Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the issues discussed in Management's Discussion and Analysis in conjunction with the Company's Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Refer also to the information provided under the heading "Forward-Looking Statements" in this Annual Report on Form 10-K.
Executive Overview
MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. From the spaces we make that help us live and work better, to how we manufacture our products, to the ways we solve challenges facing our customers and global community, design is our tool for creating positive impact. Our optimism leads us as we redefine modern for the 21st century, shaping a future that’s more sustainable, caring, and beautiful for all people and our planet.
MillerKnoll's products are sold internationally through controlled subsidiaries or branches in various countries including the United Kingdom, Denmark, Italy, France, the Netherlands, Canada, Japan, Mexico, Australia, Singapore, China, Hong Kong, India, and Brazil. The Company’s products are sold in over 100 countries primarily through independent contract furniture dealers, direct customer sales, owned and independent retailers, direct-mail catalogs, and the Company’s eCommerce platforms.
The Company is globally positioned in terms of manufacturing operations. In North America, manufacturing and distribution operations are in Georgia, New York, North Carolina, Michigan, Pennsylvania, and Texas in the United States, as well as Toronto and Mexico City. In Europe, the Company's manufacturing presence is in the United Kingdom and Italy. Manufacturing operations globally also include facilities located in Brazil, China, and India. The Company manufactures products using a system of lean manufacturing techniques collectively referred to as the MillerKnoll Performance System (MKPS). For its contract furniture business, MillerKnoll strives to maintain efficiencies and cost savings by minimizing the amount of inventory on hand. Accordingly, production is order-driven with direct materials and components purchased as needed to meet demand. These factors result in a high rate of inventory turns related to our manufactured inventories.
A key element of the Company's manufacturing strategy is to limit fixed production costs by sourcing component parts from strategic suppliers. This strategy has allowed the Company to increase the variable nature of its cost structure, while retaining proprietary control over those production processes that the Company believes provide a competitive advantage. As a result of this strategy, the Company's manufacturing operations are largely assembly-based.
A key element of the Company's growth strategy is to scale the Global Retail business through the Company's Herman Miller and Design Within Reach ("DWR") retail channels. DWR provides a channel to bring MillerKnoll's iconic and design-centric products across our brands such as Knoll, Muuto, and HAY, to retail customers, along with other proprietary and third-party products, with a focus on modern design.
The Company is comprised of various operating segments as defined by generally accepted accounting principles in the United States (U.S. GAAP). The operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions. The Company has identified the following segments:
• North America Contract — Includes the operations associated with the design, sourcing, manufacture, and sale of furniture products directly or indirectly through an independent dealership network for office, healthcare, and educational environments throughout the United States and Canada as well as the global operations of the Spinneybeck|FilzFelt, Maharam, Edelman, and Knoll Textile brands.
• International Contract — Includes the operations associated with the design, sourcing, manufacture, and sale of furniture products, directly or indirectly through an independent dealership network for office, healthcare, and educational environments in Europe, the Middle East, Africa, Asia-Pacific, and Latin America.
• Global Retail — Includes global operations associated with the sale of modern design furnishings and accessories to third party retailers, as well as direct to consumer sales through eCommerce, direct-mail catalogs, and physical retail stores, along with the global operations of the Holly Hunt brand.
The Company also reports a corporate category consisting primarily of unallocated corporate expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative, and acquisition-related costs.
Core Strengths
The Company relies on the following core strengths in delivering solutions to customers:
• Product Portfolio and Brand Collective - MillerKnoll is a collective of globally recognized design brands known for working with some of the most well-known and respected designers in the world. Combined, the Company represents over 100 years of design research and exploration in service of humanity. Within the industries in which the Company operates, Herman Miller and Knoll, along with Colebrook Bosson Saunders, DatesWeiser, Design Within Reach, Edelman, Geiger, HAY, Holly Hunt, Maharam, Muuto, NaughtOne, and Spinneybeck|FilzFelt are acknowledged as leading brands that inspire architects and designers to create their best design solutions. This portfolio has enabled MillerKnoll to connect with new audiences, channels, geographies, and product categories. Leveraging the collective brand equity of MillerKnoll across the lines of business is an important element of the Company's business strategy.
• Design Leadership - The Company is committed to developing research-based functionality and aesthetically innovative new products and has a history of doing so, in collaboration with a global network of leading independent designers. The Company believes its skills and experience in matching problem-solving design with the workplace needs of customers provide the Company with a competitive advantage in the marketplace. An important component of the Company's business strategy is to actively pursue a program of new product research, design, and development. The Company accomplishes this through the use of an internal research and engineering staff that engages with third party design resources generally compensated on a royalty basis.
• Unique Business Model - The Company has built a multi-channel distribution capability that it considers unique. Through contract furniture dealers, direct customer sales, retail stores and studios, eCommerce, wholesalers, and independent retailers, the Company serves contract and residential customers across a range of channels and geographies. As it pertains to its operations, the Company was among the first in the industry to embrace the concepts of lean manufacturing. MKPS provides the foundation for all the Company's manufacturing operations. The Company is committed to continuously improving both product quality and production and operational efficiency. The Company believes these concepts hold significant promise for further gains in reliability, quality, and efficiency.
• Global Scale and Reach - In addition to its global omni-channel distribution capability, the Company has a global network of designers, suppliers, manufacturing operations, and research and development centers that position the Company to serve contract and residential customers globally. The Company believes that leveraging this global scale will be an important enabler to executing its strategy.
