[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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[ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended March 3, 2018
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Commission File No. 001-15141
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A Michigan Corporation
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ID No. 38-0837640
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855 East Main Avenue, Zeeland, MI 49464-0302
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Phone (616) 654 3000
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Large accelerated filer [ X ]
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Accelerated filer [_]
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Non-accelerated filer [_]
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Smaller reporting company [_]
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Page No.
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Part I — Financial Information
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Item 1 Financial Statements (Unaudited)
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Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended March 3, 2018 and March 4, 2017
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Condensed Consolidated Balance Sheets — March 3, 2018 and June 3, 2017
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Condensed Consolidated Statements of Cash Flows — Nine Months Ended March 3, 2018 and March 4, 2017
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Condensed Consolidated Statements of Stockholders' Equity — Nine Months Ended March 3, 2018 and March 4, 2017
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Notes to Condensed Consolidated Financial Statements
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Note 1 - Basis of Presentation
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Note 2 - Recently Issued Accounting Standards
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Note 3 - Acquisitions and Divestitures
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Note 4 - Inventories, net
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Note 6 - Employee Benefit Plans
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Note 7 - Earnings Per Share
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Note 8 - Stock-Based Compensation
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Note 9 - Income Taxes
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Note 10 - Fair Value Measurements
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Note 11 - Commitments and Contingencies
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Note 12 - Debt
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Note 13 - Accumulated Other Comprehensive Loss
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Note 14 - Redeemable Noncontrolling Interests
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Note 15 - Operating Segments
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Note 16 - Restructuring Expenses and Other Charges
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Note 17 - Subsequent Events
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Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 3 Quantitative and Qualitative Disclosures about Market Risk
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Item 4 Controls and Procedures
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Part II — Other Information
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Item 1 Legal Proceedings
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Item 1A Risk Factors
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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3 Defaults upon Senior Securities
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Item 4 Mine Safety Disclosures
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Item 5 Other Information
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Item 6 Exhibits
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Signatures
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Three Months Ended
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Nine Months Ended
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||||||||||||
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March 3, 2018
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March 4, 2017
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March 3, 2018
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March 4, 2017
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||||||||
Net sales
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$
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578.4
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$
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524.9
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$
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1,763.2
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$
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1,701.0
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Cost of sales
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372.6
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329.4
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1,118.5
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1,057.6
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Gross margin
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205.8
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195.5
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644.7
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643.4
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Operating expenses:
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||||||||
Selling, general and administrative
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149.4
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140.4
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450.8
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443.5
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Restructuring expenses and other charges
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—
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2.7
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1.9
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3.7
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Design and research
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18.1
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17.4
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54.6
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55.2
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Total operating expenses
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167.5
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160.5
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507.3
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502.4
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Operating earnings
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38.3
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35.0
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137.4
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141.0
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||||
Other expenses:
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||||||||
Interest expense
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3.2
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3.8
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10.6
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11.4
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Other, net
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(1.1
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)
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(0.8
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)
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(2.9
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)
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(1.0
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)
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||||
Earnings before income taxes and equity income
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36.2
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32.0
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129.7
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130.6
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Income tax expense
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6.9
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9.5
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35.4
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41.1
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Equity income from nonconsolidated affiliates, net of tax
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0.7
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—
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2.2
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1.1
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Net earnings
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30.0
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22.5
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96.5
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90.6
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Net earnings attributable to noncontrolling interests
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0.2
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—
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0.2
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0.1
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Net earnings attributable to Herman Miller, Inc.
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$
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29.8
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$
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22.5
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$
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96.3
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$
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90.5
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Earnings per share — basic
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$
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0.50
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$
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0.38
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$
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1.61
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$
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1.51
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Earnings per share — diluted
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$
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0.49
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$
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0.37
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$
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1.60
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$
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1.50
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Dividends declared, per share
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$
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0.180
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$
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0.170
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$
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0.540
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$
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0.510
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Other comprehensive income (loss), net of tax
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Foreign currency translation adjustments
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$
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1.7
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$
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(0.4
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)
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$
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6.3
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$
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(10.8
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)
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Pension and other post-retirement plans
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0.9
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0.5
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2.6
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2.1
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Interest rate swaps
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5.9
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1.1
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6.9
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5.3
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Unrealized holding gain
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—
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0.2
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—
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0.2
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Other comprehensive income (loss)
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8.5
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1.4
