•Operational Excellence - The ~~company~~Company was among the first in the industry to embrace the concepts of lean manufacturing. HMPS provides the foundation for all of the ~~company's~~Company's manufacturing operations. The ~~company~~Company is committed to continuously improving both product quality and production and operational efficiency. The ~~company~~Company has extended this lean process work to its non-manufacturing processes as well as externally to its manufacturing supply chain and distribution channel. The ~~company~~Company believes these concepts hold significant promise for further gains in reliability, quality and efficiency.

Herman Miller, Inc. and Subsidiaries24

~~Leading Networks~~ •Omni-Channel Reach - The company values relationships in all areas of the business. The company considers its network of innovative designers, owned and independent dealers and suppliers to be among the most important competitive factors and vital to the long-term success of the business.

~~Multi-Channel Reach~~ ~~- The company~~Company has built a multi-channel distribution capability that it considers unique. Through contract furniture dealers, direct customer sales, retail stores and studios, ~~e-Commerce,~~eCommerce, catalogs, and independent retailers, the ~~company~~Company serves contract and residential customers across a range of channels and geographies.

•Global Scale - In addition to its global omni-channel distribution capability, the Company has a global network of designers, suppliers, manufacturing operations and research and development centers that position the Company to serve contract and residential customers globally. The Company believes that leveraging this global scale will be an important enabler to executing its strategy.

Channels of Distribution

The ~~company's~~Company's products and services are offered to most of its customers under standard trade credit terms between 30 and 45 ~~days~~days. For all the items below, revenue is recognized when control transfers to the customer. The Company's products and services are sold through the following distribution channels:

•Independent and Owned Contract Furniture Dealers - Most of the ~~company's~~Company's product sales are made to a network of independently owned and operated contract furniture dealerships doing business in many countries around the world. These dealers purchase the ~~company's~~Company's products and distribute them to end customers. ~~The company recognizes revenue on product sales through this channel once products are shipped and title passes to the dealer.~~ Many of these dealers also offer furniture-related services, including product installation.

•Direct ~~Customer~~Contract Sales - The ~~company~~Company also sells products and services directly to end customers without an intermediary (e.g., sales to the ~~U.S.~~US federal government). In most of these instances, the ~~company~~Company contracts separately with a ~~dealership~~dealer or third-party installation company to provide sales-related services. ~~The company recognizes revenue on these sales once the related product is shipped to the end customer and installation, if applicable, is substantially complete.~~

~~DWR~~ •Retail Studios - At the end of fiscal ~~2018~~,2021 the ~~Consumer~~Retail business unit included 3245 retail studios (including 3135 operating under the DWR brand, 4 under the HAY brand, 5 Herman Miller stores and a ~~Herman Miller Flagship store in New York City)~~multi-brand Chicago store). This business also operates ~~two~~3 outlet studios. The retail and outlet studios are located in metropolitan areas throughout North America. ~~Revenue on sales from these studios is recognized upon shipment and transfer to the customer of both title and risk of loss.~~

~~E-Commerce~~•eCommerce - The ~~company~~Company sells products through its online stores, in which products are available for sale via the ~~company's~~Company's website, hermanmiller.com, global ~~e-commerce~~eCommerce platforms, as well as through the ~~DWR~~dwr.com and us.hay.com online ~~store, dwr.com.~~stores. These sites complement our existing methods of distribution and extend the ~~company's~~Company's brand to new customers. ~~The company recognizes revenue on these sales upon shipment and transfer to the customer of both title and risk of loss.~~

~~DWR~~ •Direct-Mail Catalogs - The ~~company’s consumer~~Company’s Retail business unit utilizes a direct-mail catalog program through its DWR subsidiary. A regular schedule of catalog mailings is maintained throughout the fiscal year and these serve as a key driver of sales across each of DWR’s channels, including retail studios and ~~e-commerce~~eCommerce websites. ~~Revenue on sales transacted through this catalog program is recognized upon shipment and transfer to the customer of both title and risk of loss.~~

~~Independent Retailers~~ •Wholesale - Certain of the Company's products are sold on a wholesale basis to ~~end customers through independent retail operations. Revenue is recognized on these sales once products are shipped and title and risk of loss passes to~~third-party retailers located in various markets around the ~~independent retailer.~~

world.

Challenges Ahead

Like all businesses, the ~~company~~Company is faced with a host of challenges and risks. The ~~company~~Company believes its core strengths and values, which provide the foundation for its strategic direction, have well prepared the ~~company~~Company to respond to the inevitable challenges it will face in the future. While the ~~company~~Company is confident in its direction, it acknowledges the risks specific to ~~the~~our business and industry. Refer to Item 1A for discussion of certain of these risk factors and Item 7A for disclosures of market risk. In particular, the company has recently experienced the negative impact of higher steel costs and increased pressures from competitive price discounting, particularly in the North America and ELA markets.

252021 Annual Report

Areas of Strategic Focus

Despite a number of risks and challenges, the ~~company~~Company believes it is well positioned to successfully pursue its ~~mission~~purpose of ~~inspiring designs to help people do great things.~~design for the good of humankind. As our business and industry continue to evolve, we are constantly focused on staying ahead of the curve. With the composition of the office floor plate moving toward a broader variety of furnishings, a greater desire for customization from our customers, new technologies, and trends towards urbanization and more seamless transactions in the retail world, we have centered our overall value creation strategy on ~~five~~four key priorities.

~~Scaling Consumer~~ - The company has an ambition to expand the connection of its powerful brand more directly with the consumers of its products. The transformation of the Design Within Reach retail studio footprint will continue to add incremental selling space from a combination of new and repositioned studios. Studio expansions will be complemented by a continued focus on improving margins and profitability through the development of exclusive product designs and leveraging additional sales in our contract, catalog and digital channels.


						Unlock the Power of One Herman Miller Coming together as a family of complementary brands will help achieve our goals of more actively moving into the consumer marketplace, growing globally and making it easier to do business with us. We strive to become more agile, invest in responsive innovation, simplify our go-to-market strategy and continue to lead in product innovation across all our businesses globally.

						Build a Customer-centric, Digitally Enabled Business Model Building a customer centric and digitally enabled business model is at the forefront of our goal to become easier to do business with us. We will leverage our deep understanding of customer journeys to deliver inspired products and a frictionless customer experience. Along with strengthening the core technology backbone, we will also drive step-change in data, analytics, marketing and brand capabilities.

						Accelerate Profitable Growth There are identified opportunities for growth ahead in each of our business segments. We believe we are the only company in our industry with access to meaningful contract and residential growth opportunities on a global scale. At the same time, with our ongoing focus on operational excellence and specific profit improvement initiatives, we are focused on continuous improvement of our cost structure.

						Reinforce Our Commitment to Our People, Planet, Communities With a legacy of corporate social responsibility that is deeply ingrained in our culture, we will reinforce our commitment to our people, planet and communities in a more integrated and deliberate way than ever before. We will focus on building, developing and retaining world-class talent, shaping an inclusive and diverse workforce and elevating our Better World commitment. Doing so will enable us to create value for our shareholders, customers and employees, as well as for the broader communities and environment in which we operate.

~~Realizing the Living Office~~ - In fiscal 2014, the company introduced Living Office, a research-based framework for designing high-performing workplaces that deliver an elevated experience of work for people and help organizations achieve their strategic goals. The company is now focusing on taking the framework to the next level by accelerating the evolution of Living Office with new products and technology solutions, along with research that quantifies the positive impact to organizations from applying these concepts.

~~Delivering Innovation~~ - Product innovation has been a traditional strength at Herman Miller, and the company is determined to keep this dimension of its business as a competitive edge. With creative direction and new product commercialization under common leadership, the company is focused on reducing its time to market and meeting our customers' most critical needs through a robust pipeline of new products and solutions.

~~Leveraging the “Dealer Eco-System~~” - The company recognizes that the preferences and needs of its customers are evolving in favor of a greater mix of collaborative furnishings. The company intends to leverage the strength of its broad product offer in addressing this shifting market need. To this end, the company has dedicated resources under the Herman Miller Elements umbrella to best position the Herman Miller Collection, Maharam, Geiger, Design Within Reach and Naughtone brands for further growth in this space. The company complements this focused selling effort with enhanced digital platforms designed to make it easier for its contract customers and dealer partners to find, specify and order products from any brand within the Herman Miller Group.

~~Driving Profit Optimization~~ - A three-year cost savings initiative that was announced in fiscal 2017 is aimed at achieving between $25 million and $35 million in gross annual cost reductions by fiscal 2020. While these efforts will help offset potential wage and material inflation and help fund growth initiatives, the targeted cost reductions will also play a key role in achieving our goal to increase operating margins. In 2018, two additional profit optimization phases were initiated in partnership with a third party consulting firm. The first phase is a Consumer-focused initiative targeting $15 million to $20 million of gross annual profit improvement that began producing benefits in the fourth quarter of fiscal 2018 and aims to achieve its run-rate savings target by the end of fiscal 2019. The second phase, focusing on the company's North American Furniture Solutions segment, is in the early planning phases with initial opportunity estimates of $20 million to $40 million that will be further defined over the upcoming fiscal year.

The ~~company~~Company believes its strategy continues to respond well to current and future realities in its markets. AsThe Company's strategic priorities are aimed at creating a sustainable and diverse revenue model that puts the ~~company has expanded addressable market over~~customer at the ~~past five years, these initiatives will help leverage its unique multi-channel~~center of everything we do and leverages enabling digital capabilities to ~~deliver its leading designs~~fully realize that vision.

Herman Miller, Inc. and ~~innovations to new audiences virtually anywhere in the world.~~Subsidiaries26

~~Industry Analysis~~Business Overview

The ~~Business and Institutional Furniture Manufacturer's Association (BIFMA)~~following is the trade association for the North American contract furniture industry. The company monitors the trade statistics reported by BIFMA and considers them an indicator of industry-wide sales and order performance. BIFMA publishes statistical data for the contract segment and the office supply segment, including healthcare and education end markets, within the North American market. The contract segmenta summary of the ~~industry relates primarily to products sold to large to mid-size corporations~~significant events and ~~installed via a network of dealers. The office supply segment relates primarily to products sold to smaller customers via wholesalers and retailers. The company participates, and is a leader in,~~items impacting the ~~contract segment. Further, the company's business presence in the consumer sector lessens its dependence on the North American contract office furniture market.~~

The company analyzes BIFMA statistical information as a benchmark comparison against the performance of its contract business in North America and also to that of its competitors. The timing of large project-based business may affect comparisons to this data in any one period. Finally, BIFMA regularly provides its members with industry forecast information, which the company uses internally as one of several considerations in its short and long-range planning process.

Looking forward, BIFMA believes that the general economic outlook for the company's industry in the United States is expected to be positive. BIFMA issued its most recent report in April 2018, which forecasts that the growth rate of office furniture sales will be 1.9 percent and 3.6 percent in calendar 2018 and 2019, respectively. This forecast of growth is based primarily on GDP growth, industrial production, business fixed investments and a favorable tax and regulatory environment in the U.S., tempered by the current global economic uncertainty.

~~Discussion of Business Conditions~~

Fiscal 2018 and fiscal 2017 contain 52 and 53 weeks, respectively. The additional week is required periodically to more closely align the company's fiscal year with the calendar months. This additional week ofCompany's operations ~~increased fiscal 2017 net sales by approximately $37 million. This is a factor that should be considered when comparing the company's financial results to the prior year.~~

Net sales increased in 2018 to $2,381.2 million, an increase of 4.5 percent from the prior fiscal year. On an organic basis, which adjusts for dealer divestitures, changes in foreign currency translation rates, a change in shipping terms at DWR and the impact of the extra week, net sales increased by 6.5 percent⁽¹⁾ compared to last fiscal year. Each of our segments generated year-over-year net sales growth through a general increase in demand when compared to the prior year. This growth was led by the ELA segment behind strong order generation in the EMEA and Latin America regions as well as the Consumer segment, with growth in net sales driven by the recent work to transform the DWR retail studio footprint as well as other growth initiatives at DWR.

While relatively high commodity costs and a competitive pricing environment pressured gross margins compared to last year, operating expenses were controlled during the year, helping to deliver diluted earnings per share of $2.12 and adjusted diluted earnings per share~~of $2.30~~⁽¹⁾~~, which represents growth of 3 percent and 6 percent, respectively, when compared to prior year diluted earnings per share of $2.05 and adjusted diluted earnings per share of $2.16~~⁽¹⁾~~. Operating cash flow generation of $166.5 million~~ for the year ~~enabled~~ended May 29, 2021:

•The Company entered into strategic agreements during the ~~company to invest $70.6~~fiscal year, including agreements for (i) the acquisition of Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman Miller common stock for each outstanding share of Knoll common stock and (ii) the acquisition of all of the outstanding shares of Knoll's preferred stock for approximately $253 million in ~~property, plant and equipment; repurchase $46.5 million of company shares; and,~~cash in the aggregate. This transaction was finalized subsequent to the end of the fiscal ~~year, announce both~~year.

•Net sales were $2,465.1 million, representing a ~~10 percent increase in the quarterly dividend to $0.1975 per share - the highest quarterly rate in Herman Miller's history - as well as investments in Maars Living Walls and HAY.~~

~~Following a relatively flat year for sales growth in fiscal 2017, the North America segment saw order generation improve during fiscal 2018 and generated sales growth~~decrease of ~~0.6 percent during the year and 4.2 percent growth on an organic basis~~⁽¹⁾. While the prior year results were tempered by an uncertain political environment in the United States, the current year results reflect improved confidence in the U.S. economy and a generally positive response to the 2018 U.S. corporate income tax reform. Additionally, the North America segment continues to realize the benefits of the Living Office framework and the recent improvements within the company's new product development process and focus on an enhanced product offering. The North America segment saw a $10 million decrease in operating earnings during the year due to increased discounting and pricing pressures in the market; increased commodity costs and incremental out-sourcing costs earlier in the year due to capacity constraints in certain product lines. The $166.3 million of operating earnings generated during the year represented 12.9 percent of net sales for fiscal 2018.

~~The ELA segment recorded a 12.7 percent increase in net sales during the year, 11.3 percent~~⁽¹⁾ after adjusting for the impact of changes in foreign currency and the extra week of operations in the prior fiscal year. The growth in net sales reflects a significant increase in order generation during the current year with order growth of 17.2 percent or 16.9 percent⁽¹⁾ on an organic basis. The ELA segment saw broad-based growth across much of its business, with the EMEA and Latin America regions leading the way. This reflects an improved economic outlook in key regional markets such as Mexico and Brazil as well as growth across mainland Europe helping to offset the continued uncertainty around the United Kingdom's Brexit within the EMEA region. The ELA segment posted a $0.4 million decline in operating earnings relative0.9% when compared to the prior year. ~~However, after adjusting~~The decrease in net sales was driven primarily by decreased sales volumes in the North America Contract segment, partially offset by increased demand with the Retail segment, the impact the acquisition of HAY and naughtone; and incremental list price increases, net of contract price discounting. On an organic basis, net sales were $2,345.3 million(*), representing a decrease of 5.7% when compared to the prior year.

•Gross margin was 38.5% as compared to 36.6% in the prior year. The increase in gross margin was driven primarily by favorable channel and product mix combined with incremental list price increases, partially offset by lower overhead leverage due to decreased volumes as well as an increase in commodity market prices.

•Operating expenses decreased by $230.5 million or 24.3% as compared to the prior year. Operating expenses in the prior year included non-cash impairment charges of $205 million. In the current year, operating expenses included acquisition and integration charges of $11.0 million, and restructuring costs of $2.7 million. Restructuring costs related mainly to severance and outplacement benefits associated with workforce reductions and profit improvement initiatives implemented during the previous year.

•The effective tax rate was 21.2% for fiscal 2021 compared to negative 44.9% for the prior year. Excluding the impact of adjustments related to restructuring and other special charges ~~recognized~~recorded, a portion of which were not deductible for tax purposes, the effective tax rate for the prior year was 19.9%(*). This rate reflected both provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.

•Diluted earnings per share for the full year totaled $2.92 compared to a loss per share of $0.15 last year. On an adjusted basis, diluted earnings per share totaled $3.05(*) in fiscal 2021 compared to $2.61(*) in fiscal 2020, behind the strength of improved gross margins and well-managed operating expenses.

•The Company declared cash dividends of $0.56 per share compared to $0.63 per share in the ~~current fiscal year, adjusted operating earnings improvedby 14 percent~~⁽¹⁾ ~~behind~~prior year.

The following summary includes the ~~significant orders~~Company's view on the economic environment in which it operates:

•The Company's Retail segment supports a range of furniture categories aimed at the home environment. Several of these categories, including Home Office, Upholstery, Outdoor, Storage, and ~~net sales growth~~Accessories, saw a ramp-up in demand during the ~~year.~~first three quarters of fiscal 2021 and this continued into the fourth quarter of fiscal 2021.

~~Sales for~~•The disruption from the ~~Specialty segment were 2.5 percent higher than prior year,~~COVID-19 pandemic has adversely impacted our fiscal 2021 results as contract furniture industry order trends, as reported by the Business and ~~were 3.9 percent higher~~Institutional Furniture Manufacturers Herman Miller, Inc. and Subsidiaries 25 Association ("BIFMA"), have highlighted near-term demand pressures from the slowdown in economic activity from the pandemic in our North America Contract segment. Our International Contract segment has also been impacted, although many of the markets internationally have shown signs of faster economic recovery.

272021 Annual Report

•The Company is monitoring the resolution of various trade policy negotiations between the U.S. and key trading partners as well as the post-Brexit impact on ~~an organic basis~~⁽¹⁾~~, adjusting primarily for~~the U.K. and European Union. These negotiations create uncertainty in key markets, which, if unresolved in the near term, could negatively impact customer demand.

•The Company continues to navigate the impact of ~~the extra week in the fiscal 2017 results.~~global tariffs. The ~~growth in the Specialty businesses was led by the Geiger~~Company believes, based upon existing circumstances, that pricing, strategic sourcing actions and ~~Herman Miller Collection components which saw net sales growth of 13 percent and 12 percent, respectively, as reported during the year. This growth was partially~~profit optimization initiatives have fully offset ~~by lighter sales performance at Nemschoff and Maharam. While operating earnings for the segment increased by 10 percent during the year, adjusted operating earnings decreased by 45 percent~~⁽¹⁾ during the year primarily due to challenges faced by Nemschoff in fiscal 2018 from lower volume, unfavorable product mix, a supplier disruption earlier in the year and increased warranty costs. Specialty did see strong profitability from other components of the segment during the current ~~year,~~level of tariffs imposed on imports from China.

•The Company's financial performance is sensitive to changes in certain input costs, including steel and these leading design brands continued to provide a strong connection with the architect and design community and help the company to meet its customers' needs for both traditional workspaces and collaborative areas.

steel component parts. The ~~company's Consumer segment generated net sales growth~~market price of ~~12.2 percent on an as reported and on an organic basis~~⁽¹⁾~~. DWR delivered four quarters of comparable brand~~⁽²⁾ ~~growth during the year. Operating earnings and adjusted operating earnings increased by 190 percent and 157 percent~~⁽¹⁾~~, respectively, behind the strong net sales growth. The studio real estate expansion and investments to support long-term growth~~steel in ~~the Consumer business generated top-line growth, as well as improved profitability. During~~ the fourth quarter of fiscal 2021 was higher than the ~~Consumer segment also began realizing~~same period of the ~~initial benefits from the profit optimization efforts that began earlier~~prior year and negatively impacted consolidated results on a year-over-year basis. The price of steel unfavorably impacted consolidated gross margin in the ~~year. Additionally, growth this~~fourth quarter of fiscal 2021. However, ongoing cost reduction initiatives and a planned price increase in the first quarter of fiscal 2022 will help offset these pressures over time.

The remaining sections of Item 7 include additional analysis of the fiscal year ~~from studios, eCommerce, catalog and contract channels highlighted management's focus~~ended May 29, 2021, including discussion of significant variances compared to ~~improve~~ the ~~segment's~~prior year period. A detailed review of our fiscal 2020 performance ~~across all channels.~~compared to our fiscal 2019 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended May 30, 2020.

~~(1)~~(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

~~(2) DWR comparable brand sales reflects~~COVID-19 Update

The Company continues to respond to the ~~year-over-year change~~challenges brought about by the COVID-19 pandemic. Workplace restrictions are regionally applied based on the recommendations of local government and health authorities. While demand for the Company's products and services, particularly in ~~net sales across~~ the Contract channel of the business, has been adversely impacted, our multi-channel go-to-market approach has enabled us to serve customers where, and how, they need to be served. In addition, the investments we’ve made in people, technology, and products have positioned us well to capitalize on emerging opportunities as our customers' needs have changed throughout the COVID-19 crisis. This has allowed for our Retail business to take advantage of the unanticipated emerging work-from-home trend as well as "home is my castle" trends as consumers are focusing on and upgrading their broader home environments.

Employee Safety and Health

The health and well-being of employees remains top of mind. We are taking a regional approach to restrictions based on active COVID-19 case levels and local health authority recommendations. Contact tracing is active in all regions to help track and control the spread of the virus. We also continue to employ a variety of other safety measures including domestic and international travel restrictions, extensive cleaning protocols, temperature and health screenings, personal protective equipment, and visitor safety guidelines. We will be working with our employees around the globe to understand vaccine distribution and create time for every employee to be vaccinated if they wish to do so.

Herman Miller, Inc. and Subsidiaries28

Customer Focus

The digital investments we’ve made allowed us to pivot quickly and capitalize on a new set of opportunities when our customers’ purchasing behaviors changed. These investments include reimagined Design Within Reach and Herman Miller websites, a Work from Home landing page on Herman Miller’s website, a Work from Home online assessment tool, and new digital platforms that are creating greater efficiencies for contract and dealer audiences. The latest in a series of innovative solutions designed to accelerate growth in the Contract business is Herman Miller Professional – a digital ecosystem designed to meet customer demand for a simple and efficient design and product specification solution. Herman Miller Professional will deliver seamless online experiences to small- and medium sized businesses, a segment that has historically been underserved by the traditional contract furniture model, while also helping our dealers capture new clients and revenue. Businesses will be able to design their spaces with product from the Herman Miller family of brands, leverage an online quoting and purchasing process to complete their order, and select from several delivery options, including white glove service where appropriate. Our first Herman Miller retail seating concept stores are open in Los Angeles, New York Hudson Yards, Tokyo, Austin, Chicago Fulton Market, Century City Los Angeles and Greenwich, CT. In the early days, these stores have exceeded our initial revenue and operating profit expectations as we seek to educate customers about the health benefits of ergonomic seating. We remain uniquely positioned to serve our customers through multiple channels that DWR serves, including studios, outlets, contract, catalog, phone and e-commerce. Comparable brand growth in fiscal 2017 was presented on a pro forma basis using a 52-week average to normalize results forwith the ~~impact~~most comprehensive portfolio of ~~an extra week of operations~~products in the ~~first~~industry.

As our customers develop their post-pandemic work plans, there is a notable shift to work being done from a number of places, with the office as a destination – a place where employees want to be rather than are required to be. Herman Miller Group is ready to capture the many opportunities caused by this shift as our commercial customers rethink their real estate portfolios, redesign their workplaces, and seek to provide healthy and productive home work environments.

Manufacturing and Retail Operations

Manufacturing facilities continue to operate at near-normal capacity with enhanced safety precautions. All retail studios and stores are open in some capacity; with some open to the public and some open in limited capacity. All facilities operate within the context of and are subject to local guidance from government and health authorities and we will continue to adjust to ensure we are acting in accordance with these guidelines.

Cost Reductions

In fiscal 2020, the Company implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. In fiscal 2021, the Company, together with its Board of Directors, made the decision to move forward with several restorative actions. This included eliminating the 10% reduction in compensation, the introduction of a modified bonus program and re-establishing a quarterly cash dividend program. In addition, the Company has reinstated the previously suspended employer-paid retirement plan contributions in the fourth quarter of fiscal ~~2017.~~2021, and has also elected to make a catch-up contribution for the employer-paid retirement plan contributions that were suspended for a majority of fiscal 2021. Despite these various reinstatements, the Company continues to tightly control operating expenses in the face of lingering economic uncertainty.

Reconciliation of Non-GAAP Financial Measures

This report contains references to Organic net sales, Adjusted earnings per share - diluted, and adjusted effective tax rate which are non-GAAP financial measures. Organic Growth (Decline) represents the change in reported Net sales, excluding currency translation effects and the impact of acquisitions. Adjusted Earnings per Share represents reported diluted earnings per share ~~("EPS"),~~excluding the impact from adjustments related to purchase accounting adjustments related to the HAY and naughtone investments, impairment charges, restructuring expenses and other special charges or gains, including related taxes. Restructuring expenses include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with an early retirement program. Special charges include certain costs arising as a direct result of COVID-19, and retroactive payments related to reinstated employee benefits. Retroactive payments related to reinstated employee benefits were an adjustment to Earnings per Share in fourth quarter, but not for the full year. Adjusted effective tax rate reflects both provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.

Herman Miller, Inc. and Subsidiaries29

The Company believes presenting Organic net sales and Adjusted ~~operating~~ earnings all of which are non-GAAP financial measures (referred to collectively as the "Adjusted financial measures"). Adjusted diluted EPS and Adjusted operating earnings are calculated by excluding from Earnings per share - diluted ~~and Operating earnings,~~is useful for investors as it provides financial information on a more comparative basis for the periods presented by excluding items that ~~we believe~~ are not ~~indicative~~representative of ~~our~~the ongoing ~~operating performance, such as non-recurring gains; expenses associated with restructuring actions taken to adjust our cost structure to~~operations of the ~~current business climate; other special charges not indicative of ongoing performance such as costs associated with the CEO transition plan announced in fiscal 2018; and non-cash impairment expenses.~~ Company.

Organic net sales ~~represents the change in sales excluding currency translation effects, the divestiture of owned dealers, the impact of the change in DWR shipping terms in fiscal 2018~~ and the impact of an extra week of operations in fiscal 2017 as compared to fiscal 2018. These adjustments are made to provide enhanced comparability of the company's current results with historical results.

~~The company presents the~~ Adjusted financial measures because we consider them to be important supplemental measures of our performance and believe them to be useful in analyzing ongoing results from operations. The adjusted financial measuresearnings per share - diluted are not measurements of our financial performance under GAAP and should not be considered ~~an alternative~~as alternatives to ~~Earnings per share - diluted, Operating earnings or~~ the ~~company's reported Net sales under GAAP. The Adjusted financial measures~~related GAAP measurement. These non-GAAP measurements have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of ~~the company's~~our results as reported under GAAP. ~~The company's~~Our presentation of ~~the Adjusted financial~~non-GAAP measures should not be construed as an indication that ~~its~~our future results will be unaffected by unusual or infrequent items. ~~The company compensates~~We compensate for these limitations by providing prominence of ~~the~~our GAAP results and using the ~~Adjusted~~non-GAAP financial measures only as a supplement.

The following table reconciles Net sales to Organic net sales ~~by segment~~ for the ~~fiscal~~ years ~~ended:~~ended as indicated below (in millions):



	May 29, 2021				May 30, 2020
	North America	International	Retail	Total	North America	International	Retail	Total
Net Sales, as reported	$1,194.0	$669.0	$602.1	$2,465.1	$1,598.2	$502.8	$385.6	$2,486.6
% change from PY	(25.3)%	33.1%	56.1%	(0.9)%

Proforma Adjustments
Acquisitions	(10.6)	(87.3)	—	(97.9)	—	—	—	—
Currency Translation Effects (1)	(1.8)	(19.6)	(0.5)	(21.9)	—	—	—	—
Organic net sales	$1,181.6	$562.1	$601.6	$2,345.3	$1,598.2	$502.8	$385.6	$2,486.6
% change from PY	(26.1)%	11.8%	56.0%	(5.7)%

June 2, 2018 June 3, 2017
North America ELA Specialty Consumer Total North America ELA Specialty Consumer Total
Net Sales, as reported $ 1,284.4
$ 434.5
$ 305.4
$ 356.9
$ 2,381.2
$ 1,276.6
$ 385.5
$ 298.0
$ 318.1
$ 2,278.2
% change from PY 0.6 % 12.7 % 2.5 % 12.2 % 4.5 %

Proforma Adjustments
Dealer Divestitures —
—
—
—
—
(25.8 ) —
—
—
(25.8 )
Currency Translation Effects ⁽¹⁾
(3.9 ) (12.6 ) (0.1 ) (0.2 ) (16.8 ) —
—
—
—
—
Impact of Extra Week in FY17 —
—
—
—
—
(21.7 ) (6.3 ) (4.3 ) (4.7 ) (37.0 )
Impact of Change in DWR Shipping Terms —
—
—
(5.0 ) (5.0 ) —
—
—
—
—
Organic net sales $ 1,280.5
$ 421.9
$ 305.3
$ 351.7
$ 2,359.4
$ 1,229.1
$ 379.2
$ 293.7
$ 313.4
$ 2,215.4
% change from PY 4.2 % 11.3 % 3.9 % 12.2 % 6.5 %

June 3, 2017 May 28, 2016
North America ELA Specialty Consumer Total North America ELA Specialty Consumer Total
Net Sales, as reported $ 1,276.6
$ 385.5
$ 298.0
$ 318.1
$ 2,278.2
$ 1,269.4
$ 412.6
$ 294.2
$ 288.7
$ 2,264.9
% change from PY 0.6 % (6.6 )% 1.3 % 10.2 % 0.6 %

Adjustments
Dealer Divestitures —
—
—
—
—
(8.8 ) (30.8 ) —
—
(39.6 )
Currency Translation Effects ⁽¹⁾
0.7
13.9
—
—
14.6
—
—
—
—
—
Impact of Extra Week in FY17 (21.7 ) (6.3 ) (4.3 ) (4.7 ) (37.0 ) —
—
—
—
—
Organic net sales $ 1,255.6
$ 393.1
$ 293.7
$ 313.4
$ 2,255.8
$ 1,260.6
$ 381.8
$ 294.2
$ 288.7
$ 2,225.3
% change from PY (0.4)% 3.0% (0.2)% 8.6% 1.4%

⁽¹⁾ Currency translation effects represent the estimated net impact of translating current period sales ~~and orders~~ using the average exchange rates applicable to the comparable prior year period

~~The following table reconciles Operating earnings to Adjusted operating earnings by segment for the fiscal years ended:~~

June 2, 2018 June 3, 2017
North America ELA Specialty Consumer Corporate Total North America ELA Specialty Consumer Corporate Total
Operating Earnings (Loss) $ 166.3
$ 35.5
$ 8.9
$ 13.9
$ (47.1 ) $ 177.5
$ 176.0
$ 35.9
$ 8.1
$ 4.8
$ (34.0 ) $ 190.8
% Net Sales 12.9 % 8.2 % 2.9 % 3.9 % n/a
7.5 % 13.8 % 9.3 % 2.7 % 1.5 % n/a
8.4 %

Add: Special charges —
2.5
—
—
11.3
13.8
—
—
—
—
—
—
Add: Impairment charges —
—
—
—
—
—
—
—
7.1
—
—
7.1
Less: Gain on sale of dealer —
—
—
—
—
—
(0.7 ) —
—
—
—
(0.7 )
Add: Restructuring expenses 1.8
3.9
—
—
—
5.7
2.9
1.0
0.9
0.6
—
5.4
Adjusted Operating Earnings (Loss) $ 168.1
$ 41.9
$ 8.9
$ 13.9
$ (35.8 ) $ 197.0
$ 178.2
$ 36.9
$ 16.1
$ 5.4
$ (34.0 ) $ 202.6

The following table reconciles EPS to Adjusted EPS for the years ~~indicated:~~ended as of indicated below:



	May 29, 2021		May 30, 2020
Earning (Loss) per Share - Diluted	$	2.92	$	(0.15)




Less: Gain on consolidation of equity method investments	—		(0.63)
Less: Gain on legal settlement, after tax	(0.06)		—
Add: Special charges, after tax	0.02		0.15
Add: Impairment charges, after tax	—		2.90
Add: Acquisition and integration charges, after tax	0.15		—
Add: Restructuring expenses, after tax	0.02		0.34
Adjusted Earnings per Share - Diluted	$	3.05	$	2.61

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted	59,389,598		58,920,653

Note: The adjustments above are net of tax. For the twelve months ended May 29, 2021 and May 30, 2020, the tax impact of the adjustments were $0.01 and $0.62, respectively.

Herman Miller, Inc. and Subsidiaries30

June 2, 2018 June 3, 2017
Earnings per Share - Diluted $ 2.12
$ 2.05

Add: Other special charges 0.16
—
Add: Impairment charges —
0.07
Less: Gain on sale of dealer —
(0.02 )
Add: Restructuring expenses 0.07
0.06
Less: One-time impact of adopting U.S. Tax Cuts and Jobs Act (0.05 ) —
Adjusted Earnings per Share - Diluted $ 2.30
$ 2.16

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted 60,311,305
60,554,589

Financial Results

The following is a comparison of our annual results of operations and year-over-year percentage changes for the periods indicated:


(Dollars in millions)	Fiscal 2021		Fiscal 2020		% Change
Net sales	$	2,465.1	$	2,486.6	(0.9)	%
Cost of sales	1,515.9		1,575.9		(3.8)	%
Gross margin	949.2		910.7		4.2	%
Operating expenses	718.6		949.1		(24.3)	%
Operating earnings (loss)	230.6		(38.4)		n/a
Gain on consolidation of equity method investments	—		36.2		n/a
Other expenses, net	4.2		11.2		(62.5)	%
Earnings (loss) before income taxes and equity income	226.4		(13.4)		n/a
Income tax expense	47.9		6.0		n/a
Equity income from nonconsolidated affiliates, net of tax	0.3		5.0		(94.0)	%
Net earnings (loss)	178.8		(14.4)		n/a
Net earnings (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		n/a
Net earnings (loss) attributable to Herman Miller, Inc.	$	173.1	$	(9.1)	n/a

(Dollars In millions) Fiscal 2018 % Change from 2017 Fiscal 2017 % Change from 2016 Fiscal 2016
52 weeks 53 weeks 52 weeks
Net sales $ 2,381.2
4.5 % $ 2,278.2
0.6 % $ 2,264.9
Cost of sales 1,508.2
6.7 % 1,414.0
1.7 % 1,390.7
Gross margin 873.0
1.0 % 864.2
(1.1 )% 874.2
Operating expenses 695.5
3.3 % 673.4
1.6 % 662.7
Operating earnings 177.5
(7.0 )% 190.8
(9.8 )% 211.5
Net other expenses 9.4
(28.8 )% 13.2
(11.4 )% 14.9
Earnings before income taxes 168.1
(5.3 )% 177.6
(9.7 )% 196.6
Income tax expense 42.4
(23.0 )% 55.1
(7.4 )% 59.5
Equity income from nonconsolidated affiliates, net of tax 3.0
87.5 % 1.6
300.0 % 0.4
Net earnings 128.7
3.7 % 124.1
(9.7 )% 137.5
Net earnings attributable to noncontrolling interests 0.6
200.0 % 0.2
(75.0 )% 0.8
Net earnings attributable to Herman Miller, Inc. $ 128.1
3.4 % $ 123.9
(9.4 )% $ 136.7

The following table presents, for the periods indicated, the components of the ~~company's~~Company's Consolidated Statements of Comprehensive Income as a percentage of net sales:


	Fiscal 2021		Fiscal 2020
Net sales	100.0	%	100.0	%
Cost of sales	61.5		63.4
Gross margin	38.5		36.6
Operating expenses	29.2		38.2
Operating (loss) earnings	9.4		(1.5)
Gain on consolidation of equity method investments	—		1.5
Other expenses, net	0.2		0.5
Earnings (loss) before income taxes and equity income	9.2		(0.5)
Income tax expense	1.9		0.2
Equity income from nonconsolidated affiliates, net of tax	—		0.2
Net earnings (loss)	7.3		(0.6)
Net earnings (loss) attributable to redeemable noncontrolling interests	0.2		(0.2)
Net earnings (loss) attributable to Herman Miller, Inc.	7.0		(0.4)

312021 Annual Report

Fiscal 2018 Fiscal 2017 Fiscal 2016
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 63.3
62.1
61.4
Gross margin 36.7
37.9
38.6
Selling, general, and administrative expenses 25.9
25.8
25.9
Restructuring and impairment expenses 0.2
0.5
—
Design and research expenses 3.1
3.2
3.4
Total operating expenses 29.2
29.6
29.3
Operating earnings 7.5
8.4
9.3
Net other expenses 0.4
0.6
0.7
Earnings before income taxes 7.1
7.8
8.7
Income tax expense 1.8
2.4
2.6
Equity income from nonconsolidated affiliates, net of tax 0.1
0.1
—
Net earnings 5.4
5.4
6.1
Net earnings attributable to noncontrolling interests —
—
—
Net earnings attributable to Herman Miller, Inc. 5.4
5.4
6.0

Net Sales ~~Orders~~

The following chart presents graphically the primary drivers of the year-over-year change in Net sales. The amounts presented in the bar graph are expressed in millions and ~~Backlog - Fiscal 2018 Compared to Fiscal 2017~~

have been rounded.

~~Consolidated net~~Net sales ~~increased $103.0~~decreased $21.5 million ~~to $2,381.2 million from $2,278.2 million for the fiscal year ended June 2, 2018~~or 0.9% compared to the prior year fiscal ~~year ended June 3, 2017.~~period. The following items primarily contributed to the change:

~~Sales volumes within the North American segment increased by approximately $61 million, resulting from increased demand within the company's North America office furniture businesses.~~

•Increased sales volumes within the ~~ELA~~Retail segment of approximately ~~$54~~$201 million ~~were driven by broad-based growth, primarily within~~and the ~~Latin America and EMEA regions.~~

~~Incremental sales volumes within the Consumer~~International segment of approximately ~~$44~~$65 million.

•Increase of approximately $98 million ~~were driven by growth across~~due to the ~~DWR studio, e-commerce~~acquisitions of HAY and naughtone.

•Incremental list price increases, net of contract ~~channels and by a change in shipping terms at Design Within Reach that resulted in~~price discounting, of approximately ~~$5 million of net sales being accelerated into the first quarter of fiscal 2018.~~$17 million.

•Foreign currency translation had a ~~positive~~favorable impact on net sales of approximately ~~$16~~$22 million.

~~Increased~~•Decreased sales volumes ~~within the Specialty segment of approximately $12 million due primarily to increased sales volumes for the Herman Miller Collection and Geiger subsidiary.~~

Deeper contract price discounting, net of incremental price increases, reduced net sales in fiscal 2018 by roughly $21 million as compared to the prior year. Of this change, approximately $11 million related to the ELA operating segment and approximately $10 million related to the North American operating segment.

The impact of the divestiture of the company's dealerships in Vancouver, Canada in the first quarter of fiscal 2018 and Philadelphia, Pennsylvania in the third quarter of fiscal 2017 had the effect of reducing sales by $26 million as compared to the prior fiscal year.

Fiscal 2018 had 52 weeks as compared to fiscal 2017, which had 53 weeks. The impact of one less week in the current year decreased net sales by approximately $37 million compared to the prior fiscal year.

Consolidated net trade orders for fiscal 2018 totaled $2,408.2 million compared to $2,282.9 million in fiscal 2017, an increase of 5.5 percent. On an organic basis, which excludes the impact of the extra week in fiscal 2017 as well as foreign currency translation and dealer divestitures, orders increased by 7.7 percent from last fiscal year. Order rates began the year at an average pace of approximately $46 million per week for the first quarter and $48 million per week for the second quarter. For the third quarter, weekly order rates decreased to an average of approximately $43 million per week, reflecting typical seasonality in order pacing during that period of the fiscal year. The fourth quarter finished the year with average weekly order rates increasing to approximately $48 million. The impact of changes in foreign currency for the fiscal year increased net orders by approximately $14.6 million as compared to the prior year. Dealer divestitures had a $24.2 million unfavorable impact on current year orders, and the extra week in fiscal 2017 generated an additional $36.9 million of orders in the prior fiscal year.

