UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
FORM 10-Q
| X | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For Quarter Ended February 28, 2004 | Commission File No. 001-15141 |
HERMAN MILLER, INC.
| A Michigan Corporation 855 East Main Avenue, Zeeland, MI 49464-0302 |
ID No. 38-0837640 Phone (616) 654 3000 |
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, and |
Yes [X] No [__]
| (2) | has been subject to such filing requirements for the past 90 days. |
Yes [X] No [__]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [__]
Common Stock Outstanding at April 2, 2004 – 71,989,656 shares.
HERMAN MILLER, INC.
FORM 10-Q
FOR THE QUARTER ENDED
FEBRUARY 28, 2004
INDEX
| Part I - Financial Information | Page No. | ||
| Item 1 Condensed Consolidated Balance Sheets - | |||
| February 28, 2004, and May 31, 2003 | 3 | ||
| Condensed Consolidated Statements of Operations - | |||
| Three Months and Nine Months Ended February 28, 2004, | |||
| and March 1, 2003 | 4 | ||
| Condensed Consolidated Statements of Cash Flows - | |||
| Nine Months ended February 28, 2004, | |||
| and March 1, 2003 | 5 | ||
| Notes to Condensed Consolidated Financial Statements | 6-16 | ||
| Item 2 Management's Discussion and Analysis of | |||
| Financial Condition and Results of Operations | 17-26 | ||
| Item 3 Quantitative and Qualitative Disclosures | |||
| About Market Risk | 27 | ||
| Item 4 Controls and Procedures | 27 | ||
| Part II - Other Information | |||
| Item 1 Legal Proceedings | 28 | ||
| Item 2 Changes in Securities and Use of Proceeds | 28 | ||
| Item 3 Defaults Upon Senior Securities - None | |||
| Item 4 Submission of Matters to a Vote of Security Holders - None | |||
| Item 5 Other Items | 28 | ||
| Item 6 Exhibits and Reports on Form 8-K | 29 | ||
| Signatures | 30 | ||
| Exhibits | 31-34 | ||
2
HERMAN MILLER, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
| February 28, 2004 | May 31, 2003 | February 28, 2004 | May 31, 2003 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | (Audited) | (Unaudited) | (Audited) | ||||||||||||||
| ASSETS | LIABILITIES & SHAREHOLDERS' EQUITY | ||||||||||||||||
| Current Assets: | Current Liabilities: | ||||||||||||||||
| Cash and cash equivalents | $ | 197.2 | $ | 185.5 | Unfunded checks | $ | 8.1 | $ | 12.1 | ||||||||
| Short-term investments | 10.9 | 11.5 | Current portion of long-term debt | 13.0 | 13.6 | ||||||||||||
| Accounts receivable, net | 130.9 | 125.6 | Accounts payable | 71.4 | 73.9 | ||||||||||||
| Inventories - | Accrued liabilities | 166.0 | 137.6 | ||||||||||||||
| Finished goods | 14.1 | 13.5 | |||||||||||||||
| Work in process | 14.6 | 6.7 | Total current liabilities | 258.5 | 237.2 | ||||||||||||
| Raw materials | 12.6 | 11.2 | |||||||||||||||
| Total inventories | 41.3 | 31.4 | Long-term Liabilities: | ||||||||||||||
| Prepaid expenses and other | 66.7 | 59.5 | Long-term Debt, less current portion | 208.5 | 209.4 | ||||||||||||
| Pension Benefits | 58.2 | 84.5 | |||||||||||||||
| Total current assets | 447.0 | 413.5 | Other Liabilities | 46.3 | 45.4 | ||||||||||||
| Property and Equipment, at cost | 698.8 | 697.0 | |||||||||||||||
| Less - accumulated depreciation | 483.2 | 451.3 | |||||||||||||||
| Shareholders' Equity: | |||||||||||||||||
| Net property and equipment | 215.6 | 245.7 | Common stock $.20 par value | 14.5 | 14.6 | ||||||||||||
| Retained earnings | 253.2 | 250.5 | |||||||||||||||
| Other Assets: | Accumulated other comprehensive loss | (57.5 | ) | (62.6 | ) | ||||||||||||
| Notes receivable, net | 4.1 | 4.6 | Key executive stock programs | (10.5 | ) | (11.5 | ) | ||||||||||
