What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-10-09 compared with 2024-04-10 · 129 added, 232 removed, 217 unchanged (62% of the section changed)

5 unchanged sentences

The Company researches, designs, manufactures, sells, and distributes interior furnishings for use in various environments including residential, office, healthcare, and educational settings and provides related services that support organizations and individuals all over the world.

The Company's products are sold primarily through independent contract office 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 March 2, 2024:

• Net sales were $872.3 million and orders were $830.3 million, representing a decrease of 11.4% and 6.2%, respectively, when compared to the same quarter of the prior year.

On an organic basis, which excludes the impact of foreign currency translation and the impact of the closure of the Fully business, Net sales were $870.5 million (*) and orders were $826.9 million (*) , representing an organic decrease of 10.1% and 4.7%, respectively, when compared to the same quarter of the prior year.

• Gross margin in the third quarter was 38.6% as compared to 34.1% for the same quarter of the prior year.

The increase in gross margin was driven primarily by the realization of price optimization strategies;

improved freight, distribution and inventory management;

an impairment charge in the same quarter of the prior year that did not reoccur;

and benefits from our ongoing synergy efforts following the Knoll acquisition.

• Operating expenses decreased by $20.2 million or 6.4% as compared to the same quarter of the prior year.

The decrease was driven primarily by the continued realization of cost synergies as a result of optimization of our organizational structure, a reduction in restructuring costs as compared to the same prior of the prior year as well as lower variable costs due to decreased sales.

• As of the end of the third quarter, the Company has captured $153 million in annualized run rate synergies following the close of the Knoll acquisition in the first quarter of Fiscal 2022.

The Company continues to make further progress on integration plans and expects total run-rate cost synergies to equal $160 million per year by July 2024 (three years following the acquisition closing date).

The Company's products are sold primarily through independent contract office furniture dealers, direct customer sales, owned and independent retailers and the Company’s eCommerce platforms.

The following is a summary of results for the three months ended August 31, 2024:

• Net sales were $861.5 million and orders were $935.9 million, representing a decrease of 6.1% and increase of 2.4%, respectively, when compared to the same quarter of the prior year.

On an organic basis, which excludes the impact of foreign currency translation and the impact of the closure of the HAY eCommerce channel in North America, Net sales were $864.3 million (*) and orders were $940.4 million (*) , representing an organic decrease of 5.3% (*) and increase of 3.5% (*) , respectively, when compared to the same quarter of the prior year.

• Gross margin in the first quarter was 39.0% which is flat when compared to the same quarter of the prior year.

Benefits from pricing actions, favorable business and product mix and the realization of synergies associated with the Knoll acquisition offset the loss of leverage of fixed operating costs on lower sales volumes.

• Operating expenses increased by $3.3 million or 1.0% as compared to the same quarter of the prior year.

The increase was driven primarily by higher Knoll integration costs as compared to the same period in the prior year, offset in part by a reduction in restructuring costs, reduced variable-selling costs on lower sales volume and the realization of savings related to integration and restructuring actions.

• The effective tax rate was 66.2% compared to 24.4% for the same quarter of the prior year.

The current quarter rate benefited from favorable discrete impacts from return to provision true-ups related to the United States research and development tax credit.

• Diluted earnings per share was $0.30 as compared to $0.01 in the prior year.

Excluding integration related costs, restructuring costs, impairment charges, and the amortization of intangible assets purchased as part of the Knoll acquisition, adjusted diluted earnings per share was $0.45 (*) , a 16.7% (*) decrease as compared to prior year adjusted diluted earnings per share.

The current quarter rate resulted from the current quarter reflecting a pre-tax loss along with return to provision true-ups recorded in the current period compared to the prior year.

• Diluted loss per share was $0.02 as compared to diluted earnings per share of $0.22 in the prior year.

Adjusted diluted earnings per share was $0.36 (*) , a 2.7% (*) decrease as compared to prior year adjusted diluted earnings per share.

(*) Non-GAAP measurements;

1 unchanged sentence

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

• During the third quarter, demand levels for the Company's products continued to be impacted by general economic uncertainty around the world driven by geopolitical concerns, persistent inflationary effects, and elevated market interest rates.

• The Americas Contract segment in the third quarter reported Net sales totaling $441.1 million, down 9.0% compared to the prior year period on a reported basis and down 9.2% (*) organically.

Americas Contract had new orders of $420.1 million, which was a decrease of 9.0% from the prior year, and down 9.4% (*) on an organic basis.

