1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
__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 September 2, 1995 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 September 30, 1995--24,893,409 shares.
The Exhibit Index appears at page 14.
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HERMAN MILLER, INC. FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 2, 1995
INDEX
Pursuant to Rule 12b-15 under the Securities Act of 1934, as amended, the
Registrant is filing this amendment to its Quarterly Report on Form 10-Q, which
amendment contains restated financial information as of and for the three-month
period ended September 2, 1995. There have been no changes or restatements of
the financial information as of and for the three-month period ended September
3, 1994.
Page No.
--------
Part I___Financial Information
Condensed Consolidated Balance Sheets-- 3
September 2, 1995, and June 3, 1995
Condensed Consolidated Statements of Income-- 4
Three Months Ended September 2, 1995,
and September 3, 1994
Condensed Consolidated Statements of Cash Flows-- 5
Three Months Ended September 2, 1995,
and September 3, 1994
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Part II___Other Information
Submission of Matters to Vote of Security Holders 12
Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
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HERMAN MILLER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
Sept. 2, June 3,
1995 1995
----------- -----------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,193 $ 16,488
Accounts receivable, net 173,310 165,107
Inventories--
Finished goods 29,177 26,260
Work in process 11,463 8,074
Raw materials 35,605 36,742
-------- --------
Total inventories 76,245 71,706
-------- --------
Prepaid expenses and other 44,114 44,445
-------- --------
Total current assets 310,862 297,116
-------- --------
PROPERTY AND EQUIPMENT, AT COST: 523,965 513,455
Less-accumulated depreciation 253,641 243,271
-------- --------
Net property and equipment 270,324 270,184
-------- --------
OTHER ASSETS:
Notes receivable, net 41,370 43,734
Other noncurrent assets 42,501 47,978
-------- --------
Total assets $665,057 $659,012
======== ========
Sept. 2, June 3,
1995 1995
-------- -------
(unaudited) (audited)
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 477 $ 452
Notes payable 28,957 83,591
Accounts payable 54,089 51,819
Accruals 128,343 121,679
-------- --------
Total current liabilities 211,866 257,541
-------- --------
LONG-TERM DEBT, less current portion 97,505 60,145
OTHER LIABILITIES 58,882 54,411
-------- --------
SHAREHOLDERS' EQUITY:
Common stock $.20 par value 4,973 4,967
Additional paid-in capital 22,255 21,564
Retained earnings 279,415 270,631
Cumulative translation adjustment (7,804) (6,985)
Key executive stock programs (2,035) (3,262)
-------- --------
Total shareholders' equity 296,804 286,915
-------- --------
Total liabilities and
shareholders' equity $665,057 $659,012
======== ========
See accompanying notes to condensed consolidated financial statements.
3
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HERMAN MILLER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
------------------
Sept. 2,
1995(1) Sept. 3,
(as amended) 1994(2)
------------ -------
NET SALES $301,088 $252,831
COST AND EXPENSES:
Cost of goods sold 198,209 161,820
Operating expenses 83,336 77,813
Interest expense 2,101 990
Other income, net (1,472) (929)
------- --------
274,264 239,694
------- --------
INCOME BEFORE TAXES ON INCOME 18,914 13,137
PROVISION FOR TAXES ON INCOME 6,900 5,200
------- --------
NET INCOME $12,014 $ 7,937
======= ========
NET INCOME PER SHARE $ .48 $ .32
======= ========
DIVIDENDS PER SHARE OF COMMON STOCK $ .13 $ .13
======= ========
See accompanying notes to condensed consolidated financial statements.
(1) Represents 13 weeks
(2) Represents 14 weeks
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HERMAN MILLER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended
------------------
Sept. 2, Sept. 3,
1995(1) 1994(2)
---------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,014 $ 7,937
Depreciation and amortization 11,867 9,325
Other, net (760) (14,514)
------- --------
Net cash provided by operating activities 23,121 2,748
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable repayments 119,569 93,548
Notes receivable issued (117,509) (93,863)
Capital expenditures (11,371) (11,744)
Other, net 2,798 (9,976)
------- --------
Net cash used for investing activities (6,513) (22,035)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net common stock issued 3,038 842
Net long-term debt borrowings (repayments) 37,436 (58)
Net short-term debt borrowings (repayments) (53,955) 15,663
Dividends paid (3,231) (3,197)
Common stock purchased and retired -- (253)
Other, net (51) (72)
------- --------
Net cash provided by (used for) financing activities (16,763) 12,925
------- --------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH 860 198
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 705 (6,164)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 16,488 22,701
------ --------
CASH AND CASH EQUIVALENTS,
AT END OF PERIOD $17,193 $ 16,537
======= ========
See accompanying notes to condensed consolidated financial statements.
