MLKN US Equity☆

Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the issues discussed in Management's Discussion and Analysis in conjunction with the Company's Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Refer also to the information provided under the heading "Forward-Looking Statements" in this Annual Report on Form 10-K.

Executive Overview

MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. From the spaces we make that help us live and work better, to how we manufacture our products, to the ways we solve challenges facing our customers and global community, design is our tool for creating positive impact. Our optimism leads us as we redefine modern for the 21st century, shaping a future that’s more sustainable, caring, and beautiful for all people and our planet.

MillerKnoll's products are sold internationally through controlled subsidiaries or branches in various countries including the United Kingdom, Denmark, Italy, France, the Netherlands, Canada, Japan, Mexico, Australia, Singapore, China, Hong Kong, India, and Brazil. The Company’s products are sold in over 100 countries primarily through independent contract furniture dealers, direct customer sales, owned and independent retailers, direct-mail catalogs, and the Company’s eCommerce platforms.

The Company is globally positioned in terms of manufacturing operations. In North America, manufacturing and distribution operations are in Georgia, New York, North Carolina, Michigan, Pennsylvania, and Texas in the United States, as well as Toronto and Mexico City. In Europe, the Company's manufacturing presence is in the United Kingdom and Italy. Manufacturing operations globally also include facilities located in Brazil, China, and India. The Company manufactures products using a system of lean manufacturing techniques collectively referred to as the MillerKnoll Performance System (MKPS). For its contract furniture business, MillerKnoll strives to maintain efficiencies and cost savings by minimizing the amount of inventory on hand. Accordingly, production is order-driven with direct materials and components purchased as needed to meet demand. These factors result in a high rate of inventory turns related to our manufactured inventories.

A key element of the Company's manufacturing strategy is to limit fixed production costs by sourcing component parts from strategic suppliers. This strategy has allowed the Company to increase the variable nature of its cost structure, while retaining proprietary control over those production processes that the Company believes provide a competitive advantage. As a result of this strategy, the Company's manufacturing operations are largely assembly-based.

A key element of the Company's growth strategy is to scale the Global Retail business through the Company's Design Within Reach ("DWR"), HAY, Knoll, Muuto, and Herman Miller retail operations. The Global Retail business provides a channel to bring MillerKnoll's iconic and design-centric products to retail customers, along with other proprietary and third-party products, with a focus on modern design.

The Company is comprised of various operating segments as defined by generally accepted accounting principles in the United States (U.S. GAAP). The operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions. The Company has identified the following segments:

•Americas Contract — Includes the operations associated with the design, manufacture and sale of furniture products directly or indirectly through an independent dealership network for office, healthcare, and educational environments throughout North and South America.

•International Contract & Specialty — Includes the operations associated with the design, manufacture and sale of furniture products, directly or indirectly through an independent dealership network in Europe, the Middle East, Africa and Asia-Pacific as well as the global activities of the Specialty brands, which include Holly Hunt, Spinneybeck, Maharam, Edelman, and Knoll Textiles.

•Global Retail — Includes global operations associated with the sale of modern design furnishings and accessories to third party retailers, as well as direct to consumer sales through eCommerce, direct-mail catalogs, and physical retail stores.

The Company also reports a corporate category consisting primarily of unallocated corporate expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative, and acquisition-related costs.

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Core Strengths

The Company relies on the following core strengths in delivering solutions to customers:

•Product Portfolio and Brand Collective - MillerKnoll is a collective of globally recognized design brands known for working with some of the most well-known and respected designers in the world. Combined, the Company represents over 100 years of design research and exploration in service of humanity. Within the industries in which the Company operates, Herman Miller and Knoll, along withColebrook Bosson Saunders, DatesWeiser, Design Within Reach, Edelman, Geiger, HAY, Holly Hunt, Maharam, Muuto, NaughtOne, and Spinneybeck|FilzFelt are acknowledged as leading brands that inspire architects and designers to create their best design solutions. This portfolio has enabled MillerKnoll to connect with new audiences, channels, geographies, and product categories. Leveraging the collective brand equity of MillerKnoll across the lines of business is an important element of the Company's business strategy.

•Design Leadership - The Company is committed to developing research-based functionality and aesthetically innovative new products and has a history of doing so, in collaboration with a global network of leading independent designers. The Company believes its skills and experience in matching problem-solving design with the workplace needs of customers provide the Company with a competitive advantage in the marketplace. An important component of the Company's business strategy is to actively pursue a program of new product research, design, and development. The Company accomplishes this through the use of an internal research and engineering staff that engages with third party design resources generally compensated on a royalty basis.

•Unique Business Model - The Company has built a multi-channel distribution capability that it considers unique. Through contract furniture dealers, direct customer sales, retail stores and studios, eCommerce, wholesalers, and independent retailers, the Company serves contract and residential customers across a range of channels and geographies. As it pertains to its operations, the Company was among the first in the industry to embrace the concepts of lean manufacturing. MKPS provides the foundation for all the Company's manufacturing operations. The Company is committed to continuously improving both product quality and production and operational efficiency. The Company believes these concepts hold significant promise for further gains in reliability, quality, and efficiency.

•Global Scale and Reach - In addition to its global omni-channel distribution capability, the Company has a global network of designers, suppliers, manufacturing operations, and research and development centers that position the Company to serve contract and residential customers globally. The Company believes that leveraging this global scale will be an important enabler to executing its strategy.

•Extraordinary People - We believe that our employees are a critical success factor for our business. We strive to identify, hire, develop, motivate and retain the best employees. Our ability to attract, engage, and retain key employees has been and will remain critical to our success.

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Channels of Distribution

The Company's products and services are offered to most of its customers under standard trade credit terms between 30 and 45 days. For all the items below, revenue is recognized when control transfers to the customer. The Company's products and services are sold through the following distribution channels:

•Independent Contract Furniture Dealers - Most of the Company's product sales are made to a global network of independently owned and operated contract furniture dealerships. These dealers purchase the Company's products and distribute them to end customers. Many of these dealers also offer furniture-related services, including product installation.

•Direct Contract Sales - The Company sells products and services directly to end customers without an intermediary (e.g., sales to the U.S. federal government). In most of these instances, the Company contracts separately with a dealer or third-party installation company to provide sales-related services.

•eCommerce - The Company sells products in its portfolio of brands across the globe, through localized Herman Miller, Knoll, and DWR websites. These sites complement the Company’s existing methods of distribution and extend the Company's brands' reach for new and existing customers and clients.

•Wholesale - Through the Company's Global Retail segment, certain products are sold on a wholesale basis to independent retailers located in various markets around the world.

•Retail Locations - As of June 1, 2024, the Company operated 75 retail studios (including 37 operating under the DWR brand, 1 under the HAY brand, 29 Herman Miller stores, 3 Muuto stores, 4 Knoll stores and a multi-brand Chicago store). The business also operated 4 outlet studios.

Challenges Ahead

Like all businesses, the Company is faced with a host of challenges and risks. The Company believes its core strengths and values, which provide the foundation for its strategic direction, have prepared the Company to respond to the inevitable challenges it will face in the future. While the Company is confident in its direction, it acknowledges the risks specific to our business and industry. Refer to Item 1A for discussion of certain of these risk factors and Item 7A for disclosures of market risk.

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Areas of Strategic Focus

Our strategy is designed to harness the full potential of MillerKnoll while driving growth across all business segments, geographies, and customer groups and creating value for all our stakeholders. We will capitalize on global trends including hybrid and flexible work, consumers’ focus on investing in their homes, a focus on health and well-being, and an expectation of corporate social responsibility. Our strategy includes three key focus areas:

Drive Customer Demand and Order Growth

We are prioritizing programs to deliver world class experiences with every client interaction. We have a global, go-to-market framework for contract sellers, Design With Impact, that is organized around well-being, connection and change, and we are investing in MillerKnoll showrooms that bring our brands closer together to show the breadth of our offerings. As part of this work, we are enhancing and opening MillerKnoll showrooms in select markets including, Atlanta, Chicago, Dallas, London, Los Angeles, New York, Toronto and San Francisco. In addition, we will continue to leverage the wide reach of our dealers’ showrooms around the globe.

In retail, we are working to evolve and enhance the Design Within Reach experience. We are testing new store formats, expanding our product assortment and offering design services both in store and online to enhance the customer experience, attract new customers and grow existing customers. In addition, we continue to launch new online tools to support our trade customers making it easier for them to incorporate our products in their client projects.

Foster a Culture of Highly Engaged Associates

As MillerKnoll, we have created one of the most talented teams in the industry. We are committed to nurturing this distinct competitive advantage by fostering a culture of highly engaged associates and inspiring belief in our shared future. We empower our associates to be agile and hold our teams accountable for living our actions and delivering high performance.