• The International Contract & Specialty segment delivered Net sales in the third quarter of $217.3 million, a decrease of 10.4% from the year-ago period on a reported basis and a decrease of 10.6% (*) organically.

• MillerKnoll finished the first quarter of fiscal year 2025 with demand improvement within the Americas Contract and International Contract & Specialty segments.

This improvement in order volume was driven by a general increase in day-to-day and project activity, including a ramp-up in larger project opportunities in the Americas and Asia.

Demand in the Global Retail segment continues to reflect the impact of a tepid housing market, though the segment saw margin improvement in the quarter driven by investments in strengthening operational capabilities.

• The Americas Contract segment in the first quarter reported Net sales totaling $454.6 million, down 7.3% compared to the prior year period on a reported basis and down 7.0% (*) organically.

Americas Contract had new orders of $512.7 million, which was an increase of 5.2% from the prior year and and increase of 5.7% (*) on an organic basis.

• The International Contract & Specialty segment delivered Net sales in the first quarter of $213.5 million, a decrease of 6.5% from the year-ago period on a reported basis and a decrease of 6.3% (*) organically.

New orders in this segment totaled $234.1 million, representing a year-over-year increase of 2.7% on a reported basis and an increase of 3.1% (*) organically.

• Net sales in the third quarter for the Global Retail segment totaled $213.9 million, a decrease of 17.0% over the same quarter last year on a reported basis and a decrease of 11.3% (*) organically.

• Net sales in the first quarter for the Global Retail segment totaled $193.4 million, a decrease of 2.8% over the same quarter last year on a reported basis and an increase of 0.4% (*) organically.

Orders in the quarter totaled $189.1 million, down 4.7% compared to the same period last year on a reported basis and down 1.6% (*) organically.

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

The fiscal year ending June 1, 2024 contains 52 weeks, while the fiscal year ended June 3, 2023 contained 53 weeks.

The first quarter of fiscal 2024 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 year to date financial results to the prior year period.

The remaining sections within Item 2 include additional analysis of the three and nine months ended March 2, 2024, including discussion of significant variances compared to the prior year periods.

The fiscal year ending May 31, 2025 ("fiscal 2025") and the fiscal year ended June 1, 2024 ("fiscal 2024") both contain 52 weeks.

The remaining sections within Item 2 include additional analysis of the three months ended August 31, 2024, including discussion of significant variances compared to the prior year periods.

Reconciliation of Non-GAAP Financial Measures

8 unchanged sentences

Adjusted Earnings per Share and Organic Growth (Decline).

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, impairment charges, and the related tax effect of these adjustments.

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, Knoll pension plan termination charges and the related tax effect of these adjustments.

These adjustments are described further below.

Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects, the impact of an additional week in the fiscal 2023 and the impact of the closure of the Fully business.

Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the HAY eCommerce channel in North America.

The adjustments made to arrive at these non-GAAP financial measures are as follows:

7 unchanged sentences

• Integration Charges:

Knoll integration-related costs include severance, accelerated stock-based compensation expenses, asset impairment charges, and expenses related to synergy realization efforts and reorganization initiatives.

Knoll integration-related costs include severance, accelerated stock-based compensation expenses, asset impairment charges associated with lease and operations facility consolidation activity, and expenses related to synergy realization efforts and reorganization initiatives.

• Restructuring charges:

Includes costs associated with actions involving targeted workforce reductions.

• Impairment charges:

Includes non-cash, pre-tax charges for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand.

• Knoll pension plan termination charges:

Includes expenses incurred associated with the termination of the Knoll pension plan.

• Tax related items:

2 unchanged sentences

Three Months Ended

March 2, 2024

August 31, 2024

Americas Contract International Contract & Specialty Global Retail Total

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Three Months Ended

March 4, 2023

Americas Contract International Contract & Specialty Global Retail Total

Net sales, as reported $ 484.6 $ 242.5 $ 257.6 $ 984.7

Fully closure — — (16.9) (16.9)

Net sales, organic $ 484.6 $ 242.5 $ 240.7 $ 967.8

(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

Nine Months Ended

March 2, 2024

Americas Contract International Contract & Specialty Global Retail Total

Net sales, as reported $ 1,407.6 $ 686.8 $ 645.1 $ 2,739.5

% change from PY (9.3) % (11.9) % (19.2) % (12.5) %

Currency translation effects (1)

(2.2) (7.8) (5.5) (15.5)

