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: June 26, 2019
(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))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | MLHR | NASDAQ-Global Select Market System |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company [__]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [__]
Item 2.02. Results of Operations and Financial Condition
On June 26, 2019, Herman Miller, Inc. issued a press release announcing its financial results for the quarter ended June 1, 2019. 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 1, 2019 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 8.01. Other Events
On June 26, 2019, the Company's board of directors approved an increase in the quarterly dividend to $0.21 per share. This payment will be made on October 15, 2019 to shareholders of record at the close of business on August 31, 2019.
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: | June 26, 2019 | 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 2019 Results
• | Record net sales of $671 million, reflecting 9% growth over last year (8% organic growth) |
• | Operating margin expansion of 140 basis points |
• | Announces 6% increase in quarterly dividend payout |
Webcast to be held Thursday, June 27, 2019, at 8:30 AM ET
Release | Immediate |
Date | June 26, 2019 |
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 1, 2019. Net sales in the quarter totaled $671.0 million, an increase of 8.6% from the same quarter last fiscal year. New orders in the fourth quarter of $664.5 million were 7.0% above the prior year level.
On an organic basis, which excludes the impact of foreign currency translation and the adoption of the new revenue recognition standard at the start of fiscal 2019, net sales and orders in the fourth quarter increased by 7.6% and 6.4%, respectively, compared to the same quarter last fiscal year.
Herman Miller reported net earnings of $0.78 per share on a diluted basis in the fourth quarter compared to diluted earnings per share of $0.53 in the same quarter last fiscal year. Excluding the impact of restructuring expenses, other special charges, and a gain associated with the fair value adjustment of an investment, adjusted earnings per share in the fourth quarter totaled $0.88 compared to adjusted earnings per share of $0.66 in the same quarter of last fiscal year.
For the full fiscal year, net sales were $2,567.2 million, reflecting a year-over-year increase of 7.8%. On an organic basis, net sales increased by 7.1% compared to last fiscal year. Diluted earnings per share for the full year totaled $2.70 compared to $2.12 last year. On an adjusted basis, diluted earnings per share totaled $2.97 in fiscal 2019 compared to $2.30 in fiscal 2018.
The Company also announced an increase in its quarterly cash dividend to $0.21 per share payable in October 2019. This change represents an increase of 6% from the previous dividend payout of $0.1975 per share.
Andi Owen, Chief Executive Officer, stated, "Strong demand was a clear highlight of our results as we finished the quarter setting all-time records for quarterly and annual net sales for our Company. We leveraged this demand to deliver meaningful operating margin expansion over the same quarter last year. These results for the year are a tribute to the talent and effort of our people. At the same time, there is more work ahead, as we position ourselves behind a clear set of strategic priorities to drive sustainable, diversified revenue growth and long-term value creation for all of our stakeholders. As a result of our financial performance this year and strong balance sheet position, our Board of Directors approved a 6% 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."
