Millerknoll, Inc 10-Q for FY2025 Q1
Millerknoll, Inc. (MLKN)
10-Q
2024-10-09
For: 2024-08-31
View Original
Added on
April 09, 2026
About this 10-Q
Millerknoll, Inc filed this 10-Q on October 9, 2024, covering the quarter ended August 31, 2024 (FY2025 Q1).
Headline figures
Quarter ended August 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $861.5M
- down 6.1% from $917.7M a year earlier
- Net loss
- $1.2M
- compared with net income of $16.7M a year earlier
- Diluted EPS
- -$0.02
- compared with $0.22 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended August 31, 2024
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 001-15141
__________________________________________
(Exact name of registrant as specified in its charter)
__________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices and zip code)
(616 ) 654-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of October 4, 2024, MillerKnoll, Inc. had 69,165,532 shares of common stock outstanding.
MillerKnoll, Inc.
Form 10-Q
Table of Contents
| Page No. | |||||
| Part I — Financial Information | |||||
| Item 1 Financial Statements (Unaudited) | |||||
| Condensed Consolidated Statements of Comprehensive Income (Loss) — Three Months ended August 31, 2024 and September 2, 2023 | |||||
| Condensed Consolidated Balance Sheets — August 31, 2024 and June 1, 2024 | |||||
| Condensed Consolidated Statements of Cash Flows — Three Months Ended August 31, 2024 and September 2, 2023 | |||||
| Condensed Consolidated Statements of Stockholders' Equity — Three Months Ended August 31, 2024 and September 2, 2023 | |||||
| Notes to Condensed Consolidated Financial Statements | |||||
Note 2 - Recently Issued Accounting Standards | |||||
Note 4 - Inventories, net | |||||
Note 6 - Employee Benefit Plans | |||||
Note 7 - Earnings Per Share | |||||
Note 8 - Stock-Based Compensation | |||||
Note 9 - Income Taxes | |||||
Note 10 - Fair Value Measurements | |||||
Note 11 - Commitments and Contingencies | |||||
Note 12 - Short-Term Borrowings and Long-Term Debt | |||||
Note 13 - Accumulated Other Comprehensive Loss | |||||
Note 14 - Operating Segments | |||||
Note 15 - Restructuring and Integration Expense | |||||
Note 16 - Variable Interest Entities | |||||
| Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||
| Item 3 Quantitative and Qualitative Disclosures about Market Risk | |||||
| Item 4 Controls and Procedures | |||||
| Part II — Other Information | |||||
| Item 1 Legal Proceedings | |||||
| Item 1A Risk Factors | |||||
| Item 2 Unregistered Sales of Equity Securities and Use of Proceeds | |||||
| Item 5 Other Information | |||||
| Item 6 Exhibits | |||||
| Signatures | |||||
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
MillerKnoll, Inc.
Condensed Consolidated Statements of Comprehensive Income
| (Dollars in millions, except share data) | Three Months Ended | ||||||||||||||||||||||
| (Unaudited) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross margin | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Restructuring expense | |||||||||||||||||||||||
| Design and research | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating earnings | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest and other investment (income) expense | ( | ( | |||||||||||||||||||||
| Other (income) expense, net | ( | ||||||||||||||||||||||
| (Loss) earnings before income taxes and equity income | ( | ||||||||||||||||||||||
| Income tax (benefit) expense | ( | ||||||||||||||||||||||
| Equity income from nonconsolidated affiliates, net of tax | |||||||||||||||||||||||
| Net (loss) earnings | ( | ||||||||||||||||||||||
| Net earnings (loss) attributable to redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Net (loss) earnings attributable to MillerKnoll, Inc. | $ | ( | $ | ||||||||||||||||||||
| (Loss) earnings per share - basic | $ | ( | $ | ||||||||||||||||||||
| (Loss) earnings per share - diluted | $ | ( | $ | ||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustments | $ | $ | |||||||||||||||||||||
| Pension and post-retirement liability adjustments | ( | ||||||||||||||||||||||
| Unrealized (loss) gain on interest rate swap agreement | ( | ||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | $ | ( | $ | ||||||||||||||||||||
| Comprehensive (loss) income | ( | ||||||||||||||||||||||
| Comprehensive income (loss) attributable to redeemable noncontrolling interests | ( | ||||||||||||||||||||||
| Comprehensive (loss) income attributable to MillerKnoll, Inc. | $ | ( | $ | ||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
3
MillerKnoll, Inc.
Condensed Consolidated Balance Sheets
| (Dollars in millions, except share data) | |||||||||||
| (Unaudited) | August 31, 2024 | June 1, 2024 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Unbilled accounts receivable | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses | |||||||||||
| Assets held for sale | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, at cost | |||||||||||
| Less — accumulated depreciation | ( | ( | |||||||||
| Net property and equipment | |||||||||||
| Right of use assets | |||||||||||
| Goodwill | |||||||||||
| Indefinite-lived intangibles | |||||||||||
Other amortizable intangibles, net of accumulated amortization of $ | |||||||||||
| Other noncurrent assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Short-term borrowings and current portion of long-term debt | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Short-term lease liability | |||||||||||
| Accrued warranty | |||||||||||
| Customer deposits | |||||||||||
| Other accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Pension and post-retirement benefits | |||||||||||
| Lease liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Stockholders' Equity: | |||||||||||
Preferred stock, no par value ( | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Stockholders' Equity | |||||||||||
| Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity | $ | $ | |||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
4
MillerKnoll, Inc.
Condensed Consolidated Statements of Cash Flows
| (Dollars in millions) | Three Months Ended | ||||||||||
| (Unaudited) | August 31, 2024 | September 2, 2023 | |||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net (loss) earnings | $ | ( | $ | ||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Amortization of deferred financing costs | |||||||||||
| Deferred taxes | |||||||||||
| Restructuring expense | |||||||||||
| (Increase) decrease in current assets | ( | ||||||||||
| (Decrease) in current liabilities | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net Cash Provided by Operating Activities | |||||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Advances of notes receivable | ( | ( | |||||||||
| Collection of notes receivable | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net Cash Used in Investing Activities | ( | ( | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Proceeds from credit facility | |||||||||||
| Repayments of credit facility | ( | ( | |||||||||
| Dividends paid | ( | ( | |||||||||
| Common stock issued | |||||||||||
| Common stock repurchased and retired | ( | ( | |||||||||
| Other, net | |||||||||||
| Net Cash Used in Financing Activities | ( | ( | |||||||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | |||||||||||
| Net Decrease in Cash and Cash Equivalents | ( | ( | |||||||||
| Cash and Cash Equivalents, Beginning of Period | |||||||||||
| Cash and Cash Equivalents, End of Period | $ | $ | |||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
5
MillerKnoll, Inc.
Condensed Consolidated Statements of Stockholders' Equity
| Three Months Ended August 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except share data) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Deferred Compensation Plan | MillerKnoll, Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 1, 2024 | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net (loss) | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted and performance stock units released | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan issuances | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| August 31, 2024 | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 2, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except share data) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Deferred Compensation Plan | MillerKnoll, Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 3, 2023 | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted and performance stock units released | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan issuances | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ( | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 2, 2023 | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
6
Notes to Condensed Consolidated Financial Statements
(Dollars in millions, except share data)
(unaudited)
1. Description of Business
MillerKnoll, Inc. (the "Company") researches, designs, manufactures, sells, and distributes interior furnishings for use in various environments including residential, office, healthcare, and educational settings and provides related services that support organizations and individuals all over the world. The Company's products are sold primarily through the following channels: independent contract office furniture dealers, direct customer sales, owned and independent retailers, and the Company's eCommerce platforms.
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®. MillerKnoll represents over 100 years of design research and exploration in service of humanity. MillerKnoll generates insights, pioneers innovations, and champions ideas that empower our brands and our people to realize their ambitions. 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.
Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared by MillerKnoll, Inc. in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Management believes the disclosures made in this document are adequate with respect to interim reporting requirements. Unless otherwise noted or indicated by the context, all references to "MillerKnoll," "we," "our," "Company" and similar references are to MillerKnoll, Inc., its predecessors, and controlled subsidiaries.
Cash and Cash Equivalents
7
The Company’s net cash pool position consisted of the following:
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||||||||
| Gross cash position | $ | $ | |||||||||||||||
| Less: cash borrowings | ( | ( | |||||||||||||||
| Net cash position | $ | $ | |||||||||||||||
2. Recently Issued Accounting Standards
The Company evaluates all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB") for consideration of their applicability to our consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. In November 2023, the FASB issued this ASU to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The ASU becomes effective for the Company beginning with its annual period ending May 31, 2025, and interim periods beginning with the first quarter of fiscal 2026. The ASU will not impact the financial condition, results of operations, or cash flows of the Company. The Company is currently evaluating the impact of this guidance on the notes to the consolidated financial statements.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures. In December 2023, the FASB issued this ASU which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
We have assessed all other ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.
3. Revenue from Contracts with Customers
Disaggregated Revenue
Revenue disaggregated by contract type is provided in the table below:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Net Sales: | |||||||||||||||||||||||
| Single performance obligation | |||||||||||||||||||||||
| Product revenue | $ | $ | |||||||||||||||||||||
| Multiple performance obligations | |||||||||||||||||||||||
| Product revenue | |||||||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
The Company internally reports and evaluates products based on the categories Workplace, Performance Seating, Lifestyle, and Other. A description of these categories is included below.
The Workplace category includes products centered on creating highly functional and productive settings for both groups and individuals. This category focuses on the development of products, beyond seating, that define boundaries, support work, and enable productivity.
The Performance Seating category includes products centered on seating ergonomics, productivity, and function across an evolving and diverse range of settings. This category focuses on the development of ergonomic seating solutions for specific use cases requiring more than basic utility.
8
The Lifestyle category includes products focused on bringing spaces to life through beautiful yet functional products. This category focuses on the development of products that support a way of living, in thoughtful yet elevated ways. The products in this category help create emotive and visually appealing spaces via a portfolio that offers diversity in aesthetics, price, and performance.
The Other category primarily consists of textiles, uncategorized product sales, and service sales.
Revenue disaggregated by product type and reportable segment is provided in the table below:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Americas Contract: | |||||||||||||||||||||||
| Workplace | $ | $ | |||||||||||||||||||||
| Performance Seating | |||||||||||||||||||||||
| Lifestyle | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Americas Contract | $ | $ | |||||||||||||||||||||
| International Contract & Specialty: | |||||||||||||||||||||||
| Workplace | $ | $ | |||||||||||||||||||||
| Performance Seating | |||||||||||||||||||||||
| Lifestyle | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total International Contract & Specialty | $ | $ | |||||||||||||||||||||
| Global Retail: | |||||||||||||||||||||||
| Workplace | $ | $ | |||||||||||||||||||||
| Performance Seating | |||||||||||||||||||||||
| Lifestyle | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total Global Retail | $ | $ | |||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
Refer to Note 14 of the Condensed Consolidated Financial Statements for further information related to our reportable segments.
Contract Balances
Customers may make payments before the satisfaction of the Company's performance obligation and recognition of revenue. These payments represent contract liabilities and are included within the caption “Customer deposits” in the Condensed Consolidated Balance Sheets. During the three months ended August 31, 2024, and September 2, 2023, the Company recognized Net sales of $72.8 million and $47.5 million, respectively, related to customer deposits that were included in the balance sheet as of June 1, 2024, and June 3, 2023.
4. Inventories, net
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||
| Finished goods and work in process | $ | $ | |||||||||
| Raw materials | |||||||||||
| Total | $ | $ | |||||||||
9
5. Goodwill and Indefinite-Lived Intangibles
Changes in the carrying amount of Goodwill, by reportable segment, were as follows:
| (In millions) | Americas Contract(1) | International Contract & Specialty | Global Retail(2) | Total | |||||||||||||||||||||||||
| Balance at June 1, 2024 | $ | $ | $ | $ | |||||||||||||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||||||||||||||
| Balance at August 31, 2024 | $ | $ | $ | $ | |||||||||||||||||||||||||
(1) Americas Contract segment had accumulated goodwill impairments of $36.7
(2) Global Retail segment had accumulated goodwill impairments of $88.8
Other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:
| (In millions) | Indefinite-lived Intangible Assets | |||||||
| June 1, 2024 | $ | |||||||
| Foreign currency translation adjustments | ||||||||
| August 31, 2024 | $ | |||||||
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, other than the Global Retail reporting unit, was reviewed for impairment using a qualitative assessment as of March 31, 2024, our annual testing date. The Global Retail reporting unit was reviewed for impairment using a quantitative assessment as of March 31, 2024. In performing the qualitative and quantitative impairment tests for fiscal year 2024, the Company determined that the fair value of its reporting units exceeded the carrying amount and, as such, these reporting units were not impaired.
During the first quarter of fiscal year 2025, the Company performed an assessment to determine whether there were indicators of a triggering event which could indicate the carrying amount of the reporting units may not be supported by the fair value. No indicators of a triggering event for potential impairment were noted in the first quarter of fiscal 2025.
The Company generally uses the discounted cash flow method under a weighting of the income and market approach to estimate the fair value of our reporting units. These approaches are based on a discounted cash flow analysis and observable comparable company information that use several inputs, including:
•actual and forecasted revenue growth rates and operating margins,
•discount rates based on the reporting unit's weighted average cost of capital, and
•revenue and EBITDA of comparable companies.
The Company selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, management’s long-term strategic plans, and guideline companies.
10
6. Employee Benefit Plans
One of the Company's wholly owned foreign subsidiaries has a defined-benefit pension plan based upon an average final pay benefit calculation. The measurement date for this plan is the last day of the fiscal year and the plan is frozen to new participants.
The Knoll subsidiary has one domestic defined-benefit pension plan covering eligible U.S. nonunion employees. The measurement date for this plan is the last day of the fiscal year and the plan is frozen to new participants. During the fourth quarter of the year ended June 1, 2024, the Company began the process of terminating the defined-benefit pension plan held by the Knoll subsidiary. The plan participants have been notified of the Company's intention to terminate the plan and settle plan liabilities through either lump sum distributions to plan participants or annuity contracts that cover vested benefits. The plan liabilities as of June 1, 2024, were calculated using assumptions used to value the expected cost of the plan termination. The Company currently expects to complete the settlement of plan liabilities in fiscal 2025.
The following table summarizes the components of net periodic benefit cost for the Company's defined benefit pension plans:
| Pension Benefits | |||||||||||||||||||||||
| Three Months Ended August 31, 2024 | Three Months Ended September 2, 2023 | ||||||||||||||||||||||
| (In millions) | Domestic | International | Domestic | International | |||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
Expected return on plan assets(1) | ( | ( | ( | ( | |||||||||||||||||||
| Net amortization loss | |||||||||||||||||||||||
| Net periodic benefit cost (income) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
(1)The weighted-average expected long-term rate of return on plan assets is 6.0
All of the amounts in the tables above for pension benefit cost (income), other than Service cost, were included in Other (income) expense, net within our Condensed Consolidated Statements of Comprehensive Income.
7. Earnings Per Share
Basic earnings per share is computed by dividing net earnings attributable to MillerKnoll, Inc. by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net earnings attributable to MillerKnoll, Inc. by the weighted-average number of common shares outstanding, including all potentially dilutive common shares. In periods of loss, there are no potentially dilutive common shares to add to the weighted-average number of common shares outstanding.
11
The table below presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share attributable to MillerKnoll, Inc.:
| Three Months Ended | |||||||||||||||||||||||
| August 31, 2024 | September 2, 2023 | ||||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
| Numerator for both basic and diluted EPS, Net (loss) earnings attributable to MillerKnoll, Inc. - in millions | $ | ( | $ | ||||||||||||||||||||
Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding - basic | |||||||||||||||||||||||
| Potentially dilutive shares resulting from stock plans | |||||||||||||||||||||||
| Weighted-average common shares outstanding - diluted | |||||||||||||||||||||||
| Earnings per share attributable to MillerKnoll, Inc. - basic | ( | ||||||||||||||||||||||
| Earnings per share attributable to MillerKnoll, Inc. - diluted | ( | ||||||||||||||||||||||
| Antidilutive equity awards not included in weighted-average common shares - diluted | |||||||||||||||||||||||
8. Stock-Based Compensation
The following table summarizes the stock-based compensation expense and related income tax effect for the three months ended:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Stock-based compensation expense | $ | $ | |||||||||||||||||||||
| Related income tax effect | $ | $ | |||||||||||||||||||||
9. Income Taxes
The Company's process for determining the provision for income taxes for the three months ended August 31, 2024, involved using an estimated annual effective tax rate which was based on expected annual income and statutory tax rates across the various jurisdictions in which it operates. The effective tax rates were 66.2 % and 24.4 %, respectively, for the three month periods ended August 31, 2024, and September 2, 2023. The year over year change in the effective tax rate for the three months ended August 31, 2024, resulted from the current quarter reflecting pre-tax loss along with having favorable discrete impacts from stock compensation and return to provision true-ups related to the United States research and development tax credit and the prior year quarter reflecting pre-tax income with unfavorable discrete impacts related to stock compensation.
For the three months ended August 31, 2024, the effective tax rate is higher than the United States federal statutory rate due to reflecting pre-tax loss along with favorable discrete impacts from stock compensation in the United States research and development tax credit. For the three months ended September 2, 2023, the effective tax rate was higher than the United States federal statutory rate due to an unfavorable discrete tax adjustment in the quarter related to stock compensation in the United States.
The Company recognizes interest and penalties related to uncertain tax benefits through Income tax expense in its Condensed Consolidated Statements of Comprehensive Income. Interest and penalties recognized in the Company's Condensed Consolidated Statements of Comprehensive Income were negligible for the three months ended August 31, 2024, and September 2, 2023.
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The Company's recorded liability for potential interest and penalties related to uncertain tax benefits was:
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||
| Liability for interest and penalties | $ | $ | |||||||||
| Liability for uncertain tax positions, current | $ | $ | |||||||||
The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of these audits. Tax payments related to these audits, if any, are not expected to be material to the Company's Condensed Consolidated Statements of Comprehensive Income.
For the majority of tax jurisdictions, the Company is no longer subject to state, local, or non-United States income tax examinations by tax authorities for fiscal years before 2019.
10. Fair Value Measurements
The Company's financial instruments consist of cash equivalents, accounts and notes receivable, deferred compensation plans, accounts payable, debt, interest rate swaps, and foreign currency exchange contracts. The Company's financial instruments, other than long-term debt, are recorded at fair value.
The carrying value and fair value of the Company's long-term debt, including current maturities, is as follows for the periods indicated:
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||
| Carrying value | $ | $ | |||||||||
| Fair value | $ | $ | |||||||||
The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in net earnings, which have not significantly changed in the current period:
Cash and cash equivalents — The Company invests excess cash in short term investments in the form of money market funds, which are valued using net asset value ("NAV").
Deferred compensation plan — The Company's deferred compensation plan primarily includes various domestic and international mutual funds that are recorded at fair value using quoted prices for similar securities.
Foreign currency exchange contracts — The Company's foreign currency exchange contracts are valued using an approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts is based on month-end spot rates as adjusted by market-based current activity. These forward contracts are not designated as hedging instruments.
The following table sets forth financial assets and liabilities measured at fair value through net income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of August 31, 2024, and June 1, 2024.
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| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||||||||||||||||||||||||||
| Financial Assets | NAV | Quoted prices with other observable inputs (Level 2) | NAV | Quoted prices with other observable inputs (Level 2) | |||||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Foreign currency forward contracts | |||||||||||||||||||||||||||||||||||
| Deferred compensation plan | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in other comprehensive income, which have not significantly changed in the current period:
Interest rate swap agreements — The value of the Company's interest rate swap agreements are determined using a market approach based on rates obtained from active markets. The interest rate swap agreements are designated as cash flow hedging instruments.
The following table sets forth financial assets and liabilities measured at fair value through other comprehensive income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of August 31, 2024, and June 1, 2024.
| (In millions) | August 31, 2024 | June 1, 2024 | ||||||||||||
| Financial Assets | Balance Sheet Location | Quoted Prices with Other Observable Inputs (Level 2) | Quoted Prices with Other Observable Inputs (Level 2) | |||||||||||
| Interest rate swap agreement | Other noncurrent assets | $ | $ | |||||||||||
| Total | $ | $ | ||||||||||||
| Financial Liabilities | ||||||||||||||
| Interest rate swap agreement | Other liabilities | $ | $ | |||||||||||
| Total | $ | $ | ||||||||||||
Derivative Instruments and Hedging Activities
Foreign Currency Forward Contracts
The Company transacts business in various foreign currencies and has established a program that primarily utilizes foreign currency forward contracts to reduce the risks associated with the effects of certain foreign currency exposures. Under this program, the Company's strategy is to have increases or decreases in our foreign currency exposures offset by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses. These foreign currency exposures typically arise from net liability or asset exposures in non-functional currencies on the balance sheets of our foreign subsidiaries. These foreign currency forward contracts generally settle within 30 days and are not used for trading purposes.