• Extraordinary People - We believe that our employees are a critical success factor for our business. We strive to identify, hire, develop, motivate and retain the best employees. Our ability to attract, engage, and retain key employees has been and will remain critical to our success.
Channels of Distribution
The Company's products and services are offered to most of its customers under standard trade credit terms between 30 and 45 days. For all the items below, revenue is recognized when control transfers to the customer. The Company's products and services are sold through the following distribution channels:
• Independent Contract Furniture Dealers - Most of the Company's product sales are made to a global network of independently owned and operated contract furniture dealerships. These dealers purchase the Company's products and distribute them to end customers. Many of these dealers also offer furniture-related services, including product installation.
• Direct Contract Sales - The Company sells products and services directly to end customers without an intermediary (e.g., sales to the U.S. federal government). In most of these instances, the Company contracts separately with a dealer or third-party installation company to provide sales-related services.
• eCommerce - The Company sells products in its portfolio of brands across the globe, through localized Herman Miller, Knoll, and DWR websites. These sites complement the Company’s existing methods of distribution and extend the Company's brands' reach for new and existing customers and clients.
• Wholesale - Through the Company's Global Retail segment, certain products are sold on a wholesale basis to independent retailers located in various markets around the world.
• Retail Locations - As of May 31, 2025, the Company operated 75 retail studios (including 38 operating under the DWR brand, 1 under the HAY brand, 30 Herman Miller stores, 3 Muuto stores, 2 Knoll stores and a multi-brand Chicago store). The business also operated 3 outlet studios.
Challenges Ahead
Like all businesses, the Company is faced with a host of challenges and risks. The Company believes its core strengths and values, which provide the foundation for its strategic direction, have prepared the Company to respond to the inevitable challenges it will face in the future. While the Company is confident in its direction, it acknowledges the risks specific to our business and industry. Refer to Item 1A for discussion of certain of these risk factors and Item 7A for disclosures of market risk.
Areas of Strategic Focus
Our strategy is designed to harness the full potential of MillerKnoll while driving growth across all business segments, geographies, and customer groups and creating value for all our stakeholders. We will capitalize on global trends including hybrid and flexible work, consumers’ focus on investing in their homes, a focus on health and well-being, and an expectation of corporate social responsibility. Our strategy includes three key focus areas:
Drive Customer Demand and Order Growth
We are prioritizing programs to deliver world class experiences with every client interaction. We have a global, go-to-market framework for contract sellers, Design With Impact, that is organized around well-being, connection and change, and we are investing in MillerKnoll showrooms that bring our brands closer together to show the breadth of our offerings. As part of this work, we are enhancing and opening MillerKnoll showrooms in select markets including, Atlanta, Chicago, Dallas, London, Los Angeles, New York, Toronto and San Francisco. In addition we will continue to leverage the wide reach of our dealers’ showrooms around the globe.
In retail, we are working to evolve and enhance the Design Within Reach experience. We are expanding the retail f ootprint of both our DWR studios and Herman Miller stores into new geographic markets, with a primary focus on growth within the United States. We are testing new store formats, expanding our product assortment and offering design services both in store and online to enhance the customer experience, attract new customers and grow existing customers. In addition, we continue to launch new online tools to support our trade customers making it easier for them to incorporate our products in their client projects.
Foster a Culture of Highly Engaged Associates
As MillerKnoll, we have created one of the most talented teams in the industry. We are committed to nurturing this distinct competitive advantage by fostering a culture of highly engaged associates and inspiring belief in our shared future. We empower our associates to be agile and hold our teams accountable for living our actions and delivering high performance.
Our priorities include offering a seamless MillerKnoll employee experience via a global Human Resources technology platform; delivering an externally competitive and internally equitable compensation and benefits program; growing internal capabilities through development opportunities for all career levels; and investing to make MillerKnoll an employer of choice around the world.
Deliver Value to our Associates and Shareholders
We believe there is opportunity for meaningful long-term growth in each of our business segments. MillerKnoll is uniquely positioned to capitalize on these opportunities given the breadth of our Contract and Global Retail businesses and product portfolios, global reach, and omni-channel distribution and fulfillment capabilities.
Our collective of dynamic brands are united in their commitment to our purpose, design for the good of humankind, and they offer a complementary set of design solutions. By leveraging our global operations footprint, we are able to fuel our brands and build solutions in market closer to our customers, and we are creating centers of excellence in our operations facilities to support all brands in each region.
To capitalize on the opportunity ahead, we will seek to lead the industry in product innovation, design excellence, and sustainability; fortify the flagship Knoll and Herman Miller brands while nurturing and growing each of the brands within MillerKnoll; position the North America Contract business to lead; drive outsized growth in International Contract; and continue transforming our Global Retail business.
Business Overview
The following is a summary of the significant events and items impacting the Company's operations for the year ended May 31, 2025:
• Net sales were $3,669.9 million, representing an increase of 1.1% when compared to the prior year. Growth was primarily driven by increased sales volumes in the North America Contract and International Contract segments, along with the positive impact of pricing actions. These drivers more than offset sales declines due to unfavorable foreign currency translation, the strategic closure of the HAY eCommerce channel in North America and sales volume declines in the Global Retail segment. On an organic basis, net sales were $3,676.1 million(*), representing an increase of 1.6% when compared to the prior year.
• Gross margin was 38.8% as compared to 39.1% in the prior year. The decline in gross margin was driven by increases in material costs, some of which are related to increases in tariffs during the year, as well as from unfavorable channel and product mix. These pressures were offset in part by gross margin benefit from favorable net pricing.
• Operating expenses increased by $119.8 million or 9.6% as compared to the prior year. The increase was primarily related to an increase in non-cash intangible impairment charges of $113.2 million.