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15.8
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(3.2
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)
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Comprehensive income
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38.5
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23.9
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112.3
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87.4
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Comprehensive income attributable to noncontrolling interests
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0.2
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—
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0.2
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0.1
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Comprehensive income attributable to Herman Miller, Inc.
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$
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38.3
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$
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23.9
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$
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112.1
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$
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87.3
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March 3, 2018
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June 3, 2017
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$
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193.0
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$
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96.2
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Marketable securities
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8.4
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8.6
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Accounts and notes receivable, net
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191.6
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186.6
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Inventories, net
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169.4
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152.4
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Prepaid expenses and other
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46.3
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48.1
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Total current assets
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608.7
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491.9
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Property and equipment, at cost
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1,020.6
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968.7
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Less — accumulated depreciation
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(690.6
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)
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(654.1
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)
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Net property and equipment
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330.0
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314.6
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Goodwill
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304.4
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304.5
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Indefinite-lived intangibles
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78.1
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78.1
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Other amortizable intangibles, net
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41.4
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45.4
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Other noncurrent assets
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79.1
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71.8
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Total Assets
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$
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1,441.7
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$
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1,306.3
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||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
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Current Liabilities:
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||||
Accounts payable
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$
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160.9
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$
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148.4
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Accrued compensation and benefits
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70.7
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79.7
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Accrued warranty
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52.9
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47.7
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Other accrued liabilities
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98.8
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109.9
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|
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Total current liabilities
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383.3
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385.7
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Long-term debt
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275.0
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199.9
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|
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Pension and post-retirement benefits
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25.4
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38.5
|
|
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Other liabilities
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76.4
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|
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69.9
|
|
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Total Liabilities
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760.1
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|
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694.0
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Redeemable noncontrolling interests
|
24.3
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24.6
|
|
||
Stockholders' Equity:
|
|
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|
||||
Preferred stock, no par value (10,000,000 shares authorized, none issued)
|
—
|
|
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—
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Common stock, $0.20 par value (240,000,000 shares authorized, 59,683,286 and 59,715,824 shares issued and outstanding in 2018 and 2017, respectively)
|
11.8
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|
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11.9
|
|
||
Additional paid-in capital
|
129.4
|
|
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139.3
|
|
||
Retained earnings
|
583.0
|
|
|
519.5
|
|
||
Accumulated other comprehensive loss
|
(66.4
|
)
|
|
(82.2
|
)
|
||
Key executive deferred compensation plans
|
(0.7
|
)
|
|
(1.0
|
)
|
||
Herman Miller, Inc. Stockholders' Equity
|
657.1
|
|
|
587.5
|
|
||
Noncontrolling Interests
|
0.2
|
|
|
0.2
|
|
||
Total Stockholders' Equity
|
657.3
|
|
|
587.7
|
|
||
Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity
|
$
|
1,441.7
|
|
|
$
|
1,306.3
|
|
|
Nine Months Ended
|
||||||
March 3, 2018
|
|
March 4, 2017
|
|||||
Cash Flows from Operating Activities:
|
|
|
|
||||
Net earnings
|
$
|
96.5
|
|
|
$
|
90.6
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
49.4
|
|
|
43.0
|
|
||
Stock-based compensation
|
4.8
|
|
|
9.2
|
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
(0.5
|
)
|
||
Pension and post-retirement expenses
|
1.1
|
|
|
0.3
|
|
||
Pension contributions
|
(12.0
|
)
|
|
—
|
|
||
Earnings from nonconsolidated affiliates net of dividends received
|
(0.5
|
)
|
|
(1.0
|
)
|
||
Deferred taxes
|
(10.3
|
)
|
|
3.9
|
|
||
Gain on sales of property and dealers
|
(0.8
|
)
|
|
(0.7
|
)
|
||
Restructuring expenses
|
1.9
|
|
|
3.7
|
|
||
Increase in current assets
|
(18.1
|
)
|
|
(8.4
|
)
|
||
Decrease in current liabilities
|
(12.2
|
)
|
|
(23.2
|
)
|
||
Increase in non-current liabilities
|
11.4
|
|
|
4.2
|
|
||
Other, net
|
(0.5
|
)
|
|
1.0
|
|
||
Net Cash Provided by Operating Activities
|
110.7
|
|
|
122.1
|
|
||
|
|
|
|
||||
Cash Flows from Investing Activities:
|
|
|
|
||||
Proceeds from sale of property and dealers
|
2.0
|
|
|
—
|
|
||
Marketable securities purchases
|
(0.7
|
)
|
|
(1.2
|
)
|
||
Marketable securities sales
|
0.8
|
|
|
0.8
|
|
||
Equity investment in non-controlled entities
|
—
|
|
|
(13.3
|
)
|
||
Capital expenditures
|
(51.0
|
)
|
|
(70.5
|
)
|
||
Payments of loans on cash surrender value of life insurance
|
—
|
|
|
(15.3
|
)
|
||
Proceeds from life insurance policy
|
8.1
|
|
|
—
|
|
||
Net (advances) receipts on notes receivable
|
(1.1
|
)
|
|
1.4
|
|
||
Other, net
|
(0.6
|
)
|
|
(0.9
|
)
|
||
Net Cash Used in Investing Activities
|
(42.5
|
)
|
|
(99.0
|
)
|
||
|
|
|
|
||||
Cash Flows from Financing Activities:
|
|
|
|
||||
Dividends paid
|
(31.7
|
)
|
|
(29.2
|
)
|
||
Proceeds from issuance of long-term debt
|
340.4
|
|
|
659.3
|
|
||
Payments of long-term debt
|
(265.4
|
)
|
|
(646.7
|
)
|
||
Payment of deferred financing costs
|
—
|
|
|
(1.4
|
)
|
||
Common stock issued
|
16.0
|
|
|
7.6
|
|
||
Common stock repurchased and retired
|
(30.1
|
)
|
|
(17.2
|
)
|
||
Excess tax benefits from stock-based compensation
|
—
|
|
|
0.5
|
|
||
Purchase of redeemable noncontrolling interests
|
(1.0
|
)
|
|
(1.5
|
)
|
||
Payment of contingent consideration
|
—
|
|
|
(1.1
|
)
|
||
Other, net
|
0.1
|
|
|
0.1
|
|
||
Net Cash Provided by (Used in) by Financing Activities
|
28.3
|
|
|
(29.6
|
)
|
||
|
|
|
|
||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
0.3
|
|
|
—
|
|
||
Net Increase (Decrease) in Cash and Cash Equivalents
|
96.8
|
|
|
(6.5
|
)
|
||
|
|
|
|
||||
Cash and Cash Equivalents, Beginning of Period
|
96.2
|
|
|
84.9
|
|
||
Cash and Cash Equivalents, End of Period
|
$
|
193.0
|
|
|
$
|
78.4
|
|
|
Nine Months Ended
|
||||||
March 3, 2018
|
|
March 4, 2017
|
|||||
Preferred Stock
|
|
|
|
||||
Balance at beginning of year and end of period
|
$
|
—
|
|
|
$
|
—
|
|
Common Stock
|
|
|
|
||||
Balance at beginning of year
|
$
|
11.9
|
|
|
$
|
12.0
|
|
Exercise of stock options
|
0.1
|
|
|
—
|
|
||
Repurchase and retirement of common stock
|
(0.2
|
)
|
|
—
|
|
||
Balance at end of period
|
$
|
11.8
|
|
|
$
|
12.0
|
|
Additional Paid-in Capital
|
|
|
|
||||
Balance at beginning of year
|
$
|
139.3
|
|
|
$
|
142.7
|
|
Cumulative effect of accounting change
|
(0.3
|
)
|
|
—
|
|
||
Repurchase and retirement of common stock
|
(29.9
|
)
|
|
(17.1
|
)
|
||
Exercise of stock options
|
14.0
|
|
|
5.8
|
|
||
Stock-based compensation expense
|
4.6
|
|
|
8.8
|
|
||
Excess tax benefit for stock-based compensation
|
—
|
|
|
(0.3
|
)
|
||
Restricted stock units released
|
0.2
|
|
|
0.1
|
|
||
Employee stock purchase plan issuances
|
1.5
|
|
|
1.7
|
|
||
Deferred compensation plan
|
(0.4
|
)
|
|
(0.1
|
)
|
||
Directors' fees
|
0.4
|
|
|
0.3
|
|
||
Balance at end of period
|
$
|
129.4
|
|
|
$
|
141.9
|
|
Retained Earnings
|
|
|
|
||||
Balance at beginning of year
|
$
|
519.5
|
|
|
$
|
435.3
|
|
Cumulative effect of accounting change
|
0.1
|
|
|
—
|
|
||
Net income attributable to Herman Miller, Inc.
|
96.3
|
|
|
90.5
|
|
||
Dividends declared on common stock (per share - 2018: $0.54; 2017; $0.51)
|
(32.4
|
)
|
|
(30.7
|
)
|
||
Redeemable noncontrolling interests valuation adjustment
|
(0.5
|
)
|
|
0.7
|
|
||
Balance at end of period
|
$
|
583.0
|
|
|
$
|
495.8
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
||||
Balance at beginning of year
|
$
|
(82.2
|
)
|
|
$
|
(64.5
|
)
|
Other comprehensive income (loss)
|
15.8
|
|
|
(3.2
|
)
|
||
Balance at end of period
|
$
|
(66.4
|
)
|
|
$
|
(67.7
|
)
|
Key Executive Deferred Compensation
|
|
|
|
||||
Balance at beginning of year
|
$
|
(1.0
|
)
|
|
$
|
(1.1
|
)
|
Deferred compensation plan
|
0.3
|
|
|
0.1
|
|
||
Balance at end of period
|
$
|
(0.7
|
)
|
|
$
|
(1.0
|
)
|
Herman Miller, Inc. Stockholders' Equity
|
$
|
657.1
|
|
|
$
|
581.0
|
|
Noncontrolling Interests
|
|
|
|
||||
Balance at beginning of year and end of period
|
$
|
0.2
|
|
|
$
|
0.3
|
|
Total Stockholders' Equity
|
$
|
657.3
|
|
|
$
|
581.3
|
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
Improvements to Employee Share-Based Payment Accounting
|
|
Under the new guidance, all excess tax benefits/deficiencies should be recognized as income tax expense/benefit, entities may elect how to account for forfeitures and cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity on the cash flow statement.
|
|
June 4, 2017
|
|
The company adopted the accounting standard in the first quarter of fiscal 2018. As a result, the company elected to change its policy from estimating forfeitures to recognizing forfeitures when they occur, which resulted in an increase in Retained earnings of $0.1 million, a decrease in Additional paid in capital of $0.3 million and an increase in Other noncurrent assets of $0.2 million in the Condensed Consolidated Balance Sheets. The other impacts resulting from adoption did not have a material impact on the company's Financial Statements.
