1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended February 27, 1999 Commission File No. 0-5813
HERMAN MILLER, INC.
A Michigan Corporation ID No. 38-0837640
855 East Main Avenue, Zeeland, MI 49464-0302 Phone (616) 654 3000
Herman Miller, Inc.
(1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months
Yes /X/ No / /
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Common Stock Outstanding at April 9, 1999--79,567,818 shares.
The Exhibit Index appears at page 19.
-1-
2
HERMAN MILLER, INC. FORM 10-Q
-----------------------------
FOR THE QUARTER ENDED FEBRUARY 27, 1999
---------------------------------------
INDEX
-----
PAGE NO.
--------
Part I Financial Information
Condensed Consolidated Balance Sheets--
February 27, 1999, and May 30, 1998 3
Condensed Consolidated Statements of Income--
Three and Nine Months Ended February 27, 1999,
and February 28, 1998 4
Condensed Consolidated Statements of Cash Flows--
Nine Months Ended February 27, 1999,
and February 28, 1998 5
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-16
Part II---Other Information
Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit Index 19
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HERMAN MILLER, INC.
-------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(DOLLARS IN THOUSANDS)
----------------------
FEB. 27, MAY 30, FEB. 27, MAY 30,
1999 1998 1999 1998
--------- ------- --------- -------
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
ASSETS LIABILITIES & SHAREHOLDERS' EQUITY
- ------ ----------------------------------
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $55,670 $115,316 Unfunded checks $16,589 $35,241
Accounts receivable, net 181,622 192,384 Current portion of long-term
debt 125 10,203
Inventories-- Notes payable 58,445 19,542
Finished goods 14,330 19,807 Accounts payable 81,884 92,241
Work in process 9,263 8,844 Accruals 224,271 221,105
Raw materials 16,039 19,006 ------- -------
------ ------- Total current liabilities 381,314 378,332
Total inventories 39,632 47,657 ------- -------
------ ------
Prepaid expenses and other 54,134 44,778
------ ------- LONG-TERM DEBT, less current portion 100,904 100,910
Total current assets 331,058 400,135
------- -------
PROPERTY AND EQUIPMENT, AT COST: 632,688 595,872 OTHER LIABILITIES 77,363 74,102
Less-accumulated depreciation 325,667 305,208
------- ------- SHAREHOLDERS' EQUITY:
Net property and equipment 307,021 290,664
------- ------- Common stock $.20 par value 16,033 17,397
Retained earnings 184,960 227,464
Cumulative translation
OTHER ASSETS: adjustment (10,636) (9,360)
Key executive stock programs (6,915) (4,499)
Notes receivable, net 26,995 27,522 ------ ---------
Other noncurrent assets 77,949 66,025
------ -------
Total shareholders' equity 183,442 231,002
------- -------
Total liabilities and
Total assets $743,023 $784,346 shareholders' equity $743,023 $784,346
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
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HERMAN MILLER, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
---------------------------------------------
(UNAUDITED)
-----------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
FEB. 27, FEB. 28, FEB. 27, FEB. 28,
1999 1998 1999 1998
---- ---- ---- ----
NET SALES $421,550 $436,708 $1,333,871 $1,253,339
COST AND EXPENSES:
Cost of goods sold 265,575 271,812 831,572 789,799
Operating expenses (1) 108,012 111,740 339,095 316,598
Interest expense 588 1,984 5,254 6,016
Other expense (income), net (152) (2,567) (10,195) (6,566)
------- ------- --------- ---------
374,023 382,969 1,165,726 1,105,847
------- ------- --------- ---------
INCOME BEFORE TAXES ON INCOME 47,527 53,739 168,145 147,492
PROVISION FOR TAXES ON INCOME 17,600 21,100 65,300 56,600
------- ------ ------ ------
NET INCOME (1) $29,927 $32,639 $102,845 $90,892
====== ====== ======= ======
NET INCOME PER COMMON SHARE--BASIC (1) $ .36 $ .36 $ 1.21 $ 1.00
========= ======= ======= ========
NET INCOME PER COMMON SHARE--DILUTED (1) $ .35 $ .36 $ 1.19 $ .99
========= ======= ======= ========
DIVIDENDS PER SHARE OF
COMMON STOCK $ .03625 $ .03625 $ .10875 $ .10875
========= ======= ======= ========
(1) Fiscal 1998 amounts have been restated for the adoption of Statement
of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."