These forward contracts are not designated as hedging instruments. Accordingly, we record the fair value of these contracts as of the end of the reporting period in the Consolidated Balance Sheets with changes in fair value recorded within the Consolidated Statements of Comprehensive Income. The balance sheet classification for the fair values of these forward contracts is to Other current assets for unrealized gains and to Other accrued liabilities for unrealized losses. The Consolidated Statements of Comprehensive Income classification for the fair values of these forward contracts is to Other (income) expense, net, for both realized and unrealized gains and losses.
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Interest Rate Swaps
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 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. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.
The interest rate swaps were designated as cash flow hedges at inception and the facts and circumstances of the hedged relationships remain consistent with the initial quantitative effectiveness assessment in that the hedged instruments remain an effective accounting hedge as of August 31, 2024. Since a designated derivative meets hedge accounting criteria, the fair value of the hedge is recorded in the Consolidated Statements of Stockholders’ Equity as a component of Accumulated other comprehensive loss, net of tax. The ineffective portion of the change in fair value of the derivatives is immediately recognized in earnings. The interest rate swap agreements are assessed for hedge effectiveness on a quarterly basis. The impact of derivative instruments on our Condensed Consolidated Statements of Cash Flows is included in Net cash provided by operating activities.
| (In millions) | Notional Amount | Forward Start Date | Amendment Effective Date | Termination Date | Effective Fixed Interest Rate | ||||||||||||||||||||||||
| September 2016 Interest Rate Swap | $ | January 3, 2018 | February 3, 2023 | January 3, 2028 | % | ||||||||||||||||||||||||
| June 2017 Interest Rate Swap | $ | January 3, 2018 | February 3, 2023 | January 3, 2028 | % | ||||||||||||||||||||||||
| January 2022 Interest Rate Swap | $ | January 31, 2022 | January 31, 2023 | January 29, 2027 | % | ||||||||||||||||||||||||
| March 2023 Interest Rate Swap | $ | March 3, 2023 | none | January 3, 2029 | % | ||||||||||||||||||||||||
The swaps above effectively converted indebtedness up to the notional amounts from a SOFR-based floating interest rate plus 0.11448 % plus applicable margin to an effective fixed interest rate plus 0.11448 % plus applicable margin under the terms of our Credit Agreement, as amended. Effective fixed interest rates include the rates amended effective January 31, 2023, or February 3, 2023, for the first three swaps included in the chart above.
The following table summarizes the effects of the interest rate swap agreements for the three months ended:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| (Loss) Gain recognized in Other comprehensive loss (income) (effective portion) | $ | ( | $ | ||||||||||||||||||||
| Gain reclassified from Accumulated other comprehensive loss into earnings | $ | $ | |||||||||||||||||||||
There were no 19.8 million, net of tax is $14.8 million.
Redeemable Noncontrolling Interests
Changes in the Company's redeemable noncontrolling interest in HAY for the three months ended August 31, 2024, and September 2, 2023, are as follows:
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||
| Beginning Balance | $ | $ | |||||||||
| Net income attributable to redeemable noncontrolling interests | ( | ||||||||||
| Cumulative translation adjustments attributable to redeemable noncontrolling interests | |||||||||||
| Foreign currency translation adjustments | |||||||||||
| Ending Balance | $ | $ | |||||||||
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11. Commitments and Contingencies
Product Warranties
The Company provides coverage to the end-user for parts and labor on products sold under its warranty policy and for other product-related matters. The specific terms, conditions, and length of those warranties vary depending upon the product sold. The Company does not sell or otherwise issue warranties or warranty extensions as stand-alone products. Reserves have been established for various costs associated with the Company's warranty programs. General warranty reserves are based on historical claims experience and other currently available information and are periodically adjusted for business levels and other factors. Specific reserves are established once an issue is identified with the amounts for such reserves based on the estimated cost of correction. The Company provides an assurance-type warranty that ensures that products will function as intended. As such, the Company's estimated warranty obligation is accounted for as a liability and is recorded within current and long-term liabilities within the Condensed Consolidated Balance Sheets.
Changes in the warranty reserve for the stated periods were as follows:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Accrual Balance — beginning | $ | $ | |||||||||||||||||||||
| Accrual for warranty matters | |||||||||||||||||||||||
| Settlements and adjustments | ( | ( | |||||||||||||||||||||
| Accrual Balance — ending | $ | $ | |||||||||||||||||||||
Guarantees
The Company is periodically required to provide performance bonds to do business with certain customers. These arrangements are common in the industry and generally have terms ranging between one year and three years . The bonds are required to provide assurance to customers that the products and services they have purchased will be installed and/or provided properly and without damage to their facilities. The bonds are provided by various bonding agencies. However, the Company is ultimately liable for claims that may occur against them. As of August 31, 2024, the Company had a maximum financial exposure related to performance bonds totaling approximately $9.8 million. The Company has no history of claims, nor is it aware of circumstances that would require it to pay, under any of these arrangements. The Company also believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, no
The Company has entered into standby letter of credit arrangements for purposes of protecting various insurance companies and lessors against default on insurance premium and lease payments. As of August 31, 2024, the Company had a maximum financial exposure from these standby letters of credit totaling approximately $13.2 million, all of which is considered usage against the Company's revolving line of credit. The Company has no history of claims, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, no
Contingencies
The Company is also 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 have a material adverse effect, if any, on the Company's Consolidated Financial Statements.
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12. Short-Term Borrowings and Long-Term Debt
Short-term borrowings and long-term debt as of August 31, 2024, and June 1, 2024, consisted of the following:
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||
| Syndicated revolving line of credit, due July 2026 | $ | $ | |||||||||
Term Loan A, | |||||||||||
Term Loan B, | |||||||||||
| Total debt | $ | $ | |||||||||
| Less: Unamortized discount and issuance costs | ( | ( | |||||||||
| Less: Current debt | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
In connection with the acquisition of Knoll, in July 2021, the Company entered into a credit agreement that provided for a syndicated revolving line of credit and two term loans. The revolving line of credit provides the Company with up to $725 million in revolving variable rate interest borrowing capacity that matures in July 2026, replacing the previous $500 million syndicated revolving line of credit. The term loans consist of a five-year senior secured term loan "A" facility with an aggregate principal amount of $400 million and a seven-year senior secured term loan "B" facility with an aggregate principal amount of $625 million, the proceeds of which were used to finance a portion of the cash consideration for the acquisition of Knoll, and to pay fees, costs, and expenses related thereto. In January 2023, the Company entered into an Amendment to the credit agreement which transitioned the benchmark rate from LIBOR to the Secured Overnight Financing Rate ("SOFR") for U.S. dollar borrowings. SOFR is the recommended risk-free reference rate of the Federal Reserve Board and Alternative Reference Rates Committee, as defined within the credit agreement. The indebtedness incurred under the revolving line of credit and term loans is secured by substantially all of the Company’s tangible and intangible assets, including, without limitation, the Company’s intellectual property. The Company’s direct and indirect wholly-owned domestic subsidiaries have also guaranteed the obligations of the Company and the foreign borrowers under the revolving line of credit and term loans and pledged substantially all of their tangible and intangible assets as security for their obligations under such guarantee.
During the three months ended August 31, 2024, the Company made total principal payments on term loans "A" and "B" in the amounts of $7.5 million and $1.6 million, respectively. During the three months ended September 2, 2023, the Company made total principal payments on term loans "A" and "B" in the amounts of $5.0 million and $1.6 million, respectively.
Available borrowings under the syndicated revolving line of credit were as follows for the periods indicated:
| (In millions) | August 31, 2024 | June 1, 2024 | ||||||||||||
| Syndicated revolving line of credit borrowing capacity | $ | $ | ||||||||||||
| Less: Borrowings under the syndicated revolving line of credit | ||||||||||||||
| Less: Outstanding letters of credit | ||||||||||||||
Available borrowings under the syndicated revolving line of credit | $ | $ | ||||||||||||
Supplier Financing Program
The Company has an agreement with a third-party financial institution that allows certain participating suppliers the ability to finance payment obligations of the Company. Under this program, participating suppliers may finance payment obligations of the Company, prior to their scheduled due dates, at a discounted price to the third-party financial institution.
The Company has lengthened the payment terms for certain suppliers that have chosen to participate in the program. As a result, certain amounts due to suppliers have payment terms that are longer than standard industry practice and as such, these amounts have been excluded from “Accounts payable” in the Condensed Consolidated Balance Sheets as the amounts have been accounted for by the Company as current debt, within “Short-term borrowings and current portion of long-term debt.” As of August 31, 2024, and June 1, 2024, the liability related to the supplier financing program was $1.9 million and $2.0 million, respectively.
17
13. Accumulated Other Comprehensive Loss
The following table provides an analysis of the changes in accumulated other comprehensive loss for the three months ended August 31, 2024, and September 2, 2023:
| (In millions) | Cumulative Translation Adjustments | Pension and Other Post-retirement Benefit Plans | Interest Rate Swap Agreement | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||
| Balance at June 1, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||
| Other comprehensive income (loss), net of tax before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Reclassification from accumulated other comprehensive loss - Other, net | |||||||||||||||||||||||||||||
| Tax benefit | |||||||||||||||||||||||||||||
| Net reclassifications | |||||||||||||||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Balance at August 31, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||
| Balance at June 3, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||
| Other comprehensive income (loss), net of tax before reclassifications | |||||||||||||||||||||||||||||
| Reclassification from accumulated other comprehensive loss - Other, net | ( | ||||||||||||||||||||||||||||
| Tax benefit | |||||||||||||||||||||||||||||
| Net reclassifications | ( | ||||||||||||||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ||||||||||||||||||||||||||||
| Balance at September 2, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||
14. Operating Segments
The Company's reportable segments consist of three segments: Americas Contract, International Contract & Specialty, and Global Retail.
The Americas Contract segment 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.
The International Contract & Specialty segment includes the operations associated with the design, manufacture and sale of furniture products, indirectly or directly 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|FilzFelt, Maharam, Edelman, and Knoll Textiles.
The Global Retail segment 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, and physical retail stores.
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 integration-related costs. Management regularly reviews corporate costs and believes disclosing such information provides more visibility and transparency regarding how the chief operating decision maker reviews results of the Company. The accounting policies of the operating segments are the same as those of the Company.
18
The following is a summary of certain key financial measures for the respective periods indicated:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Net Sales: | |||||||||||||||||||||||
| Americas Contract | $ | $ | |||||||||||||||||||||
| International Contract & Specialty | |||||||||||||||||||||||
| Global Retail | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Operating Earnings (Loss): | |||||||||||||||||||||||
| Americas Contract | $ | $ | |||||||||||||||||||||
| International Contract & Specialty | |||||||||||||||||||||||
| Global Retail | |||||||||||||||||||||||
| Total reportable segments | $ | $ | |||||||||||||||||||||
| Corporate | ( | ( | |||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
Many of the Company's assets, including manufacturing, office and showroom facilities, support multiple segments. For that reason, it is impractical to disclose asset information on a segment basis.
15. Restructuring and Integration Expense
As part of restructuring and integration activities the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs as well as other direct separation benefit costs, right of use asset impairment charges, fixed asset impairment charges, and accelerated depreciation of fixed assets. Severance and employee benefit costs primarily relate to cash severance, as well as non-cash severance, including accelerated equity award compensation expense. The Company also incurred expenses that are an integral component of, and directly attributable to, our restructuring and integration activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include integration implementation costs that relate primarily to professional fees and non-cash losses incurred on debt extinguishment.
The expense associated with integration initiatives are included in Selling, general and administrative and the expenses associated with restructuring activities are included in Restructuring expense in the Condensed Consolidated Statements of Comprehensive Income.
Knoll Integration:
Following the Knoll acquisition, the Company announced a multi-year program (the "Knoll Integration") designed to reduce costs and integrate and optimize operations of the combined organization. To date, the Company has recorded a total of $144.4 million in pre-tax integration expense related to this plan. No future costs related to this plan are expected. The integration expenses incurred by the Company included expenses within the following categories:
•Severance and employee benefit costs associated with plans to integrate our operating structure, resulting in workforce reductions. These costs primarily include: severance and employee benefits (cash severance, non-cash severance, including accelerated stock-compensation award expense and other termination benefits).
•Exit and disposal activities include those incurred as a direct result of integration activities, primarily including the reorganization and consolidation of facilities as well as asset impairment charges.
•Other integration costs include professional fees and other incremental third-party expenses, including a loss on extinguishment of debt associated with financing of the Knoll acquisition.
For the three months ended August 31, 2024, we incurred $28.3 million of costs related to the Knoll Integration which was comprised of $25.8 million of exit and disposal costs related to the consolidation of facilities and $2.5 million of other integration costs.
For the three months ended September 2, 2023, we incurred $3.9 million of costs related to the Knoll Integration which was comprised of $3.4 million of exit and disposal costs related to the consolidation of facilities and $0.5 million of other integration costs
19
The following table provides an analysis of the changes in liability balance for Knoll Integration costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and exit and disposal activities) for the three months ended August 31, 2024:
| (In millions) | Severance and Employee Benefit | Exit and Disposal Activities | Total | ||||||||||||||
| June 1, 2024 | $ | $ | $ | ||||||||||||||
| Integration Costs | |||||||||||||||||
| Amounts Paid | ( | ( | |||||||||||||||
| Non-cash costs | ( | ( | |||||||||||||||
| August 31, 2024 | $ | $ | $ | ||||||||||||||
The Company expects that the remaining liability for the Knoll Integration as of August 31, 2024, will be paid in the balance of fiscal year 2025.
The following is a summary of integration expenses by segment for the periods indicated:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Americas Contract | $ | $ | |||||||||||||||||||||
| International Contract & Specialty | |||||||||||||||||||||||
| Global Retail | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
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. As of August 31, 2024, and June 1, 2024, the carrying amount of these assets held for sale was $3.2 million and $3.5 million, respectively, and is classified as current assets within "Assets held for sale" in the Condensed Consolidated Balance Sheets.
Restructuring Activities
During fiscal year 2024, the Company announced an action related to the 2024 restructuring plan ("2024 restructuring plan") to reduce expenses. This restructuring activity included involuntary reductions in workforces as well as expenses related to a facilities consolidation plan, comprised primarily of non-cash right of use asset impairment charges and accelerated depreciation of fixed assets. For the year ended June 1, 2024, the Company incurred $30.8 million of restructuring charges related to the 2024 restructuring plan. The restructuring plan was complete in fiscal 2024 and no future costs related to this plan are expected.
The following table provides an analysis of the changes in the restructuring cost reserve that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and exit and disposal activities) for the 2024 restructuring plan for the three months ended August 31, 2024:
| (In millions) | Severance and Employee-Related | Exit and Disposal Activities | Total | ||||||||||||||||||||
| June 1, 2024 | $ | $ | $ | ||||||||||||||||||||
| Restructuring Costs | |||||||||||||||||||||||
| Amounts Paid | ( | ( | |||||||||||||||||||||
| August 31, 2024 | $ | $ | $ | ||||||||||||||||||||
The Company expects that remaining liability for the 2024 restructuring plan as of August 31, 2024, will be paid in fiscal year 2025.
20
The following is a summary of restructuring costs by segment for the periods indicated:
| Three Months Ended | |||||||||||||||||||||||
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||||||||||||||
| Americas Contract | $ | $ | |||||||||||||||||||||
| International Contract & Specialty | |||||||||||||||||||||||
| Global Retail | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
16. Variable Interest Entities
The Company entered into long-term notes receivable with certain independently owned dealers that are deemed to be variable interests in variable interest entities. The carrying value of these long-term notes receivable was $17.8 million and $17.9 million as of August 31, 2024, and June 1, 2024, respectively, and represents the Company’s maximum exposure to loss. The Company is not deemed to be the primary beneficiary for any of these variable interest entities as each independently owned dealer controls the activities that most significantly impact the entity’s economic performance, including sales, marketing, and operations.
21
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except share data)
The following is management's discussion and analysis of certain significant factors that affected the Company's financial condition, earnings, and cash flows during the periods included in the accompanying Condensed Consolidated Financial Statements and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 1, 2024. References to “Notes” are to the footnotes included in the accompanying Condensed Consolidated Financial Statements.
Business Overview
The Company researches, designs, manufactures, sells, and distributes interior furnishings for use in various environments including residential, office, healthcare, and educational settings and provides related services that support organizations and individuals all over the world. The Company's products are sold primarily through independent contract office furniture dealers, direct customer sales, owned and independent retailers and the Company’s eCommerce platforms. The following is a summary of results for the three months ended August 31, 2024:
•Net sales were $861.5 million and orders were $935.9 million, representing a decrease of 6.1% and increase of 2.4%, respectively, when compared to the same quarter of the prior year. On an organic basis, which excludes the impact of foreign currency translation and the impact of the closure of the HAY eCommerce channel in North America, Net sales were $864.3 million(*) and orders were $940.4 million(*), representing an organic decrease of 5.3%(*) and increase of 3.5%(*), respectively, when compared to the same quarter of the prior year.
•Gross margin in the first quarter was 39.0% which is flat when compared to the same quarter of the prior year. Benefits from pricing actions, favorable business and product mix and the realization of synergies associated with the Knoll acquisition offset the loss of leverage of fixed operating costs on lower sales volumes.
•Operating expenses increased by $3.3 million or 1.0% as compared to the same quarter of the prior year. The increase was driven primarily by higher Knoll integration costs as compared to the same period in the prior year, offset in part by a reduction in restructuring costs, reduced variable-selling costs on lower sales volume and the realization of savings related to integration and restructuring actions.
•The effective tax rate was 66.2% compared to 24.4% for the same quarter of the prior year. The current quarter rate resulted from the current quarter reflecting a pre-tax loss along with return to provision true-ups recorded in the current period compared to the prior year.
•Diluted loss per share was $0.02 as compared to diluted earnings per share of $0.22 in the prior year. Adjusted diluted earnings per share was $0.36(*), a 2.7%(*) decrease as compared to prior year adjusted diluted earnings per share.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."
The following summary includes the Company's view of the economic environment in which it operates:
•MillerKnoll finished the first quarter of fiscal year 2025 with demand improvement within the Americas Contract and International Contract & Specialty segments. This improvement in order volume was driven by a general increase in day-to-day and project activity, including a ramp-up in larger project opportunities in the Americas and Asia. Demand in the Global Retail segment continues to reflect the impact of a tepid housing market, though the segment saw margin improvement in the quarter driven by investments in strengthening operational capabilities.
•The Americas Contract segment in the first quarter reported Net sales totaling $454.6 million, down 7.3% compared to the prior year period on a reported basis and down 7.0%(*) organically. Americas Contract had new orders of $512.7 million, which was an increase of 5.2% from the prior year and and increase of 5.7%(*) on an organic basis.
•The International Contract & Specialty segment delivered Net sales in the first quarter of $213.5 million, a decrease of 6.5% from the year-ago period on a reported basis and a decrease of 6.3%(*) organically. New orders in this segment totaled $234.1 million, representing a year-over-year increase of 2.7% on a reported basis and an increase of 3.1%(*) organically.
22
•Net sales in the first quarter for the Global Retail segment totaled $193.4 million, a decrease of 2.8% over the same quarter last year on a reported basis and an increase of 0.4%(*) organically. Orders in the quarter totaled $189.1 million, down 4.7% compared to the same period last year on a reported basis and down 1.6%(*) organically.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."
The Company's fiscal year is the 52 or 53 week period ending on the Saturday closest to May 31. The fiscal year ending May 31, 2025 ("fiscal 2025") and the fiscal year ended June 1, 2024 ("fiscal 2024") both contain 52 weeks.
The remaining sections within Item 2 include additional analysis of the three months ended August 31, 2024, including discussion of significant variances compared to the prior year periods.
Reconciliation of Non-GAAP Financial Measures
This report 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 report. 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 report include: Adjusted Earnings per Share 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, Knoll pension plan termination charges and the related tax effect of these adjustments. These adjustments are described further below.
Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the HAY eCommerce channel in North America.
The adjustments made to arrive at these non-GAAP financial measures are as follows:
•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 associated with lease and operations facility consolidation activity, and expenses related to synergy realization efforts and reorganization initiatives.
•Restructuring charges: Includes costs associated with actions involving targeted workforce reductions.
•Knoll pension plan termination charges: Includes expenses incurred associated with the termination of the Knoll pension plan.
