MillerKnoll, Inc. (NASDAQ:MLKN) Q3 2022 Earnings Conference Call March 29, 2022 5:30 PM ET CompanyParticipants Kevin Veltman - Vice President of Investor Relations & Treasurer Andrea Owen - President & Chief Executive Officer Jeffrey Stutz - Chief Financial Officer John Michael - President of North America Contract Conference Call Participants Steven Ramsey - Thompson Research Greg Burns - Sidoti & Company Reuben Garner - Benchmark Alex Fuhrman - Craig-Hallum Capital Rudy Yang - Berenberg Operator Good even ...

[Part I — Financial Information](index=5&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) [Item 1: Financial Statements (Unaudited)](index=5&type=section&id=Item%201%3A%20Financial%20Statements%20(Unaudited)) This section presents MillerKnoll, Inc.'s unaudited condensed consolidated financial statements, reflecting the Knoll acquisition [Note 1: Description of Business and Basis of Presentation](index=11&type=section&id=Note%201%3A%20Description%20of%20Business%20and%20Basis%20of%20Presentation) MillerKnoll, Inc. acquired Knoll, Inc. on July 19, 2021, and reorganized its reportable segments - On July 19, 2021, the company acquired Knoll, Inc. and changed its name from Herman Miller, Inc. to MillerKnoll, Inc. on November 1, 2021[17](index=17&type=chunk) - Effective May 30, 2021, the company reorganized its reportable segments into: Global Retail, Americas Contract, International Contract, and Knoll[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) [Note 5: Acquisitions](index=15&type=section&id=Note%205%3A%20Acquisitions) This note details the July 19, 2021 acquisition of Knoll, Inc. for approximately $1.89 billion, resulting in $943.7 million goodwill Preliminary Acquisition Consideration for Knoll, Inc. | Consideration Type | Value (in millions) | | :--- | :--- | | Cash Consideration | $543.9 | | Knoll Preferred Stock | $254.4 | | Settlement of Knoll's debt | $376.9 | | Share Consideration (15,843,921 shares) | $688.3 | | Replacement Share-Based Awards | $22.4 | | **Total Preliminary Fair Value** | **$1,887.3** | Preliminary Fair Value of Net Assets Acquired | (In millions) | Fair Value | | :--- | :--- | | Total assets acquired | $2,634.1 | | Total liabilities assumed | $746.8 | | **Net Assets Acquired** | **$1,887.3** | | Goodwill | $943.7 | - Goodwill of **$943.7 million** was recorded in the Knoll segment and is primarily attributed to the assembled workforce and anticipated operational synergies. It is not expected to be tax-deductible[40](index=40&type=chunk) - From the acquisition date (July 19, 2021) to November 27, 2021, Knoll contributed **$492.7 million** in revenue and a net loss of **$73.3 million** to the consolidated results[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 14: Short-Term Borrowings and Long-Term Debt](index=25&type=section&id=Note%2014%3A%20Short-Term%20Borrowings%20and%20Long-Term%20Debt) The company secured a new credit agreement in July 2021 to finance the Knoll acquisition, significantly increasing total debt - In July 2021, to fund the Knoll acquisition, the company entered into a new credit agreement providing a **$725 million** revolving credit facility, a **$400 million** Term Loan A, and a **$625 million** Term Loan B[90](index=90&type=chunk) Total Debt Comparison | (In millions) | November 27, 2021 | May 29, 2021 | | :--- | :--- | :--- | | **Total debt** | **$1,391.2** | **$277.1** | [Note 16: Operating Segments](index=26&type=section&id=Note%2016%3A%20Operating%20Segments) Effective May 30, 2021, the company reorganized its reportable segments to include Americas Contract, International Contract, Global Retail, and Knoll - The company's reportable segments now consist of Americas Contract, International Contract, Global Retail, and Knoll. Corporate expenses are reported separately[97](index=97&type=chunk)[101](index=101&type=chunk) Segment Net Sales and Operating Earnings (Loss) for Three Months Ended Nov 27, 2021 | (In millions) | Net Sales | Operating Earnings (Loss) | | :--- | :--- | :--- | | Americas Contract | $361.5 | $6.3 | | International Contract | $125.1 | $15.2 | | Global Retail | $210.0 | $23.2 | | Knoll | $336.3 | $(20.6) | | Corporate | - | $(20.3) | | **Total** | **$1,026.3** | **$3.8** | [Note 17: Restructuring and Integration Expense](index=28&type=section&id=Note%2017%3A%20Restructuring%20and%20Integration%20Expense) Following the Knoll merger, the company initiated a multi-year integration program with expected pre-tax costs up to $100 million - The Knoll Integration program is expected to result in pre-tax costs not to exceed approximately **$100 million**[106](index=106&type=chunk) - For the six months ended November 27, 2021, the company incurred **$95.8 million** of costs related to the Knoll Integration. This includes **$46.4 million** in severance, **$15.5 million** in asset impairments, **$13.4 million** in debt-extinguishment costs, and **$20.5 million** in other integration costs[106](index=106&type=chunk) Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights | (Dollars in millions) | Three Months Ended Nov 27, 2021 | Three Months Ended Nov 28, 2020 | Six Months Ended Nov 27, 2021 | Six Months Ended Nov 28, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1,026.3 | $626.3 | $1,816.0 | $1,253.0 | | **Gross margin** | $350.6 | $244.2 | $628.1 | $494.2 | | **Operating earnings (loss)** | $3.8 | $71.0 | $(49.0) | $166.4 | | **Net earnings (loss) attributable to MillerKnoll, Inc.** | $(3.4) | $51.3 | $(64.9) | $124.2 | | **Diluted earnings (loss) per share** | $(0.05) | $0.87 | $(0.92) | $2.10 | Condensed Consolidated Balance Sheets Highlights | (Dollars in millions) | November 27, 2021 | May 29, 2021 | | :--- | :--- | :--- | | **Total current assets** | $1,214.6 | $891.5 | | **Total Assets** | $4,465.9 | $2,061.9 | | **Total current liabilities** | $857.3 | $500.8 | | **Total Liabilities** | $2,960.1 | $1,135.3 | | **Total Stockholders' Equity** | $1,436.4 | $849.6 | Condensed Consolidated Statements of Cash Flows Highlights | (Dollars in millions) | Six Months Ended Nov 27, 2021 | Six Months Ended Nov 28, 2020 | | :--- | :--- | :--- | | **Net Cash (Used in) Provided by Operating Activities** | $(57.6) | $214.6 | | **Net Cash Used in Investing Activities** | $(1,133.8) | $(24.4) | | **Net Cash Provided by (Used in) Financing Activities** | $1,035.5 | $(276.9) | | **Net Decrease in Cash and Cash Equivalents** | $(169.1) | $(76.1) | [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 FY2022 financial results, highlighting increased sales due to the Knoll acquisition, declining gross margin, and integration costs [Business Overview](index=31&type=section&id=Business%20Overview) Q2 FY2022 net sales increased significantly due to the Knoll acquisition, while gross margin declined due to cost pressures and integration expenses - Net sales increased **63.9%** to **$1,026.3 million**, while organic sales (excluding Knoll and currency effects) grew **11.1%** compared to the prior year's quarter[122](index=122&type=chunk) - Gross margin decreased to **34.2%** from **39.0%** YoY, driven by commodity cost pressures, rising labor and freight expenses, and a **$4.8 million** negative impact from Knoll purchase accounting[122](index=122&type=chunk) Q2 FY2022 Earnings Per Share | Metric | Q2 FY2022 | Q2 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Diluted (Loss) EPS | $(0.05) | $0.87 | (105.7)% | | Adjusted Diluted EPS* | $0.51 | $0.89 | (42.7)% | [Analysis of Results for Three and Six Months](index=35&type=section&id=Analysis%20of%20Results%20for%20Three%20and%20Six%20Months) Q2 FY2022 net sales rose by $400 million, primarily from the Knoll acquisition, while gross margin and operating expenses were impacted by costs - The **$400 million** YoY increase in Q2 net sales was primarily driven by a **$330 million** contribution from the Knoll acquisition, with the remainder