The company's backlog of unfilled orders at the end of fiscal 2018 totaled $344.5 million, a 6.8 percent increase from fiscal 2017 ending backlog of $322.6 million. In fiscal 2018, the company completed the sale of its dealership in Vancouver. This dealer divestiture resulted in a reduction to the consolidated ending fiscal 2018 backlog of approximately $5.0 million.

BIFMA reported an estimated period-over-period increase in U.S. office furniture shipments of approximately 1.4 percent for the twelve-month period ended May 2018. By comparison, net sales increased for the company's North America segment by approximately 0.6 percent for the twelve month period ended May 2018 as compared to the prior year. However, on an organic basis, net sales within the North America segment ~~increased 4.2 percent~~⁽¹⁾ ~~when compared to the prior year.~~

~~(1) Non-GAAP measurements; see accompanying reconciliations and explanations.~~

The company also monitors trade statistics reported by the U.S. Census Bureau, which reports monthly retail sales growth data across a number of retail categories, including Furniture and Home Furnishing Stores. This information provides a relative comparison to our Consumer reportable segment, but is not intended to be an exact comparison. The average monthly year-over-year growth rate in sales for the Furniture and Home Furnishing Stores category for the twelve month period ended June 2, 2018, was approximately 5.3 percent. By comparison, net sales growth for the company's Consumer segment was approximately 12.2 percent during fiscal 2018.

~~Net Sales, Orders and Backlog - Fiscal 2017 Compared to Fiscal 2016~~

Consolidated net sales increased $13.3 million to $2,278.2 million from $2,264.9 million for the fiscal year ended June 3, 2017 compared to the fiscal year ended May 28, 2016. The following items contributed to the change:

~~Fiscal 2017 had 53 weeks as compared to the same period of fiscal 2016, which had 52 weeks. The impact of this additional week increased net sales by approximately $37 million.~~

~~Incremental sales volumes within the Consumer segment~~ of approximately ~~$25~~$425 million, ~~were~~primarily due ~~mainly~~ to ~~improvements across several Consumer sales channels, including studios, contract, e-commerce and direct-mail catalogs.~~

Increased sales volumes within the North American segment of approximately $21 million resulted primarily from increased demand within the company's Healthcare business unit, along with growth late in the fiscal year in the North America office furniture business.

Increased sales volumes within the ELA segment of approximately $17 million were driven by increases within the Europe, Latin America and Asia regions. The largest increases were due to larger project activity in mainland Europe, Mexico, Brazil, Japan and China.

~~Foreign currency translation had a negative impact on net sales of approximately $15 million.~~

Deeper discounting, net of incremental price increases, reduced net sales in fiscal 2017 by roughly $32 million as compared to the prior year. Of this change, $26 million related to the North American operating segment.

The impact of the divestiture of the company's dealerships in Australia in fiscal 2016 and Philadelphia, Pennsylvania in fiscal 2017 had the effect of reducing net sales by $39.6 million in fiscal 2017 as compared to the prior fiscal year.

~~Consolidated net trade orders for fiscal 2017 totaled $2,282.9 million compared to $2,279.7 million in fiscal 2016, an increase of 0.1 percent. On an organic basis, which excludes~~ the impact of the ~~extra week in~~COVID-19 pandemic.

Gross Margin

Gross margin was 38.5% for fiscal 2017, as well as foreign currency translation and dealer divestitures, orders increased by 0.9 percent from fiscal 2016. Order rates began the year at an average pace of approximately $43 million per week for the first quarter of fiscal 2017 and $44 million per week for the second quarter of fiscal 2017. For the third quarter of fiscal 2017, weekly order rates decreased to an average of approximately $42 million per week, reflecting typical seasonality in order pacing during that period of the fiscal year. The fourth quarter of fiscal 2017 finished the year with average weekly order rates increasing to approximately $44 million. The weekly order pacing in the third quarter and the fourth quarter of fiscal 2017 was impacted by the price increase that was announced during the third quarter of fiscal 2017. This caused approximately $21 million of orders that otherwise would have been entered in the fourth quarter, to be entered in the third quarter. When adjusting for this impact, the weekly pacing of orders for the third quarter and fourth quarter of fiscal 2017 was $40 million per week and $45 million per week, respectively. The impact of changes in foreign currency for the fiscal year decreased net orders by approximately $8.7 million2021 as compared to ~~fiscal 2016.~~

The company's backlog of unfilled orders at the end of fiscal 2017 totaled $322.6 million, a 0.3 percent decrease from fiscal 2016 ending backlog of $323.5 million. In fiscal 2017, the company completed the sale of its dealership in Philadelphia. This dealer divestiture resulted in a reduction to the consolidated ending backlog of approximately $11.6 million.

~~(1) Non-GAAP measurements; see accompanying reconciliations and explanations.~~

BIFMA reported an estimated period-over-period increase in U.S. office furniture shipments of approximately 2.0 percent for the twelve-month period ended May 2017. By comparison, net sales increased for the company's North American Contract segment by approximately 0.8 percent over the twelve months ended May 2017.

The average monthly year-over-year growth rate in sales for the Furniture and Home Furnishing Stores category for the twelve month period ended June 3, 2017, was approximately 2.9 percent. By comparison, net sales growth for the company's Consumer segment was approximately 10.2 percent.

~~Gross Margin - Fiscal 2018 Compared to Fiscal 2017~~

~~Consolidated gross margin~~36.6% for fiscal ~~2018 was 36.7 percent, a decrease of 120 basis points from the fiscal 2017 level.~~2020. The following factors summarize the major drivers of the year-over-year ~~decrease~~change in gross margin percentage:

~~Incremental price discounting, net of price increases, reduced the company's consolidated gross margin by approximately 100 basis points relative to the same period of last fiscal year.~~

~~Material cost performance was impacted favorably as a result of value engineering, insourcing and supplier cost reductions at the company's West Michigan manufacturing facilities, which~~•A favorable shift in channel mix increased gross margin by approximately 6080 basis ~~points as compared to the same period of the prior fiscal year.~~points.

~~An unfavorable change in product~~•Product mix, ~~that was driven by a shift out of seating~~material performance and ~~into lower margin product categories, as well as a move from higher margin seating to lower margin seating, drove a decrease of approximately 40 basis points as compared to last fiscal year.~~

~~Higher commodity costs drove an unfavorable year-over-year margin impact of approximately 40 basis points.~~

~~Gross Margin - Fiscal 2017 Compared to Fiscal 2016~~

Consolidated gross margin for fiscal 2017 was 37.9 percent, a decrease of 70 basis points from the fiscal 2016 level. The following factors summarize the major drivers of the year-over-year decrease in gross margin percentage:

~~Incremental price discounting, net of price increases, reduced the company's consolidated gross margin by approximately 90 basis points relative to fiscal 2016.~~

~~Higher commodity costs within the North American operating segment in fiscal 2017 drove an unfavorable impact of approximately 40 basis points relative to fiscal 2016.~~

The divestiture of the company's dealerships in Australia and Philadelphia, Pennsylvania in fiscal 2016 and 2017, respectively, resulted in a favorable impact of approximately 30 basis points in fiscal 2017 relative to fiscal 2016.

A decrease in employee incentive costs increased consolidated gross margin by 30 basis points in fiscal 2017 relative to fiscal 2016. The decrease reflects lower employee incentive costs that are variable based on the achievement of earnings levels for the fiscal year relative to plan.

~~Improved material cost performance at the company's West Michigan manufacturing facilities driven by process engineering initiatives~~ongoing profitability improvement efforts increased gross margin by approximately 20140 basis ~~points in fiscal 2017 as compared to fiscal 2016.~~points.

~~Product mix at the company's West Michigan manufacturing facilities and material usage efficiencies at various international locations had a favorable impact on~~•Incremental list price increases, net of contract price discounting, increased gross margin ~~in fiscal 2017 as compared to fiscal 2016.~~by approximately 40 basis points.

•Lower overhead leverage decreased gross margin by approximately 70 basis points.

Herman Miller, Inc. and Subsidiaries32

Operating Expenses ~~- Fiscal 2018 Compared to Fiscal 2017~~

The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses. The amounts presented in the bar graph are expressed in millions and have been rounded.

Operating expenses ~~in fiscal 2018 were $695.5~~decreased by $230.5 million or ~~29.2 percent of net sales, which compares~~24.3% compared to ~~$673.4 million, or 29.6 percent of net sales in~~the prior year fiscal ~~2017.~~period. The following factors contributed to the change:

~~Restructuring~~•The acquisition of HAY and ~~special~~naughtone increased Operating expenses by approximately $23 million and charges ~~primarily associated with the planned CEO transition, consulting fees~~ related to the ~~company's profit optimization initiatives and costs related to the International facilities consolidation plan~~Knoll acquisition increased ~~operating~~current year Operating expenses by ~~$7.7 million compared to last fiscal year.~~approximately $11 million.

~~Compensation and benefit~~•IT costs increased approximately $8$4 million ~~relative to last fiscal~~driven primarily by increased investments within the Company's digital and eCommerce platforms.

•Non-cash charges of $205 million in the prior year ~~due to headcount increases, wage inflation and higher employee incentive costs that are variable based on the achievement of earnings levels~~ for the ~~fiscal year relative~~impairment of goodwill, intangible assets and right of use assets related to ~~plan.~~Design Within Reach, Maharam, HAY and naughtone.

~~Sales volume based costs, such as sales commissions~~•Restructuring expenses decreased by approximately $24 million, primarily related to voluntary and ~~royalties, drove an increase~~involuntary reductions in ~~operating~~the Company's North American and International workforces that were substantially completed in the prior year.

•Lower marketing and selling expenses of approximately ~~$7 million.~~$16 million primarily within the North America Contract segment due to lower sales volume.

~~Incremental~~•Travel costs ~~related to the continued growth and expansion of DWR retail studios increased operating expenses by approximately $5 million.~~

~~Foreign currency translation had an incremental unfavorable impact on operating expenses of approximately $3 million.~~

~~Depreciation expense increased by approximately $2 million and was driven primarily by investment in facilities.~~

~~The divestiture of the company's dealerships in Vancouver and Philadelphia in fiscal 2018 and 2017, respectively, resulted in a decrease in operating expenses of $5.4 million.~~

~~Operating expenses~~ were approximately $9 $14 million ~~lower in the current year~~lower due to ~~the extra week of operations included in the results of the prior year.~~

During fiscal 2018, the company reduced operating expenses by an estimated $14 million related to its previously announced cost savings initiatives. These cost savings were realized across several of the company's operating expense categories and offset spending on strategic initiatives, general inflationary pressures on operating expenses and lower relative gross margin performance in the current fiscal year compared to the same period in fiscal 2017.

~~Operating Expenses - Fiscal 2017 Compared to Fiscal 2016~~

Operating expenses in fiscal 2017 were $673.4 million, or 29.6 percent of net sales, which compares to $662.7 million, or 29.3 percent of net sales in fiscal 2016. The following factors contributed to the change:

Fiscal 2017 results reflected restructuring and impairment expenses of $12.5 million. Restructuring charges related to targeted workforce reductions increased operating expenses by $5.4 million, while the impairment of the Nemschoff trade name increased operating expenses by $7.1 million.

~~Marketing and selling expenses increased approximately $10 million during fiscal 2017, relative to fiscal 2016.~~

~~The impact of an extra week in fiscal 2017 increased operating expenses by approximately $9 million.~~

~~Incremental costs of approximately $8 million related to the continued growth and expansion of DWR retail studios increased operating expenses in fiscal 2017 as compared to fiscal 2016.~~

~~Increased costs within the company's DWR subsidiary of approximately $5 million~~decreased travel as a result of ~~increased investment in information technology, infrastructure~~COVID-19.

•Lower warranty expense of approximately $9 million. Decreased warranty costs were due to ~~support~~lower sales volumes and claims experience within the ~~contract channel and other business support functions.~~North America Contract segment.

Lower employee incentive costs decreased operating expenses by $8.8 million in fiscal 2017 as compared to fiscal 2016. The decrease reflects lower incentive compensation costs that are variable based on the achievement of earnings levels for the fiscal year relative to plan.

The divestiture of the company's dealerships in Australia and Philadelphia in fiscal 2016 and 2017, respectively, resulted in a decrease in operating expenses of $14.2 million during fiscal 2017 as compared to fiscal 2016.

The remainder of the change was driven mainly by company-wide cost savings initiatives, decreases in stock-based compensation, research and development expenses and changes in foreign currency exchange rates.

~~Operating Earnings~~

In fiscal 2018, the company generated operating earnings of $177.5 million, a decrease of $13.3 million from fiscal 2017 operating earnings of $190.8 million. Fiscal 2018 had 52 weeks as compared to fiscal 2017, which had 53 weeks. The impact of the additional week in the prior year decreased operating earnings in fiscal 2018 relative to the prior fiscal year by approximately $5 million. Operating earnings of $190.8 million in fiscal 2017 represented a $20.7 million decrease from fiscal 2016 operating earnings of $211.5 million.

Other ~~Expenses and Income~~

Income/Expense

Net other expenses for fiscal ~~2018 were $9.4 million, a decrease of $3.8~~2021 was $4.2 million compared to net other expenses in fiscal 2017 of $13.2 million. The decrease in net other expenses in fiscal 2018 was primarily related to lower interest expense on outstanding debt, higher investment income on cash equivalents and foreign currency gains recorded in the current fiscal year relative to foreign currency losses recorded in the prior fiscal year.

Net other expenses for fiscal 2017 were $13.2 million, a decrease of $1.7 million compared to net other expenses in fiscal 2016 of $14.9 million. The decrease in net other expenses in fiscal 2017 was primarily related to higher investment income associated with the company's deferred compensation plan as compared to fiscal 2016.

~~Equity earnings from nonconsolidated affiliates for fiscal 2018 were $3.0 million, an increase of $1.4 million compared to Equity earnings from nonconsolidated affiliates of $1.6~~$11.2 million in fiscal ~~2017. This increase~~2020. The change was ~~driven by incremental earnings from~~primarily the ~~company's investment in Naughtone Holdings Limited ("Naughtone").~~

~~Equity earnings from nonconsolidated affiliates for fiscal 2017 were $1.6 million, an increase~~result of ~~$1.2 million compared to Equity earnings from nonconsolidated affiliates~~favorable legal settlements of ~~$0.4~~approximately $4.3 million in fiscal 2016. This increase was driven by incremental earnings from the company's Naughtone equity method investment. The company acquired a 50 percent noncontrolling equity interest in Naughtone on June 3, 2016.2021.

Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law in the United States. The results of operations for fiscal 2018 included the effect of the enactment of the Act. The effects of the Act included the reduction of the federal corporate income tax rate from 35 percent to 21 percent and a new participation exemption system of taxation on foreign earnings, among other provisions.

Effective January 1, 2018 the federal income tax rate was reduced from 35 percent to 21 percent. For fiscal tax payers a full year federal income tax rate is calculated based upon the number of days in the year subject to the 35 percent and the 21 percent tax rates. As a result, the company’s statutory federal tax rate for the fiscal year ended June 2, 2018 was 29.1 percent.

The significant impacts of the Act include reduced fiscal 2018 income tax expense resulting from the reduced federal income tax rate; remeasurement of the deferred tax assets and liabilities to reflect the anticipated new, lower rate at which the deferred items will be realized; and the impact of the one-time transition tax on undistributed foreign earnings. See Note 1011 of the Consolidated Financial Statements for additional information.

The company's effective tax rate was 25.2 percent in fiscal 2018, 31.1 percent in fiscal 2017 and 30.3 percent in fiscal 2016. The effective tax rate in fiscal 2018 was below the United States statutory rate of 29.1 percent, primarily due to an increase in the mix of earnings in tax jurisdictions that have rates lower than the United States statutory rate, the manufacturing deduction under the American Jobs Creation Act of 2004 (“AJCA”) and the research and development tax credit under the Protecting Americans from Tax Hikes ("PATH") Act of 2015.

332021 Annual Report

The effective tax rate in fiscal 2017 was below the statutory rate of 35 percent, primarily due to an increase in the mix of earnings in tax jurisdictions that have rates lower than the United States statutory rate, the manufacturing deduction under the AJCA and the research and development tax credit under the PATH.

The effective tax rate in fiscal 2016 was below the statutory rate of 35 percent, primarily due to the domestic U.S. manufacturing deduction under the AJCA as well as a significant amount of foreign earnings subject to tax at foreign rates below 35 percent.

~~For further information regarding income taxes, refer to Note 10 of the Consolidated Financial Statements.~~

~~Net Earnings; Earnings per Share~~

In fiscal 2018, fiscal 2017, and fiscal 2016, the company generated net earnings attributable to Herman Miller, Inc. of $128.1 million, $123.9 million and $136.7 million, respectively. Diluted earnings per share were $2.12, $2.05 and $2.26 for fiscal 2018, fiscal 2017 and fiscal 2016, respectively.

~~Reportable~~ Operating Segments Results

The business is comprised of various operating segments as defined by generally accepted accounting principles in the United States. These operating segments are determined on the basis of how the ~~company~~Company internally reports and evaluates financial information used to make operating decisions.

~~Effective in~~ The segments identified by the ~~first quarter of fiscal 2018, the company moved the operating results of its Nemschoff subsidiary, which primarily focuses on healthcare, from its~~Company include North America ~~Furniture Solutions operating~~Contract, International Contract, Retail and Corporate. For descriptions of each segment, refer to ~~its Specialty operating segment. This change was made to better leverage the skills and capabilities~~Note 14 of the company's Specialty business teams, particularly in the areas of craft wood and upholstery manufacturing. Additionally, the company has refreshed its methodology of allocating selling, general and administrative costs to the operating segments. The company has also identified certain corporate support costs that will no longer be allocated to the operating segments and that will be tracked and reported as "Corporate Unallocated Expenses". The company made these changes in the way that it allocates and reports its costs to better reflect the utilization of functional services across its operating segments and to also more closely align to industry practice. Prior year results disclosed in the table below have been revised to reflect these changes.Consolidated Financial Statements.

~~The company has identified the following reportable segments:~~

~~North American Furniture Solutions~~ — 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.

~~ELA Furniture Solutions~~ ~~— Includes EMEA, Latin America, and Asia-Pacific operations associated with the design, manufacture and sale of furniture products, primarily for work-related settings.~~

~~Specialty~~ — Includes 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.

~~Consumer~~ — 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 e-commerce, direct mailing catalogs and DWR retail studios.

~~Corporate~~ — Consists primarily of unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs.

The charts below present the relative mix of ~~net~~Net sales and ~~operating~~Operating earnings across each of the ~~company's reportable~~Company's segments. This is followed by a discussion of the ~~company's~~Company's results, by ~~segment, for each reportable~~ segment.

Herman Miller, Inc. and Subsidiaries34

North ~~American Furniture Solutions~~America Contract ("North America")


(Dollars in millions)	Fiscal 2021			Fiscal 2020			Change
Net sales	$	1,194.0		$	1,598.2		$	(404.2)
Gross margin	413.4			580.6			(167.2)
Gross margin %	34.6		%	36.3		%	(1.7)		%


Operating earnings	74.1			130.9			(56.8)
Operating earnings %	6.2		%	8.2		%	(2.0)		%

~~Fiscal 2018 Compared to Fiscal 2017~~

Net sales ~~in the North America segment were $1,284.4 million in fiscal 2018,~~decreased 25.3%, or 26.1%(*) on an ~~increase of 0.6 percent from fiscal 2017 net sales of $1,276.6 million. Orders for fiscal 2018 totaled $1,294.1 million, an increase of 0.7 percent from~~organic basis, over the prior ~~year. Operating earnings for North America in fiscal 2018 were $166.3 million or 12.9 percent of~~year due to:

•Decreased sales ~~as compared to $176.0 million or 13.8 percent of sales in the prior year.~~

~~Sales~~ volumes within the North America segment ~~increased by~~of approximately ~~$61~~$424.5 million, ~~resulting from increased demand within~~primarily due to the ~~company's North America office furniture businesses.~~

~~Fiscal 2017 included the full results~~outbreak of operations for the company’s dealership in Vancouver, Canada that was divested in the first quarter of fiscal 2018. Fiscal 2017 also included seven months of operations for the company's dealership in Philadelphia, Pennsylvania that was divested in the third quarter of fiscal 2017. Accordingly, the increase in sales volumes for the North American segment for fiscal 2018 was partiallyCOVID-19; offset by ~~a $25.8~~

•Incremental list price increases, net of discounting, of approximately $7.9 million ~~decrease in net sales~~

•Approximately $10.6 million due to ~~these divestitures. The sale~~the acquisition of ~~these dealerships also decreased consolidated orders for the North American segment in fiscal 2018 as compared to fiscal 2017 by $24.2 million.~~naughtone; and

•The impact of ~~an extra week in fiscal 2017 caused net sales and orders in fiscal 2018 to be lower than the prior year by approximately $21.7 millionand$20.0 million, respectively.~~

~~Incremental price discounting, net of price increases, in fiscal 2018 decreased net~~foreign currency translation which increased sales by approximately ~~$10 million compared to the prior year.~~$1.8 million.

Operating earnings decreased ~~in fiscal 2018 relative to~~$56.8 million, or 43.4%, over the prior ~~fiscal~~ year due to:

•Decreased gross margin of $167.2 million due to the following items: incremental price discounting of roughly $10 million, increased commodity costs of approximately $10 million, a change in product mix with an unfavorable impact to earnings of an estimated $7 million, higher outsourcing costs of approximately $4 million and the impact of an extra week in fiscal 2017 which generated approximately $3 million of additional earnings in the prior fiscal year. These decreases were partially offset by increased operating earnings of an estimated $14 million from incrementaldecreased sales volumes ~~and the benefit of improved material cost performance of $11 million from value engineering, insourcing and supplier cost reductions.~~

~~Fiscal 2017 Compared to Fiscal 2016~~

Net sales in the North American segment were $1,276.6 million in fiscal 2017, an increase of 0.6 percent from fiscal 2016 net sales of $1,269.4 million. Orders for fiscal 2017 totaled $1,285.4 million, an increase of 1.2 percent from fiscal 2016. Operating earnings for North America in fiscal 2017 were $176.0 million or 13.8 percent of sales as ~~compared to $187.6 million or 14.8 percent of sales in fiscal 2016.~~

~~The impact of the extra week increased net sales by an estimated $21.7 million and increased orders by $20.0 million for fiscal 2017~~well as ~~compared to fiscal 2016.~~

~~Incremental price discounting, net of price increases, in fiscal 2017 decreased net sales by approximately $26 million compared to fiscal 2016.~~

Sales volumes within the North American segment increased by approximately $21 million resulting primarily from increased demand within the company's Healthcare business unit, along with growth late in the year in the North America office furniture business.

~~The impact of the divestiture of the company's dealership in Philadelphia, Pennsylvania in fiscal 2017 had the effect of reducing net sales by approximately $9 million as compared to fiscal 2016.~~

~~Commodity price increases and incremental discounting drove~~ a decrease in gross ~~margins~~margin percentage of 170 basis points. The decrease in gross margin percentage was due primarily to lower overhead and ~~operating earnings.~~labor leverage offset in part by lower overhead spend; offset by

~~Decreased employee incentive costs recorded~~•Decrease in operating expenses of $110.4 million. This reduction was driven by lower marketing and ~~cost~~selling expenses of ~~goods sold~~approximately $15 million, lower travel costs of approximately $8 million, lower warranty costs of approximately $9 million and lower restructuring expenses of $14.9 million.

International Contract ("International")


(Dollars in millions)	Fiscal 2021			Fiscal 2020			Change
Net sales	$	669.0		$	502.8		$	166.2
Gross margin	238.9			168.5			70.4
Gross margin %	35.7		%	33.5		%	2.2		%


Operating earnings	93.0			18.2			74.8
Operating earnings %	13.9		%	3.6		%	10.3		%

Net sales increased ~~operating earnings by $10.8 million compared to prior fiscal year. The decrease reflects lower incentive compensation costs that are variable based~~33.1%, or 11.8%(*) on ~~the achievement of earnings levels for the fiscal year relative to plan.~~

~~Restructuring charges related to targeted workforce reductions increased operating expenses by $2.9 million.~~

~~Operating expenses within the North American segment were higher than~~an organic basis, over the prior year due to:

•Approximately $87 million due to the ~~extra week~~acquisition of ~~operations.~~HAY and naughtone

~~Company-wide cost savings initiatives resulted in a decrease in operating expenses relative to the prior year period.~~

~~ELA Furniture Solutions (EMEA, Latin America, and Asia Pacific)~~

~~Fiscal 2018 Compared to Fiscal 2017~~

Net sales in the ELA segment were $434.5 million in fiscal 2018, an increase of 12.7 percent from fiscal 2017 net sales of $385.5 million. Orders for fiscal 2018 totaled $451.2 million, an increase of 17.2 percent from fiscal 2017. Operating earnings within ELA for fiscal 2018 were $35.5 million, or 8.2 percent of sales as compared to $35.9 million or 9.3 percent of sales in the prior year.

•Increased sales volumes within the ~~ELA~~International segment of approximately ~~$54~~$64.9 million, ~~were~~primarily driven by ~~broad-based~~ growth ~~across all regions, most significantly~~ within the ~~Latin America~~Asia-Pacific and EMEA regions. These regions benefited from a relatively early recovery to the COVID pandemic and associated return to the office.

~~Deeper contract price~~•The impact of foreign currency translation which increased sales by approximately $19.6 million; offset by

•Incremental discounting, net of ~~incremental~~list price increases, ~~reduced net sales in fiscal 2018 by roughly $11~~of approximately $5.6 million.

Operating earnings increased $74.8 million, asor 411.0%, compared to the prior ~~year.~~year due to:

~~Foreign currency translation had a positive impact on net sales~~

•Increased gross margin of ~~approximately $13 million.~~

~~The impact of an extra week in fiscal 2017 caused net sales and orders in fiscal 2018 to be lower than the prior year by approximately $6.3 millionand$8.1 million, respectively.~~

Operating earnings were reduced in fiscal 2018 by roughly $11 million due to incremental price discounting and by $5.4 million due to restructuring and other special charges that were driven mainly by the consolidation of manufacturing facilities in China. These decreases were partially offset by increased operating earnings of an estimated $17 million from incremental sales volumes.

~~Fiscal 2017 Compared to Fiscal 2016~~

Net sales in the ELA segment were $385.5 million in fiscal 2017, a decrease of $27.1 million from fiscal 2016 net sales of $412.6 million. Orders for fiscal 2017 totaled $384.9 million, a decrease of $32.2 million from fiscal 2016. Operating earnings within ELA for fiscal 2017 were $35.9 million or 9.3 percent of sales as compared to $40.2 million or 9.7 percent of sales in fiscal 2016.

Fiscal 2016 included the results of the company’s dealership in Australia that was divested at the end of the fourth quarter of fiscal 2016. Accordingly, net sales for the ELA segment decreased by $30.8$70.4 million due to the ~~divestiture. The divestiture also decreased orders by $32.8 million year-over-year.~~

~~Increased~~increase in sales ~~volumes within the ELA segment~~explained above, and increased gross margin percentage of approximately $16 million were driven by increases within the Europe, Latin America and Asia regions. The largest increases were due to larger project activity in mainland Europe, Mexico, Brazil, Japan and China.

~~Deeper discounting, net of incremental price increases, decreased fiscal 2017 net sales by an estimated $6 million.~~

~~Foreign currency translation decreased net sales by approximately $13.9 million.~~

~~The impact of the extra week increased net sales and orders by $6.3 million and $8.1 million in fiscal 2017.~~

~~The divestiture of the company’s dealership in Australia decreased operating earnings by $1.6 million.~~

~~Operating earnings were also reduced in fiscal 2017 by $1.0 million due to restructuring expenses, related primarily to severance costs.~~

Fiscal 2016 included nonrecurring gains related to the sale of a former manufacturing facility in the United Kingdom and the divestiture of the company’s dealership in Australia. Accordingly, the operating earnings for the ELA segment decreased by $6.1 million due to the nonrecurring gains recorded in fiscal 2016.

~~Specialty~~

~~Fiscal 2018 Compared to Fiscal 2017~~

Net sales within the Specialty reportable segment were $305.4 million in fiscal 2018, an improvement of $7.4 million as compared to $298.0 million in fiscal 2017. Orders for fiscal 2018 totaled $308.4 million, an increase of $14.2 million from $294.2 million in fiscal 2017. Operating earnings within the Specialty reportable segment totaled $8.9 million or 2.9 percent of sales for the year, an increase of $0.8 million from $8.1 million or 2.7 percent of sales in fiscal 2017.

~~Net sales increased in fiscal 2018 as compared to the prior fiscal year~~220 basis points due primarily to ~~increased sales volumes~~favorable changes in channel and product mix.; and

•Decreased operating expenses of ~~approximately $12~~$4.4 million ~~which was~~ driven primarily by the ~~company's Herman Miller Collection~~prior year non-cash charge of $23.2 million for the impairment of intangible assets related to HAY and ~~Geiger businesses.~~naughtone. This was offset in part by increased operating expenses related to the acquisition of Hay and naughtone.

~~The impact of~~

352021 Annual Report

Retail


(Dollars in millions)	Fiscal 2021			Fiscal 2020			Change
Net sales	$	602.1		$	385.6		$	216.5
Gross margin	296.9			161.6			135.3
Gross margin %	49.3		%	41.9		%	7.4		%


Operating earnings	117.2			(148.3)			265.5
Operating earnings %	19.5		%	(38.5)		%	58.0		%

Net sales increased 56.1% as reported and 56.0% on an ~~extra week in fiscal 2017 caused net sales and orders in fiscal 2018 to be lower than~~organic(*) basis, over the prior year ~~by approximately $4.3 million and $4.8 million, respectively.~~due to:

Excluding the favorable year-over-year impact of $8.0 million of restructuring and impairment expenses that were recorded in fiscal 2017, operating earnings decreased in fiscal 2018 as compared to fiscal 2017. Operating earnings were adversely impacted by the company's Nemschoff subsidiary, which experienced a decrease driven by unfavorable product mix, the negative impact on operating earnings from decreased sales volumes and higher warranty costs.

~~Fiscal 2017 Compared to Fiscal 2016~~

Net sales within the Specialty reportable segment were $298.0 million in fiscal 2017, an improvement of $3.8 million as compared to $294.2 million in fiscal 2016. Orders for fiscal 2017 totaled $294.2 million, a decrease of $7.0 million from $301.2 million in fiscal 2016. Operating earnings within the Specialty reportable segment totaled $8.1 million or 2.7 percent of sales for the year, a decrease of $6.9 million from $15.0 million or 5.1 percent of sales in fiscal 2016.

~~The impact of an extra week in fiscal 2017 increased net sales and orders by approximately $4.3 million and $4.8 million, respectively, as compared to the prior year.~~

The decrease in operating earnings in fiscal 2017 relative to fiscal 2016 was driven mainly by impairment and restructuring expenses totaling $8.0 million that were primarily attributable to the impairment of the Nemschoff tradename.

~~Consumer~~

~~Fiscal 2018 Compared to Fiscal 2017~~

Net sales totaled $356.9 million for the year, an increase of 12.2 percent over the fiscal 2017 amount of $318.1. Orders of $354.5 million increased 11.3 percent over fiscal 2017. Operating earnings for the year were $13.9 million or 3.9 percent of sales as compared to operating earnings of $4.8 million or 1.5 percent of sales for fiscal 2017.

Incremental sales volumes of approximately $44 million were driven by growth across the DWR studio, e-commerce and contract channels and by a change in shipping terms at Design Within Reach that resulted in approximately $5 million of net sales being accelerated into the first quarter of fiscal 2018.

~~The impact of the extra week in fiscal 2017 caused net sales and orders in fiscal 2018 to be lower than the prior year by approximately $4.7 million and $4.0 million, respectively.~~

Operating earnings were higher in fiscal 2018 relative to the prior fiscal year due to an estimated $14 million benefit from increased sales volumes and an estimated $2 million benefit from the company's profit enhancement initiatives; partially offset by increased employee incentive costs of $2.6 million, increased compensation and benefits costs of $2.3 million and increased depreciation costs of approximately $2 million.

~~Fiscal 2017 Compared to Fiscal 2016~~

Net sales totaled $318.1 million for the year, an increase of 10.2 percent over the fiscal 2016 amount of $288.7 million. Orders of $318.4 million increased 9.2 percent over fiscal 2016. Operating earnings for the year were $4.8 million or 1.5 percent of sales as compared to operating earnings of $8.1 million or 2.8 percent of sales for fiscal 2016.

•Increased sales volumes of approximately ~~$25~~$201.0 million which were ~~due~~driven by increased demand across multiple product categories, with the largest increase relating to ~~improvements across several Consumer sales channels, including studios, e-commerce, contract~~workplace furnishings; and ~~direct-mail catalogs.~~

~~The impact~~•Incremental price increases, net of ~~the extra week increased net sales by $4.7 million in fiscal 2017 as compared to prior year.~~discounting, of approximately $15.0 million.

Operating ~~expenses within the Consumer segment were higher than~~earnings increased $265.5 million over the prior year due to:

•Increased gross margin of $135.3 million due to the increase in sales explained above, as well as an increased gross margin percentage of 740 basis points due primarily ~~as a result~~to changes in channel and product mix and the impact of ~~increased investments in information technology, marketing~~incremental price increases; and ~~investments in personnel supporting the contract and e-commerce channels.~~

~~Incremental pre-opening costs related to non-comparable studios increased~~•Decreased operating expenses ~~relative to~~of $130.2 million were driven primarily by non-cash charges recorded in the prior year of 139.0 million related to the impairment of goodwill, intangible assets and ~~had a negative impact on operating earnings~~right of ~~approximately $8~~use assets held by DWR. This was offset in part by increased investment in digital and eCommerce capabilities, the initial rollout of Herman Miller-branded seating stores, and increased variable selling expenses and incentives.

Corporate

Corporate unallocated expenses totaled $53.7 million ~~compared~~for fiscal 2021, an increase of $14.5 million from fiscal 2020. The increase was driven primarily by $11.0 million of acquisition and integration costs associated with the Knoll acquisition that was finalized subsequent to the close of fiscal ~~2016.~~2021.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations.

Liquidity and Capital Resources

The table below ~~presents certain key~~summarizes the net change in cash ~~flow~~ and ~~capital highlights~~cash equivalents for the fiscal years indicated.


	Fiscal Year Ended
(In millions)	2021		2020
Cash provided by (used in):
Operating activities	$	332.3	$	221.8
Investing activities	$	(59.9)	$	(168.1)
Financing activities	$	(347.7)	$	244.0
Effect of exchange rate changes	$	17.7	$	(2.9)
Net change in cash and cash equivalents	$	(57.6)	$	294.8

Fiscal Year Ended
(In millions) 2018 2017 2016
Cash and cash equivalents, end of period $ 203.9
$ 96.2
$ 84.9
Marketable securities, end of period $ 8.6
$ 8.6
$ 7.5
Cash provided by operating activities $ 166.5
$ 202.1
$ 210.4
Cash used for investing activities $ (62.7 ) $ (116.3 ) $ (80.8 )
Cash provided by (used for) financing activities $ 2.5
$ (74.6 ) $ (106.5 )
Pension and post-retirement benefit plan contributions $ (13.4 ) $ (1.1 ) $ (1.2 )
Capital expenditures $ (70.6 ) $ (87.3 ) $ (85.1 )
Stock repurchased $ (46.5 ) $ (23.8 ) $ (14.1 )
Interest-bearing debt, end of period $ 275.0
$ 199.9
$ 221.9
Available unsecured credit facilities, end of period ⁽¹⁾
$ 166.8
$ 391.7
$ 232.1

~~(1) Amounts shown are net of outstanding letters of credit, which are applied against the company's unsecured credit facility.~~

Cash Flow — Operating Activities

Cash ~~generated from~~provided by operating activities in fiscal ~~2018~~ ~~totaled~~ ~~$166.5~~2021 was $332.3 million compared to $~~202.1~~$221.8 million ~~generated~~ in the prior year.

~~Changes~~ The increase in ~~working capital balances~~cash generated from operations in ~~fiscal 2018~~ ~~resulted in a $32.8 million use of cash~~the current year, compared to the prior year, was primarily due to:

•Prior year net earnings included a ~~$23.5~~non-taxable non-cash gain on consolidation of an equity method investment of $36.2 million ~~use~~as well as a non-cash impact of ~~cash~~$205.4 of impairment charges; and

•Restructuring expenses of $2.7 million compared to $26.4 million in the prior ~~fiscal year. The cash outflow related to changes in working capital balances was driven primarily by an~~year; and

•An increase in ~~inventory of $12.4 million and~~current assets primarily driven by an increase in accounts receivable of ~~$33.1 million. The increase~~$14.8 million in ~~inventory as of~~ the ~~end of fiscal 2018 as~~current year compared to ~~fiscal 2017 was due mainly to growth in demand at DWR, as well as~~ a ~~build~~decrease of ~~inventory~~$68.6 million in the ~~ELA segment to fulfill demand.~~prior year. The increase in accounts receivable ~~was~~is primarily due to timing and increase in sales at the end of fiscal 2021 compared to fiscal 2020; and

Herman Miller, Inc. and Subsidiaries36

•An increase in current liabilities driven by the ~~timing of customer payments and shipments in the fourth quarter of the fiscal year. These cash outflows were partially offset by an increase~~following:

◦Increase in accounts payable of ~~$16.0 million.~~

~~In addition to changes in working capital, changes in pension contributions also impacted cash generated from operating activities. The company increased pension contributions by $12.3~~$43.2 million in the current year compared to a decrease of $59.5 million in the prior year which was a result of timing and greater production in fiscal ~~2018 as~~2021 compared to fiscal ~~2017, which was driven primarily by a contribution of $12.0 million that was made~~2020 due to ~~the international defined benefit pension plan~~manufacturing shut downs in the ~~first quarter~~prior year; and

◦Increase in accrued liabilities of ~~fiscal 2018.~~

~~During fiscal 2017, changes~~$15.1 million in ~~working capital balances resulted in a $23.5 million use of cash~~the current year compared to a ~~$6.0~~decrease of $32.0 million ~~use of cash~~ in ~~fiscal 2016. The cash outflow related to changes~~the prior year driven by increases in ~~working capital balances was driven primarily by an increase~~compensation in ~~inventory of $29.9 million and a decrease in accounts payable of $11.2 million. The increase in inventory as of~~ the end of fiscal 2017 as compared to fiscal 2016 was driven mainly by an increase at the company's DWR subsidiary, due to studio openings and year-end inventory stocking for upcoming promotional events and new product launches. This was partiallycurrent year offset by a decrease in ~~trade receivables of $17.3 million.~~accrued vacation.

The company believes its recorded accounts receivable allowances at the end of the year are adequate to cover the risk of potential bad debts. Allowances for non-collectible accounts receivable, as a percent of gross accounts receivable, totaled 1.4 percent, 1.8 percent, and 2.0 percent at the end of fiscal years 2018, 2017 and 2016, respectively.

Cash Flow — Investing Activities

~~Capital expenditures~~Cash used in investing activities in fiscal 2021 totaled ~~$70.6~~$59.9 million ~~$87.3 million and $85.1~~compared to $168.1 million in ~~fiscal 2018, 2017,~~the prior year. The decrease in cash outflow in the current year, compared to the prior year, was primarily a result of the following:

•Prior year cash outflows of $111.2 million for the additional investments in naughtone and ~~2016, respectively. The~~HAY; and

•A decrease in capital expenditures of ~~$16.7~~$9.2 million due to reduced spending as a result of COVID-19; and

•Proceeds from ~~fiscal 2017 to fiscal 2018 was driven primarily by a reduction~~the sale of the Company's manufacturing facility in ~~expenditures related to manufacturing assets in West Michigan~~China and ~~a reduction in expenditures in connection with Design Within Reach studio build outs.~~

~~The increase in capital expenditures of $2.2 million in fiscal 2017 from fiscal 2016 was driven primarily by payments related to~~ the ~~construction of a new~~office facility in the United Kingdom ~~for the purpose of consolidating manufacturing and distribution activities, as well as capital expenditures associated with product development and the opening of new DWR retail studio locations.~~

~~Cash proceeds from sale of dealers and properties were $2.1 million~~, zero and $10.7 million in fiscal 2018, 2017, and 2016 , respectively. Cash proceeds received in fiscal 2018 was primarily attributable to the sale of a wholly-owned contract furniture dealership in Vancouver, Canada for initial cash consideration of $2.0 million. During fiscal 2017, the company sold its wholly-owned contract furniture dealership in Pennsylvania in exchange for a $3.0 million note receivable. Cash proceeds received in fiscal 2016 was primarily attributable to the sale of a former manufacturing facility in the ~~United Kingdom for $4.8 million and the divestiture~~current year of ~~the company’s remaining 75 percent equity stake in its dealership in Australia for $2.7~~$14.0 million.

