MillerKnoll, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 3, 2023 (53 weeks), compared with the year ended May 28, 2022 (52 weeks). Although the request metadata says “2022 Q4,” this filing reports the full fiscal year 2023, not a standalone quarter.
Business context
MillerKnoll designs, manufactures, and sells furnishings and related services for workplace, healthcare, education, and residential settings. Its brands include Herman Miller, Knoll, Design Within Reach, HAY, and others. Sales are made through contract dealers, direct sales, retail, and eCommerce. The company reports Americas Contract, International Contract & Specialty, Global Retail, and Corporate.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $4,087.1 million | $3,946.0 million |
| Gross margin | $1,430.0 million; 35.0% | $1,352.7 million; 34.3% |
| Operating earnings | $122.3 million; 3.0% of sales | $39.8 million; 1.0% of sales |
| Net earnings (loss) attributable to MillerKnoll | $42.1 million | $(27.1) million |
| Diluted EPS | $0.55 | $(0.37) |
| Adjusted diluted EPS (non-GAAP) | $1.85 | $1.92 |
| Cash from operating activities | $162.9 million | $(11.9) million |
Reported sales rose 3.6%; organic sales increased 0.4%, excluding acquisition, currency, and the extra week. Price increases and the extra week supported reported growth, while lower volume in Americas Contract and Global Retail offset gains. Gross margin improved mainly on pricing and Knoll integration synergies, partly offset by commodity, freight, storage, distribution, and labor costs. Interest expense increased to $74.0 million from $37.8 million.
- Segment results: Americas Contract sales were $2,026.1 million (+5.0% reported; +0.3% organic) and operating earnings were $99.6 million, versus a $24.0 million loss. International Contract & Specialty sales were $1,017.3 million (+9.6%; +7.0% organic) and operating earnings were $98.6 million. Global Retail sales fell 4.1% reported and 5.1% organic to $1,043.7 million; it recorded a $15.5 million operating loss versus $134.5 million of earnings.
- Cash and debt: Cash and cash equivalents were $223.5 million. Total liquidity, including $284.2 million available under the revolving credit facility, was $507.7 million. Total debt was $1,414.4 million, including $1,365.1 million of long-term debt. The company reported compliance with its credit covenants.
- Capital and shareholder returns: Capital expenditures were $83.3 million; fiscal 2024 capital spending is expected to be $80–$100 million. Dividends declared were $0.75 per share. The board’s repurchase authorization had $204.5 million remaining at year-end.
Material changes and unusual items
- Knoll acquisition effects and the extra fiscal week contributed to year-over-year reported sales growth; organic growth was modest. Organic orders declined 11.5% year over year.
- Backlog fell to $698.0 million from $932.5 million. The company expects substantially all year-end backlog to be filled in the next fiscal year, while cautioning that backlog does not necessarily predict sales.
- Operating results included $34.4 million of restructuring expense and $41.2 million of impairment charges in operating expenses. The company also disclosed $56.9 million of total impairment charges in its cash-flow reconciliation, including charges recorded outside operating expenses.
- The company stopped operating Fully as a standalone brand and sales channel, and recorded impairment charges related to Fully. It also recorded a $19.7 million non-cash impairment of the Knoll trade name. Global Retail goodwill was not impaired, but its estimated fair value exceeded carrying value by only 1%.
- Knoll integration had generated $131 million of annualized run-rate savings by the end of the fourth quarter. The company’s goal is $145 million within three years of the acquisition. The 2023 restructuring plan is expected to produce $30–$35 million in annualized expense reductions.
Outlook, risks, and contingencies
Management cited higher interest rates, uncertainty following regional bank failures, and weak CEO and consumer confidence as challenges, particularly for luxury housing and discretionary spending. It remained optimistic about contract demand, citing its project funnel and indications of more structured returns to the office. It said inflation in some key inputs was beginning to ease and that pricing and cost-reduction initiatives should help address cost pressure.
- Key risks include economic and workplace-demand changes, competition and pricing pressure, raw-material and labor costs, supply-chain disruption, foreign exchange and trade policy, dealer and customer financial health, cybersecurity, and execution of Knoll integration and synergy plans.
- Debt increases interest expense and limits financial flexibility. The credit agreement includes leverage and other covenants; a failure to comply could trigger default and accelerated repayment.
- Environmental regulation and the company’s 2030 sustainability commitments may entail significant costs; the company says the amount is difficult to predict.
- Management said pending ordinary-course litigation is not expected to materially affect the company. Maximum exposure under performance bonds was approximately $8.9 million; no liability was recorded.
Important facts for investors to verify
- Whether the decline in orders and backlog stabilizes and converts into sales, particularly in Americas Contract and Global Retail.
- Progress toward the $145 million Knoll synergy target and whether the disclosed savings translate into sustained operating-margin improvement.
- Global Retail performance and the assumptions supporting its narrow goodwill headroom, along with possible further impairment exposure.
- Debt repayment, interest costs, covenant headroom, and the availability of revolving-credit liquidity.
- The sustainability of pricing benefits and the ability to offset labor, freight, commodity, and other input costs.