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: September 19, 2018
(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 September 19, 2018, Herman Miller, Inc. issued a press release announcing its financial results for the quarter ended September 19, 2018. A copy of the press release is attached as Exhibit 99.1. Also, a copy of the supplemental financial data for the quarter ended September 19, 2018 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.
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: | September 19, 2018 | 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 First Quarter Fiscal 2019 Results
• | Year-over-year sales growth of 8%; broad-based across all segments |
• | 9% increase in reported EPS (adjusted EPS growth of 21%) |
• | Strategic investments in HAY and Maars Living Walls |
Webcast to be held Thursday, September 20, 2018, at 9:30 AM ET
Release | Immediate |
Date | September 19, 2018 |
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 first quarter ended September 1, 2018. Net sales in the quarter totaled $624.6 million, an increase of 7.6% from the same quarter last fiscal year. New orders in the first quarter of $630.6 million were 6.0% above the prior year level.
Herman Miller reported net earnings of $0.60 per share on a diluted basis in the first quarter compared to diluted earnings per share of $0.55 in the same quarter last fiscal year. Excluding the impact of restructuring and impairment expenses, and other special charges, adjusted earnings per share in the first quarter totaled $0.69 compared to adjusted earnings per share of $0.57 in the first quarter of last fiscal year.
Andi Owen, Chief Executive Officer, stated, "As I have engaged with stakeholders across the Herman Miller community in the past month since joining the Company, it has become even more clear to me that the legacy of innovation and design at the heart of Herman Miller will lay the foundation for our future success. There are tremendous opportunities ahead to leverage Herman Miller’s global multi-channel distribution capabilities and leading portfolio of brands with both commercial and consumer audiences. These opportunities include leveraging the investments that we made this quarter in HAY, a leading global design brand in both commercial and consumer furnishings, and Maars Living Walls, a global designer and manufacturer of interior wall solutions. Our teams are in the early days of integrating these brands into our portfolio and that work is progressing ahead of schedule. Our momentum is evident from our first quarter results as net sales and order levels reflected growth across all of our business segments and adjusted earnings exceeded the expectations established at the start of the quarter. I look forward to working with our leadership team to leverage our key strategic priorities to accelerate the growth and evolution of our business.”
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First Quarter Fiscal 2019 Financial Results
FINANCIAL HIGHLIGHTS | ||||||||
(Dollars in millions, except per share data) | (Unaudited) | |||||||
Three Months Ended | ||||||||
9/1/2018 | 9/2/2017 | % Chg. | ||||||
Net Sales | $ | 624.6 | $ | 580.3 | 7.6 | % | ||
Gross Margin % | 36.0 | % | 37.4 | % | N/A | |||
Operating Expenses | $ | 178.0 | $ | 165.7 | 7.4 | % | ||
Restructuring and Impairment Expenses | $ | 1.1 | $ | 2.1 | (47.6 | )% | ||
Operating Earnings % | 7.4 | % | 8.5 | % | N/A | |||
Adjusted Operating Earnings %* | 8.4 | % | 8.8 | % | N/A | |||
Adjusted EBITDA* | $ | 73.6 | $ | 68.6 | 7.3 | % | ||
Net Earnings Attributable to Herman Miller, Inc. | $ | 35.8 | $ | 33.1 | 8.2 | % | ||
Earnings Per Share – Diluted | $ | 0.60 | $ | 0.55 | 9.1 | % | ||
Adjusted Earnings Per Share – Diluted* | $ | 0.69 | $ | 0.57 | 21.1 | % | ||
Orders | $ | 630.6 | $ | 594.8 | 6.0 | % | ||
Backlog | $ | 346.4 | $ | 332.1 | 4.3 | % | ||
*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 first quarter of fiscal 2019 totaled 36.0%, representing a 140 basis point decrease from the level reported in the same quarter of last 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 required recording certain product pricing elements as expenses within cost of goods sold that were previously classified on a net basis within sales. Excluding this impact, gross margin decreased by 80 basis points compared to the same quarter last year.
