UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 29, 2021
or
☐ 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
(State or other jurisdiction of
incorporation or organization)
38-0837640
(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
Common Stock
Trading Symbol(s)
MLHR
Name of each exchange on which
registered
NASDAQ
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ☒
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 ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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 o
Non-accelerated filer o
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by “nonaffiliates” of the registrant (for this purpose only, the affiliates of the registrant have been assumed to be
the executive officers and directors of the registrant and their associates) as of November 27, 2020, was $2.2 billion (based on $37.56 per share which was the closing
sale price as reported by Nasdaq). As of July 18, 2021, the registrant had 59,052,202 shares of common stock outstanding.
Certain portions of the Registrant's Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
Herman Miller, Inc.
Annual Report on Form 10-K
Table of Contents
Part I
Item 1 Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2 Properties
Item 3 Legal Proceedings
Additional Item: Executive Officers of the Registrant
Item 4 Mine Safety Disclosures
Part II
Item 5 Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures about Market Risk
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A Controls and Procedures
Item 9B Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10 Directors, Executive Officers, and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accountant Fees and Services
Part IV
Item 15 Exhibits and Financial Statement Schedule
Exhibit Index
Schedule II Valuation and Qualifying Accounts
Item 16 Form 10-K Summary
Signatures
Page No.
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PART I
Item 1 Business
General Development of Business
Herman Miller's purpose statement is design for the good of humankind. The Company researches, designs,
manufactures and distributes interior furnishings for use in various environments including residential, office,
healthcare and educational settings and provides related services that support organizations and individuals all over
the world. Through research, the Company seeks to understand, define and clarify customer needs and problems
existing and to design products, systems and services that serve as innovative solutions to those needs and problems.
The Company's products are sold primarily through the following channels: Owned and independent contract furniture
dealers, direct customer sales, owned and independent retailers, direct-mail catalogs and the Company's eCommerce
platforms.
Herman Miller, Inc. and Subsidiaries 2
The Company was incorporated in Michigan in 1905. As a global design leader the Company established Herman Miller
Group, a purposefully selected, complementary family of brands that collectively offers a variety of products for
environments where people live, learn, work, heal and play. The family of brands includes Herman Miller®, Colebrook
Bosson Saunders®, Design Within Reach®, Geiger®, HAY®, Maars® Living Walls, Maharam®, naughtone® and
Nemschoff®. All of these companies are considered controlled subsidiaries, except for Maars of which the Company
owns 48.2% of as of May 29, 2021. Herman Miller's corporate offices are located at 855 East Main Avenue, PO Box 302,
Zeeland, Michigan, 49464-0302 and its telephone number is 616 654 3000. Unless otherwise noted or indicated by
the context, all references to "Herman Miller," "we," "our," "Company" and similar references are to Herman Miller, Inc.
and its controlled subsidiaries. Further information relating to principles of consolidation is provided in Note 1 to the
Consolidated Financial Statements included in Item 8 of this report.
Segments
The Company has three reportable segments: North America Contract, International Contact and Retail. The Company
also reports a corporate category consisting primarily of unallocated corporate expenses. For a more detailed
description of the Company's segments, refer to Item 7 of this report.
Financial information relating to segments is provided in Note 14 to the Consolidated Financial Statements included in
Item 8 of this report.
Description of Business
The Company's principal business consists of the research, design, manufacture, selling and distribution of seating
products, office furniture systems, other freestanding furniture elements, textiles, home furnishings and related
services.
3 2021 Annual Report
The Company's ingenuity and design excellence create award-winning products and services, which have made the
Company a leader in the design and development of furniture, furniture systems, textiles and technology solutions.
This leadership is exemplified by the innovative concepts introduced by the Company in its broad array of seating
products (including Embody®, Aeron®, Mirra2™, Setu®, Sayl®, Verus®, Cosm®, Lino®, Verus®, Celle®, Equa®,
Taper™ and Ergon® office chairs) and modular systems (including Canvas Office Landscape®, Locale®, Public Office
Landscape®, Layout Studio®, Action Office®, Ethospace®, Arras®, Prospect®, Overlay™, Resolve®, and OE1®).
The Company also offers storage (including Meridian® and Tu® products), wood casegoods (including Geiger®
products), freestanding furniture products (including Abak™, Intent®, Sense™ and Envelop®), healthcare products
(including Palisade™, Compass™, Nala®, Ava® and other Nemschoff® products), the Thrive portfolio of ergonomic
solutions, ergonomic and technology support products (including Colebrook Bosson Saunders® products) and the
textiles of Maharam Fabric Corporation (Maharam®). The Live Platform™ system of cloud-connected furnishings,
applications and dashboards provides data-enabled solutions for the Company's customers.
The Company also offers products for residential settings, including Eames®, Eames (lounge chair configuration)®,
Eames (management chair configuration)®, Eames Soft Pad™, HAY®, Nelson™ basic cabinet series, Nelson™ end
table, Nelson™ lanterns, Nelson™ marshmallow sofa, Nelson™ miniature chests, Nelson™ platform bench, Nelson™
swag leg group, Nelson™ tray table, Bubble Lamps®, Airia™, Ardea®, Bumper™, Burdick Group™, Everywhere™
tables, Claw™, Caper®, Distil™, Envelope™, Formwork®, Full Round™, H Frame™, I Beam™, Landmark™, Logic
Mini™, Logic Power Access Solutions™, Renew™, Rolled Arm™, Scissor™, Sled™, Soft Pad™, Swoop™, Tone™,
Twist™, Ward Bennett™ and Wireframe™. The Company also offers residential and ancillary products through its
subsidiaries, including: the Line™ Storage Collection, Lina™ Swivel Chair, Matera™ Bedroom Collection, Emmy™
Sofa Collection, Story™ Bookcase and Sømmer™ Outdoor Collection for Design Within Reach®; the Always™ Lounge
Chair, Always™ Chair, Polly™ Chair, Viv™ Chair, and Hush™ Chair for naughtone®; and the Mags™ Sofa and About
A™ Chair Collections for HAY®.
The Company's products are marketed worldwide by its own sales staff, independent dealers and retailers, owned
dealers, via its eCommerce websites, and through its owned Herman Miller, Design Within Reach ("DWR") and HAY
retail stores and studios. Salespeople work with dealers, the architecture and design community, and directly with
end-users. Independent dealerships concentrate on the sale of Herman Miller Group products and some
complementary product lines of other manufacturers. It is estimated that approximately 63 percent of the Company's
sales in the fiscal year ended May 29, 2021, were made to or through independent dealers. The remaining sales were
made directly to end-users, including federal, state and local governments and several business organizations by the
Company's own sales staff, owned dealer network, retail channels, or independent retailers.
The Company is a recognized leader within its industry for the use, development, and integration of customer-centered
technologies that enhance the reliability, speed, and efficiency of our customers' operations. This includes proprietary
sales tools, interior design and product specification software, order entry and manufacturing scheduling and
production systems, and direct connectivity to the Company's suppliers.
The Company's furniture systems, seating, freestanding furniture, storage, casegoods, textile products, and related
services are used in (1) institutional environments including offices and related conference, lobby, and lounge areas
and general public areas including transportation terminals; (2) health/science environments including hospitals,
clinics and other healthcare facilities; (3) industrial and educational settings; and (4) residential and other
environments.
Raw Materials
The Company's manufacturing materials are available from a significant number of sources within North America,
South America, Europe and Asia. The costs of certain direct materials used in the Company's manufacturing and
assembly operations are sensitive to shifts in commodity market prices. In particular, the costs of steel, plastic,
aluminum components and particleboard are sensitive to the market prices of commodities such as raw steel,
aluminum, crude oil, lumber and resins. Increases in the market prices for these commodities can have an adverse
impact on the Company's profitability. Further information regarding the impact of direct material costs on the
Company's financial results is provided in Management's Discussion and Analysis in Item 7 of this report,
"Management's Discussion and Analysis of Financial Condition and Results of Operations”.
Herman Miller, Inc. and Subsidiaries 4
Patents, Trademarks, Licenses, Etc.
The Company has active utility and design patents in the United States. Many of the inventions covered by these
patents also have been patented in a number of foreign countries. Various trademarks, including the name and
stylized “Herman Miller” and the “Herman Miller Circled Symbolic M” trademark are registered in the United States
and many foreign countries. The Company does not believe that any material part of its business depends on the
continued availability of any one or all of its patents or trademarks, or that its business would be materially and
adversely affected by the loss of any such marks, except for the following trademarks: Herman Miller®, Herman Miller
Circled Symbolic M®, Maharam®, Geiger®, Design Within Reach®, DWR®, HAY®, naughtone®, Nemschoff®, Action
Office®, Aeron®, Mirra®, Embody®, Setu®, Sayl®, Cosm®, Caper®, Eames®, Eames Lounge & Ottoman
Configurations, Eames Aluminum Group Configuration, and Canvas Office Landscape®.
Working Capital Practices
Information concerning the Company's working capital levels relative to its sales volume can be found under the
Executive Overview section in Item 7 of this report, “Management's Discussion and Analysis of Financial Condition and
Results of Operations”. Beyond this discussion, the Company does not believe that it or the industry in general has
any special practices or special conditions affecting working capital items that are significant for understanding the
Company's business.
Customer Base
The Company approximates that no single dealer accounted for more than three percent of the Company's net sales in
the fiscal year ended May 29, 2021. The Company estimates that the largest single end-user customer accounted for
$113.0 million, $122.9 million and $129.6 million of the Company's net sales in fiscal 2021, 2020, and 2019,
respectively. This represents approximately five percent of the Company's net sales in fiscal 2021, 2020 and 2019. The
Company's ten largest customers in the aggregate accounted for approximately 17 percent of net sales in fiscal 2021
and 18 percent of net sales in fiscal 2020 and 2019.
Backlog of Unfilled Orders
As of May 29, 2021, the Company's backlog of unfilled orders was $446.9 million. At May 30, 2020, the Company's
backlog totaled $470.8 million. The decrease in backlog in the current year was primarily due to delays in processing
customer orders in the fourth quarter of fiscal 2020 caused by the outbreak of COVID-19 and related facility shut-
downs. It is expected that substantially all the orders forming the backlog at May 29, 2021, will be filled during the
next fiscal year. Many orders received by the Company are reflected in the backlog for only a short period while other
orders specify delayed shipments and are carried in the backlog for up to one year. Accordingly, the amount of the
backlog at any particular time does not necessarily indicate the level of net sales for a particular succeeding period.
Government Contracts
Other than standard provisions contained in contracts with the United States Government, the Company does not
believe that any significant portion of its business is subject to material renegotiation of profits or termination of
contracts or subcontracts at the election of various government entities. The Company sells to the U.S. Government
both through a General Services Administration ("GSA") Multiple Award Schedule Contract and through competitive
bids. The GSA Multiple Award Schedule Contract pricing is principally based upon the Company's commercial price list
in effect when the contract is initiated, rather than being determined on a cost-plus-basis. The Company is required to
receive GSA approval to apply list price increases during the term of the Multiple Award Schedule Contract period.
Competition
All aspects of the Company's business are highly competitive. From an office furniture perspective, the Company
competes largely on design, product and service quality, speed of delivery and product pricing. Although the Company
is one of the largest office furniture manufacturers in the world, it competes with manufacturers that have significant
resources and sales as well as many smaller companies. The Company's most significant competitors are Haworth, HNI
Corporation, Kimball International, and Steelcase.
The Company also competes in the home furnishings industry, primarily against national, regional and independent
home furnishings retailers who market high-craft furniture to end-user customers and the interior design community.
5 2021 Annual Report
These competitors include companies such as Crate & Barrel Holdings, Inc., Hive Modern, Restoration Hardware, Room
& Board, Wayfair and Williams-Sonoma, Inc. Similar to its office furniture product offerings, the Company competes
primarily on design, product and service quality, speed of delivery and product pricing in this market.
On July 19, 2021, we completed the acquisition of Knoll, Inc. Refer to the "Executive Overview" and "Business
Overview" sections within Item 7 for further discussion of the acquisition of Knoll as well as in Note 18 to the
Consolidated Financial Statements included in Item 8 of this report.
Research, Design and Development
The Company believes it draws great competitive strength from its research, design and development programs.
Through research, the Company seeks to understand, define and clarify customer needs and problems they are trying
to solve. The Company designs innovative products and services that address customer needs and solve their
problems. The Company uses both internal and independent research resources and independent design resources.
Exclusive of royalty payments, the Company spent approximately $50.8 million, $54.3 million and $58.8 million on
design and research activities in fiscal 2021, 2020 and 2019, respectively. Generally, royalties are paid to designers of
the Company's products as the products are sold and are included in the Design and Research line item within the
Consolidated Statements of Comprehensive Income.
Environmental Matters
The Company believes that a business must stand for more than just its products and services and the Company's
people around the globe share a commitment to using business as a force for good. The Company’s commitment to the
planet is embedded in its corporate strategy and will continue to develop as the Company outlines next steps in its
sustainability strategy. As part of this commitment, the Company focuses on operating its global footprint with
minimal impact on the environment and designing products with materials and processes that are safe for both people
and the planet. Based on current facts known to management, the Company does not believe that existing
environmental laws and regulations have had or will have any material effect upon the capital expenditures, earnings
or competitive position of the Company. However, there can be no assurance that environmental legislation will not
result in or require material capital expenditures or additional costs to our manufacturing process.
Human Resources
The Company considers its employees to be another of its major competitive strengths. The Company stresses
individual employee participation and incentives, believing that this emphasis has helped attract and retain a
competent and motivated workforce. The Company's human resources group provides employee recruitment,
education and development, as well as compensation planning and counseling. Additionally, there have been no work
stoppages or labor disputes in the Company's history. As of May 29, 2021, approximately four percent of the
Company's employees are covered by collective bargaining agreements, most of whom are employees of its Nemschoff
and Herman Miller Holdings Limited subsidiaries.
As of May 29, 2021, the Company had approximately 7,600 employees, which was consistent with May 30, 2020. In
addition to its employee workforce, the Company uses temporary labor to meet fluctuating demand in its
manufacturing operations.
Information about International Operations
The Company's sales in international markets are made primarily to office/institutional customers. Foreign sales
consist mostly of office furniture products such as Aeron®, Mirra®, Sayl®, Embody®, Layout Studio®, Imagine
Desking System®, Ratio®, Cosm®, and other seating and storage products and ergonomic accessories such as About
A Chair®, Palissade®, and the Flo® monitor arm. The Company conducts business in the following major
international markets: Europe, the Middle East, Africa, Latin America and the Asia/Pacific region.
The Company's products currently sold in international markets are manufactured primarily by controlled subsidiaries
in the United States, the United Kingdom, China, Brazil and India. A portion of the Company's products sold
internationally are also manufactured by third-party suppliers. Sales are made through wholly owned subsidiaries or
branches in Canada, the United Kingdom, Denmark, Mexico, Australia, Singapore, Japan, China (including Hong Kong),
Herman Miller, Inc. and Subsidiaries 6
India and Brazil. The Company's products are offered in Canada, Europe, the Middle East, Africa, Latin America and the
Asia/Pacific region primarily through dealers.
Additional information with respect to operations by geographic area appears in Note 14 of the Consolidated Financial
Statements included in Item 8 of this report. Fluctuating exchange rates and factors beyond the control of the
Company, such as tariff and foreign economic policies, may affect future results of international operations. Refer to
Item 7A, Quantitative and Qualitative Disclosures about Market Risk, for further discussion regarding the Company's
foreign exchange risk.
Available Information
The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all
amendments to those reports are made available free of charge through the “Investors” section of the Company's
internet website at www.hermanmiller.com, as soon as practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission (SEC). The Company's filings with the SEC are also available for
the public to read via the SEC's internet website at www.sec.gov.
Item 1A Risk Factors
The following risk factors and other information included in this report should be carefully considered. The risks and
uncertainties described 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. If any of the following occurs, our business, operating
results, cash flows, and financial condition could be materially adversely affected.
Business and Acquisition Related Risks
We may not be successful in implementing and managing our growth strategy.
We have established a growth strategy for the business based on a changing and evolving world. Through this strategy
we are focused on taking advantage of the changing composition of the office floor plate, the greater desire for
customization from our customers, new technologies and trends towards urbanization and working from home.
To that end, we intend to grow in certain targeted ways. First, we will unlock the power of One Herman Miller by
building an agile, collaborative, globally-connected organization fit for continuous evolution. This will also include
simplifying and tailoring our go-to-market approach, as well as continuing to lead in product innovation across all
businesses. Second, we intend to build a customer-centric, digitally enabled business model by leveraging our deep
understanding of customer journeys to deliver inspired products and frictionless customer experiences. Inclusive of
this will be to drive step-change in our data, analytics, marketing, and brand capabilities, as well as to strengthen our
core technology backbone. Third, we intend to accelerate profitable growth by strengthening and evolving our core
contract business, driving outsized growth in our international business and expanding our retail business. Finally, we
believe it is a business imperative to reinforce our commitment to our people, planet and communities in a more
integrated way than ever before. Beyond simply being the right thing to do, we are confident that elevating our focus
on positive social and environmental business practices will beneficially impact our customers and enhance returns
for our shareholders over the long term. Refer to the "Executive Overview" section within Item 7 for further discussion
of our areas of strategic focus.
While we have confidence that our strategic plan reflects opportunities that are appropriate and achievable and that
we have anticipated and will manage the associated risks, there is the possibility that the strategy may not deliver the
projected results due to inadequate execution, incorrect assumptions, sub-optimal resource allocation, or changing
customer requirements.
To meet these goals, we believe we will be required to continually invest in the research, design and development of
new products and services, and there is no assurance that such investments will have commercially successful results.
7 2021 Annual Report
Certain growth opportunities may require us to invest in acquisitions, alliances and the startup of new business
ventures. These investments, if available, may not perform according to plan and may involve the assumption of
business, operational or other risks that are new to our business.
Future efforts to expand our business within developing economies, particularly within China and India, may expose
us to the effects of political and economic instability. Such instability may impact our ability to compete for business.
It may also put the availability and/or value of our capital investments within these regions at risk. These expansion
efforts expose us to operating environments with complex, changing and in some cases, inconsistently-applied legal
and regulatory requirements. Developing knowledge and understanding of these requirements poses a significant
challenge and failure to remain compliant with them could limit our ability to continue doing business in these
locations.
Pursuing our strategic plan in new and adjacent markets, as well as within developing economies, will require us to
find effective new channels of distribution. There is no assurance that we can develop or otherwise identify these
channels of distribution.
We may be unable to successfully integrate our businesses and Knoll and realize the anticipated benefits of the
acquisition of Knoll.
The success of the acquisition of Knoll will depend, in part, on our ability to successfully combine and integrate the
businesses of Herman Miller and Knoll, which previously operated as independent public companies, and realize the
anticipated benefits, including synergies, cost savings, innovation opportunities and operational efficiencies, from the
acquisition, in a manner that does not materially disrupt existing customer, payer, dealer, supplier, employee and
other stakeholder relations nor result in decreased revenues due to losses of, or decreases in orders by, customers
and payers. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated
benefits may not be realized fully, or at all, or may take longer to realize than expected, and the value of our common
stock may decline.
The integration of the two companies may result in material challenges, including, without limitation:
•
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one
or both of the companies as a result of the devotion of management’s attention to the transaction and related
integration work;
•
• managing a larger and more complex combined business;
• maintaining employee morale, retaining key management and other employees and the possibility that the
integration process and potential organizational changes may adversely impact the ability to maintain
employee relationships;
retaining existing business and operational relationships, including customers, dealers, suppliers, employees
and other counterparties, as may be impacted by contracts containing consent and/or other provisions that
may be triggered by the transaction, and attracting new business and operational relationships;
the integration process not proceeding as expected, including due to a possibility of faulty assumptions or
expectations regarding the integration process or Herman Miller’s or Knoll’s operations;
consolidating corporate, administrative and compliance infrastructures and eliminating duplicative
operations;
coordinating geographically separate organizations, including in international markets with differing
business, legal and regulatory climates;
unanticipated issues in integrating information technology, communications and other systems; and
unforeseen expenses, costs, liabilities or delays associated with the acquisition or the integration.
•
•
•
•
•
Many of these factors will be outside of our control, and any one of them could result in delays, increased costs,
decreases in the amount of expected revenues or synergies and diversion of management’s time and energy, which
could materially affect Herman Miller’s financial position, results of operations and cash flows.
The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the
integration plan may not be realized on a timely basis, if at all.
Herman Miller, Inc. and Subsidiaries 8
The indebtedness incurred in connection with the acquisition of Knoll contains various covenants that impose
restrictions on us and certain of our subsidiaries that may affect their ability to operate their businesses.
The indebtedness incurred in connection with the merger and preferred stock purchase contains various affirmative
and negative covenants that, subject to certain significant exceptions, restrict the ability of us and certain of our
subsidiaries to, among other things, incur liens on our property, incur additional indebtedness, enter into sale and
lease-back transactions, make loans, advances or other investments, make non-ordinary course asset sales, declare
or pay dividends or make other distributions with respect to equity interests, and/or merge or consolidate with any
other person or sell or convey certain of its assets to any one person, among other things. In addition, the definitive
documentation governing such indebtedness contains a financial maintenance covenant that will require us to
maintain a certain leverage ratio at the end of each fiscal quarter. Our and our subsidiaries’ ability to comply with
these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in
an event of default, which, if not cured or waived, could accelerate our repayment obligations under such
indebtedness.
In connection with the acquisition of Knoll, we incurred significant additional indebtedness, which could adversely
affect Herman Miller, including by decreasing our business flexibility, and will increase our interest expense.
The consolidated long-term debt of Herman Miller as of May 29, 2021 was $274.9 million. Our long-term debt as of July
27, 2021, after giving effect to the acquisition and the incurrence and extinguishment of indebtedness in connection
therewith, is approximately $1.3 billion. We have substantially increased our indebtedness in comparison to that of
Herman Miller on a recent historical basis, which could have the effect, among other things, of reducing our flexibility
to respond to changing business and economic conditions and increasing our interest expense. We have also incurred
various costs and expenses associated with such indebtedness. The amount of cash required to pay interest on our
increased indebtedness levels and thus the demands on our cash resources will be greater than the amount of cash
flows previously required to service our indebtedness. The increased levels of indebtedness could also reduce funds
available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create
competitive disadvantages for Herman Miller relative to other companies with lower debt levels. If we do not achieve
the expected benefits and cost savings from the acquisition, or if the financial performance of the combined company
does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
In addition, we may be required to raise substantial additional financing to fund working capital, capital expenditures,
acquisitions or other general corporate requirements. Our ability to arrange additional financing will depend on,
among other factors, our financial position and performance, as well as prevailing market conditions and other factors
beyond our control. We cannot assure you that it will be able to obtain additional financing on terms acceptable to us
or at all.
Uncertainties associated with the acquisition of Knoll may cause a loss of management personnel and other key
employees, which could adversely affect the future business and operations of the combined company following
completion of the acquisition.
Herman Miller is dependent on the experience and industry knowledge of its officers and other key employees to
execute its business plans. Our success will depend in part upon our ability to retain certain key management
personnel and employees. Current and prospective employees of Herman Miller may experience uncertainty about
their roles, which may have an adverse effect on our ability to attract or retain key management and other key
personnel. Accordingly, no assurance can be given that we will be able to attract or retain key management personnel
and other key employees to the same extent that Herman Miller and Knoll have previously been able to attract or retain
their own employees.
We have incurred and expect to continue to incur significant costs in connection with the acquisition of Knoll, which
may be in excess of those we anticipate.
We have incurred and expect to continue to incur a number of non-recurring fees and costs associated with negotiating
and completing the transactions, combining the operations of Herman Miller and Knoll and achieving desired
synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-
recurring expenses will consist of transaction costs related to the merger and include, among others, the preferred
9 2021 Annual Report
stock purchase, employee retention costs, fees paid to financial, legal, strategic and accounting advisors, severance
and benefit costs, proxy solicitation costs and filing fees.
We will also incur transaction fees and costs related to formulating and implementing integration plans, including
facilities and systems consolidation costs and employment-related costs. We will continue to assess the magnitude of
these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two
companies’ businesses. Although we expect that the elimination of duplicative costs, as well as the realization of
other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over
time, this net benefit may not be achieved in the near term, or at all.
The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on
the financial condition and operating results of Herman Miller.
Macroeconomic and Workplace Trends Related Risks
Adverse economic and industry conditions could have a negative impact on our business, results of operations and
financial condition.
Customer demand within the contract office furniture and retail furnishings industries is affected by various macro-
economic factors; general corporate profitability, service sector employment levels, new office construction rates and
existing office vacancy rates are among the most influential factors. History has shown that declines in these measures
can have an adverse effect on overall office furniture demand. Additionally, factors and changes specific to our
industry, such as developments in technology, governmental standards and regulations, and health and safety issues
can influence demand. There are current and future economic and industry conditions that could adversely affect our
business, operating results, or financial condition.
Other macroeconomic developments, such as the United Kingdom referendum on European Union membership
(commonly known as Brexit) could negatively affect the Company's ability to conduct business in those geographies.
The Company is monitoring the resolution of various trade policy negotiations between the U.S. and key trading
partners as well as the post-Brexit impact on the U.K. and European Union. These negotiations create uncertainty in
key markets, which, if unresolved in the near term, could negatively impact customer demand. Furthermore, concerns
exist relating to potential tariffs and customs regulations and the potential for short term logistics disruption as any
such changes are implemented. This will impact both the Company's suppliers and customers, including distributors,
and could result in product delays and inventory issues. Further uncertainty in the marketplace also brings risk to
accounts receivable and could result in delays in collection and greater bad debt expense. There also remains a risk
for the value of the British Pound and/or the Euro to further deteriorate, reducing the purchasing power of customers in
these regions and potentially undermining the financial health of the Company's suppliers and customers in other
parts of the world.
The markets in which we operate are highly competitive and we may not be successful in winning new business.
We are one of several companies competing for new business within the office furniture industry. Many of our
competitors offer similar categories of products, including office seating, systems and freestanding office furniture,
casegoods, storage as well as residential, education and healthcare furniture solutions. Although we believe that our
innovative product design, functionality, quality, depth of knowledge, and strong network of distribution partners
differentiate us in the marketplace, increased market pricing pressure could make it difficult for us to win new
business with certain customers and within certain market segments at acceptable profit margins.
The retail furnishings market is highly competitive. We compete with national and regional furniture retailers, mail
order catalogs and online retailers focused on home furnishings. We compete with these and other retailers for
customers, suitable retail locations, vendors, qualified employees and management personnel. Some of our
competitors have significantly greater financial, marketing and other resources than we possess. This may result in our
competitors being quicker at the following: adapting to changes, devoting greater resources to the marketing and sale
of their products, generating greater national brand recognition, or adopting more aggressive pricing and promotional
Herman Miller, Inc. and Subsidiaries 10
policies, including free shipping offers. In addition, increased catalog mailings and/or digital marketing campaigns by
our competitors may adversely affect response rates to our own marketing efforts. As a result, increased competition
may adversely affect our future financial performance.
Our business presence outside the United States exposes us to certain risks that could negatively affect our results
of operations and financial condition.
We have significant manufacturing and sales operations in the United Kingdom, which represents our largest
marketplace outside the United States. We also have manufacturing operations in China, India, and Brazil.
Additionally, our products are sold internationally through controlled subsidiaries or branches in Canada, Denmark,
Korea, Mexico, Australia, China (including Hong Kong), India and Brazil. The Company's products are offered in
Canada, Europe, the Middle East, Africa, Latin America and the Asia/Pacific region primarily through dealers.
Doing business internationally exposes us to certain risks, many of which are beyond our control and could potentially
impact our ability to design, develop, manufacture, or sell products in certain countries. These factors could include,
but would not necessarily be limited to:
•
Political, social and economic conditions
• Global trade conflicts and trade policies
Legal and regulatory requirements
•
Labor and employment practices
•
•
Cultural practices and norms
• Natural disasters
•
•
•
Security and health concerns
Protection of intellectual property
Changes in foreign currency exchange rates
In some countries, the currencies in which we import and export products can differ. Fluctuations in the rate of
exchange between these currencies could negatively impact our business and our financial performance. Additionally,
tariff and import regulations, international tax policies and rates, and changes in U.S. and international monetary
policies may have an adverse impact on results of operations and financial condition.
A sustained downturn in the economy could adversely impact our access to capital.
The disruptions in the global economic and financial markets during 2007 to 2009 adversely impacted the broader
financial and credit markets, at times reducing the availability of debt and equity capital for the market as a whole.
Conditions such as these could re-emerge in the future. Accordingly, our ability to access the capital markets could be
restricted at a time when we would like, or need, to access those markets, which could have an adverse impact on our
flexibility to react to changing economic and business conditions. The resulting lack of available credit, increased
volatility in the financial markets and reduced business activity could materially and adversely affect our business,
financial condition, results of operations, our ability to take advantage of market opportunities and our ability to
obtain and manage our liquidity. In addition, the cost of debt financing and the proceeds of equity financing may be
materially and adversely impacted by these market conditions. The extent of any impact would depend on several
factors, including our operating cash flows, the duration of tight credit conditions and volatile equity markets, our
credit capacity, the cost of financing, and other general economic and business conditions. Our credit agreements
contain performance covenants, such as a limit on the ratio of debt to earnings before interest, taxes, depreciation and
amortization, and limits on subsidiary debt and incurrence of liens. Although we believe none of these covenants is
currently restrictive to our operations, our ability to meet the financial covenants can be affected by events beyond our
control.
Disease outbreaks, such as the COVID-19 pandemic, could have an adverse impact on the Company's operations and
financial results.
From time to time, various disease outbreaks may adversely impact our business, consolidated results of operations
and financial condition, such as the current COVID-19 pandemic which has had such an adverse impact. The Company
has global manufacturing facilities, suppliers, dealers and customers. Therefore, COVID-19, as well as measures taken
11 2021 Annual Report
by governmental authorities and other organizations and individuals to limit the spread of this virus, may interfere
with the ability of our employees, suppliers and other business providers to carry out their assigned tasks or supply
materials at ordinary levels of performance relative to the conduct of our business. In addition, the COVID-19 pandemic
has caused a significant percentage of the traditional office workforce to work away from their office location. It is
reasonable to assume, at least in the near-term, that this will have an adverse impact on the demand for office
furniture and related products. This has in the past caused, and may continue to cause, us to materially curtail certain
of our business operations, and has had and could continue to have, a material adverse effect on our results of
operations and cash flow.
Manufacturing, Supply Chain and Distribution Related Risks
Tariffs imposed by the U.S. government could have a material adverse effect on our results of operations.
The imposition of tariffs by the U.S. government on various products imported from certain countries, as well as
countering tariffs on the export of U.S. goods, has and will likely continue to adversely impact the cost of certain of our
raw materials and finished goods as well as products that we export to other countries. Accordingly, these tariffs and
the possibility of broader trade conflicts stemming from the tariffs could negatively impact our business in the future.
The tariffs on imports, most notably imports from China, also impacted the cost of steel in both fiscal year 2020 and
fiscal 2021, a key commodity that we consume in producing products. Given the significance of steel costs to our direct
materials costs, we are closely monitoring escalating trade tensions between the U.S. and China. The potential impact
to our direct material costs due to tariffs on Chinese imports is somewhat limited, however, as purchases of direct
materials (mainly component parts and products manufactured by third parties) from China represented an estimated
5% of our consolidated cost of sales for fiscal 2021. Going forward, continued or increased tariffs could negatively
impact our gross margin and operating performance. These factors also have the potential to significantly impact
global trade and economic conditions in many of the regions where we do business.
Disruptions in the supply of raw and component materials could adversely affect our manufacturing and assembly
operations.
We rely on outside suppliers to provide on-time shipments of the various raw materials and component parts used in
our manufacturing and assembly processes. The timeliness of these deliveries is critical to our ability to meet
customer demand. Disruptions in this flow of delivery may have a negative impact on our business, results of
operations, and financial condition.
