MillerKnoll(MLKN) - 2025 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited) Unaudited financial statements reveal a net loss and decreased earnings, primarily due to impairment charges and increased operating expenses Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a $(12.7) million net loss for the three months and decreased nine-month net earnings, driven by impairment charges | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net sales | $876.2 | $872.3 | $2,708.1 | $2,739.5 | | Operating (loss) earnings | $(82.2) | $42.8 | $(4.5) | $143.5 | | Net (loss) earnings attributable to MillerKnoll, Inc. | $(12.7) | $22.2 | $20.2 | $72.4 | | (Loss) earnings per share - diluted | $(0.19) | $0.30 | $0.29 | $0.97 | Condensed Consolidated Balance Sheets Total assets decreased to $3,895.4 million, primarily due to reductions in goodwill and indefinite-lived intangibles | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Total Assets | $3,895.4 | $4,043.6 | | Goodwill | $1,118.5 | $1,226.3 | | Indefinite-lived intangibles | $422.6 | $465.5 | | Total Liabilities | $2,572.9 | $2,584.6 | | Total Stockholders' Equity | $1,254.1 | $1,385.1 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased to $138.4 million for the nine months, mainly due to lower net earnings | Metric | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Net Cash Provided by Operating Activities | $138.4 | $273.9 | | Net Cash Used in Investing Activities | $(60.3) | $(61.0) | | Net Cash Used in Financing Activities | $(127.6) | $(213.1) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(60.6) | $0.1 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $1,254.1 million, influenced by net losses, comprehensive losses, and share repurchases | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Total Stockholders' Equity | $1,254.1 | $1,385.1 | | Accumulated other comprehensive loss | $(149.5) | $(92.7) | - Net (loss) earnings attributable to MillerKnoll, Inc. for the nine months ended March 1, 2025, was $20.2 million, down from $72.4 million in the prior year[7] - Common stock repurchased and retired for the nine months ended March 1, 2025, totaled $84.8 million, compared to $101.0 million in the prior year[9] Notes to Condensed Consolidated Financial Statements Detailed disclosures for financial statements cover business, accounting standards, revenue, inventories, goodwill, and other key financial notes Note 1 - Description of Business and Basis of Presentation MillerKnoll designs, manufactures, and distributes interior furnishings globally, recently reorganizing its reportable segments effective March 1, 2025 - MillerKnoll operates globally, designing, manufacturing, selling, and distributing interior furnishings for residential, office, healthcare, and educational settings[14] - Products are sold through independent contract office furniture dealers, direct customer sales, owned and independent retailers, and eCommerce platforms[14] - Effective March 1, 2025, the company reorganized its reportable segments into North America Contract, International Contract, and Global Retail, recasting historical results[19][21] Note 2 - Recently Issued Accounting Standards The company is evaluating new ASUs (Segment Reporting, Income Taxes, Expense Disaggregation) expected to modify disclosures but not materially affect financials - ASU 2023-07 (Segment Reporting) is effective for the annual period ending May 31, 2025, and interim periods beginning with the first quarter of fiscal 2026; expected to modify disclosures but not materially affect financials[28] - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024; expected to modify disclosures but not materially affect financials[29] - ASU 2024-03 (Expense Disaggregation) is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027; the impact on consolidated financial statements is currently under evaluation[30] Note 3 - Revenue from Contracts with Customers Net sales for the three months ended March 1, 2025, increased to $876.2 million, while nine-month net sales decreased to $2,708.1 million | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net Sales | $876.2 | $872.3 | $2,708.1 | $2,739.5 | | Product revenue (single performance obligation) | $812.7 | $809.9 | $2,506.0 | $2,526.7 | | Segment | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | | North America Contract | $468.2 | $461.7 | | International Contract | $145.5 | $153.1 | | Global Retail | $262.5 | $257.5 | Note 4 - Inventories Total inventories slightly decreased to $425.5 million as of March 1, 2025, with stable finished goods and work in process | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Finished goods and work in process | $314.6 | $314.3 | | Raw materials | $110.9 | $114.3 | | Total Inventories | $425.5 | $428.6 | Note 5 - Goodwill and Indefinite-Lived Intangibles Goodwill decreased to $1,118.5 million due to $92.3 million impairment charges, with indefinite-lived intangibles also decreasing | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Goodwill | $1,118.5 | $1,226.3 | | Indefinite-lived Intangibles | $422.6 | $465.5 | - Goodwill impairment charges of $92.3 million were recognized in Q3 FY25, affecting Global Retail ($30.1 million) and Holly Hunt ($62.2 million), driven by reduced sales/profitability projections and increased discount rates[39][44] - Indefinite-lived intangible impairment charges of $37.7 million were recognized in Q3 FY25, related to the Knoll and Muuto trade names[40][50] - Segment reorganization resulted in reassignment of $26.1 million goodwill from Americas Contract to International Contract and $33.0 million from Holly Hunt to Global Retail[49] Note 6 - Employee Benefit Plans The company completed the Knoll pension plan termination in Q2 FY25, resulting in a $1.5 million gain, with minor net periodic benefit costs - Knoll domestic defined-benefit pension plan termination completed in Q2 FY25, resulting in a $1.5 million pension plan termination gain for the nine months ended March 1, 2025[55][56] | Metric | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Net periodic benefit cost (Domestic) | $0.1 | $(1.8) | | Net periodic benefit cost (International) | $(0.5) | $(0.7) | Note 7 - Earnings Per Share Diluted loss per share for the three months was $(0.19), a decrease from $0.30 in the prior year, with reduced dilutive shares | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | (Loss) earnings per share - basic | $(0.19) | $0.31 | $0.29 | $0.98 | | (Loss) earnings per share - diluted | $(0.19) | $0.30 | $0.29 | $0.97 | | Potentially dilutive shares (3 months) | — | 1,426,092 | | | | Potentially dilutive shares (9 months) | | | 911,323 | 664,376 | Note 8 - Stock-Based Compensation Stock-based compensation expense increased to $6.1 million for the three months and $24.0 million for the nine months, with higher tax effects | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Stock-based compensation expense | $6.1 | $5.4 | $24.0 | $17.1 | | Related income tax effect | $1.5 | $1.3 | $5.9 | $4.1 | Note 9 - Income Taxes The effective tax rate significantly increased to 88.3% for three months and 139.5% for nine months, driven by intangible asset impairment | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Effective tax rate | 88.3% | 16.0% | 139.5% | 20.5% | - The significant increase in the effective tax rate was primarily due to the impact of the estimated annual effective tax rate on the pre-tax loss, driven by the impairment of indefinite-lived intangible assets[61][62] | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Liability for interest and penalties | $1.0 | $0.8 | | Liability for uncertain tax positions, current | $1.6 | $1.5 | Note 10 - Fair Value Measurements Fair value of long-term debt increased to $1,428.7 million, with the company using interest rate swaps and foreign currency forward contracts | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Long-term debt carrying value | $1,341.8 | $1,347.8 | | Long-term debt fair value | $1,428.7 | $1,411.6 | - Interest rate swap agreements are designated as cash flow hedges, with fair value changes recorded in Accumulated other comprehensive loss[75] - Foreign currency forward contracts are not designated as hedging instruments; changes in fair value are recorded in net income[73] - Unrealized loss on interest rate swap agreement for the nine months ended March 1, 2025, was $(22.1) million, compared to $(1.2) million in the prior year[7] Note 11 - Commitments and Contingencies The company maintains a $69.3 million warranty reserve and does not expect material adverse effects from current legal proceedings | Metric | March 1, 2025 | March 2, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Warranty Accrual Balance — ending | $69.3 | $70.6 | - Maximum financial exposure related to performance bonds was approximately $8.9 million as of March 1, 2025[82] - Maximum financial exposure from standby letters of credit was approximately $12.6 million as of March 1, 2025[83] - Management believes the outcome of current legal proceedings will not have a material adverse effect on the Company's Consolidated Financial Statements[84] Note 12 - Short-Term Borrowings and Long-Term Debt Total debt slightly decreased to $1,341.8 million, with $414.0 million outstanding on the revolving credit line | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Total debt | $1,341.8 | $1,347.8 | | Syndicated revolving line of credit borrowing capacity | $725.0 | $725.0 | | Borrowings under syndicated revolving line of credit | $414.0 | $390.0 | | Available borrowings under syndicated revolving line of credit | $298.4 | $322.3 | - During the nine months ended March 1, 2025, the company made principal payments of $25.0 million on Term Loan A and $4.7 million on Term Loan B[86] Note 13 - Accumulated Other Comprehensive Loss Accumulated other comprehensive loss increased to $(149.5) million, primarily due to foreign currency translation adjustments and interest rate swap losses | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Accumulated Other Comprehensive Loss | $(149.5) | $(92.7) | - Net current period other comprehensive loss for the nine months ended March 1, 2025, was $(56.8) million, compared to income of $6.5 million in the prior year[89] - Key drivers for the change include foreign currency translation adjustments and interest rate swap losses[89] Note 14 - Operating Segments The company reorganized segments into North America Contract, International Contract, and Global Retail, with varying sales and operating earnings - Segment reorganization effective March 1, 2025, into North America Contract, International Contract, and Global Retail[90] | Segment | Net Sales (3 months) | Operating Earnings (Loss) (3 months) | | :----------------------- | :------------------- | :----------------------------------- | | North America Contract | $468.2 | $17.0 | | International Contract | $145.5 | $9.9 | | Global Retail | $262.5 | $(94.4) | | Corporate | | $(14.7) | | Total | $876.2 | $(82.2) | Note 15 - Restructuring and Integration Expense The company incurred $4.2 million in restructuring charges and $28.3 million in Knoll Integration costs, with a $2.8 million gain from a facility sale | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Restructuring charges | $4.2 | $1.7 | $4.2 | $8.7 | | Knoll Integration costs | $0 | $7.6 | $28.3 | $18.4 | - The 2025 restructuring plan primarily involves involuntary workforce reductions[106] - The sale of a manufacturing facility in Q3 FY25 resulted in a gain of approximately $2.8 million[105] Note 16 - Variable Interest Entities The company holds $14.1 million in long-term notes receivable from dealers, representing its maximum exposure to loss in VIEs | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Carrying value of long-term notes receivable | $14.1 | $17.9 | - The carrying value of these notes represents the company's maximum exposure to loss[110] - The company is not deemed to be the primary beneficiary for any of these variable interest entities[110] Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Q3 FY25 saw slight sales and orders increase, but gross margin decreased and operating expenses surged 40.9% due to $130.0 million impairment charges - Net sales for the three months ended March 1, 2025, were $876.2 million, an increase of 0.4% year-over-year. Organic net sales increased by 1.8% to $885.8 million[115] - Orders for the three months ended March 1, 2025, were $853.1 million, an increase of 2.7% year-over-year. Organic orders increased by 4.1% to $862.2 million[115] - Gross margin in the third quarter was 37.9%, a decrease of 70 basis points year-over-year, primarily due to unfavorable channel and product mix, lower fixed cost leverage, and higher commodity costs[115] - Operating expenses increased by $120.4 million or 40.9% year-over-year, primarily driven by $130.0 million of indefinite-lived intangible impairment charges[115] - Diluted loss per share was $0.19 for the three months ended March 1, 2025, compared to diluted earnings per share of $0.30 in the prior year. Adjusted diluted earnings per share was $0.44, a 2.2% decrease[115] Business Overview MillerKnoll designs, manufactures, and distributes interior furnishings globally, with reporting segments reorganized effective March 1, 2025 - MillerKnoll designs, manufactures, sells, and distributes interior furnishings for various environments globally[112] - Effective March 1, 2025, reporting segments were modified to North America Contract, International Contract, and Global Retail[113][114] Reconciliation of Non-GAAP Financial Measures The company provides non-GAAP measures like Adjusted EPS and Organic Growth, excluding specific items for better investor comparability - Non-GAAP financial measures include Adjusted Earnings per Share and Organic Growth (Decline)[119] - Adjusted Earnings per Share excludes amortization of Knoll purchased intangibles, integration charges, restructuring expenses, impairment charges, Knoll pension plan termination charges, and related tax effects[119][123] - Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the North America HAY eCommerce channel[120] | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Adjusted earnings per share - diluted | $0.44 | $0.45 | $1.33 | $1.41 | Key Highlights Net sales increased 0.4% in Q3 FY25, but operating earnings turned into a $(82.2) million loss due to a 40.9% surge in operating expenses | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | % Change | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | % Change | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Net sales | $876.2 | $872.3 | 0.4 % | $2,708.1 | $2,739.5 | (1.1)% | | Operating (loss) earnings | $(82.2) | $42.8 | (292.1)% | $(4.5) | $143.5 | (103.1)% | | Orders | $853.1 | $830.3 | 2.7 % | $2,710.9 | $2,688.0 | 0.9 % | | Backlog | $686.4 | $639.4 | 7.4 % | | | | - Operating expenses increased by 40.9% for the three months ended March 1, 2025[128] Net