What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-06 compared with 2024-10-09 · 224 added, 116 removed, 230 unchanged (60% of the section changed)

6 unchanged sentences

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.

The following is a summary of results for the three months ended November 30, 2024:

• Net sales were $970.4 million and orders were $921.9 million, representing an increase of 2.2% and decrease of 2.3%, respectively, when compared to the same quarter of the prior year.

This increase in sales for the current quarter marked the first period of year-over-year sales growth in two years.

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 $968.1 million (*) and orders were $921.5 million (*) , representing an organic increase of 2.4% (*) and decrease of 1.9% (*) , respectively, when compared to the same quarter of the prior year.

• Gross margin in the second quarter was 38.8%, a decrease of 40 basis points when compared to the same quarter of the prior year, related primarily to unfavorable channel and product mix.

• Operating expenses increased by $2.9 million or 0.9% 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 increase was driven primarily by increased marketing spend, higher variable expense and higher compensation and benefit costs.

• The effective tax rate was 21.8% compared to 21.4% for the same quarter of the prior year.

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.

The change as compared to the prior year resulted primarily by a change in the mix of earnings within various tax jurisdictions.

• Diluted earnings per share was $0.49 as compared to diluted earnings per share of $0.45 in the prior year.

Adjusted diluted earnings per share was $0.55 (*) , a 6.8% (*) decrease as compared to prior year adjusted diluted earnings per share.

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

• 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.

• MillerKnoll finished the second quarter of fiscal year 2025 in line with our expectations.

Although most of our market segments continue to experience broad-based macroeconomic pressures, several areas of our business are showing signs of growth and the business has maintained the gross margin improvement that occurred in fiscal year 2024.

• The Americas Contract segment in the second quarter reported Net sales totaling $504.2 million, up 5.9% compared to the prior year period on a reported basis and up 6.2% (*) organically.

Americas Contract had new orders of $456.8 million, which was an increase of 4.4% from the prior year and and increase of 4.9% (*) 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 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.

This quarter marked our third consecutive period of order growth in the Americas Contract segment.

• The International Contract & Specialty segment delivered Net sales in the second quarter of $246.3 million, an increase of 2.1% from the year-ago period on a reported basis and an increase of 1.1% (*) organically.

New orders in this segment totaled $218.7 million, representing a year-over-year decrease of 6.5% on a reported basis and a decrease of 7.2% (*) organically.

• Net sales in the second quarter for the Global Retail segment totaled $219.9 million, a decrease of 5.3% over the same quarter last year on a reported basis and an decrease of 4.0% (*) organically.

Orders in the quarter totaled $246.4 million, down 9.6% compared to the same period last year on a reported basis and down 8.4% (*) organically.

Both sales and orders were impacted by a shift in timing of the cyber week holiday promotion period, which fell into both the second and third quarters of fiscal year 2025 and fell entirely within the second quarter last fiscal year.

The timing of this cyber week holiday promotion period shifted approximately $12 million in Net sales, and $27 million in orders from our fiscal second quarter into the third quarter.

(*) Non-GAAP measurements;

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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.

The remaining sections within Item 2 include additional analysis of the three and six months ended November 30, 2024, including discussion of significant variances compared to the prior year periods.

Reconciliation of Non-GAAP Financial Measures

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• Integration Charges:

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.

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

• Restructuring charges:

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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 reconciles Net sales to Net sales, organic for the periods ended as indicated below:

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

Three Months Ended

August 31, 2024

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

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Three Months Ended

September 2, 2023

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

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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.

Six Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

Net sales, as reported $ 958.8 $ 459.8 $ 413.3 $ 1,831.9

% change from PY (0.8) % (2.1) % (4.2) % (1.9) %

Currency translation effects (1)

2.7 (1.9) (0.3) 0.5

Net sales, organic $ 961.5 $ 457.9 $ 413.0 $ 1,832.4

% change from PY (0.5) % (2.5) % (2.0) % (1.3) %

Six Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Net sales, as reported $ 966.5 $ 469.5 $ 431.2 $ 1,867.2

HAY eCommerce — — (9.9) (9.9)

Net sales, organic $ 966.5 $ 469.5 $ 421.3 $ 1,857.3

(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:

Three Months Ended

August 31, 2024

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

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Three Months Ended

September 2, 2023

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

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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.