Net sales, organic $ 1,405.4 $ 679.0 $ 639.6 $ 2,724.0

% change from PY (7.1) % (10.7) % (11.3) % (9.0) %

Nine Months Ended

March 4, 2023

September 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Net sales, as reported $ 490.4 $ 228.3 $ 199.0 $ 917.7

Fully closure — — (59.3) (59.3)

Impact of extra week in FY23 (38.7) (19.6) (18.2) (76.5)

HAY eCommerce — — (5.5) (5.5)

Net sales, organic $ 490.4 $ 228.3 $ 193.5 $ 912.2

2 unchanged sentences

Three Months Ended

March 2, 2024

August 31, 2024

Americas Contract International Contract & Specialty Global Retail Total

6 unchanged sentences

Three Months Ended

March 4, 2023

Americas Contract International Contract & Specialty Global Retail Total

Orders, as reported $ 461.6 $ 210.1 $ 213.7 $ 885.4

Fully closure — — (17.8) (17.8)

Orders, organic $ 461.6 $ 210.1 $ 195.9 $ 867.6

(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.

Nine Months Ended

March 2, 2024

Americas Contract International Contract & Specialty Global Retail Total

Orders, as reported $ 1,344.8 $ 689.4 $ 653.8 $ 2,688.0

% change from PY (7.1) % (2.1) % (14.1) % (7.7) %

Currency translation effects (1)

(6.0) (8.4) (6.3) (20.7)

Orders, organic $ 1,338.8 $ 681.0 $ 647.5 $ 2,667.3

% change from PY (5.1) % (0.6) % (5.2) % (4.0) %

Nine Months Ended

March 4, 2023

September 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Orders, as reported $ 487.3 $ 227.9 $ 198.5 $ 913.7

Impact of extra week in FY23 (36.2) (18.9) (16.6) (71.7)

Fully closure — — (61.0) (61.0)

HAY eCommerce — — (5.1) (5.1)

Orders, organic $ 487.3 $ 227.9 $ 193.4 $ 908.6

1 unchanged sentence

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

Three Months Ended Nine Months Ended

March 2, 2024 March 4, 2023 March 2, 2024 March 4, 2023

Earnings per share - diluted $ 0.30 $ 0.01 $ 0.97 $ 0.56

Three Months Ended

August 31, 2024 September 2, 2023

(Loss) earnings per share - diluted $ (0.02) $ 0.22

Amortization of Knoll purchased intangibles 0.08 0.08

1 unchanged sentence

Restructuring charges — 0.05

Impairment charges — 0.48 — 0.48

Knoll pension plan termination charges 0.01 —

Tax impact on adjustments (0.11) (0.05)

2 unchanged sentences

Key Highlights

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) March 2, 2024 March 4, 2023 % Change March 2, 2024 March 4, 2023 % Change

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) August 31, 2024 September 2, 2023 % Change

Net sales $ 861.5 $ 917.7 (6.1) %

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Other expenses, net 16.9 19.2 (12.0) %

Earnings before income taxes and equity income 27.5 1.6 N/A 92.9 56.9 63.3 %

Income tax expense 4.4 0.5 N/A 19.0 11.1 71.2 %

Equity (loss) income from nonconsolidated affiliates, net of tax — — — % (0.3) 0.2 N/A

Net earnings 23.1 1.1 N/A 73.6 46.0 60.0 %

Net earnings attributable to redeemable noncontrolling interests 0.9 0.7 N/A 1.2 3.8 N/A

Net earnings attributable to MillerKnoll, Inc.

(Loss) earnings before income taxes and equity income (1.7) 21.1 N/A

Income tax (benefit) expense (1.1) 5.1 N/A

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

Net (loss) earnings (0.5) 16.1 N/A

Net earnings (loss) attributable to redeemable noncontrolling interests 0.7 (0.6) N/A

Net (loss) earnings attributable to MillerKnoll, Inc.

$ (1.2) $ 16.7 N/A

Earnings per share - basic $ 0.31 $ 0.01 N/A $ 0.98 $ 0.56 75.0 %

(Loss) earnings per share - basic $ (0.02) $ 0.22 N/A

Orders $ 935.9 $ 913.7 2.4 %

Backlog $ 758.0 $ 694.0 9.2 %

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

March 2, 2024 March 4, 2023 March 2, 2024 March 4, 2023

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

August 31, 2024 September 2, 2023

Net sales 100.0 % 100.0 %

4 unchanged sentences

Other expenses, net 2.0 % 2.1 %

Earnings before income taxes and equity income 3.2 % 0.2 % 3.4 % 1.8 %

Income tax expense 0.5 % 0.1 % 0.7 % 0.4 %

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

Net earnings 2.6 % 0.1 % 2.7 % 1.5 %

Net earnings attributable to redeemable noncontrolling interests 0.1 % 0.1 % — % 0.1 %

Net earnings attributable to MillerKnoll, Inc.