See accompanying notes to condensed consolidated financial statements.
-4-
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HERMAN MILLER, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF
------------------------------------
CASH FLOWS
----------
(DOLLARS IN THOUSANDS)
----------------------
(UNAUDITED)
-----------
NINE MONTHS ENDED
-----------------
FEB. 27, FEB. 28,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (1) $102,845 $90,892
Depreciation and amortization 46,409 39,950
Changes in current assets and liabilities (10,355) 21,526
Other, net 1,025 10,775
------ -------
Net cash provided by operating activities 139,924 163,143
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable repayments 356,590 438,751
Notes receivable issued (358,445) (427,763)
Capital expenditures (1) (76,626) (43,056)
Proceeds from sale of property and equipment 28,717 384
Net cash paid for acquisitions (4,689) (3,769)
Other, net (22,168) (4,126)
------- ------
Net cash used for investing activities (76,621) (39,579)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term debt repayments 38,903 634
Net long-term debt repayments (10,034) (31)
Dividends paid (9,355) (9,926)
Capital lease repayment (50) (109)
Net common stock issued 14,039 22,260
Common stock purchased and retired (155,087) (106,187)
------- -------
Net cash used for financing activities (121,584) (93,359)
------- ------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (1,365) 1,345
----- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (59,646) 31,550
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 115,316 106,161
------- -------
CASH AND CASH EQUIVALENTS,
AT END OF PERIOD $55,670 $137,711
======= =======
(1) Fiscal 1998 amounts have been restated for the adoption of Statement
of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use."
See accompanying notes to condensed consolidated financial statements.
-5-
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HERMAN MILLER, INC.
-------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
FOOTNOTE DISCLOSURES
- --------------------
The condensed consolidated financial statements have been prepared by the
company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The company believes that the disclosures made in this document are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the company's Annual Report on Form
10-K for the year ended May 30, 1998.
FISCAL YEAR
- -----------
The company's fiscal year ends on the Saturday closest to May 31. The year
ending May 29, 1999, and the year ended May 30, 1998, each contain 52 weeks.
NEW ACCOUNTING STANDARDS
- ------------------------
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The company adopted this SOP during the
third quarter of fiscal 1998, retroactive to the beginning of the fiscal year.
The adoption of this SOP resulted in a decrease in net income of $.3 million,
which had no impact on diluted earnings per share (EPS) for the quarter ended
February 28, 1998, and an increase in net income of $1.0 million, or $.02 in
diluted earnings per share for the nine months ended February 28, 1998. The
company is also in compliance with Emerging Issues Task Force (EITF) Issue
97-13, "Accounting for Costs Incurred in Connection with a Consulting Contract
that Combines Business Process Reengineering and Information Technology
Transformation."
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," issued in June 1997, was adopted by the company during the three months
ended August 29, 1998. This statement requires the disclosure of comprehensive
income, which, for Herman Miller, includes net income and foreign currency
translation adjustments. Comprehensive income was approximately $28.8 million
and $32.3 million for the three months ended February 27, 1999, and February 28,
1998, respectively. During the nine months ended February 27, 1999, and February
28, 1998, comprehensive income was approximately $101.6 million and $91.2
million, respectively.
-6-
7
EARNINGS PER SHARE
- ------------------
The following table reconciles the numerators and denominators used in the
calculations of basic and diluted EPS:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
FEB. 27, FEB. 28, FEB. 27, FEB. 28,
1999 1998 1999 1998
---- ---- ---- ----
Numerators:
- ----------
Numerator for both basic and diluted EPS,
net income $29,927 $32,639 $102,845 $ 90,892
======= ======= ======== ========
Denominators:
- ------------
Denominator for basic EPS,
weighted-average common shares outstanding 83,379,222 89,711,867 85,092,952 90,828,057
Potentially dilutive shares resulting from
stock option plans 946,471 1,783,485 1,164,315 1,868,735
------- --------- --------- ---------
Denominator for diluted EPS 84,325,693 91,495,352 86,257,267 92,696,792
========== ========== ========== ==========
The following exercisable stock options were not included in the computation of
diluted EPS because the option prices were greater than average quarterly market
prices.
