MillerKnoll(MLKN) - 2019 Q4 - Annual Report

PART I This section provides an overview of the company's business, risk factors, property, legal proceedings, and executive leadership Item 1 Business Herman Miller designs, manufactures, and distributes interior furnishings globally through various brands and channels, focusing on office, healthcare, and residential markets - Herman Miller's mission statement is 'Inspiring Designs to Help People Do Great Things'[6] - Products are primarily sold through owned and independent contract furniture dealers, accounting for approximately 69% of sales in fiscal 2019[6][12] Research and Development and Order Backlog | Metric | Fiscal 2019 (millions) | | :-------------------- | :--------------------- | | Research and development | $58.8 | | Backlog of unfilled orders | $394.2 | Item 1A Risk Factors The company faces various risks including challenges in implementing its growth strategy, potential negative impacts from tariffs, and intense competition - Growth strategy risks include inadequate execution, incorrect assumptions, sub-optimal resource allocation, and changing customer requirements[35][36][37] - Tariffs, particularly on imports from China, adversely impacted steel costs in fiscal year 2019, with Chinese direct materials representing an estimated 5% of consolidated cost of sales[40] - International operations expose the company to risks such as political/economic instability, complex legal/regulatory requirements, and fluctuating exchange rates[38][47][48] Item 1B Unresolved Staff Comments There are no unresolved staff comments from the Securities and Exchange Commission - No unresolved staff comments[66] Item 2 Properties Herman Miller owns and leases facilities globally for manufacturing, warehousing, office, design, and retail purposes, actively optimizing operations - The company owns significant manufacturing, warehouse, and office facilities in Zeeland, Michigan (770,800 sq ft), Spring Lake, Michigan (582,800 sq ft), and Dongguan, China (269,000 sq ft)[67] - Significant leased facilities include warehouses in Batavia, Ohio (617,600 sq ft) and Hebron, Kentucky (423,700 sq ft), and manufacturing/office space in Dongguan, China (429,300 sq ft)[67] - As of June 1, 2019, the company leased 39 retail studios totaling approximately 400,000 square feet of selling space[67] Item 3 Legal Proceedings Herman Miller is involved in ordinary course legal proceedings, with management believing no material financial impact will result - Management's opinion is that the outcome of current legal proceedings and litigation will not materially affect the Company's consolidated operations, cash flows, and financial condition[71] Additional Item: Executive Officers of the Registrant This section lists the executive officers of Herman Miller, Inc. as of June 1, 2019, including their positions and biographical information Executive Officers of Herman Miller, Inc. (as of June 1, 2019) | Name | Age | Year Elected an Executive Officer | Position with the Company | | :---------------- | :-- | :-------------------------------- | :------------------------------------ | | Andrea R. Owen | 54 | 2018 | President and Chief Executive Officer | | Jeremy Hocking | 58 | 2017 | President, International Contract | | Gregory J. Bylsma | 54 | 2009 | President, North America Contract | | Jeffrey M. Stutz | 48 | 2009 | Chief Financial Officer | | B. Ben Watson | 54 | 2010 | Chief Creative Officer | | Jacqueline H. Rice | 47 | 2019 | General Counsel | | John McPhee | 56 | 2015 | President, Retail | | Kevin Veltman | 44 | 2015 | Vice President, Investor Relations & Treasurer | | Jeffrey L. Kurburski | 52 | 2018 | Chief Technology Officer | | Benjamin P.T. Groom | 35 | 2019 | Chief Digital Officer | | Leander D. LeSure | 53 | 2019 | Chief Human Resource Officer | | Megan Lyon | 39 | 2019 | Chief Strategy Officer | - Andi Owen was elected President and CEO effective August 22, 2018, succeeding Brian Walker[74] - New executive appointments in 2019 include Benjamin P.T. Groom as Chief Digital Officer, Jacqueline H. Rice as General Counsel, Leander D. LeSure as Chief Human Resources Officer, and Megan Lyon as Chief Strategy Officer[75][76][77][78] Item 4 Mine Safety Disclosures This item is not applicable to Herman Miller, Inc. as the company is not involved in mining operations - This item is not applicable[80] PART II This section details market information for common equity, selected financial data, management's discussion and analysis, and financial statements Item 5 Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Herman Miller's common stock trades on NASDAQ-Global Select Market System (MLHR), with details on market prices, earnings, dividends, and share repurchases - Herman Miller, Inc. common stock is traded on the NASDAQ-Global Select Market System (Symbol: MLHR) with approximately 33,000 record holders as of July 25, 2019[82] Share Price, Earnings, and Dividends Summary | Metric | Year ended June 1, 2019 | Year ended June 2, 2018 | | :------------------------ | :---------------------- | :---------------------- | | Market Price High | $40.65 | $41.84 | | Market Price Low | $28.66 | $29.25 | | Earnings Per Share Diluted | $2.70 | $2.12 | | Dividends Declared Per Share | $0.79 | $0.72 | - The Board of Directors approved an increase in the quarterly dividend to $0.21 per share on June 26, 2019, with $264.2 million available for share repurchases[84][85] Item 6 Selected Financial Data This section provides a five-year summary of selected financial data, including operating results, key ratios, and financial condition, from fiscal year 2015 to 2019 Selected Financial Data (FY2015-2019) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :----------------------------------- | :----- | :----- | :----- | :----- | :----- | | Net sales (millions) | $2,567.2 | $2,381.2 | $2,278.2 | $2,264.9 | $2,142.2 | | Gross margin (millions) | $929.9 | $873.0 | $864.2 | $874.2 | $791.4 | | Operating earnings (millions) | $203.5 | $178.9 | $191.1 | $211.5 | $163.4 | | Net earnings (millions) | $160.5 | $128.7 | $124.1 | $137.5 | $98.1 | | Net cash provided by operating activities (millions) | $216.4 | $166.5 | $202.1 | $210.4 | $167.7 | | Sales growth (%) | 7.8% | 4.5% | 0.6% | 5.7% | 13.8% | | Gross margin (%) | 36.2 | 36.7 | 37.9 | 38.6 | 36.9 | | Operating earnings (%) | 7.9 | 7.5 | 8.4 | 9.3 | 7.6 | | Net earnings growth (decline) (%) | 24.7 | 3.7 | (9.7) | 40.2 | 543.9 | | Earnings per share-diluted | $2.70 | $2.12 | $2.05 | $2.26 | $1.62 | | Cash dividends declared per share | $0.79 | $0.72 | $0.68 | $0.59 | $0.56 | | Total assets (millions) | $1,569.3 | $1,479.5 | $1,306.3 | $1,235.2 | $1,192.7 | Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and results of operations for fiscal year 2019 compared to 2018 - Net sales increased by 7.8% to $2,567.2 million in fiscal 2019, with organic net sales increasing by 7.1%, driven by strong performance across segments[114] Key Financial Highlights (FY2019 vs. FY2018) | Metric | FY2019 (millions) | FY2018 (millions) | % Change | | :------------------------------------------ | :---------------- | :---------------- | :------- | | Net sales | $2,567.2 | $2,381.2 | 7.8% | | Gross margin | $929.9 | $873.0 | 6.5% | | Operating earnings | $203.5 | $178.9 | 13.8% | | Net earnings attributable to Herman Miller, Inc. | $160.5 | $128.1 | 25.3% | | Diluted earnings per share | $2.70 | $2.12 | 27.4% | - Gross margin decreased to 36.2% in fiscal 2019 from 36.7% in fiscal 2018, primarily due to ASC 606 adoption, higher commodity costs, and tariffs, partially offset by lower material costs[114][124] Item 7A Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, including direct material costs, foreign exchange risk, and interest rate risk, and outlines management strategies - The company is exposed to price changes for key direct materials, which increased costs by approximately $16 million in fiscal 2019, including Chinese tariffs[211] - Foreign exchange risk is managed through forward currency instruments, resulting in a net gain of $0.3 million in fiscal 2019[214][216] - Interest rate risk is managed using interest rate swap agreements, converting notional amounts of $150.0 million and $75.0 million to fixed rates of 1.949% and 2.387%, respectively, as of June 1, 2019[217][219][220] Item 8 Financial Statements and Supplementary Data This item presents the company's audited consolidated financial statements, including comprehensive income, balance sheets, stockholders' equity, cash flows, and detailed notes Consolidated Statements of Comprehensive Income Highlights (FY2019 vs. FY2018) | Metric | FY2019 (millions) | FY2018 (millions) | % Change | | :------------------------------------------ | :---------------- | :---------------- | :------- | | Net sales | $2,567.2 | $2,381.2 | 7.8% | | Gross margin | $929.9 | $873.0 | 6.5% | | Operating earnings | $203.5 | $178.9 | 13.8% | | Net earnings attributable to Herman Miller, Inc. | $160.5 | $128.1 | 25.3% | | Diluted earnings per share | $2.70 | $2.12 | 27.4% | | Total other comprehensive (loss) income | $(34.3) | $20.9 | -264.1% | Consolidated Balance Sheets Highlights (June 1, 2019 vs. June 2, 2018) | Metric | June 1, 2019 (millions) | June 2, 2018 (millions) | | :------------------------------------------ | :---------------------- | :---------------------- | | Total Assets | $1,569.3 | $1,479.5 | | Total Liabilities | $829.5 | $784.2 | | Total Stockholders' Equity | $719.2 | $664.8 | Consolidated Statements of Cash Flows Highlights (FY2019 vs. FY2018) | Metric | FY2019 (millions) | FY2018 (millions) | | :------------------------------------------ | :---------------- | :---------------- | | Net Cash Provided by Operating Activities | $216.4 | $166.5 | | Net Cash Used in Investing Activities | $(165.0) | $(62.7) | | Net Cash (Used in) Provided by Financing Activities | $(91.9) | $2.5 | | Cash and Cash Equivalents, End of Year | $159.2 | $203.9 | Note 1 - Significant Accounting and Reporting Policies This note outlines the company's key accounting policies, including principles of consolidation, revenue recognition, goodwill impairment, and recently adopted accounting standards - The company's fiscal year ends on the Saturday closest to May 31, with fiscal years 2019 and 2018 containing 52 weeks, and fiscal year 2017 containing 53 weeks[237] - Goodwill and indefinite-lived intangible assets are tested annually for impairment, with no impairment indicated in fiscal 2019 or 2018[246][249][250][252] - The company adopted ASC 606, 'Revenue from Contracts with Customers,' at the beginning of fiscal 2019, resulting in a cumulative adjustment to retained earnings of $1.9 million and reclassification of certain product pricing elements[270][289][290] Note 2 - Revenue from Contracts with Customers This note details the impact of adopting ASC 606, including changes in performance obligation identification, reclassification of pricing elements, and disaggregated revenue - The adoption of ASC 606 in fiscal 2019 led to products and services being identified as distinct performance obligations, accelerating product revenue recognition and reclassifying certain pricing elements to Cost of sales[289][290] Impact of ASC 606 Adoption on FY2019 Financials (millions) | Metric | As reported | Performance Obligation Change | Gross vs. Net Change | Legacy GAAP | | :-------------------------- | :---------- | :---------------------------- | :------------------- | :---------- | | Net sales | $2,567.2 | $(21.5) | $(38.0) | $2,507.7 | | Cost of sales | $1,637.3 | $(12.8) | $(38.0) | $1,586.5 | | Gross margin | $929.9 | $(8.7) | | $921.2 | | Operating earnings | $203.5 | $(8.6) | | $194.9 | | Net earnings | $160.5 | $(7.1) | | $153.4 | FY2019 Net Sales Disaggregated by Product Type (millions) | Product Category | North America Contract | International Contract | Retail | Total | | :------------------------- | :--------------------- | :--------------------- | :----- | :------ | | Systems | $564.4 | $103.6 | | $668.0 | | Seating | $501.8 | $276.1 | $235.6 | $1,013.5 | | Freestanding and storage | $384.9 | $53.0 | $67.5 | $505.4 | | Textiles | $113.8 | | | $113.8 | | Other | $121.6 | $59.5 | $85.4 | $266.5 | | Total | $1,686.5 | $492.2 | $388.5 | $2,567.2 | Note 3 - Acquisitions and Divestitures This note details the company's acquisition of equity interests in Maars Holding B.V. and HAY A/S, including a long-term licensing agreement, and the divestiture of contract furniture dealerships - On August 31, 2018, Herman Miller acquired 48.2% of Maars Holding B.V. for approximately $6.1 million in cash, accounted for using the equity method[307] - On June 7, 2018, the company acquired 33% of HAY A/S for approximately $65.5 million in cash, also accounted for using the equity method, and rights to the HAY brand in North America for $4.8 million[309][310] - The company has options to purchase an additional 33% of HAY equity at fair market value, exercisable annually starting from the third quarter of fiscal 2020[312] Note 4 - Inventories This note provides a breakdown of the company's inventory by category and details the valuation methods used, noting the impact of LIFO versus FIFO accounting Inventories (June 1, 2019) | Category | Amount (millions) | | :------------------------ | :---------------- | | Finished goods and work in process | $139.1 | | Raw materials | $45.1 | | Total | $184.2 | - Inventories at Michigan manufacturing facilities are valued using the LIFO method, while other locations use the FIFO method, with a total of $198.0 million if all were FIFO at June 1, 2019[313] Note 5 - Investments in Nonconsolidated Affiliates This note details the company's equity method investments in nonconsolidated affiliates, including Kvadrat Maharam, Naughtone, Maars, and HAY, and summarizes related sales and purchases Investments in Nonconsolidated Affiliates (millions) | Metric | June 1, 2019 | June 2, 2018 | | :-------------------------------- | :----------- | :----------- | | Investments in nonconsolidated affiliates | $89.0 | $16.8 | | Equity earnings from nonconsolidated affiliates | $5.0 | $3.0 | - The company increased its investment in Naughtone from 50% to 52.5% for approximately $2.0 million in the fourth quarter of fiscal 2019[318] Transactions with Nonconsolidated Affiliates (millions) | Metric | June 1, 2019 | June 2, 2018 | | :-------------------------------- | :----------- | :----------- | | Sales to nonconsolidated affiliates | $3.9 | $4.3 | | Purchases from nonconsolidated affiliates | $23.0 | $6.8 | Note 6 - Long-Term Debt This note outlines the company's long-term debt obligations, including debt securities, a syndicated revolving line of credit, a construction-type lease, and a supplier financing program Long-Term Debt Obligations (June 1, 2019, millions) | Obligation | Amount | | :------------------------------------ | :----- | | Debt securities, 6.0%, due March 1, 2021 | $50.0 | | Syndicated Revolving Line of Credit, due September 2021 | $225.0 | | Construction-Type Lease | $6.9 | | Supplier financing program | $3.1 | | Total debt | $285.0 | - The syndicated revolving line of credit provides up to $400 million in borrowing capacity, with $165.0 million available as of June 1, 2019[331][333] Annual Maturities of Debt (millions) | Fiscal Year | Amount | | :---------- | :----- | | 2020 | $3.1 | | 2021 | $50.0 | | 2022 | $225.0 | | 2023 | $0.0 | | 2024 | $0.0 | | Thereafter | $6.9 | Note 7 - Operating Leases This note provides information on the company's operating lease commitments for real property and equipment, including future minimum rental payments and total rental expense Future Minimum Rental Payments Under Operating Leases (June 1, 2019, millions) | Fiscal Year | Amount | | :---------- | :----- | | 2020 | $51.7 | | 2021 | $46.8 | | 2022 | $42.9 | | 2023 | $39.0 | | 2024 | $33.5 | | Thereafter | $101.9 | - Total rental expense charged to operations was $55.9 million in fiscal 2019, $49.3 million in fiscal 2018, and $45.3 million in fiscal 2017[342] Note 8 - Employee Benefit Plans This note describes the company's retirement benefit plans, including defined benefit pension plans, post-retirement medical insurance, and defined contribution plans, detailing obligations and costs - The company maintains domestic defined benefit pension plans, a post-retirement healthcare plan (frozen since 1998), and an international defined-benefit pension plan[345] Underfunded Status of Benefit Plans (June 1, 2019, millions) | Plan Type | Underfunded Status | | :-------------------------- | :----------------- | | Domestic Pension | $(1.0) | | International Pension | $(20.9) | | Post-Retirement Benefits | $(3.3) | - The company's 401(k) plan includes a 100% match on employee contributions up to 4% of pay and a 4% core contribution, with an expense of approximately $25.4 million in fiscal 2019[361][362] Note 9 - Common Stock and Per Share Information This note reconciles the numerators and denominators used in the calculations of basic and diluted EPS for the past three fiscal years and provides details on share repurchase plans EPS Calculation Data (FY2019) | Metric | 2019 | | :---------------------------------------------------- | :----------- | | Numerator for both basic and diluted EPS (Net earnings attributable to Herman Miller, Inc.) | $160.5 million | | Denominator for basic EPS (weighted-average common shares outstanding) | 59,011,945 | | Potentially dilutive shares resulting from stock plans | 369,846 | | Denominator for diluted EPS | 59,381,791 | - The company has two share repurchase plans with a total authorization of $550.0 million, of which $264.2 million was available as of June 1, 2019, and 1,326,023 shares were repurchased in fiscal 2019[364] Note 10 - Stock-Based Compensation This note describes the company's equity-based compensation programs, including stock options, restricted stock units, performance share units, and an employee stock purchase plan, detailing valuation and expense recognition Pre-Tax Stock-Based Compensation Expense (millions) | Program | June 1, 2019 | | :-------------------------- | :----------- | | Employee stock purchase program | $0.3 | | Stock option plans | $(0.4) | | Restricted stock units | $4.6 | | Performance share units | $2.8 | | Total | $7.3 | - As of June 1, 2019, total pre-tax stock-based compensation cost not yet recognized was approximately $7.1 million, with a weighted-average recognition period of 0.96 years[369] - In fiscal 2019, the weighted-average grant-date fair value of stock options granted was $8.05, restricted stock units was $37.81, and performance share