• The effective tax rate was negative 53.1% for fiscal 2025 compared to 14.8% for the prior year.
• Diluted loss per share for the full year totaled $0.54 compared to earnings per share of $1.11 in the prior year. On an adjusted basis(*), diluted earnings per share totaled $1.95 in fiscal 2025 compared to $2.08 in fiscal 2024.
• The Company declared cash dividends of $0.75 per share in both fiscal 2025 and fiscal 2024.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
The following summary includes the Company's view on the economic environment in which it operates:
• The current global macroeconomic environment — which reflects higher interest rates, tepid housing-related demand trends, relatively low CEO and consumer confidence levels, as well as geopolitical and global trade uncertainty — continues to pose challenges for the industry. While these factors are expected to continue in the near term, we are focused on prudent cost management and investment in targeted growth opportunities. These opportunities include growth within the Global Retail segment through expansion of our North American store footprint and product assortment. Within our North America Contract and International Contract segments, our strategy is focused on targeting economically resilient customer sectors, continued investment in product design and innovation leadership and expansion into geographies with opportunity to grow our market share.
• The Company's financial performance is sensitive to changes in material costs including changes related to tariffs or commodity cost changes. During fiscal year 2025 there were changes in trade policies that have resulted and are expected to continue to result in added cost pressures. The Company has implemented pricing actions together with other mitigation strategies that, over time, are expected to offset the net impact of tariff costs on the financial results.
• The North America Contract segment reported a net sales increase of 2.2% and an organic sales increase of 2.4%(*) year-over-year. Operating margin increased 60 basis points year-over year and 50 basis points on an adjusted basis(*). The increase was primarily driven by a reduction in restructuring charges as compared to the prior period
• The International Contract segment reported a net sales increase of 2.2% and an organic sales increase of 2.7%(*) year-over-year. Operating margin increased 10 basis points year-over-year and decreased 10 basis points on an adjusted basis(*).
• The Global Retail segment reported a net sales decrease of 1.5% and an organic sales decrease of 0.3%(*) year-over-year. Operating margin decreased 1,110 basis points year-over year and 110 basis points on an adjusted basis(*). The decrease on a reported basis was primarily driven by non-cash intangible asset impairment charges recorded in the current year.
The remaining sections of Item 7 include additional analysis of the fiscal year ended May 31, 2025, including discussion of significant variances compared to the prior year period. A detailed review of our fiscal 2024 performance compared to our fiscal 2023 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 1, 2024.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
Reconciliation of Non-GAAP Financial Measures
This presentation contains non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included within this presentation. The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented. Certain non-GAAP measures, including adjusted operating earnings, are used by the Company in its executive compensation program.
The non-GAAP financial measures referenced within this presentation include: Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), Adjusted Operating Margin and Organic Growth (Decline).
Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from amortization of Knoll purchased intangibles, integration charges, restructuring expenses, impairment charges, Knoll pension plan termination charges and the related tax effect of these adjustments. These adjustments are described further below.
Adjusted Operating Earnings (Loss) represents reported operating earnings plus integration charges, amortization of Knoll purchased intangibles, restructuring expenses, impairment charges and Knoll pension plan termination charges. These adjustments are described further below.
Adjusted Operating Margin is calculated as Adjusted Operating Earnings (Loss) divided by Net Sales.
Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impact of the closure of the North America HAY eCommerce channel in the Global Retail segment.
• 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, 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.
• Impairment charges: Includes non-cash, pre-tax charges for the impairment of the Knoll and Muuto trade names as well as impairment of goodwill attributed to the Global Retail and Holly Hunt reporting units.
• Knoll pension plan termination charges: Includes expenses incurred associated with the termination of the Knoll pension plan which was completed in the second quarter of fiscal year 2025
• Tax related items: We excluded the income tax benefit/provision effect of the tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.
The following table reconciles Operating Earnings (Loss) to Adjusted Operating Earnings (Loss) by Segment for the years ended as indicated below (in millions):
Three Months Ended
Twelve Months Ended
May 31, 2025
June 1, 2024
May 31, 2025
June 1, 2024
North America Contract
Net sales
Gross margin
Total operating expenses
Operating earnings
Adjustments
Restructuring charges
Integration charges
Amortization of Knoll purchased intangibles
Impairment charges
Knoll pension plan termination charges
Adjusted operating earnings
International Contract
Net sales
Gross margin
Total operating expenses
Operating earnings
Adjustments
Restructuring charges
Integration charges
Amortization of Knoll purchased intangibles
Impairment charges
Adjusted operating earnings
Global Retail
Net sales
Gross margin
Total operating expenses
Operating earnings (loss)
Adjustments
Restructuring charges
Integration charges
Amortization of Knoll purchased intangibles
Impairment charges
Adjusted operating earnings
Corporate
Operating expenses
Operating (loss)
Adjustments
Integration charges
Adjusted operating (loss)
MillerKnoll, Inc.