from organic growth across other segments[146](index=146&type=chunk) - Q2 gross margin was negatively impacted by approximately **330 basis points** from commodity/freight costs, **70 basis points** from increased labor costs, and **50 basis points** from Knoll purchase accounting amortization[147](index=147&type=chunk)[148](index=148&type=chunk) - The **$173.6 million** increase in Q2 operating expenses included **$99 million** from Knoll's ongoing operations, **$41 million** in acquisition/integration charges, and **$11 million** in amortization of purchased intangibles[150](index=150&type=chunk) [Operating Segment Results](index=40&type=section&id=Operating%20Segment%20Results) Q2 FY2022 segment performance varied, with Americas Contract and Global Retail facing margin pressures, while International Contract showed strong growth, and Knoll reported an operating loss - **Americas Contract:** Q2 organic sales grew **3.9%**, but operating earnings fell from **$39.1 million** to **$6.3 million** due to a **760 basis point** drop in gross margin from cost pressures[158](index=158&type=chunk)[159](index=159&type=chunk) - **International Contract:** Q2 organic sales grew **23.2%**, and operating earnings increased from **$12.9 million** to **$15.2 million**, driven by strong sales volume across all geographies[160](index=160&type=chunk)[161](index=161&type=chunk) - **Global Retail:** Q2 organic sales grew **18.3%**, but operating earnings decreased from **$29.3 million** to **$23.2 million** due to a **420 basis point** drop in gross margin (freight costs) and higher operating expenses[162](index=162&type=chunk)[163](index=163&type=chunk) - **Knoll:** For Q2, the segment recorded **$336.3 million** in sales and an operating loss of **$(20.6) million**, which includes **$27 million** in integration costs and **$16 million** in amortization of acquisition-related intangibles[164](index=164&type=chunk)[165](index=165&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Cash used in operations significantly increased for the six months ended November 27, 2021, primarily due to the Knoll acquisition and working capital changes Total Liquidity Position | (In millions) | November 27, 2021 | May 29, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $227.3 | $396.4 | | Marketable securities | $7.4 | $7.7 | | Availability under syndicated revolving line of credit | $346.5 | $265.2 | | **Total liquidity** | **$581.2** | **$669.3** | - Cash used in investing activities for the six months was **$1,133.8 million**, primarily due to the **$1,088.5 million** net cash outflow for the Knoll acquisition[173](index=173&type=chunk) - Cash provided by financing activities was **$1,035.5 million**, driven by net debt proceeds of **$1,007.0 million** and credit facility proceeds of **$587.5 million** to finance the Knoll acquisition[175](index=175&type=chunk) [Item 3: Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported, with key risks remaining interest rates, commodity prices, and foreign exchange rates - There have been no material changes to market risk disclosures since the last Form 10-K. Key risks remain interest rates, commodity prices, and foreign exchange[193](index=193&type=chunk) - The principal foreign currencies in which the Company conducts business include the British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar, Chinese renminbi, and the Danish krone[195](index=195&type=chunk) [Item 4: Controls and Procedures](index=48&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of November 27, 2021, with Knoll's internal controls currently undergoing integration - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of November 27, 2021[196](index=196&type=chunk) - The company is in the process of integrating Knoll's internal controls over financial reporting, which is the only significant change to internal controls during the quarter[197](index=197&type=chunk) [Part II — Other Information](index=49&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) [Item 1: Legal Proceedings](index=49&type=section&id=Item%201%3A%20Legal%20Proceedings) There have been no material changes in legal proceedings since the last Annual Report on Form 10-K - There have been no material changes in legal proceedings since the last Annual Report on Form 10-K[199](index=199&type=chunk) [Item 1A: Risk Factors](index=49&type=section&id=Item%201A%3A%20Risk%20Factors) An updated risk factor highlights the negative impact of a continued shortage of qualified labor on the company's business and earnings - An updated risk factor was added concerning the negative impact of a continued shortage of qualified labor on the company's business, production, and earnings[201](index=201&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 84,106 shares during Q2 FY2022 under its $250 million authorization plan, with $222.3 million remaining Share Repurchase Activity for Q2 FY2022 | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | 8/29/21-9/25/21 | 25,588 | $42.34 | $224.6 | | 9/26/21-10/30/21 | 18,455 | $39.23 | $223.9 | | 10/31/21-11/27/21 | 40,063 | $38.57 | $222.3 | | **Total** | **84,106** | - | - | [Item 6: Exhibits](index=50&type=section&id=Item%206%3A%20Exhibits) This section lists exhibits filed with the Form 10-Q report, including corporate governance documents and Sarbanes-Oxley certifications - Exhibits filed include corporate governance documents (Articles of Incorporation, Bylaws), a compensatory plan, and Sarbanes-Oxley certifications[206](index=206&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales were just under $1.03 billion, up 64% on a reported basis and 11% organically compared to last year [24] - Orders for the quarter reached $1.16 billion, an increase of 84% year-over-year, with organic orders at $796 million, reflecting a sequential improvement of 6% and a 26% increase over the prior year [25] - Adjusted gross margin was 34.8%, down from 39% the previous year, primarily due to rising commodity costs and inflationary pressures [27][28] - Adjusted operating margin for the consolidated business was 5.9%, compared to 11.7% in the prior year [31] - The company reported a consolidated net loss per share of $0.05, while adjusted earnings per share were $0.51, excluding special charges related to the integration of Knoll [32] Business Line Data and Key Metrics Changes - Global Retail orders were up almost 21% year-over-year, with sales growth of approximately 18% [25] - The Americas Contract segment saw net sales increase by 4% and new orders improve by 29% year-over-year [26] - The Knoll segment reported year-on-year sales and orders increasing by 5% and 30%, respectively [26] - The International Contract segment experienced orders up 30% and sales up 23% over the same quarter last year, with European orders specifically up 42% [27] Market Data and Key Metrics Changes - Demand in Europe, including the UK, was particularly strong, contributing to the overall growth in the International Contract segment [27] - The company faced challenges such as inflationary pressures, supply chain disruptions, and labor shortages, which impacted its ability to ship orders [11][24] Company Strategy and Development Direction - The integration of Herman Miller and Knoll has created a stronger organization focused on long-term success, with a priority on building the MillerKnoll dealer network [9][16] - The company aims to achieve cost synergies of $100 million within two years of closing the Knoll acquisition, with expectations to increase run rate savings to $120 million by the end of year three [13][14] - The focus is on leveraging the combined portfolio and distribution network to enhance product offerings and customer choice [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic pressures and deliver on cost synergies despite challenges [23] - The company anticipates continued