•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.
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The following tables reconciles Net sales to Net sales, organic for the periods ended as indicated below:
| Three Months Ended | ||||||||||||||
| August 31, 2024 | ||||||||||||||
| Americas Contract | International Contract & Specialty | Global Retail | Total | |||||||||||
| Net sales, as reported | $ | 454.6 | $ | 213.5 | $ | 193.4 | $ | 861.5 | ||||||
| % change from PY | (7.3) | % | (6.5) | % | (2.8) | % | (6.1) | % | ||||||
| Adjustments | ||||||||||||||
Currency translation effects (1) | 1.4 | 0.5 | 0.9 | 2.8 | ||||||||||
| Net sales, organic | $ | 456.0 | $ | 214.0 | $ | 194.3 | $ | 864.3 | ||||||
| % change from PY | (7.0) | % | (6.3) | % | 0.4 | % | (5.3) | % | ||||||
| Three Months Ended | ||||||||||||||
| September 2, 2023 | ||||||||||||||
| Americas Contract | International Contract & Specialty | Global Retail | Total | |||||||||||
| Net sales, as reported | $ | 490.4 | $ | 228.3 | $ | 199.0 | $ | 917.7 | ||||||
| Adjustments | ||||||||||||||
| HAY eCommerce | — | — | (5.5) | (5.5) | ||||||||||
| Net sales, organic | $ | 490.4 | $ | 228.3 | $ | 193.5 | $ | 912.2 | ||||||
| (1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period. | ||||||||||||||
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The following tables reconcile orders as reported to organic orders for the periods ended as indicated below:
| Three Months Ended | ||||||||||||||
| August 31, 2024 | ||||||||||||||
| Americas Contract | International Contract & Specialty | Global Retail | Total | |||||||||||
| Orders, as reported | $ | 512.7 | $ | 234.1 | $ | 189.1 | $ | 935.9 | ||||||
| % change from PY | 5.2 | % | 2.7 | % | (4.7) | % | 2.4 | % | ||||||
| Adjustments | ||||||||||||||
Currency translation effects (1) | 2.4 | 0.9 | 1.2 | 4.5 | ||||||||||
| Orders, organic | $ | 515.1 | $ | 235.0 | $ | 190.3 | $ | 940.4 | ||||||
| % change from PY | 5.7 | % | 3.1 | % | (1.6) | % | 3.5 | % | ||||||
| Three Months Ended | ||||||||||||||
| September 2, 2023 | ||||||||||||||
| Americas Contract | International Contract & Specialty | Global Retail | Total | |||||||||||
| Orders, as reported | $ | 487.3 | $ | 227.9 | $ | 198.5 | $ | 913.7 | ||||||
| Adjustments | ||||||||||||||
| HAY eCommerce | — | — | (5.1) | (5.1) | ||||||||||
| Orders, organic | $ | 487.3 | $ | 227.9 | $ | 193.4 | $ | 908.6 | ||||||
| (1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period. | ||||||||||||||
The following table reconciles earnings per share - diluted to adjusted earnings per share - diluted for the periods ended as indicated below:
| Three Months Ended | ||||||||||||||
| August 31, 2024 | September 2, 2023 | |||||||||||||
| (Loss) earnings per share - diluted | $ | (0.02) | $ | 0.22 | ||||||||||
| Add: Amortization of Knoll purchased intangibles | 0.08 | 0.08 | ||||||||||||
| Add: Integration charges | 0.40 | 0.07 | ||||||||||||
| Add: Restructuring charges | — | 0.05 | ||||||||||||
| Add: Knoll pension plan termination charges | 0.01 | — | ||||||||||||
| Tax impact on adjustments | (0.11) | (0.05) | ||||||||||||
| Adjusted earnings per share - diluted | $ | 0.36 | $ | 0.37 | ||||||||||
| Weighted average shares outstanding (used for calculating adjusted earnings per share) – diluted | 70,206,373 | 75,707,536 | ||||||||||||
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Key Highlights
The following table presents certain key highlights from the results of operations for the three months ended:
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (In millions, except share data) | August 31, 2024 | September 2, 2023 | % Change | ||||||||||||||||||||||||||||||||
| Net sales | $ | 861.5 | $ | 917.7 | (6.1) | % | |||||||||||||||||||||||||||||
| Cost of sales | 525.2 | 559.6 | (6.1) | % | |||||||||||||||||||||||||||||||
| Gross margin | 336.3 | 358.1 | (6.1) | % | |||||||||||||||||||||||||||||||
| Operating expenses | 321.1 | 317.8 | 1.0 | % | |||||||||||||||||||||||||||||||
| Operating earnings | 15.2 | 40.3 | (62.3) | % | |||||||||||||||||||||||||||||||
| Other expenses, net | 16.9 | 19.2 | (12.0) | % | |||||||||||||||||||||||||||||||
| (Loss) earnings before income taxes and equity income | (1.7) | 21.1 | N/A | ||||||||||||||||||||||||||||||||
| Income tax (benefit) expense | (1.1) | 5.1 | N/A | ||||||||||||||||||||||||||||||||
| Equity income from nonconsolidated affiliates, net of tax | 0.1 | 0.1 | — | % | |||||||||||||||||||||||||||||||
| Net (loss) earnings | (0.5) | 16.1 | N/A | ||||||||||||||||||||||||||||||||
| Net earnings (loss) attributable to redeemable noncontrolling interests | 0.7 | (0.6) | N/A | ||||||||||||||||||||||||||||||||
| Net (loss) earnings attributable to MillerKnoll, Inc. | $ | (1.2) | $ | 16.7 | N/A | ||||||||||||||||||||||||||||||
| (Loss) earnings per share - basic | $ | (0.02) | $ | 0.22 | N/A | ||||||||||||||||||||||||||||||
| Orders | $ | 935.9 | $ | 913.7 | 2.4 | % | |||||||||||||||||||||||||||||
| Backlog | $ | 758.0 | $ | 694.0 | 9.2 | % | |||||||||||||||||||||||||||||
The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive (Loss) Income as a percentage of Net sales, for the three months ended:
| Three Months Ended | |||||||||||||||||||||||
| August 31, 2024 | September 2, 2023 | ||||||||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | |||||||||||||||||||
| Cost of sales | 61.0 | % | 61.0 | % | |||||||||||||||||||
| Gross margin | 39.0 | % | 39.0 | % | |||||||||||||||||||
| Operating expenses | 37.3 | % | 34.6 | % | |||||||||||||||||||
| Operating earnings | 1.8 | % | 4.4 | % | |||||||||||||||||||
| Other expenses, net | 2.0 | % | 2.1 | % | |||||||||||||||||||
| (Loss) earnings before income taxes and equity income | (0.2) | % | 2.3 | % | |||||||||||||||||||
| Income tax (benefit) expense | (0.1) | % | 0.6 | % | |||||||||||||||||||
| Equity income from nonconsolidated affiliates, net of tax | — | % | — | % | |||||||||||||||||||
| Net (loss) earnings | (0.1) | % | 1.8 | % | |||||||||||||||||||
| Net earnings (loss) attributable to redeemable noncontrolling interests | 0.1 | % | (0.1) | % | |||||||||||||||||||
| Net (loss) earnings attributable to MillerKnoll, Inc. | (0.1) | % | 1.8 | % | |||||||||||||||||||
26
Net Sales
The following chart presents graphically the primary drivers of the year-over-year change in Net sales for the three months ended August 31, 2024. The amounts presented in the graph are expressed in millions and have been rounded.
Net sales decreased $56.2 million or 6.1% in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. The following items contributed to the change:
•Decreased sales volume within the Americas Contract and International Contract & Specialty segments of approximately $50 million and $10 million, respectively.
•Decrease of $6 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year.
•Foreign currency translation decreased Net sales by approximately $3 million. Offset in part by:
•Price increases, net of incremental discounting, which drove an increase in Net sales of approximately $10 million.
•Increased sales volume within the Global Retail segment of approximately $3 million.
Gross Margin
Gross margin was 39.0% in both the first quarter of fiscal 2025 and the first quarter of fiscal 2024. Although Gross margin was flat to the prior year, summarized below are factors that most significantly impacted gross margin during the quarter:
•Price increases, net of incremental discounting, contributed to margin improvement of approximately 60 basis points.
•Favorable business and product mix contributed to margin improvement of approximately 60 basis points.
•Loss of leverage on lower sales volumes negatively impacted margin by approximately 120 basis points.
27
Operating Expenses
The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses for the three months ended August 31, 2024. The amounts presented in the graphs are expressed in millions and have been rounded.
Operating expenses increased by $3.3 million or 1.0% in the first quarter of fiscal 2025 compared to the prior year period. The following factors contributed to the change:
•Acquisition related integration charges contributed an increase in Operating expenses as compared to the same period of the prior year of approximately $24 million; This was offset in part by:
•Variable selling and marketing costs decreased by approximately $13 million driven by variability on lower net sales and the impact of cost synergies achieved through the acquisition of Knoll and restructuring actions taken in the prior year;
•Restructuring charges related to reductions in the Company's workforce in the prior year of approximately $5 million that did not occur in the current year; and
•Compensation and benefit costs, which decreased approximately $3 million, driven by changes in variable-based compensation and incentives.
Other Income/Expense
During the three months ended August 31, 2024, net Other expense was $16.9 million, representing a decrease of $2.3 million compared to the same period in the prior year, driven primarily by reductions in foreign currency losses.
Income Taxes
See Note 9 of the Condensed Consolidated Financial Statements for additional information.
28
Operating Segment Results
The business is comprised of various operating segments as defined by generally accepted accounting principles in the United States. 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 are Americas Contract, International Contract & Specialty, and Global Retail. Unallocated expenses are reported within the Corporate category. For descriptions of each segment, refer to Note 14 of the Condensed Consolidated Financial Statements.
The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments during the three month period ended August 31, 2024. This is followed by a discussion of the Company's results, by reportable segment. The amounts presented in the charts are in millions and have been rounded.
29
Americas Contract
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | August 31, 2024 | September 2, 2023 | Change | ||||||||||||||||||||||||||||||||
| Net sales | $ | 454.6 | $ | 490.4 | $ | (35.8) | |||||||||||||||||||||||||||||
| Gross margin | 154.1 | 174.8 | (20.7) | ||||||||||||||||||||||||||||||||
| Gross margin % | 33.9 | % | 35.6 | % | (1.7) | % | |||||||||||||||||||||||||||||
| Operating earnings | 17.1 | 41.4 | (24.3) | ||||||||||||||||||||||||||||||||
| Operating earnings % | 3.8 | % | 8.4 | % | (4.6) | % | |||||||||||||||||||||||||||||
For the three month comparative period, Net sales decreased 7.3%, or 7.0%(*) on an organic basis, over the prior year period due to:
•Decreased sales volumes within the segment of approximately $50 million. Although the segment experienced growth in order volume during the quarter, the timing of orders during the quarter and customer requests to ship product further out from order entry drove a year over year decrease in sales; and
•Unfavorable foreign currency translation of approximately $2 million; offset in part by
•Price increases, net of incremental discounting of $16 million.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."
For the three month comparative period, operating earnings decreased $24.3 million, or 58.7%, over the prior year period due to:
•Decreased Gross margin of $20.7 million due to the decrease in net sales discussed above and a decrease in gross margin percentage of 170 basis points. The decrease in gross margin percentage was due primarily to:
◦Loss of leverage of fixed costs due to reduced production volumes which had a negative impact on margin of approximately 270 basis points; and
◦Increased commodity and product distribution costs which had a negative impact on margin of 130 basis points. These increases were offset by:
◦The impact of incremental list price increases, net of contract price discounting which provided an approximately 230 basis point improvement over the prior year; as well as
◦The favorable impact of realization of synergies associated with the Knoll acquisition.
•Increased Operating expenses of $3.6 million driven primarily by:
◦Increase acquisition related integration costs of approximately $19 million in the current period. This increase was offset by:
◦Decreased variable selling and marketing costs of $7 million;
◦Decreased restructuring charges of $4 million; and
◦Decreased variable compensation and benefit costs of $4 million.
International Contract & Specialty
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | August 31, 2024 | September 2, 2023 | Change | ||||||||||||||||||||||||||||||||
| Net sales | $ | 213.5 | $ | 228.3 | $ | (14.8) | |||||||||||||||||||||||||||||
| Gross margin | 95.1 | 96.9 | (1.8) | ||||||||||||||||||||||||||||||||
| Gross margin % | 44.5 | % | 42.4 | % | 2.1 | % | |||||||||||||||||||||||||||||
| Operating earnings | 9.3 | 11.4 | (2.1) | ||||||||||||||||||||||||||||||||
| Operating earnings % | 4.4 | % | 5.0 | % | (0.6) | % | |||||||||||||||||||||||||||||
30
For the three month comparative period, Net sales decreased 6.5%, or 6.3%(*) on an organic basis, over the prior year period due to:
•Decline in sales volume of approximately $10 million;
•Incremental promotional discounting, net of price increases, which decreased sales by $4 million; and
•Unfavorable foreign currency translation of approximately $1 million.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."
For the three month comparative period, operating earnings decreased $2.1 million, or 18.4% over the prior year period due to:
•Decreased Gross margin of $1.8 million due to the decrease in net sales discussed above, offset by an increase in gross margin percentage of 210 basis points due primarily to favorable product mix.
•Operating expenses remained relatively flat to the prior year. The factors that most significantly impacted operating expenses during the quarter were:
◦Increase in integration related charges in the current year of $5 million. This increase was offset by:
◦Decreased variable compensation and benefit costs and cost synergies achieved through the acquisition of Knoll.
Global Retail
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | August 31, 2024 | September 2, 2023 | Change | ||||||||||||||||||||||||||||||||
| Net sales | $ | 193.4 | $ | 199.0 | $ | (5.6) | |||||||||||||||||||||||||||||
| Gross margin | 87.1 | 86.4 | 0.7 | ||||||||||||||||||||||||||||||||
| Gross margin % | 45.0 | % | 43.4 | % | 1.6 | % | |||||||||||||||||||||||||||||
| Operating earnings | 4.5 | 2.2 | 2.3 | ||||||||||||||||||||||||||||||||
| Operating earnings % | 2.3 | % | 1.1 | % | 1.2 | % | |||||||||||||||||||||||||||||
For the three month comparative period, Net sales decreased 2.8%, and increased 0.4%(*) on an organic basis, over the prior year period due to:
•Decrease of $6 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year;
•Incremental discounting, net of price increases which decreased sales by $2 million; and
•Unfavorable foreign currency translation of approximately $1 million; offset in part by
•An increase in sales volume of approximately $3 million.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."
For the three month comparative period, Operating earnings increased $2.3 million or 104.5% over the prior year period due to:
•Increased Gross margin of $0.7 million due to the gross margin percentage increase of 160 basis points which was attributable to:
◦The impact of reduced costs as compared to the prior year associated with product distribution and inventory paired with operational efficiencies.
•Decreased Operating expenses of $1.6 million primarily related to lower variable selling and marketing costs driven by the impact of cost synergies achieved through the acquisition of Knoll.
Corporate
Corporate unallocated expenses totaled $15.7 million for the first quarter of fiscal 2025, an increase of $1.0 million from the first quarter of fiscal 2024.
31
Liquidity and Capital Resources
The table below summarizes the net change in Cash and cash equivalents for the three months ended as indicated.
| (In millions) | August 31, 2024 | September 2, 2023 | |||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities | $ | 21.1 | $ | 130.9 | |||||||
| Investing activities | (22.3) | (26.3) | |||||||||
| Financing activities | (20.3) | (111.1) | |||||||||
| Effect of exchange rate changes | 0.8 | 0.5 | |||||||||
| Net change in Cash and cash equivalents | $ | (20.7) | $ | (6.0) | |||||||
Cash Flows - Operating Activities
Net cash provided by operating activities for the three months ended August 31, 2024, totaled $21.1 million compared to $130.9 million in the same period of the prior year. The decrease in cash inflow is due primarily to lower net income and changes in working capital. Our working capital consists primarily of receivables from customers, inventory, prepaid expenses, accounts payable, accrued compensation, and accrued other expenses. Working capital changes were primarily affected by payment of variable compensation in the current quarter as well as timing of collection of our receivables.
Cash Flows - Investing Activities
Cash used in investing activities for the three months ended August 31, 2024, was $22.3 million, as compared to $26.3 million in the same period of the prior year. The decrease in cash outflow in the current year, compared to the prior year, was primarily due to a decrease in the total volume of notes receivable entered into with certain independently owned dealers in the current quarter as compared to the same period of the prior year, offset in part by increased capital expenditures in the quarter.
At the end of the first quarter of fiscal 2025, there were outstanding commitments for capital purchases of $14.5 million. The Company plans to fund these commitments through a combination of cash on hand and cash flows from operations. The Company expects full-year capital purchases to be between $100 million and $125 million, which will be primarily related to investments in the Company's facilities and equipment. This compares to full-year capital spending of $78.4 million in fiscal 2024. Capital expenditures for the first three months of fiscal 2025 were $22.6 million compared to $19.9 million for the three months ended September 2, 2023.
Cash Flows - Financing Activities
Cash used in financing activities for the three months ended August 31, 2024, was $20.3 million, as compared to $111.1 million in the same period of the prior year. The decrease in cash used in the current quarter, compared to the prior year, was primarily due to:
•Net borrowings on the credit agreement of $43.1 million in the current year compared to net payments of $59.4 million in the same period of the prior year.
•The Company repurchased 1,544,733 shares at a cost of $43.7 million in the current year as compared to 1,670,135 share repurchases totaling $32.0 million in the same period of the prior year.
Sources of Liquidity
The Company has taken actions to safeguard its cash flow and liquidity 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.
32
At the end of the first quarter of fiscal 2025, the Company had 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 12 to the Condensed Consolidated Financial Statements.
| (In millions) | August 31, 2024 | June 1, 2024 | |||||||||
| Cash and cash equivalents | $ | 209.7 | $ | 230.4 | |||||||
| Availability under syndicated revolving line of credit | 278.7 | 322.3 | |||||||||
| Total liquidity | $ | 488.4 | $ | 552.7 | |||||||
Of the Cash and cash equivalents noted above at the end of the first quarter of fiscal 2025, the Company had $201.3 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 August 31, 2024, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $433.1 million with available borrowings on this facility of $278.7 million.
The Company intends to repatriate $104.3 million of undistributed foreign earnings all of which is held in cash in certain foreign jurisdictions with the remainder of undistributed earnings outside the U.S. recorded in working capital. 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 $104.3 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 August 31, 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.
Contractual Obligations
Contractual obligations associated with ongoing business and financing activities will require cash payments in future periods. A table summarizing the amounts and estimated timing of these future cash payments as of June 1, 2024, was provided in the Company's Annual Report on Form 10-K for the year ended June 1, 2024. There have been no material changes in such obligations since that date.
Guarantees
See Note 11 to the Condensed Consolidated Financial Statements.
Variable Interest Entities
See Note 16 to the Condensed Consolidated Financial Statements.
Contingencies
See Note 11 to the Condensed Consolidated Financial Statements.
Critical Accounting Policies
The Company strives to report financial results clearly and understandably. The Company follows accounting principles generally accepted in the United States in preparing its consolidated financial statements, which require certain estimates and judgments that affect the financial position and results of operations for the Company. The Company continually reviews the accounting policies and financial information disclosures. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company's Annual Report on Form 10-K for the year ended June 1, 2024.
New Accounting Standards
See Note 2 to the Condensed Consolidated Financial Statements.
33
Cautionary Note Regarding 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: general economic conditions; 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; business disruption following the Knoll acquisition; 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 our most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for the year ended June 1, 2024. 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.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The information concerning quantitative and qualitative disclosures about market risk contained in the Company’s Annual Report on Form 10-K for the year ended June 1, 2024, has not changed materially. The nature of market risks from interest rates and commodity prices has not changed materially during the first three months of fiscal 2025.
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. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the change in fair value of outstanding contracts is recorded as a component of Other (income) expense.
34
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2024, and the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, the Company's disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarterly period ended August 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
35
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
There have been no material changes in the Company's legal proceedings from those set forth in the Company's Annual Report on Form 10-K for the year ended June 1, 2024.
Item 1A: Risk Factors
There have been no material changes in the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended June 1, 2024.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The Company has one share repurchase plan authorized by the Board of Directors on January 16, 2019, which provides a share repurchase authorization of $250.0 million with no specified expiration date. On July 16, 2024, the Company announced that the Board of Directors approved an increase to this repurchase plan to authorize an additional $200 million to fund share repurchases. The approximate dollar value of shares available for purchase under the plan at August 31, 2024, was $222.5 million.