In the fourth quarter of 2021, the price of steel was impacted by shortages and disruptions in the steel industry as a
result of the COVID-19 pandemic. These disruptions have not had a significant impact on our ability to manufacture
and supply products to our customers, but they have negatively impacted the cost of procuring such materials. In the
short-term, significant increases in raw material, commodity and other input costs can be difficult to offset with price
increases because of existing contractual commitments with our customers. As a result, our gross margins can be
adversely affected in the short-term by significant increases in these costs. If we are not successful in passing along
higher commodity and other input costs to our customers over the long-term because of competitive pressures, our
profitability could be negatively impacted.
Increases in the market prices of manufacturing materials may negatively affect our profitability.
The costs of certain manufacturing materials used in our operations are sensitive to shifts in commodity market prices,
including the impact of the U.S. and retaliatory tariffs previously noted. In particular, the costs of steel, plastic,
aluminum components, and particleboard are sensitive to the market prices of commodities such as raw steel,
aluminum, crude oil, lumber, and resins. Increases in the market prices of these commodities, such as what we
experienced in fiscal 2019 for steel, may have an adverse impact on our profitability if we are unable to offset them
with strategic sourcing, continuous improvement initiatives or increased prices to our customers.
Disruptions within our dealer network could adversely affect our business.
Our ability to manage existing relationships within our network of independent dealers is crucial to our ongoing
success. Although the loss of any single dealer would not have a material adverse effect on the overall business, our
Herman Miller, Inc. and Subsidiaries 12
business within a given market could be negatively impacted by disruptions in our dealer network caused by the
termination of commercial working relationships, ownership transitions, or dealer financial difficulties.
If dealers go out of business or restructure, we may suffer losses because they may not be able to pay for products
already delivered to them. Also, dealers may experience financial difficulties, creating the need for outside financial
support, which may not be easily obtained. In the past, we have, on occasion, agreed to provide direct financial
assistance through term loans, lines of credit, and/or loan guarantees to certain dealers. Those activities increase our
financial exposure.
Financial Related Risks
We are subject to risks associated with self-insurance related to health benefits.
We are self-insured for our health benefits and maintain per employee stop loss coverage; however, we retain the
insurable risk at an aggregate level. Therefore unforeseen or catastrophic losses in excess of our insured limits could
have a material adverse effect on the Company’s financial condition and operating results. See Note 1 of the
Consolidated Financial Statements for information regarding the Company’s retention level.
Goodwill and indefinite-lived intangible asset impairment charges may adversely affect our operating results.
We have a substantial amount of goodwill and indefinite-lived intangible assets, primarily trademarks, on our balance
sheet. We test the goodwill and intangible assets for impairment on an annual basis and when events occur or
circumstances change that indicate that the fair value of the reporting unit or intangible asset may be below its
carrying amount. Fair value determinations require considerable judgment and are sensitive to inherent uncertainties
and changes in estimates and assumptions regarding actual and forecasted revenue growth rates and operating
margins and discount rates. Declines in market conditions, a trend of weaker than anticipated financial performance
for our reporting units or declines in projected revenue for our trademarks, a decline in our share price for a sustained
period of time, an increase in the market-based weighted average cost of capital or a decrease in royalty rates, among
other factors, are indicators that the carrying value of our goodwill or indefinite-life intangible assets may not be
recoverable. We may be required to record a goodwill or intangible asset impairment charge that, if incurred, could
have a material adverse effect on our financial statements.
Impairment of long-lived assets may adversely affect our operating results.
Our long-lived asset groups are subject to an impairment assessment when certain triggering events or circumstances
indicate that their carrying value may be impaired. If the carrying value exceeds our estimate of future undiscounted
cash flows of the operations related to the asset group, an impairment is recorded for the difference between the
carrying amount and the fair value of the asset group. The results of these tests for potential impairment may be
adversely affected by unfavorable market conditions, our financial performance trends, or an increase in interest rates,
among other factors. If as a result of the impairment test we determine that the fair value of any of our long-lived asset
groups is less than its carrying amount, we may incur an impairment charge that could have a material adverse effect
on our financial statements.
Costs related to product defects could adversely affect our profitability.
We incur various expenses related to product defects, including product warranty costs, product recall and retrofit
costs, and product liability costs. These expenses relative to product sales vary and could increase. We maintain
reserves for product defect-related costs based on estimates and our knowledge of circumstances that indicate the
need for such reserves. We cannot, however, be certain that these reserves will be adequate to cover actual product
defect-related claims in the future. Any significant increase in the rate of our product defect expenses could have a
material adverse effect on operations.
General Risks
13 2021 Annual Report
We are subject to risks and costs associated with protecting the integrity and security of our systems and
confidential information.
We collect certain customer-specific data, including credit card information, in connection with orders placed through
our eCommerce websites, direct-mail catalog marketing program, and retail studios. For these sales channels to
function and develop successfully, we and other parties involved in processing customer transactions must be able to
transmit confidential information, including credit card information and other personal information regarding our
customers, securely over public and private networks. Third parties may have or develop the technology or knowledge
to breach, disable, disrupt or interfere with our systems or processes or those of our vendors. While we believe we take
reasonable steps to protect the security and confidentiality of the information we collect, we cannot guarantee that our
security measures will effectively prevent others from obtaining unauthorized access to our information and our
customers’ information. The techniques used to obtain unauthorized access to systems change frequently and are not
often recognized until after they have been launched.
Any person who circumvents our security measures could destroy or steal valuable information or disrupt our
operations. Any security breach could cause consumers to lose confidence in the security of our information systems,
including our eCommerce websites or retail studios and choose not to purchase from us. Any security breach could
also expose us to risks of data loss, litigation, regulatory investigations, and other significant liabilities. Such a breach
could also seriously disrupt, slow or hinder our operations and harm our reputation and customer relationships, any of
which could damage our business.
A security breach includes a third party wrongfully gaining unauthorized access to our systems for the purpose of
misappropriating assets or sensitive information, loading corrupting data, or causing operational disruption. These
actions may lead to a significant disruption of the Company’s IT systems and/or cause the loss of business and
business information resulting in an adverse business impact, including: (1) an adverse impact on future financial
results due to theft, destruction, loss misappropriation, or release of confidential data or intellectual property; (2)
operational or business delays resulting from the disruption of IT systems, and subsequent clean-up and mitigation
activities; and (3) negative publicity resulting in reputation or brand damage with customers, partners or industry
peers.
The United States federal and state governments are increasingly enacting laws and regulations to protect consumers
against identity theft. Also, as our business expands globally, we are subject to data privacy and other similar laws in
various foreign jurisdictions. If we are the target of a cybersecurity attack resulting in unauthorized disclosure of our
customer data, we may be required to undertake costly notification procedures. Compliance with these laws will likely
increase the costs of doing business. If we fail to implement appropriate safeguards or to detect and provide prompt
notice of unauthorized access as required by some of these laws, we could be subject to potential fines, claims for
damages and other remedies, which could harm our business.
We are unable to control many of the factors affecting consumer spending. Declines in consumer spending on
furnishings could reduce demand for our products.
The operations of our Retail segment are sensitive to a number of factors that influence consumer spending, including
general economic conditions, consumer disposable income, unemployment, inclement weather, availability of
consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate
increases, inflation, and consumer confidence in future economic conditions. Adverse changes in these factors may
reduce consumer demand for our products, resulting in reduced sales and profitability.
A number of factors that affect our ability to successfully implement our retail studio strategy, including opening new
locations and closing existing studios, are beyond our control. These factors may harm our ability to increase the
sales and profitability of our retail operations.
Approximately 32 percent of the sales within our Retail segment are transacted within our retail studios. Additionally,
we believe our retail studios have a direct influence on the volume of business transacted through other channels,
including our consumer eCommerce and direct-mail catalog platforms, as many customers utilize these physical
spaces to view and experience products prior to placing an order online or through the catalog call center. Our ability
Herman Miller, Inc. and Subsidiaries 14
to open additional studios or close existing studios successfully will depend upon a number of factors beyond our
control, including:
Identification and availability of suitable studio locations
Success in negotiating new leases and amending or terminating existing leases on acceptable terms
Success of other retailers in and around our retail locations
Ability to secure required governmental permits and approvals
• General economic conditions
•
•
•
•
• Hiring and training skilled studio operating personnel
•
Landlord financial stability
Increasing competition for highly skilled and talented workers could adversely affect our business.
The successful implementation of our business strategy depends on our ability to attract and retain a skilled
workforce. The increasing competition for highly skilled and talented employees could result in higher compensation
costs, difficulties in maintaining a capable workforce, and leadership succession planning challenges.
Government and other regulations could adversely affect our business.
Government and other regulations apply to the manufacture and sale of many of our products. Failure to comply with
these regulations or failure to obtain approval of products from certifying agencies could adversely affect the sales of
these products and have a material negative impact on operating results.
Item 1B Unresolved Staff Comments
None
15 2021 Annual Report
Item 2 Properties
The Company owns or leases facilities located throughout the United States and several foreign countries. The
location, square footage and use of the most significant facilities at May 29, 2021 were as follows:
Owned Locations
Zeeland, Michigan
Spring Lake, Michigan
Holland, Michigan
Holland, Michigan
Holland, Michigan
Sheboygan, Wisconsin
Melksham, United Kingdom
Hildebran, North Carolina
Square Footage
(in Thousands)
771
583
357
293
238
208
170
93
Leased Locations
Batavia, Ohio
Dongguan, China
Atlanta, Georgia
Bangalore, India
Yaphank, New York
Mexico City, Mexico
New York City, New York
Hong Kong, China
Chicago, Illinois
Brooklyn, New York
Stamford, Connecticut
Square Footage
(in Thousands)
618
429
180
105
92
77
67
54
45
39
35
Use
Manufacturing, Warehouse, Office
Manufacturing, Warehouse, Office
Warehouse
Manufacturing, Office
Office, Design
Manufacturing, Warehouse, Office
Manufacturing, Warehouse, Office
Manufacturing, Office
Use
Warehouse
Manufacturing, Office
Manufacturing, Warehouse, Office
Manufacturing, Warehouse
Warehouse, Office
Warehouse
Office, Retail
Warehouse
Office, Retail
Warehouse, Retail
Office, Retail
The properties above are primarily used in the Company's segments as indicated below:
Herman Miller, Inc. and Subsidiaries 16
Segment Primarily Supported
North America Contract
International Contract
Retail
Corporate
Owned
Leased
Total
6
1
—
1
2
4
5
—
8
5
5
1
As of May 29, 2021, the Company operated 45 retail studios (including 35 operating under the DWR brand, 4 under the
HAY brand, 5 Herman Miller stores and a multi-brand Chicago store) that totaled approximately 414,000 square feet of
selling space. The Company also maintains administrative and sales offices and showrooms in various other locations
throughout North America, Europe, Asia/Pacific and Latin America. The Company considers its existing facilities to be
in good condition and adequate for its design, production, distribution, and selling requirements.
Item 3 Legal Proceedings
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion
of management, the outcome of such proceedings and litigation currently pending will not materially affect the
Company’s consolidated operations, cash flows and financial condition.
Information About Our Executive Officers
Certain information relating to executive officers of the Company as of May 29, 2021 is as follows:
Andrea R. Owen
President and
Chief Executive Officer
Age 56, elected as an
executive officer in 2018
B. Ben Watson
Chief Creative Officer
Age 56, elected as an
executive officer in 2010
Jacqueline H. Rice
General Counsel
Age 49, elected as an
executive officer in 2019
Jeffrey M. Stutz
Chief Financial Officer
Age 50, elected as an
executive officer in 2009
17 2021 Annual Report
Benjamin P.T. Groom
Chief Digital Officer
Age 37, elected as an
executive officer in 2019
Debbie Propst
President, Retail
Age 40, elected as an
executive officer in 2020
Jeffrey L. Kurburski
Chief Technology Officer
Age 55, elected as an
executive officer in 2018
Jeremy Hocking
President,
International Contract
Age 60, elected as an
executive officer in 2017
Kevin Veltman
Vice President, Investor
Relations & Treasurer
Age 46, elected as an
executive officer in 2015
Tim Straker
Chief Marketing Officer
Age 55, elected as an
executive officer in 2020
John Michael
President,
The Americas
Age 59, elected as an
executive officer in 2020
Megan Lyon
Chief Strategy Officer
Age 41, elected as an
executive officer in 2019
Richard Scott
Chief Manufacturing and
Operations Officer
Age 53, elected as an
executive officer in 2020
Except as discussed below, each of the named officers has served the Company in their current executive position for
more than five years.
Ms. Owen joined Herman Miller, Inc. in 2018 and serves as President and Chief Executive Officer. Prior to joining
Herman Miller, Ms. Owen spent twenty-five years at The Gap, Inc. where she most recently served as Global President
of Banana Republic.
Mr. Groom joined Herman Miller, Inc. in 2019 and serves as Chief Digital Officer. Prior to joining Herman Miller, Mr.
Groom spent six years with The Boston Consulting Group where he was a Principal member of the firm’s Technology
Advantage, Retail and Consumer practices.
Ms. Propst joined Herman Miller, Inc. in 2020 and serves as President of the Company's Retail segment. Prior to joining
Herman Miller, Ms. Propst spent seven years at Bed Bath and Beyond where she most recently served as President and
Chief Merchandising Officer of One Kings Lanes, as well as Chief Brand Officer for Bed Bath and Beyond.
Ms. Rice joined Herman Miller, Inc. in 2019 and serves as General Counsel. Prior to joining Herman Miller, Ms. Rice
served as Executive Vice President, Chief Risk & Compliance Officer at Target Corporation as well as Senior Counsel
and Chief Compliance Officer at General Motors Co.
Mr. Kurburski joined Herman Miller in 1990 and serves as Chief Technology Officer. Prior to joining Herman Miller, Mr.
Kurburski spent time in both the government and private IT sectors.
Mr. Hocking joined Herman Miller in 1984 and serves as President of Herman Miller International. Throughout his 37-
year career at Herman Miller, Mr. Hocking has held many international leadership positions, including UK Sales
Director, Vice President of Sales for Northern Europe, Vice President of International Marketing, Vice President Asia
Pacific, Senior Vice President of Strategic Planning, and Executive Vice President of Strategic Planning & Business
Development.
Mr. Michael joined Herman Miller, Inc. in 2017 and serves as President, The Americas. Prior to joining Herman Miller,
Mr. Michael held leadership positions at Staples, Ivan Allen Workspace, and Steelcase.
Herman Miller, Inc. and Subsidiaries 18
Ms. Lyon joined Herman Miller, Inc. in 2019 and serves as Chief Strategy Officer. Prior to joining Herman Miller, Ms.
Lyon spent eleven years with The Boston Consulting Group where she was a Partner and Managing Director leading the
firm’s West Coast Consumer and Retail Practice.
Mr. Straker joined Herman Miller in 2012 and serves as Chief Marketing Officer. Prior to joining Herman Miller, Mr.
Straker held a variety of design leadership and strategy roles for companies such as Apple, Lowe’s, Goodyear Tire &
Rubber, McDonald’s, Nationwide Insurance, SFERRA, Netjets, and the Food Network.
Mr. Scott joined Herman Miller, Inc. in 2006 and serves as Chief Manufacturing and Operations Officer. Prior to joining
Herman Miller, Mr. Scott spent his career in engineering and manufacturing with Jacobs Suchard Germany, Eurotunnel,
and DS Smith Packaging.
There are no family relationships between or among the above-named executive officers. There are no arrangements or
understandings between any of the above-named officers pursuant to which any of them was named an officer.
Item 4 Mine Safety Disclosures
Not applicable
19 2021 Annual Report
PART II
Item 5 Market for the Registrant's Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities
Share Price, Earnings and Dividends Summary
Herman Miller, Inc.'s common stock is traded on the Nasdaq Global Select Market System (Symbol: MLHR). As of
July 18, 2021, there were approximately 38,000 shareholders of record, including individual participants in security
position listings, of the Company's common stock.
Dividends were declared for the last three quarters of fiscal 2021 as approved by the Board of Directors. On April 13,
2021 the company's Board of Directors approved a quarterly cash dividend of 18.75 cents ($0.1875) per share that was
paid on July 15, 2021, to shareholders of record on May 29, 2021. While it is anticipated that the Company will continue
to pay quarterly cash dividends, the amount and timing of such dividends is subject to the discretion of the Board
depending on the Company's future results of operations, financial condition, capital requirements and other relevant
factors.
Issuer Purchases of Equity Securities
The Company has one share repurchase plan authorized by the Board of Directors on January 16, 2019, which provides
a share repurchase authorization of $250.0 million with no specified expiration date. The approximate dollar value of
shares available for purchase under the plans at May 29, 2021 was $236.7 million.
The following is a summary of share repurchase activity during the Company's fourth fiscal quarter ended May 29,
2021:
Total Number
of Shares (or
Units)
Purchased
Average
Price Paid
per Share
or Unit
Total Number of Shares (or
Units) Purchased as Part
of Publicly Announced
Plans or Programs
Maximum Number (or Approximate
Dollar Value) of Shares (or Units)
that May Yet be Purchased Under
the Plans or Programs (1)
— $
400 $
111 $
511
—
43.56
44.95
— $
400 $
111 $
511
236,731,127
236,713,705
236,708,715
Period
2/28/21-3/27/21
3/28/21-4/24/21
4/25/21-5/29/21
Total
(1) Amounts are as of the end of the period indicated
The Company may repurchase shares from time to 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
on their evaluation of market conditions, share price and other factors. The share repurchase program may be
suspended or discontinued at any time.
During the period covered by this report, the Company did not sell any shares of common stock that were not
registered under the Securities Act of 1933.
Herman Miller, Inc. and Subsidiaries 20
Stockholder Return Performance Graph
Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on
the Company's common stock with that of the cumulative total return of the Standard & Poor's 500 Stock Index and the
Nasdaq Composite Total Return for the five-year period ended May 29, 2021. The graph assumes an investment of
$100 on May 28, 2016 in the Company's common stock, the Standard & Poor's 500 Stock Index and the Nasdaq
Composite Total Return, with dividends reinvested.
Herman Miller, Inc.
S&P 500 Index
Nasdaq Composite Total Return
2016
2017
2018
2019
$
$
$
100 $
100 $
100 $
105 $
116 $
129 $
108 $
130 $
157 $
119
131
156
2020
80
$
145
$
$ 201
2021
$
167
$ 200
$ 293
Information required by this item is also contained in Item 12 of this report.
21 2021 Annual Report
Herman Miller, Inc.S&P 500 IndexNasdaq Composite Total Return201620172018201920202021$0$20$40$60$80$100$120$140$160$180$200$220$240$260$280$300
2021
2020
2019
2018
2017
Item 6 Selected Financial Data
(In millions, except key ratios and per share data)
Operating Results
Net sales
Gross margin
Selling, general, and administrative (1)
Impairment charges
Design and research
Operating earnings (loss)
$2,465.1
949.2
646.5
—
72.1
230.6
$2,486.6
910.7
669.7
205.4
74.0
(38.4)
Earnings (loss) before income taxes and equity income 226.4
178.8
Net earnings (loss)
332.3
Net cash provided by operating activities
(59.9)
Net cash used in investing activities
(347.7)
Net cash (used in) provided by financing activities
87.2
Depreciation and amortization
59.8
Capital expenditures
Common stock repurchased plus cash dividends paid
35.4
Key Ratios
Sales (decline) growth
Gross margin (2)
Selling, general, and administrative (1) (2)
Design and research (2)
Operating earnings (loss) (2)
Net earnings growth (decline)
After-tax return on net sales (3)
After-tax return on average assets (4)
After-tax return on average equity (5)
Share and Per Share Data
Earnings (loss) per share-diluted
Cash dividends declared per share
Book value per share at year end (6)
Market price per share at year end
Weighted average shares outstanding-diluted
(0.9)%
38.5
26.2
2.9
9.4
1,341.7
7.3
8.7
24.0
$2.92
0.56
14.39
47.80
59.4
(13.4)
(14.4)
221.8
(168.1)
244.0
79.5
69.0
63.0
(3.1)%
36.6
26.9
3.0
(1.5)
(109.0)
(0.6)
(0.8)
(2.1)
$(0.15)
0.63
10.94
23.02
58.9
$2,567.2
929.9
649.5
—
76.9
203.5
195.1
160.5
216.4
(165.0)
(91.9)
72.1
85.8
93.5
7.8%
36.2
25.3
3.0
7.9
24.7
6.3
10.5
23.2
$2.70
0.79
12.23
35.49
59.4
$2,381.2
873.0
621.0
—
73.1
178.9
168.1
128.7
166.5
(62.7)
2.5
66.9
70.6
88.9
4.5%
36.7
26.1
3.1
7.5
3.7
5.4
9.2
20.6
$2.12
0.72
11.22
32.85
60.3
$2,278.2
864.2
592.9
7.1
73.1
191.1
177.6
124.1
202.1
(116.3)
(74.6)
58.9
87.3
63.1
0.6%
37.9
26.0
3.2
8.4
(9.7)
5.4
9.8
22.3
$2.05
0.68
9.84
32.70
60.6
Financial Condition
Total assets
Working capital (7)
Current ratio (8)
Interest-bearing debt and related swap agreements (9)
Stockholders' equity
Total capital (10)
$2,061.9
390.7
1.8
285.7
849.6
1,135.3
$2,053.9
403.8
1.8
558.8
643.0
1,201.8
$1,569.3
215.2
1.5
282.8
719.2
1,002.0
$1,479.5
231.6
1.6
265.1
664.8
929.9
$1,306.3
106.2
1.3
197.8
587.7
785.5
(1) Selling, general, and administrative expenses include restructuring expenses in years that are applicable.
(2) Shown as a percent of net sales.
(3) Calculated as net earnings (loss) divided by net sales.
(4) Calculated as net earnings (loss) divided by average assets.
(5) Calculated as net earnings (loss) divided by average equity.
(6) Calculated as total stockholders' equity divided by common shares of stock outstanding.
(7) Calculated using current assets less current liabilities.
(8) Calculated using current assets divided by current liabilities.
(9) Amounts shown include the fair market value of the Company’s interest rate swap arrangement(s).
(10) Calculated as interest-bearing debt and related swap agreements plus stockholders' equity.
Herman Miller, Inc. and Subsidiaries 22
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
You should read the issues discussed in Management's Discussion and Analysis in conjunction with the Company's
Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in this Annual
Report on Form 10-K. Refer also to the information provided under the heading "Forward-Looking Statements" in this
Annual Report on Form 10-K.
Executive Overview
Herman Miller’s purpose statement is design for the good of humankind. At present, most customers come to the
Company for furnishing interior environments in corporate offices, healthcare settings, higher education institutions
and residential spaces. The Company's primary products include furniture systems, seating, storage, freestanding
furniture, healthcare environment products, casegoods, textiles and related technologies and services.
More than 100 years of innovative business practices and a commitment to social responsibility have established
Herman Miller as a recognized global company. The Company trades on the Nasdaq Global Select Market under the
symbol MLHR.
Subsequent to the end of fiscal 2021, the Company finalized the acquisition of Knoll, Inc. (“Knoll”) in a cash and stock
transaction valued at approximately $1.8 billion. This combination brings together two pioneering and iconic brands to
create MillerKnoll, one of the largest and most influential modern design companies in the world. Together we will
transform our industry and redefine modern design. With a broader portfolio, global footprint, and advanced digital
capabilities, our combined company will be poised to innovate and design the future for all the places where life
happens.
Herman Miller's products are sold internationally through controlled subsidiaries or branches in various countries
including the United Kingdom, Denmark, Canada, Japan, Mexico, Australia, Singapore, China, Hong Kong, India and
Brazil. The Company's products are offered elsewhere in the world primarily through independent dealerships or joint
ventures with customers in over 100 countries.
The Company is globally positioned in terms of manufacturing operations. In the United States, manufacturing
operations are located in Michigan, Georgia, Wisconsin and North Carolina. In Europe, the Company's manufacturing
presence is located in the United Kingdom. Manufacturing operations globally also include facilities located in China,
Brazil and India. The Company manufactures products using a system of lean manufacturing techniques collectively
referred to as the Herman Miller Performance System (HMPS). For its contract furniture business, Herman Miller strives
to maintain efficiencies and cost savings by minimizing the amount of inventory on hand. Accordingly, production is
order-driven with direct materials and components purchased as needed to meet demand. The standard
manufacturing lead time for the majority of our products is 10 to 20 days. These factors result in a high rate of
inventory turns related to our manufactured inventories.
A key element of the Company's manufacturing strategy is to limit fixed production costs by sourcing component parts
from strategic suppliers. This strategy has allowed the Company to increase the variable nature of its cost structure,
while retaining proprietary control over those production processes that the Company believes provide a competitive
advantage. As a result of this strategy, the Company's manufacturing operations are largely assembly-based.
A key element of the Company's growth strategy is to scale the Retail business through the Company's Design Within
Reach (DWR), HAY and Herman Miller retail operations. The Retail business provides a channel to bring Herman
Miller's iconic and design-centric products to retail customers, along with other proprietary and third-party products,
with a focus on design. The Company continues to transform its Retail business through the DWR retail studio
footprint, which will be complemented by a continued focus on improving margins through the development of
exclusive product designs and leveraging additional sales in DWR's contract, catalog and digital channels, as well as
the HAY brand, which was launched in North America in fiscal 2019.
23 2021 Annual Report
The Company is comprised of various operating segments as defined by generally accepted accounting principles in
the United States (U.S. GAAP). The operating segments are determined on the basis of how the Company internally
reports and evaluates financial information used to make operating decisions. The Company has identified the
following segments:
• North America Contract — Includes the operations associated with the design, manufacture, and sale of
furniture and textile products for work-related settings, including office, education and healthcare
environments, throughout the United States and Canada. The business associated with the Company's owned
contract furniture dealers is also included in the North America Contract segment. In addition to the Herman
Miller brand, this segment includes the operations associated with the design, manufacture and sale of high-
craft furniture products and textiles, including Geiger wood products, Maharam textiles, Nemschoff, and
naughtone.
•
•
International Contract — Includes the operations associated with the design, manufacture and sale of
furniture products, primarily for work-related settings in EMEA, Latin America, and Asia-Pacific.
Retail — Includes the operations associated with the sale of modern design furnishings and accessories to
third-party retail distributors, as well as direct to consumer sales through eCommerce, direct mailing catalogs
and Herman Miller, DWR and HAY stores and studios.
The Company also reports a corporate category consisting primarily of unallocated corporate expenses related to
general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information
technology, administrative and acquisition-related costs.
Core Strengths
The Company relies on the following core strengths in delivering solutions to customers:
•
•
Portfolio of Leading Brands and Products - Herman Miller is a globally-recognized, design brand known for
working with some of the most well-known and respected designers in the world. Over the years, it has
evolved into Herman Miller Group, a family of brands that collectively offers a variety of products for
environments where people live, learn, work, heal and play. Within the industries in which the Company
operates, Herman Miller, DWR, Geiger, Maharam, POSH, Nemschoff, Colebrook Bosson Saunders ("CBS"),
HAY, Maars Living Walls and naughtone are acknowledged as leading brands that inspire architects and
designers to create their best design solutions. This portfolio has enabled Herman Miller to connect with new
audiences, channels, geographies and product categories. Leveraging the collective brand equity of the
Herman Miller Group across the lines of business is an important element of the Company's business strategy.
Problem-Solving Design and Innovation - The Company is committed to developing research-based
functionality and aesthetically innovative new products and has a history of doing so, in collaboration with a
global network of leading independent designers. The Company believes its skills and experience in matching
problem-solving design with the workplace needs of customers provide the Company with a competitive
advantage in the marketplace. An important component of the Company's business strategy is to actively
pursue a program of new product research, design and development. The Company accomplishes this through
the use of an internal research and engineering staff that engages with third party design resources generally
compensated on a royalty basis.
• Operational Excellence - The Company was among the first in the industry to embrace the concepts of lean
manufacturing. HMPS provides the foundation for all the Company's manufacturing operations. The Company
is committed to continuously improving both product quality and production and operational efficiency. The
Company has extended this lean process work to its non-manufacturing processes as well as externally to its
manufacturing supply chain and distribution channel. The Company believes these concepts hold significant
promise for further gains in reliability, quality and efficiency.
Herman Miller, Inc. and Subsidiaries 24
• Omni-Channel Reach - The Company has built a multi-channel distribution capability that it considers unique.
Through contract furniture dealers, direct customer sales, retail stores and studios, eCommerce, catalogs, and
independent retailers, the Company serves contract and residential customers across a range of channels and
geographies.
• Global Scale - In addition to its global omni-channel distribution capability, the Company has a global network
of designers, suppliers, manufacturing operations and research and development centers that position the
Company to serve contract and residential customers globally. The Company believes that leveraging this
global scale will be an important enabler to executing its strategy.
Channels of Distribution
The Company's products and services are offered to most of its customers under standard trade credit terms between
30 and 45 days. For all the items below, revenue is recognized when control transfers to the customer. The Company's
products and services are sold through the following distribution channels:
•
•
•
•
•
Independent and Owned Contract Furniture Dealers - Most of the Company's product sales are made to a
network of independently owned and operated contract furniture dealerships doing business in many
countries around the world. These dealers purchase the Company's products and distribute them to end
customers. Many of these dealers also offer furniture-related services, including product installation.
Direct Contract Sales - The Company also sells products and services directly to end customers without an
intermediary (e.g., sales to the US federal government). In most of these instances, the Company contracts
separately with a dealer or third-party installation company to provide sales-related services.
Retail Studios - At the end of fiscal 2021 the Retail business unit included 45 retail studios (including 35
operating under the DWR brand, 4 under the HAY brand, 5 Herman Miller stores and a multi-brand Chicago
store). This business also operates 3 outlet studios. The retail and outlet studios are located in metropolitan
areas throughout North America.
eCommerce - The Company sells products through its online stores, in which products are available for sale
via the Company's website, hermanmiller.com, global eCommerce platforms, as well as through the dwr.com
and us.hay.com online stores. These sites complement our existing methods of distribution and extend the
Company's brand to new customers.
Direct-Mail Catalogs - The Company’s Retail business unit utilizes a direct-mail catalog program through its
DWR subsidiary. A regular schedule of catalog mailings is maintained throughout the fiscal year and these
serve as a key driver of sales across each of DWR’s channels, including retail studios and eCommerce
websites.
• Wholesale - Certain of the Company's products are sold on a wholesale basis to third-party retailers located in
various markets around the world.
Challenges Ahead
Like all businesses, the Company is faced with a host of challenges and risks. The Company believes its core strengths
and values, which provide the foundation for its strategic direction, have well prepared the Company to respond to the
inevitable challenges it will face in the future. While the Company is confident in its direction, it acknowledges the
risks specific to our business and industry. Refer to Item 1A for discussion of certain of these risk factors and Item 7A
for disclosures of market risk.
25 2021 Annual Report
Areas of Strategic Focus
Despite a number of risks and challenges, the Company believes it is well positioned to successfully pursue its
purpose of design for the good of humankind. As our business and industry continue to evolve, we are constantly
focused on staying ahead of the curve. With the composition of the office floor plate moving toward a broader variety
of furnishings, a greater desire for customization from our customers, new technologies, and trends towards
urbanization and more seamless transactions in the retail world, we have centered our overall value creation strategy
on four key priorities.
Unlock the Power of One Herman Miller
Coming together as a family of complementary brands will help achieve our goals of more
actively moving into the consumer marketplace, growing globally and making it easier to
do business with us. We strive to become more agile, invest in responsive innovation,
simplify our go-to-market strategy and continue to lead in product innovation across all our
businesses globally.
Build a Customer-centric, Digitally Enabled Business Model
Building a customer centric and digitally enabled business model is at the forefront of our
goal to become easier to do business with us. We will leverage our deep understanding of
customer journeys to deliver inspired products and a frictionless customer experience.