strong demand across all segments, with expectations for order pacing to remain robust [45] - Management highlighted the need to reimagine workplaces to meet the evolving expectations of the post-pandemic workforce [18][19] Other Important Information - The company has launched new e-commerce sites in France and Germany, exceeding early sales expectations [11] - The backlog at the end of the quarter was $967 million, reflecting a $130 million increase from the beginning of the quarter [76] Q&A Session Summary Question: How much of the organic orders increase is pricing-driven versus volume? - Management indicated that order trends were consistent across the quarter, with no significant pull-ahead impact from price increases [35][36] Question: What is the expected impact of price increases on future results? - Management expects that the retail business will benefit from price actions sooner than the contract business, with a gradual improvement in gross margins anticipated [39][42] Question: How is the company managing the backlog situation? - Management noted that while orders continue to outpace shipments, they are focused on improving throughput and managing discounting methodologies to balance demand and production capacity [66][69] Question: Can you elaborate on the international business profitability? - Management highlighted that the international business has been performing well, with less severe inflationary pressures compared to North America, contributing to better profitability [62][63] Question: What are the drivers of retail growth? - The retail segment's growth is primarily driven by assortment expansion and improvements in e-commerce and brick-and-mortar channels [88][90]

[Part I — Financial Information](index=4&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This section provides unaudited condensed consolidated financial statements, detailed notes, management's discussion and analysis, market risk disclosures, and internal controls information [Item 1 Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including statements of comprehensive income, balance sheets, cash flows, and stockholders' equity, along with detailed notes [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%E2%80%94%20Three%20Months%20ended%20August%2028%2C%202021%20and%20August%2029%2C%202020) This statement presents the company's net sales, gross margin, operating results, and earnings per share for the three months ended August 28, 2021, and August 29, 2020 | (Dollars in millions, except share data) | August 28, 2021 | August 29, 2020 | | :-------------------------------------- | :-------------- | :-------------- | | Net sales | $789.7 | $626.8 | | Cost of sales | 512.2 | 376.8 | | Gross margin | 277.5 | 250.0 | | Operating (loss) earnings | (52.8) | 95.4 | | Net (loss) earnings | (59.9) | 73.4 | | Net (loss) earnings attributable to Herman Miller, Inc. | $(61.5) | $73.0 | | (Loss) Earnings per share — diluted | $(0.93) | $1.24 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%94%20August%2028%2C%202021%20and%20May%2029%2C%202021) This balance sheet details the company's assets, liabilities, and stockholders' equity as of August 28, 2021, and May 29, 2021, reflecting significant changes from the Knoll acquisition | (Dollars in millions, except share data) | August 28, 2021 | May 29, 2021 | | :--------------------------------------- | :-------------- | :----------- | | Total Assets | $4,460.5 | $2,061.9 | | Goodwill | 1,283.9 | 364.2 | | Indefinite-lived intangibles | 493.0 | 97.6 | | Total Liabilities | 2,912.3 | 1,135.3 | | Long-term debt | 1,298.4 | 274.9 | | Total Stockholders' Equity | 1,475.6 | 849.6 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%94%20Three%20Months%20Ended%20August%2028%2C%202021%20and%20August%2029%2C%202020) This statement outlines the net cash flows from operating, investing, and financing activities for the three months ended August 28, 2021, and August 29, 2020 | (Dollars in millions) | August 28, 2021 | August 29, 2020 | | :-------------------- | :-------------- | :-------------- | | Net Cash (Used in) Provided by Operating Activities | $(51.7) | $115.9 | | Net Cash Used in Investing Activities | $(1,104.7) | $(5.1) | | Acquisitions, net of cash received | (1,088.5) | — | | Net Cash Provided by (Used in) Financing Activities | 1,001.6 | (276.5) | | Net Decrease in Cash and Cash Equivalents | (161.3) | (157.4) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%E2%80%94%20Three%20Months%20Ended%20August%2028%2C%202021%20and%20August%2029%2C%202020) This statement presents the changes in total stockholders' equity, including net earnings (loss) and shares issued for the Knoll acquisition, for the periods presented | (Dollars in millions, except share data) | May 29, 2021 | August 28, 2021 | | :--------------------------------------- | :----------- | :-------------- | | Total Stockholders' Equity | $849.6 | $1,475.6 |\ | Net earnings (loss) | — | (61.5) |\ | Shares issued for the acquisition of Knoll | — | 688.3 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on the company's business, accounting policies, revenue, leases, acquisitions, inventories, goodwill, employee benefits, earnings per share, stock compensation, income taxes, fair value measurements, commitments, debt, comprehensive loss, operating segments, restructuring, and variable interest entities [Note 1 - Description of Business and Basis of Presentation](index=8&type=section&id=Note%201%20-%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Herman Miller, Inc. (to be renamed MillerKnoll, Inc.) designs, manufactures, and distributes interior furnishings globally, with the acquisition of Knoll, Inc. completed on July 19, 2021, and a segment reorganization effective May 30, 2021 - Acquisition of Knoll, Inc. completed on **July 19, 2021**[14](index=14&type=chunk) - Proposed name change to **MillerKnoll, Inc.** (subject to shareholder approval)[14](index=14&type=chunk) - New reportable segments: **Americas Contract, International Contract, Global Retail, and Knoll**, effective **May 30, 2021**[18](index=18&type=chunk)[22](index=22&type=chunk) [Note 2 - Recently Issued Accounting Standards](index=9&type=section&id=Note%202%20-%20Recently%20Issued%20Accounting%20Standards) The company adopted ASU No. 2018-14 and ASU 2019-12 on May 30, 2021, with no material effect on the consolidated financial statements - Adopted **ASU No. 2018-14** (Retirement Benefits) and **ASU 2019-12** (Income Taxes) on **May 30, 2021**[19](index=19&type=chunk)[20](index=20&type=chunk) - No **material impact** on financial statements from adopted ASUs[19](index=19&type=chunk)[20](index=20&type=chunk) [Note 3 - Revenue from Contracts with Customers](index=9&type=section&id=Note%203%20-%20Revenue%20from%20Contracts%20with%20Customers) Total net sales for the three months ended August 28, 2021, increased to $789.7 million, primarily driven by the Knoll acquisition and growth in Global Retail and International Contract segments | (In millions) | August 28, 2021 | August 29, 2020 | | :------------ | :-------------- | :-------------- | | Net Sales | $789.7 | $626.8 | Revenue by Contract Type (Three Months Ended August 28, 2021) | Contract Type | Amount (in millions) | | :------------------------------ | :------------------- | | Product revenue (single performance obligation) | $736.3 | | Product revenue (multiple performance obligations) | $49.6 | | Service revenue | $1.9 | | Other | $1.9 | | Total | $789.7 | Revenue by Segment (Three Months Ended August 28, 2021) | Segment | Amount (in millions) | | :--------------------- | :------------------- | | Americas Contract | $325.3 | | International Contract | $99.0 | | Retail | $212.6 | | Knoll | $156.4 | [Note 4 - Leases](index=11&type=section&id=Note%204%20-%20Leases) Total lease costs increased to $22.0 million for the three months ended