[ 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 September 1, 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 Months Ended September 1, 2018 and September 2, 2017
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Condensed Consolidated Balance Sheets — September 1, 2018 and June 2, 2018
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Condensed Consolidated Statements of Cash Flows — Three Months Ended September 1, 2018 and September 2, 2017
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Condensed Consolidated Statements of Stockholders' Equity — Three Months Ended September 1, 2018 and September 2, 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 4 - Acquisitions and Divestitures
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Note 5 - Inventories, net
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Note 7 - Employee Benefit Plans
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Note 8 - Earnings Per Share
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Note 9 - Stock-Based Compensation
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Note 10 - Income Taxes
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Note 11 - Fair Value Measurements
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Note 12 - Commitments and Contingencies
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Note 13 - Debt
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Note 14 - Accumulated Other Comprehensive Loss
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Note 15 - Redeemable Noncontrolling Interests
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Note 16 - Operating Segments
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Note 17 - Restructuring Expenses and Other Charges
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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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September 1, 2018
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September 2, 2017
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Net sales
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$
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624.6
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$
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580.3
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Cost of sales
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399.5
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363.4
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Gross margin
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225.1
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216.9
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Operating expenses:
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Selling, general and administrative
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159.5
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146.8
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Restructuring and impairment expenses
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1.1
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1.4
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Design and research
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18.5
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19.2
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Total operating expenses
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179.1
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167.4
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Operating earnings
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46.0
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49.5
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Other expenses:
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Interest expense
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2.9
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3.7
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Other, net
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(1.0
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(0.7
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Earnings before income taxes and equity income
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44.1
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46.5
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Income tax expense
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8.9
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14.2
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Equity income from nonconsolidated affiliates, net of tax
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0.7
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0.8
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Net earnings
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35.9
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33.1
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Net earnings attributable to noncontrolling interests
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0.1
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—
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Net earnings attributable to Herman Miller, Inc.
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$
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35.8
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$
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33.1
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Earnings per share — basic
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$
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0.60
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$
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0.55
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Earnings per share — diluted
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$
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0.60
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$
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0.55
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Dividends declared, per share
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$
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0.1975
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$
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0.1800
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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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(7.9
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$
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4.4
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Pension and other post-retirement plans
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0.7
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0.8
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Interest rate swaps
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(0.5
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)
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(1.6
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Unrealized holding loss
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(0.1
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)
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—
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Other comprehensive (loss) income
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(7.8
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)
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3.6
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Comprehensive income
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28.1
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36.7
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Comprehensive income attributable to noncontrolling interests
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0.1
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—
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Comprehensive income attributable to Herman Miller, Inc.
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$
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28.0
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$
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36.7
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September 1, 2018
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June 2, 2018
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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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101.7
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$
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203.9
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Short-term investments
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8.5
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8.6
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Accounts and notes receivable, net
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205.4
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217.4
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Unbilled accounts receivable
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25.4
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1.9
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Inventories, net
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163.8
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162.4
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Prepaid expenses and other
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51.2
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51.2
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Total current assets
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556.0
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645.4
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Property and equipment, at cost
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1,031.0
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1,020.8
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Less — accumulated depreciation
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(701.2
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(689.4
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)
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Net property and equipment
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329.8
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331.4
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Goodwill
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303.9
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304.1
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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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45.1
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41.3
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Other noncurrent assets
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150.8
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79.2
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Total Assets
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$
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1,463.7
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$
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1,479.5
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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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170.2
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$
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171.4
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Accrued compensation and benefits
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68.8
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86.3
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Accrued warranty
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52.1
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51.5
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Customer deposits
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27.3
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27.6
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Other accrued liabilities
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73.0
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77.0
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Total current liabilities
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391.4
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413.8
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Long-term debt
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281.9
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275.0
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Pension and post-retirement benefits
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14.6
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15.6
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Other liabilities
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81.9
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79.8
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Total Liabilities
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769.8
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784.2
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Redeemable noncontrolling interests
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20.7
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30.5
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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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—
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Common stock, $0.20 par value (240,000,000 shares authorized, 59,302,918 and 59,774,490 shares issued and outstanding in 2019 and 2018, respectively)
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11.9
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11.7
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Additional paid-in capital
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106.5
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116.6
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Retained earnings
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624.5
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598.3
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Accumulated other comprehensive loss
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(69.2
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(61.3
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)
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Key executive deferred compensation plans
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(0.7
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(0.7
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Herman Miller, Inc. Stockholders' Equity
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673.0
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664.6
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Noncontrolling Interests
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0.2
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0.2
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Total Stockholders' Equity
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673.2
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664.8
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Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity
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$
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1,463.7
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$
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1,479.5
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Three Months Ended
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September 1, 2018
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September 2, 2017
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Cash Flows from Operating Activities:
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Net earnings
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$
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35.9
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$
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33.1
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Adjustments to reconcile net earnings to net cash provided by operating activities:
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Depreciation and amortization
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19.0
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15.5
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Stock-based compensation
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2.5
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1.3
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Pension and post-retirement expenses
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0.3
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0.4
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Pension contributions
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—
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(12.0
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)
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Earnings from nonconsolidated affiliates net of dividends received
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(0.7
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)
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(0.1
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Deferred taxes
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—
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(0.2
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)
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Gain on sales of property and dealers
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—
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(1.1
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)
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Restructuring and impairment expenses
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1.1
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1.4
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Increase in current assets
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(7.6
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(13.9
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Decrease in current liabilities
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(18.3
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(7.6
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Increase in non-current liabilities
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0.6
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1.6
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Other, net
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0.1
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0.5
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Net Cash Provided by Operating Activities
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32.9
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18.9
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Cash Flows from Investing Activities:
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Proceeds from sale of property and dealers
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—
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2.0
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Marketable securities sales
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0.1
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—
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Equity investment in non-controlled entities
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(71.6
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)
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—
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Capital expenditures
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(22.0
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)
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(24.9
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)
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Purchase of HAY licensing agreement
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(4.8
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)
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—
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Net advances on notes receivable
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—
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(1.0
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)
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Other, net
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(1.4
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)
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(0.3
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)
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Net Cash Used in Investing Activities
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(99.7
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)
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(24.2
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Cash Flows from Financing Activities:
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Dividends paid
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(10.7
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)
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(10.2
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)
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Proceeds from issuance of long-term debt
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—
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89.4
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Payments of long-term debt
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—
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(85.4
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)
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Common stock issued
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8.5
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4.4
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Common stock repurchased and retired
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(20.8
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)
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(11.1
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)
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Purchase of redeemable noncontrolling interests
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(10.0
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)
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(1.0
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)
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Net proceeds from supplier financing program
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—
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0.8
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Payment of contingent consideration
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(0.1
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)
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—
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Other, net
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0.1
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0.1
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Net Cash Used in by Financing Activities
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(33.0
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)
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(13.0
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)
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Effect of Exchange Rate Changes on Cash and Cash Equivalents
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(2.4
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)
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2.1
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Net Decrease in Cash and Cash Equivalents
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(102.2
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)
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(16.2
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)
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Cash and Cash Equivalents, Beginning of Period
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203.9
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96.2
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Cash and Cash Equivalents, End of Period
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$
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101.7
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$
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80.0
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Three Months Ended
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September 1, 2018
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September 2, 2017
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Preferred Stock
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Balance at beginning of year and end of period
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$
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—
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$
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—
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Common Stock
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Balance at beginning of year
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$
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11.7
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$
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11.9
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Exercise of stock options
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0.2
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0.1
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Restricted stock units released
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0.1
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—
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Repurchase and retirement of common stock
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(0.1
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)
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—
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Balance at end of period
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$
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11.9
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$
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12.0
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Additional Paid-in Capital
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Balance at beginning of year
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$
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116.6
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$
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139.3
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Cumulative effect of accounting change
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—
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(0.3
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)
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Repurchase and retirement of common stock
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(20.7
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)
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(11.1
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)
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Exercise of stock options
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7.9
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3.8
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Stock-based compensation expense
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2.2
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1.6
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Restricted stock units released
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—
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0.1
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Employee stock purchase plan issuances
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0.5
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0.5
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Balance at end of period
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$
|
106.5
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$
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133.9
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Retained Earnings
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Balance at beginning of year
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$
|
598.3
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$
|
519.5
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Cumulative effect of accounting changes
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2.0
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0.2
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Net income attributable to Herman Miller, Inc.