Along with strengthening the core technology backbone, we will also drive step-change in
data, analytics, marketing and brand capabilities.
Accelerate Profitable Growth
There are identified opportunities for growth ahead in each of our business segments. We
believe we are the only company in our industry with access to meaningful contract and
residential growth opportunities on a global scale. At the same time, with our ongoing
focus on operational excellence and specific profit improvement initiatives, we are focused
on continuous improvement of our cost structure.
Reinforce Our Commitment to Our People, Planet, Communities
With a legacy of corporate social responsibility that is deeply ingrained in our culture, we
will reinforce our commitment to our people, planet and communities in a more integrated
and deliberate way than ever before. We will focus on building, developing and retaining
world-class talent, shaping an inclusive and diverse workforce and elevating our Better
World commitment. Doing so will enable us to create value for our shareholders, customers
and employees, as well as for the broader communities and environment in which we
operate.
The Company believes its strategy continues to respond well to current and future realities in its markets. The
Company's strategic priorities are aimed at creating a sustainable and diverse revenue model that puts the customer
at the center of everything we do and leverages enabling digital capabilities to fully realize that vision.
Herman Miller, Inc. and Subsidiaries 26
Business Overview
The following is a summary of the significant events and items impacting the Company's operations for the year ended
May 29, 2021:
•
The Company entered into strategic agreements during the fiscal year, including agreements for (i) the
acquisition of Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman
Miller common stock for each outstanding share of Knoll common stock and (ii) the acquisition of all of the
outstanding shares of Knoll's preferred stock for approximately $253 million in cash in the aggregate. This
transaction was finalized subsequent to the end of the fiscal year.
• Net sales were $2,465.1 million, representing a decrease of 0.9% when compared to the prior year. The
decrease in net sales was driven primarily by decreased sales volumes in the North America Contract segment,
partially offset by increased demand with the Retail segment, the impact the acquisition of HAY and
naughtone; and incremental list price increases, net of contract price discounting. On an organic basis, net
sales were $2,345.3 million(*), representing a decrease of 5.7% when compared to the prior year.
• Gross margin was 38.5% as compared to 36.6% in the prior year. The increase in gross margin was driven
primarily by favorable channel and product mix combined with incremental list price increases, partially offset
by lower overhead leverage due to decreased volumes as well as an increase in commodity market prices.
• Operating expenses decreased by $230.5 million or 24.3% as compared to the prior year. Operating expenses
in the prior year included non-cash impairment charges of $205 million. In the current year, operating
expenses included acquisition and integration charges of $11.0 million, and restructuring costs of $2.7
million. Restructuring costs related mainly to severance and outplacement benefits associated with workforce
reductions and profit improvement initiatives implemented during the previous year.
•
•
The effective tax rate was 21.2% for fiscal 2021 compared to negative 44.9% for the prior year. Excluding the
impact of adjustments related to restructuring and other special charges recorded, a portion of which were not
deductible for tax purposes, the effective tax rate for the prior year was 19.9%(*). This rate reflected both
provision to return adjustments and the accrual of withholding taxes related to planned repatriation of cash
from certain foreign jurisdictions.
Diluted earnings per share for the full year totaled $2.92 compared to a loss per share of $0.15 last year. On an
adjusted basis, diluted earnings per share totaled $3.05(*) in fiscal 2021 compared to $2.61(*) in fiscal 2020,
behind the strength of improved gross margins and well-managed operating expenses.
•
The Company declared cash dividends of $0.56 per share compared to $0.63 per share in the prior year.
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 Home Office, Upholstery, Outdoor, Storage, and Accessories, saw a
ramp-up in demand during the first three quarters of fiscal 2021 and this continued into the fourth quarter of
fiscal 2021.
The disruption from the COVID-19 pandemic has adversely impacted our fiscal 2021 results as contract
furniture industry order trends, as reported by the Business and Institutional Furniture Manufacturers Herman
Miller, Inc. and Subsidiaries 25 Association ("BIFMA"), have highlighted near-term demand pressures from the
slowdown in economic activity from the pandemic in our North America Contract segment. Our International
Contract segment has also been impacted, although many of the markets internationally have shown signs of
faster economic recovery.
27 2021 Annual Report
•
•
•
The Company is monitoring the resolution of various trade policy negotiations between the U.S. and key
trading partners as well as the post-Brexit impact on the U.K. and European Union. These negotiations create
uncertainty in key markets, which, if unresolved in the near term, could negatively impact customer demand.
The Company continues to navigate the impact of 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 fourth quarter of fiscal 2021 was higher than the same
period of the prior year and negatively impacted consolidated results on a year-over-year basis. The price of
steel unfavorably impacted consolidated gross margin in the fourth quarter of fiscal 2021. However, ongoing
cost reduction initiatives and a planned price increase in the first quarter of fiscal 2022 will help offset these
pressures over time.
The remaining sections of Item 7 include additional analysis of the fiscal year ended May 29, 2021, including
discussion of significant variances compared to the prior year period. A detailed review of our fiscal 2020 performance
compared to our fiscal 2019 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended May 30,
2020.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
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 have positioned us well to
capitalize on emerging opportunities as our customers' needs have changed throughout the COVID-19 crisis. This has
allowed for our Retail business to take advantage of the unanticipated emerging work-from-home trend as well as
"home is my castle" trends as consumers are focusing on and upgrading their broader home environments.
Employee Safety and Health
The health and well-being of employees remains top of mind. We are taking a regional approach to restrictions based
on active COVID-19 case levels and local health authority recommendations. Contact tracing is active in all regions to
help track and control the spread of the virus. We also continue to employ a variety of other safety measures including
domestic and international travel restrictions, extensive cleaning protocols, temperature and health screenings,
personal protective equipment, and visitor safety guidelines. We will be working with our employees around the globe
to understand vaccine distribution and create time for every employee to be vaccinated if they wish to do so.
Customer Focus
The digital investments we’ve made allowed us to pivot quickly and capitalize on a new set of opportunities when our
customers’ purchasing behaviors changed. These investments include reimagined Design Within Reach and Herman
Miller websites, a Work from Home landing page on Herman Miller’s website, a Work from Home online assessment
tool, and new digital platforms that are creating greater efficiencies for contract and dealer audiences. The latest in a
series of innovative solutions designed to accelerate growth in the Contract business is Herman Miller Professional – a
digital ecosystem designed to meet customer demand for a simple and efficient design and product specification
solution. Herman Miller Professional will deliver seamless online experiences to small- and medium sized businesses,
a segment that has historically been underserved by the traditional contract furniture model, while also helping our
dealers capture new clients and revenue. Businesses will be able to design their spaces with product from the Herman
Miller family of brands, leverage an online quoting and purchasing process to complete their order, and select from
several delivery options, including white glove service where appropriate. Our first Herman Miller retail seating
concept stores are open in Los Angeles, New York Hudson Yards, Tokyo, Austin, Chicago Fulton Market, Century City
Herman Miller, Inc. and Subsidiaries 28
Los Angeles and Greenwich, CT. In the early days, these stores have exceeded our initial revenue and operating profit
expectations as we seek to educate customers about the health benefits of ergonomic seating. We remain uniquely
positioned to serve our customers through multiple channels 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. Herman
Miller Group is ready to capture the many opportunities caused by this shift as our commercial customers rethink their
real estate portfolios, redesign their workplaces, and seek to provide healthy and productive home work
environments.
Manufacturing and Retail Operations
Manufacturing facilities continue to operate at near-normal capacity with enhanced safety precautions. All retail
studios and stores are open in some capacity; with some open to the public and some open in limited capacity. All
facilities operate within the context of and are subject to local guidance from government and health authorities and
we will continue to adjust to ensure we are acting in accordance with these guidelines.
Cost Reductions
In fiscal 2020, the Company implemented a range of actions aimed at temporarily reducing costs and preserving
liquidity. In fiscal 2021, the Company, together with its Board of Directors, made the decision to move forward with
several restorative actions. This included eliminating the 10% reduction in compensation, the introduction of a
modified bonus program and re-establishing a quarterly cash dividend program. In addition, the Company has
reinstated the previously suspended employer-paid retirement plan contributions in the fourth quarter of fiscal 2021,
and has also elected to make a catch-up contribution for the employer-paid retirement plan contributions that were
suspended for a majority of fiscal 2021. Despite these various reinstatements, the Company continues to tightly
control operating expenses in the face of lingering economic uncertainty.
Reconciliation of Non-GAAP Financial Measures
This report contains references to Organic net sales, Adjusted earnings per share - diluted, and adjusted effective tax
rate which are non-GAAP financial measures. Organic Growth (Decline) represents the change in reported Net sales,
excluding currency translation effects and the impact of acquisitions. Adjusted Earnings per Share represents reported
diluted earnings per share excluding the impact from adjustments related to purchase accounting adjustments related
to the HAY and naughtone investments, impairment charges, restructuring expenses and other special charges or
gains, including related taxes. Restructuring expenses include actions involving facilities consolidation and
optimization, targeted workforce reductions, and costs associated with an early retirement program. Special charges
include certain costs arising as a direct result of COVID-19, and retroactive payments related to reinstated employee
benefits. Retroactive payments related to reinstated employee benefits were an adjustment to Earnings per Share in
fourth quarter, but not for the full year. Adjusted effective tax rate reflects both provision to return adjustments and the
accrual of withholding taxes related to planned repatriation of cash from certain foreign jurisdictions.
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 items that are not
representative of the ongoing operations of the Company.
Organic net sales and Adjusted earnings per share - diluted are not measurements of our financial performance under
GAAP and should not be considered as alternatives to the related GAAP measurement. These non-GAAP measurements
have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our
results as reported under GAAP. Our presentation of non-GAAP measures should not be construed as an indication that
our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing
prominence of our GAAP results and using the non-GAAP financial measures only as a supplement.
Herman Miller, Inc. and Subsidiaries 29
The following table reconciles Net sales to Organic net sales for the years ended as indicated below (in millions):
May 29, 2021
May 30, 2020
Net Sales, as reported
North
America
$1,194.0
International Retail
$669.0
$602.1
Total
$2,465.1
North
America
$1,598.2
International Retail
$502.8
$385.6
Total
$2,486.6
% change from PY
(25.3)%
33.1%
56.1%
(0.9)%
Proforma Adjustments
Acquisitions
(10.6)
(87.3)
—
(97.9)
—
—
—
—
Currency Translation
Effects (1)
Organic net sales
% change from PY
(1) Currency translation effects represent the estimated net impact of translating current period sales using the average exchange
rates applicable to the comparable prior year period
(21.9)
$2,345.3
(5.7)%
(1.8)
$1,181.6
(26.1)%
(0.5)
$601.6
56.0%
(19.6)
$562.1
11.8%
—
$2,486.6
—
$1,598.2
—
$502.8
—
$385.6
The following table reconciles EPS to Adjusted EPS for the years ended as of indicated below:
Earning (Loss) per Share - Diluted
Less: Gain on consolidation of equity method investments
Less: Gain on legal settlement, after tax
Add: Special charges, after tax
Add: Impairment charges, after tax
Add: Acquisition and integration charges, after tax
Add: Restructuring expenses, after tax
Adjusted Earnings per Share - Diluted
May 29, 2021 May 30, 2020
$
2.92 $
(0.15)
—
(0.06)
0.02
—
0.15
0.02
3.05 $
(0.63)
—
0.15
2.90
—
0.34
2.61
$
Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per
Share) – Diluted
59,389,598
58,920,653
Note: The adjustments above are net of tax. For the twelve months ended May 29, 2021 and May 30, 2020, the tax impact of the
adjustments were $0.01 and $0.62, respectively.
Herman Miller, Inc. and Subsidiaries 30
Financial Results
The following is a comparison of our annual results of operations and year-over-year percentage changes for the
periods indicated:
(Dollars in millions)
Net sales
Cost of sales
Gross margin
Operating expenses
Operating earnings (loss)
Gain on consolidation of equity method investments
Other expenses, net
Earnings (loss) before income taxes and equity income
Income tax expense
Equity income from nonconsolidated affiliates, net of tax
Net earnings (loss)
Net earnings (loss) attributable to redeemable noncontrolling interests
Net earnings (loss) attributable to Herman Miller, Inc.
Fiscal 2021
$ 2,465.1 $ 2,486.6
1,575.9
910.7
949.1
(38.4)
36.2
11.2
(13.4)
6.0
5.0
(14.4)
(5.3)
(9.1)
Fiscal 2020 % Change
(0.9) %
(3.8) %
4.2 %
(24.3) %
n/a
n/a
(62.5) %
n/a
n/a
(94.0) %
n/a
n/a
n/a
1,515.9
949.2
718.6
230.6
—
4.2
226.4
47.9
0.3
178.8
5.7
173.1 $
$
The following table presents, for the periods indicated, the components of the Company's Consolidated Statements of
Comprehensive Income as a percentage of net sales:
Net sales
Cost of sales
Gross margin
Operating expenses
Operating (loss) earnings
Gain on consolidation of equity method investments
Other expenses, net
Earnings (loss) before income taxes and equity income
Income tax expense
Equity income from nonconsolidated affiliates, net of tax
Net earnings (loss)
Net earnings (loss) attributable to redeemable noncontrolling interests
Net earnings (loss) attributable to Herman Miller, Inc.
Fiscal 2021
Fiscal 2020
100.0 %
61.5
38.5
29.2
9.4
—
0.2
9.2
1.9
—
7.3
0.2
7.0
100.0 %
63.4
36.6
38.2
(1.5)
1.5
0.5
(0.5)
0.2
0.2
(0.6)
(0.2)
(0.4)
31 2021 Annual Report
Net Sales
The following chart presents graphically the primary drivers of the year-over-year change in Net sales. The amounts
presented in the bar graph are expressed in millions and have been rounded.
Net sales decreased $21.5 million or 0.9% compared to the prior year fiscal period. The following items primarily
contributed to the change:
•
•
•
•
•
Increased sales volumes within the Retail segment of approximately $201 million and the International
segment of approximately $65 million.
Increase of approximately $98 million due to the acquisitions of HAY and naughtone.
Incremental list price increases, net of contract price discounting, of approximately $17 million.
Foreign currency translation had a favorable impact on net sales of approximately $22 million.
Decreased sales volumes within the North America segment of approximately $425 million, primarily due to
the impact of the COVID-19 pandemic.
Gross Margin
Gross margin was 38.5% for fiscal 2021 as compared to 36.6% for fiscal 2020. The following factors summarize the
major drivers of the year-over-year change in gross margin percentage:
•
•
•
•
A favorable shift in channel mix increased gross margin by approximately 80 basis points.
Product mix, material performance and ongoing profitability improvement efforts increased gross margin by
approximately 140 basis points.
Incremental list price increases, net of contract price discounting, increased gross margin by approximately 40
basis points.
Lower overhead leverage decreased gross margin by approximately 70 basis points.
Herman Miller, Inc. and Subsidiaries 32
Change in Net SalesFiscal 2021 Compared to Fiscal 2020$2,487$201$98$65$22$17$(425)$2,465FY20Retail VolumeAcquisitionsInternational VolumeForeign CurrencyNet Price IncreasesNorth America VolumeFY21 Operating Expenses
The following chart presents graphically the primary drivers of the year-over-year change in Operating expenses. The
amounts presented in the bar graph are expressed in millions and have been rounded.
Operating expenses decreased by $230.5 million or 24.3% compared to the prior year fiscal period. The following
factors contributed to the change:
•
•
The acquisition of HAY and naughtone increased Operating expenses by approximately $23 million and
charges related to the Knoll acquisition increased current year Operating expenses by approximately $11
million.
IT costs increased approximately $4 million driven primarily by increased investments within the Company's
digital and eCommerce platforms.
• Non-cash charges of $205 million in the prior year for the impairment of goodwill, intangible assets and right
•
•
•
•
of use assets related to Design Within Reach, Maharam, HAY and naughtone.
Restructuring expenses decreased by approximately $24 million, primarily related to voluntary and involuntary
reductions in the Company's North American and International workforces that were substantially completed
in the prior year.
Lower marketing and selling expenses of approximately $16 million primarily within the North America
Contract segment due to lower sales volume.
Travel costs were approximately $14 million lower due to decreased travel as a result of COVID-19.
Lower warranty expense of approximately $9 million. Decreased warranty costs were due to lower sales
volumes and claims experience within the North America Contract segment.
Other Income/Expense
Net other expenses for fiscal 2021 was $4.2 million compared to $11.2 million in fiscal 2020. The change was primarily
the result of favorable legal settlements of approximately $4.3 million in fiscal 2021.
Income Taxes
See Note 11 of the Consolidated Financial Statements for additional information.
33 2021 Annual Report
Change in Operating ExpensesFiscal 2021 Compared to Fiscal 2020$949$23$11$4$(205)$(24)$(16)$(14)$(9)$719FY20AcquisitionsAcquisition ChargesIT CostsImpairment ChargesRestructuringMarketingT&EWarrantyFY21 Operating Segments Results
The business is comprised of various operating segments as defined by generally accepted accounting principles in
the United States. These operating segments are determined on the basis of how the Company internally reports and
evaluates financial information used to make operating decisions. The segments identified by the Company include
North America Contract, International Contract, Retail and Corporate. For descriptions of each segment, refer to Note 14
of the Consolidated Financial Statements.
The charts below present the relative mix of Net sales and Operating earnings across each of the Company's segments.
This is followed by a discussion of the Company's results, by segment.
Herman Miller, Inc. and Subsidiaries 34
Net Sales by Reportable Operating SegmentFiscal Year Ended May 29, 2021 (in Millions)$1,194$669$602North AmericaInternationalRetailNet Sales by Reportable Operating SegmentFiscal Year Ended May 30, 2020 (in Millions)$1,598$503$386North AmericaInternationalRetailOperating Earnings (Loss)by Reportable Operating SegmentFiscal Year Ended May 29, 2021 (in Millions)$74$93$117$(54)North AmericaInternationalRetailCorporateOperating Earnings (Loss)by Reportable Operating SegmentFiscal Year Ended May 30, 2020 (in Millions)$131$18$(148)$(39)North AmericaInternationalRetailCorporate North America Contract ("North America")
(Dollars in millions)
Net sales
Gross margin
Gross margin %
Operating earnings
Operating earnings %
Fiscal 2021
$ 1,194.0
413.4
34.6 %
74.1
6.2 %
Fiscal 2020
$ 1,598.2
580.6
Change
$ (404.2)
(167.2)
36.3 %
130.9
8.2 %
(1.7) %
(56.8)
(2.0) %
Net sales decreased 25.3%, or 26.1%(*) on an organic basis, over the prior year due to:
•
•
•
•
Decreased sales volumes within the North America segment of approximately $424.5 million, primarily due to
the outbreak of COVID-19; offset by
Incremental list price increases, net of discounting, of approximately $7.9 million
Approximately $10.6 million due to the acquisition of naughtone; and
The impact of foreign currency translation which increased sales by approximately $1.8 million.
Operating earnings decreased $56.8 million, or 43.4%, over the prior year due to:
•
•
Decreased gross margin of $167.2 million due to decreased sales volumes as well as a decrease in gross
margin percentage of 170 basis points. The decrease in gross margin percentage was due primarily to lower
overhead and labor leverage offset in part by lower overhead spend; offset by
Decrease in operating expenses of $110.4 million. This reduction was driven by lower marketing and selling
expenses of approximately $15 million, lower travel costs of approximately $8 million, lower warranty costs of
approximately $9 million and lower restructuring expenses of $14.9 million.
International Contract ("International")
(Dollars in millions)
Net sales
Gross margin
Gross margin %
Operating earnings
Operating earnings %
Fiscal 2021
$ 669.0
238.9
Fiscal 2020
$ 502.8
168.5
$
Change
166.2
70.4
35.7 %
93.0
13.9 %
33.5 %
18.2
3.6 %
2.2 %
74.8
10.3 %
Net sales increased 33.1%, or 11.8%(*) on an organic basis, over the prior year due to:
•
•
•
•
Approximately $87 million due to the acquisition of HAY and naughtone
Increased sales volumes within the International segment of approximately $64.9 million, primarily driven by
growth within the Asia-Pacific and EMEA regions. These regions benefited from a relatively early recovery to
the COVID pandemic and associated return to the office.
The impact of foreign currency translation which increased sales by approximately $19.6 million; offset by
Incremental discounting, net of list price increases, of approximately $5.6 million.
Operating earnings increased $74.8 million, or 411.0%, compared to the prior year due to:
•
•
Increased gross margin of $70.4 million due to the increase in sales explained above, and increased gross
margin percentage of 220 basis points due primarily to favorable changes in channel and product mix.; and
Decreased operating expenses of $4.4 million driven primarily by the prior year non-cash charge of $23.2
million for the impairment of intangible assets related to HAY and naughtone. This was offset in part by
increased operating expenses related to the acquisition of Hay and naughtone.
35 2021 Annual Report
Retail
(Dollars in millions)
Net sales
Gross margin
Gross margin %
Operating earnings
Operating earnings %
Fiscal 2021
$ 602.1
296.9
49.3 %
117.2
19.5 %
Fiscal 2020
$ 385.6
161.6
41.9 %
(148.3)
(38.5) %
Change
$ 216.5
135.3
7.4 %
265.5
58.0 %
Net sales increased 56.1% as reported and 56.0% on an organic(*) basis, over the prior year due to:
•
•
Increased sales volumes of approximately $201.0 million which were driven by increased demand across
multiple product categories, with the largest increase relating to workplace furnishings; and
Incremental price increases, net of discounting, of approximately $15.0 million.
Operating earnings increased $265.5 million over the prior year due to:
•
•
Increased gross margin of $135.3 million due to the increase in sales explained above, as well as an increased
gross margin percentage of 740 basis points due primarily to changes in channel and product mix and the
impact of incremental price increases; and
Decreased operating expenses of $130.2 million were driven primarily by non-cash charges recorded in the
prior year of 139.0 million related to the impairment of goodwill, intangible assets and right of use assets held
by DWR. This was offset in part by increased investment in digital and eCommerce capabilities, the initial
rollout of Herman Miller-branded seating stores, and increased variable selling expenses and incentives.
Corporate
Corporate unallocated expenses totaled $53.7 million for fiscal 2021, an increase of $14.5 million from fiscal 2020. The
increase was driven primarily by $11.0 million of acquisition and integration costs associated with the Knoll
acquisition that was finalized subsequent to the close of fiscal 2021.
(*) Non-GAAP measurements; see accompanying reconciliations and explanations.
Liquidity and Capital Resources
The table below summarizes the net change in cash and cash equivalents for the fiscal years indicated.
(In millions)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net change in cash and cash equivalents
Cash Flow — Operating Activities
Fiscal Year Ended
2020
2021
$
$
$
$
$
221.8
332.3 $
(168.1)
(59.9) $
244.0
(347.7) $
(2.9)
17.7 $
(57.6) $ 294.8
Cash provided by operating activities in fiscal 2021 was $332.3 million compared to $221.8 million in the prior year.
The increase in cash generated from operations in the current year, compared to the prior year, was primarily due to:
•
•
•
Prior year net earnings included a non-taxable non-cash gain on consolidation of an equity method investment
of $36.2 million as well as a non-cash impact of $205.4 of impairment charges; and
Restructuring expenses of $2.7 million compared to $26.4 million in the prior year; and
An increase in current assets primarily driven by an increase in accounts receivable of $14.8 million in the
current year compared to a decrease of $68.6 million in the prior year. The increase in accounts receivable is
primarily due to timing and increase in sales at the end of fiscal 2021 compared to fiscal 2020; and
Herman Miller, Inc. and Subsidiaries 36
•
An increase in current liabilities driven by the following:
◦
◦
Increase in accounts payable of $43.2 million in the current year compared to a decrease of $59.5
million in the prior year which was a result of timing and greater production in fiscal 2021 compared to
fiscal 2020 due to manufacturing shut downs in the prior year; and
Increase in accrued liabilities of $15.1 million in the current year compared to a decrease of $32.0
million in the prior year driven by increases in compensation in the current year offset by a decrease in
accrued vacation.
Cash Flow — Investing Activities
Cash used in investing activities in fiscal 2021 totaled $59.9 million compared to $168.1 million in the prior year. The
decrease in cash outflow in the current year, compared to the prior year, was primarily a result of the following:
•
•
•
Prior year cash outflows of $111.2 million for the additional investments in naughtone and HAY; and
A decrease in capital expenditures of $9.2 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 the office facility in the United
Kingdom in the current year of $14.0 million.
At the end of the fiscal 2021, there were outstanding commitments for capital purchases of $46.5 million. The
Company plans to fund these commitments with cash on hand and/or cash generated from operations. The Company
expects capital spending in fiscal 2022 to be between $140 million and $150 million, which will be primarily related to
investments in the Company's facilities and equipment along with the inclusion of Knoll in fiscal year 2022.
Cash Flow — Financing Activities
Cash used in financing activities was $347.7 million in fiscal 2021 as compared to cash provided by financing activities
of $244.0 million in fiscal 2020. The items below represent the major factors driving the year-over-year increase in
cash flow used in financing activities:
•
•
•
•
During the first quarter of fiscal 2021 the Company paid down the $265.0 million draw on its syndicated
revolving line of credit that was taken in the fourth quarter of fiscal 2020. Additionally, in the fourth quarter of
fiscal 2021, the Company repaid $50.0 million of private placement notes that were due March 1, 2021; and
Lower employer-benefit related stock issuances in the current year. The Company issued $5.0 million in
common stock related to these programs during the current fiscal year compared to $15.6 million in fiscal
2020; offset in part by
Common stock repurchased of $0.9 million in the current year compared to $26.6 million in the prior year; and
The prior year purchase of the remaining Herman Miller Consumer Holdings, Inc. redeemable noncontrolling
interests for $20.3 million.
Sources of Liquidity
In addition to steps taken to protect its workforce and manage business operations, the Company has taken actions to
safeguard its capital position in the current environment. The Company is closely managing spending levels, capital
investments, and working capital, and has temporarily suspended open market share repurchase activity as part of
managing cash flows.
At the end of fiscal 2021, the Company had a well-positioned balance sheet and liquidity profile. In addition to cash
flows from operating activities, the Company 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 6 to the Consolidated Financial Statements.
(In millions)
Cash and cash equivalents
Marketable securities
Availability under revolving lines of credit
May 29, 2021 May 30, 2020
454.0
$
7.0
$
0.6
$
396.4 $
7.7 $
265.2 $
37 2021 Annual Report
Of the cash and cash equivalents noted above at the end of fiscal 2021, the Company had $213.7 million of cash and
cash equivalents held outside the United States. In addition, the Company had marketable securities of $7.7 million
held by one of its international wholly-owned subsidiaries.
The Company’s syndicated revolving line of credit, which expires on August 28, 2024, provides the Company with up to
$500 million in revolving variable interest borrowing capacity and includes an "accordion feature" allowing the
Company to increase, at its option and subject to the approval of the participating banks, the aggregate borrowing
capacity of the facility by up to $250 million. Outstanding borrowings bear interest at rates based on the prime rate,
federal funds rate, LIBOR or negotiated rates as outlined in the agreement. Interest is payable periodically throughout
the period if borrowings are outstanding.
As of May 29, 2021, the total debt outstanding related to borrowings under the syndicated revolving line of credit was
$225.0 million with available borrowings against this facility of $265.2 million.
The subsidiary holding the Company's marketable securities is taxed as a United States taxpayer at the Company's
election. Consequently, for tax purposes, all United States tax impacts for this subsidiary have been recorded. The
Company intends to repatriate $107.0 million in cash held in certain foreign jurisdictions and as such has recorded a
deferred tax liability related to foreign withholding taxes on these future dividends received in the U.S. from foreign
subsidiaries of $0.7 million. The Company intends to remain indefinitely reinvested in the remaining undistributed
earnings outside the U.S.
The Company believes that its financial resources are adequate to provide for its operations for at least the next 12
months and will allow it to manage the impact of COVID-19 on the Company's business operations for the foreseeable
future. The Company will continue to evaluate its financial position in light of future developments, particularly those
relating to COVID-19 and the Knoll acquisition.
Contingencies
The Company is involved in legal proceedings and litigation arising in the ordinary course of business. In the opinion
of management, the outcome of such proceedings and litigation currently pending will not materially affect the
Company's Consolidated Financial Statements. Refer to Note 13 of the Consolidated Financial Statements for more
information relating to contingencies.
Basis of Presentation
The Company's fiscal year ends on the Saturday closest to May 31. The fiscal years ended May 29, 2021, May 30, 2020
and June 1, 2019 contained 52 weeks.
Contractual Obligations
Contractual obligations associated with our ongoing business and financing activities will result in cash payments in
future periods. The following table summarizes the amounts and estimated timing of these future cash payments.
Further information regarding debt obligations can be found in Note 6 of the Consolidated Financial Statements.
Additional information related to operating leases can be found in Note 7 of the Consolidated Financial Statements.
(In millions)
Short-term borrowings and long-term debt (1)
Estimated interest on debt obligations (1)
Operating leases
Purchase obligations (2)
Pension and other post employment benefit plans
funding (3)
Stockholder dividends (4)
Other (5)
Total
Payments due by fiscal year
Total
2022
2023-2024
2025-2026
$
277.1 $
66.0
260.8
70.8
2.2 $
9.1
42.3
62.9
— $
18.2
81.5
7.9
Thereafter
49.9
20.5
72.1
—
225.0 $
18.2
64.9
—
27.6
11.1
15.1
2.5
11.1
5.2
$
728.5 $ 135.3 $
5.1
—
4.1
116.8 $
5.4
—
1.4
314.9 $
14.6
—
4.4
161.5
Herman Miller, Inc. and Subsidiaries 38
(1) Includes the current portion of long-term debt. Contractual cash payments on long-term debt obligations are disclosed herein
based on the amounts borrowed as of May 29, 2021 and the maturity date of the underlying debt. Estimated future interest
payments on our outstanding interest-bearing debt obligations are based on interest rates as of May 29, 2021. Actual cash outflows
may differ significantly due to changes in borrowings or interest rates.
(2) Purchase obligations consist of non-cancelable purchase orders and commitments for goods, services, and capital assets.
(3) Pension plan funding commitments are known for a 12-month period for those plans that are funded; unfunded pension and
post-retirement plan funding amounts are equal to the estimated benefit payments. As of May 29, 2021, the total projected benefit
obligation for our domestic and international employee pension benefit plans was $141.9 million.
(4) Represents the dividend payable as of May 29, 2021. Future dividend payments are not considered contractual obligations until
declared.
(5) Other contractual obligations primarily represent long-term commitments related to deferred and supplemental employee
compensation benefits, and other post-employment benefits.
Other Future Obligations
The Company entered into strategic agreements during the fiscal year, including agreements for (i) the acquisition of
Knoll’s common stock for $11.00 per share in cash, without interest, and 0.32 shares of Herman Miller common stock
for each outstanding share of Knoll common stock and (ii) the acquisition of all of the outstanding shares of Knoll's
preferred stock for approximately $253 million in cash in the aggregate. This transaction was finalized subsequent to
the end of the fiscal year. The transaction was funded with a combination of new debt, as discussed in Note 19 of the
Consolidated Financial Statements, and cash on our balance sheet.
Off-Balance Sheet Arrangements — Guarantees
We provide certain guarantees to third parties under various arrangements in the form of product warranties, loan
guarantees, standby letters of credit, lease guarantees, performance bonds and indemnification provisions. These
arrangements are accounted for and disclosed in accordance with Accounting Standards Codification (ASC) Topic 460,
"Guarantees" as described in Note 13 of the Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Our goal is to report financial results clearly and understandably. We follow accounting principles generally accepted
in the United States in preparing our Consolidated Financial Statements, which require us to make certain estimates
and apply judgments that affect our financial position and results of operations. We continually review our accounting
policies and financial information disclosures. These policies and disclosures are reviewed at least annually with the
Audit Committee of the Board of Directors. The following is a summary of our more significant accounting policies that
require the use of estimates and judgments in preparing the financial statements.
