Washington, D.C. 20549 __________________________________________ FORM 10-K (Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 ...

| --- | --- | |---------------------|-------| | | | | NASDAQ: MLHR | | | | | | | | | Design for the Good | | | of Humankind | | FORWARD LOOKING STATEMENTS This information 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 ...

Financial Data and Key Metrics Changes - Consolidated sales for Q4 2021 increased by 31% compared to the previous year, with orders up 29% year-over-year [9] - Diluted earnings per share (EPS) on a GAAP basis for the quarter were $0.12, while adjusted EPS was $0.56, reflecting an increase of over 400% from the same quarter last year [13] - Adjusted operating margins improved to 7%, a rise of 370 basis points compared to the same quarter last year [14] Business Line Data and Key Metrics Changes - The Retail segment achieved record-breaking performance with sales up 106% year-over-year and orders up 81%, with a segment operating margin of 19.2% [10] - The North American contract segment saw order rates increase sequentially by 21% from Q3, remaining flat compared to the prior year [12] - The International Contract segment experienced a 55% increase in orders compared to the previous year [12] Market Data and Key Metrics Changes - Order trends showed a sequential growth of 23% across all business segments from Q3 to Q4, with North American Contract at 21% and Retail at 26% [50] - In the first three weeks of June, orders maintained at approximately $60 million per week, indicating continued momentum [51] Company Strategy and Development Direction - The company is focused on integrating the planned acquisition of Knoll, with expectations for a seamless integration process [19][20] - A digital-first approach is emphasized, aiming to serve both contract and consumer audiences effectively [17] - The company anticipates re-establishing quarterly sales and earnings guidance as the pandemic subsides, with projected sales for Q1 between $640 million and $670 million [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow and create value, citing a strong position in the industry [16] - The management acknowledged inflationary pressures impacting gross margins, with expectations for continued cost increases in Q1 [24][25] - There is optimism regarding the recovery of the North American market, particularly as larger metropolitan areas begin to open up [32] Other Important Information - The company is actively monitoring commodity trends and is prepared to implement additional price increases if necessary [28] - Supply chain challenges are being managed, with some impacts on product lead times and conversion rates noted [39][40] Q&A Session Summary Question: Can you walk us through your outlook for margins for the first quarter? - Management explained that the lower-than-normal effective tax rate in Q4 impacted EPS, and they expect sequential improvement in Q1 due to higher revenue guidance [23] Question: What are the drivers of gross margin? - Management highlighted inflationary pressures from commodity costs and direct labor, estimating $4 million and $1 million increases respectively [24][25] Question: How have order patterns trended in the North American Contract business? - Management noted significant strengthening in order patterns, with year-over-year comps up nearly 30% in Q1 [31] Question: Can you comment on recent order trends? - Management confirmed that order trends improved throughout the quarter, with a 23% sequential growth across all segments [50] Question: What is the impact of supply chain challenges on sales? - Management acknowledged some impacts from container shortages and labor availability but stated they are managing these challenges effectively [36] Question: How is the retail margin expected to evolve? - Management indicated that investments in infrastructure and digital capabilities are expected to support margin growth in the long term [62] Question: What are the spending patterns in retail? - Management reported an increase in average order value, particularly in studio channels, and noted strong customer acquisition from new stores [75][76]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 27, 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) ...

Herman Miller, Inc. (MLHR) Q3 2021 Earnings Conference Call March 18, 2021 9:30 AM ET Company Participants Kevin Veltman - Vice President of Investor Relations and Treasurer Andrea Owen - President and Chief Executive Officer Jeffrey Stutz - Chief Financial Officer Debbie Propst - President of Retail John Michael - President of North America Contract Benjamin Groom - Chief Digital Officer Conference Call Participants Reuben Garner - The Benchmark Company, LLC Gregory Burns - Sidoti & Company, LLC Steven Ram ...

| --- | --- | |---------------------------------------------------------|-------| | | | | NASDAQ: MLHR | | | | | | | | | Design for the Good | | | | | | of Humankind Investor Presentation Third Quarter FY2021 | | | | | FORWARD LOOKING STATEMENTS This information 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, e ...

PART I — FINANCIAL INFORMATION [Item 1 Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and related notes covering various accounting and financial details [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Three Months Ended November 28, 2020 vs. November 30, 2019 (in millions) | Metric | Nov 28, 2020 | Nov 30, 2019 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Net sales | $626.3 | $674.2 | (7.1)% | | Gross margin | $244.2 | $255.5 | (4.4)% | | Operating earnings | $71.0 | $62.4 | 13.8% | | Net earnings attributable to Herman Miller, Inc. | $51.3 | $78.6 | (34.7)% | | Diluted EPS | $0.87 | $1.32 | (34.1)% | Six Months Ended November 28, 2020 vs. November 30, 2019 (in millions) | Metric | Nov 28, 2020 | Nov 30, 2019 | Change (%) | | :----------------------------------- | :----------- | :----------- | :--------- | | Net sales | $1,253.0 | $1,345.2 | (6.9)% | | Gross margin | $494.2 | $501.6 | (1.5)% | | Operating earnings | $166.4 | $122.6 | 35.7% | | Net earnings attributable to Herman Miller, Inc. | $124.2 | $126.8 | (2.1)% | | Diluted EPS | $2.10 | $2.14 | (1.9)% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of November 28, 2020 vs. May 30, 2020 (in millions) | Metric | Nov 28, 2020 | May 30, 2020 