The following is a summary of share repurchase activity during the fiscal quarter ended August 31, 2024.
| Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (in millions) (1) | |||||||||||||||||||
| 6/2/2024 - 6/29/2024 | — | $ | — | — | $ | 266.3 | |||||||||||||||||
| 6/30/2024 - 7/27/2024 | 736,905 | $ | 27.45 | 736,905 | $ | 246.0 | |||||||||||||||||
| 7/28/2024 - 8/31/2024 | 807,828 | $ | 29.10 | 807,828 | $ | 222.5 | |||||||||||||||||
| Total | 1,544,733 | 1,544,733 | |||||||||||||||||||||
(1) Amounts are as of the end of the period indicated
The Company may repurchase shares from time to time in open market transactions, privately negotiated transactions, pursuant to accelerated share repurchase programs or otherwise in accordance with applicable federal securities laws. The timing and amount of the repurchases will be determined by the Company's management based on their evaluation of market conditions, share price and other factors. The share repurchase program may be suspended or discontinued at any time.
During the period covered by this report, the Company did not sell any shares of common stock that were not registered under the Securities Act of 1933.
Item 5: Other Information
Item 6: Exhibits
The following exhibits (listed by number corresponding to the Exhibit table as Item 601 in Regulation S-K) are filed with this Report:
36
Exhibit Number Document
10.1 MillerKnoll, Inc. 2023 Long-Term Incentive Plan, as Amended, Global EBITDA and Revenue Performance Share Unit with TSR Multiplier Award Agreement*
10.2 MillerKnoll, Inc. 2023 Long-Term Incentive Plan, as Amended, Global Restricted Stock Unit Award Agreement*
31.1 Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL Document)
* Denotes compensatory plan or arrangement.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MillerKnoll, Inc.
| October 9, 2024 | /s/ Andrea R. Owen | |||||||||||||
| Andrea R. Owen | ||||||||||||||
| President and Chief Executive Officer | ||||||||||||||
| (Duly Authorized Signatory for Registrant) | ||||||||||||||
| October 9, 2024 | /s/ Jeffrey M. Stutz | |||||||||||||
| Jeffrey M. Stutz | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
| (Duly Authorized Signatory for Registrant) | ||||||||||||||
38
1 MILLERKNOLL, INC. 2023 LONG-TERM INCENTIVE PLAN, AS AMENDED GLOBAL EBITDA AND REVENUE PERFORMANCE SHARE UNIT WITH TSR MULTIPLIER AWARD AGREEMENT Participant: [INSERT NAME] Award Date: [INSERT AWARD DATE] Target Number of Performance Share Units: [INSERT TOTAL PSUs] This certifies MillerKnoll, Inc. (the “Company”) has on the date set forth above (the “Award Date”) granted to the individual named above (the “Participant”) a grant of Performance Share Units (the “Award”) under the MillerKnoll, Inc. 2023 Long-Term Incentive Plan, as Amended (the “Plan”) as summarized above and as detailed in the Executive Compensation Equity Award Notice (the “Award Notice”) reflected in the web portal maintained by E*TRADE Financial Corporate Services, Inc. (the “Stock Plan Service Provider”). The Award is subject to the terms and conditions set forth in this Global EBITDA and Revenue Performance Share Unit with TSR Multiplier Award Agreement (the “Award Agreement”). A copy of the Plan and the U.S. prospectus for the Plan has been delivered or otherwise made available to the Participant. The Plan is incorporated into this Award Agreement by reference, and in the event of any conflict between the terms of the Plan and this Award Agreement, the terms of the Plan shall govern; provided, however, that definitions under this Award Agreement shall govern. Any capitalized terms not defined herein shall have the meaning set forth in the Plan. 1. Definitions. “Actual Performance Share Units” means the number of Performance Share Units earned in accordance with Section 2 of this Award Agreement. “Award Agreement” means the terms and conditions of the Award set forth in this Global EBITDA and Revenue Performance Share Unit with TSR Multiplier Award Agreement. “Common Stock” means the Company’s $.20 par value per share common stock. “Earnout Percentage” means the percentage for the relevant Tranche Period by which the number of the Target Performance Share Units subject to such Tranche Period is multiplied to determine the Actual Performance Share Units, as determined under Section 2 of this Award Agreement for each Performance Metric. “EBITDA” means the Company’s net income or loss before interest, taxes, depreciation and amortization, excluding earnings attributable to non-controlling interests and plus or minus any approved adjustments determined in accordance with the Manual. “Employer” means the Subsidiary that employs the Participant (to the extent the Participant is not directly employed by the Company)
2 “Manual” shall mean the Incentive Technical Manual as approved by the Committee. “Mutual Agreement Termination” means any termination of the Participant's employment by the Company or the Employer, as applicable, without Cause and which provides transition/separation pay to the Participant; provided, in conjunction with such termination, the Participant has executed, and not revoked during the period provided for therein, a binding and effective settlement agreement, waiver and release. “Peer Group” means the companies approved by the Committee as peer group companies, listed on the attached Appendix A of this Award Agreement. For the sake of clarity, the Company is not included in the Peer Group. “Performance Metrics” means EBITDA and Revenue. For the sake of clarity, the Performance Metrics for each Tranche Period will be distributed to the Participant within 60 days of the commencement of the applicable Tranche Period. “Performance Period” means the period of three (3) consecutive fiscal years of the Company beginning with the Company’s fiscal year in which the Award Date occurs. “Performance Share Unit” means the right to receive one (1) share of Common Stock on a future date subject to certain restrictions and on the terms and conditions contained in this Award Agreement. “Revenue” means the Company's net sales from the sale of products and services. “Retirement” means the Participant's voluntary termination of employment without Cause (other than on account of Death, Disability or Mutual Agreement Termination) occurring on or after the date (A) the Participant has attained age 55, and (B) the sum of the Participant's age (in whole years, rounded down to the nearest year) and Continuous Years of Service (in whole years, rounded down to the nearest year) equals or exceeds 65. Notwithstanding the foregoing, if the Participant's voluntary termination of employment without Cause (other than on account of Death, Disability or Mutual Agreement Termination) occurs (a) during the period commencing on July 15, 2024 and ending on July 14, 2025, and (b) at the time of such termination, the Participant has attained (i) age 55 and 5 or more Continuous Years of Service, or (ii) 30 or more Continuous Years of Service, the Participant's termination of employment shall be characterized as a Retirement. “Target Performance Share Units” means the number of Performance Share Units specified above and detailed in the Participant’s Award Notice as applicable to each individual Performance Metric. For the sake of clarity and except as otherwise reflected in the Participant's Award Notice, 50% of the Target Performance Share Units shall be attributable to EBITDA and the remaining 50% of the Target Performance Share Units shall be attributable to Revenue. “Tax Related-Items” means any or all federal, state, local or foreign income tax, social insurance, payroll tax, payment on account or other tax related-items. “Tranche Period” means a portion of the Performance Period, as follows (A) the first being the first fiscal year of the Performance Period, (B) the second being the second fiscal year
3 of the Performance Period, and (C) the third being the third fiscal year of the Performance Period. “Tranche Schedule” means that thirty-three percent (33%) of the Target Performance Share Units are subject to the first Tranche Period, thirty-three percent (33%) of the Target Performance Share Units are subject to the second Tranche Period, and the remaining Target Performance Share Units are subject to the third Tranche Period. “Total Shareholder Return” or “TSR” with respect to the Company and each member of the Peer Group shall mean the quotient of (a) the Beginning Price (as defined below) divided by (b) the Ending Price (as defined below). The “Beginning Price” shall equal the average closing price of a share of common stock during the twenty (20) trading day period ending on the last day before the start of the Performance Period. The “Ending Price” shall equal the average closing price of a share of common stock during the twenty (20) day trading period ending on the last day of the Performance Period. The Beginning Price and Ending Price shall be adjusted to reflect any and all cash, stock or in-kind dividends paid on the stock of such company during the Performance Period, or any stock splits or reverse stock splits that occur during the Performance Period. For the avoidance of doubt, dividends paid throughout the Performance Period for the Company and Peer Group companies will be reinvested as of the ex- dividend date. “TSR Multiplier” means the adjustment to the initial sum of the Performance Share Units earned for each Tranche Period determined by the Company’s TSR relative to the Peer Group. 2. Determination of Actual Performance Share Units. The Actual Performance Share Units that the Participant may earn shall equal the sum of the Target Performance Share Units earned with respect to each Tranche Period, as adjusted under subsection (d) below, for each Performance Metric. For each Tranche Period, the Performance Share Units earned with respect to each Performance Metric shall equal (a) the number of Target Performance Share Units subject to such Tranche Period as specified in the Tranche Schedule, multiplied by (b) the Earnout Percentage of such Tranche Period, as determined under this Section 2. (a) Determination of EBITDA and Revenue. Within ninety (90) days after the end of each Tranche Period, the Committee will determine EBITDA and Revenue for such Tranche Period consistent with the Manual. (b) Calculation of Earnout Percentage. Within ninety (90) days after the end of each Tranche Period, the Committee will determine the Earnout Percentage applicable to the relevant portion of the Target Performance Share Units specified in the Tranche Schedule based on the weighted average of the achievement of the EBITDA target and the Revenue target specified by the Committee for such Tranche Period, subject to adjustment in accordance with the Manual. If the EBITDA and/or the Revenue is between the approved performance levels, then the Earnout Percentage will be determined based on straight line interpolation. (c) Determination of TSR.
4 (i) Determination of Company TSR. Within ninety (90) days after the end of the Performance Period, the Committee will determine the Company’s TSR during the Performance Period, in accordance with the Manual. (ii) Determination of Peer Group TSRs. Within ninety (90) days after the end of the Performance Period, the Committee will determine the TSR for each member of the Peer Group during the Performance Period, in accordance with the Manual. (iii) Determination of Percentile Rank. Following the determination of Company’s TSR and the TSR of each member of the Peer Group, the Committee shall determine the percentile rank of the Company within the Peer Group. The Committee will include the Company in its determination of the Company’s percentile ranking. (d) Calculation of TSR Multiplier. The initial sum of the Performance Share Units earned with respect to all Tranche Periods determined in Section 2 shall be adjusted based on the Company’s TSR relative to the TSR of the Peer Group in accordance with the following, applying a multiplier approach: Relative TSR Ranking TSR Multiplier Percentage 75th percentile or above 125% 55th percentile 100% (no adjustment) 25th percentile or below 75% If the Company’s relative TSR ranking is between performance levels, the TSR Multiplier percentage shall be determined based on straight line interpolation. Notwithstanding any other provision of this Agreement, in no event shall the Actual Performance Share Units (as modified under this Section 2(d)) exceed two hundred percent (200%) of the Target Performance Share Units. (e) Calculation of Actual Performance Share Units after a Change in Control. If a Change in Control occurs, the Committee will determine the Participant’s Actual Performance Share Units as of the date of such Change in Control in accordance with Section 2(a)-(d), subject to the following: (i) the Performance Period will end (the “Adjusted Performance Period”) on the effective date of the Change in Control; (ii) with respect to any Tranche Period that is fully completed by the effective date of the Change in Control, the Participant’s Actual Performance Share Units earned with respect to such Tranche Period shall be determined in accordance with Section 2(a)-(d); (iii) with respect to any Tranche Period that is partially completed as
5 of the effective date of the Change in Control, the Committee will determine the EBITDA and the Revenue for such partially completed Tranche Period in which the Change in Control occurs from the first day of the Tranche Period through the effective date of the Change in Control, and the Committee will determine the total EBITDA and the total Revenue for such full Tranche Period by multiplying such amount for the partially completed Tranche Period by the amount equal to the of quotient of (A) the number of days in such full Tranche Period (if the Change in Control had not occurred), divided by (B) the number of days in the period of time beginning on the first date of such Tranche Period and ending on the effective date of the Change of Control (for clarity, subject to adjustment in accordance with Section 2(c)-(d)); and (iv) with respect to any Tranche Period that has not started before the effective date of the Change in Control, the deemed EBITDA and Revenue for such Tranche Period shall equal the targeted EBITDA amount and Revenue amount for a one hundred percent (100%) initial Earnout Percentage for such Tranche Period (for clarity, subject to adjustment in accordance with Section 2(c)-(d)). (f) Certification. Not later than ninety (90) days after the end of the Performance Period or the Adjusted Performance Period, as applicable, the Committee shall determine the Actual Performance Share Units and shall certify such finding to the Company and the Participant. 3. Adjustments Following Termination of Employment. (a) Termination Due to Death or Disability. Notwithstanding anything in this Award Agreement to the contrary, in the event that the Participant’s employment with the Company or the Employer terminates prior to the end of the Performance Period due to the Participant’s death or Disability, the Target Performance Share Units shall vest immediately upon the Participant's death or Disability. (b) Mutual Agreement Termination. (i) In the event that the Participant’s employment with the Company or the Employer terminates prior to the end of the Performance Period by reason of a Mutual Agreement Termination and the Participant does not satisfy the age and service requirements for Retirement, the Participant’s rights to all of the Target Performance Share Units granted under this Award Agreement will be immediately and irrevocably forfeited upon such termination of employment and the Participant shall earn no Actual Performance Share Units. (ii) In the event that the Participant’s employment with the Company or the Employer terminates prior to the end of the Performance Period by reason of a Mutual Agreement Termination and the Participant satisfies the age and service requirements for Retirement, the Participant’s Target Performance Share Units will be treated in accordance with the provisions of Section 3(c).
6 (c) Termination Due to Retirement. In the event that the Participant’s employment with the Company or the Employer terminates prior to the end of the Performance Period due to Retirement, the Participant’s Target Performance Share Units will be adjusted as follows: (i) If the Participant’s Retirement occurs prior to the end of the first twelve (12) months after the Award Date, the Participant’s Target Performance Share Units will be adjusted by multiplying the Participant’s Target Performance Share Units by a fraction, the numerator of which is the number of days that Participant was employed by the Company or the Employer from the Award Date until the date of the Participant’s Retirement, and the denominator of which is the number of days in the first 12 months after the Award Date; (ii) No adjustment to the Participant’s Target Performance Share Units will be made if the Participant’s Retirement occurs on or after the end of the first twelve (12) months after the Award Date. Actual Performance Share Units shall continue to be calculated according to Section 2. (d) Termination of Employment for Other Reasons. In the event that the Participant’s employment with the Company or the Employer terminates prior to the end of the Performance Period for any reason other than death, Disability, Retirement, or Mutual Agreement Termination, the Participant’s rights to all of the Target Performance Share Units granted under this Award Agreement will be immediately and irrevocably forfeited upon such termination of employment and the Participant shall earn no Actual Performance Share Units. (e) Termination After a Change in Control. Notwithstanding any term to the contrary in this Award Agreement or the Plan, the Participant shall retain the right to earn all of the Participant’s Target Performance Share Units if, within two (2) years following a Change in Control, the Participant’s employment (i) is terminated without Cause (including death or Disability), (ii) terminates with Good Reason, or (iii) terminates under circumstances that entitle the Participant to accelerated vesting under any individual employment agreement between the Participant and the Company, the Employer, or any successor thereof, and Actual Performance Share Units shall be calculated in accordance with Section 2(e). For all other terminations of employment that occur after a Change in Control, the Participant’s Target Performance Share Units shall be adjusted in accordance with subsections (a)-(c) of this Section 3, and Actual Performance Share Units shall be calculated in accordance with Section 2(e). (f) For purposes of this Award Agreement, the Committee shall have discretion to determine whether the Participant has ceased to be actively employed by (or, if the Participant is a consultant or director, has ceased actively providing services to) the Company or a Subsidiary, and the effective date on which such active employment (or active service-providing relationship) terminated. The Participant’s active employer-employee or other active service-providing relationship will not be extended by any notice period mandated under applicable law (e.g., active employment
7 shall not include a period of “garden leave”, paid administrative leave or similar period pursuant to applicable law) and in the event of the Participant’s termination of employment (whether or not in breach of applicable labor laws), the Participant’s right to settle any Actual Performance Share Units after termination of employment, if any, shall be measured by the date of termination of active employment or service and shall not be extended by any notice period mandated under applicable law. Unless the Committee provides otherwise (1) termination of the Participant’s employment will include instances in which the Participant is terminated and immediately rehired as an independent contractor, and (2) the spin-off, sale, or disposition of the Employer from the Company or another Subsidiary (whether by transfer of shares, assets or otherwise) such that the Employer no longer constitutes a Subsidiary will constitute a termination of employment or service. (g) If the Participant is a resident or employed in a country that is a member of the European Union, the grant of the Actual Performance Share Units and this Award Agreement is intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Award Agreement is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law. 4. Issuance of Common Stock; Shareholder Rights. (a) Settlement of Performance Share Units to Common Stock. Within ninety (90) days after the end of the Performance Period (or, in the case of the Participant’s Retirement prior to the end of the Performance Period, within ninety (90) days after the later of the end of the Performance Period or the expiration of the duration of the restrictive covenant set forth in Section 9(b)(ii), as applicable), the Company shall deposit the number of shares of Common Stock in settlement of such whole Actual Performance Share Units into the Participant’s brokerage account with the Stock Plan Service Provider, unless a valid deferral has been made pursuant to Section 7, in which case such distribution will be made within sixty (60) days after the date to which distribution has been deferred, in either case, provided that the Participant has satisfied any tax withholding obligations related to such Performance Share Units. (b) No Shareholder Rights. No shares of Common Stock will be issued to the Participant prior to the date on which the Target Performance Share Units become Actual Performance Share Units under the provisions of Section 2 of this Award Agreement. The Target Performance Share Units granted pursuant to this Award Agreement represent a contingent right to receive Common Stock in the future, are not issued shares of Common Stock and do not and will not entitle the Participant to any rights of a shareholder of Common Stock, including the right to vote or receive dividends. Except as otherwise provided in Section 2, the rights of the Participant with respect to the Target Performance Share Units will remain forfeitable at all times prior
8 to the end of the Performance Period as provided in this Award Agreement. Prior to settlement of some or all of the Target Performance Share Units into Common Stock, such Target Performance Share Units will represent only an unsecured obligation of the Company. Neither this Section 4(b) nor any action taken pursuant to or in accordance with this Section 4(b) will be construed to create a trust of any kind. 5. Restriction on Transfer. Any rights under this Award Agreement may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported sale, assignment, transfer, pledge, hypothecation or other disposition will be void and unenforceable against the Company. 6. Adjustments to Target Performance Share Units for Certain Corporate Transactions. Adjustments to Target Performance Share Units will be determined in accordance with this Section 6. (a) The Committee will make an appropriate and proportionate adjustment to the number of Target Performance Share Units granted under this Award Agreement if: (i) The outstanding shares of Common Stock are increased or decreased, as a result of merger, consolidation, sale of all or substantially all of the assets of the Company, reclassification, stock dividend, stock split, reverse stock split with respect to such shares of Common Stock or other securities, or (ii) Additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities or exchanged for a different number or kind of shares or other securities through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock or other securities. (b) The Committee may make an appropriate and proportionate adjustment in the number of Target Performance Share Units granted under this Award Agreement if the outstanding shares of Common Stock are increased or decreased as a result of a recapitalization or reorganization not included within Section 6(a) above. 7. Deferral of Distribution. The Participant may elect to defer the conversion of Actual Performance Share Units granted under this Award Agreement into Common Stock and the issuance of such Common Stock with respect thereto to a time later than that provided under Section 4(a). The Participant must file such election with the Committee at least 12 months prior to the end of the Performance Period. The Participant must specify in the election the date on which the Actual Performance Share Units earned under this Award Agreement will be converted to Common Stock and issued to the Participant. The date elected must be at least five (5) years later than the date on which the Actual Performance Share Units would have been converted to Common Stock and issued to the Participant under Section 4(a).