Net sales
Gross margin
Total operating expenses
Operating earnings
Adjustments
Restructuring charges
Integration charges
Amortization of Knoll purchased intangibles
Impairment charges
Knoll pension plan termination charges
Adjusted operating earnings
The following table reconciles net sales to organic net sales for the years ended as indicated below (in millions):
Twelve Months Ended
May 31, 2025
North America Contract
International Contract
Global Retail
Total
Net sales, as reported
% change from PY
Adjustments
Currency translation effects (1)
Net sales, organic
% change from PY
Twelve Months Ended
June 1, 2024
North America Contract
International Contract
Global Retail
Total
Net sales, as reported
Adjustments
HAY eCommerce
Net sales, organic
(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 tables reconcile orders as reported to organic orders for the periods ended as indicated below (in millions):
Twelve Months Ended
May 31, 2025
North America Contract
International Contract
Global Retail
Total
Orders, as reported
% change from PY
Adjustments
Currency translation effects (1)
Orders, organic
% change from PY
Twelve Months Ended
June 1, 2024
North America Contract
International Contract
Global Retail
Total
Orders, as reported
Adjustments
HAY eCommerce
Orders, organic
(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 EPS to Adjusted EPS for the years ended as of indicated below:
Twelve Months Ended
May 31, 2025
June 1, 2024
(Loss) Earnings per Share - Diluted
Add: Amortization of Knoll purchased intangibles
Add: Integration charges
Add: Restructuring charges
Add: Impairment charges
Add: Knoll pension plan termination charges
Tax impact on adjustments
Adjusted earnings per share - diluted
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted
Financial Results
The following is a comparison of our annual results of operations and year-over-year percentage changes for the periods indicated:
(Dollars in millions)
Fiscal 2025
Fiscal 2024
% Change
Net sales
Cost of sales
Gross margin
Operating expenses
Operating earnings
Other expenses, net
Earnings before income taxes and equity income
Income tax expense
Equity income (loss) from nonconsolidated affiliates, net of tax
Net earnings
Net earnings attributable to redeemable noncontrolling interests
Net earnings attributable to MillerKnoll, Inc.
The following table presents, for the periods indicated, the components of the Company's Consolidated Statements of Comprehensive Income as a percentage of Net sales:
Fiscal 2025
Fiscal 2024
Net sales
Cost of sales
Gross margin
Operating expenses
Operating earnings
Other expenses, net
Earnings before income taxes and equity income
Income tax expense
Equity income (loss) from nonconsolidated affiliates, net of tax
Net earnings
Net earnings attributable to redeemable noncontrolling interests
Net earnings attributable to MillerKnoll, Inc.
Net Sales
The following chart presents graphically the primary drivers of the year-over-year change in Net sales. The amounts presented in the bar graph are expressed in millions and have been rounded.
Net sales for fiscal 2025 increased $42 million, or 1.1% compared to the prior year. This increase was primarily driven by the following factors:
• Increased sales volume within the International Contract and North America Contract segments of approximately $28 million and $25 million, respectively.
• Net price increases, which contributed approximately $14 million to Net sales, reflecting our ability to maintain pricing discipline in a competitive environment. Offset in part by:
• A $12 million reduction due to the strategic closure of the HAY eCommerce channel in North America that occurred in the prior year.
• Decreased sales volume within the Global Retail segment of approximately $7 million.
• Unfavorable foreign currency impact of approximately $6 million.
Gross Margin
Gross margin for fiscal 2025 was 38.8%, compared to 39.1% in fiscal 2024. The 30 basis point decline was primarily driven by the following factors:
• Tariff-related costs negatively impacted gross margin by 30 basis points in the year.
• Unfavorable channel and product mix negatively impacted gross margin by approximately 30 basis points. These factors were offset in part by:
• Effective pricing strategies, net of incremental discounting, which contributed approximately 30 basis points of margin improvement.
Operating Expenses
The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses. The amounts presented in the bar graph are expressed in millions and have been rounded.
Operating expenses increased by $120 million or 9.6% compared to the prior year fiscal period. The current period reflects the following key changes compared to the prior year:
• An increase of $113 million in non-cash intangible impairment charges;
• Selling and marketing expenses increased by $10 million, primarily due to higher selling and marketing costs within the Global Retail segment;
• Variable selling costs, which include sales-based commission and royalty expense, increased approximately $7 million;
• Increased acquisition-related integration costs as compared to the prior year, totaling approximately $4 million. These increases were partially offset by:
• A $16 million reduction in restructuring charges as compared to the prior year.
Other Income/Expense
Net other expenses for fiscal 2025 totaled $72.4 million, compared to $67.5 million in fiscal 2024. The year-over-year increase of $4.9 million was primarily attributable to the following factors:
• A $2.3 million reduction in net periodic benefit income, resulting from the termination of the Knoll pension plan during the current fiscal year.
• A $3.1 million increase in foreign currency losses compared to the prior year, reflecting greater volatility in exchange rates.
Income Taxes
See Note 10 of the Consolidated Financial Statements for additional information.
Operating Segments Results
The business is comprised of various operating segments as defined by U.S. GAAP. These operating segments are determined on the basis of how the Company internally reports and evaluates financial information used to make operating decisions.
Effective as of March 1, 2025, the last day of the third quarter of fiscal 2025, the Company implemented an organizational change that resulted in a change in the reportable segments. The Company has recast historical results to reflect this change.
Below is a description of each reportable segment.
The North America Contract segment includes the operations associated with the design, sourcing, manufacture and sale of furniture products directly or indirectly through an independent dealership network for office, healthcare, and educational environments throughout the United States and Canada as well as the global operations of the Spinneybeck|FilzFelt, Maharam, Edelman, and Knoll Textile brands.
The International Contract segment includes the operations associated with the design, sourcing, manufacture and sale of furniture products, indirectly or directly through an independent dealership network for office, healthcare, and educational environments in Europe, the Middle East, Africa, Asia-Pacific and Latin America.
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, direct-mail catalogs, and physical retail stores, along with the global operations of the Holly Hunt brand.
The Company also reports a “Corporate” category consisting primarily of unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs. For descriptions of each segment, refer to Note 13 of the Consolidated Financial Statements.