Our priorities include offering a seamless MillerKnoll employee experience via a global Human Resources technology platform; delivering an externally competitive and internally equitable compensation and benefits program; growing internal capabilities through development opportunities for all career levels; and investing to make MillerKnoll an employer of choice around the world.

Deliver Value to our Associates and Shareholders

We believe there is opportunity for meaningful long-term growth in each of our business segments. MillerKnoll is uniquely positioned to capitalize on these opportunities given the breadth of our Contract and Global Retail businesses and product portfolios, global reach, and omni-channel distribution and fulfillment capabilities.

Our collective of dynamic brands includes Herman Miller, Knoll, DatesWeiser, Design Within Reach, Edelman Leather, Geiger, HAY, Holly Hunt, Knoll Textiles, Maharam, Muuto, and Spinneybeck Filzfelt. These brands are united in their commitment to our purpose, design for the good of humankind, and they offer a complementary set of design solutions. By leveraging our global operations footprint, we are able to fuel our brands and build solutions in market closer to our customers, and we are creating centers of excellence in our operations facilities to support all brands in each region.

To capitalize on the opportunity ahead, we will seek to lead the industry in product innovation, design excellence, and sustainability; fortify the flagship Knoll and Herman Miller brands while nurturing and growing each of the brands within MillerKnoll; position the Americas Contract business to lead; drive outsized growth in International Contract & Specialty; and continue transforming our Global Retail business.

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Business Overview

The following is a summary of the significant events and items impacting the Company's operations for the year ended June 1, 2024:

•Net sales were $3,628.4 million, representing a decrease of 11.2% when compared to the prior year. The decrease in net sales was primarily driven by decreased sales volumes in all segments, the closure of the Fully business that occurred in the prior year, the closure of the HAY eCommerce channel in North America, as well as the additional week of operations in the prior fiscal year which is required periodically to re-align calendar months with our fiscal periods. These decreases were offset by increased sales resulting from price increases, net of incremental discounting as well as favorable foreign currency translation. On an organic basis, net sales were $3,615.4 million(*), representing a decrease of 8.1% when compared to the prior year.

•Gross margin was 39.1% as compared to 35.0% in the prior year. The change in gross margin was primarily driven by the realization of price and channel optimization strategies, the realization of cost synergies associated with the Knoll acquisition, and reductions in commodities, storage and handling costs and freight and product distribution expenses.

•Operating expenses decreased by $55.4 million or 4.2% as compared to the prior year. The decrease was primarily due to lower variable selling expenses, the continued focus on cost optimization and synergy capture, and restructuring actions announced and implemented during fiscal year 2024. These decreases were partially offset by compensation and benefit costs, which increased approximately $33.0 million driven by changes in variable-based compensation and incentives.

•The integration of the Knoll acquisition continues to progress as planned. We made good progress implementing cost synergies, having achieved an annualized run-rate cost synergies of $160 million related to the integration of Knoll.

•The effective tax rate was 14.8% for fiscal 2024 compared to negative 8.8% for the prior year.

•Diluted earnings per share for the full year totaled $1.11 compared to $0.55 in the prior year. On an adjusted basis(*), diluted earnings per share totaled $2.08 in fiscal 2024 compared to $1.85 in fiscal 2023.

•The Company declared cash dividends of $0.75 per share in both fiscal 2024 and fiscal 2023.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

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

•The current macroeconomic environment in North America — which reflects higher interest rates, tepid housing-related demand trends, and relatively low CEO and consumer confidence levels — continues to pose challenges for the industry. These factors are expected to persist in the near term, posing difficulties particularly for the luxury housing market and discretionary spending on goods. However, within the contract furniture industry, the business is beginning to see improving demand indicators such as increased contract activations and increases in the number and size of new project opportunities entering our sales funnel.

•The Company's financial performance is sensitive to changes in certain input costs, including steel and steel component parts. Ongoing cost reduction initiatives and price increase actions have been implemented and have been effective in offsetting these cost pressures. Additionally, we began to benefit from relative decreases in steel and other key input costs as fiscal 2024 progressed.

•The Americas Contract segment reported a net sales decrease of 10.0% and an organic sales decrease of 8.3%(*) year-over-year. Operating margin increased 50 basis points year-over year and 100 basis points on an adjusted basis(*). The increase was primarily driven by the combination of gross margin expansion and well managed operating expenses.

•The International Contract & Specialty segment reported a net sales decrease of 8.4% and an organic sales decrease of 7.2%(*) year-over-year. Operating margin decreased 130 basis points year-over-year and 30 basis points on an adjusted basis(*). The decrease was primarily driven by the loss of leverage on lower demand and production levels in the European contract channel and within our Specialty businesses.

•The Global Retail segment reported a net sales decrease of 16.4% and an organic sales decrease of 8.6%(*) year-over-year. Operating margin increased 640 basis points year-over year and 210 basis points on an adjusted basis(*). The increase was primarily driven by pricing actions as well as improvements in inventory management and increased shipping revenues.

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The remaining sections of Item 7 include additional analysis of the fiscal year ended June 1, 2024, including discussion of significant variances compared to the prior year period. A detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 3, 2023.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

Reconciliation of Non-GAAP Financial Measures

This presentation contains non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included within this presentation. The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented.

The non-GAAP financial measures referenced within this presentation include: Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), Adjusted Operating Margin, and Organic Growth (Decline).

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

Adjusted Operating Earnings (Loss) represents reported operating earnings plus integration charges, amortization of Knoll purchased intangibles, restructuring expenses, and impairment charges. These adjustments are described further below.

Adjusted Operating Margin represents Adjusted Operating Earnings (Loss) divided by net sales.

Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects, the impact of an extra week in fiscal 2023, the impact of the closure of the Hay eCommerce channel in North America, and the impact of the closure of the Fully business.

•Amortization of Knoll purchased intangibles: Includes expenses associated with the amortization of acquisition related intangibles acquired as part of the Knoll acquisition. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. We exclude the impact of the amortization of Knoll purchased intangibles as such non-cash amounts were significantly impacted by the size of the Knoll acquisition. Furthermore, we believe that this adjustment enables better comparison of our results as Amortization of Knoll Purchased Intangibles will not recur in future periods once such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. Although we exclude the Amortization of Knoll Purchased Intangibles in these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

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

•Restructuring charges: Includes costs associated with actions involving targeted workforce reductions and non-cash charges for the impairment of assets associated with the decision to close certain showrooms.

•Impairment charges: Includes non-cash, pre-tax charges for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand as well as impairment of the Knoll and Muuto trade names.

•Tax related items: We excluded the income tax benefit/provision effect of the tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.

The following table reconciles Operating Earnings (Loss) to Adjusted Operating Earnings (Loss) by Segment for the years ended as indicated below (in millions):

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Three Months Ended Twelve Months Ended

Americas Contract

Adjustments

International Contract & Specialty

Adjustments

Global Retail

Adjustments

Integration charges — — % — — % — — % 0.2 — %

Corporate

Operating expenses $ 11.9 — % $ 16.1 — % $ 52.1 — % $ 60.4 — %

Operating (loss) $ (11.9) — % $ (16.1) — % $ (52.1) — % $ (60.4) — %

Adjustments

Integration charges — — % 1.3 — % 0.1 — % 5.6 — %

Adjusted operating (loss) $ (11.9) — % $ (14.8) — % $ (52.0) — % $ (54.8) — %

MillerKnoll, Inc.

Adjustments

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The following table reconciles net sales to organic net sales for the years ended as indicated below (in millions):

Twelve Months Ended

Americas Contract International Contract & Specialty Global Retail Total

Adjustments

Currency translation effects (1) (2.6) (6.3) (4.1) (13.0)

% change from PY (8.3) % (7.2) % (8.6) % (8.1) %

Twelve Months Ended

Americas Contract International Contract & Specialty Global Retail Total

Adjustments

Fully and HAY eCommerce — — (76.0) (76.0)

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The following tables reconcile orders as reported to organic orders for the periods ended as indicated below (in millions):

Twelve Months Ended

Americas Contract International Contract & Specialty Global Retail Total

% change from PY (4.0) % (1.7) % (12.2) % (5.6) %

Adjustments

Currency translation effects (1) (7.7) (7.4) (5.0) (20.1)

% change from PY (2.6) % (0.5) % (3.7) % (2.3) %

Twelve Months Ended

Americas Contract International Contract & Specialty Global Retail Total

Adjustments

Fully and HAY eCommerce — — (75.8) (75.8)

The following table reconciles EPS to Adjusted EPS for the years ended as of indicated below:

Twelve Months Ended

(Loss) Earnings per Share - Diluted $ 1.11 $ 0.55

Add: Amortization of Knoll purchased intangibles 0.32 0.33

Add: Integration charges 0.31 0.24

Add: Restructuring charges 0.42 0.45

Add: Impairment charges 0.24 0.76

Tax impact on adjustments (0.32) (0.48)

Adjusted earnings per share - diluted $ 2.08 $ 1.85

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Financial Results

The following is a comparison of our annual results of operations and year-over-year percentage changes for the periods indicated:

(Dollars in millions) Fiscal 2024 Fiscal 2023 % Change

Earnings before income taxes and equity income 99.7 51.4 94.0 %

Equity (loss) from nonconsolidated affiliates, net of tax (0.4) (0.8) (50.0) %

Net earnings attributable to MillerKnoll, Inc. $ 82.3 $ 42.1 95.5 %

The following table presents, for the periods indicated, the components of the Company's Consolidated Statements of Comprehensive Income as a percentage of Net sales:

Operating expenses 34.5 % 32.0 %

Operating earnings 4.6 % 3.0 %

Other expenses, net 1.9 % 1.7 %

Earnings before income taxes and equity income 2.7 % 1.3 %

Income tax expense 0.4 % 0.1 %

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

Net earnings 2.3 % 1.1 %

Net earnings attributable to redeemable noncontrolling interests 0.1 % 0.1 %

Net earnings attributable to MillerKnoll, Inc. 2.3 % 1.0 %

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Net Sales

The following chart presents graphically the primary drivers of the year-over-year change in Net sales. The amounts presented in the bar graph are expressed in millions and have been rounded.