Business Combinations
We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed
based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of
these identifiable assets and liabilities is allocated to goodwill. The allocation of the purchase consideration requires
management to make significant estimates and assumptions, especially with respect to intangible assets. These
estimates are reviewed with our advisors and can include, but are not limited to, future expected cash flows related to
acquired customer relationships, trademarks and know-how/designs and require estimation of discount rates and
royalty rates. As such, our estimates of fair value are based upon reasonable assumptions but which are inherently
uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement
period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any
subsequent adjustments are recorded to earnings. During 2020, management considered the acquisition of HAY a
material acquisition. There were no other material acquisitions during fiscal 2020 or 2021; however, the acquisition of
Knoll, which closed subsequent to year end is a material acquisition. See Note 3 to the Consolidated Financial
Statements for more information.
Goodwill and Indefinite-lived Intangibles
We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets each year as
of March 31 or more frequently if events or changes in circumstances indicate an impairment maybe possible. We may
39 2021 Annual Report
consider qualitative factors to assess if it is more likely than not that the fair value for goodwill or indefinite-lived
intangible assets is below the carrying amount. We may also elect to bypass the qualitative assessment and perform a
quantitative assessment.
To complete the impairment assessment the Company makes estimates about fair value by using a weighting of the
income and the market approach. The income approach is based on projected discounted cash flows using a market
participant discount rate. The market approach is based on financial multiples of companies comparable to each
reporting unit and applies a control premium. We corroborate the fair value through a market capitalization
reconciliation to determine if the implied control premium is reasonable based on the qualitative considerations, such
as recent market transactions.
The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-
lived trade names are reasonable, but future changes in the underlying assumptions could occur due to the inherent
uncertainty in making such estimates.
Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry
or macroeconomic development or other adverse changes in market conditions could change one of the key
assumptions the Company uses to calculate the fair value of its long-lived assets, goodwill and indefinite-lived trade
names, which could result in a further decline in fair value and require the Company to record an impairment charge in
future periods.
Goodwill
Certain business acquisitions have resulted in the recording of goodwill. At May 29, 2021 and May 30, 2020, we had
goodwill of $364.2 million and $346.0 million, respectively.
We perform our annual impairment assessment for goodwill and other indefinite-lived intangible assets as of March 31
or more frequently if events or changes in circumstances indicate that the asset might be impaired. We may consider
qualitative factors to assess if it is more likely than not that the fair value for goodwill is below the carrying amount,
however, we may also elect to bypass the qualitative assessment and perform a quantitative assessment. Each of the
reporting units were reviewed for impairment using a quantitative assessment. In performing the quantitative
impairment test for fiscal year 2021, the Company determined that the fair value of its reporting units exceeded the
carrying amount and, as such, these reporting units were not impaired. In fiscal 2020, the Company recorded $125.5
million in goodwill impairment charges related to both the Retail and Maharam reportable segments.
The Company adopted and applied ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment" using the prospective method in fiscal 2020. Refer to Note 1 of the Consolidated
Financial Statements for further information regarding the adoption of ASU No. 2017-04.
To estimate the fair value of each reporting unit when performing quantitative testing, the Company utilizes a
weighting of the income approach and the market method. These approaches are based on a discounted cash flow
analysis and observable comparable company information that use several inputs, including:
•
•
•
actual and forecasted revenue growth rates and operating margins,
discount rates based on the reporting unit's weighted average cost of capital, and
revenue and EBITDA of comparable companies
The Company corroborates the reasonableness of the inputs and outcomes of our discounted cash flow analysis
through a market capitalization reconciliation to determine whether the implied control premium is reasonable.
Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value
of the reporting unit. For example, a 1.0% decrease in estimated annual future cash flows would decrease the
estimated fair value of the reporting unit by approximately 1.0%. The estimated long-term growth rate can have a
significant impact on the estimated future cash flows, and therefore, the fair value of each reporting unit. Of the other
key assumptions that impact the estimated fair values, most reporting units have the greatest sensitivity to changes in
the estimated discount rate. In completing the annual goodwill impairment test, the respective fair values were
estimated using discount rates ranging from 12.0% to 14.0% and long-term growth rates ranging from 2.5% to 3.0%.
Herman Miller, Inc. and Subsidiaries 40
Indefinite-lived Intangible Assets
Certain business acquisitions have resulted in the recording of trade names as indefinite-lived intangible assets,
which are not amortized. At May 29, 2021 and May 30, 2020, we had trade name assets with a carrying value of $97.6
million and $92.8 million, respectively.
The Company evaluates indefinite-lived trade name intangible assets for impairment annually. The Company also tests
for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-
lived intangible asset is below its carrying amount. An impairment charge is recorded if the carrying amount of an
indefinite-lived intangible asset exceeds the estimated fair value on the measurement date. During fiscal 2020, the
Company adjusted the carrying value of all its tradenames to fair value, and as a result recognized $53.3 million in
non-cash impairment charges on its indefinite-lived trade names.
In fiscal 2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets for
impairment. In performing this assessment, we estimate the fair value of these intangible assets using the relief-from-
royalty method which requires assumptions related to:
•
•
•
actual and forecasted revenue growth rates,
assumed royalty rates that could be payable if we did not own the trademark, and
a market participant discount rate based on a weighted-average cost of capital.
The assumptions above reflect management’s best estimate; however, actual results could differ from our estimates. If
the estimated fair value of the indefinite-lived intangible asset is less than its carrying value, we would recognize an
impairment charge.
In the table below, the Company has summarized the carrying values and fair values of each of the Company’s
indefinite-lived trade names:
(In millions)
Trade name
Maharam
DWR
HAY
naughtone
Total
Segment
North America Contract
Retail
International Contract
International Contract
Carrying Value
Fair Value
16.5 $
31.5
43.1
6.5
97.6 $
20.2
92.8
43.8
10.9
167.7
$
$
In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using
discount rates ranging from 12.0% to 14.0%, royalty rates ranging from 2.00% to 3.00% and long-term growth rates
ranging from 2.5% to 3.0%. The Company’s estimates of the fair value of its HAY indefinite-lived intangible asset is
sensitive to changes in the key assumptions above as well as projected financial performance. Therefore, a sensitivity
analysis was performed on certain key assumptions.
Keeping all other assumptions constant, a 10% decrease in forecasted revenue growth rates at May 29, 2021 would
have the following effects on the fair value of the HAY trade name:
(In millions)
Trade name Segment
HAY
International Contract
10% Decrease
$
(4.3)
Keeping all other assumptions constant, a 100 basis point change in the discount rate at May 29,2021 would have the
following effects on the fair value of the HAY trade name:
(In millions)
Trade name Segment
HAY
International Contract
100 bps Increase 100 bps Decrease
4.8
$
(3.9) $
Keeping all other assumptions constant, a 50 basis point change in the royalty rate at May 29, 2021 would have the
following effects on the fair value of the HAY trade name:
41 2021 Annual Report
(In millions)
Trade name Segment
HAY
International Contract
50 bps Increase
$
8.8 $
50 bps Decrease
(8.7)
Keeping all other assumptions constant, a 50 basis point change in the long-term growth rate at May 29, 2021 would
have the following effects on the fair value of the HAY trade name:
(In millions)
Trade name Segment
HAY
International Contract
50 bps Increase
$
1.7 $
50 bps Decrease
(1.5)
If the estimated cash flows related to the Company's indefinite-lived intangibles were to decline in future periods, the
Company may need to record an impairment charge.
Long-lived Assets
The Company evaluates other long-lived assets and acquired business units for indicators of impairment when events
or changes in circumstances indicate that the carrying amount of assets may not be recoverable. If such indicators are
present, the future undiscounted cash flows attributable to the asset group are compared to the carrying value of the
asset or asset group. The judgments regarding the existence of impairment are based on market conditions,
operational performance, and estimated future cash flows. If the carrying value of a long-lived asset is considered
impaired, an impairment charge is recorded to adjust the asset to its estimated fair value.
The Company believes its assumptions for assessing the impairment of its long-lived assets, goodwill and indefinite-
lived trade names are reasonable, but if actual results are not consistent with management's estimates and
assumptions, a material impairment charge could occur, which could have a material adverse effect on our
consolidated financial statements.
New Accounting Standards
Refer to Note 1 of the Consolidated Financial Statements for information related to new accounting standards.
Forward Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs,
assumptions, current expectations, estimates, and projections about the office furniture industry, the economy, and
the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” "likely,”
“plans,” “projects,” "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;
statements regarding the acquisition of Knoll, including the anticipated benefits of the acquisition, the
anticipated impact of the acquisition on the combined company’s business and future financial and operating
results, and the expected amount and timing of synergies that might be realized from the acquisition;
the effect of the acquisition of Knoll on our ability of Herman Miller to retain and hire key personnel and
maintain relationships with customers, suppliers and others with whom we do business, or on our operating
results and business generally;
risks that the acquisition of Knoll disrupts current plans and operations and the potential difficulties in
employee retention as a result of the transaction;
the outcome of any legal proceedings related to the acquisition of Knoll;
our ability to successfully integrate Knoll’s operations;
Herman Miller, Inc. and Subsidiaries 42
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to implement our plans, forecasts and other expectations with respect to our business after the
acquisition of Knoll and realize expected synergies;
business disruptions following the acquisition of Knoll;
the ability to realize the anticipated benefits of the acquisition of Knoll, including the possibility that the
expected benefits from the transaction will not be realized within the expected time period;
the amount of the costs, fees, expenses and charges related to the merger agreement, the preferred stock
purchase agreement, and the transactions contemplated by each agreement;
unknown liabilities;
the impact of foreign currency exchange rate and interest rate fluctuations on Herman Miller’s or Knoll’s
results;
employment and general economic conditions;
the pace of economic recovery in the U.S. and in our International markets;
the increase in white-collar employment, the willingness of customers to undertake capital expenditures;
the types of products purchased by customers, competitive-pricing pressures, the availability and pricing of
raw materials;
our reliance on a limited number of suppliers;
our ability to expand globally given the risks associated with regulatory and legal compliance challenges and
accompanying currency fluctuations, changes in future tax legislation or interpretation of current tax
legislation;
the ability to increase prices to absorb the additional costs of raw materials;
changes in global tariff regulations;
the financial strength of our and Knoll’s dealers and the financial strength of our and Knoll’s customers;
our ability to locate new retail studios, negotiate favorable lease terms for new and existing locations and
implement our studio portfolio transformation;
our ability to attract and retain key executives and other qualified employees;
our ability to continue to make product innovations;
the success of newly-introduced products, our ability to serve all of our markets;
possible acquisitions, divestitures or alliances;
our ability to integrate and benefit from acquisitions and investments;
the pace and level of government procurement;
the outcome of pending litigation or governmental audits or investigations;
political risk in the markets we serve;
natural disasters, public health crises, disease outbreaks; and
other risks identified in our filings with the SEC.
Therefore, actual results and outcomes may materially differ from what we express or forecast. Furthermore, Herman
Miller, Inc. undertakes no obligation to update, amend or clarify forward-looking statements.
43 2021 Annual Report
Item 7A Quantitative and Qualitative Disclosures About Market Risk
The Company manufactures, markets, and sells its products throughout the world and, as a result, is subject to
changing economic conditions, which could reduce the demand for its products.
Direct Material Costs
The Company is exposed to risks arising from price changes for certain direct materials and assembly components
used in its operations. The largest of such costs incurred by the Company are for steel, plastics, textiles, wood
particleboard and aluminum components. The impact from changes in all commodity prices increased the Company's
costs by approximately $0.9 million during fiscal 2021 compared to the prior year. The impact from changes in
commodity prices lowered the Company's costs by approximately $4 million during fiscal 2020 as compared to fiscal
2019. Note that these changes include the impact of Chinese tariffs on the Company's direct material costs.
The market prices for commodities will fluctuate over time and the Company acknowledges that such changes are
likely to impact its costs for key direct materials and assembly components. Consequently, it views the prospect of
such changes as an outlook risk to the business.
Shortages and disruption in the steel industry as a result of the COVID-19 pandemic negatively impacted the
availability of steel. While this reduction in availability has not had a significant impact on our ability to produce and
deliver products to our customers, it has negatively impacted the cost of procuring steel. Significant increases in raw
materials can be difficult to offset with price increases due to existing contractual agreements with customers as well
as difficulty finding effective financial instruments to hedge these changes. In the short term, our gross margin could
be negatively impacted by significant increases in these costs. Our profitability could be negatively impacted in the
long term if we are not able to pass along these higher raw material costs to our customers.
Foreign Exchange Risk
The Company primarily manufactures its products in the United States, United Kingdom, China, India, and Brazil. It
also sources completed products and product components from outside the United States. The Company's completed
products are sold in numerous countries around the world. Sales in foreign countries as well as certain expenses
related to those sales are transacted in currencies other than the Company's reporting currency, the U.S. dollar.
Accordingly, production costs and profit margins related to these sales are effected by the currency exchange
relationship between the countries where the sales take place and the countries where the products are sourced or
manufactured. These currency exchange relationships can also impact the Company's competitive positions within
these markets.
In the normal course of business, the Company enters into contracts denominated in foreign currencies. The principal
foreign currencies in which the Company conducts its business are the British pound sterling, euro, Canadian dollar,
Japanese yen, Mexican peso, Hong Kong dollar and Chinese renminbi. As of May 29, 2021, the Company had
outstanding sixteen forward currency instruments designed to offset either net asset or net liability exposure that is
denominated in non-functional currencies.
Herman Miller, Inc. and Subsidiaries 44
(In millions, except number of forward contracts)
Net Asset Exposure
Currency
Number of Forward Contracts
Net Exposure
USD
EUR
NOK
SEK
GBP
Net Liability Exposure
Currency
USD
CAD
7
3
1
1
1
Number of Forward Contracts
Net Exposure
2
1
58.8
44.3
10.0
17.5
2.0
3.1
1.9
As of May 30, 2020, the Company had outstanding, twenty forward currency instruments designed to offset either net
asset or net liability exposure that is denominated in non-functional currencies.
(In millions, except number of forward contracts)
Net Asset Exposure
Currency
Number of Forward Contracts
Net Exposure
USD
EUR
ZAR
NOK
SEK
GBP
Net Liability Exposure
Currency
USD
EUR
CAD
AED
7
2
1
1
1
1
Number of Forward Contracts
Net Exposure
4
1
1
1
41.6
18.2
3.7
7.7
10.5
1.4
7.4
1.3
3.1
3.9
The cost of the foreign currency hedges and remeasuring all foreign currency transactions into the appropriate
functional currency resulted in a net gain of $0.8 million in fiscal 2021 in contrast to net loss of $1.1 million in fiscal
2020 included in net earnings. These amounts are included in “Other (income) expense, net” in the Consolidated
Statements of Comprehensive Income. Additionally, the cumulative effect of translating the balance sheet and income
statement accounts from the functional currency into the United States dollar increased the accumulated
comprehensive loss component of total stockholders' equity by $52.1 million compared to a decrease of $7.7 million
as of the end of fiscal 2021 and 2020, respectively.
Interest Rate Risk
The Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall
cost of borrowing. The Company's interest rate swap agreement was entered into to exchange variable rate interest
payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional
amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received
and does not represent the amount of exposure to credit loss. The differential paid or received on the interest rate
swap agreements is recognized as an adjustment to interest expense.
45 2021 Annual Report
These interest rate swap derivative instruments are held and used by the Company as a tool for managing interest rate
risk. They are not used for trading or speculative purposes. The counterparties to the swap instruments are large
financial institutions that the Company believes are of high-quality creditworthiness. While the Company may be
exposed to potential losses due to the credit risk of non-performance by these counterparties, such losses are not
anticipated.
In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for an
aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of
January 3, 2028. As a result of the transaction, the Company effectively converted indebtedness anticipated to be
borrowed on the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate
plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as of the
forward start date.
In June 2017, the Company entered into an additional interest rate swap agreement. The interest rate swap is for an
aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of
January 3, 2028. As a result of the transaction, the Company effectively converted the Company’s revolving line of
credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387 percent
fixed interest rate plus applicable margin under the agreement as of the forward start date.
The fair market value of the effective interest rate swap instruments was a net liability of $14.4 million at May 29, 2021
compared to $25.0 million at May 30, 2020. All cash flows related to the Company's interest rate swap instruments are
denominated in U.S. dollars. For further information, refer to Note 6 and Note 12 of the Consolidated Financial
Statements.
Expected cash outflows (notional amounts) over the next five years and thereafter related to debt instruments are as
follows.
(In millions)
Long-Term Debt - Fixed rate:
Interest rate 4.95%
Interest rate 1.949%(2)
Interest rate 2.387%(2)
2022
2023
2024
2025
2026
Thereafter
Total(1)
$ — $ — $ — $ — $ — $
$ — $ — $ — $ 150.0 $ — $
$ — $ — $ — $ 75.0 $ — $
49.9 $ 49.9
— $ 150.0
75.0
— $
(1) Amount does not include the recorded fair value of the swap instruments.
(2) The Company's revolving credit facility has a variable interest rate, but due to the interest rate swaps, the rate on $150.0 million
and $75.0 million will be fixed at 1.949% and 2.387%, respectively.
Herman Miller, Inc. and Subsidiaries 46
Item 8 Financial Statements and Supplementary Data
Herman Miller, Inc.
Consolidated Statements of Comprehensive Income
Year Ended
(In millions, except per share data)
Net sales
Cost of sales
Gross margin
Operating expenses:
Selling, general and administrative
Impairment charges
Restructuring expenses
Design and research
Total operating expenses
Operating earnings (loss)
Gain on consolidation of equity method investments
Interest expense
Interest and other investment income
Other (income) expense, net
Earnings (loss) before income taxes and equity income
Income tax expense
Equity earnings from nonconsolidated affiliates, net of tax
Net earnings (loss)
Net earnings (loss) attributable to redeemable noncontrolling
interests
Net earnings (loss) attributable to Herman Miller, Inc.
Earnings (loss) per share — basic
Earnings (loss) per share — diluted
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Pension and post-retirement liability adjustments
Unrealized gains (losses) on interest rate swap agreement
Unrealized holding (losses) gains on securities
Total other comprehensive income (loss), net of tax
Comprehensive income (loss)
Comprehensive income (loss) attributable to redeemable
noncontrolling interests
May 29, 2021 May 30, 2020
$
2,465.1 $
1,515.9
949.2
2,486.6 $
1,575.9
910.7
June 1, 2019
2,567.2
1,637.3
929.9
639.3
—
10.2
76.9
726.4
203.5
—
12.1
(2.1)
(1.6)
195.1
39.6
5.0
160.5
643.8
—
2.7
72.1
718.6
230.6
—
13.9
(2.1)
(7.6)
226.4
47.9
0.3
178.8
643.3
205.4
26.4
74.0
949.1
(38.4)
36.2
12.5
(2.3)
1.0
(13.4)
6.0
5.0
(14.4)
$
$
$
$
5.7
(5.3)
—
173.1 $
(9.1) $
160.5
2.94 $
2.92 $
(0.15) $
(0.15) $
2.72
2.70
52.1 $
8.8
8.1
(0.1)
68.9
247.7
5.7
(7.7) $
(14.2)
(18.0)
0.1
(39.8)
(54.2)
(5.3)
(14.2)
(7.8)
(12.3)
—
(34.3)
126.2
—
Comprehensive income (loss) attributable to Herman Miller, Inc.
$
242.0 $
(48.9) $
126.2
47 2021 Annual Report
Herman Miller, Inc.
Consolidated Balance Sheets
(In millions, except share and per share data)
ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances of $5.5 and $4.7
Unbilled accounts receivable
Inventories, net
Prepaid expenses
Other current assets
May 29, 2021
May 30, 2020
$
396.4 $
7.7
204.7
16.4
213.6
45.1
7.6
891.5
327.2
214.7
364.2
97.6
105.2
61.5
454.0
7.0
180.0
19.5
197.3
43.3
16.0
917.1
330.8
193.9
346.0
92.8
112.4
60.9
Total current assets
Property and equipment, net of accumulated depreciation of $832.5 and $780.5
Right of use assets
Goodwill
Indefinite-lived intangibles
Other amortizable intangibles, net of accumulated amortization of $68.6 and $62.7
Other noncurrent assets
Total Assets
$
2,061.9 $
2,053.9
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
Short-term borrowings and current portion of long-term debt
Accrued compensation and benefits
Accrued warranty
Customer deposits
Other accrued liabilities
$
Total current liabilities
Long-term debt
Pension and post-retirement benefits
Lease liabilities
Other liabilities
Total Liabilities
Redeemable noncontrolling interests
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued)
Common stock, $0.20 par value (240,000,000 shares authorized, 59,029,165 and
58,793,275 shares issued and outstanding in 2021 and 2020, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Deferred compensation plan
Herman Miller, Inc. Stockholders' Equity
178.4 $
2.2
90.2
14.5
43.1
172.4
500.8
274.9
34.5
196.9
128.2
1,135.3
77.0
—
11.8
94.7
808.4
(65.1)
(0.2)
849.6
128.8
51.4
71.1
16.1
39.8
163.0
470.2
539.9
42.4
178.8
129.2
1,360.5
50.4
—
11.8
81.6
683.9
(134.0)
(0.3)
643.0
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity
$
2,061.9 $
2,053.9
Herman Miller, Inc. and Subsidiaries 48
Herman Miller, Inc.
Consolidated Statements of Stockholders' Equity
(In millions, except share and per share data)
June 2, 2018
Net earnings
Other comprehensive loss, net of tax
Stock-based compensation expense
Exercise of stock options
Restricted and performance stock units released
Employee stock purchase plan issuances
Repurchase and retirement of common stock
Directors' fees
Deferred compensation plan
Dividends declared ($0.79 per share)
Cumulative effect of accounting changes
June 1, 2019
Net loss
Other comprehensive loss
Stock-based compensation expense
Exercise of stock options
Restricted and performance stock units released
Employee stock purchase plan issuances
Repurchase and retirement of common stock
Directors' fees
Deferred compensation plan
Dividends declared ($0.63 per share)
Redemption value adjustment
May 30, 2020
Net earnings
Other comprehensive income
Stock-based compensation expense
Exercise of stock options
Restricted and performance stock units released
Employee stock purchase plan issuances
Repurchase and retirement of common stock
Directors' fees
Deferred compensation plan
Dividends declared ($0.56 per share)
Redemption value adjustment
Other
May 29, 2021
49 2021 Annual Report
Common Stock
Shares
59,230,974
—
—
—
347,248
468,807
62,957
(1,326,023)
10,185
—
—
—
58,794,148
—
—
—
423,815
138,590
70,145
(641,192)
7,769
—
—
—
58,793,275
—
—
—
86,238
114,103
71,468
(38,932)
3,013
—
—
—
—
59,029,165
Amount
$11.7
—
—
—
0.1
0.1
—
(0.2)
—
—
—
—
$11.7
—
—
—
0.2
—
—
(0.1)
—
—
—
—
$11.8
—
—
—
—
—
—
—
—
—
—
—
—
$11.8
Additional
Paid-in
Capital
$116.6
—
—
8.4
10.0
0.2
1.9
(47.6)
0.3
—
—
—
$89.8
—
—
2.7
13.3
0.2
2.1
(26.5)
0.3
(0.3)
—
—
$81.6
—
—
9.0
2.6
0.2
2.1
(0.9)
0.1
—
—
—
—
$94.7
Retained
Earnings
$598.3
160.5
—
—
—
—
—
—
—
—
(46.6)
0.5
$712.7
(9.1)
—
—
—
—
—
—
—
—
(37.5)
17.8
$683.9
173.1
—
—
—
—
—
—
—
—
(33.4)
(15.0)
(0.2)
808.4
Accumulated
Other
Comprehensive
Income (Loss)
$(61.3)
—
(34.3)
—
—
—
—
—
—
—
—
1.4
$(94.2)
—
(39.8)
—
—
—
—
—
—
—
—
—
$(134.0)
—
68.9
—
—
—
—
—
—
—
—
—
—
$(65.1)
Deferred
Compensation
Plan
$(0.7)
—
—
—
—
—
—
—
—
(0.1)
—
—
$(0.8)
—
—
—
—
—
—
—
—
0.5
—
—
$(0.3)
—
—
—
—
—
—
—
—
0.1
—
—
—
$(0.2)
Herman
Miller, Inc.
Stockholders'
Equity
$664.6
160.5
(34.3)
8.4
10.1
0.3
1.9
(47.8)
0.3
(0.1)
(46.6)
1.9
$719.2
(9.1)
(39.8)
2.7
13.5
0.2
2.1
(26.6)
0.3
0.2
(37.5)
17.8
$643.0
173.1
68.9
9.0
2.6
0.2
2.1
(0.9)
0.1
0.1
(33.4)
(15.0)
(0.2)
$849.6
Noncontrolling
Interests
$0.2
—
—
(0.2)
—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
Stockholders'
Equity
$664.8
160.5
(34.3)
8.2
10.1
0.3
1.9
(47.8)
0.3
(0.1)
(46.6)
1.9
$719.2
(9.1)
(39.8)
2.7
13.5
0.2
2.1
(26.6)
0.3
0.2
(37.5)
17.8
$643.0
173.1
68.9
9.0
2.6
0.2
2.1
(0.9)
0.1
0.1
(33.4)
(15.0)
(0.2)
$849.6
Herman Miller, Inc.
Consolidated Statements of Cash Flows
(In millions)
Cash Flows from Operating Activities:
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation expense
Amortization expense
Earnings from nonconsolidated affiliates net of dividends received
Investment fair value adjustment
Gain on consolidation of equity method investments
Deferred taxes
Pension contributions
Pension and post-retirement expenses
Impairment charges
Restructuring expenses
Stock-based compensation
Decrease (increase) in long-term assets
Increase in long-term liabilities
Changes in current assets and liabilities:
Increase (decrease) in accounts receivable & unbilled accounts receivable
Increase (decrease) in inventories
Increase in prepaid expenses and other
Increase (decrease) in accounts payable
Increase (decrease) in accrued liabilities
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Marketable securities purchases
Marketable securities sales
Capital expenditures
Proceeds from sales of property and dealers
Purchase of HAY licensing agreement
Acquisitions, net of cash received
Equity investment in non-controlled entities
Other, net
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Borrowings of long-term debt
Repayments of long-term debt
Proceeds from credit facility
Repayments of credit facility
Dividends paid
Common stock issued
Common stock repurchased and retired
Purchase of redeemable noncontrolling interests
Other, net
Net Cash (Used in) Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net (Decrease) Increase In Cash and Cash Equivalents
Cash and cash equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Other Cash Flow Information
Interest paid
Income taxes paid, net of cash received
Year Ended
May 29, 2021 May 30, 2020 June 1, 2019
$178.8
$(14.4)
$160.5
72.0
15.2
(0.4)
—
—
6.7
(5.4)
3.0
—
2.7
9.0
1.2
16.0
(14.8)
(8.5)
(3.9)
43.2
15.1
2.4
332.3
(5.9)
5.3
(59.8)
14.0
—
—
—
(13.5)
(59.9)
—
(50.0)
—
(265.0)
(34.5)
5.0
(0.9)
—
(2.3)
(347.7)
17.7
(57.6)
454.0
$396.4
$12.5
$15.8
68.1
11.4
(4.8)
—
(36.2)
(25.2)
(0.9)
1.6
205.4
26.4
2.7
(4.7)
5.8
68.6
6.0
(2.2)
(59.5)
(32.0)
5.7
221.8
(3.1)
5.0
(69.0)
0.2
—
(111.2)
(3.3)
13.3
(168.1)
50.0
—
265.0
—
(36.4)
15.6
(26.6)
(20.3)
(3.3)
244.0
(2.9)
294.8
159.2
65.9
6.2
(2.1)
(2.1)
—
0.8
(0.9)
1.2
—
10.2
7.3
(0.4)
1.6
(24.8)
(31.9)
(0.6)
0.5
22.7
2.3
216.4
(1.9)
1.7
(85.8)
0.5
(4.8)
—
(73.6)
(1.1)
(165.0)
—
—
—
—
(45.6)
12.3
(47.9)
(10.1)
(0.6)
(91.9)
(4.2)
(44.7)
203.9
$454.0
$159.2
$11.4
$39.6
$11.5
$41.0
Herman Miller, Inc. and Subsidiaries 50
Notes to the Consolidated Financial Statements
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12
Note 13
Note 14
Note 15
Note 16
Note 17
Note 18
Significant Accounting and Reporting Policies
Revenue from Contracts with Customers
Acquisitions and Divestitures
Inventories
Investments in Nonconsolidated Affiliates
Short-Term Borrowings and Long-Term Debt
Leases
Employee Benefit Plans
Common Stock and Per Share Information
Stock-Based Compensation
Income Taxes
Fair Value
Commitments and Contingencies
Operating Segments
Accumulated Other Comprehensive Loss
Restructuring Expenses
Variable Interest Entities
Quarterly Financial Data (Unaudited)
52
59
61
64
64
65
67
69
72
72
76
79
84
85
88
88
90
90
51 2021 Annual Report
1. Significant Accounting and Reporting Policies
The following is a summary of significant accounting and reporting policies not reflected elsewhere in the
accompanying financial statements.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Herman Miller, Inc. and its controlled domestic and
foreign subsidiaries. The consolidated entities are collectively referred to as “the Company.” All intercompany
accounts and transactions have been eliminated in the Consolidated Financial Statements.
Description of Business
The Company researches, designs, manufactures, sells and distributes interior furnishings for use in various
environments including office, healthcare, educational and residential settings and provides related services that
support companies all over the world. The Company's products are sold primarily through independent contract office
furniture dealers as well as the following channels: owned contract office furniture dealership, direct customer sales,
independent retailers, owned retail studios, direct-mail catalogs and the Company's eCommerce platforms.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to May 31. The fiscal years ended May 29, 2021, May 30, 2020,
and June 1, 2019 contained 52 weeks.
Foreign Currency Translation
The functional currency for most of the foreign subsidiaries is their local currency. The cumulative effects of translating
the balance sheet accounts from the functional currency into the United States dollar using fiscal year-end exchange
rates and translating revenue and expense accounts using average exchange rates for the period are reflected as a
component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.
The financial statement impact of gains and losses resulting from remeasuring foreign currency transactions into the
appropriate functional currency resulted in a net gain of $0.8 million, net loss of $1.1 million, and a net gain of $0.3
million for the fiscal years ended May 29, 2021, May 30, 2020, and June 1, 2019, respectively. These amounts are
included in “Other (income) expense, net” in the Consolidated Statements of Comprehensive Income.
Cash Equivalents
The Company holds cash equivalents as part of its cash management function. Cash equivalents include money
market funds and time deposit investments with original maturities of less than three months. The carrying value of
cash equivalents, which approximates fair value, totaled $229.8 million and $364.0 million as of May 29, 2021 and
May 30, 2020, respectively. All cash equivalents are high-credit quality financial instruments and the amount of credit
exposure to any one financial institution or instrument is limited.
Marketable Securities
The Company maintains a portfolio of marketable securities primarily comprised of mutual funds. These mutual funds
are comprised of both equity and fixed income funds. These investments are held by the Company's wholly owned
insurance captive and have been recorded at fair value based on quoted market prices. Net unrealized holding gains
or losses related to the equity mutual funds are recorded through net income while net unrealized holding gains or
losses related to the fixed income mutual funds are recorded through other comprehensive income.
All marketable security transactions are recognized on the trade date. Realized gains and losses are included in
“Interest and other investment income” in the Consolidated Statements of Comprehensive Income. See Note 12 of the
Consolidated Financial Statements for additional disclosures of marketable securities.
Allowances for Credit Losses
Allowances for credit losses related to accounts are managed at a level considered by management to be adequate to
absorb an estimate of probable future losses existing at the balance sheet date.