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
|
|
|
|
|
|
|
Revenue from Contracts with Customers
|
|
The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The standard allows for two adoption methods, a full retrospective or modified retrospective approach.
|
|
June 3, 2018
|
|
The company has completed a preliminary review of the impact of the new standard and expects changes in the identification of performance obligations around product and service revenue. For commercial contracts in which the company sells directly to end customers, in most cases, the company currently delays revenue recognition until the products are shipped and installed and records third-party installation and certain other fees net. However, under the new standard, in most cases, the company will recognize product revenue when title and risk of loss have transferred and will recognize service revenue upon the completion of services. Additionally, the company will record certain product pricing elements related to its direct customer sales within revenue and Cost of Sales rather than net within revenue as is current practice. The company has determined that these elements relate to the product performance obligation which the company is considered to control under the new standard. The company is also in the process of implementing changes to its business processes, systems and controls to support recognition and disclosure under the new standard. The company expects to adopt the standard in fiscal 2019 using the modified retrospective approach.
|
|
|
|
|
|
|
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
|
|
|
|
|
|
|
Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
|
|
The standard provides guidance for the measurement, presentation and disclosure of financial assets and liabilities. The standard requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any change in fair value in net income. The standard does not permit early adoption and at adoption a cumulative-effect adjustment to beginning retained earnings should be recorded.
|
|
June 3, 2018
|
|
The company is currently evaluating the impact of adopting this guidance.
|
|
|
|
|
|
|
|
Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
|
|
This standard changes the rules related to the income statement presentation of the components of net periodic benefit cost for defined benefit pension and other postretirement benefit plans. Under the new guidance, entities must present the service cost component of net periodic benefit cost in the same income statement line items as other employee compensation costs related to services rendered during the period. Other components of net periodic benefit cost will be presented separately from the line items that include the service cost. Early adoption is permitted.
|
|
June 3, 2018
|
|
The standard is expected to impact the classification of certain costs within the company's Consolidated Statements of Comprehensive Income. No impact to the company's Consolidated Balance Sheets or Consolidated Statements of Cash Flow are expected as a result of the standard.
|
|
|
|
|
|
|
|
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
|
|
This update allows for the reclassification to retained earnings of the tax effects stranded in Accumulated Other Comprehensive Income resulting from The Tax Cuts and Jobs Act. Early adoption is permitted.
|
|
June 2, 2019
|
|
The company is still evaluating these amendments and has not determined its accounting policy and whether or not an election will be made to reclassify the stranded effects.
|
|
|
|
|
|
|
|
Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
|
|
This update amends the hedge accounting recognition and presentation with the objectives of improving the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities and simplifying the application of hedge accounting. The update expands the strategies eligible for hedge accounting, relaxes the timing requirements of hedge documentation and effectiveness assessments and permits the use of qualitative assessments on an ongoing basis to assess hedge effectiveness. The new guidance also requires new disclosures and presentation.
|
|
June 2, 2019
|
|
The company is currently evaluating the impact of adopting this guidance.
|
|
|
|
|
|
|
|
Leases
|
|
Under the updated standard a lessee's rights and obligations under most leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. The standard must be adopted under a modified retrospective approach and early adoption is permitted.
|
|
June 2, 2019
|
|
The standard is expected to have a significant impact on our Consolidated Financial Statements; however, the company is currently evaluating the impact.
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||
Finished goods
|
$
|
133.8
|
|
|
$
|
119.0
|
|
Raw materials
|
35.6
|
|
|
33.4
|
|
||
Total
|
$
|
169.4
|
|
|
$
|
152.4
|
|
(In millions)
|
Goodwill
|
|
Indefinite-lived Intangible Assets
|
|
Total Goodwill and Indefinite-lived Intangible Assets
|
||||||
June 3, 2017
|
$
|
304.5
|
|
|
$
|
78.1
|
|
|
$
|
382.6
|
|
Foreign currency translation adjustments
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|||
Sale of owned contract furniture dealership
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|||
March 3, 2018
|
$
|
304.4
|
|
|
$
|
78.1
|
|
|
$
|
382.5
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In millions)
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||||||
Interest cost
|
$
|
0.8
|
|
|
$
|
0.7
|
|
|
$
|
2.5
|
|
|
$
|
2.2
|
|
Expected return on plan assets
|
(1.7
|
)
|
|
(1.2
|
)
|
|
(5.3
|
)
|
|
(3.7
|
)
|
||||
Net amortization loss
|
1.3
|
|
|
0.6
|
|
|
3.9
|
|
|
1.8
|
|
||||
Net periodic benefit cost
|
$
|
0.4
|
|
|
$
|
0.1
|
|
|
$
|
1.1
|
|
|
$
|
0.3
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||||||
Numerators:
|
|
|
|
|
|
|
|
||||||||
Numerator for both basic and diluted EPS, net earnings attributable to Herman Miller, Inc. - in millions
|
$
|
29.8
|
|
|
$
|
22.5
|
|
|
$
|
96.3
|
|
|
$
|
90.5
|
|
|
|
|
|
|
|
|
|
||||||||
Denominators:
|
|
|
|
|
|
|
|
||||||||
Denominator for basic EPS, weighted-average common shares outstanding
|
59,691,709
|
|
|
59,846,034
|
|
|
59,753,271
|
|
|
59,910,844
|
|
||||
Potentially dilutive shares resulting from stock plans