Operating expenses in the first quarter were $178.0 million compared to $165.7 million in the same quarter a year ago. Operating expenses included certain special charges totaling $5.1 million in the first quarter of fiscal 2019. The special charges related primarily to costs associated with the CEO transition and external consulting fees associated with the Company's profit enhancement initiatives. Excluding these items, operating expenses increased by $7.2 million compared to the same quarter last year.
The Company recognized pre-tax restructuring and impairment expenses totaling $1.1 million in the first quarter related to the consolidation of certain facilities in China and the United Kingdom that were announced last quarter. These costs primarily reflected asset impairments, severance, outplacement costs and moving expenses.
Herman Miller’s effective income tax rate in the first quarter was 20.0%, compared to 30.5% in the same quarter last fiscal year. This rate is lower than the prior year tax rate primarily due to the lower marginal corporate tax rate that resulted from the U.S. Tax Cuts and Jobs Act enacted in the third quarter of fiscal 2018.
Jeff Stutz, Chief Financial Officer, noted, "Broad-based sales growth and well-managed operating expenses propelled our quarterly performance. Gross margins reflected higher commodity and freight expenses as well as ongoing margin pressure within one of our Specialty businesses. Our continued focus on long-term profit optimization remains a strategic priority and helped offset some of these margin pressures this quarter. This operating performance combined with a lower effective tax rate helped drive a 21% increase in adjusted earnings per share compared to last year. While we believe our business is poised to benefit from our strategic position and a generally strong economic picture, we will have to navigate the global tariff picture and related commodity pressures in the near-term. Our outlook for the upcoming second quarter reflects both our current expectations of these exposures as well as benefits from the actions that we are contemplating to help mitigate those pressures.”
The Company ended the first quarter with total cash and cash equivalents of $101.7 million, a decrease of $102.2 million from the balance at the end of fiscal 2018. The reduction in cash balances primarily related to the equity and licensing agreement investments of $77 million in HAY and Maars Living Walls in the first quarter of fiscal 2019. Cash flow generated from operations in the first quarter of $33.6 million compared to $18.9 million in the same quarter last fiscal year.
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Segment Sales and Orders
The following tables summarize reported and organic segment sales and orders for the first quarter of fiscal 2019:
Organic Sales Growth by Segment * | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
9/1/18 | 9/2/17 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Net Sales, as reported | $ | 343.7 | $ | 115.4 | $ | 77.3 | $ | 88.2 | $ | 624.6 | $ | 328.6 | $ | 93.4 | $ | 75.1 | $ | 83.2 | $ | 580.3 | ||||||||||
% change from PY | 4.6 | % | 23.6 | % | 2.9 | % | 6.0 | % | 7.6 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (0.8 | ) | — | — | — | (0.8 | ) | ||||||||||||||||||
Currency Translation Effects (1) | 0.5 | 1.2 | — | — | 1.7 | — | — | — | — | — | ||||||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | — | 4.6 | 2.1 | 0.6 | — | 7.3 | ||||||||||||||||||||
Impact of Change in DWR Shipping Terms | — | — | — | — | — | — | — | — | (5.0 | ) | (5.0 | ) | ||||||||||||||||||
