MillerKnoll, Inc. — Form 10-K Summary
Period: Fiscal year ended May 28, 2022 (52 weeks), compared with fiscal 2021 ended May 29, 2021. The request metadata says “2021 Q4,” but the supplied filing is the full fiscal 2022 annual report; it also includes fiscal 2022 fourth-quarter results. MillerKnoll acquired Knoll on July 19, 2021, and changed its name from Herman Miller, Inc. in November 2021.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $3,946.0 million | $2,465.1 million |
| Gross margin | $1,352.7 million; 34.3% | $951.1 million; 38.6% |
| Operating earnings | $39.8 million; 1.0% of sales | $232.5 million; 9.4% of sales |
| Net earnings (loss) attributable to MillerKnoll | $(27.1) million | $174.6 million |
| Diluted EPS | $(0.37) | $2.94 |
| Operating cash flow | $(11.9) million | $332.3 million |
| Capital expenditures | $94.7 million | $59.8 million |
- Sales increased 60.1%; excluding acquisitions and currency effects, organic sales increased 13.6%. Knoll contributed $1,188.5 million of reported sales from its acquisition date.
- Adjusted diluted EPS, a non-GAAP measure, was $1.92 versus $3.07. Reported results included $125 million of acquisition and integration costs and $51 million of purchased-intangible amortization in operating expenses.
- Cash used in investing activities was $1,172.4 million, including $1,088.5 million for the Knoll acquisition, net of cash acquired. Financing activities provided $1,039.9 million.
- At year-end, cash and equivalents were $230.3 million; working capital was $440.5 million and the current ratio was 1.5. Total debt was $1,427.9 million, compared with $277.1 million a year earlier. The company had $296.6 million available under its revolving credit facility and was in compliance with its debt covenants.
- Fiscal 2022 fourth-quarter sales were $1,100.5 million and net earnings attributable to MillerKnoll were $21.5 million, or $0.28 per diluted share.
Changes, segments, and operating context
- Growth reflected the Knoll acquisition and higher sales in the legacy businesses. Organic sales growth was 11.1% in Americas Contract, 23.1% in International Contract, and 13.0% in Global Retail.
- Profitability weakened: gross margin fell 4.3 percentage points. Management cited higher commodity, freight, distribution, and labor costs, purchase-accounting effects, and less favorable product and channel mix; price increases partially offset these pressures.
- Americas Contract operating earnings declined to $44.5 million from $93.6 million; International Contract earnings rose to $59.3 million from $48.5 million; Global Retail earnings declined to $96.2 million from $143.0 million. Knoll recorded a $57.6 million operating loss, including acquisition amortization and integration expenses.
- Order backlog was $932.5 million at year-end, up from $446.9 million. The filing attributes the increase partly to $293.3 million of Knoll backlog and partly to orders exceeding sales. Substantially all was expected to ship in the next fiscal year, though backlog is not necessarily predictive of sales.
- Operating cash flow turned negative, with working-capital demands including a $166.4 million inventory increase and a $92.4 million increase in accounts receivable. The company changed certain U.S. inventory costing from LIFO to FIFO and retrospectively adjusted prior periods.
Outlook, risks, and unusual items
- Management reported strong demand across segments, while identifying persistent inflation, supply-chain constraints, and labor shortages. By year-end, lead times on most new orders were near normal and staffing had stabilized; the company said it would continue monitoring conditions.
- Knoll integration was described as progressing as planned. MillerKnoll had achieved $66 million in annualized run-rate savings by the fourth quarter and targeted $120 million in annualized synergies within three years of closing. The integration program was expected to incur $100–$120 million of pretax costs; $107.9 million was incurred in fiscal 2022.
- Fiscal 2023 capital spending was expected to be $150–$160 million, primarily for facilities, equipment, acquisition synergies, and sustainability initiatives. This is a spending outlook, not earnings guidance.
- Key risks include execution of the Knoll integration and synergy plan, elevated debt and covenant requirements, commodity and freight costs, supply and labor availability, changing office and hybrid-work demand, competitive pricing, foreign exchange, and economic conditions. The company halted order fulfillment in Russia and Belarus and paused orders and fulfillment in Ukraine; revenues from those countries were described as small.
- The company reported a fiscal 2022 effective tax rate of (130.1)% despite a pretax loss, reflecting the complexity of its tax provision. Other notable items include a $13.4 million debt-extinguishment loss and a $15.5 million impairment charge related to integration activities. Management said pending ordinary-course litigation was not expected to materially affect the financial statements.
Important facts for investors to verify
- Whether Knoll integration delivers the stated $120 million annualized synergy target and whether related costs remain within expectations.
- How quickly margins recover as pricing, commodity, freight, and labor costs evolve.
- Debt repayment, liquidity, and compliance with leverage covenants, particularly if earnings or cash flow weaken.
- Whether backlog converts to shipments and revenue, and whether inventory and receivables growth normalize.
- The assumptions underlying non-GAAP adjusted EPS and organic growth, and the effects of acquisition accounting and the retrospective FIFO change on comparisons.