Six Months Ended

November 30, 2024

Americas Contract International Contract & Specialty Global Retail Total

Orders, as reported $ 969.5 $ 452.8 $ 435.5 $ 1,857.8

% change from PY 4.8 % (1.9) % (7.6) % — %

Currency translation effects (1)

4.4 (0.8) 0.5 4.1

Orders, organic $ 973.9 $ 452.0 $ 436.0 $ 1,861.9

% change from PY 5.3 % (2.1) % (5.5) % 0.7 %

Six Months Ended

December 2, 2023

Americas Contract International Contract & Specialty Global Retail Total

Orders, as reported $ 924.7 $ 461.8 $ 471.2 $ 1,857.7

HAY eCommerce — — (9.6) (9.6)

Orders, organic $ 924.7 $ 461.8 $ 461.6 $ 1,848.1

(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

August 31, 2024 September 2, 2023

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

Three Months Ended Six Months Ended

November 30, 2024 December 2, 2023 November 30, 2024 December 2, 2023

Earnings per share - diluted $ 0.49 $ 0.45 $ 0.47 $ 0.67

Amortization of Knoll purchased intangibles 0.08 0.08 0.16 0.16

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Key Highlights

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

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

Three Months Ended Six Months Ended

(In millions, except share data) November 30, 2024 December 2, 2023 % Change November 30, 2024 December 2, 2023 % Change

Net sales $ 970.4 $ 949.5 2.2 % $ 1,831.9 $ 1,867.2 (1.9) %

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Other expenses, net 17.6 16.1 9.3 % 34.5 35.3 (2.3) %

(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

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

Earnings before income taxes and equity income 44.9 44.3 1.4 % 43.2 65.4 (33.9) %

Income tax expense 9.8 9.5 3.2 % 8.7 14.6 (40.4) %

Equity income (loss) from nonconsolidated affiliates, net of tax 0.1 (0.4) (125.0) % 0.2 (0.3) (166.7) %

Net earnings 35.2 34.4 2.3 % 34.7 50.5 (31.3) %

Net earnings attributable to redeemable noncontrolling interests 1.1 0.9 22.2 % 1.8 0.3 500.0 %

Net earnings attributable to MillerKnoll, Inc.

$ 34.1 $ 33.5 1.8 % $ 32.9 $ 50.2 (34.5) %

Earnings per share - basic $ 0.49 $ 0.45 8.9 % $ 0.47 $ 0.67 (29.9) %

Orders $ 921.9 $ 944.0 (2.3) % $ 1,857.8 $ 1,857.7 — %

Backlog $ 709.4 $ 688.5 3.0 %

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

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 six months ended:

Three Months Ended Six Months Ended

November 30, 2024 December 2, 2023 November 30, 2024 December 2, 2023

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

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Other expenses, net 1.8 % 1.7 % 1.9 % 1.9 %

(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.

Earnings before income taxes and equity income 4.6 % 4.7 % 2.4 % 3.5 %

Income tax expense 1.0 % 1.0 % 0.5 % 0.8 %

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

Net earnings 3.6 % 3.6 % 1.9 % 2.7 %

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

Net earnings attributable to MillerKnoll, Inc.

3.5 % 3.5 % 1.8 % 2.7 %

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 following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three and six months ended November 30, 2024.

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

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

Net sales increased $20.9 million or 2.2% in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024.

The following items contributed to the change:

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

• Increased sales volume within the Americas Contract and International Contract & Specialty segments of approximately $26 million and $6 million, respectively;

• Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $4 million;

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

Offset in part by:

• Decreased sales volume within the Global Retail segment of approximately $13 million, driven primarily by a shift in the timing of the holiday cyber promotional period, which fell across both the second and third quarters of the current year.

• Decrease of $5 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.

Net sales decreased $35.3 million or 1.9% in the first six months of fiscal 2025 compared to the first six months of fiscal 2024.

The following items contributed to the change:

• Decreased sales volume within the Americas Contract, Global Retail and International Contract & Specialty segments of approximately $24 million, $9 million and $4 million, respectively.

• Decrease of $10 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 $1 million.

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

• 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:

Gross margin was 38.8% in the second quarter of fiscal 2025 as compared to 39.2% in the second quarter of fiscal 2024.

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

• Unfavorable product mix negatively impacted margin by approximately 140 basis points.

Offset in part by:

• Reduced freight and product distribution costs, as compared to the same period of the prior year, which increased gross margin by approximately 40 basis points.

• Leverage on higher sales volumes and increased production levels positively impacted margin by approximately 40 basis points.