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $377.9 | $454.0 | | Total current assets | $837.9 | $917.1 | | Total Assets | $2,028.5 | $2,053.9 | | Total current liabilities | $507.5 | $470.2 | | Long-term debt | $274.9 | $539.9 | | Total Liabilities | $1,173.7 | $1,360.5 | | Total Stockholders' Equity | $798.3 | $643.0 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Six Months Ended November 28, 2020 vs. November 30, 2019 (in millions) | Cash Flow Activity | Nov 28, 2020 | Nov 30, 2019 | | :----------------------------------- | :----------- | :----------- | | Net Cash Provided by Operating Activities | $214.6 | $142.4 | | Net Cash Used in Investing Activities | $(24.4) | $(82.1) | | Net Cash Used in Financing Activities | $(276.9) | $(40.6) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(76.1) | $17.8 | | Cash and Cash Equivalents, End of Period | $377.9 | $177.0 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total Stockholders' Equity increased from **$643.0 million** at May 30, 2020, to **$798.3 million** at November 28, 2020, primarily driven by net earnings of **$73.0 million** and **$51.3 million** in the two subsequent quarters, and other comprehensive income[12](index=12&type=chunk) - For the six months ended November 28, 2020, the company declared dividends of **$0.1875 per share**, totaling **$11.1 million**[12](index=12&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 - Basis of Presentation](index=12&type=section&id=Note%201%20-%20Basis%20of%20Presentation) - The Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, including all normal recurring adjustments necessary for fair presentation[17](index=17&type=chunk)[18](index=18&type=chunk) [Note 2 - Recently Issued Accounting Standards](index=12&type=section&id=Note%202%20-%20Recently%20Issued%20Accounting%20Standards) - The Company adopted ASU No. 2016-13 (Credit Losses) and ASU No. 2018-13 (Fair Value Measurement) on May 31, 2020, with no material impact on its financial statements[19](index=19&type=chunk)[20](index=20&type=chunk) - The Company is evaluating ASU No. 2018-14 (Defined Benefit Plans), effective May 30, 2021, but does not expect a material impact[21](index=21&type=chunk) [Note 3 - Revenue from Contracts with Customers](index=13&type=section&id=Note%203%20-%20Revenue%20from%20Contracts%20with%20Customers) Disaggregated Revenue by Contract Type (in millions) | Contract Type | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Single performance obligation (Product) | $544.3 | $572.7 | $1,087.6 | $1,138.9 | | Multiple performance obligations (Product) | $77.2 | $95.8 | $155.7 | $195.7 | | Multiple performance obligations (Service) | $2.9 | $2.9 | $6.0 | $5.2 | | Other | $1.9 | $2.8 | $3.7 | $5.4 | | **Total Net Sales** | **$626.3** | **$674.2** | **$1,253.0** | **$1,345.2** | Disaggregated Revenue by Product Type and Segment (3 Months Ended Nov 28, 2020 vs Nov 30, 2019, in millions) | Segment / Product Type | Nov 28, 2020 | Nov 30, 2019 | | :--------------------- | :----------- | :----------- | | **North America Contract:** | | | | Workplace | $197.2 | $277.3 | | Performance Seating | $74.7 | $108.6 | | Lifestyle | $20.4 | $24.5 | | Other | $30.8 | $40.2 | | **Total North America Contract** | **$323.1** | **$450.6** | | **International Contract:** | | | | Workplace | $35.1 | $45.3 | | Performance Seating | $73.4 | $61.5 | | Lifestyle | $57.1 | $7.4 | | Other | $2.5 | $4.0 | | **Total International Contract** | **$168.1** | **$118.2** | | **Retail:** | | | | Workplace | $2.0 | $1.1 | | Performance Seating | $49.2 | $12.6 | | Lifestyle | $83.6 | $91.7 | | Other | $0.3 | $0.0 | | **Total Retail** | **$135.1** | **$105.4** | | **Total** | **$626.3** | **$674.2** | - The Company revised its product categories to Workplace, Performance Seating, Lifestyle, and Other, reflecting internal reporting and operational decision-making changes[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 4 - Leases](index=14&type=section&id=Note%204%20-%20Leases) Lease Costs (in millions) | Cost Type | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease costs | $12.4 | $12.6 | $23.4 | $25.4 | | Short-term lease costs | $0.7 | $0.7 | $1.5 | $1.2 | | Variable lease costs | $2.0 | $2.2 | $3.6 | $4.4 | | **Total** | **$15.1** | **$15.5** | **$28.5** | **$31.0** | - Operating lease costs decreased due to a **$19.3 million** impairment of right-of-use assets recorded in Q4 fiscal 2020[30](index=30&type=chunk) Future Minimum Lease Payments (in millions) | Fiscal Year | Amount | | :---------- | :----- | | 2021 | $25.7 | | 2022 | $49.4 | | 2023 | $46.5 | | 2024 | $41.6 | | 2025 | $37.2 | | Thereafter | $103.2 | | **Total Lease Payments** | **$303.6** | | Less interest | $30.6 | | **Present Value of Lease Liabilities** | **$273.0** | [Note 5 - Acquisitions](index=15&type=section&id=Note%205%20-%20Acquisitions) - On December 2, 2019, the Company obtained a controlling interest in HAY by purchasing an additional **34% ownership** for **$79.0 million**, increasing its stake to **67%**, resulting in a **$67.8 million** non-taxable gain on remeasurement of the previously held equity interest[35](index=35&type=chunk)[39](index=39&type=chunk) - Goodwill of **$101.1 million** was recorded in the International Contract segment and **$10.0 million** in the Retail segment for the HAY acquisition, though the Retail segment goodwill was fully impaired in Q4 fiscal 2020[40](index=40&type=chunk) - On October 25, 2019, the Company acquired the remaining **47.5% equity** in naughtone for **$45.9 million**, gaining **100% ownership**, which led to a non-taxable gain of approximately **$30 million** on the remeasurement of the prior equity investment[41](index=41&type=chunk)[43](index=43&type=chunk) - Goodwill of **$35.0 million** and **$22.5 million** was recorded in the North America Contract and International Contract segments, respectively, for the naughtone acquisition[44](index=44&type=chunk) [Note 6 - Inventories, net](index=18&type=section&id=Note%206%20-%20Inventories%2C%20net) Inventories, net (in millions) | Category | Nov 28, 2020 | May 30, 2020 | | :------------- | :----------- | :----------- | | Finished goods | $147.1 | $151.1 | | Raw materials | $43.9 | $46.2 | | **Total** | **$191.0** | **$197.3** | - Inventories are valued at the lower of cost or market, with certain North America Contract manufacturing operations using