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 ~~November~~August 28, ~~2020~~2021


☐			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, MI 49464

(Address of principal executive offices and zip code)

(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, par value $0.20 per share	MLHR	~~NASDAQ~~Nasdaq Global Select Market

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 ~~December 31, 2020,~~October 1, 2021, Herman Miller, Inc. had ~~58,978,540~~75,773,618 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 Months ended August 28, 2021 and ~~Six Months Ended November 28,~~August 29, 2020 ~~and November 30, 2019~~			3
Condensed Consolidated Balance Sheets — ~~November~~August 28, ~~2020~~2021 and May ~~30, 2020~~29, 2021			4
Condensed Consolidated Statements of Cash Flows — ~~Six~~Three Months Ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019~~August 29, 2020			5

Condensed Consolidated Statements of Stockholders' Equity — ~~Six~~Three Months Ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019~~August 29, 2020			6
Notes to Condensed Consolidated Financial Statements
Note 1 - Descri ption of Business and Basis of Presentation			87
Note 2 - Recently Issued Accounting Standards			8
Note 3 - Revenue from Contracts with Customers			98
Note 4 - Leases			10
Note 5 - Acquisitions			1110
Note 6 - Inventories, net			13
Note 7 - Goodwill and Indefinite-Lived Intangibles			1413
Note 8 - Employee Benefit Plans			1514
Note 9 - Earnings Per Share			1514
Note 10 - Stock-Based Compensation			15
Note 11 - Income Taxes			15
Note 12 - Fair Value Measurements			16
Note 13 - Commitments and Contingencies			2019
Note 14 - Short-Term Borrowings and Long-Term Debt			2120
Note 15 - Accumulated Other Comprehensive Loss			2122
Note 16 - Operating Segments			22
Note 17 - Restructuring Expense			23
Note 18 - Variable Interest Entities			2426

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations			2527
Item 3 Quantitative and Qualitative Disclosures about Market Risk			3942
Item 4 Controls and Procedures			3943
Part II — Other Information
Item 1 Legal Proceedings			4144
Item 1A Risk Factors			4144
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			41
~~Item 3 Defaults upon Senior Securities~~			41
~~Item 4 Mine Safety Disclosures~~			41
~~Item 5 Other Information~~			4144
Item 6 Exhibits			4145
Signatures			4348

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

Herman Miller, Inc.

Condensed Consolidated Statements of Comprehensive Income


(Dollars in millions, except share data)	(Dollars in millions, except share data)	Three Months Ended				Six Months Ended				(Dollars in millions, except share data)	Three Months Ended
(Unaudited)	(Unaudited)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(Unaudited)	August 28, 2021		August 29, 2020
Net sales	Net sales	$	626.3	$	674.2	$	1,253.0	$	1,345.2	Net sales	$	789.7	$	626.8
Cost of sales	Cost of sales	382.1		418.7		758.8		843.6		Cost of sales	512.2		376.8
Gross margin	Gross margin	244.2		255.5		494.2		501.6		Gross margin	277.5		250.0
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	153.0		169.5		292.8		334.3		Selling, general and administrative	306.8		139.7
Restructuring expense, net	Restructuring expense, net	2.4		4.2		1.2		6.1		Restructuring expense, net	—		(1.2)
Design and research	Design and research	17.8		19.4		33.8		38.6		Design and research	23.5		16.1
Total operating expenses	Total operating expenses	173.2		193.1		327.8		379.0		Total operating expenses	330.3		154.6
Operating earnings		71.0		62.4		166.4		122.6
Gain on consolidation of equity method investment		0		30.5		0		30.5
Operating (loss) earnings										Operating (loss) earnings	(52.8)		95.4

Interest expense	Interest expense	3.5		3.0		7.2		6.0		Interest expense	5.6		3.7
Interest and other investment income	Interest and other investment income	0.4		0.7		0.8		1.4		Interest and other investment income	0.3		0.4
Other (income) expense, net		(0.9)		0.3		(2.7)		0.1
Earnings before income taxes and equity income		68.8		90.3		162.7		148.4
Income tax expense		16.2		12.9		36.9		25.2
Other expense (income), net										Other expense (income), net	12.7		(1.7)
(Loss) earnings before income taxes and equity income										(Loss) earnings before income taxes and equity income	(70.8)		93.8
Income tax (benefit) expense										Income tax (benefit) expense	(10.8)		20.6
Equity income from nonconsolidated affiliates, net of tax	Equity income from nonconsolidated affiliates, net of tax	0.2		1.2		0.4		3.4		Equity income from nonconsolidated affiliates, net of tax	0.1		0.2
Net earnings		52.8		78.6		126.2		126.6
Net earnings (loss) attributable to redeemable noncontrolling interests		1.5		0		2.0		(0.2)
Net earnings attributable to Herman Miller, Inc.		$	51.3	$	78.6	$	124.2	$	126.8
Net (loss) earnings										Net (loss) earnings	(59.9)		73.4
Net earnings attributable to redeemable noncontrolling interests										Net earnings attributable to redeemable noncontrolling interests	1.6		0.4
Net (loss) earnings attributable to Herman Miller, Inc.										Net (loss) earnings attributable to Herman Miller, Inc.	$	(61.5)	$	73.0

Earnings per share — basic		$	0.87	$	1.33	$	2.11	$	2.15
Earnings per share — diluted		$	0.87	$	1.32	$	2.10	$	2.14
(Loss) Earnings per share — basic										(Loss) Earnings per share — basic	$	(0.93)	$	1.24
(Loss) Earnings per share — diluted										(Loss) Earnings per share — diluted	$	(0.93)	$	1.24

Other comprehensive (loss) income, net of tax:
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	$	4.9	$	13.7	$	35.1	$	4.4	Foreign currency translation adjustments	$	(16.0)	$	30.1
Pension and post-retirement liability adjustments	Pension and post-retirement liability adjustments	1.4		0.7		2.5		1.4		Pension and post-retirement liability adjustments	2.3		1.2
Unrealized gains (losses) on interest rate swap agreement		0.9		3.4		1.2		(5.3)
Unrealized (loss) gains on interest rate swap agreement										Unrealized (loss) gains on interest rate swap agreement	(1.0)		0.3
Unrealized holding loss on available for sale securities	Unrealized holding loss on available for sale securities	0		0		(0.1)		0		Unrealized holding loss on available for sale securities	—		(0.1)
Other comprehensive income, net of tax		7.2		17.8		38.7		0.5
Comprehensive income		60.0		96.4		164.9		127.1
Comprehensive income (loss) attributable to redeemable noncontrolling interests		1.7		0		4.8		(0.2)
Comprehensive income attributable to Herman Miller, Inc.		$	58.3	$	96.4	$	160.1	$	127.3
Other comprehensive (loss) income, net of tax										Other comprehensive (loss) income, net of tax	(14.7)		31.5
Comprehensive (loss) income										Comprehensive (loss) income	(74.6)		104.9
Comprehensive income attributable to redeemable noncontrolling interests										Comprehensive income attributable to redeemable noncontrolling interests	2.1		3.0
Comprehensive (loss) income attributable to Herman Miller, Inc.										Comprehensive (loss) income attributable to Herman Miller, Inc.	$	(76.7)	$	101.9

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)
(Dollars in millions, except share data)						(Dollars in millions, except share data)
(Unaudited)	(Unaudited)	November 28, 2020		May 30, 2020		(Unaudited)	August 28, 2021		May 29, 2021
ASSETS	ASSETS					ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	377.9	$	454.0	Cash and cash equivalents	$	235.1	$	396.4
Short-term investments	Short-term investments	7.2		7.0		Short-term investments	8.0		7.7
Accounts receivable, net of allowances of $5.2 and $4.7		193.0		180.0
Accounts receivable, net of allowances of $5.0 and $5.5						Accounts receivable, net of allowances of $5.0 and $5.5	283.3		204.7
Unbilled accounts receivable	Unbilled accounts receivable	33.0		19.5		Unbilled accounts receivable	24.3		16.4
Inventories, net		191.0		197.3
Inventories						Inventories	446.2		213.6
Prepaid expenses	Prepaid expenses	26.8		43.3		Prepaid expenses	122.3		45.1
Other current assets	Other current assets	9.0		16.0		Other current assets	16.5		7.6
Total current assets	Total current assets	837.9		917.1		Total current assets	1,135.7		891.5
Property and equipment, at cost	Property and equipment, at cost	1,124.0		1,111.3		Property and equipment, at cost	1,464.8		1,159.7
Less — accumulated depreciation	Less — accumulated depreciation	(798.1)		(780.5)		Less — accumulated depreciation	(853.1)		(832.5)
Net property and equipment	Net property and equipment	325.9		330.8		Net property and equipment	611.7		327.2
Right-of-use assets	Right-of-use assets	225.6		193.9		Right-of-use assets	421.9		214.7
Goodwill	Goodwill	358.5		346.0		Goodwill	1,283.9		364.2
Indefinite-lived intangibles	Indefinite-lived intangibles	96.4		92.8		Indefinite-lived intangibles	493.0		97.6
Other amortizable intangibles, net of accumulated amortization of $70.7 and $62.7		112.3		112.4
Other amortizable intangibles, net of accumulated amortization of $97.7 and $68.6						Other amortizable intangibles, net of accumulated amortization of $97.7 and $68.6	446.2		105.2
Other noncurrent assets	Other noncurrent assets	71.9		60.9		Other noncurrent assets	68.1		61.5
Total Assets	Total Assets	$	2,028.5	$	2,053.9	Total Assets	$	4,460.5	$	2,061.9

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY	LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY					LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Accounts payable	Accounts payable	$	164.4	$	128.8	Accounts payable	$	327.4	$	178.4
Short-term borrowings and current portion of long-term debt	Short-term borrowings and current portion of long-term debt	52.3		51.4		Short-term borrowings and current portion of long-term debt	22.6		2.2
Accrued compensation and benefits	Accrued compensation and benefits	65.7		71.1		Accrued compensation and benefits	92.0		90.2
Short-term lease liability						Short-term lease liability	101.2		69.0
Accrued warranty	Accrued warranty	16.0		16.1		Accrued warranty	17.5		14.5
Customer deposits	Customer deposits	37.7		39.8		Customer deposits	106.8		43.1
Other accrued liabilities	Other accrued liabilities	171.4		163.0		Other accrued liabilities	139.3		103.4
Total current liabilities	Total current liabilities	507.5		470.2		Total current liabilities	806.8		500.8
Long-term debt	Long-term debt	274.9		539.9		Long-term debt	1,298.4		274.9
Pension and post-retirement benefits	Pension and post-retirement benefits	41.5		42.4		Pension and post-retirement benefits	45.6		34.5
Lease liabilities	Lease liabilities	205.7		178.8		Lease liabilities	376.2		196.9
Other liabilities	Other liabilities	144.1		129.2		Other liabilities	385.3		128.2
Total Liabilities	Total Liabilities	1,173.7		1,360.5		Total Liabilities	2,912.3		1,135.3
Redeemable noncontrolling interests	Redeemable noncontrolling interests	56.5		50.4		Redeemable noncontrolling interests	72.6		77.0
Stockholders' Equity:	Stockholders' Equity:					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, 58,971,641 and 58,793,275 shares issued and outstanding in fiscal 2021 and 2020, respectively)		11.8		11.8
Preferred stock, no par value (10,000,000 shares authorized, none issued)						Preferred stock, no par value (10,000,000 shares authorized, none issued)	—		—
Common stock, $0.20 par value (240,000,000 shares authorized, 75,784,091 and 59,029,165 shares issued and outstanding in fiscal 2022 and 2021, respectively)						Common stock, $0.20 par value (240,000,000 shares authorized, 75,784,091 and 59,029,165 shares issued and outstanding in fiscal 2022 and 2021, respectively)	15.2		11.8
Additional paid-in capital	Additional paid-in capital	87.8		81.6		Additional paid-in capital	808.3		94.7
Retained earnings	Retained earnings	797.1		683.9		Retained earnings	732.6		808.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(98.1)		(134.0)		Accumulated other comprehensive loss	(80.3)		(65.1)
Deferred compensation plan	Deferred compensation plan	(0.3)		(0.3)		Deferred compensation plan	(0.2)		(0.2)

Total Stockholders' Equity	Total Stockholders' Equity	798.3		643.0		Total Stockholders' Equity	1,475.6		849.6
Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity	Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity	$	2,028.5	$	2,053.9	Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity	$	4,460.5	$	2,061.9

See accompanying notes to Condensed Consolidated Financial Statements.

4 Form 10-Q

Herman Miller, Inc.

Condensed Consolidated Statements of Cash Flows


(Dollars in millions)	(Dollars in millions)	Six Months Ended				(Dollars in millions)	Three Months Ended
(Unaudited)	(Unaudited)	November 28, 2020		November 30, 2019		(Unaudited)	August 28, 2021		August 29, 2020
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net earnings		$	126.2	$	126.6
Net (loss) earnings						Net (loss) earnings	$	(59.9)	$	73.4
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	43.3		37.9		Depreciation and amortization	59.7		21.2
Stock-based compensation	Stock-based compensation	3.9		5.4		Stock-based compensation	15.1		1.5

Pension and post-retirement expenses						Pension and post-retirement expenses	(1.9)		0.7

Deferred taxes						Deferred taxes	(8.2)		(0.3)

Gain on consolidation of equity method investment		0		(30.5)
Restructuring expense	Restructuring expense	1.2		6.1		Restructuring expense	—		(1.2)

Decrease in current assets		2.3		16.5
Loss on extinguishment of debt						Loss on extinguishment of debt	13.4		—
(Increase) decrease in current assets						(Increase) decrease in current assets	(65.6)		3.9

Increase (decrease) in current liabilities		22.9		(21.1)
Increase in non-current liabilities		9.0		0.2
(Decrease) increase in current liabilities						(Decrease) increase in current liabilities	(5.1)		13.3
Increase (decrease) in non-current liabilities						Increase (decrease) in non-current liabilities	3.5		5.2
Other, net	Other, net	5.8		1.3		Other, net	(2.7)		(1.8)
Net Cash Provided by Operating Activities		214.6		142.4
Net Cash (Used in) Provided by Operating Activities						Net Cash (Used in) Provided by Operating Activities	(51.7)		115.9

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Proceeds from sale of property and dealers	Proceeds from sale of property and dealers	11.4		0.2		Proceeds from sale of property and dealers	—		6.4

Capital expenditures	Capital expenditures	(24.4)		(38.6)		Capital expenditures	(18.6)		(11.3)

Acquisitions, net of cash received	Acquisitions, net of cash received	0		(40.0)		Acquisitions, net of cash received	(1,088.5)		—

Other, net	Other, net	(11.4)		(3.7)		Other, net	2.4		(0.2)
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(24.4)		(82.1)		Net Cash Used in Investing Activities	(1,104.7)		(5.1)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:

Repayments of long-term debt						Repayments of long-term debt	(50.0)		—
Proceeds from issuance of debt, net of discounts						Proceeds from issuance of debt, net of discounts	1,007.0		—

Payments of deferred financing costs						Payments of deferred financing costs	(9.3)		—
Proceeds from credit facility						Proceeds from credit facility	366.6		—
Repayments of credit facility	Repayments of credit facility	(265.0)		0		Repayments of credit facility	(276.6)		(265.0)
Payment of make whole premium on debt						Payment of make whole premium on debt	(13.4)		—

Dividends paid	Dividends paid	(12.3)		(24.0)		Dividends paid	(11.1)		(12.3)
Common stock issued	Common stock issued	3.1		13.3		Common stock issued	2.2		0.8
Common stock repurchased and retired	Common stock repurchased and retired	(0.9)		(8.1)		Common stock repurchased and retired	(11.0)		(0.9)

Purchase of redeemable noncontrolling interests		0		(20.3)

Other, net	Other, net	(1.8)		(1.5)		Other, net	(2.8)		0.9
Net Cash Used in Financing Activities		(276.9)		(40.6)
Net Cash Provided by (Used in) Financing Activities						Net Cash Provided by (Used in) Financing Activities	1,001.6		(276.5)

Effect of Exchange Rate Changes on Cash and Cash Equivalents	Effect of Exchange Rate Changes on Cash and Cash Equivalents	10.6		(1.9)		Effect of Exchange Rate Changes on Cash and Cash Equivalents	(6.5)		8.3
Net (Decrease) Increase in Cash and Cash Equivalents		(76.1)		17.8
Net Decrease in Cash and Cash Equivalents						Net Decrease in Cash and Cash Equivalents	(161.3)		(157.4)

Cash and Cash Equivalents, Beginning of Period	Cash and Cash Equivalents, Beginning of Period	454.0		159.2		Cash and Cash Equivalents, Beginning of Period	396.4		454.0
Cash and Cash Equivalents, End of Period	Cash and Cash Equivalents, End of Period	$	377.9	$	177.0	Cash and Cash Equivalents, End of Period	$	235.1	$	296.6

See accompanying notes to Condensed Consolidated Financial Statements.

Herman Miller, Inc. and Subsidiaries 5

Herman Miller, Inc.

