of consolidating Knoll results for the entirety of the first quarter of fiscal 2023.

• The positive impact of additional sales from the 14th week in the quarter of $14 million and

• Price increases, net of incremental discounting, which increased sales by $6 million;

partially offset by

• The unfavorable impact of foreign currency translation which decreased sales by approximately $4 million.

For the nine month comparative period, net sales increased $93.3 million or 17.6% (*) , on an organic basis, over the prior year period due to:

• Increased sales volumes of approximately $85 million which were driven primarily by broad growth across the brands and geographies within the segment;

• Incremental list price increases, net of discounting, of approximately $11 million.

• The unfavorable impact of foreign currency translation which decreased sales by approximately $2.5 million.

• Unfavorable foreign currency translation of approximately $8 million and

• A decrease in sales volume of approximately $15 million, driven primarily by changes in customer spending trends.

For the three month comparative period, operating earnings decreased $9 million or 32.6% over the prior year period due to:

• Decreased gross margin of $5.8 million due to a decrease in gross margin percentage of 520 basis points due primarily to the unfavorable impact of increased freight and product distribution costs and unfavorable changes in product mix, offset in part by increased sales volumes;

• Increased operating expenses of $10.1 million driven primarily by increased store costs associated with the opening of new locations, increased compensation and benefit costs as certain benefits suspended in the prior year were returned, increased marketing and selling related costs, and higher IT costs driven by increased investments within the Company's digital and eCommerce platforms.

For the nine month comparative period, operating earnings decreased $26.5 million, or 26.3%, over the prior year period due to:

• Increased gross margin of $15.2 million due to the increase in sales explained above, offset in part by a decrease in gross margin percentage of 470 basis points due primarily to the unfavorable impact of increased freight and product distribution costs, pressure from increased product material costs and unfavorable changes in product mix, offset in part by increased sales volumes.

• Increased operating expenses of $41.7 million driven primarily by increased store costs associated with the opening of new locations, increased compensation and benefit costs as certain benefits suspended in the prior year were returned, increased marketing and selling related costs, and higher IT costs driven by increased investments within the Company's digital and eCommerce platforms;

partially offset by

• Increased operating expenses of $19 million driven primarily from consolidating Knoll results for the entirety of the first quarter of fiscal 2023, the increase in expense from the impact of an additional week in the current period, increased compensation and benefit costs, partially offset by the favorable operating expense impact of foreign currency translation;

offset in part by

• Increased gross margin of $10 million due to the increase in sales explained above, offset in part by a decrease in gross margin percentage of 60 basis points attributable to the unfavorable impact of higher commodity and product distribution costs as well as unfavorable changes in product mix, partially offset in part by the favorable impact of pricing.

(*) Non-GAAP measurements;

see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

MillerKnoll, Inc.

and Subsidiaries 41

Three Months Ended Nine Months Ended

(Dollars in millions) February 26, 2022 February 27, 2021 Change February 26, 2022 February 27, 2021 Change

Net sales $ 336.9 $ — $ 336.9 $ 829.5 $ — $ 829.5

Gross margin 110.6 — 110.6 278.4 — 278.4

Gross margin % 32.8 % — % 32.8 % 33.6 % — % 33.6 %

Operating earnings (loss) 1.5 — 1.5 (72.8) — (72.8)

Operating earnings % 0.4 % — % 0.4 % (8.8) % — % (8.8) %

The Company acquired Knoll on July 19, 2021 and has consolidated the financial results of Knoll from the acquisition date through the period ended February 26, 2022.

Knoll contributed $336.9 million in sales for the quarter and $110.6 million of gross margin.

Knoll operating earnings of $1.5 million for the three months ended includes the following items:

• $2.6 million related to integration related costs, which includes severance and related charges for employee separations.

• $8.0 million related to the impact of amortization expense of acquisition-related intangible assets.

Knoll operating loss of $72.8 million for the nine months ended includes the following items:

• $56.7 million related to the impact of amortization of acquisition-related intangible assets

• $59.0 million related to integration related costs, which include severance and related charges for employee separations and asset impairment charges.

Corporate unallocated expenses totaled $14.2 million for the third quarter of fiscal 2022, an increase of $3.8 million from the third quarter of fiscal 2021.

The increase was driven by $3.6 million of integration and transaction costs related to the Knoll acquisition in the quarter.

Corporate unallocated expenses totaled $83.2 million for the first nine months of fiscal 2022, an increase of $52.3 million from the same period of fiscal 2021.

The increase was driven primarily by $51.6 million of integration and transaction costs recorded in the quarter related to the Knoll acquisition.

Corporate unallocated expenses totaled $15 million for the first quarter of fiscal 2023, a decrease of $60 million from the first quarter of fiscal 2022.