(1) Represents 13 weeks
(2) Represents 14 weeks
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HERMAN MILLER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AMENDMENT
The 10Q as originally filed contained an understatement of net sales and cost
of goods sold. This understatement did not impact the dollars of gross margin,
operating expenses, or net income as previously reported.
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 June 3, 1995.
FISCAL YEAR
The company's fiscal year ends on the Saturday closest to May 31. Accordingly,
the year ended June 3, 1995, contained 53 weeks, and the year ending June 1,
1996, contains 52 weeks.
RESTRUCTURING CHARGES
In the fiscal year ended June 3, 1995, the company recorded $31.9 million in
pretax restructuring charges, which reduced net income by $20.3 million, or
$.82 per share. A charge of $15.5 million was taken in the second quarter of
fiscal 1995, to account for the closure of certain of the company's
manufacturing and logistics facilities prior to the relocation of their
production activities to other U.S. Herman Miller facilities. In addition, the
charge also included the costs associated with the closure of and
discontinuance of wood casegoods manufacturing in the Sanford, North Carolina,
facility and the transfer of products produced there to Geiger International of
Atlanta, Georgia, a respected contract provider of quality wood casegoods.
The $16.4 million charge recorded in the fourth quarter of fiscal 1995 included
charges in the United States for reductions in employment and the
discontinuation of a product development program at the company's healthcare
subsidiary, Milcare.
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The $31.9 million total pretax restructuring charge consisted of facilities and
equipment write-offs ($15.5 million), termination benefits ($14.1 million), and
other exit costs associated with the restructuring ($2.3 million).
Approximately 535 employees were terminated or took voluntary early retirement
as a result of the facility closings and job elimination process. The closure
of the manufacturing and logistics facilities was substantially complete at the
end of fiscal 1995. The job elimination process was completed in July 1995.
Amounts paid or charged against these reserves during the first quarter of
fiscal 1996 were as follows:
June 3, 1995 Costs paid Ending
In Thousands Balance or charged Balance
------------- ---------- --------
Facilities and equipment $10,829 $1,559 $9,270
Termination benefits 12,279 7,388 4,891
Other exit costs 1,310 413 897
------- ------ -------
$24,418 $9,360 $15,058
======= ====== ======
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.
Cash payments for income taxes and interest (in thousands) were as follows:
Three Months Ended
------------------
Sept. 2, Sept. 3,
1995 1994
--------- ---------
Interest paid $2,510 $ 964
Income taxes paid $2,531 $3,808
CONTINGENCIES
On January 7, 1992, Haworth, Inc. ("Haworth") filed a lawsuit against the
company, alleging that the electrical systems used in certain of the company's
products infringe one or more of Haworth's patents. Discovery in this
proceeding, which is pending in the U.S. District Court for the Western
District of Michigan (Southern Division), is substantially complete. The
company has requested a jury trial; however, no date has been set. Based on the
prevailing facts and the nature of the proceedings, the company believes that
it is more likely than not that the litigation will proceed to trial.
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All the patents which are the source of controversy expired prior to December
1, 1994. Since 1991, the company has sold a system of enhanced electrical
components on the majority of its product lines, both by number and dollar
volume. Haworth has admitted the enhanced electrical components do not infringe
the patents in suit. If Haworth were to be successful on its claims, the
statute of limitations would bar recovery of any damages arising prior to
January 1986. In November 1985, Haworth filed a lawsuit against Steelcase,
Inc., ("Steelcase") the industry's leader in market share, alleging violations
of the same patents, and has prevailed on the issue of liability. The
litigation between Haworth and Steelcase currently is continuing on the issue
of damages. The company's defenses are substantially different from those
relied upon by Steelcase.
