MILLERKNOLL, INC. 10-Q

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions, except share data) 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 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 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 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. 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 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. 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; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures." The following summary includes the Company's view of the economic environment in which it operates: 23 • The Company's financial performance is sensitive to changes in certain input costs, including steel and steel component parts. 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 This report contains non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included within this report. The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented. The non-GAAP financial measures referenced within this presentation include: Adjusted Earnings per Share 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 Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of acquisitions and divestitures. 24 • Amortization of Purchased Intangibles: Includes expenses associated with the amortization of inventory step-up and amortization of acquisition related intangibles acquired as part of the Knoll acquisition. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. We exclude the impact of the amortization of purchased intangibles, including the fair value adjustment to inventory, as such non-cash amounts were significantly impacted by the size of the Knoll acquisition. Furthermore, we believe that this adjustment enables better comparison of our results as Amortization of Purchased Intangibles will not recur in future periods once such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. Although we exclude the Amortization of Purchased Intangibles in these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. • Acquisition and Integration Charges: 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. • Restructuring charges: Includes actions involving targeted workforce reductions. • Special charges: 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. The following tables reconcile net sales to organic net sales for the periods ended as indicated below: Three Months Ended September 3, 2022 Americas International & Specialty Retail Total Net Sales, as reported $ 537.4 $ 272.5 $ 268.9 $ 1,078.8 % change from PY 40.9 % 63.1 % 11.4 % 36.6 % Adjustments 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 14.7 % 30.0 % (3.7) % 12.3 % Three Months Ended August 28, 2021 Americas International & Specialty Retail Total Net Sales, as reported $ 381.3 $ 167.1 $ 241.3 $ 789.7 Adjustments Dealer Divestitures (2.9) — — (2.9) Net sales, organic $ 378.4 $ 167.1 $ 241.3 $ 786.8 (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 tables reconcile orders as reported to organic orders for the periods ended as indicated below: 25 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 % Adjustments Acquisition (80.3) (57.5) (32.3) (170.1) Currency Translation Effects (1) 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 Adjustments Dealer Divestitures (2.9) — — (2.9) 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 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: Add: Amortization of purchased intangibles 0.08 0.49 Add: Acquisition and integration charges 0.06 1.05 Add: Restructuring charges 0.01 — Add: Special charges — (0.01) Add: 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 Analysis of Results for Three Months The following table presents certain key highlights from the results of operations for the three months ended: 26 Three Months Ended (In millions, except share data) September 3, 2022 August 28, 2021 % Change Net sales $ 1,078.8 $ 789.7 36.6 % Cost of sales 706.7 512.0 38.0 % Gross margin 372.1 277.7 34.0 % Operating expenses 321.3 330.3 (2.7) % Operating earnings (loss) 50.8 (52.6) 196.6 % Other expenses, net 17.1 18.0 (5.0) % Earnings (loss) before income taxes and equity income 33.7 (70.6) 147.7 % 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 1.6 1.6 — Net earnings (loss) attributable to MillerKnoll, Inc. $ 25.8 $ (61.4) 142.0 % 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 % 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 % Cost of sales 65.5 64.8 Gross margin 34.5 35.2 Operating expenses 29.8 41.8 Operating earnings (loss) 4.7 (6.7) Other expenses, net 1.6 2.3 Earnings (loss) before income taxes and equity income 3.1 (8.9) Income tax expense (benefit) 0.6 (1.4) Equity income from nonconsolidated affiliates, net of tax — — Net earnings (loss) 2.5 (7.6) Net earnings attributable to redeemable noncontrolling interests 0.1 0.2 Net earnings (loss) attributable to MillerKnoll, Inc. 2.4 (7.8) Net Sales 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. 27 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 $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. Gross Margin 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 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. 28 Operating Expenses 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 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 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 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. Income Taxes See Note 10 of the Condensed Consolidated Financial Statements for additional information. Operating Segment Results 29 The business is comprised of various operating segments as defined by generally accepted accounting principles in the United States. 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 & 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 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. 30 Americas Contract Three Months Ended (Dollars in millions) September 3, 2022 August 28, 2021 Change Net sales $ 537.4 $ 381.3 $ 156.1 Gross margin 144.2 106.2 38.0 Gross margin % 26.8 % 27.9 % (1.1) % Operating earnings 20.4 (10.6) 31.0 Operating earnings % 3.8 % (2.8) % 6.6 % 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; and • The positive impact of the additional sales from the extra week in the quarter of $27 million; and • 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; and ◦ An increase of approximately $6 million related to the additional week in the current period; and ◦ 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." 31 International Contract & Specialty Three Months Ended (Dollars in millions) September 3, 2022 August 28, 2021 Change Net sales $ 272.5 $ 167.1 $ 105.4 Gross margin 113.4 67.2 46.2 Gross margin % 41.6 % 40.2 % 1.4 % Operating earnings 27.9 6.6 21.3 Operating earnings % 10.2 % 3.9 % 6.3 % 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 • Unfavorable foreign currency translation of approximately $12 million, and • The negative impact of incremental discounting, net of incremental price increases of approximately $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 levels of discounting. 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 $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; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures." 32 Global Retail Three Months Ended (Dollars in millions) September 3, 2022 August 28, 2021 Change Net sales $ 268.9 $ 241.3 $ 27.6 Gross margin 114.5 104.3 10.2 Gross margin % 42.6 % 43.2 % (0.6) % Operating earnings 17.8 26.4 (8.6) Operating earnings % 6.6 % 10.9 % (4.3) % 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 • 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: • 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." Corporate 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 three months ended as indicated. (In millions) September 3, 2022 August 28, 2021 Cash (used in) provided by: Operating activities $ (64.8) $ (51.7) Investing activities (10.2) (1,104.7) Financing activities 77.0 1,001.6 Effect of exchange rate changes (16.5) (6.5) Net change in cash and cash equivalents $ (14.5) $ (161.3) 33 Cash Flows - Operating Activities 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 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 $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 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 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) September 3, 2022 May 28, 2022 Cash and cash equivalents $ 215.8 $ 230.3 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 first quarter of fiscal 2023, the Company had $201.9 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, subject to negotiated terms as outlined in the agreement. Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated terms as outlined in the agreement. 34 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. 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 Contractual obligations associated with ongoing business and financing activities will require cash payments in future periods. 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 no material changes in such obligations since that date. Guarantees See Note 12 to the Condensed Consolidated Financial Statements. Variable Interest Entities See Note 17 to the Condensed Consolidated Financial Statements. Contingencies See Note 12 to the Condensed Consolidated Financial Statements. Critical Accounting Policies The Company strives to report financial results clearly and understandably. The Company follows accounting principles generally accepted in the United States in preparing its consolidated financial statements, which require certain estimates and judgments that affect the financial position and results of operations for the Company. The Company continually reviews the accounting policies and financial information disclosures. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company's Annual Report on Form 10-K for the year ended May 28, 2022. New Accounting Standards See Note 2 to the Condensed Consolidated Financial Statements. Safe Harbor Provisions 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 35 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; the financial strength of our dealers and the financial strength of our customers; the success of newly-introduced products; the pace and level of government procurement; 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. 36