Condensed Consolidated Statements of Stockholders' Equity


																																					Three Months Ended August 28, 2021
(Dollars in millions, except share data)																																(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
(Unaudited)																																(Unaudited)			Shares					Amount
May 29, 2021																																May 29, 2021					59,029,165					$	11.8						$	94.7								$	808.4				$	(65.1)				$	(0.2)				$	849.6
Net earnings																																Net earnings																			(61.5)												(61.5)
Other comprehensive income, net of tax																																Other comprehensive income, net of tax																							(15.2)								(15.2)
Stock-based compensation expense																																Stock-based compensation expense														15.1																	15.1
Exercise of stock options																																Exercise of stock options					49,584									1.3																	1.3
Restricted and performance stock units released																																Restricted and performance stock units released					358,016																										—
Employee stock purchase plan issuances																																Employee stock purchase plan issuances					19,020									0.7																	0.7
Repurchase and retirement of common stock																																Repurchase and retirement of common stock					(267,522)									(11.0)																	(11.0)

Shares issued for the acquisition of Knoll																																Shares issued for the acquisition of Knoll					15,843,921					3.2				685.1																	688.3
Pre-combination expense from Knoll rollover																																Pre-combination expense from Knoll rollover					751,907					0.2				22.4																	22.6

Dividends declared $0.1875 per share)																																Dividends declared $0.1875 per share)																			(14.3)												(14.3)

August 28, 2021																																August 28, 2021					75,784,091					$	15.2			$	808.3				$	732.6			$	(80.3)				$	(0.2)		$	1,475.6

			Six Months Ended November 28, 2020																																			Three Months Ended August 29, 2020
(Dollars in millions, except share data)	(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					(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
(Unaudited)	(Unaudited)	Shares		Amount															(Unaudited)				Shares								Amount			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss		Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity
May 30, 2020	May 30, 2020		58,793,275		$	11.8			$	81.6					$	683.9						$	(134.0)			$	(0.3)			$	643.0	$	0												$	643.0								May 30, 2020							58,793,275			$	11.8	$	81.6		$	683.9	$	(134.0)		$	(0.3)	$	643.0
Net earnings	Net earnings		—		—		—				73.0		—				—			73.0				0				73.0					Net earnings					—					—				—					73.0				—					—			73.0
Other comprehensive income, net of tax	Other comprehensive income, net of tax		—		—		—				—		28.9				—			28.9				—				28.9					Other comprehensive income, net of tax					—					—				—					—				28.9					—			28.9
Stock-based compensation expense	Stock-based compensation expense		—		—		1.5				—		—				—			1.5				—				1.5					Stock-based compensation expense					—					—				1.5					—				—					—			1.5
Exercise of stock options	Exercise of stock options		8,133		0		0.2				—		—				—			0.2				—				0.2					Exercise of stock options					8,133					—				0.2					—				—					—			0.2
Restricted and performance stock units released	Restricted and performance stock units released		106,607		0		—				—		—				—			0				—				0					Restricted and performance stock units released					106,607					—				—					—				—					—			—
Employee stock purchase plan issuances	Employee stock purchase plan issuances		25,116		—		0.6				—		—				—			0.6				—				0.6					Employee stock purchase plan issuances					25,116					—				0.6					—				—					—			0.6
Repurchase and retirement of common stock	Repurchase and retirement of common stock		(36,644)		0		(0.9)				—		—				—			(0.9)				—				(0.9)					Repurchase and retirement of common stock					(36,644)					—				(0.9)					—				—					—			(0.9)
Directors' fees	Directors' fees		3,013		—		0.1				—		—				—			0.1				—				0.1					Directors' fees					3,013					—				0.1					—				—					—			0.1

August 29, 2020	August 29, 2020		58,899,500		$	11.8	$	83.1			$	756.9	$	(105.1)			$	(0.3)		$	746.4			$	0			$	746.4				August 29, 2020					58,899,500					$	11.8			$	83.1				$	756.9			$	(105.1)				$	(0.3)		$	746.4
Net earnings			—		—		—				51.3		—				—			51.3				—				51.3
Other comprehensive income, net of tax			—		—		—				—		7.0				—			7.0				—				7.0
Stock-based compensation expense			—		—		2.4				—		—				—			2.4				—				2.4
Exercise of stock options			54,771		0		1.9				—		—				—			1.9				—				1.9
Restricted and performance stock units released			3,688		0		—				—		—				—			0				—				0
Employee stock purchase plan issuances			14,880		—		0.4				—		—				—			0.4				—				0.4
Repurchase and retirement of common stock			(1,198)		0		0				—		—				—			0				—				0
Dividends declared ($0.1875 per share)			—		—		—				(11.1)		—				—			(11.1)				—				(11.1)

November 28, 2020			58,971,641		$	11.8	$	87.8			$	797.1	$	(98.1)			$	(0.3)		$	798.3			$	0			$	798.3

6 ~~Form 10-Q~~

Six Months Ended November 30, 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 — — — — (17.3) — (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 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 $ (111.5) $ (0.6) $ 745.3 $ 0 $ 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 0.1 — — — 0.1 — 0.1
Restricted and performance stock units released 3,653 0 — — — — 0 — 0
Employee stock purchase plan issuances 12,467 — 0.5 — — — 0.5 — 0.5
Repurchase and retirement of common stock (10,006) 0 (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 $ 0 $ 844.6

See accompanying notes to Condensed Consolidated Financial Statements.

~~Herman Miller, Inc. and Subsidiaries~~6 7Form 10-Q

Notes to Condensed Consolidated Financial Statements

(Dollars in millions, except share data)

(unaudited)

1. Description of Business

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

On July 19, 2021 the Company acquired Knoll, Inc. ("Knoll") (See Note 5. "Acquisitions"). Knoll is a leading global manufacturer of commercial and residential furniture, accessories, lighting and coverings. The Company has included the financial results of Knoll in the condensed consolidated financial statements from the date of acquisition. On July 13, 2021, the Company's Board of Directors unanimously recommended approval to shareholders of an amendment to our Restated Articles of Incorporation to change our corporate name from Herman Miller, Inc. to MillerKnoll, Inc. This proposed change is subject to shareholder approval at the upcoming shareholder meeting on October 11, 2021.

MillerKnoll is a collective of dynamic brands that comes together to design the world we live in. Powering the world's most dynamic design brands, MillerKnoll includes Herman Miller® and Knoll®, plus Colebrook Bosson Saunders®, DatesWeiser®, Design Within Reach®, Edelman® Leather, Fully®, Geiger®, HAY®, Holly Hunt®, KnollExtra®, Knoll Office, KnollStudio® , KnollTextiles®, Maars® Living Walls, Maharam®, Muuto®, naughtone®, and Spinneybeck®|FilzFelt®. Together we are redefining modern design for the 21st century.

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," "MillerKnoll," "Herman Miller Group," "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 ~~November~~August 28, ~~2020.~~2021. Operating results for the three ~~and six~~ months ended ~~November~~August 28, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending May ~~29, 2021.~~28, 2022 ("fiscal 2022"). 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 May ~~30, 2020.~~29, 2021 ("fiscal 2021"). All intercompany transactions have been eliminated in the Condensed Consolidated Financial Statements. The financial statements of equity method investments are not consolidated. ~~Certain prior~~

Segment Reorganization

Effective as of May 30, 2021, the beginning of fiscal year ~~amounts~~2022, the Company implemented an organizational change that resulted in a change in the ~~Condensed Consolidated Financial Statements have been reclassified~~reportable segments. The Company has recast historical results to ~~conform~~reflect this change. Below is a description of each reportable segment. Intersegment sales are eliminated within each segment, with ~~current year presentation.~~the exception of sales to and from the Knoll segment, which are presented as intersegment eliminations.

•Global Retail – reflects the legacy North America Retail segment and now includes International Retail

Herman Miller, Inc. and Subsidiaries 7

•Americas Contract ("Americas") – reflects the legacy Herman Miller North America Contract segment combined with Latin America and Design Within Reach Contract

•International Contract ("International") – reflects global Contract activity outside the Americas, excluding the international activity of Knoll

•Knoll – the Knoll segment includes the global operations associated with the design, manufacture, and sale of furniture products within the Knoll constellation of brands. The acquired Knoll business will initially be reflected as a stand-alone segment.

2. Recently Issued Accounting Standards

Recently Adopted Accounting Standards

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

~~On May 31, 2020,~~30, 2021, the Company adopted ASU No. ~~2018-13, "Fair Value Measurement (Topic 820)~~2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for ~~Fair Value Measurement" using the prospective method.~~Defined Benefit Plans." This update ~~modifies~~eliminates, adds and clarifies certain disclosure requirements for ~~fair value measurements.~~employers that sponsor defined benefit pension or other post-retirement plans. The eliminated disclosures include (a) the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. The adoption of this guidance did not have a material effect on our consolidated financial statements and additional disclosures will be made in our annual report.

On May 30, 2021, the Company adopted ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This update removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The update also adds guidance to reduce complexity in certain areas. The adoption of this guidance 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~~evaluates all Accounting Standards Updates ("ASUs") issued by the ~~FASB:~~

~~Standard~~

~~Description~~

~~Effective Date~~

~~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~~Financial Accounting Standards Board ("FASB") for consideration of their applicability to our consolidated financialstatements. We have assessed all ASUs issued ~~and~~but not yet ~~effective accounting standards~~adopted and concluded that those not disclosed are not relevant to the Company or are not expected to ~~the Company.~~have a material impact.

8 ~~Form 10-Q~~

3. Revenue from Contracts with Customers

Disaggregated Revenue

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


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Net Sales:	Net Sales:									Net Sales:
Single performance obligation	Single performance obligation									Single performance obligation
Product revenue	Product revenue	$	544.3	$	572.7	$	1,087.6	$	1,138.9	Product revenue	$	736.3	$	543.3
Multiple performance obligations	Multiple performance obligations									Multiple performance obligations
Product revenue	Product revenue	77.2		95.8		155.7		195.7		Product revenue	49.6		78.4
Service revenue	Service revenue	2.9		2.9		6.0		5.2		Service revenue	1.9		3.1
Other	Other	1.9		2.8		3.7		5.4		Other	1.9		2.0
Total	Total	$	626.3	$	674.2	$	1,253.0	$	1,345.2	Total	$	789.7	$	626.8

~~Effective in~~The Company internally reports and evaluates products based on 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~~A description of 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.~~is included below.

8 Form 10-Q

The Workplace category includes products centered on creating highly functional and productive settings for both groups and individuals. This category focuses on the development of products, beyond seating, that define boundaries, support work and enable productivity.

The Performance Seating category includes products centered on seating ergonomics, productivity and function across an evolving and diverse range of settings. This category focuses on the development of ergonomic seating solutions for specific use cases requiring more than basic utility.

The Lifestyle category includes products focused on bringing spaces to life through beautiful yet functional products. This category focuses on the development of products that support a way of living, in thoughtful yet elevated ways. The products in this category help create emotive and visually appealing spaces via a portfolio that offers diversity in aesthetics, price and performance.

~~Herman Miller, Inc. and Subsidiaries~~ 9

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


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
North America Contract:
Americas Contract:										Americas Contract:
Workplace	Workplace	$	197.2	$	277.3	$	404.3	$	560.8	Workplace	$	176.4	$	213.7
Performance Seating	Performance Seating	74.7		108.6		152.2		220.5		Performance Seating	84.9		86.7
Lifestyle	Lifestyle	20.4		24.5		42.8		48.0		Lifestyle	32.7		32.8
Other	Other	30.8		40.2		62.6		80.0		Other	31.3		36.9
Total North America Contract		$	323.1	$	450.6	$	661.9	$	909.3
Total Americas Contract										Total Americas Contract	$	325.3	$	370.1

International Contract:	International Contract:									International Contract:
Workplace	Workplace	$	35.1	$	45.3	$	77.0	$	92.8	Workplace	$	25.7	$	31.7
Performance Seating	Performance Seating	73.4		61.5		136.3		118.8		Performance Seating	49.2		43.7
Lifestyle	Lifestyle	57.1		7.4		103.5		13.4		Lifestyle	22.5		17.8
Other	Other	2.5		4.0		4.9		7.0		Other	1.6		0.8
Total International Contract	Total International Contract	$	168.1	$	118.2	$	321.7	$	232.0	Total International Contract	$	99.0	$	94.0

Retail:	Retail:									Retail:
Workplace	Workplace	$	2.0	$	1.1	$	4.0	$	2.1	Workplace	$	3.5	$	2.3
Performance Seating	Performance Seating	49.2		12.6		96.6		21.7		Performance Seating	61.1		57.6
Lifestyle	Lifestyle	83.6		91.7		168.4		180.1		Lifestyle	147.6		103.0
Other	Other	0.3		0		0.4		0		Other	0.4		(0.2)
Total Retail	Total Retail	$	135.1	$	105.4	$	269.4	$	203.9	Total Retail	$	212.6	$	162.7

Knoll:										Knoll:
Workplace										Workplace	$	75.2	$	—
Performance Seating										Performance Seating	12.1		—
Lifestyle										Lifestyle	56.4		—
Other										Other	12.7		—
Total Knoll										Total Knoll	$	156.4	$	—

Intersegment sales elimination										Intersegment sales elimination	$	(3.6)	$	—

Total	Total	$	626.3	$	674.2	$	1,253.0	$	1,345.2	Total	$	789.7	$	626.8

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

Herman Miller, Inc. and Subsidiaries 9

Contract Balances

Customers may make payments before the satisfaction of the Company's performance obligation and recognition of revenue. These payments represent contract liabilities and are included within the caption “Customer deposits” in the Condensed Consolidated Balance Sheets. During the three ~~and six~~ months ended ~~November~~August 28, 2021 and August 29, 2020, the Company recognized Net sales of ~~$19.9~~$41.1 million and ~~$26.7~~$18.1 million related to customer deposits that were included in the balance sheet as of ~~August~~May 29, ~~2020~~2021 and May 30, 2020, respectively. The Company assumed a contract liability of $55.5 million related to the acquisition of Knoll, Inc on July 19, 2021.

4. Leases

The components of lease expense are provided in the table below:


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Operating lease costs	Operating lease costs	$	12.4	$	12.6	$	23.4	$	25.4	Operating lease costs	$	17.9	$	11.0
Short-term lease costs	Short-term lease costs	0.7		0.7		1.5		1.2		Short-term lease costs	1.6		0.8
Variable lease costs*	Variable lease costs*	2.0		2.2		3.6		4.4		Variable lease costs*	2.5		1.6
Total	Total	$	15.1	$	15.5	$	28.5	$	31.0	Total	$	22.0	$	13.4

*Not included in the table above for the three ~~and six~~ months ended ~~November~~August 28, 2021 and August 29, 2020 are variable lease costs of ~~$21.6~~$20.7 million and ~~$38.6~~$16.9 million, respectively, for raw material purchases under certain supply arrangements that the Company has determined to meet the definition of a lease. ~~This compares to purchases of $23.8 million and $45.7 million for the three and six months ended November 30, 2019, respectively.~~

10 ~~Form 10-Q~~

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 and six months ended November 28, 2020 compared to the prior year.

At ~~November~~August 28, ~~2020,~~2021, the Company 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)	(In millions)			(In millions)
2021		$	25.7
2022	2022	49.4		2022	$	88.5
2023	2023	46.5		2023	83.5
2024	2024	41.6		2024	74.3
2025	2025	37.2		2025	65.8
2026				2026	50.3
Thereafter	Thereafter	103.2		Thereafter	153.8
Total lease payments*	Total lease payments*	$	303.6	Total lease payments*	$	516.2
Less interest	Less interest	30.6		Less interest	38.8
Present value of lease liabilities	Present value of lease liabilities	$	273.0	Present value of lease liabilities	$	477.4

*Lease payments exclude ~~$21.3~~$3.9 million of legally binding minimum lease payments for leases signed but not yet commenced.

The long-term portion of the lease liabilities included in the amounts above is ~~$205.7~~$376.2 million and the remainder of the lease liabilities are included in "Other accrued liabilities" in the Condensed Consolidated Balance Sheets.

At ~~November~~August 28, ~~2020,~~2021, the weighted average remaining lease term and weighted average discount rate for operating leases were 7 years and ~~2.8%~~2.4%, respectively.

Supplemental cash flow and other information related to leases are provided in the table below:


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Operating cash flows used for operating leases	Operating cash flows used for operating leases	$	11.6	$	13.3	$	22.6	$	25.8	Operating cash flows used for operating leases	$	16.7	$	11.1
Right-of-use assets obtained in exchange for new liabilities	Right-of-use assets obtained in exchange for new liabilities	$	36.9	$	4.0	$	49.2	$	8.6	Right-of-use assets obtained in exchange for new liabilities	$	20.0	$	11.4

5. Acquisitions

~~Nine United Denmark A/S~~

10 Form 10-Q

Knoll, Inc.

On ~~June 7, 2018,~~July 19, 2021, the Company ~~acquired 33%~~completed its previously announced acquisition of ~~the outstanding equity of Nine United Denmark A/S, d/b/a HAY and subsequently renamed to HAY ApS ("HAY”~~Knoll, Inc. (“Knoll"), a ~~Copenhagen, Denmark-based, design~~ leader in the design, manufacture, marketing and sale of high-end furniture products and ~~ancillary furnishings~~accessories for workplace and residential ~~and contract markets in Europe and Asia.~~markets. The Company ~~acquired its 33% ownership interest~~has included the financial results of Knoll in ~~HAY for~~the condensed consolidated financial statements from the date of acquisition. The transaction costs associated with the acquisition, which included financial advisory, legal, proxy filing, regulatory and financing fees, were approximately ~~$65.5~~$26.7 million and were recorded in ~~cash. The Company also acquired~~general and administrative expenses during the ~~rights to the HAY brand in North America under a long-term license agreement for approximately $4.8 million in cash.~~three months ended August 28, 2021.