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Fourth Quarter Fiscal 2019 Financial Results
FINANCIAL HIGHLIGHTS | ||||||||||||||||
(Dollars in millions, except per share data) | (Unaudited) | (Unaudited) | ||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
June 1, 2019 | June 2, 2018 | % Chg. | June 1, 2019 | June 2, 2018 | % Chg. | |||||||||||
Net Sales | $ | 671.0 | $ | 618.0 | 8.6 | % | $ | 2,567.2 | $ | 2,381.2 | 7.8 | % | ||||
Gross Margin % | 37.0 | % | 36.9 | % | N/A | 36.2 | % | 36.7 | % | N/A | ||||||
Operating Expenses | $ | 183.2 | $ | 183.9 | (0.4 | )% | $ | 716.2 | $ | 688.4 | 4.0 | % | ||||
Restructuring Expenses | $ | 8.5 | $ | 3.9 | N/A | $ | 10.2 | $ | 5.7 | N/A | ||||||
Operating Earnings % | 8.4 | % | 6.6 | % | N/A | 7.9 | % | 7.5 | % | N/A | ||||||
Adjusted Operating Earnings %* | 9.9 | % | 8.5 | % | N/A | 8.8 | % | 8.3 | % | N/A | ||||||
Net Earnings Attributable to Herman Miller, Inc. | $ | 46.2 | $ | 31.8 | 45.3 | % | $ | 160.5 | $ | 128.1 | 25.3 | % | ||||
Earnings Per Share – Diluted | $ | 0.78 | $ | 0.53 | 47.2 | % | $ | 2.70 | $ | 2.12 | 27.4 | % | ||||
Adjusted Earnings Per Share – Diluted* | $ | 0.88 | $ | 0.66 | 33.3 | % | $ | 2.97 | $ | 2.30 | 29.1 | % | ||||
Orders | $ | 664.5 | $ | 620.8 | 7.0 | % | $ | 2,614.9 | $ | 2,408.2 | 8.6 | % | ||||
Backlog | $ | 394.2 | $ | 350.7 | 12.4 | % | ||||||||||
*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 2019 totaled 37.0%, representing a 10 basis point increase from the level reported in the same quarter of last fiscal year. The adoption of the new revenue recognition standard (ASC 606) at the beginning of fiscal 2019 required recording certain product pricing elements as expenses within cost of goods sold that were previously classified on a net basis within sales. This adoption reflected an unfavorable impact on gross margin of 60 basis points compared to the basis of presentation last year. Excluding this impact, gross margin expanded by 70 basis points compared to the same quarter last year.
Operating expenses in the fourth quarter were $183.2 million compared to $183.9 million in the same quarter a year ago. Operating expenses included pre-tax special charges totaling $1.7 million in the fourth quarter of fiscal 2019 and $7.9 million in the same quarter last year. These items in the current quarter related primarily to costs associated with the CEO transition and certain business structure realignment costs. Excluding these items, operating expenses increased by $5.5 million compared to the same quarter last year.
The Company recognized pre-tax restructuring expenses totaling $8.5 million in the fourth quarter. These items related primarily to restructuring actions associated with our profit improvement initiatives, including costs associated with an early retirement program.
Other expenses, net, in the fourth quarter included a gain of $2.1 million related to a fair value adjustment of an investment in a technology partner.
Herman Miller’s effective income tax rate in the fourth quarter was 22.0%, compared to 18.3% in the same quarter last fiscal year.
Jeff Stutz, Chief Financial Officer, noted, "We were encouraged by broad-based sales and order growth for the quarter, supported by favorable macro-economic conditions and continued traction from our strategic priorities. We also further positioned our Retail business for profitable growth with the opening of three new Design Within Reach studios in the fourth quarter, a lease termination related to an underperforming studio and beginning the transition to a new, state of the art distribution center in Batavia, Ohio. These actions reflected expenses of $4.5 million during the quarter and, while they pressured profitability in the quarter, are important enablers for future growth and operating margin expansion of our Retail business. Even after factoring in these initiatives, consolidated sales growth, gross margin expansion and well-managed operating expenses combined to drive 33% growth in adjusted earnings per share compared to the same quarter last year.”
The Company ended the fourth quarter with total cash and cash equivalents of $159.2 million. Cash flow generated from operations in the fourth quarter and full fiscal year was $85.9 million and $216.4 million, respectively. This compared to $55.8 million and $166.5 million in the respective periods last fiscal year.