THREE MONTHS ENDED
------------------
FEB. 27, FEB. 28,
EXERCISE PRICE 1999 1998
---- ----
$28.41 13,000 13,000
$29.75 1,061,249
$31.00 7,950
$32.50 131,258
--------- ---------
1,213,457 13,000
SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------
Cash and cash equivalents include all highly liquid debt instruments purchased
as part of the company's cash management function. Due to the short maturities
of these items, the carrying amount approximates fair value.
-7-
8
Cash payments for income taxes and interest (in thousands) were as follows:
NINE MONTHS ENDED
------------------
FEB. 27, FEB. 28,
1999 1998
---- ----
Interest paid $5,527 $4,534
Income taxes paid 44,767 48,497
CONTINGENCIES
- -------------
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. The GSA has several audits either scheduled or in progress.
Management has been notified that the GSA has referred the audit of the 1988
contract to the Justice Department for consideration of a potential civil False
Claims Act case. Management does not expect resolution of the audits to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information which would indicate a substantive basis
for a civil False Claims Act under the 1988 contract.
The company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
REPORT OF MANAGEMENT
- --------------------
In the opinion of the company, the accompanying unaudited condensed consolidated
financial statements taken as a whole contain all adjustments, which are of a
normal recurring nature, necessary to present fairly the financial position of
the company as of February 27, 1999, and the results of its operations and cash
flows for the nine months then ended. Interim results are not necessarily
indicative of results for a full year.
-8-
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
The following is management's discussion and analysis of certain significant
factors which have affected the company's financial condition and earnings
during the periods included in the accompanying condensed consolidated financial
statements.
A. Financial Summary
-----------------
A summary of the period-to-period changes is shown below. Amounts are
increases unless shown in brackets, which are decreases. Dollars are
shown in thousands.
THREE MONTHS NINE MONTHS
------------ -----------
$ % $ %
- - - -
NET SALES (15,158) (3.5) 80,532 6.4
COST OF GOODS SOLD (6,237) (2.3) 41,773 5.3
OPERATING EXPENSES (3,728) (3.3) 22,497 7.1
INTEREST EXPENSE (1,396) (70.4) (762) (12.7)
OTHER INCOME, NET* (2,415) 3,629
INCOME BEFORE TAXES ON INCOME (6,212) (11.6) 20,653 14.0
PROVISION FOR TAXES ON INCOME (3,500) (16.6) 8,700 15.4
NET INCOME (2,712) (8.3) 11,953 13.2
*Represents a decrease in other income, net for the third quarter and an
increase in other income net for the nine months.
-9-
10
B. Results of Operations
---------------------
Third Quarter FY 1999 versus Third Quarter FY 1998
--------------------------------------------------
For the first nine months of fiscal 1999, net sales increased 6.4
percent to $1,333.9 million compared to sales of $1,253.3 million in the
first nine months of last year. Net sales decreased $15.2 million, or
3.5 percent, to $421.6 million for the three months ended February 27,
1999 from $436.7 million last year.
For the first nine months of fiscal 1999, new orders increased 1.6
percent to $1,305.5 million from $1,285.3 million in the first nine
months of last year. New orders for the third quarter decreased 6.4
percent to $386.6 million.
The backlog of unfilled orders at February 27, 1999, decreased 14.8
percent to $200.7 million from the $235.7 million reported at the end of
the second quarter.
Our domestic sales increased 7.5 percent for the first nine months.
Excluding the impact of acquisitions, domestic sales grew 6.6 percent.
Two dealer acquisitions were completed this quarter. We purchased our
largest dealer in Los Angeles, California and a primary dealer in
Orlando, Florida.
Despite declining sales in our third quarter, we do not believe we are
losing market share in the domestic market. BIFMA has estimated industry
sales increased 4.2 percent during the eight-month period ended January
1999. Orders, on the other hand, increased at a slower rate, 1.7 percent
for the same period. BIFMA is currently estimating industry sales will
increase 3.0-5.0 percent for calendar 1999.