The company continues to defend its position vigorously and has established a
reserve of $12.0 million as of September 2, 1995, that management believes will
be adequate to defray the costs of litigation. The company believes, based upon
written opinion of counsel, that its products do not infringe Haworth's patents
and that the company is more likely than not to prevail on the merits.
At this time, management does not expect the ultimate resolution of this matter
to have a material adverse effect on the company's consolidated financial
position. However, the outcome of this matter is not subject to prediction with
certainty.
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 September 2, 1995, and the results of
its operations and cash flows for the three months then ended. Interim results
are not necessarily indicative of results for a full year.
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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. It should
be noted that the three months ended September 2, 1995, contained
13 weeks versus the three months ended September 3, 1994, which
contained 14 weeks. All amounts are increases (decreases) unless
otherwise noted. Dollars are shown in thousands.
$ %
-------- -------
NET SALES 48,257 19.1
COST OF GOODS SOLD 36,389 22.5
OPERATING EXPENSES 5,523 7.1
INTEREST EXPENSE 1,111 112.2
OTHER INCOME NET* (543) (58.4)
INCOME BEFORE TAXES ON INCOME 5,777 44.0
PROVISION FOR TAXES ON INCOME 1,700 32.7
NET INCOME 4,077 51.4
* Represents an increase in other income
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B. Results of Operations
First Quarter FY 1996 versus First Quarter FY 1995
Net sales increased $48.3 million, or 19.1 percent, for the three
months (13 weeks) ended September 2, 1995, over the first quarter (14
weeks) results a year ago. For the first three months of fiscal 1996,
the company had net sales of $301.1 million, compared with net sales
of $252.8 million in the first three months last year. Net sales of
$301.1 million were the highest ever recorded in a quarter. The
increase primarily was due to unit volume increases and acquisitions
during the past year.
New orders increased 9.6 percent, to $316.9 million. The backlog of
unfilled orders at September 2, 1995, was $177.9 million, compared
with $151.0 million a year earlier, and $169.8 million at June 3,
1995.
Gross margin decreased to 34.2 percent during the first quarter of
1996, compared to a gross margin of 36.0 percent in the first quarter
of 1995. The decrease from the prior year first quarter is primarily
attributable to increased raw material costs experienced throughout
fiscal 1995.
Operating expenses, as a percent of sales, decreased to 27.7 percent
compared with 30.8 percent in the first quarter of last year. This
improvement is the result of the restructuring implemented in the
fourth quarter of last year which included: early retirement,
employment reductions, and discontinuing noncritical consulting
contracts, coupled with increased net sales. Total operating expenses
increased $5.5 million from $77.8 million in the first quarter of last
year to $83.3 million. Operating expenses attributable to acquisitions
and new ventures were $7.0 million. Additional factors contributing to
the increase were a 3.5 percent year-over-year increase in
compensation and benefits, increased depreciation and amortization,
and costs which are variable with sales.
Interest expense increased $1.1 million over first quarter fiscal
1995. Total interest-bearing debt was $126.9 million at the end of the
first quarter of fiscal 1996, compared with $144.2 million at June 3,
1995, and $86.1 million at September 3, 1994.
The effective tax rate for the first quarter was 36.5 percent compared
with 39.6 percent in the same period of last year. The lower rate is
the result of increased profitability in the UK which has net
operating loss carryforwards to offset pretax income.
Net income increased 51.4 percent to $12.0 million in the first
quarter (13 weeks compared to $7.9 million for the same period last
year (14 weeks).
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United States net sales were up 13.7 percent for the first quarter,
after being up 16.0 percent in the fourth quarter of fiscal 1995.
These increases reflect sales of our new seating product lines, and
strong growth in our domestic subsidiaries--Meridian and Phoenix
Designs.
Net sales of international operations and export sales from the United
States in the first quarter ended September 2, 1995, totaled $55.0
million compared with $36.5 million last year. Net loss from the
company's international operations and export sales from the United
States for the first quarter increased $.2 million to a $1.1 million
loss, compared with net loss of $.9 million for the same period last
year.
Net sales from international operations and exports from the United
States increased 50.9 percent over the first quarter of last year.
The first quarter increase primarily was due to a stronger performance
in our core European operations and the inclusion of Herman Miller
Italia, which was acquired in the fourth quarter of last year.