~~On December 2, 2019,~~Under the ~~Company obtained~~terms of the Agreement and Plan of Merger, each issued and outstanding share of Knoll common stock (excluding shares exercising dissenters rights, shares owned by Knoll as treasury stock, shares owned by the deal parties or their subsidiaries, or shares subject to Knoll restricted stock awards) was converted into a ~~controlling financial interest~~right to receive 0.32 shares of Herman Miller common stock and $11.00 in ~~HAY through~~cash, without interest. The preliminary acquisition date fair value of the ~~purchase~~consideration transferred for Knoll was approximately $1,887.3 million, which consisted of ~~an additional 34% ownership interest. This acquisition allows~~ the Company to further promote growth and development of HAY's ancillary product lines and continue to support product innovation and sales growth. The Company previously accounted for its ownership interest in HAY as an equity method investment, but upon increasing its ownership to 67%, the Company consolidated the operations of HAY. Total consideration paid for an additional 34% ownership interest of HAY was $79.0 million, exclusive of HAY cash on hand. The Company funded the acquisition with cash and cash equivalents.following (in millions, except share amounts):


	Knoll Shares	Herman Miller Shares Exchanged	Fair Value
Cash Consideration:
Shares of Knoll Common Stock issued and outstanding at July 19, 2021	49,444,825		$	543.9
Knoll equivalent shares for outstanding option awards, outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021	184,857		1.4
Total number of Knoll shares for cash consideration	49,629,682

Shares of Knoll Preferred Stock issued and outstanding at July 19, 2021	169,165		254.4

Consideration for payment to settle Knoll's outstanding debt			376.9

Share Consideration:
Shares of Knoll Common Stock issued and outstanding at July 19, 2021	49,444,825
Knoll equivalent shares for outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021	74,857
Total number of Knoll shares for share consideration	49,519,682	15,843,921	688.3

Replacement Share-Based Awards:
Outstanding awards of Knoll Restricted Stock and Performance units relating to Knoll Common Stock at July 19, 2021			22.4


Total preliminary acquisition date fair value of consideration transferred			$	1,887.3

The ~~previously mentioned HAY long-term licensing agreement~~aggregate cash paid in connection with the Knoll acquisition was ~~deemed~~$1,176.6 million. Herman Miller funded the acquisition through cash on-hand and debt proceeds, as described in "Note 14. Short-Term Borrowings and Long-Term Debt."

Outstanding unvested restricted stock awards, performance stock awards, performance stock units and restricted stock units with a preliminary estimated fair value of $53.4 million automatically converted into Company awards. Of the total fair value, $22.4 million was preliminarily allocated to purchase consideration and $31.0 million was preliminarily allocated to future services and will be expensed over the remaining service periods on a ~~contractual preexisting relationship. As a result~~straight-line basis. Per the terms of the ~~business combination,~~converted awards any qualifying termination within the ~~Company recorded this arrangement at its December 2, 2019 fair value,~~twelve months subsequent to the acquisition will result in accelerated vesting and related recognition of expense.

Herman Miller, Inc. and Subsidiaries 11

The transaction was accounted for as a business combination which ~~resulted in an increase in goodwill~~requires that assets and liabilities assumed be recognized at their fair value as of ~~$10.0 million~~the acquisition date. The purchase price allocation is preliminary and subject to change, including as a ~~net gain~~result of ~~approximately $6 million, which was recorded within “Gain on consolidation~~the valuation of ~~equity method investments" within~~inventory, property, plant and equipment, intangible assets and income taxes among other items. The amounts recognized will be finalized as the ~~Condensed Consolidated Statements of Comprehensive Income during~~information necessary to complete the ~~three months ended May 30, 2020. The goodwill was recorded within~~analysis is obtained, but no later than one year after the ~~Company’s Retail segment.~~acquisition date.

The ~~Company is a party to options, that if exercised, would require it to purchase~~following table summarizes the ~~remaining 33%~~preliminary fair value of assets acquired and liabilities assumed as of the ~~equity in HAY, at fair market value. This remaining redeemable noncontrolling interest in HAY is classified outside~~date of ~~permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption amount.~~

~~The allocation of the purchase price was finalized during the first quarter of fiscal 2021. The following table presents the allocation of purchase price related to acquired tangible assets:~~acquisition:


(In millions)	Fair Value
Cash	$	~~12.1~~88.0
~~Working capital, net of cash and inventory step-up~~Accounts receivable	~~12.3~~82.3
~~Net property and equipment~~Inventories	~~0.9~~224.4
Other current assets	~~3.9~~37.9
Property and equipment	292.1
Right-of-use assets	202.7
Intangible assets	770.4
Goodwill	925.9
Other noncurrent assets	22.7
Total assets acquired	2,646.4

Accounts payable	150.7
Other current liabilities	131.9
Lease liabilities	177.8
Other liabilities	~~(3.1)~~298.8
Total liabilities assumed	759.2
Net ~~assets acquired~~Assets Acquired	$	~~26.1~~1,887.2

The excess of 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 determiningconsideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributed to the ~~previously held equity method investment, including~~assembled workforce of Knoll and anticipated operational synergies. Goodwill related to 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 non-taxable gain on the remeasurement of the previously held equity method investment of $67.8 million in the third quarter of fiscal 2020. The net gain has been recognized in “Gain on consolidation of equity method investments"acquisition was recorded within the ~~Condensed Consolidated Statements~~Knoll segment at $925.9 million. Goodwill arising from the acquisition is not expected to be deductible for tax reporting purposes.

The fair values assigned to tangible assets acquired and liabilities assumed are preliminary based on management's estimates and assumptions and may be subject to change as additional information is received and certain tax matters are finalized. The primary areas that remain preliminary relate to the fair values of ~~Comprehensive Income during~~intangible assets acquired, certain tangible assets and liabilities acquired, income and non-income-based taxes and residual goodwill. The Company expects to finalize the ~~three months ended May 30, 2020.~~valuations as soon as practicable, but not later than one year from the acquisition date.

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

Backlog

Multi-Period Excess Earnings

Less than 1 Year

53.4

Trade name - indefinite lived

Relief from Royalty

Indefinite

397.0

Trade name - amortizing

Relief from Royalty

5-10 Years

23.0

Designs

Relief from Royalty

9-15 years

29.0

Customer Relationships

Multi-Period Excess Earnings

2-15 years

268.0

Total

770.4

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

~~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 allows 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

12 Form 10-Q

Company obtained a controlling financial interest and consolidated the operations of naughtone. Total consideration paid for naughtone on the Acquisition Date was $45.9 million, exclusive of naughtone cash on hand. The ~~Company funded the acquisition with cash and cash equivalents. The allocation of the purchase price was finalized during the fourth quarter of fiscal 2020.~~

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


~~(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 million on the remeasurement of the previously held equity method investment of $20.5 million. The net gain has been recognized in “Gain on consolidation of equity method investments" within theCompany's Condensed Consolidated Statements of Comprehensive Income ~~during~~for the ~~three~~period ended August 28, 2021, include $156.4 million of Revenue and ~~six months ended November 30, 2019.~~$45.9 million of Net Loss associated with the result of operations of Knoll from the acquisition date to August 28, 2021.

~~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 0.3 $ 0.2
Backlog Multi-Period Excess Earnings 0.3 0.8
Tradename Relief from Royalty Indefinite 8.5
Customer Relationships Multi-Period Excess Earnings 9.0 29.4
Total $ 38.9

~~Goodwill related to the acquisition was recorded within the North America Contract and International Contract segments for $35.0 million and $22.5 million, respectively.~~

Pro Forma Results of Operations

The results of ~~naughtone and HAY’s~~Knoll's operations have been included in the Consolidated Financial Statements beginning on ~~October 25, 2019 and December 2, 2019 respectively.~~July 19, 2021. The following table provides pro forma results of operations for the three ~~and six~~ months ended ~~November 30, 2019,~~August 28, 2021 and August 29, 2020, as if ~~naughtone and HAY~~Knoll had been acquired as of ~~June 2, 2019.~~May 31, 2020. 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. The impact of these adjustments is subject to change as valuations are finalized. The pro forma results also include the impact of incremental interest expense incurred to finance the merger. Transaction related costs, including debt extinguishment costs related to the transaction, have been eliminated from the pro forma amounts presented in both periods. Pro forma results do not include any anticipated cost savings from the ~~planned~~ integration of ~~these acquisitions.~~this acquisition. Accordingly, such amounts are not necessarily indicative of the results that would have occurred if the ~~acquisitions~~acquisition had occurred on the ~~dates~~date indicated or that may result in the future.


		Three Months Ended		Six Months Ended			Three Months Ended
(In millions)	(In millions)	November 30, 2019		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Net sales	Net sales	$	718.4	$	1,439.2	Net sales	$	943.9	$	891.8
Net earnings attributable to Herman Miller, Inc.	Net earnings attributable to Herman Miller, Inc.	$	50.3	$	99.3	Net earnings attributable to Herman Miller, Inc.	$	(30.2)	$	30.9

~~Herman Miller, Inc. and Subsidiaries~~ 13

6. Inventories, net


(In millions)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021
Finished goods		$	147.1	$	151.1
Finished goods and work in process						Finished goods and work in process	$	329.1	$	166.7
Raw materials	Raw materials	43.9		46.2		Raw materials	117.1		46.9
Total	Total	$	191.0	$	197.3	Total	$	446.2	$	213.6

Inventories are valued at the lower of cost or market and include material, labor, and overhead. Certain inventories within our ~~North America Contract~~United States-based manufacturing operations are valued using the last-in, first-out (LIFO) 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 ~~November~~August 28, ~~2020~~2021 and May ~~30, 2020:~~29, 2021:


(In millions)	(In millions)	Goodwill		Indefinite-lived Intangible Assets		(In millions)	Goodwill		Indefinite-lived Intangible Assets
May 30, 2020		$	346.0	$	92.8
May 29, 2021						May 29, 2021	$	364.2	$	97.6
Foreign currency translation adjustments	Foreign currency translation adjustments	12.5		3.6		Foreign currency translation adjustments	(6.2)		(1.5)

November 28, 2020		$	358.5	$	96.4
Acquisition of Knoll						Acquisition of Knoll	925.9		396.9
August 28, 2021						August 28, 2021	$	1,283.9	$	493.0

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

Each of the reporting units, with the exception of Knoll, were reviewed for impairment using a quantitative assessment as of March 31, ~~2020,~~2021, our annual testing date. In performing the quantitative impairment test for fiscal year 2021, the Company determined that the fair value of ~~the North America and International~~its reporting units exceeded the carrying amount and, as such, these reporting units were not impaired. ~~The assessment~~

Herman Miller, Inc. and Subsidiaries 13

In connection with the segment reorganization, certain of the ~~Retail and Maharam~~Company’s reporting units ~~indicated that the carrying value of these~~have changed in composition, and goodwill was reallocated between such reporting units ~~exceeded their~~using a relative fair ~~values, and~~value approach. Accordingly, the Company performed interim goodwill impairment ~~charges of $88.8 million and $36.7 million, respectively, were recorded~~tests in the ~~fourth~~first quarter of ~~fiscal 2020 resulting in no goodwill remaining in either the Retail or Maharam reporting units. Accumulated goodwill impairment losses were $125.3 million as of November 28, 2020 and May 30, 2020.~~

~~The fair value of the Company's International~~2022 for each reporting unit, ~~which includes $163.7 million~~with the exception of ~~goodwill as of May 30, 2020, exceeded its carrying value by 17%. Due to the level that the reporting unit fair value exceeded the carrying amount and~~Knoll. Based on the results of the ~~sensitivity analysis,~~tests performed, the Company ~~may need to record an impairment charge if~~determined that the ~~operating results~~fair value of ~~its International~~each reporting unit, ~~were~~as reorganized, exceeded its respective carrying amount in each case.

Goodwill related to ~~decline~~the acquisition of Knoll was recorded within the Knoll segment at $925.9 million. This increase was offset by foreign currency translation adjustments, resulting in ~~future periods.~~a goodwill balance of $1,283.9 million as of August 28, 2021.

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.

In fiscal ~~2020,~~2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets for ~~impairment, which resulted in the~~impairment. The carrying ~~values~~value of the ~~DWR, Maharam,~~Company's HAY ~~and naughtone~~ trade ~~names exceeding their~~name indefinite-lived intangible asset was $41.7 million as of March 31, 2021. The calculated fair ~~values by $53.3~~value of the HAY trade name was $43.8 million ~~and impairment charges~~which represents an excess fair value of ~~this amount were recognized during the fourth quarter of fiscal 2020.~~$2.1 million or 5.0%. If the residual cash ~~flows~~flow related to ~~these~~this trade ~~names~~name were to decline in future periods, the Company may need to record an ~~additional~~ impairment charge.

14 ~~Form 10-Q~~

During the ~~six~~three months ended ~~November~~August 28, ~~2020,~~2021, 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 defined benefit pension plans:


	Pension Benefits
	Three Months Ended August 28, 2021				Three Months Ended August 29, 2020
(In millions)	Domestic		International		Domestic		International
Service cost	$	0.1	$	—	$	—	$	—
Interest cost	0.5		0.8		—		0.7
Expected return on plan assets(1)	(1.0)		(1.8)		—		(1.4)
Net amortization loss	—		1.7		—		1.6
Net periodic benefit cost	$	(0.4)	$	0.7	$	—	$	0.9

(1)The weighted-average expected long-term rate of return on plan ~~for the three and six months ended:~~assets is 4.98%.

Three Months Ended Six Months Ended
(In millions) November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Interest cost $ 0.7 $ 0.6 $ 1.3 $ 1.2
Expected return on plan assets (1.4) (1.1) (2.8) (2.2)
Net amortization loss 1.6 0.9 3.3 1.7
Net periodic benefit cost $ 0.9 $ 0.4 $ 1.8 $ 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)~~("EPS") for the three ~~and six~~ months ended:

Three Months Ended Six Months Ended
November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Numerators:
Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. - in millions $ 51.3 $ 78.6 $ 124.2 $ 126.8
Denominators:
Denominator for basic EPS, weighted-average common shares outstanding 58,908,094 59,061,731 58,869,699 58,985,366
Potentially dilutive shares resulting from stock plans 359,304 340,270 174,229 333,616
Denominator for diluted EPS 59,267,398 59,402,001 59,043,928 59,318,982
Antidilutive equity awards not included in weighted-average common shares - diluted 301,002 86 1,067,979 43

14 Form 10-Q


	Three Months Ended
	August 28, 2021		August 29, 2020
Numerators:
Numerator for both basic and diluted EPS, Net earnings attributable to Herman Miller, Inc. - in millions	$	(61.5)	$	73.0

Denominators:
Denominator for basic EPS, weighted-average common shares outstanding	66,302,214		58,831,305
Potentially dilutive shares resulting from stock plans	—		132,963
Denominator for diluted EPS	66,302,214		58,964,268
Antidilutive equity awards not included in weighted-average common shares - diluted	1,328,275		1,096,907

10. Stock-Based Compensation

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


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Stock-based compensation expense	Stock-based compensation expense	$	2.4	$	2.8	$	3.9	$	5.4	Stock-based compensation expense	$	15.1	$	1.5
Related income tax effect	Related income tax effect	$	0.6	$	0.6	$	0.9	$	1.2	Related income tax effect	$	3.7	$	0.3

The increase to Stock-based compensation expense was driven in part by the additional of Knoll's equity-based compensation awards. This impact includes the accelerated stock-compensation award expense related to workforce reductions as part of the Knoll integration.

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~~ 15

11. Income Taxes

The Company's process for determining the provision for income taxes for the three ~~and six~~ months ended ~~November~~August 28, ~~2020~~2021 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 ~~23.5%~~15.3% and ~~14.3%~~22.0%, respectively, for the three month periods ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019.~~August 29, 2020. The ~~same period in the prior year included a non-taxable gain on consolidation of an equity method investment which is the primary driver of the~~ year over year ~~increase~~decrease in the effective tax ~~rate.~~rate for the three months ended August 28, 2021 resulted from a pre-tax book loss reported for the quarter coupled with non-deductible discrete compensation and acquisition costs in the current quarter in connection with the Knoll acquisition as compared to pre-tax book income. The same quarter of the prior year had no comparable impact from acquisitions. For the three months ended ~~November~~August 28, 2021, the effective tax rate is lower than the United States federal statutory rate due to the impact of the Knoll acquisition related costs creating a pre-tax loss for the quarter coupled with non-deductible discrete compensation and acquisition costs in the quarter. For the three months ended August 29, 2020, the effective tax rate iswas 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 November 30, 2019, the effective tax rate was lower than the United States federal statutory rate mainly as a result from the impact of a non-taxable gain on consolidation of an equity method investment.

The effective tax rates were 22.6% and 16.9%, respectively, for the six month periods ended November 28, 2020 and November 30, 2019. The same period in the prior year included a non-taxable gain on consolidation of an equity method investment which is the primary driver of the year over year increase in the effective tax rate. For the six months ended November 28, 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 six months ended November 30, 2019, the effective tax rate was lower than the United States federal statutory rate mainly due to the non-taxed nature of the gain on consolidation of an equity method investment.

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 six~~ months ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019.~~August 29, 2020.

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

(In millions) November 28, 2020 May 30, 2020
Liability for interest and penalties $ 1.0 $ 0.8
Liability for uncertain tax positions, current $ 2.3 $ 1.9

Herman Miller, Inc. and Subsidiaries 15


(In millions)	August 28, 2021		May 29, 2021
Liability for interest and penalties	$	0.9	$	0.9
Liability for uncertain tax positions, current	$	2.8	$	2.1

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.~~2018.