(Loss) earnings before income taxes and equity income (0.2) % 2.3 %

Income tax (benefit) expense (0.1) % 0.6 %

Equity income from nonconsolidated affiliates, net of tax — % — %

Net (loss) earnings (0.1) % 1.8 %

Net earnings (loss) attributable to redeemable noncontrolling interests 0.1 % (0.1) %

Net (loss) earnings attributable to MillerKnoll, Inc.

(0.1) % 1.8 %

The following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three and nine months ended March 2, 2024.

The following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three months ended August 31, 2024.

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

Net sales decreased $113 million or 11% in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.

The following items contributed to the change:

• Decreased sales volume within the International Contract & Specialty, Global Retail, and Americas Contract segments of approximately $25 million, $25 million and $61 million, respectively.

• Decrease of $17 million related to the closure of the Fully business that occurred in the prior year.

Offset in part by:

• Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $13 million.

• Foreign currency translation increased Net sales by approximately $2 million.

Net sales decreased $390 million or 12% in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023.

Net sales decreased $56.2 million or 6.1% in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

The following items contributed to the change:

• The additional week during the first quarter of the prior year contributed to approximately $77 million of the net sales decrease.

• Decrease of $61 million related to the closure of the Fully business that occurred in the prior year.

• Decreased sales volume within the Global Retail, International Contract & Specialty, and Americas Contract segments of approximately $60 million, $88 million and $183 million, respectively.

• Decreased sales volume within the Americas Contract and International Contract & Specialty segments of approximately $50 million and $10 million, respectively.

• Decrease of $6 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.

• Foreign currency translation decreased Net sales by approximately $3 million.

Offset in part by:

• Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $10 million.

• Foreign currency translation increased Net sales by approximately $15 million.

Gross margin was 38.6% in the third quarter of fiscal 2024 as compared to 34.1% in the third quarter of fiscal 2023.

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

• Reduction in costs from commodities, storage and handling costs, freight and product distribution costs, as compared to the same period of the prior year which increased gross margin by approximately 240 basis points.

• Charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand contributed to an increase in gross margin of approximately 170 basis points.

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 90 basis points.

• Savings from the realization of incremental synergies associated with the Knoll acquisition as compared to the same period in the prior year.

These factors were offset in part by;

• Loss of leverage on lower sales volumes, which negatively impacted margin by approximately 70 basis points.

Gross margin was 39.0% in the nine months ended March 2, 2024 as compared to 34.4% for the same period in the prior fiscal year.

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

• Increased sales volume within the Global Retail segment of approximately $3 million.

Gross margin was 39.0% in both the first quarter of fiscal 2025 and the first quarter of fiscal 2024.

Although Gross margin was flat to the prior year, summarized below are factors that most significantly impacted gross margin during the quarter:

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 60 basis points.

• Savings from the realization of incremental synergies associated with the Knoll acquisition as compared to the same period in the prior year.

These factors were offset in part by;

• Loss of leverage on lower sales volumes and unfavorable channel and product mix, which negatively impacted gross margin by approximately 130 basis points.

• Favorable business and product mix contributed to margin improvement of approximately 60 basis points.

• Loss of leverage on lower sales volumes negatively impacted margin by approximately 120 basis points.

Operating Expenses

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three and nine months ended March 2, 2024.

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three months ended August 31, 2024.

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

Operating expenses decreased by $20 million or 6.4% in the third quarter of fiscal 2024 compared to the prior year period.

The following factors contributed to the change:

• Charges for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand contributed a decrease in Operating expenses as compared to the same period of the prior year of approximately $22 million;

• Variable selling and marketing costs decreased by approximately $6 million, due in part to the closure of the Fully business that occurred in the prior year;

• Other costs decreased approximately $8 million as compared to the prior year, of which the largest category of decrease was product development costs which decreased $4 million.

These decreases were offset in part by:

• Compensation and benefit costs, which increased approximately $16 million, driven by changes in variable-based compensation and incentives.

Operating expenses decreased by $41 million or 4.3% in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023.

Operating expenses increased by $3.3 million or 1.0% in the first quarter of fiscal 2025 compared to the prior year period.