Sales Analysis Q3 FY25 net sales increased 0.4% due to volume and price, while nine-month net sales decreased 1.1% due to volume and currency impacts - Net sales increased by $3.9 million (0.4%) in Q3 FY25, driven by increased sales volume in Global Retail ($9 million) and North America Contract ($7 million), and price increases ($1 million)[132] - Q3 FY25 sales increase was partially offset by foreign currency translation ($10 million decrease) and the closure of the HAY eCommerce channel ($2 million decrease)[132] - Net sales decreased by $31.4 million (1.1%) for the first nine months of FY25, primarily due to decreased sales volume in North America Contract ($30 million) and Global Retail ($12 million), and the HAY eCommerce channel closure ($12 million)[132] - The nine-month decrease was partially offset by increased sales volume in International Contract ($18 million) and price increases ($14 million)[132] Gross Margin Analysis Gross margin decreased to 37.9% in Q3 FY25 and 38.6% for nine months, primarily due to increased commodity costs and unfavorable mix | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Gross margin | 37.9% | 38.6% | 38.6% | 39.0% | - Q3 FY25 gross margin decrease (70 basis points) was primarily due to increased commodity costs (40 basis points), unfavorable channel and product mix (30 basis points), and loss of leverage on lower sales volumes (30 basis points), partially offset by reduced freight and product distribution costs (30 basis points)[132] - Nine-month FY25 gross margin decrease (40 basis points) was primarily due to loss of leverage on lower sales volumes (40 basis points), unfavorable channel and product mix (20 basis points), and increased commodity costs (20 basis points), partially offset by price increases (30 basis points) and reduced freight costs[133] Operating Expenses Analysis Operating expenses surged 40.9% in Q3 FY25 due to $130 million impairment charges, increasing 13.7% for the nine-month period | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | % Change | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | % Change | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Operating expenses | $414.6 | $294.2 | 40.9 % | $1,050.2 | $923.6 | 13.7 % | - Q3 FY25 operating expenses increase was primarily driven by $130 million in impairment charges (goodwill and indefinite-lived intangibles) and increased restructuring charges ($3 million)[139] - Nine-month FY25 operating expenses increase was primarily driven by $130 million in impairment charges, Knoll acquisition integration charges ($10 million), and increased selling and marketing costs ($4 million)[147] - Offsetting factors for the nine-month period included decreased incentive compensation ($12 million) and decreased restructuring charges ($5 million)[147] Other Income/Expense Analysis Net Other expense increased to $18.6 million in Q3 FY25 and $53.1 million for nine months, driven by reduced benefit income and interest expense | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | % Change | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | % Change | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------ | :------------------------------ | :------- | | Other expenses, net | $18.6 | $15.3 | 21.6 % | $53.1 | $50.6 | 4.9 % | - The increase in Other expense was primarily due to reduced net periodic benefit income (Knoll pension plan termination) and increased interest expense, partially offset by reduced foreign currency losses[147] Income Taxes Analysis The effective tax rate significantly increased to 88.3% for three months and 139.5% for nine months, driven by intangible asset impairment | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Effective tax rate | 88.3% | 16.0% | 139.5% | 20.5% | - The substantial increase in the effective tax rate was primarily due to the impact of the estimated annual effective tax rate on the pre-tax loss, driven by the impairment of indefinite-lived intangible assets[61][62] Operating Segment Results Segments reorganized into North America Contract, International Contract, and Global Retail, showing varied sales and operating earnings, with Global Retail reporting a significant loss - Segment reorganization effective March 1, 2025, into North America Contract, International Contract, and Global Retail[143] | Segment | Net Sales (3 months) | Operating Earnings (Loss) (3 months) | | :----------------------- | :------------------- | :----------------------------------- | | North America Contract | $468.2 | $17.0 | | International Contract | $145.5 | $9.9 | | Global Retail | $262.5 | $(94.4) | | Corporate | | $(14.7) | | Total | $876.2 | $(82.2) | North America Contract Net sales increased 1.4% to $468.2 million, but operating earnings decreased 33.3% due to gross margin decline and increased operating expenses | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Change | | :----------------------- | :------------------------------- | :------------------------------- | :----- | | Net