UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February~~August 29, 2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-15141

HERMAN MILLER, INC.

(Exact name of registrant as specified in its charter)



Michigan						38-0837640
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

855 East Main Avenue

Zeeland,, MI49464

(Address of principal executive offices and zip code)

(~~616~~) (616) 654-3000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MLHR	NASDAQ

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

As of ~~April 2,~~October 1, 2020, Herman Miller, Inc. had ~~58,770,202~~58,900,841 shares of common stock outstanding.

Herman Miller, Inc.

Form 10-Q

Table of Contents



				Page No.
Part I — Financial Information
		Item 1 Financial Statements (Unaudited)
		Condensed Consolidated Statements of Comprehensive Income — Three ~~and Nine~~ Months ~~Ended February~~ended August 29, 2020 and ~~March 2,~~August 31, 2019	3
		Condensed Consolidated Balance Sheets — ~~February~~August 29, 2020 and ~~June 1, 2019~~May 30, 2020	4
		Condensed Consolidated Statements of Cash Flows — ~~Nine~~Three Months Ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019	5
		Condensed Consolidated Statements of Stockholders' Equity — ~~Nine~~Three Months Ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019	6
		Notes to Condensed Consolidated Financial Statements
	Note 1 - Basis of Presentation		87
	Note 2 - Recently Issued Accounting Standards		87
	Note 3 - Revenue from Contracts with Customers		98
	Note 4 - Leases		109
	Note 5 - Acquisitions		129
	Note 6 - Inventories, net		1412
	Note 7 - Goodwill and Indefinite-Lived Intangibles		1512
	Note 8 - Employee Benefit Plans		1513
	Note 9 - Earnings Per Share		1613
	Note 10 - Stock-Based Compensation		1613
	Note 11 - Income Taxes		1613
	Note 12 - Fair Value Measurements		1714
	Note 13 - Commitments and Contingencies		2017
	Note 14 - Short-Term Borrowings and Long-Term Debt		2118
	Note 15 - Accumulated Other Comprehensive Loss		2219
	Note 16 - Operating Segments		2320
	Note 17 - Restructuring Expense		2421
	Note 18 - Variable Interest Entities		2522
		~~Note 19 -~~ ~~Subsequent Event~~		25
		Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations	2623
		Item 3 Quantitative and Qualitative Disclosures about Market Risk	4133
		Item 4 Controls and Procedures	4134
Part II — Other Information
		Item 1 Legal Proceedings	4235
		Item 1A Risk Factors	4235
		Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	4235
		Item 3 Defaults upon Senior Securities	4235
		Item 4 Mine Safety Disclosures	4235
		Item 5 Other Information	4235
		Item 6 Exhibits	4335
		Signatures	4437

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

Herman Miller, Inc.

Condensed Consolidated Statements of Comprehensive Income

~~(Dollars in millions, except share data)~~

~~(Unaudited)~~

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Net sales $ 665.7
$ 619.0
$ 2,010.8
$ 1,896.2
Cost of sales 422.4
398.0
1,265.9
1,214.5
Gross margin 243.3
221.0
744.9
681.7
Operating expenses:
Selling, general and administrative 170.5
153.7
504.9
476.5
Restructuring expense 3.5
0.3
9.6
1.7
Design and research 18.9
19.2
57.4
56.6
Total operating expenses 192.9
173.2
571.9
534.8
Operating earnings 50.4
47.8
173.0
146.9
Gain on consolidation of equity method investments —
—
30.5
—
Interest expense 2.9
3.0
8.9
9.1
Interest and other investment income 0.6
0.5
2.0
1.4
Other expense (income), net 0.5
(0.3 ) 0.6
0.1
Earnings before income taxes and equity income 47.6
45.6
196.0
139.1
Income tax expense 10.6
7.3
35.8
27.3
Equity income from nonconsolidated affiliates, net of tax 0.3
1.0
3.7
2.8
Net earnings 37.3
39.3
163.9
114.6
Net (loss) earnings attributable to redeemable noncontrolling interests (0.4 ) 0.1
(0.6 ) 0.1
Net earnings attributable to Herman Miller, Inc. $ 37.7
$ 39.2
$ 164.5
$ 114.5

Earnings per share — basic $ 0.64
$ 0.67
$ 2.79
$ 1.94
Earnings per share — diluted $ 0.64
$ 0.66
$ 2.78
$ 1.92

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments $ (1.9 ) $ 8.0
$ 2.5
$ (4.4 )
Pension and post-retirement liability adjustments 0.7
0.6
2.1
1.7
Unrealized losses on interest rate swap agreement (6.6 ) (4.4 ) (11.9 ) (3.9 )
Unrealized holding gain on available for sale securities —
0.1
—
—
Other comprehensive (loss) income, net of tax (7.8 ) 4.3
(7.3 ) (6.6 )
Comprehensive income 29.5
43.6
156.6
108.0
Comprehensive (loss) income attributable to redeemable noncontrolling interests (0.4 ) 0.1
(0.6 ) 0.1
Comprehensive income attributable to Herman Miller, Inc. $ 29.9
$ 43.5
$ 157.2
$ 107.9


(Dollars in millions, except share data)	Three Months Ended
(Unaudited)	August 29, 2020		August 31, 2019
Net sales	$	626.8	$	670.9
Cost of sales	376.8		424.8
Gross margin	250.0		246.1
Operating expenses:
Selling, general and administrative	139.7		165.0
Restructuring expense, net	(1.2)		1.8
Design and research	16.1		19.2
Total operating expenses	154.6		186.0
Operating earnings	95.4		60.1

Interest expense	3.7		3.0
Interest and other investment income	0.4		0.7
Other income, net	(1.7)		(0.2)
Earnings before income taxes and equity income	93.8		58.0
Income tax expense	20.6		12.2
Equity income from nonconsolidated affiliates, net of tax	0.2		2.2
Net earnings	73.4		48.0
Net earnings (loss) attributable to redeemable noncontrolling interests	0.4		(0.2)
Net earnings attributable to Herman Miller, Inc.	$	73.0	$	48.2

Earnings per share — basic	$	1.24	$	0.82
Earnings per share — diluted	$	1.24	$	0.81

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	$	30.1	$	(9.3)
Pension and post-retirement liability adjustments	1.2		0.7
Unrealized gains (losses) on interest rate swap agreement	0.3		(8.8)
Unrealized holding loss on available for sale securities	(0.1)		0
Other comprehensive (loss) income, net of tax	31.5		(17.4)
Comprehensive income	104.9		30.6
Comprehensive income (loss) attributable to redeemable noncontrolling interests	3.0		(0.2)
Comprehensive income attributable to Herman Miller, Inc.	$	101.9	$	30.8

See accompanying notes to Condensed Consolidated Financial Statements.

Herman Miller, Inc. and Subsidiaries 3

Herman Miller, Inc.

Condensed Consolidated Balance Sheets

~~(Dollars in millions, except per share data)~~

~~(Unaudited)~~

February 29, 2020 June 1, 2019
ASSETS
Current Assets:
Cash and cash equivalents $ 110.6
$ 159.2
Short-term investments 8.9
8.8
Accounts receivable, net of allowances of $3.2 and $3.8 221.7
218.0
Unbilled accounts receivable 37.9
34.3
Inventories, net 200.5
184.2
Prepaid expenses 43.7
45.8
Other current assets 13.0
11.0
Total current assets 636.3
661.3
Property and equipment, at cost 1,121.3
1,084.7
Less — accumulated depreciation (779.7 ) (736.1 )
Net property and equipment 341.6
348.6
Right of use assets 222.9
—
Goodwill 466.1
303.8
Indefinite-lived intangibles 142.3
78.1
Other amortizable intangibles, net of accumulated amortization of $55.1 and $46.2 125.1
41.1
Other noncurrent assets 51.5
136.4
Total Assets $ 1,985.8
$ 1,569.3

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 180.6
$ 177.7
Accrued compensation and benefits 74.5
85.5
Accrued warranty 57.4
53.1
Customer deposits 36.9
30.7
Other accrued liabilities 156.7
99.1
Total current liabilities 506.1
446.1
Long-term debt 275.0
281.9
Pension and post-retirement benefits 23.1
24.5
Lease liabilities 188.5
—
Other liabilities 84.6
77.0
Total Liabilities 1,077.3
829.5
Redeemable noncontrolling interests 71.7
20.6
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, 58,785,228 and 58,794,148 shares issued and outstanding in 2020 and 2019, respectively) 11.8
11.7
Additional paid-in capital 86.9
89.8
Retained earnings 839.9
712.7
Accumulated other comprehensive loss (101.5 ) (94.2 )
Deferred compensation plan (0.3 ) (0.8 )
Total Stockholders' Equity 836.8
719.2
Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity $ 1,985.8
$ 1,569.3


(Dollars in millions, except per share data)
(Unaudited)	August 29, 2020		May 30, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	296.6	$	454.0
Short-term investments	7.0		7.0
Accounts receivable, net of allowances of $5.3 and $4.7	195.3		180.0
Unbilled accounts receivable	28.4		19.5
Inventories, net	186.5		197.3
Prepaid expenses	29.1		43.3
Other current assets	14.6		16.0
Total current assets	757.5		917.1
Property and equipment, at cost	1,111.2		1,111.3
Less — accumulated depreciation	(783.5)		(780.5)
Net property and equipment	327.7		330.8
Right of use assets	197.8		193.9
Goodwill	358.6		346.0
Indefinite-lived intangibles	96.2		92.8
Other amortizable intangibles, net of accumulated amortization of $67.0 and $62.7	115.8		112.4
Other noncurrent assets	63.5		60.9
Total Assets	$	1,917.1	$	2,053.9

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	159.5	$	128.8
Short-term borrowings and current portion of long-term debt	52.4		51.4
Accrued compensation and benefits	56.6		71.1
Accrued warranty	16.2		16.1
Customer deposits	36.2		39.8
Other accrued liabilities	156.6		163.0
Total current liabilities	477.5		470.2
Long-term debt	274.9		539.9
Pension and post-retirement benefits	43.4		42.4
Lease liabilities	178.7		178.8
Other liabilities	139.0		129.2
Total Liabilities	1,113.5		1,360.5
Redeemable noncontrolling interests	57.2		50.4
Stockholders' Equity:
Preferred stock, 0 par value (10,000,000 shares authorized, NaN issued)	0		0
Common stock, $0.20 par value (240,000,000 shares authorized, 58,899,500 and 58,793,275 shares issued and outstanding in fiscal 2021 and 2020, respectively)	11.8		11.8
Additional paid-in capital	83.1		81.6
Retained earnings	756.9		683.9
Accumulated other comprehensive loss	(105.1)		(134.0)
Deferred compensation plan	(0.3)		(0.3)


Total Stockholders' Equity	746.4		643.0
Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity	$	1,917.1	$	2,053.9

See accompanying notes to Condensed Consolidated Financial Statements.

4 Form 10-Q

Herman Miller, Inc.

Condensed Consolidated Statements of Cash Flows

~~(Dollars in millions)~~

~~(Unaudited)~~

Nine Months Ended
February 29, 2020
March 2, 2019
Cash Flows from Operating Activities:

Net earnings $ 163.9
$ 114.6
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 59.7
55.3
Stock-based compensation 7.9
7.2
Earnings from nonconsolidated affiliates net of dividends received (3.6 ) (0.8 )
Gain on consolidation of equity method investments (30.5 ) —
Restructuring expense 9.6
1.7
Decrease (increase) in current assets 17.8
(55.3 )
(Decrease) increase in current liabilities (36.7 ) 7.5
Other, net 3.7
0.4
Net Cash Provided by Operating Activities 191.8
130.6

Cash Flows from Investing Activities:
Capital expenditures (56.5 ) (63.0 )
Equity investment in non-controlled entities (3.3 ) (71.6 )
Acquisitions, net of cash received (111.2 ) —
Purchase of HAY licensing agreement —
(4.8 )
Other, net (0.3 ) (3.0 )
Net Cash Used in Investing Activities (171.3 ) (142.4 )

Cash Flows from Financing Activities:
Dividends paid (36.4 ) (34.0 )
Common stock issued 15.1
11.1
Common stock repurchased and retired (25.9 ) (43.4 )
Purchase of redeemable noncontrolling interests (20.3 ) (10.1 )
Other, net (2.3 ) (0.2 )
Net Cash Used in Financing Activities (69.8 ) (76.6 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents 0.7
(2.0 )
Net Decrease in Cash and Cash Equivalents (48.6 ) (90.4 )

Cash and Cash Equivalents, Beginning of Period 159.2
203.9
Cash and Cash Equivalents, End of Period $ 110.6
$ 113.5


(Dollars in millions)	Three Months Ended
(Unaudited)	August 29, 2020		August 31, 2019
Cash Flows from Operating Activities:
Net earnings	$	73.4	$	48.0
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	21.2		19.3
Stock-based compensation	1.5		2.6









Restructuring expense	(1.2)		1.8


(Increase) decrease in current assets	3.9		1.4

Increase (decrease) in current liabilities	13.3		(18.9)
Increase in non-current liabilities	5.2		0
Other, net	(1.4)		0.5
Net Cash Provided by Operating Activities	115.9		54.7

Cash Flows from Investing Activities:
Proceeds from sale of property and dealers	6.4		0






Capital expenditures	(11.3)		(20.6)
Equity investment in non-controlled entities	0		(3.1)


Other, net	(0.2)		(0.3)
Net Cash Used in Investing Activities	(5.1)		(24.0)

Cash Flows from Financing Activities:



Repayments of credit facility	(265.0)		0

Dividends paid	(12.3)		(11.6)
Common stock issued	0.8		12.7
Common stock repurchased and retired	(0.9)		(7.6)

Purchase of redeemable noncontrolling interests	0		(19.8)

Other, net	0.9		(1.6)
Net Cash Used in Financing Activities	(276.5)		(27.9)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	8.3		(2.5)
Net (Decrease) Increase in Cash and Cash Equivalents	(157.4)		0.3

Cash and Cash Equivalents, Beginning of Period	454.0		159.2
Cash and Cash Equivalents, End of Period	$	296.6	$	159.5

See accompanying notes to Condensed Consolidated Financial Statements.

Herman Miller, Inc. and Subsidiaries 5

Herman Miller, Inc.

Condensed Consolidated Statements of Stockholders' Equity

~~(Dollars in millions, except share data)~~


	Three Months Ended August 29, 2020
(Dollars in millions, except share data)	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Deferred Compensation Plan		Herman Miller, Inc. Stockholders' Equity		Noncontrolling Interests		Total Stockholders' Equity
(Unaudited)	Shares	Amount
May 30, 2020	58,793,275	$	11.8	$	81.6	$	683.9	$	(134.0)	$	(0.3)	$	643.0	$	0	$	643.0
Net earnings	—	—		—		73.0		—		—		73.0		0		73.0
Other comprehensive income, net of tax	—	—		—		—		28.9		—		28.9		—		28.9
Stock-based compensation expense	—	—		1.5		—		—		—		1.5		—		1.5
Exercise of stock options	8,133	0		0.2		—		—		—		0.2		—		0.2
Restricted and performance stock units released	106,607	0		—		—		—		—		0		—		0
Employee stock purchase plan issuances	25,116	—		0.6		—		—		—		0.6		—		0.6
Repurchase and retirement of common stock	(36,644)	0		(0.9)		—		—		—		(0.9)		—		(0.9)
Directors' fees	3,013	—		0.1		—		—		—		0.1		—		0.1




August 29, 2020	58,899,500	$	11.8	$	83.1	$	756.9	$	(105.1)	$	(0.3)	$	746.4	$	0	$	746.4

~~(Unaudited)~~

Nine Months Ended February 29, 2020
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Deferred Compensation Plan Herman Miller, Inc. Stockholders' Equity Noncontrolling Interests
Total
Stockholders' Equity
Shares Amount
June 1, 2019 58,794,148
$ 11.7
$ 89.8
$ 712.7
$ (94.2 ) $ (0.8 ) $ 719.2
$ —
$ 719.2
Net earnings —
—
—
48.2
—
—
48.2
(0.2 ) 48.0
Other comprehensive loss, net of tax —
—
—
—
(17.3 ) —
(17.3 ) —
(17.3 )
Stock-based compensation expense —
—
2.6
—
—
—
2.6
—
2.6
Exercise of stock options 382,898
0.1
12.1
—
—
—
12.2
—
12.2
Restricted and performance stock units released 45,105
—
—
—
—
—
—
—
—
Employee stock purchase plan issuances 14,750
—
0.5
—
—
—
0.5
—
0.5
Repurchase and retirement of common stock (173,001 ) —
(7.6 ) —
—
—
(7.6 ) —
(7.6 )
Deferred compensation plan —
—
—
—
—
0.2
0.2
—
0.2
Dividends declared ($0.21 per share) —
—
—
(12.5 ) —
—
(12.5 ) —
(12.5 )
Redemption value adjustment —
—
—
(0.2 ) —
—
(0.2 ) 0.2
—
August 31, 2019 59,063,900
$ 11.8
$ 97.4
$ 748.2
$ (111.5 ) $ (0.6 ) $ 745.3
$ —
$ 745.3
Net earnings —
—
—
78.6
—
—
78.6
—
78.6
Other comprehensive income, net of tax —
—
—
—
17.8
—
17.8
—
17.8
Stock-based compensation expense —
—
2.8
—
—
—
2.8
—
2.8
Exercise of stock options 5,227
—
0.1
—
—
—
0.1
—
0.1
Restricted and performance stock units released 3,653
—
—
—
—
—
—
—
—
Employee stock purchase plan issuances 12,467
—
0.5
—
—
—
0.5
—
0.5
Repurchase and retirement of common stock (10,006 ) —
(0.4 ) —
—
—
(0.4 ) —
(0.4 )
Dividends declared ($0.21 per share) —
—
—
(0.1 ) —
—
(0.1 ) —
(0.1 )
November 30, 2019 59,075,241
$ 11.8
$ 100.4
$ 826.7
$ (93.7 ) $ (0.6 ) $ 844.6
$ —
$ 844.6
Net earnings —
—
—
37.7
—
—
37.7
—
37.7
Other comprehensive loss, net of tax —
—
—
—
(7.8 ) —
(7.8 ) —
(7.8 )
Stock-based compensation expense —
—
2.5
—
—
—
2.5
—
2.5
Exercise of stock options 35,690
—
1.1
—
—
—
1.1
—
1.1
Restricted and performance stock units released 87,461
—
0.2
—
—
—
0.2
—
0.2
Employee stock purchase plan issuances 20,021
—
0.6
—
—
—
0.6
—
0.6
Repurchase and retirement of common stock (440,954 ) —
(17.9 ) —
—
—
(17.9 ) —
(17.9 )
Directors' fees 7,769
—
0.3
—
—
—
0.3
—
0.3
Deferred compensation plan —
—
(0.3 ) —
—
0.3
—
—
—
Dividends declared ($0.21 per share) —
—
—
(24.5 ) —
—
(24.5 ) —
(24.5 )
February 29, 2020 58,785,228
$ 11.8
$ 86.9
$ 839.9
$ (101.5 ) $ (0.3 ) $ 836.8
$ —
$ 836.8