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Segment Sales and Orders
The following tables summarize reported and organic segment sales and orders for the fourth quarter of fiscal 2019:
Organic Sales Growth (Decline) by Segment * | ||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Net Sales, as reported | $ | 433.8 | $ | 132.3 | $ | 104.9 | $ | 671.0 | $ | 392.4 | $ | 125.4 | $ | 100.2 | $ | 618.0 | ||||||||
% change from PY | 10.6 | % | 5.5 | % | 4.7 | % | 8.6 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Currency Translation Effects (1) | 0.9 | 4.4 | 0.1 | 5.4 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 6.2 | 4.2 | — | 10.4 | ||||||||||||||||
Net Sales, organic | $ | 434.7 | $ | 136.7 | $ | 105.0 | $ | 676.4 | $ | 398.6 | $ | 129.6 | $ | 100.2 | $ | 628.4 | ||||||||
% change from PY | 9.1 | % | 5.5 | % | 4.8 | % | 7.6 | % | ||||||||||||||||
Organic Order Growth (Decline) by Segment * | ||||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Orders, as reported | $ | 440.5 | $ | 111.7 | $ | 112.3 | $ | 664.5 | $ | 408.3 | $ | 110.8 | $ | 101.7 | $ | 620.8 | ||||||||
% change from PY | 7.9 | % | 0.8 | % | 10.4 | % | 7.0 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Currency Translation Effects (1) | 0.9 | 4.2 | 0.1 | 5.2 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 5.6 | 3.2 | — | 8.8 | ||||||||||||||||
Orders, organic | $ | 441.4 | $ | 115.9 | $ | 112.4 | $ | 669.7 | $ | 413.9 | $ | 114.0 | $ | 101.7 | $ | 629.6 | ||||||||
% change from PY | 6.6 | % | 1.7 | % | 10.5 | % | 6.4 | % | ||||||||||||||||
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period. | ||||||||||||||||||||||||
* 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 2020 Guidance
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2020 to be in the range of $650 million to $670 million. On an organic basis, adjusted for foreign currency translation, this forecast implies sales growth of 6% compared to the first quarter of the prior year at the mid-point of the range. The Company expects diluted earnings per share to range between $0.77 to $0.81.
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 2019 on Thursday, June 27, 2019, at 8:30 AM 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. Since its inception in 1905, the company has relied on innovative design to help people do great things. The global design leader has evolved into Herman Miller Group, a family of brands that collectively offers a variety of products for environments where people live, learn, work, and heal. The family of brands includes Colebrook Bosson Saunders, Design Within Reach, Geiger, HAY, Maars Living Walls, Maharam, naughtone, Nemschoff, and Herman Miller. For more information visit www.hermanmiller.com/about-us.
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 retail 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 quarter ended June 1, 2019, 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 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | ||||||||||||||||||
Net Sales | $ | 671.0 | 100.0 | % | $ | 618.0 | 100.0 | % | $ | 2,567.2 | 100.0 | % | $ | 2,381.2 | 100.0 | % | |||||
Cost of Sales | 422.8 | 63.0 | % | 389.7 | 63.1 | % | 1,637.3 | 63.8 | % | 1,508.2 | 63.3 | % | |||||||||
Gross Margin | 248.2 | 37.0 | % | 228.3 | 36.9 | % | 929.9 | 36.2 | % | 873.0 | 36.7 | % | |||||||||
Operating Expenses | 183.2 | 27.3 | % | 183.9 | 29.8 | % | 716.2 | 27.9 | % | 688.4 | 28.9 | % | |||||||||
Restructuring Expenses | 8.5 | 1.3 | % | 3.9 | 0.6 | % | 10.2 | 0.4 | % | 5.7 | 0.2 | % | |||||||||
Total Operating Expenses | 191.7 | 28.6 | % | 187.8 | 30.4 | % | 726.4 | 28.3 | % | 694.1 | 29.1 | % | |||||||||
Operating Earnings | 56.5 | 8.4 | % | 40.5 | 6.6 | % | 203.5 | 7.9 | % | 178.9 | 7.5 | % | |||||||||
Other Expenses, net | 0.4 | 0.1 | % | 2.0 | 0.3 | % | 8.4 | 0.3 | % | 10.8 | 0.5 | % | |||||||||
Earnings Before Income Taxes and Equity Income | 56.1 | 8.4 | % | 38.5 | 6.2 | % | 195.1 | 7.6 | % | 168.1 | 7.1 | % | |||||||||
Income Tax Expense | 12.3 | 1.8 | % | 7.1 | 1.1 | % | 39.6 | 1.5 | % | 42.4 | 1.8 | % | |||||||||
Equity Income, net of tax | 2.2 | 0.3 | % | 0.8 | 0.1 | % | 5.0 | 0.2 | % | 3.0 | 0.1 | % | |||||||||