Net sales decreased $459 million or 11.2% compared to the prior year fiscal period. The following items primarily contributed to the change:

•Decreased sales volume within the Americas Contract, International Contract & Specialty and Global Retail segments of approximately $262 million, $76 million and $61 million, respectively.

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

•Decrease of $76 million related to the closure of the Fully business that occurred in the prior year and the closure of the Hay eCommerce channel in North America. Offset in part by:

•Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $80 million.

•Foreign currency translation increased Net sales by approximately $13 million.

Gross Margin

Gross margin was 39.1% for fiscal 2024 as compared to 35.0% for fiscal 2023. The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

•Reduction in costs from commodities, storage and handling costs, freight and product distribution costs, as compared to the prior year which increased gross margin by approximately 260 basis points.

•The positive impact of price increases, net of incremental discounting, contributed to margin improvement by approximately 140 basis points.

•Charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand contributed to an increase in gross margin of approximately 40 basis points.

•Benefit to margin from the realization of incremental synergies associated with the Knoll acquisition as compared to the same period in the prior year. These factors were offset in part by;

•Loss of leverage on lower sales volumes and unfavorable channel and product mix, which negatively impacted gross margin by approximately 70 basis points.

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Operating Expenses

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses. The amounts presented in the bar graph are expressed in millions and have been rounded.

Operating expenses decreased by $56 million or 4.3% compared to the prior year fiscal period. The following factors contributed to the change:

•Variable selling and marketing costs decreased by approximately $34 million, due in part to the closure of the Fully business that occurred in the prior year;

•Decrease in asset impairment charges recorded in the current year as compared to the prior year contributed a net decrease in Operating expenses of approximately $24 million;

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

•Product development costs decreased approximately $3 million, primarily in the Americas Contract segment; and

•Savings from the realization of incremental synergies associated with the Knoll acquisition as compared to the prior year as well as reduced expenses attributable to the recently implemented restructuring actions. These decreases were offset in part by:

•Compensation and benefit costs, which increased approximately $33 million driven by changes in variable-based compensation and incentives.

Other Income/Expense

Net other expenses for fiscal 2024 were $67.5 million compared to $70.9 million in fiscal 2023. This change is driven primarily by increased interest income in the current year of $3.3 million, the impact of net foreign currency transaction gains of $1.8 million as well as favorable net periodic benefit income from our pension plans. These favorable changes were offset by increased Interest expense of $2.2 million as compared to the same period of the prior year, driven by increased interest rates as compared to the same period of the prior year.

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Income Taxes

See Note 11 of the Consolidated Financial Statements for additional information.

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Operating Segments Results

The business is comprised of various operating segments as defined by U.S. GAAP. These operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions. The segments identified by the Company include Americas Contract, International Contract & Specialty, and Global Retail. The Company also reports a “Corporate” category consisting primarily of unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs. For descriptions of each segment, refer to Note 14 of the Consolidated Financial Statements.

The charts below present the relative mix of net sales and operating earnings across each of the Company's segments. This is followed by a discussion of the Company's results, by segment.

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Americas Contract

(Dollars in millions) Fiscal 2024 Fiscal 2023 Change

Operating earnings % 5.4 % 4.9 % 0.5 %

Net sales decreased 10.0%, or 8.3%(*) on an organic basis, from the prior year due to:

•Decreased sales volume within the segment of approximately $262 million, which was driven by the impact of a challenging macro-economic environment compounded by pandemic-driven pent-up demand at the start of the prior year; and

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

•Price increases, net of incremental discounting, of approximately $97 million; and

•Favorable foreign currency translation of approximately $3 million.

Operating earnings decreased $0.9 million, or 0.9% compared to the same period of the prior year due to:

•Increased operating expenses of $9.9 million. The following factors contributed to the change:

◦An increase in variable based compensation of approximately $19 million;

◦Increased Knoll acquisition integration costs of $9 million; and

◦Increased restructuring expenses of approximately $2 million related to a workforce reduction as well as showroom consolidations. These increases were offset in part by:

◦Decreased product development costs of $3 million as well as a decrease of $5 million due to the additional week in the prior year;

◦A decrease of $6 million in non-cash intangible impairment charges as compared to the prior year;

◦Decreased variable marketing and selling costs.

•The increase in operating expenses was offset in part by improved gross margin of $9.0 million due to the increased gross margin percentage of 380 basis points. The increase in gross margin percentage was due primarily to:

◦The impact of incremental list price increases, net of contract price discounting, that increased gross margin percentage by 370 basis points; and

◦Decreased commodity and product distribution costs that increased gross margin percentage by 200 basis points. These increases were offset in part by:

◦Unfavorable product mix which had a negative impact on margin of 170 basis points and increased labor costs as well as loss of fixed cost leverage due to reduced production volumes that decreased gross margin percentage by 20 basis points.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

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International Contract & Specialty

(Dollars in millions) Fiscal 2024 Fiscal 2023 Change

Operating earnings % 8.4 % 9.7 % (1.3) %

Net sales decreased 8.4%, or 7.2%(*) on an organic basis, from the prior year due to:

•Decline in sales volume of approximately $76 million driven mainly by challenging macroeconomic conditions in Europe and parts of Asia-Pacific; and

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

•Favorable foreign currency translation of approximately $6 million; and

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

Operating earnings decreased $20.4 million, or 20.7%, compared to the prior year due to:

•Decreased Gross margin of $14.7 million due to the decrease in sales explained above, offset in part by an increase in gross margin percentage of 230 basis points due primarily to favorable product mix.

•Increased Operating expenses of $5.7 million which was largely due to an:

◦Increased variable compensation costs in the current year of $10 million; and

◦Increased restructuring, integration and impairment charges of $8 million in the current year. Restructuring charges were related to workforce reductions and the increase in impairment charges was primarily related to the impairment of the Muuto trade name in the current year. These increases were offset in part by:

◦Decrease of $4 million due to the additional week in the prior year as well as a decrease of $8 million primarily related to a reduction in variable selling costs.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

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Global Retail

(Dollars in millions) Fiscal 2024 Fiscal 2023 Change

Operating earnings (loss) % 4.9 % (1.5) % 6.4 %

Net sales decreased 16.4% as reported and 8.6%(*) on an organic basis, from the prior year due to:

•Decreased sales of $76 million primarily related to the closure of the Fully business that occurred in the prior year as well as the closure of the Hay eCommerce channel in North America;

•Decreased sales volumes of approximately $61 million driven by a slowdown in the North American housing market and a continuation of general economic uncertainty;

•Incremental promotional discounting, net of price increases, which decreased sales by $21 million; and

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

•Favorable foreign currency translation of approximately $4 million.

Operating earnings increased $57.9 million, or 373.5% over the prior year due to:

•An increase in gross margin percentage of 690 basis points attributable to the favorable impact of reduced costs as compared to the prior year associated with product distribution and inventory handling as well as charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand. These increases were offset in part by promotional discounting, net of price increases.

•Decreased Operating expenses of $63 million driven by:

◦Decreased selling and marketing costs including the reduction in costs associated with no longer operating Fully as a stand alone brand, which contributed an approximate decrease of $28 million;

◦Decrease of $21 million in expenses primarily related to charges in the prior year for the impairment of assets associated with the decision to cease operating Fully as a stand-alone brand;

◦Decreased restructuring charges of approximately $8 million relating to the decision to cease operating Fully as a stand-alone brand in fiscal year 2023; and

◦Decrease of $4 million due to the additional week in the prior year, as well as a general decrease in operating expenses associated with the closure of the Fully business in the prior year. These decreases were offset by:

◦Increase of $3 million in variable compensation costs in the current year.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

Corporate

Corporate unallocated expenses totaled $52.1 million for fiscal 2024, a decrease of $8.3 million from fiscal 2023. The decrease was driven primarily by a decrease in integration costs related to the Knoll acquisition of $5.5 million.