Nine Months Ended March 2, 2019
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Deferred Compensation Plan Herman Miller, Inc. Stockholders' Equity Noncontrolling Interests Total Stockholders' Equity
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 —
—
—
35.8
—
—
35.8
—
35.8
Other comprehensive loss, net of tax —
—
—
—
(7.8 ) —
(7.8 ) —
(7.8 )
Stock-based compensation expense —
—
2.2
—
—
—
2.2
—
2.2
Exercise of stock options 265,739
0.2
7.9
—
—
—
8.1
—
8.1
Restricted and performance stock units released 335,266
0.1
—
—
—
—
0.1
—
0.1
Employee stock purchase plan issuances 16,805
—
0.5
—
—
—
0.5
—
0.5
Repurchase and retirement of common stock (545,866 ) (0.1 ) (20.7 ) —
—
—
(20.8 ) —
(20.8 )
Dividends declared ($0.1975 per share) —
—
—
(11.6 ) —
—
(11.6 ) —
(11.6 )
Cumulative effect of accounting changes —
—
—
2.0
(0.1 ) —
1.9
—
1.9
September 1, 2018 59,302,918
$ 11.9
$ 106.5
$ 624.5
$ (69.2 ) $ (0.7 ) $ 673.0
$ 0.2
$ 673.2
Net earnings —
—
—
39.3
—
—
39.3
—
39.3
Other comprehensive loss, net of tax —
—
—
—
(3.1 ) —
(3.1 ) —
(3.1 )
Stock-based compensation expense —
—
2.5
—
—
—
2.5
—
2.5
Exercise of stock options 53,614
—
1.3
—
—
—
1.3
—
1.3
Restricted and performance stock units released 7,511
—
—
—
—
—
—
—
—
Employee stock purchase plan issuances 14,813
—
0.5
—
—
—
0.5
—
0.5
Repurchase and retirement of common stock (476,854 ) (0.1 ) (16.5 ) —
—
—
(16.6 ) —
(16.6 )
Dividends declared ($0.1975 per share) —
—
—
(11.7 ) —
—
(11.7 ) —
(11.7 )
Cumulative effect of accounting changes —
—
—
(1.5 ) 1.5
—
—
—
—
December 1, 2018 58,902,002
$ 11.8
$ 94.3
$ 650.6
$ (70.8 ) $ (0.7 ) $ 685.2
$ 0.2
$ 685.4
Net earnings —
—
—
39.2
—
—
39.2
0.1
39.3
Other comprehensive income —
—
—
—
4.3
—
4.3
—
4.3
Stock-based compensation expense —
—
2.8
—
—
—
2.8
(0.2 ) 2.6
Exercise of stock options 3,197
—
—
—
—
—
—
—
—
Restricted and performance stock units released 75,917
—
0.1
—
—
—
0.1
—
0.1
Employee stock purchase plan issuances 16,253
—
0.5
—
—
—
0.5
—
0.5
Repurchase and retirement of common stock (183,737 ) —
(6.0 ) —
—
—
(6.0 ) —
(6.0 )
Directors' fees 10,185
—
0.3
—
—
—
0.3
—
0.3
Deferred compensation plan —
—
—
—
—
(0.1 ) (0.1 ) —
(0.1 )
Dividends declared ($0.1975 per share) —
—
—
(11.5 ) —
—
(11.5 ) —
(11.5 )
March 2, 2019 58,823,817
$ 11.8
$ 92.0
$ 678.3
$ (66.5 ) $ (0.8 ) $ 714.8
$ 0.1
$ 714.9


	Three Months Ended August 31, 2019
	Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Deferred Compensation Plan		Herman Miller, Inc. Stockholders' Equity		Noncontrolling Interests		Total Stockholders' Equity
	Shares	Amount
June 1, 2019	58,794,148	$	11.7	$	89.8	$	712.7	$	(94.2)	$	(0.8)	$	719.2	$	0	$	719.2
Net earnings	—	—		—		48.2		—		—		48.2		(0.2)		48.0
Other comprehensive loss, net of tax	—	—		—		—		(17.4)		—		(17.4)		—		(17.4)
Stock-based compensation expense	—	—		2.6		—		—		—		2.6		—		2.6
Exercise of stock options	382,898	0.1		12.1		—		—		—		12.2		—		12.2
Restricted and performance stock units released	45,105	0		—		—		—		—		0		—		0
Employee stock purchase plan issuances	14,750	—		0.5		—		—		—		0.5		—		0.5
Repurchase and retirement of common stock	(173,001)	0		(7.6)		—		—		—		(7.6)		—		(7.6)
Deferred compensation plan	—	—		—		—		—		0.2		0.2		—		0.2
Dividends declared ($0.21 per share)	—	—		—		(12.5)		—		—		(12.5)		—		(12.5)
Redemption value adjustment	—	—		—		(0.2)		—		—		(0.2)		0.2		—

August 31, 2019	59,063,900	11.8		97.4		748.2		(111.6)		(0.6)		745.2		0		745.2

See accompanying notes to Condensed Consolidated Financial Statements.

6 Form 10-Q

Notes to Condensed Consolidated Financial Statements

(Dollars in millions, except share data)

(unaudited)

1.Basis of Presentation

The Condensed Consolidated Financial Statements have been prepared by Herman Miller, Inc. (“the Company”) in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Management believes the disclosures made in this document are adequate with respect to interim reporting requirements. Unless otherwise noted or indicated by the context, all references to "Herman Miller," "we," "our," "Company" and similar references are to Herman Miller, Inc., its predecessors, and controlled subsidiaries.

The accompanying unaudited Condensed Consolidated Financial Statements, taken as a whole, contain all adjustments that are of a normal recurring nature necessary to present fairly the financial position of the Company as of ~~February~~August 29, 2020. Operating results for the three ~~and nine~~ months ended ~~February~~August 29, 2020 are not necessarily indicative of the results that may be expected for the year ending May ~~30, 2020.~~29, 2021. It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended ~~June 1, 2019.~~May 30, 2020. All intercompany transactions have been eliminated in the Condensed Consolidated Financial Statements. The financial statements of equity method investments are not consolidated.

Certain prior year amounts in the Condensed Consolidated Financial Statements have been reclassified to conform with current year presentation.

2. Recently Issued Accounting Standards

Recently Adopted Accounting Standards

On ~~June 2, 2019,~~May 31, 2020, the Company adopted Accounting Standards Update ("ASU") No. ~~2016-02, "Leases~~2016-13, "Financial Instruments - Credit Losses (Topic ~~842)"~~326): Measurement of Credit Losses on Financial Instruments" using the modified retrospective method. ~~Under~~This update replaces the ~~updated standard,~~existing incurred loss impairment model with an expected loss model and requires consideration of a ~~lessee's rights~~broader range of reasonable and ~~obligations under most leases,~~supportable information to inform credit loss estimates including ~~existing~~customer credit quality, historical write-off trends and ~~new arrangements, are recognized as assets and liabilities, respectively, on the balance sheet. Refer to Note 4 to the Condensed Consolidated Financial Statements for further~~general information regarding industry trends and the ~~adoption of the standard.~~

On June 2, 2019, the Company adopted ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" using the prospective method. 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.macroeconomic environment. The adoption did not have a material impact on the Company's financial ~~statements. Refer~~statements, accounting policies or methods utilized to ~~Note 12~~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 ~~Condensed Consolidated Financial Statements~~Disclosure Requirements for ~~further information.~~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.

Recently Issued Accounting Standards Not Yet Adopted

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

Standard

Description

Effective Date

~~Standard~~2018-14

~~Description~~

~~Effective Date~~

~~2016-13~~

~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~

This guidance 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.

~~May 31, 2020~~

~~2018-13~~

~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement~~

~~This update eliminates, adds and modifies certain disclosure requirements for fair value measurements. Early adoption is permitted.~~

~~May 31, 2020~~

~~2018-14~~

Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans

This update eliminates, adds and clarifies certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its financial statements.

May 30, 2021

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

Herman Miller, Inc. and Subsidiaries 7

3. Revenue from Contracts with Customers

Disaggregated Revenue

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


	Three Months Ended
(In millions)	August 29, 2020		August 31, 2019
Net Sales:
Single performance obligation
Product revenue	$	543.3	$	566.2
Multiple performance obligations
Product revenue	78.4		99.9
Service revenue	3.1		2.3
Other	2.0		2.5
Total	$	626.8	$	670.9

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Net Sales:
Single performance obligation
Product revenue $ 561.1
$ 524.5
$ 1,699.9
$ 1,599.0
Multiple performance obligations
Product revenue 98.9
89.0
294.5
281.7
Service revenue 2.5
2.8
7.8
8.7
Other 3.2
2.7
8.6
6.8
Total $ 665.7
$ 619.0
$ 2,010.8
$ 1,896.2

Effective in the first quarter of fiscal 2021, the Company has revised its product categories in the table below to consist of workplace, performance seating, lifestyle and other. The change in these product categories reflects how the Company internally reports and evaluates products when making operational decisions. Prior year results disclosed in the table below have been revised to reflect these changes.

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


	Three Months Ended
(In millions)	August 29, 2020		August 31, 2019
North America Contract:
Workplace	$	207.1	$	283.2
Performance Seating	77.5		111.9
Lifestyle	22.4		23.5
Other	31.8		39.8
Total North America Contract	$	338.8	$	458.4

International Contract:
Workplace	$	41.9	$	47.6
Performance Seating	62.7		57.0
Lifestyle	46.7		6.3
Other	2.4		3.0
Total International Contract	$	153.7	$	113.9

Retail:
Workplace	$	1.9	$	1.0
Performance Seating	47.5		9.1
Lifestyle	84.7		88.5
Other	0.2		0
Total Retail	$	134.3	$	98.6

Total	$	626.8	$	670.9

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
North America Contract:
Systems $ 132.3
$ 128.7
$ 424.6
$ 420.2
Seating 120.4
122.7
380.3
375.2
Freestanding and storage 96.8
91.4
317.7
282.3
Textiles 27.2
26.5
86.8
84.8
Other 36.7
27.7
113.1
90.3
Total North America Contract $ 413.4
$ 397.0
$ 1,322.5
$ 1,252.8

International Contract:
Systems $ 21.5
$ 26.8
$ 66.2
$ 78.0
Seating 107.1
71.8
235.4
202.7
Freestanding and storage 14.0
14.5
42.5
38.7
Other 13.5
12.9
44.0
40.5
Total International Contract $ 156.1
$ 126.0
$ 388.1
$ 359.9

Retail:
Seating $ 68.7
$ 59.2
$ 197.9
$ 171.0
Freestanding and storage 16.9
15.2
50.6
49.2
Other 10.6
21.6
51.7
63.3
Total Retail $ 96.2
$ 96.0
$ 300.2
$ 283.5

Total $ 665.7
$ 619.0
$ 2,010.8
$ 1,896.2

Refer to Note 16 of the Condensed Consolidated Financial Statements for further information related to our reportable segments.

Contract ~~Assets and Contract Liabilities~~Balances

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 toCustomers may make payments before 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 Condensed Consolidated Balance Sheets.

Contract assets also include amounts that are conditional because certain performance obligations in the contract with the customer are incomplete as of the balance sheet date. These contract assets generally arise due to contracts with the customer 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 Condensed Consolidated Balance Sheets until all performance obligations in the contract with the customer have been satisfied.

~~Contract liabilities represent deposits made by customers before the satisfaction of~~Company's 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~~These payments represent contract ~~the liability for the customer deposit is relieved~~liabilities and ~~revenue is recognized. These customer deposits~~ are included within the caption “Customer deposits” in the Condensed Consolidated Balance Sheets. During the three ~~and nine~~ months ended ~~February~~August 29, 2020, the Company recognized Net sales of ~~$22.1 million and $26.9~~$18.1 million related to customer deposits that were included in the balance sheet as of ~~November~~May 30, ~~2019 and June 1, 2019, respectively.~~2020.

8 Form 10-Q

4. Leases

~~Impact of Adoption~~

~~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.

~~As part of the implementation process the Company made the following elections:~~

~~The Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.~~

~~The Company elected to make the accounting policy election for short-term leases resulting in lease costs being recorded as an expense on a straight-line basis over the lease term.~~

~~The Company elected to not separate lease and non-lease components, for all leases.~~

~~The Company did not elect the hindsight practical expedient in determining the lease term and in assessing the likelihood that a lessee purchase option will be exercised, for all leases.~~

~~The Company did not elect the land easement practical expedient in determining whether land easements that were not previously accounted for as leases are or contain a lease.~~

Upon adoption, the cumulative effect of initially applying this new standard resulted in the addition of approximately $245 million of ROU assets, as well as corresponding short-term and long-term lease liabilities of approximately $275 million. Additionally, as a result of adoption, the Company derecognized its construction-type lease asset and financing liability and there was 0 related cumulative adjustment to retained earnings.

~~Accounting Policies~~

The Company has leases for retail studios, showrooms, manufacturing facilities, warehouses, and vehicles, which expire at various dates through 2036. 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.

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 Condensed Consolidated Statement of Operations and Comprehensive Income in the same line item as the expense arising from fixed lease payments for operating leases.

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 Condensed Balance Sheets, 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 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~~

~~During the three and nine months ended February 29, 2020, lease expense was $15.9 million and $46.9 million, respectively.~~ The components of lease expense ~~were as follows:~~are provided in the table below:


	Three Months Ended		Nine Months Ended
(In millions)	February 29, 2020		February 29, 2020		(In millions)	August 29, 2020		August 31, 2019
Operating lease costs	$	13.1	$	38.5	Operating lease costs	$	11.0	$	12.7
Short-term lease costs	0.7		1.9		Short-term lease costs	0.8		0.6
Variable lease costs*	2.1		6.5		Variable lease costs*	1.6		2.2
Total	$	15.9	$	46.9	Total	$	13.4	$	15.5

*Not included in the table above for the three ~~and nine~~ months ended ~~February~~August 29, 2020 and August 31, 2019 are variable lease costs of ~~$18.6~~$16.9 million and ~~$64.3~~$21.9 million, respectively, 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 in the fourth quarter of fiscal 2020 which is the primary driver of lower operating lease cost in the three months ended August 29, 2020 compared to the prior year.

At ~~February~~August 29, 2020, the Company ~~has~~had 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)
2020 $ 12.3
2021 47.7
2022 44.1
2023 39.7
2024 33.9
Thereafter 102.0
Total lease payments* $ 279.7
Less interest 28.1
Present value of lease liabilities $ 251.6


(In millions)
2021	$	37.3
2022	47.2
2023	42.6
2024	36.8
2025	32.7
Thereafter	74.7
Total lease payments*	$	271.3
Less interest	25.9
Present value of lease liabilities	$	245.4

*Lease payments exclude ~~$29.0~~$31.2 million of legally binding minimum lease payments for leases signed but not yet commenced, primarily related to a new Chicago showroom expected to open in fiscal 2021.

The long-term portion of the lease liabilities included in the amounts above is ~~$188.5~~$178.7 million and the remainder of the lease liabilities are included in "Other accrued liabilities" in the Condensed Consolidated Balance Sheets.

~~The following table summarizes future minimum rental payments required under operating leases that have non-cancelable lease terms as of June 1, 2019, prior to the adoption of ASC 842:~~

(In millions)
2020 $ 51.7
2021 46.8
2022 42.9
2023 39.0
2024 33.5
Thereafter 101.9
Total $ 315.8

At ~~February~~August 29, 2020, the weighted average remaining lease term and weighted average discount rate for operating leases were 7 years and ~~3.1%~~3.0%, respectively.

During the three ~~and nine~~ months ended ~~February~~August 29, 2020, the cash paid for leases included in the measurement of the liabilities and the operating cash flows was $11.1 million and the right of use assets obtained in exchange for new liabilities were $11.4 million. During the three months ended August 31, 2019, the cash paid for leases included in the measurement of the liabilities and the operating cash flows was $12.5 million and ~~$38.4 million, respectively, and~~ the right of use assets obtained in exchange for new liabilities were ~~$0.3 million and $9.1 million, respectively.~~$4.6 million.

~~5. Acquisitions~~

~~Maars Holding B.V.~~

On 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.

5. Acquisitions

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 entity was accounted for using the equity method of accounting until the purchase of the additional 34% equity on December 2, 2019. 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. ~~This licensing agreement is recorded as a definite-lived intangible asset~~

Herman Miller, Inc. and ~~is being amortized over its 15-year useful life. This asset is recorded within "Other amortizable intangibles, net" within the Condensed Consolidated Balance Sheets.~~Subsidiaries 9

On December 2, 2019, ~~(“Acquisition Date”),~~ the Company ~~purchased~~obtained a controlling financial interest in HAY through the purchase of an additional 34% of equity voting interest. This 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 ~~increasing its ownership interest to 67%, resulting in a controlling financial interest. As of the acquisition date, the Company has consolidated HAY, which was previously accounted for~~ as an equity method investment, ~~through~~but upon increasing its ownership to 67% on the ~~second quarter~~Acquisition Date, the Company consolidated the operations of ~~fiscal 2020.~~HAY. Total consideration paid for ~~the additional ownership in~~ HAY on the ~~acquisition date~~Acquisition Date was $79.0 million, exclusive of HAY cash on hand. The Company funded the acquisition with cash and cash equivalents.

~~Additionally,~~The previously mentioned HAY long-term licensing agreement was deemed to be a contractual preexisting relationship. As a result of the business combination, the Company recorded this arrangement at its 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 “Gain on consolidation of equity method investments" within the Condensed Consolidated Statements of Comprehensive Income during the three months ended May 30, 2020. The goodwill was recorded within the Company’s Retail segment.

The Company is a party to options, that if exercised, would require it to purchase the remaining 33% of the equity in HAY, at fair market value. This remaining ~~outside ownership of~~redeemable noncontrolling interest in HAY is classified outside permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption ~~amounts. Refer to Note 12 to the Condensed Consolidated Financial Statements for further information.~~amount.