LIFO and all other operations using FIFO[47](index=47&type=chunk) [Note 7 - Goodwill and Indefinite-Lived Intangibles](index=18&type=section&id=Note%207%20-%20Goodwill%20and%20Indefinite-Lived%20Intangibles) Goodwill and Indefinite-Lived Intangible Assets (in millions) | Category | Nov 28, 2020 | May 30, 2020 | | :-------------------------- | :----------- | :----------- | | Goodwill | $358.5 | $346.0 | | Indefinite-lived Intangible Assets | $96.4 | $92.8 | - In fiscal 2020, goodwill impairment charges of **$88.8 million** for Retail and **$36.7 million** for Maharam were recorded, resulting in no remaining goodwill for these units[49](index=49&type=chunk) - Indefinite-lived intangible asset impairment charges of **$53.3 million** were recognized in fiscal 2020 for DWR, Maharam, HAY, and naughtone trade names[52](index=52&type=chunk) - No interim quantitative impairment assessment was required for reporting units or indefinite-lived intangible assets during the six months ended November 28, 2020[53](index=53&type=chunk) [Note 8 - Employee Benefit Plans](index=19&type=section&id=Note%208%20-%20Employee%20Benefit%20Plans) Net Periodic Benefit Cost for Defined Benefit Pension Plan (in millions) | Component | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest cost | $0.7 | $0.6 | $1.3 | $1.2 | | Expected return on plan assets | $(1.4) | $(1.1) | $(2.8) | $(2.2) | | Net amortization loss | $1.6 | $0.9 | $3.3 | $1.7 | | **Net periodic benefit cost** | **$0.9** | **$0.4** | **$1.8** | **$0.7** | [Note 9 - Earnings Per Share](index=19&type=section&id=Note%209%20-%20Earnings%20Per%20Share) Earnings Per Share Reconciliation | Metric | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :---------------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net earnings attributable to Herman Miller, Inc. (in millions) | $51.3 | $78.6 | $124.2 | $126.8 | | Weighted average common shares outstanding (basic) | 58,908,094 | 59,061,731 | 58,869,699 | 58,985,366 | | Potentially dilutive shares | 359,304 | 340,270 | 174,229 | 333,616 | | Denominator for diluted EPS | 59,267,398 | 59,402,001 | 59,043,928 | 59,318,982 | | Basic EPS | $0.87 | $1.33 | $2.11 | $2.15 | | Diluted EPS | $0.87 | $1.32 | $2.10 | $2.14 | [Note 10 - Stock-Based Compensation](index=19&type=section&id=Note%2010%20-%20Stock-Based%20Compensation) Stock-Based Compensation Expense (in millions) | Metric | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock-based compensation expense | $2.4 | $2.8 | $3.9 | $5.4 | | Related income tax effect | $0.6 | $0.6 | $0.9 | $1.2 | [Note 11 - Income Taxes](index=20&type=section&id=Note%2011%20-%20Income%20Taxes) Effective Tax Rates | Period | Nov 28, 2020 | Nov 30, 2019 | | :-------------------- | :----------- | :----------- | | Three Months Ended | 23.5% | 14.3% | | Six Months Ended | 22.6% | 16.9% | - The increase in effective tax rates year-over-year is primarily due to a non-taxable gain on consolidation of an equity method investment in the prior year[57](index=57&type=chunk)[58](index=58&type=chunk) - The Company's liability for potential interest and penalties related to uncertain tax benefits increased to **$1.0 million** as of November 28, 2020, from **$0.8 million** as of May 30, 2020[60](index=60&type=chunk) [Note 12 - Fair Value Measurements](index=20&type=section&id=Note%2012%20-%20Fair%20Value%20Measurements) Carrying Value and Fair Value of Long-Term Debt (in millions) | Metric | Nov 28, 2020 | May 30, 2020 | | :------------- | :----------- | :----------- | | Carrying value | $327.2 | $591.3 | | Fair value | $334.4 | $594.0 | Financial Assets and Liabilities Measured at Fair Value Through Net Income (in millions) | Category | Nov 28, 2020 (NAV) | Nov 28, 2020 (Level 2) | May 30, 2020 (NAV) | May 30, 2020 (Level 2) | | :-------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Money market funds | $90.1 | — | $283.7 | — | | Mutual funds - equity | — | $0.7 | — | $0.7 | | Foreign currency forward contracts (assets) | — | $1.4 | — | $1.1 | | Deferred compensation plan | — | $16.4 | — | $13.2 | | **Total Financial Assets** | **$90.1** | **$18.5** | **$283.7** | **$15.0** | | Foreign currency forward contracts (liabilities) | — | $0.3 | — | $0.8 | | **Total Financial Liabilities** | **—** | **$0.3** | **—** | **$0.8** | - The Company uses foreign currency forward contracts to reduce risks from foreign currency exposures, with changes in fair value recorded in net earnings[72](index=72&type=chunk)[73](index=73&type=chunk) - Interest rate swap agreements, designated as cash flow hedges, convert variable interest payments to fixed rates, with a fair value liability of **$23.5 million** as of November 28, 2020[74](index=74&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) [Note 13 - Commitments and Contingencies](index=24&type=section&id=Note%2013%20-%20Commitments%20and%20Contingencies) Changes in Warranty Reserve (in millions) | Metric | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Accrual Balance — beginning | $60.3 | $53.3 | $59.2 | $53.1 | | Accrual for warranty matters | $2.7 | $6.3 | $7.3 | $11.6 | | Settlements and adjustments | $(3.2) | $(5.0) | $(6.7) | $(10.1) | | **Accrual Balance — ending** | **$59.8** | **$54.6** | **$59.8** | **$54.6** | - The Company provides a 12-year assurance-type warranty for most products and maintains reserves based on historical claims[81](index=81&type=chunk) - As of November 28, 2020, the Company had **$5.5 million** in maximum financial exposure from performance bonds and **$9.8 million** from standby letters of credit, with no history of claims[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 14 - Short-Term Borrowings and Long-Term Debt](index=25&type=section&id=Note%2014%20-%20Short-Term%20Borrowings%20and%20Long-Term%20Debt) Short-Term Borrowings and Long-Term Debt (in millions) | Obligation | Nov 28, 2020 | May 30, 2020 | | :------------------------------------ | :----------- | :----------- | | Debt securities, 6.0%, due March 1, 2021 | $50.0 | $50.0 | | Debt securities, 4.95%, due May 20, 2030 | $49.9 | $49.9 | | Syndicated revolving line of credit, due August 2024 | $225.0 | $490.0 | | Supplier financing program | $2.3 | $1.4 | | **Total debt** | **$327.2** | **$591.3** | | Less: Current debt | $(52.3) | $(51.4) | | **Long-term debt** | **$274.9** | **$539.9** | - In June 2020, the Company repaid **$265 million** on