Included in the fiscal 2018, 2017 and 2016 investing activities are net cash outflows related to the acquisition of consolidated and non-consolidated entities. The followings amounts represent the primary investments that drove the cash outflows:

(In millions) 2018 2017 2016
Naughtone Holdings Limited $ —
$ 11.6
$ —
George Nelson Bubble Lamp Product Line $ —
$ —
$ 3.6

In fiscal 2018, the company received cash proceeds from a company-owned life insurance policy in the amount of $8.1 million. In fiscal 2017, the repayment of loans against the cash surrender value of life insurance policies was $15.3 million, which has been recorded within investing activities. The cash surrender value of the company-owned life insurance policies and the loans were previously recorded net within "Other noncurrent assets" within the Condensed Consolidated Balance Sheets.

~~Outstanding commitments for future capital purchases at~~At the end of the fiscal ~~2018~~2021, there were ~~approximately $49.5~~outstanding commitments for capital purchases of $46.5 million. The ~~company~~Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company expects capital spending in fiscal ~~2019~~2022 to be between ~~$90~~$140 million and ~~$100 million. The capital spending~~$150 million, which will be ~~allocated~~ primarily related to ~~planned~~ investments in ~~product development~~the Company's facilities and ~~retail studio openings.~~

~~The company's net marketable securities transactions for fiscal 2018 yielded a zero change in cash flows. This compares to a $1.1 million use~~equipment along with the inclusion of ~~cash and $1.7 million source of cash~~Knoll in fiscal ~~2017 and fiscal 2016, respectively.~~year 2022.

Cash Flow — Financing Activities

Cash used in financing activities was $347.7 million in fiscal 2021 as compared to cash provided by financing activities ~~was $2.5~~of $244.0 million in fiscal ~~2018 as compared to~~2020. The items below represent the major factors driving the year-over-year increase in cash flow used ~~for~~in financing ~~activities~~activities:

•During the first quarter of ~~$74.6~~fiscal 2021 the Company paid down the $265.0 million ~~in fiscal 2017. During fiscal 2018, the company borrowed $225.0 million~~draw on its syndicated revolving line of credit ~~and~~that was taken in the fourth quarter of ~~these proceeds, $150.0~~ fiscal 2020. Additionally, in the fourth quarter of fiscal 2021, the Company repaid $50.0 million ~~was used to repay its Series B Notes. By comparison, cash outflows from net payments on~~of private placement notes that were due March 1, 2021; and

•Lower employer-benefit related stock issuances in the ~~revolving credit facility were $22.0~~current year. The Company issued $5.0 million ~~during fiscal 2017.~~

~~Cash paid for repurchases of~~in common stock ~~was $46.5~~related to these programs during the current fiscal year compared to $15.6 million in fiscal 2020; offset in part by

•Common stock repurchased of $0.9 million in the current year as compared to ~~$23.8~~$26.6 million in the prior ~~year. Additionally, in fiscal 2018 there was an increase in cash inflows from~~year; and

•The prior year purchase of the ~~issuance of shares related to stock-based compensation plans. The company received $17.0 million related to stock-based compensation plans in fiscal 2018 compared to $11.7 million in fiscal 2017.~~

Cash paid for repurchases of common stock was $23.8 million in fiscal 2017 as compared to $14.1 million in fiscal 2016. Additionally, in fiscal 2017 there was an increase in cash inflows from the issuance of shares related to stock-based compensation plans. The company received $11.7 million related to stock-based compensation plans in fiscal 2017 compared to $9.2 million in fiscal 2016.

In fiscal 2017, cash used for financing activities was $74.6 million as compared to cash used for financing activities of $106.5 million in fiscal 2016. Cash outflows from net payments on the revolving credit facility were $22 million during fiscal 2017. By comparison, cash outflows from net payments on the revolving credit facility were $68.0 million during fiscal 2016.

~~Cash outflows for dividend payments were $42.4 million, $39.4 million and $34.9 million fiscal 2018, 2017 and 2016, respectively.~~

Certain minority shareholders in a subsidiary have the right, at certain times, to require the company to acquire a portion of their ownership interest in those entities at fair value. It is possible that between June 2, 2018 and the first half of fiscal 2020 that the company could be required to acquire this ownership interest. The fair value of thisremaining Herman Miller Consumer Holdings, Inc. redeemable noncontrolling ~~interest as of June 2, 2018 was $30.5 million and is included within "Redeemable noncontrolling interests" on the Consolidated Balance Sheets.~~interests for $20.3 million.

Sources of Liquidity

In addition to steps taken to protect its workforce and manage business operations, the Company has taken actions to safeguard its capital position in the current environment. The Company is closely managing spending levels, capital investments, and working capital, and has temporarily suspended open market share repurchase activity as part of managing cash flows.

At the end of fiscal 2021, the Company had a well-positioned balance sheet and liquidity profile. In addition to cash flows from operating activities, the ~~company~~Company has access to liquidity through credit facilities, cash and cash equivalents and short-term investments. These sources have been summarized below. For additional information, ~~see~~refer to Note 56 to the ~~consolidated financial statements.~~Consolidated Financial Statements.


(In millions)	May 29, 2021		May 30, 2020
Cash and cash equivalents	$	396.4	$	454.0
Marketable securities	$	7.7	$	7.0
Availability under revolving lines of credit	$	265.2	$	0.6

372021 Annual Report

(In millions) June 2, 2018 June 3, 2017
Cash and cash equivalents $ 203.9
$ 96.2
Marketable securities $ 8.6
$ 8.6
Availability under revolving lines of credit $ 166.8
$ 391.7

AtOf the cash and cash equivalents noted above at the end of fiscal ~~2018,~~2021, the ~~company~~Company had $213.7 million of cash and cash equivalents ~~of $203.9 million, including foreign cash and cash equivalents of $75.0 million.~~held outside the United States. In addition, the ~~company~~Company had ~~foreign~~ marketable securities of ~~$8.6~~$7.7 million held by one of its international wholly-owned subsidiaries.

The Company’s syndicated revolving line of credit, which expires on August 28, 2024, provides the Company with up to $500 million in revolving variable interest borrowing capacity and includes an "accordion feature" allowing the Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing capacity of the facility by up to $250 million. Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated rates as outlined in the agreement. Interest is payable periodically throughout the period if borrowings are outstanding.

As of May 29, 2021, the total debt outstanding related to borrowings under the syndicated revolving line of credit was $225.0 million with available borrowings against this facility of $265.2 million.

The ~~foreign~~ subsidiary holding the ~~company's~~Company's marketable securities is taxed as a ~~U.S.~~United States taxpayer at the ~~company's~~Company's election. Consequently, for tax purposes, all ~~U.S.~~United States tax impacts for this subsidiary have

been ~~recorded.Historically,~~recorded. The Company intends to repatriate $107.0 million in cash held in certain foreign jurisdictions and as such has recorded a deferred tax liability related to foreign withholding taxes on these future dividends received in the ~~company’s intent was~~U.S. from foreign subsidiaries of $0.7 million. The Company intends to ~~permanently reinvest~~remain indefinitely reinvested in the ~~remainder of the cash~~remaining undistributed earnings outside the ~~United States. However,~~U.S.

The Company believes that its financial resources are adequate to provide for its operations for at least the ~~Tax Cuts~~next 12 months and ~~Jobs Act (the “Act”), enacted on December 22, 2017, assesses a one-time tax on deferred foreign income upon transition~~will allow it to ~~a participation exemption system of taxation. The company is considering~~manage the impact of COVID-19 on the ~~Act~~Company's business operations for the foreseeable future. The Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19 and the one-time transition tax on its foreign earnings which are invested in liquidable assets. As a result, the company may repatriate certain amounts in the future and is assessing the amount of cash that will remain permanently reinvested.Knoll acquisition.

Subsequent to the end of fiscal 2018, on June 7, 2018, the company used cash of approximately $66 million to acquire 33 percent of the outstanding equity of Nine United Denmark A/S, d/b/a HAY ("HAY”), a Copenhagen, Denmark-based, design leader in furniture and ancillary furnishings for residential and contract markets in Europe and Asia. The company also used cash of approximately $5 million to acquire the rights to the HAY brand in North America under a long-term license agreement.

Subsequent to year end, on June 6, 2018, Herman Miller Holdings Limited, a wholly owned subsidiary of the company, announced its intent to lead a group of buyers to acquire the outstanding equity of Maars Holding B.V. ("MAARS”), a Harderwijk, Netherlands-based worldwide leader in the design and manufacturing of interior wall solutions. In the first quarter of fiscal 2019, the company will acquire a 48 percent ownership interest in MAARS for an estimated $6 million in cash.

Contingencies

The company believes cash on hand, cash generated from operations, and borrowing capacity will provide adequate liquidity to fund near term and foreseeable future business operations, capital needs, future dividends and share repurchases, subject to financing availability in the marketplace.

~~Contingencies~~

~~The company~~Company is 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~~Company's Consolidated Financial Statements. Refer to Note 13 of the Consolidated Financial Statements for more information relating to contingencies.

Basis of Presentation

The ~~company's~~Company's fiscal year ends on the Saturday closest to May 31. The fiscal ~~year~~years ended May 29, 2021, May 30, 2020 and June ~~2, 2018~~ ~~had~~1, 2019 contained 52 ~~weeks of operations, the fiscal year ended June 3, 2017 had 53 weeks of operations and the fiscal year ended~~ ~~May 28, 2016~~ ~~had 52 weeks of operations.~~weeks.

Contractual Obligations

Contractual obligations associated with our ongoing business and financing activities will result in cash payments in future periods. The following table summarizes the amounts and estimated timing of these future cash payments. Further information regarding debt obligations can be found in Note 56 of the Consolidated Financial Statements. Additional information related to operating leases can be found in Note 67 of the Consolidated Financial Statements.


	Payments due by fiscal year
(In millions)	Total		2022		2023-2024		2025-2026		Thereafter
Short-term borrowings and long-term debt (1)	$	277.1	$	2.2	$	—	$	225.0	$	49.9
Estimated interest on debt obligations (1)	66.0		9.1		18.2		18.2		20.5
Operating leases	260.8		42.3		81.5		64.9		72.1
Purchase obligations (2)	70.8		62.9		7.9		—		—
Pension and other post employment benefit plans funding (3)	27.6		2.5		5.1		5.4		14.6
Stockholder dividends (4)	11.1		11.1		—		—		—
Other (5)	15.1		5.2		4.1		1.4		4.4
Total	$	728.5	$	135.3	$	116.8	$	314.9	$	161.5

Herman Miller, Inc. and Subsidiaries38

(In millions) Payments due by fiscal year
Total 2019 2020-2021 2022-2023 Thereafter
Long-term debt⁽¹⁾
$ 275.0
$ —
$ 50.0
$ 225.0
$ —
Estimated interest on debt obligations ⁽¹⁾
71.9
9.6
18.5
13.3
30.5
Operating leases 328.5
45.8
83.3
75.6
123.8
Purchase obligations ⁽²⁾
93.5
88.1
2.9
0.4
2.1
Pension and other post employment benefit plans funding ⁽³⁾
0.9
0.4
0.1
0.1
0.3
Stockholder dividends ⁽⁴⁾
10.7
10.7
—
—
—
Other ⁽⁵⁾
15.3
1.3
2.5
2.3
9.2
Total $ 795.8
$ 155.9
$ 157.3
$ 316.7
$ 165.9

(1) Includes the current portion of long-term debt. Contractual cash payments on long-term debt obligations are disclosed herein based on the amounts borrowed as of May 29, 2021 and the maturity date of the underlying debt. Estimated future interest payments on our outstanding interest-bearing debt obligations are based on interest rates as of ~~June 2, 2018.~~May 29, 2021. Actual cash outflows may differ significantly due to changes in ~~underlying timing of principal payments.~~borrowings or interest rates.

(2) Purchase obligations consist of non-cancelable purchase orders and commitments for goods, services, and capital assets.

(3) Pension plan funding commitments are known for a 12-month period for those plans that are funded; unfunded pension and post-retirement plan funding amounts are equal to the estimated benefit ~~payments.~~payments. As of ~~June 2, 2018,~~May 29, 2021, the total projected benefit obligation for our domestic and international employee pension benefit plans was ~~$106.9~~$141.9 million.

(4) Represents the dividend payable as of ~~June 2, 2018.~~May 29, 2021. Future dividend payments are not considered contractual obligations until declared.

(5) Other contractual obligations primarily represent long-term commitments related to deferred and supplemental employee compensation benefits, and other post-employment benefits.

Other Future Obligations

The Company entered into strategic agreements during the fiscal year, including agreements for (i) the acquisition of Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman Miller common stock for each outstanding share of Knoll common stock and (ii) the acquisition of all of the outstanding shares of Knoll's preferred stock for approximately $253 million in cash in the aggregate. This transaction was finalized subsequent to the end of the fiscal year. The transaction was funded with a combination of new debt, as discussed in Note 19 of the Consolidated Financial Statements, and cash on our balance sheet.

Off-Balance Sheet Arrangements — Guarantees

We provide certain guarantees to third parties under various arrangements in the form of product warranties, loan guarantees, standby letters of credit, lease guarantees, performance bonds and indemnification provisions. These arrangements are accounted for and disclosed in accordance with Accounting Standards Codification (ASC) Topic 460, "~~Guarantees~~""Guarantees" as described in Note 1213 of the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our goal is to report financial results clearly and understandably. We follow accounting principles generally accepted in the United States in preparing our Consolidated Financial Statements, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. These policies and disclosures are reviewed at least annually with the Audit Committee of the Board of Directors. ~~Following~~The following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements.

~~Revenue Recognition~~Business Combinations

We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to goodwill. The allocation of the purchase consideration requires management to make significant estimates and assumptions, especially with respect to intangible assets. These estimates are reviewed with our advisors and can include, but are not limited to, future expected cash flows related to acquired customer relationships, trademarks and know-how/designs and require estimation of discount rates and royalty rates. As ~~described in~~such, our estimates of fair value are based upon reasonable assumptions but which are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the ~~“Executive Overview,”~~measurement period, which is up to one year from the majority of our products and services are sold through one of six channels: independent and owned contract furniture dealers, direct to end customers, DWR retail studios, e-commerce, DWR direct-mail catalogs and independent retailers. We recognize revenue on sales to independent dealers, licensees and retailers once products are shipped and title passesacquisition date, we may record adjustments to the ~~buyer. When we sell product directly~~assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. During 2020, management considered the acquisition of HAY a material acquisition. There were no other material acquisitions during fiscal 2020 or 2021; however, the acquisition of Knoll, which closed subsequent to year end is a material acquisition. See Note 3 to the end customer or through owned dealers or retail studios, we recognize revenue once the product and services are shipped, title and risk of loss have transferred to the customer and installation is substantially complete, if applicable.Consolidated Financial Statements for more information.

Amounts recorded as net sales generally include any freight charged to customers, with the related freight expenses recognized within cost of sales. Items such as discounts off list price, rebates and other price related incentives are recorded as reductions to net sales. We record accruals for rebates and other marketing programs, which require us to make estimates about future customer buying patterns and market conditions. Customer sales that reach (or fail to reach) certain levels can affect the amount of such estimates and actual results could differ from our estimates.

~~Receivable Allowances~~

We base our allowances for receivables on known customer exposures, historical credit experience and the specific identification of other potential problems, including the current economic climate. These methods are applied to all major receivables, including trade, lease and notes receivable. In addition, we follow a policy that consistently applies reserve rates based on the outstanding accounts receivable and historical experience. Actual collections can differ from our historical experience and if economic or business conditions deteriorate significantly, adjustments to these reserves may be required.

The accounts receivable allowance totaled $3.1 million and $3.3 million at June 2, 2018 and June 3, 2017, respectively. As a percentage of gross accounts receivable, these allowances totaled 1.4 percent and 1.8 percent for fiscal 2018 and fiscal 2017, respectively. The year-over-year decrease in the allowance is primarily due to fewer customer-specific reserves in the current year, relative to the prior year.

Goodwill and Indefinite-lived Intangibles

We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets each year as of March 31 or more frequently if events or changes in circumstances indicate an impairment maybe possible. We may

392021 Annual Report

consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived intangible assets is below the carrying amount. We may also elect to bypass the qualitative assessment and perform a quantitative assessment.

To complete the impairment assessment the Company makes estimates about fair value by using a weighting of the income and the market approach. The ~~carrying~~income approach is based on projected discounted cash flows using a market participant discount rate. The market approach is based on financial multiples of companies comparable to each reporting unit and applies a control premium. We corroborate the fair value through a market capitalization reconciliation to determine if the implied control premium is reasonable based on the qualitative considerations, such as recent market transactions.

The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but future changes in the underlying assumptions could occur due to the inherent uncertainty in making such estimates.

Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry or macroeconomic development or other adverse changes in market conditions could change one of the key assumptions the Company uses to calculate the fair value of its long-lived assets, goodwill and indefinite-lived trade names, which could result in a further decline in fair value and require the Company to record an impairment charge in future periods.

Goodwill

Certain business acquisitions have resulted in the recording of goodwill. At May 29, 2021 and May 30, 2020, we had goodwill of $364.2 million and $346.0 million, respectively.

We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets as of ~~June 2, 2018~~ ~~and~~ ~~June 3, 2017, was~~ ~~$382.2 million~~ ~~and~~ ~~$382.6 million, respectively. Goodwill and indefinite-lived intangible assets are tested for impairment annually,~~March 31 or more frequently if events or changes in circumstances orindicate that the ~~occurrence of events suggest~~asset might be impaired. We may consider qualitative factors to assess if it is more likely than not that ~~impairment exists. The company performs~~ the ~~annual~~fair value for goodwill is below the carrying amount, however, we may also elect to bypass the qualitative assessment and ~~indefinite-lived intangible assets impairment testing during the fourth quarter~~perform a quantitative assessment. Each of the ~~fiscal year.~~

~~The company completed the required annual goodwill impairment test in the fourth quarter of fiscal 2018, as of March 31, 2018, performing a quantitative impairment test for all goodwill~~ reporting units ~~and other indefinite-lived intangible assets.~~were reviewed for impairment using a quantitative assessment. In performing the quantitative impairment test for fiscal year 2021, the ~~company~~Company determined that the fair value of ~~the~~its reporting units exceeded the carrying amount and, as such, ~~the~~these reporting units were not ~~impaired~~impaired. In fiscal 2020, the Company recorded $125.5 million in goodwill impairment charges related to both the Retail and Maharam reportable segments.

The Company adopted and applied ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the ~~second step~~Test for Goodwill Impairment" using the prospective method in fiscal 2020. Refer to Note 1 of the ~~impairment test was not necessary. The company performed a sensitivity analysis over key valuation assumptions, noting low risk~~Consolidated Financial Statements for further information regarding the adoption of impairment. Also, due to the level that the reporting unit fair values exceeded the carrying amounts and the results of our sensitivity analysis, the company did not deem any reporting units to be at risk of impairment.ASU No. 2017-04.

~~The test for impairment requires the company to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. We estimated~~To estimate the fair value of each reporting unit when performing quantitative testing, the ~~reporting units using~~Company utilizes a weighting of the income approach and the market method. These approaches are based on a discounted cash flow analysis and ~~reconciled the sum of the fair values of~~observable comparable company information that use several inputs, including:

•actual and forecasted revenue growth rates and operating margins,

•discount rates based on the reporting ~~units to total market capitalization of the company, plus a control premium. The control premium~~

~~represents an estimate associated with obtaining control of the company in an acquisition. The discounted cash flow analysis used the present value of projected cash flows and a residual value.~~

The company employs a market-based approach in selecting the discount rates used in our analysis. The discount rates selected represent market rates of return equal to what the company believes a reasonable investor would expect to achieve on investments of similar size to the company's reporting units. The company believes the discount rates selected in the quantitative assessment are appropriate in that, in all cases, they meet or exceed the estimatedunit's weighted average cost of capital, ~~for our business as a whole.~~ and

•revenue and EBITDA of comparable companies

The ~~results~~Company corroborates the reasonableness of the ~~impairment test are sensitive~~inputs and outcomes of our discounted cash flow analysis through a market capitalization reconciliation to determine whether the implied control premium is reasonable.

Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the reporting unit. For example, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the reporting unit by approximately 1.0%. The estimated long-term growth rate can have a significant impact on the estimated future cash flows, and therefore, the fair value of each reporting unit. Of the other key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate. In completing the annual goodwill impairment test, the respective fair values were estimated using discount rates ranging from 12.0% to 14.0% and ~~changes~~long-term growth rates ranging from 2.5% to 3.0%.

Herman Miller, Inc. and Subsidiaries40

Indefinite-lived Intangible Assets

Certain business acquisitions have resulted in the ~~discount rate may result in future impairment.~~recording of trade names as indefinite-lived intangible assets, which are not amortized. At May 29, 2021 and May 30, 2020, we had trade name assets with a carrying value of $97.6 million and $92.8 million, respectively.

~~Historically,~~The Company evaluates indefinite-lived trade name intangible assets for impairment annually. The Company also tests for impairment if events and circumstances indicate that it is more likely than not that the ~~company has performed both qualitative and quantitative assessments to determine whether~~fair value of an indefinite-lived intangible asset is ~~impaired.~~ below its carrying amount. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date. During fiscal 2020, the Company adjusted the carrying value of all its tradenames to fair value, and as a result recognized $53.3 million in non-cash impairment charges on its indefinite-lived trade names.

In fiscal ~~2018,~~2021, the ~~company~~Company performed ~~only~~ quantitative assessments in testing indefinite-lived intangible assets for impairment. ~~The quantitative impairment test is~~In performing this assessment, we estimate the fair value of these intangible assets using the relief-from-royalty method which requires assumptions related to:

•actual and forecasted revenue growth rates,

•assumed royalty rates that could be payable if we did not own the trademark, and

•a market participant discount rate based on a weighted-average cost of capital.

The assumptions above reflect management’s best estimate; however, actual results could differ from our estimates. If the ~~relief from royalty method to determine the~~estimated fair value of the indefinite-lived intangible ~~assets, which~~asset is ~~both a market-based approach~~less than its carrying value, we would recognize an impairment charge.

In the table below, the Company has summarized the carrying values and ~~an income-based approach. The relief from royalty method focuses on the level~~fair values of ~~royalty payments that the user of an intangible asset would have to pay a third party for the use~~each of the ~~asset if it~~Company’s indefinite-lived trade names:


(In millions)
Trade name	Segment	Carrying Value		Fair Value
Maharam	North America Contract	$	16.5	$	20.2
DWR	Retail	31.5		92.8
HAY	International Contract	43.1		43.8
naughtone	International Contract	6.5		10.9
Total		$	97.6	$	167.7

In completing our annual indefinite-lived trade name impairment test, the respective fair values were not owned by the user. This method involves estimating theoretical future after tax royalty payments based on the company's forecasted revenues attributable to the trade names. These payments are then discounted to present value utilizing a discount rate that considers the after-corporate tax required rate of return applicable to the asset. The projected revenues reflect the best estimate of management for the trade names; however, actual revenues could differ from our estimates.

~~The~~estimated using discount rates ~~selected represent market~~ranging from 12.0% to 14.0%, royalty rates ranging from 2.00% to 3.00% and long-term growth rates ranging from 2.5% to 3.0%. The Company’s estimates of ~~return equal to what~~ the ~~company believes a reasonable investor would expect to achieve on investments~~fair value of ~~similar size and type to the~~its HAY indefinite-lived intangible asset being tested. The company believes the discount rates selected are appropriate in that, in all cases, they exceed the estimated weighted average cost of capital for our business as a whole. The results of the impairment test areis sensitive to changes in the ~~discount~~key assumptions above as well as projected financial performance. Therefore, a sensitivity analysis was performed on certain key assumptions.

Keeping all other assumptions constant, a 10% decrease in forecasted revenue growth rates ~~and changes~~at May 29, 2021 would have the following effects on the fair value of the HAY trade name:


(In millions)
Trade name	Segment	10% Decrease


HAY	International Contract	$	(4.3)

Keeping all other assumptions constant, a 100 basis point change in the discount rate ~~may result~~at May 29,2021 would have the following effects on the fair value of the HAY trade name:


(In millions)
Trade name	Segment	100 bps Increase		100 bps Decrease


HAY	International Contract	$	(3.9)	$	4.8

Keeping all other assumptions constant, a 50 basis point change in the royalty rate at May 29, 2021 would have the following effects on the fair value of the HAY trade name:

412021 Annual Report


(In millions)
Trade name	Segment	50 bps Increase		50 bps Decrease


HAY	International Contract	$	8.8	$	(8.7)

Keeping all other assumptions constant, a 50 basis point change in the long-term growth rate at May 29, 2021 would have the following effects on the fair value of the HAY trade name:


(In millions)
Trade name	Segment	50 bps Increase		50 bps Decrease


HAY	International Contract	$	1.7	$	(1.5)

If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future ~~impairment. The company performed a sensitivity analysis over key valuation assumptions, noting low risk of impairment. Also, due~~periods, the Company may need to the level that the indefinite-lived intangible assets exceeded the carrying amounts and the results of our sensitivity analysis, the company did not deem any of these assets to be at risk of impairment.record an impairment charge.

During fiscal 2017, the company recognized pre-tax asset impairment expenses totaling $7.1 million associated with the Nemschoff trade name, after which there is no remaining carrying value for this trade name. This impairment expense was incurred due to the fact that the forecasted revenue and profitability of the business did not support the recorded fair value for the trade name. There was no impairment indicated on indefinite-lived intangible assets in fiscal 2018 or fiscal 2016 as a result of our impairment testing.

Long-lived Assets

The ~~company~~Company evaluates other long-lived assets and acquired business units for indicators of impairment when events or changes in circumstances indicate that ~~an impairment risk~~the carrying amount of assets may not be ~~present.~~recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset group are compared to the carrying value of the asset or asset group. The judgments regarding the existence of impairment are based on market conditions, operational performance, and estimated future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.

~~Warranty Reserves~~

The ~~company stands behind company products~~Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-lived trade names are reasonable, but if actual results are not consistent with management's estimates and assumptions, a material impairment charge could occur, which could have a material adverse effect on our consolidated financial statements.

New Accounting Standards

Refer to Note 1 of the ~~promises it makes~~Consolidated Financial Statements for information related to ~~customers. From time to time, quality issues arise resulting in~~new accounting standards.

Forward Looking Statements

This report contains forward-looking statements within the ~~need to incur costs to correct problems with products or services. The company has established warranty reserves for~~meaning of Section 27A of the ~~various costs associated with these obligations. General warranty reserves~~Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on ~~historical claims experience~~management’s beliefs, assumptions, current expectations, estimates, and ~~periodically adjusted for business levels. Specific reserves are established once an issue is identified. The valuation~~projections about the office furniture industry, the economy, and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” "likely,” “plans,” “projects,” "could," and “should,” variations of such ~~reserves is based~~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;

•statements regarding the acquisition of Knoll, including the anticipated benefits of the acquisition, the anticipated impact of the acquisition on the ~~estimated~~combined company’s business and future financial and operating results, and the expected amount and timing of synergies that might be realized from the acquisition;

•the effect of the acquisition of Knoll on our ability of Herman Miller to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom we do business, or on our operating results and business generally;

•risks that the acquisition of Knoll disrupts current plans and operations and the potential difficulties in employee retention as a result of the transaction;

•the outcome of any legal proceedings related to the acquisition of Knoll;

•our ability to successfully integrate Knoll’s operations;

Herman Miller, Inc. and Subsidiaries42

•our ability to implement our plans, forecasts and other expectations with respect to our business after the acquisition of Knoll and realize expected synergies;

•business disruptions following the acquisition of Knoll;

•the ability to realize the anticipated benefits of the acquisition of Knoll, including the possibility that the expected benefits from the transaction will not be realized within the expected time period;

•the amount of the costs, fees, expenses and charges related to the merger agreement, the preferred stock purchase agreement, and the transactions contemplated by each agreement;

•unknown liabilities;

•the impact of foreign currency exchange rate and interest rate fluctuations on Herman Miller’s or Knoll’s results;

•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 and Knoll’s dealers and the financial strength of our and Knoll’s 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;

•natural disasters, public health crises, disease outbreaks; and

•other risks identified in our filings with the SEC.

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.

432021 Annual Report

Item 7A Quantitative and Qualitative Disclosures About Market Risk

The Company manufactures, markets, and sells its products throughout the world and, as a result, is subject to changing economic conditions, which could reduce the demand for its products.

Direct Material Costs

The Company is exposed to risks arising from price changes for certain direct materials and assembly components used in its operations. The largest of such costs incurred by the Company are for steel, plastics, textiles, wood particleboard and aluminum components. The impact from changes in all commodity prices increased the Company's costs by approximately $0.9 million during fiscal 2021 compared to the prior year. The impact from changes in commodity prices lowered the Company's costs by approximately $4 million during fiscal 2020 as compared to fiscal 2019. Note that these changes include the impact of Chinese tariffs on the Company's direct material costs.

The market prices for commodities will fluctuate over time and the Company acknowledges that such changes are likely to impact its costs for key direct materials and assembly components. Consequently, it views the prospect of such changes as an outlook risk to the business.

Shortages and disruption in the steel industry as a result of the COVID-19 pandemic negatively impacted the availability of steel. While this reduction in availability has not had a significant impact on our ability to produce and deliver products to our customers, it has negatively impacted the cost of procuring steel. Significant increases in raw materials can be difficult to offset with price increases due to existing contractual agreements with customers as well as difficulty finding effective financial instruments to hedge these changes. In the short term, our gross margin could be negatively impacted by significant increases in these costs. Our profitability could be negatively impacted in the long term if we are not able to pass along these higher raw material costs to ~~correct~~our customers.

Foreign Exchange Risk

The Company primarily manufactures its products in the ~~problem. Actual~~United States, United Kingdom, China, India, and Brazil. It also sources completed products and product components from outside the United States. The Company's completed products are sold in numerous countries around the world. Sales in foreign countries as well as certain expenses related to those sales are transacted in currencies other than the Company's reporting currency, the U.S. dollar. Accordingly, production costs ~~may vary~~ and ~~may result~~profit margins related to these sales are effected by the currency exchange relationship between the countries where the sales take place and the countries where the products are sourced or manufactured. These currency exchange relationships can also impact the Company's competitive positions within these markets.

In the normal course of business, the Company enters into contracts denominated in foreign currencies. The principal foreign currencies in which the Company conducts its business are the British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar and Chinese renminbi. As of May 29, 2021, the Company had outstanding sixteen forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies.

Herman Miller, Inc. and Subsidiaries44


(In millions, except number of forward contracts)
Net Asset Exposure
Currency	Number of Forward Contracts	Net Exposure
USD	7	58.8
EUR	3	44.3
NOK	1	10.0
SEK	1	17.5
GBP	1	2.0


Net Liability Exposure
Currency	Number of Forward Contracts	Net Exposure
USD	2	3.1
CAD	1	1.9

As of May 30, 2020, the Company had outstanding, twenty forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies.


(In millions, except number of forward contracts)
Net Asset Exposure
Currency	Number of Forward Contracts	Net Exposure
USD	7	41.6
EUR	2	18.2
ZAR	1	3.7
NOK	1	7.7
SEK	1	10.5
GBP	1	1.4

Net Liability Exposure
Currency	Number of Forward Contracts	Net Exposure
USD	4	7.4
EUR	1	1.3
CAD	1	3.1
AED	1	3.9

The cost of the foreign currency hedges and remeasuring all foreign currency transactions into the appropriate functional currency resulted in a net gain of $0.8 million in fiscal 2021 in contrast to net loss of $1.1 million in fiscal 2020 included in net earnings. These amounts are included in “Other (income) expense, net” in the Consolidated Statements of Comprehensive Income. Additionally, the cumulative effect of translating the balance sheet and income statement accounts from the functional currency into the United States dollar increased the accumulated comprehensive loss component of total stockholders' equity by $52.1 million compared to a decrease of $7.7 million as of the end of fiscal 2021 and 2020, respectively.

Interest Rate Risk

The Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall cost of borrowing. The Company's interest rate swap agreement was entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.

452021 Annual Report

These interest rate swap derivative instruments are held and used by the Company as a tool for managing interest rate risk. They are not used for trading or speculative purposes. The counterparties to the swap instruments are large financial institutions that the Company believes are of high-quality creditworthiness. While the Company may be exposed to potential losses due to the credit risk of non-performance by these ~~reserves.~~counterparties, such losses are not anticipated.

~~Inventory Reserves~~In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted indebtedness anticipated to be borrowed on the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as of the forward start date.

In June 2017, the Company entered into an additional interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the Company effectively converted the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387 percent fixed interest rate plus applicable margin under the agreement as of the forward start date.

The fair market value of the effective interest rate swap instruments was a net liability of $14.4 million at May 29, 2021 compared to $25.0 million at May 30, 2020. All cash flows related to the Company's interest rate swap instruments are denominated in U.S. dollars. For further information, refer to Note 6 and Note 12 of the Consolidated Financial Statements.

Expected cash outflows (notional amounts) over the next five years and thereafter related to debt instruments are as follows.


(In millions)	2022		2023		2024		2025		2026		Thereafter		Total(1)


Long-Term Debt - Fixed rate:
Interest rate 4.95%	$	—	$	—	$	—	$	—	$	—	$	49.9	$	49.9

Interest rate 1.949%(2)	$	—	$	—	$	—	$	150.0	$	—	$	—	$	150.0
Interest rate 2.387%(2)	$	—	$	—	$	—	$	75.0	$	—	$	—	$	75.0

(1) Amount does not include the recorded fair value of the swap instruments.

(2) The Company's revolving credit facility has a variable interest rate, but due to the interest rate swaps, the rate on $150.0 million and $75.0 million will be fixed at 1.949% and 2.387%, respectively.

Herman Miller, Inc. and Subsidiaries46

Item 8 Financial Statements and Supplementary Data

Herman Miller, Inc.

Consolidated Statements of Comprehensive Income


	Year Ended
(In millions, except per share data)	May 29, 2021		May 30, 2020		June 1, 2019
Net sales	$	2,465.1	$	2,486.6	$	2,567.2
Cost of sales	1,515.9		1,575.9		1,637.3
Gross margin	949.2		910.7		929.9
Operating expenses:
Selling, general and administrative	643.8		643.3		639.3
Impairment charges	0		205.4		0
Restructuring expenses	2.7		26.4		10.2
Design and research	72.1		74.0		76.9
Total operating expenses	718.6		949.1		726.4
Operating earnings (loss)	230.6		(38.4)		203.5
Gain on consolidation of equity method investments	0		36.2		0
Interest expense	13.9		12.5		12.1
Interest and other investment income	(2.1)		(2.3)		(2.1)
Other (income) expense, net	(7.6)		1.0		(1.6)
Earnings (loss) before income taxes and equity income	226.4		(13.4)		195.1
Income tax expense	47.9		6.0		39.6
Equity earnings from nonconsolidated affiliates, net of tax	0.3		5.0		5.0
Net earnings (loss)	178.8		(14.4)		160.5
Net earnings (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Net earnings (loss) attributable to Herman Miller, Inc.	$	173.1	$	(9.1)	$	160.5

Earnings (loss) per share — basic	$	2.94	$	(0.15)	$	2.72
Earnings (loss) per share — diluted	$	2.92	$	(0.15)	$	2.70

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	$	52.1	$	(7.7)	$	(14.2)
Pension and post-retirement liability adjustments	8.8		(14.2)		(7.8)
Unrealized gains (losses) on interest rate swap agreement	8.1		(18.0)		(12.3)
Unrealized holding (losses) gains on securities	(0.1)		0.1		0
Total other comprehensive income (loss), net of tax	68.9		(39.8)		(34.3)
Comprehensive income (loss)	247.7		(54.2)		126.2
Comprehensive income (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Comprehensive income (loss) attributable to Herman Miller, Inc.	$	242.0	$	(48.9)	$	126.2

472021 Annual Report

Herman Miller, Inc.

Consolidated Balance Sheets


(In millions, except share and per share data)	May 29, 2021		May 30, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	396.4	$	454.0
Short-term investments	7.7		7.0
Accounts receivable, net of allowances of $5.5 and $4.7	204.7		180.0
Unbilled accounts receivable	16.4		19.5
Inventories, net	213.6		197.3
Prepaid expenses	45.1		43.3
Other current assets	7.6		16.0
Total current assets	891.5		917.1
Property and equipment, net of accumulated depreciation of $832.5 and $780.5	327.2		330.8
Right of use assets	214.7		193.9
Goodwill	364.2		346.0
Indefinite-lived intangibles	97.6		92.8
Other amortizable intangibles, net of accumulated amortization of $68.6 and $62.7	105.2		112.4
Other noncurrent assets	61.5		60.9
Total Assets	$	2,061.9	$	2,053.9

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	178.4	$	128.8
Short-term borrowings and current portion of long-term debt	2.2		51.4
Accrued compensation and benefits	90.2		71.1
Accrued warranty	14.5		16.1
Customer deposits	43.1		39.8
Other accrued liabilities	172.4		163.0
Total current liabilities	500.8		470.2
Long-term debt	274.9		539.9
Pension and post-retirement benefits	34.5		42.4
Lease liabilities	196.9		178.8
Other liabilities	128.2		129.2
Total Liabilities	1,135.3		1,360.5
Redeemable noncontrolling interests	77.0		50.4
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, 0ne issued)	0		0
Common stock, $0.20 par value (240,000,000 shares authorized, 59,029,165 and 58,793,275 shares issued and outstanding in 2021 and 2020, respectively)	11.8		11.8
Additional paid-in capital	94.7		81.6
Retained earnings	808.4		683.9
Accumulated other comprehensive loss	(65.1)		(134.0)
Deferred compensation plan	(0.2)		(0.3)
Herman Miller, Inc. Stockholders' Equity	849.6		643.0


Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity	$	2,061.9	$	2,053.9

Herman Miller, Inc. and Subsidiaries48

Herman Miller, Inc.