August 28, 2021, with total undiscounted future minimum lease payments of $516.2 million for operating leases | (In millions) | August 28, 2021 | August 29, 2020 | | :------------ | :-------------- | :-------------- | | Total Lease Costs | $22.0 | $13.4 | Undiscounted Annual Future Minimum Lease Payments (as of August 28, 2021) | Fiscal Year | Amount (in millions) | | :---------- | :------------------- | | 2022 | $88.5 | | 2023 | $83.5 | | 2024 | $74.3 | | 2025 | $65.8 | | 2026 | $50.3 | | Thereafter | $153.8 | | Total | $516.2 | - Weighted average remaining lease term for operating leases: **7 years** (as of August 28, 2021)[30](index=30&type=chunk) - Weighted average discount rate for operating leases: **2.4%** (as of August 28, 2021)[30](index=30&type=chunk) [Note 5 - Acquisitions](index=11&type=section&id=Note%205%20-%20Acquisitions) Herman Miller acquired Knoll, Inc. on July 19, 2021, for $1,887.3 million, resulting in significant goodwill and intangible assets, with Knoll contributing $156.4 million in revenue and a net loss of $45.9 million - Acquisition of Knoll, Inc. completed on **July 19, 2021**[33](index=33&type=chunk) Preliminary Acquisition Date Fair Value of Consideration Transferred for Knoll | Consideration Type | Amount (in millions) | | :----------------- | :------------------- | | Cash Consideration | $800.7 | | Share Consideration | $688.3 | | Replacement Share-Based Awards | $22.4 | | Consideration for payment to settle Knoll's outstanding debt | $376.9 | | Total | $1,887.3 | Preliminary Fair Value of Assets Acquired and Liabilities Assumed (as of acquisition date) | Item | Fair Value (in millions) | | :-------------------- | :----------------------- | | Total assets acquired | $2,646.4 | | Total liabilities assumed | $759.2 | | Net Assets Acquired | $1,887.2 | | Goodwill | $925.9 | | Intangible assets | $770.4 | - Knoll contributed **$156.4 million** of Revenue and **$45.9 million** of Net Loss to the consolidated statements for the period from acquisition date to August 28, 2021[39](index=39&type=chunk) Pro Forma Results of Operations (Three Months Ended) | (In millions) | August 28, 2021 | August 29, 2020 | | :------------ | :-------------- | :-------------- | | Net sales | $943.9 | $891.8 | | Net earnings attributable to Herman Miller, Inc. | $(30.2) | $30.9 | [Note 6 - Inventories, net](index=14&type=section&id=Note%206%20-%20Inventories%2C%20net) Total inventories significantly increased to $446.2 million as of August 28, 2021, primarily in finished goods, work in process, and raw materials, reflecting the Knoll acquisition | (In millions) | August 28, 2021 | May 29, 2021 | | :------------------------ | :-------------- | :----------- | | Finished goods and work in process | $329.1 | $166.7 | | Raw materials | 117.1 | 46.9 | | Total | $446.2 | $213.6 | [Note 7 - Goodwill and Indefinite-Lived Intangibles](index=14&type=section&id=Note%207%20-%20Goodwill%20and%20Indefinite-Lived%20Intangibles) Goodwill and indefinite-lived intangible assets substantially increased due to the Knoll acquisition, with no impairment identified for reorganized reporting units | (In millions) | Goodwill | Indefinite-lived Intangible Assets | | :-------------------------------- | :------- | :--------------------------------- | | May 29, 2021 | $364.2 | $97.6 | | Acquisition of Knoll | 925.9 | 396.9 | | August 28, 2021 | $1,283.9 | $493.0 | - No identified indicators of impairment for reporting units or indefinitely-lived intangible assets during the three months ended August 28, 2021[49](index=49&type=chunk) [Note 8 - Employee Benefit Plans](index=16&type=section&id=Note%208%20-%20Employee%20Benefit%20Plans) The net periodic benefit cost for defined benefit pension plans varied between domestic and international plans, with a weighted-average expected long-term rate of return on plan assets of 4.98% Net Periodic Benefit Cost (Three Months Ended August 28, 2021) | (In millions) | Domestic Pension Benefits | International Pension Benefits | | :------------ | :------------------------ | :----------------------------- | | Service cost | $0.1 | $— | | Interest cost | $0.5 | $0.8 | | Expected return on plan assets | $(1.0) | $(1.8) | | Net amortization loss | $— | $1.7 | | Net periodic benefit cost | $(0.4) | $0.7 | - Weighted-average expected long-term rate of return on plan assets is **4.98%**[50](index=50&type=chunk) [Note 9 - Earnings Per Share](index=16&type=section&id=Note%209%20-%20Earnings%20Per%20Share) Diluted loss per share for the three months ended August 28, 2021, was $(0.93), a significant decrease from $1.24 in the prior year, based on an increased number of weighted-average common shares outstanding | | August 28, 2021 | August 29, 2020 | | :-------------------------------------------------------------------------------- | :-------------- | :-------------- | | (Loss) Earnings per Share - Diluted | $(0.93) | $1.24 | | Denominator for basic EPS, weighted-average common shares outstanding | 66,302,214 | 58,831,305 | | Denominator for diluted EPS | 66,302,214 | 58,964,268 | [Note 10 - Stock-Based Compensation](index=17&type=section&id=Note%2010%20-%20Stock-Based%20Compensation) Stock-based compensation expense increased significantly to $15.1 million, primarily due to the Knoll acquisition and accelerated expenses from workforce reductions | (In millions) | August 28, 2021 | August 29, 2020 | | :---------------------------- | :-------------- | :-------------- | | Stock-based compensation expense | $15.1 | $1.5 | - Increase in stock-based compensation expense driven by the addition of Knoll's equity-based compensation awards and accelerated expense related to workforce reductions as part of the Knoll integration[53](index=53&type=chunk) [Note 11 - Income Taxes](index=17&type=section&id=Note%2011%20-%20Income%20Taxes) The effective tax rate decreased to 15.3% for the three months ended August 28, 2021, primarily due to a pre-tax book loss and non-deductible acquisition costs related to Knoll | | August 28, 2021 | August 29, 2020 | | :-------------------- | :-------------- | :-------------- | | Effective Tax Rate | 15.3% | 22.0% | - The decrease in the effective tax rate for the three months ended August 28, 2021, resulted from a pre-tax book loss for the quarter coupled with non-deductible discrete compensation and acquisition costs in connection with the Knoll acquisition[55](index=55&type=chunk) [Note 12 - Fair Value Measurements](index=18&type=section&id=Note%2012%20-%20Fair%20Value%20Measurements) The fair value of long-term debt increased to $1,317.2 million due to new debt for the Knoll acquisition, and the company holds various financial instruments measured at fair value Carrying Value and Fair Value of Long-Term Debt (in millions) | | August 28, 2021 | May 29, 2021 | | :------------ | :-------------- | :----------- | | Carrying value | $1,342.9 | $277.1 | | Fair value | $1,317.2 | $284.8 | - Contingent consideration obligation related to Knoll's acquisition of Fully: **$13.5 million** (as of August 28, 2021), classified as a **Level 3 measurement**[65](index=65&type=chunk) - Fair value of interest rate swap agreements (liability): **$15.7 million** (as of August 28, 2021). These are designated as **cash flow hedges**[77](index=77&type=chunk)[75](index=75&type=chunk) - Foreign currency forward contracts are not designated as hedging instruments; changes in fair value are recorded within 'Other (income) expense, net' in the Consolidated Statements of Comprehensive Income[73](index=73&type=chunk) [Note 13 - Commitments and Contingencies](index=22&type=section&id=Note%2013%20-%20Commitments%20and%20Contingencies) The warranty reserve increased to $69.8 million, partly due to the Knoll acquisition, and the company maintains performance bonds and standby letters of credit with no material legal proceedings Changes in Warranty Reserve (in millions) | | August 