units was $36.37[373][378][380] Note 11 - Income Taxes This note discusses the impact of the Tax Cuts and Jobs Act, components of earnings before income taxes, the provision for income taxes, and reconciliation of the statutory to effective tax rate - The company completed its accounting for the Tax Cuts and Jobs Act in fiscal 2019, recording an adjustment to increase the income tax benefit by $1.0 million[390] Income Tax Provision and Effective Tax Rate | Metric | 2019 | 2018 | | :-------------------------- | :----- | :----- | | Total income tax provision (millions) | $39.6 | $42.4 | | Effective tax rate | 20.3% | 25.2% | - The effective tax rate in fiscal 2019 was 20.3%, below the U.S. statutory rate of 21%, primarily due to a mix of earnings in lower tax jurisdictions and R&D tax credits[392] Note 12 - Fair Value of Financial Instruments This note details the fair value measurements of the company's financial instruments, including cash equivalents, marketable securities, foreign currency exchange contracts, and interest rate swaps Fair Value of Long-Term Debt (millions) | Metric | June 1, 2019 | June 2, 2018 | | :---------------- | :----------- | :----------- | | Carrying value | $285.0 | $285.8 | | Fair value | $287.8 | $288.6 | - The company uses foreign currency forward contracts (not designated as hedges) and interest rate swap agreements (designated as cash flow hedges) to manage foreign currency and interest rate risks[417][419] - The fair value of the company's two outstanding interest rate swap agreements was a net liability of $1.2 million as of June 1, 2019, compared to a net asset of $15.0 million as of June 2, 2018[423] Note 13 - Warranties, Guarantees, and Contingencies This note discusses the company's product warranties, other guarantees such as performance bonds and standby letters of credit, and general legal contingencies - The company provides a standard 12-year product warranty, with an accrual balance of $53.1 million as of June 1, 2019[428] - Maximum financial exposure related to performance bonds was approximately $5.7 million, and from standby letters of credit was $10 million as of June 1, 2019, with no history of claims[429][431] - The company has outstanding commitments for future purchase obligations approximating $73.5 million as of the end of fiscal 2019[434] Note 14 - Operating Segments This note provides detailed financial information for the company's reportable operating segments: North America Contract, International Contract, and Retail, along with a Corporate category - Effective in Q4 fiscal 2019, the company reorganized its reportable segments: 'Specialty' combined with 'North American Furniture Solutions' to form 'North America Contract'; 'ELA' renamed 'International Contract'; and 'Consumer' renamed 'Retail'[435] Net Sales by Segment (FY2019, millions) | Segment | Net Sales | | :--------------------- | :-------- | | North America Contract | $1,686.5 | | International Contract | $492.2 | | Retail | $388.5 | | Total | $2,567.2 | Operating Earnings (Losses) by Segment (FY2019, millions) | Segment | Operating Earnings (Losses) | | :--------------------- | :-------------------------- | | North America Contract | $189.7 | | International Contract | $57.8 | | Retail | $5.3 | | Corporate | $(49.3) | | Total | $203.5 | Note 15 - Accumulated Other Comprehensive Loss This note provides an analysis of the changes in accumulated other comprehensive loss, detailing components such as cumulative translation adjustments, pension and post-retirement benefit plan adjustments, and interest rate swap agreement adjustments - Total Accumulated Other Comprehensive Loss increased to $(94.2) million at June 1, 2019, from $(61.3) million at June 2, 2018[446] - Key components contributing to the change in fiscal 2019 include foreign currency translation adjustments ($(14.2) million loss), pension and post-retirement liability adjustments ($(7.8) million loss), and unrealized losses on interest rate swap agreements ($(12.3) million loss)[225][446] Note 16 - Redeemable Noncontrolling Interests This note explains the accounting for redeemable noncontrolling interests, classified in mezzanine equity, and details changes in their balance, including purchases by the subsidiary and a post-period acquisition - Redeemable noncontrolling interests totaled $20.6 million at June 1, 2019, a decrease from $30.5 million at June 2, 2018[448] - During fiscal 2019, minority shareholders exercised options requiring the company's subsidiary to purchase $10.1 million of outstanding redeemable noncontrolling interests[448] - Subsequent to fiscal year-end, on July 23, 2019, the subsidiary exercised