Consolidated Statements of Stockholders' Equity


	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Deferred Compensation Plan	Herman Miller, Inc. Stockholders' Equity	Noncontrolling Interests	Total Stockholders' Equity
(In millions, except share and per share data)	Shares	Amount














June 2, 2018	59,230,974	$11.7	$116.6	$598.3	$(61.3)	$(0.7)	$664.6	$0.2	$664.8
Net earnings	—	—	—	160.5	—	—	160.5	—	160.5
Other comprehensive loss, net of tax	—	—	—	—	(34.3)	—	(34.3)	—	(34.3)
Stock-based compensation expense	—	—	8.4	—	—	—	8.4	(0.2)	8.2
Exercise of stock options	347,248	0.1	10.0	—	—	—	10.1	—	10.1
Restricted and performance stock units released	468,807	0.1	0.2	—	—	—	0.3	—	0.3
Employee stock purchase plan issuances	62,957	—	1.9	—	—	—	1.9	—	1.9
Repurchase and retirement of common stock	(1,326,023)	(0.2)	(47.6)	—	—	—	(47.8)	—	(47.8)
Directors' fees	10,185	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	—	—	—	(0.1)	(0.1)	—	(0.1)
Dividends declared ($0.79 per share)	—	—	—	(46.6)	—	—	(46.6)	—	(46.6)

Cumulative effect of accounting changes	—	—	—	0.5	1.4	—	1.9	—	1.9
June 1, 2019	58,794,148	$11.7	$89.8	$712.7	$(94.2)	$(0.8)	$719.2	$0	$719.2
Net loss	—	—	—	(9.1)	—	—	(9.1)	—	(9.1)
Other comprehensive loss	—	—	—	—	(39.8)	—	(39.8)	—	(39.8)
Stock-based compensation expense	—	—	2.7	—	—	—	2.7	—	2.7
Exercise of stock options	423,815	0.2	13.3	—	—	—	13.5	—	13.5
Restricted and performance stock units released	138,590	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	70,145	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(641,192)	(0.1)	(26.5)	—	—	—	(26.6)	—	(26.6)
Directors' fees	7,769	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	(0.3)	—	—	0.5	0.2	—	0.2
Dividends declared ($0.63 per share)	—	—	—	(37.5)	—	—	(37.5)	—	(37.5)
Redemption value adjustment	—	—	—	17.8	—	—	17.8	—	17.8

May 30, 2020	58,793,275	$11.8	$81.6	$683.9	$(134.0)	$(0.3)	$643.0	$0	$643.0
Net earnings	—	—	—	173.1	—	—	173.1	—	173.1
Other comprehensive income	—	—	—	—	68.9	—	68.9	—	68.9
Stock-based compensation expense	—	—	9.0	—	—	—	9.0	—	9.0
Exercise of stock options	86,238	0	2.6	—	—	—	2.6	—	2.6
Restricted and performance stock units released	114,103	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	71,468	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(38,932)	0	(0.9)	—	—	—	(0.9)	—	(0.9)
Directors' fees	3,013	—	0.1	—	—	—	0.1	—	0.1
Deferred compensation plan	—	—	0	—	—	0.1	0.1	—	0.1
Dividends declared ($0.56 per share)	—	—	—	(33.4)	—	—	(33.4)	—	(33.4)
Redemption value adjustment	—	—	—	(15.0)	—	—	(15.0)	—	(15.0)
Other	—	—	—	(0.2)	—	—	(0.2)	—	(0.2)
May 29, 2021	59,029,165	$11.8	$94.7	808.4	$(65.1)	$(0.2)	$849.6	0	$849.6

492021 Annual Report

Herman Miller, Inc.

Consolidated Statements of Cash Flows


	Year Ended
(In millions)	May 29, 2021	May 30, 2020	June 1, 2019
Cash Flows from Operating Activities:
Net earnings (loss)	$178.8	$(14.4)	$160.5
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation expense	72.0	68.1	65.9
Amortization expense	15.2	11.4	6.2
Earnings from nonconsolidated affiliates net of dividends received	(0.4)	(4.8)	(2.1)
Investment fair value adjustment	0	0	(2.1)
Gain on consolidation of equity method investments	0	(36.2)	0

Deferred taxes	6.7	(25.2)	0.8
Pension contributions	(5.4)	(0.9)	(0.9)
Pension and post-retirement expenses	3.0	1.6	1.2
Impairment charges	0	205.4	0
Restructuring expenses	2.7	26.4	10.2
Stock-based compensation	9.0	2.7	7.3

Decrease (increase) in long-term assets	1.2	(4.7)	(0.4)
Increase in long-term liabilities	16.0	5.8	1.6
Changes in current assets and liabilities:
Increase (decrease) in accounts receivable & unbilled accounts receivable	(14.8)	68.6	(24.8)
Increase (decrease) in inventories	(8.5)	6.0	(31.9)
Increase in prepaid expenses and other	(3.9)	(2.2)	(0.6)
Increase (decrease) in accounts payable	43.2	(59.5)	0.5
Increase (decrease) in accrued liabilities	15.1	(32.0)	22.7
Other, net	2.4	5.7	2.3
Net Cash Provided by Operating Activities	332.3	221.8	216.4

Cash Flows from Investing Activities:

Marketable securities purchases	(5.9)	(3.1)	(1.9)
Marketable securities sales	5.3	5.0	1.7
Capital expenditures	(59.8)	(69.0)	(85.8)
Proceeds from sales of property and dealers	14.0	0.2	0.5


Purchase of HAY licensing agreement	0	0	(4.8)
Acquisitions, net of cash received	0	(111.2)	0
Equity investment in non-controlled entities	0	(3.3)	(73.6)
Other, net	(13.5)	13.3	(1.1)
Net Cash Used in Investing Activities	(59.9)	(168.1)	(165.0)

Cash Flows from Financing Activities:


Borrowings of long-term debt	0	50.0	0
Repayments of long-term debt	(50.0)	0	0
Proceeds from credit facility	0	265.0	0
Repayments of credit facility	(265.0)	0	0
Dividends paid	(34.5)	(36.4)	(45.6)
Common stock issued	5.0	15.6	12.3
Common stock repurchased and retired	(0.9)	(26.6)	(47.9)


Purchase of redeemable noncontrolling interests	0	(20.3)	(10.1)
Other, net	(2.3)	(3.3)	(0.6)
Net Cash (Used in) Provided by Financing Activities	(347.7)	244.0	(91.9)
Effect of exchange rate changes on cash and cash equivalents	17.7	(2.9)	(4.2)
Net (Decrease) Increase In Cash and Cash Equivalents	(57.6)	294.8	(44.7)
Cash and cash equivalents, Beginning of Year	454.0	159.2	203.9
Cash and Cash Equivalents, End of Year	$396.4	$454.0	$159.2

Other Cash Flow Information
Interest paid	$12.5	$11.4	$11.5
Income taxes paid, net of cash received	$15.8	$39.6	$41.0

Herman Miller, Inc. and Subsidiaries50

Notes to the Consolidated Financial Statements


Note 1	Significant Accounting and Reporting Policies	52
Note 2	Revenue from Contracts with Customers	61
Note 3	Acquisitions and Divestitures	63
Note 4	Inventories	65
Note 5	Investments in Nonconsolidated Affiliates	66
Note 6	Short-Term Borrowings and Long-Term Debt	67
Note 7	Leases	69
Note 8	Employee Benefit Plans	71
Note 9	Common Stock and Per Share Information	74
Note 10	Stock-Based Compensation	75
Note 11	Income Taxes	79
Note 12	Fair Value	83
Note 13	Commitments and Contingencies	88
Note 14	Operating Segments	89
Note 15	Accumulated Other Comprehensive Loss	92
Note 16	Restructuring Expenses	92
Note 17	Variable Interest Entities	94
Note 18	Quarterly Financial Data (Unaudited)	94

512021 Annual Report

1. Significant Accounting and Reporting Policies

The following is a summary of significant accounting and reporting policies not reflected elsewhere in the accompanying financial statements.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Herman Miller, Inc. and its controlled domestic and foreign subsidiaries. The consolidated entities are collectively referred to as “the Company.” All intercompany accounts and transactions have been eliminated in the Consolidated Financial Statements.

Description of Business

The Company researches, designs, manufactures, sells and distributes interior furnishings for use in various environments including office, healthcare, educational and residential settings and provides related services that support companies all over the world. The Company's products are sold primarily through independent contract office furniture dealers as well as the following channels: owned contract office furniture dealership, direct customer sales, independent retailers, owned retail studios, direct-mail catalogs and the Company's eCommerce platforms.

Fiscal Year

The Company's fiscal year ends on the Saturday closest to May 31. The fiscal years ended May 29, 2021, May 30, 2020, and June 1, 2019 contained 52 weeks.

Foreign Currency Translation

The functional currency for most of the foreign subsidiaries is their local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the United States dollar using fiscal year-end exchange rates and translating revenue and expense accounts using average exchange rates for the period are reflected as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.

The financial statement impact of gains and losses resulting from remeasuring foreign currency transactions into the appropriate functional currency resulted in a net gain of $0.8 million, net loss of $1.1 million, and a net gain of $0.3 million for the fiscal years ended May 29, 2021, May 30, 2020, and June 1, 2019, respectively. These amounts are included in “Other (income) expense, net” in the Consolidated Statements of Comprehensive Income.

Cash Equivalents

The Company holds cash equivalents as part of its cash management function. Cash equivalents include money market funds and time deposit investments with original maturities of less than three months. The carrying value of cash equivalents, which approximates fair value, totaled $229.8 million and $364.0 million as of May 29, 2021 and May 30, 2020, respectively. All cash equivalents are high-credit quality financial instruments and the amount of credit exposure to any one financial institution or instrument is limited.

Marketable Securities

The Company maintains a portfolio of marketable securities primarily comprised of mutual funds. These mutual funds are comprised of both equity and fixed income funds. These investments are held by the Company's wholly owned insurance captive and have been recorded at fair value based on quoted market prices. Net unrealized holding gains or losses related to the equity mutual funds are recorded through net income while net unrealized holding gains or losses related to the fixed income mutual funds are recorded through other comprehensive income.

All marketable security transactions are recognized on the trade date. Realized gains and losses are included in “Interest and other investment income” in the Consolidated Statements of Comprehensive Income. See Note 12 of the Consolidated Financial Statements for additional disclosures of marketable securities.

Allowances for Credit Losses

Allowances for credit losses related to accounts are managed at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date.

Herman Miller, Inc. and Subsidiaries52

In estimating probable losses, we review accounts based on known customer exposures, historical credit experience, and specific identification of other potentially uncollectible accounts. An accounts receivable balance is considered past due when payment is not received within the stated terms. Accounts that are considered to have higher credit risk are reviewed using information available about the debtor, such as financial statements, news reports and published credit ratings. General information regarding industry trends, the economic environment is used as well.

We arrive at an estimated loss for specific concerns and estimate an additional amount for the remainder of trade balances based on historical trends and other factors previously referenced. Balances are written off against the reserve once the Company determines the probability of collection to be remote. The Company generally does not require collateral or other security on trade accounts receivable. Subsequent recoveries, if any, are credited to bad debt expense when received.

Concentrations of Credit Risk

The Company's trade receivables are primarily due from independent dealers who, in turn, carry receivables from their customers. The Company monitors and manages the credit risk associated with individual dealers and direct customers where applicable. Dealers are responsible for assessing and assuming credit risk of their customers and may require their customers to provide deposits, letters of credit or other credit enhancement measures. Some sales contracts are structured such that the customer payment or obligation is direct to the Company. In those cases, the Company may assume the credit risk. Whether from dealers or customers, the Company's trade credit exposures are not concentrated with any particular entity.

Inventories

Inventories are valued at the lower of cost or ~~net realizable value. The inventories at our West Michigan manufacturing operations are valued~~market and include material, labor and overhead. Inventory cost is determined using the last-in, first-out (LIFO) method at manufacturing facilities in Michigan, whereas inventories of ~~certain~~the Company's other ~~subsidiaries~~locations are valued using the first-in, first-out (FIFO) method. The ~~company~~Company establishes reserves for excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or ~~market~~net realizable value may be adjusted in response to changing conditions. Further information on the Company's recorded inventory balances can be found in Note 4 of the Consolidated Financial Statements.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:


(In millions)	Goodwill		Indefinite-lived Intangible Assets		Total Goodwill and Indefinite-lived Intangible Assets
Balance, June 2, 2019	$	303.8	$	78.1	$	381.9
Foreign currency translation adjustments	(0.9)		(0.5)		(1.4)
Acquisition of HAY	111.1		60.0		171.1
Acquisition of naughtone	57.5		8.5		66.0
Impairment charges	(125.5)		(53.3)		(178.8)


Balance, May 30, 2020	$	346.0	$	92.8	$	438.8
Foreign currency translation adjustments	18.2		4.8		23.0



Balance, May 29, 2021	$	364.2	$	97.6	$	461.8

Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value. Each of the reporting units were reviewed for impairment using a quantitative assessment as of March 31, 2021.

532021 Annual Report

To estimate the fair value of each reporting unit when performing quantitative testing, the Company utilizes a weighting of the income approach and the market method. These approaches are based on a discounted cash flow analysis and observable comparable company information that use several inputs, including:

•actual and forecasted revenue growth rates and operating margins,

•discount rates based on the reporting unit's weighted average cost of capital, and

•revenue and EBITDA of comparable companies

The Company corroborates the reasonableness of the inputs and outcomes of our discounted cash flow analysis through a market capitalization reconciliation to determine whether the implied control premium is reasonable.

The Company completed its annual goodwill impairment test in the fourth quarter of the year, as of March 31st. In fiscal 2021, the Company elected to perform quantitative impairment tests for all goodwill reporting units and other indefinite-lived intangible assets. In performing the quantitative impairment test, the Company determined that the fair value of the reporting units exceeded the carrying amount and, as such, the reporting units were not impaired and the second step of the impairment test was not necessary.

In completing our annual goodwill impairment test, the respective fair values were estimated using an income approach with market participant discount rates ranging from 12.0% to 14.0% developed using a weighted average cost of capital analysis and long-term growth rates ranging from 2.5% to 3.0%.

Intangible assets with indefinite useful lives are not subject to amortization and are evaluated annually for impairment, or more frequently, when events or changes in circumstances indicate that the fair value of an intangible asset may not be recoverable. The Company utilizes the relief from royalty methodology to test for impairment. The primary assumptions for the relief from royalty method include forecasted revenue growth rates, royalty rates and discount rates. The Company measures and records an impairment loss for the excess of the carrying value of the asset over its fair value.

In fiscal 2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets for impairment. The carrying value of the Company's HAY trade name indefinite-lived intangible asset was $41.7 million as of March 31, 2021. The calculated fair value of the HAY trade name was $43.8 million which represents an excess fair value of $2.1 million or 5.0%. If the residual cash flow related to this trade name were to decline in future periods, the Company may need to record an impairment charge.

In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using a relief-from-royalty approach, applying market participant discount rates ranging from 12.0% to 14.0% developed using a weighted average cost of capital analysis, royalty rates ranging from 2.0% to 3.0% and long-term growth rates ranging from 2.5% to 3.0%.

The table below summarizes the carrying values as of May 29, 2021, for each of the Company’s indefinite-lived trade names:


(In millions)
Trade name	Carrying Value
Maharam	$	16.5
DWR	31.5
HAY	43.1
naughtone	6.5
Total	$	97.6

During fiscal 2020, the Company recognized $205.4 million of impairment charges related to goodwill, indefinite-lived intangible assets and long-lived assets. These charges are included in "Impairment charges" within the Consolidated Statements of Comprehensive Income.

Property, Equipment and Depreciation

Herman Miller, Inc. and Subsidiaries54

Property and equipment are stated at cost. The cost is depreciated over the estimated useful lives of the assets using the straight-line method. Estimated useful lives range from 3 to 10 years for machinery and equipment and do not exceed 40 years for buildings. Leasehold improvements are depreciated over the lesser of the lease term or the useful life of the asset. The Company capitalizes certain costs incurred in connection with the development, testing and installation of software for internal use and cloud computing arrangements. Software for internal use is included in property and equipment and is depreciated over an estimated useful life not exceeding 5 years. Depreciation and amortization expense is included in the Consolidated Statements of Comprehensive Income in the Cost of sales, Selling, general and administrative and Design and research line items.

The following table summarizes our property as of the dates indicated:


(In millions)	May 29, 2021		May 30, 2020
Land and improvements	$	25.2	$	23.7
Buildings and improvements	286.1		266.5
Machinery and equipment	820.8		791.9
Construction in progress	27.6		29.2
Accumulated depreciation	(832.5)		(780.5)
Property and equipment, net	$	327.2	$	330.8

As of the end of fiscal 2021, outstanding commitments for future capital purchases approximated $46.5 million.

Other Long-Lived Assets

The Company reviews the carrying value of long–lived assets for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future undiscounted cash flows attributable to the asset or asset group are compared to the carrying value of the asset or asset group. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the carrying value of the assets exceeds their fair value.

Amortizable intangible assets within Other amortizable intangibles, net in the Consolidated Balance Sheets consist primarily of patents, trademarks and customer relationships. The customer relationships intangible asset is comprised of relationships with customers, specifiers, networks, dealers and distributors. Refer to the following table for the combined gross carrying value and accumulated amortization for these amortizable intangibles.


	May 29, 2021
(In millions)	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	45.5	$	113.0	$	15.3	$	173.8
Accumulated amortization	18.9		39.6		10.1		68.6
Net	$	26.6	$	73.4	$	5.2	$	105.2

	May 30, 2020
	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	41.7	$	118.7	$	14.7	$	175.1
Accumulated amortization	14.4		38.3		10.0		62.7
Net	$	27.3	$	80.4	$	4.7	$	112.4

The Company amortizes these assets over their remaining useful lives using the straight-line method over periods ranging from 5 years to 20 years, or on an accelerated basis, to reflect the expected realization of the economic benefits. It is estimated that the weighted-average remaining useful life of the patents and trademarks is approximately 6 and the weighted-average remaining useful life of the customer relationships is 7 years.

Estimated amortization expense on existing amortizable intangible assets as of May 29, 2021, for each of the succeeding five fiscal years, is as follows:

552021 Annual Report


(In millions)
2022	$	15.4
2023	$	14.9
2024	$	13.7
2025	$	13.5
2026	$	13.2

Self-Insurance

The Company is partially self-insured for general liability, workers' compensation and certain employee health and dental benefits under insurance arrangements that provide for third-party coverage of claims exceeding the Company's loss retention levels. The Company's health benefit and auto liability retention levels do not include an aggregate stop loss policy. The Company's retention levels designated within significant insurance arrangements as ofMay 29, 2021, are as follows:


(In millions)	Retention Level (per occurrence)
General liability	$	1.00
Auto liability	$	1.00
Workers' compensation	$	0.75
Health benefit	$	0.50

The Company accrues for its self-insurance arrangements, as well as reserves for health, prescription drugs, and dental benefit exposures based on actuarially-determined estimates, which are recorded in “Other liabilities” in the Consolidated Balance Sheets. The value of the liability as of May 29, 2021 and May 30, 2020 was $12.3 million and $13.1 million, respectively. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical costs, payment lag times and changes in actual experience could cause these estimates to change. The general, auto, and workers' compensation liabilities are managed through the Company's wholly-owned insurance captive.

Research, Development and Other Related Costs

Research, development, pre-production and start-up costs are expensed as incurred. Research and development ("R&D") costs consist of expenditures incurred during the course of planned research and investigation aimed at discovery of new knowledge useful in developing new products or processes. R&D costs also include the enhancement of existing products or production processes and the implementation of such through design, testing of product alternatives or construction of prototypes. R&D costs included in “Design and research” expense in the accompanying Consolidated Statements of Comprehensive Income are $50.8 million, $54.3 million and $58.8 million, in fiscal 2021, 2020, and 2019, respectively.

Royalty payments made to designers of the Company's products as the products are sold are variable costs based on product sales. These expenses totaled $21.3 million, $19.7 million and $18.1 million in fiscal years 2021, 2020 and 2019 respectively. They are included in Design and research expense in the accompanying Consolidated Statements of Comprehensive Income.

Customer Payments and Incentives

We offer various sales incentive programs to our customers, such as rebates and discounts. Programs such as rebates and discounts are adjustments to the selling price and are therefore characterized as a reduction to net sales.

Herman Miller, Inc. and Subsidiaries56

Revenue Recognition

The Company recognizes revenue when performance obligations, based on the terms of customer contracts, are satisfied. This happens when control of goods and services based on the contract have been conveyed to the customer. Revenue for the sale of products is recognized at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. Revenue for services, including the installation of products by the Company's owned dealers, is recognized over time as the services are provided. The method of revenue recognition may vary, depending on the type of contract with the customer, as noted in the section "Disaggregated Revenue" in Note 2 of the Consolidated Financial Statements.

The Company's contracts with customers include master agreements and certain other forms of contracts, which do not reach the level of a performance obligation until a purchase order is received from a customer. At the point in time that a purchase order under a contract is received by the Company, the collective group of documents represent an enforceable contract between the Company and the customer. While certain customer contracts may have a duration of greater than a year, all purchase orders are less than a year in duration. As of May 29, 2021, all unfulfilled performance obligations are expected to be fulfilled in the next twelve months.

Variable consideration exists within certain contracts that the Company has with customers. When variable consideration is present in a contract with a customer, the Company estimates the amount that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. These estimates are primarily related to rebate programs which involve estimating future sales amounts and rebate percentages to use in the determination of transaction price. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Adjustments to Net sales from changes in variable consideration related to performance obligations completed in previous periods are not material to the Company's financial statements. Also, the Company has no contracts with significant financing components.

The Company accounts for shipping and handling activities as fulfillment activities and these costs are accrued within Cost of sales at the same time revenue is recognized. The Company does not record revenue for sales tax, value added tax or other taxes that are collected on behalf of government entities. The Company’s revenue is recorded net of these taxes as they are passed through to the relevant government entities. The Company has recognized incremental costs to obtain a contract as an expense when incurred as the amortization period is less than one year. The Company has not adjusted the amount of consideration to be received for any significant financing components as the Company’s contracts have a duration of one year or less.

Leases

The Company adopted ASC 842 - Leases at the beginning of fiscal year 2020. The new standard required the Company to recognize most leases on the balance sheet as right of use (ROU) assets with corresponding lease liabilities. All necessary changes required by the new standard, including those to the Company’s accounting policies, business processes, systems, controls and disclosures, were implemented as of the first quarter of fiscal year 2020. See Note 7 of the Consolidated Financial Statements for further information regarding the Company's lease accounting policies.

Cost of Sales

The Company includes material, labor and overhead in cost of sales. Included within these categories are items such as freight charges, warehousing costs, internal transfer costs and other costs of its distribution network.

Selling, General and Administrative

The Company includes costs not directly related to the manufacturing of its products in the Selling, general and administrative line item within the Consolidated Statements of Comprehensive Income. Included in these expenses are items such as compensation expense, rental expense, warranty expense and travel and entertainment expense.

Income Taxes

572021 Annual Report

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

The Company's annual effective tax rate is based on income, statutory tax rates and tax planning strategies available in the various jurisdictions the Company operates. Complex tax laws can be subject to different interpretations by the Company and the respective government authorities. Significant judgment is required in evaluating tax positions and determining our tax expense. Tax positions are reviewed quarterly and tax assets and liabilities are adjusted as new information becomes available.

In evaluating ~~our~~the Company's ability to recover ~~our~~ deferred tax assets within the jurisdiction from which they arise, ~~we consider~~the Company considers all ~~available~~ positive and

negative evidence. ~~The~~These assumptions ~~about future taxable income~~ require significant judgment ~~and are consistent with the plans and estimates we are using to manage the underlying businesses.~~

~~See Note 10~~about forecasts of ~~the Consolidated Financial Statements for information regarding the company's uncertain tax positions.~~

~~The company has net operating loss (NOL) carryforwards available in certain jurisdictions to reduce~~ future taxable income. The company also has foreign tax credits available in certain jurisdictions to reduce future tax due. Future tax benefits for NOL carryforwards and foreign tax credits are recognized to the extent that realization of these benefits is considered more likely than not. This determination is based on the expectation that related operations will be sufficiently profitable or various tax planning strategies available to us will enable us to utilize the NOL carryforwards and/or foreign tax credits. When information becomes available that raises doubts about the realization of a deferred income tax asset, a valuation allowance is established.

~~Self-Insurance Reserves~~

With the assistance of independent actuaries, reserves are established for workers' compensation and general liability exposures. The reserves are established based on expected future claims for incurred losses. The company also establishes reserves for health, prescription drugs and dental benefit exposures based on historical claims information along with certain assumptions about future trends. The methods and assumptions used to determine the liabilities are applied consistently, although, actual claims experience can vary. The company also maintains insurance coverage for certain risk exposures through traditional, premium-based insurance policies. The company's health benefit and auto liability retention levels do not include an aggregate stop loss policy. The company's retention levels designated within significant insurance arrangements as of June 2, 2018, are as follows:

(In millions) Retention Level (per occurrence)
General liability $ 1.00
Auto liability $ 1.00
Workers' compensation $ 0.75

~~Pension and other Post-Retirement Benefits~~

The determination of the obligation and expense for pension and other post-retirement benefits depends on certain actuarial assumptions. Among the most significant of these assumptions are the discount rate and expected long-term rate of return on plan assets. We determine these assumptions as follows.

~~Discount Rate~~ — This assumption is established at the end of the fiscal year based on high-quality corporate bond yields. The company utilizes the services of an independent actuarial firm to assist in determining the rate. Future expected actuarially determined cash flows for the company's domestic pension, international pension and post-retirement medical plans are individually discounted at the spot rates under the Mercer Yield Curve to arrive at the plan’s obligations as of the measurement date.

~~Expected Long-Term Rate of Return~~ —~~The~~company bases this assumption on our long-term assumed rates of return for equities and fixed income securities, weighted by the allocation of the invested assets of the pension plan. The company considers likely returns and risk factors specific to the various classes of investments and advice from independent actuaries in establishing this rate. Changes in the investment allocation of plan assets would impact this assumption. A shift to a higher relative percentage of fixed income securities, for example, would result in a lower assumed rate.

While the above assumption represents the long-term market return expectation, actual asset returns can and do differ from year-to-year. Such differences give rise to actuarial gains and losses. In years where actual market returns are lower than the assumed rate, an actuarial loss is generated. Conversely, an actuarial gain results when actual market returns exceed the assumed rate in a given year. As of ~~June 2, 2018, and~~ ~~June 3, 2017, the net actuarial loss associated with the employee pension and post-retirement benefit plans totaled approximately $40.0 million and $50.6 million, respectively.~~

Changes in the discount rate and return on assets can have a significant effect on the expense and obligations related to our pension plans. The company cannot reasonably predict if adjustments impacting the expense or obligation from changes in these estimates will be significant. Both the ~~June 2, 2018~~ pension funded status and fiscal 2018 expense are affected by year end fiscal 2018 discount rate and expected return on assets assumptions. Any change to these assumptions will be specific to the time periods noted and may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown.

~~The effect of a 1 percent increase/(decrease) in discount rates and expected return on assets on the projected fiscal 2019 expense and the pension obligation as at June 2, 2018 is shown below:~~



~~(In millions)~~
~~Assumption~~	~~2019 Expense~~		~~June 2, 2018 Obligation~~
	~~U.S.~~	~~International~~	~~U.S.~~	~~International~~
~~Discount rate~~	—	~~$(1.4) / 1.7~~	~~$(0.3) / 0.3~~	~~$(18.4) / 24.6~~
~~Expected return on assets~~	—	~~$(1.0) / 1.0~~	—	—

For purposes of determining annual net pension expense, the company uses a calculated method for determining the market-related value of plan assets. Under this method, the company recognizes the change in fair value of plan assets systematically over a five-year period. Accordingly, a portion of the net actuarial loss is deferred. As of ~~June 2, 2018, the deferred net actuarial loss (i.e., the portion of the total net actuarial loss not subject to amortization) was $2.4 million.~~

~~Refer to Note 7 of the Consolidated Financial Statements for more information regarding costs and assumptions used for employee benefit plans.~~

~~Stock-Based Compensation~~Interest Rate Risk

The ~~company views stock-based compensation~~Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall cost of borrowing. The Company's interest rate swap agreement was entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.

452021 Annual Report

These interest rate swap derivative instruments are held and used by the Company as a ~~key component~~tool for managing interest rate risk. They are not used for trading or speculative purposes. The counterparties to the swap instruments are large financial institutions that the Company believes are of ~~total compensation~~high-quality creditworthiness. While the Company may be exposed to potential losses due to the credit risk of non-performance by these counterparties, such losses are not anticipated.

In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for ~~certain employees, non-employee directors~~an aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and ~~officers. The stock-based compensation programs have included grants~~a termination date of stock options, restricted stock units, performance share units, and employee stock purchases. The company recognizes expense related to each of these share-based arrangements. The Black-Scholes option pricing model is used in estimating the fair value of stock options issued in connection with compensation programs. This pricing model requires the use of several input assumptions. Among the most significant of these assumptions are the expected volatilityJanuary 3, 2028. As a result of the ~~common stock price and~~transaction, the ~~expected timing~~Company effectively converted indebtedness anticipated to be borrowed on the Company’s revolving line of ~~future stock option exercises.~~

~~Expected Volatility~~ ~~— This represents~~credit up to the notional amount from a ~~measure, expressed~~LIBOR-based floating interest rate plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as ~~a percentage,~~ of the ~~expected fluctuation in~~forward start date.

In June 2017, the ~~market price~~Company entered into an additional interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the ~~company's common stock. As~~transaction, the Company effectively converted the Company’s revolving line of credit up to the notional amount from a ~~point~~LIBOR-based floating interest rate plus applicable margin to a 2.387 percent fixed interest rate plus applicable margin under the agreement as of ~~reference, a high volatility percentage would assume a wider expected range of~~the forward start date.

The fair market ~~returns for a particular security. All other assumptions held constant, this would yield a higher stock option valuation than a calculation using a lower measure of volatility. In measuring the fair~~ value of the ~~majority~~effective interest rate swap instruments was a net liability of ~~stock options issued during~~ ~~fiscal 2018, we utilized an expected volatility of 26 percent. Certain options~~$14.4 million at May 29, 2021 compared to $25.0 million at May 30, 2020. All cash flows related to the ~~Herman Miller Consumer Holdings (HMCH) Stock Option Plan~~Company's interest rate swap instruments are ~~classified as a liability within the Consolidated Balance Sheets. As of~~ ~~June 2, 2018, an expected volatility of 35 percent was used~~denominated in ~~the year end liability valuation.~~

~~Expected Term of Options~~ — This assumption represents the expected length of time between the grant date of a stock option and the date at which it is exercised (option life). The company assumed an average expected term of 4.6 years in calculating the fair values of the majority of stock options issued during ~~fiscal 2018, except for the HMCH Stock Option Plan, where we utilized an average expected term of 1.1 years.~~

~~Refer~~U.S. dollars. For further information, refer to Note ~~9 of the Consolidated Financial Statements for further discussion on our stock-based compensation plans.~~

~~Contingencies~~

~~In the ordinary course of business, the company encounters matters that raise the potential for contingent liabilities. In evaluating these matters for accounting treatment~~6 and disclosure, the company is required to apply judgment to determine the probability that a liability has been incurred. The company is also required to measure, if possible, the dollar value of such liabilities in determining whether or not recognition in our financial statements is required. This process involves the use of estimates which may differ from actual outcomes. Refer to Note 12 of the Consolidated Financial Statements.

Expected cash outflows (notional amounts) over the next five years and thereafter related to debt instruments are as follows.


(In millions)	2022		2023		2024		2025		2026		Thereafter		Total(1)


Long-Term Debt - Fixed rate:
Interest rate 4.95%	$	—	$	—	$	—	$	—	$	—	$	49.9	$	49.9

Interest rate 1.949%(2)	$	—	$	—	$	—	$	150.0	$	—	$	—	$	150.0
Interest rate 2.387%(2)	$	—	$	—	$	—	$	75.0	$	—	$	—	$	75.0

(1) Amount does not include the recorded fair value of the swap instruments.

Herman Miller, Inc. and Subsidiaries46

Item 8 Financial Statements ~~for more information relating~~and Supplementary Data

Herman Miller, Inc.

Consolidated Statements of Comprehensive Income


	Year Ended
(In millions, except per share data)	May 29, 2021		May 30, 2020		June 1, 2019
Net sales	$	2,465.1	$	2,486.6	$	2,567.2
Cost of sales	1,515.9		1,575.9		1,637.3
Gross margin	949.2		910.7		929.9
Operating expenses:
Selling, general and administrative	643.8		643.3		639.3
Impairment charges	0		205.4		0
Restructuring expenses	2.7		26.4		10.2
Design and research	72.1		74.0		76.9
Total operating expenses	718.6		949.1		726.4
Operating earnings (loss)	230.6		(38.4)		203.5
Gain on consolidation of equity method investments	0		36.2		0
Interest expense	13.9		12.5		12.1
Interest and other investment income	(2.1)		(2.3)		(2.1)
Other (income) expense, net	(7.6)		1.0		(1.6)
Earnings (loss) before income taxes and equity income	226.4		(13.4)		195.1
Income tax expense	47.9		6.0		39.6
Equity earnings from nonconsolidated affiliates, net of tax	0.3		5.0		5.0
Net earnings (loss)	178.8		(14.4)		160.5
Net earnings (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Net earnings (loss) attributable to Herman Miller, Inc.	$	173.1	$	(9.1)	$	160.5

Earnings (loss) per share — basic	$	2.94	$	(0.15)	$	2.72
Earnings (loss) per share — diluted	$	2.92	$	(0.15)	$	2.70

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	$	52.1	$	(7.7)	$	(14.2)
Pension and post-retirement liability adjustments	8.8		(14.2)		(7.8)
Unrealized gains (losses) on interest rate swap agreement	8.1		(18.0)		(12.3)
Unrealized holding (losses) gains on securities	(0.1)		0.1		0
Total other comprehensive income (loss), net of tax	68.9		(39.8)		(34.3)
Comprehensive income (loss)	247.7		(54.2)		126.2
Comprehensive income (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Comprehensive income (loss) attributable to Herman Miller, Inc.	$	242.0	$	(48.9)	$	126.2

472021 Annual Report

Herman Miller, Inc.

Consolidated Balance Sheets


(In millions, except share and per share data)	May 29, 2021		May 30, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	396.4	$	454.0
Short-term investments	7.7		7.0
Accounts receivable, net of allowances of $5.5 and $4.7	204.7		180.0
Unbilled accounts receivable	16.4		19.5
Inventories, net	213.6		197.3
Prepaid expenses	45.1		43.3
Other current assets	7.6		16.0
Total current assets	891.5		917.1
Property and equipment, net of accumulated depreciation of $832.5 and $780.5	327.2		330.8
Right of use assets	214.7		193.9
Goodwill	364.2		346.0
Indefinite-lived intangibles	97.6		92.8
Other amortizable intangibles, net of accumulated amortization of $68.6 and $62.7	105.2		112.4
Other noncurrent assets	61.5		60.9
Total Assets	$	2,061.9	$	2,053.9

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	178.4	$	128.8
Short-term borrowings and current portion of long-term debt	2.2		51.4
Accrued compensation and benefits	90.2		71.1
Accrued warranty	14.5		16.1
Customer deposits	43.1		39.8
Other accrued liabilities	172.4		163.0
Total current liabilities	500.8		470.2
Long-term debt	274.9		539.9
Pension and post-retirement benefits	34.5		42.4
Lease liabilities	196.9		178.8
Other liabilities	128.2		129.2
Total Liabilities	1,135.3		1,360.5
Redeemable noncontrolling interests	77.0		50.4
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, 0ne issued)	0		0
Common stock, $0.20 par value (240,000,000 shares authorized, 59,029,165 and 58,793,275 shares issued and outstanding in 2021 and 2020, respectively)	11.8		11.8
Additional paid-in capital	94.7		81.6
Retained earnings	808.4		683.9
Accumulated other comprehensive loss	(65.1)		(134.0)
Deferred compensation plan	(0.2)		(0.3)
Herman Miller, Inc. Stockholders' Equity	849.6		643.0


Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity	$	2,061.9	$	2,053.9

Herman Miller, Inc. and Subsidiaries48

Herman Miller, Inc.

Consolidated Statements of Stockholders' Equity


	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Deferred Compensation Plan	Herman Miller, Inc. Stockholders' Equity	Noncontrolling Interests	Total Stockholders' Equity
(In millions, except share and per share data)	Shares	Amount














June 2, 2018	59,230,974	$11.7	$116.6	$598.3	$(61.3)	$(0.7)	$664.6	$0.2	$664.8
Net earnings	—	—	—	160.5	—	—	160.5	—	160.5
Other comprehensive loss, net of tax	—	—	—	—	(34.3)	—	(34.3)	—	(34.3)
Stock-based compensation expense	—	—	8.4	—	—	—	8.4	(0.2)	8.2
Exercise of stock options	347,248	0.1	10.0	—	—	—	10.1	—	10.1
Restricted and performance stock units released	468,807	0.1	0.2	—	—	—	0.3	—	0.3
Employee stock purchase plan issuances	62,957	—	1.9	—	—	—	1.9	—	1.9
Repurchase and retirement of common stock	(1,326,023)	(0.2)	(47.6)	—	—	—	(47.8)	—	(47.8)
Directors' fees	10,185	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	—	—	—	(0.1)	(0.1)	—	(0.1)
Dividends declared ($0.79 per share)	—	—	—	(46.6)	—	—	(46.6)	—	(46.6)

Cumulative effect of accounting changes	—	—	—	0.5	1.4	—	1.9	—	1.9
June 1, 2019	58,794,148	$11.7	$89.8	$712.7	$(94.2)	$(0.8)	$719.2	$0	$719.2
Net loss	—	—	—	(9.1)	—	—	(9.1)	—	(9.1)
Other comprehensive loss	—	—	—	—	(39.8)	—	(39.8)	—	(39.8)
Stock-based compensation expense	—	—	2.7	—	—	—	2.7	—	2.7
Exercise of stock options	423,815	0.2	13.3	—	—	—	13.5	—	13.5
Restricted and performance stock units released	138,590	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	70,145	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(641,192)	(0.1)	(26.5)	—	—	—	(26.6)	—	(26.6)
Directors' fees	7,769	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	(0.3)	—	—	0.5	0.2	—	0.2
Dividends declared ($0.63 per share)	—	—	—	(37.5)	—	—	(37.5)	—	(37.5)
Redemption value adjustment	—	—	—	17.8	—	—	17.8	—	17.8

May 30, 2020	58,793,275	$11.8	$81.6	$683.9	$(134.0)	$(0.3)	$643.0	$0	$643.0
Net earnings	—	—	—	173.1	—	—	173.1	—	173.1
Other comprehensive income	—	—	—	—	68.9	—	68.9	—	68.9
Stock-based compensation expense	—	—	9.0	—	—	—	9.0	—	9.0
Exercise of stock options	86,238	0	2.6	—	—	—	2.6	—	2.6
Restricted and performance stock units released	114,103	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	71,468	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(38,932)	0	(0.9)	—	—	—	(0.9)	—	(0.9)
Directors' fees	3,013	—	0.1	—	—	—	0.1	—	0.1
Deferred compensation plan	—	—	0	—	—	0.1	0.1	—	0.1
Dividends declared ($0.56 per share)	—	—	—	(33.4)	—	—	(33.4)	—	(33.4)
Redemption value adjustment	—	—	—	(15.0)	—	—	(15.0)	—	(15.0)
Other	—	—	—	(0.2)	—	—	(0.2)	—	(0.2)
May 29, 2021	59,029,165	$11.8	$94.7	808.4	$(65.1)	$(0.2)	$849.6	0	$849.6

492021 Annual Report

Herman Miller, Inc.