12. Fair Value Measurements

The Company's financial instruments consist of cash equivalents, marketable securities, accounts and notes receivable, a deferred compensation plan, accounts payable, debt, interest rate swaps, foreign currency exchange 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)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021
Carrying value	Carrying value	$	327.2	$	591.3	Carrying value	$	1,342.9	$	277.1
Fair value	Fair value	$	334.4	$	594.0	Fair value	$	1,317.2	$	284.8

16 ~~Form 10-Q~~

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, which 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.

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 through net income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of ~~November~~August 28, ~~2020~~2021 and May ~~30, 2020.~~29, 2021.

(In millions) November 28, 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 $ 90.1 $ 0 $ 283.7 $ 0
Mutual funds - equity 0 0.7 0 0.7
Foreign currency forward contracts — 1.4 — 1.1
Deferred compensation plan 0 16.4 0 13.2
Total $ 90.1 $ 18.5 $ 283.7 $ 15.0
Financial Liabilities
Foreign currency forward contracts $ 0 $ 0.3 $ 0 $ 0.8
Total $ 0 $ 0.3 $ 0 $ 0.8

16 Form 10-Q


(In millions)	August 28, 2021				May 29, 2021
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	$	15.1	$	—	$	162.2	$	—
Mutual funds - equity	—		0.8		—		0.8
Foreign currency forward contracts	—		0.1		—		1.6
Deferred compensation plan	—		17.7		—		16.1
Total	$	15.1	$	18.6	$	162.2	$	18.5

Financial Liabilities
Foreign currency forward contracts	$	—	$	1.1	$	—	$	0.1

Total	$	—	$	1.1	$	—	$	0.1

In connection with the acquisition of Knoll, the Company acquired a contingent consideration obligation related to Knoll's acquisition of Fully. The fair value measurement of the Company's contingent consideration obligation is based on significant, unobservable inputs for which little or no market data exists, and thus represents a Level 3 measurement. The contingent consideration obligation is revalued each reporting period, with changes in fair value recognized through net income. The valuation inputs utilized to estimate fair value of the contingent consideration obligation at August 28, 2021, included a discount rate of 2.5%, Fully's net sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the period ended August 28. 2021, and projections related to Fully's net sales and EBITDA for each of the calendar years 2021 through 2023. The contingent consideration obligation's fair value at August 28, 2021 is $13.5 million. The maximum amount of contingent consideration that could be earned by Fully through 2023 is $13.8 million.

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 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 isare determined using a market approach based on rates obtained from active markets. The interest rate swap agreements are designated as cash flow hedging instruments.

~~Herman Miller, Inc. and Subsidiaries~~ 17

The following table sets forth financial assets and liabilities measured at fair value through other comprehensive income and the respective pricing levels to which the fair value measurements are classified within the fair value hierarchy as of ~~November~~August 28, ~~2020~~2021 and May ~~30, 2020.~~29, 2021.


(In millions)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021
Financial Assets	Financial Assets	Quoted Prices with Other Observable Inputs (Level 2)		Quoted Prices with Other Observable Inputs (Level 2)		Financial Assets	Quoted Prices with Other Observable Inputs (Level 2)		Quoted Prices with Other Observable Inputs (Level 2)
Mutual funds - fixed income	Mutual funds - fixed income	$	6.5	$	6.3	Mutual funds - fixed income	$	7.2	$	6.9

Total	Total	$	6.5	$	6.3	Total	$	7.2	$	6.9

Financial Liabilities	Financial Liabilities					Financial Liabilities
Interest rate swap agreement	Interest rate swap agreement	$	23.5	$	25.0	Interest rate swap agreement	$	15.7	$	14.4

Total	Total	$	23.5	$	25.0	Total	$	15.7	$	14.4

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 dates indicated:

November 28, 2020 May 30, 2020
(In millions) Cost Unrealized
Gain/(Loss) Market
Value Cost Unrealized
Gain/(Loss) Market
Value
Mutual funds - fixed income $ 6.4 $ 0.1 $ 6.5 $ 6.2 $ 0.1 $ 6.3
Mutual funds - equity 0.5 0.2 0.7 0.6 0.1 0.7
Total $ 6.9 $ 0.3 $ 7.2 $ 6.8 $ 0.2 $ 7.0

Herman Miller, Inc. and Subsidiaries 17


	August 28, 2021						May 29, 2021
(In millions)	Cost		Unrealized Gain/(Loss)		Market Value		Cost		Unrealized Gain/(Loss)		Market Value
Mutual funds - fixed income	$	7.2	$	—	$	7.2	$	6.9	$	—	$	6.9
Mutual funds - equity	0.5		0.3		0.8		0.5		0.3		0.8
Total	$	7.7	$	0.3	$	8.0	$	7.4	$	0.3	$	7.7

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) ~~expense,~~, net". 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~~"Other current ~~assets~~assets" for unrealized gains and to ~~Other~~"Other accrued ~~liabilities~~liabilities" for unrealized losses. The Consolidated Statements of Comprehensive Income classification for the fair values of these forward contracts is to ~~Other~~"Other (income) expense, ~~net,~~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.

18 ~~Form 10-Q~~

The interest rate swaps were designated as cash flow hedges at inception and the facts and circumstances of the hedged ~~relationship remains~~relationships remain consistent with the initial quantitative effectiveness assessment in that the hedged instruments remain an effective accounting hedge as of ~~November~~August 28, ~~2020.~~2021. 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~~"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.

As of ~~November~~August 28, ~~2020,~~2021, the Company had the following ~~two~~2 outstanding interest rate swap 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	%

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

18 Form 10-Q

As of ~~November~~August 28, ~~2020,~~2021, the fair value of the Company’s ~~two~~2 outstanding interest rate swap agreements was a liability of ~~$23.5 million. The liability fair value was~~$15.7 million and is recorded within "Other liabilities" ~~within~~in the Condensed Consolidated Balance Sheets.

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

Three Months Ended Six Months Ended
(In millions) November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Gain (loss) recognized in Other comprehensive loss (effective portion) $ 0.9 $ 3.4 $ 1.2 $ (5.3)
(Loss) gain reclassified from Accumulated other comprehensive loss into earnings $ (1.1) $ 0 $ (2.2) $ 0.1


	Three Months Ended
(In millions)	August 28, 2021		August 29, 2020
(Loss) gain recognized in Other comprehensive loss (effective portion)	$	(1.0)	$	0.3
(Loss) reclassified from Accumulated other comprehensive loss into earnings	$	(0.8)	$	(1.1)

There were 0no gains or losses recognized in earnings for hedge ineffectiveness for the three ~~and six~~ month periods ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019, respectively.~~August 29, 2020. The amount of loss expected to be reclassified from Accumulated other comprehensive loss into earnings during the next twelve months is ~~$4.4~~$4.5 million, and net of tax is ~~$3.3~~$3.4 million.

Redeemable Noncontrolling Interests

Changes in the Company's redeemable noncontrolling interest in HAY for the ~~six~~three months ended ~~November~~August 28, 2021 and August 29, 2020 are as follows:


~~(In millions)~~	~~November 28, 2020~~
~~Beginning Balance~~	$	~~50.4~~

~~Net income attributable to redeemable noncontrolling interests~~	~~2.0~~

~~Distributions to redeemable noncontrolling interests~~	~~(2.7)~~
~~Cumulative translation adjustments attributable to redeemable noncontrolling interests~~	~~2.8~~
~~Foreign currency translation adjustments~~	~~4.0~~
~~Ending Balance~~	$	~~56.5~~


(In millions)	August 28, 2021		August 29, 2020
Beginning Balance	$	77.0	$	50.4

Net income attributable to redeemable noncontrolling interests	1.6		0.4

Distributions to redeemable noncontrolling interests	(3.9)		—
Cumulative translation adjustments attributable to redeemable noncontrolling interests	0.5		2.6
Foreign currency translation adjustments	(2.6)		3.8
Ending Balance	$	72.6	$	57.2

~~During August 2019, the Company acquired all of the remaining redeemable noncontrolling equity interests in the Company's subsidiary, Herman Miller Consumer Holdings, Inc. for $20.4 million.~~

~~Herman Miller, Inc. and Subsidiaries~~ 19

~~Other~~

~~The following table summarizes the valuation of the Company's assets measured at fair 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 above is goodwill related to the Retail and Maharam reporting units, as these were fully written off with a resulting impairment charge of $125.5 million in the fourth quarter of fiscal 2020.

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~~specific terms, conditions and length of ~~warranty is 12 years for the majority of products sold; however, this varies~~those warranties vary depending onupon the product ~~classification.~~sold. 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 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 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				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Accrual Balance — beginning	Accrual Balance — beginning	$	60.3	$	53.3	$	59.2	$	53.1	Accrual Balance — beginning	$	60.1	$	59.2
Accrual for warranty matters	Accrual for warranty matters	2.7		6.3		7.3		11.6		Accrual for warranty matters	5.4		4.6
Settlements and adjustments	Settlements and adjustments	(3.2)		(5.0)		(6.7)		(10.1)		Settlements and adjustments	(5.8)		(3.5)
Acquired through business acquisition										Acquired through business acquisition	10.1		—
Accrual Balance — ending	Accrual Balance — ending	$	59.8	$	54.6	$	59.8	$	54.6	Accrual Balance — ending	$	69.8	$	60.3

Herman Miller, Inc. and Subsidiaries 19

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 ~~November~~August 28, ~~2020,~~2021, the Company had a maximum financial exposure related to performance bonds totaling approximately ~~$5.5~~$7.3 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, 0no liability has been recorded in respect to these bonds as of either ~~November~~August 28, ~~2020~~2021 or May ~~30, 2020.~~29, 2021.

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 ~~November~~August 28, ~~2020,~~2021, the Company had a maximum financial exposure from these standby letters of credit totaling approximately ~~$9.8~~$15.4 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

20 ~~Form 10-Q~~

affect the Company's Consolidated Financial Statements. Accordingly, 0no liability has been recorded in respect to these arrangements as of ~~November~~August 28, ~~2020 and~~2021 or May ~~30, 2020.~~29, 2021.

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.

20 Form 10-Q

14. Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt as of ~~November~~August 28, ~~2020~~2021 and May ~~30, 2020~~29, 2021 consisted of the ~~following obligations:~~following:


(In millions)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021

Debt securities, 6.0%, due March 1, 2021		$	50.0	$	50.0

Debt securities, 4.95%, due May 20, 2030	Debt securities, 4.95%, due May 20, 2030	49.9		49.9		Debt securities, 4.95%, due May 20, 2030	$	—	$	49.9
Syndicated revolving line of credit, due August 2024	Syndicated revolving line of credit, due August 2024	225.0		490.0		Syndicated revolving line of credit, due August 2024	—		225.0
Syndicated revolving line of credit, due July 2026						Syndicated revolving line of credit, due July 2026	315.0		—

Term Loan A, 1.5625%, due July 2026						Term Loan A, 1.5625%, due July 2026	400.0		—
Term Loan B, 2.0625%, due July 2028						Term Loan B, 2.0625%, due July 2028	625.0		—
Supplier financing program	Supplier financing program	2.3		1.4		Supplier financing program	2.9		2.2
Total debt	Total debt	$	327.2	$	591.3	Total debt	$	1,342.9	$	277.1
Less: Current debt		(52.3)		(51.4)
Less: Unamortized discount and issuance costs						Less: Unamortized discount and issuance costs	(21.9)		—
Less: Current portion of long-term debt						Less: Current portion of long-term debt	(22.6)		(2.2)
Long-term debt	Long-term debt	$	274.9	$	539.9	Long-term debt	$	1,298.4	$	274.9

As of May ~~30, 2020,~~29, 2021, the Company's syndicated revolving line of credit provided the Company with up to $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 $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.

~~In June 2020,~~ The Company paid off the ~~Company repaid~~outstanding balance due on the ~~$265 million draw on its~~ syndicated revolving line of credit during the first quarter of 2022.

In connection with the acquisition of Knoll, in July, 2021, the Company entered into a credit agreement that provided for a syndicated revolving line of credit and 2 term loans. The revolving line of credit provides the Company with up to $725 million in revolving variable interest borrowing capacity that matures in July 2026, replacing the previous $500 million syndicated revolving line of credit. The term loans consist of a five-year senior secured term loan "A" facility with an aggregate principal amount of $400 million and a seven-year senior secured term loan "B" facility with an aggregate principal amount of $625 million, the proceeds of which were used to finance a portion of the cash consideration for the acquisition of Knoll, for the repayment of certain debt of Knoll and to pay fees, costs and expenses related thereto. Both term loans have a variable interest rate. The Company also repaid$64 million of private placement notes due May 20, 2030. A loss on extinguishment of debt of approximately $13.4 million was ~~taken~~recognized as ~~a precautionary measure in March 2020 to provide additional near-term liquidity given~~part of the ~~uncertainty related to COVID-19.~~repayment of the private placement notes, which represented the premium on early redemption.

Available borrowings under the syndicated revolving line of credit were as follows for the periods indicated:


(In millions)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021
Syndicated revolving line of credit borrowing capacity	Syndicated revolving line of credit borrowing capacity	$	500.0	$	500.0	Syndicated revolving line of credit borrowing capacity	$	725.0	$	500.0
Less: Borrowings under the syndicated revolving line of credit	Less: Borrowings under the syndicated revolving line of credit	225.0		490.0		Less: Borrowings under the syndicated revolving line of credit	315.0		225.0
Less: Outstanding letters of credit	Less: Outstanding letters of credit	9.8		9.4		Less: Outstanding letters of credit	15.4		9.8
Available borrowings under the syndicated revolving line of credit	Available borrowings under the syndicated revolving line of credit	$	265.2	$	0.6	Available borrowings under the syndicated revolving line of credit	$	394.6	$	265.2

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~~of 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” in the Condensed Consolidated Balance Sheets as the amounts have been accounted for by the Company as current debt, within the caption “Short-term borrowings and current portion of long-term debt”.

Herman Miller, Inc. and Subsidiaries 21

15. Accumulated Other Comprehensive Loss

The following table provides an analysis of the changes in accumulated other comprehensive loss for the ~~six~~three months ended ~~November~~August 28, ~~2020~~2021 and ~~November 30, 2019:~~August 29, 2020:


(In millions)	(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		(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 29, 2021												Balance at May 29, 2021	$	(3.9)	$	(50.4)	$	—	$	(10.8)	$	(65.1)

Other comprehensive (loss) income, net of tax before reclassifications												Other comprehensive (loss) income, net of tax before reclassifications	(16.5)		—		—		(0.2)		(16.7)
Reclassification from accumulated other comprehensive loss - Other, net												Reclassification from accumulated other comprehensive loss - Other, net	—		2.5		—		(0.8)		1.7
Tax benefit												Tax benefit	—		(0.2)		—		—		(0.2)
Net reclassifications												Net reclassifications	—		2.3		—		(0.8)		1.5
Net current period other comprehensive (loss) income												Net current period other comprehensive (loss) income	(16.5)		2.3		—		(1.0)		(15.2)
Balance at August 28, 2021												Balance at August 28, 2021	$	(20.4)	$	(48.1)	$	—	$	(11.8)	$	(80.3)

Balance at May 30, 2020	Balance at May 30, 2020	$	(56.0)	$	(59.2)	$	0.1	$	(18.9)	$	(134.0)	Balance at May 30, 2020	$	(56.0)	$	(59.2)	$	0.1	$	(18.9)	$	(134.0)

Other comprehensive income (loss), net of tax before reclassifications	Other comprehensive income (loss), net of tax before reclassifications	32.3		0		(0.1)		3.4		35.6		Other comprehensive income (loss), net of tax before reclassifications	27.5		—		(0.1)		1.4		28.8
Reclassification from accumulated other comprehensive loss - Other, net	Reclassification from accumulated other comprehensive loss - Other, net	0		3.0		0		(2.2)		0.8		Reclassification from accumulated other comprehensive loss - Other, net	—		1.4		—		(1.1)		0.3
Tax benefit	Tax benefit	0		(0.5)		0		0		(0.5)		Tax benefit	—		(0.2)		—		—		(0.2)
Net reclassifications	Net reclassifications	0		2.5		0		(2.2)		0.3		Net reclassifications	—		1.2		—		(1.1)		0.1
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	32.3		2.5		(0.1)		1.2		35.9		Net current period other comprehensive income (loss)	27.5		1.2		(0.1)		0.3		28.9
Balance at November 28, 2020		$	(23.7)	$	(56.7)	$	0	$	(17.7)	$	(98.1)

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

Other comprehensive income (loss), net of tax before reclassifications		4.4		0		0		(5.4)		(1.0)
Reclassification from accumulated other comprehensive loss - Other, net		0		1.7		0		0.1		1.8
Tax benefit		0		(0.3)		0		0		(0.3)
Net reclassifications		0		1.4		0		0.1		1.5
Net current period other comprehensive income (loss)		4.4		1.4		0		(5.3)		0.5
Balance at November 30, 2019		$	(43.9)	(43.6)		$	0	$	(6.2)	$	(93.7)
Balance at August 29, 2020												Balance at August 29, 2020	$	(28.5)	(58.0)		$	—	$	(18.6)	$	(105.1)

16. Operating Segments

Effective as of May 30, 2021, the beginning of fiscal year 2022, the Company implemented an organizational change that resulted in a change in the reportable segments. The ~~Company's~~Company has restated historical results to reflect this change. Below is a summary of the change in reportable ~~segments consist~~segments.