Net Earnings | 46.0 | 6.9 | % | 32.2 | 5.2 | % | 160.5 | 6.3 | % | 128.7 | 5.4 | % | |||||||||
Net Earnings Attributable to Noncontrolling Interests | (0.2 | ) | — | % | 0.4 | 0.1 | % | — | — | % | 0.6 | — | % | ||||||||
Net Earnings Attributable to Herman Miller, Inc. | $ | 46.2 | 6.9 | % | $ | 31.8 | 5.1 | % | $ | 160.5 | 6.3 | % | $ | 128.1 | 5.4 | % | |||||
Amounts per Common Share Attributable to Herman Miller, Inc. | |||||||||||||||||||||
Earnings Per Share – Basic | $0.78 | $0.53 | $2.72 | $2.15 | |||||||||||||||||
Weighted Average Basic Common Shares | 58,784,081 | 59,526,820 | 59,011,945 | 59,681,268 | |||||||||||||||||
Earnings Per Share – Diluted | $0.78 | $0.53 | $2.70 | $2.12 | |||||||||||||||||
Weighted Average Diluted Common Shares | 59,132,195 | 60,094,769 | 59,381,791 | 60,311,305 | |||||||||||||||||
Herman Miller, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (Dollars in millions)
Twelve Months Ended | ||||||
June 1, 2019 | June 2, 2018 | |||||
Net Earnings | $ | 160.5 | $ | 128.7 | ||
Net Cash Provided by Operating Activities | 216.4 | 166.5 | ||||
Net Cash Used in Investing Activities | (165.0 | ) | (62.7 | ) | ||
Net Cash (Used in) Provided by Financing Activities | (91.9 | ) | 2.5 | |||
Effect of Exchange Rates | (4.2 | ) | 1.4 | |||
Change in Cash | (44.7 | ) | 107.7 | |||
Cash, Beginning of Period | 203.9 | 96.2 | ||||
Cash, End of Period | $ | 159.2 | $ | 203.9 | ||
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Herman Miller, Inc.
Condensed Consolidated Balance Sheets
(Unaudited) (Dollars in millions)
June 1, 2019 | June 2, 2018 | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and Cash Equivalents | $ | 159.2 | $ | 203.9 | ||
Short-term Investments | 8.8 | 8.6 | ||||
Accounts and Notes Receivable, net | 218.0 | 217.4 | ||||
Unbilled Accounts Receivable | 34.3 | 1.9 | ||||
Inventories, net | 184.2 | 162.4 | ||||
Prepaid Expenses and Other | 56.8 | 51.2 | ||||
Total Current Assets | 661.3 | 645.4 | ||||
Net Property and Equipment | 348.6 | 331.4 | ||||
Other Assets | 559.4 | 502.7 | ||||
Total Assets | $ | 1,569.3 | $ | 1,479.5 | ||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts Payable | $ | 177.7 | $ | 171.4 | ||
Accrued Liabilities | 268.4 | 242.4 | ||||
Total Current Liabilities | 446.1 | 413.8 | ||||
Long-term Debt | 281.9 | 275.0 | ||||
Other Liabilities | 101.5 | 95.4 | ||||
Total Liabilities | 829.5 | 784.2 | ||||
Redeemable Noncontrolling Interests | 20.6 | 30.5 | ||||
Herman Miller, Inc. Stockholders' Equity | 719.2 | 664.6 | ||||
Noncontrolling Interests | 0.0 | 0.2 | ||||
Total Stockholders' Equity | 719.2 | 664.8 | ||||
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity | $ | 1,569.3 | $ | 1,479.5 | ||
-end-
Herman Miller, Inc. Supplemental Financial Data
Three and Twelve Months Ended June 1, 2019
(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 below. |
Herman Miller, Inc. Supplemental Financial Data
Three and Twelve Months Ended June 1, 2019
(Unaudited) ($ in millions except per share data and square footage metrics)
Non-GAAP Financial Measures
This presentation contains certain non-GAAP financial measures such as Adjusted Earnings per Share, Adjusted Operating Earnings (Loss), and Organic Growth (Decline). Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from the adoption of U.S. Tax Reform, an investment fair value adjustment, amortization of an inventory step up on the HAY equity method investment, restructuring expenses, and other charges or gains, including related taxes. Adjusted Operating Earnings (Loss) represents reported operating earnings plus restructuring expenses and other special charges. Restructuring expenses include actions involving facilities consolidation, targeted workforce reductions and costs associated with an early retirement program. Special charges include costs related to the CEO transition, certain business structure realignment costs, and third party consulting costs related to the Company's profit enhancement initiatives. Organic Growth represents the change in sales and orders, excluding currency translation effects, the impact of reclassification related to the new revenue recognition standard (ASC 606), 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), 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.