Herman Miller, Inc. and Subsidiaries 52
In estimating probable losses, we review accounts based on known customer exposures, historical credit experience,
and specific identification of other potentially uncollectible accounts. An accounts receivable balance is considered
past due when payment is not received within the stated terms. Accounts that are considered to have higher credit risk
are reviewed using information available about the debtor, such as financial statements, news reports and published
credit ratings. General information regarding industry trends, the economic environment is used as well.
We arrive at an estimated loss for specific concerns and estimate an additional amount for the remainder of trade
balances based on historical trends and other factors previously referenced. Balances are written off against the
reserve once the Company determines the probability of collection to be remote. The Company generally does not
require collateral or other security on trade accounts receivable. Subsequent recoveries, if any, are credited to bad
debt expense when received.
Concentrations of Credit Risk
The Company's trade receivables are primarily due from independent dealers who, in turn, carry receivables from their
customers. The Company monitors and manages the credit risk associated with individual dealers and direct
customers where applicable. Dealers are responsible for assessing and assuming credit risk of their customers and
may require their customers to provide deposits, letters of credit or other credit enhancement measures. Some sales
contracts are structured such that the customer payment or obligation is direct to the Company. In those cases, the
Company may assume the credit risk. Whether from dealers or customers, the Company's trade credit exposures are
not concentrated with any particular entity.
Inventories
Inventories are valued at the lower of cost or market and include material, labor and overhead. Inventory cost is
determined using the last-in, first-out (LIFO) method at manufacturing facilities in Michigan, whereas inventories of the
Company's other locations are valued using the first-in, first-out (FIFO) method. The Company establishes reserves for
excess and obsolete inventory based on prevailing circumstances and judgment for consideration of current events,
such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net
realizable value may be adjusted in response to changing conditions. Further information on the Company's recorded
inventory balances can be found in Note 4 of the Consolidated Financial Statements.
Goodwill and Indefinite-lived Intangible Assets
Goodwill and other indefinite-lived assets included in the Consolidated Balance Sheets consist of the following:
(In millions)
Balance, June 2, 2019
Foreign currency translation adjustments
Acquisition of HAY
Acquisition of naughtone
Impairment charges
Balance, May 30, 2020
Foreign currency translation adjustments
Balance, May 29, 2021
Goodwill
Indefinite-lived
Intangible Assets
Total Goodwill and Indefinite-
lived Intangible Assets
$
$
$
303.8 $
(0.9)
111.1
57.5
(125.5)
346.0 $
18.2
364.2 $
78.1 $
(0.5)
60.0
8.5
(53.3)
92.8 $
4.8
97.6 $
381.9
(1.4)
171.1
66.0
(178.8)
438.8
23.0
461.8
Goodwill is tested for impairment at the reporting unit level annually, or more frequently, when events or changes in
circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value.
When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative
assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair
value, additional quantitative testing is performed. The Company may also elect to bypass the qualitative testing and
proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying
value of goodwill is written down to fair value. Each of the reporting units were reviewed for impairment using a
quantitative assessment as of March 31, 2021.
53 2021 Annual Report
To estimate the fair value of each reporting unit when performing quantitative testing, the Company utilizes a
weighting of the income approach and the market method. These approaches are based on a discounted cash flow
analysis and observable comparable company information that use several inputs, including:
•
•
•
actual and forecasted revenue growth rates and operating margins,
discount rates based on the reporting unit's weighted average cost of capital, and
revenue and EBITDA of comparable companies
The Company corroborates the reasonableness of the inputs and outcomes of our discounted cash flow analysis
through a market capitalization reconciliation to determine whether the implied control premium is reasonable.
The Company completed its annual goodwill impairment test in the fourth quarter of the year, as of March 31st. In fiscal
2021, the Company elected to perform quantitative impairment tests for all goodwill reporting units and other
indefinite-lived intangible assets. In performing the quantitative impairment test, the Company determined that the
fair value of the reporting units exceeded the carrying amount and, as such, the reporting units were not impaired and
the second step of the impairment test was not necessary.
In completing our annual goodwill impairment test, the respective fair values were estimated using an income
approach with market participant discount rates ranging from 12.0% to 14.0% developed using a weighted average
cost of capital analysis and long-term growth rates ranging from 2.5% to 3.0%.
Intangible assets with indefinite useful lives are not subject to amortization and are evaluated annually for
impairment, or more frequently, when events or changes in circumstances indicate that the fair value of an intangible
asset may not be recoverable. The Company utilizes the relief from royalty methodology to test for impairment. The
primary assumptions for the relief from royalty method include forecasted revenue growth rates, royalty rates and
discount rates. The Company measures and records an impairment loss for the excess of the carrying value of the
asset over its fair value.
In fiscal 2021, the Company performed quantitative assessments in testing indefinite-lived intangible assets for
impairment. The carrying value of the Company's HAY trade name indefinite-lived intangible asset was $41.7 million as
of March 31, 2021. The calculated fair value of the HAY trade name was $43.8 million which represents an excess fair
value of $2.1 million or 5.0%. If the residual cash flow related to this trade name were to decline in future periods, the
Company may need to record an impairment charge.
In completing our annual indefinite-lived trade name impairment test, the respective fair values were estimated using
a relief-from-royalty approach, applying market participant discount rates ranging from 12.0% to 14.0% developed
using a weighted average cost of capital analysis, royalty rates ranging from 2.0% to 3.0% and long-term growth rates
ranging from 2.5% to 3.0%.
The table below summarizes the carrying values as of May 29, 2021, for each of the Company’s indefinite-lived trade
names:
(In millions)
Trade name
Maharam
DWR
HAY
naughtone
Total
Carrying Value
16.5
31.5
43.1
6.5
97.6
$
$
During fiscal 2020, the Company recognized $205.4 million of impairment charges related to goodwill, indefinite-lived
intangible assets and long-lived assets. These charges are included in "Impairment charges" within the Consolidated
Statements of Comprehensive Income.
Property, Equipment and Depreciation
Property and equipment are stated at cost. The cost is depreciated over the estimated useful lives of the assets using
the straight-line method. Estimated useful lives range from 3 to 10 years for machinery and equipment and do not
Herman Miller, Inc. and Subsidiaries 54
exceed 40 years for buildings. Leasehold improvements are depreciated over the lesser of the lease term or the useful
life of the asset. The Company capitalizes certain costs incurred in connection with the development, testing and
installation of software for internal use and cloud computing arrangements. Software for internal use is included in
property and equipment and is depreciated over an estimated useful life not exceeding 5 years. Depreciation and
amortization expense is included in the Consolidated Statements of Comprehensive Income in the Cost of sales,
Selling, general and administrative and Design and research line items.
The following table summarizes our property as of the dates indicated:
(In millions)
Land and improvements
Buildings and improvements
Machinery and equipment
Construction in progress
Accumulated depreciation
Property and equipment, net
May 29, 2021
May 30, 2020
$
$
25.2 $
286.1
820.8
27.6
(832.5)
327.2 $
23.7
266.5
791.9
29.2
(780.5)
330.8
As of the end of fiscal 2021, outstanding commitments for future capital purchases approximated $46.5 million.
Other Long-Lived Assets
The Company reviews the carrying value of long–lived assets for impairment when events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable. If such indicators are present, the future
undiscounted cash flows attributable to the asset or asset group are compared to the carrying value of the asset or
asset group. If such assets are considered to be impaired, the impairment amount to be recognized is the amount by
which the carrying value of the assets exceeds their fair value.
Amortizable intangible assets within Other amortizable intangibles, net in the Consolidated Balance Sheets consist
primarily of patents, trademarks and customer relationships. The customer relationships intangible asset is comprised
of relationships with customers, specifiers, networks, dealers and distributors. Refer to the following table for the
combined gross carrying value and accumulated amortization for these amortizable intangibles.
(In millions)
Gross carrying value
Accumulated amortization
Net
Gross carrying value
Accumulated amortization
Net
Patent and Trademarks
$
Patent and Trademarks
$
May 29, 2021
Customer Relationships
Other
Total
113.0 $
39.6
73.4 $
15.3 $
10.1
5.2 $
173.8
68.6
105.2
May 30, 2020
Customer Relationships
Other
Total
118.7 $
38.3
80.4 $
14.7 $
10.0
4.7 $
175.1
62.7
112.4
45.5 $
18.9
26.6 $
41.7 $
14.4
27.3 $
$
$
The Company amortizes these assets over their remaining useful lives using the straight-line method over periods
ranging from 5 years to 20 years, or on an accelerated basis, to reflect the expected realization of the economic
benefits. It is estimated that the weighted-average remaining useful life of the patents and trademarks is
approximately 6 and the weighted-average remaining useful life of the customer relationships is 7 years.
Estimated amortization expense on existing amortizable intangible assets as of May 29, 2021, for each of the
succeeding five fiscal years, is as follows:
55 2021 Annual Report
(In millions)
2022
2023
2024
2025
2026
Self-Insurance
$ 15.4
$ 14.9
$ 13.7
$ 13.5
$ 13.2
The Company is partially self-insured for general liability, workers' compensation and certain employee health and
dental benefits under insurance arrangements that provide for third-party coverage of claims exceeding the Company's
loss retention levels. The Company's health benefit and auto liability retention levels do not include an aggregate stop
loss policy. The Company's retention levels designated within significant insurance arrangements as of May 29, 2021,
are as follows:
(In millions)
General liability
Auto liability
Workers' compensation
Health benefit
Retention Level (per occurrence)
1.00
$
1.00
$
0.75
$
0.50
$
The Company accrues for its self-insurance arrangements, as well as reserves for health, prescription drugs, and
dental benefit exposures based on actuarially-determined estimates, which are recorded in “Other liabilities” in the
Consolidated Balance Sheets. The value of the liability as of May 29, 2021 and May 30, 2020 was $12.3 million and
$13.1 million, respectively. The actuarial valuations are based on historical information along with certain assumptions
about future events. Changes in assumptions for such matters as legal actions, medical costs, payment lag times and
changes in actual experience could cause these estimates to change. The general, auto, and workers' compensation
liabilities are managed through the Company's wholly-owned insurance captive.
Research, Development and Other Related Costs
Research, development, pre-production and start-up costs are expensed as incurred. Research and development
("R&D") costs consist of expenditures incurred during the course of planned research and investigation aimed at
discovery of new knowledge useful in developing new products or processes. R&D costs also include the enhancement
of existing products or production processes and the implementation of such through design, testing of product
alternatives or construction of prototypes. R&D costs included in “Design and research” expense in the accompanying
Consolidated Statements of Comprehensive Income are $50.8 million, $54.3 million and $58.8 million, in fiscal 2021,
2020, and 2019, respectively.
Royalty payments made to designers of the Company's products as the products are sold are variable costs based on
product sales. These expenses totaled $21.3 million, $19.7 million and $18.1 million in fiscal years 2021, 2020 and
2019 respectively. They are included in Design and research expense in the accompanying Consolidated Statements of
Comprehensive Income.
Customer Payments and Incentives
We offer various sales incentive programs to our customers, such as rebates and discounts. Programs such as rebates
and discounts are adjustments to the selling price and are therefore characterized as a reduction to net sales.
Revenue Recognition
The Company recognizes revenue when performance obligations, based on the terms of customer contracts, are
satisfied. This happens when control of goods and services based on the contract have been conveyed to the
customer. Revenue for the sale of products is recognized at the point in time when control transfers, generally upon
transfer of title and risk of loss to the customer. Revenue for services, including the installation of products by the
Company's owned dealers, is recognized over time as the services are provided. The method of revenue recognition
Herman Miller, Inc. and Subsidiaries 56
may vary, depending on the type of contract with the customer, as noted in the section "Disaggregated Revenue" in
Note 2 of the Consolidated Financial Statements.
The Company's contracts with customers include master agreements and certain other forms of contracts, which do
not reach the level of a performance obligation until a purchase order is received from a customer. At the point in time
that a purchase order under a contract is received by the Company, the collective group of documents represent an
enforceable contract between the Company and the customer. While certain customer contracts may have a duration
of greater than a year, all purchase orders are less than a year in duration. As of May 29, 2021, all unfulfilled
performance obligations are expected to be fulfilled in the next twelve months.
Variable consideration exists within certain contracts that the Company has with customers. When variable
consideration is present in a contract with a customer, the Company estimates the amount that should be included in
the transaction price utilizing either the expected value method or the most likely amount method, depending on the
nature of the variable consideration. These estimates are primarily related to rebate programs which involve
estimating future sales amounts and rebate percentages to use in the determination of transaction price. Variable
consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future
reversal of cumulative revenue under the contract will not occur. Adjustments to Net sales from changes in variable
consideration related to performance obligations completed in previous periods are not material to the Company's
financial statements. Also, the Company has no contracts with significant financing components.
The Company accounts for shipping and handling activities as fulfillment activities and these costs are accrued within
Cost of sales at the same time revenue is recognized. The Company does not record revenue for sales tax, value added
tax or other taxes that are collected on behalf of government entities. The Company’s revenue is recorded net of these
taxes as they are passed through to the relevant government entities. The Company has recognized incremental costs
to obtain a contract as an expense when incurred as the amortization period is less than one year. The Company has
not adjusted the amount of consideration to be received for any significant financing components as the Company’s
contracts have a duration of one year or less.
Leases
The Company adopted ASC 842 - Leases at the beginning of fiscal year 2020. The new standard required the Company
to recognize most leases on the balance sheet as right of use (ROU) assets with corresponding lease liabilities. All
necessary changes required by the new standard, including those to the Company’s accounting policies, business
processes, systems, controls and disclosures, were implemented as of the first quarter of fiscal year 2020. See Note 7
of the Consolidated Financial Statements for further information regarding the Company's lease accounting policies.
Cost of Sales
The Company includes material, labor and overhead in cost of sales. Included within these categories are items such
as freight charges, warehousing costs, internal transfer costs and other costs of its distribution network.
Selling, General and Administrative
The Company includes costs not directly related to the manufacturing of its products in the Selling, general and
administrative line item within the Consolidated Statements of Comprehensive Income. Included in these expenses
are items such as compensation expense, rental expense, warranty expense and travel and entertainment expense.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse.
The Company's annual effective tax rate is based on income, statutory tax rates and tax planning strategies available
in the various jurisdictions the Company operates. Complex tax laws can be subject to different interpretations by the
Company and the respective government authorities. Significant judgment is required in evaluating tax positions and
57 2021 Annual Report
determining our tax expense. Tax positions are reviewed quarterly and tax assets and liabilities are adjusted as new
information becomes available.
In evaluating the Company's ability to recover deferred tax assets within the jurisdiction from which they arise, the
Company considers all positive and negative evidence. These assumptions require significant judgment about
forecasts of future taxable income.
Stock-Based Compensation
The Company has several stock-based compensation plans, which are described in Note 10 of the Consolidated
Financial Statements. Our policy is to expense stock-based compensation using the fair-value based method of
accounting for all awards granted.
Earnings per Share
Basic earnings per share (EPS) excludes the dilutive effect of common shares that could potentially be issued, due to
the exercise of stock options or the vesting of restricted shares and is computed by dividing net earnings by the
weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net
earnings by the sum of the weighted-average number of shares outstanding, plus all dilutive shares that could
potentially be issued. When in a loss position, basic and diluted EPS use the same weighted-average number of shares
outstanding. Refer to Note 9 of the Consolidated Financial Statements for further information regarding the
computation of EPS.
Comprehensive Income
Comprehensive income consists of Net earnings, Foreign currency translation adjustments, Unrealized holding gains
on securities, Unrealized gains on interest rate swap agreement and Pension and post-retirement liability adjustments.
Refer to Note 15 of the Consolidated Financial Statements for further information regarding comprehensive income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value
The Company classifies and discloses its fair value measurements in one of the following three categories:
•
•
•
Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges.
Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including
over-the-counter traded financial instruments. Financial instrument values are determined using prices for
recently traded financial instruments with similar underlying terms and direct or indirect observational inputs,
such as interest rates and yield curves at commonly quoted intervals.
Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market
activity. Values are determined using significant unobservable inputs or valuation techniques.
See Note 12 of the Consolidated Financial Statements for the required fair value disclosures.
Derivatives and Hedging
The Company calculates the fair value of financial instruments using quoted market prices whenever available. The
Company utilizes derivatives to manage exposures to foreign currency exchange rates and interest rate risk. The fair
values of all derivatives are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of
these instruments are reported within "Other (income) expense, net" in the Consolidated Statements of
Comprehensive Income, or "Accumulated other comprehensive loss" within the Consolidated Balance Sheets,
depending on the use of the derivative and whether it qualifies for hedge accounting treatment.
Herman Miller, Inc. and Subsidiaries 58
Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in
Accumulated Other Comprehensive Loss, to the extent the hedges are effective, until the underlying transactions are
recognized in the Consolidated Statements of Comprehensive Income. Derivatives not designated as hedging
instruments are marked-to-market at the end of each period with the results included in Consolidated Statements of
Comprehensive Income.
See Note 12 of the Consolidated Financial Statements for further information regarding derivatives.
Recently Adopted Accounting Standards
On March 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2017-04, "Intangibles - Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment" using the prospective method. This update
simplifies how an entity assesses goodwill for impairment by eliminating Step 2 from the goodwill impairment test. As
amended, the goodwill impairment test consists of one step comparing the fair value of a reporting unit with its
carrying amount. An entity then recognizes a goodwill impairment charge for the amount by which the carrying amount
exceeds the reporting unit’s fair value. The adoption was utilized in the Company's current year goodwill impairment
testing. Refer above to the "Goodwill and Indefinite-lived Intangible Assets" section for further information.
On May 31, 2020, the Company adopted ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments" using the modified retrospective method. This update
replaces the existing incurred loss impairment model with an expected loss model and requires consideration of a
broader range of reasonable and supportable information to inform credit loss estimates including customer credit
quality, historical write-off trends and general information regarding industry trends and the macroeconomic
environment. The adoption did not have a material impact on the Company's financial statements, accounting policies
or methods utilized to determine the allowance for doubtful accounts.
On May 31, 2020, the Company adopted ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework
- Changes to the Disclosure Requirements for Fair Value Measurement" using the prospective method. This update
modifies certain disclosure requirements for fair value measurements. The adoption did not have a material impact on
the Company's financial statements.
Recently Issued Accounting Standards Not Yet Adopted
The Company is currently evaluating the impact of adopting the following relevant standards issued by the FASB:
Standard
Description
2018-14 Compensation - Retirement Benefits -
Defined Benefit Plans - General (Subtopic
715-20): Disclosure Framework - Changes
to the Disclosure Requirements for
Defined Benefit Plans
2019-12 Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes
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.
This update removes certain exceptions for
recognizing deferred taxes for investments,
performing intraperiod allocation and
calculating income taxes in interim periods.
The update also adds guidance to reduce
complexity in certain areas, including
recognizing deferred taxes for tax goodwill
and allocating taxes to members of a
consolidated group. Early adoption is
permitted.
Effective Date
May 30, 2021
May 30, 2021
All other issued and not yet effective accounting standards are not relevant to the Company.
59 2021 Annual Report
2. Revenue from Contracts with Customers
Disaggregated Revenue
The Company’s revenue is comprised primarily of sales of products and installation services. Depending on the type of
contract, the method of accounting and timing of revenue recognition may differ. Below, descriptions have been
provided that summarize the Company’s different types of contracts and how revenue is recognized for each.
•
Single Performance Obligation - these contracts are transacted with customers and include only the product
performance obligation. Most commonly, these contracts represent master agreements with independent third-
party dealers in which a purchase order represents the customer contract, point of sale transactions through the
Retail segment, as well as customer purchase orders for the Maharam subsidiary within the North America
Contract segment. For contracts that include a single performance obligation, the Company records revenue at the
point in time when title and risk of loss has transferred to the customer.
• Multiple Performance Obligations - these contracts are transacted with customers and include more than one
performance obligation; products, which are shipped to the customer by the Company and installation and other
services, which are primarily fulfilled by independent third-party dealers. For contracts that include multiple
performance obligations, the Company records revenue for the product performance obligation at the point in
time when control transfers, generally upon transfer of title and risk of loss to the customer. In most cases, the
Company has concluded that it is the agent for the installation services performance obligation and as such, the
revenue and costs of these services are recorded net within Net sales in the Company’s Consolidated Statements
of Comprehensive Income.
In certain instances, entities owned by the Company, rather than independent third-party dealers, perform
installation and other services. In these cases, Service revenue is generated by the Company’s entities that
provide installation services, which include owned dealers, and is recognized by the Company over time as the
services are provided. For contracts with multiple performance obligations, the Company allocates the transaction
price to each performance obligation based on relative standalone selling prices.
• Other - these contracts are comprised mainly of alliance fee arrangements, whereby the Company earns revenue
for allowing other furniture sellers access to its dealer distribution channel, as well as other miscellaneous selling
arrangements. Revenue from alliance contracts are recorded at the point in time in which the sale is made by
other furniture sellers through the Company’s sales channel.
Revenue disaggregated by contract type has been provided in the table below:
(In millions)
Net Sales:
Single performance obligation
Product revenue
Multiple performance obligations
Product revenue
Service revenue
Other
Total
Year Ended
May 29, 2021
May 30, 2020
$
2,180.5 $
2,116.6
265.8
9.6
9.2
2,465.1 $
347.8
9.7
12.5
2,486.6
$
Herman Miller, Inc. and Subsidiaries 60
Revenue disaggregated by product type and segment has been provided in the table below:
(In millions)
North America Contract:
Workplace
Performance Seating
Lifestyle
Other
Total North America Contract
International Contract:
Workplace
Performance Seating
Lifestyle
Other
Total International Contract
Retail:
Workplace
Performance Seating
Lifestyle
Other
Total Retail
Total
Year Ended
May 29, 2021
May 30, 2020
$
$
$
$
$
$
$
717.2 $
280.7
81.1
115.0
1,194.0 $
129.0 $
296.4
223.8
19.8
669.0 $
8.5 $
207.5
385.0
1.1
602.1 $
976.0
381.5
93.1
147.6
1,598.2
155.9
222.2
105.8
18.9
502.8
3.9
43.1
338.6
—
385.6
2,465.1 $
2,486.6
Refer to Note 14 of the Consolidated Financial Statements for further information related to our segments.
Contract Assets and Contract Liabilities
The Company records contract assets and contract liabilities related to its revenue generating activities. Contract
assets include certain receivables from customers that are unconditional as all performance obligations with respect
to the contract with the customer have been completed. These amounts represent trade receivables and they are
recorded within the caption “Accounts receivable, net” in the Consolidated Balance Sheets.
Contract assets also include amounts that are conditional because certain performance obligations in contracts with
customers are incomplete as of the balance sheet date. These contract assets generally arise due to contracts with
customers that include multiple performance obligations, e.g., both the product that is shipped to the customer by the
Company, as well as installation services provided by independent third-party dealers. For these contracts, the
Company recognizes revenue upon satisfaction of the product performance obligation. These contract assets are
included in the caption "Unbilled accounts receivable" in the Consolidated Balance Sheets until all performance
obligations in the contract with the customer have been satisfied.
Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and
recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer
based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized. These
customer deposits are included within the caption “Customer deposits” in the Consolidated Balance Sheets. During
the year ended May 29, 2021, the Company recognized Net sales of $28.9 million related to customer deposits that
were included in the balance sheet as of May 30, 2020.
3. Acquisitions and Divestitures
Maars Holding B.V.
On August 31, 2018, the Company acquired 48.2% of the outstanding equity of Global Holdings Netherlands B.V.,
which owns 100% of Maars Holding B.V. ("Maars”), a Harderwijk, Netherlands-based worldwide leader in the design
and manufacturing of interior wall solutions. The Company acquired its 48.2% ownership interest in Maars for
Herman Miller, Inc. and Subsidiaries 61
approximately $6.1 million in cash. The entity is accounted for using the equity method of accounting as the Company
has significant influence, but not control, over the entity.
For the Maars equity method investment, the fair values assigned to the assets acquired were based on best estimates
and assumptions as of August 31, 2018, and the valuation analysis was completed in the fourth quarter of fiscal 2019.
Nine United Denmark A/S
On June 7, 2018, the Company acquired 33% of the outstanding equity of Nine United Denmark A/S, d/b/a HAY and
subsequently renamed to HAY ApS ("HAY”), a Copenhagen, Denmark-based, design leader in furniture and ancillary
furnishings for residential and contract markets in Europe and Asia. The Company acquired its 33% ownership interest
in HAY for approximately $65.5 million in cash. The Company also acquired the rights to the HAY brand in North
America under a long-term license agreement for approximately $4.8 million in cash. In the fiscal periods leading up to
December 2, 2019 (“HAY Acquisition Date”), the date when the Company purchased an additional 34% equity voting
interest in HAY, this licensing agreement was recorded as a definite life intangible asset and was being amortized over
its 15-year useful life. This asset was also recorded within Other amortizable intangibles, net within the Condensed
Consolidated Balance Sheets as of June 1, 2019.
On December 2, 2019, the Company obtained a controlling financial interest in HAY through the purchase of an
additional 34% equity voting interest. The completion of the acquisition will allow the Company to further promote
growth and development of HAY's ancillary product lines and continue to support product innovation and sales
growth. The Company previously accounted for its ownership interest in HAY as an equity method investment, but
upon increasing its ownership to 67% on the HAY Acquisition Date, the Company consolidated the operations of HAY.
Total consideration paid for HAY on the HAY Acquisition Date was $79.0 million, exclusive of HAY cash on hand. The
Company funded the acquisition with cash and cash equivalents.
The previously mentioned HAY long-term licensing agreement was deemed to be a contractual preexisting relationship.
As a result of the business combination, the Company recorded this arrangement at its HAY Acquisition Date fair value,
which resulted in an increase in goodwill of $10.0 million and a net gain of $5.9 million, which was recorded within
“Gain on consolidation of equity method investments" within the Consolidated Statements of Comprehensive Income.
The goodwill was recorded within the Company’s Retail segment.
The Company is a party to options, that if exercised, would require it to purchase the remaining 33% of the equity in
HAY, at fair market value. This remaining redeemable noncontrolling interest in HAY is classified outside 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:
(In millions)
Cash
Working capital, net of cash and inventory step-up
Net property and equipment
Other assets
Other liabilities
Net assets acquired
$
$
12.1
12.3
0.9
3.9
(3.1)
26.1
The purchase of the additional equity interest in HAY was considered to be an acquisition achieved in stages, whereby
the previously held equity interest was remeasured as of the HAY Acquisition Date. The Company considered multiple
factors in determining the fair value of the previously held equity method investment, including the price negotiated
with the selling shareholder for the 34% equity interest in HAY, an income valuation model (discounted cash flow) and
current trading multiples for comparable companies. Based on this analysis, the Company recognized a non-taxable
gain of approximately $0.3 million on the remeasurement of the previously held equity method investment of $67.8
million in the third quarter of fiscal 2020. The net gain has been recognized in “Gain on consolidation of equity method
investments" within the Consolidated Statements of Comprehensive Income.
Herman Miller, Inc. and Subsidiaries 62
The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives
and fair value, as determined by the Company at the HAY Acquisition Date:
(In millions)
Inventory Step-up
Backlog
Deferred Revenue
Tradename
Product Development
Customer Relationships
Total
Valuation Method
Comparative Sales Approach
Multi-Period Excess Earnings
Adjusted Fulfillment Cost Method
Relief from Royalty
Relief from Royalty
Multi-Period Excess Earnings
Useful Life
(years)
0.8
0.3
0.1
Indefinite
8.0
9.0
Fair Value
$
3.4
1.7
(2.2)
60.0
22.0
34.0
118.9
$
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. Additionally, the Company recognized an impairment charge of $20.7 million on the HAY tradename in
the fourth quarter of fiscal 2020 based on the results of the Company's annual indefinite-lived trade name impairment
test.
naughtone
On October 25, 2019 (“naughtone Acquisition Date”), the Company purchased the remaining 47.5% equity voting
interest in naughtone (Holdings) Limited and naughtone Manufacturing Ltd. (together “naughtone”). naughtone is an
upscale, contemporary furniture manufacturer based in Harrogate, North Yorkshire, UK. The acquisition is intended to
allow the Company to further promote growth and development of naughtone's ancillary product lines, and continue to
support product innovation and sales growth. The Company previously accounted for its ownership interest in
naughtone as an equity method investment. Upon increasing its ownership to 100% on the naughtone Acquisition
Date, the Company obtained a controlling financial interest and consolidated the operations of naughtone. Total
consideration paid for naughtone on the naughtone Acquisition Date was $45.9 million, exclusive of naughtone cash
on hand. The Company funded the acquisition with cash and cash equivalents. The allocation of the purchase price
was finalized during the fourth quarter of fiscal 2020.
The following table presents the allocation of purchase price related to acquired tangible assets:
(In millions)
Cash
Working capital, net of cash and inventory step-up
Net property and equipment
Net assets acquired
$
$
5.1
1.3
0.8
7.2
The purchase of the remaining equity interest in naughtone was considered to be an acquisition achieved in stages,
whereby the previously held equity interest was remeasured as of the naughtone Acquisition Date. The Company
considered multiple factors in determining the fair value of the previously held equity method investment, including
the price negotiated with the selling shareholder for the 47.5% equity interest in naughtone, an income valuation
model (discounted cash flow) and current trading multiples for comparable companies. Based on this analysis, the
Company recognized a non-taxable gain of approximately $30.0 million on the remeasurement of the previously held
equity method investment of $20.5 million. The net gain has been recognized in “Gain on consolidation of equity
method investments" within the Consolidated Statements of Comprehensive Income.
The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives
and fair value, as determined by the Company at the naughtone Acquisition Date:
63 2021 Annual Report
(In millions)
Inventory Step-up
Backlog
Tradename
Customer Relationships
Total
Valuation Method
Comparative Sales Approach
Multi-Period Excess Earnings
Relief from Royalty
Multi-Period Excess Earnings
Useful Life (years)
0.3
0.3
Indefinite
9.0
$
Fair Value
$
0.2
0.8
8.5
29.4
38.9
Goodwill related to the acquisition was recorded within the North America Contract and International Contract
segments for $35.0 million and $22.5 million, respectively. Subsequent to the acquisition, the Company recognized an
impairment charge of $2.5 million on the naughtone tradename in the fourth quarter of fiscal 2020 based on the
results of the Company's annual indefinite-lived trade name impairment test.
Pro Forma Results of Operations
The results of naughtone and HAY’s operations have been included in the Consolidated Financial Statements
beginning on October 25, 2019 and December 2, 2019 respectively. The following table provides pro forma results of
operations for the years ended May 30, 2020 and June 1, 2019, as if naughtone and HAY had been acquired as of June
3, 2018. The pro forma results include certain purchase accounting adjustments such as the estimated change in
depreciation and amortization expense on the acquired tangible and intangible assets. Pro forma results do not
include any anticipated cost savings from the planned integration of these acquisitions, or the gain on the
consolidation of the HAY and naughtone equity method investments of approximately $36.2 million. Accordingly, such
amounts are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the
dates indicated or that may result in the future.
(In millions)
Net sales
Net (loss) earnings attributable to Herman Miller, Inc.
Year Ended
May 30, 2020
$
$
2,580.6 $
(46.3) $
June 1, 2019
2,757.3
163.7
4. Inventories
(In millions)
Finished goods and work in process
Raw materials
Total
May 29, 2021
May 30, 2020
$
$
166.7 $
46.9
213.6 $
151.1
46.2
197.3
Inventories valued using LIFO amounted to $21.8 million and $24.9 million as of May 29, 2021 and May 30, 2020,
respectively. If all inventories had been valued using the first-in first-out method, inventories would have been $230.2
million and $210.8 million at May 29, 2021 and May 30, 2020, respectively.
5. Investments in Nonconsolidated Affiliates
The Company has certain investments in entities that are accounted for using the equity method (“nonconsolidated
affiliates”). The investments are included in "Other noncurrent assets" in the Consolidated Balance Sheets and the
equity earnings are included in "Equity earnings from nonconsolidated affiliates, net of tax" in the Consolidated
Statements of Comprehensive Income. Refer to the tables below for the investment balances that are included in the
Consolidated Balance Sheets and for the equity earnings that are included in the Consolidated Statements of
Comprehensive Income.