•The activities related to the manufacture and sale of furniture products direct to consumers and to third-party retailers that previously resided within the International Contract segment moved to the Global Retail segment.

•The operations associated with the design, manufacture and sale of furniture products for work-related settings in Latin America moved from the International Contract segment to the North America Contract ~~International~~segment to form a new Americas Contract segment.

•Operations of the DWR Contract business, a division of DWR that sells design furnishings and ~~Retail.~~accessories for use in work-related settings moved into the Americas Contract segment.

The ~~North America~~Company's reportable segments now consist of Americas Contract, International Contract, Global Retail, and Knoll. Intersegment sales are eliminated within each segment, with the exception of sales to and from the Knoll segment, which are presented as intersegment eliminations.

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

22 Form 10-Q

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~~Europe, the Middle East and Africa ("EMEA") and Asia-Pacific.

The Global 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 ~~e-commerce, direct mailing~~eCommerce, direct-mail catalogs, DWR studios and HAY stores.

The Knoll segment includes the global operations associated with the design, manufacture, and sale of furniture products within the Knoll constellation of brands.

Intersegment sales are eliminated within each segment, with the exception of sales to and from the Knoll segment, which are presented as intersegment eliminations.

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 operating segments are the same as those of the Company.

22 ~~Form 10-Q~~

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


		Three Months Ended				Six Months Ended					Three Months Ended
(In millions)	(In millions)	November 28, 2020		November 30, 2019		November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020
Net Sales:	Net Sales:									Net Sales:
North America Contract		$	323.1	$	450.6	$	661.9	$	909.3
Americas Contract										Americas Contract	$	325.3	$	370.1
International Contract	International Contract	168.1		118.2		321.7		232.0		International Contract	99.0		94.0
Retail		135.1		105.4		269.4		203.9
Global Retail										Global Retail	212.6		162.7
Knoll										Knoll	156.4		—
Intersegment Eliminations										Intersegment Eliminations	(3.6)		—
Total	Total	$	626.3	$	674.2	$	1,253.0	$	1,345.2	Total	$	789.7	$	626.8

Operating Earnings (Loss):	Operating Earnings (Loss):									Operating Earnings (Loss):
North America Contract		$	35.6	$	62.5	$	87.4	$	125.4
Americas Contract										Americas Contract	$	10.5	$	57.9
International Contract	International Contract	23.4		12.8		48.4		25.9		International Contract	11.3		16.2
Retail		22.6		(0.9)		51.8		(4.9)
Global Retail										Global Retail	27.8		31.5
Knoll										Knoll	(53.6)		—
Corporate	Corporate	(10.6)		(12.0)		(21.2)		(23.8)		Corporate	(48.8)		(10.2)
Total	Total	$	71.0	$	62.4	$	166.4	$	122.6	Total	$	(52.8)	$	95.4

(In millions) November 28, 2020 May 30, 2020
Total Assets:
North America Contract $ 760.9 $ 769.5
International Contract 558.8 512.5
Retail 323.7 310.9
Corporate 385.1 461.0
Total $ 2,028.5 $ 2,053.9
Many of the Company's assets, including manufacturing, office and showroom facilities, support multiple segments. For that reason, it is impractical to disclose asset information on a segment basis.

17. Restructuring and Integration Expense

As part of restructuring and integration activities the Company has incurred expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs as well as other direct separation benefit costs. Severance and employee benefit costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense. The Company also incurs expenses that are an integral component of, and directly attribute to, our restructuring and integration activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include integration implementation costs that relate primarily to professional fees and non-cash losses incurred on debt extinguishment.

Herman Miller, Inc. and Subsidiaries 23

The expense associated with integration initiatives are included in Selling, general and administrative and the expense associated with restructuring activities are included in Restructuring expense in the Condensed Consolidated Statements of Comprehensive Income. Non-cash costs related to debt extinguishment in the financing of the transaction is recorded in Other expense (income), net in the Condensed Consolidated Statements of Comprehensive Income.

Knoll Integration:

Following the Knoll merger the Company announced a multi-year program (the "Knoll Integration") designed to reduce costs, integrate and optimize the combined organization. The Company currently expects that the Knoll Integration will result in pre-tax costs that are expected not to exceed approximately $100 million, comprised of the following categories:

•Severance and employee benefit costs associated with plans to integrate our operating structure, resulting in workforce reductions. These costs will primarily include: severance and employee benefits (cash severance, non-cash severance, including accelerated stock-compensation award expense and other termination benefits).

•Exit and disposal activities include those incurred as a direct result of integration activities, primarily including contract and lease terminations.

•Other integration costs include professional fees and other incremental third-party expenses, including a loss on extinguishment of debt associated with financing of the merger.

For the three months ended August 28, 2021, we have incurred $55.6 million of costs related to the Knoll Integration including: $30.5 million of severance and employee benefit costs, $13.4 million of non-cash costs related to debt-extinguishment in the financing of the transaction, and $11.7 million of other integration costs.

The following table provides an analysis of the changes in liability balance for Knoll Integration costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and exit and disposal activities) for the three months ended August 28, 2021:


(In millions)	Severance and Employee Benefit		Exit and Disposal Activities		Total
May 29, 2021	$	—	$	—	$	—
Integration Costs	30.5		—		30.5
Amounts Paid	(14.9)		—		(14.9)
Non-cash costs	(10.4)		—		(10.4)
August 28, 2021	$	5.2	$	—	$	5.2

The Company's expects that a substantial portion of the liability for the Knoll Integration as of August 28, 2021 to be paid in fiscal year 2022.

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


	Three Months Ended
(In millions)	August 28, 2021		August 29, 2020
Americas Contract	$	1.0	$	—
International Contract	—		—
Retail	—		—
Knoll	29.4		—
Corporate	25.2		—
Total	$	55.6	$	—

Restructuring Activities:

24 Form 10-Q

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. To date, the Company recognized restructuring and impairment expenses of $5.9 million, with a net credit of $1.9 million recognized ~~to-date~~ in fiscal 2021 and the remainder in fiscal 2020, 2019 and 2018. These expenses related to the facilities consolidation plan, comprised primarily of an asset impairment recorded against an office building in the United Kingdom that was vacated and the consolidation of the Company's manufacturing facilities in China. No future restructuring costs related to the plan are expected as the plan is substantially complete.

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. The office building and related assets in the United Kingdom were sold in the second quarter of fiscal 2021, resulting in a nominal gain. Both of these gains are included within "Restructuring expense" in the Condensed Consolidated Statements of Comprehensive Income.

In the second quarter of fiscal 2020, the ~~North America~~Americas 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. These restructuring costs relate to potential partial outsourcing and in-sourcing strategies, long-lived asset ~~impairments and employee-related costs.~~ To date, the Company has recorded approximately $3.1 million in pre-tax restructuring expense related to this plan, with a net credit of $0.1 million recognized in fiscal 2021 and the remainder in fiscal 2020. The plan is ~~expected~~ complete and no future costs related to ~~be completed in fiscal 2021.~~this plan are expected.

In the second quarter of fiscal 2020, the Company initiated a reorganization of the Global Sales and Product teams. The reorganization activities occurred primarily in the North America business with additional costs incurred ~~Internationally.~~internationally. To date, the Company has recorded a total of $2.6 million in pre-tax restructuring expense related to this plan. The reorganization is complete and no future costs related to this plan are expected.

~~Herman Miller, Inc. and Subsidiaries~~ 23

~~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 $2.2 million related to the plan. No~~ ~~future restructuring costs related to the plan are expected as the plan is complete.~~

The following table provides an analysis of the changes in the restructuring costs reserve for the above plans for the ~~six~~three months ended ~~November~~August 28, ~~2020:~~2021:

(In millions) Severance and Employee-Related Exit or Disposal Activities Total
May 30, 2020 $ 5.9 $ 0.8 $ 6.7
Restructuring Costs 0.1 (2.0) $ (1.9)
Amounts Paid (2.1) (0.1) $ (2.2)
Other* $ — $ 3.4 $ 3.4
November 28, 2020 $ 3.9 $ 2.1 $ 6.0

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


(In millions)	Severance and Employee-Related		Exit or Disposal Activities		Total
May 29, 2021	$	0.9	$	0.6	$	1.5
Restructuring Costs	—		—		—
Amounts Paid	(0.3)		—		(0.3)

August 28, 2021	$	0.6	$	0.6	$	1.2

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 ~~$18.3~~$18.7 million with ~~$3.1~~$3.4 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 remaining amounts will be paid in fiscal ~~2021.~~2022.

The following table provides an analysis of the changes in the restructuring cost reserve for the ~~six~~May 2020 restructuring plan for the three months ended ~~November~~August 28, ~~2020:~~2021:


(In millions)	Severance and Employee-Related
May ~~30, 2020~~29, 2021	$	~~15.3~~1.0
Restructuring Costs	~~3.1~~—
Amounts Paid	~~(16.0)~~(0.5)
~~November~~August 28, ~~2020~~2021	$	~~2.4~~0.5

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

Three Months Ended Six Months Ended
(In millions) November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
North America Contract $ 0.8 $ 3.8 $ 2.4 $ 5.5
International Contract 1.6 0.4 (1.2) 0.6
Total $ 2.4 $ 4.2 $ 1.2 $ 6.1

Herman Miller, Inc. and Subsidiaries 25


	Three Months Ended
(In millions)	August 28, 2021		August 29, 2020
Americas Contract	$	—	$	1.6
International Contract	—		(2.8)
Retail	—		—
Knoll	—		—

Total	$	—	$	(1.2)

18. Variable Interest Entities

The Company ~~has~~previously held a long-term ~~notes~~note receivable with a third-party ~~owned~~ dealer that ~~are~~was deemed to be a variable ~~interests~~interest in a variable interest entity. The carrying value of ~~these~~this long-term ~~notes~~note receivable was ~~$1.3 million and $1.5~~$1.2 million as of ~~November~~May 29, 2021 and was paid in full during the quarter ended August 28, ~~2020 and May 30, 2020, respectively, and represents the Company’s maximum exposure to loss.~~2021. The Company iswas 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.

2426 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 May ~~30, 2020.~~29, 2021. 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, architects and designers, and the Company's ~~e-commerce~~eCommerce platforms. The following is a summary of results for the three months ended ~~November~~August 28, ~~2020:~~2021:

•Net sales were ~~$626.3~~$789.7 million and orders were ~~$629.7~~$916.5 million, representing ~~a decrease~~an increase of ~~7.1%~~26.0% and ~~6.7%~~64.8%, respectively, when compared to the same quarter of the prior year. The ~~decrease~~increase in net sales was driven ~~primarily~~by the consolidation of Knoll results from the date of acquisition of July 19, 2021, as well as growth in both the Global Retail and International Contract segments, as compared to the same quarter of the prior year. This sales volume growth was offset in part by decreased ~~sales volumes~~volume in the ~~North America~~Americas Contract ~~segment, partially offset by increased demand within the Retail segment and the acquisitions of HAY and naughtone.~~segment. On an organic basis, which excludes the impact of acquisitions and foreign currency translation, net sales were ~~$573.5~~$629.6 million(*) and orders were ~~$572.2~~$747.9 million(*) , representing a decrease of ~~14.9%~~0.4%(*) and ~~15.2%~~34.5%(*) , respectively, when compared to the same quarter of the prior year.

•Gross margin was ~~39.0%~~35.1% as compared to ~~37.9%~~39.9% for the same quarter of the prior year. In the current year, this included the negative impact of charges totaling $6.3 million related to the initial purchase accounting effects of the Company's acquisition of Knoll. The ~~increase~~decrease in gross margin was also driven ~~primarily~~ by ~~favorable channel~~commodity cost pressures as well as rising labor and ~~product sales mix partially offset by lower overhead leverage due to decreased volumes.~~freight expenses.

•Operating expenses ~~decreased~~increased by ~~$19.9~~$175.7 million or ~~10.3%~~113.6% as compared to the same quarter of the prior year. ~~The decrease~~Operating expenses in the current quarter included $69 million of transaction and integration related costs associated with the Knoll acquisition and $26.2 million(*) of charges related to the initial purchase accounting effects of the merger. After excluding the impact of purchase accounting amortization and the transaction and integration related costs, the addition of Knoll increased operating expenses ~~was driven primarily~~ by ~~lower compensation and benefit costs, lower marketing and selling costs, and lower travel costs.~~$49.1 million.

•The effective tax rate was ~~23.5%~~15.3% compared to ~~14.3%~~22.0% for the same quarter of the prior year. ~~The same period in the prior year included a non-taxable gain on consolidation of an equity method investment which is the primary driver of the year over year increase in the effective tax rate.~~

•Diluted ~~earnings~~loss per share ~~were $0.87,~~was $(0.93), a ~~34.1%~~175.0% decrease as compared to the prior year. Excluding ~~restructuring expenses~~transaction and ~~other special charges,~~integration related costs, the amortization of purchased intangible assets, and a loss on the extinguishment of debt, adjusted diluted earnings per share ~~were $0.89~~was $0.49(*), a ~~1.1% increase~~60.5%(*) decrease as compared to prior year adjusted diluted earnings per share.

(*) Non-GAAP measurements; see accompanying reconciliations and ~~explanations.~~explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

Herman Miller, Inc. and Subsidiaries 27

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

•The Company's Retail segment supports a range of furniture categories aimed at the home environment. Several of these categories, including Upholstery, Outdoor, Storage, and Accessories, saw a ramp-up in demand during the first quarter of fiscal 2021 and this continued into the second quarter of fiscal 2021.

•The disruption from the COVID-19 pandemic adversely impacted the results of our second quarter as industry order trends, as reported by the Business and Institutional Furniture Manufacturers Association ("BIFMA"), have highlighted near-term demand pressures from the slowdown in economic activity from the pandemic in

~~Herman Miller, Inc. and Subsidiaries~~ 25

~~our North America Contract segment. Our International Contract segment has also been impacted, though many of the markets internationally have shown signs of faster economic recovery.~~

•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 uncertainty in key markets, particularly the U.K., continental Europe and China, which, if unresolved in the near term, could negatively impact customer demand.

•The Company continues to navigate the impact of global tariffs. The Company 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 financial performance is sensitive to changes in certain input costs, including steel and steel component parts. The market price of steel in the ~~second~~first quarter of fiscal ~~2021~~2022 was ~~lower~~higher than the same period of the prior year and ~~favorably~~negatively impacted consolidated results on a year-over-year basis. ~~However, the~~The price of steel ~~increased towards the end of the quarter~~continues to increase and ~~has the potential~~is expected to unfavorably impact consolidated gross margin in fiscal 2022. Ongoing cost reduction initiatives and price increases in the first and second ~~half~~quarters of fiscal ~~2021.~~2022 are expected to help offset these pressures over time.

•The Company has experienced operational challenges within its production facilities and supply networks. Broad-based shortages of production labor and rising material and freight expenses negatively impacted net sales and gross margins during the quarter.

•The Company's Global Retail segment supports a range of furniture categories aimed at the home environment. Several of these categories, including Upholstery, Workplace Furnishings, Storage, and Accessories, saw a ramp-up in demand during fiscal 2021 that has continued in the first quarter of fiscal 2022.

•Following several quarters of industry-wide declines in order volume within the North America contract furniture industry, we saw a rebound in activity this quarter driven by the implementation of initial return-to-office plans for many businesses. In addition, demand levels in the contract business outside North America continued to improve in the quarter relative to prior year levels.

The remaining sections within Item 2 include additional analysis of the three ~~and six~~ months ended ~~November~~August 28, ~~2020,~~2021, including discussion of significant variances compared to the prior year periods.

COVID-19 Update

The Company continues to respond to the challenges brought about by the COVID-19 pandemic. Workplace restrictions are regionally applied based on the recommendations of local government and health authorities. While demand for the Company's products and services, particularly in the Contract channel of the business, has been adversely impacted, our multi-channel go-to-market approach has enabled us to serve customers where, and how, they need to be served. In addition, the investments we’ve made in people, technology, and products ~~has~~have positioned us well to capitalize on emerging opportunities as our customers' needs have changed ~~quickly at the onset of~~throughout the COVID-19 crisis. This has allowed ~~for~~ our Retail business to take advantage of the unanticipated emerging work-from-home trend as well as "home is my castle" trends as consumers are focusing on and upgrading their broader home environments. Despite this, the ~~extent of the geographic spread and~~ duration of this virus, the impact on our supply chain, future demand for our products, and related ~~financial impact cannot be estimated at this time~~impacts remain difficult to estimate with any degree of certainty.

Employee Safety and Health

The health and well-being of employees remains top of mind. We ~~are taking~~continue to take a regional approach to restrictions based on active COVID-19 case levels and recommendations from local health ~~authority recommendations.~~authorities. Contact tracing is active in all regions to help track and control the spread of the virus. We also continue to employ a variety of other safety measures including domestic and international travel restrictions, extensive cleaning protocols, temperature and health screenings, personal protective equipment, and visitor safety guidelines. We continue to encourage vaccinations with our employees and are awaiting direction from the U.S. agencies on the recently announced proposed requirements for mandatory vaccines or weekly proof of negative COVID tests.