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 20 basis points.

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

Gross margin was 38.9% in the six months ended November 30, 2024, as compared to 39.1% 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:

• Loss of leverage on lower sales volumes negatively impacted margin by approximately 40 basis points.

• Unfavorable channel and product mix negatively impacted margin by approximately 40 basis points.

These factors were offset in part by:

• Price increases, net of incremental discounting, contributed to margin improvement of approximately 50 basis points.

• Reduced freight and product distribution costs, as compared to the same period of the prior year which increased gross margin by approximately 10 basis points.

Operating Expenses

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 following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three and six months ended November 30, 2024.

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

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

Operating expenses increased by $2.9 million or 0.9% in the second quarter of fiscal 2025 compared to the prior year period.

The following factors contributed to the change:

• Variable selling and marketing costs increased by approximately $6 million driven by increased net sales as compared to the prior year period ;

• Compensation and benefit costs, which increased approximately $4 million;

• Foreign currency translation increased Operating expenses by approximately $2 million.

Offset in part by:

• Acquisition related integration charges contributed a decrease in Operating expenses as compared to the same period of the prior year of approximately $7 million;

• Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $2 million that did not occur in the current year.

Operating expenses increased by $6.2 million or 1.0% in the first six months of fiscal 2025 compared to the first six months of fiscal 2024.

The following factors contributed to the change:

• Acquisition related integration charges contributed an increase in Operating expenses as compared to the same period of the prior year of approximately $18 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 ;

• Foreign currency translation increased Operating expenses by approximately $2 million;

• Compensation and benefit costs increased approximately $1 million.

These increases were offset in part by:

• Variable selling and marketing costs, which decreased by approximately $7 million driven by variability on lower net sales and the impact of cost synergies achieved through the acquisition of Knoll;

• Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $7 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 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.

During the three months ended November 30, 2024, net Other expense was $17.6 million, representing an increase of $1.5 million compared to the same period in the prior year, driven primarily by increased foreign currency losses.

During the six months ended November 30, 2024, net Other expense was $34.5 million, representing a decrease of $0.8 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.

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

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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 month period ended August 31, 2024.

The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments during the three and six month periods ended November 30, 2024.

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

1 unchanged sentence

Americas Contract

Three Months Ended

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

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

Net sales $ 504.2 $ 476.1 $ 28.1 $ 958.8 $ 966.5 $ (7.7)

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Operating earnings % 9.4 % 7.4 % 2.0 % 6.7 % 7.9 % (1.2) %

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 $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;

For the three month comparative period, Net sales increased 5.9%, or 6.2% (*) on an organic basis, over the prior year period due to:

• Increased sales volumes within the segment of approximately $26 million;

• Price increases, net of incremental discounting of $4 million;

offset in part by

• Unfavorable foreign currency translation of approximately $1 million.

For the six month comparative period, Net sales decreased 0.8%, or 0.5% (*) on an organic basis, over the prior year period due to:

• Decreased volumes within the segment of approximately $24 million;

• Unfavorable foreign currency translation of approximately $3 million;

offset in part by

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

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

For the three month comparative period, operating earnings increased $12.4 million, or 35.3%, over the prior year period due to:

• Increased Gross margin of $10.5 million due to the increase in net sales discussed above and an increase in gross margin percentage of 20 basis points.

The increase in gross margin percentage was due primarily to:

◦ The impact of incremental list price increases, net of contract price discounting which provided an approximately 50 basis point improvement over the prior year;

◦ Leverage of fixed costs on increased production volumes w hich had a positive impact on margin of approximately 70 basis points.

These increases were offset by:

◦ Unfavorable product mix which had a negative impact on margin of approximately 100 basis points.

• Decreased Operating expenses of $1.9 million driven primarily by:

◦ Decrease in acquisition related integration costs of approximately $6 million in the current period.

Offset in part by:

◦ Increase of $4 million related to costs associated with distribution channel and technology initiatives.

For the six month comparative period, operating earnings decreased $11.9 million, or 15.6%, over the prior year period due to:

• Decreased Gross margin of $10.2 million due to the decrease in sales discussed above and a decrease in gross margin percentage of 70 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;

◦ Loss of leverage of fixed costs due to reduced production volumes as well as unfavorable product mix which had a negative impact on margin of approximately 170 basis points;

◦ Increased commodity and product distribution costs which had a negative impact on margin of 30 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;

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

• 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:

These changes were offset in part by:

◦ The impact of incremental list price increases, net of contract price discounting, that increased gross margin percentage by 130 basis points.