Certain tables below summarize select financial information, for the periods indicated, related to each of the Company’s reportable segments. The North America Contract 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 America Contract segment. North America Contract also 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 International Contract segment includes EMEA, Latin America, and Asia-Pacific. International Contract includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in these aforementioned geographic regions. The Retail 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 and HAY 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.
A. Reconciliation of Earnings per Share to Adjusted Earnings per Share
Three Months Ended | Twelve Months Ended | |||||||||||
June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | |||||||||
Earnings per Share - Diluted | $ | 0.78 | $ | 0.53 | $ | 2.70 | $ | 2.12 | ||||
Less: Adjustments Related to Adoption of U.S. Tax Cuts and Jobs Act | — | (0.01 | ) | (0.02 | ) | (0.05 | ) | |||||
Less: Investment fair value adjustment, after tax | (0.03 | ) | — | (0.03 | ) | — | ||||||
Add: Special charges, after tax | 0.02 | 0.09 | 0.18 | 0.16 | ||||||||
Add: Inventory step up on HAY equity method investment, after tax | — | — | 0.01 | — | ||||||||
Add: Restructuring expenses, after tax | 0.11 | 0.05 | 0.13 | 0.07 | ||||||||
Adjusted Earnings per Share - Diluted | $ | 0.88 | $ | 0.66 | $ | 2.97 | $ | 2.30 | ||||
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted | 59,132,195 | 60,094,769 | 59,381,791 | 60,311,305 | ||||||||
Herman Miller, Inc. Supplemental Financial Data
Three and Twelve Months Ended June 1, 2019
(Unaudited) ($ in millions except per share data and square footage metrics)
B. Reconciliation of Operating Earnings to Adjusted Operating Earnings by Segment
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | |||||||||||||||||
North America Contract | ||||||||||||||||||||
Net Sales | $ | 433.8 | 100.0 | % | $ | 392.4 | 100.0 | % | $ | 1,686.5 | 100.0 | % | $ | 1,589.8 | 100.0 | % | ||||
Gross Margin | 156.2 | 36.0 | % | 139.1 | 35.4 | % | 592.3 | 35.1 | % | 565.5 | 35.6 | % | ||||||||
Total Operating Expenses | 106.0 | 24.4 | % | 101.2 | 25.8 | % | 402.6 | 23.9 | % | 390.3 | 24.6 | % | ||||||||
Operating Earnings | 50.2 | 11.6 | % | 37.9 | 9.7 | % | 189.7 | 11.2 | % | 175.2 | 11.0 | % | ||||||||
Adjustments | ||||||||||||||||||||
Special Charges | 0.6 | 0.1 | % | — | — | % | 0.6 | — | % | — | — | % | ||||||||
Restructuring | 7.7 | 1.8 | % | — | — | % | 7.7 | 0.5 | % | 1.8 | 0.1 | % | ||||||||
Adjusted Operating Earnings | $ | 58.5 | 13.5 | % | $ | 37.9 | 9.7 | % | $ | 198.0 | 11.7 | % | $ | 177.0 | 11.1 | % | ||||
International Contract | ||||||||||||||||||||