The following factors contributed to the change:

• Charges for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand, restructuring charges related to reductions in the Company's workforce as well as acquisition related integration costs contributed a decrease in Operating expenses as compared to the same period of the prior year of approximately $27 million;

• Variable selling and marketing costs decreased by approximately $16 million, due in part to the closure of the Fully business that occurred in the prior year;

• Product development costs decreased approximately $13 million, primarily in the Americas Contract and Global Retail segments;

• The impact of an extra week in the first quarter of fiscal 2023 decreased operating expenses by approximately $10 million in the current period;

• Savings from the realization of incremental synergies associated with the Knoll acquisition as compared to the same period in the prior year.

These decreases were offset in part by:

• Compensation and benefit costs, which increased approximately $32 million, driven by changes in variable-based compensation and incentives.

• Acquisition related integration charges contributed an increase in Operating expenses as compared to the same period of the prior year of approximately $24 million;

This was offset in part by:

• Variable selling and marketing costs decreased by approximately $13 million driven by variability on lower net sales and the impact of cost synergies achieved through the acquisition of Knoll and restructuring actions taken in the prior year ;

• Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $5 million that did not occur in the current year;

• Compensation and benefit costs, which decreased approximately $3 million, driven by changes in variable-based compensation and incentives.

Other Income/Expense

During the three months ended March 2, 2024, net Other expense was $15.3 million, representing a decrease of $4.3 million compared to the same period in the prior year, driven primarily by increased interest income as well as reductions in foreign currency losses.

During the nine months ended March 2, 2024, net Other expense was $50.6 million, representing a decrease of $3.2 million compared to the same period in the prior year.

This change is driven primarily by increased interest income in the current year offset in part by increased interest expense as compared to the same period of the prior year.

During the three months ended August 31, 2024, net Other expense was $16.9 million, representing a decrease of $2.3 million compared to the same period in the prior year, driven primarily by reductions in foreign currency losses.

See Note 9 of the Condensed Consolidated Financial Statements for additional information.

5 unchanged sentences

For descriptions of each segment, refer to Note 14 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 March 2, 2024.

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 August 31, 2024.

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

1 unchanged sentence

Americas Contract

Three Months Ended Nine Months Ended

(Dollars in millions) March 2, 2024 March 4, 2023 Change March 2, 2024 March 4, 2023 Change

Three Months Ended

(Dollars in millions) August 31, 2024 September 2, 2023 Change

Net sales $ 454.6 $ 490.4 $ (35.8)

4 unchanged sentences

For the three month comparative period, Net sales decreased 7.3%, or 7.0% (*) on an organic basis, over the prior year period due to:

• Decreased sales volumes within the segment of approximately $61 million, driven by the impact of a challenging macro-economic environment;

offset in part by

• Price increases, net of incremental discounting of $16 million;

• Favorable foreign currency translation of approximately $1 million.

For the nine month comparative period, Net sales decreased 9.3%, or 7.1% (*) on an organic basis, over the prior year period due to:

• Decreased volumes within the segment of approximately $183 million, which was driven by the impact of a challenging macro-economic environment compounded by pandemic-driven pent-up demand at the start of the prior year;

• The impact of an additional week in the same period of the prior year, which reduced sales approximately $39 million;

• Decreased sales volumes within the segment of approximately $50 million.

Although the segment experienced growth in order volume during the quarter, the timing of orders during the quarter and customer requests to ship product further out from order entry drove a year over year decrease in sales;

• Unfavorable foreign currency translation of approximately $2 million;

offset in part by

• Price increases, net of incremental discounting of $16 million.

• Favorable foreign currency translation of approximately $2 million.

(*) Non-GAAP measurements;

1 unchanged sentence

For the three month comparative period, operating earnings decreased $24.3 million, or 58.7%, over the prior year period due to:

• Decreased Gross margin of $4 million due to the decrease in net sales discussed above offset in part by an increase in gross margin percentage of 220 basis points.

The increase in gross margin percentage was due primarily to:

• Decreased Gross margin of $20.7 million due to the decrease in net sales discussed above and a decrease in gross margin percentage of 170 basis points.

The decrease in gross margin percentage was due primarily to:

◦ Loss of leverage of fixed costs due to reduced production volumes w hich had a negative impact on margin of approximately 270 basis points;

◦ Increased commodity and product distribution costs which had a negative impact on margin of 130 basis points.

These increases were offset by:

◦ The impact of incremental list price increases, net of contract price discounting which provided an approximately 230 basis point improvement over the prior year;

◦ Decreased commodity costs which provided an improvement of approximately 180 basis points.