The charts below present the relative mix of net sales and operating earnings across each of the Company's segments. This is followed by a discussion of the Company's results, by segment.
North America Contract
(Dollars in millions)
Fiscal 2025
Fiscal 2024
Change
Net sales
Gross margin
Gross margin %
Operating earnings
Operating earnings %
Net sales increased 2.2%, or 2.4% (*) on an organic basis, from the prior year due to:
• Increased sales volume within the segment of approximately $25 million; and
• Price increases, net of incremental discounting, of approximately $20 million. These increases were offset in part by:
• Unfavorable foreign currency translation of approximately $2 million.
Operating earnings increased $14.2 million, or 13.3% compared to the same period of the prior year due to:
• Decreased operating expenses of $9.7 million. The following factors contributed to the change:
◦ A decrease of approximately $16 million in restructuring charges related to reductions in the Company's workforce; and
◦ A decrease of approximately $8 million in annual incentive compensation. These decreases were offset in part by:
◦ An increase of $12 million in non-cash intangible impairment charges as compared to the prior year; and
◦ Increased acquisition related integration costs of approximately $2 million.
• Gross margin increased by $4.5 million, primarily driven by the higher sales volume discussed above. This increase was offset by a 60 basis point decline in gross margin percentage, which was mainly attributable to the following factors:
◦ Unfavorable product mix reduced margin by approximately 40 basis points; and
◦ Higher tariff-related costs led to a 30 basis point decline in gross margin; and
◦ Increased commodity and product distribution costs further reduced margin by 30 basis points; and
◦ Higher labor costs and loss of fixed cost leverage due to reduced production volumes in the first part of the year contributed an additional 30 basis point decrease in gross margin. These negative impacts were partially offset by:
◦ Incremental list price increases, net of contract price discounting, which improved gross margin by approximately 70 basis points.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
International Contract
(Dollars in millions)
Fiscal 2025
Fiscal 2024
Change
Net sales
Gross margin
Gross margin %
Operating earnings
Operating earnings %
Net sales increased 2.2%, or 2.7% (*) on an organic basis, from the prior year due to:
• Increased sales volume within the segment of approximately $28 million; offset in part by
• Incremental discounting, net of price increases, which negatively impacted sales by approximately $11 million; and
• Unfavorable foreign currency translation of approximately $3 million.
Operating earnings increased $1.7 million, or 2.8%, compared to the prior year due to:
• Increased gross margin of $7.7 million due to the increase in sales explained above and an increase in gross margin percentage of 40 basis points. The increase in gross margin percentage was due primarily to:
◦ Leverage on fixed costs on higher sales volumes which had a favorable impact on margin of approximately 70 basis points; and
◦ Favorable product and business mix which increased margin by 60 basis points. Offset in part by:
◦ Incremental discounting, net of price increases which had a negative impact on margin of 90 basis points.
• The increase in gross margin was partially offset by increased Operating expenses of $6 million which was largely due to increased variable selling costs in the current year.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
Global Retail
(Dollars in millions)
Fiscal 2025
Fiscal 2024
Change
Net sales
Gross margin
Gross margin %
Operating (loss) earnings
Operating (loss) earnings %
Net sales decreased 1.5% as reported and 0.3% (*) on an organic basis, from the prior year due to:
• Decrease of approximately $12 million related to the closure of the HAY eCommerce channel in North America that occurred in the prior year; and
• A decrease in sales volumes of approximately $7 million; and
• Unfavorable foreign currency translation of approximately $1 million. These decreases were offset in part by:
• Price increases, net of incre mental discounting, of approximately $4 million.
Operating earnings decreased $117.0 million, or 229.4% over the prior year due to:
• Decreased gross margin of $9.1 million due to the decrease in sales explained above and a decrease in gross margin percentage of 20 basis points. The decrease in gross margin percentage was due primarily to:
◦ The impact of increased inventory costs as compared to the prior year which negatively impacted margin by approximately 110 basis points.
◦ Loss of leverage on fixed costs attributable to lower sales volumes as compared to the prior year which had an unfavorable impact on gross margin percentage of approximately 30 basis points. These decreases were offset in part by:
◦ Reduced freight and product distribution costs, net of freight revenue, as compared to the same period of the prior year and favorable product mix which had a favorable impact on gross margin percentage of approximately 100 basis points; and
◦ The impact of incremental price increases, net of promotional discounting, that increased gross margin percentage by approximately 20 basis points. These increases were offset in part by:
• Increased Operating expenses of $108 million primarily driven by an increase of $105 million in non-cash intangible impairment charges as compared to the prior year as well as increased selling and marketing costs in the current year.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
Corporate
Corporate unallocated expenses totaled $67.7 million for fiscal 2025, an increase of $15.6 million from fiscal 2024. The increase primarily related to higher stock based compensation expense.
Liquidity and Capital Resources
The table below summarizes the net change in cash and cash equivalents for the fiscal years indicated.
Fiscal Year Ended
(In millions)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents
Cash Flow — Operating Activities
The principal source of our operating cash flow is net earnings, meaning cash receipts from the sale of our products, net of costs to manufacture, distribute, and market our products. Net cash provided by operating activities for the twelve months ended May 31, 2025, totaled $209.3 million compared to $352.3 million in the twelve months ended June 1, 2024. The decrease in cash inflow is due primarily to a net increase in working capital. Our working capital consists primarily of rec eivables from customers, inventory, prepaid expenses, accounts payable, accrued compensation, and accrued other expenses. The following all affect these account balances:
• The timing of collection of our receivables;
• Fluctuations in inventory levels; and
• Changes in accruals related to variable compensation.