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Liquidity and Capital Resources

The table below summarizes the net change in cash and cash equivalents for the fiscal years indicated.

Fiscal Year Ended

Cash provided by (used in):

Investing activities (86.3) (76.5)

Effect of exchange rate changes (0.3) (6.4)

Net change in cash and cash equivalents $ 6.9 $ (6.8)

Cash Flow — Operating Activities

The principal source of our operating cash flow is net earnings, meaning cash receipts from the sale of our products, net of costs to manufacture, distribute, and market our products. Net cash provided by operating activities for the twelve months ended June 1, 2024 totaled $352.3 million compared to $162.9 million in the twelve months ended June 3, 2023. The increase in cash inflow is due primarily to an increase in earnings of $38.5 million in the current year compared to the prior year, a reduction in contributions to our pension plans, as well as a reduction in working capital. Our working capital consists primarily of receivables from customers, inventory, prepaid expenses, accounts payable, accrued compensation, and accrued other expenses. The following all affect these account balances:

•The timing of collection of our receivables;

•Effective inventory management resulting in reduced inventory levels; and

•Changes in accruals related to variable compensation.

Cash Flow — Investing Activities

Cash used in investing activities for the twelve months ended June 1, 2024 was $86.3 million, as compared to $76.5 million in the twelve months ended June 3, 2023. The increase in cash outflow in the current year was primarily due to:

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

•The advancement of $13.5 million of cash against the value of company owned life insurance policies received in the twelve months ended June 3, 2023 for which there was no activity in the current year. Offset in part by:

•Proceeds of $3.5 million received in the twelve months ended June 1, 2024 related to the sale of the Company's investment in Global Holdings Netherlands B.V.

Capital expenditures for the current year were $78.4 million as compared to $83.3 million in the prior year. At the end of the fiscal 2024, there were outstanding commitments for capital purchases of $53.7 million. The Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company expects capital spending in fiscal 2025 to be between $100 million and $125 million, which will be primarily related to investments in the Company's facilities, (including manufacturing, showrooms, and retail stores) and equipment as well as investments associated with achieving the Company's sustainability goals.

Cash Flow — Financing Activities

Cash used in financing activities for the twelve months ended June 1, 2024 was $258.8 million, compared to $86.8 million in the twelve months ended June 3, 2023. The increase in cash used in the current year, compared to the prior year, was primarily due to:

•The Company repurchased 6,022,646 shares at a cost of $138.2 million in the current year as compared to 575,207 share repurchases totaling $16.0 million in the prior year; and

•Net payments on the credit agreement of $36.7 million in the current year compared to net borrowings of $13.7 million in the prior year; and

•Repayments of long-term debt of $31.3 million in the current year compared to $26.3 million in the prior year.

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Sources of Liquidity

The Company has taken actions to safeguard its capital position in the current environment. The Company is closely managing spending levels, capital investments, and working capital.

The Company maintains an open market share repurchase program under our existing share repurchase authorization and may repurchase shares from time to time based on management’s evaluation of market conditions, share price and other factors.

At the end of fiscal 2024, the Company has a well-positioned balance sheet and liquidity profile. The Company has access to liquidity through credit facilities as well as cash and cash equivalents. These sources have been summarized below. For additional information, refer to Note 6 to the Consolidated Financial Statements.

Cash and cash equivalents $ 230.4 $ 223.5

Availability under revolving lines of credit(1) 322.3 284.2

(1) Available access to our revolving line of credit is subject to covenant restrictions outlined in our credit agreement.

Of the cash and cash equivalents noted above at the end of fiscal 2024, the Company had $218.5 million of cash and cash equivalents held outside the United States.

The Company’s syndicated revolving line of credit, which matures in July 2026, provides the Company with up to $725 million in revolving variable interest borrowing capacity and allows the Company to borrow incremental amounts, at its option, subject to negotiated terms as outlined in the agreement. Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, SOFR or negotiated terms as outlined in the agreement.

As of June 1, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $390.0 million with available borrowings against this facility of $322.3 million.

The Company intends to repatriate $114.9 million of undistributed foreign earnings, all of which is held in cash in certain foreign jurisdictions. The Company has recorded a $3.7 million deferred tax liability related to foreign withholding taxes on these future dividends received in the U.S. from foreign subsidiaries. A significant portion of the $114.9 million of undistributed foreign earnings was previously taxed under the U.S. Tax Cut and Jobs Act (TCJA). The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S. which is estimated to be approximately $347.5 million on June 1, 2024.

The Company believes cash on hand, cash generated from operations, and borrowing capacity will provide adequate liquidity to fund near term and foreseeable future business operations, capital needs, upcoming debt maturities, future dividends and share repurchases, subject to financing availability in the marketplace.

Contingencies

The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such proceedings and litigation currently pending will not materially affect the Company's Consolidated Financial Statements. Refer to Note 13 of the Consolidated Financial Statements for more information relating to contingencies.

Basis of Presentation

The Company's fiscal year ends on the Saturday closest to May 31. The fiscal year ended June 1, 2024 contained 52 weeks, the fiscal year ended June 3, 2023 contained 53 weeks, and the fiscal year ended May 28, 2022 contained 52 weeks.

Contractual Obligations

Contractual obligations associated with our ongoing business and financing activities will result in cash payments in future periods. The following table summarizes the amounts and estimated timing of these future cash payments. Further information regarding debt obligations can be found in Note 6 of the Consolidated Financial Statements. Additional information related to operating leases can be found in Note 7 of the Consolidated Financial Statements.

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Payments due by fiscal year

Pension and other post employment benefit plans funding (2) 6.4 5.9 0.1 0.1 0.3

Stockholder dividends (3) 13.2 13.2 — — —

(1) Includes the current portion of long-term debt. Contractual cash payments on long-term debt obligations are disclosed herein based on the amounts borrowed as of June 1, 2024 and the maturity date of the underlying debt. Estimated future interest payments on our outstanding interest-bearing debt obligations are based on interest rates as of June 1, 2024. Actual cash outflows may differ significantly due to changes in borrowings or interest rates.

(2) Pension plan funding commitments are known for a 12-month period for those plans that are funded; unfunded pension and post-retirement plan funding amounts are equal to the estimated benefit payments. As of June 1, 2024, the total projected benefit obligation for our domestic and international employee pension benefit plans was $207.1 million.

(3) Represents the dividend payable as of June 1, 2024. Future dividend payments are not considered contractual obligations until declared.

(4) Other contractual obligations primarily represent long-term commitments related to deferred and supplemental employee compensation benefits, and other post-employment benefits.

Critical Accounting Policies and Estimates

Our goal is to report financial results clearly and understandably. We follow accounting principles generally accepted in the United States in preparing our Consolidated Financial Statements, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. These policies and disclosures are reviewed at least annually with the Audit Committee of the Board of Directors.

We believe that of our significant accounting policies, which are described in Note 1 of our consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition contingencies. We use our best estimates and assumptions to accurately assign fair values to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to goodwill. The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates are reviewed with our advisors and can include, but are not limited to:

•future expected cash flows from acquired customer relationships and trade names,

•assumed royalty rates that could be payable if we did not own the trademarks, and

•discount rates.

Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the values of assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. During fiscal 2022, management considered the acquisition of Knoll a material acquisition. There were no material acquisitions during fiscal 2024 or fiscal 2023. See Note 3 to the Consolidated Financial Statements for more information.

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Goodwill and Indefinite-lived Intangibles

We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets each year as of March 31 or more frequently if events or changes in circumstances indicate an impairment might be possible. We may consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived intangible assets is below the carrying amount. We may also elect to bypass the qualitative assessment and perform a quantitative assessment.

When the Company performs a quantitative assessment, the Company makes estimates about fair value by using a weighting of the income approach and the market approach. The income approach is based on projected discounted cash flows using a market participant discount rate. The market approach is based on financial multiples of companies comparable to each reporting unit and applies a control premium. We corroborate the fair value through a market capitalization reconciliation to determine if the implied control premium is reasonable based on the qualitative considerations, such as recent market transactions.

The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but future changes in the underlying assumptions could occur due to the inherent uncertainty in making such estimates.

Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry or macroeconomic development or other adverse changes in market conditions could change one of the key assumptions the Company uses to calculate the fair value of its long-lived assets, goodwill and indefinite-lived trade names, which could result in a further decline in fair value and require the Company to record an impairment charge in future periods.

Goodwill

Certain business acquisitions have resulted in the recording of goodwill. At June 1, 2024 and June 3, 2023, we had goodwill recorded within the Consolidated Balance Sheets of $1,226.3 million and $1,221.7 million, respectively.

Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value.

Each of the reporting units was reviewed for impairment using a qualitative assessment as of March 31, 2024. The Company elected to test each reporting unit, with the exception of the Global Retail reporting unit, qualitatively, as is permitted under ASU 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. For the Global Retail reporting unit, the Company elected to proceed directly to the quantitative test. No goodwill impairment charges were recorded in fiscal 2024, 2023, or 2022.

The Company performed the quantitative impairment analysis of the Global Retail reporting unit as of March 31, 2024 to determine the fair value of the Global Retail reporting unit as compared to the carrying value. The Company utilized a weighting of the income approach and the market approach to estimate the fair value of the Global Retail reporting unit.

The test for impairment requires the Company to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. We estimated the fair value of the Global Retail reporting unit using a discounted cash flow analysis. The discounted cash flow analysis used the present value of projected cash flows and a residual value.

The Company employed a market-based approach in selecting the discount rate used in our analysis. The discount rate selected represents the market rate of return equal to what the Company believes a reasonable investor would expect to achieve on investments of similar size to the Global Retail reporting unit. The Company believes the discount rate selected in the quantitative assessment is appropriate in that it exceeds the estimated weighted average cost of capital for our business as a whole. The results of the impairment test are sensitive to changes in the discount rates and changes in the discount rate may result in future impairment.

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In performing the quantitative impairment test, the Company determined that the fair value of the Global Retail reporting unit exceeded the carrying amount and, as such, the reporting unit was not impaired. The Company determined that the Global Retail reporting unit exceeded its carrying value by 37% and therefore does not have a heightened risk of future impairments if any assumptions, estimates or market factors change in the future.

The Company evaluated the sensitivity of changes in forecasted sales, operating margin and the discount rate for the Global Retail reporting unit. Reducing the Global Retail reporting unit's forecasted sales by 5% in all years, and leaving all other assumptions static, would not result in impairment. A decrease in the operating margin of 100 basis points in all years would not result in impairment. An increase in the discount rate of 100 basis points would not result in impairment.

Indefinite-lived Intangible Assets

Certain business acquisitions have resulted in the recording of trade names as indefinite-lived intangible assets, which are not amortized. At June 1, 2024 and June 3, 2023, the Company held trade name assets with a carrying value of $465.5 million and $480.7 million, respectively.

The Company evaluates indefinite-lived trade name intangible assets for impairment using a qualitative assessment annually. The Company also tests for impairment using a quantitative assessment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

In fiscal 2024, the Company performed quantitative assessments in testing the Knoll product brand and Muuto brand indefinite-lived intangible assets for impairment, which resulted in the carrying values of the trade names exceeding their fair values by $8.9 million and $7.9 million, respectively. Accordingly, impairment charges of $16.8 million in total were recognized. The carrying value of the Knoll trade name as of the measurement date was $153.3 million and the fair value of the Knoll trade name as of the measurement date was $144.4 million. The carrying value of the Muuto trade name as of the measurement date was $88.4 million and the fair value of the Muuto trade name as of the measurement date was $80.5 million. If the residual cash flows related to these trade names were to decline in future periods, the Company may need to record additional impairment charges.

In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using a relief-from-royalty approach, which requires assumptions related to the following:

•forecasted revenue growth rate,

•assumed royalty rates that could be payable if we did not own the trademark, and

•a market participant discount rate based on a weighted-average cost of capital.

The assumptions used reflect management’s best estimates; however, actual results could differ from our estimates. In completing our annual indefinite-lived trade name impairment test, the fair values of the Knoll and Muuto trade names were both estimated using a discount rate of 12.0%. The royalty rates used for the Knoll and Muuto trade names were 2.0% and 4.5%, respectively. The long-term growth rates in the valuation of the Knoll and Muuto trade names were 2.5% and 3.0%, respectively. The Company’s estimates of the fair value of its Knoll and Muuto indefinite-lived intangible assets are sensitive to changes in the key assumptions above as well as projected financial performance. Therefore, a sensitivity analysis was performed on certain key assumptions.

For the Knoll trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales at March 31, 2024 would have resulted in $14.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would have resulted in an additional $18.0 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $14.0 million of impairment charges.

For the Muuto trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales at March 31, 2024 would have resulted in $8.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would have resulted in an additional $4.5 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $8.0 million of impairment charges.

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During fiscal 2023, the Company determined through a qualitative assessment that the Knoll trade name carrying value was more than likely above its fair value. As a result, the Company performed a quantitative assessment to determine the fair value and as a result recognized a $19.7 million non-cash impairment charge to the indefinite-lived trade name. The carrying value of the Knoll trade name as of the measurement date was $173.0 million. The fair value of the Knoll trade name as of the measurement date was $153.3 million.

The assumptions used reflect management’s best estimates; however, actual results could differ from our estimates. In completing our annual indefinite-lived trade name impairment tests, the fair value of the Knoll trade name was estimated using a discount rate of 12.0%, royalty rate of 2.0% and long-term growth rate of 2.5%. The Company’s estimates of the fair value of its Knoll indefinite-lived intangible asset are sensitive to changes in the key assumptions above as well as projected financial performance. Therefore, a sensitivity analysis was performed on certain key assumptions.

If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record additional impairment charges.

Long-lived Assets

The Company evaluates other long-lived assets and acquired business units for indicators of impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset group are compared to the carrying value of the asset or asset group. The judgments regarding the existence of impairment are based on market conditions, operational performance, and estimated future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.

In the fourth quarter of fiscal 2024, the decision was made to cease the use of certain leased locations resulting in impairment charges of $5.5 million recognized for the right of use assets associated with these locations. In the second quarter of fiscal 2024, a manufacturing facility located in Wisconsin met the criteria to be classified as an asset held for sale. The decision to sell this facility was made as a result of facility integration activities performed in connection with the integration of Knoll. In the fourth quarter of fiscal 2024, it was determined that the carrying value of these assets exceeded their fair value and an impairment charge of $1.0 million was recognized. The carrying amount of these assets held for sale was $3.5 million and is classified as current assets within "Assets held for sale" in the Condensed Consolidated Balance Sheets as of June 1, 2024.

During fiscal 2023, the decision was made to cease operating Fully as a stand-alone brand and sales channel and instead sell certain Fully products through other channels already existing within the Global Retail business. Management identified this decision as an indicator of impairment, and accordingly recorded impairment of certain long-lived assets within the Fully asset group of $21.5 million.

In fiscal 2022, the Company recorded a non-cash impairment charge of $15.5 million related to the discontinued use of a long-lived asset that was a direct result of integration activities associated with the Knoll acquisition.

The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but if actual results are not consistent with management's estimates and assumptions, a material impairment charge could occur, which could have a material adverse effect on our consolidated financial statements.

New Accounting Standards

Refer to Note 1 of the Consolidated Financial Statements for information related to new accounting standards.

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Forward Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to future events and anticipated results of operations, business strategies, the anticipated benefits of our acquisition of Knoll, the anticipated impact of the Knoll acquisition on the combined company’s business and future financial and operating results, the expected amount and timing of synergies from the Knoll acquisition, and other aspects of our operations or operating results. These forward-looking statements generally can be identified by phrases such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. It is uncertain whether any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what impact they will have on the results of operations and financial condition of MillerKnoll or the price of MillerKnoll’s stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond MillerKnoll’s control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to: global and national economic conditions including heightened inflation, uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential governmental responses to these events; the impact of any government policies and actions to protect the health and safety of individuals or to maintain the functioning of national or global economies, and the Company's response to any such policies and actions; the impact of public health crises, such as pandemics and epidemics; risks related to the additional debt incurred in connection with the Knoll acquisition; MillerKnoll’s ability to comply with its debt covenants and obligations; the risk that the anticipated benefits of the Knoll acquisition will be more costly to realize than expected; the effect of the Knoll acquisition on the ability of MillerKnoll to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom MillerKnoll does business, or on MillerKnoll’s operating results and business generally; the ability to successfully integrate Knoll’s operations; the ability of MillerKnoll to implement its plans, forecasts and other expectations with respect to MillerKnoll’s business after the completion of the Knoll acquisition and realize expected synergies; the availability and pricing of raw materials; the financial strength of our dealers and the financial strength of our customers; the success of newly-introduced products; the pace and level of government procurement; and the outcome of pending litigation or governmental audits or investigations. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to MillerKnoll’s periodic reports and other filings with the SEC, including the risk factors identified in this report. The forward-looking statements included in this report are made only as of the date hereof. MillerKnoll does not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances, except as required by law.

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Item 7A Quantitative and Qualitative Disclosures About Market Risk

The Company manufactures, markets, and sells its products throughout the world and, as a result, is subject to changing economic conditions, which could reduce the demand for its products.