These increases were offset in part by i ncreased labor costs as well as loss of labor and overhead leverage due to reduced production volumes which had a negative impact on margin of 210 basis points;

◦ The favorable impact of realization of synergies associated with the Knoll acquisition.

• Increased Operating expenses of $4 million driven primarily by an increase in variable compensation costs of approximately $9 million offset in part by decreased restructuring charges related to reductions in the Company's workforce of approximately $3 million and decreased product development costs of $2 million.

For the nine month comparative period, operating earnings increased $23.6 million, or 30.2%, over the prior year period due to:

• Increased Gross margin of $29.2 million due to the increased gross margin percentage of 500 basis points.

The increase in gross margin percentage was due primarily to:

◦ The impact of incremental list price increases, net of contract price discounting, that increased gross margin percentage by 360 basis points;

◦ Decreased commodity and product distribution costs that increased gross margin percentage by 300 basis points.

These increases were offset in part by i ncreased labor costs as well as loss of labor and overhead leverage due to reduced production volumes as well as unfavorable product mix which had a negative impact on margin of 160 basis points.

• The improvement in operating earnings from Gross margin was offset in part by increased Operating expenses of $6 million.

The following factors contributed to the change:

◦ An increase in variable based compensation of approximately $18 million and increased Knoll integration related costs costs of $9 million;

◦ A decrease of approximately $11 million in restructuring charges related to reductions in the Company's workforce compared to the prior year, decreased product development costs of $5 million, as well as a decrease of $5 million due to the additional week in the prior year.

• Increased Operating expenses of $3.6 million driven primarily by:

◦ Increase acquisition related integration costs of approximately $19 million in the current period.

This increase was offset by:

◦ Decreased variable selling and marketing costs of $7 million;

◦ Decreased restructuring charges of $4 million;

◦ Decreased variable compensation and benefit costs of $4 million.

International Contract & Specialty

Three Months Ended Nine Months Ended

(Dollars in millions) March 2, 2024 March 4, 2023 Change March 2, 2024 March 4, 2023 Change

Three Months Ended

(Dollars in millions) August 31, 2024 September 2, 2023 Change

Net sales $ 213.5 $ 228.3 $ (14.8)

4 unchanged sentences

For the three month comparative period, Net sales decreased 6.5%, or 6.3% (*) on an organic basis, over the prior year period due to:

• Decline in sales volume of approximately $25 million driven mainly by challenging macroeconomic conditions in Europe and parts of Asia-Pacific;

offset in part by

• Favorable foreign currency translation of approximately $1 million.

For the nine month comparative period, Net sales decreased 11.9%, or 10.7% (*) on an organic basis, over the prior year period due to:

• Decreased sales volume of approximately $88 million;

• Impact of the extra week in the prior year period, which drove a decrease of $20 million;

offset in part by

• Favorable foreign currency translation of approximately $8 million;

• Price increases, net of incremental discounting of $7 million.

• Decline in sales volume of approximately $10 million;

• Incremental promotional discounting, net of price increases, which decreased sales by $4 million;

• Unfavorable foreign currency translation of approximately $1 million.

(*) Non-GAAP measurements;

2 unchanged sentences

• Decreased Gross margin of $1.8 million due to the decrease in net sales discussed above, offset by an increase in gross margin percentage of 210 basis points due primarily to favorable product mix.

• Operating expenses increased approximately $3 million which was largely due to an increase in variable compensation costs in the current year.

For the nine month comparative period, operating earnings decreased $27.8 million, or 34.1%, over the prior year period due to:

• Decreased Gross margin of $23 million due to the decrease in sales explained above, offset in part by an increase in gross margin percentage of 220 basis points due primarily to favorable product mix and th e impact of incremental list price increases, net of contract price discounting.

• Increased Operating expenses of $5 million which was largely due to an increase in variable compensation costs in the current year of $11 million, offset in part by a decrease of $4 million due to the additional week in the prior year and a decrease of $2 million of variable selling costs.

• Operating expenses remained relatively flat to the prior year.

The factors that most significantly impacted operating expenses during the quarter were:

◦ Increase in integration related charges in the current year of $5 million.

This increase was offset by:

◦ Decreased variable compensation and benefit costs and cost synergies achieved through the acquisition of Knoll .