|
670,375
|
|
|
537,152
|
|
|
620,943
|
|
|
511,134
|
|
||||
Denominator for diluted EPS
|
60,362,084
|
|
|
60,383,186
|
|
|
60,374,214
|
|
|
60,421,978
|
|
||||
Antidilutive equity awards not included in weighted-average common shares - diluted
|
101,763
|
|
|
554,320
|
|
|
381,446
|
|
|
745,583
|
|
(In millions)
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||||||
Stock-based compensation expense
|
$
|
1.8
|
|
|
$
|
2.7
|
|
|
$
|
4.8
|
|
|
$
|
9.2
|
|
Related income tax effect
|
0.5
|
|
|
1.0
|
|
|
1.4
|
|
|
3.3
|
|
(Shares)
|
Nine Months Ended
|
||||
|
March 3, 2018
|
|
March 4, 2017
|
||
Stock Options
|
506,565
|
|
|
211,566
|
|
Restricted Stock Units
|
116,981
|
|
|
89,290
|
|
Performance Share Units
|
130,179
|
|
|
113,040
|
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||
Liability for interest and penalties
|
$
|
1.0
|
|
|
$
|
0.8
|
|
Liability for uncertain tax positions, current
|
3.0
|
|
|
2.8
|
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||
Carrying value
|
$
|
278.3
|
|
|
$
|
203.1
|
|
Fair value
|
$
|
281.9
|
|
|
$
|
213.0
|
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||||||||||
Financial Assets
|
Quoted Prices with
Other Observable Inputs (Level 2)
|
|
Management Estimate (Level 3)
|
|
Quoted Prices with
Other Observable Inputs (Level 2) |
|
Management Estimate (Level 3)
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
31.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
70.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Available-for-sale marketable securities:
|
|
|
|
|
|
|
|
||||||||
Mutual funds - fixed income
|
7.6
|
|
|
—
|
|
|
7.7
|
|
|
—
|
|
||||
Mutual funds - equity
|
0.8
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
||||
Foreign currency forward contracts
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
||||
Interest rate swap agreement
|
13.7
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
||||
Deferred compensation plan
|
11.7
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
||||
Total
|
$
|
135.7
|
|
|
$
|
—
|
|
|
$
|
25.2
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
Contingent consideration
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.5
|
|
||||
Total
|
$
|
0.6
|
|
|
$
|
0.4
|
|
|
$
|
0.6
|
|
|
$
|
0.5
|
|
Contingent Consideration
|
March 3, 2018
|
|
June 3, 2017
|
||||
Beginning balance
|
$
|
0.5
|
|
|
$
|
2.7
|
|
Net realized losses (gains)
|
—
|
|
|
(0.2
|
)
|
||
Payments
|
(0.1
|
)
|
|
(2.0
|
)
|
||
Ending balance
|
$
|
0.4
|
|
|
$
|
0.5
|
|
|
March 3, 2018
|
|
June 3, 2017
|
||||||||||||||||||||
(In millions)
|
Cost
|
|
Unrealized
Gain/(loss)
|
|
Market
Value
|
|
Cost
|
|
Unrealized
Gain/(Loss) |
|
Market
Value |
||||||||||||
Mutual funds - fixed income
|
$
|
7.6
|
|
|
$
|
—
|
|
|
$
|
7.6
|
|
|
$
|
7.6
|
|
|
$
|
0.1
|
|
|
$
|
7.7
|
|
Mutual funds - equity
|
0.7
|
|
|
0.1
|
|
|
0.8
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
||||||
Total
|
$
|
8.3
|
|
|
$
|
0.1
|
|
|
$
|
8.4
|
|
|
$
|
8.5
|
|
|
$
|
0.1
|
|
|
$
|
8.6
|
|
(In millions)
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||||||
Accrual Balance — beginning
|
$
|
53.3
|
|
|
$
|
44.6
|
|
|
$
|
47.7
|
|
|
$
|
43.9
|
|
Accrual for product-related matters
|
4.2
|
|
|
6.7
|
|
|
19.2
|
|
|
17.6
|
|
||||
Settlements and adjustments
|
(4.6
|
)
|
|
(4.8
|
)
|
|
(14.0
|
)
|
|
(15.0
|
)
|
||||
Accrual Balance — ending
|
$
|
52.9
|
|
|
$
|
46.5
|
|
|
$
|
52.9
|
|
|
$
|
46.5
|
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||
Series B senior notes, due January 3, 2018
|
$
|
—
|
|
|
$
|
149.9
|
|
Debt securities, due March 1, 2021
|
50.0
|
|
|
50.0
|
|
||
Syndicated revolving line of credit, due September 2021
|
225.0
|
|
|
—
|
|
||
Supplier financing program
|
3.3
|
|
|
$
|
3.2
|
|
|
Total debt
|
$
|
278.3
|
|
|
$
|
203.1
|
|
Less: Current debt
|
(3.3
|
)
|
|
(3.2
|
)
|
||
Long-term debt
|
$
|
275.0
|
|
|
$
|
199.9
|
|
(In millions)
|
Cumulative Translation Adjustments
|
|
Pension and Other Post-retirement Benefit Plans
|
|
Unrealized
Gains on Available-for-sale Securities
|
|
Interest Rate Swap Agreement
|
|
Accumulated Other Comprehensive Loss
|
||||||||||
Balance at May 28, 2016
|
$
|
(29.6
|
)
|
|
$
|
(34.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(64.5
|
)
|
Other comprehensive income (loss) before reclassifications
|
(10.8
|
)
|
|
—
|
|
|
0.2
|
|
|
5.3
|
|
|
(5.3
|
)
|
|||||
Reclassification from accumulated other comprehensive loss - Selling, general and administrative
|
—
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|||||
Tax benefit
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||
Net reclassifications
|
—
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
|||||
Net current period other comprehensive income
|
(10.8
|
)
|
|
2.1
|
|
|
0.2
|
|
|
5.3
|
|
|
(3.2
|
)
|
|||||
Balance at March 2, 2017
|
$
|
(40.4
|
)
|
|
(32.8
|
)
|
|
$
|
0.2
|
|
|
$
|
5.3
|
|
|
$
|
(67.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at June 3, 2017
|
$
|
(36.8
|
)
|
|
$
|
(47.6
|
)
|
|
$
|
0.1
|
|
|
$
|
2.1
|
|
|
$
|
(82.2
|
)
|
Other comprehensive income before reclassifications
|
6.3
|
|
|
—
|
|
|
—
|
|
|
6.9
|
|
|
13.2
|
|
|||||
Reclassification from accumulated other comprehensive loss - Selling, general and administrative
|
—
|
|
|
3.2
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
|||||
Tax expense
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|||||
Net reclassifications
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||
Net current period other comprehensive income
|
6.3
|
|
|
2.6
|
|
|
—
|
|
|
6.9
|
|
|
15.8
|
|
|||||
Balance at March 3, 2018
|
$
|
(30.5
|
)
|
|
$
|
(45.0
|
)
|
|
$
|
0.1
|
|
|
$
|
9.0
|
|
|
$
|
(66.4
|
)
|
(In millions)
|
March 3, 2018
|
|
March 4, 2017
|
||||
Beginning Balance
|
$
|
24.6
|
|
|
$
|
27.0
|
|
Purchase of redeemable noncontrolling interests
|
(1.0
|
)
|
|
(1.5
|
)
|
||
Net income attributable to redeemable noncontrolling interests
|
0.2
|
|
|
0.1
|
|
||
Redemption value adjustment
|
0.5
|
|
|
(0.7
|
)
|
||
Other adjustments
|
—
|
|
|
0.1
|
|
||
Ending Balance
|
$
|
24.3
|
|
|
$
|
25.0
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In millions)
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||||||
Net Sales:
|
|
|
|
|
|
|
|
||||||||
North American Furniture Solutions
|
$
|
316.4
|
|
|
$