28, 2021 | August 29, 2020 | | :------------------------------ | :-------------- | :-------------- | | Accrual Balance — beginning | $60.1 | $59.2 | | Accrual for warranty matters | 5.4 | 4.6 | | Settlements and adjustments | (5.8) | (3.5) | | Acquired through business acquisition | 10.1 | — | | Accrual Balance — ending | $69.8 | $60.3 | - Maximum financial exposure related to performance bonds: approximately **$7.3 million** (as of August 28, 2021)[82](index=82&type=chunk) - Maximum financial exposure from standby letters of credit: approximately **$15.4 million** (as of August 28, 2021)[83](index=83&type=chunk) [Note 14 - Short-Term Borrowings and Long-Term Debt](index=24&type=section&id=Note%2014%20-%20Short-Term%20Borrowings%20and%20Long-Term%20Debt) Total debt significantly increased to $1,342.9 million due to new credit agreements for the Knoll acquisition, including a $725 million revolving line of credit, a $400 million Term Loan A, and a $625 million Term Loan B Short-term borrowings and long-term debt (in millions) | | August 28, 2021 | May 29, 2021 | | :-------------------------------------- | :-------------- | :----------- | | Total debt | $1,342.9 | $277.1 | | Long-term debt | $1,298.4 | $274.9 | - In July 2021, the Company entered into a new credit agreement to finance the Knoll acquisition, providing for a **$725 million** syndicated revolving line of credit, a **$400 million** Term Loan A, and a **$625 million** Term Loan B[87](index=87&type=chunk) - A loss on extinguishment of debt of approximately **$13.4 million** was recognized from the repayment of private placement notes[87](index=87&type=chunk) Available borrowings under the syndicated revolving line of credit (in millions) | | August 28, 2021 | May 29, 2021 | | :-------------------------------------- | :-------------- | :----------- | | Syndicated revolving line of credit borrowing capacity | $725.0 | $500.0 | | Available borrowings under the syndicated revolving line of credit | $394.6 | $265.2 | [Note 15 - Accumulated Other Comprehensive Loss](index=26&type=section&id=Note%2015%20-%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss increased to $(80.3) million, primarily driven by cumulative translation adjustments and unrealized losses on interest rate swap agreements Accumulated Other Comprehensive Loss (in millions) | | May 29, 2021 | August 28, 2021 | | :-------------------------------------- | :----------- | :-------------- | | Balance | $(65.1) | $(80.3) | | Net current period other comprehensive (loss) income | — | (15.2) | [Note 16 - Operating Segments](index=26&type=section&id=Note%2016%20-%20Operating%20Segments) Effective May 30, 2021, the company reorganized its reportable segments into Americas Contract, International Contract, Global Retail, and Knoll, with the Knoll segment contributing $156.4 million in net sales but an operating loss of $53.6 million - New reportable segments: **Americas Contract, International Contract, Global Retail, and Knoll**, effective **May 30, 2021**[92](index=92&type=chunk)[93](index=93&type=chunk) Net Sales by Segment (Three Months Ended August 28, 2021) | Segment | Amount (in millions) | | :--------------------- | :------------------- | | Americas Contract | $325.3 | | International Contract | $99.0 | | Global Retail | $212.6 | | Knoll | $156.4 | | Total | $789.7 | Operating Earnings (Loss) by Segment (Three Months Ended August 28, 2021) | Segment | Amount (in millions) | | :--------------------- | :------------------- | | Americas Contract | $10.5 | | International Contract | $11.3 | | Global Retail | $27.8 | | Knoll | $(53.6) | | Corporate | $(48.8) | | Total | $(52.8) | [Note 17 - Restructuring Expense](index=27&type=section&id=Note%2017%20-%20Restructuring%20Expense) The company incurred $55.6 million in Knoll Integration costs for the three months ended August 28, 2021, with total integration costs expected not to exceed $100 million - Knoll Integration costs incurred for the three months ended August 28, 2021: **$55.6 million**[103](index=103&type=chunk) - Knoll Integration costs breakdown: **$30.5 million** for severance and employee benefit costs, **$13.4 million** for non-cash debt extinguishment, and **$11.7 million** for other integration costs[103](index=103&type=chunk) - Total Knoll Integration costs are expected not to exceed approximately **$100 million**[103](index=103&type=chunk) Summary of Integration Expenses by Segment (Three Months Ended August 28, 2021) | Segment | Amount (in millions) | | :--------------------- | :------------------- | | Americas Contract | $1.0 | | Knoll | $29.4 | | Corporate | $25.2 | | Total | $55.6 | [Note 18 - Variable Interest Entities](index=31&type=section&id=Note%2018%20-%20Variable%20Interest%20Entities) A long-term note receivable with a third-party dealer, previously a variable interest in a VIE, was paid in full during the quarter ended August 28, 2021 - A long-term note receivable of **$1.2 million** with a third-party dealer, previously a variable interest in a VIE, was paid in full during the quarter ended August 28, 2021[114](index=114&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial performance for the three months ended August 28, 2021, was significantly impacted by the acquisition of Knoll, leading to a 26.0% increase in net sales to $789.7 million but a 175.0% decrease in diluted EPS to $(0.93) [Business Overview](index=32&type=section&id=Business%20Overview) Herman Miller, Inc. (soon to be MillerKnoll) saw net sales increase by 26.0% to $789.7 million in Q1 fiscal 2022, driven by the Knoll acquisition, but gross margin declined and operating expenses more than doubled due to acquisition-related costs, resulting in a diluted loss per share of $(0.93) Key Financial Highlights (Three Months Ended) | Metric | August 28, 2021 | August 29, 2020 | % Change | | :----- | :-------------- | :-------------- | :------- | | Net sales | $789.7M | $626.8M | 26.0% | | Orders | $916.5M | $556.0M | 64.8% | | Gross margin | 35.1% | 39.9% | -4.8 ppts | | Operating expenses | $330.3M | $154.6M | 113.6% | | Diluted loss per share | $(0.93) | $1.24 | -175.0% | | Adjusted diluted earnings per share | $0.49 | $1.24 | -60.5% | - Organic net sales decreased by **0.4%** to **$629.6 million**, and organic orders decreased by **34.5%** to **$747.9 million**, excluding the impact of acquisitions and foreign currency translation[118](index=118&type=chunk) - Gross margin was negatively impacted by **$6.3 million** in charges related to Knoll acquisition purchase accounting, commodity cost pressures, and rising labor and freight expenses[118](index=118&type=chunk) - Operating expenses included **$69 million** of transaction and integration related costs and **$26.2 million** of charges related to initial purchase accounting effects of the Knoll merger[118](index=118&type=chunk) [COVID-19 Update](index=33&type=section&id=COVID-19%20Update) The company continues to adapt to the COVID-19 pandemic by maintaining employee safety, leveraging digital investments, and capitalizing on emerging work-from-home and office redesign trends - The company's multi-channel go-to-market approach and digital investments (e.g., reimagined websites, Work from Home landing page, Herman Miller Professional) enabled it to pivot quickly and capitalize on new opportunities arising from changing customer purchasing behaviors[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Capitalizing on emerging work-from-home and 'home is my castle' trends, as well as the shift to offices as destinations requiring redesigns and provision of healthy home work environments[120](index=120&type=chunk)[126](index=126&type=chunk) - Manufacturing facilities operate at near-normal capacity with enhanced safety precautions, and all retail studios and stores are open at full