(In millions)
Investments in nonconsolidated affiliates
(In millions)
Equity earnings from nonconsolidated affiliates, net of tax
May 29, 2021 May 30, 2020
12.2
$
11.7 $
May 29, 2021 May 30, 2020
0.3 $
$
5.0 $
June 1, 2019
5.0
The Company had an ownership interest in two nonconsolidated affiliates at May 29, 2021. Refer to the Company's
ownership percentages shown below:
Herman Miller, Inc. and Subsidiaries 64
Ownership Interest
Kvadrat Maharam Arabia DMCC
Kvadrat Maharam Pty Limited
Kvadrat Maharam Turkey JSC
Danskina B.V.
Global Holdings Netherlands B.V. (Maars)
Kvadrat Maharam
May 29, 2021 May 30, 2020
—%
50.0%
—%
—%
48.2%
50.0%
50.0%
50.0%
50.0%
48.2%
The Kvadrat Maharam nonconsolidated affiliates are distribution entities that are engaged in selling decorative
upholstery, drapery and wall covering products. At May 29, 2021 and May 30, 2020, the Company's investment value
in Kvadrat Maharam Pty was approximately equal to and $1.7 million more than the Company's proportionate share of
the underlying net assets, respectively. This difference was driven by a step-up in fair value of the investment in
Kvadrat Maharam Pty, stemming from the Maharam business combination. This amount is considered to be a
permanent basis difference.
In fiscal 2020 the Company agreed to fully divest its interest in Kvadrat Maharam Arabia DMCC, Kvadrat Maharam
Turkey JSC and Danskina B.V for approximately $3 million. The divestitures were completed in the first half of fiscal
2021.
Maars
On August 31, 2018, the Company acquired 48.2% of the outstanding equity of Global Holdings Netherlands B.V.,
which owns 100% of Maars Holding B.V. ("Maars”), a Harderwijk, Netherlands-based worldwide leader in the design
and manufacturing of interior wall solutions. The Company acquired its 48.2% ownership interest in Maars for
approximately $6.1 million in cash. The entity is accounted for using the equity method of accounting as the Company
has significant influence, but not control, over the entity.
As of the August 31, 2018 acquisition date, the Company's investment value in Maars was $3.1 million more than the
Company's proportionate share of the underlying net assets. This amount represented the difference between the
price that the Company paid to acquire 48.2% of the outstanding equity and the carrying value of the net assets of
Maars. Of this difference, $2.7 million is being amortized over the remaining useful lives of the assets, while $0.4
million is considered a permanent difference.
At May 29, 2021, the Company's investment value in Maars is $2.5 million more than the Company's proportionate
share of the underlying net assets, of which $2.1 million is being amortized over the remaining useful lives of the
assets, while $0.4 million was considered a permanent basis difference.
Transactions with Nonconsolidated Affiliates
Sales to and purchases from nonconsolidated affiliates were as follows for the periods presented below:
(In millions)
Sales to nonconsolidated affiliates
Purchases from nonconsolidated affiliates
May 29, 2021 May 30, 2020
1.0 $
$
0.3 $
$
3.6 $
5.0 $
June 1, 2019
3.9
23.0
Balances due to or due from nonconsolidated affiliates were as follows for the periods presented below:
(In millions)
Receivables from nonconsolidated affiliates
Payables to nonconsolidated affiliates
May 29, 2021 May 30, 2020
0.6
0.2 $
$
—
0.1 $
$
6. Short-Term Borrowings and Long-Term Debt
Long-term debt consisted of the following obligations:
65 2021 Annual Report
(In millions)
Debt securities, 6.0%, due March 1, 2021
Debt securities, 4.95%, due May 20, 2030
Syndicated Revolving Line of Credit, due August 2024
Supplier financing program
Total debt
Less: Current debt
Long-term debt
May 29, 2021
May 30, 2020
— $
49.9
225.0
2.2
277.1
(2.2)
274.9 $
50.0
49.9
490.0
1.4
591.3
(51.4)
539.9
$
$
The Company's syndicated revolving line of credit provides 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 repaid the $265 million draw on its syndicated revolving line of credit that was taken as a
precautionary measure in March 2020 to provide additional near-term liquidity given the uncertainty related to
COVID-19. After the end of the quarter ended February 27, 2021, the Company repaid $50 million of private placement
notes due March 1, 2021 with available cash on hand.
Available borrowings under the syndicated revolving line of credit were as follows for the periods indicated:
(In millions)
Syndicated revolving line of credit borrowing capacity
Less: Borrowings under the syndicated revolving line of credit
Less: Outstanding letters of credit
Available borrowings under the syndicated revolving line of credit
$
$
May 29, 2021
May 30, 2020
500.0 $
225.0
9.8
265.2 $
500.0
490.0
9.4
0.6
The unsecured senior revolving credit facility restricts, without prior consent, the Company's borrowings, capital leases
and the sale of certain assets. In addition, the Company has agreed to maintain certain financial performance ratios,
which include a maximum leverage ratio covenant, which is measured by the ratio of debt to trailing four quarter
adjusted EBITDA (as defined in the credit agreement) and is required to be less than 3.5:1, except that the Company
may elect, under certain conditions, to increase the maximum Leverage Ratio to 4:1 for four consecutive fiscal quarter
end dates. The covenants also require a minimum interest coverage ratio, which is measured by the ratio of trailing
four quarter EBITDA to trailing four quarter interest expense (as defined in the credit agreement) and is required to be
greater than 3.5:1. Adjusted EBITDA is generally defined in the credit agreement as EBITDA adjusted by certain items
which include non-cash share-based compensation, non-recurring restructuring costs and extraordinary items. At
May 29, 2021 and May 30, 2020, the Company was in compliance with all of these restrictions and performance ratios.
On May 20, 2020, the Company entered into a third amendment to its existing Private Shelf Agreement, dated
December 14, 2010, as amended (together with the third amendment, the "Agreement"), between the Company and
PGIM, Inc. (formerly known as Prudential Investment Management, Inc.) and certain of its affiliates (collectively,
“Prudential”). The Agreement provides for a $150.0 million revolving facility, which includes $50.0 million of
unsecured senior notes that were repaid on March 1, 2021 (the "Existing Notes") and an additional $50.0 million
aggregate principal amount of unsecured senior notes issued on May 20, 2020 (the "2020 Notes"). The 2020 Notes are
due on May 20, 2030 and bear interest at a fixed annual coupon rate of 4.95%. The Company intends to use the
proceeds of the 2020 Notes for general corporate purposes and/or to refinance existing indebtedness, including the
Existing Notes. The Agreement also establishes an uncommitted shelf facility (the “Facility”), under which Prudential
will consider one or more requests from the Company to purchase up to an additional $50.0 million in aggregate
amount of the Company’s senior unsecured notes from time to time. The interest rate on any future notes issued under
the Facility will be based on the benchmark Treasury rate corresponding to the weighted average life of the notes, plus
a spread as determined by Prudential. The Facility will expire on May 20, 2023.
Herman Miller, Inc. and Subsidiaries 66
Annual maturities of debt for the five fiscal years subsequent to May 29, 2021 are as shown in the table below.
(In millions)
2022
2023
2024
2025
2026
Thereafter
$
$
$
$
$
$
2.2
—
—
225.0
—
49.9
Supplier Financing Program
The Company has an agreement with a third-party financial institution that allows certain participating suppliers the
ability to finance payment obligations from the Company. Under this program, participating suppliers may finance
payment obligations of the Company, prior to their scheduled due dates, at a discounted price to the third-party
financial institution.
The Company has lengthened the payment terms for certain suppliers that have chosen to participate in the program.
As a result, certain amounts due to suppliers have payment terms that are longer than standard industry practice and
as such, these amounts have been excluded from the caption “Accounts payable” in the Condensed Consolidated
Balance Sheets as the amounts have been accounted for by the Company as a current debt obligation. Accordingly,
$2.2 million and $1.4 million have been recorded within the caption “Short-term borrowings and current portion of
long-term debt” for the periods ended May 29, 2021 and May 30, 2020, respectively.
Construction-Type Lease
During fiscal 2015, the Company entered into a lease agreement for the occupancy of a new studio facility in Palo Alto,
California which runs through fiscal 2026. In fiscal 2017, the Company became the deemed owner of the leased
building for accounting purposes as a result of the Company's involvement during the construction phase of the
project. The lease was therefore accounted for as a financing lease and the building and related financing liability were
initially recorded at fair value in the Consolidated Balance Sheets within Construction in progress and Other accrued
liabilities. During the first quarter of fiscal 2019, the construction was substantially completed, and the property was
placed in service. As a result, the Company began depreciating the assets over their estimated useful lives. The
Company also reclassified the related financing liability to Long-term debt. The carrying value of the building was $6.7
million and the related financing liability was $6.9 million at June 1, 2019. As a result of the adoption of ASC 842 in the
first quarter of fiscal 2020, the Company derecognized its construction-type lease asset and financing liability and
there was no related cumulative adjustment to retained earnings.
7. Leases
Accounting Policies
The Company has leases for retail studios, showrooms, manufacturing facilities, warehouses and vehicles, which
expire at various dates through 2042. Certain lease agreements include contingent rental payments based on per unit
usage over a contractual amount and others include rental payments adjusted periodically for inflationary indexes.
For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or
contains a lease. The Company records right-of use ("ROU") assets and lease obligations for its finance and operating
leases, which are initially recognized based on the discounted future lease payments over the term of the lease. As the
rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate
is used in calculating the present value of the sum of the lease payments.
Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when
it is reasonably certain that the Company will exercise the option. Leases, and any leasehold improvements, are
depreciated over the expected lease term. The Company’s leases do not contain any residual value guarantees or
material restrictive covenants.
67 2021 Annual Report
The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined
as leases with an initial term of 12 months or less. The Company recognizes lease expense for these leases on a
straight-line basis over the lease term.
Variable lease costs associated with the Company’s leases are recognized when the event, activity, or circumstance in
the lease agreement on which those payments are assessed occurs. Variable lease costs are presented as operating
expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income in the same line item
as the expense arising from fixed lease payments for operating leases.
Additionally, certain leases include renewal or termination options, which can be exercised at the Company’s
discretion. Lease terms include the noncancelable portion of the underlying leases along with any reasonably certain
lease periods associated with available renewal periods. The Company’s leases do not contain any residual value
guarantees or material restrictive covenants.
The Company determines if an arrangement is a lease at contract inception. Arrangements that are leases with an
initial term of 12 months or less are not recorded in the Consolidated Balance Sheets, and the Company recognizes
lease expense for these leases on a straight-line basis over the lease term. If leased assets have leasehold
improvements, the depreciable life of those leasehold improvements are limited by the expected lease term.
As none of the Company’s leases provide an implicit discount rate, the Company uses an estimated incremental
borrowing rate at the lease commencement date in determining the present value of the lease payments. Relevant
information used in determining the Company’s incremental borrowing rate includes the duration of the lease, location
of the lease, and the Company’s credit risk relative to risk-free market rates.
Leases
The Company's lease costs recognized in the Consolidated Statement of Income consist of the following:
(In millions)
Operating lease costs
Short-term lease costs
Variable lease costs*
Total
Year Ended
May 29, 2021
Year Ended
May 30, 2020
$
$
50.3 $
3.2
8.3
61.8 $
51.3
2.6
8.2
62.1
*Not included in the table above for the year ended May 29, 2021 are variable lease costs of approximately $84.5 million for raw
material purchases under certain supply arrangements that the Company has determined to meet the definition of a lease.
During the fourth quarter of fiscal 2020, the Company determined it was more likely than not that the fair value of
certain right of use assets were below their carrying values and assessed these assets for impairment. As result of this
assessment the Company recorded an impairment of $19.3 million in the Consolidated Statements of Comprehensive
income.
At May 29, 2021, the Company has no financing leases. The undiscounted annual future minimum lease payments
related to the Company's right-of-use assets are summarized by fiscal year in the following table:
(In millions)
2022
2023
2024
2025
2026
Thereafter
Total lease payments*
Less interest
Present value of lease liabilities
$
$
42.3
42.4
39.1
36.3
28.6
72.1
260.8
25.2
235.6
Herman Miller, Inc. and Subsidiaries 68
*Lease payments exclude $20.9 million of legally binding minimum lease payments for leases signed but not yet commenced,
primarily related to a new DWR corporate office in Stamford, CT expected to be occupied in fiscal 2022.
The long-term portion of the lease liabilities included in the amounts above is $196.9 million and the remainder of the
lease liabilities are included in Other accrued liabilities in the Condensed Consolidated Balance Sheets.
As of May 29, 2021 and May 30, 2020, the weighted average remaining lease term for all operating leases was 7 years.
The weighted average discount rate for operating leases as of May 29, 2021 and May 30, 2021 was 2.8%, and 3.1%,
respectively.
During the years ended May 29, 2021 and May 30, 2020, the cash paid for leases included in the measurement of the
liabilities and the operating cash flows was $45.3 million and $49.2 million, respectively. Right of use assets obtained
in exchange for new liabilities was $58.1 million and $13.4 million for the years ended May 29, 2021 and May 30, 2020,
respectively.
8. Employee Benefit Plans
The Company maintains retirement benefit plans for substantially all of its employees.
Pension Plan
One of the Company's wholly owned foreign subsidiaries has a defined-benefit pension plan based upon an average
final pay benefit calculation. The measurement date for this plan is the last day of the fiscal year and the plan is frozen
to new participants.
Benefit Obligations and Funded Status
The following table presents, for the fiscal years noted, a summary of the changes in the projected benefit obligation,
plan assets and funded status of the Company's pension plan:
(In millions)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Plan Amendments
Foreign exchange impact
Actuarial (gain) loss (1)
Benefits paid
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Foreign exchange impact
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Funded status:
Under funded status at end of year
Components of the amounts recognized in the Consolidated Balance Sheets:
Current liabilities
Non-current liabilities
Pension Benefit
2021
2020
126.5 $
2.2
—
18.6
(2.9)
(3.5)
140.9 $
88.1 $
6.6
13.7
5.0
(3.5)
109.9 $
109.1
2.4
—
(2.9)
21.0
(3.1)
126.5
88.2
4.7
(2.0)
0.3
(3.1)
88.1
(31.0) $
(38.4)
— $
(30.9) $
—
(38.3)
$
$
$
$
$
$
$
Components of the amounts recognized in Accumulated other comprehensive loss before the effect of income taxes:
0.7
Prior service cost
63.2
Unrecognized net actuarial loss (gain)
63.9
Accumulated other comprehensive loss
0.7 $
61.8 $
62.5 $
$
$
$
69 2021 Annual Report
(1) In fiscal 2021 and 2020, the net actuarial (gain) loss includes amounts resulting from changes in actuarial assumptions utilized
to calculate our benefit plan obligations such as the weighted-average discount rate.
The accumulated benefit obligation for the Company's pension plan totaled $135.5 million and $123.9 million as of
fiscal 2021 and fiscal 2020, respectively.
The following table is a summary of the annual cost of the Company's pension plan:
Components of Net Periodic Benefit Costs and Other Changes Recognized in Other Comprehensive Income (Loss):
(In millions)
Interest cost
Expected return on plan assets
Amortization of prior service costs
Amortization of net (gain)/loss
Net periodic benefit cost
2.2 $
(4.6)
0.1
5.3
3.0 $
2.4 $
(4.4)
0.1
3.2
1.3 $
2020
2021
$
$
2019
2.7
(4.5)
0.1
2.7
1.0
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):
(In millions)
Net actuarial (gain) loss
Net amortization
Total recognized in other comprehensive loss
(4.9) $
3.5
(1.4) $
2021
$
$
2020
20.6
(4.8)
15.8
The net actuarial loss, included in accumulated other comprehensive loss (pretax), expected to be recognized in net
periodic benefit cost during fiscal 2022 is $4.8 million.
Actuarial Assumptions
The weighted-average actuarial assumptions used to determine the benefit obligation amounts and the net periodic
benefit cost for the Company's pension plan are as follows:
Weighted-average assumptions used in the determination of net periodic benefit cost:
(Percentages)
Discount rate
Compensation increase rate
Expected return on plan assets
1.66
2.75
4.80
2021
2020
2019
2.39
3.20
4.80
Weighted-average assumptions used in the determination of the projected benefit obligations:
Discount rate
Compensation increase rate
1.99
3.20
1.66
2.75
2.87
3.10
4.80
2.39
3.20
The Company uses a full yield curve approach to estimate the interest component of net periodic benefit cost for
pension benefits. This method applies the specific spot rates along the yield curve used in the determination of the
benefit obligation to the relevant projected cash flows.
Plan Assets and Investment Strategies
The Company's employee benefit plan assets consist mainly of listed fixed income obligations and common/collective
trusts. The Company's primary objective for invested pension plan assets is to provide for sufficient long-term growth
and liquidity to satisfy all of its benefit obligations over time. Accordingly, the Company has developed an investment
strategy that it believes maximizes the probability of meeting this overall objective. This strategy includes the
development of a target investment allocation by asset category in order to provide guidelines for making investment
decisions. This target allocation emphasizes the long-term characteristics of individual asset classes as well as the
diversification among multiple asset classes. In developing its strategy, the Company considered the need to balance
the varying risks associated with each asset class with the long-term nature of its benefit obligations. The Company's
strategy moving forward will be to increase the level of fixed income investments as the funding status improves,
thereby more closely matching the return on assets with the liabilities of the plans.
Herman Miller, Inc. and Subsidiaries 70
The Company utilizes independent investment managers to assist with investment decisions within the overall
guidelines of the investment strategy. The target asset allocation at the end of fiscal 2021 and asset categories for the
Company's pension plan for fiscal 2021 and 2020 are as follows:
Targeted Asset Allocation Percentage
Percentage of Plan Assets at Year End
Asset Category
Fixed income
Common collective trusts
Total
2021
31%
69%
(In millions)
Asset Category
Cash and cash equivalents
Foreign government obligations
Common collective trusts-balanced
Total
(In millions)
Asset Category
Foreign government obligations
Common collective trusts-balanced
Total
Cash Flows
2020
35%
65%
Level 1
2021
32%
68%
100%
May 29, 2021
Level 2
—
34.2
75.0
0.7
—
—
0.7 $
109.2 $
2020
37%
63%
100%
Total
Level 1
May 30, 2020
Level 2
Total
—
—
— $
31.4
56.7
88.1 $
0.7
34.2
75.0
109.9
31.4
56.7
88.1
$
$
The Company reviews pension funding requirements to determine the contribution to be made in the next year. Actual
contributions will be dependent upon investment returns, changes in pension obligations and other economic and
regulatory factors. During fiscal 2021 and fiscal 2020, the Company made total cash contributions of $5.4 million to its
benefit plans.
The Company expects to contribute approximately $5.8 million to our benefit plans in fiscal 2022. The following
represents a summary of the benefits expected to be paid by the plans in future fiscal years. These expected benefits
were estimated based on the same actuarial valuation assumptions used to determine benefit obligations at May 29,
2021.
(In millions)
2022
2023
2024
2025
2026
2027-2031
Pension Benefits
3.9
3.9
4.0
4.0
4.1
21.3
$
$
$
$
$
$
Profit Sharing, 401(k) Plan, and Core Contribution
Substantially all of the Company’s domestic employees are eligible to participate in a defined contribution retirement
plan, primarily the Herman Miller, Inc. profit sharing and 401(k) plan (the "plan"). Employees under the plan are
eligible to begin participating on their date of hire. Effective June 2017, the Company matches 100 percent of employee
contributions to their 401(k) accounts up to 3 percent of their pay which was subsequently increased to 4 percent in
September 2017 for all eligible employees. A core contribution of 4 percent is also included for most participants of the
plan. There was an additional 1 percent contribution added to the quarterly Core Contribution for the quarter prior to
the increased Employer Matching Contribution effective September 3, 2017. During the fourth quarter of fiscal 2020,
the Company elected to temporarily suspend the Company's Core Contribution and 401(k) matches in order to reduce
costs and preserve liquidity. The Company reinstated the previously suspended employer-paid retirement plan
71 2021 Annual Report
contributions in the fourth quarter of fiscal 2021, and has also elected to make a catch-up contribution for the
employer-paid retirement plan contributions that were suspended for a majority of fiscal 2020.
There were no Herman Miller, Inc. profit sharing contributions made in fiscal 2021, fiscal 2020 or fiscal 2019. The
expense recorded for the Company's 401(k) matching and core contributions was $23.7 million, $22.2 million and
$25.4 million in fiscal years 2021, 2020 and 2019, respectively.
9. Common Stock and Per Share Information
The following table reconciles the numerators and denominators used in the calculations of basic and diluted EPS for
each of the last three fiscal years:
(In millions, except shares)
Numerator:
Numerator for both basic and diluted EPS, Net earnings (loss)
attributable to Herman Miller, Inc.
Denominator:
Denominator for basic EPS, weighted-average common shares
outstanding
Potentially dilutive shares resulting from stock plans
Denominator for diluted EPS
2021
2020
2019
$
173.1 $
(9.1) $
160.5
58,931,268 58,920,653 59,011,945
369,846
59,389,598 58,920,653 59,381,791
458,330
—
Equity awards of 207,365 shares, 142,224 shares and 218,037 shares of common stock were excluded from the
denominator for the computation of diluted earnings per share for the fiscal years ended May 29, 2021, May 30, 2020
and June 1, 2019, respectively, because they were anti-dilutive.
Common Stock
The Company has a share repurchase plan authorized by the Board of Directors on January 16, 2019, which provides a
share repurchase authorization of $250.0 million with no specified expiration date. The approximate dollar value of
shares available for purchase under the plan at May 29, 2021 was $236.7 million. During fiscal year 2021, 2020, and
2019, shares repurchased and retired under the current and past repurchase plans totaled 38,931, 641,192, and
1,326,023 shares respectively.
10. Stock-Based Compensation
The Company utilizes equity-based compensation incentives as a component of its employee and non-employee
director and officer compensation philosophy. Currently, these incentives consist principally of stock options,
restricted stock, restricted stock units and performance share units. The Company issues shares in connection with its
share-based compensation plans from authorized, but unissued, shares. At May 29, 2021 there were 7,182,670 shares
authorized under the various stock-based compensation plans.The Company also offers a stock purchase plan for its
domestic and certain international employees.
Valuation and Expense Information
The Company measures the cost of employee services received in exchange for an award of equity instruments based
on their grant-date fair market value. This cost is recognized over the requisite service period.
Certain of the Company's equity-based compensation awards contain provisions that allow for continued vesting into
retirement. Stock-based awards are considered fully vested for expense attribution purposes when the employee's
retention of the award is no longer contingent on providing subsequent service.
The Company classifies pre-tax stock-based compensation expense primarily within Operating expenses in the
Consolidated Statements of Comprehensive Income. Pre-tax compensation expense and the related income tax benefit
for all types of stock-based programs were as follows for the periods indicated:
Herman Miller, Inc. and Subsidiaries 72
(In millions)
Employee stock purchase program
Stock option plans
Restricted stock units
Performance share units
Total
Tax benefit
May 29, 2021 May 30, 2020
0.4 $
$
3.7
4.1
0.8
9.0 $
2.0 $
0.3 $
0.6
3.9
(2.1)
2.7 $
0.5 $
$
$
June 1, 2019
0.3
(0.4)
4.6
2.8
7.3
1.6
As of May 29, 2021, total pre-tax stock-based compensation cost not yet recognized related to non-vested awards was
approximately $13.7 million. The weighted-average period over which this amount is expected to be recognized is 1.5
years.
Employee Stock Purchase Program
Under the terms of the Company's Employee Stock Purchase Plan, 4 million shares of authorized common stock were
reserved for purchase by plan participants at 85 percent of the market price. Shares of common stock purchased under
the employee stock purchase plan were 71,468, 70,145, and 62,957 for the fiscal years ended 2021, 2020 and 2019
respectively.
Stock Options
The Company grants options to purchase the Company's stock to certain key employees and non-employee directors
under its Long-Term Incentive Plan, as amended (the "LTIP") at a price not less than the market price of the Company's
common stock on the date of grant. Under the current award program, all options become exercisable between one
year and three years from date of grant and expire ten years from date of grant. Most options are subject to graded
vesting with the related compensation expense recognized on a straight-line basis over the requisite service period.
In fiscal 2021 there was one stock option valuation date, but two valuations. In fiscal 2020 were no stock option
grants awarded to employees or non-employee directors. In fiscal 2019 there were two separate stock option valuation
dates. Therefore the table below has been presented with the assumptions relevant to each valuation date. The
Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes model. In
determining these values, the following weighted-average assumptions were used for the options granted during the
fiscal years indicated:
Risk-free interest rates (1)
Expected term of options (2)
Expected volatility (3)
Dividend yield (4)
Weighted-average grant-date fair value of stock options:
2021
2.30-2.47%
3.8-4.1 years
43-44%
1.99 %
2020
N/A
N/A
N/A
N/A
2019
2.65-2.70%
4.4 years
27 %
2.18-2.33%
Granted with exercise prices equal to the fair market value of the
stock on the date of grant
Granted with exercise prices greater than the fair market value of
the stock on the date of grant
$
$
6.10
5.62
N/A $
8.05
N/A
N/A
(1) Represents term-matched, zero-coupon risk-free rate from the Treasury Constant Maturity yield curve, continuously compounded.
(2) Represents historical settlement data, using midpoint scenario with 1-year grant date filter assumption for outstanding options.
(3) The blended volatility approach was used. 90% term-matched historical volatility from daily stock prices and 10% percent
weighted average implied volatility from the 90 days preceding the grant date.
(4) Represents the quarterly dividend divided by the three-month average stock price as of February 28, 2020.
The following is a summary of the transactions under the Company's stock option plan:
73 2021 Annual Report
Shares Under
Option
Weighted-Average
Exercise Prices
Aggregate
Intrinsic Value
(in millions)
Weighted-Average
Remaining Contractual
Term (Years)
Outstanding at May 30, 2020
Granted at market
Exercised
Forfeited or expired
Outstanding at May 29, 2021
Ending vested + expected to vest
Exercisable at end of period
361,416 $
1,409,792 $
(86,238) $
(11,598) $
1,673,372 $
1,673,372 $
230,462 $
32.80 $
22.9
30.81
22.53
24.63 $
24.63 $
32.55 $
0.2
38.8
38.8
3.5
5.8
8.56
8.56
5.35
The weighted-average remaining recognition period of the outstanding stock options at May 29, 2021 was 1.62 years.
The total pre-tax intrinsic value of options exercised during fiscal 2021, 2020 and 2019 was $0.5 million, $5.5 million
and $3.3 million, respectively. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic
value, based on the Company's closing stock price as of the end of the period presented, which would have been
received by the option holders had all option holders exercised in-the-money options as of that date. Total cash
received during fiscal 2021 from the exercise of stock options was approximately $3 million.
Restricted Stock Units
The Company grants restricted stock units to certain key employees under its LTIP. This program provides that the
actual number of restricted stock units awarded is based on the value of a portion of the participant's long-term
incentive compensation divided by the fair value of the Company's stock on the date of grant. The awards generally
cliff-vest after a three-year service period, with prorated vesting under certain circumstances and full or partial
accelerated vesting upon retirement. Awards granted in fiscal 2021 had a graded vesting schedule of 25% after the first
year, 25% after the second year, and the remaining 50% after the third year. Each restricted stock unit represents one
equivalent share of the Company's common stock to be awarded, free of restrictions, after the vesting period.
Compensation expense related to these awards is recognized over the requisite service period, which includes any
applicable performance period. Dividend equivalent awards are credited quarterly. The units do not entitle
participants to the rights of stockholders of common stock, such as voting rights, until shares are issued after vesting.
The following is a summary of restricted stock unit transactions for the fiscal years indicated:
Share
Units
Weighted Average
Grant-Date
Fair Value
Aggregate
Intrinsic Value
(in millions)
Weighted-Average
Remaining Contractual
Term (Years)
Outstanding at May 30, 2020
Granted
Forfeited
Released
Outstanding at May 29, 2021
Ending vested + expected to vest
243,774 $
307,652 $
(6,955) $
(60,460) $
484,011 $
484,011 $
37.02 $
26.71
32.36
33.98
30.84 $
30.84 $
5.6
23.1
23.1
1.3
1.4
1.4
The weighted-average remaining recognition period of the outstanding restricted stock units at May 29, 2021, was 1.4
years. The fair value of the share units that vested during the twelve months ended May 29, 2021, was $1.5 million. The
weighted average grant-date fair value of restricted stock units granted during 2021, 2020, and 2019 was $26.71,
$44.70 and $37.81 respectively.
Performance Share Units
The Company grants performance share units to certain key employees under its LTIP. The number of units initially
awarded was based on the value of a portion of the participant's long-term incentive compensation, divided by the fair
value of the Company's common stock on the date of grant. Each unit represents one equivalent share of the
Company's common stock. The number of common shares ultimately issued in connection with these performance
share units is determined based on the Company's financial performance over the related three-year service period or
the Company's financial performance based on certain total shareholder return results as compared to a selected
Herman Miller, Inc. and Subsidiaries 74
group of peer companies. Compensation expense is determined based on the grant-date fair value and the number of
common shares projected to be issued and is recognized over the requisite service period.
The following is a summary of performance share unit transactions for the fiscal years indicated:
Share
Units
Weighted Average
Grant-Date Fair
Value
Aggregate
Intrinsic Value
(in millions)
Weighted-Average
Remaining Contractual
Term (Years)
Outstanding at May 30, 2020
Granted
Forfeited
Released
Outstanding at May 29, 2021
Ending vested + expected to vest
384,537 $
84,989 $
(52,914) $
(48,553) $
368,059 $
368,059 $
37.95 $
37.21
24.76
23.67
41.54 $
41.54 $
8.9
17.6
17.6
1.3
1.1
1.1
The weighted-average remaining recognition period of the outstanding performance share units at May 29, 2021, was
1.3 years. The fair value for shares that vested during the twelve months ended May 29, 2021, was 1.1 million. The
weighted average grant-date fair value of performance share units granted during 2021, 2020, and 2019 was $37.21,
$45.71, and $36.37 respectively.
Deferred Compensation Plan
The Herman Miller, Inc. Executive Equalization Retirement Plan is a supplemental deferred compensation plan and was
made available for salary deferrals and Company contributions beginning in January 2008. The plan is available to a
select group of management or highly compensated employees who are selected for participation by the Executive
Compensation Committee of the Board of Directors. The plan allows participants to defer up to 50 percent of their base
salary and up to 100 percent of their incentive cash bonus. Company contributions to the plan “mirror” the amounts
the Company would have contributed to the various qualified retirement plans had the employee's compensation not
been above the IRS statutory ceiling ($290,000 in 2021). The Company does not guarantee a rate of return for these
funds. Instead, participants make investment elections for their deferrals and Company contributions. Investment
options are closely aligned to those available under the Herman Miller Profit Sharing and 401(k) Plan.
The Nonemployee Officer and Director Deferred Compensation Plan allows the Board of Directors of the Company to
defer a portion of their annual director fee. Investment options are the same as those available under the Herman
Miller Profit Sharing and 401(k) Plan, including Company stock.
In accordance with the terms of the Executive Equalization Plan and Nonemployee Officer and Director Deferred
Compensation Plan, the salary and bonus deferrals, Company contributions and director fee deferrals have been
placed in a Rabbi trust. The assets in the Rabbi trust remain subject to the claims of creditors of the Company and are
not the property of the participant. Investments in securities other than the Company's common stock are included
within the Other assets line item, while investments in the Company's stock are included in the line item Deferred
compensation plan in the Company's Consolidated Balance Sheets. A liability of the same amount is recorded on the
Consolidated Balance Sheets within the Other liabilities line item. Investment asset realized and unrealized gains and
losses are recognized within the Company's Consolidated Statements of Comprehensive Income in the Interest and
other investment income line item. The associated changes to the liability are recorded as compensation expense
within the Selling, general and administrative line item within the Company's Consolidated Statements of
Comprehensive Income. The net effect of any change to the asset and corresponding liability is offset and has no
impact on Net earnings in the Consolidated Statements of Comprehensive Income.