Net Sales, organic | $ | 344.2 | $ | 116.6 | $ | 77.3 | $ | 88.2 | $ | 626.3 | $ | 332.4 | $ | 95.5 | $ | 75.7 | $ | 78.2 | $ | 581.8 | ||||||||||
% change from PY | 3.5 | % | 22.1 | % | 2.1 | % | 12.8 | % | 7.6 | % | ||||||||||||||||||||
Organic Order Growth by Segment * | ||||||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
9/1/18 | 9/2/17 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Orders, as reported | $ | 345.0 | $ | 125.0 | $ | 80.1 | $ | 80.5 | $ | 630.6 | $ | 334.8 | $ | 108.5 | $ | 75.4 | $ | 76.1 | $ | 594.8 | ||||||||||
% change from PY | 3.0 | % | 15.2 | % | 6.2 | % | 5.8 | % | 6.0 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (2.2 | ) | — | — | — | (2.2 | ) | ||||||||||||||||||
Currency Translation Effects (1) | 0.6 | 1.5 | — | — | 2.1 | — | — | — | — | — | ||||||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | — | 5.0 | 2.1 | 0.5 | — | 7.6 | ||||||||||||||||||||
Orders, proforma | $ | 345.6 | $ | 126.5 | $ | 80.1 | $ | 80.5 | $ | 632.7 | $ | 337.6 | $ | 110.6 | $ | 75.9 | $ | 76.1 | $ | 600.2 | ||||||||||
% change from PY | 2.4 | % | 14.4 | % | 5.5 | % | 5.8 | % | 5.4 | % | ||||||||||||||||||||
(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 | ||||||||||||||||||||||||||||||
* 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. | ||||||||||||||||||||||||||||||
Second Quarter Fiscal 2019 Guidance
Looking forward, Herman Miller expects net sales in the second quarter of fiscal 2019 to be in the range of $635 million to $655 million. On an organic basis, adjusted for the impact of reclassification related to the new revenue recognition standard, this forecast implies sales growth of 5% compared to the second quarter of the prior year at the mid-point of the range. The Company expects adjusted diluted earnings per share to range between $0.70 to $0.74.
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 webcast to discuss the results of the first quarter of fiscal 2019 on Thursday, September 20, 2018, 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.
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About Herman Miller
Herman Miller is a globally recognized provider of furnishings and related technologies and services. Headquartered in West Michigan, the 113-year-old company has relied on innovative design to solve problems wherever people work, live, learn, and heal. With recognizable designs as part of museum collections worldwide, Herman Miller is a past recipient of the Smithsonian Institution's Cooper Hewitt National Design Award and has been ranked number one on Contract Magazine’s list of “Brands that Inspire” for four straight years. Known and respected for its leadership in corporate social responsibility, Herman Miller has earned numerous global sustainability and inclusivity awards including the Human Rights Foundation’s top rating in its Corporate Equality Index for 11 years in a row. In fiscal 2018, the Company generated $2.38 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, our success in initiatives aimed at achieving long-term profit optimization goals, 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, changes in future tax legislation or interpretation of current tax legislation, the ability to increase prices to absorb the additional costs of raw materials, changes in global tariff regulations, 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, our ability to integrate and benefit from acquisitions and investments, 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.
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Financial highlights for the three months ended September 1, 2018 follow:
Herman Miller, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) (Dollars in millions, except per share and common share data)
Three Months Ended | ||||||||||
September 1, 2018 | September 2, 2017 | |||||||||
Net Sales | $ | 624.6 | 100.0 | % | $ | 580.3 | 100.0 | % | ||
Cost of Sales | 399.5 | 64.0 | % | 363.4 | 62.6 | % | ||||
Gross Margin | 225.1 | 36.0 | % | 216.9 | 37.4 | % | ||||
Operating Expenses | 178.0 | 28.5 | % | 165.7 | 28.6 | % | ||||
Restructuring and Impairment Expenses | 1.1 | 0.2 | % | 2.1 | 0.4 | % | ||||
Operating Earnings | 46.0 | 7.4 | % | 49.1 | 8.5 | % | ||||
Other Expenses, net | 1.9 | 0.3 | % | 2.6 | 0.4 | % | ||||
Earnings Before Income Taxes and Equity Income | 44.1 | 7.1 | % | 46.5 | 8.0 | % | ||||
Income Tax Expense | 8.9 | 1.4 | % | 14.2 | 2.4 | % | ||||
Equity Income, net of tax | 0.7 | 0.1 | % | 0.8 | 0.1 | % | ||||
Net Earnings | 35.9 | 5.7 | % | 33.1 | 5.7 | % | ||||
Net Earnings Attributable to Noncontrolling Interests | 0.1 | — | % | — | — | % | ||||
Net Earnings Attributable to Herman Miller, Inc. | $ | 35.8 | 5.7 | % | $ | 33.1 | 5.7 | % | ||
Amounts per Common Share Attributable to Herman Miller, Inc. | ||||||||||
Earnings Per Share – Basic | $0.60 | $0.55 | ||||||||
Weighted Average Basic Common Shares | 59,370,160 | 59,758,610 | ||||||||
Earnings Per Share – Diluted | $0.60 | $0.55 | ||||||||
Weighted Average Diluted Common Shares | 59,869,114 | 60,329,269 | ||||||||
Herman Miller, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Dollars in millions)
Three Months Ended | ||||||
September 1, 2018 | September 2, 2017 | |||||
Net Earnings | $ | 35.9 | $ | 33.1 | ||
Cash Flows provided by Operating Activities | 33.6 | 18.9 | ||||
Cash Flows used for Investing Activities | (100.4 | ) | (24.2 | ) | ||
Cash Flows used for Financing Activities | (33.0 | ) | (13.0 | ) | ||
Effect of Exchange Rates | (2.4 | ) | 2.1 | |||
Change in Cash | (102.2 | ) | (16.2 | ) | ||
Cash, Beginning of Period | 203.9 | 96.2 | ||||
Cash, End of Period | $ | 101.7 | $ | 80.0 | ||
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Herman Miller, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Dollars in millions)
September 1, 2018 | June 2, 2018 | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and Cash Equivalents | $ | 101.7 | $ | 203.9 | ||
Marketable Securities | 8.5 | 8.6 | ||||
Accounts and Notes Receivable, net | 230.8 | 219.3 | ||||
Inventories, net | 163.8 | 162.4 | ||||
Prepaid Expenses and Other | 51.2 | 51.2 | ||||
Total Current Assets | 556.0 | 645.4 | ||||
Net Property and Equipment | 329.8 | 331.4 | ||||
Other Assets | 577.9 | 502.7 | ||||
Total Assets | $ | 1,463.7 | $ | 1,479.5 | ||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts Payable | $ | 170.2 | $ | 171.4 | ||
Accrued Liabilities | 223.0 | 242.4 | ||||
Total Current Liabilities | 393.2 | 413.8 | ||||
Long-term Debt | 281.9 | 275.0 | ||||
Other Liabilities | 94.7 | 95.4 | ||||
Total Liabilities | 769.8 | 784.2 | ||||
Redeemable Noncontrolling Interests | 20.7 | 30.5 | ||||
Herman Miller, Inc. Stockholders' Equity | 673.0 | 664.6 | ||||
Noncontrolling Interests | 0.2 | 0.2 | ||||
Total Stockholders' Equity | 673.2 | 664.8 | ||||
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity | $ | 1,463.7 | $ | 1,479.5 | ||
-end-
Herman Miller, Inc. Supplemental Financial Data
Three Months Ended September 1, 2018
(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
Three Months Ended September 1, 2018
(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 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, Nemschoff 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. Corporate costs represent unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs.