|
294.5
|
|
|
$
|
975.3
|
|
|
$
|
955.6
|
|
ELA Furniture Solutions
|
102.6
|
|
|
88.0
|
|
|
309.0
|
|
|
292.9
|
|
||||
Specialty
|
72.6
|
|
|
69.3
|
|
|
222.2
|
|
|
224.4
|
|
||||
Consumer
|
86.8
|
|
|
73.1
|
|
|
256.7
|
|
|
228.1
|
|
||||
Total
|
$
|
578.4
|
|
|
$
|
524.9
|
|
|
$
|
1,763.2
|
|
|
$
|
1,701.0
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Earnings (Loss):
|
|
|
|
|
|
|
|
||||||||
North American Furniture Solutions
|
$
|
37.8
|
|
|
$
|
35.9
|
|
|
$
|
131.6
|
|
|
$
|
125.7
|
|
ELA Furniture Solutions
|
7.2
|
|
|
6.5
|
|
|
26.1
|
|
|
27.1
|
|
||||
Specialty
|
2.0
|
|
|
1.3
|
|
|
5.7
|
|
|
12.2
|
|
||||
Consumer
|
4.2
|
|
|
(0.7
|
)
|
|
5.5
|
|
|
1.9
|
|
||||
Corporate
|
(12.9
|
)
|
|
(8.0
|
)
|
|
(31.5
|
)
|
|
(25.9
|
)
|
||||
Total
|
$
|
38.3
|
|
|
$
|
35.0
|
|
|
$
|
137.4
|
|
|
$
|
141.0
|
|
(In millions)
|
March 3, 2018
|
|
June 3, 2017
|
||||
Total Assets:
|
|
|
|
||||
North American Furniture Solutions
|
$
|
506.1
|
|
|
$
|
533.6
|
|
ELA Furniture Solutions
|
259.0
|
|
|
230.3
|
|
||
Specialty
|
177.9
|
|
|
157.9
|
|
||
Consumer
|
283.6
|
|
|
276.4
|
|
||
Corporate
|
215.1
|
|
|
108.1
|
|
||
Total
|
$
|
1,441.7
|
|
|
$
|
1,306.3
|
|
(In millions)
|
March 3, 2018
|
|
March 4, 2017
|
||||
Beginning Balance
|
$
|
2.4
|
|
|
$
|
0.4
|
|
Restructuring expenses
|
1.9
|
|
|
3.7
|
|
||
Payments
|
(4.0
|
)
|
|
(1.6
|
)
|
||
Ending Balance
|
$
|
0.3
|
|
|
$
|
2.5
|
|
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
|
|
Three Months Ended
|
Three Months Ended
|
||||||||||||||||||||||||||||
|
3/3/18
|
3/4/17
|
||||||||||||||||||||||||||||
|
North America
|
ELA
|
Specialty
|
Consumer
|
Total
|
North America
|
ELA
|
Specialty
|
Consumer
|
Total
|
||||||||||||||||||||
Net Sales, as reported
|
$
|
316.4
|
|
$
|
102.6
|
|
$
|
72.6
|
|
$
|
86.8
|
|
$
|
578.4
|
|
$
|
294.5
|
|
$
|
88.0
|
|
$
|
69.3
|
|
$
|
73.1
|
|
$
|
524.9
|
|
% change from PY
|
7.4
|
%
|
16.6
|
%
|
4.8
|
%
|
18.7
|
%
|
10.2
|
%
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Proforma Adjustments
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Dealer Divestitures
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2.6
|
)
|
—
|
|
—
|
|
—
|
|
(2.6
|
)
|
||||||||||
Currency Translation Effects (1)
|
(1.1
|
)
|
(5.0
|
)
|
—
|
|
(0.1
|
)
|
(6.2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||
Organic net sales
|
$
|
315.3
|
|
$
|
97.6
|
|
$
|
72.6
|
|
$
|
86.7
|
|
$
|
572.2
|
|
$
|
291.9
|
|
$
|
88.0
|
|
$
|
69.3
|
|
$
|
73.1
|
|
$
|
522.3
|
|
% change from PY
|
8.0
|
%
|
10.9
|
%
|
4.8
|
%
|
18.6
|
%
|
9.6
|
%
|
|
|
|
|
|
|
Nine Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||
|
3/3/18
|
3/4/17
|
|||||||||||||||||||||||||||
|
North America
|
ELA
|
Specialty
|
Consumer
|
Total
|
North America
|
ELA
|
Specialty
|
Consumer
|
Total
|
|||||||||||||||||||
Net Sales, as reported
|
$
|
975.3
|
|
$
|
309.0
|
|
$
|
222.2
|
|
$
|
256.7
|
|
$1,763.2
|
$
|
955.6
|
|
$
|
292.9
|
|
$
|
224.4
|
|
$
|
228.1
|
|
$
|
1,701.0
|
|
|
% change from PY
|
2.1
|
%
|
5.5
|
%
|
(1.0
|
)%
|
12.5
|
%
|
3.7
|
%
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Proforma Adjustments
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Dealer Divestitures
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(21.4
|
)
|
—
|
|
—
|
|
—
|
|
(21.4
|
)
|
|||||||||
Currency Translation Effects (1)
|
(2.7
|
)
|
(7.4
|
)
|
(0.1
|
)
|
(0.2
|
)
|
(10.4
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Impact of Extra Week in FY17
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(21.7
|
)
|
(6.3
|
)
|
(4.3
|
)
|
(4.7
|
)
|
(37.0
|
)
|
|||||||||
Impact of change in DWR shipping terms
|
—
|
|
—
|
|
—
|
|
(5.0
|
)
|
(5.0
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Organic net sales
|
$
|
972.6
|
|
$
|
301.6
|
|
$
|
222.1
|
|
$
|
251.5
|
|
$1,747.8
|
$
|
912.5
|
|
$
|
286.6
|
|
$
|
220.1
|
|
$
|
223.4
|
|
$
|
1,642.6
|
|
|
% change from PY
|
6.6
|
%
|
5.2
|
%
|
0.9
|
%
|
12.6
|
%
|
6.4
|
%
|
|
|
|
|
|
||||||||||||||
(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
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||
|
3/3/2018
|
3/4/2017
|
3/3/2018
|
3/4/2017
|
||||||||
Earnings per Share - Diluted
|
$
|
0.49
|
|
$
|
0.37
|
|
$
|
1.60
|
|
$
|
1.50
|
|
|
|
|
|
|
||||||||
Less: One-time impact of adopting U.S. Tax Cuts and Jobs Act
|
(0.04
|
)
|
—
|
|
(0.04
|
)
|
—
|
|
||||
Less: Gain on sale of dealer
|
—
|
|
(0.01
|
)
|
—
|
|
(0.01
|
)
|
||||
Add: Special charges
|
0.05
|
|
—
|
|
0.06
|
|
—
|
|
||||
Add: Restructuring expense
|
—
|
|
0.03
|
|
0.02
|
|
0.03
|
|
||||
Adjusted Earnings per Share - Diluted
|
$
|
0.50
|
|
$
|
0.39
|
|
$
|
1.64
|
|
$
|
1.52
|
|
(In millions, except per share data)
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||
|
March 3, 2018
|
|
March 4, 2017
|
|
Percent
Change
|
|
March 3, 2018
|
|
March 4, 2017
|
|
Percent
Change |
||||||||||
|
(13 weeks)
|
|
(13 weeks)
|
|
|
|
(39 weeks)
|
|
|
(40 weeks)
|
|
|
|
||||||||
Net sales
|
$
|
578.4
|
|
|
$
|
524.9
|
|
|
10.2
|
%
|
|
$
|
1,763.2
|
|
|
$
|
1,701.0
|
|
|
3.7
|
%
|
Cost of sales
|
372.6
|
|
|
329.4
|
|
|
13.1
|
%
|
|
1,118.5
|
|
|
1,057.6
|
|
|
5.8
|
%
|
||||
Gross margin
|
205.8
|
|
|
195.5
|
|
|
5.3
|
%
|
|
644.7
|
|
|
643.4
|
|
|
0.2
|
%
|
||||
Operating expenses
|
167.5
|
|
|
157.8
|
|
|
6.1
|
%
|
|
505.4
|
|
|
498.7
|
|
|
1.3
|
%
|
||||
Restructuring expenses
|
—
|
|
|
2.7
|
|
|
n/a
|
|
|
1.9
|
|
|
3.7
|
|
|
(48.6
|
)%
|
||||
Total operating expenses
|
167.5
|
|
|
160.5
|
|
|
4.4
|
%
|
|
507.3
|
|
|
502.4
|
|
|
1.0
|
%
|
||||
Operating earnings
|
38.3
|
|
|
35.0
|
|
|
9.4
|
%
|
|
137.4
|
|
|
141.0
|
|
|
(2.6
|
)%
|
||||
Other expenses, net
|
2.1
|
|
|
3.0
|
|
|
(30.0
|
)%
|
|
7.7
|
|
|
10.4
|
|
|
(26.0
|
)%
|
||||
Earnings before income taxes and equity income
|
36.2
|
|
|
32.0
|
|
|
13.1
|
%
|
|
129.7
|
|
|
130.6
|
|
|
(0.7
|
)%
|
||||
Income tax expense
|
6.9
|
|
|
9.5
|
|
|
(27.4
|
)%
|
|
35.4
|
|
|
41.1
|
|
|
(13.9
|
)%
|
||||
Equity income from nonconsolidated affiliates, net of tax
|
0.7
|
|
|
—
|
|
|
n/a
|
|
|
2.2
|
|
|
1.1
|
|
|
100.0
|
%
|
||||
Net earnings
|
30.0
|
|
|
22.5
|
|
|
33.3
|
%
|
|
96.5
|
|
|
90.6
|
|
|
6.5
|
%
|
||||
Net earnings attributable to noncontrolling interests
|
0.2
|
|
|
—
|
|
|
n/a
|
|
|
0.2
|
|
|
0.1
|
|
|
100.0
|
%
|
||||
Net earnings attributable to Herman Miller, Inc.
