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 26, 2005 | 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 March 30, 2005 – 70,353,862 shares
HERMAN MILLER, INC. FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 26, 2005
INDEX
| Page No. | |||||
| Part I - Financial Information | |||||
| Item 1 Condensed Consolidated Balance Sheets - | |||||
| February 26, 2005, and May 29, 2004 | 3 | ||||
| Condensed Consolidated Statements of Operations - | |||||
| Three Months and Nine Months Ended February 26, 2005, | |||||
| and February 28, 2004 | 4 | ||||
| Condensed Consolidated Statements of Cash Flows - | |||||
| Nine Months Ended February 26, 2005, | |||||
| and February 28, 2004 | 5 | ||||
| Notes to Condensed Consolidated Financial Statements | 6- | 20 | |||
| Item 2 Management's Discussion and Analysis of | |||||
| Financial Condition and Results of Operations | 21 | -29 | |||
| Item 3 Quantitative and Qualitative Disclosures About Market Risk | 30 | ||||
| Item 4 Controls and Procedures | 30 | ||||
| Part II - Other Information | |||||
| Item 1 Legal Proceedings | 31 | ||||
| Item 2 Unregistered Sales of Equity Securities and Use of Proceeds | 31 | ||||
| Item 3 Defaults Upon Senior Securities - None | |||||
| Item 4 Submission of Matters to a Vote of Security Holders - None | |||||
| Item 5 Other Items | 32 | ||||
| Item 6 Exhibits | 33 | ||||
| Signatures | 33 | ||||
| Exhibits | 34 | -54 | |||
2
HERMAN MILLER, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
| February 26, 2005 |
May 29, 2004 |
February 26, 2005 |
May 29, 2004 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited) | (Audited) | (Unaudited) | (Audited) | ||||||||||||||
| ASSETS | LIABILITIES & SHAREHOLDERS' EQUITY | ||||||||||||||||
| Current Assets: | Current Liabilities: | ||||||||||||||||
| Cash and cash equivalents (Note 9) | $ | 164.2 | $ | 189.2 | Unfunded checks | $ | 6.4 | $ | 8.6 | ||||||||
| Short-term investments (Note 10) | 14.9 | 10.7 | Current portion of long-term debt | 13.0 | 13.0 | ||||||||||||
| Accounts receivable, net | 152.3 | 142.4 | Notes payable (Note 18 and 19) | -- | 1.5 | ||||||||||||
| Inventories - | Accounts payable | 80.9 | 90.4 | ||||||||||||||
| Finished goods | 17.2 | 16.4 | Accrued liabilities (Note 15) | 158.2 | 123.8 | ||||||||||||
| Work in process | 14.1 | 10.5 | |||||||||||||||
| Raw materials | 10.0 | 11.2 | Total current liabilities | 258.5 | 237.3 | ||||||||||||
| Total inventories | 41.3 | 38.1 | |||||||||||||||
| Prepaid expenses and other | 50.7 | 50.2 | Long-term Liabilities: | ||||||||||||||
| Long-term Debt, less current portion (Note 14) | 193.6 | 192.7 | |||||||||||||||
| Total current assets | 423.4 | 430.6 | Pension Benefits (Note 17) | 20.1 | 43.2 | ||||||||||||
| Other Liabilities (Note 15) | 45.5 | 46.9 | |||||||||||||||
| Total Liabilities | 517.7 | 520.1 | |||||||||||||||
| Property and Equipment, at cost | 698.1 | 700.1 | |||||||||||||||
| Less - accumulated depreciation | 503.4 | 491.6 | Minority Interest (Notes 6 and 18) | 0.1 | -- | ||||||||||||
| Net property and equipment | 194.7 | 208.5 | Shareholders' Equity: | ||||||||||||||
| Common stock $.20 par value (Note 5) | 14.0 | 14.4 | |||||||||||||||
| Other Assets: | Retained earnings | 220.6 | 246.1 | ||||||||||||||
| Notes receivable, net | 2.0 | 1.9 | Accumulated other comprehensive loss (Note 4) | (51.4 | ) | (57.6 | ) | ||||||||||
| Goodwill | 39.1 | 39.1 | Key executive stock programs | (7.2 | ) | (8.3 | ) | ||||||||||
| Intangible assets, net (Note 13) | 5.6 | 5.9 | |||||||||||||||
| Other noncurrent assets | 29.0 | 28.7 | Total Shareholders' Equity | 176.0 | 194.6 | ||||||||||||
| Total Assets | $ | 693.8 | $ | 714.7 | Total Liabilities and
Shareholders' Equity | $ | 693.8 | $ | 714.7 | ||||||||
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 26, 2005 | February 28, 2004 | February 26, 2005 | February 28, 2004 | |||||||||||
| Net Sales | $ | 382.4 | $ | 329.6 | $ | 1,108.1 | $ | 984.4 | ||||||
| Cost of Sales | 259.5 | 230.3 | 753.1 | 681.4 | ||||||||||
| Gross Margin | 122.9 | 99.3 | 355.0 | 303.0 | ||||||||||
| Operating Expenses | 93.7 | 84.8 | 277.1 | 251.1 | ||||||||||
| Restructuring Expenses (Note 8) | 0.3 | 1.1 | 0.9 | 9.4 | ||||||||||
| Operating Earnings | 28.9 | 13.4 | 77.0 | 42.5 | ||||||||||
| Other Expenses (Income): | ||||||||||||||
| Interest Expense | 3.5 | 3.2 | 10.2 | 10.9 | ||||||||||
| Other, Net (Notes 3, 6, 10, and 18) | (0.8 | ) | 0.1 | (3.7 | ) | (2.5 | ) | |||||||