Three Months Ended | ||||||||
Net Sales | 9/1/2018 | 9/2/2017 | % change | |||||
North America | $ | 343.7 | $ | 328.6 | 4.6 | % | ||
ELA | 115.4 | 93.4 | 23.6 | % | ||||
Specialty | 77.3 | 75.1 | 2.9 | % | ||||
Consumer | 88.2 | 83.2 | 6.0 | % | ||||
Total | $ | 624.6 | $ | 580.3 | 7.6 | % | ||
Gross Margin | ||||||||
North America | $ | 117.2 | $ | 119.7 | (2.1 | )% | ||
ELA | 38.1 | 31.8 | 19.8 | % | ||||
Specialty | 30.4 | 28.8 | 5.6 | % | ||||
Consumer | 39.4 | 36.6 | 7.7 | % | ||||
Total | $ | 225.1 | $ | 216.9 | 3.8 | % | ||
Gross Margin % Net Sales | ||||||||
North America | 34.1 | % | 36.4 | % | ||||
ELA | 33.0 | % | 34.0 | % | ||||
Specialty | 39.3 | % | 38.3 | % | ||||
Consumer | 44.7 | % | 44.0 | % | ||||
Total | 36.0 | % | 37.4 | % | ||||
Operating Earnings (Loss) | ||||||||
North America | $ | 45.0 | $ | 48.7 | (7.6 | )% | ||
ELA | 10.5 | 6.6 | 59.1 | % | ||||
Specialty | 3.1 | 1.6 | 93.8 | % | ||||
Consumer | 2.1 | 0.3 | 600.0 | % | ||||
Corporate Unallocated Expenses | (14.7 | ) | (8.1 | ) | 81.5 | % | ||
Total | $ | 46.0 | $ | 49.1 | (6.3 | )% | ||
Operating Earnings % Net Sales | ||||||||
North America | 13.1 | % | 14.8 | % | ||||
ELA | 9.1 | % | 7.1 | % | ||||
Specialty | 4.0 | % | 2.1 | % | ||||
Consumer | 2.4 | % | 0.4 | % | ||||
Total | 7.4 | % | 8.5 | % | ||||
Herman Miller, Inc. Supplemental Financial Data
Three Months Ended September 1, 2018
(Unaudited) ($ in millions except per share data and square footage metrics)
II. Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures such as Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), Adjusted EBITDA and Organic Growth (Decline). Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact of restructuring and impairment expenses, and other charges or gains, including related taxes. Adjusted Operating Earnings (Loss) represents reported operating earnings plus restructuring and impairment expenses, and other special charges. These items include certain restructuring and impairment expenses related to actions involving targeted workforce reductions and moving costs, as well as special charges related to the CEO transition and third party consulting costs related to the company's profit enhancement initiatives. Adjusted EBITDA is calculated by excluding depreciation and amortization from Adjusted Operating Earnings (Loss)and including other income and expenses, equity income and inventory step up on HAY equity method investment. Organic Growth (Decline) represents the change in sales and orders, excluding currency translation effects, the impact of reclassification related to the new revenue recognition standard (ASC 606) and the impact of acquisitions, divestitures and changes in shipping terms. 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.
Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), 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.
A. Reconciliation of Earnings per Share - Diluted to Adjusted Earnings per Share - Diluted
Three Months Ended | ||||||
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 | ||
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted | 59,869,114 | 60,329,269 | ||||
B. Reconciliation of Operating Earnings and Net Income to EBITDA
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||
9/1/18 | 9/2/17 | |||||||||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Corporate | Total | North America | ELA | Specialty | Consumer | Corporate | Total | |||||||||||||||||||||||||
