Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Herman Miller, Inc. Consolidated Statements of Comprehensive Income Fiscal Years Ended May 30, 2015 May 28, 2016 May 31, 2014 2.264.9 1,390.7 874.2 2,1422 1,350.8 791.4 1,882.0 1,251.0 631.0 585.6 77.1 662.7 211.5 543.9 12.7 71.4 628.0 163.4 564.3 26.5 65.9 656.7 (25.7) (In millions, except per share data) Net sales Cost of sales Gross margin Operating expenses: Selling, general, and administrative Restructuring and impairment expenses Design and research Total operating expenses Operating earnings (loss) Other expenses (income): Interest expense Interest and other investment income Other, net Net other expenses Earnings (loss) before income taxes Income tax expense (benefit) Equity earnings from nonconsolidated affiliates, net of tax Net earnings (loss) Net earnings attributable to noncontrolling interests Net earnings (loss) attributable to Herman Miller, Inc. 15.4 (0.8) 0.3 14.9 196.6 59.5 17.5 (0.6) 1.3 18.2 145.2 472 0.1 98.1 0.6 97.5 17.6 (0.4) 0.5 17.7 (43.4) (21.2) 0.1 (22.1) 0.4 137.5 0.8 136.7 $ (22.1) 1.64 $ Earnings (loss) per share-basic Earnings (loss) per share - diluted $ $ 2.28 2.26 $ $ (0.37) (0.37) 1.62 S S $ $ Other comprehensive income (loss): Foreign currency translation adjustments (net of tax of ($0.3), $0.3, and $-) Pension and post-retirement liability adjustments (net of tax of ($1.4), $2.2 and $(50.9)) Total other comprehensive income (loss) Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Herman Miller, Inc. (8.8) 0.5 (8.3) 129.2 0.8 128.4 (9.7) (8.6) (18.3) 79.8 0.6 79.2 2.9 83.5 86.4 64.3 64.3 43- Herman Miller, Inc. Consolidated Balance Sheets May 28, 2016 May 30, 2015 (In millions, except share and per share data) Assets Current Assets: Cash and cash equivalents Marketable securities Accounts and notes receivable, less allowances of $4.7 in 2016 and $3.8 in 2015 Inventories, net Deferred income taxes Prepaid taxes Other Total Current Assets 84.9 7.5 211.0 128.2 63.7 5.7 189.6 129.6 32.0 20.4 28.5 480.5 10.0 32.9 463.5 Property and Equipment: Land and improvements Buildings and improvements Machinery and equipment Construction in progress Gross Property and Equipment Less: Accumulated depreciation Net Property and Equipment Goodwill Indefinite-lived intangibles Other amortizable intangibles, net Other assets Total Assets 24.1 205.7 645.3 53.9 929.0 (648.9) 280.1 305.3 85.2 50.8 21.4 188.9 610.1 48.2 868.6 (619.1) 249.5 303.1 85.2 52.3 39.1 1,192.7 33.3 1.235.2 165.6 $ Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity Current Liabilities: Accounts payable Accrued compensation and benefits Accrued warranty Unearned revenue Other accrued liabilities Total Current Liabilities 85.2 43.9 164.7 66.6 39.3 35.4 59.9 390.0 32.0 60.8 363.4 Long-term debt Pension and post-retirement benefits Other liabilities 289.8 27.8 221.9 25.8 45.8 683.5 61.0 742.0 Total Liabilities 27.0 30.4 Redeemable noncontrolling interests Stockholders' Equity Preferred stock, no par value (10,000,000 shares authorized, none issued) Common stock, $0.20 par value (240,000,000 shares authorized, 59,868,276 and 59,694,611 shares issued and outstanding in 2016 and 2015, respectively) Additional paid-in capital Retained earnings Accumulated other comprehensive loss Key executive deferred compensation Herman Miller, Inc. Stockholders' Equity Noncontrolling interests Total Stockholders' Equity Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity 12.0 142.7 435.3 (64.5) (1.1) 524.4 0.3 524.7 1.235.2 11.9 135.1 330.2 (56.2) (1.2) 419.8 0.5 420.3 1,192.7 $ Herman Miller (MLHR) Common Size Analysis Project General Guidelines: Each individual should gather data from Edgar.com to create the common size analysis. You can discuss your answers with the group prior to turning in the assignment Save this sheet as: Lname, Fname Section xxx MLHR Assignment.xex and upload the file to CANVAS A. Follow the Instructions on sheet Edgar Instructions to obtain the annual financial report (10-K) for Miller Herman using instructions provided on the sheet "Edgar Instructions": Fill in your answers in the yellow Boxes below. The light red arrows indicate the answers you need to provide. For drop-down boxes, choose the appropriate answer. B. Use MLHR's 10-K annual report from Edgar.com to find Financial Information for Common Size analysis 1. Click on the Income Statement tab below and fill in the information from Consolidated Statements of Operations in Edgar.gov to fill in the highlighted area of the spreadsheet. Note use the previous year's information to guide you. Notice the footnote on the bottom of the Income Statement regarding Depreciation Expense. 