Consolidated Statements of Cash Flows


	Year Ended
(In millions)	May 29, 2021	May 30, 2020	June 1, 2019
Cash Flows from Operating Activities:
Net earnings (loss)	$178.8	$(14.4)	$160.5
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation expense	72.0	68.1	65.9
Amortization expense	15.2	11.4	6.2
Earnings from nonconsolidated affiliates net of dividends received	(0.4)	(4.8)	(2.1)
Investment fair value adjustment	0	0	(2.1)
Gain on consolidation of equity method investments	0	(36.2)	0

Deferred taxes	6.7	(25.2)	0.8
Pension contributions	(5.4)	(0.9)	(0.9)
Pension and post-retirement expenses	3.0	1.6	1.2
Impairment charges	0	205.4	0
Restructuring expenses	2.7	26.4	10.2
Stock-based compensation	9.0	2.7	7.3

Decrease (increase) in long-term assets	1.2	(4.7)	(0.4)
Increase in long-term liabilities	16.0	5.8	1.6
Changes in current assets and liabilities:
Increase (decrease) in accounts receivable & unbilled accounts receivable	(14.8)	68.6	(24.8)
Increase (decrease) in inventories	(8.5)	6.0	(31.9)
Increase in prepaid expenses and other	(3.9)	(2.2)	(0.6)
Increase (decrease) in accounts payable	43.2	(59.5)	0.5
Increase (decrease) in accrued liabilities	15.1	(32.0)	22.7
Other, net	2.4	5.7	2.3
Net Cash Provided by Operating Activities	332.3	221.8	216.4

Cash Flows from Investing Activities:

Marketable securities purchases	(5.9)	(3.1)	(1.9)
Marketable securities sales	5.3	5.0	1.7
Capital expenditures	(59.8)	(69.0)	(85.8)
Proceeds from sales of property and dealers	14.0	0.2	0.5


Purchase of HAY licensing agreement	0	0	(4.8)
Acquisitions, net of cash received	0	(111.2)	0
Equity investment in non-controlled entities	0	(3.3)	(73.6)
Other, net	(13.5)	13.3	(1.1)
Net Cash Used in Investing Activities	(59.9)	(168.1)	(165.0)

Cash Flows from Financing Activities:


Borrowings of long-term debt	0	50.0	0
Repayments of long-term debt	(50.0)	0	0
Proceeds from credit facility	0	265.0	0
Repayments of credit facility	(265.0)	0	0
Dividends paid	(34.5)	(36.4)	(45.6)
Common stock issued	5.0	15.6	12.3
Common stock repurchased and retired	(0.9)	(26.6)	(47.9)


Purchase of redeemable noncontrolling interests	0	(20.3)	(10.1)
Other, net	(2.3)	(3.3)	(0.6)
Net Cash (Used in) Provided by Financing Activities	(347.7)	244.0	(91.9)
Effect of exchange rate changes on cash and cash equivalents	17.7	(2.9)	(4.2)
Net (Decrease) Increase In Cash and Cash Equivalents	(57.6)	294.8	(44.7)
Cash and cash equivalents, Beginning of Year	454.0	159.2	203.9
Cash and Cash Equivalents, End of Year	$396.4	$454.0	$159.2

Other Cash Flow Information
Interest paid	$12.5	$11.4	$11.5
Income taxes paid, net of cash received	$15.8	$39.6	$41.0

Herman Miller, Inc. and Subsidiaries50

Notes to ~~contingencies.~~

~~New Accounting Standards~~

~~Refer to Note 1 of~~ the Consolidated Financial Statements ~~for information related to new~~


Note 1	Significant Accounting and Reporting Policies	52
Note 2	Revenue from Contracts with Customers	61
Note 3	Acquisitions and Divestitures	63
Note 4	Inventories	65
Note 5	Investments in Nonconsolidated Affiliates	66
Note 6	Short-Term Borrowings and Long-Term Debt	67
Note 7	Leases	69
Note 8	Employee Benefit Plans	71
Note 9	Common Stock and Per Share Information	74
Note 10	Stock-Based Compensation	75
Note 11	Income Taxes	79
Note 12	Fair Value	83
Note 13	Commitments and Contingencies	88
Note 14	Operating Segments	89
Note 15	Accumulated Other Comprehensive Loss	92
Note 16	Restructuring Expenses	92
Note 17	Variable Interest Entities	94
Note 18	Quarterly Financial Data (Unaudited)	94

512021 Annual Report

1. Significant Accounting and Reporting Policies

The following is a summary of significant accounting ~~standards.~~

~~Forward Looking Statements~~

~~This information contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,~~ and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements doreporting policies not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, employment and general economic conditions, the pace of economic recoveryreflected elsewhere in the ~~U.S~~accompanying financial statements.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Herman Miller, Inc. and ~~in our International markets, the increase in white-collar employment, the willingness of customers~~its controlled domestic and foreign subsidiaries. The consolidated entities are collectively referred to ~~undertake capital expenditures, the types of products purchased by customers, competitive-pricing pressures, the availability~~as “the Company.” All intercompany accounts and pricing of raw materials, our reliance on a limited number of suppliers, our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, the ability to increase prices to absorb the additional costs of raw materials, the financial strength of our dealers and the financial strength of our customers, our ability to locate new retail studios, negotiate favorable lease terms for new and existing locations and the implementation of our studio portfolio transformation, our ability to attract and retain key executives and other qualified employees, our ability to continue to make product innovations, the success of newly-introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or alliances, the pace and level of government procurement, the outcome of pending litigation or governmental audits or investigations, political risktransactions have been eliminated 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.Consolidated Financial Statements.

~~Item 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Description of Business

The ~~company~~Company researches, designs, manufactures, ~~markets,~~sells and ~~sells its products throughout~~distributes interior furnishings for use in various environments including office, healthcare, educational and residential settings and provides related services that support companies all over the ~~world and, as a result, is subject to changing economic conditions, which could reduce the demand for its products.~~

~~Direct Material Costs~~

world. The company is exposed to risks arising from price changes for certain direct materials and assembly components used in its operations. The largest of such costs incurred by the company are for steel, plastics, textiles, wood particleboard, and aluminum components. The impact from changes in all commodity prices increased the company's costs by approximately $10 million during fiscal 2018 compared to the prior year. The impact from changes in commodity prices increased the company's costs by approximately $9 million during fiscal 2017 as compared to fiscal 2016.

The market prices for commodities will fluctuate over time and the company acknowledges that such changes are likely to impact its costs for key direct materials and assembly components. Consequently, it views the prospect of such changes as an outlook risk to the business.

~~Foreign Exchange Risk~~

The company primarily manufactures its products in the United States, United Kingdom, China and India. It also sources completed products and product components from outside the United States. The company's completedCompany's products are sold ~~in numerous countries around the world. Sales in foreign countries~~primarily through independent contract office furniture dealers as well as ~~certain expenses related to those~~the following channels: owned contract office furniture dealership, direct customer sales, are transacted in currencies other than the company's reporting currency, the U.S. dollar. Accordingly, production costs and profit margins related to these sales are effected by the currency exchange relationship between the countries where the sales take placeindependent retailers, owned retail studios, direct-mail catalogs and the ~~countries where the products are sourced or manufactured. These currency exchange relationships can also impact the company's competitive positions within these markets.~~Company's eCommerce platforms.

In the normal course of business, the company enters into contracts denominated in foreign currencies. The principal foreign currencies in which the company conducts its business are the British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar and Chinese renminbi. As of June 2, 2018, the company had outstanding, thirteen forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies. Three forward contracts were placed to offset a 18.5 million U.S. dollar-denominated net liability exposure. Two forward contracts were placed to offset a 13.7 million euro-denominated net asset exposure. One forward contract was placed to offset an 10.5 million South African rand-denominated net asset exposure. Five forward contracts were placed to offset a 13.0 million U.S.dollar-denominated net liability exposure. One forward contract was placed to offset a 1.2 million euro-denominated net liability exposure.

As of June 3, 2017, the company had outstanding, thirteen forward currency instruments designed to offset either net asset or net liability exposure that is denominated in non-functional currencies. One forward contract was placed to offset a 35.0 million Hong Kong dollar-denominated net asset exposure. Two forward contracts were placed to offset an 11.6 million euro-denominated net asset exposure. Three forward contracts were placed to offset a 12.0 million U.S. dollar-denominated net liability exposure. One forward contract was placed to offset an 8.5 million South

African rand-denominated net asset exposure. Five forward contracts were placed to offset a 13.3 million U.S.dollar-denominated net liability exposure. One forward contract was placed to offset a 5.8 million euro-denominated net liability exposure.

Fiscal Year

The ~~cost~~Company's fiscal year ends on the Saturday closest to May 31. The fiscal years ended May 29, 2021, May 30, 2020, and June 1, 2019 contained 52 weeks.

Foreign Currency Translation

The functional currency for most of the foreign currency hedges and remeasuring all foreign currency transactions into the appropriate functional currency was a net gain of $0.4 million in fiscal 2018 in contrast to net loss of $0.7 million and $0.7 million in fiscal 2017 and 2016 included in net earnings, respectively. These amounts are included in “Other Expenses (Income)” in the Consolidated Statements of Comprehensive Income. Additionally, thesubsidiaries is their local currency. The cumulative ~~effect~~effects of translating the balance sheet ~~and income statement~~ accounts from the functional currency into the United States dollar ~~increased~~using fiscal year-end exchange rates and translating revenue and expense accounts using average exchange rates for the ~~accumulated~~period are reflected as a component of Accumulated other comprehensive loss ~~component~~in the Consolidated Balance Sheets.

The financial statement impact of ~~total stockholders' equity by $2.7~~gains and losses resulting from remeasuring foreign currency transactions into the appropriate functional currency resulted in a net gain of $0.8 million, ~~$7.2~~net loss of $1.1 million, and ~~$8.8~~a net gain of $0.3 million for the fiscal years ended May 29, 2021, May 30, 2020, and June 1, 2019, respectively. These amounts are included in “Other (income) expense, net” in the Consolidated Statements of Comprehensive Income.

Cash Equivalents

The Company holds cash equivalents as part of its cash management function. Cash equivalents include money market funds and time deposit investments with original maturities of less than three months. The carrying value of cash equivalents, which approximates fair value, totaled $229.8 million and $364.0 million as of May 29, 2021 and May 30, 2020, respectively. All cash equivalents are high-credit quality financial instruments and the ~~end~~amount of credit exposure to any one financial institution or instrument is limited.

Marketable Securities

Allowances for Credit Losses

Allowances for credit losses related to accounts are managed at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date.

Herman Miller, Inc. and Subsidiaries52

Concentrations of Credit Risk

Inventories

Inventories are valued at the lower of cost or market and include material, labor and overhead. Inventory cost is determined using the last-in, first-out (LIFO) method at manufacturing facilities in Michigan, whereas inventories of the Company's other locations are valued using the first-in, first-out (FIFO) method. The Company establishes reserves for excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions. Further information on the Company's recorded inventory balances can be found in Note 4 of the Consolidated Financial Statements.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:


(In millions)	Goodwill		Indefinite-lived Intangible Assets		Total Goodwill and Indefinite-lived Intangible Assets
Balance, June 2, 2019	$	303.8	$	78.1	$	381.9
Foreign currency translation adjustments	(0.9)		(0.5)		(1.4)
Acquisition of HAY	111.1		60.0		171.1
Acquisition of naughtone	57.5		8.5		66.0
Impairment charges	(125.5)		(53.3)		(178.8)


Balance, May 30, 2020	$	346.0	$	92.8	$	438.8
Foreign currency translation adjustments	18.2		4.8		23.0



Balance, May 29, 2021	$	364.2	$	97.6	$	461.8

532021 Annual Report

•actual and forecasted revenue growth rates and operating margins,

•discount rates based on the reporting unit's weighted average cost of capital, and

•revenue and EBITDA of comparable companies

The table below summarizes the carrying values as of May 29, 2021, for each of the Company’s indefinite-lived trade names:


(In millions)
Trade name	Carrying Value
Maharam	$	16.5
DWR	31.5
HAY	43.1
naughtone	6.5
Total	$	97.6

Property, Equipment and Depreciation

Herman Miller, Inc. and Subsidiaries54

The following table summarizes our property as of the dates indicated:


(In millions)	May 29, 2021		May 30, 2020
Land and improvements	$	25.2	$	23.7
Buildings and improvements	286.1		266.5
Machinery and equipment	820.8		791.9
Construction in progress	27.6		29.2
Accumulated depreciation	(832.5)		(780.5)
Property and equipment, net	$	327.2	$	330.8

As of the end of fiscal ~~2018, 2017~~2021, outstanding commitments for future capital purchases approximated $46.5 million.

Other Long-Lived Assets

Amortizable intangible assets within Other amortizable intangibles, net in the Consolidated Balance Sheets consist primarily of patents, trademarks and ~~2016,~~customer relationships. The customer relationships intangible asset is comprised of relationships with customers, specifiers, networks, dealers and distributors. Refer to the following table for the combined gross carrying value and accumulated amortization for these amortizable intangibles.


	May 29, 2021
(In millions)	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	45.5	$	113.0	$	15.3	$	173.8
Accumulated amortization	18.9		39.6		10.1		68.6
Net	$	26.6	$	73.4	$	5.2	$	105.2

	May 30, 2020
	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	41.7	$	118.7	$	14.7	$	175.1
Accumulated amortization	14.4		38.3		10.0		62.7
Net	$	27.3	$	80.4	$	4.7	$	112.4

Estimated amortization expense on existing amortizable intangible assets as of May 29, 2021, for each of the succeeding five fiscal years, is as follows:

552021 Annual Report


(In millions)
2022	$	15.4
2023	$	14.9
2024	$	13.7
2025	$	13.5
2026	$	13.2

Self-Insurance


(In millions)	Retention Level (per occurrence)
General liability	$	1.00
Auto liability	$	1.00
Workers' compensation	$	0.75
Health benefit	$	0.50

Research, Development and Other Related Costs

Customer Payments and Incentives

Herman Miller, Inc. and Subsidiaries56

Revenue Recognition

Leases

Cost of Sales

Selling, General and Administrative

Income Taxes

572021 Annual Report

In evaluating the Company's ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all positive and negative evidence. These assumptions require significant judgment about forecasts of future taxable income.

Interest Rate Risk

The ~~company~~Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall cost of borrowing. The ~~company's~~Company's interest rate swap agreement was entered into to exchange variable rate interest payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional amounts. The notional amount of the interest rate swap ~~agreement~~agreements is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap ~~agreement~~agreements is recognized as an adjustment to interest expense.

452021 Annual Report

These interest rate swap derivative instruments are held and used by the ~~company~~Company as a tool for managing interest rate risk. They are not used for trading or speculative purposes. The counterparties to the swap instruments are large financial institutions that the ~~company~~Company believes are of high-quality creditworthiness. While the ~~company~~Company may be exposed to potential losses due to the credit risk of non-performance by these counterparties, such losses are not anticipated.

In September 2016, the ~~company~~Company entered into an interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the ~~company~~Company effectively converted indebtedness anticipated to be borrowed on the ~~company’s~~Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as of the forward start date.

In June 2017, the ~~company~~Company entered into an additional interest rate swap agreement. The interest rate swap is for an aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of January 3, 2028. As a result of the transaction, the ~~company~~Company effectively converted the ~~company’s~~Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387 percent fixed interest rate plus applicable margin under the agreement as of the forward start date.

The ~~combined~~ fair market value ~~and net asset amount~~ of the effective interest rate swap instruments was ~~$9.9~~a net liability of $14.4 million at ~~June 2, 2018~~May 29, 2021 compared to ~~$2.1~~$25.0 million at ~~June 3, 2017.~~May 30, 2020. All cash flows related to the ~~company's~~Company's interest rate swap instruments are denominated in U.S. dollars. For further information, refer to ~~Notes 5~~Note 6 and 11Note 12 of the Consolidated Financial Statements.

Expected cash outflows (notional amounts) over the next five years and thereafter related to debt instruments are as follows.

(In millions) 2019 2020 2021 2022 2023 Thereafter
Total⁽¹⁾
Long-Term Debt - Fixed rate:
Interest rate = 6.00% $ —
$ —
$ 50.0
$ —
$ —
$ —
$ 50.0
Interest rate = 1.949%⁽²⁾
$ —
$ —
$ —
$ 150.0
$ —
$ —
$ 150.0
Interest rate = 2.387%⁽²⁾
$ —
$ —
$ —
$ 75.0
$ —
$ —
$ 75.0


(In millions)	2022		2023		2024		2025		2026		Thereafter		Total(1)


Long-Term Debt - Fixed rate:
Interest rate 4.95%	$	—	$	—	$	—	$	—	$	—	$	49.9	$	49.9

Interest rate 1.949%(2)	$	—	$	—	$	—	$	150.0	$	—	$	—	$	150.0
Interest rate 2.387%(2)	$	—	$	—	$	—	$	75.0	$	—	$	—	$	75.0

(1) Amount does not include the recorded fair value of the swap ~~instrument, which totaled $9.9 million and $2.1 million at the end of fiscal 2018 and 2017, respectively.~~instruments.

(2) The ~~company's~~Company's revolving credit facility has a variable interest rate, but due to the interest rate swaps, the rate on $150.0 million and $75.0 million will be fixed at 1.949% and 2.387%, ~~respectively as demonstrated in the table above.~~respectively.

Herman Miller, Inc. and Subsidiaries46

Item 8 ~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~Financial Statements and Supplementary Data

Herman Miller, Inc.

Consolidated Statements of Comprehensive Income


	Year Ended
(In millions, except per share data)	May 29, 2021		May 30, 2020		June 1, 2019
Net sales	$	2,465.1	$	2,486.6	$	2,567.2
Cost of sales	1,515.9		1,575.9		1,637.3
Gross margin	949.2		910.7		929.9
Operating expenses:
Selling, general and administrative	643.8		643.3		639.3
Impairment charges	0		205.4		0
Restructuring expenses	2.7		26.4		10.2
Design and research	72.1		74.0		76.9
Total operating expenses	718.6		949.1		726.4
Operating earnings (loss)	230.6		(38.4)		203.5
Gain on consolidation of equity method investments	0		36.2		0
Interest expense	13.9		12.5		12.1
Interest and other investment income	(2.1)		(2.3)		(2.1)
Other (income) expense, net	(7.6)		1.0		(1.6)
Earnings (loss) before income taxes and equity income	226.4		(13.4)		195.1
Income tax expense	47.9		6.0		39.6
Equity earnings from nonconsolidated affiliates, net of tax	0.3		5.0		5.0
Net earnings (loss)	178.8		(14.4)		160.5
Net earnings (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Net earnings (loss) attributable to Herman Miller, Inc.	$	173.1	$	(9.1)	$	160.5

Earnings (loss) per share — basic	$	2.94	$	(0.15)	$	2.72
Earnings (loss) per share — diluted	$	2.92	$	(0.15)	$	2.70

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	$	52.1	$	(7.7)	$	(14.2)
Pension and post-retirement liability adjustments	8.8		(14.2)		(7.8)
Unrealized gains (losses) on interest rate swap agreement	8.1		(18.0)		(12.3)
Unrealized holding (losses) gains on securities	(0.1)		0.1		0
Total other comprehensive income (loss), net of tax	68.9		(39.8)		(34.3)
Comprehensive income (loss)	247.7		(54.2)		126.2
Comprehensive income (loss) attributable to redeemable noncontrolling interests	5.7		(5.3)		0
Comprehensive income (loss) attributable to Herman Miller, Inc.	$	242.0	$	(48.9)	$	126.2

472021 Annual Report

Fiscal Years Ended
(In millions, except per share data) June 2, 2018 June 3, 2017 May 28, 2016
Net sales $ 2,381.2
$ 2,278.2
$ 2,264.9
Cost of sales 1,508.2
1,414.0
1,390.7
Gross margin 873.0
864.2
874.2
Operating expenses:
Selling, general and administrative 616.7
587.8
585.6
Restructuring and impairment expenses 5.7
12.5
—
Design and research 73.1
73.1
77.1
Total operating expenses 695.5
673.4
662.7
Operating earnings 177.5
190.8
211.5
Other expenses (income):
Interest expense 13.5
15.2
15.4
Interest and other investment income (4.4 ) (2.2 ) (0.8 )
Other, net 0.3
0.2
0.3
Net other expenses 9.4
13.2
14.9
Earnings before income taxes 168.1
177.6
196.6
Income tax expense 42.4
55.1
59.5
Equity earnings from nonconsolidated affiliates, net of tax 3.0
1.6
0.4
Net earnings 128.7
124.1
137.5
Net earnings attributable to noncontrolling interests 0.6
0.2
0.8
Net earnings attributable to Herman Miller, Inc. $ 128.1
$ 123.9
$ 136.7

Earnings per share — basic $ 2.15
$ 2.07
$ 2.28
Earnings per share — diluted $ 2.12
$ 2.05
$ 2.26

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments $ 2.7
$ (7.2 ) $ (8.8 )
Pension and post-retirement liability adjustments 10.4
(12.7 ) 0.5
Unrealized gains on interest rate swap agreement 7.8
2.1
—
Unrealized holding gain on available for sale securities —
0.1
—
Total other comprehensive income (loss) 20.9
(17.7 ) (8.3 )
Comprehensive income 149.6
106.4
129.2
Comprehensive income attributable to noncontrolling interests 0.6
0.2
0.8
Comprehensive income attributable to Herman Miller, Inc. $ 149.0
$ 106.2
$ 128.4

Herman Miller, Inc.

Consolidated Balance Sheets


(In millions, except share and per share data)	May 29, 2021		May 30, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	396.4	$	454.0
Short-term investments	7.7		7.0
Accounts receivable, net of allowances of $5.5 and $4.7	204.7		180.0
Unbilled accounts receivable	16.4		19.5
Inventories, net	213.6		197.3
Prepaid expenses	45.1		43.3
Other current assets	7.6		16.0
Total current assets	891.5		917.1
Property and equipment, net of accumulated depreciation of $832.5 and $780.5	327.2		330.8
Right of use assets	214.7		193.9
Goodwill	364.2		346.0
Indefinite-lived intangibles	97.6		92.8
Other amortizable intangibles, net of accumulated amortization of $68.6 and $62.7	105.2		112.4
Other noncurrent assets	61.5		60.9
Total Assets	$	2,061.9	$	2,053.9

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	178.4	$	128.8
Short-term borrowings and current portion of long-term debt	2.2		51.4
Accrued compensation and benefits	90.2		71.1
Accrued warranty	14.5		16.1
Customer deposits	43.1		39.8
Other accrued liabilities	172.4		163.0
Total current liabilities	500.8		470.2
Long-term debt	274.9		539.9
Pension and post-retirement benefits	34.5		42.4
Lease liabilities	196.9		178.8
Other liabilities	128.2		129.2
Total Liabilities	1,135.3		1,360.5
Redeemable noncontrolling interests	77.0		50.4
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, 0ne issued)	0		0
Common stock, $0.20 par value (240,000,000 shares authorized, 59,029,165 and 58,793,275 shares issued and outstanding in 2021 and 2020, respectively)	11.8		11.8
Additional paid-in capital	94.7		81.6
Retained earnings	808.4		683.9
Accumulated other comprehensive loss	(65.1)		(134.0)
Deferred compensation plan	(0.2)		(0.3)
Herman Miller, Inc. Stockholders' Equity	849.6		643.0


Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity	$	2,061.9	$	2,053.9

Herman Miller, Inc. and Subsidiaries48

(In millions, except share and per share data) June 2, 2018 June 3, 2017
Assets
Current Assets:
Cash and cash equivalents $ 203.9
$ 96.2
Marketable securities 8.6
8.6
Accounts and notes receivable, less allowances of $3.1 in 2018 and $3.3 in 2017 219.3
186.6
Inventories, net 162.4
152.4
Prepaid taxes 9.9
17.7
Other 41.3
30.4
Total Current Assets 645.4
491.9

Property and Equipment:
Land and improvements 24.4
24.0
Buildings and improvements 238.6
229.0
Machinery and equipment 700.0
662.4
Construction in progress 57.8
53.3
Gross Property and Equipment 1,020.8
968.7
Less: Accumulated depreciation (689.4 ) (654.1 )
Net Property and Equipment 331.4
314.6
Goodwill 304.1
304.5
Indefinite-lived intangibles 78.1
78.1
Other amortizable intangibles, net 41.3
45.4
Other assets 79.2
71.8
Total Assets $ 1,479.5
$ 1,306.3

Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity
Current Liabilities:
Accounts payable $ 171.4
$ 148.4
Accrued compensation and benefits 86.3
79.7
Accrued warranty 51.5
47.7
Unearned revenue 30.4
33.2
Other accrued liabilities 74.2
76.7
Total Current Liabilities 413.8
385.7

Long-term debt, less current portion 275.0
199.9
Pension and post-retirement benefits 15.6
38.5
Other liabilities 79.8
69.9
Total Liabilities 784.2
694.0

Redeemable noncontrolling interests 30.5
24.6
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued) —
—
Common stock, $0.20 par value (240,000,000 shares authorized, 59,230,974 and 59,715,824 shares issued and outstanding in 2018 and 2017, respectively) 11.7
11.9
Additional paid-in capital 116.6
139.3
Retained earnings 598.3
519.5
Accumulated other comprehensive loss (61.3 ) (82.2 )
Key executive deferred compensation (0.7 ) (1.0 )
Herman Miller, Inc. Stockholders' Equity 664.6
587.5
Noncontrolling interests 0.2
0.2
Total Stockholders' Equity 664.8
587.7
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity $ 1,479.5
$ 1,306.3

Herman Miller, Inc.

Consolidated Statements of Stockholders' Equity


	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Deferred Compensation Plan	Herman Miller, Inc. Stockholders' Equity	Noncontrolling Interests	Total Stockholders' Equity
(In millions, except share and per share data)	Shares	Amount














June 2, 2018	59,230,974	$11.7	$116.6	$598.3	$(61.3)	$(0.7)	$664.6	$0.2	$664.8
Net earnings	—	—	—	160.5	—	—	160.5	—	160.5
Other comprehensive loss, net of tax	—	—	—	—	(34.3)	—	(34.3)	—	(34.3)
Stock-based compensation expense	—	—	8.4	—	—	—	8.4	(0.2)	8.2
Exercise of stock options	347,248	0.1	10.0	—	—	—	10.1	—	10.1
Restricted and performance stock units released	468,807	0.1	0.2	—	—	—	0.3	—	0.3
Employee stock purchase plan issuances	62,957	—	1.9	—	—	—	1.9	—	1.9
Repurchase and retirement of common stock	(1,326,023)	(0.2)	(47.6)	—	—	—	(47.8)	—	(47.8)
Directors' fees	10,185	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	—	—	—	(0.1)	(0.1)	—	(0.1)
Dividends declared ($0.79 per share)	—	—	—	(46.6)	—	—	(46.6)	—	(46.6)

Cumulative effect of accounting changes	—	—	—	0.5	1.4	—	1.9	—	1.9
June 1, 2019	58,794,148	$11.7	$89.8	$712.7	$(94.2)	$(0.8)	$719.2	$0	$719.2
Net loss	—	—	—	(9.1)	—	—	(9.1)	—	(9.1)
Other comprehensive loss	—	—	—	—	(39.8)	—	(39.8)	—	(39.8)
Stock-based compensation expense	—	—	2.7	—	—	—	2.7	—	2.7
Exercise of stock options	423,815	0.2	13.3	—	—	—	13.5	—	13.5
Restricted and performance stock units released	138,590	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	70,145	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(641,192)	(0.1)	(26.5)	—	—	—	(26.6)	—	(26.6)
Directors' fees	7,769	—	0.3	—	—	—	0.3	—	0.3
Deferred compensation plan	—	—	(0.3)	—	—	0.5	0.2	—	0.2
Dividends declared ($0.63 per share)	—	—	—	(37.5)	—	—	(37.5)	—	(37.5)
Redemption value adjustment	—	—	—	17.8	—	—	17.8	—	17.8

May 30, 2020	58,793,275	$11.8	$81.6	$683.9	$(134.0)	$(0.3)	$643.0	$0	$643.0
Net earnings	—	—	—	173.1	—	—	173.1	—	173.1
Other comprehensive income	—	—	—	—	68.9	—	68.9	—	68.9
Stock-based compensation expense	—	—	9.0	—	—	—	9.0	—	9.0
Exercise of stock options	86,238	0	2.6	—	—	—	2.6	—	2.6
Restricted and performance stock units released	114,103	—	0.2	—	—	—	0.2	—	0.2
Employee stock purchase plan issuances	71,468	—	2.1	—	—	—	2.1	—	2.1
Repurchase and retirement of common stock	(38,932)	0	(0.9)	—	—	—	(0.9)	—	(0.9)
Directors' fees	3,013	—	0.1	—	—	—	0.1	—	0.1
Deferred compensation plan	—	—	0	—	—	0.1	0.1	—	0.1
Dividends declared ($0.56 per share)	—	—	—	(33.4)	—	—	(33.4)	—	(33.4)
Redemption value adjustment	—	—	—	(15.0)	—	—	(15.0)	—	(15.0)
Other	—	—	—	(0.2)	—	—	(0.2)	—	(0.2)
May 29, 2021	59,029,165	$11.8	$94.7	808.4	$(65.1)	$(0.2)	$849.6	0	$849.6

492021 Annual Report

(In millions) Fiscal Years Ended
June 2, 2018 June 3, 2017 May 28, 2016
Preferred Stock
Balance at beginning of year and end of year $ —
$ —
$ —
Common Stock
Balance at beginning of year $ 11.9
$ 12.0
$ 11.9
Repurchase and retirement of common stock (0.3 ) (0.1 ) —
Restricted stock units released 0.1
—
0.1
Balance at end of year $ 11.7
$ 11.9
$ 12.0
Additional Paid-in Capital
Balance at beginning of year $ 139.3
$ 142.7
$ 135.1
Cumulative effect of accounting change (0.3 ) —
—
Exercise of stock options 14.6
9.4
6.6
Repurchase and retirement of common stock (46.2 ) (23.7 ) (14.1 )
Employee stock purchase plan issuances 2.0
1.9
1.7
Stock-based compensation expense 7.0
9.1
11.9
Excess tax benefit for stock-based compensation —
(0.6 ) 0.8
Restricted stock units released 0.2
0.3
0.2
Deferred compensation plan (0.4 ) (0.1 ) (0.1 )
Directors' fees 0.4
0.3
0.6
Balance at end of year $ 116.6
$ 139.3
$ 142.7
Retained Earnings
Balance at beginning of year $ 519.5
$ 435.3
$ 330.2
Cumulative effect of accounting change 0.1
—
—
Net income attributable to Herman Miller, Inc. 128.1
123.9
136.7
Dividends declared on common stock (per share - 2018: $0.72; 2017: $0.68; 2016: $0.59) (43.2 ) (40.9 ) (35.6 )
Noncontrolling interests redemption value adjustment (6.2 ) 1.2
4.0
Balance at end year $ 598.3
$ 519.5
$ 435.3
Accumulated Other Comprehensive Loss
Balance at beginning of year $ (82.2 ) $ (64.5 ) $ (56.2 )
Other comprehensive income (loss) 20.9
(17.7 ) (8.3 )
Balance at end of year $ (61.3 ) $ (82.2 ) $ (64.5 )
Key Executive Deferred Compensation
Balance at beginning of year $ (1.0 ) $ (1.1 ) $ (1.2 )
Deferred compensation plan 0.3
0.1
0.1
Balance at end of year $ (0.7 ) $ (1.0 ) $ (1.1 )
Herman Miller, Inc. Stockholders' Equity $ 664.6
$ 587.5
$ 524.4
Noncontrolling Interests
Balance at beginning of year $ 0.2
$ 0.3
$ 0.5
Net income attributable to noncontrolling interests —
—
0.3
Deconsolidation of entity with noncontrolling interests —
—
(0.5 )
Stock-based compensation expense —
(0.1 ) —
Balance at end of year $ 0.2
$ 0.2
$ 0.3
Total Stockholders' Equity $ 664.8
$ 587.7
$ 524.7

Herman Miller, Inc.

Consolidated Statements of Cash Flows


	Year Ended
(In millions)	May 29, 2021	May 30, 2020	June 1, 2019
Cash Flows from Operating Activities:
Net earnings (loss)	$178.8	$(14.4)	$160.5
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation expense	72.0	68.1	65.9
Amortization expense	15.2	11.4	6.2
Earnings from nonconsolidated affiliates net of dividends received	(0.4)	(4.8)	(2.1)
Investment fair value adjustment	0	0	(2.1)
Gain on consolidation of equity method investments	0	(36.2)	0

Deferred taxes	6.7	(25.2)	0.8
Pension contributions	(5.4)	(0.9)	(0.9)
Pension and post-retirement expenses	3.0	1.6	1.2
Impairment charges	0	205.4	0
Restructuring expenses	2.7	26.4	10.2
Stock-based compensation	9.0	2.7	7.3

Decrease (increase) in long-term assets	1.2	(4.7)	(0.4)
Increase in long-term liabilities	16.0	5.8	1.6
Changes in current assets and liabilities:
Increase (decrease) in accounts receivable & unbilled accounts receivable	(14.8)	68.6	(24.8)
Increase (decrease) in inventories	(8.5)	6.0	(31.9)
Increase in prepaid expenses and other	(3.9)	(2.2)	(0.6)
Increase (decrease) in accounts payable	43.2	(59.5)	0.5
Increase (decrease) in accrued liabilities	15.1	(32.0)	22.7
Other, net	2.4	5.7	2.3
Net Cash Provided by Operating Activities	332.3	221.8	216.4

Cash Flows from Investing Activities:

Marketable securities purchases	(5.9)	(3.1)	(1.9)
Marketable securities sales	5.3	5.0	1.7
Capital expenditures	(59.8)	(69.0)	(85.8)
Proceeds from sales of property and dealers	14.0	0.2	0.5


Purchase of HAY licensing agreement	0	0	(4.8)
Acquisitions, net of cash received	0	(111.2)	0
Equity investment in non-controlled entities	0	(3.3)	(73.6)
Other, net	(13.5)	13.3	(1.1)
Net Cash Used in Investing Activities	(59.9)	(168.1)	(165.0)

Cash Flows from Financing Activities:


Borrowings of long-term debt	0	50.0	0
Repayments of long-term debt	(50.0)	0	0
Proceeds from credit facility	0	265.0	0
Repayments of credit facility	(265.0)	0	0
Dividends paid	(34.5)	(36.4)	(45.6)
Common stock issued	5.0	15.6	12.3
Common stock repurchased and retired	(0.9)	(26.6)	(47.9)


Purchase of redeemable noncontrolling interests	0	(20.3)	(10.1)
Other, net	(2.3)	(3.3)	(0.6)
Net Cash (Used in) Provided by Financing Activities	(347.7)	244.0	(91.9)
Effect of exchange rate changes on cash and cash equivalents	17.7	(2.9)	(4.2)
Net (Decrease) Increase In Cash and Cash Equivalents	(57.6)	294.8	(44.7)
Cash and cash equivalents, Beginning of Year	454.0	159.2	203.9
Cash and Cash Equivalents, End of Year	$396.4	$454.0	$159.2

Other Cash Flow Information
Interest paid	$12.5	$11.4	$11.5
Income taxes paid, net of cash received	$15.8	$39.6	$41.0

Herman Miller, Inc. and Subsidiaries50

Fiscal Years Ended
(In millions) June 2, 2018 June 3, 2017 May 28, 2016
Cash Flows from Operating Activities:
Net earnings $ 128.7
$ 124.1
$ 137.5
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation expense 60.9
52.9
47.0
Amortization expense 6.0
6.0

6.0
Provision for losses on accounts receivable and notes receivable 0.9
—

2.2
Earnings from nonconsolidated affiliates net of dividends received (0.2 ) (1.5 ) —
Gain on sales of property and dealers (0.5 ) —
(5.8 )
Deferred taxes (0.8 ) 14.8
10.4
Pension contributions (13.4 ) (1.1 ) (1.2 )
Pension and post-retirement expenses 2.9
0.5
1.4
Restructuring and impairment expenses 5.7
12.5
—
Stock-based compensation 7.7
8.7
11.9
Excess tax benefits from stock-based compensation —
(0.5 ) (1.4 )
Increase in long-term liabilities 3.4
6.2
6.7
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (33.1 ) 17.3
(30.5 )
Increase in inventories (12.4 ) (29.9 ) (6.0 )
Increase in prepaid expenses and other (3.0 ) (0.5 ) (11.7 )
Increase (decrease) in accounts payable 16.0
(11.2 ) 8.7
(Decrease) increase in accrued liabilities (0.3 ) 0.8
33.5
Other (2.0 ) 3.0
1.7
Net Cash Provided by Operating Activities 166.5
202.1
210.4

Cash Flows from Investing Activities:
Net (advances) receipts from notes receivable (1.1 ) 2.4
0.2
Marketable securities purchases (1.0 ) (2.0 ) (7.8 )
Marketable securities sales 1.0
0.9
6.1
Capital expenditures (70.6 ) (87.3 ) (85.1 )
Proceeds from sales of property and dealers 2.1
—
10.7
Payments of loans on cash surrender value of life insurance —
(15.3 ) —
Proceeds from life insurance policy 8.1
—
—
Acquisitions, net of cash received —
—
(3.6 )
Equity investment in non-controlled entities —
(13.1 ) —
Other, net (1.2 ) (1.9 ) (1.3 )
Net Cash Used for Investing Activities (62.7 ) (116.3 ) (80.8 )

Cash Flows from Financing Activities:
Repayments of long-term debt (150.0 ) —
—
Proceeds from credit facility 340.4
794.4
800.8
Repayments of credit facility (115.4 ) (816.4 ) (868.8 )
Dividends paid (42.4 ) (39.4 ) (34.9 )
Common stock issued 17.0
11.7
9.2
Common stock repurchased and retired (46.5 ) (23.8 ) (14.1 )
Excess tax benefits from stock-based compensation —
0.5
1.4
Payment of contingent consideration obligation (0.1 ) (2.0 ) —
Purchase of noncontrolling interests (1.0 ) (1.5 ) —
Other, net 0.5
1.9
(0.1 )
Net Cash Provided by (Used for) Financing Activities 2.5
(74.6 ) (106.5 )
Effect of exchange rate changes on cash and cash equivalents 1.4
0.1
(1.9 )
Net Increase In Cash and Cash Equivalents 107.7
11.3
21.2
Cash and cash equivalents, Beginning of Year 96.2
84.9
63.7
Cash and Cash Equivalents, End of Year $ 203.9
$ 96.2
$ 84.9

Other Cash Flow Information
Interest paid $ 16.4
$ 13.4
$ 13.4
Income taxes paid, net of cash received $ 34.2
$ 35.6
$ 57.6

Notes to the Consolidated Financial Statements

~~Table of Contents~~



			~~Page No.~~
Note 1	~~Note 1 -~~ Significant Accounting and Reporting Policies			5052
Note 2			Revenue from Contracts with Customers		61
Note ~~2 -~~ 3			Acquisitions and Divestitures		5763
Note 4			~~Note 3 -~~ Inventories		5765
Note 5			~~Note 4 -~~ Investments in Nonconsolidated Affiliates		5866
Note 6			~~Note 5 -~~ Short-Term Borrowings and Long-Term Debt		5967
Note 7			~~Note 6 -~~ ~~Operating~~ Leases		6169
Note 8			~~Note 7 -~~ Employee Benefit Plans		6171
Note 9			~~Note 8 -~~ Common Stock and Per Share Information		6574
Note 10			~~Note 9 -~~ Stock-Based Compensation		6575
Note 11			~~Note 10 -~~ Income Taxes		6979
Note 12			~~Note 11 -~~ Fair Value ~~of Financial Instruments~~		7283
Note 13			~~Note 12 -~~ ~~Warranties, Guarantees,~~Commitments and Contingencies		7688
Note 14			~~Note 13 -~~ Operating Segments		7789
Note 15			~~Note 14 -~~ Accumulated Other Comprehensive Loss		8092
Note 16			~~Note 15 -~~ ~~Redeemable Noncontrolling Interests~~Restructuring Expenses		8092
Note 17			~~Note 16 -~~ ~~Restructuring and Impairment Activities~~Variable Interest Entities		8194
Note 18			~~Note 17 -~~ ~~Subsequent Event~~		82
	~~Note 18 -~~ Quarterly Financial Data (Unaudited)	8294

512021 Annual Report

1. Significant Accounting and Reporting Policies

The following is a summary of significant accounting and reporting policies not reflected elsewhere in the accompanying financial statements.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Herman Miller, Inc. and its ~~majority-owned~~controlled domestic and foreign subsidiaries. The consolidated entities are collectively referred to as “the ~~company.~~Company.” All intercompany accounts and transactions have been eliminated in the Consolidated Financial Statements. ~~Nonconsolidated affiliates (20-50 percent owned companies) are accounted for using the equity method.~~

Description of Business

The ~~company~~Company researches, designs, manufactures, sells and distributes interior furnishings for use in various environments including office, healthcare, educational and residential settings and provides related services that support companies all over the world. The ~~company's~~Company's products are sold primarily through independent contract office furniture dealers as well as the following channels: owned contract office furniture ~~dealers,~~dealership, direct customer sales, independent retailers, owned retail studios, direct-mail catalogs and the ~~company's e-commerce~~Company's eCommerce platforms.

Fiscal Year

The ~~company's~~Company's fiscal year ends on the Saturday closest to May 31. The fiscal ~~year ended June 2, 2018 contained 52 weeks, while the fiscal year ended June 3, 2017 contained 53 weeks. The fiscal year~~years ended May ~~28, 2016~~29, 2021, May 30, 2020, and June 1, 2019 contained 52 weeks.