9 8. Tax Withholding. (a) Regardless of any action the Company or the Employer takes with respect to Tax Related-Items, the Participant acknowledges that the ultimate liability for all Tax Related-Items associated with the Actual Performance Share Units are and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company and that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax Related-Items in connection with any aspect of the Actual Performance Share Units, including, but not limited to, the grant, vesting or settlement of the Actual Performance Share Units, the subsequent sale of any shares of Common Stock acquired pursuant to such settlement and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the Actual Performance Share Units to reduce or eliminate the Participant’s liability for Tax Related-Items. Further, if the Participant is subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Related-Items in more than one jurisdiction. (b) Prior to the delivery of any shares of Common Stock upon settlement of the Actual Performance Share Units, if the Participant’s country of residence (and/or the Participant’s country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of shares of Common Stock otherwise issuable upon settlement of the Performance Share Units that have an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld. In cases where the Fair Market Value of the number of shares of Common Stock withheld is greater than the Tax-Related Items required to be withheld, the Company shall make a cash payment to the Participant equal to the difference as soon as administratively practicable. The cash equivalent of the shares of Common Stock withheld will be used to settle the obligation to withhold the Tax-Related Items. Alternatively, the Company may permit the Participant to tender payment of the Tax- Related Items to the Company (i) in the form of cash, check (bank check, certified check or personal check) or money order payable to the Company, (ii) in the form of unencumbered shares of Common Stock already owned by the Participant for at least six (6) months, (iii) causing the broker to sell from the number of shares of Common Stock to be issued to the Participant having an aggregate Fair Market Value necessary to satisfy the amount of Tax-Related Items due, or (iv) by having the Company or the Employer withhold the Tax-Related Items required to be withheld with respect to the shares of Common Stock in cash from the Participant’s regular salary/wages, or from any other amounts payable to the Participant. In the event the withholding requirements for Tax- Related Items are not satisfied through any of the foregoing methods, no shares of Common Stock will be issued to the Participant (or the Participant’s estate) upon settlement of the Performance Share Units unless and until satisfactory arrangements have been made by the Participant with respect to the payment of any Tax-Related Items which the Company and the Employer determine, in their sole discretion, must be withheld or collected with respect to such Performance Share Units.
10 (c) Depending on the withholding method, the Company may withhold or account for Tax Related-Items by considering maximum applicable rates to the extent permitted by the Plan, in which case the Participant may receive a refund of any over- withheld amount in cash from the applicable taxing authority and will have no entitlement to the Share equivalent. If the obligation for Tax Related-Items is satisfied by withholding in shares of Common Stock, for tax purposes, the Participant shall be deemed to have been issued the full member of shares of Common Stock issued upon settlement of the Performance Share Units notwithstanding that a member of the shares of Common Stock are held back solely for the purpose of paying the Tax Related-Items. (d) By accepting the Performance Share Units, the Participant expressly consents to the foregoing methods of tax withholding for Tax-Related Items associated with the Performance Share Units. All other Tax-Related Items related to the Performance Share Units and any shares of Common Stock delivered in payment thereof are the Participant’s sole responsibility. 9. Participant Covenants. In consideration of the grant of this Award by the Company, the Participant agrees to the following: (a) Confidentiality. In the course of the Participant’s employment with the Company or the Employer, the Participant will be provided with or may have access to, and/or come into the possession of, Confidential Information; accordingly and subject to Section 9(e),, the Participant agrees and promises: (i) to protect and maintain the confidentiality of Confidential Information while employed by the Company or the Employer; (ii) to return or provide to the Company (and not retain any copies, reproductions, or manifestations of any kind in any form) any and all materials reflecting Confidential Information and any other equipment, materials and writings received from, created for, belonging to the Company or the Employer or relating to the Company’s or the Employer’s business, then in the Participant’s possession or under the Participant’s control, (whether in “hard copy” or electronic form) including, but not limited to, those which relate to or contain Confidential Information (including all Company- or Employer-owned equipment) immediately upon end of employment or upon demand by the Company or the Employer; and (iii) not to (without the express prior written consent of the Company or the Employer) use, reproduce, create any derivative work improvement, modify, adapt, disclose, publish, communicate or make available any Confidential Information for any purpose other than as necessary and reasonable for performing the Participant’s employment services or duties on behalf of the Company or the Employer or for the benefit of the Company or the Employer. (b) Restrictive Covenants. The Participant understands and agrees that the Company and the Employer have legitimate interests in protecting their goodwill, their
11 relationships with customers and business partners, and in maintaining their confidential information, trade secrets and Confidential Information, and that it would cause severe and irreparable harm to the Company or the Employer if the Participant were to improperly utilize or disclose any trade secrets, other Confidential Information or customer relationships, or if the Company or the Employer were to otherwise lose its customer relationships or goodwill. Therefore, the Participant hereby agrees that the following restrictions are appropriate and necessary to meet such goals and that such restrictions do not impose undue hardship or burdens on the Participant. (i) Non-Solicitation of Company Customers or Employer Customers. The Participant acknowledges that the relationships and goodwill that the Participant develops with Company Customers or Employer Customers as a result of the Participant’s employment belong to the Company. The Participant therefore agrees and covenants that during the Restricted Period, the Participant will not, and will not assist anyone else to, except in furtherance of the Participant’s employment with the Company or the Employer (1) solicit, aid, induce or encourage any Company Customer or Employer Customer to cease purchasing goods or services from, or otherwise interfere with the relationship between the Company or the Employer and any Company Customer or Employer Customer, respectively. (ii) Non-Service of Company Customers or Employer Customers. The Participant agrees and covenants, during the Restricted Period, except in the furtherance of the Participant’s employment with the Company or the Employer, not to render any services to or sell any products to any Company Customer or Employer Customer, unless such services or products or similar services or products are not provided to any Company Customer or Employer Customer by the Company or the Employer, respectively, and are not planned to be offered by the Company or the Employer to any Company Customer or Employer Customer, respectively. For purposes of this Award Agreement, services, products or business shall be considered “planned to be offered by the Company or the Employer” if the following conditions are satisfied: (1) the Company or the Employer plans to offer or engage in such services, products or business within six (6) months after the termination of Participant’s employment, and (2) the Participant participated in the Company’s or the Employer’s planning of such services, products or business. Except as otherwise provided in this Award Agreement, nothing in this Section shall prevent the Participant from performing or providing such services, products or business as an employee of a Company Customer or Employer Customer, unless: (i) such Company Customer’s or Employer Customer’s business is to perform or provide services, products or business similar to those performed or provided by the Company or the Employer; (ii) such services, products or business are being performed or provided by the Participant to multiple persons or entities; or (iii) such services, products or business would impair the Company’s or the Employer’s independence and the Participant has not obtained approval from the Company’s Legal Department prior to performing or providing such services, products or business.
12 (iii) Non-Solicitation of Employees. The Participant agrees and covenants that during the Restricted Period, the Participant shall not, except in furtherance of the Participant’s employment with the Company or the Employer, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, hire, recruit, or attempt to solicit, hire, or recruit, any Covered Employee, or induce the resignation of any Covered Employee from the Company or the Employer. This Section does not restrict or impede, in any way, and shall not be interpreted or understood as restricting or impeding, the Participant from exercising protected rights that cannot be waived by agreement. (iv) Non-Competition. T he Participant agrees that during the Restricted Period, the Participant will not, for the Participant, or on behalf of any other person or entity, directly or indirectly, engage in any Competitive Activity, unless approved by the Company or the Employer in advance in writing. Notwithstanding the foregoing, nothing herein shall prohibit the Participant from being a passive owner of not more than two percent (2%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company or the Employer, so long as the Participant has no active participation in the business of such corporation. (c) Definitions. For purposes of this Section 9, the following terms shall be defined as follows: (i) Company Customer or Employer Customer. “Company Customer” or “Employer Customer” is limited to those customers or partners who did business with the Company, or the Employer as applicable, and (A) with whom the Participant had substantive contact within the most recent 12 months of the Participant’s employment with the Company or the Employer (or during the period of the Participant’s employment, if the Participant was employed for less than 12 months) and (B) about whom the Participant has Customer Information or any other trade secret or confidential information that is not available publicly. “Company Customer” or “Employer Customer” shall not, however, include any individual who purchased a product from the Company, or the Employer as applicable, by direct purchase from one of its retail establishments or via on-line over the Internet, unless such purchase was of such quantity that the purchase price exceeded $15,000. (ii) Competitive Activity. “Competitive Activity” means becoming an employee, advisor, officer, director, consultant, contractor, partner, principal, manager, or executive of a Direct Competitor, (including as an employee of, or consultant to, any vendor providing services or products to any Direct Competitor), whether or not for compensation, where there is a reasonable possibility that the Participant may, intentionally or inadvertently, directly or indirectly, use or rely upon Confidential Information; or (1) in a capacity that is similar to the capacity the Participant was in, (2) where the Participant provides services that are similar to the services the Participant provided, or (3) with
13 responsibilities that are similar to the responsibilities the Participant had, in each case, during the final 12 months the Participant was employed by the Company or the Employer (or during the period of the Participant’s employment, if the Participant was employed for less than 12 months). (iii) Competitive Services. “Competitive Services” means services of the type that the Company or the Employer provided or offered to its customers or partners at any time during the 12 months immediately preceding the last day of the Participant’s employment with the Company or the Employer (or at any time during the Participant’s employment if the Participant was employed for less than 12 months), and for which services the Participant was involved in providing or managing. (iv) Competitive Products. “Competitive Products” means products that serve the same function as, or that could be used to replace, products the Company or the Employer provided to, offered to, or was in the process of developing for a present, former, or future possible customer/partner at any time during the twelve (12) months immediately preceding the last day of the Participant’s employment with the Company or the Employer (or at any time during the Participant’s employment if the Participant was employed for less than 12 months), with which the Participant had direct responsibility for the sale or development of such products or managing those persons responsible for the sale or development of such products. (v) Confidential Information. “Confidential Information” means, individually and collectively, the Company’s or the Employer’s confidential, proprietary and/or trade secret information relating to the Company’s actual or anticipated business and/or the Company’s or the Employer’s existing and prospective clients, products, services, and technology. Confidential Information includes, but is not limited to, existing and prospective client databases, lists, identities, characteristics, and contact information, information regarding decision-makers for the Company’s or the Employer’s existing and prospective clients, proposals, intellectual property, and other proprietary features of Company’s or the Employer’s current and anticipated products, processes, techniques, devices, software, product development information including technical information, designs, formulas, drawings and prototypes, trade secrets or know-how, supplier and vendor information, pricing schedules, financial information, processes, strategic plans and initiatives, investment strategies and plans, marketing and sales techniques and plans, budgets, projections, forecasts, employee personnel files and other non-public information about Company or Employer employees, compensation or other terms of employment, contracts, procedures, all non-public information that has or could have commercial value or other utility in the business in which the Company or the Employer is engaged or contemplates engaging, and all information, including confidential third party information disclosed to the Company or the Employer, the unauthorized use or disclosure of which could be detrimental to the interests of the Company or the Employer, whether or not such information is labeled, marked, or otherwise
14 identified as Confidential Information by the Company or the Employer, and all compilations, reproductions, and derivations of any of the foregoing information. Confidential Information includes not only information disclosed by the Company or the Employer to the Participant, but also information developed, obtained, or learned, and work product produced, by the Participant during the course of the Participant’s employment with the Company or the Employer or derived from use of any Company or Employer equipment, systems or information. Confidential Information (i) includes the foregoing information even if disclosed to the Participant in connection with the contemplation of the Participant becoming an employee of the Company or the Employer, i.e., prior to the effective date of the Participant’s employment, or prior to the Participant signing this Award Agreement, and (ii) does not include any information that is publicly known, or after it becomes publicly known through no wrongful act or omission of the Participant or of others who were under confidentiality or non- disclosure obligations at that time related to such information. (vi) Covered Employee. “Covered Employee” means any then- current employee of the Company or the Employer or any employee who has been employed by the Company or the Employer in the twelve (12) months before the Participant’s last day of employment (or at any time during the Participant’s employment if the Participant was employed for less than 12 months) with whom the Participant had contact during the course of performing the Participant’s duties. (vii) Direct Competitor. “Direct Competitor” means any person, business, company or operation, irrespective of form (e.g., a sole proprietorship, partnership, limited liability company, corporation, joint venture or other type of entity) that (1) provides Competitive Products and/or Competitive Services or (2) owns or controls a significant interest in any entity that provides, or proposes or plans to provide, any Competitive Product and/or Competitive Services. (viii) Restricted Period. “Restricted Period” means the period during the Participant’s employment with the Company or the Employer and for a period of twelve (12) months (or such longer period as set forth in another agreement between the Participant and the Company or the Employer) immediately following the termination of the Participant’s employment with the Company or the Employer, regardless of the reason for the termination, whether voluntary or involuntary. (d) Non-disparagement. Subject to Section 9(e), the Participant agrees that, while employed with the Company or the Employer and thereafter, the Participant will not, directly or indirectly, individually or in concert with others, engage in any conduct or make any statement calculated or likely to have the effect of undermining, disparaging or otherwise reflecting poorly upon the Company or the Employer, any member of its Board of Directors or any executive officer of the Company or the Employer (the “Protected Persons”) or the Company’s or the Employer’s business. This Section does not, in any way, restrict or impede the Participant from exercising protected rights to the
15 extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized Governmental Entity, provided that such compliance does not exceed that required by the law, regulation, or order. (e) Protected Rights. Nothing in this Award Agreement is intended to interfere with the whistleblower provisions of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act of 1934 or § 1833(b) of the U.S. Defend Trade Secrets Act of 2016 (the “DTSA”). Accordingly, notwithstanding anything to the contrary therein, nothing in this Award Agreement shall prohibit or impede the Participant (or the Participant's attorney) from communicating or otherwise participating in or fully cooperating with any investigation or proceeding that may be conducted by a United States federal, state or local governmental, regulatory or law enforcement branch, agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General (collectively, a “Governmental Entity”), filing a charge or complaint with the Securities and Exchange Commission, or any other federal, state, or local governmental regulatory or law enforcement agency, or making other disclosures or reports that are protected under the whistleblower provisions of federal, state or local law or regulation, including about alleged unlawful employment practices or alleged criminal conduct. The Participant understands and acknowledges that the Participant does not need the prior authorization from the Company or the Employer to make any such reports or disclosures and that the Participant is not required to notify the Company or the Employer that the Participant has made such reports or disclosures. The Participant can provide Confidential Information to Government Entity without risk of being held liable by the Company or the Employer for liquidated damages or other financial penalties. This Award Agreement also does not limit the Participant’s right to receive an award for information provided to any Government Entity. In addition, nothing in this Award Agreement shall prohibit or restrict the Participant from (i) disclosing Confidential Information to a court or other administrative or legislative body in response to a private third-party subpoena, provided that the Participant first promptly notifies and provides the Company or the Employer the opportunity to seek, and join in its efforts at the sole expense of the Company or the Employer, to challenge the subpoena or obtain a protective order limiting its disclosure, or other appropriate remedy, (ii) discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Participant has reason to believe is unlawful, or (iii) filing or disclosing any facts necessary to receive unemployment insurance, Medicaid or other public benefits to which the Participant is entitled. Further, nothing in this Award Agreement is intended to interfere with any rights the Participant may have under Section 7 of the National Labor Relations Act. (f) The Participant understands and acknowledges that the DTSA provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such
16 filing is made under seal. In addition, the DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement or any other agreement by and between the Participant and the Company is intended to conflict with the DTSA or create liability for disclosures of trade secrets expressly allowed by such section. (g) Severability and Enforcement. The covenants set forth in Section 9 of the Award Agreement are independent and severable from every other provision of this Award Agreement, and the breach of any other provision of this Award Agreement by the Company or the Employer or any other agreement between the Participant and the Company or the Employer shall not affect the validity of the provisions of Section 9 or constitute a defense in any action brought by the Company or the Employer to enforce the provisions of Section 9 or to seek any relief for the Participant’s breach thereof. The parties agree that if a competent authority declines to enforce any of the provisions of Section 9, that the authority responsible for such determination shall have the power to reduce, modify or limit the restrictions to restrict competition with or solicitation from the Company or the Employer to the maximum extent permitted by law. To the extent that any invalid or unenforceable provision cannot be cured by modification or reformation, such offending provision shall be limited or eliminated to the minimum extent necessary so that this Section 9 shall otherwise remain in full force and effect and be enforceable. The modification, reformation, limitation or elimination of any provision of this Section 9 shall not affect the validity or enforceability of the remaining provisions of this Agreement in that jurisdiction, or the validity or enforceability of this Agreement in any other jurisdiction. The provisions of this Section 9 will not apply to the Participant to the extent any such provision is prohibited or otherwise restricted by applicable law. (h) State-Specific Modifications. The US State Addendum, attached hereto and hereby incorporated herein, contains certain important modifications that may apply to the Participant based on the laws of the state of the Participant’s Primary Place of Employment if the Participant primarily performs services in the United States. The Participant acknowledges that the Participant reviewed the US State Addendum before electronically accepting this Award Agreement and understand the impact of state law modifications, if any, that may apply to the Participant. The term “Primary Place of Employment” means the location where the Participant primarily performs services for the Company as designated by the Company or the Employer in accordance with the Company’s or the Employer’s applicable policies and procedures. 10. Miscellaneous. (a) Neither this Award Agreement nor the Plan confers on the Participant any right with respect to the continuance of employment by the Company or the Employer, nor will there be a limitation in any way on the right of the Company or the Employer to terminate the Participant’s employment at any time.
17 (b) An original record of this Award Agreement and of the Participant’s acceptance and acknowledgement will be held on file by the Company. This Award Agreement and the Participant’s acknowledgement may be made either in paper or electronic format as specified by the Company. To the extent there is any conflict between the terms contained in this Award Agreement and the terms contained in the original held by the Company, the terms of the original held by the Company will control. Notwithstanding anything to the contrary herein, upon a Change in Control in which the surviving entity does not assume this Award (or replace this Award with an Award having substantially similar terms), this Award shall be treated in accordance with Section 14.3(b) of the Plan. 11. Section 409A Compliance. To the extent applicable, it is intended that this Award Agreement be exempt from or comply with the provisions of Section 409A of the Internal Revenue Code, as amended (“Section 409A”). This Award Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Award Agreement to fail to satisfy Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A). If any payments under this Award Agreement constitute nonqualified deferred compensation subject to the requirements of Section 409A and are payable upon a termination of the Participant’s employment, then (a) all such payments shall be made only upon a “separation from service” within the meaning of Section 409A, (b) for purposes of determining the timing of such payments, the Participant’s termination shall not be considered to occur until the Participant has incurred such a separation from service and (c) to the extent required for compliance with Section 409A if the Participant is a “specified employee” within the meaning of Section 409A, payments will be delayed by six months. 12. Section 280G. Notwithstanding anything contained in this Award Agreement to the contrary, to the extent that any of the payments and benefits provided for under this Award Agreement, together with any payments or benefits under any other agreement or arrangement between the Company or any of its affiliates and the Participant (collectively, the “Payments”) would constitute a “parachute payment” within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced (to the extent any reduction is necessary) to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code if and only if such reduction would provide the Participant with an after-tax amount greater than if there was no reduction. Any reduction shall be done in a manner that maximizes the amount to be retained by the Participant, provided that to the extent any order is required to be set forth herein, then such reduction shall be applied in the following order: (a) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (b) payments due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced next (if necessary, to zero), with amounts that are payable or deliverable last reduced first; (c) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G- 1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); (d) payments due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as
18 such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); and (v) all other non-cash benefits will be next reduced pro-rata. 13. Electronic Delivery. The Company, in its sole discretion, may decide to deliver any documents related to the Performance Share Units to the Participant under the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. 14. Data Privacy. The Company is located at 855 East Main Avenue, Zeeland, MI 49464, United States of America and grants Performance Share Units under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company’s grant of Performance Share Units under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices (“Personal Data Activities”). In accepting the grant of Performance Share Units, the Participant expressly and explicitly consents to the Personal Data Activities as described herein. The Participant should consult the Company’s Global Associate Privacy Notice for additional information on its current privacy practices concerning the collection of employee information, a copy of which can be provided by contacting the Participant’s local human resources department or the Company’s privacy team at privacy@millerknoll.com. (a) Data Collection, Processing and Usage. The Company collects, processes and uses the Participant’s personal data, including the Participant’s name, home address, e-mail address, and telephone number, date of birth, social insurance / passport number or other identification number (e.g. resident registration number), salary, citizenship, job title, any shares of Common Stock or directorships held in the Company, and details of all Performance Share Units or any other equity compensation awards granted, canceled, exercised, vested, or outstanding in the Participant’s favor, which the Company receives from the Participant or the Employer (“Personal Information”). In granting Performance Share Units under the Plan, the Company will collect the Participant’s Personal Information for purposes of allocating shares of Common Stock and implementing, administering and managing the Plan. The Company’s legal basis for the collection, processing and usage of the Participant’s Personal Information is the Participant’s consent. (b) Stock Plan Service Provider. The Company transfers the Participant’s Personal Information to the Stock Plan Service Provider, an independent service provider based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Service Provider and share the Participant’s Personal Information with another company that serves in a similar manner. The Stock Plan Service Provider will open an account for the Participant to receive and trade shares of Common Stock acquired under the Plan. The Participant will be asked to agree on separate terms and data processing practices with the Stock Plan Service Provider, which is a condition to the Participant’s ability to participate in the Plan.