~~Purchase Price Allocations~~

The Company is in the process of finalizing assessments for the purpose of allocating the purchase price to the individual assets acquired and liabilities assumed in the HAY acquisition. This has the potential to result in adjustments to the carrying values of certain assets and liabilities as accounting policies are harmonized and purchase price allocation assumptions are updated. The refinement of these estimates may impact residual amounts allocated to goodwill. The preliminary allocation of the purchase ~~prices included in~~price was finalized during the ~~current period balance sheet is based on the best estimates~~first quarter of management and is subject to revision based on final determination of asset fair values and useful lives. The related depreciation and amortization expense from the acquired assets is also subject to such revisions on a prospective basis.

fiscal 2021. The following table presents the ~~preliminary~~ allocation of purchase price related to acquired tangible assets:


(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

(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 purchase of the additional equity interest in HAY was considered to be an acquisition achieved in stages, whereby the previously held equity interest was remeasured as of the 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 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 ~~an immaterial~~a non-taxable gain of approximately $0.3 million on the remeasurement of the previously held equity method investment ~~which prior to the acquisition had a carrying value~~ of ~~$65.5~~$67.8 million. The net gain has been recognized in “Gain on consolidation of equity method investments" within the Condensed Consolidated Statements of Comprehensive ~~Income.~~Income during the three months ended May 30, 2020.

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

(In millions) Valuation Method Useful Life (years) Fair Value
Inventory Step-up Comparative Sales Approach 0.3 $ 3.4
Backlog Multi-Period Excess Earnings 0.3 3.4
Deferred Revenue Adjusted Fulfillment Cost Method 0.1 (2.0 )
Tradename Relief from Royalty Indefinite 56.0
Product Development/Technology Relief from Royalty 11.0 21.0
Customer Relationships Multi-Period Excess Earnings 14.0 33.0
Total $ 114.8

Goodwill related to the acquisition was recorded within the International Contract segment for ~~$104.8~~$101.1 million and ~~included deferred tax liabilities~~the Retail segment for $10.0 million. Subsequent to the acquisition, the goodwill recorded to the Retail segment was fully impaired in fiscal 2020 based on the results of ~~$25.3 million.~~the Company's annual goodwill impairment assessment.

10 Form 10-Q

naughtone

On October 25, 2019 (“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 completion of the acquisition will 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 an equity method investment. Upon increasing its ownership to 100% on the acquisition date, the Company obtained a controlling financial interest and consolidated the operations of naughtone. Total consideration paid for naughtone on the ~~acquisition date~~Acquisition Date was $45.9 million, exclusive of naughtone cash on hand. The Company funded the acquisition with cash and cash equivalents.

~~Purchase Price Allocations~~

The Company is in the process of finalizing assessments for the purpose of allocating the purchase price to the individual assets acquired and liabilities assumed in the naughtone acquisition. This has the potential to result in adjustments to the carrying values of certain assets and liabilities as accounting policies are harmonized and purchase price allocation assumptions are updated. The refinement of these estimates may impact residual amounts allocated to goodwill. The preliminary allocation of the purchase ~~prices included in~~price was finalized during the ~~current period balance sheet is based on the best estimates~~fourth quarter of management and is subject to revision based on final determination of asset fair values and useful lives. The related depreciation and amortization expense from the acquired assets is also subject to such revisions on a prospective basis.fiscal 2020.

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

(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


(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 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~~$30.0 million on the remeasurement of the previously held equity method investment ~~which prior to the acquisition had a carrying~~ of $20.5 million. The net gain has been recognized in “Gain on consolidation of equity method investments" within the Condensed Consolidated Statements of Comprehensive ~~Income.~~Income during the three months ended November 30, 2019.

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


(In millions)	Valuation Method	Useful Life (years)	Fair Value		(In millions)	Valuation Method	Useful Life (years)	Fair Value
Inventory Step-up	Comparative Sales Approach	0.3	$	0.2	Inventory Step-up	Comparative Sales Approach	0.3	$	0.2
Backlog	Multi-Period Excess Earnings	0.3	0.8		Backlog	Multi-Period Excess Earnings	0.3	0.8
Tradename	Relief from Royalty	Indefinite	8.5		Tradename	Relief from Royalty	Indefinite	8.5
Customer Relationships	Multi-Period Excess Earnings	10.0	29.4		Customer Relationships	Multi-Period Excess Earnings	9.0	29.4
Total			$	38.9	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.

During the three months ended February 29, 2020, the Company recorded measurement period adjustments of $4.1 million related to an increase in the fair value of the tradename, and $1.6 million related to a decrease in the fair value of customer relationships. In addition, the Company revised the useful life of the customer relationships from 12 to 10 years. These adjustments reduced goodwill by $2.5 million, and all amounts referenced above are inclusive of these measurement period adjustments.

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 the ~~nine~~three months ended ~~February 29, 2020 and the year ended June 1,~~August 31, 2019, as if naughtone and HAY had been acquired as of June ~~3, 2018.~~2, 2019. 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 acquired.~~assets. Pro forma results do not include any anticipated cost savings ~~or other effects of~~from the planned integration of these acquisitions. Accordingly, such amounts are not necessarily indicative of the results that would have occurred if the ~~acquisitions~~acquisition had occurred on the dates indicated or that may result in the future.

Nine Months Ended Year Ended
(In millions) February 29, 2020 June 1, 2019
Net sales $ 2,104.8
$ 2,757.3
Net earnings attributable to Herman Miller, Inc. $ 139.9
$ 160.8

Herman Miller, Inc. and Subsidiaries 11


	Three Months Ended
(In millions)	August 31, 2019
Net sales	$	720.8
Net earnings attributable to Herman Miller, Inc.	$	49.0

6. Inventories, net

(In millions) February 29, 2020 June 1, 2019
Finished goods $ 155.3
$ 139.1
Raw materials 45.2
45.1
Total $ 200.5
$ 184.2


(In millions)	August 29, 2020		May 30, 2020
Finished goods	$	144.5	$	151.1
Raw materials	42.0		46.2
Total	$	186.5	$	197.3

Inventories are valued at the lower of cost or market and include material, labor, and overhead. Certain inventories within our North America Contract manufacturing operations are valued using the last-in, first-out (LIFO) ~~method, whereas inventories~~method. Inventories of all other operations are valued using the first-in, first-out (FIFO) method.

7. Goodwill and Indefinite-Lived Intangibles

Goodwill and other indefinite-lived intangible assets included in the Condensed Consolidated Balance Sheets consisted of the following as of ~~February~~August 29, 2020 and ~~June 1, 2019:~~May 30, 2020:


(In millions)	Goodwill		Indefinite-lived Intangible Assets
May 30, 2020	$	346.0	$	92.8
Foreign currency translation adjustments	12.6		3.4


August 29, 2020	$	358.6	$	96.2

(In millions) Goodwill Indefinite-lived Intangible Assets Total Goodwill and Indefinite-lived Intangible Assets
June 1, 2019 $ 303.8
$ 78.1
$ 381.9
Foreign currency translation adjustments —
(0.3 ) (0.3 )
Acquisition of HAY 104.8
56.0
160.8
Acquisition of naughtone 57.5
8.5
66.0
February 29, 2020 $ 466.1
$ 142.3
$ 608.4

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. AWhen 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 ~~defined as an operating segment or one level below an operating segment.~~performed. The Company ~~completed~~may also elect to bypass the ~~required annual~~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 ~~test in the fourth quarter of fiscal 2019,~~using a quantitative assessment as of March 31, ~~2019,~~2020, our annual testing date. In performing athe quantitative ~~and qualitative~~ impairment test, ~~for all goodwill~~the Company determined that the fair value of the North America and International reporting units exceeded the carrying amount and, ~~other indefinite-lived intangible assets.~~as such, these reporting units were not impaired. The assessment of the Retail and Maharam reporting units indicated that the carrying value of these reporting units exceeded their fair values, and goodwill impairment charges of $88.8 million and $36.7 million, respectively, were recorded in fiscal 2020 resulting in no goodwill in either the Retail or Maharam reporting units. Accumulated goodwill impairment losses were $125.3 million as of August 29, 2020 and May 30, 2020.

The fair value of the Company's ~~Retail~~International reporting unit, ~~was $249.9~~which includes $163.7 million of goodwill as of ~~June 1, 2019. The calculated fair~~May 30, 2020, exceeded its carrying value ~~of the reporting unit was $282.6 million, which represents an excess fair value of $32.7 million or 13.0%~~by 17%. Due to the level that the reporting unit fair ~~values~~value exceeded the carrying ~~amounts~~amount and the results of the sensitivity analysis, the Company may need to record an impairment charge if the operating results of its ~~Retail~~International reporting unit were to decline in future periods.

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 carrying value of~~

In fiscal 2020, the ~~Company's Design Within Reach ("DWR") trade name~~Company performed quantitative assessments in testing indefinite-lived intangible ~~asset was $55.1 million as of June 1, 2019. The calculated fair value~~assets for impairment, which resulted in the carrying values of the DWR, Maharam, HAY and naughtone trade ~~name was $63.2~~names exceeding their fair values by $53.3 million, ~~which represents an excess fair value~~and impairment charges of ~~$8.1 million or 14.7%.~~this amount were recognized. If the residual cash flows

12 Form 10-Q

related to ~~the Company's DWR~~these trade ~~name~~names were to decline in future periods, the Company may need to record an additional impairment charge.

During the ~~nine~~three months ended ~~February~~August 29, 2020, there were no identified indicators of impairment that required the Company to complete an interim quantitative impairment assessment related to any of the Company's reporting units or indefinitely-lived intangible assets.

8. Employee Benefit Plans

The following table summarizes the components of net periodic benefit cost for the Company's ~~International~~ defined benefit pension plan for the three ~~and nine~~ months ended:



(In millions)	August 29, 2020		August 31, 2019
Interest cost	$	0.7	$	0.5
Expected return on plan assets	(1.4)		(1.0)
Net amortization loss	1.6		0.8
Net periodic benefit cost	$	0.9	$	0.3

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Interest cost $ 0.6
$ 0.7
$ 1.8
$ 2.0
Expected return on plan assets (1.1 ) (1.1 ) (3.3 ) (3.3 )
Net amortization loss 0.9
0.7
2.5
2.0
Net periodic benefit cost $ 0.4
$ 0.3
$ 1.0
$ 0.7

9. Earnings Per Share

The following table reconciles the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS) for the three ~~and nine~~ months ended:



	August 29, 2020		August 31, 2019
Numerators:
Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. - in millions	$	73.0	$	48.2

Denominators:
Denominator for basic EPS, weighted-average common shares outstanding	58,831,305		58,909,001
Potentially dilutive shares resulting from stock plans	132,963		322,727
Denominator for diluted EPS	58,964,268		59,231,728
Antidilutive equity awards not included in weighted-average common shares - diluted	1,096,907		123,088

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Numerators:

Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. - in millions $ 37.7
$ 39.2
$ 164.5
$ 114.5

Denominators:

Denominator for basic EPS, weighted-average common shares outstanding 58,940,060
58,838,958
58,970,264
59,087,899
Potentially dilutive shares resulting from stock plans 278,041
288,300
296,665
360,395
Denominator for diluted EPS 59,218,101
59,127,258
59,266,929
59,448,294
Antidilutive equity awards not included in weighted-average common shares - diluted 164,443
401,811
74,932
211,097

10. Stock-Based Compensation

The following table summarizes the stock-based compensation expense and related income tax effect for the three ~~and nine~~ months ended:



(In millions)	August 29, 2020		August 31, 2019
Stock-based compensation expense	$	1.5	$	2.6
Related income tax effect	0.3		0.6

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Stock-based compensation expense $ 2.5
$ 2.2
$ 7.9
$ 7.2
Related income tax effect 0.6
0.5
1.8
1.6

Certain of the 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.

Herman Miller, Inc. and Subsidiaries 13

11. Income Taxes

The Company recognizes interest and penalties related to uncertain tax benefits through income tax expense in its Condensed Consolidated Statements of Comprehensive Income. Interest and penalties recognized in the Company's Condensed Consolidated Statements of Comprehensive Income were negligible for the three ~~and nine~~ months ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019.

The Company's recorded liability for potential interest and penalties related to uncertain tax benefits was:


(In millions)	August 29, 2020		May 30, 2020
Liability for interest and penalties	$	0.8	$	0.8
Liability for uncertain tax positions, current	$	2.0	$	1.9

(In millions) February 29, 2020 June 1, 2019
Liability for interest and penalties $ 0.9
$ 0.7
Liability for uncertain tax positions, current $ 2.2
$ 1.9

The Company's process for determining the provision for income taxes for the three ~~and nine~~ months ended ~~February~~August 29, 2020 involved using an estimated annual effective tax rate which was based on expected annual income and statutory tax rates across the various jurisdictions in which it operates. The effective tax rates were ~~22.4%~~22.0% and ~~16.0%~~21.0%, respectively, for the three month periods ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019. The year over year increase in the effective tax rate for the three months ended August 29, 2020 resulted from a decrease in the current quarter tax deduction for certain stock based compensation awards as compared to the same quarter in the prior year. For the three months ended ~~February~~August 29, 2020, the effective tax rate is higher than the United States federal statutory rate due to United States state income taxes and the mix of earnings in tax jurisdictions that had rates that were higher than the United States federal statutory rate. For the three months ended ~~March 2,~~August 31, 2019, the effective tax rate was ~~lower than~~the same as the United States federal statutory ~~rate mainly due to the impact of SAB 118 resulting from United States tax reform.~~rate.

The effective tax rates were 18.3% and 19.6%, respectively, for the nine month periods ended February 29, 2020 and March 2, 2019. The year over year decrease in the effective tax rate for the nine months ended February 29, 2020 was mainly the result of a non-taxable gain recorded in the current year related to the recent acquisition of naughtone shares. For the nine months ended February 29, 2020, the effective tax rate was lower than the United States federal statutory rate mainly due to the non-taxed nature of the naughtone gain. For the nine months ended March 2, 2019, the effective tax rate was lower than the United States federal statutory rate mainly due to the impact of SAB 118 resulting from United States tax reform.

The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months because of the audits. Tax payments related to these audits, if any, are not expected to be material to the Company's Condensed Consolidated Statements of Comprehensive Income.

For the majority of tax jurisdictions, the Company is no longer subject to state, local, or non-United States income tax examinations by tax authorities for fiscal years before 2016.

12. Fair Value Measurements

The Company's financial instruments consist of cash equivalents, marketable securities, accounts and notes receivable, deferred compensation plan, accounts payable, debt, interest rate swaps, ~~and~~ foreign currency exchange ~~contracts.~~contracts, redeemable noncontrolling interests, indefinite-lived intangible assets and right of use assets. The Company's financial instruments, other than long-term debt, are recorded at fair value.

The carrying value and fair value of the Company's long-term debt, including current maturities, is as follows for the periods indicated:


(In millions)	August 29, 2020		May 30, 2020
Carrying value	$	327.3	$	591.4
Fair value	$	332.1	$	594.0

(In millions) February 29, 2020 June 1, 2019
Carrying value $ 277.5
$ 285.0
Fair value $ 279.8
$ 287.8

The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in net earnings, which have not significantly changed in the current period:

Cash and cash equivalents — The Company invests excess cash in short term investments in the form of commercial paper and money market funds. Commercial paper is valued at amortized costs while money market funds are valued using net asset value ("NAV").

Mutual Funds-equity — The Company's equity securities primarily include equity mutual funds. The equity mutual fund investments are recorded at fair value using quoted prices for similar securities.

14 Form 10-Q

Deferred compensation plan — The Company's deferred compensation plan primarily includes various domestic and international mutual funds that are recorded at fair value using quoted prices for similar securities.

Foreign currency exchange contracts — The Company's foreign currency exchange contracts are valued using an approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts is based on month-end spot rates as adjusted by market-based current activity. These forward contracts are not designated as hedging instruments.

The following table sets forth financial assets and liabilities measured at fair value ~~and recorded in~~through net ~~earnings~~income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of ~~February~~August 29, 2020 and ~~June 1, 2019.~~May 30, 2020.

(In millions) February 29, 2020 June 1, 2019
Financial Assets NAV
Quoted Prices with Other
Observable Inputs (Level 2)
NAV
Quoted Prices with Other
Observable Inputs (Level 2)
Cash equivalents:
Money market funds $ 14.7
$ —
$ 69.5
$ —
Mutual funds - equity —
0.9
—
0.9
Deferred compensation plan —
12.6
—
12.5
Total $ 14.7
$ 13.5
$ 69.5
$ 13.4

Financial Liabilities
Foreign currency forward contracts $ —
$ 0.3
$ —
$ 1.4
Total $ —
$ 0.3
$ —
$ 1.4


(In millions)	August 29, 2020						May 30, 2020
Financial Assets	NAV		Quoted Prices with Other Observable Inputs (Level 2)		NAV		Quoted Prices with Other Observable Inputs (Level 2)
Cash equivalents:
Money market funds	$	100.9	$	0	$	283.7	$	0
Mutual funds - equity	0		0.7		0		0.7
Foreign currency forward contracts	—		1.0		—		1.1
Deferred compensation plan	0		15.2		0		13.2
Total	$	100.9	$	16.9	$	283.7	$	15.0

Financial Liabilities
Foreign currency forward contracts	$	0	$	0.2	$	0	$	0.8

Total	$	0	$	0.2	$	0	$	0.8

The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities recorded in other comprehensive income, which have not significantly changed in the current period:

Mutual funds-fixed income — The Company's ~~available-for-sale marketable~~fixed-income securities primarily include fixed income mutual funds and government obligations. These investments are recorded at fair value using quoted prices for similar securities.

Interest rate swap agreements — The value of the Company's interest rate swap agreements is determined using a market approach based on rates obtained from active markets. The interest rate swap agreements are designated as cash flow hedging instruments.

The following table sets forth financial assets and liabilities measured at fair value ~~and recorded in~~through other comprehensive income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of ~~February~~August 29, 2020 and ~~June 1, 2019.~~May 30, 2020.