| Goodwill | 39.1 | 39.1 | |||||||||||||||
| Intangible assets, net | 5.2 | 6.3 | Total Shareholders' Equity | 199.7 | 191.0 | ||||||||||||
| Other noncurrent assets | 60.2 | 58.3 | |||||||||||||||
| Total Liabilities and | |||||||||||||||||
| Total Assets | $ | 771.2 | $ | 767.5 | Shareholders' Equity | $ | 771.2 | $ | 767.5 | ||||||||
See accompanying notes to condensed consolidated financial statements
3
HERMAN MILLER, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions,
Except Per Share Data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| February 28, 2004 | March 1, 2003 | February 28, 2004 | March 1, 2003 | |||||||||||
| Net Sales | $ | 329.6 | $ | 310.4 | $ | 984.4 | $ | 1,014.6 | ||||||
| Cost of Sales | 230.3 | 216.9 | 681.4 | 698.2 | ||||||||||
| Gross Margin | 99.3 | 93.5 | 303.0 | 316.4 | ||||||||||
| Operating Expenses | 84.8 | 85.5 | 251.1 | 268.9 | ||||||||||
| Restructuring Expenses | 1.1 | 0.3 | 9.4 | 0.6 | ||||||||||
| Operating Earnings | 13.4 | 7.7 | 42.5 | 46.9 | ||||||||||
| Other Expenses (Income): | ||||||||||||||
| Interest Expense | 3.2 | 3.9 | 10.9 | 11.8 | ||||||||||
| Other, Net | 0.1 | (0.7 | ) | (2.5 | ) | (2.2 | ) | |||||||
| Earnings Before Income Taxes | 10.1 | 4.5 | 34.1 | 37.3 | ||||||||||
| Income Tax Expense | 2.3 | 1.5 | 11.1 | 12.7 | ||||||||||
| Net Earnings | $ | 7.8 | $ | 3.0 | $ | 23.0 | $ | 24.6 | ||||||
| Earnings Per Share - Basic | $ | .11 | $ | .04 | $ | .32 | $ | .33 | ||||||
| Earnings Per Share - Diluted | $ | .11 | $ | .04 | $ | .31 | $ | .33 | ||||||
| Dividends Per Share | $ | .03625 | $ | .03625 | $ | .10875 | $ | .10875 | ||||||
See accompanying notes to condensed consolidated financial statements.
4
HERMAN MILLER, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars
in Millions)
(Unaudited)
| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| February 28, 2004 | March 1, 2003 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net earnings | $ | 23.0 | $ | 24.6 | ||||
| Depreciation and amortization | 45.1 | 53.3 | ||||||
| Restructuring charges / (credits) | (1.4 | ) | (10.8 | ) | ||||
| Changes in current assets and liabilities | 3.0 | 77.6 | ||||||
| Impairment of equity investment | -- | 2.2 | ||||||
| Pension benefits | (25.4 | ) | (13.3 | ) | ||||
| Other, net | 1.9 | 7.5 | ||||||
| Net Cash Provided by Operating Activities | 46.2 | 141.1 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Notes receivable issued, net | (1.6 | ) | (2.0 | ) | ||||
| Short-term investment purchases | (9.0 | ) | (1.9 | ) | ||||
| Short-term investment sales | 9.3 | 2.1 | ||||||
| Capital expenditures | (19.4 | ) | (19.7 | ) | ||||
| Proceeds from sale of fixed assets | 6.5 | 4.0 | ||||||
| Net cash paid for acquisitions | (0.2 | ) | -- | |||||
| Other, net | (0.7 | ) | 2.5 | |||||
| Net Cash Used for Investing Activities | (15.1 | ) | (15.0 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net short-term debt repayments | -- | (2.7 | ) | |||||
| Net long-term debt repayments | (1.8 | ) | (0.6 | ) | ||||
| Dividends paid | (7.9 | ) | (8.2 | ) | ||||
| Common stock issued | 11.4 | 2.9 | ||||||
| Common stock repurchased and retired | (25.2 | ) | (56.1 | ) | ||||
| Net Cash Used for Financing Activities | (23.5 | ) | (64.7 | ) | ||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | 4.1 | 2.6 | ||||||
| Net Increase in Cash and Cash Equivalents | 11.7 | 64.0 | ||||||
| Cash and Cash Equivalents, Beginning of Period | $ | 185.5 | $ | 124.0 | ||||
| Cash and Cash Equivalents, End of Period | $ | 197.2 | $ | 188.0 | ||||
See accompanying notes to condensed consolidated financial statements.
