Herman Miller, Inc. Investor Presentation Q4 FY2012
NASDAQ: MLHR
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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
itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,”
likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify
such forward-looking statements.
These statements do not guarantee future performance and involve certain risks, uncertainties,
and assumptions that are difficult to predict with regard to timing, extent, likelihood, and
degree of occurrence. These risks include, without limitation, employment and general economic
conditions, the pace of economic recovery in the U.S, and in our International markets, the
increase in white-collar employment, the willingness of customers to undertake capital
expenditures, the types of products purchased by customers, competitive-pricing pressures, the
availability and pricing of raw materials, our reliance on a limited number of suppliers, currency
fluctuations, the ability to increase prices to absorb the additional costs of raw materials, the
financial strength of our dealers and the financial strength of our customers, the mix of our
products purchased by customers, our ability to attract and retain key executives and other
qualified employees, our ability to continue to make product innovations, the success of newly
introduced products, our ability to serve all of our markets, possible acquisitions, divestitures or
alliances, the pace and level of government procurement, the outcome of pending litigation or
governmental audits or investigations, political risk in the markets we serve, and other risks
identified in our filings with the Securities and Exchange Commission.
Therefore, actual results and outcomes may materially differ from what we express or forecast.
Furthermore, Herman Miller, Inc., undertakes no obligation to update, amend or clarify forward-
looking statements.
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A History of Bold Innovation
1923 1930s & 40s 1950s 1960s 1970s & 80s 1990s Today
Founded as a manufacturer of traditional residential furniture
Fostered lasting ties with well-known,
independent designers; a model
that continues to this day
Became a leader in modern
furniture design
Transformed the office furniture industry with
the introduction of Action Office – the
industry’s first open plan office system
Pioneered ergonomic
office seating
Broadened product offering,
expanded distribution, focused on
manufacturing efficiency and sustainability
A recognized industry leader in the areas of innovative
product design, sustainable business practices, and financial performance
At Herman Miller, we value our rich legacy more for what it shows us we might become than as a picture of what we’ve been.
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Herman Miller Around the World
Manufacturing Locations
Design Center Showrooms
Global Product Distribution:
North America: ≈ 250 Dealer Locations
Worldwide*: ≈ 740 Dealer Locations
* Including Posh franchise dealer locations
Dealer Logistics & Support Centers
• No single source for industry data outside North America
• BIFMA is the North American trade organization for our industry
• Leading economic indicators include: – Corporate profitability
– Service sector employment levels
– Non-residential construction activity
– Office vacancy rates
– Architectural billing activity (ABI)
– Corporate sentiment (CEO & small business confidence, etc.)
• Herman Miller N.A. market share ≈ 13.5%
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The Contract Office Furniture Industry
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Steady Growth to Cyclicality
Source: BIFMA
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Variable Cost Structure
We have designed our cost structure to flex with the economic cycles we face as an industry.
• Manufacturing Costs
Direct labor – use temps and overtime which can be quickly flexed with volume
Direct materials – assembly based model (sub-assemblies outsourced)
Overhead – assembly based model (only 11-14% of sales)
Freight & Distribution – Utilize third-party outside freight haulers
• SG&A Costs
Incentive compensation – EVA based on continuous improvement
Sales costs – Variable commissions
Distribution costs – Variable cost independent dealers
Designer royalties – Variable cost independent designers
• Capital Base
Assembly based manufacturing model keeps asset costs low
Build to order keeps inventory costs low
Early prepay discounts keeps accounts receivable balances low
EVA incentive systems focuses on balance sheet and income statement
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Commitment to Innovation
Design & Research Expenditures
$0
$10
$20
$30
$40
$50
$60
2008 2009 2010 2011 2012
0.0%
0.3%
0.6%
0.9%
1.2%
1.5%
1.8%
2.1%
2.4%
2.7%
3.0%
3.3%
$ Millions % Net Sales
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We Have Diversified Our Revenue Base
U.S. Office / Gov't
Int'l
Health, Home &
Educ.
FY 2001
U.S. Office
/ Gov't
Int'l
Health,
Home & Educ.
23%
29%
48%
16%
9%
75%
FY 2012
Pension Funding Strategy
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The Situation: • We have 3 DB pension plans; currently ≈$29MM under-
funded. • Funding status has been highly volatile during the past 2
industry cycles. • Company contributions have averaged $23MM/year over the
past 10 years (to fund an $8MM/year employee benefit).
Our Strategy: • Fund U.S. plans to near 100% by end of FY2012. • De-risk plan investment profiles. • Convert U.S. employees to a DC-based retirement model. • Begin process of terminating our U.S. DB plans.
Expected Result: • Some P&L volatility during the termination process as
non-cash settlement expenses are recognized. • Improved cash flow and expense visibility going forward. • Better alignment of cash flow and expenses with business
cycles.
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Recent Operating Performance
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
$458
$446
$400 $421
$481
$440
$361
$444
Millio
ns
Quarterly Net Sales & Orders
Net Sales Orders
$105
$106
$107
$108
$109
$110
$111
$112
$113
$114
$115
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
$113
$111
$109
$115
Million
s
Quarterly Operating Expenses
33.7% 34.1% 33.6%
35.7%
9.1% 9.1%
6.3%
8.4%
0%
10%
20%
30%
40%
50%
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
% N
et
Sale
s
Gross Margin and Adj. Operating Income % *
Gross Margin % Adj. Operating Income %
Q4 net sales decreased 5% from the prior year;
orders down 1% over the same period. Dealer de-
consolidation drove ≈$16 million of this year-over-
year reduction.