Foreign Currency Translation

The functional currency for most of the foreign subsidiaries is their local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the United States dollar using fiscal year-end exchange rates and translating revenue and expense accounts using average exchange rates for the period isare reflected as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.

The financial statement impact of gains and losses resulting from remeasuring foreign currency transactions into the appropriate functional currency resulted in a net gain ~~$0.4~~of $0.8 million, ~~for fiscal year ended June 2, 2018,~~net loss of $1.1 million, and a net ~~loss~~gain of ~~$0.7 million and $0.7~~$0.3 million for the fiscal years ended May 29, 2021, May 30, 2020, and June ~~3, 2017 and May 28, 2016,~~1, 2019, respectively. These amounts are included in ~~“Other, net”~~“Other (income) expense, net” in the Consolidated Statements of Comprehensive Income.

Cash Equivalents

The ~~company~~Company holds cash equivalents as part of its cash management function. Cash equivalents include money market funds and time deposit investments with original maturities of less than three months. The carrying value of cash equivalents, which approximates fair value, totaled ~~$148.8~~$229.8 million and ~~$33.6~~$364.0 million as of ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017~~May 30, 2020, respectively. All cash equivalentsare high-credit quality financial instruments and the amount of credit exposure to any one financial institution or instrument is limited.

Marketable Securities

The ~~company~~Company maintains a portfolio of marketable securities primarily comprised of mutual funds. These mutual funds are comprised of both equity and fixed income funds. These investments are held by the ~~company's~~Company's wholly owned insurance captive and ~~are considered “available-for-sale” securities. Accordingly, they~~ have been recorded at fair value based on quoted market ~~prices, with~~prices. Net unrealized holding gains or losses related to the ~~resulting~~equity mutual funds are recorded through net income while net unrealized holding gains or losses ~~reflected net of tax as a component of “Accumulated~~related to the fixed income mutual funds are recorded through other comprehensive ~~loss” in the Consolidated Balance Sheets.~~income.

All marketable security transactions are recognized on the trade date. Realized gains and losses ~~on disposal of available-for-sale investments~~ are included in “Interest and other investment income” in the Consolidated Statements of Comprehensive Income. See Note 1112 of the Consolidated Financial Statements for additional disclosures of marketable securities.

~~Accounts Receivable~~ Allowances for Credit Losses

~~Reserves~~Allowances for ~~uncollectible~~credit losses related to accounts ~~receivable balances~~ are managed at a level considered by management to be adequate to absorb an estimate of probable future losses existing at the balance sheet date.

Herman Miller, Inc. and Subsidiaries52

In estimating probable losses, we review accounts based on known customer exposures, historical credit experience, and ~~the~~ specific identification of other potentially uncollectible accounts. An accounts receivable balance is considered past due when payment is not received within the stated terms. Accounts that are considered to have higher credit risk are reviewed using information available about the debtor, such as financial statements, news reports and published credit ratings. General information regarding industry trends, the economic environment is used as well.

We arrive at an estimated loss for specific concerns and estimate an additional amount for the remainder of trade balances based on historical trends and other factors previously referenced. Balances are written off against the reserve once the ~~company~~Company determines the probability of collection to be remote. The ~~company~~Company generally does not require collateral or other security on trade accounts receivable. Subsequent recoveries, if any, are credited to bad debt expense when received.

Concentrations of Credit Risk

The ~~company's~~Company's trade receivables are primarily due from independent dealers who, in turn, carry receivables from their customers. The ~~company~~Company monitors and manages the credit risk associated with individual dealers and direct customers where applicable. Dealers are responsible for assessing and assuming credit risk of their customers and may require their customers to provide deposits, letters of credit or other credit

enhancement measures. Some sales contracts are structured such that the customer payment or obligation is direct to the ~~company.~~Company. In those cases, the ~~company~~Company may assume the credit risk. Whether from dealers or customers, the ~~company's~~Company's trade credit exposures are not concentrated with any particular entity.

Inventories

Inventories are valued at the lower of cost or market and include material, labor and overhead. Inventory cost is determined using the last-in, first-out (LIFO) method at manufacturing facilities in Michigan, whereas inventories of the ~~company's~~Company's other locations are valued using the first-in, first-out (FIFO) method. The ~~company~~Company establishes reserves for excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions. Further information on the ~~company's~~Company's recorded inventory balances can be found in Note 34 of the Consolidated Financial Statements.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:


(In millions)	Goodwill		Indefinite-lived Intangible Assets		Total Goodwill and Indefinite-lived Intangible Assets
Balance, June 2, 2019	$	303.8	$	78.1	$	381.9
Foreign currency translation adjustments	(0.9)		(0.5)		(1.4)
Acquisition of HAY	111.1		60.0		171.1
Acquisition of naughtone	57.5		8.5		66.0
Impairment charges	(125.5)		(53.3)		(178.8)


Balance, May 30, 2020	$	346.0	$	92.8	$	438.8
Foreign currency translation adjustments	18.2		4.8		23.0



Balance, May 29, 2021	$	364.2	$	97.6	$	461.8

Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. ~~A reporting unit is defined as an operating segment or one level below an operating segment.~~ When testing goodwill for impairment, the ~~company~~Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. The ~~company~~Company may also elect to ~~skip~~bypass the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value. Each of the reporting units were reviewed for impairment using a quantitative assessment as of March 31, 2021.

532021 Annual Report

To estimate the fair value of each reporting unit when performing quantitative testing, the ~~company~~Company utilizes a weighting of the income ~~method~~approach and the market method. ~~The income method is~~These approaches are based on a discounted ~~future~~ cash flow ~~approach~~analysis and observable comparable company information that ~~uses a number of estimates, including~~use several inputs, including:

•actual and forecasted revenue ~~based on assumed~~ growth rates ~~estimated costs~~ and operating margins,

•discount rates based on the reporting unit's weighted average cost of ~~capital. Growth rates for each reporting unit are determined based on internal estimates, historical data~~capital, and ~~external sources.~~

•revenue and EBITDA of comparable companies

The ~~growth estimates are also used in planning for the company's long-term and short-term business planning and forecasting. We test~~Company corroborates the reasonableness of the inputs and outcomes of our discounted cash flow analysis ~~against comparable~~through a market ~~data.~~ capitalization reconciliation to determine whether the implied control premium is reasonable.

The ~~market method is based on financial multiples~~Company completed its annual goodwill impairment test in the fourth quarter of ~~companies comparable~~the year, as of March 31st. In fiscal 2021, the Company elected to ~~each~~perform quantitative impairment tests for all goodwill reporting ~~unit~~units and ~~applies a control premium. The carrying~~other indefinite-lived intangible assets. In performing the quantitative impairment test, the Company determined that the fair value of ~~each~~the reporting ~~unit represents~~units exceeded the ~~assignment~~carrying amount and, as such, the reporting units were not impaired and the second step of ~~various assets~~the impairment test was not necessary.

Intangible assets with indefinite useful lives are not subject to amortization and are evaluated annually for impairment, or more frequently, when events or changes in circumstances indicate that the fair value of an intangible asset may not be recoverable. The ~~company~~Company utilizes the relief from royalty methodology to test for impairment. The primary assumptions for the relief from royalty method include forecasted revenue ~~forecasts, earnings forecasts,~~growth rates, royalty rates and discount rates. The ~~company~~Company measures and records an impairment loss for the excess of the carrying value of the asset over its fair value. ~~The company's~~

In fiscal 2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets ~~consist of certain trade names valued at approximately $78.1 million as of the end of fiscal 2018 and fiscal 2017. These assets have indefinite useful lives.~~

During fiscal 2017, the company recognized asset impairment expense totaling $7.1 million associated with the Nemschoff trade name, which was recorded within the Specialty operating segment. As of the end of fiscal 2017, thefor impairment. The carrying value of the ~~Nemschoff~~Company's HAY trade name indefinite-lived intangible asset was $41.7 million as of March 31, 2021. The calculated fair value of the HAY trade name was ~~zero.~~$43.8 million which represents an excess fair value of $2.1 million or 5.0%. If the residual cash flow related to this trade name were to decline in future periods, the Company may need to record an impairment charge.

The table below summarizes the carrying values as of May 29, 2021, for each of the Company’s indefinite-lived trade names:


(In millions)
Trade name	Carrying Value
Maharam	$	16.5
DWR	31.5
HAY	43.1
naughtone	6.5
Total	$	97.6

During fiscal 2020, the Company recognized $205.4 million of impairment charges related to goodwill, indefinite-lived intangible assets and long-lived assets. These ~~impairment expenses~~charges are ~~recorded~~included in ~~the Restructuring and impairment expenses line item~~"Impairment charges" within the Consolidated Statements of Comprehensive Income.

~~Goodwill and other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:~~

(In millions) Goodwill Indefinite-lived Intangible Assets Total Goodwill and Indefinite-lived Intangible Assets
Balance, May 28, 2016 $ 305.3
$ 85.2
$ 390.5
Foreign currency translation adjustments (0.7 ) —
(0.7 )
Sale of owned dealer (0.1 ) —
(0.1 )
Impairment charges —
(7.1 ) (7.1 )
Balance, June 03, 2017 $ 304.5
$ 78.1
$ 382.6
Foreign currency translation adjustments (0.1 ) —
(0.1 )
Sale of owned dealer (0.3 ) —
(0.3 )
Balance, June 02, 2018 $ 304.1
$ 78.1
$ 382.2

Property, Equipment and Depreciation

Herman Miller, Inc. and Subsidiaries54

Property and equipment are stated at cost. The cost is depreciated over the estimated useful lives of the assets using the straight-line method. Estimated useful lives range from 3 to 10 years for machinery and equipment and do not exceed 40 years for buildings. Leasehold improvements are depreciated over the lesser of the lease term or the useful life of the asset. The ~~company~~Company capitalizes certain costs incurred in connection with the development, testing and installation of software for internal ~~use.~~use and cloud computing arrangements. Software for internal use is included in property and equipment and is depreciated over an estimated useful life not exceeding 5 years. Depreciation and amortization expense is included in the Consolidated Statements of Comprehensive Income in the Cost of sales, Selling, general and administrative and Design and research line items.

The following table summarizes our property as of the dates indicated:


(In millions)	May 29, 2021		May 30, 2020
Land and improvements	$	25.2	$	23.7
Buildings and improvements	286.1		266.5
Machinery and equipment	820.8		791.9
Construction in progress	27.6		29.2
Accumulated depreciation	(832.5)		(780.5)
Property and equipment, net	$	327.2	$	330.8

As of the end of fiscal ~~2018,~~2021, outstanding commitments for future capital purchases approximated ~~$49.5~~$46.5 million.

Other Long-Lived Assets

The ~~company~~Company reviews ~~other long-lived~~the carrying value of long–lived assets for impairment ~~whenever~~when events or changes in circumstances indicate that the carrying amount of ~~an asset or an asset group~~assets may not be recoverable. ~~Each impairment test is based on a comparison of~~If such indicators are present, the future undiscounted cash flows attributable to the asset or asset group are compared to the carrying ~~amount~~value of the asset or asset ~~group to the future undiscounted net cash flows expected to be generated by the asset or asset group, or in some cases, by prices for similar assets.~~group. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by which the carrying value of the assets exceeds their fair value.


	May 29, 2021
(In millions)	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	45.5	$	113.0	$	15.3	$	173.8
Accumulated amortization	18.9		39.6		10.1		68.6
Net	$	26.6	$	73.4	$	5.2	$	105.2

	May 30, 2020
	Patent and Trademarks		Customer Relationships		Other		Total
Gross carrying value	$	41.7	$	118.7	$	14.7	$	175.1
Accumulated amortization	14.4		38.3		10.0		62.7
Net	$	27.3	$	80.4	$	4.7	$	112.4

June 2, 2018
(In millions) Patent and Trademarks Customer Relationships Other Total
Gross carrying value $ 22.4
$ 55.3
$ 7.5
$ 85.2
Accumulated amortization 14.7
23.5
5.7
43.9
Net $ 7.7
$ 31.8
$ 1.8
$ 41.3

June 3, 2017
Patent and Trademarks Customer Relationships Other Total
Gross carrying value $ 20.5
$ 55.3
$ 7.5
$ 83.3
Accumulated amortization 13.3
19.7
4.9
37.9
Net $ 7.2
$ 35.6
$ 2.6
$ 45.4

The ~~company~~Company amortizes these assets over their remaining useful lives using the straight-line method over periods ranging from 5 years to 20 years, or on an accelerated basis, to reflect the expected realization of the economic benefits. It is estimated that the weighted-average remaining useful life of the patents and trademarks is approximately 6 ~~years~~ and the weighted-average remaining useful life of the customer relationships is 87 years.

Estimated amortization expense on existing amortizable intangible assets as of ~~June 2, 2018~~,May 29, 2021, for each of the succeeding five fiscal years, is as follows:

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(In millions)			(In millions)
2019	$	5.9
2020	$	5.6
2021	$	5.6
2022	$	5.6	2022	$	15.4
2023	$	5.6	2023	$	14.9
2024			2024	$	13.7
2025			2025	$	13.5
2026			2026	$	13.2

Self-Insurance

The ~~company~~Company is partially self-insured for general liability, workers' compensation and certain employee health and dental benefits under insurance arrangements that provide for third-party coverage of claims exceeding the ~~company's~~Company's loss retention levels. The ~~company's~~Company's health benefit and auto liability retention levels do not include an aggregate stop loss policy. The ~~company's~~Company's retention levels designated within significant insurance arrangements as of~~June 2, 2018~~May 29, 2021, are as follows:


(In millions)	Retention Level (per occurrence)
General liability	$	1.00
Auto liability	$	1.00
Workers' compensation	$	0.75
Health benefit	$	0.50

(In millions) Retention Level (per occurrence)
General liability $ 1.00
Auto liability $ 1.00
Workers' compensation $ 0.75

The ~~company~~Company accrues for its self-insurance arrangements, as well as reserves for health, prescription drugs, and dental benefit exposures based on actuarially-determined estimates, which are recorded in “Other liabilities” in the Consolidated Balance Sheets. The value of the liability as of ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017~~May 30, 2020 was ~~$11.2~~$12.3 million and ~~$10.5~~$13.1 million, respectively. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical costs, payment lag times and changes in actual experience could cause these estimates to change. The general, auto, and workers' compensation liabilities are managed through the ~~company's~~Company's wholly-owned insurance captive.

~~Redeemable Noncontrolling Interests~~

Certain minority shareholders in the company's subsidiary Herman Miller Consumer Holdings, Inc. have the right, at specified times over a period of time, to require the company to acquire portions of their ownership interest in those entities at fair value. Their interests in these subsidiaries are classified outside permanent equity in the Consolidated Balance Sheets and are carried at the current estimated redemption amounts.

The redemption amounts have been estimated based on the fair value of the subsidiary, which was determined based on a weighting of the discounted cash flow and market methods. The discounted cash flow analysis used the present value of projected cash flows and a residual value. To determine the discount rate for the discounted cash flow method, a market-based approach was used to select the discount rates used. Market multiples for comparable companies were used for the market method of valuation. The fair value of the subsidiary is sensitive to changes in projected revenues and costs, the discount rate and the forward multiples of the comparable companies.

Changes in the estimated redemption amounts of the noncontrolling interests, subject to put options, are reflected at each reporting period with a corresponding adjustment to Retained earnings. Future reductions in the carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable noncontrolling interests at the time they were originally recorded. See Note 15 - Redeemable Noncontrolling Interests for additional information.

Research, Development and Other Related Costs

Research, development, pre-production and start-up costs are expensed as incurred. Research and development ("R&D") costs consist of expenditures incurred during the course of planned research and investigation aimed at discovery of new knowledge useful in developing new products or processes. R&D costs also include the ~~significant~~ enhancement of existing products or production processes and the implementation of such through design, testing of product alternatives or construction of prototypes. R&D costs included in “Design and research” expense in the accompanying Consolidated Statements of Comprehensive Income are ~~$57.1~~$50.8 million, ~~$58.6~~$54.3 million and ~~$62.4~~$58.8 million,, in fiscal ~~2018, 2017,~~2021, 2020, and ~~2016,~~2019, respectively.

Royalty payments made to designers of the ~~company's~~Company's products as the products are sold are a variable ~~cost~~costs based on product sales. These expenses totaled $~~16.0~~21.3 million, $~~14.5~~19.7 million and ~~$14.7~~$18.1 million in fiscal years ~~2018, 2017~~2021, 2020 and ~~2016~~2019 respectively. They are included in Design and research expense in the accompanying Consolidated Statements of Comprehensive Income.

Customer Payments and Incentives

Herman Miller, Inc. and Subsidiaries56

Revenue Recognition

The ~~company~~Company recognizes revenue when performance obligations, based on ~~sales through its network~~the terms of ~~independent~~customer contracts, are satisfied. This happens when control of goods and services based on the contract ~~furniture dealers and independent retailers once the related product is shipped and title passes. In situations where products are sold through subsidiary dealers or directly~~have been conveyed to the ~~end customer, revenue~~customer. Revenue for the sale of products is recognized ~~once~~at the related product is shipped to the end customer and installation, if applicable, is substantially complete. Offers such as rebates and discounts are recorded as reductions to net sales. Unearned revenue occurs during the normal coursepoint in time when control transfers, generally upon transfer of ~~business due to advance payments from customers for future delivery of products and services.~~

In addition to independent retailers, the company also sells product through owned retail channels, including e-commerce and Consumer retail studios. Revenue is recognized on these transactions upon shipment and transfer to the customer of both title and risk of ~~loss.~~loss to the customer. Revenue for services, including the installation of products by the Company's owned dealers, is recognized over time as the services are provided. The method of revenue recognition may vary, depending on the type of contract with the customer, as noted in the section "Disaggregated Revenue" in Note 2 of the Consolidated Financial Statements.

Variable consideration exists within certain contracts that the Company has with customers. When variable consideration is present in a contract with a customer, the Company estimates the amount that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. These estimates are primarily related to rebate programs which involve estimating future sales ~~may include provisions involving~~amounts and rebate percentages to use in the determination of transaction price. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a ~~right~~significant future reversal of ~~return.~~ cumulative revenue under the contract will not occur. Adjustments to Net sales from changes in variable consideration related to performance obligations completed in previous periods are not material to the Company's financial statements. Also, the Company has no contracts with significant financing components.

The ~~company reduces~~Company accounts for shipping and handling activities as fulfillment activities and these costs are accrued within Cost of sales at the same time revenue is recognized. The Company does not record revenue for ~~an estimate~~sales tax, value added tax or other taxes that are collected on behalf of ~~potential future product returns related to current~~

~~period product revenue. When developing the allowance for sales returns, the company considers historical returns and current economic trends. Revenue~~government entities. The Company’s revenue is recorded net of ~~sales~~these taxes as they are passed through to the ~~company~~relevant government entities. The Company has recognized incremental costs to obtain a contract as an expense when incurred as the amortization period is less than one year. The Company has not adjusted the amount of consideration to be received for any significant financing components as the Company’s contracts have a ~~pass-through entity for collecting and remitting sales tax.~~duration of one year or less.

~~Shipping and Handling Expenses~~Leases

The ~~company records shipping~~Company adopted ASC 842 - Leases at the beginning of fiscal year 2020. The new standard required the Company to recognize most leases on the balance sheet as right of use (ROU) assets with corresponding lease liabilities. All necessary changes required by the new standard, including those to the Company’s accounting policies, business processes, systems, controls and ~~handling related expenses under~~disclosures, were implemented as of the ~~caption Cost~~first quarter of ~~sales in~~fiscal year 2020. See Note 7 of the Consolidated Financial Statements ~~of Comprehensive Income.~~for further information regarding the Company's lease accounting policies.

Cost of Sales

~~We include~~The Company includes material, labor and overhead in cost of sales. Included within these categories are items such as freight charges, warehousing costs, internal transfer costs and other costs of ~~our~~its distribution network.

Selling, General and Administrative

~~We include~~The Company includes costs not directly related to the manufacturing of ~~our~~its products in the Selling, general and administrative line item within the Consolidated Statements of Comprehensive Income. Included in these expenses are items such as compensation expense, rental expense, warranty expense and travel and entertainment expense.

Income Taxes

572021 Annual Report

The ~~company's~~Company's annual effective tax rate is based on income, statutory tax rates and tax planning strategies available in the various jurisdictions the ~~company~~Company operates. Complex tax laws can be subject to different interpretations by the ~~company~~Company and the respective government authorities. Significant judgment is required in evaluating tax positions and determining our tax expense. Tax positions are reviewed quarterly and tax assets and liabilities are adjusted as new information becomes available.

In evaluating the ~~company's~~Company's ability to recover deferred tax assets within the jurisdiction from which they arise, the ~~company~~Company considers all positive and negative evidence. These assumptions require significant judgment about forecasts of future taxable income.

Stock-Based Compensation

The ~~company~~Company has several stock-based compensation plans, which are described in ~~Note 9~~Note 10 of the Consolidated Financial Statements. Our policy is to expense stock-based compensation using the fair-value based method of accounting for all awards granted.

Earnings per Share

Basic earnings per share (EPS) excludes the dilutive effect of common shares that could potentially be issued, due to the exercise of stock options or the vesting of restricted shares and is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted-average number of shares outstanding, plus all dilutive sharesthat could potentially be issued. When in a loss position, basic and diluted EPS use the same weighted-average number of shares outstanding. Refer to Note 89 of the Consolidated Financial Statements for further information regarding the computation of EPS.

Comprehensive Income

Comprehensive income consists of Net earnings, Foreign currency translation adjustments, Unrealized holding ~~gain~~gains on ~~available-for-sale~~ securities, Unrealized gains on interest rate swap agreement and Pension and post-retirement liability adjustments. Refer to Note 1415 of the Consolidated Financial Statements for further information regarding comprehensive income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value

The ~~company~~Company classifies and discloses its fair value measurements in one of the following three categories:

•Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges.

•Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. Financial instrument values are determined using prices for recently traded financial instruments with similar underlying terms and direct or indirect observational inputs, such as interest rates and yield curves at commonly quoted intervals.

•Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market activity. Values are determined using significant unobservable inputs or valuation techniques.

See Note 1112 of the Consolidated Financial Statements for the required fair value disclosures.

Herman Miller, Inc. and Subsidiaries58

592021 Annual Report

Derivatives and Hedging

The ~~company~~Company calculates the fair value of financial instruments using quoted market prices whenever available. The ~~company~~Company utilizes derivatives to manage exposures to foreign currency exchange rates and interest rate risk. The fair values of all derivatives are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of these instruments are reported within ~~Other expenses~~"Other (income)~~: Other, net~~ expense, net" in the Consolidated Statements of Comprehensive Income, or ~~Accumulated Other Comprehensive Loss~~"Accumulated other comprehensive loss" within the Consolidated Balance Sheets, depending on the use of the derivative and whether it qualifies for hedge accounting treatment.

Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in Accumulated Other Comprehensive Loss, to the extent the hedges are effective, until the underlying transactions are recognized in the Consolidated Statements of Comprehensive Income. Derivatives not designated as hedging instruments are marked-to-market at the end of each period with the results included in Consolidated Statements of Comprehensive Income.

~~New~~See Note 12 of the Consolidated Financial Statements for further information regarding derivatives.

Recently Adopted Accounting Standards

On March 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" using the prospective method. This update simplifies how an entity assesses goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As amended, the goodwill impairment test consists of one step comparing the fair value of a reporting unit with its carrying amount. An entity then recognizes a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The adoption was utilized in the Company's current year goodwill impairment testing. Refer above to the "Goodwill and Indefinite-lived Intangible Assets" section for further information.

On May 31, 2020, the Company adopted ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" using the modified retrospective method. This update replaces the existing incurred loss impairment model with an expected loss model and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates including customer credit quality, historical write-off trends and general information regarding industry trends and the macroeconomic environment. The adoption did not have a material impact on the Company's financial statements, accounting policies or methods utilized to determine the allowance for doubtful accounts.

On May 31, 2020, the Company adopted ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" using the prospective method. This update modifies certain disclosure requirements for fair value measurements. The adoption did not have a material impact on the Company's financial statements.

Herman Miller, Inc. and Subsidiaries60

Recently Issued Accounting Standards Not Yet Adopted

The Company is currently evaluating the impact of adopting the following relevant standards issued by the FASB:

~~Recently Adopted Accounting Standards~~

Standard

Description

Effective Date ~~of Adoption~~

~~Effect on the Financial Statements or Other Significant Matters~~

~~Improvements to Employee Share-Based Payment Accounting~~

Under the new guidance, all excess tax benefits/deficiencies should be recognized as income tax expense/benefit, entities may elect how to account for forfeitures and cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity on the cash flow.

~~June 4, 2017~~

The company adopted the accounting standard in the first quarter of fiscal 2018. As a result, the company elected to change its policy from estimating forfeitures to recognizing forfeitures when they occur, which resulted in an increase in Retained earnings of $0.1 million, a decrease in Additional paid in capital of $0.3 million and an increase in Other noncurrent assets of $0.2 million in the Condensed Consolidated Balance Sheets. The other impacts resulting from adoption did not have a material impact on the company's Financial Statements.

~~Recently Issued Accounting Standards Not Yet Adopted~~

~~Standard~~2018-14

~~Description~~

~~Date of Adoption~~

~~Effect on the Financial Statements or Other Significant Matters~~

~~Revenue from Contracts with Customers~~

The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The standard allows for two adoption methods, a full retrospective or modified retrospective approach.

~~June 3, 2018~~

The company has completed its review of the impact of the new standard and has identified changes in the determination of performance obligations around product and service revenue. For commercial contracts in which the company sells directly to end customers, in most cases, the company currently delays revenue recognition until the products are shipped and installed and records third-party installation and certain other fees net. However, under the new standard, in most cases, the company will recognize product revenue when title and risk of loss have transferred and will recognize service revenue as the services are performed. Additionally, the company will record certain product pricing elements related to its direct customer sales within Cost of Sales rather than net within revenue as is current practice. The company has determined that these elements relate to the product performance obligation which the company is considered to control under the new standard. The company has implemented changes to its business processes, systems and controls to support recognition and disclosure under the new standard. The company is adopting the standard in fiscal 2019 using the modified-retrospective approach and as a result expects to record an accumulative catch up adjustment of approximately $2 million increase to fiscal 2019 beginning retained earnings.

Compensation - Retirement ~~Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement~~Benefits - Defined Benefit ~~Cost~~

~~This standard changes the rules related~~Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the ~~income statement presentation of the components of net periodic benefit cost~~Disclosure Requirements for Defined Benefit Plans

This update eliminates, adds and clarifies certain disclosure requirements for employers that sponsor defined benefit pension ~~and~~or other ~~postretirement benefit~~post-retirement plans. Under the new guidance, entities must present the service cost component of net periodic benefit cost in the same income statement line items as other employee compensation costs related to services rendered during the period. Other components of net periodic benefit cost will be presented separately from the line items that include the service cost. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its financial statements.

~~June 3, 2018~~

The standard is expected to impact the classification of certain costs within the company's Consolidated Statements of Comprehensive Income. No impact to the company's Consolidated Balance Sheets or Consolidated Statements of Cash Flow are expected as a result of the standard.May 30, 2021

2019-12

Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes

~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~

This update ~~allows~~removes certain exceptions for ~~the reclassification~~
recognizing deferred taxes for investments,
performing intraperiod allocation and
calculating income taxes in interim periods.
The update also adds guidance to ~~retained earnings~~reduce
complexity in certain areas, including
recognizing deferred taxes for tax goodwill and allocating taxes to members of ~~the tax effects stranded in Accumulated Other Comprehensive Income resulting from The Tax Cuts and Jobs Act.~~a consolidated group. Early adoption is permitted.

~~June 2, 2019~~

~~The company is still evaluating these amendments and has not determined its accounting policy and whether or not an election will be made to reclassify the stranded effects.~~

~~Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities~~

This update amends the hedge accounting recognition and presentation with the objectives of improving the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities and simplifying the application of hedge accounting. The update expands the strategies eligible for hedge accounting, relaxes the timing requirements of hedge documentation and effectiveness assessments and permits the use of qualitative assessments on an ongoing basis to assess hedge effectiveness. The new guidance also requires new disclosures and presentation.

~~June 2, 2019~~

~~The company is currently evaluating the impact of adopting this guidance.~~May 30, 2021

All other issued and not yet effective accounting standards are not relevant to the Company.

2. Revenue from Contracts with Customers

Disaggregated Revenue

The Company’s revenue is comprised primarily of sales of products and installation services. Depending on the type of contract, the method of accounting and timing of revenue recognition may differ. Below, descriptions have been provided that summarize the Company’s different types of contracts and how revenue is recognized for each.

~~2. Acquisitions~~•Single Performance Obligation - these contracts are transacted with customers and ~~Divestitures~~

~~Contract Furniture Dealerships~~

~~On July 31, 2017,~~include only the ~~company completed~~product performance obligation. Most commonly, these contracts represent master agreements with independent third-party dealers in which a purchase order represents the customer contract, point of sale ~~of a wholly-owned contract furniture dealership in Vancouver, Canada~~transactions through the Retail segment, as well as customer purchase orders for ~~initial cash consideration of $2.0 million. A pre-tax gain of $1.1 million was recognized as a result of~~ the ~~sale~~Maharam subsidiary within the ~~caption Selling, general~~North America Contract segment. For contracts that include a single performance obligation, the Company records revenue at the point in time when title and ~~administrative~~risk of loss has transferred to the customer.

•Multiple Performance Obligations - these contracts are transacted with customers and include more than one performance obligation; products, which are shipped to the customer by the Company and installation and other services, which are primarily fulfilled by independent third-party dealers. For contracts that include multiple performance obligations, the Company records revenue for the product performance obligation at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. In most cases, the Company has concluded that it is the agent for the installation services performance obligation and as such, the revenue and costs of these services are recorded net within Net sales in the ~~Condensed~~Company’s Consolidated Statements of Comprehensive Income.

In certain instances, entities owned by the Company, rather than independent third-party dealers, perform installation and other services. In these cases, Service revenue is generated by the Company’s entities that provide installation services, which include owned dealers, and is recognized by the Company over time as the services are provided. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on relative standalone selling prices.

•Other - these contracts are comprised mainly of alliance fee arrangements, whereby the Company earns revenue for allowing other furniture sellers access to its dealer distribution channel, as well as other miscellaneous selling arrangements. Revenue from alliance contracts are recorded at the point in time in which the sale is made by other furniture sellers through the Company’s sales channel.

612021 Annual Report

Revenue disaggregated by contract type has been provided in the table below:


	Year Ended
(In millions)	May 29, 2021		May 30, 2020
Net Sales:
Single performance obligation
Product revenue	$	2,180.5	$	2,116.6
Multiple performance obligations
Product revenue	265.8		347.8
Service revenue	9.6		9.7
Other	9.2		12.5
Total	$	2,465.1	$	2,486.6

Revenue disaggregated by product type and segment has been provided in the table below:


	Year Ended
(In millions)	May 29, 2021		May 30, 2020
North America Contract:
Workplace	$	717.2	$	976.0
Performance Seating	280.7		381.5
Lifestyle	81.1		93.1

Other	115.0		147.6
Total North America Contract	$	1,194.0	$	1,598.2

International Contract:
Workplace	$	129.0	$	155.9
Performance Seating	296.4		222.2
Lifestyle	223.8		105.8
Other	19.8		18.9
Total International Contract	$	669.0	$	502.8

Retail:
Workplace	$	8.5	$	3.9
Performance Seating	207.5		43.1
Lifestyle	385.0		338.6

Other	1.1		0
Total Retail	$	602.1	$	385.6

Total	$	2,465.1	$	2,486.6

Refer to Note 14 of the Consolidated Financial Statements for further information related to our segments.

Contract Assets and Contract Liabilities

The Company records contract assets and contract liabilities related to its revenue generating activities. Contract assets include certain receivables from customers that are unconditional as all performance obligations with respect to the contract with the customer have been completed. These amounts represent trade receivables and they are recorded within the caption “Accounts receivable, net” in the Consolidated Balance Sheets.

Contract assets also include amounts that are conditional because certain performance obligations in contracts with customers are incomplete as of the balance sheet date. These contract assets generally arise due to contracts with customers that include multiple performance obligations, e.g., both the product that is shipped to the customer by the Company, as well as installation services provided by independent third-party dealers. For these contracts, the Company recognizes revenue upon satisfaction of the product performance obligation. These contract assets are included in the caption "Unbilled accounts receivable" in the Consolidated Balance Sheets until all performance obligations in the contract with the customer have been satisfied.

Herman Miller, Inc. and Subsidiaries62

Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized. These customer deposits are included within the caption “Customer deposits” in the Consolidated Balance Sheets. During the year ended May 29, 2021, the Company recognized Net sales of $28.9 million related to customer deposits that were included in the balance sheet as of May 30, 2020.

3. Acquisitions and Divestitures

Maars Holding B.V.

On ~~January~~August 31, 2018, the Company acquired 48.2% of the outstanding equity of Global Holdings Netherlands B.V., which owns 100% of Maars Holding B.V. ("Maars”), a Harderwijk, Netherlands-based worldwide leader in the design and manufacturing of interior wall solutions. The Company acquired its 48.2% ownership interest in Maars for approximately $6.1 million in cash. The entity is accounted for using the equity method of accounting as the Company has significant influence, but not control, over the entity.

For the Maars equity method investment, the fair values assigned to the assets acquired were based on best estimates and assumptions as of August 31, 2018, and the valuation analysis was completed in the fourth quarter of fiscal 2019.

Nine United Denmark A/S

On June 7, 2018, the Company acquired 33% of the outstanding equity of Nine United Denmark A/S, d/b/a HAY and subsequently renamed to HAY ApS ("HAY”), a Copenhagen, Denmark-based, design leader in furniture and ancillary furnishings for residential and contract markets in Europe and Asia. The Company acquired its 33% ownership interest in HAY for approximately $65.5 million in cash. The Company also acquired the rights to the HAY brand in North America under a long-term license agreement for approximately $4.8 million in cash. In the fiscal periods leading up to December 2, 2019 (“HAY Acquisition Date”), the date when the Company purchased an additional 34% equity voting interest in HAY, this licensing agreement was recorded as a definite life intangible asset and was being amortized over its 15-year useful life. This asset was also recorded within Other amortizable intangibles, net within the Condensed Consolidated Balance Sheets as of June 1, ~~2017,~~2019.

On December 2, 2019, the ~~company completed~~Company obtained a controlling financial interest in HAY through the ~~sale~~purchase of an additional 34% equity voting interest. The completion of the acquisition will allow the Company to further promote growth and development of HAY's ancillary product lines and continue to support product innovation and sales growth. The Company previously accounted for its ownership interest in HAY as an equity method investment, but upon increasing its ownership to 67% on the HAY Acquisition Date, the Company consolidated the operations of HAY. Total consideration paid for HAY on the HAY Acquisition Date was $79.0 million, exclusive of HAY cash on hand. The Company funded the acquisition with cash and cash equivalents.

The previously mentioned HAY long-term licensing agreement was deemed to be a ~~wholly-owned contract furniture dealership in Pennsylvania in exchange for a $3.0 million note receivable. A pre-tax gain of $0.7 million was recognized as~~contractual preexisting relationship. As a result of the ~~sale~~business combination, the Company recorded this arrangement at its HAY Acquisition Date fair value, which resulted in an increase in goodwill of $10.0 million and a net gain of $5.9 million, which was recorded within ~~the caption Selling, general and administrative~~“Gain on consolidation of equity method investments" within the Consolidated Statements of Comprehensive Income. The ~~note receivable~~goodwill was ~~deemed~~recorded within the Company’s Retail segment.

The Company is a party to ~~be a variable~~options, that if exercised, would require it to purchase the remaining 33% of the equity in HAY, at fair market value. This remaining redeemable noncontrolling interest in ~~a variable interest entity.~~ HAY is classified outside permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption amount.

The ~~carrying value~~allocation of the ~~note~~purchase price was ~~$2.5 million as~~finalized during the first quarter of ~~June 2, 2018~~fiscal 2021. The following table presents the allocation of purchase price related to acquired tangible assets:

Herman Miller, Inc. and ~~represents the company's maximum exposure to loss.~~ Subsidiaries63


(In millions)
Cash	$	12.1
Working capital, net of cash and inventory step-up	12.3
Net property and equipment	0.9
Other assets	3.9
Other liabilities	(3.1)
Net assets acquired	$	26.1

The ~~company is not deemed to be the primary beneficiary~~purchase of the ~~variable interest entity as the buyers of the dealership control the activities that most significantly~~

~~impact the entity's economic performance, including sales, marketing and operations.~~

~~Naughtone Holdings Limited~~

~~On June 3, 2016, the company acquired a 50 percent noncontrolling~~additional equity interest in ~~Naughtone, a leader~~HAY was considered to be an acquisition achieved in ~~soft seating products, stools, occasional tables and meeting tables, for $12.4 million in cash consideration. In~~stages, whereby the ~~second quarter of fiscal 2017, the company paid additional purchase consideration of approximately $0.6 million as part of the final net~~previously held equity ~~adjustment.~~

~~George Nelson Bubble Lamp Product Line Acquisition~~

On September 17, 2015, the company acquired certain assets associated with the George Nelson Bubble Lamp product line, which together constituted the acquisition of a business. Consideration transferred to acquire the assets consisted of $3.6 million in cash transferred during the second quarter of fiscal 2016 and an additional component of performance-based contingent consideration with a fair value of $2.7 millioninterest was remeasured as of the ~~acquisition date.~~

HAY Acquisition Date. The assets acquired included an exclusive manufacturing agreement and customer relationships with fair values of $2.5 million and $0.6 million, respectively, each having a useful life of 10 years. The excess of the purchase consideration overCompany considered multiple factors in determining the fair value of the previously held equity method investment, including the price negotiated with the selling shareholder for the 34% equity interest in HAY, an income valuation model (discounted cash flow) and current trading multiples for comparable companies. Based on this analysis, the Company recognized a non-taxable gain of approximately $0.3 million on the remeasurement of the previously held equity method investment of $67.8 million in the third quarter of fiscal 2020. The net gain has been recognized in “Gain on consolidation of equity method investments" within the Consolidated Statements of Comprehensive Income.

The following table summarizes the acquired identified intangible assets, ~~acquired~~valuation method employed, useful lives and fair value, as determined by the Company at the HAY Acquisition Date:


(In millions)	Valuation Method	Useful Life (years)	Fair Value
Inventory Step-up	Comparative Sales Approach	0.8	$	3.4
Backlog	Multi-Period Excess Earnings	0.3	1.7
Deferred Revenue	Adjusted Fulfillment Cost Method	0.1	(2.2)
Tradename	Relief from Royalty	Indefinite	60.0
Product Development	Relief from Royalty	8.0	22.0
Customer Relationships	Multi-Period Excess Earnings	9.0	34.0
Total			$	118.9

Goodwill related to the acquisition was ~~$3.2~~recorded within the International Contract segment for $101.1 million and the Retail segment for $10.0 million. Subsequent to the acquisition, the goodwill recorded to the Retail segment was fully impaired in the fourth quarter of fiscal 2020 based on the results of the Company's annual goodwill impairment assessment. Additionally, the Company recognized an impairment charge of $20.7 million on the HAY tradename in the fourth quarter of fiscal 2020 based on the results of the Company's annual indefinite-lived trade name impairment test.

naughtone

On October 25, 2019 (“naughtone Acquisition Date”), the Company purchased the remaining 47.5% equity voting interest in naughtone (Holdings) Limited and naughtone Manufacturing Ltd. (together “naughtone”). naughtone is an upscale, contemporary furniture manufacturer based in Harrogate, North Yorkshire, UK. The acquisition is intended to allow the Company to further promote growth and development of naughtone's ancillary product lines, and continue to support product innovation and sales growth. The Company previously accounted for its ownership interest in naughtone as ~~goodwill~~an equity method investment. Upon increasing its ownership to 100% on the naughtone Acquisition Date, the Company obtained a controlling financial interest and consolidated the operations of naughtone. Total consideration paid for naughtone on the naughtone Acquisition Date was $45.9 million, exclusive of naughtone cash on hand. The Company funded the acquisition with cash and cash equivalents. The allocation of the purchase price was finalized during the fourth quarter of fiscal 2020.