The decrease was driven by $64 million of integration and transaction costs related to the Knoll acquisition in the in fiscal 2022 compared to $1 million of integration and transaction costs in the first quarter of fiscal 2023.

Liquidity and Capital Resources

The table below summarizes the net change in cash and cash equivalents for the nine months ended as indicated.

(In millions) February 26, 2022 February 27, 2021

The table below summarizes the net change in cash and cash equivalents for the three months ended as indicated.

(In millions) September 3, 2022 August 28, 2021

Cash (used in) provided by:

5 unchanged sentences

Cash Flows - Operating Activities

Cash used in operating activities for the nine months ended February 26, 2022 was $57.9 million, as compared to cash provided of $260.1 million in the same period of the prior year.

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

• A decrease in net earnings of $216.1 million largely driven by acquisition and integration related charges of $117.1 million as well as cost pressures from commodities, labor, and freight and product distribution resulting in a lower gross margin;

• An increase in current assets of $219.6 million compared to a decrease in current assets of $6.4 million in the prior year period.

The increase in current assets in the current year was driven by an increase in accounts receivable and inventory as sales volumes increased from the end of fiscal 2021 as well as an increase in prepaid taxes driven by an expected benefit for the current year.

The increases above were offset by an increase of depreciation and amortization in the current period of $150.3 million related to the amortization of purchased intangible assets as part of the Knoll acquisition as well as an increase in stock based compensation of $27.0 million.

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

The principal source of our operating cash flow is net earnings, meaning cash receipts from the sale of our products, net of costs to manufacture, distribute, and market our products.

Net cash used in our operating activities for the three months ended September 3, 2022 totaled $64.8 million, as compared to cash used of $51.7 million in the same period of the prior year.

The increase is due primarily to changes in incentive compensation as well as inventory levels which have risen as market conditions have eroded demand in key parts of our business in recent months, and as the Company has taken a higher inventory position to mitigate against further supply chain challenges.

Cash Flows - Investing Activities

Cash used in investing activities for the nine months ended February 26, 2022 was $1,145.0 million, as compared to $42.9 million in the same period of the prior year.

The increase in cash outflow in the current year, compared to the prior year, was primarily due to the acquisition of Knoll, which drove a cash outflow, net of cash acquired, of $1,088.5 million.

Additionally, capital expenditures for the current year were $65.8 million as compared to $42.8 million in the same period of the prior year.

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

At the end of the third quarter of fiscal 2022, there were outstanding commitments for capital purchases of $13.5 million.

Cash used in investing activities for the three months ended September 3, 2022 was $10.2 million, as compared to $1,104.7 million in the same period of the prior year.

The decrease in cash outflow in the current year, compared to the prior year, was primarily due to the acquisition of Knoll, which drove a cash outflow, net of cash acquired, of $1,088.5 million in the prior year period.

In the three months ended September 3, 2022, we were advanced $13.5 million of cash against the value of company owned life insurance policies.

This is reflected as cash proceeds from investing activities in the Consolidated Statement of Cash Flows.

At the end of the first quarter of fiscal 2023, there were outstanding commitments for capital purchases of $22.9 million.

The Company plans to fund these commitments through a combination of cash on hand and cash flows from operations.

The Company expects full-year capital purchases to be between $100 million and $120 million, which will be primarily related to investments in the Company's facilities and equipment along with the inclusion of Knoll in fiscal year 2022.

The Company expects full-year capital purchases to be between $90 million and $100 million, which will be primarily related to investments in the Company's facilities and equipment.

This compares to full-year capital spending of $94.7 million in fiscal 2022.

Cash Flows - Financing Activities

Cash provided from financing activities for the nine months ended February 26, 2022 was $1,061.4 million, as compared to cash used in financing activities of $287.3 million in the same period of the prior year.

The increase in cash provided in the current year, compared to the prior year, was primarily due to net borrowings of $1,007.0 million from the credit agreement the Company entered into during Q1 and proceeds of $815.7 million on the Company's credit facility.

These increases were offset by:

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

• Payments of $6.6 million related to the Company's term loans

• Payments of $627.7 million on the Company's credit facility

• Dividends paid of $39.8 million and stock repurchases of $16.0 million

Cash provided from financing activities for the three months ended September 3, 2022 was $77.0 million, as compared to cash provided by financing activities of $1,001.6 million in the same period of the prior year.

The decrease in cash provided in the current year, compared to the prior year, was primarily due to net borrowings of $1,007.0 million from the credit agreement the Company entered into during the prior year.

Sources of Liquidity

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

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

At the end of the third quarter of fiscal 2022, the Company had a well-positioned balance sheet and liquidity profile.

The Company has access to liquidity through credit facilities and cash and cash equivalents.

The Company has taken actions to safeguard its cash flow and liquidity position in the current environment.