Operating Earnings (Loss) | $ | 45.0 | $ | 10.5 | $ | 3.1 | $ | 2.1 | $ | (14.7 | ) | $ | 46.0 | $ | 48.7 | $ | 6.6 | $ | 1.6 | $ | 0.3 | $ | (8.1 | ) | $ | 49.1 | ||||||||||
% Net Sales | 13.1 | % | 9.1 | % | 4.0 | % | 2.4 | % | n/a | 7.4 | % | 14.8 | % | 7.1 | % | 2.1 | % | 0.4 | % | n/a | 8.5 | % | ||||||||||||||
Add: Special charges | — | 0.1 | — | — | 5.0 | 5.1 | — | — | — | — | — | — | ||||||||||||||||||||||||
Add: Restructuring and impairment expenses | — | 1.1 | — | — | — | 1.1 | 1.4 | — | — | — | 0.7 | 2.1 | ||||||||||||||||||||||||
Adjusted Operating Earnings (Loss) | $ | 45.0 | $ | 11.7 | $ | 3.1 | $ | 2.1 | $ | (9.7 | ) | $ | 52.2 | $ | 50.1 | $ | 6.6 | $ | 1.6 | $ | 0.3 | $ | (7.4 | ) | $ | 51.2 | ||||||||||
% Net Sales | 13.1 | % | 10.1 | % | 4.0 | % | 2.4 | % | n/a | 8.4 | % | 15.2 | % | 7.1 | % | 2.1 | % | 0.4 | % | n/a | 8.8 | % | ||||||||||||||
Other Income (Expense), net | — | — | — | — | 1.1 | 1.1 | — | — | — | — | 1.1 | 1.1 | ||||||||||||||||||||||||
Equity Income, net of tax | 0.3 | 0.2 | 0.2 | — | — | 0.7 | 0.4 | 0.3 | 0.1 | — | — | 0.8 | ||||||||||||||||||||||||
Add: Depreciation and Amortization | 10.1 | 2.7 | 2.7 | 3.3 | 0.2 | 19.0 | 7.8 | 2.4 | 2.4 | 2.8 | 0.1 | 15.5 | ||||||||||||||||||||||||
Add: Inventory step up on HAY equity method investment | — | — | — | — | 0.6 | 0.6 | — | — | — | — | — | — | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 55.4 | $ | 14.6 | $ | 6.0 | $ | 5.4 | $ | (7.8 | ) | $ | 73.6 | $ | 58.3 | $ | 9.3 | $ | 4.1 | $ | 3.1 | $ | (6.2 | ) | $ | 68.6 | ||||||||||
% Net Sales | 16.1 | % | 12.7 | % | 7.8 | % | 6.1 | % | n/a | 11.8 | % | 17.7 | % | 10.0 | % | 5.5 | % | 3.7 | % | n/a | 11.8 | % | ||||||||||||||
Herman Miller, Inc. Supplemental Financial Data
Three Months Ended September 1, 2018
(Unaudited) ($ in millions except per share data and square footage metrics)
Three Months Ended | ||||||
9/1/18 | 9/2/17 | |||||
Net Earnings | $ | 35.9 | $ | 33.1 | ||
Add: Interest expense | 3.0 | 3.7 | ||||
Add: Income tax expense | 8.9 | 14.2 | ||||
Add: Amortization and depreciation | 19.0 | 15.5 | ||||
Add: Special charges | 5.1 | — | ||||
Add: Restructuring and impairment expenses | 1.1 | 2.1 | ||||
Add: Inventory step up on HAY equity method investment | 0.6 | — | ||||
Adjusted EBITDA | $ | 73.6 | $ | 68.6 | ||
C. Organic Sales Growth by Segment
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
9/1/18 | 9/2/17 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Net Sales, as reported | $ | 343.7 | $ | 115.4 | $ | 77.3 | $ | 88.2 | $ | 624.6 | $ | 328.6 | $ | 93.4 | $ | 75.1 | $ | 83.2 | $ | 580.3 | ||||||||||
% change from PY | 4.6 | % | 23.6 | % | 2.9 | % | 6.0 | % | 7.6 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (0.8 | ) | — | — | — | (0.8 | ) | ||||||||||||||||||
Currency Translation Effects (1) | 0.5 | 1.2 | — | — | 1.7 | — | — | — | — | — | ||||||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | — | 4.6 | 2.1 | 0.6 | — | 7.3 | ||||||||||||||||||||
Impact of Change in DWR Shipping Terms | — | — | — | — | — | — | — | — | (5.0 | ) | (5.0 | ) | ||||||||||||||||||
Net Sales, organic | $ | 344.2 | $ | 116.6 | $ | 77.3 | $ | 88.2 | $ | 626.3 | $ | 332.4 | $ | 95.5 | $ | 75.7 | $ | 78.2 | $ | 581.8 | ||||||||||
% change from PY | 3.5 | % | 22.1 | % | 2.1 | % | 12.8 | % | 7.6 | % | ||||||||||||||||||||