Cash Flow — Investing Activities
Cash used in investing activities for the twelve months ended May 31, 2025, was $100.9 million, as compared to $86.3 million in the twelve months ended June 1, 2024. The increase in cash outflow in the current year was primarily due to:
• Increased capital expenditures in the current year; Offset in part by:
• Cash proceeds of $6.0 million in the current period related to the sale of a manufacturing facility located in Wisconsin; and
• A decrease in the total volume of notes receivable entered into with certain independently owned dealers in the current period as compared to the same period of the prior year.
Capital expenditures for the current year were $107.6 million a s compared to $78.4 million in the prior year. At the end of the fiscal 2025, there were outstanding commitments for capital purchases of $69.2 million. The Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company expects capital spending in fiscal 2026 to be between $120 million and $130 million, which will be primarily related to investments in the Company's facilities, (including manufacturing, showrooms, and retail stores) and equipment as well as investments associated with achieving the Company's sustainability goals.
Cash Flow — Financing Activities
Cash used in financing activities for the twelve months ended May 31, 2025 was $150.3 million, compared to $258.8 million in the twelve months ended June 1, 2024. The decrease in cash used in the current year, compared to the prior year, was primarily due to:
• The Company repurchased 3,291,176 shares at a cost of $84.9 million in the current year as compared to 6,022,646 share repurchases totaling $138.2 million in the prior year; and
• The refinancing of Term Loan A which resulted in proceeds of $90.0 million in the current year. Offset in part by:
• Net payments on the credit agreement of $61.7 million in the current year compared to net payments of $36.7 million in the prior year.
Sources of Liquidity
The Company has taken actions to safeguard its capital position in the current environment. The Company is closely managing spending levels, capital investments, and working capital.
The Company maintains an open market share repurchase program under our existing share repurchase authorization and may repurchase shares from time to time based on management’s evaluation of market conditions, share price and other factors.
At the end of fiscal 2025, the Company has a well-positioned balance sheet and liquidity profile. The Company has access to liquidity through credit facilities as well as cash and cash equivalents. These sources have been summarized below. For additional information, refer to Note 5 to the Consolidated Financial Statements.
(In millions)
May 31, 2025
June 1, 2024
Cash and cash equivalents
Availability under revolving lines of credit (1)
Total liquidity
(1) Available access to our revolving line of credit is subject to covenant restrictions outlined in our credit agreement.
Of the cash and cash equivalents noted above at the end of fiscal 2025, the Company had $182.7 million of cash and cash equivalents held outside the United States.
The Company’s syndicated revolving line of credit, which matures in April 2030, 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 May 31, 2025, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $330.8 million with available borrowings against this facility of $382.2 million.
The Company intends to repatriate $137.3 million of undistributed foreign earnings, all of which is held in cash in certain foreign jurisdictions. The Company has recorded a $3.5 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 $137.3 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 $382.9 million on May 31, 2025.
The Company believes cash on hand, cash generated from operations, and borrowing capacity will provide adequate liquidity to fund near term and foreseeable future business operations, capital needs, upcoming debt maturities, future dividends and share repurchases, subject to financing availability in the marketplace.
Contingencies
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such proceedings and litigation currently pending will not materially affect the Company's Consolidated Financial Statements. Refer to Note 12 of the Consolidated Financial Statements for more information relating to contingencies.
Basis of Presentation
The Company's fiscal year ends on the Saturday closest to May 31. The fiscal year ended May 31, 2025, and the fiscal year ended June 1, 2024, both contained 52 weeks, and the fiscal year ended June 3, 2023, contained 53 weeks.
Contractual Obligations
Contractual obligations associated with our ongoing business and financing activities will result in cash payments in future periods. The following table summarizes the amounts and estimated timing of these future cash payments. Further information regarding debt obligations can be found in Note 5 of the Consolidated Financial Statements. Additional information related to operating leases can be found in Note 6 of the Consolidated Financial Statements.
Payments due by fiscal year
(In millions)
Total
Thereafter
Short-term borrowings and long-term debt (1)
Estimated interest on debt obligations (1)
Operating leases
Purchase obligations
Pension and other post employment benefit plans funding (2)
Stockholder dividends (3)
Other (4)
Total
(1) Includes the current portion of long-term debt. Contractual cash payments on long-term debt obligations are disclosed herein based on the amounts borrowed as of May 31, 2025, and the maturity date of the underlying debt. Estimated future interest payments on our outstanding interest-bearing debt obligations are based on interest rates as of May 31, 2025. Actual cash outflows may differ significantly due to changes in borrowings or interest rates.
(2) Pension plan funding commitments are known for a 12-month period for those plans that are funded; unfunded pension and post-retirement plan funding amounts are equal to the estimated benefit payments . As of May 31, 2025, the total projected benefit obligation for our domestic and international employee pension benefit plans was $77.9 million.
(3) Represents the dividend payable as of May 31, 2025. Future dividend payments are not considered contractual obligations until declared.
(4) Other contractual obligations primarily represent long-term commitments related to deferred and supplemental employee compensation benefits, and other post-employment benefits.
Critical Accounting Policies and Estimates
Our goal is to report financial results clearly and understandably. We follow accounting principles generally accepted in the United States in preparing our Consolidated Financial Statements, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. These policies and disclosures are reviewed at least annually with the Audit Committee of the Board of Directors.
We believe that of our significant accounting policies, which are described in Note 1 of our consolidated financial statements, the following accounting policies and specific estimates involve a greater degree of judgment and complexity.