sales | $468.2 | $461.7 | $6.5 | | Operating earnings | $17.0 | $25.5 | $(8.5) | | Operating earnings % | 3.6 % | 5.5 % | (1.9)% | - Net sales increased 1.4% (1.7% organically) due to increased sales volumes ($7 million), offset by unfavorable foreign currency translation ($1 million)[150] - Operating earnings decreased due to a 90 basis point decrease in gross margin (increased commodity costs, loss of fixed cost leverage) and increased operating expenses (impairment and restructuring charges)[151] International Contract Net sales decreased 5.0% to $145.5 million, and operating earnings decreased 43.4% due to gross margin decline and increased operating expenses | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Change | | :----------------------- | :------------------------------- | :------------------------------- | :----- | | Net sales | $145.5 | $153.1 | $(7.6) | | Operating earnings | $9.9 | $17.5 | $(7.6) | | Operating earnings % | 6.8 % | 11.4 % | (4.6)% | - Net sales decreased 5.0% (1.5% organically) due to unfavorable foreign currency translation ($5 million), incremental discounting ($1 million), and decreased sales volume ($1 million)[155] - Operating earnings decreased due to a 140 basis point decrease in gross margin (discounting, unfavorable product/business mix, loss of fixed cost leverage) and increased operating expenses (restructuring and impairment charges)[155] Global Retail Net sales increased 1.9% to $262.5 million, but operating earnings resulted in a $(94.4) million loss due to $108.8 million impairment charges | Metric | Three Months Ended March 1, 2025 | Three Months Ended March 2, 2024 | Change | | :----------------------- | :------------------------------- | :------------------------------- | :------- | | Net sales | $262.5 | $257.5 | $5.0 | | Operating (loss) earnings | $(94.4) | $12.1 | $(106.5) | | Operating earnings % | (36.0)% | 4.7 % | (40.7)% | - Net sales increased 1.9% (3.9% organically) due to a shift in cyber week holiday timing ($9 million increase) and price increases ($1 million increase), partially offset by unfavorable foreign currency translation ($3 million decrease) and HAY eCommerce channel closure (~$2 million decrease)[159] - Operating earnings decreased by $106.5 million, primarily due to $108.8 million in impairment charges incurred in the current quarter[158][159] Corporate Corporate unallocated expenses increased to $14.7 million for Q3 FY25 and $47.9 million for nine months, primarily due to higher stock-based compensation - Corporate unallocated expenses for Q3 FY25 were $14.7 million, an increase of $2.4 million YoY, primarily due to higher stock-based compensation expense[160] - For the first nine months of FY25, corporate unallocated expenses totaled $47.9 million, an increase of $7.7 million YoY, primarily due to higher stock-based compensation expense[160] Liquidity and Capital Resources Net cash from operating activities decreased to $138.4 million, with total liquidity at $468.2 million including cash and available credit | Metric | Nine Months Ended March 1, 2025 | Nine Months Ended March 2, 2024 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Cash provided by operating activities | $138.4 | $273.9 | | Cash used in financing activities | $(127.6) | $(213.1) | | Metric | March 1, 2025 | June 1, 2024 | | :--------------------------------------- | :-------------- | :------------- | | Cash and cash equivalents | $169.8 | $230.4 | | Availability under syndicated revolving line of credit | $298.4 | $322.3 | | Total liquidity | $468.2 | $552.7 | - Capital expenditures for the first nine months of fiscal 2025 were $68.1 million, compared to $56.5 million in the prior year[166] - The company repurchased 3,286,029 shares at a cost of $84.8 million in the current year, compared to 4,594,116 shares totaling $101.0 million in the prior year[174] - The company intends to repatriate $104.3 million of undistributed foreign earnings[172] Contractual Obligations No material changes in contractual obligations have occurred since the Annual Report on Form 10-K for the year ended June 1, 2024 - No material changes in contractual obligations since the Annual Report on Form 10-K for the year ended June 1, 2024[175] Guarantees Refer to Note 11 of the Condensed Consolidated Financial Statements for detailed information on guarantees - Information on guarantees is provided in Note 11 to the Condensed Consolidated Financial Statements[176] Variable Interest Entities Refer to Note 16 of the Condensed Consolidated Financial Statements for detailed information on variable interest entities - Information on variable interest entities is provided in Note 16 to the Condensed Consolidated Financial Statements[177] Contingencies Refer to Note 11 of the Condensed Consolidated Financial Statements for detailed information on contingencies - Information on contingencies is provided in Note 11 to the Condensed Consolidated Financial Statements[178] Critical Accounting Policies Critical