Director Fees
Company directors may elect to receive their director fees in one or more of the following forms: cash, deferred
compensation in the form of shares or other selected investment funds, unrestricted Company stock at the market
value at the date of election or stock options that vest in one year and expire in 10 years. The exercise price of the
stock options granted may not be less than the market price of the Company's common stock on the date of grant.
Under the plan, the Board members received the following shares or options in the fiscal years indicated:
75 2021 Annual Report
Shares of common stock
Shares through the deferred compensation program
2021
2020
2019
3,013
—
7,769
1,045
10,185
7,619
11. Income Taxes
The components of (loss) earnings before income taxes are as follows:
(In millions)
Domestic
Foreign
Total
The provision (benefit) for income taxes consists of the following:
(In millions)
Current: Domestic - Federal
Domestic - State
Foreign
Deferred: Domestic - Federal
Domestic - State
Foreign
Total income tax provision
2021
2020
2019
$
133.2 $
93.2
$ 226.4 $
(75.6) $
62.2
(13.4) $
136.2
58.9
195.1
2021
2020
2019
$
$
13.2 $
5.2
22.8
41.2
10.1
1.3
(4.7)
6.7
47.9 $
12.0 $
5.7
13.3
31.0
(16.8)
(3.9)
(4.3)
(25.0)
6.0 $
19.0
6.4
12.9
38.3
1.0
(0.2)
0.5
1.3
39.6
The following table represents a reconciliation of income taxes at the United States statutory rate of 21% with the
effective tax rate as follows:
(In millions)
Income taxes computed at the United States Statutory rate
Increase (decrease) in taxes resulting from:
State and local income taxes, net of federal income tax benefit
Non-deductible goodwill impairment
Gain on consolidation of equity method investments
U.S. tax liability on undistributed foreign earnings due to the Tax Act
Foreign-derived intangible income
Global intangible low-taxed income
Foreign statutory rate differences
Research and development incentives
Foreign offshore income claim
Foreign tax credit
Foreign withholding taxes and other miscellaneous foreign taxes
Other, net
Income tax expense
Effective tax rate
2021
$ 47.5
2020
$
(2.8)
2019
$ 41.0
5.6
—
—
—
(2.1)
7.9
2.6
(3.2)
(0.7)
(10.3)
1.0
(0.4)
$ 47.9
21.2 %
$
1.4
17.1
(5.5)
—
(1.4)
5.9
0.7
(4.4)
(1.7)
(5.8)
2.7
(0.2)
6.0
(44.9) %
4.9
—
—
(2.6)
(3.1)
6.9
1.9
(5.3)
(0.7)
(5.7)
0.8
1.5
$ 39.6
20.3 %
Herman Miller, Inc. and Subsidiaries 76
The tax effects and types of temporary differences that give rise to significant components of the deferred tax assets
and liabilities at May 29, 2021 and May 30, 2020, are as follows:
(In millions)
Deferred tax assets:
Compensation-related accruals
Accrued pension and post-retirement benefit obligations
Deferred revenue
Inventory related
Other reserves and accruals
Warranty
State and local tax net operating loss carryforwards and credits
Federal net operating loss carryforward
Foreign tax net operating loss carryforwards and credits
Accrued step rent and tenant reimbursements
Interest rate swap
Lease liability
Other
Subtotal
Valuation allowance
Total
Deferred tax liabilities:
Book basis in property in excess of tax basis
Intangible assets
Right of use lease assets
Other
Total
2021
2020
$
$
$
$
11.1 $
9.2
5.5
3.7
7.5
14.1
1.5
1.1
8.9
0.6
3.5
57.0
6.9
130.6
(8.9)
121.7 $
14.2
9.6
3.7
3.9
7.9
14.0
2.5
1.2
8.4
0.7
6.1
52.5
6.9
131.6
(10.6)
121.0
38.0 $
46.5
49.1
3.6
137.2 $
32.0
43.6
44.7
3.4
123.7
The future tax benefits of net operating loss (NOL) carry-forwards and foreign tax credits are recognized to the extent
that realization of these benefits is considered more likely than not. The Company bases this determination on the
expectation that related operations will be sufficiently profitable or various tax planning strategies will enable the
Company to utilize the NOL carry-forwards and/or foreign tax credits. To the extent that available evidence about the
future raises doubt about the realization of these tax benefits, a valuation allowance is established.
At May 29, 2021, the Company had state and local tax NOL carry-forwards of $19.7 million, the state tax benefit of
which is $1.1 million, which have various expiration periods from 1 to 21 years. The Company also had state credits
with a state tax benefit of $0.4 million, which expire in 1 to 6 years. For financial statement purposes, the NOL carry-
forwards and state tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $0.7
million.
At May 29, 2021, the Company had federal NOL carry-forwards of $5.2 million, the tax benefit of which is $1.1 million,
which expire in 8 years. For financial statement purposes, the NOL carry-forwards have been recognized as deferred
tax assets.
At May 29, 2021, the Company had federal deferred assets of $0.8 million, the tax benefit of which is $0.2 million,
which is related to an investment in a foreign joint venture. For financial statement purposes, the assets have been
recognized as deferred tax assets, subject to a valuation allowance of $0.2 million.
At May 29, 2021, the Company had foreign net operating loss carry-forwards of $36.1 million, the tax benefit of which is
$8.6 million, which have expiration periods from 7 years to an unlimited term. The Company also had foreign tax
credits with a tax benefit of $0.3 million which will expire in 11 years. For financial statement purposes, the NOL carry-
forwards and foreign tax credits have been recognized as deferred tax assets, subject to a valuation allowance of $7.3
million.
77 2021 Annual Report
At May 29, 2021, the Company had foreign deferred assets of $4.0 million, the tax benefit of which is $0.7 million,
which is related to various deferred taxes in Hong Kong as well as buildings in the United Kingdom. For financial
statement purposes, the assets have been recognized as deferred tax assets, subject to a valuation allowance of $0.7
million.
The Company intends to repatriate $107.0 million in cash held in certain foreign jurisdictions and as such has recorded
a deferred tax liability related to foreign withholding taxes on these future dividends received in the U.S. from foreign
subsidiaries of $0.7 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, which was $200.1 million on May 29, 2021.
Determination of the total amount of unrecognized deferred income tax on the remaining undistributed earnings of
foreign subsidiaries is not practicable.
The components of the Company's unrecognized tax benefits are as follows:
(In millions)
Balance at June 1, 2019
Increases related to current year income tax positions
Decreases related to prior year income tax positions
Decreases related to lapse of applicable statute of limitations
Balance at May 30, 2020
Increases related to current year income tax positions
Increases related to prior year income tax positions
Decreases related to lapse of applicable statute of limitations
Balance at May 29, 2021
$
$
$
1.9
0.3
(0.1)
(0.2)
1.9
0.1
0.4
(0.3)
2.1
The Company's effective tax rate would have been affected by the total amount of unrecognized tax benefits had this
amount been recognized as a reduction to income tax expense.
The Company recognizes interest and penalties related to unrecognized tax benefits through Income tax expense in its
Consolidated Statements of Comprehensive Income. Interest and penalties and the related liability, which are
excluded from the table above, were as follows for the periods indicated:
(In millions)
Interest and penalty expense (income)
Liability for interest and penalties
$
$
May 29, 2021
May 30, 2020
June 1, 2019
0.1 $
0.9 $
0.1 $
0.8
(0.3)
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 12 months as a result of new positions that may be
taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected that
any of the changes will be material to the Company's Consolidated Statements of Comprehensive Income.
During the year, the returns for fiscal years 2018 through 2020 have been fully accepted by the Internal Revenue
Service under the Compliance Assurance Process (CAP) and the Company is awaiting final closing documentation. For
the majority of the remaining tax jurisdictions, the Company is no longer subject to state and local, or non-U.S. income
tax examinations by tax authorities for fiscal years before 2018.
Herman Miller, Inc. and Subsidiaries 78
12. Fair Value
The Company's financial instruments consist of cash equivalents, marketable securities, accounts and notes
receivable, 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)
Carrying value
Fair value
May 29, 2021
May 30, 2020
$
$
277.1 $
284.8 $
591.3
594.0
The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities
recorded in net earnings, which have not significantly changed in the current period:
Cash and cash equivalents — The Company invests excess cash in short term investments in the form of commercial
paper and money market funds. Commercial paper is valued at amortized costs while money market funds are valued
using net asset value ("NAV").
Mutual Funds-equity — The Company's equity securities primarily include equity mutual funds. The equity mutual fund
investments are recorded at fair value using quoted prices for similar securities.
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
May 29, 2021 and May 30, 2020:
(In millions)
Financial Assets
Cash equivalents:
May 29, 2021
May 30, 2020
NAV
Quoted Prices With Other
Observable Inputs (Level 2)
NAV
Quoted Prices With Other
Observable Inputs (Level 2)
Money market funds
Mutual funds - equity
Foreign currency forward contracts
Deferred compensation plan
Total
$ 162.2 $
—
—
—
$ 162.2 $
Financial Liabilities
Foreign currency forward contracts $
$
Total
— $
— $
— $ 283.7 $
0.8
1.6
16.1
18.5 $ 283.7 $
—
—
—
0.1 $
0.1 $
— $
— $
—
0.7
1.1
13.2
15.0
0.8
0.8
The following describes the methods the Company uses to estimate the fair value of financial assets and liabilities
recorded in other comprehensive income, which have not significantly changed in the current period:
79 2021 Annual Report
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 is determined using a
market approach based on rates obtained from active markets. The interest rate swap agreements are designated as
cash flow hedging instruments.
The following table sets forth financial assets and liabilities measured at fair value through other comprehensive
income and the respective pricing levels to which the fair value measurements are classified within the fair value
hierarchy as of May 29, 2021 and May 30, 2020.
(In millions)
May 29, 2021
May 30, 2020
Financial Assets
Mutual funds - fixed income
Interest rate swap agreement
Total
Financial Liabilities
Interest rate swap agreement
Total
Quoted Prices with Other
Observable Inputs (Level 2)
$
Quoted Prices with Other
Observable Inputs (Level 2)
6.3
—
6.3
6.9 $
—
6.9 $
14.4 $
14.4 $
25.0
25.0
$
$
$
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:
(In millions)
Mutual funds - fixed income
Mutual funds - equity
Total
May 29, 2021
Unrealized
Gain/(Loss)
Cost
Market
Value
Cost
May 30, 2020
Unrealized
Gain/(Loss)
Market
Value
$
$
6.9 $
0.5
7.4 $
— $
0.3
0.3 $
6.9 $
0.8
7.7 $
6.2 $
0.6
6.8 $
0.1 $
0.1
0.2 $
6.3
0.7
7.0
The cost of securities sold is based on the specific identification method; realized gains and losses resulting from
such sales are included in the Consolidated Statements of Comprehensive Income within "Other (income) expense,
net".
The Company reviews its investment portfolio for any unrealized losses that would be deemed other-than-temporary
and requires the recognition of an impairment loss in earnings. If the cost of an investment exceeds its fair value, the
Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is
less than its cost, the Company's intent to hold the investment, and whether it is more likely than not that the
Company will be required to sell the investment before recovery of the cost basis. The Company also considers the
type of security, related industry and sector performance, and published investment ratings. Once a decline in fair
value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the
investment is established. If conditions within individual markets, industry segments, or macro-economic
environments deteriorate, the Company could incur future impairments.
The Company views its equity and fixed income mutual funds as available for use in its current operations.
Accordingly, the investments are recorded within Current Assets within the 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 offset 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
Herman Miller, Inc. and Subsidiaries 80
currency transaction gains or losses. These foreign currency exposures typically arise from net liability or asset
exposures in non-functional currencies on the balance sheets of our foreign subsidiaries. These foreign currency
forward contracts generally settle within 30 days and are not used for trading purposes. These forward contracts are
not designated as hedging instruments. Accordingly, we record the fair value of these contracts as of the end of the
reporting period in the Consolidated Balance Sheets with changes in fair value recorded within the Consolidated
Statements of Comprehensive Income. The balance sheet classification for the fair values of these forward contracts is
to "Other current assets" for unrealized gains and to "Other accrued liabilities" for unrealized losses. The Consolidated
Statements of Comprehensive Income classification for the fair values of these forward contracts is to "Other (income)
expense, net", for both realized and unrealized gains and losses.
The notional amounts of the forward contracts held to purchase and sell U.S. dollars in exchange for other major
international currencies were $61.9 million and $52.6 million as of May 29, 2021 and May 30, 2020, respectively. The
notional amounts of the foreign currency forward contracts held to purchase and sell British pound sterling in
exchange for other major international currencies were £44.5 million and £27.5 million as of May 29, 2021 and May 30,
2020, respectively. The Company also has other forward contracts related to other currency pairs at varying notional
amounts.
Interest Rate Swaps
The Company enters into interest rate swap agreements to manage its exposure to interest rate changes and its overall
cost of borrowing. The Company's interest rate swap agreements were entered into to exchange variable rate interest
payments for fixed rate payments over the life of the agreement without the exchange of the underlying notional
amounts. The notional amount of the interest rate swap agreements is used to measure interest to be paid or received.
The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest
expense.
The interest rate swaps were designated cash flow hedges at inception and the facts and circumstances of the hedged
relationship remains consistent with the initial quantitative effectiveness assessment in that the hedged instruments
remain an effective accounting hedge as of May 29, 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 other comprehensive loss, net of tax. The ineffective portion of the change in fair value of the
derivatives is immediately recognized in earnings. The interest rate swap agreements are assessed for hedge
effectiveness on a quarterly basis.
In September 2016, the Company entered into an interest rate swap agreement. The interest rate swap is for an
aggregate notional amount of $150.0 million with a forward start date of January 3, 2018 and a termination date of
January 3, 2028. As a result of the transaction, the Company effectively converted indebtedness anticipated to be
borrowed on the Company’s revolving line of credit up to the notional amount from a LIBOR-based floating interest rate
plus applicable margin to a 1.949 percent fixed interest rate plus applicable margin under the agreement as of the
forward start date.
In June 2017, the Company entered into an additional interest rate swap agreement. The interest rate swap is for an
aggregate notional amount of $75.0 million with a forward start date of January 3, 2018 and a termination date of
January 3, 2028. As a result of the transaction, the Company effectively converted the Company’s revolving line of
credit up to the notional amount from a LIBOR-based floating interest rate plus applicable margin to a 2.387 percent
fixed interest rate plus applicable margin under the agreement as of the forward start date.
The fair value of the Company’s two outstanding interest rate swap agreements was a net liability of $14.4 million and
$25.0 million as of May 29, 2021 and May 30, 2020, respectively. The liability and asset fair value were recorded within
"Other liabilities" and "Other noncurrent assets" within the Consolidated Balance Sheets. Recorded within Other
comprehensive loss, net of tax, for the effective portion of the Company's designated cash flow hedges was a net
unrealized loss of $12.6 million and $17.2 million for the fiscal years ended May 29, 2021 and May 30, 2020,
respectively.
For fiscal 2021, 2020 and 2019, there were no gains or losses recognized against earnings for hedge ineffectiveness.
81 2021 Annual Report
Effects of Derivatives on the Financial Statements
The effects of derivatives on the consolidated financial statements were as follows for the fiscal years ended 2021 and
2020 (amounts presented exclude any income tax effects):
Balance Sheet Location
May 29, 2021 May 30, 2020
(In millions)
Designated derivatives:
Interest rate swap
Interest rate swap
Non-designated derivatives:
Long-term assets: Other noncurrent assets
Long-term liabilities: Other liabilities
Foreign currency forward contracts
Foreign currency forward contracts
Current assets: Other current assets
Current liabilities: Other accrued liabilities
$
$
$
$
— $
14.4 $
1.6 $
0.1 $
—
25.0
1.1
0.8
Fiscal Year
(In millions)
(Loss) gain recognized on foreign
currency forward contracts
Statement of Comprehensive
Income Location
May 29, 2021
May 30, 2020
June 1, 2019
Other expense (income), net
$
0.8
$
(1.1) $
0.3
The gain/(loss) recorded, net of income taxes, in Other comprehensive loss for the effective portion of designated
derivatives was as follows for the periods presented below:
Fiscal Year
(In millions)
Interest rate swap
May 29, 2021 May 30, 2020
$
12.6 $
(17.2) $
June 1, 2019
(12.8)
Reclassified from Accumulated other comprehensive loss into earnings within "Interest expense" for the fiscal years
ended 2021, 2020, and 2019 were gains of $4.5 million and $0.8 million and a loss of $0.5 million, respectively. Pre-
tax gains expected to be reclassified from Accumulated other comprehensive loss into earnings during the next twelve
months are $4.5 million. The amount of gain, net of tax, expected to be reclassified out of Accumulated other
comprehensive loss into earnings during the next twelve months is $3.4 million.
Investments in Equity Securities Without a Readily Determinable Fair Value
In the fourth quarter of fiscal 2019, the Company recorded a gain from a $2.1 million fair value adjustment in an
investment in a technology partner, which increased the total carrying value of the investment to $3.6 million as of
June 1, 2020. The gain was the result of an observable price change for a similar investment in the same entity. There
were no similar gains in fiscal 2020 or 2021.
Redeemable Noncontrolling Interests
Redeemable noncontrolling interests are reported on the Condensed Consolidated Balance Sheets in mezzanine
equity in “Redeemable noncontrolling interests.” These financial instruments represent a level 3 fair value
measurement.
As of June 1, 2019, the outstanding redeemable noncontrolling interests in the Company's subsidiary, Herman Miller
Consumer Holdings, Inc. ("HMCH") were $20.6 million, and represented an approximate 5% minority ownership.
During August 2019, the Company acquired all of the remaining redeemable noncontrolling equity interests. HMCH
redeemed certain HMCH stock for cash and then, in August 2019, HMCH merged with and into the Company, with the
remaining minority HMCH shareholders receiving a cash payment. Total cash paid of $20.4 million for the redemptions
and for merger consideration was at fair market value based on an independent appraisal. This compares to purchases
of $10.1 million during the twelve month period ended June 1, 2019.
Herman Miller, Inc. and Subsidiaries 82
Changes in the Company's redeemable noncontrolling interest in HMCH for the years ended May 29, 2021 and May 30,
2020 are as follows:
(In millions)
Beginning Balance
Purchase of HMCH redeemable noncontrolling interests
Redemption value adjustment
Exercised options
Ending Balance
May 29, 2021
May 30, 2020
$
$
— $
—
— $
20.6
(20.4)
(0.2)
—
—
On December 2, 2019, the Company purchased an additional 34% equity voting interest in HAY. Upon increasing its
ownership to 67%, the Company obtained a controlling financial interest and consolidated the financial results of HAY.
Additionally, the Company is a party to options, that if exercised, would require it to purchase the remaining 33% of
the equity in HAY, at fair market value. This remaining redeemable noncontrolling interest in HAY is classified outside
permanent equity in the Consolidated Balance Sheets and is carried at the current estimated redemption amount. The
Company recognizes changes to the redemption value of redeemable noncontrolling interests as they occur and
adjusts the carrying value to equal the redemption value at the end of each reporting period. The redemption amounts
have been estimated based on the fair value of the subsidiary, determined using discounted cash flow methods. This
represents a level 3 fair value measurement.
Changes in the Company's redeemable noncontrolling interest in HAY for the year ended May 29, 2021 are as follows:
(In millions)
Beginning Balance
Dividend attributable to redeemable noncontrolling interests
Redemption value adjustment
Net income attributable to redeemable noncontrolling interests
Foreign currency translation adjustments
Ending Balance
May 29, 2021
$
$
50.4
(2.8)
15.0
5.7
8.7
77.0
Other
The following table summarizes the valuation of our assets measured at fair value on a non-recurring basis as of
May 29, 2021:
(In millions)
Assets:
Indefinite-lived intangible assets
May 29, 2021
Level 3
$
97.6
The relief-from-royalty method for the quantitative impairment assessment for indefinite-lived intangible assets
utilized discount rates ranging from 12.0% to 14.0% and royalty rates ranging from 2.0% to 3.0%. Based on the
quantitative impairment assessment performed, the carrying value these assets exceeded their fair value, resulting in
an impairment charge of $53.3 million in fiscal 2020.
See Note 1 and Note 7 to the Consolidated Financial Statements for additional information.
83 2021 Annual Report
13. Commitments and Contingencies
Product Warranties
The Company provides coverage to the end-user for parts and labor on products sold under its warranty policy and for
other product-related matters. The standard length of warranty is 12 years; however, this varies depending on the
product classification. The Company does not sell or otherwise issue warranties or warranty extensions as stand-alone
products. Reserves have been established for various costs associated with the Company's warranty program. General
warranty reserves are based on historical claims experience and other currently available information and are
periodically adjusted for business levels and other factors. Specific reserves are 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. In fiscal 2020, warranty reserves were
classified as short-term liabilities. The current and long-term portions of the warranty reserve are included within
"Accrued warranty," and "Other liabilities," respectively, within the consolidated balance sheets. The prior period
consolidated balance sheet was reclassified in the current year to be consistent with this presentation.
Changes in the warranty reserve for the stated periods were as follows:
Year Ended
(In millions)
Accrual Balance — beginning
Accrual for warranty matters
Settlements and adjustments
Accrual Balance — ending
Guarantees
May 29, 2021 May 30, 2020
$
59.2 $
12.8
(11.9)
60.1 $
$
June 1, 2019
51.5
20.7
(19.1)
53.1
53.1 $
23.7
(17.6)
59.2 $
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 May 29, 2021, the
Company had a maximum financial exposure related to performance bonds of approximately $6.3 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, no liability has been recorded in respect to these bonds as of either May 29, 2021 or May 30, 2020.
The Company has entered into standby letter of credit arrangements for purposes of protecting various insurance
companies and lessors against default on insurance premium and lease payments. As of May 29, 2021, the Company
had a maximum financial exposure from these standby letters of credit totaling approximately $9.8 million, all of
which is considered usage against the Company's revolving line of credit. The Company has no history of claims, nor is
it aware of circumstances that would require it to perform under any of these arrangements and believes that the
resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially
affect the Company's Consolidated Financial Statements. Accordingly, no liability has been recorded as of May 29,
2021 and May 30, 2020.
Contingencies
The Company is also involved in legal proceedings and litigation arising in the ordinary course of business. In the
opinion of management, the outcome of such proceedings and litigation currently pending will not have a material
adverse effect, if any, on the Company's Consolidated Financial Statements.
As of the end of fiscal 2021, outstanding commitments for future purchase obligations approximated $70.8 million.
Herman Miller, Inc. and Subsidiaries 84
14. Operating Segments
The Company's segments consist of North America Contract, International Contract and Retail.
The North America Contract segment includes the operations associated with the design, manufacture and sale of
furniture and textile products for work-related settings, including office, healthcare, and educational environments,
throughout the United States and Canada. The business associated with the Company's owned contract furniture
dealer is also included in the North America Contract segment. In addition to the Herman Miller brand, this segment
includes the operations associated with the design, manufacture and sale of high-craft furniture products and textiles
including Geiger wood products, Maharam textiles, Nemschoff, and naughtone products.
The International Contract segment includes the operations associated with the design, manufacture, and sale of
furniture products, primarily for work-related settings in Europe, the Middle East and Africa ("EMEA"), Latin America
and Asia-Pacific.
The Retail segment includes operations associated with the sale of modern design furnishings and accessories to third
party retailers, as well as direct to consumer sales through eCommerce, direct-mail catalogs, DWR studios and HAY
stores.
The Company also reports a “Corporate” category consisting primarily of unallocated expenses related to general
corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology,
administrative and acquisition-related costs. Management regularly reviews corporate costs and believes disclosing
such information provides more visibility and transparency regarding how the chief operating decision maker reviews
results of the Company. The accounting policies of the operating segments are the same as those of the Company.
Subsequent to the end of fiscal 2021, the Company implemented an organizational change that will result in a change
in our reportable segments. Beginning in the first quarter of fiscal 2022, the Company will recast the historical results
in reflection of the change. Below is a summary of the change:
•
•
The activities related to the manufacture and sale of furniture products direct to consumers and to third-party
retailers that currently reside within the International Contract segment will move to the Retail segment.
The operations associated with the design, manufacture and sale of furniture products for work-related
settings in Latin America will move to the North America Contract segment to form a new Americas Contract
segment.
• Operations of the DWR Contract business, a division of DWR that sells design furnishings and accessories for
use in work-related settings will move into the Americas Contract segment.
85 2021 Annual Report
The performance of the operating segments is evaluated by the Company's management using various financial
measures. The following is a summary of certain key financial measures for the years indicated:
(In millions)
Net Sales:
North America Contract
International Contract
Retail
Total
Depreciation and Amortization:
North America Contract
International Contract
Retail
Corporate
Total
Operating Earnings (Loss):
North America Contract
International Contract
Retail
Corporate
Total
Capital Expenditures:
North America Contract
International Contract
Retail
Corporate
Total
Total Assets:
North America Contract
International Contract
Retail
Corporate
Total
Goodwill:
North America Contract
International Contract
Retail
Corporate
Total
Year Ended
May 29, 2021 May 30, 2020 June 1, 2019
$
1,194.0 $
1,598.2 $
1,686.5
669.0
602.1
2,465.1 $
502.8
385.6
2,486.6 $
492.2
388.5
2,567.2
53.5 $
22.1
11.6
—
87.2 $
74.1 $
93.0
117.2
(53.7)
230.6 $
44.9 $
10.3
4.6
—
59.8 $
46.7 $
17.4
14.7
0.7
79.5 $
130.9 $
18.2
(148.3)
(39.2)
(38.4) $
53.7 $
10.4
4.9
—
69.0 $
46.8
10.5
14.1
0.7
72.1
189.7
57.8
5.3
(49.3)
203.5
52.7
16.6
16.5
—
85.8
745.3 $
572.4
340.1
404.1
2,061.9 $
769.5 $
512.5
310.9
461.0
2,053.9 $
733.6
356.8
310.0
168.9
1,569.3
187.4 $
176.8
—
—
364.2 $
182.3 $
163.7
—
—
346.0 $
185.3
39.7
78.8
—
303.8
$
$
$
$
$
$
$
$
$
$
$
The accounting policies of the operating segments are the same as those of the Company. Additionally, the Company
employs a methodology for allocating corporate costs and assets with the underlying objective of this methodology
being to allocate corporate costs according to the relative usage of the underlying resources and to allocate corporate
assets according to the relative expected benefit. The majority of the allocations for corporate expenses are based on
relative net sales. However, certain corporate costs, generally considered the result of isolated business decisions, are
not subject to allocation and are evaluated separately from the rest of the regular ongoing business operations.
Herman Miller, Inc. and Subsidiaries 86
The Company's product offerings consist primarily of office furniture systems, seating, freestanding furniture, storage
and casegoods. These product offerings are marketed, distributed and managed primarily as a group of similar
products on an overall portfolio basis. The following is a summary of net sales estimated by product category for the
years indicated:
(In millions)
Net Sales:
Workplace
Performance Seating
Lifestyle
Other (1)
Total
Year Ended
May 29, 2021 May 30, 2020 June 1, 2019
$
$
854.7 $
784.6
689.9
135.9
2,465.1 $
1,135.8 $
646.8
537.5
166.5
2,486.6 $
1,201.8
708.5
473.5
183.4
2,567.2
(1) “Other” primarily consists of uncategorized product sales and service
sales.
Sales by geographic area are based on the location of the customer. Long-lived assets consist of long-term assets of
the Company, excluding financial instruments, deferred tax assets and long-term intangibles. The following is a
summary of geographic information for the years indicated. Individual foreign country information is not provided as
none of the individual foreign countries in which the Company operates are considered material for separate
disclosure based on quantitative and qualitative considerations.
(In millions)
Net Sales:
United States
International
Total
Long-lived assets:
United States
International
Total
Year Ended
May 29, 2021 May 30, 2020 June 1, 2019
$
$
$
$
1,728.9 $
736.2
2,465.1 $
1,795.8 $
690.8
2,486.6 $
1,865.8
701.4
2,567.2
311.1 $
70.6
381.7 $
306.7 $
59.6
366.3 $
422.1
52.2
474.3
The Company approximates that no single dealer accounted for more than three percent of the Company's net sales in
the fiscal year ended May 29, 2021. The Company estimates that the largest single end-user customer accounted for
$113.0 million, $122.9 million and $129.6 million of the Company's net sales in fiscal 2021, 2020 and 2019,
respectively. This represents approximately five percent of the Company's net sales in in each of fiscal 2021, 2020 and
2019. The Company's ten largest customers in the aggregate accounted for approximately 17 percent of net sales in
fiscal 2021 and 18 percent of net sales in fiscal 2020 and 2019.
Approximately 4 percent of the Company's employees are covered by collective bargaining agreements, most of whom
are employees of its Nemschoff and Herman Miller Holdings Limited subsidiaries.
87 2021 Annual Report
15. Accumulated Other Comprehensive Loss
The following table provides an analysis of the changes in accumulated other comprehensive loss for the years
indicated:
(In millions)
Cumulative translation adjustments at beginning of period
Other comprehensive income (loss)
Balance at end of period
Year Ended
May 29, 2021 May 30, 2020 June 1, 2019
$
(56.0) $
(48.3) $
(34.1)
52.1
(3.9)
(7.7)
(56.0)
(14.2)
(48.3)
Pension and other post-retirement benefit plans at beginning of period
Other comprehensive income (loss) before reclassifications (net of
tax of ($.03), $3.5, and $2.0)
(59.2)
(45.0)
(37.2)
5.3
(16.9)
(10.0)
Reclassification from accumulated other comprehensive income -
Other, net
Tax (expense) benefit
Net reclassifications
Net current period other comprehensive income (loss)
Balance at end of period
Interest rate swap agreement at beginning of period
Cumulative effect of accounting change
Other comprehensive income (loss) before reclassifications (net of
tax of ($2.6), $5.8, and $5.3)
Reclassification from accumulated other comprehensive income -
Other, net
Net reclassifications
Net current period other comprehensive income (loss)
Balance at end of period
Unrealized holding gains on securities at beginning of period
Cumulative effect of accounting change
Other comprehensive (loss) income before reclassifications
Balance at end of period
5.5
(2.0)
3.5
8.8
(50.4)
(18.9)
—
3.3
(0.6)
2.7
(14.2)
(59.2)
(0.9)
—
2.6
(0.4)
2.2
(7.8)
(45.0)
9.9
1.5
12.6
(17.2)
(12.8)
(4.5)
(4.5)
8.1
(10.8)
0.1
—
(0.1)
—
(0.8)
(0.8)
(18.0)
(18.9)
—
—
0.1
0.1
0.5
0.5
(12.3)
(0.9)
0.1
(0.1)
—
—
Total Accumulated other comprehensive loss
$
(65.1) $
(134.0) $
(94.2)
16. Restructuring Expenses
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. The Company recognized
restructuring and impairment expenses of $5.9 million, with a net credit of $1.9 million recognized 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 Contract segment initiated restructuring discussions with labor
unions related to its Nemschoff operation in Wisconsin. To date, the Company has recorded approximately $3.1 million
Herman Miller, Inc. and Subsidiaries 88
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. These restructuring costs relate to potential partial outsourcing and in-sourcing strategies,
long-lived asset impairments and employee-related costs. The plan is complete and no future costs related to 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. 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.
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 material future restructuring costs related to the plan are expected as the plan is substantially complete.