We believe the recent slowing in industry growth rates is due to
economic forecasts of weaker corporate profits. In late summer and early
fall of 1998, many economic analysts began to predict declining
corporate profits for the last quarter of calendar 1998 and much of
1999. We believe this resulted in many companies delaying or reducing
investment plans. The impact of these changes began to be reflected in
our order entry in the beginning of December. This macro factor was
further exacerbated by our normal pattern of lower order entry during
the Christmas and New Year holiday season.
In contrast, recent economic news has been more positive. Business
confidence polls, such as the Fortune magazine poll of chief financial
officers, have begun to suggest that businesses are becoming more
confident the United States economy will remain strong in calendar 2000.
We believe our industry generally lags the changes in the overall
economy; therefore, it is too soon to determine if this renewed
confidence will result in increased demand for our industry.
-10-
11
In addition to corporate profits, industry sales growth is also
influenced by growth in white collar employment and non-residential
fixed investment. These macro economic indicators are expected to
continue to have year-over-year growth for the next 12 to 18 months. If
these factors continue to be positive and corporate profits continue to
rebound, the industry should be able to achieve BIFMA's current industry
growth forecast of 3.0-5.0 percent for calendar 1999, and 4.0-6.0
percent for calendar 2000.
Net sales of international operations and export sales from the United
States in the third quarter ended February 27, 1999, totaled $68.1
million compared with $69.4 million last year. This represents a
decrease of 2.0 percent for the quarter. Year to date, net sales have
increased .8 percent compared to the first nine months of last year.
This year our international business has been negatively impacted by
three factors: First, the strong US dollar has made it more difficult to
compete as an exporter. Second, the crisis in Asia has made indigenous
companies curtail investments due to lower profitability. Last, the more
recent troubles in Latin America have slowed activity levels in that
region.
Our European operations have recorded year-over-year improvements in net
income. This year our sales in the United Kingdom have been flat as
their economy began to tighten. Over the past few years, we have changed
the cost structure of our operation in the United Kingdom to be more
variable. As a result of these changes, we are much more capable of
maintaining our profitability at different demand levels. In addition,
the operating results of our continental European operations have
improved significantly. We are still losing money in some of the
operations, but the actions taken over the past year have significantly
reduced our losses. We have also been able to develop alliances with
some other manufacturers that have given us new product capabilities and
new distribution for our products.
We continue to experience weakness in demand throughout Asia and Latin
America. These areas are only around 4 percent of our total sales,
however, they are a significant percentage of our international
business.
While we are concerned with the economic outlook in many of the
international regions and the impact it may have on revenue and
profitability, we are very pleased with the progress we have made in
improving the profitability of our total international business. This
was our eighth consecutive quarter of profitability from our
international operations. For the quarter, net income from international
operations was $2.8 million compared with $3.3 million in the same
quarter of last year. The year-to-date net income is comparable between
years at $7.8 million.
Given current order entry levels, we expect revenue in the fourth
quarter of fiscal 1999 to be in the range of $420 to $440 million. At
this point we do not expect revenue to exceed $430 million. However,
with our lead times (from order to shipment) currently averaging 4 to 5
weeks and a large percentage shipping in two weeks or less, we have the
capability to out perform this if we have the demand.
-11-
12
Gross margin, as a percent of net sales, for the quarter and nine months
was 37.0 percent and 37.7 percent, respectively. This compares to 37.8
percent and 37.0 percent in same periods of last year. The decline in
gross margin from the third quarter of last year is primarily due to
lower volume and deeper discounting. These unfavorable factors were
offset by a favorable product mix, lower bonus payments, productivity
improvements, and material cost reductions. The improved productivity is
due to our continued implementation of lean manufacturing techniques
throughout our facilities. While we are still in the initial phase of
this process, we are beginning to see tangible benefits and results. Our
improvement in per-unit material cost is due in part to increased
efforts by our purchasing organization to obtain material cost
reductions. Going forward, we expect gross margins to be in the range of
37.0 percent to 38.0 percent. We believe we can continue to improve
productivity and implement cost savings measures; however, these
improvements may be partially offset by the cost of implementing our new
ERP (Enterprise Resource Planning) system and continued pricing
pressures.