accounting policies, especially for goodwill and intangibles, involve significant estimates, leading to $130.0 million in Q3 FY25 impairment charges - Goodwill is tested for impairment annually or more frequently if triggering events occur. A quantitative valuation was performed in Q3 FY25 due to lower-than-expected operating results[180][181] - A non-cash goodwill impairment charge of $92.3 million was recognized in Q3 FY25 for Global Retail and Holly Hunt reporting units, primarily due to reduced sales/profitability projections and increased discount rates[183] - Indefinite-lived trade name intangible assets are evaluated for impairment annually. A non-cash impairment charge of $37.7 million was recognized in Q3 FY25 related to the Knoll and Muuto trade names[189] Cautionary Note Regarding Forward-Looking Statements This section highlights forward-looking statements are subject to risks like economic conditions, government policies, and foreign currency fluctuations - The report contains forward-looking statements regarding future events, business strategies, acquisition benefits, and operating results[194] - These statements are subject to risks and uncertainties, including economic conditions, government policies, debt obligations, supply chain challenges, and foreign currency exchange fluctuations[194] - MillerKnoll does not undertake any obligation to update forward-looking statements, except as required by law[194] Item 3 Quantitative and Qualitative Disclosures about Market Risk Market risks from interest rates and commodity prices remain unchanged, with foreign exchange risk managed through forward contracts - Market risks from interest rates and commodity prices have not materially changed during the first nine months of fiscal 2025[195] - Foreign exchange risk arises from sales and expenses transacted in currencies other than the U.S. dollar, impacting production costs and profit margins[196] - The company uses foreign currency forward contracts to reduce risks associated with foreign currency exposures[196][197] Item 4 Controls and Procedures Disclosure controls and procedures were effective as of March 1, 2025, with no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed effective as of March 1, 2025[198] - There were no material changes in the company's internal control over financial reporting during the quarterly period ended March 1, 2025[199] PART II — OTHER INFORMATION Item 1 Legal Proceedings No material changes in the company's legal proceedings have occurred since the Annual Report on Form 10-K for the year ended June 1, 2024 - No material changes in the company's legal proceedings from those previously disclosed[200] Item 1A Risk Factors Updated risk factors highlight potential adverse effects from changes in U.S. trade policy and federal government spending - Changes to U.S. trade policy, including new or increased tariffs and changing import/export regulations, are expected to adversely affect operating results[202][203] - Changes in spending or budgetary policies of the U.S. Federal Government may materially adversely affect the business, as sales to the U.S. federal government represented approximately 4% of total net sales in fiscal year 2024[204] Item 2 Unregistered Sales of Equity Securities and Use of Proceeds The share repurchase plan was increased by $200 million, with $181.5 million remaining available, and 785,650 shares repurchased in the quarter - The Board of Directors approved an increase of $200 million to the share repurchase plan on July 16, 2024, bringing the total authorization to $250.0 million[205] - Approximate dollar value of shares available for purchase under the plan was $181.5 million as of March 1, 2025[205] | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :------------------------------- | :--------------------------- | | 12/1/2024 - 12/28/2024 | 226,598 | $24.27 | | 12/29/2024 - 1/25/2025 | 314,769 | $22.05 | | 1/26/2025 - 3/1/2025 | 244,283 | $22.29 | | Total | 785,650 | | - No shares of common stock were sold that were not registered under the Securities Act of 1933 during the period[208] Item 5 Other Information No director or officer adopted or terminated a Rule 10b5-1 or Non-Rule 10b5-1 Trading Arrangement during the reporting period - No director or officer adopted or terminated a Rule 10b5-1 or Non-Rule 10b5-1 Trading Arrangement during the period[209] Item 6 Exhibits This section lists exhibits including CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906) and XBRL-related documents - Exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[210] - XBRL Taxonomy Extension documents (Schema, Calculation, Label, Presentation, Definition Linkbase) are filed[210] Signatures The report was signed by Andrea R. Owen, President and CEO, and Jeffrey M. Stutz, CFO, on March 31, 2025 - The report was signed by Andrea R. Owen, President and Chief Executive Officer, and Jeffrey M. Stutz, Chief Financial Officer[212] - The signing date for the report was March 31, 2025[212]