(In millions) February 29, 2020 June 1, 2019

Financial Assets
Quoted Prices with
Other Observable Inputs (Level 2)
Quoted Prices with
Other Observable Inputs (Level 2)
Mutual funds - fixed income $ 8.0
$ 7.9
Interest rate swap agreement —
1.0
Total $ 8.0
$ 8.9

Financial Liabilities
Interest rate swap agreement $ 17.3
$ 2.2
Total $ 17.3
$ 2.2


(In millions)	August 29, 2020		May 30, 2020
Financial Assets	Quoted Prices with Other Observable Inputs (Level 2)		Quoted Prices with Other Observable Inputs (Level 2)
Mutual funds - fixed income	$	6.3	$	6.3

Total	$	6.3	$	6.3

Financial Liabilities
Interest rate swap agreement	$	24.6	$	25.0

Total	$	24.6	$	25.0

Herman Miller, Inc. and Subsidiaries 15

The following is a summary of the carrying and market values of the Company's fixed income mutual funds and equity mutual funds as of the ~~respective dates:~~dates indicated:


	August 29, 2020										May 30, 2020
(In millions)	Cost		Unrealized Gain/(Loss)		Market Value		Cost		Unrealized Gain/(Loss)		Market Value
Mutual funds - fixed income	$	6.3	$	0	$	6.3	$	6.2	$	0.1	$	6.3
Mutual funds - equity	0.6		0.1		0.7		0.6		0.1		0.7
Total	$	6.9	$	0.1	$	7.0	$	6.8	$	0.2	$	7.0

February 29, 2020 June 1, 2019
(In millions) Cost
Unrealized
Gain/(Loss)

Market
Value
Cost Unrealized
Gain/(Loss) Market
Value
Mutual funds - fixed income $ 8.0
$ —
$ 8.0
$ 7.9
$ —
$ 7.9
Mutual funds - equity 0.7
0.2
0.9
0.8
0.1
0.9
Total $ 8.7
$ 0.2
$ 8.9
$ 8.7
$ 0.1
$ 8.8

The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in the Condensed Consolidated Statements of Comprehensive Income within "~~Other expense (income), net~~""Other income, net".

The Company reviews its investment portfolio for any unrealized losses that would be deemed other-than-temporary and requires the recognition of an impairment loss in earnings. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than its cost, the Company's intent to hold the investment, and whether it is more likely than not that the Company will be required to sell the investment before recovery of the cost basis. The Company also considers the type of security, related industry and sector performance, and published investment ratings. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If conditions within individual markets, industry segments, or macro-economic environments deteriorate, the Company could incur future impairments.

The Company views its equity and fixed income mutual funds as available for use in its current operations. Accordingly, the investments are recorded within Current Assets within the Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging Activities

Foreign Currency Forward Contracts

The Company transacts business in various foreign currencies and has established a program that primarily utilizes foreign currency forward contracts to reduce the risks associated with the effects of certain foreign currency exposures. Under this program, the Company's strategy is to have increases or decreases in our foreign currency exposures offset by gains or losses on the foreign currency forward contracts to mitigate the risks and volatility associated with foreign currency transaction gains or losses. Foreign currency exposures typically arise from net liability or asset exposures in non-functional currencies on the balance sheets of our foreign subsidiaries. Foreign currency forward contracts generally settle within 30 days and are not used for trading purposes.

These forward contracts are not designated as hedging instruments. Accordingly, we record the fair value of these contracts as of the end of the reporting period in the Consolidated Balance Sheets with changes in fair value recorded within the Consolidated Statements of Comprehensive Income. The balance sheet classification for the fair values of these forward contracts is to Other current assets for unrealized gains and to Other accrued liabilities for unrealized losses. The Consolidated Statements of Comprehensive Income classification for the fair values of these forward contracts is to Other (income) expense, net, for both realized and unrealized gains and losses.

Interest Rate Swaps

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 agreements were 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. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.

The interest rate swaps were designated cash flow hedges at inception and the facts and circumstances of the hedged relationship remains consistent with the initial quantitative effectiveness assessment in that the hedged instruments remain an effective accounting hedge as of ~~February~~August 29, 2020. Since a designated derivative meets hedge accounting criteria, the fair value of the hedge is recorded in the Consolidated Statements of Stockholders’ Equity as a component of Accumulated other comprehensive loss, net of tax. The ineffective portion of the change in fair value of the derivatives is immediately recognized in earnings. The interest rate swap agreements are assessed for hedge effectiveness on a quarterly basis.

~~In September 2016,~~As of August 29, 2020, the Company ~~entered into an~~had the following two outstanding interest rate swap ~~agreement.~~ agreements:


(In millions)	Notional Amount		Forward Start Date	Termination Date	Effective Fixed Interest Rate
September 2016 Interest Rate Swap	$	150.0	January 3, 2018	January 3, 2028	1.949	%
June 2017 Interest Rate Swap	$	75.0	January 3, 2018	January 3, 2028	2.387	%

16 Form 10-Q

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 Companyswaps above effectively converted indebtedness anticipated to be borrowed on the ~~Company’s~~Company's revolving line of credit up to the notional ~~amount~~amounts from a LIBOR-based floating interest rate plus applicable margin to ~~a 1.949%~~an effective fixed interest rate plus applicable margin under the ~~agreement~~agreements as of the forward start date.

On June 12, 2017, the Company entered into an 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% fixed interest rate plus applicable margin under the agreement as of the forward start date.

As of ~~February~~August 29, 2020, the fair value of the Company’s two outstanding interest rate swap agreements ~~which are designated cash flow hedges,~~ was a liability of ~~$17.3~~$24.6 million. The liability fair value was recorded within "Other liabilities" within the Condensed Consolidated Balance Sheets. Recorded within Other comprehensive loss, net of tax, for the effective portion of the Company's designated cash flow hedges was a net unrealized gain of $0.3 million and net unrealized loss of ~~$6.6 million and $4.4~~$8.8 million for the three months ended ~~February~~August 29, 2020 and March 2, 2019, respectively. Recorded within Other comprehensive loss, net of tax, for the effective portion of the Company's designated cash flow hedges was a net unrealized loss of $11.9 million and a net unrealized gain of $4.2 million for the nine months ended February 29, 2020 and March 2,August 31, 2019, respectively.

The following table summarizes the effects of the interest rate swap agreements for the three months ended:


(In millions)	August 29, 2020		August 31, 2019
Gain (loss) recognized in Other comprehensive loss (effective portion)	$	0.3	$	(8.8)
(Loss) gain reclassified from Accumulated other comprehensive loss into earnings	$	(1.1)	$	0.2

There were 0 gains or losses recognized in earnings for hedge ineffectiveness for the three ~~and nine~~ month periods ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019, respectively. The ~~losses reclassified from Accumulated other comprehensive~~amount of loss into earnings were $0.1 million and $0.2 million for the three month periods ended February 29, 2020 and March 2, 2019, respectively. The losses reclassified from Accumulated other comprehensive loss into earnings were $0.1 million and $0.3 million for the nine month periods ended February 29, 2020 and March 2, 2019, respectively. Losses expected to be reclassified from Accumulated other comprehensive loss into earnings during the next twelve months ~~are $2.4 million. The amount of loss,~~is $4.4 million, and net of tax ~~expected to be reclassified out of Accumulated other comprehensive loss into earnings during the next twelve months~~ is ~~$1.8~~$3.3 million.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests are reported on the Condensed Consolidated Balance Sheets in mezzanine equity in “Redeemable noncontrolling interests.” As of June 1, 2019, the outstanding redeemable noncontrolling interests were $20.6 million, and represented an approximate 5% minority ownershipChanges in the Company's ~~subsidiary, Herman Miller Consumer Holdings, Inc. ("HMCH").~~ redeemable noncontrolling interest in HAY for the three months ended August 29, 2020 are as follows:


(In millions)	August 29, 2020
Beginning Balance	$	50.4

Net income attributable to redeemable noncontrolling interests	0.4

Cumulative translation adjustments attributable to redeemable noncontrolling interests	2.6
Foreign currency translation adjustments	3.8
Ending Balance	$	57.2

During August 2019, the Company acquired all of the remaining redeemable noncontrolling equity interests. HMCH redeemed certain HMCH stock for cash and then, on August 23, 2019, HMCH merged with and into the Company, with the remaining minority HMCH shareholders receiving a cash payment. Total cash paid of $20.4 million for the redemptions and for merger consideration was at fair market value based on an independent appraisal. This compares to purchases of $10.1 million during the nine month period ended March 2, 2019.

~~Changes~~interests in the Company's ~~redeemable noncontrolling interest in HMCH~~subsidiary, Herman Miller Consumer Holdings, Inc. for ~~the nine months ended February 29, 2020 and March 2, 2019 are as follows:~~$20.4 million.

(In millions) February 29, 2020 March 2, 2019
Beginning Balance $ 20.6
$ 30.5
Purchase of HMCH redeemable noncontrolling interests (20.4 ) (10.1 )
Redemption value adjustment (0.2 ) —
Exercised options —
0.2
Net income attributable to redeemable noncontrolling interests —
0.1
Ending Balance $ —
$ 20.7

Other

~~On December 2, 2019,~~The following table summarizes the ~~Company purchased an additional 34% equity voting interest in HAY. Upon increasing its ownership to 67%, the Company obtained a controlling financial interest and consolidated the financial results~~valuation of ~~HAY. Additionally, the Company is a party to options, that if exercised, would require it to purchase the remaining 33% of the equity in HAY,~~our assets measured at fair ~~market value. This remaining redeemable noncontrolling interest in HAY is classified outside permanent equity~~value on a non-recurring basis as of May 30, 2020:


(In millions)	May 30, 2020
Assets:	Level 3
Indefinite-lived intangible assets	$	92.8
DWR right of use assets	110.9

Not included in the ~~Consolidated Balance Sheets~~above is goodwill related to the Retail and ~~is carried at the current estimated redemption amount.~~

~~Changes~~Maharam reporting units, as these were fully written down with a resulting impairment charge of $125.5 million in the ~~Company's redeemable noncontrolling interest in HAY for the nine months ended February 29, 2020 are as follows:~~fourth quarter of fiscal 2020.

(In millions) February 29, 2020
Beginning Balance $ —
Increase due to HAY acquisition 72.1
Net income attributable to redeemable noncontrolling interests (0.4 )
Ending Balance $ 71.7

13. Commitments and Contingencies

Product Warranties

The Company provides coverage to the end-user for parts and labor on products sold under its warranty policy and for other product-related matters. The standard length of warranty is 12 years for the majority of products sold; however, this varies depending on the product classification. The Company does not sell or otherwise issue warranties or warranty extensions as stand-alone products. Reserves have been established for various costs associated with the Company's warranty program. General warranty reserves are based on historical claims experience and other currently available information and are periodically adjusted for business levels and other factors. Specific reserves are

Herman Miller, Inc. and Subsidiaries 17

established once an issue is identified with the amounts for such reserves based on the estimated cost of correction. The Company provides an assurance-type warranty that ensures that products will function as intended. As such, the Company's estimated warranty obligation is accounted for as a ~~liability.~~liability and is recorded within current and long-term liabilities within the Condensed Consolidated Balance Sheets. Changes in the warranty reserve for the stated periods were as follows:


	Three Months Ended
(In millions)	August 29, 2020		August 31, 2019
Accrual Balance — beginning	$	59.2	$	53.1
Accrual for warranty matters	4.6		5.3
Settlements and adjustments	(3.5)		(5.1)
Accrual Balance — ending	$	60.3	$	53.3

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Accrual Balance — beginning $ 54.6
$ 52.4
$ 53.1
$ 51.5
Accrual for warranty matters 7.5
4.6
19.1
15.3
Settlements and adjustments (4.7 ) (4.5 ) (14.8 ) (14.3 )
Accrual Balance — ending $ 57.4
$ 52.5
$ 57.4
$ 52.5

Guarantees

The Company is periodically required to provide performance bonds to do business with certain customers. These arrangements are common in the industry and generally have terms ranging between one year and three years. The bonds are required to provide assurance to customers that the products and services they have purchased will be installed and/or provided properly and without damage to their facilities. The bonds are provided by various bonding agencies. However, the Company is ultimately liable for claims that may occur against them. As of ~~February~~August 29, 2020, the Company had a maximum financial exposure related to performance bonds totaling approximately $4.6 million. The Company has no history of claims, nor is it aware of circumstances that would require it to pay, under any of these arrangements. The Company also believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, 0 liability has been recorded in respect to these bonds as of either ~~February~~August 29, 2020 or ~~June 1, 2019.~~May 30, 2020.

The Company has entered into standby letter of credit arrangements for purposes of protecting various insurance companies and lessors against default on insurance premium and lease payments. As of ~~February~~August 29, 2020, the Company had a maximum financial exposure from these standby letters of credit totaling approximately ~~$9.5~~$9.3 million, all of which is considered usage against the Company's revolving line of credit. The Company has no history of claims, nor is it aware of circumstances that would require it to perform under any of these arrangements and believes that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect the Company's Consolidated Financial Statements. Accordingly, 0 liability has been recorded in respect to these arrangements as of ~~February~~August 29, 2020 and ~~June 1, 2019.~~May 30, 2020.

Contingencies

The Company is also involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such proceedings and litigation currently pending will not have a material adverse effect, if any, on the Company's Consolidated Financial Statements.

~~14.Debt~~

~~Long-term~~

14. Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt as of ~~February~~August 29, 2020 and ~~June 1, 2019~~May 30, 2020 consisted of the following obligations:


(In millions)	August 29, 2020		May 30, 2020

Debt securities, 6.0%, due March 1, 2021	$	50.0	$	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	2.4		1.4
Total debt	$	327.3	$	591.3
Less: Current debt	(52.4)		(51.4)
Long-term debt	$	274.9	$	539.9

(In millions) February 29, 2020 June 1, 2019
Debt securities, due March 1, 2021 $ 50.0
$ 50.0
Syndicated revolving line of credit, due August 2024 225.0
225.0
Construction-type lease —
6.9
Supplier financing program 2.5
3.1
Total debt $ 277.5
$ 285.0
Less: Current debt (2.5 ) (3.1 )
Long-term debt $ 275.0
$ 281.9

As of ~~June 1, 2019,~~May 30, 2020, the Company's syndicated revolving line of credit provided the Company with up to ~~$400~~$500 million in revolving variable interest borrowing capacity and included 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 $200 million. On August 28, 2019, the Company entered into an amendment and restatement of its existing unsecured credit facility (the "Agreement"). The Agreement, 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

18 Form 10-Q

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 February 29,~~In June 2020, the ~~total debt outstanding~~Company repaid the $265 million draw on its syndicated revolving line of credit that was taken as a precautionary measure in March 2020 to provide additional near-term liquidity given the uncertainty related to COVID-19.

Available borrowings under the syndicated revolving line of credit ~~was $225.0 million. Available borrowings against this facility~~ were ~~$265.5 million due to $9.5 million related to outstanding letters of credit. As of June 1, 2019, total debt outstanding related to borrowings under~~as follows for the ~~syndicated revolving line of credit was $225.0 million and available borrowings were $165.0 million due to $10.0 million of outstanding letters of credit.~~periods indicated:


(In millions)	August 29, 2020		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	9.3		9.4
Available borrowings under the syndicated revolving line of credit	$	265.7	$	0.6

Supplier Financing Program

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

The 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~~”“Accounts payable” in the Condensed Consolidated Balance Sheets as the amounts have been accounted for by the Company as a current debt, ~~obligation. Accordingly, $2.5 million and $3.1 million have been recorded~~ within the caption “~~Other accrued liabilities” as~~“Short-term borrowings and current portion of ~~February 29, 2020 and June 1, 2019, respectively.~~long-term debt”.

~~Construction-Type Lease~~

During fiscal 2015, the Company entered into a lease agreement for the occupancy of a new studio facility in Palo Alto, California which runs through fiscal 2026. In fiscal 2017, the Company became the deemed owner of the leased building for accounting purposes as a result of the Company's involvement during the construction phase of the project. The lease was therefore accounted for as a financing lease and the building and related financing 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 and the related financing liability were both $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.

~~15.~~

Herman Miller, Inc. and Subsidiaries 19

15. Accumulated Other Comprehensive Loss

The following table provides an analysis of the changes in accumulated other comprehensive loss for the ~~nine~~three months ended ~~February~~August 29, 2020 and ~~March 2,~~August 31, 2019:


(In millions)	Cumulative Translation Adjustments		Pension and Other Post-retirement Benefit Plans		Unrealized Gains on Available-for-sale Securities		Interest Rate Swap Agreement		Accumulated Other Comprehensive Loss
Balance at May 30, 2020	$	(56.0)	$	(59.2)	$	0.1	$	(18.9)	$	(134.0)

Other comprehensive income (loss), net of tax before reclassifications	27.5		0		(0.1)		1.4		28.8
Reclassification from accumulated other comprehensive loss - Other, net	0		1.4		0		(1.1)		0.3
Tax benefit	0		(0.2)		0		0		(0.2)
Net reclassifications	0		1.2		0		(1.1)		0.1
Net current period other comprehensive income (loss)	27.5		1.2		(0.1)		0.3		28.9
Balance at August 29, 2020	$	(28.5)	$	(58.0)	$	0	$	(18.6)	$	(105.1)

Balance at June 1, 2019	$	(48.3)	$	(45.0)	$	0	$	(0.9)	$	(94.2)

Other comprehensive loss, net of tax before reclassifications	(9.3)		0		0		(9.0)		(18.3)
Reclassification from accumulated other comprehensive loss - Other, net	0		0.8		0		0.2		1.0
Tax benefit	0		(0.1)		0		0		(0.1)
Net reclassifications	0		0.7		0		0.2		0.9
Net current period other comprehensive (loss) income	(9.3)		0.7		0		(8.8)		(17.4)
Balance at August 31, 2019	$	(57.6)	(44.3)		$	0	$	(9.7)	$	(111.6)

(In millions) Cumulative Translation Adjustments Pension and Other Post-retirement Benefit Plans
Unrealized
Gains on Available-for-sale Securities
Interest Rate Swap Agreement Accumulated Other Comprehensive Loss
Balance at June 1, 2019 $ (48.3 ) $ (45.0 ) $ —
$ (0.9 ) $ (94.2 )
Other comprehensive income (loss), net of tax before reclassifications 2.5
—
—
(12.0 ) (9.5 )
Reclassification from accumulated other comprehensive loss - Other, net —
2.5
—
0.1
2.6
Tax benefit —
(0.4 ) —
—
(0.4 )
Net reclassifications —
2.1
—
0.1
2.2
Net current period other comprehensive income (loss) 2.5
2.1
—
(11.9 ) (7.3 )
Balance at February 29, 2020 $ (45.8 ) $ (42.9 ) $ —
$ (12.8 ) $ (101.5 )

Balance at June 2, 2018 $ (34.1 ) $ (37.2 ) $ 0.1
$ 9.9
$ (61.3 )
Cumulative effect of accounting change —
—
(0.1 ) 1.5
1.4
Other comprehensive loss, net of tax before reclassifications (4.4 ) —
—
(4.2 ) (8.6 )
Reclassification from accumulated other comprehensive loss - Other, net —
2.0
—
0.3
2.3
Tax benefit —
(0.3 ) —
—
(0.3 )
Net reclassifications —
1.7
—
0.3
2.0
Net current period other comprehensive (loss) income (4.4 ) 1.7
—
(3.9 ) (6.6 )
Balance at March 2, 2019 $ (38.5 ) (35.5 ) $ —
$ 7.5
$ (66.5 )

16.Operating Segments

The Company's reportable segments consist of North America Contract, International Contract, and Retail.