The following table presents the allocation of purchase price related to acquired tangible assets:

Herman Miller, Inc. and Subsidiaries64


(In millions)
Cash	$	5.1
Working capital, net of cash and inventory step-up	1.3
Net property and equipment	0.8
Net assets acquired	$	7.2

The purchase of the remaining equity interest in naughtone was considered to be an acquisition achieved in stages, whereby the previously held equity interest was remeasured as of the naughtone Acquisition Date. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including the price negotiated with the selling shareholder for the 47.5% equity interest in naughtone, an income valuation model (discounted cash flow) and current trading multiples for comparable companies. Based on this analysis, the Company recognized a non-taxable gain of approximately $30.0 million on the remeasurement of the previously held equity method investment of $20.5 million. The net gain has been recognized in “Gain on consolidation of equity method investments" within the ~~Consumer reportable segment.~~ Consolidated Statements of Comprehensive Income.

The ~~total amount~~following table summarizes the acquired identified intangible assets, valuation method employed, useful lives and fair value, as determined by the Company at the naughtone Acquisition Date:


(In millions)	Valuation Method	Useful Life (years)	Fair Value
Inventory Step-up	Comparative Sales Approach	0.3	$	0.2
Backlog	Multi-Period Excess Earnings	0.3	0.8
Tradename	Relief from Royalty	Indefinite	8.5
Customer Relationships	Multi-Period Excess Earnings	9.0	29.4
Total			$	38.9

Goodwill related to the acquisition was recorded within the North America Contract and International Contract segments for $35.0 million and $22.5 million, respectively. Subsequent to the acquisition, the Company recognized an impairment charge of ~~this goodwill is deductible~~$2.5 million on the naughtone tradename in the fourth quarter of fiscal 2020 based on the results of the Company's annual indefinite-lived trade name impairment test.

Pro Forma Results of Operations

The results of naughtone and HAY’s operations have been included in the Consolidated Financial Statements beginning on October 25, 2019 and December 2, 2019 respectively. The following table provides pro forma results of operations for ~~tax purposes.~~the years ended May 30, 2020 and June 1, 2019, as if naughtone and HAY had been acquired as of June 3, 2018. The pro forma results include certain purchase accounting adjustments such as the estimated change in depreciation and amortization expense on the acquired tangible and intangible assets. Pro forma results do not include any anticipated cost savings from the planned integration of these acquisitions, or the gain on the consolidation of the HAY and naughtone equity method investments of approximately $36.2 million. Accordingly, such amounts are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the dates indicated or that may result in the future.


	Year Ended
(In millions)	May 30, 2020		June 1, 2019
Net sales	$	2,580.6	$	2,757.3
Net (loss) earnings attributable to Herman Miller, Inc.	$	(46.3)	$	163.7

4. Inventories


(In millions)	May 29, 2021		May 30, 2020
Finished goods and work in process	$	166.7	$	151.1
Raw materials	46.9		46.2
Total	$	213.6	$	197.3

652021 Annual Report

(In millions) June 2, 2018 June 3, 2017
Finished goods and work in process $ 124.2
$ 119.0
Raw materials 38.2
33.4
Total $ 162.4
$ 152.4

Inventories valued using LIFO amounted to ~~$25.5~~$21.8 million and ~~$25.2~~$24.9 million as of ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017,~~May 30, 2020, respectively. If all inventories had been valued using the first-in first-out method, inventories would have been ~~$175.3~~$230.2 million and ~~$164.6~~$210.8 million at ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017,~~May 30, 2020, respectively.

4.5. Investments in Nonconsolidated Affiliates

The ~~company~~Company has certain investments in entities that are accounted for using the equity method (“nonconsolidated affiliates”). The investments are included in "Other noncurrent assets" in the Consolidated Balance Sheets and the equity earnings are included in ~~Equity~~"Equity earnings from nonconsolidated affiliates, net of ~~tax~~tax" in the Consolidated Statements of Comprehensive Income. Refer to the tables below for the investment balances that are included in the Consolidated Balance Sheets and for the equity earnings that are included in the Consolidated Statements of Comprehensive Income.


(In millions)	May 29, 2021		May 30, 2020
Investments in nonconsolidated affiliates	$	11.7	$	12.2

(in millions) June 2, 2018 June 3, 2017
Investments in nonconsolidated affiliates $ 16.8
$ 16.2


(In millions)	May 29, 2021		May 30, 2020		June 1, 2019
Equity earnings from nonconsolidated affiliates, net of tax	$	0.3	$	5.0	$	5.0

(in millions) June 2, 2018 June 3, 2017 May 28, 2016
Equity earnings from nonconsolidated affiliates $ 3.0
$ 1.6
$ 0.4

The ~~company~~Company had an ownership interest in ~~five~~2 nonconsolidated affiliates at ~~June 2, 2018.~~May 29, 2021. Refer to the ~~company's~~Company's ownership percentages shown below:


Ownership Interest	June 2, 2018	June 3, 2017	Ownership Interest	May 29, 2021	May 30, 2020
Kvadrat Maharam Arabia DMCC	50.0%	50.0%	Kvadrat Maharam Arabia DMCC	0%	50.0%
Kvadrat Maharam Pty Limited	50.0%		Kvadrat Maharam Pty Limited	50.0%	50.0%
Kvadrat Maharam Turkey JSC	50.0%		Kvadrat Maharam Turkey JSC	0%	50.0%
Danskina B.V.	50.0%		Danskina B.V.	0%	50.0%
Naughtone Holdings Limited	50.0%
Global Holdings Netherlands B.V. (Maars)			Global Holdings Netherlands B.V. (Maars)	48.2%	48.2%

Kvadrat Maharam

The Kvadrat Maharam nonconsolidated affiliates are distribution entities that are engaged in selling decorative upholstery, drapery and wall covering products. At ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017,~~May 30, 2020, the ~~company's~~Company's investment value in Kvadrat Maharam Pty was ~~$1.9 million~~approximately equal to and ~~$1.8~~$1.7 million more than the ~~company's~~Company's proportionate share of the underlying net assets, respectively. This difference was driven by a step-up in fair value of the investment in Kvadrat Maharam Pty, stemming from the Maharam business combination. This amount is considered to be a permanent basis difference.

~~Naughtone~~In fiscal 2020 the Company agreed to fully divest its interest in Kvadrat Maharam Arabia DMCC, Kvadrat Maharam Turkey JSC and Danskina B.V for approximately $3 million. The divestitures were completed in the first half of fiscal 2021.

~~At June 2,~~

Maars

On August 31, 2018, the ~~company's~~Company acquired 48.2% of the outstanding equity of Global Holdings Netherlands B.V., which owns 100% of Maars Holding B.V. ("Maars”), a Harderwijk, Netherlands-based worldwide leader in the design and manufacturing of interior wall solutions. The Company acquired its 48.2% ownership interest in Maars for approximately $6.1 million in cash. The entity is accounted for using the equity method of accounting as the Company has significant influence, but not control, over the entity.

As of the August 31, 2018 acquisition date, the Company's investment value in ~~Naughtone~~Maars was ~~$10.2~~$3.1 million more than the ~~company's~~Company's proportionate share of the underlying net assets. This amount represented the difference between the price that the Company paid to acquire 48.2% of the outstanding equity and the carrying value of the net assets of ~~which $2.4~~Maars. Of this difference, $2.7 million ~~was~~is being amortized over the remaining useful lives of the assets, while ~~$7.8~~$0.4 million ~~was~~is considered a permanent ~~basis~~ difference. ~~The change in the permanent basis difference from the prior year was due to changes in foreign currency exchange rates.~~

Herman Miller, Inc. and Subsidiaries66

At ~~June 3, 2017,~~May 29, 2021, the ~~company's~~Company's investment value in ~~Naughtone was $9.8~~Maars is $2.5 million more than the ~~company's~~Company's proportionate share of the underlying net assets, of which ~~$2.3~~$2.1 million ~~was~~is being amortized over the remaining useful lives of the assets, while ~~$7.5~~$0.4 million was considered a permanent basis difference.

Transactions with Nonconsolidated Affiliates

Sales to and purchases from nonconsolidated affiliates were as follows for the periods presented below:


(In millions)	May 29, 2021		May 30, 2020		June 1, 2019
Sales to nonconsolidated affiliates	$	1.0	$	3.6	$	3.9
Purchases from nonconsolidated affiliates	$	0.3	$	5.0	$	23.0

(in millions) June 2, 2018 June 3, 2017 May 28, 2016
Sales to nonconsolidated affiliates $ 4.3
$ 4.0
$ 2.5
Purchases from nonconsolidated affiliates $ 6.8
$ 4.2
$ 0.9

Balances due to or due from nonconsolidated affiliates were as follows for the periods presented below:


(In millions)	May 29, 2021		May 30, 2020
Receivables from nonconsolidated affiliates	$	0.2	$	0.6
Payables to nonconsolidated affiliates	$	0.1	$	0

(in millions) June 2, 2018 June 3, 2017
Receivables from nonconsolidated affiliates $ 0.9
$ 0.8
Payables to nonconsolidated affiliates $ 1.0
$ 0.5

5.6. Short-Term Borrowings and Long-Term Debt

Long-term debt consisted of the following obligations:


(In millions)	May 29, 2021		May 30, 2020
Debt securities, 6.0%, due March 1, 2021	$	0	$	50.0
Debt securities, 4.95%, due May 20, 2030	49.9		49.9
Syndicated Revolving Line of Credit, due August 2024	225.0		490.0

Supplier financing program	2.2		1.4

Total debt	277.1		591.3
Less: Current debt	(2.2)		(51.4)
Long-term debt	$	274.9	$	539.9

(In millions) June 2, 2018 June 3, 2017
Series B Senior Notes, 6.42%, due January 3, 2018 $ —
$ 149.9
Debt securities, 6.0%, due March 1, 2021 50.0
50.0
Syndicated Revolving Line of Credit, due September 2021 225.0
—
Construction-Type Lease 7.0
7.0
Supplier financing program 3.8
3.2
Total debt $ 285.8
$ 210.1
Less: Current debt (10.8 ) (10.2 )
Long-term debt $ 275.0
$ 199.9

The ~~company's~~Company's syndicated revolving line of credit provides the ~~company~~Company with up to ~~$400~~$500 million in revolving variable interest borrowing capacity and ~~includes~~included an "accordion feature" allowing the ~~company~~Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing capacity of the facility by ~~$200~~up to $250 million. ~~The facility expires in September 2021 and outstanding~~Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated rates as outlined in the agreement. Interest is payable periodically throughout the period if borrowings are outstanding.

~~On January 3, 2018,~~In June 2020, the ~~company borrowed $225.0~~Company repaid the $265 million draw on its ~~existing~~syndicated revolving line of ~~credit. Of these proceeds, $150.0 million~~credit that was ~~used~~taken as a precautionary measure in March 2020 to ~~repay its Series B senior notes upon maturity, while~~provide additional near-term liquidity given the ~~rest~~uncertainty related to COVID-19. After the end of the ~~proceeds was designated for general business purposes.~~quarter ended February 27, 2021, the Company repaid $50 million of private placement notes due March 1, 2021 with available cash on hand.

~~As of June 2, 2018, the total debt outstanding related to~~Available borrowings under the syndicated revolving line of credit ~~was $225.0 million. Available borrowings against this facility~~ were $166.8 million due to $8.2 million related to outstanding letters of credit. As of June 3, 2017, there were zero outstanding borrowings against this facility and available borrowings were $391.7 million due to $8.3 million related to outstanding letters of credit.as follows for the periods indicated:


(In millions)	May 29, 2021		May 30, 2020
Syndicated revolving line of credit borrowing capacity	$	500.0	$	500.0
Less: Borrowings under the syndicated revolving line of credit	225.0		490.0
Less: Outstanding letters of credit	9.8		9.4
Available borrowings under the syndicated revolving line of credit	$	265.2	$	0.6

~~Our senior notes and the~~

The unsecured senior revolving credit facility ~~restrict,~~restricts, without prior consent, ~~our~~the Company's borrowings, capital leases and the sale of certain assets. In addition, ~~we have~~the Company has agreed to maintain certain financial performance ratios, which include a maximum leverage ratio covenant, which is measured by the ratio of debt to trailing four quarter adjusted EBITDA (as defined in the credit agreement) and is required to be less than 3.5:1, except that wethe Company may elect, under certain conditions, to increase the maximum Leverage Ratio to 4:1 for four consecutive fiscal quarter

672021 Annual Report

end dates. The covenants also require a minimum interest coverage ratio, which is measured by the ratio of trailing four quarter EBITDA to trailing four quarter interest expense (as defined in the credit agreement) and is required to be greater than 4:3.5:1. Adjusted EBITDA is generally defined in the credit agreement as EBITDA adjusted by certain items which include non-cash share-based compensation, non-recurring restructuring costs and extraordinary items. At ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017,~~May 30, 2020, the ~~company~~Company was in compliance with all of these restrictions and performance ratios.

On May 20, 2020, the Company entered into a third amendment to its existing Private Shelf Agreement, dated December 14, 2010, as amended (together with the third amendment, the "Agreement"), between the Company and PGIM, Inc. (formerly known as Prudential Investment Management, Inc.) and certain of its affiliates (collectively, “Prudential”). The Agreement provides for a $150.0 million revolving facility, which includes $50.0 million of unsecured senior notes that were repaid on March 1, 2021 (the "Existing Notes") and an additional $50.0 million aggregate principal amount of unsecured senior notes issued on May 20, 2020 (the "2020 Notes"). The 2020 Notes are due on May 20, 2030 and bear interest at a fixed annual coupon rate of 4.95%. The Company intends to use the proceeds of the 2020 Notes for general corporate purposes and/or to refinance existing indebtedness, including the Existing Notes. The Agreement also establishes an uncommitted shelf facility (the “Facility”), under which Prudential will consider one or more requests from the Company to purchase up to an additional $50.0 million in aggregate amount of the Company’s senior unsecured notes from time to time. The interest rate on any future notes issued under the Facility will be based on the benchmark Treasury rate corresponding to the weighted average life of the notes, plus a spread as determined by Prudential. The Facility will expire on May 20, 2023.

Annual maturities of debt for the five fiscal years subsequent to May 29, 2021 are as shown in the table below.


(In millions)
2022	$	2.2
2023	$	0
2024	$	0
2025	$	225.0
2026	$	0
Thereafter	$	49.9

Herman Miller, Inc. and Subsidiaries68

Supplier Financing Program

The ~~company~~Company has an agreement with a ~~third party~~third-party financial institution ~~to provide a platform~~ that allows certain participating suppliers the ability to finance payment obligations from the ~~company.~~Company. Under this program, participating suppliers may finance payment obligations of the ~~company,~~Company, prior to their scheduled due dates, at a discounted price to the ~~third party~~third-party financial institution.

The ~~company~~Company has lengthened the payment terms for certain suppliers that have chosen to participate in the program. As a result, certain amounts due to suppliers have payment terms that are longer than standard industry practice and as such, these amounts have been excluded from the caption “Accounts payable” in the Condensed Consolidated Balance Sheets as the amounts have been accounted for by the ~~company~~Company as a current debt obligation. Accordingly, ~~$3.8~~$2.2 million and ~~$3.2~~$1.4 million have been recorded within the caption ~~“Other accrued liabilities”~~“Short-term borrowings and current portion of long-term debt” for the periods ended ~~June 2, 2018~~May 29, 2021 and ~~June 3, 2017,~~May 30, 2020, respectively.

Construction-Type Lease

During fiscal 2015, the ~~company~~Company entered into a lease agreement for the occupancy of a new studio facility in Palo Alto, ~~California. During~~California which runs through fiscal 2026. In fiscal 2017, the ~~company~~Company became the deemed owner of the leased building for accounting purposes as a result of the ~~company's~~Company's involvement during the construction phase of the project. The lease iswas therefore accounted for as a financing ~~transaction~~lease and the ~~recorded asset~~building and related financing ~~obligation have been~~liability were initially recorded at fair value in the Consolidated Balance Sheets within Construction in progress and Other accrued liabilities. During the first quarter of fiscal 2019, the construction was substantially completed, and the property was placed in service. As a result, the Company began depreciating the assets over their estimated useful lives. The Company also reclassified the related financing liability to Long-term debt. The carrying value of the building was $6.7 million and the related financing liability was $6.9 million at June 1, 2019. As a result of the adoption of ASC 842 in the first quarter of fiscal 2020, the Company derecognized its construction-type lease asset and financing liability and there was 0 related cumulative adjustment to retained earnings.

7. Leases

Accounting Policies

The Company has leases for retail studios, showrooms, manufacturing facilities, warehouses and vehicles, which expire at various dates through 2042. Certain lease agreements include contingent rental payments based on per unit usage over a contractual amount and others include rental payments adjusted periodically for inflationary indexes.

For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of use ("ROU") assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. Leases, and any leasehold improvements, are depreciated over the expected lease term. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Variable lease costs associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease costs are presented as operating expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income in the same line item as the expense arising from fixed lease payments for operating leases.

692021 Annual Report

Additionally, certain leases include renewal or termination options, which can be exercised at the Company’s discretion. Lease terms include the noncancelable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at contract inception. Arrangements that are leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets, ~~within both Construction~~and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. If leased assets have leasehold improvements, the depreciable life of those leasehold improvements are limited by the expected lease term.

As none of the Company’s leases provide an implicit discount rate, the Company uses an estimated incremental borrowing rate at the lease commencement date in ~~progress~~determining the present value of the lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, location of the lease, and the Company’s credit risk relative to risk-free market rates.

Leases

The Company's lease costs recognized in the Consolidated Statement of Income consist of the following:


	Year Ended		Year Ended
(In millions)	May 29, 2021		May 30, 2020
Operating lease costs	$	50.3	$	51.3
Short-term lease costs	3.2		2.6
Variable lease costs*	8.3		8.2
Total	$	61.8	$	62.1

*Not included in the table above for the year ended May 29, 2021 are variable lease costs of approximately $84.5 million for raw material purchases under certain supply arrangements that the Company has determined to meet the definition of a lease.

During the fourth quarter of fiscal 2020, the Company determined it was more likely than not that the fair value of certain right of use assets were below their carrying values and assessed these assets for impairment. As result of this assessment the Company recorded an impairment of $19.3 million in the Consolidated Statements of Comprehensive income.

At May 29, 2021, the Company has no financing leases. The undiscounted annual future minimum lease payments related to the Company's right-of-use assets are summarized by fiscal year in the following table:


(In millions)
2022	$	42.3
2023	42.4
2024	39.1
2025	36.3
2026	28.6
Thereafter	72.1
Total lease payments*	260.8
Less interest	25.2
Present value of lease liabilities	$	235.6

*Lease payments exclude $20.9 million of legally binding minimum lease payments for leases signed but not yet commenced, primarily related to a new DWR corporate office in Stamford, CT expected to be occupied in fiscal 2022.

The long-term portion of the lease liabilities included in the amounts above is $196.9 million and the remainder of the lease liabilities are included in Other accrued liabilities in the Condensed Consolidated Balance Sheets.

As of May 29, 2021 and May 30, 2020, the weighted average remaining lease term for all operating leases was 7 years. The weighted average discount rate for operating leases as of May 29, 2021 and May 30, 2021 was 2.8%, and 3.1%, respectively.

Herman Miller, Inc. and Subsidiaries70

During the years ended May 29, 2021 and May 30, 2020, the cash paid for leases included in the measurement of the liabilities and the operating cash flows was $45.3 million and $49.2 million, respectively. Right of use assets obtained in exchange for new liabilities was $58.1 million and $13.4 million for the ~~fiscal periods~~years ended ~~June 2, 2018~~May 29, 2021 and June 3, 2017. The value of the building and the related financing liability was $7.0 million at June 2, 2018 and June 3, 2017. The original fair value of the building and the related financing liability was determined through a blend of an income approach,May 30, 2020, respectively.

~~comparable property sales approach and a replacement cost approach. Upon completion of construction, the liability will be reclassified into Long-term debt.~~

~~Annual maturities of long-term debt for the five fiscal years subsequent to June 2, 2018 are as shown in the table below.~~

(In millions)
2019 $ —
2020 $ —
2021 $ 50.0
2022 $ 225.0
2023 $ —
Thereafter $ —

~~6. Operating Leases~~

The company leases real property and equipment under agreements that expire on various dates. Certain leases contain renewal provisions and generally require the company to pay utilities, insurance, taxes, and other operating expenses.

~~Future minimum rental payments required under operating leases that have non-cancelable lease terms as of~~ ~~June 2, 2018, are as follows:~~

(In millions)
2019 $ 45.8
2020 $ 42.8
2021 $ 40.5
2022 $ 43.1
2023 $ 32.5
Thereafter $ 123.8

~~Total rental expense charged to operations was $49.3 million,~~ ~~$45.3 million~~ ~~and~~ ~~$45.6 million, in fiscal 2018, 2017 and 2016, respectively. Substantially all such rental expense represented the minimum rental payments under operating leases.~~

7.8. Employee Benefit Plans

The ~~company~~Company maintains retirement benefit plans for substantially all of its employees.

Pension ~~Plans and Post-Retirement Medical Insurance~~Plan

~~The company offers certain employees retirement benefits under domestic defined benefit plans. The~~ ~~company provides healthcare benefits to employees who retired from service on or before a qualifying date in 1998. As~~One of the qualifying date, the company discontinued offering post-retirement medical to future retirees. Benefits to qualifying retirees under this plan are based on the employee's years of service and age at the date of retirement. In addition to the domestic pension and retiree ~~healthcare plan, one of the~~ ~~company's~~ Company's wholly owned foreign subsidiaries has a defined-benefit pension plan based upon an average final pay benefit calculation. The measurement date for ~~the company's remaining domestic and international pension plans, as well as its post-retirement medical~~this plan is the last day of the fiscal ~~year.~~year and the plan is frozen to new participants.

Benefit Obligations and Funded Status

The following table presents, for the fiscal years noted, a summary of the changes in the projected benefit obligation, plan assets and funded status of the ~~company's domestic~~Company's pension plan:


	Pension Benefit
(In millions)	2021		2020

Change in benefit obligation:
Benefit obligation at beginning of year	$	126.5	$	109.1

Interest cost	2.2		2.4
Plan Amendments	0		0

Foreign exchange impact	18.6		(2.9)
Actuarial (gain) loss (1)	(2.9)		21.0


Benefits paid	(3.5)		(3.1)
Benefit obligation at end of year	$	140.9	$	126.5

Change in plan assets:
Fair value of plan assets at beginning of year	$	88.1	$	88.2
Actual return on plan assets	6.6		4.7
Foreign exchange impact	13.7		(2.0)
Employer contributions	5.0		0.3



Benefits paid	(3.5)		(3.1)

Fair value of plan assets at end of year	$	109.9	$	88.1

Funded status:
Under funded status at end of year	$	(31.0)	$	(38.4)

Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities	$	0	$	0
Non-current liabilities	$	(30.9)	$	(38.3)

Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes:
Prior service cost	$	0.7	$	0.7
Unrecognized net actuarial loss (gain)	$	61.8	$	63.2

Accumulated other comprehensive loss	$	62.5	$	63.9

(1) In fiscal 2021 and ~~international pension plans and post-retirement plan:~~2020, the net actuarial (gain) loss includes amounts resulting from changes in actuarial assumptions utilized to calculate our benefit plan obligations such as the weighted-average discount rate.

Pension Benefits Post-Retirement Benefits
2018 2017 2018 2017
(In millions) Domestic International Domestic International
Change in benefit obligation:
Benefit obligation at beginning of year $ 1.0
$ 113.8
$ 1.0
$ 104.4
$ 5.0
$ 5.9
Interest cost 0.1
2.7
0.1
2.7
0.1
0.2
Foreign exchange impact —
4.2
—
(12.5 ) —
—
Actuarial (gain) loss —
(12.2 ) —
23.4
(0.5 ) (0.4 )
Benefits paid (0.1 ) (2.6 ) (0.1 ) (4.2 ) (0.6 ) (0.7 )
Benefit obligation at end of year $ 1.0
$ 105.9
$ 1.0
$ 113.8
$ 4.0
$ 5.0

Change in plan assets:
Fair value of plan assets at beginning of year $ —
$ 80.5
$ —
$ 85.0
$ —
$ —
Actual return on plan assets —
1.2
—
9.6
—
—
Foreign exchange impact —
2.8
—
(10.3 ) —
—
Employer contributions 0.1
12.7
0.1
0.4
0.6
0.7
Benefits paid (0.1 ) (2.6 ) (0.1 ) (4.2 ) (0.6 ) (0.7 )
Fair value of plan assets at end of year $ —
$ 94.6
$ —
$ 80.5
$ —
$ —

Funded status:
Under funded status at end of year $ (1.0 ) $ (11.3 ) $ (1.0 ) $ (33.3 ) $ (4.0 ) $ (5.0 )

Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities $ (0.1 ) $ —
$ (0.1 ) $ —
$ (0.6 ) $ (0.7 )
Non-current liabilities $ (0.9 ) $ (11.3 ) $ (0.9 ) $ (33.3 ) $ (3.4 ) $ (4.3 )

Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes:
Unrecognized net actuarial loss (gain) $ 0.3
$ 40.8
$ 0.3
$ 50.9
$ (1.1 ) $ (0.6 )
Accumulated other comprehensive loss $ 0.3
$ 40.8
$ 0.3
$ 50.9
$ (1.1 ) $ (0.6 )

The accumulated benefit obligation for the ~~company's domestic~~Company's pension ~~benefit plans~~plan totaled~~$1.0~~ $135.5 million ~~as of the end of both fiscal 2018~~ and ~~fiscal 2017. For its international plans, the accumulated benefit obligation totaled$102.2 million~~ ~~and $110.0~~$123.9 million as of fiscal ~~2018~~2021 and fiscal ~~2017,~~2020, respectively. ~~The following table summarizes the totals for pension plans with accumulated benefit obligations in excess of plan assets:~~

Pension Plans with Accumulated Benefit Obligation in Excess of Plan Assets
(In millions) 2018 2017
Projected benefit obligation $ 106.9
$ 114.8
Accumulated benefit obligation $ 103.1
$ 111.0
Fair value of plan assets $ 94.6
$ 80.5

The following table is a summary of the annual cost of the ~~company's~~Company's pension ~~and post-retirement plans:~~plan:

712021 Annual Report


Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income (Loss):																Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income (Loss):

(In millions)																(In millions)	2021		2020		2019

Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income:
	Pension Benefits									Post-Retirement Benefits
(In millions)	2018			2017			2016			2018		2017		2016
Domestic:
Interest cost	$	0.1		$	0.1		$	—		$	0.1	$	0.2	$	0.2
Net periodic benefit cost	$	0.1		$	0.1		$	—		$	0.1	$	0.2	$	0.2

International:

Interest cost	$	2.7		$	2.7		$	3.8								Interest cost	$	2.2	$	2.4	$	2.7
Expected return on plan assets	(5.6		)	(4.7		)	(5.4		)							Expected return on plan assets	(4.6)		(4.4)		(4.5)
Net amortization	4.2			2.2			2.8
Amortization of prior service costs																Amortization of prior service costs	0.1		0.1		0.1
Amortization of net (gain)/loss																Amortization of net (gain)/loss	5.3		3.2		2.7
Net periodic benefit cost	$	1.3		$	0.2		$	1.2								Net periodic benefit cost	$	3.0	$	1.3	$	1.0


Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):

(In millions)	2021		2020






Net actuarial (gain) loss	$	(4.9)	$	20.6
Net amortization	3.5		(4.8)
Total recognized in other comprehensive loss	$	(1.4)	$	15.8

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income):
Pension Benefits Post-Retirement Benefits
(In millions) 2018 2017 2018 2017
Domestic:
Net actuarial gain $ —
$ —
$ (0.5 ) $ (0.4 )
Total recognized in other comprehensive loss $ —
$ —
$ (0.5 ) $ (0.4 )

International:
Net actuarial (gain) loss $ (7.7 ) $ 18.6

Net amortization (4.2 ) (2.2 )
Total recognized in other comprehensive loss $ (11.9 ) $ 16.4

The net actuarial loss, included in accumulated other comprehensive loss (pretax), expected to be recognized in net periodic benefit cost duringfiscal ~~2019~~ 2022is~~$2.9 million~~. $4.8 million.

Actuarial Assumptions

The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic benefit cost for the ~~company's~~Company's pension ~~and post-retirement plans~~plan are as follows:


Weighted-average assumptions used in the determination of net periodic benefit cost:
(Percentages)	2021	2020	2019

Discount rate	1.66	2.39	2.87
Compensation increase rate	2.75	3.20	3.10
Expected return on plan assets	4.80	4.80	4.80

Weighted-average assumptions used in the determination of the projected benefit obligations:
Discount rate	1.99	1.66	2.39
Compensation increase rate	3.20	2.75	3.20

The weighted-average used in the determination of net periodic benefit cost:
2018 2017 2016
(Percentages) Domestic International Domestic International Domestic International
Discount rate 3.53 2.49 3.51 3.43 3.41 3.50
Compensation increase rate n/a 3.25 n/a 2.95 n/a 3.20
Expected return on plan assets n/a 6.10 n/a 6.10 n/a 6.10

The weighted-average used in the determination of the projected benefit obligations:
Discount rate 3.99 2.87 3.53 2.49 3.51 3.43
Compensation increase rate n/a 3.10 n/a 3.25 n/a 2.95

~~Effective May 28, 2016, the company changed the method it~~The Company uses a full yield curve approach to estimate the interest component of net periodic benefit cost for pension ~~and other postretirement~~ benefits. Historically, the company has estimated the interest cost component utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The company has elected to utilize a full yield curve approach in the estimation of interest cost by applyingThis method applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The company has made this change to provide a more precise measurement of interest cost by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The company accounted for this change as a change in accounting estimate and accordingly, accounted for it prospectively. The impact of this change on consolidated earnings for fiscal 2018 and ~~2017~~ ~~was a reduction of the interest cost component of net periodic benefit cost of approximately $0.3 million and $0.4 million.~~

~~In calculating post-retirement benefit obligations for fiscal 2018, a~~ ~~7.1 percent~~ ~~annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2019, decreasing gradually to~~ ~~4.3 percent~~ ~~by 2038 and remaining at that level thereafter. For purposes of calculating post-retirement benefit costs, a 7.5 percent annual rate of increase in the per~~ ~~capita cost of covered healthcare benefits was assumed for~~ ~~2018, decreasing gradually to~~ ~~4.3 percent~~ by ~~2038 and remaining at that level thereafter.~~

Assumed health care cost-trend rates have a significant effect on the amounts reported for retiree health care costs. A one-percentage-point change in the assumed health care cost-trend rates would have the following effects:

(In millions) 1 Percent Increase 1 Percent Decrease
Effect on total fiscal 2018 service and interest cost components $ —
$ —
Effect on post-retirement benefit obligation at June 2, 2018 $ 0.1
$ (0.1 )

Plan Assets and Investment Strategies

The ~~company's international~~Company's employee benefit plan assets consist mainly of listed fixed income obligations and common/collective trusts. The ~~company's~~Company's primary objective for invested pension plan assets is to provide for sufficient long-term growth and liquidity to satisfy all of its benefit obligations over time. Accordingly, the ~~company~~Company has developed an investment strategy that it believes maximizes the probability of meeting this

overall objective. This strategy includes the development of a target investment allocation by asset category in order to provide guidelines for making investment decisions. This target allocation emphasizes the long-term characteristics of individual asset classes as well as the diversification among multiple asset classes. In developing its strategy, the ~~company~~Company considered the need to balance the varying risks associated with each asset class with the long-term nature of its benefit obligations. The ~~company's~~Company's strategy moving forward will be to increase the level of fixed income investments as the funding status improves, thereby more closely matching the return on assets with the liabilities of the plans.

The ~~company~~Company utilizes independent investment managers to assist with investment decisions within the overall guidelines of the investment strategy. The target asset allocation at the end of fiscal ~~2018~~2021 and asset categories for the ~~company's primary international~~Company's pension plan for fiscal ~~2018~~2021 and ~~2017~~2020 are as follows:

Herman Miller, Inc. and Subsidiaries72


Asset Category	Targeted Asset Allocation Percentage			Percentage of Plan Assets at Year End				Asset Category	Targeted Asset Allocation Percentage			Percentage of Plan Assets at Year End
	2018	2017		2018		2017			2021	2020		2021		2020

Fixed income	35	20		36		27		Fixed income	31%	35%		32%		37%
Common collective trusts	65	80		64		73		Common collective trusts	69%	65%		68%		63%
Total				100		100		Total				100%		100%

(In millions)		International Plan as of June 2, 2018						(In millions)		May 29, 2021
Asset Category		Level 1		Level 2		Total		Asset Category		Level 1		Level 2		Total

Cash and cash equivalents		$	0.2	$	—	$	0.2	Cash and cash equivalents		0.7		0		0.7
Foreign government obligations		—		33.4		33.4		Foreign government obligations		0		34.2		34.2
Common collective trusts-balanced		—		61.0		61.0		Common collective trusts-balanced		0		75.0		75.0
Total		$	0.2	$	94.4	$	94.6	Total		$	0.7	$	109.2	$	109.9

(In millions)		International Plan as of June 3, 2017						(In millions)		May 30, 2020
Asset Category		Level 1		Level 2		Total		Asset Category		Level 1		Level 2		Total
Cash and cash equivalents		$	0.2	$	—	$	0.2

Foreign government obligations		—		21.4		21.4		Foreign government obligations		0		31.4		31.4
Common collective trusts-balanced		—		58.9		58.9		Common collective trusts-balanced		0		56.7		56.7
Total		$	0.2	$	80.3	$	80.5	Total		$	0	$	88.1	$	88.1

732021 Annual Report

Cash Flows

The ~~company~~Company reviews pension funding requirements to determine the contribution to be made in the next year. Actual contributions will be dependent upon investment returns, changes in pension obligations and other economic and regulatory factors. During fiscal ~~2018,~~2021 and fiscal 2020, the ~~company~~Company made total cash contributions of ~~$13.4 million to its benefit plans. In fiscal 2017, the company made total cash contributions of $1.1~~$5.4 million to its benefit plans.

The Company expects to contribute approximately $5.8 million to our benefit plans in fiscal 2022. The following represents a summary of the benefits expected to be paid by the plans in future fiscal years. These expected benefits were estimated based on the same actuarial valuation assumptions used to determine benefit obligations at ~~June 2, 2018.~~May 29, 2021.


(In millions)	Pension Benefits
2022	$	3.9
2023	$	3.9
2024	$	4.0
2025	$	4.0
2026	$	4.1
2027-2031	$	21.3

(In millions) Pension Benefits Domestic Pension Benefits International Post-Retirement Benefits
2019 $ 0.1
$ 2.0
$ 0.6
2020 $ 0.1
$ 2.0
$ 0.5
2021 $ 0.1
$ 2.1
$ 0.5
2022 $ 0.1
$ 2.5
$ 0.4
2023 $ 0.1
$ 2.4
$ 0.4
2024-2028 $ 0.3
$ 16.5
$ 1.4

Profit Sharing, 401(k) Plan, and Core Contribution

Substantially all of the ~~company’s~~Company’s domestic employees are eligible to participate in a defined contribution retirement plan, primarily the Herman Miller, Inc. profit sharing and 401(k) plan (the "plan"). Employees under the plan are eligible to begin participating on their date of hire. ~~Until~~Effective June 4, 2017, the plan provided for discretionary contributions for eligible participants, payable in the company's common stock, of not more than 6 percent of employees' wages based on the company's financial performance. Effective June 4, 2017, the company discontinued the Employer Profit Sharing Contribution and instead, began allocating those funds to other components of pay and retirement. Under the plan the companyCompany matches 100 percent of employee contributions to their 401(k) accounts up to 3 percent of their ~~pay. Effective September 3, 2017, the company~~pay which was subsequently increased ~~the Employer Matching Contribution from 3 percent~~ to 4 percent in September 2017 for all eligible employees. A core contribution of 4 percent

is also included for most participants of the plan. There was an additional 1 percent contribution added to the quarterly Core Contribution for the quarter prior to the increased Employer Matching Contribution effective September 3, 2017. During the fourth quarter of fiscal 2020, the Company elected to temporarily suspend the Company's Core Contribution and 401(k) matches in order to reduce costs and preserve liquidity. The ~~company’s other defined~~Company reinstated the previously suspended employer-paid retirement plan contributions in the fourth quarter of fiscal 2021, and has also elected to make a catch-up contribution for the employer-paid retirement ~~plans may provide~~plan contributions that were suspended for ~~matching contributions, non-elective contributions and discretionary contributions as declared by management.~~a majority of fiscal 2020.

~~The cost of the~~There were 0 Herman Miller, Inc. profit sharing ~~contribution during fiscal 2017 and 2016 was $6.0 million and $10.9 million, respectively. No profit sharing contribution was~~contributions made in fiscal ~~2018.~~2021, fiscal 2020 or fiscal 2019. The expense recorded for the ~~company's~~Company's 401(k) matching ~~contributions~~ and core contributions was ~~approximately~~ ~~$24.9~~$23.7 million,, ~~$22.8~~ $22.2 million and ~~$21.9~~$25.4 million in fiscal years ~~2018, 2017~~2021, 2020 and ~~2016,~~2019, respectively.

8.9. Common Stock and Per Share Information

The following table reconciles the numerators and denominators used in the calculations of basic and diluted EPS for each of the last three fiscal years:


(In millions, except shares)	2021		2020		2019
Numerator:
Numerator for both basic and diluted EPS, Net earnings (loss) attributable to Herman Miller, Inc.	$	173.1	$	(9.1)	$	160.5

Denominator:
Denominator for basic EPS, weighted-average common shares outstanding	58,931,268		58,920,653		59,011,945
Potentially dilutive shares resulting from stock plans	458,330		0		369,846
Denominator for diluted EPS	59,389,598		58,920,653		59,381,791

Herman Miller, Inc. and Subsidiaries74

(In millions, except shares) 2018 2017 2016
Numerator:
Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. $ 128.1
$ 123.9
$ 136.7

Denominator:
Denominator for basic EPS, weighted-average common shares outstanding 59,681,268
59,871,805
59,844,540
Potentially dilutive shares resulting from stock plans 630,037
682,784
684,729
Denominator for diluted EPS 60,311,305
60,554,589
60,529,269

Equity awards of ~~348,089~~207,365 shares, ~~764,154~~142,224 shares and ~~528,676~~218,037 sharesof common stock were excluded from the denominator for the computation of diluted earnings per share for the fiscal years ended May 29, 2021, May 30, 2020 and June ~~2, 2018~~, ~~June 3, 2017~~ ~~and~~ ~~May 28, 2016~~,1, 2019, respectively, because they were anti-dilutive. ~~The company has certain share-based payment awards that meet the definition of participating securities.~~

Common Stock

The ~~company~~Company has a share repurchase plan authorized by the Board of Directors on ~~September 28, 2007,~~January 16, 2019, which ~~provided~~provides a share repurchase authorization of ~~$300.0~~$250.0 million with no specified expiration date. The approximate dollar value of shares available for purchase under the plan at May 29, 2021 was $236.7 million. During fiscal year ~~2018~~, ~~2017,~~2021, 2020, and ~~2016,~~2019, shares repurchased and retired ~~totaled 1,356,156, 765,556,~~under the current and ~~482,040~~past repurchase plans totaled 38,931, 641,192, and 1,326,023 shares respectively.

9.10. Stock-Based Compensation

The ~~company~~Company utilizes equity-based compensation incentives as a component of its employee and non-employee director and officer compensation philosophy. Currently, these incentives consist principally of stock options, restricted stock, restricted stock units and performance share units. The ~~company also offers a stock purchase plan for its domestic and certain international employees. The company~~Company issues shares in connection with its share-based compensation plans from authorized, but unissued, shares. At ~~June 2, 2018~~May 29, 2021 there were ~~5,991,307~~7,182,670 shares authorized under the various stock-based compensation ~~plans.~~plans.The Company also offers a stock purchase plan for its domestic and certain international employees.