Global Retail

Three Months Ended Nine Months Ended

(Dollars in millions) March 2, 2024 March 4, 2023 Change March 2, 2024 March 4, 2023 Change

Three Months Ended

(Dollars in millions) August 31, 2024 September 2, 2023 Change

Net sales $ 193.4 $ 199.0 $ (5.6)

1 unchanged sentence

Gross margin % 45.0 % 43.4 % 1.6 %

Operating earnings (loss) 11.3 (24.5) 35.8 28.2 (4.7) 32.9

Operating earnings 4.5 2.2 2.3

For the three month comparative period, Net sales decreased 17.0%, and decreased 11.3% (*) on an organic basis, over the prior year period due to:

• A decrease in sales volume of approximately $25 million, driven by elevated interest rates in major markets around the world, ongoing geopolitical concerns, and a lagging housing market in the U.S.;

• Decrease of $17 million related to the closure of the Fully business that occurred in the prior year;

• Incremental discounting, net of price increases which decreased sales by $2 million.

For the nine month comparative period, Net sales decreased 19.2%, and decreased 11.3% (*) on an organic basis, over the prior year period due to:

• Decrease of $61 million related to the closure of the Fully business that occurred in the prior year;

• A decrease in sales volume of approximately $60 million, driven by a slowdown in the North American housing market and a continuation of general economic uncertainty;

• The additional week during the first quarter of the prior year contributed to approximately $18 million of the net sales decrease;

Operating earnings % 2.3 % 1.1 % 1.2 %

For the three month comparative period, Net sales decreased 2.8%, and increased 0.4% (*) on an organic basis, over the prior year period due to:

• Decrease of $6 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;

• Incremental discounting, net of price increases which decreased sales by $2 million;

• Favorable foreign currency translation of approximately $6 million.

• Unfavorable foreign currency translation of approximately $1 million;

offset in part by

• An increase in sales volume of approximately $3 million.

(*) Non-GAAP measurements;

2 unchanged sentences

• Increased Gross margin of $0.7 million due to the gross margin percentage increase of 160 basis points which was attributable to:

◦ Charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand;

◦ The impact of reduced costs as compared to the prior year associated with product distribution and inventory handling.

• Decreased Operating expenses of $27 million driven primarily by charges of $22 million in the prior year for the impairment charges of assets associated with the decision to cease operating Fully as a stand-alone brand, decreased variable selling and marketing costs, as well as a decrease due to to the closure of the Fully business that occurred in the prior year.

For the nine month comparative period, Operating earnings increased $32.9 million, or 700% over the prior year period due to:

• An increase in gross margin percentage of 680 basis points attributable to the favorable impact of reduced costs as compared to the prior year associated with product distribution and inventory handling as well as charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand.

These increases were offset in part by unfavorable discounting, net of price increases.

• Decreased Operating expenses of $47 million driven primarily by charges of $22 million in the prior year for the impairment charges of assets associated with the decision to cease operating Fully as a stand-alone brand, decreased

variable selling and marketing costs of $14 million, decreased product development of $4 million, a decrease of $4 million due to the additional week in the prior year, as well as a decrease due to to the closure of the Fully business that occurred in the prior year.

Corporate unallocated expenses totaled $12.3 million for the third quarter of fiscal 2024, a decrease of $0.2 million from the third quarter of fiscal 2023.

The decrease was driven primarily by a reduction in integration costs as compared to the same period of the prior year.

Corporate unallocated expenses totaled $40.2 million for the first nine months of fiscal 2024, a decrease of $4.1 million from the same period of fiscal 2023.

The decrease was driven primarily by a reduction in integration costs as compared to the same period of the prior year.

◦ The impact of reduced costs as compared to the prior year associated with product distribution and inventory paired with operational efficiencies .

• Decreased Operating expenses of $1.6 million primarily related to lower variable selling and marketing costs driven by the impact of cost synergies achieved through the acquisition of Knoll.

Corporate unallocated expenses totaled $15.7 million for the first quarter of fiscal 2025, an increase of $1.0 million from the first quarter of fiscal 2024.

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) March 2, 2024 March 4, 2023

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

(In millions) August 31, 2024 September 2, 2023

Cash provided by (used in):

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Cash Flows - Operating Activities

The principal source of our operating cash flow is net earnings.

Net cash provided by operating activities for the nine months ended March 2, 2024 totaled $273.9 million compared to $70.4 million in the same period of the prior year.

The increase in cash inflow is due primarily to higher net income and a reduction in working capital.

Net cash provided by operating activities for the three months ended August 31, 2024, totaled $21.1 million compared to $130.9 million in the same period of the prior year.