Net Sales | $ | 132.3 | 100.0 | % | $ | 125.4 | 100.0 | % | $ | 492.2 | 100.0 | % | $ | 434.5 | 100.0 | % | ||||
Gross Margin | 46.9 | 35.4 | % | 40.9 | 32.6 | % | 166.9 | 33.9 | % | 144.2 | 33.2 | % | ||||||||
Total Operating Expenses | 29.8 | 22.5 | % | 31.1 | 24.8 | % | 109.1 | 22.2 | % | 107.3 | 24.7 | % | ||||||||
Operating Earnings | 17.1 | 12.9 | % | 9.8 | 7.8 | % | 57.8 | 11.7 | % | 36.9 | 8.5 | % | ||||||||
Adjustments | ||||||||||||||||||||
Special Charges | — | — | % | 2.0 | 1.6 | % | 0.2 | — | % | 2.5 | 0.6 | % | ||||||||
Restructuring | 0.8 | 0.6 | % | 3.9 | 3.1 | % | 2.5 | 0.5 | % | 3.9 | 0.9 | % | ||||||||
Adjusted Operating Earnings | $ | 17.9 | 13.5 | % | $ | 15.7 | 12.5 | % | $ | 60.5 | 12.3 | % | $ | 43.3 | 10.0 | % | ||||
Retail | ||||||||||||||||||||
Net Sales | $ | 104.9 | 100.0 | % | $ | 100.2 | 100.0 | % | $ | 388.5 | 100.0 | % | $ | 356.9 | 100.0 | % | ||||
Gross Margin | 45.1 | 43.0 | % | 48.3 | 48.2 | % | 170.7 | 43.9 | % | 163.3 | 45.8 | % | ||||||||
Total Operating Expenses | 46.1 | 43.9 | % | 39.9 | 39.8 | % | 165.4 | 42.6 | % | 149.4 | 41.9 | % | ||||||||
Operating (Loss) Earnings | (1.0 | ) | (1.0 | )% | 8.4 | 8.4 | % | 5.3 | 1.4 | % | 13.9 | 3.9 | % | |||||||
Adjustments | ||||||||||||||||||||
Special Charges | 0.8 | 0.8 | % | — | — | % | 0.8 | 0.2 | % | — | — | % | ||||||||
Adjusted Operating (Loss) Earnings | $ | (0.2 | ) | (0.2 | )% | $ | 8.4 | 8.4 | % | $ | 6.1 | 1.6 | % | $ | 13.9 | 3.9 | % | |||
Corporate | ||||||||||||||||||||
Operating Loss | $ | (9.8 | ) | — | % | $ | (15.6 | ) | — | % | $ | (49.3 | ) | — | % | (47.1 | ) | — | % | |
Adjustments | ||||||||||||||||||||
Special Charges | 0.3 | — | % | 5.9 | — | % | 11.5 | — | % | 11.3 | — | % | ||||||||
Restructuring | — | — | % | — | — | % | — | — | % | — | — | % | ||||||||
Adjusted Operating Loss | $ | (9.5 | ) | — | % | $ | (9.7 | ) | — | % | $ | (37.8 | ) | — | % | $ | (35.8 | ) | — | % |
Herman Miller, Inc. | ||||||||||||||||||||
Net Sales | $ | 671.0 | 100.0 | % | $ | 618.0 | 100.0 | % | $ | 2,567.2 | 100.0 | % | $ | 2,381.2 | 100.0 | % | ||||
Gross Margin | 248.2 | 37.0 | % | 228.3 | 36.9 | % | 929.9 | 36.2 | % | 873.0 | 36.7 | % | ||||||||
Total Operating Expenses | 191.7 | 28.6 | % | 187.8 | 30.4 | % | 726.4 | 28.3 | % | 694.1 | 29.1 | % | ||||||||
Operating Earnings | 56.5 | 8.4 | % | 40.5 | 6.6 | % | 203.5 | 7.9 | % | 178.9 | 7.5 | % | ||||||||
Adjustments | ||||||||||||||||||||
Special Charges | 1.7 | 0.3 | % | 7.9 | 1.3 | % | 13.1 | 0.5 | % | 13.8 | 0.6 | % | ||||||||
Restructuring | 8.5 | 1.3 | % | 3.9 | 0.6 | % | 10.2 | 0.4 | % | 5.7 | 0.2 | % | ||||||||
Adjusted Operating Earnings | $ | 66.7 | 9.9 | % | $ | 52.3 | 8.5 | % | $ | 226.8 | 8.8 | % | $ | 198.4 | 8.3 | % | ||||
Herman Miller, Inc. Supplemental Financial Data
Three and Twelve Months Ended June 1, 2019