Direct Material Costs

The Company is exposed to risks arising from price changes for certain direct materials and assembly components used in its operations. The largest of such costs incurred by the Company are for steel, plastics, textiles, wood particleboard and aluminum components. The impact from changes in all commodity prices decreased the Company's costs by approximately $10.8 million during fiscal 2024 compared to the prior year primarily due to decreased steel and aluminum costs offset in part by increased plastic costs. The impact from changes in commodity prices decreased the Company's costs by approximately $3.5 million during fiscal 2023 as compared to fiscal 2022. Note that these changes include the impact of Chinese tariffs on the Company's direct material costs.

The market prices for commodities will fluctuate over time and the Company acknowledges that such changes are likely to impact its costs for key direct materials and assembly components. Consequently, it views the prospect of such changes as an outlook risk to the business.

Significant increases in raw materials can be difficult to offset with price increases due to existing contractual agreements with customers as well as difficulty finding effective financial instruments to hedge these changes. Our profitability could be negatively impacted in the long term if we are not able to pass along higher raw material costs to our customers.

Foreign Exchange Risk

The Company primarily manufactures its products in the United States, United Kingdom, Canada, China, Italy, India, Mexico and Brazil. It also sources completed products and product components from outside the United States. The Company's completed products are sold in numerous countries around the world. Sales in foreign countries as well as certain expenses related to those sales are transacted in currencies other than the Company's reporting currency, the U.S. dollar. Accordingly, production costs and profit margins related to these sales are affected by the currency exchange relationship between the countries where the sales take place and the countries where the products are sourced or manufactured. These currency exchange relationships can also impact the Company's competitive positions within these markets.

In the normal course of business, the Company enters into contracts denominated in foreign currencies. The principal foreign currencies in which the Company conducts its business are the British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar, Chinese renminbi, and the Danish krone. As of June 1, 2024, the Company had outstanding 21 forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies.

(In millions, except number of forward contracts)

Net Asset Exposure

Currency Number of Forward Contracts Net Exposure

Net Liability Exposure

Currency Number of Forward Contracts Net Exposure

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As of June 3, 2023, the Company had outstanding 35 forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies.

(In millions, except number of forward contracts)

Net Asset Exposure

Currency Number of Forward Contracts Net Exposure

Net Liability Exposure

Currency Number of Forward Contracts Net Exposure

The cost of the foreign currency hedges and remeasuring all foreign currency transactions into the appropriate functional currency resulted in a net gain of $3.0 million in fiscal 2024 compared to net gain of $4.8 million in fiscal 2023 included in net earnings. These amounts are included in Other (income) expense, net in the Consolidated Statements of Comprehensive Income. Additionally, the cumulative effect of translating the balance sheet and income statement accounts from the functional currency into the United States dollar increased the accumulated comprehensive loss component of total stockholders' equity by $8.3 million compared to a decrease of $20.1 million as of the end of fiscal 2024 and 2023, respectively.

Interest Rate Risk

The Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall cost of borrowing. The Company's interest rate swap agreements were entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.

These interest rate swap derivative instruments are held and used by the Company as a tool for managing interest rate risk. They are not used for trading or speculative purposes. The counterparties to the swap instruments are large financial institutions that the Company believes are of high-quality creditworthiness. While the Company may be exposed to potential losses due to the credit risk of non-performance by these counterparties, such losses are not anticipated.

In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted the interest rate on indebtedness anticipated to be borrowed on its revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 1.949% fixed interest rate plus applicable margin as of the forward start date. The swap agreement was amended in February 2023 for each calculation period beginning on February 3, 2023, and thereafter, to replace the LIBOR-based floating interest rate with a Term SOFR rate, and a 1.910% modified fixed interest rate.

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In June 2017, the Company entered into a second interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted the interest rate on indebtedness anticipated to be borrowed on its revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387% fixed interest rate plus applicable margin under the agreement as of the forward start date. The swap agreement was amended in February 2023 for each calculation period beginning on February 3, 2023, and thereafter, to replace the LIBOR-based floating interest rate with a Term SOFR rate, and a 2.348% modified fixed interest rate.

In January 2022, the Company entered into a third interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $575.0 million with a forward start date of January 31, 2022 and a maturity date of January 29, 2027. The interest rate swap locked in the Company’s interest rate on forecasted outstanding borrowings of $575.0 million at 1.689% exclusive of the credit spread on the variable rate debt. The Company effectively will convert LIBOR-based floating interest rate plus applicable margin indebtedness to a 1.689% fixed interest rate plus applicable margin under the agreement as of the forward start date. The swap agreement was amended in February 2023 for each calculation period beginning on January 31, 2023, and thereafter, to replace the LIBOR-based floating interest rate with a Term SOFR rate, and a 1.650% modified fixed interest rate.

In February 2023, the Company entered into a fourth interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $150.0 million with a forward start date of March 3, 2023 and a termination date of January 3, 2029. As a result of the transaction, under the terms of the agreement the Company effectively will convert one month Spread Adjusted Term SOFR floating interest rate plus applicable margin to 3.950% fixed interest rate and adjustment percentage plus applicable margin as of the forward start date. "Spread Adjusted Term SOFR" means Term SOFR plus an adjustment percentage that varies with tenor. The Company typically selects a one month tenor that is calculated as the one month Term SOFR rate plus 0.11448%.

The fair market value of the effective interest rate swap instruments was a net asset of $61.7 million and $56.9 million as of June 1, 2024 and June 3, 2023, respectively. All cash flows related to the Company's interest rate swap instruments are denominated in U.S. Dollars. For further information, refer to Note 6 and Note 12 of the Consolidated Financial Statements.

Expected cash outflows (notional amounts) over the next five years and thereafter related to debt instruments are as follows.

Long-Term Debt Instruments:

Interest rate 2.348%(2) $ — $ — $ — $ 75.0 $ — $ — $ 75.0

(1) Amount does not include the recorded fair value of the swap instruments.

(2) The Company's revolving credit facility and Term Loans have a variable interest rate, but due to the interest rate swaps, the rate on $150.0 million, $75.0 million, $575.0 million and $150.0 million will be fixed at 1.91%, 2.348%, 1.65% and 3.95%, respectively.

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Item 8 Financial Statements and Supplementary Data

MillerKnoll, Inc.

Consolidated Statements of Comprehensive Income

Year Ended

Operating expenses:

Restructuring expenses 30.8 34.4 —

Interest and other investment (income) expense (6.1) (2.8) (1.6)

Other (income) expense, net (2.6) (0.3) 12.2

Earnings (loss) before income taxes and equity income 99.7 51.4 (8.6)

Equity (loss) earnings from nonconsolidated affiliate, net of tax (0.4) (0.8) —

Net earnings attributable to redeemable noncontrolling interests 2.3 4.0 7.4

Net earnings (loss) attributable to MillerKnoll, Inc. $ 82.3 $ 42.1 $ (27.1)

Earnings (loss) per share - basic $ 1.12 $ 0.56 $ (0.37)

Earnings (loss) per share - diluted 1.11 0.55 (0.37)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 8.3 (20.1) (90.0)

Pension and post-retirement liability adjustments (9.5) 13.1 13.5

Unrealized gains on interest rate swap agreement 3.6 19.0 34.5

Other comprehensive income (loss), net of tax 2.4 12.0 (42.0)

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MillerKnoll, Inc.

Consolidated Balance Sheets

(In millions, except share and per share data) June 1, 2024 June 3, 2023

ASSETS

Current Assets:

Cash and cash equivalents $ 230.4 $ 223.5

Accounts receivable, net of allowances of $7.4 and $6.4 308.3 334.1

Unbilled accounts receivable 22.2 29.4

Assets held for sale 3.5 —

Other current assets 10.1 9.1

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term borrowings and current portion of long-term debt 43.5 33.4

Accrued compensation and benefits 104.5 61.7

Short-term lease liability 67.2 77.1

Pension and post-retirement benefits 10.0 7.5

Redeemable noncontrolling interests 73.9 107.6

Stockholders' Equity:

Preferred stock, no par value (10,000,000 shares authorized, none issued) — —

Accumulated other comprehensive loss (92.7) (95.1)

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MillerKnoll, Inc.