2. Click on the Balance Sheet tab below and fill in the information from Consolidated Balance Sheet from Edgar.gov. C. Answer the following questions regarding Herman Miller 1. DuPont Analysis is a great place to start the analysis, because it shows how three major areas intemct to determine ROE. (Hint: Click the Ratios tab below to fill in the appropriate ratios to compare MLHR to the industry. ROE PM TAT EM MLHR Industry 25.9% 4.50% 2.30 2.50 2. What component(s) isare) improving MLHR's ROE relative to the industry average? (highlight your answer(s)) 3. Based on this DuPont analysis which of the following areas are strengths for MLHR? (could be more than one) 4. Based on this DuPont analysis which of the following areas are weaknesses for MLHR? (could be more than one) Operating Cyele in Days Cash Cycle In Days 5. How long is the operating cycle for MLHR for the most recent year ending financial information? (Sec Ratio Page) 6. How long is the cash cycle for MLHR for the most recent year ending financial information? (See Ratio Page) 7 Is the length of the operating cycle a strength or weakness for MLHR compared to the industry? Why? - Answer Succinctly 8. IfMLHR's cash cycle increases significantly it would need to: 9. Look at the trends over the 5 years for the following ratio categories. Identify whether the trend is improving, , deteriorating, or neither. (For ratios that fluctuate over time compare 5 years ago with the most recent year.) a Liquidity h. Inventory Turnover c. Total Asset Turnover d. Daya Sales Outstanding Asset Management Leverage g. Profitability 10. What account causes the current ratio to be smaller than the industry and the quick ratio to be similar to the industry? 11. Does the amount of time it takes Herman Miller to pay it's suppliers appear to be a problem? (Hint: compare their ratios to the industry) 12. When comparing the assets on the balance sheet ta industry averages, what account should the analyst question? 13. What was MLHR) Net Working Capital for the last two years (omit 000's)? Most Current Year Previous Year 14. How big a factor would you say market conditions played on the performance of MLHR over the past 10 years? 15. Suppose MLHR doubled the amount of time to pay trade creditors. Use the proforma sheet to indicate the impact on the financial statements. (Start with the identical parameters indicated on Ratio page for previous year for Inv, AR, and AP and then double Days Payable.) What are the new plug figure to make the balance sheet balance? State answer omitting the last 000,000's consistent with proforma (Note one plug is always zero for cells D28 and D4 1 on the Proforma Spreadsheet) a. Cash & Marketable Securities - b. Notes Payable Bank = a. Cash & Marketable Securities = b. Notes Payable Bank- 16. Suppose MLHR Days Payable is at the same level as the prior year. Use the proforma sheet to indicate the impact on the financial statements assuming Days Sales Outstanding and Days in Inventory both double, causing the operating cycle to double in length. What are the new plug figure to make the balance sheet balance? State answer amitting the last 000,000's consistent with proforma. (Note one plug is always zero for cells D28 and 141 on the Proforma Spreadsheet) 17. Using the same parameters as in question 16, what is the proforma Net Income (Loss) (omitting 000,000'sy? 18. Suppose all parameter estimates are based on last years results, except Sales is expected to grow at 25% What would be the impact on Net Income and the Plugs? (Note omit 000,000's and one of the plugs is always zero.) Proforma Net Income - Cash & Marketable Securities = Notes Payable Bank- Proforma Net Income - 19. Assuming MLHR is expecting a 25% increase in Sales and they have the plant capacity, what should they do now to prepare for this? Discussion Question: Summarize your advise to management of MLHR based on inferences gained from this common size analysis. Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Herman Miller, Inc. Consolidated Statements of Comprehensive Income Fiscal Years Ended May 30, 2015 May 28, 2016 May 31, 2014 2.264.9 1,390.7 874.2 2,1422 1,350.8 791.4 1,882.0 1,251.0 631.0 585.6 77.1 662.7 211.5 543.9 12.7 71.4 628.0 163.4 564.3 26.5 65.9 656.7 (25.7) (In millions, except per share data) Net sales Cost of sales Gross margin Operating expenses: Selling, general, and administrative Restructuring and impairment expenses Design and research Total operating expenses Operating earnings (loss) Other expenses (income): Interest expense Interest and other investment income Other, net Net other expenses Earnings (loss) before income taxes Income tax expense (benefit) Equity earnings from nonconsolidated affiliates, net of tax Net earnings (loss) Net earnings attributable to noncontrolling interests Net earnings (loss) attributable to Herman Miller, Inc. 15.4 (0.8) 0.3 14.9 196.6 59.5 17.5 (0.6) 1.3 18.2 145.2 472 0.1 98.1 0.6 97.5 17.6 (0.4) 0.5 17.7 (43.4) (21.2) 0.1 (22.1) 0.4 137.5 0.8 136.7 $ (22.1) 1.64 $ Earnings (loss) per share-basic Earnings (loss) per share - diluted $ $ 2.28 2.26 $ $ (0.37) (0.37) 1.62 S S $ $ Other comprehensive income (loss): Foreign currency translation adjustments (net of tax of ($0.3), $0.3, and $-) Pension and post-retirement liability adjustments (net of tax of ($1.4), $2.2 and $(50.9)) Total other comprehensive income (loss) Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Herman Miller, Inc. (8.8) 0.5 (8.3) 129.2 0.8 128.4 (9.7) (8.6) (18.3) 79.8 0.6 79.2 2.9 83.5 86.4 64.3 64.3 43- Herman Miller, Inc. Consolidated Balance Sheets May 28, 2016 May 30, 2015 (In millions, except share and per share data) Assets Current Assets: Cash and cash equivalents Marketable securities Accounts and notes receivable, less allowances of $4.7 in 2016 and $3.8 in 2015 Inventories, net Deferred income taxes Prepaid taxes Other Total Current Assets 84.9 7.5 211.0 128.2 63.7 5.7 189.6 129.6 32.0 20.4 28.5 480.5 10.0 32.9 463.5 Property and Equipment: Land and improvements Buildings and improvements Machinery and equipment Construction in progress Gross Property and Equipment Less: Accumulated depreciation Net Property and Equipment Goodwill Indefinite-lived intangibles Other amortizable intangibles, net Other assets Total Assets 24.1 205.7 645.3 53.9 929.0 (648.9) 280.1 305.3 85.2 50.8 21.4 188.9 610.1 48.2 868.6 (619.1) 249.5 303.1 85.2 52.3 39.1 1,192.7 33.3 1.235.2 165.6 $ Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity Current Liabilities: Accounts payable Accrued compensation and benefits Accrued warranty Unearned revenue Other accrued liabilities Total Current Liabilities 85.2 43.9 164.7 66.6 39.3 35.4 59.9 390.0 32.0 60.8 363.4 Long-term debt Pension and post-retirement benefits Other liabilities 289.8 27.8 221.9 25.8 45.8 683.5 61.0 742.0 Total Liabilities 27.0 30.4 Redeemable noncontrolling interests Stockholders' Equity Preferred stock, no par value (10,000,000 shares authorized, none issued) Common stock, $0.20 par value (240,000,000 shares authorized, 59,868,276 and 59,694,611 shares issued and outstanding in 2016 and 2015, respectively) Additional paid-in capital Retained earnings Accumulated other comprehensive loss Key executive deferred compensation Herman Miller, Inc. Stockholders' Equity Noncontrolling interests Total Stockholders' Equity Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity 12.0 142.7 435.3 (64.5) (1.1) 524.4 0.3 524.7 1.235.2 11.9 135.1 330.2 (56.2) (1.2) 419.8 0.5 420.3 1,192.7 $ Herman Miller (MLHR) Common Size Analysis Project General Guidelines: Each individual should gather data from Edgar.com to create the common size analysis. You can discuss your answers with the group prior to turning in the assignment Save this sheet as: Lname, Fname Section xxx MLHR Assignment.xex and upload the file to CANVAS A. Follow the Instructions on sheet Edgar Instructions to obtain the annual financial report (10-K) for Miller Herman using instructions provided on the sheet "Edgar Instructions": Fill in your answers in the yellow Boxes below. The light red arrows indicate the answers you need to provide. For drop-down boxes, choose the appropriate answer. B. Use MLHR's 10-K annual report from Edgar.com to find Financial Information for Common Size analysis 1. Click on the Income Statement tab below and fill in the information from Consolidated Statements of Operations in Edgar.gov to fill in the highlighted area of the spreadsheet. Note use the previous year's information to guide you. Notice the footnote on the bottom of the Income Statement regarding Depreciation Expense. 