• Increased Operating expenses of $2 million.

The following factors contributed to the change:

◦ Increase in acquisition related integration costs of approximately $13 million in the current period.

Offset in part 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.

◦ A decrease of approximately $4 million in restructuring charges related to reductions in the Company's workforce taken in the prior year;

◦ A decrease of approximately $4 million in compensation and benefit costs.

International Contract & Specialty

Three Months Ended

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

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

Net sales $ 246.3 $ 241.2 $ 5.1 $ 459.8 $ 469.5 $ (9.7)

3 unchanged sentences

Operating earnings % 9.7 % 9.9 % (0.2) % 7.2 % 7.5 % (0.3) %

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 $10 million;

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

• Unfavorable foreign currency translation of approximately $1 million.

For the three month comparative period, Net sales increased 2.1%, or 1.1% (*) on an organic basis, over the prior year period due to:

• Increase in sales volume of approximately $6 million, which was driven by sales growth within the APMEA and Europe regions;

• Favorable foreign currency translation of approximately $2 million;

offset in part by

• Incremental discounting, net of price increases, which negatively impacted sales approximately $3 million.

For the six month comparative period, Net sales decreased 2.1%, or 2.5% (*) on an organic basis, over the prior year period due to:

• Incremental discounting, net of price increases, which negatively impacted sales by approximately $7 million;

• Decreased sales volume of approximately $4 million, driven by lower sales volume within the textiles and Holly Hunt businesses, which more than offset volume increases in Europe and APMEA;

offset in part by

• Favorable foreign currency translation of approximately $2 million.

(*) Non-GAAP measurements;

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

For the three month comparative period, operating earnings decreased $2.1 million, or 18.4% over the prior year period due to:

• 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 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 .

Operating earnings were $23.8 million in both the second quarter of fiscal 2025 and the second quarter of fiscal 2024.

Although Operating earnings were flat to the prior year, summarized below are factors that most significantly impacted Operating earnings during the quarter:

• Increased Gross margin of $0.8 million due to the increase in net sales discussed above, offset by a decease in gross margin percentage of 50 basis points due primarily to incremental discounting, net of price increases.

• Increased Operating expenses of $0.8 million.

The following factors contributed to the change:

◦ Increase in variable selling and marketing costs of $3 million.

This increase was offset in part by:

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

For the six month comparative period, operating earnings decreased $2.1 million, or 6.0%, over the prior year period due to:

• Decreased Gross margin of $1 million due to the decrease in sales explained above, offset in part by an increase in gross margin percentage of 70 basis points due primarily to favorable product and business mix.

• Increased Operating expenses of $1 million which was largely due to an increase in integration related charges in the current year of $4 million.

This increase was offset in part by a decrease of $3 million in variable compensation and benefit costs and cost synergies achieved through the acquisition of Knoll.

Global Retail

Three Months Ended

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

Three Months Ended Six Months Ended

(Dollars in millions) November 30, 2024 December 2, 2023 Change November 30, 2024 December 2, 2023 Change

Net sales $ 219.9 $ 232.2 $ (12.3) $ 413.3 $ 431.2 $ (17.9)

3 unchanged sentences

Operating earnings % 4.0 % 6.3 % (2.3) % 3.2 % 3.9 % (0.7) %

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;

• Unfavorable foreign currency translation of approximately $1 million;

For the three month comparative period, Net sales decreased 5.3%, and 4.0% (*) on an organic basis, over the prior year period due to:

• A decrease in sales volume of approximately $13 million, driven primarily by a shift in timing of the cyber week holiday promotional period.

In the current year, the promotional period was split between the second and third quarters;

in the prior year the entire promotional period was included in the second quarter;

• Decrease of approximately $5 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;

offset in part by:

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

• Price increases, net of incremental discounting which increased sales by approximately $4 million;

• Favorable foreign currency translation of approximately $1 million.

For the six month comparative period, Net sales decreased 4.2%, and 2.0% (*) on an organic basis, over the prior year period due to:

• Decrease of approximately $10 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;

• A decrease in sales volume of approximately $9 million, driven in part by the shift in timing for how the cyber week promotional period fell within our fiscal quarters ;

offset in part by

• Price increases, net of incremental discounting, which increased sales by $1 million.