Customer Focus

The digital investments we’ve made allowed us to pivot quickly and capitalize on a new set of opportunities when our customers’ purchasing behaviors changed. These investments include a reimagined Design Within Reach ~~website,~~and Herman Miller websites, a Work from Home landing page on Herman Miller’s website, a Work from Home online assessment tool, and new digital platforms that are creating greater efficiencies for contract and dealer audiences. ~~Perhaps most notable~~The latest in a series of innovative solutions designed to accelerate growth in the Contract business is Herman Miller Professional – a digital ecosystem designed to meet customer demand for a simple and efficient design and product specification

28 Form 10-Q

solution. Herman Miller Professional will deliver seamless online experiences to small- and medium sized businesses, a segment that has historically been underserved by the traditional contract furniture model, while also helping our dealers capture new clients and revenue. Businesses will be able to design their spaces with product from the Herman Miller family of brands, leverage an online quoting and purchasing process to complete their order, and select from several delivery options, including white glove service where appropriate.

Knoll saw strong order growth bolstered by the one-year anniversary of Knoll’s eCommerce platform and the recent consolidation of Muuto into the Knoll distribution systems to simplify the order process for dealers and customers. In July, Holly Hunt introduced enhanced website functionality with an in-stock, to-the-trade, online eCommerce site. Further expansion of the site later this year will add textiles, leather, and wall coverings to the offer. Fully also introduced a new European eCommerce storefront in the quarter ~~our~~and saw its commercial business begin to rebound in the second half of the quarter.

Our first Herman Miller retail seating concept stores ~~opened~~are open in Los Angeles, ~~and~~ New York ~~City.~~Hudson Yards, Tokyo, Austin, Chicago Fulton Market, Century City Los Angeles and Greenwich, CT. In the early days, these stores have exceeded our initial revenue and operating profit expectations as we seek to educate customers about the health benefits of ergonomic seating.

We ~~are~~remain uniquely positioned to serve our customers through multiple channels with the most comprehensive portfolio of products in the industry. As our customers develop their post-pandemic work plans, there is a notable shift to work being done from a number of places, with the office as a destination – a place where employees want to be rather than are required to be. We are ~~confident in~~ready to capture the many opportunities caused by this shift as our ~~ability to partner with them to solve for the next generation workplace by providing authentic modern designs for~~commercial customers rethink their real estate portfolios, redesign their workplaces, and ~~their homes.~~seek to provide healthy and productive home work environments.

26 ~~Form 10-Q~~

Manufacturing and Retail Operations

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

~~Cost Reductions~~

In fiscal 2020, the Company implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. In fiscal 2021, the Company, together with its Board of Directors, made the decision to move forward with several restorative actions. This included eliminating the 10% reduction in compensation, the introduction of a modified bonus program and re-establishing a quarterly cash dividend program. In addition, the Company has elected to reinstate the previously suspended retirement plan contributions starting in the fourth quarter of fiscal 2021. The Company continues to tightly control operating expenses in the face of lingering economic uncertainty.

Reconciliation of Non-GAAP Financial Measures

This report contains ~~references to organic net sales and adjusted earnings per share - diluted, which are~~ non-GAAP financial measures. Organic growth (decline) represents the change in net sales, excluding currency translation effects and the impact of acquisitions. Adjusted earnings per share represents reported diluted earnings per share excluding the impact from adjustments related to restructuring expenses and other special charges or gains, including related taxes. Restructuring expenses 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.

The Company believes presenting organic net sales and 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 itemsmeasures that are not ~~representative of the ongoing operations of the Company.~~

~~Organic net sales~~in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and ~~adjusted earnings per share - diluted~~may be different from non-GAAP measures presented by other companies. These non-GAAP financial measures are not measurements of our financial performance under GAAP and should not be considered ~~as alternatives~~an alternative to the related GAAP measurement. These non-GAAP ~~measurements~~measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence of our GAAP ~~results~~results. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and ~~using~~presented in accordance with GAAP are provided in the financial tables included within this report. The Company believes these non-GAAP measures are useful for investors as they provide financial information on a more comparative basis for the periods presented.

The non-GAAP financial measures ~~only~~referenced within this presentation include: Adjusted Earnings per Share and Organic Sales Growth (Decline).

Adjusted Earnings per Share represents reported diluted earnings per share excluding the impact from adjustments related to transaction and integration related charges, amortization of purchased intangibles, debt restructuring charges, restructuring expenses and other special charges or gains, including related taxes. These adjustments are described further below.

Herman Miller, Inc. and Subsidiaries 29

Organic Sales Growth represents the change in sales and orders, excluding currency translation effects and the impact of acquisitions.

Acquisition and Integration Charges: Costs related directly to the Knoll acquisition including legal, accounting and other professional fees as well as integration-related costs. Integration-related costs include severance, accelerated stock-based compensation expenses and other cost reduction efforts or reorganization initiatives.

Amortization of Purchased Intangibles: Includes expenses associated with the fair value adjustment to inventory and amortization of acquisition related intangibles acquired as part of the Knoll acquisition. The revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. We exclude the impact of the amortization of purchased intangibles, including the fair value adjustment to inventory, as such non-cash amounts were significantly impacted by the size of the Knoll acquisition. Furthermore, we believe that this adjustment enables better comparison of our results as Amortization of Purchased Intangibles will not recur in future periods once such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. Although we exclude the Amortization of Purchased Intangibles in these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

Debt Restructuring Charges: Includes expenses associated with the restructuring of debt as part of financing the Knoll acquisition. We excluded these items from our non-GAAP measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.

Restructuring expenses: Include actions involving facilities consolidation and optimization, targeted workforce reductions, and costs associated with an early retirement program.

Special charges: Include certain costs arising as a ~~supplement.~~direct result of COVID-19.

Tax Related Items: We excluded the income tax benefit/provision effect of the tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.

30 Form 10-Q

The following tables reconcile net sales to organic net sales for the periods ended as indicated below:

Three Months Ended Three Months Ended
November 28, 2020 November 30, 2019
North America International Retail Total North America International Retail Total
Net sales, as reported $ 323.1 $ 168.1 $ 135.1 $ 626.3 $ 450.6 $ 118.2 $ 105.4 $ 674.2
% change from PY (28.3) % 42.2 % 28.2 % (7.1) %
Proforma Adjustments
Acquisitions (3.5) (47.8) — (51.3) — — — —
Currency translation effects (1)
(0.1) (1.4) — (1.5) — — — —
Net sales, organic $ 319.5 $ 118.9 $ 135.1 $ 573.5 $ 450.6 $ 118.2 $ 105.4 $ 674.2
% change from PY (29.1) % 0.6 % 28.2 % (14.9) %

~~Herman Miller, Inc. and Subsidiaries~~ 27

Six Months Ended Six Months Ended
November 28, 2020 November 30, 2019
North America International Retail Total North America International Retail Total
Net sales, as reported $ 661.9 $ 321.7 $ 269.4 $ 1,253.0 $ 909.3 $ 232.0 $ 203.9 $ 1,345.2
% change from PY (27.2) % 38.7 % 32.1 % (6.9) %
Proforma Adjustments
Acquisitions (10.6) (87.3) — (97.9) — — — —
Currency translation effects (1)
0.2 (0.3) — (0.1) — — — —
Net sales, organic $ 651.5 $ 234.1 $ 269.4 $ 1,155.0 $ 909.3 $ 232.0 $ 203.9 $ 1,345.2
% change from PY (28.4) % 0.9 % 32.1 % (14.1) %
(1) Currency translation effects represent the estimated net impact of translating current period sales and orders using the average exchange rates applicable to the comparable prior year period.




	Three Months Ended
	August 28, 2021
	Americas			International			Retail			Knoll		Intersegment Elimination		Total
Net Sales, as reported	$	325.3		$	99.0		$	212.6		$	156.4	$	(3.6)	$	789.7
% change from PY	(12.1)		%	5.3		%	30.7		%	N/A		N/A		26.0		%

Adjustments
Acquisitions	—			—			—			$	(156.4)	3.6		(152.8)

Currency Translation Effects (1)	(0.8)			(4.7)			(1.8)			—				(7.3)
Net Sales, organic	$	324.5		$	94.3		$	210.8		$	—	$	—	$	629.6
% change from PY	(12.3)		%	0.3		%	29.6		%	N/A		N/A		0.4		%

	Three Months Ended
	August 29, 2020
	Americas			International			Retail			Knoll		Intersegment Elimination		Total
Net Sales, as reported	$	370.1		$	94.0		$	162.7		$	—	$	—	$	626.8
(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 per share - diluted to adjusted earnings per share - diluted for the three ~~and six~~ months ended:

Three Months Ended Six Months Ended
November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Earnings per share - diluted $ 0.87 $ 1.32 $ 2.10 $ 2.14
Less: Gain on consolidation of equity method investment — (0.51) — (0.51)
Add: Special charges, after tax — 0.02 0.01 0.02
Add: Restructuring expenses, after tax 0.02 0.05 0.02 0.07
Adjusted earnings per share - diluted $ 0.89 $ 0.88 $ 2.13 $ 1.72
Weighted average shares outstanding (used for calculating adjusted earnings per share) – diluted 59,267,398 59,402,001 59,043,928 59,318,982
Note: The adjustments above are net of tax. For the three and six months ended November 28, 2020 and November 30, 2019, the tax impact of the adjustments were immaterial.


	Three Months Ended
	August 28, 2021		August 29, 2020
(Loss) Earnings per Share - Diluted	$	(0.93)	$	1.24






Non-comparable items:
Add: Special charges, after tax	—		0.01

Add: Amortization of purchased intangibles, after tax	0.37		—
Add: Acquisition and integration charges, after tax	0.90		—
Add: Debt extinguishment, after tax	0.15		—
Add: Restructuring expenses, after tax	—		(0.01)
Adjusted Earnings per Share - Diluted	$	0.49	$	1.24
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted	66,302,214		58,964,268
Note: The adjustments above are net of tax. For the three months ended August 28, 2021, the tax impact of the adjustments was $0.30. For the three months ended August 29, 2020, the tax impact of the adjustments was immaterial.

28 Herman Miller, Inc. and Subsidiaries~~Form 10-Q~~ 31

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

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


		Three Months Ended						Six Months Ended							Three Months Ended
(In millions, except per share data)		November 28, 2020		November 30, 2019		% Change		November 28, 2020		November 30, 2019		% Change
(In millions, except share data)														(In millions, except share data)	August 28, 2021		August 29, 2020		% Change

Net sales	Net sales	$	626.3	$	674.2	(7.1)	%	$	1,253.0	$	1,345.2	(6.9)	%	Net sales	$	789.7	$	626.8	26.0	%
Cost of sales	Cost of sales	382.1		418.7		(8.7)	%	758.8		843.6		(10.1)	%	Cost of sales	512.2		376.8		35.9	%
Gross margin	Gross margin	244.2		255.5		(4.4)	%	494.2		501.6		(1.5)	%	Gross margin	277.5		250.0		11.0	%
Operating expenses	Operating expenses	173.2		193.1		(10.3)	%	327.8		379.0		(13.5)	%	Operating expenses	330.3		154.6		113.6	%
Operating earnings		71.0		62.4		13.8	%	166.4		122.6		35.7	%
Gain on consolidation of equity method investment		—		30.5		n/a		—		30.5		n/a
Operating (loss) earnings														Operating (loss) earnings	(52.8)		95.4		(155.3)	%

Other expenses, net	Other expenses, net	2.2		2.6		(15.4)	%	3.7		4.7		(21.3)	%	Other expenses, net	18.0		1.6		1,025.0	%
Earnings before income taxes and equity income		68.8		90.3		(23.8)	%	162.7		148.4		9.6	%
(Loss) Earnings before income taxes and equity income														(Loss) Earnings before income taxes and equity income	(70.8)		93.8		(175.5)	%
Income tax expense	Income tax expense	16.2		12.9		25.6	%	36.9		25.2		46.4	%	Income tax expense	(10.8)		20.6		(152.4)	%
Equity income from nonconsolidated affiliates, net of tax	Equity income from nonconsolidated affiliates, net of tax	0.2		1.2		(83.3)	%	0.4		3.4		(88.2)	%	Equity income from nonconsolidated affiliates, net of tax	0.1		0.2		(50.0)	%
Net earnings		52.8		78.6		(32.8)	%	126.2		126.6		(0.3)	%
Net earnings (loss) attributable to redeemable noncontrolling interests		1.5		—		n/a		2.0		(0.2)		n/a
Net earnings attributable to Herman Miller, Inc.		$	51.3	$	78.6	(34.7)	%	$	124.2	$	126.8	(2.1)	%
Earnings per share — diluted		$	0.87	$	1.32	(34.1)	%	$	2.10	$	2.14	(1.9)	%
Net (loss) earnings														Net (loss) earnings	(59.9)		73.4		(181.6)	%
Net earnings attributable to redeemable noncontrolling interests														Net earnings attributable to redeemable noncontrolling interests	1.6		0.4		n/a
Net (loss) earnings attributable to Herman Miller, Inc.														Net (loss) earnings attributable to Herman Miller, Inc.	$	(61.5)	$	73.0	(184.2)	%
(Loss) Earnings per share — diluted														(Loss) Earnings per share — diluted	$	(0.93)	$	1.24	(175.0)	%
Orders	Orders	$	629.7	$	674.9	(6.7)	%	$	1,185.7	$	1,351.6	(12.3)	%	Orders	$	916.5	$	556.0	64.8	%
Backlog	Backlog	$	403.4	$	400.6	0.7	%							Backlog	$	835.9	$	400.0	109.0	%

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 six~~ months ended:

Three Months Ended Six Months Ended
November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 61.0 62.1 60.6 62.7
Gross margin 39.0 37.9 39.4 37.3
Operating expenses 27.7 28.6 26.2 28.2
Operating earnings 11.3 9.3 13.3 9.1
Gain on consolidation of equity method investment — 4.5 — 2.3
Other expenses, net 0.4 0.4 0.3 0.3
Earnings before income taxes and equity income 11.0 13.4 13.0 11.0
Income tax expense 2.6 1.9 2.9 1.9
Equity income from nonconsolidated affiliates, net of tax — 0.2 — 0.3
Net earnings 8.4 11.7 10.1 9.4
Net earnings (loss) attributable to redeemable noncontrolling interests 0.2 — 0.2 —
Net earnings attributable to Herman Miller, Inc. 8.2 11.7 9.9 9.4


	Three Months Ended
	August 28, 2021		August 29, 2020
Net sales	100.0	%	100.0	%
Cost of sales	64.9		60.1
Gross margin	35.1		39.9
Operating expenses	41.8		24.7
Operating (loss) earnings	(6.7)		15.2

Other expenses, net	2.3		0.3
(Loss) Earnings before income taxes and equity income	(9.0)		15.0
Income tax (benefit) expense	(1.4)		3.3

Net (loss) earnings	(7.6)		11.7
Net earnings attributable to redeemable noncontrolling interests	0.2		0.1
Net (loss) earnings attributable to Herman Miller, Inc.	(7.8)		11.6

~~Herman Miller, Inc. and Subsidiaries~~ 29

Net Sales

The following charts present graphically the primary drivers of the year-over-year change in net sales for the three ~~and six~~ months ended ~~November~~August 28, ~~2020.~~2021. The amounts presented in the graphs are expressed in millions and have been rounded.

32 Form 10-Q

Net sales ~~decreased $47.9~~increased $162.9 million or ~~7.1%~~26.0% in the ~~second~~first quarter of fiscal ~~2021~~2022 compared to the ~~second~~first quarter of fiscal ~~2020.~~2021. The following items contributed to the change:

•Increase of approximately ~~$51~~$153 million due to the ~~acquisitions~~acquisition of ~~HAY and naughtone.~~Knoll.

•Increased sales volumes within the Global Retail segment of approximately ~~$28~~$45 million which were ~~driven primarily by increased demand within the segment's e-commerce channel.~~broad based across each Global Retail brand and geography.

•Foreign currency translation had a positive impact on net sales of approximately $2$7 million.

•Decreased sales volumes within the ~~North America~~Americas Contract ("~~NAC"~~Americas") segment of approximately ~~$129~~$46 million, primarily due to ~~the impact~~continued impacts of the outbreak of COVID-19.

~~Net sales decreased $92.2 million or 6.9% in the first six months of fiscal 2021 compared to the first six months of fiscal 2020. The following items led to the change:~~

•~~Increase of approximately $98 million due to the acquisitions of HAY and naughtone.~~

•~~Increased sales volumes within the Retail segment of approximately $62 million which were driven primarily by increased demand within the segment's e-commerce channel.~~

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

•~~Decreased sales volumes within the NAC segment of approximately $264 million, primarily due to the impact of the outbreak of COVID-19.~~

Gross Margin

Gross margin was ~~39.0%~~35.1% in the ~~second~~first quarter of fiscal ~~2021~~2022 as compared to ~~37.9%~~39.9% in the ~~second~~first quarter of fiscal ~~2020.~~2021. The following factors summarize the major drivers of the year-over-year change in gross margin percentage:

•~~Favorable channel~~Cost pressures from commodities, freight and product ~~sales~~distribution costs had a negative impact on gross margin of approximately 360 basis points.

•Increased labor costs, including the impact of benefits reinstated at the end of the last fiscal year, had a negative impact on margin of approximately 110 basis points.

•Amortization of purchased intangibles related to the Knoll acquisition had a negative impact on gross margin of approximately 100 basis points.