Orders in Q4 reflect continued softening from U.S.
government and healthcare buyers; remaining core
U.S. business was up 15% vs. prior year Q4.
Highest gross margin in 12 years; excluding pension
curtailment gain, gross margin improved 250 basis
points from the prior year level…….driven by benefit
capture from recent price increases, lower employee
bonus expenses, and improved direct material costs.
* Represents a Non-GAAP Measure, see Appendix for reconciliation.
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Debt & Liquidity Profile
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
$39
$0
$44
$8
Millio
ns
Quarterly Cash Flow from Operations
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
1.5 1.4 1.4 1.4
Rolling 4Qtr Leverage Ratio
(Debt to EBITDA* - excluding restructure)
PPN & Bank Covenant < 3.50 (allows 4.0 for 4 Qtrs)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
8.8 9.6
10.1 10.5
Rolling 4Qtr Coverage Ratio
(EBITDA* to Interest - excluding restructure)
Bank Covenant > 4.0
Q4 Ending Cash and Equivalents of $172 million.
Operating cash flows in Q4 reflect $45 million in pension
contributions (net of tax benefits); Full year pension
contributions of $64 million; Defined benefit plans are 96%
funded in the U.S.
Cash used for acquisitions (POSH) totaled $47 million in Q4.
Debt maturity schedule:
PPN ($50M) due 2015
PPN ($150M) due 2018
PPN ($50M) due 2021
CAPEX totaled $29 million in FY12; estimated to range
between $50 million and $60 million in FY13.
Increased dividend to $0.09 per share (from $0.02)
* Represents a Non-GAAP Measure, see Appendix for reconciliation.
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Catalysts for Growth
Growth
Avenues
Benchmark
Performance
Seating
Breadth of New
Products
Healthcare
Furnishings
Global
Expansion
New Channels to
Market
New Customers
* The combination of Nemschoff and
HermanMiller Healthcare creates the
industry’s most comprehensive
healthcare furniture offering
* Acquisition of POSH significantly
expands our Asian distribution
presence
* Future focus on India and Latin
America
* Robust product development queue
* Dealer “Share of Wallet”
* Improve upon our industry
leading position in high-
performance task seating
* Herman Miller for the Home has a
growing retail and wholesale
presence
* e-Commerce
* Initiatives to capture small to
mid-sized business customers
* Targeted A&D focus through the
Herman Miller Collection
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FY2015 Financial Targets
$1,724
$2,200
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
Fiscal 2012 Actual Fiscal 2015 Goal
Net Sales ($ millions)
CAGR GOALS BY SEGMENT:
N. America… 5%
Non-N.A… 16% S&C… 12%
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FY2015 Financial Targets
8.3%
10.0%
3%
4%
5%
6%
7%
8%
9%
10%
11%
Fiscal 2012 Actual Fiscal 2015 Goal
Adj. Operating Margin (% sales) *
≥
* Represents a Non-GAAP Measure, see Appendix for reconciliation.
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We Intend to Increase our North American Dealer “Share of Wallet”
≈40%
Non-HMI Products
≈60%
HMI Products
On average, approximately 40% of the sales through our dealer channel in North America involve non-Herman Miller branded products.
Setu
Lower Price-Point Seating
SAYL
Performance Tables
Everywhere Tables
Ergonomic Solutions
Thrive Portfolio
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NEOCON 2012
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NEOCON 2012
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NEOCON 2012
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New York City “Pop-Up” Shop
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Appendix This report contains references to Adjusted Operating Income/Margin and Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA) which are non-GAAP financial measures.
Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12
Earnings Before Income Taxes (EBT) 115.7$ 125.6$ 120.7$ 119.5
Add:
Depreciation 36.5 35.4 35.5 34.4
Amortization 2.2 2.9 2.8 2.9
Interest 19.5 19.1 18.2 17.5
Other Adjustments 1 (2.1) 0.4 5.8 9.7
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) 171.8$ 183.4$ 183.0$ 184.0$
Total Debt, End of Trailing Period 259.9$ 259.9$ 259.9$ 259.8$
Rolling 4-Quarter Debt-to-EBITDA 1.5 1.4 1.4 1.4
Rolling 4-Quarter EBITDA-to-Interest 8.8 9.6 10.1 10.5
1 "Other Adjustments" include, as applicable in the period, non-cash stock based compensation expenses, charges associated w ith business restructuring
initiatives, changes in the value of the contingent consideration components of the Nemschoff purchase price, pro-forma income statement adjustments
associated w ith Nemschoff, as permitted under lender covenant arrangements, and non-cash charges and credits associated w ith the company's
planned termination of its domestic defined benefit pension programs.
(Calculation of EBITDA Ratios)
Trailing 4-Quarter Period Ended
($ in millions)
(unaudited)
Table II
Herman Miller, Inc.
Reconciliation of Non-GAAP Measures
Q4 FY12 FY2012
Net Sales 420.7$ 1,724.1$
Operating Earnings (GAAP) 29.8$ 137.6$
Operating Margin (% net sales) 7.1% 8.0%
Add: Restructuring Expense 5.4$ 5.4$
Adj. Operating Earnings (non-GAAP) 35.2$ 143.0$
Adj. Operating Margin (% net sales) 8.4% 8.3%
(unaudited)
Table I
Herman Miller, Inc.
Reconciliation of Non-GAAP Measures
($ millions; percents represent % of net sales)