2. Click on the Balance Sheet tab below and fill in the information from Consolidated Balance Sheet from Edgar.gov. C. Answer the following questions regarding Herman Miller 1. DuPont Analysis is a great place to start the analysis, because it shows how three major areas intemct to determine ROE. (Hint: Click the Ratios tab below to fill in the appropriate ratios to compare MLHR to the industry. ROE PM TAT EM MLHR Industry 25.9% 4.50% 2.30 2.50 2. What component(s) isare) improving MLHR's ROE relative to the industry average? (highlight your answer(s)) 3. Based on this DuPont analysis which of the following areas are strengths for MLHR? (could be more than one) 4. Based on this DuPont analysis which of the following areas are weaknesses for MLHR? (could be more than one) Operating Cyele in Days Cash Cycle In Days 5. How long is the operating cycle for MLHR for the most recent year ending financial information? (Sec Ratio Page) 6. How long is the cash cycle for MLHR for the most recent year ending financial information? (See Ratio Page) 7 Is the length of the operating cycle a strength or weakness for MLHR compared to the industry? Why? - Answer Succinctly 8. IfMLHR's cash cycle increases significantly it would need to: 9. Look at the trends over the 5 years for the following ratio categories. Identify whether the trend is improving, , deteriorating, or neither. (For ratios that fluctuate over time compare 5 years ago with the most recent year.) a Liquidity h. Inventory Turnover c. Total Asset Turnover d. Daya Sales Outstanding Asset Management Leverage g. Profitability 10. What account causes the current ratio to be smaller than the industry and the quick ratio to be similar to the industry? 11. Does the amount of time it takes Herman Miller to pay it's suppliers appear to be a problem? (Hint: compare their ratios to the industry) 12. When comparing the assets on the balance sheet ta industry averages, what account should the analyst question? 13. What was MLHR) Net Working Capital for the last two years (omit 000's)? Most Current Year Previous Year 14. How big a factor would you say market conditions played on the performance of MLHR over the past 10 years? 15. Suppose MLHR doubled the amount of time to pay trade creditors. Use the proforma sheet to indicate the impact on the financial statements. (Start with the identical parameters indicated on Ratio page for previous year for Inv, AR, and AP and then double Days Payable.) What are the new plug figure to make the balance sheet balance? State answer omitting the last 000,000's consistent with proforma (Note one plug is always zero for cells D28 and D4 1 on the Proforma Spreadsheet) a. Cash & Marketable Securities - b. Notes Payable Bank = a. Cash & Marketable Securities = b. Notes Payable Bank- 16. Suppose MLHR Days Payable is at the same level as the prior year. Use the proforma sheet to indicate the impact on the financial statements assuming Days Sales Outstanding and Days in Inventory both double, causing the operating cycle to double in length. What are the new plug figure to make the balance sheet balance? State answer amitting the last 000,000's consistent with proforma. (Note one plug is always zero for cells D28 and 141 on the Proforma Spreadsheet) 17. Using the same parameters as in question 16, what is the proforma Net Income (Loss) (omitting 000,000'sy? 18. Suppose all parameter estimates are based on last years results, except Sales is expected to grow at 25% What would be the impact on Net Income and the Plugs? (Note omit 000,000's and one of the plugs is always zero.) Proforma Net Income - Cash & Marketable Securities = Notes Payable Bank- Proforma Net Income - 19. Assuming MLHR is expecting a 25% increase in Sales and they have the plant capacity, what should they do now to prepare for this? Discussion Question: Summarize your advise to management of MLHR based on inferences gained from this common size analysis