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35.8
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33.1
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Dividends declared on common stock (per share - 2019: $0.1975; 2018; $0.1800)
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(11.6
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)
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(10.8
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)
|
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Redeemable noncontrolling interests valuation adjustment
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—
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|
|
0.2
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|
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Balance at end of period
|
$
|
624.5
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|
|
$
|
542.2
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Accumulated Other Comprehensive Loss
|
|
|
|
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Balance at beginning of year
|
$
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(61.3
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)
|
|
$
|
(82.2
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)
|
Cumulative effect of accounting change
|
(0.1
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)
|
|
—
|
|
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Other comprehensive income (loss)
|
(7.8
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)
|
|
3.6
|
|
||
Balance at end of period
|
$
|
(69.2
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)
|
|
$
|
(78.6
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)
|
Key Executive Deferred Compensation
|
|
|
|
||||
Balance at beginning of year and end of period
|
$
|
(0.7
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)
|
|
$
|
(1.0
|
)
|
Herman Miller, Inc. Stockholders' Equity
|
$
|
673.0
|
|
|
$
|
608.5
|
|
Noncontrolling Interests
|
|
|
|
||||
Balance at beginning of year and end of period
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Total Stockholders' Equity
|
$
|
673.2
|
|
|
$
|
608.7
|
|
Standard
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Description
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Effective Date
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Effect on the Financial Statements or Other Significant Matters
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Revenue from Contracts with Customers
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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.
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June 3, 2018
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The company adopted the standard effective June 3, 2018 using the modified retrospective method. Refer to Note 3 to the financial statements for further information regarding the adoption of the standard.
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Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
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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.
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June 3, 2018
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The company adopted the standard effective June 3, 2018 using the modified retrospective method. As a result, the company reclassified $0.1 million of net gains on mutual fund equity securities, that were formerly classified as available for sale securities before the adoption of the new standard, from Accumulated Other Comprehensive Loss to Retained earnings. The impact of adoption also resulted in certain disclosure changes. Refer to Note 11 of the financial statements for further information.
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Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
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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.
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June 3, 2018
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The company retrospectively adopted the standard effective June 3, 2018. Prior to adoption, the company recorded net periodic benefit costs related to its defined benefit pension and post-retirement medical plans within Selling, general and administrative expenses. As a result of adoption, these costs are recorded within Other, net. The company retrospectively reclassified these costs in the Condensed Consolidated Statements of Comprehensive Income for the period ending September 2, 2017 from Selling, general and administrative to Other, net. Refer to Note 7 of the financial statements for further information.
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Standard
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Description
|
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Effective Date
|
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Effect on the Financial Statements or Other Significant Matters
|
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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.
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June 2, 2019
|
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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.
|
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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. The company does not expect the Statement of Comprehensive Income to be significantly impacted. However, the impact to the balance sheet of recording right of use assets and lease liabilities for the company’s operating leases, as well as the necessary financial statement disclosures, is expected to be significant. The company has assembled a project team and is working towards implementation of the lease accounting standard.
|
|
|
|
|
|
|
|
Measurement of Credit Losses on Financial Instruments
|
|
This guidance replaces the existing incurred loss impairment model with an expected loss model and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
|
|
May 30, 2020
|
|
The company is currently evaluating the impact of adopting this guidance.
|
|
Balance at
|
|
Adjustments due
|
|
Balance at
|
||||||
(In millions)
|
June 2, 2018
|
|
to ASC 606
|
|
June 3, 2018
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Assets:
|
|
|
|
|
|
||||||
Unbilled accounts receivable
|
$
|
1.9
|
|
|
$
|
11.1
|
|
|
$
|
13.0
|
|
Inventories, net
|
162.4
|
|
|
(7.1
|
)
|
|
155.3
|
|
|||
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
||||||
Accrued compensation and benefits
|
86.3
|
|
|
0.2
|
|
|
86.5
|
|
|||
Other accrued liabilities
|
77.0
|
|
|
1.9
|
|
|
78.9
|
|
|||
|
|
|
|
|
|
||||||
Equity:
|
|
|
|
|
|
||||||
Retained earnings
|
598.3
|
|
|
1.9
|
|
|
600.2
|
|
|
For the period ended September 1, 2018
|
||||||||||||||
(In millions)
|
As reported
|
|
Performance Obligation Change
|
|
Gross vs. Net Change
|
|
Legacy GAAP
|
||||||||
Statement of Comprehensive Income
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
624.6
|
|
|
$
|
(10.7
|
)
|
|
$
|
(8.5
|
)
|
|
$
|
605.4
|
|
Cost of sales
|
399.5
|
|
|
(5.8
|
)
|
|
(8.5
|
)
|
|
385.2
|
|
||||
Gross margin
|
225.1
|
|
|
(4.9
|
)
|
|
|
|
220.2
|
|
|||||
Total operating expenses
|
179.1
|
|
|
(0.1
|
)
|
|
|
|
179.0
|
|
|||||
Operating earnings
|
46.0
|
|
|
(4.8
|
)
|
|
|
|
41.2
|
|
|||||
Income tax expense
|
8.9
|
|
|
(1.1
|
)
|
|
|
|
7.8
|
|
|||||
Net earnings
|
35.9
|
|
|
(3.7
|
)
|
|
|
|
32.2
|
|
|
For the period ended September 1, 2018
|
|||||||||||
(In millions)
|
As reported
|
|
Performance Obligation Change
|
|
Gross vs. Net Change
|
|
Legacy GAAP
|
|||||
Balance Sheet
|
|
|
|
|
|
|
|
|||||
Assets:
|
|
|
|
|
|
|
|
|||||
Unbilled accounts receivable
|
$
|
25.4
|
|
|
(21.8
|
)
|
|
|
|
$
|
3.6
|
|
Inventories, net
|
163.8
|
|
|
12.5
|
|
|
|
|
176.3
|
|
||
|
|
|
|
|
|
|
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|||||
Accrued compensation and benefits
|
68.8
|
|
|
(0.3
|
)
|
|
|
|
68.5
|
|
||
Other accrued liabilities
|
73.0
|
|
|
(3.4
|
)
|
|
|
|
69.6
|
|
||
|
|
|
|
|
|
|
|
|||||
Equity:
|
|
|
|
|
|
|
|
|||||
Retained earnings
|
624.5
|
|
|
(5.6
|
)
|
|
|
|
618.9
|
|
–
|
Shipping and Handling Activities - the company accounts for shipping and handling activities as fulfillment activities and these costs are accrued within Cost of sales at the same time revenue is recognized.
|
–
|
Sales Taxes - the company does not record revenue for sales tax, value added tax or other taxes that are collected on behalf of government entities. The company’s revenue is recorded net of these taxes as they are passed through to the relevant government entities.
|
–
|
Incremental Costs of Obtaining a Contract - the company has recognized incremental costs to obtain a contract as an expense when incurred as the amortization period is less than one year.
|
–
|
Significant Financing Component - the company has not adjusted the amount of consideration to be received for any significant financing components as the company’s contracts have a duration of one year or less.
|
–
|
Single Performance Obligation - these contracts are transacted with customers and include only the product performance obligation. Most commonly, these contracts represent master agreements with independent third-party dealers in which a purchase order represents the customer contract, point of sale transactions through the Consumer reportable segment, as well as customer purchase orders for the Maharam subsidiary within the Specialty reportable segment. For contracts that include a single performance obligation, the company records revenue at the point in time when title and risk of loss has transferred to the customer.
|
–
|
Multiple Performance Obligations - these contracts are transacted with customers and include more than one performance obligation; products, which are shipped to the customer by the company and installation and other services, which are primarily fulfilled by independent third-party dealers. For contracts that include multiple performance obligations, the company records revenue for the product performance obligation at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. In most cases, the company has concluded that it is the agent for the installation services performance obligation and as such, the revenue and costs of these services are recorded net within “Net sales” in the company’s Condensed Consolidated Statements of Comprehensive Income.
|
–
|
Other - these contracts are comprised mainly of alliance fee arrangements, whereby the company earns revenue for allowing other furniture sellers access to its dealer distribution channel, as well as other miscellaneous selling arrangements. Revenue from alliance contracts are recorded at the point in time in which the sale is made by other furniture sellers through the company’s sales channel.
|
|
Three Months Ended
|
||
(In millions)
|
September 1, 2018
|
||
Net Sales:
|
|
||
Single performance obligation
|
|
||
Product revenue
|
$
|
535.2
|
|
Multiple performance obligations
|
|
||
Product revenue
|
84.8
|
|
|
Service revenue
|
2.7
|
|
|
Other
|
1.9
|
|
|
Total
|
$
|
624.6
|
|
|
Three Months Ended
|
||
(In millions)
|
September 1, 2018
|
||
North American Furniture Solutions:
|
|
||
Systems
|
$
|
144.5
|
|
Seating
|
96.6
|
|
|
Freestanding and storage
|
74.7
|
|
|
Other
|
27.9
|
|
|
Total North American Furniture Solutions
|
$
|
343.7
|
|
|
|
||
ELA Furniture Solutions:
|
|
||
Systems
|
$
|
22.8
|
|
Seating
|
68.7
|
|
|
Freestanding and storage
|
10.4
|
|
|
Other
|
13.5
|
|
|
Total ELA Furniture Solutions
|
$
|
115.4
|
|
|
|
||
Specialty:
|
|
||
Systems
|
$
|
1.6
|
|
Seating
|
29.0
|
|
|
Freestanding and storage
|
12.9
|
|
|
Textiles
|
28.8
|
|
|
Other
|
5.0
|
|
|
Total Specialty
|
$
|
77.3
|
|
|
|
||
Consumer:
|
|
||
Seating
|
53.7
|
|
|
Freestanding and storage
|
17.2
|
|
|
Other
|
17.3
|
|
|
Total Consumer
|
$
|
88.2
|
|
|
|
||
Total
|
$
|
624.6
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||
Finished goods
|
$
|
125.2
|
|
|
$
|
124.2
|
|
Raw materials
|
38.6
|
|
|
38.2
|
|
||
Total
|
$
|
163.8
|
|
|
$
|
162.4
|
|
(In millions)
|
Goodwill
|
|
Indefinite-lived Intangible Assets
|
|
Total Goodwill and Indefinite-lived Intangible Assets
|
||||||
June 2, 2018
|
$
|
304.1
|
|
|
$
|
78.1
|
|
|
$
|
382.2
|
|
Foreign currency translation adjustments
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||
September 1, 2018
|
$
|
303.9
|
|
|
$
|
78.1
|
|
|
$
|
382.0
|
|
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Interest cost
|
$
|
0.7
|
|
|
$
|
0.8
|
|
Expected return on plan assets
|
(1.2
|
)
|
|
(1.7
|
)
|
||
Net amortization loss
|
0.8
|
|
|
1.3
|
|
||
Net periodic benefit cost
|
$
|
0.3
|
|
|
$
|
0.4
|
|
|
September 1, 2018
|
|
September 2, 2017
|
||||
Numerators:
|
|
|
|
||||
Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. - in millions
|
$
|
35.8
|
|
|
$
|
33.1
|
|
|
|
|
|
||||
Denominators:
|
|
|
|
||||
Denominator for basic EPS, weighted-average common shares outstanding
|
59,370,160
|
|
|
59,758,610
|
|
||
Potentially dilutive shares resulting from stock plans
|
498,954
|
|
|
570,659
|
|
||
Denominator for diluted EPS
|
59,869,114
|
|
|
60,329,269
|
|
||
Antidilutive equity awards not included in weighted-average common shares - diluted
|
161,457
|
|
|
536,418
|
|
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Stock-based compensation expense
|
$
|
2.5
|
|
|
$
|
1.3
|
|
Related income tax effect
|
0.6
|
|
|
0.5
|
|
(Shares)
|
Three Months Ended
|
||||
|
September 1, 2018
|
|
September 2, 2017
|
||
Stock Options
|
265,739
|
|
|
150,556
|
|
Restricted Stock Units
|
95,587
|
|
|
90,671
|
|
Performance Share Units
|
239,679
|
|
|
130,179
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||
Liability for interest and penalties
|
$
|
0.8
|
|
|
$
|
1.0
|
|
Liability for uncertain tax positions, current
|
3.0
|
|
|
3.2
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||
Carrying value
|
$
|
285.6
|
|
|
$
|
285.8
|
|
Fair value
|
$
|
288.9
|
|
|
$
|
288.6
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||||||||||
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 equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
25.8
|
|
|
$
|
—
|
|
|
$
|
121.0
|
|
|
$
|
—
|
|
Mutual funds - equity
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
||||
Foreign currency forward contracts
|
0.3
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
||||
Deferred compensation plan
|
16.1
|
|
|
—
|
|
|
15.1
|
|
|
—
|
|
||||
Total
|
$
|
43.1
|
|
|
$
|
—
|
|
|
$
|
137.4
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
Contingent consideration
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.5
|
|
||||
Total
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
0.3
|
|
|
$
|
0.5
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||||||||||
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)
|
||||||||
Mutual funds - fixed income
|
7.6
|
|
|
—
|
|
|
7.7
|
|
|
—
|
|
||||
Interest rate swap agreement
|
14.4
|
|
|
—
|
|
|
15.0
|
|
|
—
|
|
||||
Total
|
$
|
22.0
|
|
|
$
|
—
|
|
|
$
|
22.7
|
|
|
$
|
—
|
|
Contingent Consideration
|
September 1, 2018
|
|
September 2, 2017
|
||||
Beginning balance
|
$
|
0.5
|
|
|
$
|
0.5
|
|
Payments
|
(0.1
|
)
|
|
—
|
|
||
Ending balance
|
$
|
0.4
|
|
|
$
|
0.5
|
|
|
September 1, 2018
|
|
June 2, 2018
|
||||||||||||||||||||
(In millions)
|
Cost
|
|
Unrealized
Gain/(loss)
|
|
Market
Value
|
|
Cost
|
|
Unrealized
Gain/(Loss) |
|
Market
Value |
||||||||||||
Mutual funds - fixed income
|
$
|
7.7
|
|
|
$
|
(0.1
|
)
|
|
$
|
7.6
|
|
|
$
|
7.8
|
|
|
$
|
(0.1
|
)
|
|
$
|
7.7
|
|
Mutual funds - equity
|
0.7
|
|
|
0.2
|
|
|
0.9
|
|
|
0.7
|
|
|
0.2
|
|
|
0.9
|
|
||||||
Total
|
$
|
8.4
|
|
|
$
|
0.1
|
|
|
$
|
8.5
|
|
|
$
|
8.5
|
|
|
$
|
0.1
|
|
|
$
|
8.6
|
|
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Accrual Balance — beginning
|
$
|
51.5
|
|
|
$
|
47.7
|
|
Accrual for product-related matters
|
5.6
|
|
|
9.4
|
|
||
Settlements and adjustments
|
(5.0
|
)
|
|
(4.5
|
)
|
||
Accrual Balance — ending
|
$
|
52.1
|
|
|
$
|
52.6
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||
Debt securities, due March 1, 2021
|
50.0
|
|
|
50.0
|
|
||
Syndicated revolving line of credit, due September 2021
|
225.0
|
|
|
225.0
|
|
||
Construction-Type Lease
|
6.9
|
|
|
7.0
|
|
||
Supplier financing program
|
3.7
|
|
|
$
|
3.8
|
|
|
Total debt
|
$
|
285.6
|
|
|
$
|
285.8
|
|
Less: Current debt
|
(3.7
|
)
|
|
(10.8
|
)
|
||
Long-term debt
|
$
|
281.9
|
|
|
$
|
275.0
|
|
(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 June 3, 2017
|
$
|
(36.8
|
)
|
|
$
|
(47.6
|
)
|
|
$
|
0.1
|
|
|
$
|
2.1
|
|
|
$
|
(82.2
|
)
|
Other comprehensive income (loss) before reclassifications
|
4.4
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
2.8
|
|
|||||
Reclassification from accumulated other comprehensive loss - Selling, general and administrative
|
—
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|||||
Tax benefit
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|||||
Net reclassifications
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|||||
Net current period other comprehensive income
|
4.4
|
|
|
0.8
|
|
|
—
|
|
|
(1.6
|
)
|
|
3.6
|
|
|||||
Balance at September 2, 2017
|
$
|
(32.4
|
)
|
|
(46.8
|
)
|
|
$
|
0.1
|
|
|
$
|
0.5
|
|
|
$
|
(78.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at June 2, 2018
|
$
|
(34.1
|
)
|
|
$
|
(37.2
|
)
|
|
$
|
0.1
|
|
|
$
|
9.9
|
|
|
$
|
(61.3
|
)
|
Cumulative effect of accounting change
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||||
Other comprehensive income before reclassifications
|
(7.9
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(8.5
|
)
|
|||||
Reclassification from accumulated other comprehensive loss - Selling, general and administrative
|
—
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|||||
Tax benefit
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||
Net reclassifications
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|||||
Net current period other comprehensive income
|
(7.9
|
)
|
|
0.7
|
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(7.8
|
)
|
|||||
Balance at September 1, 2018
|
$
|
(42.0
|
)
|
|
$
|
(36.5
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
9.4
|
|
|
$
|
(69.2
|
)
|
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Beginning Balance
|
$
|
30.5
|
|
|
$
|
24.6
|
|
Purchase of redeemable noncontrolling interests
|
(10.0
|
)
|
|
(1.0
|
)
|
||
Net income attributable to redeemable noncontrolling interests
|
0.1
|
|
|
—
|
|
||
Exercised options
|
0.2
|
|
|
—
|
|
||
Redemption value adjustment
|
—
|
|
|
(0.2
|
)
|
||
Other adjustments
|
(0.1
|
)
|
|
—
|
|
||
Ending Balance
|
$
|
20.7
|
|
|
$
|
23.4
|
|
|
Three Months Ended
|
||||||
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Net Sales:
|
|
|
|
||||
North American Furniture Solutions
|
$
|
343.7
|
|
|
$
|
328.6
|
|
ELA Furniture Solutions
|
115.4
|
|
|
93.4
|
|
||
Specialty
|
77.3
|
|
|
75.1
|
|
||
Consumer
|
88.2
|
|
|
83.2
|
|
||
Total
|
$
|
624.6
|
|
|
$
|
580.3
|
|
|
|
|
|
||||
Operating Earnings (Loss):
|
|
|
|
||||
North American Furniture Solutions
|
$
|
45.0
|
|
|
$
|
48.7
|
|
ELA Furniture Solutions
|
10.5
|
|
|
7.0
|
|
||
Specialty
|
3.1
|
|
|
1.6
|
|
||
Consumer
|
2.1
|
|
|
0.3
|
|
||
Corporate
|
(14.7
|
)
|
|
(8.1
|
)
|
||
Total
|
$
|
46.0
|
|
|
$
|
49.5
|
|
(In millions)
|
September 1, 2018
|
|
June 2, 2018
|
||||
Total Assets:
|
|
|
|
||||
North American Furniture Solutions
|
$
|
506.1
|
|
|
$
|
488.7
|
|
ELA Furniture Solutions
|
347.4
|
|
|
283.4
|
|
||
Specialty
|
190.8
|
|
|
188.7
|
|
||
Consumer
|
294.8
|
|
|
291.2
|
|
||
Corporate
|
124.6
|
|
|
227.5
|
|
||
Total
|
$
|
1,463.7
|
|
|
$
|
1,479.5
|
|
(In millions)
|
September 1, 2018
|
||
Beginning Balance
|
$
|
—
|
|
Restructuring and impairment expenses
|
1.1
|
|
|
Payments
|
(1.1
|
)
|
|
Ending Balance
|
$
|
—
|
|
(In millions)
|
September 2, 2017
|
||
Beginning Balance
|
$
|
2.4
|
|
Restructuring expenses
|
1.4
|
|
|
Payments
|
(1.8
|
)
|
|
Ending Balance
|
$
|
2.0
|
|
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
|
|
|
9/1/2018
|
9/2/2017
|
||||
Earnings per Share - Diluted
|
$
|
0.60
|
|
$
|
0.55
|
|
|
|
|
||||
Add: Inventory step up on HAY equity method investment, after tax
|
0.01
|
|
—
|
|
||
Add: Special charges, after tax
|
0.06
|
|
—
|
|
||
Add: Restructuring and impairment expenses, after tax
|
0.02
|
|
0.02
|
|
||
Adjusted Earnings per Share - Diluted
|
$
|
0.69
|
|
$
|
0.57
|
|
(In millions, except per share data)
|
September 1, 2018
|
|
September 2, 2017
|
|
Percent
Change
|
|||||
Net sales
|
$
|
624.6
|
|
|
$
|
580.3
|
|
|
7.6
|
%
|
Cost of sales
|
399.5
|
|
|
363.4
|
|
|
9.9
|
%
|
||
Gross margin
|
225.1
|
|
|
216.9
|
|
|
3.8
|
%
|
||
Operating expenses
|
178.0
|
|
|
166.0
|
|
|
7.2
|
%
|
||
Restructuring expenses
|
1.1
|
|
|
1.4
|
|
|
n/a
|
|
||
Total operating expenses
|
179.1
|
|
|
167.4
|
|
|
7.0
|
%
|
||
Operating earnings
|
46.0
|
|
|
49.5
|
|
|
(7.1
|
)%
|
||
Other expenses, net
|
1.9
|
|
|
3.0
|
|
|
(36.7
|
)%
|
||
Earnings before income taxes and equity income
|
44.1
|
|
|
46.5
|
|
|
(5.2
|
)%
|
||
Income tax expense
|
8.9
|
|
|
14.2
|
|
|
(37.3
|
)%
|
||
Equity income from nonconsolidated affiliates, net of tax
|
0.7
|
|
|
0.8
|
|
|
n/a
|
|
||
Net earnings
|
35.9
|
|
|
33.1
|
|
|
8.5
|
%
|
||
Net earnings attributable to noncontrolling interests
|
0.1
|
|
|
—
|
|
|
n/a
|
|
||
Net earnings attributable to Herman Miller, Inc.
|
$
|
35.8
|
|
|
$
|
33.1
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|||||
Earnings per share — diluted
|
0.60
|
|
|
0.55
|
|
|
9.1
|
%
|
||
Orders
|
630.6
|
|
|
594.8
|
|
|
6.0
|
%
|
||
Backlog
|
346.4
|
|
|
332.1
|
|
|
4.3
|
%
|
|
September 1, 2018
|
|
September 2, 2017
|
||
Net sales
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
64.0
|
|
|
62.6
|
|
Gross margin
|
36.0
|
|
|
37.4
|
|
Operating expenses
|
28.5
|
|
|
28.6
|
|
Restructuring expenses
|
0.2
|
|
|
0.2
|
|
Total operating expenses
|
28.7
|
|
|
28.8
|
|
Operating earnings
|
7.4
|
|
|
8.5
|
|
Other expenses, net
|
0.3
|
|
|
0.5
|
|
Earnings before income taxes and equity income
|
7.1
|
|
|
8.0
|
|
Income tax expense
|
1.4
|
|
|
2.4
|
|
Equity income from nonconsolidated affiliates, net of tax
|
0.1
|
|
|
0.1
|
|
Net earnings
|
5.7
|
|
|
5.7
|
|
Net earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
Net earnings attributable to Herman Miller, Inc.
|
5.7
|
|
|
5.7
|
|
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
|
•
|
Increased sales volumes within the ELA segment of approximately $21 million were driven primarily by broad-based growth across all regions.
|
•
|
Sales volumes within the North American segment increased by approximately $12 million, resulting from increased demand within the company's North America office furniture businesses.
|
•
|
Adoption of ASC 606 - Revenue from Contracts with Customers at the beginning of fiscal 2019 led to the reclassification of certain pricing elements from Net sales to Cost of sales, which resulted in an increase in Net sales of $8.5 million compared to the same period of the prior year in which revenue was recorded under previous accounting rules.
|
•
|
Incremental sales volumes within the Consumer segment of approximately $4 million were driven by growth across the DWR studio, e-commerce and contract channels. In the prior year period, Consumer sales benefited from a change in shipping terms at DWR that increased sales volumes by $5 million.
|
•
|
Increased sales volumes within the Specialty segment of approximately $1 million was driven mainly by the company's Maharam subsidiary.
|
•
|
Foreign currency translation had a negative impact on net sales of approximately $1 million.
|
•
|
The impact of the divestiture of the company's dealerships in Vancouver, Canada in fiscal 2018 had the effect of reducing sales by $0.8 million in the current three month period as compared to the same period of the prior fiscal year.
|
•
|
Approximately 60 basis points of the year-over-year decrease in gross margin related to the adoption of the new revenue recognition standard (ASC 606) at the beginning of fiscal 2019. This adoption requires recording certain product pricing elements as expenses within cost of goods sold that were previously classified on a net basis within sales. This reclassification lowers gross margin percentage but has no impact on gross margin dollars.
|
•
|
Higher manufacturing costs at the company's West Michigan manufacturing facilities related to higher medical costs, depreciation and overtime costs decreased gross margin by approximately 30 basis points as compared to the same period of the prior fiscal year.
|
•
|
Shipping and freight costs were unfavorable compared to the same period of the prior year period, which drove a decrease of approximately 20 basis points. This impact was recognized primarily within the company's Consumer reportable segment.
|
•
|
Higher commodity costs within the North American operating segment drove an unfavorable impact of approximately 20 basis points relative to the prior year period.
|
•
|
The rest of the decrease in gross margin was driven by several factors, including lower alliance revenues during the current year period and product mix changes.
|
•
|
Restructuring and special charges, primarily associated with the planned CEO transition, consulting fees related to the company's profit optimization initiatives and costs related to the International facilities consolidation plan increased operating expenses by $4.0 million compared to last fiscal year.
|
•
|
Depreciation expense increased by approximately $4 million and was driven primarily by capital investment in facilities and systems.
|
•
|
Compensation and benefit costs increased $2.2 million due mainly to employee headcount increases and wage inflation.
|
•
|
Higher employee incentive costs increased operating expenses by $1.9 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.
|
•
|
Warranty costs were $3.7 million lower due to specific reserves incurred in the same period of the prior year that did not recur in the current three month period.
|
•
|
The rest of the increase in operating expenses was driven mainly by incremental legal and marketing expenditures.
|
•
|
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 $12 million, resulting from increased demand within the company's North America office furniture businesses.
|
•
|
Adoption of ASC 606 - Revenue from Contracts with Customers at the beginning of fiscal 2019 led to the reclassification of certain pricing elements from Net sales to Cost of sales, which resulted in an increase in Net sales for the North American segment by $5.3 million compared to the same period of the prior year, in which revenue was recorded under previous accounting rules.
|
•
|
Deeper contract price discounting, net of incremental list price increases, reduced net sales and operating earnings in the first quarter of fiscal 2019 by roughly $1 million as compared to the prior year.
|
•
|
Operating earnings decreased due to higher costs of approximately $3 million at the company's West Michigan manufacturing facilities due to higher commodity costs, medical costs, depreciation expense and overtime costs.
|
•
|
Increased depreciation expenses of approximately $2 million, which related to investments in facilities and systems, and workforce related costs, including compensation and benefits and incentive compensation costs decreased operating earnings by roughly $2 million as compared to the prior year period.
|
•
|
These decreases in operating earnings were partially offset by increased operating earnings of an estimated $4 million from incremental sales volumes.
|
•
|
Increased sales volumes within the ELA segment of approximately $21 million were driven by broad-based growth, with Asia Pacific and EMEA generating the most significant year-over-year growth.
|
•
|
Adoption of ASC 606 - Revenue from Contracts with Customers at the beginning of fiscal 2019 led to the reclassification of certain pricing elements from Net sales to Cost of sales, which resulted in an increase in Net sales for the ELA segment by $2.8 million compared to the same period of the prior year, in which revenue was recorded under previous accounting rules.
|
•
|
Operating earnings increased by approximately $7 million in the current three month period of fiscal 2018 due to increased sales volumes. This increase was partially offset by the impact of unfavorable product mix of approximately $2 million and higher restructuring and impairment costs of $1.1 million.
|
•
|
Net sales increased in the first quarter of fiscal 2018 as compared to the same period of the prior year due primarily to increased sales volumes of approximately $1 million, which was driven primarily by the company's Maharam subsidiary businesses.
|
•
|
Adoption of ASC 606 - Revenue from Contracts with Customers at the beginning of fiscal 2019 led to the reclassification of certain pricing elements from Net sales to Cost of sales, which resulted in an increase in Net sales for the Specialty segment by $0.4 million compared to the same period of the prior year, in which revenue was recorded under previous accounting rules.
|
•
|
Operating earnings increased by approximately $1.5 million in the current three month period of fiscal 2018 due to the increased sales volumes, favorable channel mix and a decrease in warranty expenses of $0.6 million.
|
•
|
Incremental sales volumes within the Consumer segment of approximately $4 million were driven by growth across the DWR studio, e-commerce and contract channels. In the prior year period, Consumer sales benefited from a change in shipping terms at DWR that increased sales volumes by $5 million.
|
•
|
Operating earnings increased by approximately $3 million in the current three month period of fiscal 2018 due to increased sales volumes and net pricing benefits. Decreased freight revenue due to changes in shipping policies and an increase in freight costs partially offset these increases in operating earnings.
|
(In millions)
|
September 1, 2018
|
|
September 2, 2017
|
||||
Cash and cash equivalents, end of period
|
$
|
101.7
|
|
|
$
|
80.0
|
|
Marketable securities, end of period
|
8.5
|
|
|
8.7
|
|
||
Cash provided by operating activities
|
32.9
|
|
|
18.9
|
|
||
Cash used in investing activities
|
(99.7
|
)
|
|
(24.2
|
)
|
||
Cash used in financing activities
|
(33.0
|
)
|
|
(13.0
|
)
|
||
Capital expenditures
|
(22.0
|
)
|
|
(24.9
|
)
|
||
Stock repurchased and retired
|
(20.8
|
)
|
|
(11.1
|
)
|
||
Common stock issued
|
8.5
|
|
|
4.4
|
|
||
Dividends paid
|
(10.7
|
)
|
|
(10.2
|
)
|
||
Interest-bearing debt, end of period
|
281.9
|
|
|
203.9
|
|
||
Available unsecured credit facility, end of period (1)
|
$
|
165.2
|
|
|
$
|
387.8
|
|
(In millions)
|
September 1, 2018
|
September 2, 2017
|
||||
Cash and cash equivalents
|
$
|
101.7
|
|
$
|
80.0
|
|
Marketable securities
|
8.5
|
|
8.7
|
|
||
Availability under syndicated revolving line of credit
|
$
|
165.2
|
|
$
|
387.8
|
|
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)
|
||||||
6/3/18 - 6/30/18
|
5,871
|
|
|
$
|
34.19
|
|
|
5,871
|
|
|
$
|
61,888,262
|
|
7/1/18 - 7/28/18
|
328,037
|
|
|
$
|
38.47
|
|
|
328,037
|
|
|
$
|
49,268,550
|
|
7/29/18 - 9/1/18
|
211,958
|
|
|
$
|
37.80
|
|
|
211,958
|
|
|
$
|
41,256,763
|
|
Total
|
545,866
|
|
|
|
|
545,866
|
|
|
|
Exhibit Number
|
Document
|
3.1
|
3.2
|
10.1
|
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
|
October 10, 2018
|
|
/s/ Andrea R. Owen
|
|
|
|
|
|
Andrea R. Owen
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
(Duly Authorized Signatory for Registrant)
|
|
|
|
|
|
|
October 10, 2018
|
|
/s/ Jeffrey M. Stutz
|
|
|
|
|
|
Jeffrey M. Stutz
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Duly Authorized Signatory for Registrant)
|
(a)
|
your noncompetition restriction or any forfeiture provision based on competition will be limited to a list of 28 direct competitors, which list is subject to change by the Company at its discretion from time to time in the normal course of business, provided that (i) the total number of direct competitors is no greater than 28, (ii) all the added companies are direct competitors, and (iii) you will not be subject to any changes to the list made within 90 days of your termination or thereafter. The initial list is annexed hereto as Exhibit G. Future lists will be made available to you, including upon request;
|
(b)
|
nonsolicitation restrictions or any forfeiture based on nonsolicitation will not be violated by general non-targeted advertising or serving as a reference upon request;
|
(c)
|
any nondisparagement restrictions shall be deemed mutual between the Company (officers and directors only) and you and shall not continue for a period of greater than five (5) years following
|
(d)
|
any confidentiality restriction shall not apply to information that (i) was known to the public prior to its disclosure to you; (ii) becomes generally known to the public subsequent to disclosure to you through no wrongful act of you or any of your representatives; or (iii) you are required to disclose by applicable law, regulation or legal process (provided that you provide the Company with prior notice of the contemplated disclosure and reasonably cooperate with the Company at its expense in seeking a protective order or other appropriate protection of such information). Nothing in any confidentiality restriction under any agreement between the Company and you is intended to conflict with the whistleblower provisions of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act of 1934 or § 1833(b) of the Defend Trade Secrets Act of 2016. Accordingly, notwithstanding anything to the contrary therein, nothing in any agreement between the Company and you prohibits, restricts or prevents you from reporting possible violations of United States federal, state or local law or regulation to any United States federal, state or local governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or to an attorney, or from making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or from disclosing trade secrets and other confidential information in the course of such reporting; provided, however, that you use your reasonable best efforts to (a) disclose only information that is reasonably related to such possible violations or that is requested by such agency or entity and (b) request that such agency or entity treat such information as confidential. You do not need the prior authorization from the Company to make any such reports or disclosures and is not required to notify the Company that you have made such reports or disclosures; and
|
(e)
|
you may retain your address book to the extent it only contains contact information.
|
•
|
In the event you terminate for Good Reason, you will be entitled to the same severance as if you were involuntarily terminated for other than Cause, e.g., on a non-Change in Control termination, eighteen (18) months of base salary payable in accordance with the Company’s normal payroll practice, as well as eighteen (18) months of benefits continuation.
|
•
|
The definitions of “Cause” and “Disability” under the salary continuation plan shall have the definitions currently set forth in the Herman Miller, Inc. 2011 Long-Term Incentive Plan.
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•
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The definition of “Good Reason” under the salary continuation plan, the Change in Control Agreement, and for all other purposes, shall mean: with respect to your termination of employment by you, any of the following events or conditions (without your prior written consent) and the failure of the Company (or any successor corporation) to cure such event or condition within thirty (30) days after receipt of written notice from you specifying the events or conditions in reasonable detail; provided that you serve notice of such event and intended termination within ninety (90) days of your knowledge of its occurrence and you terminate your employment within thirty (30) days following the expiration of the applicable cure period: (a) a material diminution in your duties, responsibilities, authorities, or reporting lines (other than a temporary change resulting from your inability to perform your duties as a result of your disability); (b) a material reduction by the Company of your annual base salary or annual or long-term cash incentive compensation opportunities; (c) any requirement of the Company that you be based at any office location that is more than fifty (50) miles farther from your primary work location in Holland, Michigan but only if it results in a longer commute for you from your residence at such time, except for reasonable required travel on behalf of the Company (or any successor corporation); and (d) a material breach by the Company (or any successor corporation) of its obligations to you under this agreement or under any other material agreement or arrangement between the Company (or any successor corporation) and you.
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•
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In the event of your involuntary termination without Cause or for Good Reason in the first twenty-four (24) months of your employment with the Company, you will not be subject to the cutbacks to severance payments under the salary continuation plan.
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•
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The current severance provisions may not be reduced as they apply to you without your written consent.
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•
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The definition of a “Nonqualifying Termination” under the Change in Control Agreement shall mean a termination of your employment (1) by the Company for Cause; (2) by you following a Change in Control for any reason other than Good Reason; (3) as a result of your death; or (4) by the Company due to your absence from your duties with the Company on a full-time basis for at least one-hundred eighty (180) consecutive days as a result of your incapacity due to physical or mental illness.
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•
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The definition of “Termination Period” shall also include six (6) months prior to such Change in Control.
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•
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If termination is within the six (6) months prior the Change in Control, any amounts payable as a result of the termination shall continue to be paid in the pre-termination form and only the excess shall be paid as specified for after a Change in Control termination. Furthermore, if the Change in Control is not a 409A Change in Control under Treasury Regulation 409A-3(i)(5), amounts up to the amounts paid on a non-409A Change in Control severance shall be paid in such form and the excess paid in the Change in Control form.
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•
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Payment of severance in any circumstance shall be conditioned on execution of a release in substantially the form attached hereto as Exhibit H, so long as the Company signs such mutual release. Severance shall commence within ten (10) days after the release becomes effective with a retroactive payment for any payment missed after termination, provided that to the extent the consideration and revocation period of the release overlaps the calendar year, amounts shall be initially paid in the second calendar year with a catchup.
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Performance Goals
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Established annually at the start of each fiscal year by the Compensation Committee. The Committee retains discretion in its assessment of ultimate performance and related payouts
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Payment Timing
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Within thirty (30) days after the Compensation Committee’s certification of the performance results
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Retirement Treatment
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Pro-rated for time worked during the fiscal year, paid based on actual performance at the same time bonus would be payable if remained employed
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Other Terminations Before End of Fiscal Year
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Forfeited
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Threshold
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Target
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Maximum
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EBITDA
|
$255.8M
|
$300.9M
|
$346.0M
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Payout as a % of Target
|
0%
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100%
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200%
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|
Threshold
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Target
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Maximum
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Three-year Average HMVA (FY19-FY21)
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$185.0M
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$204.0M
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$232.0M
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Payout as a % of Target
|
34%
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100%
|
200%
|
Eligibility
|
Can participate starting January 1, 2019
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Employee Contributions
|
At your election, but irrevocable for the calendar year
Enrollment will occur in the fall of 2018
Value determined by your contribution amount
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Employer Contributions
|
Match using the same formula as under the 401(k) Plan
Employer contribution of 4% of your pay above $275,000, as indexed by the IRS
Discretionary profit sharing contribution also available
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Distributions
|
At the time and in form that you select
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Investments
|
May elect the investment for your plan account
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Change in Control
|
Account automatically distributed in a lump sum
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House Hunting Trip
|
Herman Miller will pay for one house hunting trip for you and your spouse/partner, for up to five (5) days and four (4) nights.
Reimbursable expenses include round-trip transportation, rental cars costs, mileage reimbursement, meals, and lodging
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Home Sale Assistance
|
Herman Miller will cover costs related to marketing and selling your existing home
Benefit is available for your primary residence only
Must use a real estate agent registered with Signature Relocation
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Home Purchase Assistance
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Herman Miller will cover closing costs, including costs of any legal fees, title search, transfer taxes, recording fees, notary fees, and other standard fees
Must use a real estate agent registered with Signature Relocation
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Moving Expenses
|
Herman Miller will cover coach air travel for you and your dependents and cost to ship your personal autos if move is over five hundred (500) miles
If move is less than five hundred (500) miles, will reimburse mileage on up to two (2) personal autos
Will also pay for the shipment of household goods with a carrier selected by Signature Relocation
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Other Reimbursable Expenses
|
Temporary living expenses for up to ninety (90) days
Storage of household goods for up to thirty (30) days in the event you cannot move directly from your old residence to your new residence
Tax assistance payments for certain non-deductible expenses
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Repayment Obligations
|
If you voluntarily resign other than for Good Reason or are terminated for Cause within twelve (12) months of your relocation, then you must repay all relocation benefits
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Term of Benefits
|
Must complete all relocation activities within twelve (12) months of start date
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Reimbursement Process
|
You must submit your receipts and Expense Report online through the Company’s third party administrator. You will receive reimbursement
within seven (7) to ten (10) business days of your submission.
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1.
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Steelcase
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2.
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Hawolth
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3.
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Knoll
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4.
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Teknion
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5.
|
HNI
|
6.
|
Allsteel
|
7.
|
KI
|
8.
|
Kimball
|
9.
|
Trendway
|
10.
|
Inscape
|
11.
|
Riviera
|
12.
|
Humanscale
|
13.
|
Halcon
|
14.
|
Vitra
|
15.
|
Room and Board
|
16.
|
Restoration Hardware
|
17.
|
Ethan Allen
|
18.
|
Holly Hunt
|
19.
|
Nucraft Furniture
|
20.
|
OFS/First Office
|
21.
|
Watson
|
22.
|
HAY
|
23.
|
Sit On It
|
24.
|
Bernhardt
|
25.
|
DECCA
|
26.
|
Touhy
|
27.
|
Weiland
|
28.
|
WeWork
|
1.
|
You will receive current regular base salary, less applicable withholdings, for eighteen (18) months following your separation date and the full execution of this Agreement, unless you receive other employment with a competitor as defined below, solicit the employees of Company as defined below, or otherwise materially breach this agreement. This amount will be paid on the standard payroll cycle. A lump sum payment is not available under this Agreement for the payments described in paragraph 1. [To be adjusted in Change in Control related termination to reflect the payment provisions of the Change in Control Agreement.]
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2.
|
You will receive a lump sum payment equivalent to eighteen (18) months of the amount that HMI contributes toward your medical and dental benefits, which you may use to purchase medical and dental benefits through COBRA, other individual insurance policies, or options on the government Health Insurance Marketplace. You will be provided a “Disposition of Benefits” letter to explain this process in more detail. [To be adjusted in Change in Control related termination to reflect the benefits continuation provisions of the Change in Control Agreement.]
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3.
|
You are not eligible for the Employee Incentive Bonus earned for financial year [current FY] if HMI earns a bonus.
|
4.
|
Any accrued but unused vacation for fiscal year [___] will be paid to you within five weeks of [term date].
|
5.
|
[Include if part of the Employee Equalization Plan] Any amount of income deferred by you pursuant to the Employee Equalization Plan are fully vested and will be distributed to you according to the terms of the Plan and your deferral elections.
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6.
|
If you are enrolled in a Healthcare Reimbursement (flexible spending) Account, you have the option to continue your participation in this account through COBRA. The payments will be with after-tax dollars. You must elect COBRA coverage to continue your participation. If you choose not to continue participation in the Healthcare Reimbursement account under COBRA, all claims for services incurred up to your separation date must be submitted within 90 days of the date of your separation of employment. Any unused balances will be forfeited at that time.
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7.
|
If you are enrolled in a Health Savings Account, you can continue to make contributions on an after-tax basis as long as you are enrolled in a High Deductible Health Plan.
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8.
|
You are not eligible to participate in the 401(k) Plan after [term date]. You will receive a final core contribution to your 401(k) account based on compensation earned in this fiscal quarter up to your separation date. This core contribution will be paid at the end of the current fiscal quarter. Employee and Company matching contributions to the 401(k) Plan will cease as of [term date]. The balance of your quarterly payroll deductions relating to the employee stock purchase plan will be paid to you within thirty (30) days of your separation date.
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9.
|
The restricted stock units granted to you on [date], representing [number of shares] shares will vest upon your
|
10.
|
You will receive outplacement support through OI Partners, Inc.
|
11.
|
You are responsible for returning your Corporate Visa card along with any keys, phone cards and/or access cards immediately. You should process a final expense report to cover the cost of any unreimbursed business-related travel through [term date]. If you have an existing balance on your Corporate Visa card or your cellular phone service, you are required to pay off the balance within 10 days of this letter. Any remaining balances at that point will be deducted from your severance pay.
|
12.
|
You are responsible for returning all company-owned computers along with any associated company-owned computer equipment and printers immediately.
|
13.
|
Any balance owed to HMI on your employee purchase account (product purchase) will be deducted from the total amount of severance pay. In the event that severance will not cover the full amount due, it will be your responsibility to pay off the balance.
|
1.
|
Steelcase
|
2.
|
Haworth
|
3.
|
Knoll
|
4.
|
Teknion
|
5.
|
HNI
|
6.
|
Allsteel
|
7.
|
KI
|
8.
|
Kimball
|
9.
|
Trendway
|
10.
|
Inscape
|
11.
|
Riviera
|
12.
|
Humanscale
|
13.
|
Halcon
|
14.
|
Vitra
|
15.
|
Room and Board
|
16.
|
Restoration Hardware
|
17.
|
Ethan Allen
|
18.
|
Holly Hunt
|
19.
|
Nucraft Furniture
|
20.
|
OFS/First Office
|
21.
|
Watson
|
22.
|
HAY
|
23.
|
Sit On It
|
24.
|
Bernhardt
|
25.
|
DECCA
|
26.
|
Touhy
|
27.
|
Weiland
|
28.
|
WeWork
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended September 1, 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 September 1, 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 September 1, 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 September 1, 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 September 1, 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 September 1, 2018, fairly presents, in all material respects, the financial condition and results of operations of the company.
|