its syndicated revolving line of credit, which was drawn in March 2020 as a precautionary measure due to COVID-19[88](index=88&type=chunk) Available Borrowings Under Syndicated Revolving Line of Credit (in millions) | Metric | Nov 28, 2020 | May 30, 2020 | | :------------------------------------------------ | :----------- | :----------- | | Syndicated revolving line of credit borrowing capacity | $500.0 | $500.0 | | Less: Borrowings | $225.0 | $490.0 | | Less: Outstanding letters of credit | $9.8 | $9.4 | | **Available borrowings** | **$265.2** | **$0.6** | [Note 15 - Accumulated Other Comprehensive Loss](index=26&type=section&id=Note%2015%20-%20Accumulated%20Other%20Comprehensive%20Loss) Changes in Accumulated Other Comprehensive Loss (Six Months Ended Nov 28, 2020, in millions) | Component | Balance at May 30, 2020 | Net current period other comprehensive income (loss) | Balance at Nov 28, 2020 | | :-------------------------------- | :---------------------- | :------------------------------------------------- | :---------------------- | | Cumulative Translation Adjustments | $(56.0) | $32.3 | $(23.7) | | Pension and Other Post-retirement Benefit Plans | $(59.2) | $2.5 | $(56.7) | | Unrealized Gains on Available-for-sale Securities | $0.1 | $(0.1) | $0.0 | | Interest Rate Swap Agreement | $(18.9) | $1.2 | $(17.7) | | **Total Accumulated Other Comprehensive Loss** | **$(134.0)** | **$35.9** | **$(98.1)** | [Note 16 - Operating Segments](index=26&type=section&id=Note%2016%20-%20Operating%20Segments) - The Company's reportable segments are North America Contract, International Contract, and Retail, with a 'Corporate' category for unallocated expenses[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) Net Sales by Segment (in millions) | Segment | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America Contract | $323.1 | $450.6 | $661.9 | $909.3 | | International Contract | $168.1 | $118.2 | $321.7 | $232.0 | | Retail | $135.1 | $105.4 | $269.4 | $203.9 | | **Total** | **$626.3** | **$674.2** | **$1,253.0** | **$1,345.2** | Operating Earnings (Loss) by Segment (in millions) | Segment | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America Contract | $35.6 | $62.5 | $87.4 | $125.4 | | International Contract | $23.4 | $12.8 | $48.4 | $25.9 | | Retail | $22.6 | $(0.9) | $51.8 | $(4.9) | | Corporate | $(10.6) | $(12.0) | $(21.2) | $(23.8) | | **Total** | **$71.0** | **$62.4** | **$166.4** | **$122.6** | [Note 17 - Restructuring Expense](index=27&type=section&id=Note%2017%20-%20Restructuring%20Expense) - The Company recognized a net credit of **$1.9 million** in fiscal 2021 related to a facilities consolidation plan in its International Contract segment, which is substantially complete and expected to generate **$3 million** in cost savings[98](index=98&type=chunk) - Gains of approximately **$3.4 million** from the sale of an office building in China and a nominal gain from a UK office building were included in restructuring expense[99](index=99&type=chunk) - A May 2020 restructuring plan, in response to COVID-19, eliminated approximately **400 full-time positions**, projecting annualized expense reductions of **$40 million**, with **$3.1 million** in severance recognized in fiscal 2021[103](index=103&type=chunk) Restructuring Expenses by Segment (in millions) | Segment | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America Contract | $0.8 | $3.8 | $2.4 | $5.5 | | International Contract | $1.6 | $0.4 | $(1.2) | $0.6 | | **Total** | **$2.4** | **$4.2** | **$1.2** | **$6.1** | [Note 18 - Variable Interest Entities](index=29&type=section&id=Note%2018%20-%20Variable%20Interest%20Entities) - The Company holds long-term notes receivable with a third-party owned dealer, classified as a variable interest entity, with a carrying value of **$1.3 million** as of November 28, 2020, representing its maximum exposure to loss[105](index=105&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and cash flows for the three and six months ended November 28, 2020 [Business Overview](index=30&type=section&id=Business%20Overview) - Net sales decreased **7.1%** to **$626.3 million**, and orders decreased **6.7%** to **$629.7 million** for the three months ended November 28, 2020, compared to the prior year[109](index=109&type=chunk) - Organic net sales and orders decreased by **14.9%** and **15.2%** respectively, primarily due to decreased sales volumes in the North America Contract segment, partially offset by increased demand in the Retail segment and acquisitions[109](index=109&type=chunk) - Gross margin increased to **39.0%** from **37.9%** in the prior year, driven by favorable channel and product sales mix, partially offset by lower overhead leverage[109](index=109&type=chunk) - Operating expenses decreased by **$19.9 million (10.3%)** due to lower compensation, marketing, selling, and travel costs[109](index=109&type=chunk) - Diluted EPS decreased **34.1%** to **$0.87**, but adjusted diluted EPS increased **1.1%** to **$0.89**, excluding restructuring and special charges[109](index=109&type=chunk) [COVID-19 Update](index=31&type=section&id=COVID-19%20Update) - The COVID-19 pandemic adversely impacted demand in the Contract channel, but the multi-channel approach and digital investments allowed the Retail business to capitalize on the work-from-home trend[112](index=112&type=chunk) - The Company implemented enhanced safety precautions in manufacturing facilities and retail stores, which are operating at near-normal capacity or with limited access[113](index=113&type=chunk)[115](index=115&type=chunk) - Cost reduction actions from fiscal 2020 were partially reversed in fiscal 2021, with the reinstatement of compensation, a modified bonus program, quarterly cash dividends, and retirement plan contributions[116](index=116&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=32&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) - Organic net sales exclude currency translation effects and the impact of acquisitions, while adjusted EPS excludes restructuring expenses and other special charges or gains[117](index=117&type=chunk) Organic Net Sales (3 Months Ended Nov 28, 2020, in millions) | Segment | Net Sales, as Reported | Acquisitions | Currency Translation Effects | Net Sales, Organic | % Change from PY | | :-------------------- | :--------------------- | :----------- | :------------------------- | :----------------- | :--------------- | | North