Consolidated Statements of Stockholders' Equity

(In millions, except share and per share data) Shares Amount

Net loss — — — (27.1) — — (27.1)

Other comprehensive loss, net of tax — — — — (42.0) — (42.0)

Stock-based compensation expense — — 31.4 — — — 31.4

Restricted stock issuance 611,452 0.1 (0.1) — — — —

Restricted and performance stock units released 503,687 0.1 (0.1) — — — —

Employee stock purchase plan issuances 87,562 — 2.8 — — — 2.8

Repurchase and retirement of common stock (390,979) (0.1) (16.1) — — — (16.2)

Directors' fees direct issuance 23,255 — 0.9 — — — 0.9

Director's fees deferred restricted stock units — — 0.6 — — — 0.6

Deferred compensation plan — — — — — 0.2 0.2

Pre-combination expense from Knoll rollover — — 22.4 — — — 22.4

NCI Adjustment — — 0.5 — — — 0.5

Redemption Value Adjustment — — — (41.6) — — (41.6)

Restricted stock units dividend reinvestment — — 0.3 (0.3) — — —

Dividends declared ($0.75 per share) — — — (57.0) — — (57.0)

Net earnings — — — 42.1 — — 42.1

Other comprehensive income, net of tax — — — — 12.0 — 12.0

Stock-based compensation expense (39,839) — 20.2 — — — 20.2

Exercise of stock options 49,482 — 1.0 — — — 1.0

Restricted and performance stock units released 226,657 — 0.4 — — — 0.4

Employee stock purchase plan issuances 185,551 — 3.1 — — — 3.1

Repurchase and retirement of common stock (575,207) (0.1) (15.9) — — — (16.0)

Deferred stock unit — — 0.6 — — — 0.6

Redemption Value Adjustment — — — (1.9) — — (1.9)

Dividends declared ($0.75 per share) — — — (57.2) — — (57.2)

Net earnings — — — 82.3 — — 82.3

Other comprehensive income, net of tax — — — — 2.4 — 2.4

Stock-based compensation expense (983) — 20.7 — — — 20.7

Exercise of stock options 74,096 — 1.7 — — — 1.7

Restricted and performance stock units released 457,965 0.1 0.9 — — — 1.0

Employee stock purchase plan issuances 139,211 0.1 2.9 — — — 3.0

Redemption Value Adjustment — — — 34.5 — — 34.5

Dividends declared ($0.75 per share) — — — (55.0) — — (55.0)

Other — — — 0.5 — — 0.5

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MillerKnoll, Inc.

Consolidated Statements of Cash Flows

Year Ended

Cash Flows from Operating Activities:

Loss on sale of equity method investment 0.4 — —

Loss on sale of property and dealers — — (1.0)

Pension contributions (1.8) (11.7) (5.0)

Loss on extinguishment of debt — — 13.4

Restructuring expenses 30.8 34.0 —

Amortization of deferred financing costs 4.6 4.6 4.2

Decrease (increase) in long-term assets 2.4 (4.7) (1.6)

(Decrease) in long-term liabilities (3.6) (1.8) (2.1)

Changes in current assets and liabilities:

Decrease (increase) in inventories 59.0 81.5 (166.4)

Decrease (increase) in prepaid expenses and other 25.6 19.6 (39.6)

(Decrease) increase in accounts payable (28.9) (82.5) 51.5

(Decrease) increase in accrued liabilities (7.5) (124.8) 47.2

Net Cash Provided by (Used in) Operating Activities 352.3 162.9 (11.9)

Cash Flows from Investing Activities:

Advances of notes receivable (14.7) (5.1) (1.2)

Collection of notes receivable 2.8 — —

Marketable securities sales — — 7.7

Proceeds from sales of property and dealers — 0.3 2.8

Proceeds from life insurance policy — 13.5 —

Acquisitions, net of cash received — — (1,088.5)

Proceeds from the sale of equity method investment 3.5 — —

Net Cash (Used in) Investing Activities (86.3) (76.5) (1,172.4)

Cash Flows from Financing Activities:

Proceeds from issuance of debt, net of discounts — — 1,007.0

Payments of deferred financing costs — — (9.3)

Repayments of long-term debt (31.3) (26.3) (63.1)

Payment of make whole premium on debt — — (13.4)

Common stock issued 5.9 5.5 7.5

Common stock repurchased and retired (138.2) (16.0) (16.2)

Distribution to noncontrolling interest (2.8) (4.9) (6.8)

Net Cash (Used in) Provided by Financing Activities (258.8) (86.8) 1,039.9

Effect of exchange rate changes on cash and cash equivalents (0.3) (6.4) (21.7)

Net Increase (Decrease) In Cash and Cash Equivalents 6.9 (6.8) (166.1)

Cash and cash equivalents, Beginning of Year 223.5 230.3 396.4

Cash and Cash Equivalents, End of Year $ 230.4 $ 223.5 $ 230.3

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Other Cash Flow Information

Income taxes paid, net of cash received $ 28.1 $ 34.8 $ 36.9

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Notes to the Consolidated Financial Statements

Note 1 Significant Accounting and Reporting Policies 53

Note 2 Revenue from Contracts with Customers 62

Note 3 Acquisitions and Divestitures 65

Note 4 Inventories 65

Note 5 Investments in Nonconsolidated Affiliates 66

Note 6 Short-Term Borrowings and Long-Term Debt 67

Note 7 Leases 68

Note 8 Employee Benefit Plans 69

Note 9 Common Stock and Per Share Information 74

Note 10 Stock-Based Compensation 74

Note 11 Income Taxes 80

Note 12 Fair Value 83

Note 13 Commitments and Contingencies 87

Note 14 Operating Segments 88

Note 15 Accumulated Other Comprehensive Loss 91

Note 16 Restructuring and Integration Expense 91

Note 17 Variable Interest Entities 93

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1. Significant Accounting and Reporting Policies

The following is a summary of significant accounting and reporting policies not reflected elsewhere in the accompanying financial statements.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of MillerKnoll, Inc. and its controlled domestic and foreign subsidiaries. The consolidated entities are collectively referred to as “the Company.” All intercompany accounts and transactions have been eliminated in the Consolidated Financial Statements.

Description of Business

The Company researches, designs, manufactures, sells and distributes interior furnishings for use in various environments including office, healthcare, educational and residential settings and provides related services that support companies all over the world. The Company's products are sold primarily through independent contract furniture dealers, retail studios, the Company's eCommerce platforms, direct-mail catalogs, as well as direct customer sales and independent retailers.

MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. A global leader in design, MillerKnoll includes Herman Miller® and Knoll®, as well as Colebrook Bosson Saunders®, DatesWeiser®, Design Within Reach®, Edelman®, Geiger®, HAY®, Holly Hunt®, KnollTextiles®, Maharam®, Muuto®, NaughtOne®, and Spinneybeck®|FilzFelt®. Combined, MillerKnoll represents over 100 years of design research and exploration in service of humanity. The Company is united by a belief in design as a tool to create positive impact and shape a more sustainable, caring, and beautiful future for all people and the planet.

Fiscal Year

The Company's fiscal year ends on the Saturday closest to May 31. The fiscal year ended June 1, 2024, contained 52 weeks; the fiscal year ended June 3, 2023, contained 53 weeks; and the fiscal year ended May 28, 2022, contained 52 weeks.

Foreign Currency Translation

The functional currency for most of the foreign subsidiaries is their local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the United States dollar using fiscal year-end exchange rates and translating revenue and expense accounts using average exchange rates for the period are reflected as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.

The financial statement impact of gains and losses resulting from remeasuring foreign currency transactions into the appropriate functional currency resulted in a net loss of $3.0 million, $4.8 million, and $3.3 million for the fiscal years ended June 1, 2024, June 3, 2023, and May 28, 2022, respectively. These amounts are included in Other (income) expense, net in the Consolidated Statements of Comprehensive Income.

Cash and Cash Equivalents

Certain of the Company’s subsidiaries participate in a notional cash pooling arrangement to manage global liquidity requirements. As part of a master netting arrangement, the participants combine their cash balances in pooling accounts at the same financial institution with the ability to offset bank overdrafts of one participant against positive cash account balances held by another participant. Under the terms of the master netting arrangement, the financial institution has the right, ability, and intent to offset a positive balance in one account against an overdrawn amount in another account. Amounts in each of the accounts are unencumbered and unrestricted with respect to use. As such, the net cash balance related to this pooling arrangement is included in Cash and cash equivalents in the accompanying Consolidated Balance Sheets.

The Company’s net cash pool position consisted of the following:

(In millions) June 1, 2024

Gross cash position $ 26.6

Less: cash borrowings (23.0)

Net cash position $ 3.6

The Company holds cash equivalents as part of its cash management function. Cash equivalents include money market funds and time deposit investments with original maturities of less than three months. The carrying value of cash equivalents, which approximates fair value, totaled $55.9 million and $40.8 million as of June 1, 2024 and June 3, 2023, respectively.

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All cash equivalents are high-credit quality financial instruments and the amount of credit exposure to any one financial institution or instrument is limited.

Allowances for Credit Losses

Allowances for credit losses related to accounts are managed at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date.

In estimating probable losses, we review accounts based on known customer exposures, historical credit experience, and specific identification of other potentially uncollectible accounts. An accounts receivable balance is considered past due when payment is not received within the stated terms. Accounts that are considered to have higher credit risk are reviewed using information available about the debtor, such as financial statements, news reports and published credit ratings. General information regarding industry trends and the economic environment is also used.