The decrease in cash inflow is due primarily to lower net income and changes in working capital.

Our working capital consists primarily of receivables from customers, inventory, prepaid expenses, accounts payable, accrued compensation, and accrued other expenses.

The following all affected these account balances:

•The timing of collection of our receivables;

•Effective inventory management resulting in reduced inventory levels;

•Increased variable compensation in the current year.

Working capital changes were primarily affected by payment of variable compensation in the current quarter as well as timing of collection of our receivables.

Cash Flows - Investing Activities

Cash used in investing activities for the nine months ended March 2, 2024 was $61.0 million, as compared to $53.2 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:

• An increase in notes receivable received from certain independently owned dealers in the current year;

• The advancement of $13.5 million of cash against the value of company owned life insurance policies received in the nine months ended March 4, 2023 for which there was no activity in the current year.

Offset in part by:

• Proceeds of $3.5 million received in the nine months ended March 2, 2024 related to the sale of the Company's investment in Global Holdings Netherlands B.V.

At the end of the third quarter of fiscal 2024, there were outstanding commitments for capital purchases of $14.9 million.

Cash used in investing activities for the three months ended August 31, 2024, was $22.3 million, as compared to $26.3 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 a decrease in the total volume of notes receivable entered into with certain independently owned dealers in the current quarter as compared to the same period of the prior year, offset in part by increased capital expenditures in the quarter.

At the end of the first quarter of fiscal 2025, there were outstanding commitments for capital purchases of $14.5 million.

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

1 unchanged sentence

This compares to full-year capital spending of $78.4 million in fiscal 2024.

Capital expenditures for the first nine months of fiscal 2024 were $56.5 million compared to $60.6 million for the nine months ended March 4, 2023.

Capital expenditures for the first three months of fiscal 2025 were $22.6 million compared to $19.9 million for the three months ended September 2, 2023.

Cash Flows - Financing Activities

Cash used in financing activities for the nine months ended March 2, 2024 was $213.1 million, as compared to $22.1 million in the same period of the prior year.

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

• Net payments on the credit agreement of $48.8 million in the current year compared to net borrowings of $55.5 million in the same period of the prior year;

• The Company repurchased 4.6 million shares at a cost of $101.0 million during the nine months ended March 2, 2024 as compared to share repurchases totaling $15.9 million in the same period of the prior year.

Cash used in financing activities for the three months ended August 31, 2024, was $20.3 million, as compared to $111.1 million in the same period of the prior year.

The decrease in cash used in the current quarter, compared to the prior year, was primarily due to:

• Net borrowings on the credit agreement of $43.1 million in the current year compared to net payments of $59.4 million in the same period of the prior year.

• The Company repurchased 1,544,733 shares at a cost of $43.7 million in the current year as compared to 1,670,135 share repurchases totaling $32.0 million in the same period of the prior year.

Sources of Liquidity

2 unchanged sentences

The Company maintains an 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 third quarter of fiscal 2024, the Company had a well-positioned balance sheet and liquidity profile.

At the end of the first quarter of fiscal 2025, the Company had a well-positioned balance sheet and liquidity profile.

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

1 unchanged sentence

For additional information, refer to Note 12 to the Condensed Consolidated Financial Statements.

(In millions) March 2, 2024 June 3, 2023

(In millions) August 31, 2024 June 1, 2024

Cash and cash equivalents $ 209.7 $ 230.4

1 unchanged sentence

Total liquidity $ 488.4 $ 552.7

Of the Cash and cash equivalents noted above at the end of the third quarter of fiscal 2024, the Company had $210.4 million of Cash and cash equivalents held outside the United States.

Of the Cash and cash equivalents noted above at the end of the first quarter of fiscal 2025, the Company had $201.3 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, subject to negotiated terms as outlined in the agreement.

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

As of March 2, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $377.9 million with available borrowings on this facility of $334.4 million.

As of August 31, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $433.1 million with available borrowings on this facility of $278.7 million.

The Company intends to repatriate $104.3 million of undistributed foreign earnings all of which is held in cash in certain foreign jurisdictions with the remainder of undistributed earnings outside the U.S.

5 unchanged sentences

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

which is estimated to be approximately $282.2 million on March 2, 2024.

which is estimated to be approximately $347.5 million on August 31, 2024.

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, upcoming debt maturities, future dividends and share repurchases, subject to financing availability in the marketplace.

27 unchanged sentences

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

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

the ability to successfully integrate Knoll’s operations;

10 unchanged sentences

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