America Contract | $323.1 | $(3.5) | $(0.1) | $319.5 | (29.1)% | | International Contract | $168.1 | $(47.8) | $(1.4) | $118.9 | 0.6% | | Retail | $135.1 | — | — | $135.1 | 28.2% | | **Total** | **$626.3** | **$(51.3)** | **$(1.5)** | **$573.5** | **(14.9)%** | Adjusted Earnings Per Share - Diluted | Metric | 3 Months Ended Nov 28, 2020 | 3 Months Ended Nov 30, 2019 | 6 Months Ended Nov 28, 2020 | 6 Months Ended Nov 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Earnings per share - diluted | $0.87 | $1.32 | $2.10 | $2.14 | | Less: Gain on consolidation of equity method investment | — | $(0.51) | — | $(0.51) | | Add: Special charges, after tax | — | $0.02 | $0.01 | $0.02 | | Add: Restructuring expenses, after tax | $0.02 | $0.05 | $0.02 | $0.07 | | **Adjusted earnings per share - diluted** | **$0.89** | **$0.88** | **$2.13** | **$1.72** | [Analysis of Results for Three and Six Months](index=34&type=section&id=Analysis%20of%20Results%20for%20Three%20and%20Six%20Months) [Net Sales](index=35&type=section&id=Net%20Sales) - Net sales decreased by **$47.9 million (7.1%)** in Q2 fiscal 2021, primarily due to a **$129 million** decrease in North America Contract sales volumes, partially offset by **$51 million** from acquisitions (HAY and naughtone) and **$28 million** from increased Retail segment sales[127](index=127&type=chunk) - For the first six months of fiscal 2021, net sales decreased by **$92.2 million (6.9%)**, driven by a **$264 million** decrease in North America Contract sales, partially offset by **$98 million** from acquisitions and **$62 million** from Retail segment growth[127](index=127&type=chunk) [Gross Margin](index=35&type=section&id=Gross%20Margin) - Gross margin increased to **39.0%** in Q2 fiscal 2021 (from **37.9%**), primarily due to favorable channel and product sales mix (**200 basis points**) and lower commodity costs, partially offset by lower overhead leverage (**90 basis points**)[127](index=127&type=chunk) - For the six months, gross margin increased to **39.4%** (from **37.3%**), driven by strong channel mix (**150 basis points**), product mix, material performance, and profitability efforts (**50 basis points**), and incremental list price increases (**40 basis points**), partially offset by lower overhead leverage (**30 basis points**)[127](index=127&type=chunk)[129](index=129&type=chunk) [Operating Expenses](index=36&type=section&id=Operating%20Expenses) - Operating expenses decreased by **$19.9 million (10.3%)** in Q2 fiscal 2021, mainly due to lower marketing and selling costs (**$10 million**), reduced compensation and benefits (**$7 million**), and decreased travel costs (**$3 million**), while acquisitions of HAY and naughtone increased operating expenses by approximately **$12 million**[130](index=130&type=chunk)[132](index=132&type=chunk) - For the first six months, operating expenses decreased by **$51.2 million (13.5%)**, driven by lower marketing and selling costs (**$23 million**), reduced compensation and benefits (**$23 million**), and decreased travel costs (**$9 million**), while acquisitions increased operating expenses by approximately **$23 million**[130](index=130&type=chunk)[132](index=132&type=chunk) [Other Income/Expense](index=37&type=section&id=Other%20Income%2FExpense) - Net other expense decreased by **$0.4 million** to **$2.2 million** in Q2 fiscal 2021 and by **$1.0 million** to **$3.7 million** for the six months, compared to the prior year[130](index=130&type=chunk) - The prior year's other income/expense included a **$30.5 million** pre-tax gain from the remeasurement of the initial equity-method investment in naughtone[131](index=131&type=chunk) [Income Taxes](index=37&type=section&id=Income%20Taxes) - Refer to Note 11 for detailed information on income taxes[132](index=132&type=chunk) [Operating Segment Results](index=38&type=section&id=Operating%20Segment%20Results) [North America Contract ("North America")](index=39&type=section&id=North%20America%20Contract%20(%22North%20America%22)) - Net sales decreased **28.3% (29.1% organic)** in Q2 fiscal 2021, primarily due to a **$129 million** decrease in sales volumes from COVID-19, partially offset by **$4 million** from the naughtone acquisition[136](index=136&type=chunk) - Operating earnings decreased **$26.9 million (43.0%)** in Q2 fiscal 2021, driven by a **$53.1 million** decrease in gross margin due to lower sales volumes and a **160 basis point** drop in gross margin percentage, partially offset by a **$26.2 million** reduction in operating expenses[136](index=136&type=chunk)[137](index=137&type=chunk) [International Contract ("International")](index=40&type=section&id=International%20Contract%20(%22International%22)) - Net sales increased **42.2% (0.6% organic)** in Q2 fiscal 2021, primarily due to approximately **$48 million** from the HAY and naughtone acquisitions[138](index=138&type=chunk) - Operating earnings increased **$10.6 million (82.8%)** in Q2 fiscal 2021, driven by a **$20.4 million** increase in gross margin due to higher sales and a **200 basis point** increase in gross margin percentage, partially offset by a **$9.8 million** increase in operating expenses from acquisitions[138](index=138&type=chunk)[140](index=140&type=chunk) [Retail](index=40&type=section&id=Retail) - Net sales increased **28.2%** (both as reported and organic) in Q2 fiscal 2021, driven by approximately **$28 million** in increased sales volumes from the e-commerce channel and **$3 million** from incremental list price increases[139](index=139&type=chunk)[141](index=141&type=chunk) - Operating earnings increased **$23.5 million** in Q2 fiscal 2021, due to a **$21.4 million** increase in gross margin (higher sales, **630 basis point** increase in gross margin percentage) and a **$2.1 million** decrease in operating expenses[142](index=142&type=chunk) [Corporate](index=41&type=section&id=Corporate) - Corporate unallocated expenses decreased by **$1.4 million** to **$10.6 million** in Q2 fiscal 2021, primarily due to lower special charges[143](index=143&type=chunk) - For the first six months, corporate expenses decreased by **$2.6 million** to **$21.2 million**, mainly due to lower compensation, benefit costs, and special charges[144](index=144&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flows - Operating