(*) Non-GAAP measurements;

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

For the three month comparative period, Operating earnings increased $2.3 million or 104.5% over the prior year period due to:

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

◦ 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.

For the three month comparative period, Operating earnings decreased $6.0 million or 40.8% over the prior year period due to:

• Decreased Gross margin of $6.3 million due to decrease in net sales discussed above and the gross margin percentage decrease of 30 basis points which was attributable to:

◦ The impact of increased inventory costs as compared to the prior year and loss of leverage of fixed costs negatively impacted margin by 170 basis points.

This decrease was offset in part by benefits realized from price increases, net of incremental discounting which positively impacted margin by 100 basis points as well as reduced product distribution costs which positively impacted margin by approximately 40 basis points.

• Decreased Operating expenses of $0.3 million primarily related to lower acquisition related integration costs and restructuring costs in the current period as compared to the prior year.

These increases were offset in part by increased variable selling costs in the current period.

For the six month comparative period, Operating earnings decreased $3.7 million, or 21.9% over the prior year period due to:

• Decreased Gross margin of $5.6 million due to the decrease in net sales discussed above, offset by an increase in gross margin percentage of 60 basis points.

The increase in gross margin percentage was due primarily to:

◦ Decreased product distribution costs and favorable product mix which had a favorable impact on gross margin percentage of 180 basis points;

◦ The impact of incremental list price increases, net of discounting, that increased gross margin percentage by 30 basis points.

These increases were offset in part by:

◦ The impact of increased inventory costs as compared to the prior year which negatively impacted margin by 100 basis points.

◦ Loss of leverage on fixed costs attributable to lower sales volumes as compared to the prior year which had an unfavorable impact on gross margin percentage of 50 basis points.

• Decreased Operating expenses of $2 million driven by restructuring charges related to reductions in the Company's workforce in the prior year that did not occur in the current year and benefit from the realization of cost synergies achieved through the acquisition of Knoll.

Corporate unallocated expenses totaled $17.5 million for the second quarter of fiscal 2025, an increase of $4.3 million from the second quarter of fiscal 2024 related primarily to higher stock based compensation expense.

Corporate unallocated expenses totaled $33.2 million for the first six months of fiscal 2025, an increase of $5.3 million from the same period of fiscal 2024 related primarily to higher stock based compensation expense.

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) August 31, 2024 September 2, 2023

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

(In millions) November 30, 2024 December 2, 2023

Cash provided by (used in):

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Cash Flows - Operating Activities

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.

Net cash provided by operating activities for the six months ended November 30, 2024, totaled $76.4 million compared to $213.4 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.

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

Working capital changes were primarily affected by payment of variable compensation in the six months ended November 30, 2024, as well as timing of collection of our receivables.

Cash Flows - Investing Activities

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.

Cash used in investing activities for the six months ended November 30, 2024, was $44.8 million, as compared to $41.3 million in the same period of the prior year.

The change in cash outflow in the current year, compared to the prior year, was primarily due to increased capital expenditures in the current year offset in part by:

• 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;

• In the six months ended December 2, 2023, the Company received $3.5 million of proceeds related to the sale of its investment in Maars.

At the end of the second quarter of fiscal 2025, there were outstanding commitments for capital purchases of $17.1 million.

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

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

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.

Capital expenditures for the first six months of fiscal 2025 were $44.9 million compared to $39.9 million for the six months ended December 2, 2023.

Cash Flows - Financing Activities

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.

Cash used in financing activities for the six months ended November 30, 2024, was $33.9 million, as compared to $170.8 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 $73.1 million in the current year compared to net payments of $71.7 million in the same period of the prior year.

This was offset in part by:

• The Company repurchased 2,500,379 shares at a cost of $66.9 million in the current year as compared to 3,060,686 share repurchases totaling $60.0 million in the same period of the prior year.

• Increased payments on our term loans in the current period as compared to the same period of the prior year of $5.0 million.

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.

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

At the end of the second 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.

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

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

(In millions) November 30, 2024 June 1, 2024

Cash and cash equivalents $ 221.1 $ 230.4

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Total liquidity $ 470.4 $ 552.7

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.

Of the Cash and cash equivalents noted above at the end of the second quarter of fiscal 2025, the Company had $207.8 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 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.

As of November 30, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $463.1 million with available borrowings on this facility of $249.3 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.

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

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

which is estimated to be approximately $347.5 million on November 30, 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.

40 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