19 (c) International Data Transfers. The Company and the Stock Plan Service Provider are based in the United States. The Participant should note that the Participant’s country of residence may have enacted data privacy laws that are different from the United States. The Company’s legal basis for the transfer of the Participant’s Personal Information to the United States is the Participant’s consent. (d) Voluntariness and Consequences of Consent Denial or Withdrawal. The Participant’s participation in the Plan and the Participant’s grant of consent is purely voluntary. The Participant may deny or withdraw the Participant’s consent at any time. If the Participant does not consent, or if the Participant later withdraws the Participant’s consent, the Participant may be unable to participate in the Plan. This would not affect the Participant’s existing employment or salary; instead, the Participant merely may forfeit the opportunities associated with the Plan. (e) Data Subject Rights. The Participant may have a number of rights under the data privacy laws in the Participant’s country of residence. For example, the Participant’s rights may include the right to (i) request access or copies of Personal Information the Company processes, (ii) request rectification of incorrect data, (iii) request deletion of data, (iv) place restrictions on processing, (v) lodge complaints with competent authorities in the Participant’s country of residence, and/or (vi) request a list with the names and addresses of any potential recipients of the Participant’s personal data. To receive clarification regarding the Participant’s rights, the Participant should contact the Participant’s local human resources department or the Company’s privacy team at privacy@millerknoll.com. Further, the Participant may exercise the Participant’s rights via the Company’s Privacy Rights Portal (https://www.millerknoll.com/legal/privacy/privacy-rights). 15. Severability. In the event that any provision of this Award Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Award Agreement. 16. Governing Law and Venue. Except for Section 9 of this Award Agreement, which shall be governed by, and construed in accordance with, the laws of the State of the Participant’s Primary Place of Employment if the Participant primarily works in the United States, the laws of the State of Michigan (other than its choice of law provisions) shall govern this Award Agreement and its interpretation. For purposes of litigating any dispute that arises with respect to the Performance Share Units, this Award Agreement or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of Michigan, and agree that such litigation shall be conducted in the courts of Kent County, or the United States Federal court for the Western District of Michigan, and no other courts; and waive, to the fullest extent permitted by law, any objection that the laying of the venue of any legal or equitable proceedings related to, concerning or arising from such dispute which is brought in any such court is improper or that such proceedings have been brought in an inconvenient forum. Any claim under the Plan, this Award Agreement or any Performance Share Units must be commenced by the Participant within twelve (12) months of the earliest date on which the Participant’s claim first arises, or the Participant’s cause of action accrues, or such claim will be deemed waived by the Participant.
20 17. Nature of Performance Share Units. In accepting the Performance Share Units, the Participant expressly acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; (b) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; (c) all decisions with respect to future equity awards, if any, shall be at the sole discretion of the Company; (d) the Participant’s participation in the Plan is voluntary; (e) the Performance Share Units, and the income and value of same, is an extraordinary item that (i) does not constitute compensation of any kind for services of any kind rendered to the Company or any Subsidiary, and (ii) is outside the scope of the Participant’s employment or service contract, if any, with the Employer; (f) the Performance Share Units, and the income and value of same, is an extraordinary item that (i) does not constitute compensation of any kind for services of any kind rendered to the Company or any Subsidiary, and (ii) is outside the scope of the Participant’s employment or service contract, if any, with the Employer; (g) the Performance Share Units, and the income and value of same, is an extraordinary item that (i) does not constitute compensation of any kind for services of any kind rendered to the Company or any Subsidiary, and (ii) is outside the scope of the Participant’s employment or service contract, if any, with the Employer; (h) unless otherwise agreed with the Company, the Performance Share Units, and the income from and value of same, are not granted as consideration for, or in connection with, any service the Participant may provide as a director of any Subsidiary; (i) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (j) if the shares of Common Stock do not increase in value, the Performance Share Units will have no value; (k) if the Participant settles the Performance Share Units and obtains shares of Common Stock, the value of the shares of Common Stock obtained upon settlement may increase or decrease in value; (l) in consideration of the award of the Performance Share Units, no claim or entitlement to compensation or damages shall arise from termination of the Performance Share Units or diminution in value of the Performance Share Units, or shares of Common
21 Stock issued through the settlement of the Performance Share Units, resulting from termination of the Participant’s employment or continuous service with the Company or any Subsidiary (for any reason whatsoever, whether or not later found to be invalid or in breach of applicable labor laws of the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of the grant of the Performance Share Units, the Participant agrees not to institute any claim against the Company or any Subsidiary; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing/electronically accepting this Award Agreement, the Participant shall be deemed to have irrevocably waived the Participant’s entitlement to pursue or seek remedy for any such claim; and (m) neither the Company, the Employer nor any other Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the U.S. Dollar that may affect the value of the Performance Share Units or of any amounts due to the Participant pursuant to the settlement of the Performance Share Units or the subsequent sale of any shares of Common Stock acquired upon settlement. 18. Language. The Participant acknowledges that the Participant is proficient in the English language and understands the terms of this Award Agreement. If the Participant has received the Plan, this Award Agreement, the Plan or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control, unless otherwise prescribed by applicable law. 19. Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by the Participant or any other participant. 20. Insider Trading/Market Abuse Laws. By accepting the Performance Share Units, the Participant acknowledges that the Participant is bound by all the terms and conditions of any Company insider trading policy as may be in effect from time to time. The Participant further acknowledges that, depending on the Participant’s country, the Participant may be or may become subject to insider trading restrictions and/or market abuse laws, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock, rights to shares of Common Stock (e.g., Performance Share Units) or rights linked to the value of shares of Common Stock under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before the Participant possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party, which may include fellow employees and (b) “tipping” third parties or causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any Company insider trading policy as may be in effect from time to time. The Participant acknowledges that it is the Participant’s personal responsibility to comply with any applicable restrictions, and the
22 Participant should speak to the Participant’s personal advisor on this matter. 21. Legal and Tax Compliance; Cooperation. If the Participant resides or is employed outside of the United States, the Participant agrees, as a condition of the grant of the Performance Share Units, to repatriate all payments attributable to the shares of Common Stock and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of shares of Common Stock acquired pursuant to the Performance Share Units) if required by and in accordance with local foreign exchange rules and regulations in the Participant’s country of residence (and country of employment, if different). In addition, the Participant also agrees to take any and all actions, and consent to any and all actions taken by the Company and its Subsidiaries, as may be required to allow the Company and its Subsidiaries to comply with local laws, rules and regulations in the Participant’s country of residence (and country of employment, if different). Finally, the Participant agrees to take any and all actions as may be required to comply with the Participant’s personal legal and tax obligations under local laws, rules and regulations in the Participant’s country of residence (and country of employment, if different). 22. Private Offering. The grant of the Performance Share Units is not intended to be a public offering of securities in the Participant’s country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filing with the local securities authorities with respect to the grant of the Performance Share Units (unless otherwise required under local law). No employee of the Company is permitted to advise the Participant on whether the Participant should participate in the settlement of any shares of Common Stock pursuant to the Performance Share Units under the Plan or provide the Participant with any legal, tax or financial advice with respect to the grant of the Performance Share Units. Participation in Performance Share Units involves a degree of risk. Before deciding to participate in the settlement of any shares of Common Stock pursuant to the Performance Share Units, the Participant should carefully consider all risk factors and tax considerations relevant to the acquisition of shares of Common Stock under the Plan or the disposition of them. Further, the Participant should carefully review all of the materials related to the Performance Share Units and the Plan, and the Participant should consult with the Participant’s personal legal, tax and financial advisors for professional advice in relation to the Participant’s personal circumstances. 23. Foreign Asset/Account Reporting and Exchange Controls. The Participant’s country of residence (and country of employment, if different) may have certain exchange control and/or foreign asset/account reporting requirements which may affect the Participant’s ability to acquire or hold shares of Common Stock under the Plan or cash received from participating in the Plan (including from any dividends paid on shares of Common Stock or sale proceeds resulting from the sale of shares of Common Stock) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in the Participant’s country. The Participant may be required to repatriate sale proceeds or other funds received as a result of the Participant’s participation in the Plan to the Participant’s country through a designated bank or broker within a certain time after receipt. The Participant acknowledges that it is the Participant’s responsibility to comply with any applicable regulations, and that the Participant should speak to the Participant’s personal advisor on this matter.
23 24. Country Addendum. Notwithstanding any provisions of this Award Agreement, the Performance Share Units and any shares of Common Stock acquired under the Plan shall be subject to any special terms and conditions for the Participant’s country of residence (and country of employment, if different), as set forth in the addendum to this Award Agreement (the “Country Addendum). Moreover, if the Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines, in its discretion, that the application of such terms and conditions is necessary or advisable for legal or administrative reasons and provided the imposition of the term or condition will not result in any adverse accounting expense with respect to the Performance Share Units (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant’s transfer). The Country Addendum shall form part of this Award Agreement. 25. Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Performance Share Units and any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons and provided the imposition of the term or condition will not result in adverse accounting expense to the Company, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. 26. Recoupment. The Performance Share Units granted pursuant to this Award Agreement are subject to the terms of the Company’s recoupment policy(ies) in the form approved by the Committee from time to time (including any successor(s) thereto, the “Policy”) and to the terms required by applicable law; and the terms of the Policy and such applicable law are incorporated by reference herein and made a part hereof. For purposes of the foregoing, the Participant expressly and explicitly authorizes the Company to issue instructions, on the Participant’s behalf, to any brokerage firm and/or third party administrator engaged by the Company to hold the shares of Common Stock and other amounts acquired pursuant to the Participant’s Performance Share Units, to re-convey, transfer or otherwise return such shares of Common Stock and/or other amounts to the Company upon the Company’s enforcement of the Policy. To the extent that this Award Agreement and the Policy conflict, the terms of the Policy shall prevail. 27. Notices. The Company may, directly or through its third party stock plan administrator, endeavor to provide certain notices to the Participant regarding certain events relating to awards that the Participant may have received or may in the future receive under the Plan, such as notices reminding the Participant of the vesting or expiration date of certain awards. The Participant acknowledges and agrees that (a) the Company has no obligation (whether pursuant to this Award Agreement or otherwise) to provide any such notices; (b) to the extent the Company does provide any such notices to the Participant the Company does not thereby assume any obligation to provide any such notices or other notices; and (c) the Company, its Subsidiaries and the third party stock plan administrator have no liability for, and the Participant has no right whatsoever (whether pursuant to this Award Agreement or otherwise) to make any claim against the Company, any of its Subsidiaries or the third party stock plan administrator based on any allegations of, damages or harm suffered by the Participant as a result of the Company’s failure to provide any such notices or the Participant’s
24 failure to receive any such notices. The Participant further agrees to notify the Company upon any change in the Participant’s residence address. 28. Limitations on Liability. Notwithstanding any other provisions of the Plan or this Award Agreement, no individual acting as a director, employee, or agent of the Company or any of its Subsidiaries will be liable to the Participant or the Participant’s spouse, beneficiary, or any other person or entity for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable because of any contract or other instrument the Participant executes in such other capacity. No member of the Board or of the Committee will be liable for any action or determination (including, but limited to, any decision not to act) made in good faith with respect to the Plan or any Performance Share Units. 29. Consent and Agreement With Respect to Plan. The Participant (a) acknowledges that the Plan and the prospectus relating thereto are available to the Participant on the website maintained by the Company’s third party stock plan administrator; (b) represents that the Participant has read and understands the terms and provisions thereof, has had an opportunity to obtain the advice of counsel of the Participant’s choice prior to accepting this Award Agreement and fully understands all provisions of this Award Agreement and the Plan; (c) accepts the Performance Share Units subject to all of the terms and provisions thereof; and (d) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement. [Signatures appear on the following page]
25 IN WITNESS WHEREOF, the parties have executed this Award Agreement effective as of the Award Date. MillerKnoll, Inc. By: Jeffrey M. Stutz Chief Financial Officer ELECTRONIC ACKNOWLEDGEMENT, ACCEPTANCE AND AGREEMENT By electronically accepting this Award Agreement via the Stock Plan Service Provider’s web portal, the Participant hereby acknowledges and accepts the grant of the Performance Share Units described in this Award Agreement, and expressly acknowledges and agrees to be bound by the terms and conditions of the Plan, the Award Notice, this Award Agreement and the following US State Addendum and Country Addendum. Further, the Participant hereby expressly acknowledges and agrees that all decisions and determinations of the Committee with respect to the Performance Share Units and the shares of Common Stock shall be final, conclusive and binding upon the Participant.
26
1 MILLERKNOLL, INC. 2023 LONG-TERM INCENTIVE PLAN, AS AMENDED GLOBAL RESTRICTED STOCK UNIT AWARD AGREEMENT Participant: [INSERT NAME] Award Date: [INSERT AWARD DATE] Number of Restricted Stock Units: [INSERT TOTAL RSUs] This certifies MillerKnoll, Inc. (the “Company”) has on the date set forth above (the “Award Date”) granted to the individual named above (the “Participant”) a grant of Restricted Stock Units (the “Award”) under the MillerKnoll, Inc. 2023 Long-Term Incentive Plan, as Amended (the “Plan”) as summarized above and as detailed in the Executive Compensation Equity Award Notice (the “Award Notice”) reflected in the web portal maintained by E*TRADE Financial Corporate Services, Inc. (the “Stock Plan Service Provider”). The Award is subject to the terms and conditions set forth in this Global Restricted Stock Unit Award Agreement (the “Award Agreement”). A copy of the Plan and the U.S. prospectus for the Plan Prospectus has been delivered or otherwise made available to the Participant. The Plan is incorporated into this Award Agreement by reference, and in the event of any conflict between the terms of the Plan and this Award Agreement, the terms of the Plan shall govern; provided, however, that definitions under this Award Agreement shall govern. Any capitalized terms not defined herein shall have the meaning set forth in the Plan. 1. Definitions. “Employer” means the Subsidiary that employs the Participant (to the extent the Participant is not directly employed by the Company. “Mutual Agreement Termination” means any termination of the Participant's employment by the Company or the Employer, as applicable, without Cause and which provides transition/separation pay to the Participant; provided, in conjunction with such termination, the Participant has executed, and not revoked during the period provided for therein, a binding and effective settlement agreement, waiver and release. “Retirement” means the Participant's voluntary termination of employment without Cause (other than on account of Death, Disability or Mutual Agreement Termination) occurring on or after the date (A) the Participant has attained age 55, and (B) the sum of the Participant's age (in whole years, rounded down to the nearest year) and Continuous Years of Service (in whole years, rounded down to the nearest year) equals or exceeds 65. Notwithstanding the foregoing, if the Participant's voluntary termination of employment without Cause (other than on account of Death, Disability or Mutual Agreement Termination) occurs (a) during the period commencing on July 15, 2024 and ending on July 14, 2025, and (b) at the time of such termination, the Participant has attained (i) age 55 and 5 or more Continuous Years of Service, or (ii) 30 or more Continuous Years of Service, the Participant's termination of employment shall be characterized as a Retirement.
