MillerKnoll, Inc. — Form 10-K Summary
Period clarification: The supplied filing is for the fiscal year ended June 1, 2024 (52 weeks), compared with fiscal 2023 ended June 3, 2023 (53 weeks). It is not a fiscal 2023 Q4 filing. The filing separately reports the three months ended June 1, 2024; quarterly figures are identified below where available. Amounts are in U.S. dollars.
Business context and reporting period
MillerKnoll designs, manufactures and sells furnishings for workplace, healthcare, education and residential markets through contract dealers, direct sales, retail stores and eCommerce. Its reportable segments are Americas Contract, International Contract & Specialty, and Global Retail. Approximately 57.4% of fiscal 2024 sales were made to or through independent dealers.
Financial performance and liquidity
| Metric | Fiscal 2024 | Fiscal 2023 |
|---|---|---|
| Net sales | $3,628.4 million | $4,087.1 million |
| Gross margin | $1,419.5 million; 39.1% | $1,430.0 million; 35.0% |
| Operating earnings | $167.2 million; 4.6% of sales | $122.3 million; 3.0% of sales |
| Net earnings attributable to MillerKnoll | $82.3 million | $42.1 million |
| Diluted EPS | $1.11 | $0.55 |
| Adjusted diluted EPS (non-GAAP) | $2.08 | $1.85 |
| Cash from operating activities | $352.3 million | $162.9 million |
| Capital expenditures | $78.4 million | $83.3 million |
- Sales declined 11.2% reported and 8.1% on an organic basis. Lower volumes, the prior-year extra week, and the Fully and North American HAY eCommerce closures drove the decline; price increases and currency translation partly offset it.
- Gross margin improved 4.1 percentage points, supported by pricing, Knoll synergies, and lower commodity, freight, storage and distribution costs. Lower volume and unfavorable mix partly offset these benefits.
- Operating cash flow increased by $189.4 million, mainly from higher earnings, lower pension contributions and reduced working capital. Cash and equivalents were $230.4 million at year-end.
- Debt totaled $1,347.8 million, including $390.0 million drawn on the $725 million revolving facility. The company reported $322.3 million of availability under that facility and total liquidity of $552.7 million. It was in compliance with its debt covenants at year-end.
- Current assets were $1,069.6 million and current liabilities were $697.7 million. Inventory declined to $428.6 million from $487.4 million.
- Quarter ended June 1, 2024: sales were $888.9 million versus $956.7 million a year earlier; gross margin was 39.6% versus 37.1%; operating earnings were $23.7 million versus $11.6 million. A clear quarterly net earnings or EPS value is not provided in the supplied text.
Material changes versus the prior comparable year
- All three segments recorded lower annual sales: Americas Contract $1,824.2 million (down 10.0%); International Contract & Specialty $931.8 million (down 8.4%); and Global Retail $872.4 million (down 16.4%).
- Americas Contract operating earnings were $98.7 million versus $99.6 million. International Contract & Specialty earnings fell to $78.2 million from $98.6 million. Global Retail moved to $42.4 million of earnings from a $15.5 million loss, reflecting margin improvement and lower expenses despite lower sales.
- Operating expenses declined 4.2% to $1,252.3 million. Lower variable selling costs, cost optimization and synergies were partly offset by a $33 million increase in compensation and benefits.
- Fiscal 2024 reported sales comparisons were affected by fiscal 2023’s extra week, which contributed approximately $77 million to prior-year sales, and by $76 million related to the Fully and HAY eCommerce closures.
- Operating cash flow improved substantially, while financing cash use rose to $258.8 million, including $138.2 million for repurchases of 6.0 million shares and $31.3 million of long-term debt repayments.
Outlook, management commentary, risks and unusual items
- Management said higher interest rates, weak housing-related demand and low confidence continue to pressure the market, particularly luxury housing and discretionary purchases. It also cited improving contract-furniture indicators, including more contract activations and project opportunities entering the sales funnel.
- Fiscal 2025 capital spending is expected to be $100 million to $125 million, primarily for facilities, showrooms, retail stores, equipment and sustainability investments. No specific sales or earnings guidance is provided in the supplied filing text.
- Management reported $160 million in annualized run-rate cost synergies from Knoll integration. The integration program is expected to involve approximately $150 million of pre-tax costs; fiscal 2024 integration costs were $23.5 million.
- Fiscal 2024 included $30.8 million of restructuring charges and $16.8 million of impairment charges. The impairments included $8.9 million for the Knoll trade name and $7.9 million for the Muuto trade name; the company also recorded $6.5 million of other asset impairments. No goodwill impairment was recorded.
- Backlog was $683.6 million at June 1, 2024, down from $698.0 million a year earlier. Management expects substantially all of the year-end backlog to be filled in the next fiscal year but cautions that backlog is not necessarily indicative of future sales.
- Key risks include continued weak demand, pricing and competitive pressure, commodity and tariff exposure, labor and supply-chain constraints, foreign exchange and geopolitical developments, cybersecurity, and the substantial debt incurred in the Knoll acquisition. Future impairment charges are possible if estimates or market conditions worsen.
- Management considers pending ordinary-course litigation unlikely to materially affect the company. Performance bonds had maximum exposure of approximately $9.2 million; no liability was recorded. The auditor issued an unqualified opinion on the financial statements and internal controls, while identifying goodwill and Knoll/Muuto trade-name impairment assessments as critical audit matters.
Important facts for investors to verify
- Reconcile the fiscal-year filing period with the requested “2023 Q4” period; confirm whether a separate quarterly filing is intended.
- Track whether improving contract demand indicators translate into orders, sales and sustained margins across all segments.
- Assess debt repayment, interest expense, covenant headroom and liquidity against the $1.35 billion debt balance and upcoming maturities.
- Monitor whether the $160 million annualized synergy run rate is sustained and whether further integration or restructuring costs arise.
- Review the assumptions behind Knoll and Muuto trade-name valuations and the sensitivity of goodwill and intangible assets to sales, margins, royalty rates and discount rates.
- Compare planned fiscal 2025 capital spending with operating cash generation, dividends and any additional share repurchases.