Activities](index=42&type=section&id=Cash%20Flows%20-%20Operating%20Activities) - Cash provided by operating activities increased to **$214.6 million** for the six months ended November 28, 2020, from **$142.4 million** in the prior year, primarily due to an increase in current liabilities and the absence of a non-taxable non-cash gain on consolidation of an equity method investment present in the prior year[147](index=147&type=chunk) [Cash Flows - Investing Activities](index=42&type=section&id=Cash%20Flows%20-%20Investing%20Activities) - Cash used in investing activities decreased to **$24.4 million** for the six months ended November 28, 2020, from **$82.1 million** in the prior year, driven by the absence of a **$40.0 million** purchase of naughtone, a **$14.2 million** decrease in capital expenditures, and **$11.4 million** in proceeds from asset sales[147](index=147&type=chunk) - The Company expects full-year capital purchases to be between **$50.0 million** and **$60.0 million**, primarily for facilities and equipment[147](index=147&type=chunk) [Cash Flows - Financing Activities](index=42&type=section&id=Cash%20Flows%20-%20Financing%20Activities) - Cash used in financing activities increased to **$276.9 million** for the six months ended November 28, 2020, from **$40.6 million** in the prior year, primarily due to the repayment of **$265.0 million** on the Company's credit facility[148](index=148&type=chunk) [Sources of Liquidity](index=42&type=section&id=Sources%20of%20Liquidity) Total Liquidity (in millions) | Metric | Nov 28, 2020 | May 30, 2020 | | :------------------------------------------ | :----------- | :----------- | | Cash and cash equivalents | $377.9 | $454.0 | | Marketable securities | $7.2 | $7.0 | | Availability under syndicated revolving line of credit | $265.2 | $0.6 | | **Total liquidity** | **$650.3** | **$461.6** | - The Company had **$176.4 million** of cash and cash equivalents held outside the United States as of November 28, 2020[152](index=152&type=chunk) - The Company intends to repatriate **$26.7 million** in cash from certain foreign jurisdictions over the next two years, resulting in a deferred tax liability of **$1.8 million** for foreign withholding taxes[155](index=155&type=chunk) [Safe Harbor Provisions](index=44&type=section&id=Safe%20Harbor%20Provisions) - The report contains forward-looking statements based on management's beliefs and expectations, which involve risks and uncertainties that could cause actual results to differ materially[163](index=163&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the Company's exposure to market risks, particularly foreign exchange risk, and notes no significant changes in interest rate and commodity price risks [Foreign Exchange Risk](index=44&type=section&id=Foreign%20Exchange%20Risk) - The Company is exposed to foreign exchange risk due to manufacturing, sourcing, and sales in various foreign currencies, impacting production costs and profit margins[165](index=165&type=chunk) - To mitigate foreign currency exposures, the Company uses foreign currency forward contracts, primarily in British pound sterling, euro, Canadian dollar, Japanese yen, Mexican peso, Hong Kong dollar, Chinese renminbi, and Danish krone[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 4 Controls and Procedures](index=45&type=section&id=Item%204%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=45&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of November 28, 2020[167](index=167&type=chunk) [Changes in Internal Control Over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were no material changes in the Company's internal control over financial reporting during the quarter ended November 28, 2020[168](index=168&type=chunk) PART II — OTHER INFORMATION [Item 1 Legal Proceedings](index=46&type=section&id=Item%201%20Legal%20Proceedings) This section refers to Note 13 for information on legal proceedings, indicating that the outcome of pending litigation is not expected to have a material adverse effect - Refer to Note 13 of the Condensed Consolidated Financial Statements for information on legal proceedings[169](index=169&type=chunk) [Item 1A Risk Factors](index=46&type=section&id=Item%201A%20Risk%20Factors) This section states that there have been no material changes to the Company's risk factors since its Annual Report on Form 10-K for the year ended May 30, 2020 - No material changes in the Company's risk factors from those set forth in the Annual Report on Form 10-K for the year ended May 30, 2020[170](index=170&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's share repurchase activity during the quarter ended November 28, 2020, under previously authorized plans [Issuer Purchases of Equity Securities](index=46&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Issuer Purchases of Equity Securities (Quarter Ended Nov 28, 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs (in millions) | | :---------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :-------------------------------------------------------------------------------------------------------------------- | | 8/30/20 - 9/26/20 | 632 | $29.16 | 632 | $236,769,598 | | 9/27/20 - 10/24/20 | — | — | — | $236,769,598 | | 10/25/20 - 11/28/20 | 566 | $33.01 | 566 | $236,750,879 | | **Total** | **1,198** | | **1,198** | | - The Company repurchased **1,198 shares** under previously announced plans during the quarter, with no plans expiring or being terminated[172](index=172&type=chunk) [Item 3 Defaults upon Senior Securities](index=46&type=section&id=Item%203%20Defaults%20upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - None[173](index=173&type=chunk) [Item 4 Mine Safety Disclosures](index=46&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Not applicable[173](index=173&type=chunk) [Item 5 Other Information](index=46&type=section&id=Item%205%20Other%20Information) This section states that there is no other information to report - None[173](index=173&type=chunk) [Item 6 Exhibits](index=46&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed with the Form 10-Q report, including certifications, XBRL taxonomy documents, and the cover page interactive data file - The report includes certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2) and various XBRL taxonomy extension documents (Exhibits 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[173](index=173&type=chunk)[174](index=174&type=chunk) Signatures - The report was signed on January 4, 2021, by Andrea R. Owen, President and Chief Executive Officer, and Jeffrey M. Stutz, Chief Financial Officer[177](index=177&type=chunk)