2 “Tax Related-Items” means any or all federal, state, local or foreign income tax, social insurance, payroll tax, payment on account or other tax related-items. 2. Rights of the Participant with Respect to the Restricted Stock Units. (a) No Shareholder Rights. The Restricted Stock Units granted pursuant to this Award are not shares of Common Stock, but instead are the contingent right to receive shares of Common Stock and do not and shall not entitle the Participant to any rights of a shareholder of Common Stock. The rights of the Participant with respect to the Restricted Stock Units shall remain forfeitable at all times prior to the date on which such rights become vested in accordance with Section 3, 4 or 5. (b) Additional Restricted Stock Units. As long as the Participant holds Restricted Stock Units granted pursuant to this Award, the Company shall credit to the Participant, as of each date that the Company pays a Dividend (as defined below) in cash to holders of Common Stock (the “Dividend Payment Date”), an additional number of Restricted Stock Units (“Additional Restricted Stock Units”) equal to: (i) The total number of Restricted Stock Units and Additional Restricted Stock Units credited to the Participant under this Award as of the close of business on the record date for such Dividend, multiplied by (ii) The dollar amount of the Dividend paid per share of Common Stock by the Company on such Dividend Payment Date, divided by (iii) The Fair Market Value of a share of Common Stock on such Dividend Payment Date. The term “Dividend” shall include all dividends, whether normal or special, and whether payable in cash, Common Stock, or other property. A report showing the number of Additional Restricted Stock Units so credited shall be made available to the Participant periodically, as determined by the Company. The Additional Restricted Stock Units so credited shall vest and be subject to the same terms and conditions as the Restricted Stock Units to which such the Additional Restricted Stock Units relate, and the Additional Restricted Stock Units shall be forfeited in the event that the Restricted Stock Units with respect to which such Additional Restricted Stock Units were credited are forfeited. (c) Settlement of Restricted Stock Units; Issuance of Common Stock. No shares of Common Stock shall be issued to the Participant prior to the date on which the Restricted Stock Units vest, and the restrictions with respect to the Restricted Stock Units lapse, in accordance with Section 3, 4 or 5. Neither this Section 2(c) nor any action taken pursuant to or in accordance with this Section 2(c) shall be construed to create a trust of any kind. After any Restricted Stock Units vest pursuant to Section 3, 4 or 5, all restrictions with respect to the distribution of the Restricted Stock Units have lapsed, and any tax withholding obligations related to such Restricted Stock Units have been satisfied pursuant to Section 9, the Company shall, within sixty (60) days, deposit the number of
3 shares of Common Stock in settlement of such vested whole Restricted Stock Units and Additional Restricted Stock Units into the Participant’s brokerage account with the Stock Plan Service Provider, unless a valid deferral has been made pursuant to Section 8, in which case such distribution shall be made within sixty (60) days after the date to which distribution has been deferred. 3. Vesting. Subject to the terms and conditions of this Award, the Restricted Stock Units shall vest and become issuable as Common Stock to the Participant as set forth in the Award Notice. 4. Forfeiture or Early Vesting Upon Termination of Employment. (a) Termination of Employment Generally. Except as provided in Sections 4(b), 4(c), and 4(d), if, prior to full vesting of the Restricted Stock Units pursuant to Section 3 or 5, the Participant ceases to be an employee of the Company or the Employer, then the Participant’s rights to all of the unvested Restricted Stock Units shall be immediately and irrevocably forfeited, including the right to receive Additional Restricted Stock Units issued in respect of unvested Restricted Stock Units. (b) Death. If the Participant dies while employed by the Company or the Employer and has complied with Section 3 prior to the time that the Participant’s Restricted Stock Units become fully vested, then all of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of death. No transfer by will or the applicable laws of descent and distribution of any Restricted Stock Units that vest by reason of the Participant’s death shall be effective to bind the Company unless the Committee shall have been furnished with written notice of such transfer and a copy of the will or such other evidence as the Committee may deem necessary to establish the validity of the transfer. (c) Disability. If the Participant’s employment by the Company or the Employer is terminated due to the Participant’s Disability and the Participant has complied with Section 3 at all times prior to such termination, then all of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of such termination. (d) Retirement. (i) Except as provided in 4(d)(ii) below, if the Participant’s employment by the Company or the Employer is terminated by reason of the Participant’s Retirement during the first 12 months after the Award Date and prior to the time that the Participant’s Restricted Stock Units have otherwise become fully vested, then a portion of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of the Participant's Retirement. The portion of the Restricted Stock Units that shall vest upon the date of the Participant’s Retirement will be determined by multiplying the sum of the Participant’s Restricted Stock Units granted under this Award and any related Additional Restricted Stock Units by a fraction, the numerator of which is the
4 number of days that Participant was employed by the Company or the Employer from the Award Date until the date of the Participant’s Retirement, and the denominator of which is the number of days in the first 12 months after the Award Date. If the Participant terminates employment by reason of Retirement after the initial 12 month period, then all of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of such Retirement. (ii) Notwithstanding (i), if the Participant is a “Key Employee” (as defined below), such pro rata portion of the Participant’s Restricted Stock Units shall become vested as provided above, but the conversion to Common Stock and the distribution of Common Stock to the Participant shall not occur until the earlier of: (A) The date which is six (6) months after the date of the Participant’s Retirement, or (B) The date of the Participant’s death. (iii) For purposes of Section 4, a “Key Employee” is a Participant who, at any time during the year in which the Participant’s employment with the Company terminated, was: (A) An officer of the Company whose compensation from the Company for the year was more than $180,000, as adjusted pursuant to Code Section 416(i)(1)(A); (B) A more than 5% owner of the Company; or (C) A more than 1% owner of the Company with annual compensation from the Company of more than $150,000. For purposes of this Section 3, the term “owner” will include ownership attributed to the Participant under the rules of Code Section 318; provided, however, that the rules of Code Section 414(b), (c), and (m) do not apply for purposes of determining ownership of the Company. (e) Mutual Agreement Termination. (i) If the Participant’s employment by the Company or the Employer is terminated by reason of a Mutual Agreement Termination and the Participant does not otherwise satisfy the age and service requirements for Retirement, then a portion of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of the Participant's Mutual Agreement Termination. The portion of the Restricted Stock Units that shall vest will be determined by multiplying the sum of the Participant’s Restricted Stock Units granted under this Award and any related Additional Restricted Stock Units by a fraction, the numerator of which is the number of days that Participant was employed by the Company or the Employer from the Award Date until the date of the Participant’s Mutual Agreement Termination, and the denominator of
5 which is the number of days from the Award Date to the applicable Vesting Date. (ii) If the Participant’s employment by the Company or the Employer is terminated by reason of a Mutual Agreement Termination within the first anniversary of the Award Date and the Participant satisfies the age and service requirements for Retirement, then a portion of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of the Participant's Mutual Agreement Termination. The portion of the Restricted Stock Units that shall vest will be determined by multiplying the sum of the Participant’s Restricted Stock Units granted under this Award and any related Additional Restricted Stock Units by a fraction, the numerator of which is the number of days that Participant was employed by the Company or the Employer from the Award Date until the date of the Participant’s Mutual Agreement Termination, and the denominator of which is the number of days from the Award Date to the first anniversary of the Award Date. (iii) If the Participant’s employment by the Company or the Employer is terminated by reason of a Mutual Agreement Termination on or after the first anniversary of the Award Date and the Participant satisfies the age and service requirements for Retirement, then all of the Participant’s unvested Restricted Stock Units shall become immediately vested as of the date of the Participant's Mutual Agreement Termination. (f) For purposes of this Award Agreement, the Committee shall have discretion to determine whether the Participant has ceased to be actively employed by (or, if the Participant is a consultant or director, has ceased actively providing services to) the Company or a Subsidiary, and the effective date on which such active employment (or active service-providing relationship) terminated. The Participant’s active employer-employee or other active service-providing relationship will not be extended by any notice period mandated under applicable law (e.g., active employment shall not include a period of “garden leave”, paid administrative leave or similar period pursuant to applicable law) and in the event of the Participant’s termination of employment (whether or not in breach of applicable labor laws), the Participant’s right to settle any Restricted Stock Units after termination of employment, if any, shall be measured by the date of termination of active employment or service and shall not be extended by any notice period mandated under applicable law. Unless the Committee provides otherwise (1) termination of the Participant’s employment will include instances in which the Participant is terminated and immediately rehired as an independent contractor, and (2) the spin-off, sale, or disposition of the Employer from the Company or another Subsidiary (whether by transfer of shares, assets or otherwise) such that the Employer no longer constitutes a Subsidiary will constitute a termination of employment or service. (g) If the Participant is a resident or employed in a country that is a member of the European Union, the grant of the Restricted Stock Units and this Award Agreement is intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age
6 Discrimination Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Award Agreement is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, the Company, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law. 5. Change in Control. Notwithstanding any term to the contrary in this Award Agreement or the Plan, if within two (2) years after a Change in Control the Participant’s employment (a) is terminated without Cause, (b) terminates with Good Reason or (c) terminates under circumstances that entitle the Participant to accelerated vesting under any individual employment agreement between the Participant and the Company, a Subsidiary, or any successor thereof, then this Award (or its replacement) shall become fully vested upon the date of such termination of employment. Notwithstanding the foregoing, if upon the occurrence of a Change in Control this Award is not assumed or continued, then this Award shall be treated in accordance with Section 14.3(a) of the Plan. 6. Restriction on Transfer. Any rights under this Award may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported sale, assignment, transfer, pledge, hypothecation or other disposition will be void and unenforceable against the Company. 7. Adjustments to Restricted Stock Units for Certain Corporate Transactions. (a) The Committee will make an appropriate and proportionate adjustment to the number of Restricted Stock Units granted under this Award, if (i) the outstanding shares of Common Stock are increased or decreased, as a result of merger, consolidation, sale of all or substantially all of the assets of Company, reclassification, stock dividend, stock split, reverse stock split, with respect to such shares of Common Stock or other securities, or (ii) additional shares or new or different shares for other securities are distributed with respect to such shares of Common Stock or other securities or exchanged for a different number or kind of shares or other securities to merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock or other securities. (b) The Committee may make an appropriate and proportionate adjustment in the number of Restricted Stock Units granted under this Award if the outstanding shares of Common Stock are increased or decreased as a result of a recapitalization or reorganization not included within Section 7(a) above. 8. Deferral of Distribution. The Participant may elect to defer the conversion of Restricted Stock Units granted under this Award and related Additional Restricted Stock Units into Common Stock and the issuance of such Common Stock with respect thereto to a time later than that provided under Section 2(c). The Participant must file such election with the Committee at least 12 months prior to the date provided under Section 2(c) that such Restricted Stock Units
7 are scheduled to be converted into Common Stock and issued to the Participant. The Participant must specify in the election the date on which the Restricted Stock Units granted under this Award and the related Additional Restricted Stock Units will be converted to Common Stock and issued to the Participant. The date elected must be at least five (5) years later than the date on which the Restricted Stock Units would have been converted to Common Stock and issued to the Participant under Section 2(c). 9. Tax Withholding. (a) Regardless of any action the Company or the Employer takes with respect to Tax Related-Items, the Participant acknowledges that the ultimate liability for all Tax Related-Items associated with the Restricted Stock Units are and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company and that the Company and the Employer (i) make no representations or undertakings regarding the treatment of any Tax Related-Items in connection with any aspect of the Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of any shares of Common Stock acquired pursuant to such settlement and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate the Participant’s liability for Tax Related-Items. Further, if the Participant is subject to tax in more than one jurisdiction, the Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Related-Items in more than one jurisdiction. (b) Prior to the delivery of any shares of Common Stock upon settlement of the Restricted Stock Units, if the Participant’s country of residence (and/or the Participant’s country of employment, if different) requires withholding of Tax-Related Items, the Company shall withhold a sufficient number of shares of Common Stock otherwise issuable upon settlement of the Restricted Stock Units that have an aggregate Fair Market Value sufficient to pay the Tax-Related Items required to be withheld. In cases where the Fair Market Value of the number of shares of Common Stock withheld is greater than the Tax-Related Items required to be withheld, the Company shall make a cash payment to the Participant equal to the difference as soon as administratively practicable. The cash equivalent of the shares of Common Stock withheld will be used to settle the obligation to withhold the Tax-Related Items. Alternatively, the Company may permit the Participant to tender payment of the Tax-Related Items to the Company (i) in the form of cash, check (bank check, certified check or personal check) or money order payable to the Company, (ii) in the form of unencumbered shares of Common Stock already owned by the Participant for at least six (6) months, (iii) causing the broker to sell from the number of shares of Common Stock to be issued to the Participant having an aggregate Fair Market Value necessary to satisfy the amount of Tax-Related Items due, or (iv) by having the Company or the Employer withhold the Tax-Related Items required to be withheld with respect to the shares of Common Stock in cash from the Participant’s regular salary/wages, or from any other amounts payable to the Participant. In the event the withholding requirements for Tax-Related Items are not satisfied through any of the foregoing methods, no shares of Common Stock will be issued to the Participant (or the Participant’s estate) upon settlement of the Restricted Stock Units
8 unless and until satisfactory arrangements have been made by the Participant with respect to the payment of any Tax-Related Items which the Company and the Employer determine, in their sole discretion, must be withheld or collected with respect to such Restricted Stock Units. (c) Depending on the withholding method, the Company may withhold or account for Tax Related-Items by considering maximum applicable rates to the extent permitted by the Plan, in which case the Participant may receive a refund of any over- withheld amount in cash from the applicable taxing authority and will have no entitlement to the Share equivalent. If the obligation for Tax Related-Items is satisfied by withholding in shares of Common Stock, for tax purposes, the Participant shall be deemed to have been issued the full member of shares of Common Stock issued upon settlement of the Restricted Stock Units notwithstanding that a member of the shares of Common Stock are held back solely for the purpose of paying the Tax Related-Items. (d) By accepting the Restricted Stock Units, the Participant expressly consents to the foregoing methods of tax withholding for Tax-Related Items associated with the Restricted Stock Units. All other Tax-Related Items related to the Restricted Stock Units and any shares of Common Stock delivered in payment thereof are the Participant’s sole responsibility. 10. Participant Covenants. In consideration of the grant of this Award by the Company, the Participant agrees to the following: (a) Confidentiality. In the course of the Participant’s employment with the Company or the Employer, the Participant will be provided with or may have access to, and/or come into the possession of, Confidential Information; accordingly, and subject to Section 10(e), the Participant agrees and promises: (i) to protect and maintain the confidentiality of Confidential Information while employed by the Company or the Employer; (ii) to return or provide to the Company (and not retain any copies, reproductions, or manifestations of any kind in any form) any and all materials reflecting Confidential Information and any other equipment, materials and writings received from, created for, belonging to the Company or the Employer or relating to the Company’s or the Employer’s business, then in the Participant’s possession or under the Participant’s control, (whether in “hard copy” or electronic form) including, but not limited to, those which relate to or contain Confidential Information (including all Company- or Employer-owned equipment) immediately upon end of employment or upon demand by the Company or the Employer; and (iii) not to (without the express prior written consent of the Company or the Employer) use, reproduce, create any derivative work improvement, modify, adapt, disclose, publish, communicate or make available any Confidential Information for any purpose other than as necessary and reasonable
9 for performing the Participant’s employment services or duties on behalf of the Company or the Employer or for the benefit of the Company or the Employer. (b) Restrictive Covenants. The Participant understands and agrees that the Company and the Employer have legitimate interests in protecting their goodwill, their relationships with customers and business partners, and in maintaining their confidential information, trade secrets and Confidential Information, and that it would cause severe and irreparable harm to the Company or the Employer if the Participant were to improperly utilize or disclose any trade secrets, other Confidential Information or customer relationships, or if the Company or the Employer were to otherwise lose its customer relationships or goodwill. Therefore, the Participant hereby agrees that the following restrictions are appropriate and necessary to meet such goals and that such restrictions do not impose undue hardship or burdens on the Participant. (i) Non-Solicitation of Company Customers or Employer Customers. The Participant acknowledges that the relationships and goodwill that the Participant develops with Company Customers or Employer Customers as a result of the Participant’s employment belong to the Company. The Participant therefore agrees and covenants that during the Restricted Period, the Participant will not, and will not assist anyone else to, except in furtherance of the Participant’s employment with the Company or the Employer (1) solicit, aid, induce or encourage any Company Customer or Employer Customer to cease purchasing goods or services from, or otherwise interfere with the relationship between the Company or the Employer and any Company Customer or Employer Customer, respectively. (ii) Non-Service of Company Customers or Employer Customers. The Participant agrees and covenants, during the Restricted Period, except in the furtherance of the Participant’s employment with the Company or the Employer, not to render any services to or sell any products to any Company Customer or Employer Customer, unless such services or products or similar services or products are not provided to any Company Customer or Employer Customer by the Company or the Employer, respectively, and are not planned to be offered by the Company or the Employer to any Company Customer or Employer Customer, respectively. For purposes of this Award Agreement, services, products or business shall be considered “planned to be offered by the Company or the Employer” if the following conditions are satisfied: (1) the Company or the Employer plans to offer or engage in such services, products or business within six (6) months after the termination of Participant’s employment, and (2) the Participant participated in the Company’s or the Employer’s planning of such services, products or business. Except as otherwise provided in this Award Agreement, nothing in this Section shall prevent the Participant from performing or providing such services, products or business as an employee of a Company Customer or Employer Customer, unless: (i) such Company Customer’s or Employer Customer’s business is to perform or provide services, products or business similar to those performed or provided by the Company or the Employer; (ii) such services, products or business are being performed or
10 provided by the Participant to multiple persons or entities; or (iii) such services, products or business would impair the Company’s or the Employer’s independence and the Participant has not obtained approval from the Company’s Legal Department prior to performing or providing such services, products or business. (iii) Non-Solicitation of Employees. The Participant agrees and covenants that during the Restricted Period, the Participant shall not, except in furtherance of the Participant’s employment with the Company or the Employer, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, hire, recruit, or attempt to solicit, hire, or recruit, any Covered Employee, or induce the resignation of any Covered Employee from the Company or the Employer. This Section does not restrict or impede, in any way, and shall not be interpreted or understood as restricting or impeding, the Participant from exercising protected rights that cannot be waived by agreement. (iv) Non-Competition. The Participant agrees that during the Restricted Period, the Participant will not, for the Participant, or on behalf of any other person or entity, directly or indirectly, engage in any Competitive Activity, unless approved by the Company or the Employer in advance in writing. Notwithstanding the foregoing, nothing herein shall prohibit the Participant from being a passive owner of not more than two percent (2%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company or the Employer, so long as the Participant has no active participation in the business of such corporation. (c) Definitions. For purposes of this Section 10, the following terms shall be defined as follows: (i) Company Customer or Employer Customer. “Company Customer” or “Employer Customer” is limited to those customers or partners who did business with the Company, or the Employer as applicable, and (A) with whom the Participant had substantive contact within the most recent 12 months of the Participant’s employment with the Company or the Employer (or during the period of the Participant’s employment, if the Participant was employed for less than 12 months) and (B) about whom the Participant has Customer Information or any other trade secret or confidential information that is not available publicly. “Company Customer” or “Employer Customer” shall not, however, include any individual who purchased a product from the Company, or the Employer as applicable, by direct purchase from one of its retail establishments or via on-line over the Internet, unless such purchase was of such quantity that the purchase price exceeded $15,000. (ii) Competitive Activity. “Competitive Activity” means becoming an employee, advisor, officer, director, consultant, contractor, partner, principal, manager, or executive of a Direct Competitor, (including as an employee of, or
11 consultant to, any vendor providing services or products to any Direct Competitor), whether or not for compensation, where there is a reasonable possibility that the Participant may, intentionally or inadvertently, directly or indirectly, use or rely upon Confidential Information; or (1) in a capacity that is similar to the capacity the Participant was in, (2) where the Participant provides services that are similar to the services the Participant provided, or (3) with responsibilities that are similar to the responsibilities the Participant had, in each case, during the final 12 months the Participant was employed by the Company or the Employer (or during the period of the Participant’s employment, if the Participant was employed for less than 12 months). (iii) Competitive Services. “Competitive Services” means services of the type that the Company or the Employer provided or offered to its customers or partners at any time during the 12 months immediately preceding the last day of the Participant’s employment with the Company or the Employer (or at any time during the Participant’s employment if the Participant was employed for less than 12 months), and for which services the Participant was involved in providing or managing. (iv) Competitive Products. “Competitive Products” means products that serve the same function as, or that could be used to replace, products the Company or the Employer provided to, offered to, or was in the process of developing for a present, former, or future possible customer/partner at any time during the twelve (12) months immediately preceding the last day of the Participant’s employment with the Company or the Employer (or at any time during the Participant’s employment if the Participant was employed for less than 12 months), with which the Participant had direct responsibility for the sale or development of such products or managing those persons responsible for the sale or development of such products. (v) Confidential Information. “Confidential Information” means, individually and collectively, the Company’s or the Employer’s confidential, proprietary and/or trade secret information relating to the Company’s actual or anticipated business and/or the Company’s or the Employer’s existing and prospective clients, products, services, and technology. Confidential Information includes, but is not limited to, existing and prospective client databases, lists, identities, characteristics, and contact information, information regarding decision-makers for the Company’s or the Employer’s existing and prospective clients, proposals, intellectual property, and other proprietary features of Company’s or the Employer’s current and anticipated products, processes, techniques, devices, software, product development information including technical information, designs, formulas, drawings and prototypes, trade secrets or know-how, supplier and vendor information, pricing schedules, financial information, processes, strategic plans and initiatives, investment strategies and plans, marketing and sales techniques and plans, budgets, projections, forecasts, employee personnel files and other non-public information about Company or Employer employees, compensation or other terms of employment, contracts,
12 procedures, all non-public information that has or could have commercial value or other utility in the business in which the Company or the Employer is engaged or contemplates engaging, and all information, including confidential third party information disclosed to the Company or the Employer, the unauthorized use or disclosure of which could be detrimental to the interests of the Company or the Employer, whether or not such information is labeled, marked, or otherwise identified as Confidential Information by the Company or the Employer, and all compilations, reproductions, and derivations of any of the foregoing information. Confidential Information includes not only information disclosed by the Company or the Employer to the Participant, but also information developed, obtained, or learned, and work product produced, by the Participant during the course of the Participant’s employment with the Company or the Employer or derived from use of any Company or Employer equipment, systems or information. Confidential Information (i) includes the foregoing information even if disclosed to the Participant in connection with the contemplation of the Participant becoming an employee of the Company or the Employer, i.e., prior to the effective date of the Participant’s employment, or prior to the Participant signing this Award Agreement, and (ii) does not include any information that is publicly known, or after it becomes publicly known through no wrongful act or omission of the Participant or of others who were under confidentiality or non- disclosure obligations at that time related to such information. (vi) Covered Employee. “Covered Employee” means any then- current employee of the Company or the Employer or any employee who has been employed by the Company or the Employer in the twelve (12) months before the Participant’s last day of employment (or at any time during the Participant’s employment if the Participant was employed for less than 12 months) with whom the Participant had contact during the course of performing the Participant’s duties. (vii) Direct Competitor. “Direct Competitor” means any person, business, company or operation, irrespective of form (e.g., a sole proprietorship, partnership, limited liability company, corporation, joint venture or other type of entity) that (1) provides Competitive Products and/or Competitive Services or (2) owns or controls a significant interest in any entity that provides, or proposes or plans to provide, any Competitive Product and/or Competitive Services. (viii) Restricted Period. “Restricted Period” means the period during the Participant’s employment with the Company or the Employer and for a period of twelve (12) months (or such longer period as set forth in another agreement between the Participant and the Company or the Employer) immediately following the termination of the Participant’s employment with the Company or the Employer, regardless of the reason for the termination, whether voluntary or involuntary. (d) Non-disparagement. Subject to Section 10(e), the Participant agrees that, while employed with the Company or the Employer and thereafter, the Participant will
13 not, directly or indirectly, individually or in concert with others, engage in any conduct or make any statement calculated or likely to have the effect of undermining, disparaging or otherwise reflecting poorly upon the Company or the Employer, any member of its Board of Directors or any executive officer of the Company or the Employer (the “Protected Persons”) or the Company’s or the Employer’s business. This Section does not, in any way, restrict or impede the Participant from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized Governmental Entity, provided that such compliance does not exceed that required by the law, regulation, or order. (e) Protected Rights. Nothing in this Award Agreement is intended to interfere with the whistleblower provisions of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act of 1934 or § 1833(b) of the U.S. Defend Trade Secrets Act of 2016 (the “DTSA”). Accordingly, notwithstanding anything to the contrary therein, nothing in this Award Agreement shall prohibit or impede the Participant (or the Participant's attorney) from communicating or otherwise participating in or fully cooperating with any investigation or proceeding that may be conducted by a United States federal, state or local governmental, regulatory or law enforcement branch, agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General (collectively, a “Governmental Entity”), filing a charge or complaint with the Securities and Exchange Commission, or any other federal, state, or local governmental regulatory or law enforcement agency, or making other disclosures or reports that are protected under the whistleblower provisions of federal, state or local law or regulation, including about alleged unlawful employment practices or alleged criminal conduct. The Participant understands and acknowledges that the Participant does not need the prior authorization from the Company or the Employer to make any such reports or disclosures and that the Participant is not required to notify the Company or the Employer that the Participant has made such reports or disclosures. The Participant can provide Confidential Information to Government Entity without risk of being held liable by the Company or the Employer for liquidated damages or other financial penalties. This Award Agreement also does not limit the Participant’s right to receive an award for information provided to any Government Entity. In addition, nothing in this Award Agreement shall prohibit or restrict the Participant from (i) disclosing Confidential Information to a court or other administrative or legislative body in response to a private third-party subpoena, provided that the Participant first promptly notifies and provides the Company or the Employer the opportunity to seek, and join in its efforts at the sole expense of the Company or the Employer, to challenge the subpoena or obtain a protective order limiting its disclosure, or other appropriate remedy, (ii) discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Participant has reason to believe is unlawful, or (iii) filing or disclosing any facts necessary to receive unemployment insurance, Medicaid or other public benefits to which the Participant is entitled. Further, nothing in this Award Agreement is intended to interfere with any rights the Participant may have under Section 7 of the National Labor Relations Act.