|
$
|
29.8
|
|
|
$
|
22.5
|
|
|
32.4
|
%
|
|
96.3
|
|
|
90.5
|
|
|
6.4
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share — diluted
|
0.49
|
|
|
0.37
|
|
|
32.4
|
%
|
|
1.60
|
|
|
1.50
|
|
|
6.7
|
%
|
||||
Orders
|
563.2
|
|
|
543.2
|
|
|
3.7
|
%
|
|
1,787.4
|
|
|
1,714.7
|
|
|
4.2
|
%
|
||||
Backlog
|
341.7
|
|
|
331.6
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
March 3, 2018
|
|
March 4, 2017
|
|
March 3, 2018
|
|
March 4, 2017
|
||||
Net sales
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
64.4
|
|
|
62.8
|
|
|
63.4
|
|
|
62.2
|
|
Gross margin
|
35.6
|
|
|
37.2
|
|
|
36.6
|
|
|
37.8
|
|
Operating expenses
|
29.0
|
|
|
30.1
|
|
|
28.7
|
|
|
29.3
|
|
Restructuring expenses
|
—
|
|
|
0.5
|
|
|
0.1
|
|
|
0.2
|
|
Total operating expenses
|
29.0
|
|
|
30.6
|
|
|
28.8
|
|
|
29.5
|
|
Operating earnings
|
6.6
|
|
|
6.7
|
|
|
7.8
|
|
|
8.3
|
|
Other expenses, net
|
0.4
|
|
|
0.6
|
|
|
0.4
|
|
|
0.6
|
|
Earnings before income taxes and equity income
|
6.3
|
|
|
6.1
|
|
|
7.4
|
|
|
7.7
|
|
Income tax expense
|
1.2
|
|
|
1.8
|
|
|
2.0
|
|
|
2.4
|
|
Equity income from nonconsolidated affiliates, net of tax
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Net earnings
|
5.2
|
|
|
4.3
|
|
|
5.5
|
|
|
5.3
|
|
Net earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net earnings attributable to Herman Miller, Inc.
|
5.2
|
|
|
4.3
|
|
|
5.5
|
|
|
5.3
|
|
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
|
•
|
Sales volumes within the North American segment increased by approximately $27 million, resulting from increased demand within the company's North America office furniture businesses.
|
•
|
Incremental sales volumes within the Consumer segment of approximately $14 million were driven by growth across the DWR studio, e-commerce and contract channels.
|
•
|
Increased sales volumes within the ELA segment of approximately $12 million were driven primarily by broad-based growth across all regions.
|
•
|
Foreign currency translation had a positive impact on net sales of approximately $6 million.
|
•
|
Increased sales volumes within the Specialty segment of approximately $4 million due primarily to increased sales volumes for the Herman Miller Collection and Geiger subsidiary.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales in the third quarter of fiscal 2018 by roughly $7 million as compared to the prior year. Of this change, approximately $4 million related to the North American operating segment.
|
•
|
The impact of the divestiture of the company's dealerships in Vancouver, Canada in fiscal 2018 and Philadelphia, Pennsylvania in fiscal 2017 had the effect of reducing sales by $2.6 million in the current three month period as compared to the same period of the prior fiscal year.
|
•
|
Sales volumes within the North American segment increased by approximately $72 million, resulting from increased demand within the company's North America office furniture business.
|
•
|
Incremental sales volumes within the Consumer segment of approximately $33 million were driven partly by a change in shipping terms at Design Within Reach that resulted in approximately $5 million of net sales being accelerated into the first quarter of fiscal 2018. The rest of the change was due mainly to growth across the DWR studio, e-commerce and contract channels.
|
•
|
Increased sales volumes within the ELA segment of approximately $20 million were driven primarily by growth in the Latin America and Asia Pacific regions.
|
•
|
Foreign currency translation had a positive impact on net sales of approximately $10 million.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales in the first half of fiscal 2018 by roughly $15 million as compared to the prior year. Of this change, approximately $12 million related to the North American operating segment.
|
•
|
The impact of the divestiture of the company's dealerships in Vancouver, Canada in fiscal 2018 and Philadelphia, Pennsylvania in fiscal 2017 had the effect of reducing sales by $21.4 million in the current nine month period as compared to the same period of the prior fiscal year.
|
•
|
The nine month period of fiscal 2018 had 39 weeks as compared to the same period of fiscal 2017, which had 40 weeks. The impact of this additional week decreased net sales by approximately $37 million compared to the prior year period.
|
•
|
Incremental price discounting, net of price increases, reduced the company's consolidated gross margin by approximately 50 basis points relative to the same period of last fiscal year.
|
•
|
Material cost performance at the company's West Michigan manufacturing facilities decreased gross margin by approximately 20 basis points as compared to the same period of the prior fiscal year. The company incurred higher than expected outsourcing costs in its West Michigan operations to meet increased customer demand for products made in capacity-constrained areas of the factory.
|
•
|
Unfavorable product mix shift at the company's West Michigan operations drove a decrease of approximately 20 basis points as compared to the same period of last fiscal year.
|
•
|
Manufacturing overhead and labor cost leverage was unfavorable by approximately 40 basis points at the company's West Michigan operations. This was driven primarily by incremental costs related to depreciation and wage base increases in comparison to the same period last fiscal year.
|
•
|
The rest of the decrease in gross margin was driven by several factors, including the unfavorable impact of increased incentive compensation costs as well as lower volume leverage at the company's Nemschoff subsidiary, partially offset by improved channel mix across operating segments including the growth in the company's Consumer business.
|
•
|
Incremental price discounting, net of price increases, reduced the company's consolidated gross margin by approximately 50 basis points relative to the same period of last fiscal year.
|
•
|
Higher commodity costs due to higher steel prices in the first half of this fiscal year drove an unfavorable year-over-year margin impact of approximately 30 basis points.
|
•
|
Material cost performance at the company's West Michigan manufacturing facilities decreased gross margin by approximately 20 basis points as compared to the same period of the prior fiscal year. The company incurred higher than expected outsourcing costs in its West Michigan operations to meet increased customer demand for products made in capacity-constrained areas of the factory.
|
•
|
Unfavorable product mix shift at the company's West Michigan operations drove a decrease of approximately 30 basis points as compared to the same period of last fiscal year.
|
•
|
These decreases in gross margin were partially offset by improved channel mix across operating segments including the growth in the company's Consumer business.
|
•
|
Special charges, primarily associated with the planned CEO transition and consulting fees related to the profit optimization of the company's consumer business increased operating expenses by $3.9 million.
|
•
|
Higher employee incentive costs increased operating expenses by $1.5 million. The increase reflects higher incentive compensation costs that are variable based on the achievement of earnings levels for the fiscal year relative to plan.
|
•
|
Depreciation expense increased by approximately $2 million and was driven primarily by investment in facilities.
|
•
|
Sales volume based costs, such as sales commissions and royalties, drove an increase in operating expenses of $1.7 million.
|
•
|
Incremental costs related to the continued growth and expansion of DWR retail studios increased operating expenses by approximately $1 million.
|
•
|
Higher restructuring costs in the prior year period had the effect of decreasing operating expenses by $2.7 million.
|
•
|
Special charges, primarily associated with the planned CEO transition and consulting fees related to the profit optimization of the company's consumer business increased operating expenses by $5.9 million.
|
•
|
Incremental costs related to the continued growth and expansion of DWR retail studios increased operating expenses by approximately $4 million.
|
•
|
Sales volume based costs, such as sales commissions and royalties, drove an increase in operating expenses of approximately $4 million.
|
•
|
Depreciation expense increased by approximately $4 million and was driven primarily by investment in facilities.
|
•
|
Higher employee incentive costs increased operating expenses by $2.9 million. The increase reflects higher incentive compensation costs that are variable based on the achievement of earnings levels for the fiscal year relative to plan.
|
•
|
Foreign currency translation had an incremental impact on operating expenses of approximately $2 million.
|
•
|
Higher restructuring costs in the prior year period had the effect of decreasing operating expenses by $1.8 million.
|
•
|
The divestiture of the company's dealerships in Vancouver and Philadelphia in fiscal 2018 and 2017, respectively, resulted in a decrease in operating expenses of $5.0 million.
|
•
|
Operating expenses were approximately $9 million lower due to the extra week of operations included in the results of the prior year.
|
•
|
North American Furniture Solutions — Includes the operations associated with the design, manufacture and sale of furniture products for work-related settings, including office, education, and Herman Miller healthcare environments, throughout the United States and Canada.
|
•
|
ELA Furniture Solutions — Includes EMEA, Latin America and Asia-Pacific operations associated with the design, manufacture and sale of furniture products, primarily for work-related settings.
|
•
|
Specialty — Includes operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, Nemschoff and Herman Miller Collection products.
|
•
|
Consumer — Includes operations associated with the sale of modern design furnishings and accessories to third party retail distributors, as well as direct-to-consumer sales through eCommerce and DWR retail studios and outlets.
|
•
|
Corporate — Consists 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.
|
•
|
Sales volumes within the North American segment increased by approximately $27 million, resulting from increased demand within the company's North America office furniture business.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales and operating earnings in the third quarter of fiscal 2018 by roughly $4 million as compared to the prior year.
|
•
|
The third quarter of fiscal 2017 included the full results of operations for the company’s dealership in Vancouver, Canada and one month of operations for the company's dealership in Philadelphia, Pennsylvania. Accordingly, the increase in sales volumes for the North American segment for the current three month period was partially offset by a $2.6 million decrease in net sales due to the
|
•
|
Operating earnings increased primarily due to increased sales volumes and reductions in operating expenses related to company-wide cost savings initiatives. These factors were partially offset by deeper contract price discounting, net of incremental price increases, and a mix shift into lower margin products which had the combined impact of decreasing gross margin by approximately $7 million as compared to the same quarter in fiscal 2017.
|
•
|
The impact of an extra week in fiscal 2017 caused net sales and orders in the first nine months of fiscal 2018 to be lower than the prior year comparative period by approximately $22 million and $20 million, respectively.
|
•
|
Sales volumes within the North American segment increased by approximately $72 million, resulting from increased demand within the company's North America office furniture business.
|
•
|
The first nine months of fiscal 2017 included the full results of operations for the company’s dealership in Vancouver, Canada that was divested in the first quarter of fiscal 2018. The first nine months of fiscal 2017 included seven months of operations for the company's dealership in Philadelphia, Pennsylvania that was divested in the third quarter of fiscal 2017. Accordingly, the increase in sales volumes for the North American segment for the current nine month period was partially offset by a $21.4 million decrease in net sales due to the divestitures. The sale of these dealerships also decreased consolidated orders and operating earnings for the North America segment in the first nine months of fiscal 2018 by $22.4 million and $0.7 million respectively, compared to the same period last year.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales and operating earnings in the nine month period of fiscal 2018 by roughly $12 million as compared to the prior year.
|
•
|
Operating earnings increased primarily due to increased sales volumes and reductions in operating expenses related to company-wide cost savings initiatives. These factors were partially offset by deeper contract price discounting, net of incremental price increases, a mix shift into lower margin products, outsourcing costs due to capacity constraints within the company's plants and commodity price pressure which had the combined impact of decreasing gross margin by approximately $23 million as compared to the same quarter in fiscal 2017.
|
•
|
Increased sales volumes within the ELA segment of approximately $12 million were driven primarily by growth in Asia Pacific and EMEA.
|
•
|
The impact of foreign currency translation increased net sales and operating earnings by $5.0 million and $0.8 million, respectively.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales and operating earnings in the third quarter of fiscal 2018 by roughly $2 million as compared to the prior year.
|
•
|
Operating earnings in the current three month period of fiscal 2018 were higher due to increased sales volumes and lower restructuring costs and special charges of $0.4 million as compared to the same period of the prior year. These increases were offset partially by deeper discounting, net of incremental price increases and increased royalty costs of $0.3 million in the period.
|
•
|
The impact of an extra week in fiscal 2017 caused net sales and orders in the first nine months of fiscal 2018 to be lower than the prior year comparative period by approximately $6 million and $8 million, respectively.
|
•
|
Increased sales volumes within the ELA segment of approximately $20 million were driven primarily by growth in Asia Pacific and Latin America.
|
•
|
The impact of foreign currency translation increased net sales and operating earnings by $7.4 million and $1.6 million, respectively.
|
•
|
Deeper contract price discounting, net of incremental price increases, reduced net sales and operating earnings in the nine month period of fiscal 2018 by roughly $5 million as compared to the prior year.
|
•
|
Operating earnings in the first nine months of fiscal 2018 decreased as compared to the same period in the prior year due to the impact of the extra week of operations included in the prior year results, increased royalty costs of $0.8 million, increased warranty costs of $0.5 million and deeper discounting, net of incremental price increases. These decreases were partially offset by the increase in operating earnings from increased sales volumes.
|
•
|
Net sales increased in the third quarter of fiscal 2018 as compared to the same period of the prior year due primarily to increased sales volumes of approximately $4 million, which was driven primarily by the company's Herman Miller Collection and Geiger businesses.
|
•
|
The increase in operating earnings as compared to the prior year was mainly by driven increased profitability at the company's Maharam subsidiary and the Herman Miller Collection portfolio of products. The increase in operating earnings for Maharam was driven by a decrease in operating expenses of approximately $1.3 million as compared to the prior year, while the increase in operating earnings for the Herman Miller Collection was driven by higher sales volumes. These increases were partially offset by decreased operating earnings at the company's Nemschoff subsidiary of approximately $1 million as compared to the same period of the prior year.
|
•
|
The impact of an extra week in fiscal 2017 caused net sales and orders in the first nine months of fiscal 2018 to be lower than the prior year comparative period by approximately $4 million and $5 million, respectively.
|
•
|
The company's Nemschoff subsidiary experienced a decrease in operating earnings of approximately $5 million as compared to the prior year period. This decrease was driven by unfavorable product mix, the negative impact on operating earnings from decreased sales volumes and higher warranty costs.
|
•
|
Increased inventory reserves of approximately $0.5 million, which was driven by all entities in the Specialty segment, had a negative impact on operating earnings in the first nine months of fiscal 2018.
|
•
|
Net sales increased due to incremental sales volumes of approximately $14 million which was driven by growth across the DWR studio, e-commerce and contract channels.
|
•
|
Operating earnings in the third quarter of fiscal 2018 were higher than prior year driven by the increase in sales, an increase in shipments of higher margin proprietary products. This includes improvements in the operating performance of new studio locations that have been put in place over the past 18 months.
|
•
|
Incremental sales volumes within the Consumer segment of approximately $33 million were driven partly by a change in shipping terms at Design Within Reach that resulted in the acceleration of approximately $5 million of net sales in the first quarter of fiscal 2018. The balance of the change was due to growth across the DWR studio, e-commerce and contract channels.