The North America Contract segment includes the operations associated with the design, manufacture and sale of furniture and textile products for work-related settings, including office, education, and healthcare environments, throughout the United States and Canada. The business associated with the Company's owned contract furniture dealers is also included in the North America Contract segment. In addition to the Herman Miller brand, this segment includes the operations associated with the design, manufacture and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, Nemschoff, naughtone and Herman Miller Collection products.

The International Contract segment includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings in EMEA, Latin America and Asia-Pacific.

The Retail segment includes operations associated with the sale of modern design furnishings and accessories to third party retailers, as well as direct to consumer sales through ~~eCommerce,~~e-commerce, direct mailing catalogs, ~~and~~ DWR studios and HAY ~~studios.~~stores.

The Company also reports a “Corporate” category consisting 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. Management regularly reviews corporate costs and believes disclosing such information provides more visibility and transparency regarding how the chief operating decision maker reviews results of the Company. The accounting policies of the ~~reportable~~ operating segments are the same as those of the Company.

20 Form 10-Q

The following is a summary of certain key financial measures for the respective ~~fiscal~~ periods indicated:


	Three Months Ended
(In millions)	August 29, 2020		August 31, 2019
Net Sales:
North America Contract	$	338.8	$	458.4
International Contract	153.7		113.9
Retail	134.3		98.6
Total	$	626.8	$	670.9

Operating Earnings (Loss):
North America Contract	$	51.8	$	62.9
International Contract	25.1		13.1
Retail	29.2		(3.9)
Corporate	(10.7)		(12.0)
Total	$	95.4	$	60.1

Three Months Ended Nine Months Ended
(In millions) February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Net Sales:
North America Contract $ 413.4
$ 397.0
$ 1,322.5
$ 1,252.8
International Contract 156.1
126.0
388.1
359.9
Retail 96.2
96.0
300.2
283.5
Total $ 665.7
$ 619.0
$ 2,010.8
$ 1,896.2

Operating Earnings (Loss):
North America Contract $ 51.2
$ 40.2
$ 176.4
$ 139.5
International Contract 11.3
16.3
37.3
40.7
Retail (1.6 ) 2.3
(6.4 ) 6.3
Corporate (10.5 ) (11.0 ) (34.3 ) (39.6 )
Total $ 50.4
$ 47.8
$ 173.0
$ 146.9


(In millions)	August 29, 2020		May 30, 2020
Total Assets:
North America Contract	$	744.9	$	769.5
International Contract	552.7		512.5
Retail	315.9		310.9
Corporate	303.6		461.0
Total	$	1,917.1	$	2,053.9

(In millions) February 29, 2020 June 1, 2019
Total Assets:
North America Contract $ 832.4
$ 733.6
International Contract 557.6
356.8
Retail 476.3
310.0
Corporate 119.5
168.9
Total $ 1,985.8
$ 1,569.3

17. Restructuring Expense

~~17.Restructuring Expense~~

~~North America Contract Segment~~

During the fourth quarter of fiscal ~~2019,~~2018, the Company announced ~~restructuring activities associated with profit improvement initiatives, including costs associated with an early retirement plan.~~a facilities consolidation plan related to its International Contract segment. This impacted certain office and manufacturing facilities in the United Kingdom and China. The plan is expected to generate ~~annual~~ cost savings of approximately ~~$10~~$3 million.

~~During the nine months ended~~ ~~February 29, 2020, the Company recognized $1.7 million related to the plan.~~ To date, the Company ~~has~~ recognized ~~$9.4~~restructuring and impairment expenses of $5.0 million, with a net credit of ~~restructuring expense~~$2.8 million recognized to-date in fiscal 2021 and the remainder in fiscal 2020, 2019 and 2018. These expenses related to the ~~plan. The early retirement~~facilities consolidation plan, ~~is complete~~comprised primarily of an asset impairment recorded against an office building in the United Kingdom that was vacated and 0the consolidation of the Company's manufacturing facilities in China. No material future restructuring costs related to ~~this~~the plan are ~~expected.~~expected as the plan is substantially complete.

~~The following table provides an analysis of the changes in the restructuring costs reserve for the above plan for the nine months ended February 29, 2020:~~

(In millions) Severance and Employee-Related Exit or Disposal Activities Total
Beginning Balance $ 6.7
$ 1.0
$ 7.7
Restructuring Costs 1.7
—
1.7
Amounts Paid (7.9 ) (0.3 ) $ (8.2 )
Ending Balance $ 0.5
$ 0.7
$ 1.2

The office building and related assets in China were sold in the first quarter of fiscal 2021, resulting in a gain of approximately $3.4 million, which is included within "Restructuring expense" in the Condensed Consolidated Statements of Comprehensive Income. The office building and related assets in the United Kingdom have a carrying value of approximately $4.3 million and meet the criteria to be designated as assets held for sale. Therefore these assets have been classified as current assets and included within "Other current assets" in the Condensed Consolidated Balance Sheets at August 29, 2020.

In the second quarter of fiscal 2020, the ~~Company~~North America Contract segment initiated restructuring discussions with labor unions related to its Nemschoff operation in Wisconsin. The discussions were concluded in the third quarter of fiscal 2020 and as a result, the Company anticipates the total estimated costs related to the actions will be approximately $5 ~~million of which $3 million is anticipated to be recorded in fiscal 2020.~~million. These restructuring costs relate to potential partial outsourcing and in-sourcing strategies, long-lived asset impairments and employee-related costs. ~~In conjunction with these discussions, during the nine months ended~~ ~~February 29, 2020~~,To date, the Company has recorded approximately $3.0 million in pre-tax restructuring expense related to this plan,. with a net credit of $0.2 million recognized in fiscal 2021 and the remainder in fiscal 2020. The plan is expected to be completed in fiscal 2021.

~~The following table provides an analysis of the changes in the restructuring costs reserve for the above plan for the nine months ended February 29, 2020:~~

(In millions) Severance and Employee-Related Exit or Disposal Activities Total
Beginning Balance $ —
$ —
$ —
Restructuring Costs 2.7
0.3
3.0
Amounts Paid (0.1 ) —
$ (0.1 )
Ending Balance $ 2.6
$ 0.3
$ 2.9

In the second quarter of fiscal 2020, the Company initiated a reorganization of the Global Sales and Product teams. The ~~reorganization~~reorganization activities occurred primarily in the North America business with ~~minor~~additional costs incurred ~~internationally. In the nine months ended~~ ~~February 29, 2020, the~~Internationally. The Company has recorded a total of $2.6 million ~~of which $0.4 million has been paid. The reorganization will be completed during fiscal 2020 and the remaining charges are expected to be immaterial.~~

~~International Contract Segment~~

~~During the fourth quarter of fiscal 2018, the Company announced a facilities consolidation plan related to its International Contract segment. This impacted certain office and manufacturing facilities~~ in ~~the United Kingdom and China. The plan is expected to generate cost savings of approximately $3 million.~~

In fiscal 2019, the Company recognized restructuring and impairment expenses of $2.5 million related to the facilities consolidation plan, comprised primarily of $0.8 million related to an asset impairment recorded against an office building in the United Kingdom that was vacated and $1.4 million from the consolidation of the Company's manufacturing facilities in China.

~~During the nine months ended~~ ~~February 29, 2020, the Company recognized~~ pre-tax restructuring expense ~~of $0.6 million,~~to date related to ~~the~~this plan. ~~To date, the Company has recognized $7.0 million of restructuring~~The reorganization is complete and no future costs related to ~~the plan. NaN future restructuring costs related to the~~this plan are expected. ~~The plan is expected to be complete by the end of fiscal 2020.~~

As the United Kingdom office building and related assets meet the criteria to be designated as assets held for sale, the carrying value of these assets have been classified as current assets and included within "Other current assets" in the Condensed Consolidated Balance Sheets at February 29, 2020. The carrying amount of the assets held for sale was approximately $4.4 million as of February 29, 2020.

~~The following table provides an analysis of the changes in the International Contract segment restructuring costs reserve~~ ~~for thenine months endedFebruary 29, 2020~~:

(In millions) Severance and Employee-Related Exit or Disposal Activities Total
Beginning Balance $ 0.1
$ 0.1
$ 0.2
Restructuring Costs —
0.6
0.6
Amounts Paid (0.1 ) (0.7 ) (0.8 )
Ending Balance $ —
$ —
$ —

Herman Miller, Inc. and Subsidiaries 21

~~Retail Segment~~

~~During~~In the third quarter of fiscal 2020, the Company announced a reorganization of the Retail segment's leadership team. The Company recognized pre-tax severance and employee related restructuring expense of ~~$1.7~~$2.2 million related to the plan. No material future restructuring costs related to the plan are expected as the plan is substantially complete.

The ~~reorganization~~following table provides an analysis of the changes in the restructuring costs reserve for the above plans for the three months ended August 29, 2020:


(In millions)	Severance and Employee-Related		Exit or Disposal Activities		Total
May 30, 2020	$	5.9	$	0.8	$	6.7
Restructuring Costs	0.1		(3.1)		$	(3.0)
Amounts Paid	(2.4)		(0.1)		$	(2.5)
Other*	$	—	$	3.4	$	3.4
August 29, 2020	$	3.6	$	1.0	$	4.6

*This represents the gain on the sale of office building and related assets in China which were recorded as restructuring cost, however, do not impact the restructuring reserve.

In the fourth quarter of fiscal 2020, the Company announced a restructuring plan (“May 2020 restructuring plan") to substantially reduce expenses in response to the impact of the COVID-19 pandemic and related restrictions. These activities included voluntary and involuntary reductions in its North American and International workforces. Combined, these actions resulted in the elimination of approximately 400 full-time positions throughout the Company in various businesses and functions. As the result of these actions, the Company projects an annualized expense reduction of approximately $40 million. To date, the Company incurred severance and related charges of $17.0 million with $1.8 million recognized in fiscal 2021 and the remainder in fiscal 2020. No material future restructuring costs related to the plan are expected as the plan is substantially complete and ~~the~~the remaining ~~charges are expected to~~amounts will be ~~immaterial.~~

paid in fiscal 2021.

~~18.~~

The following table provides an analysis of the changes in the restructuring cost reserve for the three months ended August 29, 2020:


(In millions)	Severance and Employee-Related
May 30, 2020	$	15.3
Restructuring Costs	1.8
Amounts Paid	(9.6)
August 29, 2020	$	7.5

The following is a summary of restructuring expenses by segment for the periods indicated:


	Three Months Ended
(In millions)	August 29, 2020		August 31, 2019
North America Contract	$	1.6	$	1.6
International Contract	(2.8)		0.2


Total	$	(1.2)	$	1.8

18. Variable Interest Entities

The Company has long-term notes receivable with a third-party owned dealer that are deemed to be variable interests in a variable interest entity. The carrying value of these long-term notes receivable was $1.4 million and ~~$1.6~~$1.5 million as of ~~February~~August 29, 2020 and ~~June 1, 2019,~~May 30, 2020, respectively, and represents the Company’s maximum exposure to loss. The Company is not deemed to be the primary beneficiary of the variable interest entity as the entity controls the activities that most significantly impact the entity’s economic performance, including sales, marketing, and operations.

~~19. Subsequent Event~~

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The pandemic has significantly impacted the economic conditions in the U.S., accelerating during the first half of March, as federal, state and local governments react to the public health crisis, creating significant uncertainties in the economy. As of the date of this filing, the Company has been impacted by temporary facility closures and reduced hours of operations.

In Michigan, Governor Gretchen Whitmer’s “Stay Home, Stay Safe” executive order required all non-essential businesses to close for three weeks until April 13. As a result, this order has reduced operations in the Company’s West Michigan manufacturing facilities. Internationally, the Company’s manufacturing facility located near Bangalore, India is temporarily closed under a government order. In the United Kingdom, manufacturing and distribution operations are suspended until further notice. In Brazil and Mexico, the Company’s manufacturing and warehouse facilities, which serve the Latin America region, are temporarily closed under a government order. Additionally, DWR and HAY retail studios and stores across the U.S. are currently closed to the public.

The Company cannot reasonably estimate the length or severity of this pandemic, however, as a result of these developments the Company expects a material adverse impact on its sales, results of operations, and cash flows in the remainder of fiscal 2020 and in fiscal 2021, including the potential impairment of certain intangible and other long-lived assets.

In response to these developments, the Company announced a number of temporary cost reduction actions in April 2020 including a reduction in cash compensation for the majority of the Company's salaried workforce and suspension of certain employer 401(k) paid retirement contributions along with other measures.

In addition to these cost reductions, the Company has taken actions to safeguard its capital position. In March 2020, the Company borrowed $265 million from its syndicated revolving line of credit as a precautionary measure to provide additional near-term liquidity. In addition, the Board of Directors has authorized the postponement of the Company's upcoming quarterly cash dividend, which was declared on January 16, 2020, and was to be paid on April 15, 2020, to shareholders of record on February 29, 2020. The Company intends for this dividend to be paid to the original shareholders of record at a future date to be determined by the Board of Directors. The Board also determined to temporarily suspend future dividends.

22 Form 10-Q

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in millions, except share data)

The following is management's discussion and analysis of certain significant factors that affected the Company's financial condition, earnings and cash flows during the periods included in the accompanying Condensed Consolidated Financial Statements and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended ~~June 1, 2019.~~May 30, 2020. References to “Notes” are to the footnotes included in the accompanying Condensed Consolidated Financial Statements.

Business Overview

The Company researches, designs, manufactures, sells, and distributes furnishings and accessories, 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 dealers, direct customer sales, independent retailers, owned retail studios and stores, direct-mail catalogs and the Company's e-commerce platforms. The following is a summary of the results from continuing operations for the three months ended ~~February~~August 29, 2020:

•Net sales were $626.8 million and orders were $556.0 million, representing a decrease of 6.6% and 17.8%, respectively, when compared to the same quarter of the prior year. The decrease in net sales was driven primarily by decreased sales volumes due to the outbreak of COVID-19, offset by the acquisitions of HAY and naughtone and incremental list price increases, net of contract price discounting. On an organic basis, net sales were $581.6 million^(*)and orders were $511.4 million, representing a decrease of 13.3%^(*) and 24.4%, respectively, when compared to the same quarter of the prior year.

•

Net sales were $665.7 million and orders were $651.7 million, representing an increase of 7.5% and 6.3%, respectively, when compared to the same quarter of the prior year. The increase in net sales was driven primarily by the acquisitions of HAY and naughtone, as well as incremental list price increases. On an organic basis, net sales were $615.9 million^(*)~~and orders were $604.1 million, representing a decrease of 0.5%~~^(*) ~~and 1.4%, respectively, when compared to the same quarter of the prior year.~~

Gross margin was ~~36.5%~~39.9% as compared to ~~35.7%~~36.7% for the same quarter of the prior year. In the current year, this included the negative impact of special charges totaling ~~$1.4~~$1.0 million related to the initial purchase accounting effects of the Company's investment in HAY. The increase in gross margin was driven primarily by strong channel and product sales mix, list price increases ~~lower steel costs,~~implemented in the past twelve months, supplier cost reduction and other profitability improvement efforts ~~partially offset by the acquisitions of HAY~~ and ~~naughtone.~~lower freight and warehousing expenses.

•Operating expenses ~~increased~~decreased by ~~$19.7~~$31.4 million or ~~11.4%~~16.9% as compared to the same quarter of the prior year. Operating expenses included special charges, totaling ~~$4.7 million, related to transaction costs and initial purchase accounting effects of the Company's investments in HAY and naughtone.~~$0.4 million. Operating expenses also included a restructuring ~~expense~~benefit of ~~$3.5~~$1.2 million related primarily to ~~restructuring actions associated with profit improvement initiatives.~~a gain on the sale of a property offset by costs related mainly to severance and outplacement benefits. The decrease in operating expenses was driven primarily by lower compensation and benefit costs and lower marketing and selling costs.

•The effective tax rate was ~~22.4%~~22.0% compared to ~~16.0%~~21.0% for the same quarter of the prior year. ~~The rate in~~

•Diluted earnings per share increased $0.43 to $1.24, a 53.1% increase as compared to the prior year. Excluding restructuring expenses and other special charges, adjusted diluted earnings per share were $1.24^(*), a 47.6% increase as compared to prior year ~~included~~adjusted diluted earnings per share.

•In June 2020, the ~~final adjustment~~Company repaid the $265 million draw on its syndicated revolving line of credit that was taken as a precautionary measure in March 2020 to provide additional near-term liquidity given the uncertainty related to ~~recognizing~~COVID-19. As of August 29, 2020, the ~~impact~~Company's gross-debt to EBITDA ratio of 1.1x is well below the maximum level of 3.5x required by its bank covenants.

•Subsequent to the end of the ~~U.S. Tax Cuts and Jobs Act.~~


•	Diluted earnings per share decreased $0.02 to $0.64, a 3.0% decrease as compared to the prior year. Excluding restructuring expenses and other special charges, adjusted diluted earnings per share were $0.74^(*)~~, a 15.6% increase as compared to the prior year.~~

~~The Company declared cash dividends~~first quarter, on September 15, 2020, the Company's Board of ~~$0.21~~Directors approved the re-establishment of a quarterly dividend at $0.1875 per ~~share compared~~share. This payment will be made on January 15, 2021, to ~~$0.1975 per share in~~shareholders of record at the ~~same quarter~~close of ~~the prior year.~~

~~Strategic investment~~business as of ~~approximately $79 million was made in acquiring an additional 34% of the outstanding equity of HAY.~~

November 28, 2020.

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

Herman Miller, Inc. and Subsidiaries 23

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

~~Throughout most~~•The disruption from the COVID-19 pandemic adversely impacted the results of ~~the third~~our first quarter ~~our business in North America reflected a mixed macro-economic picture. Job growth~~as Gross Domestic Product forecasts and ~~architectural billing activity reflect positive trends, while~~ industry order trends, as reported by the Business and Institutional Furniture Manufacturers Association ("BIFMA"), have ~~varied~~highlighted near-term demand pressures from the slowdown in ~~recent months.~~economic activity from the pandemic.

•The Company is monitoring the resolution of various trade policy negotiations between the U.S. and key trading partners as well as the ongoing negotiations concerning the U.K. referendum to exit the European Union ("Brexit"). These negotiations create ~~a level of~~ uncertainty in key markets, particularly the U.K., continental Europe and China, which, if unresolved in the near term, ~~will likely~~could negatively impact customer demand.

•The Company ~~is also navigating~~continues to navigate the impact of global tariffs. The Company ~~continues to believe,~~believes, based upon existing circumstances, that pricing, strategic sourcing actions and profit optimization initiatives have fully offset the current level of tariffs imposed on imports from China.