14 (f) The Participant understands and acknowledges that the DTSA provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, the DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement or any other agreement by and between the Participant and the Company is intended to conflict with the DTSA or create liability for disclosures of trade secrets expressly allowed by such section. (g) Severability and Enforcement. The covenants set forth in Section 10 of the Award Agreement are independent and severable from every other provision of this Award Agreement, and the breach of any other provision of this Award Agreement by the Company or the Employer or any other agreement between the Participant and the Company or the Employer shall not affect the validity of the provisions of Section 10 or constitute a defense in any action brought by the Company or the Employer to enforce the provisions of Section 10 or to seek any relief for the Participant’s breach thereof. The parties agree that if a competent authority declines to enforce any of the provisions of Section 10, that the authority responsible for such determination shall have the power to reduce, modify or limit the restrictions to restrict competition with or solicitation from the Company or the Employer to the maximum extent permitted by law. To the extent that any invalid or unenforceable provision cannot be cured by modification or reformation, such offending provision shall be limited or eliminated to the minimum extent necessary so that this Section 10 shall otherwise remain in full force and effect and be enforceable. The modification, reformation, limitation or elimination of any provision of this Section 10 shall not affect the validity or enforceability of the remaining provisions of this Agreement in that jurisdiction, or the validity or enforceability of this Agreement in any other jurisdiction. The provisions of this Section 10 will not apply to the Participant to the extent any such provision is prohibited or otherwise restricted by applicable law. (h) State-Specific Modifications. The US State Addendum, attached hereto and hereby incorporated herein, contains certain important modifications that may apply to the Participant based on the laws of the state of the Participant’s Primary Place of Employment if the Participant primarily performs services in the United States. The Participant acknowledges that the Participant reviewed the US State Addendum before electronically accepting this Award Agreement and understand the impact of state law modifications, if any, that may apply to the Participant. The term “Primary Place of Employment” means the location where the Participant primarily performs services for the Company as designated by the Company or the Employer in accordance with the Company’s or the Employer’s applicable policies and procedures.
15 11. Miscellaneous. (a) Neither this Award Agreement nor the Plan confers on the Participant any right with respect to the continuance of employment by the Company or the Employer, nor will there be a limitation in any way on the right of the Company or the Employer to terminate the Participant’s employment at any time. (b) An original record of this Award Agreement and all the terms hereof, executed by the Company and accepted and acknowledged by the Participant, is held on file by the Company. This Award Agreement and the Participant’s acknowledgment may be made in paper or in electronic format as specified by the Company. To the extent there is any conflict between the terms contained in this Award and the terms contained in the original held by the Company, the terms of the original held by the Company shall control. 12. Section 409A Compliance. To the extent applicable, it is intended that this Award Agreement be exempt from or comply with the provisions of Section 409A of the Internal Revenue Code, as amended (“Section 409A”). This Award Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Award Agreement to fail to satisfy Section 409A will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A). If any payments under this Award Agreement constitute nonqualified deferred compensation subject to the requirements of Section 409A and are payable upon a termination of the Participant’s employment, then (a) all such payments shall be made only upon a “separation from service” within the meaning of Section 409A, (b) for purposes of determining the timing of such payments, the Participant’s termination shall not be considered to occur until the Participant has incurred such a separation from service and (c) to the extent required for compliance with Section 409A if the Participant is a “specified employee” within the meaning of Section 409A, payments will be delayed by six months. 13. Section 280G. Notwithstanding anything contained in this Award Agreement to the contrary, to the extent that any of the payments and benefits provided for under this Award Agreement, together with any payments or benefits under any other agreement or arrangement between the Company or any of its affiliates and the Participant (collectively, the “Payments”) would constitute a “parachute payment” within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced (to the extent any reduction is necessary) to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code if and only if such reduction would provide the Participant with an after-tax amount greater than if there was no reduction. Any reduction shall be done in a manner that maximizes the amount to be retained by the Participant, provided that to the extent any order is required to be set forth herein, then such reduction shall be applied in the following order: (a) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (b) payments due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced next (if necessary, to zero), with amounts that are payable or deliverable last reduced first; (c) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G- 1, Q&A 24
16 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); (d) payments due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); and (e) all other non-cash benefits will be next reduced pro-rata. 14. Electronic Delivery. The Company, in its sole discretion, may decide to deliver any documents related to the Restricted Stock Units to the Participant under the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. 15. Data Privacy. The Company is located at 855 East Main Avenue, Zeeland, MI 49464, United States of America and grants Restricted Stock Units under the Plan to employees of the Company and its Subsidiaries in its sole discretion. In conjunction with the Company’s grant of Restricted Stock Units under the Plan and its ongoing administration of such awards, the Company is providing the following information about its data collection, processing and transfer practices (“Personal Data Activities”). In accepting the grant of Restricted Stock Units, the Participant expressly and explicitly consents to the Personal Data Activities as described herein. The Participant should consult the Company’s Global Associate Privacy Notice for additional information on its current privacy practices concerning the collection of employee information, a copy of which can be provided by contacting the Participant’s local human resources department or the Company’s privacy team at privacy@millerknoll.com. (a) Data Collection, Processing and Usage. The Company collects, processes and uses the Participant’s personal data, including the Participant’s name, home address, e-mail address, and telephone number, date of birth, social insurance / passport number or other identification number (e.g. resident registration number), salary, citizenship, job title, any shares of Common Stock or directorships held in the Company, and details of all Restricted Stock Units or any other equity compensation awards granted, canceled, exercised, vested, or outstanding in the Participant’s favor, which the Company receives from the Participant or the Employer (“Personal Information”). In granting Restricted Stock Units under the Plan, the Company will collect the Participant’s Personal Information for purposes of allocating shares of Common Stock and implementing, administering and managing the Plan. The Company’s legal basis for the collection, processing and usage of the Participant’s Personal Information is the Participant’s consent. (b) Stock Plan Service Provider. The Company transfers the Participant’s Personal Information to the Stock Plan Service Provider, an independent service provider based in the United States, which assists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different Stock Plan Service Provider and share the Participant’s Personal Information with another company that serves in a similar manner. The Stock Plan Service Provider will open an account for the Participant to receive and trade shares of Common Stock acquired under the Plan. The Participant will be asked to
17 agree on separate terms and data processing practices with the Stock Plan Service Provider, which is a condition to the Participant’s ability to participate in the Plan. (c) International Data Transfers. The Company and the Stock Plan Service Provider are based in the United States. The Participant should note that the Participant’s country of residence may have enacted data privacy laws that are different from the United States. The Company’s legal basis for the transfer of the Participant’s Personal Information to the United States is the Participant’s consent. (d) Voluntariness and Consequences of Consent Denial or Withdrawal. The Participant’s participation in the Plan and the Participant’s grant of consent is purely voluntary. The Participant may deny or withdraw the Participant’s consent at any time. If the Participant does not consent, or if the Participant later withdraws the Participant’s consent, the Participant may be unable to participate in the Plan. This would not affect the Participant’s existing employment or salary; instead, the Participant merely may forfeit the opportunities associated with the Plan. (e) Data Subject Rights. The Participant may have a number of rights under the data privacy laws in the Participant’s country of residence. For example, the Participant’s rights may include the right to (i) request access or copies of Personal Information the Company processes, (ii) request rectification of incorrect data, (iii) request deletion of data, (iv) place restrictions on processing, (v) lodge complaints with competent authorities in the Participant’s country of residence, and/or (vi) request a list with the names and addresses of any potential recipients of the Participant’s personal data. To receive clarification regarding the Participant’s rights, the Participant should contact the Participant’s local human resources department or the Company’s privacy team at privacy@millerknoll.com. Further, the Participant may exercise the Participant’s rights via the Company’s Privacy Rights Portal (https://www.millerknoll.com/legal/privacy/privacy-rights). 16. Severability. In the event that any provision of this Award Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Award Agreement. 17. Governing Law and Venue. Except for Section 10 of this Award Agreement, which shall be governed by, and construed in accordance with, the laws of the State of the Participant’s Primary Place of Employment if the Participant primarily works in the United States, the laws of the State of Michigan (other than its choice of law provisions) shall govern this Award Agreement and its interpretation. For purposes of litigating any dispute that arises with respect to the Restricted Stock Units, this Award Agreement or the Plan, the parties hereby submit to and consent to the jurisdiction of the State of Michigan, and agree that such litigation shall be conducted in the courts of Kent County, or the United States Federal court for the Western District of Michigan, and no other courts; and waive, to the fullest extent permitted by law, any objection that the laying of the venue of any legal or equitable proceedings related to, concerning or arising from such dispute which is brought in any such court is improper or that such proceedings have been brought in an inconvenient forum. Any claim under the Plan, this
18 Award Agreement or any Restricted Stock Units must be commenced by the Participant within twelve (12) months of the earliest date on which the Participant’s claim first arises, or the Participant’s cause of action accrues, or such claim will be deemed waived by the Participant. 18. Nature of Restricted Stock Units. In accepting the Restricted Stock Units, the Participant expressly acknowledges and agrees that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; (b) the grant of the Restricted Stock Units is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, benefits in lieu of Restricted Stock Units or other equity awards, even if Restricted Stock Units have been granted repeatedly in the past; (c) all decisions with respect to future equity awards, if any, shall be at the sole discretion of the Company; (d) the Participant’s participation in the Plan is voluntary; (e) the Restricted Stock Units, and the income and value of same, is an extraordinary item that (i) does not constitute compensation of any kind for services of any kind rendered to the Company or any Subsidiary, and (ii) is outside the scope of the Participant’s employment or service contract, if any, with the Employer; (f) the Restricted Stock Units, and the income and value of same, is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Subsidiary; (g) the Restricted Stock Units and any shares of Common Stock acquired under the Plan, and the income from and value of same, are not intended to replace or supplement any pension rights or compensation; (h) unless otherwise agreed with the Company, the Restricted Stock Units, and the income from and value of same, are not granted as consideration for, or in connection with, any service the Participant may provide as a director of any Subsidiary; (i) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; (j) if the shares of Common Stock do not increase in value, the Restricted Stock Units will have no value; (k) if the Participant settles the Restricted Stock Units and obtains shares of
19 Common Stock, the value of the shares of Common Stock obtained upon settlement may increase or decrease in value; (l) in consideration of the award of the Restricted Stock Units, no claim or entitlement to compensation or damages shall arise from termination of the Restricted Stock Units or diminution in value of the Restricted Stock Units, or shares of Common Stock issued through the settlement of the Restricted Stock Units, resulting from termination of the Participant’s employment or continuous service with the Company or any Subsidiary (for any reason whatsoever, whether or not later found to be invalid or in breach of applicable labor laws of the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), and in consideration of the grant of the Restricted Stock Units, the Participant agrees not to institute any claim against the Company or any Subsidiary; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing/electronically accepting this Award Agreement, the Participant shall be deemed to have irrevocably waived the Participant’s entitlement to pursue or seek remedy for any such claim; and (m) neither the Company, the Employer nor any other Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the U.S. Dollar that may affect the value of the Restricted Stock Units or of any amounts due to the Participant pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any shares of Common Stock acquired upon settlement. 19. Language. The Participant acknowledges that the Participant is proficient in the English language and understands the terms of this Award Agreement. If the Participant has received the Plan, this Award Agreement, the Plan or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control, unless otherwise prescribed by applicable law. 20. Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by the Participant or any other participant. 21. Insider Trading/Market Abuse Laws. By accepting the Restricted Stock Units, the Participant acknowledges that the Participant is bound by all the terms and conditions of any Company insider trading policy as may be in effect from time to time. The Participant further acknowledges that, depending on the Participant’s country, the Participant may be or may become subject to insider trading restrictions and/or market abuse laws, which may affect the Participant’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock, rights to shares of Common Stock (e.g., Restricted Stock Units) or rights linked to the value of shares of Common Stock under the Plan during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before the Participant possessed inside information.
20 Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party, which may include fellow employees and (b) “tipping” third parties or causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any Company insider trading policy as may be in effect from time to time. The Participant acknowledges that it is the Participant’s personal responsibility to comply with any applicable restrictions, and the Participant should speak to the Participant’s personal advisor on this matter. 22. Legal and Tax Compliance; Cooperation. If the Participant resides or is employed outside of the United States, the Participant agrees, as a condition of the grant of the Restricted Stock Units, to repatriate all payments attributable to the shares of Common Stock and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of shares of Common Stock acquired pursuant to the Restricted Stock Units) if required by and in accordance with local foreign exchange rules and regulations in the Participant’s country of residence (and country of employment, if different). In addition, the Participant also agrees to take any and all actions, and consent to any and all actions taken by the Company and its Subsidiaries, as may be required to allow the Company and its Subsidiaries to comply with local laws, rules and regulations in the Participant’s country of residence (and country of employment, if different). Finally, the Participant agrees to take any and all actions as may be required to comply with the Participant’s personal legal and tax obligations under local laws, rules and regulations in the Participant’s country of residence (and country of employment, if different). 23. Private Offering. The grant of the Restricted Stock Units is not intended to be a public offering of securities in the Participant’s country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filing with the local securities authorities with respect to the grant of the Restricted Stock Units (unless otherwise required under local law). No employee of the Company is permitted to advise the Participant on whether the Participant should participate in the settlement of any shares of Common Stock pursuant to the Restricted Stock Units under the Plan or provide the Participant with any legal, tax or financial advice with respect to the grant of the Restricted Stock Units. Participation in Restricted Stock Units involves a degree of risk. Before deciding to participate in the settlement of any shares of Common Stock pursuant to the Restricted Stock Units, the Participant should carefully consider all risk factors and tax considerations relevant to the acquisition of shares of Common Stock under the Plan or the disposition of them. Further, the Participant should carefully review all of the materials related to the Restricted Stock Units and the Plan, and the Participant should consult with the Participant’s personal legal, tax and financial advisors for professional advice in relation to the Participant’s personal circumstances. 24. Foreign Asset/Account Reporting and Exchange Controls. The Participant’s country of residence (and country of employment, if different) may have certain exchange control and/or foreign asset/account reporting requirements which may affect the Participant’s ability to acquire or hold shares of Common Stock under the Plan or cash received from participating in the Plan (including from any dividends paid on shares of Common Stock or sale proceeds resulting from the sale of shares of Common Stock) in a brokerage or bank account outside the Participant’s country. The Participant may be required to report such accounts,
21 assets or transactions to the tax or other authorities in the Participant’s country. The Participant may be required to repatriate sale proceeds or other funds received as a result of the Participant’s participation in the Plan to the Participant’s country through a designated bank or broker within a certain time after receipt. The Participant acknowledges that it is the Participant’s responsibility to comply with any applicable regulations, and that the Participant should speak to the Participant’s personal advisor on this matter. 25. Country Addendum. Notwithstanding any provisions of this Award Agreement, the Restricted Stock Units and any shares of Common Stock acquired under the Plan shall be subject to any special terms and conditions for the Participant’s country of residence (and country of employment, if different), as set forth in the addendum to this Award Agreement (the “Country Addendum). Moreover, if the Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines, in its discretion, that the application of such terms and conditions is necessary or advisable for legal or administrative reasons and provided the imposition of the term or condition will not result in any adverse accounting expense with respect to the Restricted Stock Units (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant’s transfer). The Country Addendum shall form part of this Award Agreement. 26. Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Restricted Stock Units and any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons and provided the imposition of the term or condition will not result in adverse accounting expense to the Company, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. 27. Recoupment. The Restricted Stock Units granted pursuant to this Award Agreement are subject to the terms of the Company’s recoupment policy(ies) in the form approved by the Committee from time to time (including any successor(s) thereto, the “Policy”) and to the terms required by applicable law; and the terms of the Policy and such applicable law are incorporated by reference herein and made a part hereof. For purposes of the foregoing, the Participant expressly and explicitly authorizes the Company to issue instructions, on the Participant’s behalf, to any brokerage firm and/or third party administrator engaged by the Company to hold the shares of Common Stock and other amounts acquired pursuant to the Participant’s Restricted Stock Units, to re-convey, transfer or otherwise return such shares of Common Stock and/or other amounts to the Company upon the Company’s enforcement of the Policy. To the extent that this Award Agreement and the Policy conflict, the terms of the Policy shall prevail. 28. Notices. The Company may, directly or through its third party stock plan administrator, endeavor to provide certain notices to the Participant regarding certain events relating to awards that the Participant may have received or may in the future receive under the Plan, such as notices reminding the Participant of the vesting or expiration date of certain awards. The Participant acknowledges and agrees that (a) the Company has no obligation (whether pursuant to this Award Agreement or otherwise) to provide any such notices; (b) to
22 the extent the Company does provide any such notices to the Participant the Company does not thereby assume any obligation to provide any such notices or other notices; and (c) the Company, its Subsidiaries and the third party stock plan administrator have no liability for, and the Participant has no right whatsoever (whether pursuant to this Award Agreement or otherwise) to make any claim against the Company, any of its Subsidiaries or the third party stock plan administrator based on any allegations of, damages or harm suffered by the Participant as a result of the Company’s failure to provide any such notices or the Participant’s failure to receive any such notices. The Participant further agrees to notify the Company upon any change in the Participant’s residence address. 29. Limitations on Liability. Notwithstanding any other provisions of the Plan or this Award Agreement, no individual acting as a director, employee, or agent of the Company or any of its Subsidiaries will be liable to the Participant or the Participant’s spouse, beneficiary, or any other person or entity for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable because of any contract or other instrument the Participant executes in such other capacity. No member of the Board or of the Committee will be liable for any action or determination (including, but limited to, any decision not to act) made in good faith with respect to the Plan or any Restricted Stock Units. 30. Consent and Agreement With Respect to Plan. The Participant (a) acknowledges that the Plan and the prospectus relating thereto are available to the Participant on the website maintained by the Company’s third party stock plan administrator; (b) represents that the Participant has read and understands the terms and provisions thereof, has had an opportunity to obtain the advice of counsel of the Participant’s choice prior to accepting this Award Agreement and fully understands all provisions of this Award Agreement and the Plan; (c) accepts the Restricted Stock Units subject to all of the terms and provisions thereof; and (d) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement. [Signatures appear on the following page] IN WITNESS WHEREOF, the parties have executed this Award Agreement effective as of the Award Date. MillerKnoll, Inc. By: Jeffrey M. Stutz Chief Financial Officer
23 ELECTRONIC ACKNOWLEDGEMENT, ACCEPTANCE AND AGREEMENT By electronically accepting this Award Agreement via the Stock Plan Service Provider’s web portal, the Participant hereby acknowledges and accepts the grant of the Restricted Stock Units described in this Award Agreement, and expressly acknowledges and agrees to be bound by the terms and conditions of the Plan, the Award Notice, this Award Agreement and the following US State Addendum and Country Addendum. Further, the Participant hereby expressly acknowledges and agrees that all decisions and determinations of the Committee with respect to the Restricted Stock Units and the shares of Common Stock shall be final, conclusive and binding upon the Participant.
Exhibit 31.1
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF MILLERKNOLL, INC. (THE “REGISTRANT”)
I, Andrea R. Owen, certify that:
1.I have reviewed this quarterly report on Form 10-Q for the period ended August 31, 2024, of MillerKnoll, Inc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 9, 2024
/s/ Andrea R. Owen
Andrea R. Owen
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF MILLERKNOLL, INC. (THE “REGISTRANT”)
I, Jeffrey M. Stutz, certify that:
1.I have reviewed this quarterly report on Form 10-Q for the period ended August 31, 2024, of MillerKnoll, Inc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 9, 2024
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
Chief Financial Officer
Exhibit 32.1
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF MILLERKNOLL, INC. (THE "COMPANY")
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
I, Andrea R. Owen, President and Chief Executive Officer of the company, certify to the best of my knowledge and belief pursuant to Section 906 of Sarbanes-Oxley Act of 2002 that:
(1)The quarterly report on Form 10-Q for the period ended August 31, 2024, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in this quarterly report on Form 10-Q for the quarterly period ended August 31, 2024, fairly presents, in all material respects, the financial condition and results of operations of the company
Dated: October 9, 2024
/s/ Andrea R. Owen
Andrea R. Owen
President and Chief Executive Officer
The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MillerKnoll, Inc. and will be retained by MillerKnoll, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF MILLERKNOLL, INC. (THE "COMPANY")
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
I, Jeffrey M. Stutz, Chief Financial Officer of the company, certify to the best of my knowledge and belief pursuant to Section 906 of Sarbanes-Oxley Act of 2002 that:
(1)The quarterly report on Form 10-Q for the period ended August 31, 2024, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in this quarterly report on Form 10-Q for the quarterly period ended August 31, 2024, fairly presents, in all material respects, the financial condition and results of operations of the company.
Dated: October 9, 2024
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
Chief Financial Officer
The signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MillerKnoll, Inc. and will be retained by MillerKnoll, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.