| Earnings Before Income Taxes and | ||||||||||||||
| Minority Interest | 26.2 | 10.1 | 70.5 | 34.1 | ||||||||||
| Income Tax Expense (Note 16) | 9.3 | 2.3 | 24.0 | 11.1 | ||||||||||
| Minority Interest, net of income taxes | ||||||||||||||
| (Notes 6 and 18) | 0.1 | -- | 0.1 | -- | ||||||||||
| Net Earnings | $ | 16.8 | $ | 7.8 | $ | 46.4 | $ | 23.0 | ||||||
| Earnings Per Share - Basic (Note 7) | $ | .24 | $ | .11 | $ | .66 | $ | .32 | ||||||
| Earnings Per Share - Diluted (Note 7) | $ | .24 | $ | .11 | $ | .65 | $ | .31 | ||||||
| Dividends Per Share | $ | .0725 | $ | .03625 | $ | .2175 | $ | .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 26, 2005 | February 28, 2004 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net earnings | $ | 46.4 | $ | 23.0 | ||||
| Depreciation and amortization | 35.1 | 45.1 | ||||||
| Restructuring charges / (credits) | (0.7 | ) | (1.4 | ) | ||||
| Minority Interest | 0.1 | -- | ||||||
| Changes in current assets and liabilities | 14.1 | 3.0 | ||||||
| Pension benefits | (23.9 | ) | (25.4 | ) | ||||
| Other, net | 1.6 | 1.9 | ||||||
| Net Cash Provided by Operating Activities | 72.7 | 46.2 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Notes receivable issued, net | -- | (1.6 | ) | |||||
| Short-term investment purchases | (10.6 | ) | (9.0 | ) | ||||
| Short-term investment sales | 6.2 | 9.3 | ||||||
| Capital expenditures | (21.1 | ) | (19.4 | ) | ||||
| Proceeds from sale of fixed assets | 0.3 | 6.5 | ||||||
| Net cash paid for acquisitions (Note 6) | (0.7 | ) | (0.2 | ) | ||||
| Other, net | (0.6 | ) | (0.7 | ) | ||||
| Net Cash Used for Investing Activities | (26.5 | ) | (15.1 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Net short-term debt repayments (Note 18) | (1.5 | ) | -- | |||||
| Net long-term debt repayments | -- | (1.8 | ) | |||||
| Dividends paid | (15.4 | ) | (7.9 | ) | ||||
| Common stock issued (Note 5) | 31.6 | 11.4 | ||||||
| Common stock repurchased and retired (Note 5) | (90.5 | ) | (25.2 | ) | ||||
| Net Cash Used for Financing Activities | (75.8 | ) | (23.5 | ) | ||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | 4.6 | 4.1 | ||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | (25.0 | ) | 11.7 | |||||
| Cash and Cash Equivalents, Beginning of Period | $ | 189.2 | $ | 185.5 | ||||
| Cash and Cash Equivalents, End of Period | $ | 164.2 | $ | 197.2 | ||||
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 26, 2005, are not necessarily indicative of the results
that may be expected for the year ending May 28, 2005. 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 29, 2004.
2. FISCAL YEAR
The company’s fiscal year ends
on the Saturday closest to May 31. Fiscal 2005, the year ending May 28, 2005, will contain
52 weeks as did fiscal 2004, the year ended May 29, 2004. Both of the three-month periods
ended February 26, 2005, and February 28, 2004, 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, were $(0.2) million and $(1.0)
million for the three months ended February 26, 2005, and February 28, 2004, respectively.
For the nine months ended February 26, 2005, and February 28, 2004, the currency gain
(loss) totaled $0.2 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 (losses) on “available-for-sale” securities.
Comprehensive income was approximately $16.3 million and $11.3 million for the three
months ended February 26, 2005, and February 28, 2004, respectively. For the nine months
ended February 26, 2005, and February 28, 2004, comprehensive income totaled $52.6 million
and $28.1 million, respectively. The following presents the components of
“Accumulated Other Comprehensive Income/(Loss)” for the period indicated.
| (In Millions) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Foreign Currency Translation Adjustments | Minimum Pension Liability (net of tax) | Unrealized Holding Period Gains (Losses) | Total Accumulated Other Comprehensive Income (Loss) | |||||||||||
| Balance, May 29, 2004 | $ | (7.9 | ) | $ | (50.1 | ) | $ | 0.4 | $ | (57.6 | ) | |||
| Other comprehensive income | ||||||||||||||
| (loss) for the nine months | ||||||||||||||
| ended February 26, 2005 | 6.7 | (0.4 | ) | (0.1 | ) | 6.2 | ||||||||
| Balance, February 26, 2005 | $ | (1.2 | ) | $ | (50.5 | ) | $ | 0.3 | $ | (51.4 | ) | |||
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 26, 2005 | February 28, 2004 | February 26, 2005 | February 28, 2004 | |||||||||||
| Numerators: | ||||||||||||||