•The Company's Retail segment is facing continuing gross margin pressure from increasing customer expectations that the products they buy should come with free or discounted shipping. In response, the Company is continuing to evaluatesupports a ~~variety~~range of ~~strategies, including negotiating lower costs from third party freight providers, implementing actions~~furniture categories aimed at ~~improving~~ the ~~efficiency~~home environment. Several of ~~its logistics processes and more closely reflecting~~these categories, including home office products, saw a significant ramp-up in demand during the ~~cost~~first quarter of ~~delivery into the base price of its products.~~fiscal 2021.

The remaining sections within Item 2 include additional analysis of the three ~~and nine~~ months ended ~~February~~August 29, 2020, including discussion of significant variances compared to the prior year periods.

COVID-19 Update

The ~~outbreak~~Company continues to navigate the new realities brought about by the COVID-19 pandemic. Most global facilities are open in some capacity, depending on local government and health authority recommendations. While demand for the Company's products and services, particularly in the Contract segments of ~~COVID-19 in China during our third fiscal quarter~~the business, has been adversely impacted, our ~~financial performance for~~multi-channel go-to-market approach has enabled us to serve customers where, and how, they need to be served. In addition, the ~~quarter~~investments we’ve made in people, technology, and ~~will have an adverse impact for~~products has positioned us well to capitalize on emerging opportunities as our customers' needs changed quickly at the remainder of fiscal 2020 and in fiscal 2021. This outbreak has adversely impacted our supply base, including goods shipped from China in the quarter as well as resulted in temporary facility closures in other locations throughout the globe in the fourth quarter. While we cannot determine the precise impactonset of the COVID-19 ~~outbreak~~crisis. This has allowed for our Retail business to take advantage of the unanticipated emerging work from home trend as consumers are focusing on ~~our third quarter results, we do know that~~their broader home environments. Despite this, the ~~temporary closure of our Company’s manufacturing plant in Dongguan, China reduced International sales by approximately $6 million. The~~ extent of the geographic spread and duration of this ~~new~~ virus, ~~as well as~~ the impact on our supply chain, future demand for our products, and related financial impact cannot be estimated at this time with any degree of certainty.

Employee Safety and Health

~~While~~The health and well-being of employees remains top of mind as we begin to slowly return to our workplaces around the ~~Company’s manufacturing plant~~globe. Our return to the office will continue to be more methodical with maximum occupancy limits in ~~Dongguan, China experienced~~place according to local mandates and best practices to ensure the ~~initial impact~~health and safety of ~~COVID-19, it was running at near full capacity by late March. Lessons learned from that first interaction with the virus led~~our employees. We also continue to employ a ~~number~~variety of ~~employee~~other safety measures ~~to contain the spread of COVID-19,~~ including domestic and international travel restrictions, ~~work-from-home practices,~~ extensive cleaning protocols, temperature and ~~ultimately the closure of our showrooms~~health screenings, personal protective equipment, and ~~retail outlets to the public.~~visitor safety guidelines.

Customer Focus

~~Our customer service, sales, supplier,~~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 a reimagined Design Within Reach website, 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 teams are working closely with customers to meet current demand. Sales teams are meeting with customers remotely via video calls and by leveraging virtual reality to continue the design and specification process that would normally take place in a showroom. Customer service representatives are working remotely to stay connected to customers regarding order status and projected delivery dates.audiences.

Manufacturing and Retail Operations

~~As a global manufacturer, the Company is responding to shelter-in-place and similar government orders in various locations around the world.~~

In Michigan for example, Governor Gretchen Whitmer’s “Stay Home, Stay Safe” executive order required all non-essential businesses to close for three weeks until April 13. However, as the Company serves the health care industry and the federal government, among other critical sectors, the Company willAll our manufacturing facilities continue to help support customers who are actively engaged in the COVID-19 response. In an effort to support the thousands of medical workers on the front lines of the battle against COVID-19, this work will also include transforming a portion of its manufacturing footprint to fulfill the immediate need for medical and personal protective equipment. The Company continues to monitor similar executive orders to understand the potential impact on its operations in other areas.

~~Elsewhere in the U.S., Nemschoff, which also serves the health care industry, continues operations~~operate at ~~full capacity in Sheboygan, WI. Operations at Maharam, based in Yaphank, NY and Geiger, in both its Fulton, GA and Hildebran, NC locations, also remain open.~~

Internationally, outside of China, the Company’s manufacturing facility located near Bangalore, India is temporarily closed under a government order. In the United Kingdom, manufacturing and distribution operations are suspended until further notice. In Brazil and Mexico, the Company’s manufacturing and warehouse facilities, which serve the Latin America region, are temporarily closed under a government order.

~~Retail Operations~~

~~DWR and HAY~~near-normal capacity. All retail studios and stores ~~across the US~~ are ~~currently closed~~open in some capacity; with some open to the public, ~~but the Company’s distribution center~~some in ~~Batavia, OH is still operational. Freight carriers are delivering to every market domestically but changing policies~~limited capacity, and procedures daily that may affect distribution. In some markets the Company is unable to offer white glove delivery at this time, but can coordinate with customers to deliver product to their door. Its eCommerce platforms are operating, however, this will not offset the temporary closure of the studios and stores.others by appointment only.

24 Form 10-Q

Cost Reductions

~~The~~In fiscal 2020, the Company ~~has~~ implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. ~~These actions include a~~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 ~~compensation for the majority of the Company's salaried workforce. Additionally,~~dividend program. Retirement plan contributions remain suspended, and the Company ~~is immediately suspending certain employer-paid retirement contributions and will suspend previously planned compensation increases and cash incentive bonus programs for~~continues to tightly control operating expenses in the ~~upcoming fiscal year ending May 2021. The Company will continue to evaluate further ways to manage costs in line with reduced revenue levels.~~face of lingering economic uncertainty.

Reconciliation of Non-GAAP Financial Measures

This report contains references to ~~Organic~~organic net sales and ~~Adjusted~~adjusted earnings per share - diluted, which are non-GAAP financial measures. Organic ~~Growth (Decline)~~growth (decline) represents the change in ~~Net~~net sales, excluding currency translation effects and the impact of acquisitions. Adjusted ~~Earnings~~earnings per ~~Share~~share represents reported diluted earnings per share excluding the impact from adjustments related to ~~the adoption of the U.S. Tax Cuts and Jobs Act, amortization of an inventory step up on the HAY equity method investment, a gain on the consolidation of equity method investments,~~ restructuring expenses and other special charges or gains, including related taxes. Restructuring expenses ~~include~~in the current period included actions involving facilities consolidation and optimization and targeted workforce reductions, while in the comparative period included actions involving facilities consolidation and optimization and costs associated with an early retirement program. Special charges ~~include~~in the current period included acquisition-related costs and certain costs arising as a direct result of COVID-19, while in the comparative period included costs related to CEO ~~transition, third party consulting costs related to the Company's profit enhancement initiatives, and acquisition related costs.~~transition.

The Company believes presenting ~~Organic~~organic net sales and ~~Adjusted~~adjusted earnings per share - diluted is useful for investors as it provides financial information on a more comparative basis for the periods presented by excluding items that are not representative of the ongoing operations of the Company.

Organic net sales and ~~Adjusted~~adjusted earnings per share - diluted are not measurements of our financial performance under GAAP and should not be considered as alternatives to the 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 our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing prominence of our GAAP results and using the non-GAAP financial measures only as a supplement.

The following table reconciles ~~Net~~net sales to ~~Organic~~organic net sales for the periods ended as indicated below:


	Three Months Ended																		Three Months Ended
	August 29, 2020																		August 31, 2019
	North America			International			Retail			Total			North America		International		Retail		Total
Net sales, as reported	$	338.8		$	153.7		$	134.3		$	626.8		$	458.4	$	113.9	$	98.6	$	670.9
% change from PY	(26.1)		%	34.9		%	36.2		%	(6.6)		%
Proforma Adjustments
Acquisitions	(7.1)			(39.5)			—			(46.6)			—		—		—		—
Currency translation effects⁽¹⁾	0.3			1.1			—			1.4			—		—		—		—



Net sales, organic	$	332.0		$	115.3		$	134.3		$	581.6		$	458.4	$	113.9	$	98.6	$	670.9
% change from PY	(27.6)		%	1.2		%	36.2		%	(13.3)		%














(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.

Three Months Ended Three Months Ended
February 29, 2020 March 2, 2019
North America International Retail Total North America International Retail Total
Net Sales, as reported $ 413.4
$ 156.1
$ 96.2
$ 665.7
$ 397.0
$ 126.0
$ 96.0
$ 619.0
% change from PY 4.1 % 23.9 % 0.2 % 7.5 %

Proforma Adjustments
Acquisitions (6.4 ) (44.0 ) —
(50.4 ) —
—
—
—
Currency Translation Effects ⁽¹⁾
(0.2 ) 0.8
—
0.6
—
—
—
—
Net Sales, organic $ 406.8
$ 112.9
$ 96.2
$ 615.9
$ 397.0
$ 126.0
$ 96.0
$ 619.0
% change from PY 2.5 % (10.4 )% 0.2 % (0.5 )%

Herman Miller, Inc. and Subsidiaries 25

Nine Months Ended Nine Months Ended
February 29, 2020 March 2, 2019
North America International Retail Total North America International Retail Total
Net Sales, as reported $ 1,322.5
$ 388.1
$ 300.2
$2,010.8 $ 1,252.8
$ 359.9
$ 283.5
$ 1,896.2
% change from PY 5.6 % 7.8 % 5.9 % 6.0 %

Proforma Adjustments
Acquisitions (8.9 ) (45.0 ) —
(53.9 ) —
—
—
—
Currency Translation Effects ⁽¹⁾
0.3
4.2
0.1
4.6
—
—
—
—
Net Sales, organic $ 1,313.9
$ 347.3
$ 300.3
$1,961.5 $ 1,252.8
$ 359.9
$ 283.5
$ 1,896.2
% change from PY 4.9 % (3.5 )% 5.9 % 3.4 %
⁽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 ~~Earnings~~earnings per share - diluted to ~~Adjusted~~adjusted earnings per share - diluted for the three ~~and nine~~ months ended:

Three Months Ended Nine Months Ended
2/29/20 3/2/19 2/29/20 3/2/19
Earnings per Share - Diluted $ 0.64
$ 0.66
$ 2.78
$ 1.92

Less: Adjustments Related to Adoption of U.S. Tax Cuts and Jobs Act —
(0.03 ) —
(0.02 )
Add: Inventory step up on HAY equity method investment, after tax —
—
—
0.01
Less: Gain on consolidation of equity method investments —
—
(0.51 ) —
Add: Special charges, after tax 0.06
0.01
0.08
0.15
Add: Restructuring expense, after tax 0.04
—
0.12
0.03
Adjusted Earnings per Share - Diluted $ 0.74
$ 0.64
$ 2.47
$ 2.09

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted 59,218,101
59,127,258
59,266,929
59,448,294


	Three Months Ended
	August 29, 2020		August 31, 2019
Earnings per share - diluted	$	1.24	$	0.81




Add: Special charges, after tax	0.01		0.01
Add: Restructuring expenses, after tax	(0.01)		0.02
Adjusted earnings per share - diluted	$	1.24	$	0.84

Weighted average shares outstanding (used for calculating adjusted earnings per share) – diluted	58,964,268		59,231,728
Note: The adjustments above are net of tax. For the three months ended August 29, 2020 and August 31, 2019, the tax impact of the adjustments were immaterial.

Analysis of Results for Three ~~and Nine~~Months

The following table presents certain key highlights from the results of operations for the three ~~and nine~~ months ended:



(In millions, except per share data)	August 29, 2020		August 31, 2019		% Change

Net sales	$	626.8	$	670.9	(6.6)	%
Cost of sales	376.8		424.8		(11.3)	%
Gross margin	250.0		246.1		1.6	%
Operating expenses	154.6		186.0		(16.9)	%
Operating earnings	95.4		60.1		58.7	%

Other expenses, net	1.6		2.1		(23.8)	%
Earnings before income taxes and equity income	93.8		58.0		61.7	%
Income tax expense	20.6		12.2		68.9	%
Equity income from nonconsolidated affiliates, net of tax	0.2		2.2		(90.9)	%
Net earnings	73.4		48.0		52.9	%
Net earnings (loss) attributable to redeemable noncontrolling interests	0.4		(0.2)		n/a
Net earnings attributable to Herman Miller, Inc.	$	73.0	$	48.2	51.5	%
Earnings per share — diluted	$	1.24	$	0.81	53.1	%
Orders	$	556.0	$	676.7	(17.8)	%
Backlog	$	400.0	$	399.9	—	%

Three Months Ended Nine Months Ended
(In millions, except per share data) February 29, 2020 March 2, 2019 % Change February 29, 2020 March 2, 2019 % Change
Net sales $ 665.7
$ 619.0
7.5 % $ 2,010.8
$ 1,896.2
6.0 %
Cost of sales 422.4
398.0
6.1 % 1,265.9
1,214.5
4.2 %
Gross margin 243.3
221.0
10.1 % 744.9
681.7
9.3 %
Operating expenses 192.9
173.2
11.4 % 571.9
534.8
6.9 %
Operating earnings 50.4
47.8
5.4 % 173.0
146.9
17.8 %
Gain on consolidation of equity method investments —
—
n/a 30.5
—
n/a
Other expenses, net 2.8
2.2
27.3 % 7.5
7.8
(3.8 )%
Earnings before income taxes and equity income 47.6
45.6
4.4 % 196.0
139.1
40.9 %
Income tax expense 10.6
7.3
45.2 % 35.8
27.3
31.1 %
Equity income from nonconsolidated affiliates, net of tax 0.3
1.0
(70.0 )% 3.7
2.8
32.1 %
Net earnings 37.3
39.3
(5.1 )% 163.9
114.6
43.0 %
Net (loss) earnings attributable to redeemable noncontrolling interests (0.4 ) 0.1
n/a (0.6 ) 0.1
n/a
Net earnings attributable to Herman Miller, Inc. $ 37.7
$ 39.2
(3.8 )% $ 164.5
$ 114.5
43.7 %

Earnings per share — diluted $ 0.64
$ 0.66
(3.0 )% $ 2.78
$ 1.92
44.8 %
Orders $ 651.7
$ 612.8
6.3 % $ 2,003.3
$ 1,950.4
2.7 %
Backlog $ 411.2
$ 400.5
2.7 %

The following table presents select components of the Company's Condensed Consolidated Statements of Comprehensive Income as a percentage of net sales, for the three ~~and nine~~ months ended:



	August 29, 2020		August 31, 2019
Net sales	100.0	%	100.0	%
Cost of sales	60.1		63.3
Gross margin	39.9		36.7
Operating expenses	24.7		27.7
Operating earnings	15.2		9.0

Other expenses, net	0.3		0.3
Earnings before income taxes and equity income	15.0		8.6
Income tax expense	3.3		1.8
Equity income from nonconsolidated affiliates, net of tax	—		0.3
Net earnings	11.7		7.2
Net earnings (loss) attributable to redeemable noncontrolling interests	0.1		—
Net earnings attributable to Herman Miller, Inc.	11.6		7.2

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 February 29, 2020 March 2, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 63.5
64.3
63.0
64.0
Gross margin 36.5
35.7
37.0
36.0
Operating expenses 29.0
28.0
28.4
28.2
Operating earnings 7.6
7.7
8.6
7.7
Gain on consolidation of equity method investments —
—
1.5
—
Other expenses, net 0.4
0.4
0.4
0.4
Earnings before income taxes and equity income 7.2
7.4
9.7
7.3
Income tax expense 1.6
1.2
1.8
1.4
Equity income from nonconsolidated affiliates, net of tax —
0.2
0.2
0.1
Net earnings 5.6
6.3
8.2
6.0
Net (loss) earnings attributable to redeemable noncontrolling interests (0.1 ) —
—
—
Net earnings attributable to Herman Miller, Inc. 5.7
6.3
8.2
6.0

26 Form 10-Q

Net Sales

The following chart presents graphically the primary drivers of the year-over-year change in ~~Net~~net sales for the three ~~and nine~~ months ended ~~February~~August 29, 2020. The amounts presented in the bar graph are expressed in millions and have been rounded.

Net sales ~~increased $46.7~~decreased $44.1 million or ~~7.5%~~6.6% in the ~~third~~first quarter of fiscal ~~2020~~2021 compared to the ~~third~~first quarter of fiscal ~~2019.~~2020. The following items contributed to the change:

~~Approximately $50~~•Increase of approximately $47 million due to the ~~acquisition~~acquisitions of HAY and naughtone.

•Increased sales volumes within the Retail segment of approximately $34 million which were driven primarily by increased demand within the segment's e-commerce channel offset by lower DWR studio volume due to the outbreak of COVID-19.

•Incremental list price increases, net of contract price discounting, of approximately ~~$11~~$9 million.

•Decreased sales volumes within the International segment of approximately $14 million, of which approximately $6 million was due to the temporary closure of the Company's China manufacturing facility, stemming from the outbreak of COVID-19.

~~Net sales increased $114.6 million or 6.0% in the first nine months of fiscal 2020 compared to the first nine months of fiscal 2019. The following items led to the change:~~

~~Approximately $54 million due to the acquisition of HAY and naughtone.~~

~~Incremental list price increases, net of contract price discounting, of approximately $34 million.~~

~~Increased~~ sales volumes within the North America Contract ("NAC") segment of approximately ~~$27~~$134 million, ~~due to increased demand within the core contract and Geiger businesses.~~

~~Increased sales volumes within the Retail segment of approximately $20 million which were driven~~ primarily ~~by growth across the Company's DWR studio, outlet and contract channels, which were partially offset by lower freight revenue.~~

~~Decreased sales volumes within the International segment of approximately $15 million, of which approximately $6 million was~~ due to the ~~temporary closure~~impact of ~~the Company's China manufacturing facility, stemming from~~ the outbreak of COVID-19.

~~Foreign currency translation had a negative impact on net sales of approximately $5 million.~~

Gross Margin

Gross margin was ~~36.5%~~39.9% in the ~~third~~first quarter of fiscal ~~2020~~2021 as compared to ~~35.7%~~36.7% in the ~~third~~first quarter of fiscal ~~2019.~~2020. The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

•Strong channel mix increased gross margin by approximately 140 basis points.

•Incremental list price increases, net of contract price discounting, increased gross margin by approximately 9080 basis points.

~~Lower steel costs~~•Product mix, material performance and ongoing profitability improvement efforts increased gross margin by approximately ~~110~~60 basis points.

•Lower ~~volume leverage primarily within the North America Contract segment decreased~~freight and warehousing expense increased gross margin by approximately 5060 basis ~~points.~~points as we transitioned into a higher efficiency distribution center, supporting our Retail business, in the first half of fiscal 2020.