•These factors were offset in part by favorable channel mix, ~~combined with lower commodity costs~~which increased gross margin by approximately ~~200 basis points.~~

•~~Lower overhead leverage decreased gross margin by approximately 90 basis points.~~

Gross margin was 39.4% for the six month period ended November 28, 2020 as compared to 37.3% 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:

•~~Strong channel mix increased gross margin by approximately 150 basis points.~~

30 ~~Form 10-Q~~

•~~Product mix, material performance and ongoing profitability improvement efforts increased gross margin by approximately 50 basis points.~~

•~~Incremental list price increases, net of price discounting, increased gross margin by approximately 40 basis points.~~

•~~Lower overhead leverage decreased gross margin by approximately 30~~100 basis points.

Operating Expenses

The following charts present graphically the primary drivers of the year-over-year change in operating expenses for the three ~~and six~~ months ended ~~November~~August 28, ~~2020.~~2021. The amounts presented in the graphs are expressed in millions and have been rounded.

Herman Miller, Inc. and Subsidiaries 3133

Operating expenses ~~decreased~~increased by ~~$19.9~~$175.7 million or ~~10.3%~~113.6% in the ~~second~~first quarter of fiscal ~~2021~~2022 compared to the prior year period. The following factors contributed to the change:

•~~Lower marketing~~The acquisition of Knoll during the quarter had the following impact on Operating Expenses as compared to the prior year.

◦$27 million of transaction related costs recorded in the quarter

◦$42 million of integration related costs, which include severance and ~~selling~~related charges for employee separations

◦Knoll operating expenses in the quarter, excluding integration related costs ~~of approximately $10~~incurred by Knoll, contributed $49 million ~~primarily within~~to the ~~North America Contract and Retail segments.~~increase as compared to the same quarter in the prior year

•Compensation and benefit costs ~~decreased~~increased approximately $7$10 million as compared to the same period in the prior year due to ~~lower headcount associated with~~ the ~~reduction in workforce actions initiated in the fourth quarter of fiscal 2020 and the temporary suspension~~return of certain employee ~~benefits.~~benefits that were temporarily suspended during the first quarter of the prior year to mitigate the financial impacts of the COVID-19 pandemic.

•~~Travel~~Studio costs ~~were~~increased approximately $3$8 million ~~lower due to decreased travel as a result of COVID-19.~~driven by increased lease expense within the Global Retail segment.

•~~Restructuring expenses and special charges decreased approximately $3 million.~~

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

•~~Warranty costs decreased approximately $3 million.~~

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

~~Operating expenses decreased by $51.2 million or 13.5% in the first six months of fiscal 2021 compared to the prior year period. The following factors contributed to the change:~~

•~~Lower~~Increased marketing and selling costs of approximately ~~$23~~$6 million, ~~primarily within~~driven by both the ~~North America Contract~~Global Retail and ~~Retail~~Americas segments.

•Compensation and benefit costs decreased approximately $23 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 first quarter of the year.

•~~Travel costs were approximately $9 million lower due to decreased travel as a result of COVID-19.~~

•~~Restructuring expenses and special charges decreased approximately $5 million.~~

•~~Lower studio costs of approximately $5 million driven by lower lease expense.~~

•~~Warranty costs decreased approximately $4 million.~~

•~~The acquisition of HAY and naughtone increased operating expenses by approximately $23 million.~~

Other Income/Expense

During the three months ended ~~November~~August 28, ~~2020,~~2021, net other expense was ~~$2.2~~$18.0 million. This compares to net other income of $1.6 million ~~a decrease~~in the same period of ~~$0.4~~the prior year, representing an unfavorable change of $19.6 million. A loss on extinguishment of debt of approximately $13.4 million, which represented the premium on early redemption as well as increased interest expense of $5.6 million, related to higher levels of debt taken to finance the acquisition of Knoll, contributed to the increased expense as compared to the same ~~period~~quarter in the prior year. ~~During the six months ended November 28, 2020, net other expense was $3.7 million, a decrease of $1.0 million compared to the same period in the prior year.~~

Other income/expense in the three and six months ended November 30, 2019 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 of fiscal 2020 and as a result, was required to adjust the value of the initial investment to fair value, resulting in a non-taxable gain.

Income Taxes

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

3234 Form 10-Q

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 segments identified by the Company ~~include North America~~are Americas Contract, International Contract, Global Retail, and ~~Corporate.~~Knoll. Unallocated expenses are reported within the Corporate category. 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 segments during the three ~~and six~~ month ~~periods~~period ended ~~November~~August 28, ~~2020.~~2021. This is followed by a discussion of the Company's results, by reportable segment. The amounts presented in the charts are in millions and have been rounded.

Herman Miller, Inc. and Subsidiaries 3335

~~North America~~Americas Contract ("~~North America"~~Americas")


		Three Months Ended									Six Months Ended										Three Months Ended
(Dollars in millions)	(Dollars in millions)	November 28, 2020			November 30, 2019			Change			November 28, 2020			November 30, 2019			Change			(Dollars in millions)	August 28, 2021			August 29, 2020			Change
Net sales	Net sales	$	323.1		$	450.6		$	(127.5)		$	661.9		$	909.3		$	(247.4)		Net sales	$	325.3		$	370.1		$	(44.8)
Gross margin	Gross margin	116.2			169.3			(53.1)			245.2			337.0			(91.8)			Gross margin	100.1			139.0			(38.9)
Gross margin %	Gross margin %	36.0		%	37.6		%	(1.6)		%	37.0		%	37.1		%	(0.1)		%	Gross margin %	30.8		%	37.6		%	(6.8)		%

Operating earnings	Operating earnings	35.6			62.5			(26.9)			87.4			125.4			(38.0)			Operating earnings	10.5			57.9			(47.4)
Operating earnings %	Operating earnings %	11.0		%	13.9		%	(2.9)		%	13.2		%	13.8		%	(0.6)		%	Operating earnings %	3.2		%	15.6		%	(12.4)		%

For the three month comparative period, net sales decreased ~~28.3%~~12.1%, or ~~29.1%~~12.3%(*) on an organic basis, over the prior year period due to:

•Decreased sales volumes within the ~~North America~~ segment of approximately ~~$129~~$45.3 million, primarily due to the ~~outbreak~~continued impact of ~~COVID-19;~~the COVID-19 pandemic; partially offset by

•~~Approximately $4~~The impact of foreign currency translation which increased sales by approximately $1 million.

For the three month comparative period, operating earnings decreased $47.4 million, or 81.9%, over the prior year period due to:

•Decreased gross margin of $38.9 million due to decreased sales volumes and a decrease in gross margin percentage of 680 basis points. The decrease in gross margin percentage was due primarily to the ~~acquisition~~impact of ~~naughtone.~~higher commodity, labor, freight and product distribution costs; and

•Increased operating expenses of $8.5 million driven primarily by increased compensation and benefit costs of approximately $4 million, increased marketing and selling expenses of approximately $2 million and increased expense related to new product development of $2 million.

(*) Non-GAAP measurements; see accompanying reconciliations and explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

36 Form 10-Q

International Contract ("International")


	Three Months Ended
(Dollars in millions)	August 28, 2021			August 29, 2020			Change
Net sales	$	99.0		$	94.0		$	5.0
Gross margin	33.7			33.3			0.4
Gross margin %	34.0		%	35.4		%	(1.4)		%


Operating earnings	11.3			16.2			(4.9)
Operating earnings %	11.4		%	17.2		%	(5.8)		%

For the ~~six~~three month comparative period, net sales ~~decreased 27.2%~~increased 5.3%, or ~~28.4%~~0.3%(*) on an organic basis, over the prior year period due to:

•~~Decreased~~Increased sales ~~volumes~~volume of approximately $4 million, driven primarily by growth within the ~~North America segment~~Europe region.

•The impact of foreign currency translation which increased sales by approximately ~~$264 million, primarily due to the outbreak of COVID-19;~~$5 million; partially offset by

•~~Incremental list price~~Price increases, net of ~~price~~incremental discounting, which reduced sales by $4 million. The impact of ~~approximately $5 million; and~~

•~~Approximately $11 million due to the acquisition~~discounting was driven by increased sales volume, as a percentage of ~~naughtone.~~total mix, from geographies with higher discounting.

For the three month comparative period, operating earnings decreased ~~$26.9~~$4.9 million, or ~~43.0%, over the prior year period due to:~~

•Decreased gross margin of $53.1 million due to decreased sales volumes and a decrease in gross margin percentage of 160 basis points. The decrease in gross margin percentage was due primarily to lower volume leverage due to the outbreak of COVID-19 described above, partially mitigated by improvements in material and labor performance; partially offset by

•Decreased operating expenses of $26.2 million driven primarily by lower marketing and selling expenses of approximately $8 million, lower compensation and benefit costs of approximately $6 million, lower warranty costs of approximately $3 million, lower restructuring costs of approximately $3 million, and lower travel costs of approximately $2 million.

~~For the six month comparative period, operating earnings decreased $38.0 million, or 30.3%, over the prior year period due to:~~

•~~Decreased gross margin of $91.8 million due to decreased sales volumes; partially offset by~~

•Decreased operating expenses of $53.8 million driven primarily by lower marketing and selling expenses of approximately $20 million, lower compensation and benefit costs of approximately $13 million, lower travel costs of approximately $6 million, lower warranty costs of approximately $4 million, and lower restructuring costs of approximately $3 million.

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

34 ~~Form 10-Q~~

~~International Contract ("International")~~

Three Months Ended Six Months Ended
(Dollars in millions) November 28, 2020 November 30, 2019 Change November 28, 2020 November 30, 2019 Change
Net sales $ 168.1 $ 118.2 $ 49.9 $ 321.7 $ 232.0 $ 89.7
Gross margin 60.7 40.3 20.4 115.7 80.1 35.6
Gross margin % 36.1 % 34.1 % 2.0 % 36.0 % 34.5 % 1.4 %
Operating earnings 23.4 12.8 10.6 48.4 25.9 22.5
Operating earnings % 13.9 % 10.8 % 3.1 % 15.0 % 11.2 % 3.8 %

~~For the three month comparative period, net sales increased 42.2%, or 0.6%(*)~~ ~~on an organic basis, over the prior year period due primarily to the acquisition of HAY and naughtone which increased sales by approximately $48 million.~~

~~For the six month comparative period, net sales increased 38.7%, or 0.9%(*)~~ ~~on an organic basis, over the prior year period due primarily to the acquisition of HAY and naughtone which increased sales by approximately $87 million.~~

~~For the three month comparative period, operating earnings increased $10.6 million, or 82.8%~~30.2%, over the prior year period due to:

•Increased gross margin of ~~$20.4~~$0.4 million due to the increase in sales explained above, ~~as well as increased gross margin percentage of 200 basis points due primarily to changes~~offset in ~~channel and product mix; partially offset~~part by

•~~Increased operating expenses of $9.8 million driven primarily by the acquisition of HAY and naughtone.~~

~~For the six month comparative period, operating earnings increased $22.5 million, or 86.9%, over the prior year period due to:~~

•~~Increased gross margin of $35.6 million due to the increase in sales explained above, and increased~~ decreased gross margin percentage of 140 basis points due primarily to unfavorable changes in channel and product mix; ~~partially~~ offset by

•Increased operating expenses of ~~$13.1~~$5.3 million driven primarily by ~~the acquisition of HAY~~increased compensation and ~~naughtone~~benefit costs as well as increased costs associated with product development and ~~partially offset by cost reduction actions.~~IT related projects.

(*) Non-GAAP measurements; see accompanying reconciliations and ~~explanations.~~explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

Herman Miller, Inc. and Subsidiaries 37

Global Retail


		Three Months Ended								Six Months Ended										Three Months Ended
(Dollars in millions)	(Dollars in millions)	November 28, 2020			November 30, 2019		Change			November 28, 2020			November 30, 2019			Change			(Dollars in millions)	August 28, 2021			August 29, 2020			Change
Net sales	Net sales	$	135.1		105.4		$	29.7		$	269.4		$	203.9		$	65.5		Net sales	$	212.6		$	162.7		$	49.9
Gross margin	Gross margin	67.3			45.9		21.4			133.3			84.5			48.8			Gross margin	92.7			77.7			15.0
Gross margin %	Gross margin %	49.8		%	43.5	%	6.3		%	49.5		%	41.4		%	8.1		%	Gross margin %	43.6		%	47.8		%	(4.2)		%

Operating earnings	Operating earnings	22.6			(0.9)		23.5			51.8			(4.9)			56.7			Operating earnings	27.8			31.5			(3.7)
Operating earnings %	Operating earnings %	16.7		%	(0.9)	%	17.6		%	19.2		%	(2.4)		%	21.6		%	Operating earnings %	13.1		%	19.4		%	(6.3)		%

For the three month comparative period, net sales increased ~~28.2%~~30.7%, ~~both on an as reported and organic~~or 29.6%(*) on an organic basis, over the prior year period due to:

•Increased sales volumes of approximately ~~$28~~$45 million which were driven ~~primarily~~ by increased demand within each of the ~~segment's e-commerce channel;~~brands, geographies and channels of the segment; and

•Incremental list price increases, net of ~~price~~ discounting, of approximately $3 ~~million.~~

~~Herman Miller, Inc. and Subsidiaries~~ 35

~~For the six month comparative period, net sales increased 32.1%, both on an as reported and organic(*)~~ ~~basis, over the prior year period due to:~~

•~~Increased sales volumes of approximately $62 million which were driven primarily by increased demand within the segment's e-commerce channel; and~~

•~~Incremental list price increases, net of price discounting, of approximately $6 million; offset by~~

•~~Lower freight revenue of approximately $2~~ million.

For the three month comparative period, operating earnings ~~increased $23.5~~decreased $3.7 million over the prior year period due to:

•Increased gross margin of ~~$21.4~~$15.0 million due to the increase in sales explained above, ~~as well as increased~~offset in part by a decrease in gross margin percentage of ~~630~~420 basis points due primarily to the unfavorable impact of production and material costs, increased freight and product distribution costs and unfavorable changes in ~~channel and~~ product ~~mix and incremental list price increases, net of price discounting,~~mix; partially offset by ~~higher freight expenses; and~~

•~~Decreased~~Increased operating expenses of ~~$2.1~~$18.7 million driven primarily by ~~lower~~increased studio ~~costs.~~

~~For~~costs associated with the ~~six month comparative period, operating earnings~~opening of new locations, increased ~~$56.7 million over~~compensation and benefit costs as certain benefits suspended in the prior year ~~period due to:~~

•~~Increased gross margin of $48.8 million due to~~were returned and higher IT costs driven by increased investments within the ~~increase in sales explained above, as well as increased gross margin of 810 basis points due primarily to changes in channel~~Company's digital and ~~product mix and incremental list price increases, net of price discounting; and~~

•~~Decreased operating expenses of $7.9 million driven primarily by lower studio costs and lower marketing expenses.~~eCommerce platforms.

(*) Non-GAAP measurements; see accompanying reconciliations and ~~explanations.~~explanations under the heading "Reconciliation of Non-GAAP Financial Measures."

38 Form 10-Q

Knoll


	Three Months Ended
(Dollars in millions)	August 28, 2021			August 29, 2020			Change
Net sales	$	156.4		$	—		$	156.4
Gross margin	51.0			—			51.0
Gross margin %	32.6		%	n/a			n/a


Operating (loss)	(53.6)			—			(53.6)
Operating earnings %	(34.3)		%	—		%	(34.3)		%

The Company acquired Knoll on July 19, 2021 and has consolidated the financial results of Knoll for the period from the acquisition date through the period ending August 28, 2021. Knoll contributed $156.4 million in sales for the quarter and $51.0 million of gross margin.

Knoll operating loss of $53.6 million includes the following items:

•$29.4 million related to integration related costs, which includes severance and related charges for employee separations

•$32.5 million related to the impact of amortization expense of acquisition-related intangible assets.

Corporate

Corporate unallocated expenses totaled $10.6 million for the second quarter of fiscal 2021, a decrease of $1.4 million from the second quarter of fiscal 2020. The decrease was driven primarily by lower special charges in the current period.

~~Corporate unallocated expenses totaled $21.2~~$48.8 million for the first ~~six months~~quarter of fiscal ~~2021, a decrease~~2022, an increase of ~~$2.6~~$38.6 million from the ~~same period~~first quarter of fiscal ~~2020.~~2021. The ~~decrease~~increase was driven ~~primarily~~ by ~~lower compensation~~$38.5 million of transaction and ~~benefit~~integration costs ~~and lower special charges~~recorded in the ~~current period.~~quarter related to the Knoll acquisition.

Liquidity and Capital Resources

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


(In millions)	(In millions)	November 28, 2020		November 30, 2019		(In millions)	August 28, 2021		August 29, 2020

Cash provided by (used in):
Cash (used in) provided by:						Cash (used in) provided by:
Operating activities	Operating activities	$	214.6	$	142.4	Operating activities	$	(51.7)	$	115.9
Investing activities	Investing activities	(24.4)		(82.1)		Investing activities	(1,104.7)		(5.1)
Financing activities	Financing activities	(276.9)		(40.6)		Financing activities	1,001.6		(276.5)
Effect of exchange rate changes	Effect of exchange rate changes	10.6		(1.9)		Effect of exchange rate changes	(6.5)		8.3
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(76.1)	$	17.8	Net change in cash and cash equivalents	$	(161.3)	$	(157.4)

36 ~~Form 10-Q~~

Cash Flows - Operating Activities

Cash ~~provided by~~used in operating activities for the ~~six~~three months ended ~~November~~August 28, ~~2020~~2021 was ~~$214.6~~$51.7 million, as compared to ~~$142.4~~cash provided of $115.9 million in the same period of the prior year. The ~~increase~~change in cash ~~generated~~ from ~~operations in the current year,~~operating activities as compared to the prior year, was primarily due to:

•~~Prior year~~a decrease in net earnings ~~which included a non-taxable non-cash gain on consolidation~~ of ~~an equity method investment of $30.5~~$133.3 million; ~~and~~

•Anan increase in current ~~liabilities in the current period~~assets of ~~$22.9~~$65.6 million ~~driven primarily by an increase in accounts payable. This compares~~compared to a decrease in current ~~liabilities~~assets of ~~$21.1~~$3.9 million in the prior year period. The ~~decrease in the prior year period was driven primarily by a decrease in accrued liabilities; offset by~~

•~~A decrease~~increase in current assets in the current ~~period of $2.3 million,~~year was driven ~~by a decrease in inventory and prepaid expenses, offset~~ by an increase in accounts ~~receivable. This compares to a decrease~~receivable as sales volumes increased from the end of fiscal 2021 as well as increases in ~~current assets~~inventory and prepaid expenses.