Business Combinations
Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed and pre-acquisition contingencies. We use our best estimates and assumptions to accurately assign fair values to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.
We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to goodwill. The allocation of the purchase consideration requires management to make significant
estimates and assumptions, especially with respect to intangible assets. These estimates are reviewed with our advisors and can include, but are not limited to:
• future expected cash flows from acquired customer relationships and trade names,
• assumed royalty rates that could be payable if we did not own the trademarks, and
• discount rates.
Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the values of assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. There were no material acquisitions during fiscal 2025, fiscal 2024 or fiscal 2023.
Goodwill and Indefinite-lived Intangibles
We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets each year as of March 31 or more frequently if events or changes in circumstances indicate an impairment might be possible. We may consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived intangible assets is below the carrying amount. We may also elect to bypass the qualitative assessment and perform a quantitative assessment.
When the Company performs a quantitative assessment, the Company makes estimates about fair value by using a weighting of the income approach and the market approach. The income approach is based on projected discounted cash flows using a market participant discount rate. The market approach is based on financial multiples of companies comparable to each reporting unit and applies a control premium. We corroborate the fair value through a market capitalization reconciliation to determine if the implied control premium is reasonable based on the qualitative considerations, such as recent market transactions.
The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but future changes in the underlying assumptions could occur due to the inherent uncertainty in making such estimates.
Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry or macroeconomic development or other adverse changes in market conditions could change one of the key assumptions the Company uses to calculate the fair value of its long-lived assets, goodwill and indefinite-lived trade names, which could result in a further decline in fair value and require the Company to record an impairment charge in future periods.
Goodwill
Certain business acquisitions have resulted in the recording of goodwill. At May 31, 2025, and June 1, 2024, we had goodwill recorded within the Consolidated Balance Sheets of $1,152.4 million and $1,226.3 million , respectively.
Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value.
During the third quarter of fiscal year 2025, the Company identified indicators of a triggering event which could indicate the carrying amount of the reporting units may not be supported by the fair value. Although our annual impairment test is performed during the fourth quarter, we perform a qualitative assessment each interim reporting period to determine whether there are indicators of a triggering event in the quarter. Through this assessment management identified an impairment triggering event associated with lower-than-expected operating results. This suggested that the fair value of one or more of our reporting units may have fallen below their carrying amount. Accordingly, we performed a quantitative valuation of each reporting unit during the quarter.
The Company used 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.
The test for impairment requires the Company to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. We estimated the fair value of each reporting unit using a discounted cash flow analysis. The discounted cash flow analysis used the present value of projected cash flows and a residual value.
The Company employed a market-based approach in selecting the discount rate used in our analysis. The discount rate selected represents the market rate of return equal to what the Company believes a reasonable investor would expect to achieve on investments of similar size to each reporting unit. The Company believes the discount rates selected in the quantitative assessment is appropriate in that it exceeds the estimated weighted average cost of capital for our business as a whole.
As a result of the third quarter fiscal year 2025 goodwill impairment test, the Company recognized a total non-cash impairment charge of $30.1 million and $62.2 million in its Global Retail and Holly Hunt reporting units, respectively. The goodwill impairment charges were primarily caused by reduced sales and profitability projections as well as an increase in the discount rate. After these impairment charges and before the changes in reporting units resulting from our third quarter fiscal year 2025 segment re-organization, the Global Retail and Holly Hunt reporting units had remaining goodwill of $357.0 million and $33.0 million, respectively. The quantitative assessment in the third quarter of fiscal year 2025 resulted in the fair values of the Americas Contract, International Contract and Coverings reporting units exceeding their respective carrying values (the "cushion") by 32%, 63% and 10%, respectively.
Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the reporting unit. For example, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%. The estimated long-term growth rate can have a significant impact on the estimated future cash flows, and therefore, the fair value of each reporting unit. Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate. In completing the goodwill impairment test, the respective fair values were estimated using discount rates ranging from 12.0% to 15.0% and long-term growth rates ranging from 2.5% to 3.0%.
The Company evaluated the sensitivity of changes in projected growth rates, discount rates and long-term growth rates for the reporting units with goodwill remaining as of March 1, 2025.
• A decrease in the forecasted sales by 500 basis points in all years or an increase in the discount rate of 100 basis points, leaving all other assumptions static, would not result in impairment for the Americas Contract, International Contract or Coverings reporting units.
• A decrease in the operating margin of 100 basis points in all years, leaving all other assumptions static, would not result in impairment for the Americas Contract or International Contract reporting units. For the Coverings reporting unit it would result in impairment of $3.0 million.
• A reduction in the projected sales growth rate, decline in operating margins, an increase in the discount rate or a decline in the long-term sales growth rate for the Holly Hunt or Global Retail reporting units may result in the need to record an additional impairment charge.
Additionally, in the third quarter of fiscal year 2025 the Company implemented an organizational change that resulted in a change in the reportable segments and reporting units. As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units. As a result of this change, $26.1 million of goodwill was reassigned from the Americas Contract reporting unit to the International Contract reporting unit, based on the relative fair value approach. Additionally, the $33.0 million of remaining goodwill for the Holly Hunt reporting unit was moved to the Global Retail reporting unit. Subsequent to this change the Company has four reporting units, North America Contract, International Contract, Global Retail and Coverings.
Each of the reporting units was reviewed for impairment using a qualitative assessment as of March 31, 2025. The Company elected to test each reporting unit qualitatively, as is permitted under ASU 2011-08, Intangibles-Goodwill and Other (Topic
350): Testing Goodwill for Impairment. Through the performance of this qualitative assessment we determined that there were no indicators of impairment.