•Special charges related to the initial purchase accounting of HAY ~~combined with unfavorable product mix associated with the business acquisitions~~and naughtone decreased gross margin by approximately 7020 basis points.

Herman Miller, Inc. and Subsidiaries 27

Gross margin was 37.0% for the nine month period ended February 29, 2020 as compared to 36.0% for the same period of the prior fiscal year. The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

~~Incremental list price increases, net of contract price discounting, increased gross margin by approximately 110 basis points.~~

~~Lower steel costs increased gross margin by approximately 40 basis points.~~

Higher net freight expenses and cost inefficiencies driven partly by the move into a new Ohio–based distribution center within the Retail segment decreased gross margin by approximately 50 basis points.

Operating Expenses

The following chart presents graphically the primary drivers of the year-over-year change in ~~Operating~~operating expenses for the three ~~and nine~~ months ended ~~February~~August 29, 2020. The amounts presented in the bar graph are expressed in millions and have been rounded.

Operating expenses ~~increased~~decreased by ~~$19.7~~$31.4 million or ~~11.4%~~16.9% in the ~~third~~first quarter of fiscal ~~2020~~2021 compared to the prior year period. The following factors contributed to the change:

•Compensation and benefit costs decreased approximately $16 million due primarily to lower headcount associated with the reduction in workforce actions initiated in the fourth quarter of fiscal 2020, as well as temporary wage reductions that were in effect during the quarter but were terminated at the end of the quarter.

•Lower marketing and selling costs of approximately $13 million primarily within the North America Contract and Retail segments.

•Travel costs were approximately $5 million lower due to decreased travel as a result of COVID-19.

•Restructuring expenses decreased approximately $3 million due to a gain on sale of property in the current year associated with the Company's International Contract facilities consolidation plan.

•Lower studio costs of approximately $3 million driven by lower lease expense.

•The acquisition of HAY and naughtone increased Operating expenses by approximately ~~$12~~$11 million.

~~Special charges increased by approximately $4 million, while restructuring expense increased by approximately $3 million.~~

~~Incremental warranty costs increased by approximately $3 million partially due to higher claim rates and a product recall.~~

~~Lower incentive compensation costs of approximately $2 million.~~

~~Operating expenses increased by $37.1 million or 6.9% in the first nine months of fiscal 2020 compared to the prior year period. The following factors contributed to the change:~~

~~The acquisition of HAY and naughtone increased Operating expenses by approximately $15 million.~~

~~Incremental IT costs increased by approximately $6 million.~~

~~Incremental sales volume based costs, such as sales commissions and royalties, increased approximately $5 million.~~

~~Compensation and benefit costs increased approximately $5 million.~~

~~Incremental warranty costs increased by approximately $4 million partially due to higher claim rates and a product recall.~~

~~Restructuring expense increased approximately $7 million, while special charges decreased approximately $5 million.~~

Other Income/Expense

During the three months ended ~~February~~August 29, 2020, net other expense was $2.8 million, an increase of $0.6 million compared to the same period in the prior year. This increase resulted primarily from investment losses associated with the Company's deferred compensation plan in the current quarter relative to investment gains recorded in the prior fiscal year. These investments losses are directly offset by decreases in compensation expense within operating expenses related to the deferred compensation plan.

Other income/expense in the nine months ended February 29, 2020 reflected a pre-tax gain of $30.5 million related to the purchase accounting treatment of the initial equity-method investment in U.K.-based naughtone. The Company acquired the remaining shares of naughtone during the second quarter and as a result, was required to adjust the value of the initial investment to fair value, resulting in a non-taxable gain.

~~During the nine months ended February 29, 2020, net other expense was $7.5~~$1.6 million, a decrease of ~~$0.3~~$0.5 million compared to the same period in the prior year. This decrease resulted primarily from an increase in investment gains associated with the Company's deferred compensation plan in the current ~~year relative to investment losses recorded~~quarter partially offset by an increase in ~~the prior fiscal year, and foreign currency losses~~interest expense in the current ~~year relative to foreign currency gains recorded in the prior fiscal year.~~quarter.

Income Taxes

See Note 11 of the Condensed Consolidated Financial Statements for additional information.

~~Reportable~~ Operating Segment 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 internally reports and evaluates financial information used to make operating decisions. The ~~reportable~~ segments identified by the Company include

28 Form 10-Q

North America Contract, International Contract, Retail, and Corporate. For descriptions of each segment, refer to Note 16 of the Condensed Consolidated Financial Statements.

The charts below present the relative mix of Net sales and Operating earnings across each of the Company's ~~reportable~~ segments during the three ~~and nine~~ month ~~periods~~period ended ~~February~~August 29, 2020. This is followed by a discussion of the Company's results, by reportable segment.

North America Contract ("North America")


	Three Months Ended
(Dollars in millions)	August 29, 2020			August 31, 2019			Change
Net sales	$	338.8		$	458.4		$	(119.6)
Gross margin	129.0			167.7			(38.7)
Gross margin %	38.1		%	36.6		%	1.5		%


Operating earnings	51.8			62.9			(11.1)
Operating earnings %	15.3		%	13.7		%	1.6		%

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 Change February 29, 2020 March 2, 2019 Change
Net sales $ 413.4
$ 397.0
$ 16.4
$ 1,322.5
$ 1,252.8
$ 69.7
Gross margin 150.1
136.6
13.5
487.0
436.3
50.7
Gross margin % 36.3 % 34.4 % 1.9 % 36.8 % 34.8 % 2.0 %
Operating earnings 51.2
40.2
11.0
176.4
139.5
36.9
Operating earnings % 12.4 % 10.1 % 2.3 % 13.3 % 11.1 % 2.2 %

For the three month comparative period, ~~Net~~net sales ~~increased 4.1%~~decreased 26.1%, or ~~2.5%~~27.6%^(*) on an organic basis, over the prior year period due to:

•Decreased sales volumes within the North America segment of approximately $134 million, primarily due to the outbreak of COVID-19; offset by

•Incremental list price increases, net of contract price discounting, of approximately $9$7 million; and

•Approximately $6$7 million due to the acquisition of naughtone.

For the three month comparative period, ~~Operating~~operating earnings ~~increased $11.0~~decreased $11.1 million, or ~~27.4%~~17.6%, over the prior year period due to:

~~Increased Gross~~•Decreased gross margin of ~~$13.5~~$38.7 million ~~and increased~~due to decreased sales volumes, partially offset by an increase in gross margin percentage of ~~190~~150 basis ~~points~~points. The increase in gross margin percentage was due primarily to incremental list price increases, net of contract price discounting, and ~~lower steel costs,~~improvements in material and labor performance, partially offset by lower volume ~~leverage;~~leverage due to the outbreak of COVID-19 described above; offset by

~~Increased Operating~~•Decreased operating expenses of ~~$2.5~~$27.6 million driven primarily by ~~increased restructuring, warranty,~~lower marketing and ITselling expenses of approximately $12 million, lower compensation and benefit costs ~~partially offset by~~of approximately $11 million, and lower ~~employee incentive~~

Herman Miller, Inc. and Subsidiaries 29

travel costs of approximately $4 million. The decrease in compensation ~~costs.~~and benefit costs were due to lower headcount associated with the reduction in workforce actions initiated in the fourth quarter of fiscal 2020, as well as temporary wage reductions that were in effect during the quarter but were terminated at the end of the quarter.

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

International Contract ("International")


	Three Months Ended
(Dollars in millions)	August 29, 2020			August 31, 2019			Change
Net sales	$	153.7		$	113.9		$	39.8
Gross margin	55.0			39.8			15.2
Gross margin %	35.8		%	34.9		%	0.9		%


Operating earnings	25.1			13.1			12.0
Operating earnings %	16.3		%	11.5		%	4.8		%

For the ~~nine~~three month comparative period, ~~Net~~net sales increased ~~5.6%~~34.9%, or ~~4.9%~~1.2%^(*) on an organic basis, over the prior year period due ~~to:~~

~~Increased sales volumes within the North America segment of approximately $27 million due to increased demand within the core contract and Geiger businesses;~~

~~Incremental list price increases, net of contract price discounting, of approximately $32 million; and~~

~~Approximately $9 million due~~primarily to the acquisition of ~~naughtone.~~HAY and naughtone which increased sales by approximately $39 million.

For the ~~nine~~three month comparative period, ~~Operating~~operating earnings increased ~~$36.9~~$12.0 million, or ~~26.5%~~91.6%, over the prior year period due to:

•Increased ~~Gross~~gross margin of ~~$50.7~~$15.2 million ~~and~~due to the increase in sales explained above, as well as increased gross margin percentage of ~~200~~90 basis points due primarily to ~~incremental list price increases, net of contract price discounting,~~changes in channel and ~~lower steel costs;~~product mix; offset by

•Increased ~~Operating~~operating expenses of ~~$13.8~~$3.2 million driven primarily by ~~increased restructuring, warranty,~~the acquisition of HAY and ~~IT costs,~~naughtone partially offset by lower ~~marketing costs.~~restructuring expenses in the current period.

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

Retail


	Three Months Ended
(Dollars in millions)	August 29, 2020			August 31, 2019		Change
Net sales	$	134.3		98.6		$	35.7
Gross margin	66.0			38.6		27.4
Gross margin %	49.1		%	39.1	%	10.0		%


Operating earnings	29.2			(3.9)		33.1
Operating earnings %	21.7		%	(4.0)	%	25.7		%

~~International Contract ("International")~~

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 Change February 29, 2020 March 2, 2019 Change
Net sales $ 156.1
$ 126.0
$ 30.1
$ 388.1
$ 359.9
$ 28.2
Gross margin 50.8
42.1
8.7
130.9
119.9
11.0
Gross margin % 32.5 % 33.4 % (0.9 )% 33.7 % 33.3 % 0.4 %
Operating earnings 11.3
16.3
(5.0 ) 37.3
40.7
(3.4 )
Operating earnings % 7.2 % 12.9 % (5.7 )% 9.6 % 11.3 % (1.7 )%

For the three month comparative period, ~~Net~~net sales increased ~~23.9%~~36.2%, ~~or decreased 10.4%~~^(*)both on an as reported and organic^(*)basis, over the prior year period due to:

~~Approximately $44~~•Increased sales volumes of approximately $34 million ~~due to~~which were driven primarily by increased demand within the ~~acquisition of HAY and naughtone;~~segment's e-commerce channel offset by

~~Decreased sales volumes within the International segment of approximately $14 million, of which approximately $6 million was~~ lower DWR studio volume due to the outbreak of ~~COVID-19 in China during the current quarter~~COVID-19; and ~~associated temporary closure~~

•Incremental list price increases, net of ~~our China facility.~~price discounting, of approximately $4 million; offset by

•Lower freight revenue of approximately $2 million.

For the three month comparative period, ~~Operating~~operating earnings ~~decreased $5.0~~increased $33.1 million, or ~~30.7%~~848.7%, over the prior year period due to:

•Increased ~~Operating expenses of $13.7 million driven primarily by the acquisition of HAY and naughtone and special charges related to the initial purchase accounting effects of HAY and naughtone; offset by~~

~~Increased Gross~~gross margin of ~~$8.7~~$27.4 million due to the increase in sales explained above, ~~and decreased~~as well as increased gross margin percentage of 901,000 basis points due primarily to special charges related to the initial purchase accounting effects of HAY. Gross margin during the current quarter was approximately $2 million lower due to the outbreak of COVID-19 as described above.

~~For the nine month comparative period, Net sales increased 7.8%, or decreased 3.5%~~^(*) ~~on an organic basis, over the prior year period due to:~~

~~Approximately $45 million due to the acquisition of HAY~~changes in channel and ~~naughtone; offset by~~

Decreased sales volumes within the International segment of approximately $15 million, of which approximately $6 million was due to the temporary closure of the Company's China manufacturing facility, stemming from the outbreak of COVID-19; and

~~The impact of foreign currency translation which decreased sales by approximately $4 million.~~

~~For the nine month comparative period, Operating earnings decreased $3.4 million, or 8.4%, over the prior year period due to:~~

Increased Operating expenses of $14.4 million, driven primarily by the acquisition of HAY and naughtone and special charges related to the initial purchase accounting effects of HAY and naughtone; offset by

~~Increased Gross margin of $11.0 million due to the increase in sales explained above, and increased gross margin percentage of 40 basis points due primarily to~~product mix, incremental list price increases, net of ~~contract~~ price discounting, and ~~restructuring cost savings, offset partially~~lower freight and warehousing expenses; and

30 Form 10-Q

•Decreased operating expenses of $5.7 million driven primarily by ~~special charges related to the initial purchase accounting effects of HAY. Gross margin during the current year was approximately $2 million~~ lower ~~due to the outbreak of COVID-19 as described above.~~studio costs, lower compensation and benefit costs and lower marketing expenses.

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

~~Retail~~

Three Months Ended Nine Months Ended
February 29, 2020 March 2, 2019 Change February 29, 2020 March 2, 2019 Change
Net sales $ 96.2
96.0
$ 0.2
$ 300.2
$ 283.5
$ 16.7
Gross margin 42.4
42.3
0.1
127.0
125.5
1.5
Gross margin % 44.1 % 44.1 % — % 42.3 % 44.3 % (2.0 )%
Operating earnings (1.6 ) 2.3
(3.9 ) (6.4 ) 6.3
(12.7 )
Operating earnings % (1.7 )% 2.4 % (4.1 )% (2.1 )% 2.2 % (4.3 )%

~~For the three month comparative period, Net sales increased 0.2%, both on an as reported and organic~~^(*)~~basis, over the prior year period.~~

~~For the three month comparative period, Operating earnings decreased $3.9 million, or 169.6%, over the prior year period due to:~~

~~Increased Operating expenses of $4.0 million primarily due to restructuring costs, sales volume based costs, new DWR studios, and the launch of the HAY brand in North America.~~

~~For the nine month comparative period, Net sales increased 5.9%, both on an as reported and organic~~^(*)~~basis, over the prior year period due to:~~

Increased sales volumes within the Retail segment of approximately $20 million which were driven primarily by growth across the Company's DWR studio, outlet and contract channels, which were partially offset by lower freight revenue.

~~For the nine month comparative period, Operating earnings decreased $12.7 million, or 201.6%, over the prior year period due to:~~

~~Increased Operating expenses of $14.2 million primarily due to restructuring costs, sales volume based costs, new DWR studios, and the launch of the HAY brand in North America; offset by~~

Increased Gross margin of $1.5 million and decreased gross margin percentage of 200 basis points due primarily to higher net freight expenses and cost inefficiencies associated with the move into a new Ohio–based distribution center, partially offset by product mix.

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

Corporate

Corporate unallocated expenses totaled ~~$10.5~~$10.7 million for the ~~third~~first quarter of fiscal ~~2020,~~2021, a decrease of ~~$0.5~~$1.3 million from the ~~third~~first quarter of fiscal ~~2019.~~2020. The decrease was driven primarily by lower ~~IT and medical costs, partially offset by higher employee~~ compensation and ~~incentive~~benefit costs in the current period.

Corporate unallocated expenses totaled $34.3 million for the first nine months of fiscal 2020, a decrease of $5.3 million from the same period of fiscal 2019. The decrease was driven primarily by lower special charges related to third-party consulting costs for the Company's profit optimization initiatives, as well as transition costs incurred in the prior year related to the retirement of the Company's previous CEO, partially offset by higher employee compensation and incentive costs in the current period.

Liquidity and Capital Resources

The table below summarizes the net change in cash and cash equivalents for the ~~nine~~three months ended as indicated.


(In millions)	February 29, 2020			March 2, 2019			(In millions)	August 29, 2020		August 31, 2019

Cash provided by (used in):							Cash provided by (used in):
Operating activities	$	191.8		$	130.6		Operating activities	$	115.9	$	54.7
Investing activities	(171.3		)	(142.4		)	Investing activities	(5.1)		(24.0)
Financing activities	(69.8		)	(76.6		)	Financing activities	(276.5)		(27.9)
Effect of exchange rate changes	0.7			(2.0		)	Effect of exchange rate changes	8.3		(2.5)
Net change in cash and cash equivalents	$	(48.6	)	$	(90.4	)	Net change in cash and cash equivalents	$	(157.4)	$	0.3

Cash Flows - Operating Activities

Cash provided by operating activities for the ~~nine~~three months ended ~~February~~August 29, 2020 was ~~$191.8~~$115.9 million, as compared to ~~$130.6~~$54.7 million in the same period of the prior year. The increase in cash generated from operations in the current year, compared to the prior year, was primarily due to:

•An increase in net earnings ~~excluding~~of $25.4 million;

•An increase in current liabilities in the ~~naughtone non-cash gain,~~current period of ~~$18.8 million;~~$13.3 million, driven primarily by an increase in accounts payable. This compares to a decrease in current liabilities of $18.9 million in the prior year period. The decrease in the prior year period was driven primarily by a decrease in accrued liabilities; and

•A decrease in current assets in the current period of ~~$17.8~~$3.9 million, driven by a decrease in inventory and prepaid expenses, offset by an increase in accounts receivable. This compares to ~~an increase~~a decrease in current assets of ~~$55.3~~$1.4 million in the prior year period. ~~The increase in the prior year period was driven primarily by an increase in inventory and unbilled accounts receivable; offset by~~

A decrease in current liabilities in the current period of $36.7 million, driven primarily by a decease in accounts payable and accrued liabilities. This compares to an increase in current liabilities of $7.5 million in the prior year period. The increase in the prior year period was driven primarily by an increase in accounts payable and accrued liabilities.

Cash Flows - Investing Activities

Cash used in investing activities for the ~~nine~~three months ended ~~February~~August 29, 2020 was ~~$171.3~~$5.1 million, as compared to ~~$142.4 million in the same period of the prior year. The increase in cash outflow in the current year, compared to the prior year, was primarily due to:~~

Current year cash outflows of $111.2 million for the additional investments in naughtone and HAY compared to prior year cash outflows of $71.6 million for equity investments in HAY and Maars, and $4.8 million for the purchase of the HAY licensing agreement.

At the end of the third quarter of fiscal 2020, there were outstanding commitments for capital purchases of $21.8 million. The Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company expects full-year capital purchases to be between $75.0 million and $85.0 million, which will be primarily related to investments in the Company's facilities and equipment. This compares to full-year capital spending of $85.8 million in fiscal 2019.

~~Cash Flows - Financing Activities~~

~~Cash used in financing activities for the nine months ended February 29, 2020 was $69.8 million, as compared to $76.6~~$24.0 million in the same period of the prior year. The decrease in cash outflow in the current year, compared to the prior year, was primarily due to:

~~Lower common stock repurchased~~•A decrease in capital expenditures of ~~$25.9~~$9.3 million due to reduced spending as a result of COVID-19; and

•Proceeds from the sale of the Company's manufacturing facilities in China in the current quarter of $6.4 million.