The following table provides an analysis of the changes in the restructuring costs reserve for the above plans for the
fiscal years ended May 30, 2020 and May 29, 2021:
(In millions)
June 1, 2019
Restructuring Costs
Amounts Paid
May 30, 2020
Restructuring Costs
Amounts Paid
Other*
May 29, 2021
Severance and Employee-Related Exit or Disposal Activities
Total
$
$
$
6.8 $
9.9
(10.8)
5.9 $
(1.7)
(3.3)
—
0.9 $
1.1 $
1.2 $
(1.5) $
0.8 $
(2.0) $
(0.1) $
1.9 $
0.6 $
7.9
11.1
(12.3)
6.7
(3.7)
(3.4)
1.9
1.5
*This represents the gains on the sales of office buildings and related assets in China and the United Kingdom offset by other non-
cash charges. The gains and other non-cash charges were recorded as restructuring cost, but do not impact the restructuring
reserve.
In the fourth quarter of fiscal 2020, the Company announced a restructuring plan (“May 2020 restructuring plan") to
substantially reduce expenses in response to the impact of the COVID-19 pandemic and related restrictions. These
activities included voluntary and involuntary reductions in its North American and international workforces. Combined,
these actions resulted in the elimination of approximately 400 full-time positions throughout the Company in various
businesses and functions. As the result of these actions, the Company projects an annualized expense reduction of
approximately $40 million. To date, the Company incurred severance and related charges of $18.7 million with
$3.4 million recognized in fiscal 2021 and the remainder in fiscal 2020. No material future restructuring costs related
to the plan are expected and the remaining amounts will be paid in fiscal 2022.
The following table provides an analysis of the changes in the restructuring cost reserve for the May 2020 restructuring
plan for the fiscal year ended May 29, 2021:
(In millions)
Beginning Balance
Restructuring Costs
Amounts Paid
Ending Balance
89 2021 Annual Report
Severance and
Employee-Related
$
$
15.3
3.4
(17.7)
1.0
The following is a summary of restructuring expenses by segment for the fiscal years indicated:
Year Ended
(In millions)
North America Contract
International Contract
Retail
Total
17. Variable Interest Entities
May 29, 2021 May 30, 2020
3.8 $
$
18.7 $
June 1, 2019
7.7
(1.1)
—
2.7 $
4.8
2.9
26.4 $
2.5
—
10.2
$
The Company has long-term notes receivable with a third-party owned dealer that are deemed to be variable interests
in variable interest entity. The carrying value of these long-term notes receivable was $1.2 million and $1.5 million as of
May 29, 2021 and May 30, 2020, respectively, and represents the Company’s maximum exposure to loss. The
Company is not deemed to be the primary beneficiary of the variable interest entity as the entity controls the activities
that most significantly impact the entity’s economic performance, including sales, marketing, and operations.
18. Quarterly Financial Data (Unaudited)
Set forth below is a summary of the quarterly operating results on a consolidated basis for the years ended May 29,
2021, May 30, 2020, and June 1, 2019.
(In millions, except per share data)
2021 Net sales
Gross margin
Net earnings attributable to Herman Miller, Inc.
Earnings per share-basic
Earnings per share-diluted
2020 Net Sales
Gross margin
Net earnings attributable to Herman Miller, Inc.
Earnings per share-basic
Earnings per share-diluted
2019 Net sales
Gross margin
Net earnings attributable to Herman Miller, Inc.
Earnings per share-basic
Earnings per share-diluted
$
$
$
First
Quarter (1)
Second
Quarter (1)
Third
Quarter (1)
Fourth
Quarter (1)
626.8 $
250.0
73.0
1.24
1.24
670.9 $
246.1
48.2
0.82
0.81
624.6 $
225.1
35.8
0.60
0.60
626.3 $
244.2
51.3
0.87
0.87
674.2 $
255.5
78.6
1.33
1.32
652.6 $
235.6
39.3
0.66
0.66
590.5 $
230.9
41.5
0.70
0.70
665.7 $
243.3
37.7
0.64
0.64
619.0 $
221.0
39.2
0.67
0.66
621.5
224.0
7.4
0.12
0.12
475.7
165.8
(173.7)
(2.95)
(2.95)
671.0
248.2
46.2
0.78
0.78
(1) For some line items, the sum of the quarters does not equal the annual balance reflected in the Consolidated Statements of
Comprehensive Income due to rounding associated with the calculations on an individual quarter basis.
Herman Miller, Inc. and Subsidiaries 90
19. Subsequent Event
Acquisition of Knoll
In April, we announced that we entered into a definitive agreement with Knoll, under which Herman Miller will acquire
Knoll in a cash and stock transaction valued at $1.8 billion. On July 13, 2021, the Herman Miller shareholders and Knoll
stockholders approved the proposals necessary to complete the previously announced merger of Herman Miller and
Knoll and the merger closed on July 19, 2021.
In connection with our acquisition of Knoll, in July, 2021, the Company entered into a syndicated revolving line of credit
that provides the Company with up to $725 million in revolving variable interest borrowing capacity that matures in
July, 2026, replacing our previous $500 million syndicated revolving line of credit. The Company also entered into a
debt commitment letter for a five-year senior secured term loan "A" facility in an aggregate principal amount of
$400 million and a seven-year senior secured term loan "B" facility in 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. The Company also repaid
$64 million of private placement notes due May 20, 2030.
91 2021 Annual Report
Management's Report on Internal Control over Financial Reporting
To the Board of Directors and Stockholders of Herman Miller, Inc.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rules 13a-15(f). The internal control over financial reporting at Herman Miller, Inc. is designed
to provide reasonable assurance to our stakeholders that the financial statements of the Company fairly represent its
financial condition and results of operations.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable
assurance and may not prevent or detect all misstatements. Further, because of changes in conditions, effectiveness
of internal control over financial reporting may vary over time.
Under the supervision and with the participation of management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of
May 29, 2021, based on the original framework in Internal Control — Integrated Framework (2013 Framework) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management
believes the Company's internal control over financial reporting was effective as of May 29, 2021.
KPMG LLP has issued an attestation report on the effectiveness of our internal control over financial reporting, which is
included herein.
/s/ Andrea R. Owen
Andrea R. Owen
Chief Executive Officer
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Herman Miller, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Herman Miller, Inc. and subsidiaries (the
Company) as of May 29, 2021 and May 30, 2020, the related consolidated statements of comprehensive income,
stockholders’ equity, and cash flows for each of the years in the two-year period ended May 29, 2021, and the related
notes and financial statement schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial
statements). We also have audited the Company’s internal control over financial reporting as of May 29, 2021, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of May 29, 2021 and May 30, 2020, and the results of its operations and its cash
flows for each of the years in the two-year period ended May 29, 2021, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of May 29, 2021 based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting
for leases as of June 2, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
93 2021 Annual Report
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
HAY tradename impairment assessment
As discussed in Note 1 to the consolidated financial statements, the indefinite-lived intangible asset balance
as of May 29, 2021 was $43.1 million related to the HAY tradename. Indefinite-lived intangible assets are
tested for impairment annually in the fourth quarter, or more frequently, when events or changes in
circumstances indicate that the fair value of an indefinite-lived intangible asset has declined below its
carrying value. To estimate the fair value of the indefinite-lived intangible assets, the Company utilizes the
relief from royalty method.
We identified the evaluation of the HAY tradename for impairment as a critical audit matter. Subjective and
challenging auditor judgment was required to evaluate the selection of forecasted revenue growth rates,
discount rate, and royalty rate used to estimate the fair value of the HAY tradename. Additionally, the audit
effort associated with the evaluation of the HAY tradename for impairment required specialized skills and
knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the Company’s impairment
evaluation for the HAY tradename, including controls over the selection of forecasted revenue growth rates,
discount rate, and royalty rate used to estimate the fair value of the HAY tradename. We evaluated the
reasonableness of management’s forecasted revenue growth rates by comparing the forecasts to historical
revenue growth rates, considering industry conditions and growth plans. We performed sensitivity analyses to
assess the impact of reasonably possible changes to the forecasted revenue growth rates, discount rate, and
royalty rate assumptions on the fair value of the tradename. In addition, we involved valuation professionals
with specialized skills and knowledge, who assisted in:
•
•
evaluating the Company’s discount rate by comparing the Company’s inputs to the discount rate to
publicly available data for comparable entities and assessing the overall discount rate; and
evaluating the Company’s royalty rate by comparing the selected royalty rate to the forecasted
operating margins of the sales associated with the tradename and publicly available data for
comparable licensing agreements and assessing the overall royalty rate.
/s/ KPMG LLP
We have served as the Company’s auditor since 2019.
Chicago, Illinois
July 27, 2021
Herman Miller, Inc. and Subsidiaries 94
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Herman Miller, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Herman Miller, Inc. and subsidiaries (the Company)
as of June 1, 2019, and the related consolidated statements of comprehensive income, stockholders’ equity and cash
flows for each of the two years in the period ended June 1, 2019, and the related notes and financial statement
schedule for each of the two years in the period ended June 1, 2019 listed in the Index at Item 15(a) (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at June 1, 2019, and the results of its operations
and its cash flows for each of the two years in the period ended June 1, 2019, in conformity with U.S. generally
accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We served as the Company’s auditor from 2002 to 2019.
Grand Rapids, Michigan
July 27, 2021
95 2021 Annual Report
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
None
Item 9A Controls and Procedures
(a)
(b)
(c)
Disclosure Controls and Procedures. Under the supervision and with the participation of management, the
Company's Chief Executive Officer and Chief Financial Officer have 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 May 29, 2021 and have concluded that as of that date, the Company's disclosure controls and procedures
were effective.
Management's Annual Report on Internal Control Over Financial Reporting and Attestation Report of the
Independent Registered Public Accounting Firm. Refer to Item 8 for “Management's Report on Internal Control
Over Financial Reporting.” The effectiveness of the Company's internal control over financial reporting has
been audited by KPMG LLP, an independent registered accounting firm, as stated in its report included in
Item 8.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company's internal
control over financial reporting during the fourth quarter ended May 29, 2021 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B Other Information
None
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable
Herman Miller, Inc. and Subsidiaries 96
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Directors, Executive Officers, Promoters and Control Persons
Information relating to directors and director nominees of the Company is contained under the caption “Director and
Executive Officer Information” in the Company's definitive Proxy Statement, relating to the Company's 2021 Annual
Meeting of Stockholders, and the information within that section is incorporated by reference. Information relating to
executive officers of the Company is included in Part I hereof entitled “Information About Our Executive Officers.”
Compliance with Section 16(a) of the Exchange Act
Information relating to compliance with Section 16(a) of the Exchange Act is contained under the caption “Delinquent
Section 16(a) Reports” in the Company's definitive Proxy Statement, relating to the Company's 2021 Annual Meeting of
Stockholders, and the information within that section is incorporated by reference.
Code of Ethics
The Company has adopted a Code of Conduct that serves as the code of ethics for the executive officers and senior
financial officers and as the code of business conduct for all Company directors and employees. This code is made
available free of charge through the “Legal” section of the Company's website at www.hermanmiller.com. Any
amendments to, or waivers from, a provision of this code applicable to any such officers will be posted to the "Legal"
section of the Company's website.
Corporate Governance
Information relating to the identification of the audit committee, audit committee financial experts, and director
nomination procedures of the Company is contained under the captions “Board Committees” and “Corporate
Governance and Board Matters — Director Nominations” in the Company's definitive Proxy Statement, relating to the
Company's 2021 Annual Meeting of Stockholders, and the information within these sections is incorporated by
reference.
Item 11 Executive Compensation
Information relating to executive compensation is contained under the captions “Compensation Discussion and
Analysis,” “Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal
Year-End,” “Option Exercises and Stock Vested,” “Pension Benefits,” “Nonqualified Deferred Compensation,”
“Potential Payments Upon Termination, Death, Disability, Retirement or Change in Control,” “Director Compensation,”
“Director Compensation Table,” and “Executive Compensation Committee Interlocks and Insider Participation” in the
Company's definitive Proxy Statement, relating to the Company's 2021 Annual Meeting of Stockholders, and the
information within these sections is incorporated by reference. The information under the caption “Compensation
Committee Report” is incorporated by reference, however, such information is not deemed filed with the SEC.
Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
The sections entitled “Voting Securities and Principal Shareholders,” “Director and Executive Officer Information,” and
“Equity Compensation Plan Information” in the Company's definitive Proxy Statement, relating to the Company's 2021
Annual Meeting of Stockholders, and the information within these sections is incorporated by reference.
97 2021 Annual Report
Item 13 Certain Relationships and Related Transactions, and Director
Independence
Information concerning certain relationships and related transactions contained under the captions “Certain
Relationships and Related Party Transactions,” and “Corporate Governance and Board Matters — Determination of
Independence of Board Members” in the Company's definitive Proxy Statement, relating to the Company's 2021
Annual Meeting of Stockholders and the information within these sections is incorporated by reference.
Item 14 Principal Accountant Fees and Services
Information relating to the ratification of the selection of the Company's independent public accountants and
concerning the payments to our principal accountants and the services provided by our principal accounting firm set
forth under the captions "Ratification of the Audit Committee's selection of Independent Registered Public Accounting
Firm" including “Disclosure of Fees Paid to Independent Auditors” in the Company's definitive Proxy Statement,
relating to the Company's 2021 Annual Meeting of Stockholders, and the information within that section is
incorporated by reference.
Herman Miller, Inc. and Subsidiaries 98
PART IV
Item 15 Exhibits and Financial Statement Schedule
(a)
The following documents are filed as a part of this report:
1.
Financial Statements
The following Consolidated Financial Statements of the Company are included in this Annual Report on Form
10-K on the pages noted:
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Management's Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firms
2.
Financial Statement Schedule
Page Number in
this Form 10-K
47
48
49
50
51
92
93
The following financial statement schedule is included in this Annual Report on Form 10-K on the pages noted:
Schedule II-
Valuation and Qualifying Accounts
Page Number in
this Form 10-K
103
All other schedules required by Form 10-K Annual Report have been omitted because they were not applicable,
included in the Notes to the Consolidated Financial Statements, or otherwise not required under instructions
contained in Regulation S-X.
3.
Exhibits
Refer to the Exhibit Index which is included below.
99 2021 Annual Report
Exhibit Index
(2)
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
(a)
(b)
Agreement and Plan of Merger, by and among Herman Miller, Inc., Heat Merger Sub, Inc. and Knoll,
Inc., dated as of April 19, 2021, is incorporated by reference to Exhibit 2.1 of Registrant’s Form 8-K
Report dated April 22, 2021 (Commission File No. 001-15141).
Stock Purchase Agreement, by and between Furniture Investments Acquisitions S.C.S. and Herman
Miller, Inc., dated as of April 19, 2021, is incorporated by reference to Exhibit 2.2 of the Registrant's
Form 8-K Report dated April 22, 2021 (Commission File No. 001-15141).
(3)
Articles of Incorporation and Bylaws
(a)
(b)
Restated Articles of Incorporation, dated October 8, 2018, are incorporated by reference to Exhibit
3.1 of Registrant's Form 8-K Report dated October 8, 2018 (Commission File No. 001-15141).
Amended and Restated Bylaws, dated April 9, 2019, are incorporated by reference to Exhibit 3 of
the Registrant's Form 8-K Report dated April 9, 2019 (Commission File No. 001-15141).
Herman Miller, Inc. and Subsidiaries 100
(4)
Instruments Defining the Rights of Security Holders
(a) Other instruments which define the rights of holders of long-term debt individually represent debt
of less than 10% of total assets. In accordance with item 601(b)(4)(iii)(A) of regulation S-K, the
Registrant agrees to furnish to the SEC copies of such agreements upon request.
(b) Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934, dated May 30, 2020, is incorporated by reference to Exhibit 4.B of
Registrant's Form 10-K Report dated July 28, 2020 (Commission File No. 001-15141).
(10)
Material Contracts
(a)
Credit Agreement dated as of July 19, 2021 is incorporated by reference to Exhibit 10.1 of
Registrant’s Form 8-K Report dated July 19, 2021 (Commission File No. 001-15141).
(b)
2020 Herman Miller, Inc Long-Term Incentive Plan is incorporated by reference to Article 1 of the
Registrant's Schedule 14A dated September 1, 2020 (Commission File No. 001-15141).(1)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Herman Miller, Inc. Nonemployee Officer and Director Deferred Compensation Plan is incorporated
by reference to Exhibit 10(b) of the Registrant's Form 10-K Report dated July 26, 2016 (Commission
File No. 001-15141).(1)
Form of Management Continuity Agreement of the Registrant, dated May 30, 2020, is incorporated
by reference to Exhibit 10.C of Registrant's Form 10-K Report dated July 28, 2020 (Commission File
No. 001-15141).(1)
Herman Miller, Inc. Executive Equalization Retirement Plan is incorporated by reference to Exhibit
10 (d) of the Registrant's Form 10-K Report dated July 28, 2015 (Commission File No. 001-15141).(1)
Form of Herman Miller, Inc., Long-Term Incentive Plan Stock Option Agreement is incorporated by
reference to Exhibit 10.1 of the Registrant's Form 10-Q Report dated January 9, 2019 (Commission
File No. 001-15141).(1)
Form of Herman Miller, Inc., Long-Term Incentive Restricted Stock Unit Award is incorporated by
reference to Exhibit 10.1 of the Registrant's Form 10-Q Report dated April 7, 2020 (Commission File
No. 001-15141).(1)
Form of Herman Miller, Inc. 2011 Long-Term Incentive Plan HMVA Plan Performance Share Unit
Award is incorporated by reference to Exhibit 10.3 of the Registrant's Form 10-Q Report dated
January 9, 2019 (Commission File No. 001-15141).(1)
Form of Herman Miller, Inc. 2011 Long-Term Incentive Plan TSR Performance Share Unit Award
Agreement is incorporated by reference to Exhibit 10.4 of the Registrant's Form 10-Q Report dated
January 9, 2019 (Commission File No. 001-15141).(1)
101 2021 Annual Report
(j)
(k)
(l)
Form of Herman Miller, Inc. 2011 Long-Term Incentive Plan Conditional Stock Option Award is
incorporated by reference to Exhibit 10(p) of the Registrant's Form 10-K Report dated July 28, 2015
(Commission File No. 001-15141).(1)
Trust Under the Herman Miller, Inc. Nonemployee Officer and Director Compensation Plan is
incorporated by reference to Exhibit 10(q) of the Registrant's Form 10-K Report dated July 26, 2016
(Commission File No. 001-15141).(1)
Share Purchase Agreement dated October 8, 2019 between Herman Miller Holdings Limited and
Nine United A/S is incorporated by reference to Exhibit 10.3 of the Registrant's Form 10-Q Report
dated October 8, 2019 (Commission File No. 001-15141).(1)
(m) Employment Agreement between Herman Miller, Inc. and Andrea R. Owen, Chief Executive Officer,
dated August 3, 2018, is incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q
Report dated October 10, 2018 (Commission File No. 001-15141).(1)
(n)
(o)
Stock Option Agreement between Herman Miller, Inc. and Andrea Owen is incorporated by
reference to Exhibit 10.5 of the Registrant's Form 10-Q Report dated January 9, 2019 (Commission
File No. 001-15141). (1)
Restricted Stock Unit Award Agreement between Herman Miller, Inc. and Andrea Owen is
incorporated by reference to Exhibit 10.6 of the Registrant's Form 10-Q Report dated January 9,
2019 (Commission File No. 001-15141).(1)
(p) HMVA Performance Share Award Agreement between Herman Miller, Inc. and Andrea Owen is
incorporated by reference to Exhibit 10.7 of the Registrant's Form 10-Q Report dated January 9,
2019 (Commission File No. 001-15141).(1)
(q)
(r)
(s)
(t)
(u)
(v)
TSR Performance Share Unit Award Agreement between Herman Miller, Inc. and Andrea Owen is
incorporated by reference to Exhibit 10.8 of the Registrant's Form 10-Q Report dated January 9,
2019 (Commission File No. 001-15141).(1)
Herman Miller, Inc. 2019 Executive Incentive Cash Bonus Plan dated July 15, 2019 is incorporated
by reference to Exhibit 10 of the Registrant's Form 8-K Report filed July 19, 2019 (Commission File
No. 001-15141).(1)
Form of Indemnification Agreement between Herman Miller, Inc. and certain employees serving as
a director or officer of a foreign subsidiary, including executive officers of Herman Miller, Inc. is
incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q Report dated October 8,
2019 (Commission File No. 001-15141).(1)
Fifth Amended and Restated Credit Agreement dated as of August 28, 2019 among Herman Miller,
Inc., certain subsidiary borrowers, Wells Fargo Bank, National Agent, as Administrative Agent, and
JPMorgan Chase Bank N.A., as Syndication Agent, is incorporated by reference to Exhibit 10.1 of the
Registrant's Report on Form 8-K Report dated August 28, 2019 (Commission File No. 001-15141).
Form of Herman Miller, Inc., Long-Term Incentive Plan Operating Income Growth Performance Share
Unit with TSR Modifier Award Agreement is incorporated by reference to Exhibit 10.2 of the
Registrant's Form 10-Q Report dated April 7, 2020 (Commission File No. 001-15141).(1)
Form of Herman Miller, Inc., Long-Term Incentive Plan Revenue Growth Performance Share Unit with
TSR Modifier Award Agreement is incorporated by reference to Exhibit 10.3 of the Registrant's Form
10-Q Report dated April 7, 2020 (Commission File No. 001-15141).(1)
(w) Advisory Agreement dated August 7, 2020 by and between Herman Miller, Inc. and Gregory Bylsma
is incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Report dated October 5,
2020 (Commission File No. 001-15141).
(x)
Voting and Support Agreement, by and between Herman Miller, Inc. and Furniture Investments
Acquisitions S.C.S., dated as of April 19, 2021 is incorporated by reference to Exhibit 10.1 of the
Registrant’s Form 8-K Report dated April 22, 2021 (Commission File No. 001-15141).
Herman Miller, Inc. and Subsidiaries 102
(21)
Subsidiaries
(23)(a) Consent of Independent Registered Public Accounting Firm
(23)(b) Consent of Independent Registered Public Accounting Firm
(24)
Power of Attorney (included on the signature page to this Form 10-K Report)
(31)(a)
Certificate of the Chief Executive Officer of Herman Miller, Inc., pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
(31)(b) Certificate of the Chief Financial Officer of Herman Miller, Inc., pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
(32)(a) Certificate of the Chief Executive Officer of Herman Miller, Inc., pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
(32)(b) Certificate of the Chief Financial Officer of Herman Miller, Inc., pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
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embedded within the inline XBRL document.
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
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Inline XBRL Taxonomy Extension Definition Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit
101).
(1) Denotes compensatory plan or arrangement.
Schedule II - Valuation and Qualifying Accounts
(In millions)
Column A
Description
Year ended May 29, 2021:
Column B
Balance at
beginning
of period
Column D
Column C
Charges to
expenses
or net sales Deductions (3)
Column E
Balance at
end of
period
Accounts receivable allowances — uncollectible accounts(1) $
Accounts receivable allowances — credit memo(2)
$
$
Allowance for possible losses on notes receivable
$
Valuation allowance for deferred tax asset
Year ended May 30, 2020:
Accounts receivable allowances — uncollectible accounts(1) $
Accounts receivable allowances — credit memo(2)
$
$
Allowance for possible losses on notes receivable
$
Valuation allowance for deferred tax asset
Year ended June 1, 2019:
Accounts receivable allowances — uncollectible accounts(1) $
Accounts receivable allowances — credit memo(2)
$
$
Allowance for possible losses on notes receivable
$
Valuation allowance for deferred tax asset
4.3 $
0.1 $
0.3 $
10.6 $
2.9 $
0.6 $
0.3 $
10.4 $
2.4 $
0.5 $
0.4 $
10.3 $
1.7 $
— $
(0.3) $
(2.3) $
2.3 $
— $
— $
0.4 $
0.6 $
— $
(0.1) $
0.4 $
(1.2) $
0.6 $
— $
0.6 $
(0.9) $
(0.5) $
— $
(0.2) $
(0.1) $
0.1 $
— $
(0.3) $
4.8
0.7
—
8.9
4.3
0.1
0.3
10.6
2.9
0.6
0.3
10.4
103 2021 Annual Report
(1) Activity under the “Charges to expense or net sales” column are recorded within Selling, general and administrative expenses.
(2) Activity under the “Charges to expenses or net sales” column are recorded within Net sales.
(3) Represents amounts written off, net of recoveries and other adjustments. Includes effects of foreign translation.
Item 16 Form 10-K Summary
None
Herman Miller, Inc. and Subsidiaries 104
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HERMAN MILLER, INC.
/s/ Jeffrey M. Stutz
By Jeffrey M. Stutz
Chief Financial Officer (Principal
Accounting Officer and Duly
Authorized Signatory for Registrant)
Date:
July 27, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on July 27, 2021 by
the following persons on behalf of the Registrant in the capacities indicated.
/s/ Michael A. Volkema
Michael A. Volkema
(Chairman of the Board)
/s/ Lisa Kro
Lisa Kro
(Director)
/s/ David A. Brandon
David A. Brandon
(Director)
/s/ Douglas D. French
Douglas D. French
(Director)
/s/ Heidi Manheimer
Heidi Manheimer
(Director)
/s/ Michael C. Smith
Michael C. Smith
(Director)
/s/ Mary Vermeer Andringa
Mary Vermeer Andringa
(Director)
/s/ John R. Hoke III
John R. Hoke III
(Director)
/s/ Andrea R. Owen
Andrea R. Owen
(President, Chief Executive Officer,
and Director)
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
(Chief Financial Officer and Principal
Accounting Officer)
/s/ Candace Matthews
Candace Matthews
(Director)
/s/ Michael R. Smith
Michael R. Smith
(Director)
105 2021 Annual Report
Exhibit 21
HERMAN MILLER, INC., SUBSIDIARIES
The Company's principal subsidiaries are as follows:
Name
Anpartsselskabet af 5.12 2018
Anpartsselskabet af 6.9 2019
Ownership
67% Company
67% Company
Jurisdiction of Incorporation
Denmark
Denmark
Colebrook Bosson & Saunders Products Limited
100% Company
England, U.K.
Colebrook Bosson Saunders, Pty. Ltd.
Design Within Reach, Inc.
Geiger International, Inc.
HAY ApS
HAY International BE B.V.
HAY International CH GmbH
HAY International DE GmbH B.V.
HAY International NL B.V.
HAY International UK Ltd.
HAR AS
Hemiri, S.A. de C.V.
Herman Miller Asia (Pte.) Ltd.
Herman Miller (Aust.) Proprietary Limited
Herman Miller B.V.
Herman Miller Canada, Inc.
Herman Miller Consumer Co.
100% Company
100% Company
100% Company
67% Company
67% Company
67% Company
67% Company
67% Company
67% Company
67% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
Herman Miller Consumer Corporation Canada
100% Company
Herman Miller do Brasil, Ltda.
Herman Miller (Dongguan) Furniture Co., Ltd.
Herman Miller Finance Company (Hong Kong)
LImited
Herman Miller Furniture (India) Pvt. Ltd.
Herman Miller Global Customer Solutions (Hong
Kong) Limited
100% Company
100% Company
100% Company
100% Company
100% Company
Herman Miller Global Customer Solutions, Inc.
100% Company
Herman Miller Global Holdings Luxembourg S.à r.l.
100% Company
Herman Miller Holdings Limited
Herman Miller International Finance Luxembourg
S.à r.l.
Herman Miller Japan, Ltd.
Herman Miller Korea LLC
Herman Miller Limited
Herman Miller Mexico S.A. de C.V.
Herman Miller (Ningbo) Furniture Co. Ltd.
Herman Miller Servicios S. de R.L. de C.V.
HM Delaware LLC
HMI Liquidating Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
Australia
Delaware
Delaware
Denmark
Belgium
Switzerland
Germany
Netherlands
England, U.K.
Norway
Mexico
Singapore
Australia
Netherlands
Canada
Michigan
Canada
Brazil
China
Hong Kong
India
Hong Kong
Michigan
Luxembourg
England, U.K.
Luxembourg
Japan
Korea
England, U.K.
Mexico
China
Mexico
Delaware
Michigan
Maharam Fabric Corporation
Maharam B.V.
Meridian Incorporated
Milsure Insurance, Ltd.
Naughtone (Holdings) Limited
Naughtone Manufacturing Ltd.
Naught One Ltd.
Nemschoff, Inc.
POSH Office Systems (Hong Kong) Limited
Sun Hing POSH Holdings Limited
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
100% Company
New York
Netherlands
Michigan
Barbados
England, U.K.
England, U.K.
England, U.K.
Wisconsin
Hong Kong
Hong Kong
Exhibit 23(a) - Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-04367, 333-42506, 333-04365,
333-122282, 333-04369, 333-122283, 333-179138, 333-201706 and 333-220893, 333-251572, 333-258017, 333-258019
and 333-258170) on Form S-8, registration statement (No. 333-220892) on Form S-3, and registration statement (No.
333-256401) on Form S-4 of our report dated July 27, 2021, with respect to the consolidated financial statements and
financial statement schedule II - Valuation and Qualifying Accounts of Herman Miller, Inc. and the effectiveness of
internal control over financial reporting.
Our report dated July 27, 2021, on the consolidated financial statements, refers to a change in the method of
accounting for leases as of June 2, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases
(Topic 842).
/s/ KPMG LLP
Chicago, Illinois
July 27, 2021
Exhibit 23(b) - Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements Nos. 333-04367, 333-42506,
333-04365, 333-122282, 333-04369, 333-122283, 333-179138, 333-201706 and 333-220893, 333-251572, 333-258019,
333-258017, 333-258170 on Form S-8, No. 333-220892 on Form S-3 and No. 333-256401 on Form S-4 of Herman Miller,
Inc. of our report dated July 30, 2019, with respect to the consolidated financial statements and schedule of Herman
Miller, Inc. included in this Annual Report (Form 10-K) for the fiscal year ended May 29, 2021.
/s/ Ernst & Young LLP
Grand Rapids, Michigan
July 27, 2021
Exhibit 31(a)
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF HERMAN MILLER, INC. (THE “REGISTRANT”)
I, Andrea R. Owen, certify that:
1.
2.
3.
4.
I have reviewed this quarterly report on Form 10-K for the period ended May 29, 2021, of Herman Miller, Inc;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: July 27, 2021
/s/ Andrea R. Owen
Andrea R. Owen
President and Chief Executive Officer
Exhibit 31(b)
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF HERMAN MILLER, INC. (THE “REGISTRANT”)
I, Jeffrey M. Stutz, certify that:
1.
2.
3.
4.
I have reviewed this quarterly report on Form 10-K for the period ended May 29, 2021, of Herman Miller, Inc;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: July 27, 2021
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
Chief Financial Officer
Exhibit 32(a)
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF HERMAN MILLER, INC. (THE "COMPANY")
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
I, Andrea R. Owen, President and Chief Executive Officer of the company, certify to the best of my knowledge and belief
pursuant to Section 906 of Sarbanes-Oxley Act of 2002 that:
(1)
(2)
The Annual Report on Form 10-K for the period ended May 29, 2021, which this statement accompanies, fully
complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Annual Report on Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated: July 27, 2021
/s/ Andrea R. Owen
Andrea R. Owen
President and Chief Executive Officer
The signed original of this written statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Herman Miller, Inc. and will be retained by Herman
Miller, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32(b)
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF HERMAN MILLER, INC. (THE "COMPANY")
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:
I, Jeffrey M. Stutz, Chief Financial Officer of the company, certify to the best of my knowledge and belief pursuant to
Section 906 of Sarbanes-Oxley Act of 2002 that:
(1)
(2)
The Annual Report on Form 10-K for the period ended May 29, 2021, which this statement accompanies, fully
complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Annual Report on Form 10-K, fairly presents, in all material respects, the
financial condition and results of operations of the Company.
Dated: July 27, 2021
/s/ Jeffrey M. Stutz
Jeffrey M. Stutz
Chief Financial Officer
The signed original of this written statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Herman Miller, Inc. and will be retained by Herman
Miller, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.