Financial Performance & Outlook - FY20 revenue was $2.49 billion[6] - FY20 adjusted operating income was $206 million[6] - The company anticipates annual organic revenue growth of 4-7% over the next five years[60, 62] - The company expects operating income growth of 2x to 2.5x the rate of organic revenue growth[65] - Q2 FY21 net sales and orders both decreased 7% year-over-year, but organically decreased by 15%[77] - Q2 FY21 EPS totaled $0.87 per share on a reported basis and $0.89 on an adjusted basis[77] - Q2 ending cash and equivalents totaled $378 million[85] Strategic Priorities - The company is focused on unlocking the power of One Herman Miller, building a customer-centric, digitally-enabled business model, accelerating profitable growth, and reinforcing its commitment to people, planet, and communities[25, 26, 27] - The company aims to drive outsized growth internationally by expanding dealer distribution, entering new product categories, and growing HAY and naughtone brands[37] - The company plans to expand its retail business by building new digital capabilities, expanding product assortment, developing a new retail seating concept, and entering the gaming market[39] Capital Allocation - The company has a disciplined capital allocation approach focused on value creation, including supporting growth, targeted M&A, maintaining a strong balance sheet, and returning capital to shareholders[52] - The company invested $202 million in M&A in the past 5 years[52] - The company's average annual adjusted return on invested capital was 22% over the past 5 years[52]

Financial Data and Key Metrics Changes - The company reported an improvement in order trends, with a decline of mid-teen percentages in September and October, improving to around 9% in November [10] - Retail segment order growth was 41% ahead of last year, with a significant spike in November orders [14][15] - The international business showed encouraging trends, with organic orders up about 5% in November, leading to a total decline of 2% for the quarter [19] Business Line Data and Key Metrics Changes - Retail orders saw substantial growth, with consumer orders increasing by 84% and trade business orders growing by 14% [15] - The North American contract business remained consistent, with orders down 30% to 35% throughout the quarter [18] Market Data and Key Metrics Changes - E-commerce performance was strong, with a 220% increase compared to last year, while physical retail locations saw a 14% increase in orders despite a 35% decline in traffic [20][21] Company Strategy and Development Direction - The company is focusing on enhancing its e-commerce platforms, with significant improvements noted in conversion rates following the update of the DWR website [22] - Plans are in place to relaunch the Herman Miller store in Q4 and hay.com in the next financial year [22] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the order trends, particularly in the retail segment, and noted strong backlogs heading into Q3 [12][14] - There is hope for recovery in the North American contract business, with increased inquiries and customer conversations [18] Other Important Information - The company has shifted its quarterly press release format to a shareholder letter format to provide more timely information [4] Q&A Session Summary Question: Order trends throughout the quarter on both contract and retail sides - Management noted an improvement in consolidated order trends, with a decline of around 9% in the first weeks of Q3 [10] Question: Notable trends at the segment level - Retail segment saw order growth of 41%, with strong performance in consumer orders [14][15] Question: Supply constraints affecting revenue - Management indicated that while there were challenges, the backlog and order growth suggest potential revenue growth in Q3 [13] Question: Growth sources in the Retail segment - E-commerce was a significant driver, with a 220% increase, while physical retail locations also showed improvement [20] Question: Updates on e-commerce platforms - The DWR website update led to a 26% increase in conversion rates, with plans to update other platforms in the near future [22]

Part I — Financial Information [Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) The company reported decreased net sales but significantly increased net earnings, supported by a strengthened balance sheet and robust operating cash flow [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Quarterly net sales declined 6.6% year-over-year, yet operating earnings grew 58.7% and diluted EPS rose to $1.24 due to improved cost management Condensed Consolidated Statements of Comprehensive Income (Three Months Ended) | (Dollars in millions, except share data) | August 29, 2020 | August 31, 2019 | | :--- | :--- | :--- | | **Net sales** | **$626.8** | **$670.9** | | Gross margin | $250.0 | $246.1 | | Operating earnings | $95.4 | $60.1 | | Net earnings attributable to Herman Miller, Inc. | $73.0 | $48.2 | | **Earnings per share — diluted** | **$1.24** | **$0.81** | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased while total stockholders' equity increased, driven by a significant reduction in long-term debt Condensed Consolidated Balance Sheet Highlights | (Dollars in millions) | August 29, 2020 | May 30, 2020 | | :--- | :--- | :--- | | **Total current assets** | **$757.5** | **$917.1** | | Cash and cash equivalents | $296.6 | $454.0 | | **Total Assets** | **$1,917.1** | **$2,053.9** | | **Total current liabilities** | **$477.5** | **$470.2** | | Long-term debt | $274.9 | $539.9 | | **Total Liabilities** | **$1,113.5** | **$1,360.5** | | **Total Stockholders' Equity** | **$746.4** | **$643.0** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations more than doubled year-over-year, though a large credit facility repayment led to a net decrease in cash Condensed Consolidated Statements of Cash Flows (Three Months Ended) | (Dollars in millions) | August 29, 2020 | August 31, 2019 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | **$115.9** | **$54.7** | | Net Cash Used in Investing Activities | ($5.1) | ($24.0) | | Net