(Unaudited) ($ in millions except per share data and square footage metrics)
C. Organic Sales Growth (Decline) by Segment
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Net Sales, as reported | $ | 433.8 | $ | 132.3 | $ | 104.9 | $ | 671.0 | $ | 392.4 | $ | 125.4 | $ | 100.2 | $ | 618.0 | ||||||||
% change from PY | 10.6 | % | 5.5 | % | 4.7 | % | 8.6 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Currency Translation Effects (1) | 0.9 | 4.4 | 0.1 | 5.4 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 6.2 | 4.2 | — | 10.4 | ||||||||||||||||
Net Sales, organic | $ | 434.7 | $ | 136.7 | $ | 105.0 | $ | 676.4 | $ | 398.6 | $ | 129.6 | $ | 100.2 | $ | 628.4 | ||||||||
% change from PY | 9.1 | % | 5.5 | % | 4.8 | % | 7.6 | % | ||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Net Sales, as reported | $ | 1,686.5 | $ | 492.2 | $ | 388.5 | $ | 2,567.2 | $ | 1,589.8 | $ | 434.5 | $ | 356.9 | $ | 2,381.2 | ||||||||
% change from PY | 6.1 | % | 13.3 | % | 8.9 | % | 7.8 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | (0.8 | ) | — | — | (0.8 | ) | ||||||||||||||
Currency Translation Effects (1) | 3.8 | 12.4 | 0.3 | 16.5 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 23.9 | 12.3 | — | 36.2 | ||||||||||||||||
Impact of Change in DWR Shipping Terms | — | — | — | — | — | — | (5.0 | ) | (5.0 | ) | ||||||||||||||
Net sales, organic | $ | 1,690.3 | $ | 504.6 | $ | 388.8 | $ | 2,583.7 | $ | 1,612.9 | $ | 446.8 | $ | 351.9 | $ | 2,411.6 | ||||||||
% change from PY | 4.8 | % | 12.9 | % | 10.5 | % | 7.1 | % | ||||||||||||||||
(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
Three and Twelve Months Ended June 1, 2019
(Unaudited) ($ in millions except per share data and square footage metrics)
D. Organic Order Growth (Decline) by Segment
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Orders, as reported | $ | 440.5 | $ | 111.7 | $ | 112.3 | $ | 664.5 | $ | 408.3 | $ | 110.8 | $ | 101.7 | $ | 620.8 | ||||||||
% change from PY | 7.9 | % | 0.8 | % | 10.4 | % | 7.0 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Currency Translation Effects (1) | 0.9 | 4.2 | 0.1 | 5.2 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 5.6 | 3.2 | — | 8.8 | ||||||||||||||||
Orders, organic | $ | 441.4 | $ | 115.9 | $ | 112.4 | $ | 669.7 | $ | 413.9 | $ | 114.0 | $ | 101.7 | $ | 629.6 | ||||||||
% change from PY | 6.6 | % | 1.7 | % | 10.5 | % | 6.4 | % | ||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||||
June 1, 2019 | June 2, 2018 | |||||||||||||||||||||||
North America | International | Retail | Total | North America | International | Retail | Total | |||||||||||||||||
Orders, as reported | $ | 1,714.2 | $ | 501.1 | $ | 399.6 | $ | 2,614.9 | $ | 1,602.5 | $ | 451.2 | $ | 354.5 | $ | 2,408.2 | ||||||||
% change from PY | 7.0 | % | 11.1 | % | 12.7 | % | 8.6 | % | ||||||||||||||||