We arrive at an estimated loss for specific concerns and estimate an additional amount for the remainder of trade balances based on historical trends and other factors previously referenced. Balances are written off against the reserve once the Company determines the probability of collection to be remote. The Company generally does not require collateral or other security on trade accounts receivable. Subsequent recoveries, if any, are credited to bad debt expense when received.

Concentrations of Credit Risk

The Company's trade receivables are primarily due from independent dealers who, in turn, carry receivables from their customers. The Company monitors and manages the credit risk associated with individual dealers and direct customers where applicable. Dealers are responsible for assessing and assuming credit risk of their customers and may require their customers to provide deposits, letters of credit or other credit enhancement measures. Some sales contracts are structured such that the customer payment or obligation is direct to the Company. In those cases, the Company may assume the credit risk. Whether from dealers or customers, the Company's trade credit exposures are not concentrated with any particular entity.

Inventories

Inventories are valued at the lower of cost or net realizable value and include material, labor and overhead. The Company establishes reserves for excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions, however inventory cannot be subsequently written back up, since the reserve establishes a new (lower) cost basis. Inventory cost is primarily determined using the first in, first out (FIFO) method. Further information on the Company's recorded inventory balances can be found in Note 4 of the Consolidated Financial Statements.

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Goodwill and Indefinite-lived Intangible Assets

The changes in the carrying amount of goodwill, by reporting segment, are as follows:

Sale of owned dealer (0.3) — — (0.3)

Foreign currency translation adjustments 23.7 (33.7) (31.2) (41.2)

Accumulated impairment losses (36.7) — (88.8) (125.5)

Foreign currency translation adjustments (1.7) (1.3) (1.5) (4.5)

Accumulated impairment losses (36.7) — (88.8) (125.5)

Foreign currency translation adjustments 1.7 1.4 1.5 4.6

Accumulated impairment losses (36.7) — (88.8) (125.5)

Other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:

(In millions) Indefinite-lived Intangible Assets

Foreign currency translation adjustments (0.6)

Acquisition of Knoll (19.7)

Foreign currency translation adjustments 1.6

Impairment charges (16.8)

Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value.

Each of the reporting units was reviewed for impairment using a qualitative assessment as of March 31, 2024. The Company elected to test each reporting unit, with the exception of the Global Retail reporting unit, qualitatively, as is permitted under ASU 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. For the Global Retail reporting unit, the Company elected to proceed directly to the quantitative test.

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The Company performed the quantitative impairment analysis of the Global Retail reporting unit as of March 31, 2024, to determine the fair value of the Global Retail reporting unit as compared to the carrying value. The Company utilized a weighting of the income approach and the market approach to estimate the fair value of the Global Retail reporting unit. In performing the quantitative impairment test, the Company determined that the fair value of the Global Retail reporting unit exceeded the carrying amount and, as such, the reporting unit was not impaired. The Company determined that the Global Retail reporting unit exceeded its carrying value by 37% and therefore does not have a heightened risk of future impairments if any assumptions, estimates or market factors change in the future.

The test for impairment requires the Company to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. We estimated the fair value of the Global Retail reporting unit using a discounted cash flow analysis. The discounted cash flow analysis used the present value of projected cash flows and a residual value.

The Company employed a market-based approach in selecting the discount rate used in our analysis. The discount rate selected represents the market rates of return equal to what the Company believes a reasonable investor would expect to achieve on investments of similar size to the Global Retail reporting unit. The Company believes the discount rate selected in the quantitative assessment is appropriate in that exceeds the estimated weighted average cost of capital for our business as a whole. The results of the impairment test are sensitive to changes in the discount rates and changes in the discount rate may result in future impairment.

The Company evaluated the sensitivity of changes in forecasted sales, operating margin and the discount rate for the Global Retail reporting unit. Reducing the Global Retail reporting unit's forecasted sales by 5% in all years, and leaving all other assumptions static, would not result in impairment. A decrease in the operating margin of 100 basis points would not result in impairment. An increase in the discount rate of 100 basis points would not result in impairment.

The Company evaluates indefinite-lived trade name intangible assets for impairment using a qualitative assessment annually. The Company also tests for impairment using a quantitative assessment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.

In fiscal 2024, the Company performed quantitative assessments in testing the Knoll product brand and Muuto brand indefinite-lived intangible assets for impairment, which resulted in the carrying values of the trade names exceeding their fair values by $8.9 million and $7.9 million, respectively. Accordingly, impairment charges of $16.8 million in total were recognized. The carrying value of the Knoll trade name as of the measurement date was $153.3 million and the fair value of the Knoll trade name as of the measurement date was $144.4 million. The carrying value of the Muuto trade name as of the measurement date was $88.4 million and the fair value of the Muuto trade name as of the measurement date was $80.5 million. If the residual cash flows related to these trade names were to decline in future periods, the Company may need to record additional impairment charges.

In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using a relief-from-royalty approach, which requires assumptions related to the following:

•forecasted revenue growth rate,

•assumed royalty rates that could be payable if we did not own the trademark, and

•a market participant discount rate based on a weighted-average cost of capital.

The assumptions used reflect management’s best estimates; however, actual results could differ from our estimates. In completing our annual indefinite-lived trade name impairment test, the fair values of the Knoll and Muuto trade names were both estimated using a discount rate of 12.0%. The, royalty rate used for the Knoll and Muuto trade names were 2.0% and 4.5%, respectively. The long-term growth rate used in the valuation of the Knoll and Muuto trade names was 2.5% and 3.0%, respectively. The Company’s estimates of the fair value of its Knoll and Muuto indefinite-lived intangible assets are sensitive to changes in the key assumptions above as well as projected financial performance. Therefore, a sensitivity analysis was performed on certain key assumptions.

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For the Knoll trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales at March 31, 2024, would have resulted in $14.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would result in an additional $18.0 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $14.0 million of impairment charges.

For the Muuto trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales at March 31, 2024 would have resulted in $8.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would have resulted in an additional $4.5 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $8.0 million of impairment charges.

During fiscal 2023, the Company determined through a qualitative assessment that the Knoll trade name carrying value was more than likely above its fair value. As a result, the Company performed a quantitative assessment to determine the fair value and as a result recognized a $19.7 million non-cash impairment charge to the indefinite-lived trade name. The carrying value of the Knoll trade name as of the measurement date was $173.0 million. The fair value of the Knoll trade name as of the measurement date was $153.3 million.

The assumptions used reflect management’s best estimate; however, actual results could differ from our estimates. In completing our annual indefinite-lived trade name impairment tests, the fair value of the Knoll trade name was estimated using a discount rate of 12.0%, royalty rate of 2.0% and long-term growth rate of 2.5%. The Company’s estimates of the fair value of its Knoll indefinite-lived intangible asset are sensitive to changes in the key assumptions above as well as projected financial performance. Therefore, a sensitivity analysis was performed on certain key assumptions.

If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record additional impairment charges.

Property, Equipment and Depreciation

Property and equipment are stated at cost. The cost is depreciated over the estimated useful lives of the assets using the straight-line method. Estimated useful lives range from 3 to 10 years for machinery and equipment and do not exceed 40 years for buildings. Leasehold improvements are depreciated over the lesser of the lease term or the useful life of the asset. The Company capitalizes certain costs incurred in connection with the development, testing and installation of software for internal use and cloud computing arrangements. Software for internal use is included in property and equipment and is depreciated over an estimated useful life not exceeding 10 years. Depreciation and amortization expense is included in the Consolidated Statements of Comprehensive Income in the Cost of sales, Selling, general and administrative and Design and research line items.

The following table summarizes our property as of the dates indicated:

Land and improvements $ 55.0 $ 55.1

Construction in progress 55.1 55.5

Property and equipment, net $ 492.0 $ 536.3

As of the end of fiscal 2024, outstanding commitments for future capital purchases approximated $53.7 million.

Other Long-Lived Assets

The Company reviews the carrying value of long–lived assets for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset or asset group are compared to the carrying value of the asset or asset group. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the carrying value of the assets exceeds their fair value.

Amortizable intangible assets within Other amortizable intangibles, net in the Consolidated Balance Sheets consist primarily of patents, trademarks and customer relationships. The customer relationships intangible asset is comprised of relationships with customers, specifiers, networks, dealers and distributors. Refer to the following table for the combined gross carrying value and accumulated amortization for these amortizable intangibles.

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The Company amortizes these assets over their remaining useful lives using the straight-line method over periods ranging from 3 years to 20 years, or on an accelerated basis, to reflect the expected realization of the economic benefits. It is estimated that the weighted-average remaining useful life of the patents and trademarks is approximately 3.1 years and the weighted-average remaining useful life of the customer relationships is 8.6 years.

Estimated amortization expense on existing amortizable intangible assets as of June 1, 2024, for each of the succeeding five fiscal years, is as follows:

(In millions)