an option to acquire approximately $12.6 million of the remaining $20.6 million of redeemable noncontrolling equity interests[448] Note 17 - Restructuring and Impairment Activities This note details restructuring expenses and impairment activities in the North America Contract and International Contract segments, including workforce reductions, facilities consolidation, and associated costs and expected savings - North America Contract segment incurred $7.7 million in restructuring expenses in fiscal 2019, primarily for employee severance ($6.7 million) and lease termination/disposal ($1.0 million), expected to generate approximately $10 million in annual cost savings[449] - International Contract segment recognized $2.5 million in restructuring and impairment expenses in fiscal 2019, including an asset impairment of $0.8 million and $1.4 million from China manufacturing facilities consolidation, expected to generate approximately $3 million in annual cost reductions[453][455] - The UK office building and related assets, with a carrying value of approximately $4.2 million, were classified as assets held for sale as of June 1, 2019[455] Note 18 - Variable Interest Entities This note describes the company's long-term notes receivable with certain third-party owned dealers, which are considered variable interests in variable interest entities, for which the company is not the primary beneficiary - The carrying value of long-term notes receivable with third-party owned dealers, deemed variable interests, was $1.6 million as of June 1, 2019, representing the company's maximum exposure to loss[457] - The company is not considered the primary beneficiary for these variable interest entities, as each entity controls the activities that most significantly impact its economic performance[457] Note 19 - Quarterly Financial Data (Unaudited) This note provides unaudited quarterly operating results for net sales, gross margin, net earnings attributable to Herman Miller, Inc., and diluted EPS for fiscal years 2019, 2018, and 2017 FY2019 Quarterly Operating Results (millions, except per share data) | Quarter | Net sales | Gross margin | Net earnings attributable to Herman Miller, Inc. | Earnings per share-diluted | | :-------- | :-------- | :----------- | :--------------------------------------------- | :------------------------- | | First | $624.6 | $225.1 | $35.8 | $0.60 | | Second | $652.6 | $235.6 | $39.3 | $0.66 | | Third | $619.0 | $221.0 | $39.2 | $0.66 | | Fourth | $671.0 | $248.2 | $46.2 | $0.78 | Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures There were no changes in or disagreements with accountants on accounting and financial disclosures during the reported period - No changes in or disagreements with accountants on accounting and financial disclosures[484] Item 9A Controls and Procedures Management assessed the effectiveness of disclosure controls and procedures, concluding they were effective, and Ernst & Young LLP issued an unqualified opinion on internal control over financial reporting - The company's disclosure controls and procedures were evaluated by management, including the CEO and CFO, and concluded to be effective as of June 1, 2019[486] - Management believes the company's internal control over financial reporting was effective as of June 1, 2019, based on the COSO framework, with Ernst & Young LLP issuing an unqualified opinion[465][469] - There were no changes in the company's internal control over financial reporting during the fourth quarter ended June 1, 2019, that materially affected or are reasonably likely to materially affect internal control over financial reporting[486] Item 9B Other Information There is no other information to report under this item for the fiscal year ended June 1, 2019 - No other information to report[487] PART III This section covers directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and accountant fees Item 10 Directors, Executive Officers, and Corporate Governance This item incorporates by reference information regarding directors, executive officers, corporate governance, and the company's Code of Conduct from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information relating to directors, executive officers, promoters, control persons, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[489][492] - The company has adopted a Code of Conduct that serves as the code of ethics for executive and senior financial officers and as the code of business conduct for all directors and employees, available on its website[491] Item 11 Executive Compensation This item incorporates by reference detailed information on executive compensation