capacity[127](index=127&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=34&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP financial measures, such as Adjusted Earnings per Share and Organic Sales Growth, to provide a clearer view of ongoing operational performance by excluding specific acquisition, integration, and restructuring charges - Non-GAAP financial measures include **Adjusted Earnings per Share** and **Organic Sales Growth (Decline)**[129](index=129&type=chunk) - Adjustments to GAAP measures exclude: acquisition and integration charges, amortization of purchased intangibles, debt restructuring charges, restructuring expenses, special charges, and related tax effects[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) Organic Net Sales (Three Months Ended August 28, 2021) | Segment | Net Sales, as reported | Adjustments (Acquisitions & Currency) | Net Sales, organic | | :--------------------- | :--------------------- | :------------------------------------ | :----------------- | | Americas Contract | $325.3M | $(0.8)M | $324.5M | | International Contract | $99.0M | $(4.7)M | $94.3M | | Retail | $212.6M | $(1.8)M | $210.8M | | Knoll | $156.4M | $(156.4)M | $— | | Intersegment Elimination | $(3.6)M | $3.6M | $— | | Total | $789.7M | $(152.8)M - $7.3M | $629.6M | Adjusted Earnings per Share - Diluted (Three Months Ended) | | August 28, 2021 | August 29, 2020 | | :-------------------------------------------------------------------------------- | :-------------- | :-------------- | | (Loss) Earnings per Share - Diluted | $(0.93) | $1.24 | | Add: Amortization of purchased intangibles, after tax | 0.37 | — | | Add: Acquisition and integration charges, after tax | 0.90 | — | | Add: Debt extinguishment, after tax | 0.15 | — | | Adjusted Earnings per Share - Diluted | $0.49 | $1.24 | [Analysis of Results for Three Months](index=37&type=section&id=Analysis%20of%20Results%20for%20Three%20Months) For the three months ended August 28, 2021, net sales increased by 26.0% to $789.7 million, primarily due to the Knoll acquisition, while gross margin declined by 4.8 percentage points and operating expenses surged by 113.6% due to acquisition-related costs Key Financial Measures (Three Months Ended) | (In millions, except share data) | August 28, 2021 | August 29, 2020 | % Change | | :------------------------------- | :-------------- | :-------------- | :------- | | Net sales | $789.7 | $626.8 | 26.0 % | | Gross margin | 277.5 | 250.0 | 11.0 % | | Operating (loss) earnings | (52.8) | 95.4 | (155.3)% | | Net (loss) earnings attributable to Herman Miller, Inc. | $(61.5) | $73.0 | (184.2)% | | (Loss) Earnings per share — diluted | $(0.93) | $1.24 | (175.0)% | | Orders | $916.5 | $556.0 | 64.8 % | | Backlog | $835.9 | $400.0 | 109.0 % | - Net sales increase drivers: **$153 million** from Knoll acquisition, **$45 million** from Global Retail sales volumes, **$7 million** from foreign currency translation, offset by **$46 million** decrease in Americas Contract sales volumes[140](index=140&type=chunk) - Gross margin percentage decrease drivers: **360 basis points** from commodity, freight, and product distribution costs; **110 basis points** from increased labor costs; **100 basis points** from amortization of purchased intangibles related to Knoll acquisition. Partially offset by **100 basis points** from favorable channel mix[140](index=140&type=chunk) - Operating expenses increase drivers: **$27 million** transaction costs and **$42 million** integration costs from Knoll acquisition, **$49 million** Knoll operating expenses, **$10 million** increased compensation/benefit costs, **$8 million** increased studio costs, **$6 million** increased marketing/selling costs[141](index=141&type=chunk) - Other expenses, net: **$18.0 million** (Aug 28, 2021) compared to **$1.6 million** (Aug 29, 2020), primarily due to a **$13.4 million** loss on extinguishment of debt and increased interest expense related to Knoll acquisition financing[141](index=141&type=chunk) [Operating Segment Results](index=40&type=section&id=Operating%20Segment%20Results) The company's operating segments experienced varied performance, with Americas Contract sales decreasing, International Contract sales increasing but earnings declining, Global Retail sales surging but earnings decreasing, and the Knoll segment contributing sales but reporting a significant operating loss due to integration costs [Americas Contract ("Americas")](index=41&type=section&id=Americas%20Contract%20(%22Americas%22)) Net sales for Americas Contract decreased by 12.1% to $325.3 million, and operating earnings declined by 81.9% to $10.5 million, primarily due to reduced sales volumes and higher costs Americas Contract Segment Results (Three Months Ended) | (Dollars in millions) | August 28, 2021 | August 29, 2020 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Net sales | $325.3 | $370.1 | $(44.8) | | Gross margin % | 30.8 % | 37.6 % | (6.8)% | | Operating earnings | 10.5 | 57.9 | (47.4) | | Operating earnings % | 3.2 % | 15.6 % | (12.4)%| - Net sales decreased **12.1%** (**12.3% organic**) due to decreased sales volumes of approximately **$45.3 million**, primarily from COVID-19 impacts, partially offset by **$1 million** from foreign currency translation[147](index=147&type=chunk) - Operating earnings decreased **$47.4 million** due to a **$38.9 million** decrease in gross margin (**680 basis points** drop from higher commodity, labor, freight costs) and an **$8.5 million** increase in operating expenses (compensation, marketing, product development)[147](index=147&type=chunk) [International Contract ("International")](index=42&type=section&id=International%20Contract%20(%22International%22)) International Contract net sales increased by 5.3% to $99.0 million, driven by sales volume growth and foreign currency translation, but operating earnings decreased by 30.2% due to higher operating expenses International Contract Segment Results (Three Months Ended) | (Dollars in millions) | August 28, 2021 | August 29, 2020 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Net sales | $99.0 | $94.0 | $5.0 | | Gross margin % | 34.0 % | 35.4 % | (1.4)% | | Operating earnings | 11.3 | 16.2 | (4.9) | | Operating earnings % | 11.4 % | 17.2 % | (5.8)% | - Net sales increased **5.3%** (**0.3% organic**) due to approximately **$4 million** in increased sales volume (Europe) and **$5 million** from foreign currency translation, partially offset by **$4 million** reduction from price increases net of discounting[149](index=149&type=chunk) - Operating earnings decreased **$4.9 million** due to increased operating expenses of **$5.3 million**, driven by compensation, benefits, product development, and IT projects[149](index=149&type=chunk) [Global Retail](index=43&type=section&id=Global%20Retail) Global Retail net sales significantly increased by 30.7% to $212.6 million, driven by broad-based demand, but operating earnings decreased by 11.7% due to a decline in gross margin and increased operating expenses Global Retail Segment Results (Three Months Ended) | (Dollars in millions) | August 28, 2021 | August 29, 2020 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Net sales | $212.6 | $162.7 | $49.9 | | Gross margin % | 43.6 % | 47.8 % | (4.2)% | | Operating earnings | 27.8 | 31.5 | (3.7) | | Operating earnings % | 13.1 % | 19.4 % | (6.3)% | - Net sales increased **30.7%** (**29.6% organic**) due to approximately **$45 million** in increased sales volumes across brands, geographies, and channels, and **$3 million** from incremental list price increases[151](index=151&type=chunk) - Operating earnings decreased **$3.7 million** due to a **420 basis point** decrease in gross margin percentage (production/material costs, freight, unfavorable product mix) and an **$18.7 million** increase in operating expenses (new studio costs, compensation, IT investments)[151](index=151&type=chunk) [Knoll](index=44&type=section&id=Knoll) The