D. Organic Order Growth by Segment
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||
9/1/18 | 9/2/17 | |||||||||||||||||||||||||||||
North America | ELA | Specialty | Consumer | Total | North America | ELA | Specialty | Consumer | Total | |||||||||||||||||||||
Orders, as reported | $ | 345.0 | $ | 125.0 | $ | 80.1 | $ | 80.5 | $ | 630.6 | $ | 334.8 | $ | 108.5 | $ | 75.4 | $ | 76.1 | $ | 594.8 | ||||||||||
% change from PY | 3.0 | % | 15.2 | % | 6.2 | % | 5.8 | % | 6.0 | % | ||||||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | — | (2.2 | ) | — | — | — | (2.2 | ) | ||||||||||||||||||
Currency Translation Effects (1) | 0.6 | 1.5 | — | — | 2.1 | — | — | — | — | — | ||||||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | — | 5.0 | 2.1 | 0.5 | — | 7.6 | ||||||||||||||||||||
Orders, organic | $ | 345.6 | $ | 126.5 | $ | 80.1 | $ | 80.5 | $ | 632.7 | $ | 337.6 | $ | 110.6 | $ | 75.9 | $ | 76.1 | $ | 600.2 | ||||||||||
% change from PY | 2.4 | % | 14.4 | % | 5.5 | % | 5.8 | % | 5.4 | % | ||||||||||||||||||||
Herman Miller, Inc. Supplemental Financial Data
Three Months Ended September 1, 2018
(Unaudited) ($ in millions except per share data and square footage metrics)
E. Design Within Reach Studio Metrics
Studio Count | Studio Selling Square Footage | |||||||
Three Months Ended | Three Months Ended | |||||||
9/1/18 | 9/2/17 | 9/1/18 | 9/2/17 | |||||
Beginning of Period | 32 | 31 | 357,387 | 317,456 | ||||
Studio Openings | 2 | 2 | 17,878 | 30,181 | ||||
Studio Closings | (1 | ) | (1 | ) | (2,750 | ) | (4,098 | ) |
End of Period | 33 | 32 | 372,515 | 343,539 | ||||
Comparable Studios, End of Period | 27 | 22 | ||||||
Non-Comparable Studios, End of Period | 6 | 10 | ||||||
E. Design Within Reach Studio Metrics (Continued) | ||||||
Studio Revenue Metrics | ||||||
Three Months Ended | ||||||
9/1/18 | 9/2/17 | |||||
Average Studio Square Footage | 364,951 | 330,498 | ||||
Annualized Net Sales per Square Foot, All Studios | $ | 516 | $ | 520 | ||
DWR Comparable Brand Sales* | 9.1 | % | 12.1 | % | ||
Annualized Net Sales per Square Foot, Comparable Studios | $ | 546 | $ | 653 | ||
*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.
F. Sales and Earnings Guidance - Upcoming Quarter | Company Guidance | |
Q2 Fiscal 2019 | ||
Net Sales | $635 million to $655 million | |
Gross Margin % | 35.9% - 36.9% | |
Operating Expenses | $177 million to $182 million | |
Effective Tax Rate | 21% - 23% | |
Earnings Per Share, Diluted | $0.70 to $0.74 | |
Herman Miller, Inc. Supplemental Financial Data
Three Months Ended September 1, 2018
(Unaudited) ($ in millions except per share data and square footage metrics)
Forward Looking Statements
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, our success in initiatives aimed at achieving long-term profit optimization goals, 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, changes in future tax legislation or interpretation of current tax legislation, the ability to increase prices to absorb the additional costs of raw materials, changes in global tariff regulations, the financial strength of our dealers and the financial strength of our customers, our ability to locate new 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, our ability to integrate and benefit from acquisitions and investments, 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. |