European net sales, including Herman Miller Italia, more than doubled
and new orders increased 84 percent compared to the same period of
last year.
While we have had consistent growth in the net sales of our
international operations, we have not been able to improve the
profitability to an acceptable level. This is due to negative
operating profits in our Mexican and German operations and the cost of
integrating Herman Miller Italia. Poor results in Europe and Mexico
reflect the poor economic conditions existing in those market.
C. Financial Condition, Liquidity, and Capital Resources
First Quarter FY 1996 versus First Quarter FY 1995
1. Cash flow from operating activities increased to $23.1 million
versus $2.8 million in the first quarter of 1995. The $20.3
million increase in cash provided by operating activities was
due to the improved profitability and a reduction in cash used
for working capital items.
2. Days sales in accounts receivable plus days sales in inventory
decreased to 86.4 days versus 91.2 days on June 3, 1995.
3. Total interest-bearing debt decreased to $126.9 million
compared to $144.2 million at June 3, 1995. Debt-to-total
capital now stands at 29.9 percent versus 33.5 percent on June
3, 1995. We expect interest bearing debt to remain in the range
of $125 to $145 million for the remainder of the year.
4. Capital expenditures for the quarter were $11.4 million versus
$11.7 million in the first quarter of 1995. The expenditures
were primarily for new facilities at our fastest growing
subsidiaries and new or improved internal processes. Capital
expenditures for the year are expected to be in the range of
$75 to $80 million.
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Part II
Item 4: Submission of Matters to Vote of Security Holders
At the Annual Shareholders Meeting held October 5, 1995, the shareholders voted
on various proposals presented in the company's 1995 definitive proxy
statement. The results of the votes follow:
1. Proposal to elect four directors to serve a term of three years and
one director for a term of one year:
Broker
For Against Withheld Non-vote
--- ------- -------- --------
a. Terms expiring in 1998
Dr. E. David Crockett 22,504,146 0 332,792 0
David L. Nelson 22,522,017 0 314,921 0
Charles D. Ray, M.D. 22,481,148 0 355,790 0
Michael A. Volkema 22,532,207 0 304,731 0
b. Term expiring in 1996
J. Harold Chandler 22,483,164 0 353,774 0
2. Proposal to approve the Herman Miller, Inc., 1995 Employee Stock
Purchase Plan
Broker
For Against Withheld Non-vote
--- ------- -------- --------
21,977,996 263,432 443,177 152,333
3. Proposal to ratify the appointment of Arthur Andersen LLP as the
independent public accountants for the company for the fiscal year
ending June 1, 1996.
Broker
For Against Withheld Non-vote
--- ------- -------- --------
22,783,099 24,175 29,664 0
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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
September 2, 1995.
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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.
January 5, 1996 /s/ Michael A. Volkema
--------------------------
Michael A. Volkema
(President and Chief
Executive Officer)
January 5, 1996 /s/ Brian C. Walker
--------------------------
Brian C. Walker
(Vice President, Finance)
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Exhibit Index
(11) Computations of earnings per common share.
(27) Financial Data Schedule (Exhibit available upon request)
1
EXHIBIT 11
HERMAN MILLER, INC.
COMPUTATIONS OF EARNINGS PER COMMON SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
------------------
Sept. 2, Sept. 3,
1995(1) 1994(2)
--------- ----------
NET INCOME APPLICABLE
TO COMMON SHARES $12,014 $ 7.937
======= =========
Weighted Average Common
Shares Outstanding 24,879,050 24,602,613
Net Common Shares
Issuable Upon Exercise
of Certain Stock Options 58,556 123,478
------ -------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING AS ADJUSTED 24,937,606 24,726,091
========== ==========
NET INCOME PER SHARE $ .48 $ .32
========== ==========
(1) Represents 13 weeks
(2) Represents 14 weeks
5
3-MOS
JUN-01-1996
JUN-04-1996
SEP-02-1995
17,193
0
181,312
8,002
76,245
310,862
523,965
253,641
665,057
211,866
0
0
0
4,973
291,831
665,057
301,088
301,088
198,209
198,209
80,784
1,080
2,101
18,914
6,900
12,014
0
0
0
12,014
.48
.48