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

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

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

At the end of the first quarter of fiscal 2023, the Company had a well-positioned balance sheet and liquidity profile.

The Company has access to liquidity through credit facilities, cash and cash equivalents, and short-term investments.

These sources have been summarized below.

For additional information, refer to Note 13 to the Condensed Consolidated Financial Statements.

(In millions) February 26, 2022 May 29, 2021

(In millions) September 3, 2022 May 28, 2022

Cash and cash equivalents $ 215.8 $ 230.3

Marketable securities — 7.7

Availability under syndicated revolving line of credit 186.6 296.6

Total liquidity $ 402.4 $ 526.9

Of the cash and cash equivalents noted above at the end of the third quarter of fiscal 2022, the Company had $222.3 million of cash and cash equivalents held outside the United States.

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

MillerKnoll, Inc.

and Subsidiaries 43

subject to negotiated terms as outlined in the agreement.

Of the cash and cash equivalents noted above at the end of the first quarter of fiscal 2023, the Company had $201.9 million of cash and cash equivalents held outside the United States.

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

As of February 26, 2022, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $413.0 million with available borrowings against this facility of $296.6 million.

As of September 3, 2022, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $523.9 million with available borrowings against this facility of $186.6 million.

The Company intends to repatriate $100.0 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 $7.5 million.

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

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

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

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 September 3, 2022.

The Company believes cash on hand, cash generated from operations, and borrowing capacity will provide adequate liquidity to fund near term and foreseeable future business operations, capital needs, future dividends and share repurchases, subject to financing availability in the marketplace.

Contractual Obligations

1 unchanged sentence

A table summarizing the amounts and estimated timing of these future cash payments as of May 28, 2022 was provided in the Company's annual report on Form 10-K for the year ended May 28, 2022.

There have been material changes in certain obligations since that date as a result of the acquisition of Knoll.

See the following Notes for additional discussion:

Short-Term Borrowings and Long-Term Debt, Leases, Acquisitions, and Fair Value Measurements.

The following table summarizes the amounts and estimated timing of these future cash payments for obligations of the Company as of February 26, 2022 for which there were material changes since May 29, 2021.

Payments due by fiscal year

(in millions) Total 2022 2023-2024 2025-2026 Thereafter

Short-term borrowings and long-term debt (1)

$ 1,258.5 $ 96.6 $ 57.5 $ 87.5 $ 1,016.9

Estimated interest on debt obligations (1)

187.4 26.8 57.9 73.8 28.9

Operating leases 492.3 75.5 157.4 113.7 145.7

Pension and other post employment benefit plans funding (2)

28.6 1.4 5.7 5.9 15.6

Shareholder dividends (3)

14.8 14.8 — — —

Other liabilities (4)

14.9 5.0 4.1 1.4 4.4

Total $ 1,996.5 $ 220.1 $ 282.6 $ 282.3 $ 1,211.5

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

Contractual cash payments on long-term debt obligations are disclosed herein based on the amounts borrowed as of February 26, 2022 and the maturity date of the underlying debt.

Estimated future interest payments on our outstanding interest bearing debt obligations are based on interest rates as of February 26, 2022.

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

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

unfunded pension and post-retirement plan funding amounts are equal to the estimated benefit payments.

(3) Represents the dividend payable as of February 26, 2022.

Future dividend payments are not considered contractual obligations until declared.

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

There have been no material changes in such obligations since that date.

See Note 12 to the Condensed Consolidated Financial Statements.

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Safe Harbor Provisions

Certain statements in this report are not historical facts but are “forward-looking statements” as defined under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the industries in which the Company operates, the economy, and the Company itself.

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

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

inflationary pressures;

supply chain disruptions and labor shortages;

the impact of the war in Ukraine on our global business, including the effects on our supply chain;

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

risks related to the additional debt incurred in connection with the Knoll acquisition;

the Company’s ability to comply with its debt covenants and obligations;

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

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

the ability to successfully integrate Knoll’s operations;

the ability of the Company to implement its plans, forecasts and other expectations with respect to the Knoll acquisition and realize expected synergies;

business disruption following the acquisition;

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

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

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

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

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

general economic conditions;

the impact of and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and market of public health crises, such as pandemics and epidemics;

risks related to the additional debt incurred in connection with the merger;

MillerKnoll’s ability to comply with its debt covenants and obligations;

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

the effect of the announcement of the merger on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with

customers, suppliers and others with whom MillerKnoll does business, or on MillerKnoll’s operating results and business generally;

the ability to successfully integrate Knoll’s operations;

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

business disruption following the merger;

the availability and pricing of raw materials;

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the pace and level of government procurement;

and the outcome of pending litigation or governmental audits or investigations, and other risks identified in our filings with the Securities and Exchange Commission.

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

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

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

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis