UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 5, 2017
(Date of earliest event reported)
HERMAN MILLER, INC.
(Exact name of registrant as specified in its charter)
Michigan (State or Other Jurisdiction of incorporation) | 001-15141 (Commission File No.) | 38-0837640 (IRS Employer Identification no.) | |||
855 East Main Avenue Zeeland, Michigan (Address of Principal Executive Offices) | 49464 (Zip Code) | ||||
(616) 654-3000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[__] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[__] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[__] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[__] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On July 5, 2017, Herman Miller, Inc. issued a press release announcing its financial results for the quarter ended June 3, 2017. A copy of the press release is attached as Exhibit 99.1. Also, a copy of the supplemental financial data for the quarter ended June 3, 2017 is attached as Exhibit 99.2.
The information in this Form 8-K and the attached Exhibits shall not be deemed filed for purposes of Section 18 of the Securities Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
Exhibits.
99.1 Press release dated July 5, 2017.
99.2 Supplemental financial data for the quarter ended June 3, 2017.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: | July 5, 2017 | HERMAN MILLER, INC. | ||
(Registrant) | ||||
By: | /s/ Kevin J. Veltman Kevin J. Veltman | |||
Vice President of Investor Relations & Treasurer (Duly Authorized Signatory for Registrant) | ||||
Herman Miller Reports Fourth Quarter Fiscal 2017 Results
Webcast to be held Thursday, July 6, 2017, at 9:30 AM ET
Release | Immediate |
Date | July 5, 2017 |
Contact | Kevin Veltman (616) 654-3973 or kevin_veltman@hermanmiller.com |
Jeff Stutz (616) 654-8538 or jeff_stutz@hermanmiller.com | |
Media (616) 654-5977 or media_relations@hermanmiller.com | |
Address | Herman Miller, Inc., 855 East Main Avenue, PO Box 302, Zeeland, MI 49464-0302 |
Internet | www.hermanmiller.com |
NOTE: A data supplement with additional financial information relating to the periods covered by this press release is available for download from the company’s website at http://www.hermanmiller.com/about-us/investors.html.
Herman Miller, Inc. (NASDAQ: MLHR) today announced results for its fourth quarter ended June 3, 2017. Net sales in the quarter totaled $577.2 million, a decrease of 0.9% from the same quarter last fiscal year. New orders in the fourth quarter of $568.1 million were 6.3% below the prior year level.
Last quarter, the company estimated its most recent price increase, which became effective on February 6, 2017, had the effect of accelerating approximately $21 million of orders that would have otherwise been entered in the fourth quarter of fiscal 2017. On an organic basis, which includes the impact of that order acceleration as well as foreign currency translation and dealer divestitures, net sales in the fourth quarter increased by 2.7%, while orders were essentially flat from the same quarter last fiscal year.
Herman Miller reported net earnings of $0.55 per share on a diluted basis in the fourth quarter compared to diluted earnings per share of $0.67 in the same quarter last fiscal year. Excluding the impact of restructuring and impairment charges recognized in the period, adjusted earnings per share in the fourth quarter totaled $0.64, an increase of 14.3% over adjusted earnings per share of $0.56 in the fourth quarter of last fiscal year.
For the full fiscal year, net sales were $2.28 billion, reflecting a year-over-year increase of 0.6%. On an organic basis, net sales increased by 1.4% compared to last fiscal year. Diluted earnings per share for the full year totaled $2.05 compared to $2.26 last year. On an adjusted basis, diluted earnings per share totaled $2.16 in fiscal 2017 compared to $2.17 in fiscal 2016.
The company also announced an increase in its quarterly cash dividend to $0.18 per share payable in October 2017. This change represents an increase of 6% from the previous dividend payout of $0.17 per share.
Brian Walker, Chief Executive Officer, stated “While order levels across our contract businesses remained mixed this quarter, we were pleased to see continued net sales and order acceleration within our Consumer business segment. This growth reflects improved momentum in all areas of this segment and highlights the opportunity we see to leverage growth through our multi-channel business strategy. Better than expected gross margins and well-managed operating expenses combined to deliver adjusted earnings per share above the expectations that we provided at the start of the quarter and reflected adjusted earnings growth of 14% over the same quarter last year. As a result of strong cash flow generation and a well-positioned balance sheet, the Board of Directors approved an increase in our quarterly dividend payout - an action that reflects the confidence of the Board and our leadership team in the power of our long-term strategy.”
-more-
Fourth Quarter Fiscal 2017 Financial Results
FINANCIAL HIGHLIGHTS | ||||||||||||||||
(Dollars in millions, except per share data) | (Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
6/3/2017 | 5/28/2016 | % Chg. | 6/3/2017 | 5/28/2016 | % Chg. | |||||||||||
(13 weeks) | (13 weeks) | (53 weeks) | (52 weeks) | |||||||||||||
Net Sales | $ | 577.2 | $ | 582.6 | (0.9 | )% | $ | 2,278.2 | $ | 2,264.9 | 0.6 | % | ||||
Gross Margin % | 38.3 | % | 38.7 | % | N/A | 37.9 | % | 38.6 | % | N/A | ||||||
Operating Expenses | $ | 162.3 | $ | 168.6 | (3.7 | )% | $ | 660.9 | $ | 662.7 | (0.3 | )% | ||||
Restructuring and Impairment Expenses | $ | 8.8 | $ | — | N/A | $ | 12.5 | $ | — | N/A | ||||||
Operating Earnings % | 8.6 | % | 9.7 | % | N/A | 8.4 | % | 9.3 | % | N/A | ||||||
Adjusted Operating Earnings %* | 10.2 | % | 8.7 | % | N/A | 8.9 | % | 9.1 | % | N/A | ||||||
Adjusted EBITDA* | $ | 75.4 | $ | 64.8 | 16.4 | % | $ | 263.5 | $ | 258.9 | 1.8 | % | ||||
Net Earnings Attributable to Herman Miller, Inc. | $ | 33.4 | $ | 40.7 | (17.9 | )% | $ | 123.9 | $ | 136.7 | (9.4 | )% | ||||
Earnings Per Share – Diluted | $ | 0.55 | $ | 0.67 | (17.9 | )% | $ | 2.05 | $ | 2.26 | (9.3 | )% | ||||
Adjusted Earnings Per Share – Diluted* | $ | 0.64 | $ | 0.56 | 14.3 | % | $ | 2.16 | $ | 2.17 | (0.5 | )% | ||||
Orders | $ | 568.1 | $ | 606.2 | (6.3 | )% | $ | 2,282.9 | $ | 2,279.7 | 0.1 | % | ||||
Backlog | $ | 322.6 | $ | 323.5 | (0.3 | )% | ||||||||||
*Items indicated represent Non-GAAP measurements; see the reconciliations of non-GAAP financial measures and related explanations in the supplemental data file available for download at http://www.hermanmiller.com/about-us/investors.html. A copy of this supplemental data file has also been included with the earnings press release filed on Form 8-K with the Securities and Exchange Commission.
Consolidated gross margin in the fourth quarter of fiscal 2017 totaled 38.3%, representing a 40 basis point decrease from the level reported in the same quarter of last fiscal year.
Operating expenses in the current year fourth quarter were $162.3 million compared to $168.6 million in the same quarter a year ago. This represents a year-over-year decrease of $6.3 million.
The Company recognized pre-tax restructuring expenses totaling $1.7 million in the fourth quarter. These costs relate to severance and outplacement benefits associated with targeted workforce reductions implemented during the period. During the fourth quarter, the company also recognized pretax asset impairment expenses totaling $7.1 million associated with the Nemschoff trade name intangible. This non-cash charge was determined based upon Herman Miller's annual impairment review process.
Herman Miller’s effective income tax rate in the fourth quarter was 29.9%. Excluding the impact from asset impairment expenses of 100 basis points, the adjusted effective rate in the quarter was approximately 30.9%, compared to 24.9% in the same quarter last fiscal year. The prior year included the full year benefit of a favorable transfer pricing adjustment.
Jeff Stutz, Chief Financial Officer, noted, "While relatively high commodity costs and a challenging pricing environment persisted this quarter, our recently implemented price increase and favorable channel mix combined to help mitigate those pressures. Operating expenses were well managed in the quarter, and our results demonstrate progress in the early stages of the cost savings initiative we announced last quarter. The initiative targets achieving between $25 million and $35 million of gross annualized cost savings over the next three fiscal years. We still have a lot of work in front of us as we move toward this goal, and the timing of necessary investments for the future will make the path uneven. With that said we feel good about our progress this quarter and were very pleased to deliver improved adjusted operating margins in every segment compared to last year.”
The company ended the fourth quarter with total cash and cash equivalents of $96.2 million, an increase of $17.8 million from the balance at the end of the third quarter. Cash flow generated from operations in the fourth quarter and full fiscal year was $80.0 million and $202.1 million, respectively. This compared to $84.5 million and $210.4 million in the respective periods last fiscal year.
-more-
Segment Sales and Orders
The following tables summarize reported and organic segment sales and orders for the fourth quarter of fiscal 2017:
Organic Sales Growth (Decline) by Segment * | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Net Sales, as reported | $ | 337.8 | $ | 92.6 | $ | 56.8 | $ | 90.0 | $ | 577.2 | $ | 332.9 | $ | 110.5 | $ | 61.6 | $ | 77.6 | $ | 582.6 | ||||||||||
% change from PY | 1.5 | % | (16.2 | )% | (7.8 | )% | 16.0 | % | (0.9 | )% | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (6.0 | ) | (10.5 | ) | — | — | (16.5 | ) | |||||||||||||||||
Currency Translation Effects (1) | 1.2 | 2.8 | — | — | 4.0 | — | ||||||||||||||||||||||||
Net Sales, organic | $ | 339.0 | $ | 95.4 | $ | 56.8 | $ | 90.0 | $ | 581.2 | $ | 326.9 | $ | 100.0 | $ | 61.6 | $ | 77.6 | $ | 566.1 | ||||||||||
% change from PY | 3.7 | % | (4.6 | )% | (7.8 | )% | 16.0 | % | 2.7 | % | ||||||||||||||||||||
Organic Order Growth (Decline) by Segment * | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Orders, as reported | $ | 328.7 | $ | 89.8 | $ | 58.7 | $ | 90.9 | $ | 568.1 | $ | 358.6 | $ | 101.7 | $ | 61.7 | $ | 84.2 | $ | 606.2 | ||||||||||
% change from PY | (8.3 | )% | (11.7 | )% | (4.9 | )% | 8.0 | % | (6.3 | )% | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (8.0 | ) | (4.7 | ) | — | — | (12.7 | ) | |||||||||||||||||
Currency Translation Effects (1) | 1.1 | 2.1 | — | 0.1 | 3.3 | — | — | — | — | — | ||||||||||||||||||||
Price Increase Pull Forward Impact | 20.0 | — | 1.0 | — | 21.0 | — | — | — | — | — | ||||||||||||||||||||
Orders, organic | $ | 349.8 | $ | 91.9 | $ | 59.7 | $ | 91.0 | $ | 592.4 | $ | 350.6 | $ | 97.0 | $ | 61.7 | $ | 84.2 | $ | 593.5 | ||||||||||
% change from PY | (0.2 | )% | (5.3 | )% | (3.2 | )% | 8.1 | % | (0.2 | )% | ||||||||||||||||||||
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period. | ||||||||||||||||||||||||||||||
* Items represent Non-GAAP measurements; see the reconciliations of non-GAAP financial measures and related explanations in the supplemental data file available for download at http://www.hermanmiller.com/about-us/investors.html. A copy of this supplemental data file has also been included with the earnings press release filed on Form 8-K with the Securities and Exchange Commission.
First Quarter Fiscal 2018 Guidance
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2018 to be in the range of $570 million to $590 million. On an organic basis, adjusted for the impact of a dealer divestiture and foreign currency translation, this forecast implies organic sales growth of 5.0% compared to the first quarter of the prior year at the mid-point of the range. Diluted earnings per share in the quarter are expected to range from $0.55 to $0.59 per share.
Supplemental Information and Webcast
The company has created a supplemental data report which provides additional information relevant to its quarterly results. This document can be accessed via a link on the Investors section of the company's website at http://www.hermanmiller.com/about-us/investors.html.
The company will host a live webcast to discuss the results of the fourth quarter of fiscal 2017 on Thursday, July 6, 2017, at 9:30 a.m. ET. To ensure your access to the webcast, you should allow extra time to visit the company’s website at www.hermanmiller.com to download the streaming software necessary to participate. An online archive of the presentation will be available on the website later that day.
-more-
About Herman Miller
Herman Miller is a globally recognized provider of furnishings and related technologies and services. Headquartered in West Michigan, the global company has relied on innovative design for over 100 years to solve problems for people wherever they work, live, learn, and heal. Herman Miller’s designs are part of museum collections worldwide, and the company is a past recipient of the Smithsonian Institution's Cooper Hewitt National Design Award. Known and respected for its leadership in corporate social responsibility, Herman Miller has earned the Human Rights Campaign Foundation’s top rating in its Corporate Equality Index ten years in a row, was named a 2016 Top 100 Healthiest Employer, and has earned numerous global sustainability awards. In fiscal 2017, the company generated $2.28 billion in revenue and employed nearly 8,000 people worldwide. Herman Miller trades on the NASDAQ Global Select Market under the symbol MLHR.
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” "likely,” “plans,” “projects,” and “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, employment and general economic conditions, the pace of economic recovery in the U.S., and in our International markets, the increase in white-collar employment, the willingness of customers to undertake capital expenditures, the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of raw materials, our reliance on a limited number of suppliers, our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, the ability to increase prices to absorb the additional costs of raw materials, the financial strength of our dealers and the financial strength of our customers, our ability to locate new DWR studios, negotiate favorable lease terms for new and existing locations and implement our studio portfolio transformation, our ability to attract and retain key executives and other qualified employees, our ability to continue to make product innovations, the success of newly-introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or alliances, the pace and level of government procurement, the outcome of pending litigation or governmental audits or investigations, political risk in the markets we serve, and other risks identified in our filings with the Securities and Exchange Commission. Therefore, actual results and outcomes may materially differ from what we express or forecast. Furthermore, Herman Miller, Inc., undertakes no obligation to update, amend or clarify forward-looking statements.
-more-
Financial highlights for the quarter ended June 3, 2017, follow:
Herman Miller, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) (Dollars in millions, except per share and common share data)
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
June 3, 2017 | May 28, 2016 | June 3, 2017 | May 28, 2016 | ||||||||||||||||||
(13 weeks) | (13 weeks) | (53 weeks) | (52 weeks) | ||||||||||||||||||
Net Sales | $ | 577.2 | 100.0 | % | $ | 582.6 | 100.0 | % | $ | 2,278.2 | 100.0 | % | $ | 2,264.9 | 100.0 | % | |||||
Cost of Sales | 356.3 | 61.7 | % | 357.4 | 61.3 | % | 1,414.0 | 62.1 | % | 1,390.7 | 61.4 | % | |||||||||
Gross Margin | 220.9 | 38.3 | % | 225.2 | 38.7 | % | 864.2 | 37.9 | % | 874.2 | 38.6 | % | |||||||||
Operating Expenses | 162.3 | 28.1 | % | 168.6 | 28.9 | % | 660.9 | 29.0 | % | 662.7 | 29.3 | % | |||||||||
Restructuring and Impairment Expenses | 8.8 | 1.5 | % | — | — | % | 12.5 | 0.5 | % | — | — | % | |||||||||
Operating Earnings | 49.8 | 8.6 | % | 56.6 | 9.7 | % | 190.8 | 8.4 | % | 211.5 | 9.3 | % | |||||||||
Other Expenses, net | 2.8 | 0.5 | % | 2.6 | 0.4 | % | 13.2 | 0.6 | % | 14.9 | 0.7 | % | |||||||||
Earnings Before Income Taxes and Equity Income | 47.0 | 8.1 | % | 54.0 | 9.3 | % | 177.6 | 7.8 | % | 196.6 | 8.7 | % | |||||||||
Income Tax Expense | 14.1 | 2.4 | % | 13.4 | 2.3 | % | 55.1 | 2.4 | % | 59.5 | 2.6 | % | |||||||||
Equity Income, net of tax | 0.6 | 0.1 | % | 0.1 | — | % | 1.6 | 0.1 | % | 0.4 | — | % | |||||||||
Net Earnings | 33.5 | 5.8 | % | 40.7 | 7.0 | % | 124.1 | 5.4 | % | 137.5 | 6.1 | % | |||||||||
Net Earnings Attributable to Noncontrolling Interests | 0.1 | — | % | — | — | % | 0.2 | — | % | 0.8 | — | % | |||||||||
Net Earnings Attributable to Herman Miller, Inc. | $ | 33.4 | 5.8 | % | $ | 40.7 | 7.0 | % | $ | 123.9 | 5.4 | % | $ | 136.7 | 6.0 | % | |||||
Amounts per Common Share Attributable to Herman Miller, Inc. | |||||||||||||||||||||
Earnings Per Share – Basic | $0.56 | $0.68 | $2.07 | $2.28 | |||||||||||||||||
Weighted Average Basic Common Shares | 59,751,684 | 59,866,764 | 59,871,805 | 59,844,540 | |||||||||||||||||
Earnings Per Share – Diluted | $0.55 | $0.67 | $2.05 | $2.26 | |||||||||||||||||
Weighted Average Diluted Common Shares | 60,460,171 | 60,623,047 | 60,554,589 | 60,529,269 | |||||||||||||||||
Herman Miller, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Dollars in millions)
Twelve Months Ended | ||||||
June 3, 2017 | May 28, 2016 | |||||
(53 weeks) | (52 weeks) | |||||
Net Earnings | $ | 124.1 | $ | 137.5 | ||
Cash Flows provided by Operating Activities | 202.1 | 210.4 | ||||
Cash Flows used for Investing Activities | (116.3 | ) | (80.8 | ) | ||
Cash Flows used for Financing Activities | (74.6 | ) | (106.5 | ) | ||
Effect of Exchange Rates | 0.1 | (1.9 | ) | |||
Change in Cash | 11.3 | 21.2 | ||||
Cash, Beginning of Period | 84.9 | 63.7 | ||||
Cash, End of Period | $ | 96.2 | $ | 84.9 | ||
-more-
Herman Miller, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Dollars in millions)
June 3, 2017 | May 28, 2016 | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and Cash Equivalents | $ | 96.2 | $ | 84.9 | ||
Marketable Securities | 8.6 | 7.5 | ||||
Accounts and Notes Receivable, net | 186.6 | 211.0 | ||||
Inventories, net | 152.4 | 128.2 | ||||
Prepaid Expenses and Other | 48.1 | 48.9 | ||||
Total Current Assets | 491.9 | 480.5 | ||||
Net Property and Equipment | 314.6 | 280.1 | ||||
Other Assets | 499.8 | 474.6 | ||||
Total Assets | $ | 1,306.3 | $ | 1,235.2 | ||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts Payable | 148.4 | 165.6 | ||||
Accrued Liabilities | 237.3 | 224.4 | ||||
Total Current Liabilities | 385.7 | 390.0 | ||||
Long-term Debt | 199.9 | 221.9 | ||||
Other Liabilities | 108.4 | 71.6 | ||||
Total Liabilities | 694.0 | 683.5 | ||||
Redeemable Noncontrolling Interests | 24.6 | 27.0 | ||||
Herman Miller, Inc. Stockholders' Equity | 587.6 | 524.4 | ||||
Noncontrolling Interests | 0.1 | 0.3 | ||||
Total Stockholders' Equity | 587.7 | 524.7 | ||||
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity | $ | 1,306.3 | $ | 1,235.2 | ||
-end-
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
Earnings Release Data Supplement
Herman Miller, Inc. (together with its consolidated subsidiaries, the "company", "we", "our" or "us") provides this supplement to assist investors in evaluating the company's financial and operating results and metrics. We suggest that the narratives to each of the tables included in this supplement be read in conjunction with the financial tables. The financial information included in this supplement contains certain non-GAAP financial measures, as explained in more detail in Section II below. |
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
I. Operating Segment Information
The table below summarizes select financial information, for the periods indicated, related to each of the company’s reportable operating segments. The North American Furniture Solutions segment includes the operations associated with the design, manufacture, and sale of furniture products for work-related settings, including office, education, and healthcare environments, throughout the United States and Canada. The business associated with the company's owned contract furniture dealers is also included in the North American Furniture Solutions segment. The ELA Furniture Solutions segment includes EMEA, Latin America, and Asia-Pacific. ELA includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in these aforementioned geographic regions. The Specialty segment includes the operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles and Herman Miller Collection products. The Consumer segment 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 Design Within Reach retail studios. The Corporate category consists primarily of unallocated corporate expenses including, if applicable to the periods shown, acquisition-related costs, and other unallocated corporate costs.
Three Months Ended | Twelve Months Ended | ||||||||||||||||
Net Sales | 6/3/2017 | 5/28/2016 | % change | 6/3/2017 | 5/28/2016 | % change | |||||||||||
North America | $ | 337.8 | $ | 332.9 | 1.5 | % | $ | 1,342.2 | $ | 1,331.8 | 0.8 | % | |||||
ELA | 92.6 | 110.5 | (16.2 | )% | 385.5 | 412.6 | (6.6 | )% | |||||||||
Specialty | 56.8 | 61.6 | (7.8 | )% | 232.4 | 231.8 | 0.3 | % | |||||||||
Consumer | 90.0 | 77.6 | 16.0 | % | 318.1 | 288.7 | 10.2 | % | |||||||||
Corporate | — | — | n/a | — | — | n/a | |||||||||||
Total | $ | 577.2 | $ | 582.6 | (0.9 | )% | $ | 2,278.2 | $ | 2,264.9 | 0.6 | % | |||||
Operating Earnings (Loss) | |||||||||||||||||
North America | $ | 35.4 | $ | 39.2 | (9.7 | )% | $ | 137.7 | $ | 152.0 | (9.4 | )% | |||||
ELA | 7.6 | 14.6 | (47.9 | )% | 30.8 | 35.3 | (12.7 | )% | |||||||||
Specialty | 4.2 | 4.5 | (6.7 | )% | 17.7 | 16.4 | 7.9 | % | |||||||||
Consumer | 2.9 | (1.2 | ) | n/a | 5.3 | 8.1 | (34.6 | )% | |||||||||
Corporate | (0.3 | ) | (0.5 | ) | n/a | (0.7 | ) | (0.3 | ) | n/a | |||||||
Total | $ | 49.8 | $ | 56.6 | (12.0 | )% | $ | 190.8 | $ | 211.5 | (9.8 | )% | |||||
Operating Earnings % Net Sales | |||||||||||||||||
North America | 10.5 | % | 11.8 | % | 10.3 | % | 11.4 | % | |||||||||
ELA | 8.2 | % | 13.2 | % | 8.0 | % | 8.6 | % | |||||||||
Specialty | 7.4 | % | 7.3 | % | 7.6 | % | 7.1 | % | |||||||||
Consumer | 3.2 | % | (1.5 | )% | 1.7 | % | 2.8 | % | |||||||||
Corporate | n/a | n/a | n/a | n/a | |||||||||||||
Total | 8.6 | % | 9.7 | % | 8.4 | % | 9.3 | % | |||||||||
II. Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures such as Adjusted Earnings per Share, Adjusted EBITDA and Organic Growth (Decline). Adjusted EBITDA is calculated by excluding depreciation and amortization from operating earnings and including other income and expenses. Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects and the impacts of acquisitions, divestitures and the extra week in fiscal 2017. The company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented. The twelve months ended June 3, 2017 included 53 weeks of operations as compared to a standard 52-week period. The additional week is required periodically in order to more closely align Herman Miller’s fiscal year with the calendar months.
Adjusted Earnings per Share, Adjusted EBITDA and Organic Growth (Decline) are not measurements of our financial performance under GAAP and should not be considered an alternative to the related GAAP measurement. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP results.
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
A. Reconciliation of Earnings per Share to Adjusted Earnings per Share
Three Months Ended | Twelve Months Ended | |||||||||||
6/3/2017 | 5/28/2016 | 6/3/2017 | 5/28/2016 | |||||||||
Earnings per Share - Diluted | $ | 0.55 | $ | 0.67 | $ | 2.05 | $ | 2.26 | ||||
Less: Non-recurring Gains | — | (0.09 | ) | — | (0.09 | ) | ||||||
Less: Tax Planning Benefit not Attributable to quarter | — | (0.02 | ) | — | — | |||||||
Less: Gain on sale of dealer | — | — | (0.02 | ) | — | |||||||
Add: Restructuring and impairment expenses | 0.09 | — | 0.13 | |||||||||
Adjusted Earnings per Share - Diluted | $ | 0.64 | $ | 0.56 | $ | 2.16 | $ | 2.17 | ||||
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted | 60,460,171 | 60,623,047 | 60,554,589 | 60,529,269 | ||||||||
B. Reconciliation of Operating Earnings to EBITDA by Segment and Total
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Corporate | Total | North America | ELA | Specialty | Consumer | Corporate | Total | |||||||||||||||||||||||||
Operating Earnings (Loss) | $ | 35.4 | $ | 7.6 | $ | 4.2 | $ | 2.9 | $ | (0.3 | ) | $ | 49.8 | $ | 39.2 | $ | 14.6 | $ | 4.5 | $ | (1.2 | ) | $ | (0.5 | ) | $ | 56.6 | |||||||||
% Net Sales | 10.5 | % | 8.2 | % | 7.4 | % | 3.2 | % | n/a | 8.6 | % | 11.8 | % | 13.2 | % | 7.3 | % | (1.5 | )% | n/a | 9.7 | % | ||||||||||||||
Less: Non-recurring Gains | — | — | — | — | — | — | — | (6.1 | ) | — | — | — | (6.1 | ) | ||||||||||||||||||||||
Add: Restructuring and Impairment Expenses | 8.1 | 0.1 | — | 0.6 | — | 8.8 | — | — | — | — | — | — | ||||||||||||||||||||||||
Adjusted Operating Earnings (Loss) | $ | 43.5 | $ | 7.7 | $ | 4.2 | $ | 3.5 | $ | (0.3 | ) | $ | 58.6 | $ | 39.2 | $ | 8.5 | $ | 4.5 | $ | (1.2 | ) | $ | (0.5 | ) | $ | 50.5 | |||||||||
% Net Sales | 12.9 | % | 8.3 | % | 7.4 | % | 3.9 | % | n/a | 10.2 | % | 11.8 | % | 7.7 | % | 7.3 | % | (1.5 | )% | n/a | 8.7 | % | ||||||||||||||
Other Income, net | — | — | — | — | 1.0 | 1.0 | — | — | — | — | 1.2 | 1.2 | ||||||||||||||||||||||||
Add: Depreciation and Amortization | 8.8 | 2.1 | 2.1 | 2.7 | 0.1 | 15.8 | 6.9 | 2.0 | 1.9 | 2.1 | 0.2 | 13.1 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 52.3 | $ | 9.8 | $ | 6.3 | $ | 6.2 | $ | 0.8 | $ | 75.4 | $ | 46.1 | $ | 10.5 | $ | 6.4 | $ | 0.9 | $ | 0.9 | $ | 64.8 | ||||||||||||
% Net Sales | 15.5 | % | 10.6 | % | 11.1 | % | 6.9 | % | n/a | 13.1 | % | 13.8 | % | 9.5 | % | 10.4 | % | 1.2 | % | n/a | 11.1 | % | ||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Corporate | Total | North America | ELA | Specialty | Consumer | Corporate | Total | |||||||||||||||||||||||||
Operating Earnings (Loss) | $ | 137.7 | $ | 30.8 | $ | 17.7 | $ | 5.3 | $ | (0.7 | ) | $ | 190.8 | $ | 152.0 | $ | 35.3 | $ | 16.4 | $ | 8.1 | $ | (0.3 | ) | $ | 211.5 | ||||||||||
% Net Sales | 10.3 | % | 8.0 | % | 7.6 | % | 1.7 | % | n/a | 8.4 | % | 11.4 | % | 8.6 | % | 7.1 | % | 2.8 | % | n/a | 9.3 | % | ||||||||||||||
Less: Non-recurring Gains | — | — | — | — | — | — | — | (6.1 | ) | — | — | — | (6.1 | ) | ||||||||||||||||||||||
Less: Gain on sale of dealer | (0.7 | ) | — | — | — | — | (0.7 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
Add: Restructuring and Impairment Expenses | 10.3 | 1.0 | 0.6 | 0.6 | — | 12.5 | — | — | — | — | — | — | ||||||||||||||||||||||||
Adjusted Operating Earnings (Loss) | $ | 147.3 | $ | 31.8 | $ | 18.3 | $ | 5.9 | $ | (0.7 | ) | $ | 202.6 | $ | 152.0 | $ | 29.2 | $ | 16.4 | $ | 8.1 | $ | (0.3 | ) | $ | 205.4 | ||||||||||
% Net Sales | 11.0 | % | 8.2 | % | 7.9 | % | 1.9 | % | n/a | 8.9 | % | 11.4 | % | 7.1 | % | 7.1 | % | 2.8 | % | n/a | 9.1 | % | ||||||||||||||
Other Income, net | — | — | — | — | 2.0 | 2.0 | — | — | — | — | 0.5 | 0.5 | ||||||||||||||||||||||||
Add: Depreciation and Amortization | 32.0 | 8.8 | 7.5 | 10.2 | 0.4 | 58.9 | 27.9 | 8.5 | 7.4 | 8.6 | 0.6 | 53.0 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 179.3 | $ | 40.6 | $ | 25.8 | $ | 16.1 | $ | 1.7 | $ | 263.5 | $ | 179.9 | $ | 37.7 | $ | 23.8 | $ | 16.7 | $ | 0.8 | $ | 258.9 | ||||||||||||
% Net Sales | 13.4 | % | 10.5 | % | 11.1 | % | 5.1 | % | n/a | 11.6 | % | 13.5 | % | 9.1 | % | 10.3 | % | 5.8 | % | n/a | 11.4 | % | ||||||||||||||
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
C. Organic Sales Growth (Decline) by Segment | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Net Sales, as reported | $ | 337.8 | $ | 92.6 | $ | 56.8 | $ | 90.0 | $ | 577.2 | $ | 332.9 | $ | 110.5 | $ | 61.6 | $ | 77.6 | $ | 582.6 | ||||||||||
% change from PY | 1.5 | % | (16.2 | )% | (7.8 | )% | 16.0 | % | (0.9 | )% | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (6.0 | ) | (10.5 | ) | — | — | (16.5 | ) | |||||||||||||||||
Currency Translation Effects (1) | 1.2 | 2.8 | — | — | 4.0 | — | ||||||||||||||||||||||||
Net Sales, organic | $ | 339.0 | $ | 95.4 | $ | 56.8 | $ | 90.0 | $ | 581.2 | $ | 326.9 | $ | 100.0 | $ | 61.6 | $ | 77.6 | $ | 566.1 | ||||||||||
% change from PY | 3.7 | % | (4.6 | )% | (7.8 | )% | 16.0 | % | 2.7 | % | ||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Net Sales, as reported | $ | 1,342.2 | $ | 385.5 | $ | 232.4 | $ | 318.1 | $ | 2,278.2 | $ | 1,331.8 | $ | 412.6 | $ | 231.8 | $ | 288.7 | $ | 2,264.9 | ||||||||||
% change from PY | 0.8 | % | (6.6 | )% | 0.3 | % | 10.2 | % | 0.6 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (8.8 | ) | (30.8 | ) | — | — | (39.6 | ) | |||||||||||||||||
Currency Translation Effects (1) | 0.7 | 13.9 | — | — | 14.6 | — | ||||||||||||||||||||||||
Impact of Extra Week in FY17 | (22.7 | ) | (6.3 | ) | (3.3 | ) | (4.7 | ) | (37.0 | ) | — | — | — | — | — | |||||||||||||||
Net sales, organic | $ | 1,320.2 | $ | 393.1 | $ | 229.1 | $ | 313.4 | $ | 2,255.8 | $ | 1,323.0 | $ | 381.8 | $ | 231.8 | $ | 288.7 | $ | 2,225.3 | ||||||||||
% change from PY | (0.2 | )% | 3.0 | % | (1.2 | )% | 8.6 | % | 1.4 | % | ||||||||||||||||||||
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period | ||||||||||||||||||||||||||||||
D. Organic Order Growth (Decline) by Segment | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Orders, as reported | $ | 328.7 | $ | 89.8 | $ | 58.7 | $ | 90.9 | $ | 568.1 | $ | 358.6 | $ | 101.7 | $ | 61.7 | $ | 84.2 | $ | 606.2 | ||||||||||
% change from PY | (8.3 | )% | (11.7 | )% | (4.9 | )% | 8.0 | % | (6.3 | )% | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (8.0 | ) | (4.7 | ) | — | — | (12.7 | ) | |||||||||||||||||
Currency Translation Effects (1) | 1.1 | 2.1 | — | 0.1 | 3.3 | — | — | — | — | — | ||||||||||||||||||||
Price Increase Pull Forward Impact | 20.0 | — | 1.0 | — | 21.0 | — | — | — | — | — | ||||||||||||||||||||
Orders, organic | $ | 349.8 | $ | 91.9 | $ | 59.7 | $ | 91.0 | $ | 592.4 | $ | 350.6 | $ | 97.0 | $ | 61.7 | $ | 84.2 | $ | 593.5 | ||||||||||
% change from PY | (0.2 | )% | (5.3 | )% | (3.2 | )% | 8.1 | % | (0.2 | )% | ||||||||||||||||||||
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period | ||||||||||||||||||||||||||||||
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||
6/3/17 | 5/28/16 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Orders, as reported | $ | 1,347.6 | $ | 384.9 | $ | 232.0 | $ | 318.4 | $ | 2,282.9 | $ | 1,336.1 | $ | 417.1 | $ | 234.8 | $ | 291.7 | $ | 2,279.7 | ||||||||||
% change from PY | 0.9 | % | (7.7 | )% | (1.2 | )% | 9.2 | % | 0.1 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (12.7 | ) | (32.8 | ) | — | — | (45.5 | ) | |||||||||||||||||
Currency Translation Effects (1) | 0.1 | 8.6 | — | — | 8.7 | — | — | — | — | — | ||||||||||||||||||||
Impact of Extra Week in FY17 | (21.0 | ) | (8.1 | ) | (3.8 | ) | (4.0 | ) | (36.9 | ) | — | — | — | — | — | |||||||||||||||
Orders, organic | $ | 1,326.7 | $ | 385.4 | $ | 228.2 | $ | 314.4 | $ | 2,254.7 | $ | 1,323.4 | $ | 384.3 | $ | 234.8 | $ | 291.7 | $ | 2,234.2 | ||||||||||
% change from PY | 0.2 | % | 0.3 | % | (2.8 | )% | 7.8 | % | 0.9 | % | ||||||||||||||||||||
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period | ||||||||||||||||||||||||||||||
E. Design Within Reach Studio Metrics | ||||||||||||
Studio Count | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||
June 3, 2017 | May 28, 2016 | June 3, 2017 | May 28, 2016 | |||||||||
Beginning of Period | 31 | 30 | 29 | 33 | ||||||||
Studio Openings | 1 | 1 | 8 | 2 | ||||||||
Studio Closings | (1 | ) | (2 | ) | (6 | ) | (6 | ) | ||||
End of Period | 31 | 29 | 31 | 29 | ||||||||
Comparable Studios, End of Period | 23 | 28 | 23 | 28 | ||||||||
Number of Studios Open Less than 12 Months, End of Period | 8 | 1 | 8 | 1 | ||||||||
Studio Selling Square Footage | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||
June 3, 2017 | May 28, 2016 | June 3, 2017 | May 28, 2016 | |||||||||
Beginning of Period | 308,189 | 251,795 | 246,481 | 248,440 | ||||||||
Studio Openings | 13,267 | 4,050 | 100,551 | 19,165 | ||||||||
Studio Expansions | — | — | — | 3,906 | ||||||||
Studio Closings | (4,000 | ) | (9,364 | ) | (29,576 | ) | (25,030 | ) | ||||
End of Period | 317,456 | 246,481 | 317,456 | 246,481 | ||||||||
Studio Revenue Metrics | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||
June 3, 2017 | May 28, 2016 | June 3, 2017 | May 28, 2016 | |||||||||
Average Studio Square Footage | 312,823 | 249,138 | 281,969 | 247,461 | ||||||||
Annualized Net Sales per Square Foot | $ | 632 | $ | 709 | $ | 610 | $ | 655 | ||||
DWR Comparable Brand Sales* | 18.6 | % | (1.9 | )% | 9.5 | % | (0.4 | )% | ||||
*Year to date fiscal 2017 figures are presented on a pro forma basis using a 52-week average to normalize results for the impact of an extra week of operations in the first quarter of fiscal 2017. DWR comparable brand sales reflects the year-over-year change in net sales across the multiple channels that DWR serves, including studios, outlets, contract, catalog, phone and e-commerce.
Note: Consumer segment sales also include sales through eCommerce, outlet store, call center and wholesale channels.
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
F. New and Expanded Design Within Reach Locations
Atlanta, Georgia |  | |
Opened: April 2017 | ||
Square Footage: 15,000 | ||
G. Sales and Earnings Guidance - Upcoming Quarter | Company Guidance | ||
Q1 Fiscal 2018 | |||
Net Sales | $570 million to $590 million | ||
Gross Margin % | 37.5% - 38.5% | ||
Operating Expenses | $166 million to $170 million | ||
Effective Tax Rate | 30.5% - 32.5% | ||
Earnings Per Share, Diluted | $0.55 to $0.59 | ||
Herman Miller, Inc. Supplemental Financial Data
Twelve Months Ended June 3, 2017
(Unaudited) ($ in millions except per share data and square footage metrics)
Forward Looking Statements
This information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, employment and general economic conditions, the pace of economic recovery in the U.S and in our International markets, the increase in white-collar employment, the willingness of customers to undertake capital expenditures, the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of raw materials, our reliance on a limited number of suppliers, our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, the ability to increase prices to absorb the additional costs of raw materials, the financial strength of our dealers and the financial strength of our customers, our ability to locate new DWR studios, negotiate favorable lease terms for new and existing locations and the implementation of our studio portfolio transformation, our ability to attract and retain key executives and other qualified employees, our ability to continue to make product innovations, the success of newly-introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or alliances, the pace and level of government procurement, the outcome of pending litigation or governmental audits or investigations, political risk in the markets we serve, and other risks identified in our filings with the Securities and Exchange Commission. Therefore, actual results and outcomes may materially differ from what we express or forecast. Furthermore, Herman Miller, Inc., undertakes no obligation to update, amend or clarify forward-looking statements. |