Cash Used in Financing Activities | ($276.5) | ($27.9) | | **Net (Decrease) Increase in Cash and Cash Equivalents** | **($157.4)** | **$0.3** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures cover accounting standards, acquisitions, goodwill impairments, restructuring, debt management, and a 22.0% effective tax rate - The company adopted ASU No 2016-13 (Credit Losses) and ASU No 2018-13 (Fair Value Measurement) on May 31, 2020, with **no material impact** on its financial statements[18](index=18&type=chunk)[19](index=19&type=chunk) - The purchase price allocation for the acquisition of HAY was finalized in Q1 FY2021, and the acquisition of naughtone was finalized in Q4 FY2020, with both accounted for as **acquisitions achieved in stages**[35](index=35&type=chunk)[37](index=37&type=chunk) - In fiscal 2020, the company recorded goodwill impairment charges of **$88.8 million** for the Retail reporting unit and **$36.7 million** for the Maharam reporting unit, resulting in no remaining goodwill in either unit[44](index=44&type=chunk) - The company announced a restructuring plan in May 2020 in response to COVID-19, eliminating approximately **400 positions** and projecting annualized expense reductions of about **$40 million**[104](index=104&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales decreased 6.6% due to COVID-19's impact on Contract segments, but improved gross margin and lower expenses drove a 58.7% rise in operating earnings - Net sales decreased 6.6% YoY, but on an organic basis (excluding acquisitions and currency effects), the decrease was **13.3%**[109](index=109&type=chunk) - Gross margin increased by **320 basis points to 39.9%**, driven by strong channel/product mix, price increases, and lower freight/warehousing costs[109](index=109&type=chunk)[125](index=125&type=chunk) - The company repaid a **$265 million** draw on its credit facility, taken as a precautionary measure in March 2020 due to COVID-19 uncertainty[86](index=86&type=chunk)[109](index=109&type=chunk) - Subsequent to the quarter end, the Board of Directors re-established a quarterly dividend of **$0.1875 per share**[109](index=109&type=chunk) [COVID-19 Update](index=35&type=section&id=COVID-19%20Update) The company's multi-channel approach and digital investments helped mitigate pandemic impacts, with the Retail business capitalizing on work-from-home trends - The company's multi-channel go-to-market approach has enabled it to serve customers effectively despite the pandemic, with the **Retail business benefiting from the work-from-home trend**[111](index=111&type=chunk) - Digital investments, such as a reimagined Design Within Reach website and a Work from Home online assessment tool, have helped **capitalize on new opportunities**[113](index=113&type=chunk) [Operating Segment Results](index=40&type=section&id=Operating%20Segment%20Results) The Retail segment's 36.2% sales growth and a swing to profitability offset a 26.1% decline in the North America Contract segment Net Sales by Segment (Three Months Ended) | (In millions) | August 29, 2020 | August 31, 2019 | | :--- | :--- | :--- | | North America Contract | $338.8 | $458.4 | | International Contract | $153.7 | $113.9 | | Retail | $134.3 | $98.6 | | **Total** | **$626.8** | **$670.9** | Operating Earnings (Loss) by Segment (Three Months Ended) | (In millions) | August 29, 2020 | August 31, 2019 | | :--- | :--- | :--- | | North America Contract | $51.8 | $62.9 | | International Contract | $25.1 | $13.1 | | Retail | $29.2 | ($3.9) | | Corporate | ($10.7) | ($12.0) | | **Total** | **$95.4** | **$60.1** | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position of $569.3 million after repaying $265.0 million on its credit facility Total Liquidity | (In millions) | August 29, 2020 | May 30, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $296.6 | $454.0 | | Marketable securities | $7.0 | $7.0 | | Availability under syndicated revolving line of credit | $265.7 | $0.6 | | **Total liquidity** | **$569.3** | **$461.6** | - Cash provided by operating activities increased to **$115.9 million** from $54.7 million in the prior year, mainly due to higher net earnings and improved working capital management[142](index=142&type=chunk)[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk exposure remains foreign currency exchange risk, which is managed using forward contracts - The company's primary market risk is **foreign currency exchange risk** due to its global operations, with principal exposures including the British pound sterling, euro, and Canadian dollar[161](index=161&type=chunk)[162](index=162&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of August 29, 2020[163](index=163&type=chunk) - **No changes** occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[164](index=164&type=chunk) Part II — Other Information [Legal Proceedings](index=48&type=section&id=Item%201%20Legal%20Proceedings) Pending legal proceedings from the ordinary course of business are not expected to have a material adverse effect on financial statements - In management's opinion, the outcome of currently pending legal proceedings and litigation will **not have a material adverse effect** on the Company's Consolidated Financial Statements[83](index=83&type=chunk)[166](index=166&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A%20Risk%20Factors) No material changes to the company's risk factors were reported since the fiscal year-end 2020 Form 10-K filing - **No material changes** in the Company's risk factors were reported from those set forth in the Annual Report on Form 10-K for the year ended May 30, 2020[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 36,644 shares of its common stock during the quarter and did not sell any unregistered equity securities Share Repurchase Activity (Quarter Ended August 29, 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 5/31/20 - 6/27/20 | 305 | $28.20 | | 6/28/20 - 7/25/20 | 34,398 | $23.05 | | 7/26/20 - 8/29/20 | 1,941 | $27.18 | | **Total** | **36,644** | **N/A** | [Exhibits](index=49&type=section&id=Item%206%20Exhibits) Filed exhibits include CEO/CFO certifications under the Sarbanes-Oxley Act and interactive data files in XBRL format - Exhibits filed include CEO and CFO certifications under **Sections 302 and 906 of the Sarbanes-Oxley Act**, and Inline XBRL documents[172](index=172&type=chunk)