At the end of the second quarter, we reevaluated our ERP systems project
time line and cost. We continue to believe that this investment is a key
component of our overall strategy and will give us competitive advantage
by increasing our speed, reliability, and efficiency. At the end of
November, we went live with our first manufacturing site and finance for
our North American operations. The implementations went well and we did
not have any major disruptions from the go-live and we are already
seeing benefits. We are planning on bringing our next manufacturing site
live at the end of May 1999.
Operating expenses, as a percent of net sales, were basically the same
for both the quarter and nine months. For the quarter, operating
expenses, as a percent of net sales, were 25.6 percent for both years.
For the nine month period, operating expenses were 25.4 percent versus
25.3 percent last year. For the year, our operating expenses have
increased approximately $22 million, or 7 percent. We are doing a good
job of containing general costs while increasing our spending in support
of our strategy. During the quarter and nine months, we have made
significant investments in three areas. First, we have been investing in
our ERP Systems project. Incrementally, this represented $11.4 million
in operating expenses when compared to the first nine months of last
year. Secondly, we continue to expand our capabilities on our electronic
selling platform. The incremental investment in our electronic selling
platform was approximately $6.4 million for the nine months. Our third
area of investment is the continued development of new and enhanced
products for our customers. Research and development spending increased
$4.3 million for the nine months.
-12-
13
Included in our results are gains from disposing of our Grandville,
Michigan facility, our Roswell, Georgia facility and some excess land in
the United Kingdom. Net of other capital losses, these gains had the
after-tax effect of increasing net income for the quarter by $1.2
million, or $.01 per share. The impact for the nine months was to
increase net income by $4.3 million, or $.05 per share
Interest expense was $5.3 million for the first nine months of fiscal
1999 compared to $6.0 million for the same period last year. Total
interest-bearing debt was $159.5 million at the end of the third quarter
of fiscal 1999, compared with $130.7 million at May 30, 1998, and $127.8
million at February 28, 1998.
The effective tax rate for the third quarter was 37 percent compared
with 39 percent in the same period of last year. We expect the tax rate
to be 37 percent for the fourth quarter and 38 percent for the year. The
lower rate is primarily due to a lower overall cost of state income
taxes.
Net income increased 13.2 percent to $102.8 million in the first nine
months of fiscal 1999, compared to $90.9 million for the same period
last year. For the quarter, net income decreased 8.3 percent to $29.9
million compared with $32.6 million last year.
Year 2000
---------
This Year 2000 readiness disclosure is the most current information
available and replaces all previous disclosures made by the Company in
its filings on Form 10-Q and Form 10-K, and in its annual report to
shareholders.
During fiscal year 1998, the company performed an analysis of the work
necessary to assure that its existing information systems and
manufacturing equipment for both domestic and international operations
will be able to address the issues surrounding the advent of the year
2000.
Company's State of Readiness:
Herman Miller has a comprehensive, written plan, which is regularly
updated and monitored by technical personnel and company management, and
reported to senior management and the Board of Directors.
All of our domestic locations are now substantially year 2000 compliant.
For international locations, the company presently believes that all
remediation and testing will be completed prior to any year 2000 issues
having an adverse material impact on its operations.
-13-
14
The Company is also in the process of verifying year 2000 conversion
plans with its significant vendors and independent dealers. If any
significant vendors or dealers are identified which do not have
appropriate or timely year 2000 conversion plans, the company will
immediately begin to make contingency plans in order to minimize
potential adverse effects on business operations.
Costs to Address the Company's Year 2000 Issues:
To date, the Company has spent approximately $5.5 million on year 2000
renovations. These are renovations to existing systems and are exclusive
of the implementation of our new ERP system. The company does not
separately track the internal costs incurred for the year 2000 project,
and such costs incurred are principally related to payroll costs for
employees involved with the project.
Based on costs incurred to date, the Company does not believe the
expenses related to year 2000 compliance will be material to the results
of its operations, financial position or cash flows.