Proforma Adjustments | ||||||||||||||||||||||||
Dealer Divestitures | — | — | — | — | (2.2 | ) | — | — | (2.2 | ) | ||||||||||||||
Currency Translation Effects (1) | 3.7 | 9.7 | 0.3 | 13.7 | — | — | — | — | ||||||||||||||||
Impact of Reclassification Related to New Revenue Recognition Standard | — | — | — | — | 23.4 | 12.3 | — | 35.7 | ||||||||||||||||
Orders, organic | $ | 1,717.9 | $ | 510.8 | $ | 399.9 | $ | 2,628.6 | $ | 1,623.7 | $ | 463.5 | $ | 354.5 | $ | 2,441.7 | ||||||||
% change from PY | 5.8 | % | 10.2 | % | 12.8 | % | 7.7 | % | ||||||||||||||||
(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
Three and Twelve Months Ended June 1, 2019
(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 | Twelve Months Ended | Three Months Ended | Twelve Months Ended | |||||||||||||
June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | |||||||||
Beginning of Period | 33 | 32 | 32 | 31 | 369,215 | 357,387 | 357,387 | 317,456 | ||||||||
Studio Openings | 3 | — | 5 | 3 | 20,032 | — | 37,910 | 43,579 | ||||||||
Studio Expansions | — | — | — | — | — | — | — | 4,500 | ||||||||
Studio Reductions | — | — | — | — | — | — | (3,300 | ) | — | |||||||
Studio Closings | — | — | (1 | ) | (2 | ) | — | — | (2,750 | ) | (8,148 | ) | ||||
End of Period | 36 | 32 | 36 | 32 | 389,247 | 357,387 | 389,247 | 357,387 | ||||||||
Comparable Studios, End of Period | 31 | 26 | 27 | 21 | ||||||||||||
Non-Comparable Studios, End of Period | 5 | 6 | 9 | 11 | ||||||||||||
Studio Revenue Metrics | ||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||
June 1, 2019 | June 2, 2018 | June 1, 2019 | June 2, 2018 | |||||||||
Average Studio Square Footage | 379,231 | 357,387 | 373,317 | 337,422 | ||||||||
Annualized Net Sales per Square Foot, All Studios | $ | 555 | $ | 621 | $ | 521 | $ | 563 | ||||
DWR Comparable Brand Sales* | (1.6 | )% | 11.6 | % | 3.0 | % | 11.8 | % | ||||
Annualized Net Sales per Square Foot, Comparable Studios | $ | 569 | $ | 708 | $ | 567 | $ | 676 | ||||
*DWR comparable brand sales reflects the year-over-year change in net sales across the multiple channels that Design Within Reach serves, including studios, outlets, contract, catalog, phone and e-commerce. | ||||||||||||
Note: Retail segment sales also include sales through Herman Miller and HAY eCommerce, contract and wholesale channels.
F. Sales and Earnings Guidance - Upcoming Quarter
Company Guidance | ||
Q1 Fiscal 2020 | ||
Net Sales | $650 million to $670 million | |
Gross Margin % | 36.6% - 37.6% | |
Operating Expenses | $182 million to $186 million | |
Effective Tax Rate | 21% - 23% | |
Earnings Per Share, Diluted | $0.77 to $0.81 | |
Herman Miller, Inc. Supplemental Financial Data
Three and Twelve Months Ended June 1, 2019
(Unaudited) ($ 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. |