|
•
|
The impact of an extra week in fiscal 2017 caused net sales and orders in the first nine months of fiscal 2018 to be lower than the prior year comparative period by approximately $5 million and $4 million, respectively.
|
•
|
The impact of the changes in DWR shipping terms and the incremental $5 million of first quarter revenue had a favorable impact on operating earnings of approximately $1 million in the current period as compared to the same period of last fiscal year.
|
•
|
Operating earnings in the first nine months of fiscal 2018 were higher due to increased sales volumes as compared to the same period of the prior year. This increase was offset partially by the negative impact of the addition of new DWR studio locations, which add incremental selling square footage but take time (twelve to eighteen months on average) to achieve full operational efficiency. These incremental costs increased operating expenses by approximately $4 million as compared to the prior year.
|
•
|
Increased warranty costs of $0.2 million and inventory reserves of $0.5 million related to the bankruptcy of a product vendor also negatively impacted operating earnings in the current nine month period.
|
|
March 3, 2018
|
|
March 4, 2017
|
||||
(In millions)
|
(39 weeks)
|
|
(40 weeks)
|
||||
Cash and cash equivalents, end of period
|
$
|
193.0
|
|
|
$
|
78.4
|
|
Marketable securities, end of period
|
8.4
|
|
|
8.0
|
|
||
Cash provided by operating activities
|
110.7
|
|
|
122.1
|
|
||
Cash used in investing activities
|
(42.5
|
)
|
|
(99.0
|
)
|
||
Cash provided by (used in) financing activities
|
28.3
|
|
|
(29.6
|
)
|
||
Capital expenditures
|
(51.0
|
)
|
|
(70.5
|
)
|
||
Stock repurchased and retired
|
(30.1
|
)
|
|
(17.2
|
)
|
||
Common stock issued
|
16.0
|
|
|
7.6
|
|
||
Dividends paid
|
(31.7
|
)
|
|
(29.2
|
)
|
||
Interest-bearing debt, end of period
|
275.0
|
|
|
234.5
|
|
||
Available unsecured credit facility, end of period (1)
|
$
|
166.8
|
|
|
$
|
357.1
|
|
(In millions)
|
March 3, 2018
|
March 4, 2017
|
||||
Cash and cash equivalents
|
$
|
193.0
|
|
$
|
78.4
|
|
Marketable securities
|
8.4
|
|
8.0
|
|
||
Availability under syndicated revolving line of credit
|
$
|
166.8
|
|
$
|
357.1
|
|
Period
|
(a) Total Number of Shares (or Units)
Purchased
|
|
(b) Average price Paid per Share or Unit
|
|
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
|
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (in millions)
|
||||||
12/3/17 - 12/30/17
|
25,494
|
|
|
$
|
36.33
|
|
|
25,494
|
|
|
$
|
90,317,595
|
|
12/31/17 - 1/27/18
|
61,939
|
|
|
$
|
40.27
|
|
|
61,939
|
|
|
$
|
87,823,265
|
|
1/28/18 - 3/3/18
|
249,416
|
|
|
$
|
37.60
|
|
|
249,416
|
|
|
$
|
78,444,810
|
|
Total
|
336,849
|
|
|
|
|
336,849
|
|
|
|
Exhibit Number
|
Document
|
10.1
|
10.2
|
31.1
|
31.2
|
32.1
|
32.2
|
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
|
April 11, 2018
|
|
/s/ Brian C. Walker
|
|
|
|
|
|
Brian C. Walker
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
(Duly Authorized Signatory for Registrant)
|
|
|
|
|
|
|
April 11, 2018
|
|
/s/ Jeffrey M. Stutz
|
|
|
|
|
|
Jeffrey M. Stutz
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Duly Authorized Signatory for Registrant)
|
|
EXECUTIVE
/S/ Brian C. Walker
|
I.
|
OWNERSHIP RIGHTS
|
A.
|
Inventions.
|
B.
|
Copyrights.
|
C.
|
Cooperation.
|
D.
|
Prior Inventions.
|
E.
|
Notice of Limits to Assignment.
|
II.
|
CONFIDENTIALITY
|
A.
|
Necessity.
|
B.
|
Promises.
|
C.
|
Promise To Protect.
|
D.
|
Promise to Return.
|
E.
|
Promise Not To Use Or Disclose.
|
F.
|
Required Disclosures.
|
III.
|
RESTRICTIVE COVENANTS
|
A.
|
Non-Solicitation.
|
B.
|
Non-Interference.
|
C.
|
Non-Competition.
|
IV.
|
Non-Disparagement
|
V.
|
Enforcement
|
A.
|
Injunctive relief
|
VI.
|
MISCELLANEOUS
|
VII.
|
Definitions
|
VIII.
|
Acknowledgement
|
•
|
Steelcase
|
•
|
Haworth
|
•
|
Knoll
|
•
|
Teknion
|
•
|
HNI
|
•
|
Allsteel
|
•
|
KI
|
•
|
Kimball
|
•
|
Trendway
|
•
|
Inscape
|
•
|
Riviera
|
•
|
Humanscale
|
•
|
Halcon
|
•
|
Vitra
|
•
|
Room & Board
|
•
|
Restoration Hardware
|
•
|
Ethan Allen
|
•
|
Holly Hunt
|
•
|
Nucraft Furniture
|
•
|
OFS/First Office
|
•
|
Watson
|
•
|
HAY
|
•
|
Sit On It
|
•
|
Bernhardt
|
•
|
DECCA
|
•
|
Touhy
|
•
|
Weiland
|
•
|
WeWork
|
I.
|
OWNERSHIP RIGHTS
|
A.
|
Inventions.
|
B.
|
Copyrights.
|
C.
|
Cooperation.
|
D.
|
Prior Inventions.
|
E.
|
Notice of Limits to Assignment.
|
II.
|
CONFIDENTIALITY
|
A.
|
Necessity.
|
B.
|
Promises.
|
C.
|
Promise To Protect.
|
D.
|
Promise to Return.
|
E.
|
Promise Not To Use Or Disclose.
|
F.
|
Required Disclosures.
|
III.
|
RESTRICTIVE COVENANTS
|
A.
|
Non-Solicitation.
|
B.
|
Non-Interference.
|
C.
|
Non-Competition.
|
IV.
|
Non-Disparagement
|
V.
|
Enforcement
|
A.
|
Injunctive relief
|
VI.
|
MISCELLANEOUS
|
VII.
|
Definitions
|
VIII.
|
Acknowledgement
|
•
|
Steelcase
|
•
|
Haworth
|
•
|
Knoll
|
•
|
Teknion
|
•
|
HNI
|
•
|
Allsteel
|
•
|
KI
|
•
|
Kimball
|
•
|
Trendway
|
•
|
Inscape
|
•
|
Riviera
|
•
|
Humanscale
|
•
|
Halcon
|
•
|
Vitra
|
•
|
Room & Board
|
•
|
Restoration Hardware
|
•
|
Ethan Allen
|
•
|
Holly Hunt
|
•
|
Nucraft Furniture
|
•
|
OFS/First Office
|
•
|
Watson
|
•
|
HAY
|
•
|
Sit On It
|
•
|
Bernhardt
|
•
|
DECCA
|
•
|
Touhy
|
•
|
Weiland
|
•
|
WeWork
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended March 3, 2018, of Herman Miller, 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.
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended March 3, 2018, of Herman Miller, 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.
|
(1)
|
The quarterly report on Form 10-Q for the period ended March 3, 2018, 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 March 3, 2018, fairly presents, in all material respects, the financial condition and results of operations of the company
|
(1)
|
The quarterly report on Form 10-Q for the period ended March 3, 2018, 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 March 3, 2018, fairly presents, in all material respects, the financial condition and results of operations of the company.
|