from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information relating to executive compensation, including compensation discussion and analysis, summary compensation table, grants of plan-based awards, outstanding equity awards, pension benefits, and potential payments upon termination, is incorporated by reference from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[494] Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This item incorporates by reference information regarding security ownership of certain beneficial owners and management, as well as equity compensation plan information, from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information relating to voting securities, principal stockholders, director and executive officer information, and equity compensation plan information is incorporated by reference from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[496] Item 13 Certain Relationships and Related Transactions, and Director Independence This item incorporates by reference information concerning certain relationships and related transactions, and director independence from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information concerning related party transactions and the determination of independence of Board members is incorporated by reference from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[498] Item 14 Principal Accountant Fees and Services This item incorporates by reference information relating to the ratification of the selection of the company's independent public accountants and the fees paid for their services from the definitive Proxy Statement for the 2019 Annual Meeting of Stockholders - Information relating to the ratification of the selection of the Company's independent registered accounting firm and disclosure of fees paid to independent auditors is incorporated by reference from the company's definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[500] PART IV This section lists exhibits, financial statement schedules, and required signatures for the annual report Item 15 Exhibits and Financial Statement Schedule This item lists the financial statements, financial statement schedule (Schedule II), and exhibits filed as part of the 10-K report, including articles of incorporation, bylaws, material contracts, and certifications - The report includes Consolidated Statements of Comprehensive Income, Balance Sheets, Stockholders' Equity, Cash Flows, Notes to the Consolidated Financial Statements, Management's Report on Internal Control over Financial Reporting, and Reports of Independent Registered Public Accounting Firm[504] - Financial statement schedule II, 'Valuation and Qualifying Accounts and Reserves,' is included for the years ended June 1, 2019, June 2, 2018, and June 3, 2017[505] - Exhibits include Articles of Incorporation, Bylaws, Instruments Defining the Rights of Security Holders, Material Contracts, Subsidiaries, Consent of Independent Registered Public Accounting Firm, Power of Attorney, and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[510][511] Item 16 Form 10-K Summary This item indicates that no Form 10-K Summary is provided in this annual report - No Form 10-K Summary is provided[508] Signatures This section contains the required signatures for the Form 10-K report, including those of the Chief Financial Officer and members of the Board of Directors, certifying the report's submission - The report is signed by Jeffrey M. Stutz, Chief Financial Officer (Principal Accounting Officer and Duly Authorized Signatory), and members of the Board of Directors, including Andrea R. Owen (President, Chief Executive Officer, and Director) and Michael A. Volkema (Chairman of the Board)[516][517] Schedule II Valuation and Qualifying Accounts This schedule provides a detailed breakdown of valuation and qualifying accounts, including accounts receivable allowances and valuation allowance for deferred tax assets, for fiscal years 2019, 2018, and 2017 Valuation and Qualifying Accounts (June 1, 2019, millions) | Description | Balance at beginning of period | Charges to expenses or net sales | Deductions | Balance at end of period | | :------------------------------------------ | :----------------------------- | :------------------------------- | :--------- | :----------------------- | | Accounts receivable allowances — uncollectible accounts | $2.4 | $0.6 | $(0.1) | $2.9 | | Accounts receivable allowances — credit memo | $0.5 | $0.0 | $0.1 | $0.6 | | Allowance for possible losses on notes receivable | $0.4 | $(0.1) | $0.0 | $0.3 | | Valuation allowance for deferred tax asset | $10.3 | $0.4 | $(0.3) | $10.4 |