Valuation and Expense Information

The ~~company~~Company measures the cost of employee services received in exchange for an award of equity instruments based on their grant-date fair market value. This cost is recognized over the requisite service period.

Certain of the ~~company's~~Company's equity-based compensation awards contain provisions that allow for continued vesting into retirement. Stock-based awards are considered fully vested for expense attribution purposes when the employee's retention of the award is no longer contingent on providing subsequent service.

The ~~company~~Company classifies pre-tax stock-based compensation expense primarily within Operating expenses in the Consolidated Statements of Comprehensive Income. Pre-tax compensation expense and the related income tax benefit for all types of stock-based programs ~~was~~were as follows for the periods indicated:


(In millions)	May 29, 2021		May 30, 2020		June 1, 2019
Employee stock purchase program	$	0.4	$	0.3	$	0.3
Stock option plans	3.7		0.6		(0.4)

Restricted stock units	4.1		3.9		4.6
Performance share units	0.8		(2.1)		2.8
Total	$	9.0	$	2.7	$	7.3
Tax benefit	$	2.0	$	0.5	$	1.6

(In millions) June 2, 2018 June 3, 2017 May 28, 2016
Employee stock purchase program $ 0.3
$ 0.3
$ 0.3
Stock option plans 2.6
2.0
1.9
Restricted stock units 3.9
3.6
3.2
Performance share units 0.9
2.8
6.5
Total $ 7.7
$ 8.7
$ 11.9

Tax benefit $ 2.3
$ 3.1
$ 4.3

As of ~~June 2, 2018~~,May 29, 2021, total pre-tax stock-based compensation cost not yet recognized related to non-vested awards was approximately ~~$7.8 million~~.$13.7 million. The weighted-average period over which this amount is expected to be recognized is ~~0.79 years~~.1.5 years.

Employee Stock Purchase Program

Under the terms of the ~~company's~~Company's Employee Stock Purchase Plan, 4 million shares of authorized common stock were reserved for purchase by plan participants at 85 percent of the market price. Shares of common stock purchased under the employee stock purchase plan were ~~67,335, 68,547,~~71,468, 70,145, and ~~70,768~~62,957 for the fiscal years ended ~~2018, 2017~~2021, 2020 and ~~2016~~2019 respectively.

Stock ~~Option Plans~~Options

The ~~company has stock option plans under which~~Company grants options to purchase the ~~company's~~Company's stock ~~may be granted~~ to certain key employees and non-employee directors under its Long-Term Incentive Plan, as amended (the "LTIP") at a price not less than the market price of the ~~company's~~Company's common stock on the date of grant. Under the current award program, all options become exercisable between one

752021 Annual Report

year and three years from date of grant and expire ten years from date of grant. Most options are subject to graded vesting with the related compensation expense recognized on a straight-line basis over the requisite service period.

In fiscal 2021 there was one stock option valuation date, but two valuations. In fiscal 2020 were no stock option grants awarded to employees or non-employee directors. In fiscal 2019 there were two separate stock option valuation dates. Therefore the table below has been presented with the assumptions relevant to each valuation date. The ~~company~~Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes model. In determining these values, the following weighted-average assumptions were used for the options granted during the fiscal years indicated:


	2018			2017			2016				2021			2020	2019
Risk-free interest rates ⁽¹⁾	1.79		%	1.01		%	1.51		%	Risk-free interest rates (1)	2.30-2.47%			N/A	2.65-2.70%
Expected term of options ⁽²⁾	4.6 years			4.0 years			4.0 years			Expected term of options (2)	3.8-4.1 years			N/A	4.4 years
Expected volatility ⁽³⁾	26		%	26		%	33		%	Expected volatility (3)	43-44%			N/A	27		%
Dividend yield ⁽⁴⁾	2.23		%	2.13		%	2.03		%	Dividend yield (4)	1.99		%	N/A	2.18-2.33%
Weighted-average grant-date fair value of stock options:										Weighted-average grant-date fair value of stock options:
Granted with exercise prices equal to the fair market value of the stock on the date of grant	$	6.39		$	5.50		$	6.73		Granted with exercise prices equal to the fair market value of the stock on the date of grant	$	6.10		N/A	$	8.05
Granted with exercise prices greater than the fair market value of the stock on the date of grant										Granted with exercise prices greater than the fair market value of the stock on the date of grant	$	5.62		N/A	N/A

(1) Represents term-matched, zero-coupon risk-free rate from the Treasury Constant Maturity yield curve, continuously compounded.

(2) Represents historical settlement data, using midpoint scenario with 1-year grant date filter assumption for outstanding options.

(3) The blended volatility approach was used. 90% term-matched historical volatility from daily stock prices and 10% percent weighted average implied volatility from the 90 days preceding the grant date.

(4) Represents the quarterly dividend divided by the three-month average stock price as of ~~the grant date, annualized and continuously compounded.~~February 28, 2020.

The following is a summary of the transactions under the ~~company's~~Company's stock option ~~plans:~~plan:


	Shares Under Option	Weighted-Average Exercise Prices		Aggregate Intrinsic Value (in millions)		Weighted-Average Remaining Contractual Term (Years)
Outstanding at May 30, 2020	361,416	$	32.80	$	0.2	5.8
Granted at market	1,409,792	$	22.9
Exercised	(86,238)	$	30.81
Forfeited or expired	(11,598)	$	22.53
Outstanding at May 29, 2021	1,673,372	$	24.63	$	38.8	8.56
Ending vested + expected to vest	1,673,372	$	24.63	$	38.8	8.56
Exercisable at end of period	230,462	$	32.55	$	3.5	5.35

Shares Under Option Weighted-Average Exercise Prices Weighted-Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
(In millions)
Outstanding at June 3, 2017 1,329,702
$ 28.36
7.26 $ 5.8
     Granted at market 323,412
$ 33.75

     Exercised (538,259 ) $ 27.28

     Forfeited or expired (51,606 ) $ 32.83

Outstanding at June 2, 2018 1,063,249
$ 30.33
7.45 $ 2.9
Ending vested + expected to vest 1,063,249
$ 30.33
7.45 $ 2.9
Exercisable at end of period 265,519
$ 23.96
4.78 $ 2.4

The weighted-average remaining recognition period of the outstanding stock options at ~~June 2, 2018~~May 29, 2021 was ~~0.75~~1.62 years. The total pre-tax intrinsic value of options exercised during fiscal ~~2018, 2017~~2021, 2020 and ~~2016~~2019 was ~~$5.0~~$0.5 million, ~~$1.3~~$5.5 million and ~~$2.3~~$3.3 million, respectively. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the ~~company's~~Company's closing stock price as of the end of the period

presented, which would have been received by the option holders had all option holders exercised in-the-money options as of that date. Total cash received during fiscal ~~2018~~2021 from the exercise of stock options was ~~$4.4~~approximately $3 million.

Restricted Stock Units

The ~~company~~Company grants restricted stock units to certain key ~~employees.~~employees under its LTIP. This program provides that the actual number of restricted stock units awarded is based on the value of a portion of the participant's long-term incentive compensation divided by the fair value of the ~~company's~~Company's stock on the date of grant. ~~In some years the awards have been partially tied to the company's financial performance for the year in which the grant was based.~~ The awards generally cliff-vest after a three-year service period, with prorated vesting under certain circumstances and full or partial accelerated vesting upon retirement. Awards granted in fiscal 2021 had a graded vesting schedule of 25% after the first year, 25% after the second year, and the remaining 50% after the third year. Each restricted stock unit represents ~~one~~1 equivalent share of the ~~company's~~Company's common stock to be awarded, free of restrictions, after the vesting period. Compensation expense related to these awards is recognized over the requisite service period, which includes any

Herman Miller, Inc. and Subsidiaries76

applicable performance period. Dividend equivalent awards are credited quarterly. The units do not entitle participants to the rights of stockholders of common stock, such as voting rights, until shares are issued after vesting.

772021 Annual Report

The following is a summary of restricted stock unit transactions for the fiscal years indicated:


	Share Units	Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value (in millions)		Weighted-Average Remaining Contractual Term (Years)
Outstanding at May 30, 2020	243,774	$	37.02	$	5.6	1.3
Granted	307,652	$	26.71
Forfeited	(6,955)	$	32.36
Released	(60,460)	$	33.98
Outstanding at May 29, 2021	484,011	$	30.84	$	23.1	1.4
Ending vested + expected to vest	484,011	$	30.84	$	23.1	1.4

Share
Units

Weighted Average
Grant-Date
Fair Value
Aggregate Intrinsic Value in Millions
Weighted-Average
Remaining Contractual
Term (Years)
Outstanding at June 3, 2017 384,952
$ 28.73
$ 12.6
1.14
Granted 242,012
$ 35.28

Forfeited (19,233 ) $ 30.86

Released (126,704 ) $ 27.75

Outstanding at June 2, 2018 481,027
$ 32.20
$ 15.8
1.28
Ending vested + expected to vest 481,027
32.20
$ 15.8
1.28

The weighted-average remaining recognition period of the outstanding restricted stock units at ~~June 2, 2018,~~May 29, 2021, was ~~1.15~~1.4 years. The fair value of the share units that vested during the twelve months ended ~~June 2, 2018,~~May 29, 2021, was ~~$4.3~~$1.5 million. The weighted average grant-date fair value of restricted stock units granted during ~~2018, 2017,~~2021, 2020, and ~~2016~~2019 was ~~$35.28, $31.83~~$26.71, $44.70 and ~~$29.03~~$37.81 respectively.

Performance Share Units

The ~~company~~Company grants performance share units to certain key ~~employees.~~employees under its LTIP. The number of units initially awarded was based on the value of a portion of the participant's long-term incentive compensation, divided by the fair value of the ~~company's~~Company's common stock on the date of grant. Each unit represents ~~one~~1 equivalent share of the ~~company's~~Company's common stock. The number of common shares ultimately issued in connection with these performance share units is determined based on the ~~company's~~Company's financial performance over the related three-year service period or the ~~company's~~Company's financial performance based on certain total shareholder return results as compared to a selected group of peer companies. Compensation expense is determined based on the grant-date fair value and the number of common shares projected to be issued and is recognized over the requisite service period.

The following is a summary of performance share unit transactions for the fiscal years indicated:


	Share Units	Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value (in millions)		Weighted-Average Remaining Contractual Term (Years)
Outstanding at May 30, 2020	384,537	$	37.95	$	8.9	1.3
Granted	84,989	$	37.21
Forfeited	(52,914)	$	24.76
Released	(48,553)	$	23.67
Outstanding at May 29, 2021	368,059	$	41.54	$	17.6	1.1
Ending vested + expected to vest	368,059	$	41.54	$	17.6	1.1

Share
Units
Weighted Average Grant-Date Fair Value
Aggregate Intrinsic
Value in Millions
Weighted-Average Remaining Contractual Term (Years)
Outstanding at June 3, 2017 417,947
$ 31.18
$ 13.7
1.03
Granted 129,131
$ 31.28

Forfeited (42,339 ) $ 34.27

Released (130,179 ) $ 31.47

Outstanding at June 2, 2018 374,560
$ 30.76
$ 12.3
1.01
Ending vested + expected to vest 374,560
$ 30.76
$ 12.3
1.01

The weighted-average remaining recognition period of the outstanding performance share units at ~~June 2, 2018,~~May 29, 2021, was ~~0.73~~1.3 years. The fair value for shares that vested during the twelve months ended ~~June 2, 2018,~~May 29, 2021, was ~~$4.5~~1.1 million. The weighted average grant-date fair value of performance share units granted during ~~2018~~, ~~2017,~~2021, 2020, and ~~2016~~2019 was ~~$31.28, $29.40,~~$37.21, $45.71, and ~~$30.81~~$36.37 respectively.

~~Herman Miller Consumer Holdings Stock (HMCH) Option Plan~~

Certain employees were granted options to purchase stock of HMCH at a price not less than the market price of HMCH common stock on the date of grant. For the grants of options under the award program, options are potentially exercisable between one year and five years from date of grant and expire at the end of the window period that follows the fifth anniversary of the grant date. Vesting is based on the performance of

HMCH over a period of five years. Certain of these options have been classified as liability awards as the holders have the right to put the underlying shares to the company immediately upon exercise. Given this, the awards are measured at fair value at the end of each reporting period and compensation expense is adjusted accordingly to reflect the fair value over the requisite service period. The company estimates the issuance date fair value of HMCH stock options on the date of grant using the Black-Scholes model. The expense for these awards was $0.6 million during fiscal 2018 and the related liability for these awards was $0.9 million as of the end of fiscal 2018. The liability for the HMCH stock options is recorded within the Consolidated Balance Sheets within the "Other liabilities" line item.

~~The following weighted-average assumptions were used to value the liability associated with HMCH stock options as of June 2, 2018 and June 3, 2017:~~

2018 2017
Risk-free interest rates ⁽¹⁾
2.29 % 1.29 %
Expected term of options ⁽²⁾
1.1 years
2.1 years
Expected volatility ⁽³⁾
35 % 35 %
Dividend yield not applicable
not applicable
Strike price $ 30.64
24.39
Per share value ⁽⁴⁾
$ 8.24
3.24

~~(1) Represents the U.S. Treasury yield over the same period as the expected option term.~~

~~(2) Represents the period of time that options granted are expected to be outstanding.~~

~~(3) Amount is determined based on analysis of historical price volatility of the common stock of peer companies over a period equal to the expected term of the options.~~

~~(4) Based on the Black-Scholes formula.~~

Shares Under Option Weighted-Average Exercise Prices Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In millions)
Outstanding at June 3, 2017 526,244
$ 24.20
2.20 $ 0.1
Granted 28,810
$ 21.08

Forfeited (10,928 ) $ 24.39

Outstanding at June 2, 2018 544,126
$ 24.04
1.20 $ 3.6
Exercisable at end of period 75,568
$ 21.83
1.20 $ 0.6

~~There were no H~~MCH options exercised during fiscal 2018. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the HMCH market price, less the strike price, as of the end of the period presented, which would have been received by the option holders had all option holders exercised in-the-money options as of that date.

Deferred Compensation Plan

The Herman Miller, Inc. Executive Equalization Retirement Plan is a supplemental deferred compensation plan and was made available for salary deferrals and ~~company~~Company contributions beginning in January 2008. The plan is available to a select group of management or highly compensated employees who are selected for participation by the Executive Compensation Committee of the Board of Directors. The plan allows participants to defer up to 50 percent of their base salary and up to 100 percent of their incentive cash bonus. Company contributions to the plan “mirror” the amounts the ~~company~~Company would have contributed to the various qualified retirement plans had the employee's compensation not been above the IRS statutory ceiling ($~~275,000~~290,000 in ~~2018)~~2021). The ~~company~~Company does not guarantee a rate of return for these funds. Instead, participants make investment elections for their deferrals and ~~company~~Company contributions. Investment options are ~~the same as~~closely aligned to those available under the Herman Miller Profit Sharing and 401(k) ~~Plan, except for company stock, which is not an investment option under this plan.~~Plan.

Herman Miller, Inc. and Subsidiaries78

The Nonemployee Officer and Director Deferred Compensation Plan allows the Board of Directors of the ~~company~~Company to defer a portion of their annual director fee. Investment options are the same as those available under the Herman Miller Profit Sharing and 401(k) Plan, including ~~company~~Company stock.

In accordance with the terms of the Executive Equalization Plan and Nonemployee Officer and Director Deferred Compensation Plan, the salary and bonus deferrals, ~~company~~Company contributions and director fee deferrals have been placed in a Rabbi trust. The assets in the Rabbi trust remain subject to the claims of creditors of the ~~company~~Company and are not the property of the participant. Investments in securities other than the ~~company's~~Company's common stock are included within the Other assets line item, while investments in the ~~company's~~Company's stock are included in the line item ~~Key executive deferred~~Deferred compensation plan in the ~~company's~~Company's Consolidated Balance Sheets. A liability of the same amount is recorded on the Consolidated Balance Sheets within the Other liabilities line item. Investment ~~assets are classified as trading, and accordingly,~~asset realized and unrealized gains and losses are recognized within the ~~company's~~Company's Consolidated Statements of Comprehensive Income in the Interest and other investment income line item.

The associated changes to the liability are recorded as compensation expense within the Selling, general and administrative line item within the ~~company's~~Company's Consolidated Statements of Comprehensive Income. The net effect of any change to the asset and corresponding liability is offset and has no impact on Net earnings in the Consolidated Statements of Comprehensive Income.

Director Fees

Company directors may elect to receive their director fees in one or more of the following forms: cash, deferred compensation in the form of shares or other selected investment funds, unrestricted ~~company~~Company stock at the market value at the date of election or stock options that vest in one year and expire in ~~ten~~10 years. The exercise price of the stock options granted may not be less than the market price of the ~~company's~~Company's common stock on the date of grant. Under the plan, the Board members received the following shares or options in the fiscal years indicated:


	2021	2020	2019

Shares of common stock	3,013	7,769	10,185
Shares through the deferred compensation program	0	1,045	7,619



	Michigan	38-0837640
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~855 East Main Avenue~~
~~PO Box 302~~
~~Zeeland, Michigan~~	~~49464-0302~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



~~Registrant's telephone number, including area code: (616) 654 3000~~
~~Securities registered pursuant to Section 12(b) of the Act: None~~
~~Securities registered pursuant to Section 12(g) of the Act:~~
~~Common Stock, $.20 Par Value~~ (Title of ~~Class)~~ each class	Trading Symbol(s)		Name of each exchange on which registered
Common Stock		MLHR		NASDAQ ~~Stock Market LLC~~


		Page No.
Part I		~~Page No.~~
~~Part I~~
Item 1 Business	32
Item 1A Risk Factors		67
Item 1B Unresolved Staff Comments		1015
Item 2 Properties		1116
Item 3 Legal Proceedings		1217
Additional Item: Executive Officers of the Registrant		1217
Item 4 Mine Safety Disclosures		1219
Part II
Item 5 Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities		1320
Item 6 Selected Financial Data		1522
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations		1723
Item 7A Quantitative and Qualitative Disclosures about Market Risk		4344
Item 8 Financial Statements and Supplementary Data		4547
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		86100
Item 9A Controls and Procedures		86100
Item 9B Other Information		86100
~~Part III~~Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		100
Part III
Item 10 Directors, Executive Officers, and Corporate Governance		87101
Item 11 Executive Compensation		87101
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		87101
Item 13 Certain Relationships and Related Transactions, and Director Independence		87102
Item 14 Principal Accountant Fees and Services		87102
Part IV
Item 15 Exhibits and Financial Statement Schedule		88103
Exhibit Index		89104
~~Signatures~~		91
Schedule II Valuation and Qualifying Accounts	92107
Item 16 Form 10-K Summary		108
Signatures		109



Name	Age	Year Elected an Executive Officer	Position with the Company
Brian C. Walker	56	1996	President and Chief Executive Officer
Andrew J. Lock	64	2003	President, Herman Miller International
Gregory J. Bylsma	53	2009	President, North America Contract
Steven C. Gane	63	2009	President, Specialty Brands
Jeffrey M. Stutz	47	2009	Executive Vice President, Chief Financial Officer
B. Ben Watson	53	2010	Chief Creative Officer
H. Timothy Lopez	47	2014	Senior Vice President of Legal Services, General Counsel and Secretary
John McPhee	55	2015	President, Herman Miller Consumer
John Edelman	51	2015	Chief Executive Officer, Herman Miller Consumer
Kevin Veltman	43	2015	Vice President, Investor Relations & Treasurer
Jeremy Hocking	57	2017	Executive Vice President, Strategy and Business Development



Per Share and Unaudited	Market Price High (at close)		Market Price Low (at close)		Market Price Close		Earnings Per Share- Diluted		Dividends Declared Per Share
Year ended June 2, 2018:
First quarter	$	35.30	$	29.25	$	34.00	$	0.55	$	0.1800
Second quarter	37.00		32.05		34.55		0.55		0.1800
Third quarter	41.84		33.65		36.75		0.49		0.1800
Fourth quarter	39.20		29.95		32.85		0.53		0.1800
Year	$	41.84	$	29.25	$	32.85	$	2.12	$	0.7200
Year ended June 3, 2017:
First quarter	$	36.46	$	27.87	$	35.94	$	0.60	$	0.1700
Second quarter	36.14		26.99		32.65		0.53		0.1700
Third quarter	36.45		29.75		30.45		0.37		0.1700
Fourth quarter	34.05		28.55		32.70		0.55		0.1700
Year	$	36.46	$	26.99	$	32.70	$	2.05	$	0.6800



~~[ X ]~~☒			ANNUAL REPORT ~~UNDER~~PURSUANT TO 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 Fiscal Year Ended June 2, 2018~~	~~Commission File No. 001-15141~~



~~Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.~~
	~~Yes [ X ] No [__]~~



~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.~~
	~~Yes [__] No [ X ]~~



Indicate by check mark whether the registrant (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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
	~~Yes [ X ] No [__]~~



~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~
	~~Yes [__] No [ X ]~~


Segment Primarily Supported	Owned	Leased	Total
North America Contract	6	2	8
International Contract	1	4	5
Retail	—	5	5
Corporate	1	—	1



Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share or Unit	Total Number of Share (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares(or Units) that May Yet be Purchased Under the Plans or Programs ⁽¹⁾
3/4/18 - 3/31/18	65,767	32.24	65,767	$	76,324,290
4/1/18 - 4/28/18	301,500	32.10	301,500	$	66,647,521
4/29/18 - 6/2/18	143,566	31.75	143,566	$	62,088,967
Total	510,833		510,833


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share or Unit		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs (1)
2/28/21-3/27/21	—	$	—	—	$	236,731,127
3/28/21-4/24/21	400	$	43.56	400	$	236,713,705
4/25/21-5/29/21	111	$	44.95	111	$	236,708,715
Total	511			511


	2016		2017		2018		2019		2020		2021
Herman Miller, Inc.	$	100	$	105	$	108	$	119	$	80	$	167
S&P 500 Index	$	100	$	116	$	130	$	131	$	145	$	200
Nasdaq Composite Total Return	$	100	$	129	$	157	$	156	$	201	$	293



	2013		2014		2015		2016		2017		2018
Herman Miller, Inc.	$	100	$	113	$	102	$	119	$	125	$	129
S&P 500 Index	$	100	$	118	$	129	$	129	$	150	$	168
NASD Non-Financial	$	100	$	124	$	150	$	148	$	192	$	228


Review of Operations
(In millions, except key ratios and per share data)	2018			2017			2016			2015			2014			(In millions, except key ratios and per share data)	2021	2020	2019	2018	2017
Operating Results																Operating Results
Net sales	$	2,381.2		$	2,278.2		$	2,264.9		$	2,142.2		$	1,882.0		Net sales	$2,465.1	$2,486.6	$2,567.2	$2,381.2	$2,278.2
Gross margin	873.0			864.2			874.2			791.4			631.0			Gross margin	949.2	910.7	929.9	873.0	864.2
Selling, general, and administrative ⁽⁸⁾	622.4			600.3			585.6			556.6			590.8
Selling, general, and administrative (1)																Selling, general, and administrative (1)	646.5	669.7	649.5	621.0	592.9

Impairment charges																Impairment charges	—	205.4	—	—	7.1
Design and research	73.1			73.1			77.1			71.4			65.9			Design and research	72.1	74.0	76.9	73.1	73.1
Operating earnings (loss)	177.5			190.8			211.5			163.4			(25.7		)	Operating earnings (loss)	230.6	(38.4)	203.5	178.9	191.1
Earnings (loss) before income taxes	168.1			177.6			196.6			145.2			(43.4		)
Earnings (loss) before income taxes and equity income																Earnings (loss) before income taxes and equity income	226.4	(13.4)	195.1	168.1	177.6
Net earnings (loss)	128.7			124.1			137.5			98.1			(22.1		)	Net earnings (loss)	178.8	(14.4)	160.5	128.7	124.1
Cash flow from operating activities	166.5			202.1			210.4			167.7			90.1
Cash flow used in investing activities	(62.7		)	(116.3		)	(80.8		)	(213.6		)	(48.2		)
Cash flow (used in) provided by financing activities	2.5			(74.6		)	(106.5		)	6.8			(22.4		)
Net cash provided by operating activities																Net cash provided by operating activities	332.3	221.8	216.4	166.5	202.1
Net cash used in investing activities																Net cash used in investing activities	(59.9)	(168.1)	(165.0)	(62.7)	(116.3)
Net cash (used in) provided by financing activities																Net cash (used in) provided by financing activities	(347.7)	244.0	(91.9)	2.5	(74.6)
Depreciation and amortization	66.9			58.9			53.0			49.8			42.4			Depreciation and amortization	87.2	79.5	72.1	66.9	58.9
Capital expenditures	70.6			87.3			85.1			63.6			40.8			Capital expenditures	59.8	69.0	85.8	70.6	87.3
Common stock repurchased plus cash dividends paid	88.9			63.2			49.0			37.0			43.0			Common stock repurchased plus cash dividends paid	35.4	63.0	93.5	88.9	63.1

Key Ratios																Key Ratios
Sales growth	4.5		%	0.6		%	5.7		%	13.8		%	6.0		%
Gross margin ⁽¹⁾	36.7			37.9			38.6			36.9			33.5
Selling, general, and administrative ^{(1) (8)}	26.1			26.3			25.9			26.0			31.4
Design and research ⁽¹⁾	3.1			3.2			3.4			3.3			3.5
Operating earnings ⁽¹⁾	7.5			8.4			9.3			7.6			(1.4		)
Sales (decline) growth																Sales (decline) growth	(0.9)%	(3.1)%	7.8%	4.5%	0.6%
Gross margin (2)																Gross margin (2)	38.5	36.6	36.2	36.7	37.9
Selling, general, and administrative (1) (2)																Selling, general, and administrative (1) (2)	26.2	26.9	25.3	26.1	26.0
Design and research (2)																Design and research (2)	2.9	3.0	3.0	3.1	3.2
Operating earnings (loss) (2)																Operating earnings (loss) (2)	9.4	(1.5)	7.9	7.5	8.4
Net earnings growth (decline)	3.7			(9.7		)	40.2			543.9			(132.4		)	Net earnings growth (decline)	1,341.7	(109.0)	24.7	3.7	(9.7)
After-tax return on net sales ⁽⁴⁾	5.4			5.4			6.1			4.6			(1.2		)
After-tax return on average assets ⁽⁵⁾	9.2			9.8			11.3			9.0			(2.3		)
After-tax return on average equity ⁽⁶⁾	20.5		%	22.3		%	29.1		%	25.0		%	(6.5		)%
After-tax return on net sales (3)																After-tax return on net sales (3)	7.3	(0.6)	6.3	5.4	5.4
After-tax return on average assets (4)																After-tax return on average assets (4)	8.7	(0.8)	10.5	9.2	9.8
After-tax return on average equity (5)																After-tax return on average equity (5)	24.0	(2.1)	23.2	20.6	22.3

Share and Per Share Data																Share and Per Share Data
Earnings (loss) per share-diluted	$	2.12		$	2.05		$	2.26		$	1.62		$	(0.37	)	Earnings (loss) per share-diluted	$2.92	$(0.15)	$2.70	$2.12	$2.05
Cash dividends declared per share	0.72			0.68			0.59			0.56			0.53			Cash dividends declared per share	0.56	0.63	0.79	0.72	0.68
Book value per share at year end⁽⁹⁾	11.22			9.82			8.76			7.04			6.14
Book value per share at year end (6)																Book value per share at year end (6)	14.39	10.94	12.23	11.22	9.84
Market price per share at year end	32.85			32.70			31.64			27.70			31.27			Market price per share at year end	47.80	23.02	35.49	32.85	32.70
Weighted average shares outstanding-diluted	60.3			60.6			60.5			60.1			59.0			Weighted average shares outstanding-diluted	59.4	58.9	59.4	60.3	60.6

Financial Condition																Financial Condition
Total assets	$	1,479.5		$	1,306.3		$	1,235.2		$	1,192.7		$	995.6		Total assets	$2,061.9	$2,053.9	$1,569.3	$1,479.5	$1,306.3
Working capital ⁽³⁾	231.6			106.2			90.5			110.1			83.2
Current ratio ⁽²⁾	1.6			1.3			1.2			1.3			1.2
Interest-bearing debt and related swap agreements⁽¹⁰⁾	265.1			197.8			221.9			290.0			250.0
Working capital (7)																Working capital (7)	390.7	403.8	215.2	231.6	106.2
Current ratio (8)																Current ratio (8)	1.8	1.8	1.5	1.6	1.3
Interest-bearing debt and related swap agreements (9)																Interest-bearing debt and related swap agreements (9)	285.7	558.8	282.8	265.1	197.8
Stockholders' equity	664.8			587.7			524.7			420.3			364.3			Stockholders' equity	849.6	643.0	719.2	664.8	587.7
Total capital ⁽⁷⁾	929.9			785.5			746.6			710.3			614.3
Total capital (10)																Total capital (10)	1,135.3	1,201.8	1,002.0	929.9	785.5



	June 3, 2017															May 28, 2016
	North America			ELA			Specialty			Consumer			Total			North America			ELA			Specialty		Consumer		Total
Net Sales, as reported	$	1,276.6		$	385.5		$	298.0		$	318.1		$	2,278.2		$	1,269.4		$	412.6		$	294.2	$	288.7	$	2,264.9
% change from PY	0.6		%	(6.6		)%	1.3		%	10.2		%	0.6		%

Adjustments
Dealer Divestitures	—			—			—			—			—			(8.8		)	(30.8		)	—		—		(39.6		)
Currency Translation Effects ⁽¹⁾	0.7			13.9			—			—			14.6			—			—			—		—		—
Impact of Extra Week in FY17	(21.7		)	(6.3		)	(4.3		)	(4.7		)	(37.0		)	—			—			—		—		—
Organic net sales	$	1,255.6		$	393.1		$	293.7		$	313.4		$	2,255.8		$	1,260.6		$	381.8		$	294.2	$	288.7	$	2,225.3
% change from PY	(0.4)%			3.0%			(0.2)%			8.6%			1.4%



	June 2, 2018			June 3, 2017
Earnings per Share - Diluted	$	2.12		$	2.05

Add: Other special charges	0.16			—
Add: Impairment charges	—			0.07
Less: Gain on sale of dealer	—			(0.02		)
Add: Restructuring expenses	0.07			0.06
Less: One-time impact of adopting U.S. Tax Cuts and Jobs Act	(0.05		)	—
Adjusted Earnings per Share - Diluted	$	2.30		$	2.16

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted	60,311,305			60,554,589



(Dollars In millions)	Fiscal 2018		% Change from 2017		Fiscal 2017		% Change from 2016		Fiscal 2016
(Dollars In millions)	52 weeks		% Change from 2017		53 weeks		% Change from 2016		52 weeks
Net sales	$	2,381.2	4.5	%	$	2,278.2	0.6	%	$	2,264.9
Cost of sales	1,508.2		6.7	%	1,414.0		1.7	%	1,390.7
Gross margin	873.0		1.0	%	864.2		(1.1	)%	874.2
Operating expenses	695.5		3.3	%	673.4		1.6	%	662.7
Operating earnings	177.5		(7.0	)%	190.8		(9.8	)%	211.5
Net other expenses	9.4		(28.8	)%	13.2		(11.4	)%	14.9
Earnings before income taxes	168.1		(5.3	)%	177.6		(9.7	)%	196.6
Income tax expense	42.4		(23.0	)%	55.1		(7.4	)%	59.5
Equity income from nonconsolidated affiliates, net of tax	3.0		87.5	%	1.6		300.0	%	0.4
Net earnings	128.7		3.7	%	124.1		(9.7	)%	137.5
Net earnings attributable to noncontrolling interests	0.6		200.0	%	0.2		(75.0	)%	0.8
Net earnings attributable to Herman Miller, Inc.	$	128.1	3.4	%	$	123.9	(9.4	)%	$	136.7



	Fiscal Years Ended
(In millions, except per share data)	June 2, 2018			June 3, 2017			May 28, 2016
Net sales	$	2,381.2		$	2,278.2		$	2,264.9
Cost of sales	1,508.2			1,414.0			1,390.7
Gross margin	873.0			864.2			874.2
Operating expenses:
Selling, general and administrative	616.7			587.8			585.6
Restructuring and impairment expenses	5.7			12.5			—
Design and research	73.1			73.1			77.1
Total operating expenses	695.5			673.4			662.7
Operating earnings	177.5			190.8			211.5
Other expenses (income):
Interest expense	13.5			15.2			15.4
Interest and other investment income	(4.4		)	(2.2		)	(0.8		)
Other, net	0.3			0.2			0.3
Net other expenses	9.4			13.2			14.9
Earnings before income taxes	168.1			177.6			196.6
Income tax expense	42.4			55.1			59.5
Equity earnings from nonconsolidated affiliates, net of tax	3.0			1.6			0.4
Net earnings	128.7			124.1			137.5
Net earnings attributable to noncontrolling interests	0.6			0.2			0.8
Net earnings attributable to Herman Miller, Inc.	$	128.1		$	123.9		$	136.7

Earnings per share — basic	$	2.15		$	2.07		$	2.28
Earnings per share — diluted	$	2.12		$	2.05		$	2.26

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	$	2.7		$	(7.2	)	$	(8.8	)
Pension and post-retirement liability adjustments	10.4			(12.7		)	0.5
Unrealized gains on interest rate swap agreement	7.8			2.1			—
Unrealized holding gain on available for sale securities	—			0.1			—
Total other comprehensive income (loss)	20.9			(17.7		)	(8.3		)
Comprehensive income	149.6			106.4			129.2
Comprehensive income attributable to noncontrolling interests	0.6			0.2			0.8
Comprehensive income attributable to Herman Miller, Inc.	$	149.0		$	106.2		$	128.4



(In millions)
2019	$	45.8
2020	$	42.8
2021	$	40.5
2022	$	43.1
2023	$	32.5
Thereafter	$	123.8



(In millions)	1 Percent Increase		1 Percent Decrease
Effect on total fiscal 2018 service and interest cost components	$	—	$	—
Effect on post-retirement benefit obligation at June 2, 2018	$	0.1	$	(0.1	)



(In millions)	Pension Benefits Domestic		Pension Benefits International		Post-Retirement Benefits
2019	$	0.1	$	2.0	$	0.6
2020	$	0.1	$	2.0	$	0.5
2021	$	0.1	$	2.1	$	0.5
2022	$	0.1	$	2.5	$	0.4
2023	$	0.1	$	2.4	$	0.4
2024-2028	$	0.3	$	16.5	$	1.4



	Share Units		Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value in Millions		Weighted-Average Remaining Contractual Term (Years)
Outstanding at June 3, 2017	384,952		$	28.73	$	12.6	1.14
Granted	242,012		$	35.28
Forfeited	(19,233	)	$	30.86
Released	(126,704	)	$	27.75
Outstanding at June 2, 2018	481,027		$	32.20	$	15.8	1.28
Ending vested + expected to vest	481,027		32.20		$	15.8	1.28



	Share Units		Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value in Millions		Weighted-Average Remaining Contractual Term (Years)
Outstanding at June 3, 2017	417,947		$	31.18	$	13.7	1.03
Granted	129,131		$	31.28
Forfeited	(42,339	)	$	34.27
Released	(130,179	)	$	31.47
Outstanding at June 2, 2018	374,560		$	30.76	$	12.3	1.01
Ending vested + expected to vest	374,560		$	30.76	$	12.3	1.01


(In millions)
Balance at June 1, 2019	$	1.9
Increases related to current year income tax positions	0.3

Decreases related to prior year income tax positions	(0.1)
Decreases related to lapse of applicable statute of limitations	(0.2)

Balance at May 30, 2020	$	1.9
Increases related to current year income tax positions	0.1
Increases related to prior year income tax positions	0.4

Decreases related to lapse of applicable statute of limitations	(0.3)

Balance at May 29, 2021	$	2.1



(In millions)
Balance at May 28, 2016	$	1.7
Increases related to current year income tax positions	0.3
Increases related to prior year income tax positions	1.1
Decreases related to prior year income tax positions	(0.1		)
Decreases related to lapse of applicable statute of limitations	(0.1		)
Decreases related to settlements	(0.1		)
Balance at June 3, 2017	2.8
Increases related to current year income tax positions	0.3
Increases related to prior year income tax positions	0.4
Decreases related to lapse of applicable statute of limitations	(0.3		)
Balance at June 2, 2018	$	3.2



	Fair Value Measurements
	June 2, 2018				June 3, 2017
(In millions) Financial Assets	Quoted Prices With Other Observable Inputs (Level 2)		Management Estimates (Level 3)		Quoted Prices With Other Observable Inputs (Level 2)		Management Estimates (Level 3)
Cash Equivalents	$	121.0	$	—	$	—	$	—
Available-for-sale securities:
Mutual funds - fixed income	7.7		—		7.7		—
Mutual funds - equity	0.9		—		0.9		—
Foreign currency forward contracts	0.4		—		0.5		—
Interest rate swap agreement	15.0		—		3.3		—
Deferred compensation plan	15.1		—		12.8		—
Total	$	160.1	$	—	$	25.2	$	—

Financial Liabilities
Foreign currency forward contracts	$	0.3	$	—	$	0.6	$	—
Contingent consideration	—		0.5		—		0.5
Total	$	0.3	$	0.5	$	0.6	$	0.5


(In millions)	Balance Sheet Location	May 29, 2021		May 30, 2020
Designated derivatives:
Interest rate swap	Long-term assets: Other noncurrent assets	$	0	$	0
Interest rate swap	Long-term liabilities: Other liabilities	$	14.4	$	25.0
Non-designated derivatives:
Foreign currency forward contracts	Current assets: Other current assets	$	1.6	$	1.1
Foreign currency forward contracts	Current liabilities: Other accrued liabilities	$	0.1	$	0.8


		Fiscal Year
(In millions)	Statement of Comprehensive Income Location	May 29, 2021		May 30, 2020		June 1, 2019
(Loss) gain recognized on foreign currency forward contracts	Other expense (income), net	$	0.8	$	(1.1)	$	0.3


(In millions)	May 29, 2021
Beginning Balance	$	50.4
Dividend attributable to redeemable noncontrolling interests	(2.8)
Redemption value adjustment	15.0
Net income attributable to redeemable noncontrolling interests	5.7
Foreign currency translation adjustments	8.7
Ending Balance	$	77.0


(In millions)	May 29, 2021
Assets:	Level 3
Indefinite-lived intangible assets	$	97.6




Long-lived assets:
United States	$	349.3	$	328.6	$	254.8
International	50.5		45.3		48.1
Total	$	399.8	$	373.9	$	302.9



	June 2, 2018
(In millions)	Severance and employee related expenses			Costs associated with exit and disposal activities			Total
Beginning Balance	$	—		$	—		$	—
Restructuring expenses	2.4			1.5			3.9
Payments	(2.4		)	(1.5		)	(3.9		)
Ending Balance	$	—		$	—		$	—


(In millions)	Severance and Employee-Related		Exit or Disposal Activities		Total
June 1, 2019	$	6.8	$	1.1	$	7.9
Restructuring Costs	9.9		1.2		$	11.1
Amounts Paid	(10.8)		(1.5)		$	(12.3)
May 30, 2020	$	5.9	$	0.8	$	6.7
Restructuring Costs	(1.7)		(2.0)		$	(3.7)
Amounts Paid	(3.3)		(0.1)		$	(3.4)
Other*	0		1.9		$	1.9

May 29, 2021	$	0.9	$	0.6	$	1.5

~~Recently Issued Accounting Standards Not Yet Adopted (continued)~~

~~Standard~~

~~Description~~

~~Date of Adoption~~

~~Effect on the Financial Statements or Other Significant Matters~~

~~Leases~~

Under the updated standard a lessee's rights and obligations under most leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. The standard must be adopted under a modified retrospective approach and early adoption is permitted.

~~June 2, 2019~~

~~The standard is expected to have a significant impact on our Consolidated Financial Statements, however the company is currently evaluating the impact.~~