newly acquired Knoll segment contributed $156.4 million in net sales but reported an operating loss of $53.6 million, primarily due to integration-related costs and amortization expense of intangible assets Knoll Segment Results (Three Months Ended August 28, 2021) | (Dollars in millions) | Amount | | :-------------------- | :----- | | Net sales | $156.4 | | Gross margin | $51.0 | | Gross margin % | 32.6 % | | Operating (loss) | $(53.6)| | Operating earnings % | (34.3)%| - Knoll's operating loss of **$53.6 million** includes **$29.4 million** related to integration costs (severance and employee separations) and **$32.5 million** related to amortization expense of acquisition-related intangible assets[156](index=156&type=chunk) [Corporate](index=44&type=section&id=Corporate) Corporate unallocated expenses totaled $48.8 million for the first quarter of fiscal 2022, a significant increase primarily driven by $38.5 million in transaction and integration costs related to the Knoll acquisition - Corporate unallocated expenses totaled **$48.8 million** for Q1 fiscal 2022, an increase of **$38.6 million** from Q1 fiscal 2021[153](index=153&type=chunk) - The increase was driven by **$38.5 million** of transaction and integration costs recorded in the quarter related to the Knoll acquisition[153](index=153&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Cash used in operating activities was $51.7 million, investing activities used $1,104.7 million primarily for the Knoll acquisition, and financing activities provided $1,001.6 million through new debt issuance, with total liquidity at $637.7 million Net Change in Cash and Cash Equivalents (Three Months Ended) | (In millions) | August 28, 2021 | August 29, 2020 | | :---------------------------- | :-------------- | :-------------- | | Cash (used in) provided by: | | | | Operating activities | $(51.7) | $115.9 | | Investing activities | (1,104.7) | (5.1) | | Financing activities | 1,001.6 | (276.5) | | Effect of exchange rate changes | (6.5) | 8.3 | | Net change in cash and cash equivalents | $(161.3) | $(157.4) | - Cash used in operating activities was primarily due to a **$133.3 million** decrease in net earnings and a **$65.6 million** increase in current assets (accounts receivable, inventory, prepaid expenses)[156](index=156&type=chunk)[157](index=157&type=chunk) - Cash used in investing activities was primarily due to the **$1,088.5 million** cash outflow for the acquisition of Knoll[158](index=158&type=chunk) - Cash provided from financing activities was primarily due to **$1,007.0 million** net borrowings from a new credit agreement and a **$366.6 million** draw on the credit facility[160](index=160&type=chunk) Total Liquidity (in millions) | | August 28, 2021 | May 29, 2021 | | :-------------------------------------- | :-------------- | :----------- | | Cash and cash equivalents | $235.1 | $396.4 | | Marketable securities | 8.0 | 7.7 | | Availability under syndicated revolving line of credit | 394.6 | 265.2 | | Total liquidity | $637.7 | $669.3 | - Expected full-year capital purchases for fiscal 2022 are between **$150 million** and **$160 million**, significantly higher than **$59.8 million** in fiscal 2021, primarily for facilities, equipment, and Knoll's inclusion[159](index=159&type=chunk) Contractual Obligations (as of August 28, 2021, in millions) | Obligation | Total | 2022 | 2023-2024 | 2025-2026 | Thereafter | | :---------------------------------------- | :-------- | :------ | :-------- | :-------- | :--------- | | Short-term borrowings and long-term debt | $1,265.0 | $103.1 | $57.5 | $87.5 | $1,016.9 | | Estimated interest on debt obligations | 169.7 | 29.2 | 55.4 | 52.8 | 32.3 | | Operating leases | 516.2 | 88.5 | 157.8 | 116.1 | 153.8 | | Pension and other post employment benefit plans funding | 27.0 | 1.9 | 5.1 | 5.4 | 14.6 | | Shareholder dividends | 14.9 | 14.9 | — | — | — | | Other liabilities | 30.0 | 5.1 | 16.6 | 3.9 | 4.4 | | Total | $2,022.8 | $242.7 | $292.4 | $265.7 | $1,222.0 | [Critical Accounting Policies](index=47&type=section&id=Critical%20Accounting%20Policies) The company's financial statements are prepared using U.S. GAAP, which necessitates certain estimates and judgments - Financial statements are prepared in accordance with **U.S. GAAP**, requiring certain estimates and judgments[175](index=175&type=chunk) [New Accounting Standards](index=47&type=section&id=New%20Accounting%20Standards) Information regarding recently issued accounting standards is provided in Note 2 to the Condensed Consolidated Financial Statements - Refer to **Note 2** to the Condensed Consolidated Financial Statements for information on recently issued accounting standards[176](index=176&type=chunk) [Safe Harbor Provisions](index=47&type=section&id=Safe%20Harbor%20Provisions) This report contains forward-looking statements that are subject to various risks and uncertainties, including economic conditions, competitive pressures, and the ability to integrate acquisitions, with actual results potentially differing materially from forecasts - The report contains forward-looking statements that are subject to risks, uncertainties, and assumptions[177](index=177&type=chunk) - Risks include: success of growth strategy, economic conditions, raw material availability, global expansion, changes in tax legislation, ability to integrate acquisitions, competitive-pricing pressures, and public health crises[177](index=177&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no material changes in market risks related to interest rates and commodity prices, but the company faces foreign exchange risk from international operations and uses foreign currency forward contracts to mitigate these risks - No material changes in market risks from interest rates and commodity prices during the first three months of fiscal 2022[179](index=179&type=chunk) - The company is exposed to foreign exchange risk from sales and expenses transacted in foreign currencies (e.g., British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar, Chinese renminbi, Danish krone)[180](index=180&type=chunk)[181](index=181&type=chunk) - Foreign currency forward contracts are utilized to reduce foreign currency exposure risks, with changes in fair value reported in earnings[181](index=181&type=chunk) [Item 4 Controls and Procedures](index=48&type=section&id=Item%204%20Controls%20and%20Procedures) As of August 28, 2021, the company's disclosure controls and procedures were deemed effective, with Knoll's internal controls currently being integrated following its acquisition - Disclosure controls and procedures were evaluated and deemed **effective** as of **August 28, 2021**[182](index=182&type=chunk) - The company is integrating Knoll's internal controls over financial reporting following the **July 19, 2021** acquisition[183](index=183&type=chunk) - No other material changes in internal control over financial reporting occurred during the quarter ended **August 28, 2021**[183](index=183&type=chunk) [Part II — Other Information](index=49&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This section includes disclosures on legal proceedings, updated risk factors, unregistered equity sales, a list of exhibits, and official signatures [Item 1 Legal Proceedings](index=49&type=section&id=Item%201%20Legal%20Proceedings) There have been no material changes in the company's legal proceedings from those reported in the Annual Report on Form 10-K for the year ended May 29, 2021 - No material changes in the company's legal proceedings from those set forth in the Annual Report on Form 10-K for the year ended **May 29, 2021**[185](index=185&type=chunk) [Item 1A Risk Factors](index=49&type=section&id=Item%201A%20Risk%20Factors) A new risk factor highlights that a continued shortage of qualified labor could negatively affect the