Indefinite-lived Intangible Assets
Certain business acquisitions have resulted in the recording of trade names as indefinite-lived intangible assets, which are not amortized. At May 31, 2025, and June 1, 2024, the Company held trade name assets with a carrying value of $432.5 million and $465.5 million, respectively.
The Company evaluates indefinite-lived trade name intangible assets for impairment using a qualitative assessment annually. The Company also tests for impairment using a quantitative assessment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date.
During the third quarter of fiscal year 2025 the Company identified indicators that impairment was more likely than not for certain of the indefinite-lived intangible assets. Accordingly, the Company performed quantitative assessments during the third quarter of fiscal year 2025 to testing the indefinite-lived intangible assets which showed indicators that impairment was more likely than not. This quantitative assessment resulted in the recognition of $37.7 million in non-cash impairment charges related to the Knoll and Muuto trade names. The other indefinite-lived intangible assets were determined to have no impairment.
In performing this quantitative assessment, we estimate the fair value of these intangible assets using the relief-from-royalty method which requires assumptions related to:
• actual and forecasted revenue growth rates,
• assumed royalty rates that could be payable if we did not own the trademark, and
• a market participant discount rate based on a weighted-average cost of capital.
In completing the third quarter fiscal year 2025 assessment of indefinite-lived trade name impairment, the respective fair values were estimated using discount rates ranging from 12.00% to 13.00%, royalty rates ranging from 1.50% to 4.50% and long-term growth rates ranging from 2.5% to 3.0%. The Company’s estimates of the fair value of its indefinite-lived intangible assets are sensitive to changes in the key assumptions above as well as projected financial performance. If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record additional impairment charges.
For the Knoll trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales would have resulted in $12.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would have resulted in an additional $15.0 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $11.0 million of impairment charges.
For the Muuto trade name, keeping all other assumptions constant, a 10% decrease in forecasted sales would have resulted in $7.0 million of additional pre-tax impairment charges; a decrease in the royalty rate of 25 basis points would have resulted in an additional $4.0 million of impairment charges; and a 100 basis point increase in the discount rate would have resulted in an additional $6.0 million of impairment charges.
In fiscal 2024, the Company performed quantitative assessments in testing the Knoll product brand and Muuto brand indefinite-lived intangible assets for impairment, which resulted in the carrying values of the trade names exceeding their fair values by $8.9 million and $7.9 million, respectively. Accordingly, impairment charges of $16.8 million in total were recognized.
During fiscal 2023, the Company determined through a qualitative assessment that the Knoll trade name carrying value was more than likely above its fair value. As a result, the Company performed a quantitative assessment to determine the fair value and as a result recognized a $19.7 million non-cash impairment charge to the indefinite-lived trade name.
If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the Company may need to record additional impairment charges.
Each indefinite-lived intangible asset was reviewed for impairment using a qualitative assessment as of March 31, 2025. The Company elected to test each asset qualitatively, as is permitted under ASU 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. Through the performance of this qualitative assessment we determined that there were no indicators of impairment.
Long-lived Assets
The Company evaluates other long-lived assets and acquired business units for indicators of impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset group are compared to the carrying value of the asset or asset group. The judgments regarding the existence of impairment are based on market conditions, operational performance, and estimated future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.
In the first quarter of fiscal 2025, the decision was made to cease the use of certain leased locations resulting in impairment charges of $17.4 million related to the right of use assets associated with these locations.
In the fourth quarter of fiscal 2024, the decision was made to cease the use of certain leased locations resulting in impairment charges of $5.5 million related to the right of use assets associated with these locations.
During fiscal 2023, the decision was made to cease operating Fully as a stand-alone brand and sales channel and instead sell certain Fully products through other channels already existing within the Global Retail business. Management identified this decision as an indicator of impairment, and accordingly recorded impairment of certain long-lived assets within the Fully asset group of $21.5 million.
The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but if actual results are not consistent with management's estimates and assumptions, a material impairment charge could occur, which could have a material adverse effect on our consolidated financial statements.
New Accounting Standards
Refer to Note 1 of the Consolidated Financial Statements for information related to new accounting standards.
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 include those relating to future events, anticipated results of operations, our expectations regarding future market conditions, our business strategies, our assessment of risks we face, 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 our results of operations or financial condition or the price of our stock. These forward-looking statements involve certain risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those indicated in such forward-looking statements, including, but not limited to:
• Changes to U.S. and international trade policies, including new or increased tariffs and changing import/export regulations, which impact both the cost and availability of materials and components used to manufacture our products as well as demand for our products;
• Challenges in implementing our growth strategy and the possibility that the assumptions on which that strategy was built prove inaccurate;
• Consumer spending levels, which have a significant impact on demand for our products within our Global Retail segment;
• Global and national economic conditions such as heightened inflation, uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential governmental responses to these events;
• Cybersecurity threats and risks;
• Public health crises, such as pandemics and epidemics, and governmental policies and actions to protect the health and safety of individuals or to maintain the functioning of national or global economies;
• Risks related to the additional debt incurred in connection with our acquisition of Knoll, including increased interest expense, our ability to comply with our debt covenants and obligations, and limitations on certain business activities imposed by our credit agreement;
• Availability and pricing of raw materials;
• Financial strength of our dealers and customers;
• Pace and level of government procurement; and
• 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 our periodic reports and other filings with the SEC, including the risk factors identified in this report. The forward-looking statements included in this report are made only as of the date of this report, and we do not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances, except as required by law.