At the end of the first quarter of fiscal 2021, there were outstanding commitments for capital purchases of $17.4 million. The Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company expects full-year capital purchases to be between $50.0 million and $60.0 million, which will be primarily related to investments in the Company's facilities and equipment. This compares to full-year capital spending of $69.0 million in fiscal 2020.

Cash Flows - Financing Activities

Cash used in financing activities for the three months ended August 29, 2020 was $276.5 million, as compared to $27.9 million in the same period of the prior year. The increase in cash outflow in the current year, compared to ~~$43.4~~the

Herman Miller, Inc. and Subsidiaries 31

prior year, was primarily due to repayments of $265.0 million inon the ~~prior year; offset by~~

~~The purchase of the remaining redeemable noncontrolling interests~~Company's syndicated credit facility in the current ~~year for $20.3 million as described in Note 12 of the Condensed Consolidated Financial Statements, compared to purchases of $10.1 million in the prior year.~~quarter.

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 share repurchase activity as part of managing cash flows during this period. In addition, the Company's Board of Directors has approved a resolution to postpone payment of the current quarter's dividend to a future date to be established by the Board of Directors and temporarily suspend all future planned dividends.flows. For more information on current cost reductions, refer to the COVID-19 Update section ~~within Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.~~above.

At the end of the ~~third~~first quarter of fiscal ~~2020,~~2021, the Company had a well-positioned balance sheet and liquidity ~~profile to weather these disruptions for the foreseeable future.~~profile. In addition to cash flows from operating activities, the 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, refer to Note 14 to the Condensed Consolidated Financial Statements.


(In millions)	February 29, 2020		June 1, 2019		(In millions)	August 29, 2020		May 30, 2020
Cash and cash equivalents	$	110.6	$	159.2	Cash and cash equivalents	$	296.6	$	454.0
Marketable securities	8.9		8.8		Marketable securities	7.0		7.0
Availability under syndicated revolving line of credit	265.5		165.0		Availability under syndicated revolving line of credit	265.7		0.6
Total liquidity	$	385.0	$	333.0	Total liquidity	$	569.3	$	461.6

AtOf the cash and cash equivalents noted above at the end of the ~~third~~first quarter of fiscal ~~2020,~~2021, the Company had ~~cash and cash equivalents of $110.6 million, including $94.6~~$135.8 million of cash and cash equivalents held outside the United States. In addition, the Company had marketable securities of ~~$8.9~~$7.0 million held by one of its international wholly-owned subsidiaries.

The subsidiary holding the Company's marketable securities is taxed as a United States taxpayer at the Company's election. Consequently, for tax purposes, all United States tax impacts for this subsidiary have been recorded. The Company intends to repatriate $23 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 U.S. from foreign subsidiaries of $0.5 million. A significant portion of this cash was previously taxed under the U.S. Tax Cut and Jobs Act (TCJA) one-time U.S. tax liability on undistributed foreign earnings. The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S.

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 ~~February~~August 29, 2020, 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 ~~$265.5 million. Since the end of the quarter, the company withdrew $265~~$265.7 million.

The subsidiary holding the Company's marketable securities is taxed as a United States taxpayer at the Company's election. Consequently, for tax purposes, all United States tax impacts for this subsidiary have been recorded. The Company intends to repatriate $29 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 U.S. from foreign subsidiaries of $1.8 million. A significant portion of this cash was previously taxed under the U.S. Tax Cut and Jobs Act (TCJA) one-time U.S. tax liability on undistributed foreign earnings. The Company intends to remain indefinitely reinvested in the remaining undistributed earnings outside the U.S.

The Company believes that its financial resources will allow it to manage the ~~anticipated~~ impact of COVID-19 on ~~the Company's~~ business operations for the foreseeable future which ~~will~~could include materially reduced revenue and ~~profits for the Company.~~profits. The ~~challenges posed by COVID-19 on the Company's business have evolved rapidly in the past two months and are likely to evolve further. Consequently, the~~ Company will continue to evaluate its financial position in light of future developments, particularly those relating to COVID-19.

Contractual Obligations

Contractual obligations associated with ongoing business and financing activities will require cash payments in future periods. A table summarizing the amounts and estimated timing of these future cash payments as of ~~June 1, 2019~~May 30, 2020 was provided in the Company's annual report on Form 10-K for the year ended ~~June 1, 2019.~~May 30, 2020. There have been no material changes in such obligations since that date.

32 Form 10-Q

Guarantees

See Note 13 to the Condensed Consolidated Financial Statements.

Variable Interest Entities

See Note 18 to the Condensed Consolidated Financial Statements.

Contingencies

See Note 13 to the Condensed Consolidated Financial Statements.

Critical Accounting Policies

The Company strives to report financial results clearly and understandably. The Company follows accounting principles generally accepted in the United States in preparing its consolidated financial statements, which require certain estimates and judgments that affect the financial position and results of operations for the Company. The Company continually reviews the accounting policies and financial information disclosures. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in the Company's annual report on Form 10-K for the year ended ~~June 1, 2019. During fiscal 2020, the Company changed certain accounting policies in connection with the adoption of~~ ~~ASC 842 - Leases. Refer to Note 4 to the Condensed Consolidated Financial Statements for further information.~~May 30, 2020.

New Accounting Standards

See Note 2 to the Condensed Consolidated Financial Statements.

Safe Harbor Provisions

Certain statements in this filing are not historical facts but are “forward-looking statements” as defined under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” and “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, employment and general economic conditions, the pace of economic growth in the U.S., and in our International markets, the potential impact of changes in U.S. tax law, 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, 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 DWR and HAY 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 risk in the markets we serve, natural disasters, public health crises, disease outbreaks, 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.

Herman Miller, Inc. and Subsidiaries 33

Item 3: Quantitative and Qualitative Disclosures About Market Risk

The information concerning quantitative and qualitative disclosures about market risk contained in the Company’s Annual Report on Form 10-K for its fiscal year ended ~~June 1, 2019~~May 30, 2020 has not changed significantly. The nature of market risks from interest rates and commodity prices has not changed materially during the first ~~nine~~three months of fiscal ~~2020.~~2021.

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 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 and profit margins related to these sales are affected 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. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the change in fair value of outstanding contracts is recorded as a component of Other ~~expense (income), net~~income, net.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~February~~August 29, 2020, and the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, the Company's disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarterly period ended ~~February~~August 29, 2020, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

34 Form 10-Q

PART II - OTHER INFORMATION

Item 1: Legal Proceedings

Referred to in Note 13 of the Condensed Consolidated Financial Statements.

Item 1A: Risk Factors

There have been no material changes in the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended June 1, 2019, except for the following risk factor which supplements the risk factors previously disclosed and should be considered in conjunction with the Risk Factors section in the Company's Annual report on Form 10-K for the year ended June 1, 2019:May 30, 2020.

~~Disease outbreaks, such as the COVID-19 pandemic, could have an adverse impact on the Company's operations and financial results~~

From time to time, various disease outbreaks may adversely impact our business, consolidated results of operations and financial condition, such as the current COVID-19 pandemic which has had such an adverse impact. The Company has global manufacturing facilities, suppliers, dealers and customers. Therefore, COVID-19, as well as measures taken by governmental authorities and private actors to limit the spread of this virus, may interfere with the ability of our employees, suppliers and other business providers to carry out their assigned tasks or supply materials at ordinary levels of performance relative to the conduct of our business. This has caused, and may continue to cause, us to materially curtail certain of our business operations, and has had and could continue to have, a material adverse effect on our results of operations and cash flow.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following is a summary of share repurchase activity during the quarter ended ~~February~~August 29, 2020.


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average price Paid per Share or Unit		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (in millions)
5/31/20 - 6/27/20	305	$	28.20	305	$	237,633,525
6/28/20 - 7/25/20	34,398	$	23.05	34,398	$	236,840,785
7/26/20 - 8/29/20	1,941	$	27.18	1,941	$	236,788,029
Total	36,644			36,644

Period
(a) Total Number of Shares (or Units)
Purchased
(b) Average price Paid per Share or Unit (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (in millions)
12/1/19 - 12/28/19 13,572
$ 42.69
13,572
$ 255,569,568
12/29/19 - 1/25/20 148,671
$ 41.20
148,671
$ 249,444,561
1/26/20 - 2/29/20 278,711
$ 40.44
278,711
$ 238,172,837
Total 440,954
440,954

The Company repurchased shares under previously announced plans authorized by the Board of Directors. No repurchase plans expired or were terminated during the ~~third~~first quarter of fiscal ~~2020,~~2021, nor do any plans exist under which the Company does not intend to make further purchases. The Board has the authority to terminate any further repurchases. During the period covered by this report, the Company did not sell any of its equity securities that were not registered under the Securities Act of 1933.

Item 3: Defaults upon Senior Securities

None

Item 4: Mine Safety Disclosures

Not applicable

Item 5: Other Information

None

Herman Miller, Inc. and Subsidiaries 35

Item 6: Exhibits

The following exhibits (listed by number corresponding to the Exhibit table as Item 601 in Regulation S-K) are filed with this Report:


~~Exhibit Number~~	~~Document~~

Exhibit Number Document

10.1* Advisory Agreement dated August 7, 2020 by and between Herman Miller, Inc. and Gregory Bylsma

10.1*

~~Form of Herman Miller, Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement~~

31.1 Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL Document)


10.2*	~~Form of Herman Miller, Inc. Long-Term Incentive Plan Operating Income Growth Performance Share Unit With TSR Modifier Award Agreement~~


10.3*	~~Form of Herman Miller, Inc. Long-Term Incentive Plan Revenue Growth Performance Share Unit With TSR Modifier Award Agreement~~


~~31.1~~	~~Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~


~~31.2~~	~~Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~


~~32.1~~	~~Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~


~~32.2~~	~~Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~


~~101.INS~~	~~The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.~~


~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~


~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~


~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~


~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~


~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

(*) Denotes compensatory plan or arrangement.

36 Form 10-Q

~~SIGNATURES~~

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

HERMAN MILLER, INC.

October 5, 2020

/s/ Andrea R. Owen

Andrea R. Owen

President and Chief Executive Officer

(Duly Authorized Signatory for Registrant)

~~April 7,~~October 5, 2020

/s/ ~~Andrea R. Owen~~Jeffrey M. Stutz

~~Andrea R. Owen~~Jeffrey M. Stutz

~~President and~~ Chief ~~Executive~~Financial Officer

(Duly Authorized Signatory for Registrant)

~~April 7, 2020~~

~~/s/ Jeffrey M. Stutz~~

~~Jeffrey M. Stutz~~

~~Chief Financial Officer~~

~~(Duly Authorized Signatory for Registrant)~~

Herman Miller, Inc. and Subsidiaries 37



	Nine Months Ended February 29, 2020
	Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
June 1, 2019	58,794,148		$	11.7	$	89.8		$	712.7		$	(94.2	)	$	(0.8	)	$	719.2		$	—		$	719.2
Net earnings	—		—		—			48.2			—			—			48.2			(0.2		)	48.0
Other comprehensive loss, net of tax	—		—		—			—			(17.3		)	—			(17.3		)	—			(17.3		)
Stock-based compensation expense	—		—		2.6			—			—			—			2.6			—			2.6
Exercise of stock options	382,898		0.1		12.1			—			—			—			12.2			—			12.2
Restricted and performance stock units released	45,105		—		—			—			—			—			—			—			—
Employee stock purchase plan issuances	14,750		—		0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(173,001	)	—		(7.6		)	—			—			—			(7.6		)	—			(7.6		)
Deferred compensation plan	—		—		—			—			—			0.2			0.2			—			0.2
Dividends declared ($0.21 per share)	—		—		—			(12.5		)	—			—			(12.5		)	—			(12.5		)
Redemption value adjustment	—		—		—			(0.2		)	—			—			(0.2		)	0.2			—
August 31, 2019	59,063,900		$	11.8	$	97.4		$	748.2		$	(111.5	)	$	(0.6	)	$	745.3		$	—		$	745.3
Net earnings	—		—		—			78.6			—			—			78.6			—			78.6
Other comprehensive income, net of tax	—		—		—			—			17.8			—			17.8			—			17.8
Stock-based compensation expense	—		—		2.8			—			—			—			2.8			—			2.8
Exercise of stock options	5,227		—		0.1			—			—			—			0.1			—			0.1
Restricted and performance stock units released	3,653		—		—			—			—			—			—			—			—
Employee stock purchase plan issuances	12,467		—		0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(10,006	)	—		(0.4		)	—			—			—			(0.4		)	—			(0.4		)
Dividends declared ($0.21 per share)	—		—		—			(0.1		)	—			—			(0.1		)	—			(0.1		)
November 30, 2019	59,075,241		$	11.8	$	100.4		$	826.7		$	(93.7	)	$	(0.6	)	$	844.6		$	—		$	844.6
Net earnings	—		—		—			37.7			—			—			37.7			—			37.7
Other comprehensive loss, net of tax	—		—		—			—			(7.8		)	—			(7.8		)	—			(7.8		)
Stock-based compensation expense	—		—		2.5			—			—			—			2.5			—			2.5
Exercise of stock options	35,690		—		1.1			—			—			—			1.1			—			1.1
Restricted and performance stock units released	87,461		—		0.2			—			—			—			0.2			—			0.2
Employee stock purchase plan issuances	20,021		—		0.6			—			—			—			0.6			—			0.6
Repurchase and retirement of common stock	(440,954	)	—		(17.9		)	—			—			—			(17.9		)	—			(17.9		)
Directors' fees	7,769		—		0.3			—			—			—			0.3			—			0.3
Deferred compensation plan	—		—		(0.3		)	—			—			0.3			—			—			—
Dividends declared ($0.21 per share)	—		—		—			(24.5		)	—			—			(24.5		)	—			(24.5		)
February 29, 2020	58,785,228		$	11.8	$	86.9		$	839.9		$	(101.5	)	$	(0.3	)	$	836.8		$	—		$	836.8



	Nine Months Ended March 2, 2019
	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
June 2, 2018	59,230,974		$	11.7		$	116.6		$	598.3		$	(61.3	)	$	(0.7	)	$	664.6		$	0.2		$	664.8
Net earnings	—		—			—			35.8			—			—			35.8			—			35.8
Other comprehensive loss, net of tax	—		—			—			—			(7.8		)	—			(7.8		)	—			(7.8		)
Stock-based compensation expense	—		—			2.2			—			—			—			2.2			—			2.2
Exercise of stock options	265,739		0.2			7.9			—			—			—			8.1			—			8.1
Restricted and performance stock units released	335,266		0.1			—			—			—			—			0.1			—			0.1
Employee stock purchase plan issuances	16,805		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(545,866	)	(0.1		)	(20.7		)	—			—			—			(20.8		)	—			(20.8		)
Dividends declared ($0.1975 per share)	—		—			—			(11.6		)	—			—			(11.6		)	—			(11.6		)
Cumulative effect of accounting changes	—		—			—			2.0			(0.1		)	—			1.9			—			1.9
September 1, 2018	59,302,918		$	11.9		$	106.5		$	624.5		$	(69.2	)	$	(0.7	)	$	673.0		$	0.2		$	673.2
Net earnings	—		—			—			39.3			—			—			39.3			—			39.3
Other comprehensive loss, net of tax	—		—			—			—			(3.1		)	—			(3.1		)	—			(3.1		)
Stock-based compensation expense	—		—			2.5			—			—			—			2.5			—			2.5
Exercise of stock options	53,614		—			1.3			—			—			—			1.3			—			1.3
Restricted and performance stock units released	7,511		—			—			—			—			—			—			—			—
Employee stock purchase plan issuances	14,813		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(476,854	)	(0.1		)	(16.5		)	—			—			—			(16.6		)	—			(16.6		)
Dividends declared ($0.1975 per share)	—		—			—			(11.7		)	—			—			(11.7		)	—			(11.7		)
Cumulative effect of accounting changes	—		—			—			(1.5		)	1.5			—			—			—			—
December 1, 2018	58,902,002		$	11.8		$	94.3		$	650.6		$	(70.8	)	$	(0.7	)	$	685.2		$	0.2		$	685.4
Net earnings	—		—			—			39.2			—			—			39.2			0.1			39.3
Other comprehensive income	—		—			—			—			4.3			—			4.3			—			4.3
Stock-based compensation expense	—		—			2.8			—			—			—			2.8			(0.2		)	2.6
Exercise of stock options	3,197		—			—			—			—			—			—			—			—
Restricted and performance stock units released	75,917		—			0.1			—			—			—			0.1			—			0.1
Employee stock purchase plan issuances	16,253		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(183,737	)	—			(6.0		)	—			—			—			(6.0		)	—			(6.0		)
Directors' fees	10,185		—			0.3			—			—			—			0.3			—			0.3
Deferred compensation plan	—		—			—			—			—			(0.1		)	(0.1		)	—			(0.1		)
Dividends declared ($0.1975 per share)	—		—			—			(11.5		)	—			—			(11.5		)	—			(11.5		)
March 2, 2019	58,823,817		$	11.8		$	92.0		$	678.3		$	(66.5	)	$	(0.8	)	$	714.8		$	0.1		$	714.9



(In millions)
2020	$	12.3
2021	47.7
2022	44.1
2023	39.7
2024	33.9
Thereafter	102.0
Total lease payments*	$	279.7
Less interest	28.1
Present value of lease liabilities	$	251.6



(In millions)
2020	$	51.7
2021	46.8
2022	42.9
2023	39.0
2024	33.5
Thereafter	101.9
Total	$	315.8



	Nine Months Ended		Year Ended
(In millions)	February 29, 2020		June 1, 2019
Net sales	$	2,104.8	$	2,757.3
Net earnings attributable to Herman Miller, Inc.	$	139.9	$	160.8



	Three Months Ended					Nine Months Ended
	2/29/20		3/2/19			2/29/20			3/2/19
Earnings per Share - Diluted	$	0.64	$	0.66		$	2.78		$	1.92

Less: Adjustments Related to Adoption of U.S. Tax Cuts and Jobs Act	—		(0.03		)	—			(0.02		)
Add: Inventory step up on HAY equity method investment, after tax	—		—			—			0.01
Less: Gain on consolidation of equity method investments	—		—			(0.51		)	—
Add: Special charges, after tax	0.06		0.01			0.08			0.15
Add: Restructuring expense, after tax	0.04		—			0.12			0.03
Adjusted Earnings per Share - Diluted	$	0.74	$	0.64		$	2.47		$	2.09

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted	59,218,101		59,127,258			59,266,929			59,448,294