business, potentially leading to decreased production, inability to meet demand, and higher labor costs - A new risk factor identifies that a continued shortage of qualified labor could negatively affect the business and materially reduce earnings[187](index=187&type=chunk) - This shortage impacts the company's ability to produce and meet customer demand, and could lead to higher wages and reduced operating results[187](index=187&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has one outstanding share repurchase plan authorized for $250.0 million, under which 259,663 shares were repurchased during the quarter ended August 28, 2021 - The company has one outstanding share repurchase plan with a **$250.0 million** authorization and no specified expiration date[188](index=188&type=chunk) Share Repurchase Activity (Three Months Ended August 28, 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------- | :------------------------------- | :--------------------------- | | 6/27/21-7/24/21 | 26,564 | $37.12 | | 7/25/21-8/28/21 | 233,099 | $43.09 | | Total | 259,663 | ~$40.11 | - As of **August 28, 2021**, approximately **$225.68 million** remained available for repurchase under the plan[189](index=189&type=chunk) [Item 6 Exhibits](index=51&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed with the 10-Q report, including credit agreements, stock incentive plans, CEO/CFO certifications, and XBRL taxonomy documents - Exhibits filed include Credit Agreements, Knoll, Inc. Stock Incentive Plans, Certificates of the Chief Executive Officer and Chief Financial Officer (pursuant to Sarbanes-Oxley Act), and XBRL Taxonomy documents[193](index=193&type=chunk)[194](index=194&type=chunk) [Signatures](index=53&type=section&id=Signatures) The report is duly signed on October 6, 2021, by Andrea R. Owen, President and Chief Executive Officer, and Jeffrey M. Stutz, Chief Financial Officer, on behalf of Herman Miller, Inc - The report was signed on **October 6, 2021**, by Andrea R. Owen (President and Chief Executive Officer) and Jeffrey M. Stutz (Chief Financial Officer) for Herman Miller, Inc[198](index=198&type=chunk)

Herman Miller, Inc. (MLHR) Q1 2022 Earnings Conference Call September 29, 2021 5:30 PM ET Company Participants Antonella Pilo - Vice President of Investor Relations and FP&A Andrea Owen - President and Chief Executive Officer Jeffrey Stutz - Chief Financial Officer John Michael - President of North America Contract Debbie Propst - President of Retail Kevin Veltman - Vice President of Investor Relations and Treasurer Chris Baldwin - Group President MillerKnoll Conference Call Participants Greg Burns - Sidoti ...

Washington, D.C. 20549 __________________________________________ FORM 10-K (Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ☒ 1934 For the fiscal year ended May 29, 2021 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ☐ OF 1934 For the transition period from to Commission file number: 001-15141 __________________________________________ HERMAN MILLER, INC. (Exact name of registrant ...

| --- | --- | |---------------------|-------| | | | | NASDAQ: MLHR | | | | | | | | | Design for the Good | | | of Humankind | | FORWARD LOOKING STATEMENTS This information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management's beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the company ...

Financial Data and Key Metrics Changes - Consolidated sales for Q4 2021 increased by 31% compared to the previous year, with orders up 29% year-over-year [9] - Diluted earnings per share (EPS) on a GAAP basis for the quarter were $0.12, while adjusted EPS was $0.56, reflecting an increase of over 400% from the same quarter last year [13] - Adjusted operating margins improved to 7%, a rise of 370 basis points compared to the same quarter last year [14] Business Line Data and Key Metrics Changes - The Retail segment achieved record-breaking performance with sales up 106% year-over-year and orders up 81%, with a segment operating margin of 19.2% [10] - The North American contract segment saw order rates increase sequentially by 21% from Q3, remaining flat compared to the prior year [12] - The International Contract segment experienced a 55% increase in orders compared to the previous year [12] Market Data and Key Metrics Changes - Order trends showed a sequential growth of 23% across all business segments from Q3 to Q4, with North American Contract at 21% and Retail at 26% [50] - In the first three weeks of June, orders maintained at approximately $60 million per week, indicating continued momentum [51] Company Strategy and Development Direction - The company is focused on integrating the planned acquisition of Knoll, with expectations for a seamless integration process [19][20] - A digital-first approach is emphasized, aiming to serve both contract and consumer audiences effectively [17] - The company anticipates re-establishing quarterly sales and earnings guidance as the pandemic subsides, with projected sales for Q1 between $640 million and $670 million [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow and create value, citing a strong position in the industry [16] - The management acknowledged inflationary pressures impacting gross margins, with expectations for continued cost increases in Q1 [24][25] - There is optimism regarding the recovery of the North American market, particularly as larger metropolitan areas begin to open up [32] Other Important Information - The company is actively monitoring commodity trends and is prepared to implement additional price increases if necessary [28] - Supply chain challenges are being managed, with some impacts on product lead times and conversion rates noted [39][40] Q&A Session Summary Question: Can you walk us through your outlook for margins for the first quarter? - Management explained that the lower-than-normal effective tax rate in Q4 impacted EPS, and they expect sequential improvement in Q1 due to higher revenue guidance [23] Question: What are the drivers of gross margin? - Management highlighted inflationary pressures from commodity costs and direct labor, estimating $4 million and $1 million increases respectively [24][25] Question: How have order patterns trended in the North American Contract business? - Management noted significant strengthening in order patterns, with year-over-year comps up nearly 30% in Q1 [31] Question: Can you comment on recent order trends? - Management confirmed that order trends improved throughout the quarter, with a 23% sequential growth across all segments [50] Question: What is the impact of supply chain challenges on sales? - Management acknowledged some impacts from container shortages and labor availability but stated they are managing these challenges effectively [36] Question: How is the retail margin expected to evolve? - Management indicated that investments in infrastructure and digital capabilities are expected to support margin growth in the long term [62] Question: What are the spending patterns in retail? - Management reported an increase in average order value, particularly in studio channels, and noted strong customer acquisition from new stores [75][76]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 27, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-15141 HERMAN MILLER, INC. (Exact name of registrant as specified in its charter) ...

Herman Miller, Inc. (MLHR) Q3 2021 Earnings Conference Call March 18, 2021 9:30 AM ET Company Participants Kevin Veltman - Vice President of Investor Relations and Treasurer Andrea Owen - President and Chief Executive Officer Jeffrey Stutz - Chief Financial Officer Debbie Propst - President of Retail John Michael - President of North America Contract Benjamin Groom - Chief Digital Officer Conference Call Participants Reuben Garner - The Benchmark Company, LLC Gregory Burns - Sidoti & Company, LLC Steven Ram ...