The increases above were offset by an increase of ~~$16.5 million~~depreciation and amortization in the ~~prior year period.~~current period of $59.7 million related to the amortization of purchased intangible assets as part of the Knoll acquisition as well as an increase in stock based compensation of $15.1 million. The increase in stock based compensation included the impact of accelerated vesting for employee separations associated with the Knoll acquisition.

Herman Miller, Inc. and Subsidiaries 39

Cash Flows - Investing Activities

Cash used in investing activities for the ~~six~~three months ended ~~November~~August 28, ~~2020~~2021 was ~~$24.4~~$1,104.7 million, as compared to ~~$82.1~~$5.1 million in the same period of the prior year. The ~~decrease~~increase in cash outflow in the current year, compared to the prior year, was primarily due ~~to:~~to the acquisition of Knoll, which drove a cash outflow, net of cash acquired, of $1,088.5 million.

•~~Prior year cash outflow of $40.0 million for the purchase of naughtone;~~

•~~A decrease in capital expenditures of $14.2 million due to reduced spending as a result of COVID-19; and~~

•~~Proceeds from the sale of the Company's manufacturing facility in China and office facility in the United Kingdom in the current year of $11.4 million.~~

At the end of the ~~second~~first quarter of fiscal ~~2021,~~2022, there were outstanding commitments for capital purchases of ~~$16.3~~$18.9 million. The Company plans to fund these commitments through a combination of cash on hand and cash flows from operations. The Company expects full-year capital purchases to be between ~~$50.0~~$150 million and ~~$60.0~~$160 million, which will be primarily related to investments in the Company's facilities and ~~equipment.~~equipment along with the inclusion of Knoll in fiscal year 2022. This ~~compares~~compares to full-year capital spending of ~~$69.0~~$59.8 million in fiscal ~~2020.~~2021.

Cash Flows - Financing Activities

Cash provided from financing activities for the three months ended August 28, 2021 was $1,001.6 million, as compared to cash used in financing activities ~~for the six months ended November 28, 2020 was $276.9 million, as compared to $40.6~~of $276.5 million in the samesame period of the prior year. The increase in cash ~~outflow~~provided in the current year, compared to the prior year, was primarily due to ~~repayments~~net borrowings of ~~$265.0~~$1,007.0 million from the credit agreement the Company entered into during the quarter as well as a draw of $366.6 million on the Company's credit ~~facility in June 2020.~~facility. These increases were offset by payments of $63.4 million related to the extinguishment of the Company's former debt agreement and payments of $276.6 million on the Company's credit facility.

Sources of Liquidity

In addition to steps taken to protect its workforce and manage business operations, the Company has taken actions to safeguard its capital position in the current environment. The Company is closely managing spending levels, capital investments, and working capital, and has temporarily suspended open market share repurchase activity as part of managing cash flows. ~~For more information on current cost reductions, refer to the COVID-19 Update section above.~~

At the end of the ~~second~~first quarter of fiscal ~~2021,~~2022, the Company had a well-positioned balance sheet and liquidity profile. ~~In addition to cash flows from operating activities, the~~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)	(In millions)	November 28, 2020		May 30, 2020		(In millions)	August 28, 2021		May 29, 2021
Cash and cash equivalents	Cash and cash equivalents	$	377.9	$	454.0	Cash and cash equivalents	$	235.1	$	396.4
Marketable securities	Marketable securities	7.2		7.0		Marketable securities	8.0		7.7
Availability under syndicated revolving line of credit	Availability under syndicated revolving line of credit	265.2		0.6		Availability under syndicated revolving line of credit	394.6		265.2
Total liquidity	Total liquidity	$	650.3	$	461.6	Total liquidity	$	637.7	$	669.3

~~Herman Miller, Inc. and Subsidiaries~~ 37

Of the cash and cash equivalents noted above at the end of the ~~second~~first quarter of fiscal ~~2021,~~2022, the Company had ~~$176.4~~$209.3 million of cash and cash equivalents held outside the United States. In addition, the Company had marketable securities of ~~$7.2~~$8.0 million held by one of its international wholly-owned subsidiaries.

The Company’s syndicated revolving line of credit, which ~~expires on August 28, 2024,~~matures in July, 2026, provides the Company with up to ~~$500~~$725 million in revolving variable interest borrowing capacity and ~~includes an "accordion feature" allowing~~allows the Company to ~~increase,~~borrow incremental amounts, at its option, ~~and~~ subject to negotiated terms as outlined in the ~~approval of the participating banks, the aggregate borrowing capacity of the facility by up to $250 million.~~agreement. Outstanding borrowings bear interest at rates based on the prime rate, federal funds rate, LIBOR or negotiated ~~rates~~terms as outlined in the agreement. ~~Interest is payable periodically throughout the period if borrowings are outstanding.~~

As of ~~November~~August 28, ~~2020,~~2021, the total debt outstanding related to borrowings under the syndicated revolving line of credit was ~~$225.0~~$315.0 million with available borrowings against this facility of ~~$265.2~~$394.6 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

40 Form 10-Q

Company intends to repatriate ~~$26.7~~$64.1 million in cash held in certain foreign jurisdictions ~~over the next two years~~ 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~~$9.5 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 believes that its financial resources will allow it to manage the impact of COVID-19 on business operations for the foreseeable future which could include materially reduced revenue and profits. 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 May ~~30, 2020~~29, 2021 was provided in the Company's annual report on Form 10-K for the year ended May ~~30, 2020.~~ 29, 2021.

There have been no material changes in ~~such~~certain obligations since that ~~date.~~date as a result of the acquisition of Knoll. See the following Notes for additional discussion: Short-Term Borrowings and Long-Term Debt, Leases, Acquisitions and Fair Value Measurements.

The following table summarizes the amounts and estimated timing of these future cash payments for obligations of the Company as of August 28, 2021 for which there were material changes since May 29, 2021.


	Payments due by fiscal year
(in millions)	Total		2022		2023-2024		2025-2026		Thereafter
Short-term borrowings and long-term debt(1)	$	1,265.0	$	103.1	$	57.5	$	87.5	$	1,016.9
Estimated interest on debt obligations(1)	169.7		29.2		55.4		52.8		32.3
Operating leases	516.2		88.5		157.8		116.1		153.8

Pension and other post employment benefit plans funding(2)	27.0		1.9		5.1		5.4		14.6
Shareholder dividends (3)	14.9		14.9		—		—		—
Other liabilities(4)	30.0		5.1		16.6		3.9		4.4
Total	$	2,022.8	$	242.7	$	292.4	$	265.7	$	1,222.0

(1)Includes the current portion of long-term debt. Contractual cash payments on long-term debt obligations are disclosed herein based on the amounts borrowed as of August 28, 2021 and the maturity date of the underlying debt. Estimated future interest payments on our outstanding interest bearing debt obligations are based on interest rates as of August 28, 2021. Actual cash outflows may differ significantly due to changes in borrowings or interest rates.

(2)Pension funding commitments are known for a 12-month period for those plans that are funded; unfunded pension and post-retirement plan funding amounts are equal to the estimated benefit payments.

(3)Represents the dividend payable as of August 28, 2021. Future dividend payments are not considered contractual obligations until declared.

(4)Other contractual obligations include an earn-out consideration related to the Knoll acquisition of Fully. The maximum earn-out consideration is $13.8 million and is based on certain revenue and earnings before interest, taxes, depreciation and amortization targets over the next four years. Additionally, other contractual obligations include long-term commitments related to deferred and supplemental employee compensation benefits, and other post-employment benefits.

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.

Herman Miller, Inc. and Subsidiaries 41

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~~Annual Report on Form 10-K for the year ended May ~~30, 2020.~~29, 2021.

New Accounting Standards

See Note 2 to the Condensed Consolidated Financial Statements.

38 ~~Form 10-Q~~

Safe Harbor Provisions

Certain statements in this ~~filing~~report 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 of 1934, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the ~~office furniture industry,~~industries in which the Company operates, the economy, and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” "could," and “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. These risks include, without limitation, the success of our growth strategy, our success in initiatives aimed at achieving long-term profit optimization goals, employment and general economic conditions, the pace of economic ~~growth~~recovery in the U.S., and in our International markets, the ~~potential impact of changes in U.S. tax law, the~~ increase in ~~white collar~~white-collar employment, the willingness of customers to undertake capital expenditures, the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of raw materials, our reliance on a limited number of suppliers, our ability to expand globally given the risks associated with regulatory and legal compliance challenges and accompanying currency fluctuations, changes in future tax legislation or interpretation of current tax legislation, the ability to increase prices to absorb the additional costs of raw materials, changes in global tariff regulations, the financial strength of our dealers and the financial strength of our customers, our ability to locate new ~~DWR, HAY,~~retail studios and ~~Herman Miller retail stores and studios,~~ negotiate favorable lease terms for new and existing locations and ~~the implementation of~~implement our studio portfolio transformation, our ability to attract and retain key executives and other qualified employees, our ability to continue to make product innovations, the success of newly-introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or alliances, our ability to integrate and benefit from acquisitions and investments, the pace and level of government procurement, the outcome of pending litigation or governmental audits or investigations, political risk in the markets we serve, natural disasters, public health crises, disease outbreaks, and other risks identified in our filings with the Securities and Exchange Commission. Therefore, actual results and outcomes may materially differ from what we express or forecast. ~~Furthermore, Herman Miller, Inc., undertakes~~We undertake no obligation to update, amend or clarify forward-looking statements.

42 Form 10-Q

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~~the year ended May ~~30, 2020~~29, 2021 has not changed ~~significantly.~~materially. The nature of market risks from interest rates and commodity prices has not changed materially during the first ~~six~~three months of fiscal ~~2021.~~2022.

Foreign Exchange Risk

The Company primarily manufactures its products in the United States, Canada, United Kingdom, Italy, 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, Chinese renminbi, and the Danish krone. 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) ~~expense,~~, net.

~~Herman Miller, Inc. and Subsidiaries~~ 39

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 ~~November~~August 28, ~~2020,~~2021, 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~~On July 19, 2021, the Company completed its acquisition of Knoll. The Company is currently in the ~~Company's~~process of integrating Knoll’s internal ~~control~~controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Except for the inclusion of Knoll, there has been no change in our internal control over financial reporting that occurred during the quarterly period ended ~~November~~August 28, ~~2020,~~2021, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

40 Herman Miller, Inc. and Subsidiaries~~Form 10-Q~~ 43

PART II - OTHER INFORMATION

Item 1: Legal Proceedings

~~Referred to~~There have been no material changes in ~~Note 13 of~~ the ~~Condensed Consolidated Financial Statements.~~Company's legal proceedings from those set forth in the Company's Annual Report on Form 10-K for the year ended May 29, 2021.

Item 1A: Risk Factors

~~There have been no material changes in~~The risk factor set forth below updates the ~~Company's~~ risk factors ~~from those set forth~~ in ~~the Company's~~our Annual Report on Form 10-K for the year ended May ~~30, 2020.~~29, 2021. In addition to the risk factor below, you should carefully consider the risk factors discussed in our most recent Form 10-K report, which could materially affect our business, operating results, cash flows, and financial condition. The risks and uncertainties described in our Annual Report on Form 10-K and below are not the only ones we face; others, either unforeseen or currently deemed not material, may also have a negative impact on our Company.

A continued shortage of qualified labor could negatively affect our business and materially reduce earnings.

We have experienced shortages of qualified labor across our operations. Outside suppliers that we rely on have also experienced shortages of qualified labor. The future success of our operations depends on our ability, and the ability of third parties on which we rely, to identify, recruit, develop and retain qualified and talented individuals in order to supply and deliver our products. Any shortage of qualified labor could have a negative impact on our business. Employee recruitment, development and retention efforts that we or such third parties undertake may not be successful, which could result in a shortage of qualified individuals in future periods. Any such shortage could decrease our ability to effectively produce and meet customer demand. Such a shortage would also likely lead to higher wages for employees (or higher costs to purchase the services of such third parties) and a corresponding reduction in our results of operations. In the current operating environment, we are experiencing a shortage of qualified labor in certain geographies, particularly with plant production workers, resulting in increased costs from certain temporary wage actions, such as hiring and referral bonus programs. A continuation of such shortages for a prolonged period of time could have a material adverse effect on our operating results.

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

Issuer Purchases of Equity Securities

The ~~following is a summary of~~Company has one outstanding share repurchase ~~activity during the quarter ended November 28, 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)
8/30/20 - 9/26/20 632 $ 29.16 632 $ 236,769,598
9/27/20 - 10/24/20 — $ — — $ 236,769,598
10/25/20 - 11/28/20 566 $ 33.01 566 $ 236,750,879
Total 1,198 1,198

~~The Company repurchased shares under previously announced plans~~plan, which was authorized by the Board of ~~Directors.~~Directors on January 16, 2019, and provides a share repurchase authorization of $250.0 million with no specified expiration date. No repurchase plans expired or were terminated during the ~~second~~first quarter of fiscal ~~2021,~~2022, nor do any plans exist under which the Company does not intend to make further purchases.

The ~~Board has~~following is a summary of share repurchase activity during the ~~authority~~quarter ended August 28, 2021.


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)
5/30/21-6/26/21	—	$	—	—	$	236,708,715
6/27/21-7/24/21	26,564	$	37.12	26,564	$	235,722,639
7/25/21-8/28/21	233,099	$	43.09	233,099	$	225,677,351
Total	259,663			259,663

The Company may repurchase shares from time to ~~terminate~~time for cash in open market transactions, privately negotiated transactions, pursuant to accelerated share repurchase programs or otherwise in accordance with applicable federal securities laws. The timing and amount of the repurchases will be determined by the Company's management based

44 Form 10-Q

on their evaluation of market conditions, share price and other factors. The share repurchase program may be suspended or discontinued at 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.~~time.

~~Item 3: Defaults upon Senior Securities~~

~~None~~

Herman Miller, Inc. and Subsidiaries 45

~~Item 4: Mine Safety Disclosures~~

~~Not applicable~~

~~Item 5: Other Information~~

~~None~~

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

10.1 Credit Agreement, dated as of July 19, 2021, by and among Herman Miller, Inc., the lenders and other parties thereto and Goldman Sachs Bank USA and Wells Fargo Bank, National Association, as administrative agents, and Goldman Sachs Bank USA, as collateral agent, is incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K Report dated July 20, 2021 (Commission File No. 001-15141).

10.2 Amendment No. 1 to Credit Agreement, dated as of September 22, 2021, by and among Herman Miller, Inc ., Goldman Sachs Ba n k , USA , as administrative agen ts, and Wells Fargo Bank National Association, as administrative agent.

10.3* Knoll, Inc. 2021 Stock Incentive Plan (incorporated by reference to Knoll, Inc.'s Definitive Proxy St atement on Form DEF 14A file d with the Commission on April 1, 2021).

10.4* Knoll, Inc. Amended and Restated 2018 Stock Incentive Plan (incor porated by refere nce to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on A pril 9, 2018).

10.5* Knoll, Inc. Amended and Restated 2013 Stock Incentive Plan (incorporated by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the C ommis s ion on April 26, 201 3).

10.6* Knoll, Inc. Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Knoll, Inc.'s Current Report on F orm 8-K with the Commission on May 11, 2010 ).

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

~~Herman Miller, Inc. and Subsidiaries~~ 41

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~~Inline XBRL ~~document.~~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)

* Denotes compensatory plan or arrangement.

4246 Form 10-Q

Herman Miller, Inc. and Subsidiaries 47

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~~thereunto duly authorized.

HERMAN MILLER, INC.

~~January 4,~~October 6, 2021

/s/ Andrea R. Owen

Andrea R. Owen

President and Chief Executive Officer

(Duly Authorized Signatory for Registrant)

~~January 4,~~October 6, 2021

/s/ Jeffrey M. Stutz

Jeffrey M. Stutz

Chief Financial Officer

(Duly Authorized Signatory for Registrant)

~~Herman Miller, Inc. and Subsidiaries~~48 43Form 10-Q


		Six Months Ended November 30, 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		—		—		—		—		(17.3)		—		(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		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	$	(111.5)	$	(0.6)	$	745.3	$	0	$	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		0.1		—		—		—		0.1		—		0.1
Restricted and performance stock units released		3,653		0		—		—		—		—		0		—		0
Employee stock purchase plan issuances		12,467		—		0.5		—		—		—		0.5		—		0.5
Repurchase and retirement of common stock		(10,006)		0		(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	$	0	$	844.6