5
HERMAN MILLER, INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by Herman Miller, Inc. (“the company”), without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Management believes that the disclosures made in this document are adequate so as not to make the information presented misleading. Operating results for the nine-month period ended February 28, 2004, are not necessarily indicative of the results that may be expected for the year ending May 29, 2004. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the company’s Form 10-K for the year ended May 31, 2003.
2. FISCAL YEAR
The company’s fiscal year ends on the Saturday closest to May 31. Fiscal 2004, the year ending May 29, 2004, will contain 52 weeks as did fiscal 2003, the year ended May 31, 2003. Both of the three-month periods ended February 28, 2004, and March 1, 2003, contained 13 weeks.
3. FOREIGN CURRENCY TRANSLATION
The functional currency for foreign subsidiaries is the local currency. The cumulative effects of translating the balance sheet accounts from the functional currency into the United States dollar at current exchange rates and revenue and expense accounts using average exchange rates for the period are included as a separate component of shareholders equity. Gains (losses) arising from remeasuring all foreign currency transactions into the appropriate functional currency, which were included in determining net earnings, totaled $(1.0) million and $0.7 million for the three months ended February 28, 2004, and March 1, 2003, respectively. For the nine months ended February 28, 2004, and March 1, 2003, the currency gain (loss) totaled $(0.6) million and $0.6 million, respectively.
4. COMPREHENSIVE INCOME/(LOSS)
Comprehensive income/(loss) consists of net earnings, foreign currency translation adjustments, minimum pension liability, and unrealized holding gains or losses on “available-for-sale” securities. Comprehensive income was approximately $11.3 million and $4.2 million for the three months ended February 28, 2004, and March 1, 2003, respectively. For the nine months ended February 28, 2004, and March 1, 2003, comprehensive income totaled $28.1 million and $28.0 million, respectively. The following presents the components of “Accumulated Other Comprehensive Loss” for the periods indicated.
(In Millions)
| Foreign Currency Translation Adjustments | Minimum Pension Liability | Unrealized Holding Period Gains/(Losses) | Total Accumulated Other Comprehensive Loss | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, June 1, 2002 | $ | (19.0 | ) | $ | (16.2 | ) | $ | 0.9 | $ | (34.3 | ) | |||
| Other comprehensive gain/(loss) | ||||||||||||||
| for fiscal year 2003 | 7.7 | (36.1 | ) | 0.1 | (28.3 | ) | ||||||||
| Balance, May 31, 2003 | $ | (11.3 | ) | $ | (52.3 | ) | $ | 1.0 | $ | (62.6 | ) | |||
| Other comprehensive gain/(loss) | ||||||||||||||
| for the nine months | ||||||||||||||
| ended February 28, 2004 | 5.4 | -- | (0.3 | ) | 5.1 | |||||||||
| Balance, February 28, 2004 | $ | (5.9 | ) | $ | (52.3 | ) | $ | 0.7 | $ | (57.5 | ) | |||
6
5. COMMON STOCK AND EARNINGS PER SHARE
The following table reconciles the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS).
| Three Months Ended | Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| February 28, 2004 | March 1, 2003 | February 28, 2004 | March 1, 2003 | |||||||||||
| Numerators: | ||||||||||||||
| Numerator for both basic and diluted EPS, net | ||||||||||||||
| earnings (In Millions) | $ | 7.8 | $ | 3.0 | $ | 23.0 | $ | 24.6 | ||||||
| Denominators: | ||||||||||||||
| Denominator for basic EPS, weighted-average | ||||||||||||||
| common shares outstanding | 72,684,875 | 73,346,082 | 72,801,498 | 74,612,531 | ||||||||||
| Potentially dilutive shares resulting from stock option plans | 543,684 | 318,900 | ||||||||||||