The Company expects to spend an additional $.5 - $1 million to complete
the renovation. The renovation is expected to be completed by May 1999.
Risks of the Company's Year 2000 Issues:
The Company expects to have completed its year 2000 remediation plan
prior to any year 2000 issues having an adverse impact on its
operations. However, due to the uncertain and unprecedented nature of
the year 2000 issue, and especially the uncertainty surrounding the
readiness of third party suppliers and customers, the Company cannot
provide assurance at this time that the consequences of the year 2000
dating issue will not have a material impact on its results of
operations, financial position or cash flows.
Possible business consequences of the year 2000 dating issues include,
but are not limited to, higher than expected costs of remediation, a
temporary inability to manufacture or ship product; process
transactions; communicate with customers, suppliers, subsidiary
locations and employees; or conduct other similar corporate activities
in a normal business environment.
Company's Contingency Plans:
In the event that additional actions beyond those described above are
necessary, the company will immediately, upon identifying the need,
begin developing and implementing remedial actions to address the
issues.
Safe Harbor Provision
---------------------
Certain statements in this filing are not historical facts but are
"forward-looking statements" as defined under the Private Securities
Litigation Reform Act of 1995.
-14-
15
These statements are not guarantees of future performance and involve
certain risks, uncertainties, and assumptions that are difficult to
predict with regard to timing, extent, likelihood, and degree of
occurrence. Therefore, actual results and outcomes may materially differ
from what may be expressed or forecasted in such forward-looking
statements. Furthermore, Herman Miller, Inc., undertakes no obligation
to update, amend, or clarify forward-looking statements, whether as a
result of new information, future events, or otherwise. Forward-looking
statements include, but are not limited to, statements concerning the
outcome of GSA audits; future gross margin expectations; future tax
rates; benefits to be obtained by the new ERP system; the Company's
ability to implement its year 2000 project in accordance with estimated
timetables and costs; and the consequences of potential year 2000
business interruptions.
-15-
16
C. Financial Condition, Liquidity, and Capital Resources
-----------------------------------------------------
Third Quarter FY 1999 versus Third Quarter FY 1998
--------------------------------------------------
1. Cash flow from operating activities was $139.9 million versus
$163.1 million in the first nine months of fiscal 1998. The
decrease from last year is due entirely to working capital.
2. Days sales in accounts receivable plus days sales in inventory
decreased to 57.3 days versus 59.9 days on February 28, 1998, and
increased compared to 56.2 days on May 30, 1998.
3. Total interest-bearing debt increased to $159.5 million compared
to $130.7 million at May 30, 1998. The increase in interest
bearing debt is to fund the stock repurchase programs.
4. Capital expenditures for the first nine months of fiscal 1999
were $76.6 million versus $43.1 million for the first nine months
of fiscal 1998. Much of the increase was related to the
implementation of our enterprise-wide information system,
continued implementation of our electronic selling platform, and
new product development. We also acquired two dealers for
approximately $4.7 million and invested in a joint venture with
another dealer for approximately $3.7 million. We do not expect
to conclude any additional transactions this year.
5. During the first nine months of fiscal 1999, the company
repurchased 7.7 million shares of common stock for $155.1
million.
-16-
17
Part II
Item 6: Exhibits and Reports on Form 8-K
1. Exhibits
See Exhibit Index.
2. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended February
27, 1999.
-17-
18
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
HERMAN MILLER, INC.
April 13, 1999 \s\ Michael A. Volkema
-----------------------------------
Michael A. Volkema
(President and
Chief Executive Officer)
April 13, 1999 \s\ Brian C. Walker
-----------------------------------
Brian C. Walker
(Chief Financial Officer)
-18-
19
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX-27 Financial Data Schedule
5
1,000
9-MOS
MAY-29-1999
MAY-31-1998
FEB-27-1999
55,670
0
198,564
16,942
39,632
331,058
632,688
325,667
743,023
381,314
0
0
0
16,033
167,409
743,023
1,333,871
1,333,871
831,572
831,572
325,199
3,701
5,254
168,145
65,300
102,845
0
0
0
102,845
1.21
1.19
